Mark Latham Commodity Equity Intelligence Service

Friday 16th June 2017
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    Oil and Gas


    South Africa raises black ownership threshold for mining firms

    South Africa has raised the minimum threshold for black ownership of mining companies to 30 percent from 26 percent, the government said on Thursday, though an industry body said it would try to block the change in court.

    Mining firms in the world's top platinum producer have complained about a lack of consultation over revisions to the industry charter that sets targets for black ownership and participation in the powerful sector.

    The charter is part of a wider empowerment drive across Africa's most industrialised economy designed to rectify the disparities of apartheid that persist more than two decades since the end of white minority rule in 1994.

    The Chamber of Mines, which represents mining firms, said it would take the government to court over the charter because it had not been consulted sufficiently and feared the new rules would create regulatory uncertainty and scare off investors.

    Announcing the new rules on Thursday, Mines Minister Mosebenzi Zwane said companies had 12 months to meet the new 30 percent target.

    The rand fell 2 percent after Zwane announced details of the revisions while the Johannesburg bourse's Mining Index extended its decline to more than 3 percent.

    The government has said in the past that companies must stick to ownership targets even if black shareholders sell their stakes but Zwane said it had not yet decided whether mining firms must maintain the threshold permanently.

    The Mining Charter was introduced in 2002 to increase black ownership of the mining industry, which accounts for about 7 percent of South Africa's economic output.

    Black South Africans make up 80 percent of the 54 million population, yet most of the economy in terms of ownership of land and companies remains in the hands of whites, who account for about 8 percent of the population.


    Zwane told a news conference in the capital Pretoria that he had consulted widely with businesses.

    "We will engage with business going forward in a respectable manner. We will never take them to court," he said.

    The new charter stipulates that mining firms must pay 1 percent of their annual turnover to the Mining Transformation and Development Agency, which helps black communities.

    Under the new rules, prospecting rights must be 50 percent black owned and mining rights should be 30 percent black owned. Mining firms are required to procure 70 percent of goods and 80 percent of services from black-owned companies.

    The new rules also state that half of the members of mining company boards must be black, and a quarter of the overall board must be women.

    Officials at the Chamber of Mines said they hoped legal action would force the government back to the negotiating table.

    "We will not sign this charter because it is not our charter," Chamber of Mines CEO Roger Baxter told a news conference in Johannesburg.

    The chamber, which represents companies such as Anglo American and Sibanye Gold, did not take part in the launch of the new charter because of what it said was a lack of prior consultation.

    Investec co-head of fixed income Nazmeera Moola said the charter would deter investment.

    "This mining charter means we won't be seeing any substantial investment in the mining sector for many years to come. It is distinctly unfriendly to investment," Moola said.
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    BHP names packaging guru MacKenzie as new chairman

    Mining giant BHP on Friday named successful packaging executive Ken MacKenzie as its next chairman, handing him the job of tackling calls to dump its oil business and overhaul the board.

    MacKenzie, 53, succeeds Jac Nasser as of Sept. 1 at a time when the world's biggest miner is being challenged by activist investors to revamp its structure and improve returns to shareholders.

    Investors welcomed the appointment of MacKenzie, who was considered one of Australia's most successful chief executives in his 10 years running Amcor Ltd.

    "It's an important first step in the right direction. Hopefully it creates a platform to be able to review what's amiss with the company in the eyes of some and address the concerns," said Brenton Saunders, an analyst at BT Investment Management, which owns shares in BHP.

    Canadian-born MacKenzie presided over a long stretch of prosperity at Amcor, which makes packaging for food producers, industrial companies and pharmaceutical firms, that coincided with the end of a boom period for mining companies.

    Hedge fund Elliott Management has fired a barrage of criticism at Nasser and BHP Chief Executive Andrew Mackenzie since publicly releasing a roadmap of changes it wants at the company, most notably an exit from U.S. oil and shale businesses.

    Elliott also wants BHP to collapse its dual listing, and earlier this week called for a board shake-up, blaming long-tenured directors for bad investments and ill-timed share buybacks.

    That could place MacKenzie, who joined BHP's board just last year, in good standing. Focused on capital discipline, he replaced 75 percent of Amcor's top 80 managers in his first two years at the company.

    On Friday, Elliott said it supported the appointment of MacKenzie as a "constructive step in bringing much needed change to the direction of BHP."

    Portfolio managers at another activist shareholder, Tribeca Investment Partners, were not immediately available to comment.

    MacKenzie said he would meet with shareholders and others over the coming weeks to listen to their views.

    "I am committed to the creation of long-term value for all of our shareholders and will work tirelessly with the board and management to achieve this," he said in a statement.

    Nasser has defended the company's $20 billion investment in shale acquisitions in 2011 against Elliott's criticism.

    BHP also faces a key juncture in the Samarco mine dam liability saga in Brazil, which is due to be settled in September.

    A burst dam at Samarco, a joint venture between BHP and Brazil's Vale, killed 19 people and caused the country's worst ever environmental disaster in late 2015, when mud and waste destroyed a village and polluted the Rio Doce river.

    Despite being the world's biggest mining house, BHP has a history of appointing executives from outside the sector as chairs. Since 1984 only two out of six chairmen had mining backgrounds.

    BHP's shares were flat on Friday but have suffered a stretch of underperformance against arch rival Rio Tinto. The stock is down about 18 percent from its 2017 peak in late January.

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    Commodity prices likely to be softer, due to China

    Mining commodity prices are expected to decline over the next 12 months, largely as a result of slowing demand from China. But supply dynamics in markets such as iron ore and oil will also play a role in moving prices.

    “Our negative outlook is driven by end-user demand slowing in China as the pro-growth agenda fades,” says Brian Phelps, general manager, CommSec retail distribution.

    So far this year, China’s focus on growth has led to relatively strong demand for commodities from China’s infrastructure and manufacturing sectors. But as policymakers transition the Chinese economy towards consumption and services from mid-2018, the nation’s commodity consumption is expected to moderate.

    Nevertheless, the news is not all bad. “While demand for commodities is expected to drop, supply-side factors will also play a role in determining individual commodity prices,” says Phelps.

    When it comes to iron ore, Ric Spooner, chief market analyst at CMC Markets, says the relentless downwards trend in the spot iron ore price is not over yet.

    He says rising supply from Australia and Brazil has pushed the price down, which has helped inventories in China to grow to record levels.

    “In early June, they stood at a record 136.6 million tonnes, up 36 per cent over the past year,” Spooner notes.

    However, Ole Hansen, head of commodity strategy at Saxo Bank Group, says the iron ore price could stabilise over the coming months. “It could potentially ease further into the second half of this year.”

    Mathew Kaleel, co-head of managed futures and global commodities, Janus Henderson Investors, says major iron ore producers are still able to generate robust margins in the $US50 a tonne range.

    “Growth in supply will continue to be the major driver of returns, as opposed to demand, but the future for iron ore remains muted at best and we will likely see lower prices going into year end,” he says.

    Phelps expects iron ore prices to average $US55 a tonne by the December quarter, similar to spot prices now.

    “Our near-term price forecast over the next two months is more positive as high steel mill margins in China provide a powerful economic incentive for Chinese steel mills to boost output and iron ore consumption,” says Phelps.

    “Our overarching view over the next year is that surplus pressures will re-emerge, particularly as China moves away from prioritising stable growth in a leadership transition year. Supply is also expected to pick up as Brazilian and Australian projects ramp up output capacity,” he says.

    ‘Downside risk’ for coal

    Coal is another commodity largely driven by Chinese demand. “Its policies on infrastructure spending, steel production and pollution control are all variables [that determine the coal price],” says Spooner.

    “The most likely scenario is for prices to be steady around current levels but with some downside risk as the government looks to moderate infrastructure spending and property prices into next year,” he says.

    Phelps says coking coal prices are expected to moderate to about $US120 a tonne by the end of the year, as seaborne supply resumes following the impact of Cyclone Debbie on the Queensland coking coal sector in April. The cyclone likely sidelined up to 5 per cent of global export supply.

    “A lift in US and Mongolian exports is expected to mitigate most of the lost tonnage. Coking coal prices have already declined from highs of around $US315 a tonne in April to current spot prices of about $US150 a tonne,” says Phelps.

    “Thermal coal prices are expected to track sideways as China targets a price range equivalent to $US68 a tonne to $US77 a tonne. Policymakers have signalled a willingness to lift or reduce supply if prices move meaningfully away from this price range,” he says.

    Supply is also a focus in the oil market, where there has recently been a pick-up in trading.

    The US Energy Information Administration has upgraded US oil supply forecasts as oil rigs continue to ramp up. US oil rig counts have more than doubled in the last year, with rig operators adding rigs for 20 consecutive weeks – the longest streak in at least 30 years.

    “The market is always trying to work out what’s happening with the inventory cycle in the US, which has been improving,” says Chris Weston, chief market strategist, IG.

    CommSec expects Brent crude oil prices to lift to US$56 a barrel by the fourth quarter of this year as an OPEC-led deal to sideline global supply is extended.

    The focus on oil exports should help reduce global oil stockpiles towards the five-year average, which is OPEC’s target.

    “But compliance with the accord among non-OPEC producers remains an issue that needs to be addressed,” says Phelps.

    Gold keeps its shine

    Turning to gold, commentators are more positive about this market. “It’s looking strong,” says Weston.

    Hansen agrees. He says gold and silver both look positioned to gain from multiple political and economic uncertainties over the coming months.

    “Gold is currently breaking the downward trend that began in 2011. We maintain our end of year target of US$1,325 an ounce,” he says.

    According to Phelps gold prices have lifted higher on stronger safe haven demand, reflecting concerns about the Trump administration and tensions in the Middle East.

    “A softer US dollar has helped pushed gold prices higher. But we expect prices to weaken through the year towards US$1200 an ounce as safe haven demand retreats and as the US lifts interest rates,” he says.

    Higher US interest rates help increase US 10-year real yields, which has a strong inverse relationship with gold prices.

    “We expect this relationship will help put pressure on gold prices when US economic data outperforms and when the Fed lifts interest rates,” Phelps says.

    With so much movement in commodity prices, there are opportunities for smart traders to profit from positive and negative market movements.
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    Drax raises dividend and earnings outlook in bet on supply crunch

    British power producer Drax raised its dividend payout to shareholders and set a target to more than triple earnings by 2025 as it banks on higher rewards for its conventional power plants to back up renewable energy output.

    Drax, whose huge Yorkshire coal-fired power plant was once Europe's most polluting station, said on Thursday it would pay shareholders 50 million pounds ($64 million) in dividends this year, up from 10 million in 2015 and the first payout rise in seven years.

    It pledged to continue increasing dividends annually.

    The power producer also said it expects to be able to deliver earnings before interest, tax, depreciation and amortisation (EBITDA) of 425 million pounds by 2025, more than three times its core earnings in 2016.

    Most of these profits, or around 300 million pounds, will come from Drax's power generation business, it said, the core part of the company that has been hit hardest in recent years by weak electricity prices and sudden changes in government subsidy payments.

    Drax has been modernising its coal-fired power plant to run on wood pellets instead as Britain has imposed a coal plant shutdown by 2025 to curb carbon emissions.

    The power producer is now banking on the need for its biomass units and flexible gas plants, which it intends to build in the coming years provided they obtain contracts to produce back-up electricity, to complement solar plants and wind turbines.

    "These are very, very competitive plants in the capacity auction and we believe there are a number of factors that could lead to an improvement in the conditions of the capacity auctions going forward as the market is tightening," Drax Chief Executive Officer Dorothy Thompson told Reuters.

    Despite the bullish update, Drax's shares fell 2.4 percent by 0750 GMT, with analysts at RBC Capital Markets saying the lack of a definitive dividend trajectory was a disappointment.
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    Australia faces potential summer power crunch, market operator warns

    Eastern Australia's power grid will be stretched again if fierce heatwaves hit over the next two summers, despite recent government steps to beef up supply, the nation's electricty market operator said on Thursday.

    The latest outlook from the Australian Energy Market Operator (AEMO) comes three months after it warned that Australia's most populous states face a gas shortfall from the end of 2018 that could spark power or gas cuts to homes and businesses.

    That warning, a string of blackouts and soaring energy prices led the Australian government and states to step in to shore up supply, including restarting a mothballed gas-fired power plant, funding huge storage batteries and limiting gas exports.

    "This latest analysis indicates there will be challenges that will need to be managed proactively on days of extreme conditions to maintain secure, reliable and affordable energy to Australian consumers," AEMO Chief Executive Audrey Zibelman said in a statement.

    The AEMO said power supply should be adequate in normal summer weather, assuming 140 megawatts (MW) of energy storage backed by the South Australian and Victorian state governments is in place, there are no planned generator outages and three gas-fired generators return to service as promised.

    The market will need more coal-fired power in the state of New South Wales, more renewable power and higher output from gas-fired generators to replace a 1,600 MW plant shut by France's Engie SA in neighbouring Victoria in March.

    The grid would be most vulnerable in extreme heat on weekday afternoons and evenings when people switch on air conditioners, with the risk rising if the wind drops and the sun is down or other generation is disrupted at the same time, the AEMO said.

    Gas supply for two power stations that are being resuscitated to stabilise the grid will be key to avoiding power cuts, the body said in its Energy Supply Outlook (ESO).

    "The ESO analysis suggests gas supply remains tight, however, the latest industry projections of gas production are just sufficient to meet current projections of gas demand," the AEMO said.

    Companies ranging from the world's biggest miners, BHP and Rio Tinto, to steelmakers and brickmakers have raised alarm over unstable power supplies and soaring prices, which are threatening jobs.

    The AEMO's outlook comes on the heels of a call by Australia's chief scientist calling for the federal government to set a "fuel neutral" clean energy target that provides an incentive to build new generation to cap soaring power prices, cut carbon emissions and keep the lights on.
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    London Fire: systemic question?

    Image title

     I am a building inspector and fire engineer with 30 years’ experience. I’ve overseen numerous projects across London, including new builds and refurbishments, making sure buildings comply with the proper regulations, and post-occupation fire risk assessments. Given my experience, I was shocked by the blaze which engulfed Grenfell Tower in the early hours of Wednesday morning

    At this point in time it’s very hard to tell precisely what went wrong. We don’t know where the fire started and we don’t know how it spread. What we can say for sure is how the building should have performed – and that it definitely did not perform that way. If regulations were followed, what happened at Grenfell Tower should never have been possible, and there are very big question which need to be answered. There are already suggestions that proper planning procedures were not followed.

    Normally, British fire regulations assume that fires will start in one location only – and normally, this is completely reasonable. In a big tower block like Grenfell, each individual flat is a fire-tight box from which flames should not be able to escape, and a fire which starts in one tends to stay in it. That is why residents are usually advised to stay within their own rooms and wait for rescue. The fire service should arrive within ten minutes, ascend the building, and tackle the fire where it burns, while other residents sit quite happily in place.

    This is also why we shouldn't be disturbed by reports from Grenfell that there was no common alarm system installed. Most residential blocks don’t have common alarms, because they could trigger a mass panic in which everyone tries to evacuate via the same stairwell which the fire service are using to reach the fire. Unlike in a hotel, there are no fire trained fire wardens to safely direct such an evacuation. In the event that a fire grows too large, firefighters might sometimes decide to evacuate the floor immediately above. Otherwise, it’s better everyone stays where they are. That policy has worked several hundred times over the past few years without a problem.

    Forty fire engines with 200 officers were called shortly before 1am as flames engulfed the block from the second floor upwards
    Forty fire engines with 200 officers were called shortly before 1am as flames engulfed the block from the second floor upwards CREDIT: NIGEL HOWARD/EVENING STANDARD / EYEVINE

    What happened at Grenfell was something else entirely. Firefighters were on site six minutes after being called, which is within expectations. But it is extremely unusual for the fire to spread this far and with this speed and ferocity. Within half an hour or so it had travelled way beyond the first flat, making it very difficult for the fire services to control it. Even more worryingly, survivors have reported that stairwells and lobbies were choked with smoke, which should never happen: there are supposed to be means of clearing smoke from such areas. In those circumstances, “stay and hide” becomes obsolete.

    And yet to me the fire spread still had a horrifying familiarity. This has happened before, and – if we are not careful – it may happen again.


    In Knowsley Heights in Manchester in 1991, fire spread in a way no one had predicted via the decorative cladding on the outside of the building. These plastic or metal panels are installed to protect a building from weather or improve its appearance, but between them and the wall there is a cavity where rain can run down. In the event of a fire this acts like a chimney, drawing the hot air up through itself and making the flames burn brighter. In this way fire travelled all the way up from the base of the building to the very top.

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    China's May power output up 5pct YoY

    China's May power output up 5pct YoY
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    Global energy demand stumbles for third year, BP

    Global energy demand continued its sluggish rise last year as growth in Chinese consumption fell to its lowest in nearly two decades, while renewables flourished, Reuters reported, citing BP's  latest report

    Slower demand growth helped stall the acceleration of greenhouse gas emissions for a third year to levels not seen since the 1980s, but emissions remained well above targets set out globally under the 2015 Paris accord on climate change.

    Coal's share in the energy mix declined to its lowest since 2004 at around 28%, while production of the highly polluting fossil fuel saw its largest ever annual drop at 6.2%, BP said.

    Global energy demand grew by 1% in 2016, a rate similar to those seen in the previous two years but well below the 10-year average of 1.8%, the British company said in its benchmark Statistical Review of World Energy.

    "This is a third year where we've seen weak growth in world energy demand ... The new normal is that all of this growth is coming from developing economies," particularly China and India, BP Chief Economist Spencer Dale told reporters.

    China's energy demand growth in 2015 and 2016, 1.2% and 1.3% respectively, although still the strongest in the world, marked its lowest over a two-year period since 1997-98.

    While that slowdown resulted from sluggish global economic activity, it also stemmed from greater efficiency in engines and factories, he said.

    Cheaper and abundant gas supplies in the United States and China's drive to switch to cleaner feedstock for its power plants led to a 1.7% drop in demand for coal, the most pollutant fossil fuel.

    Renewables such as solar and wind power were the fastest-growing source of energy, rising by 12% and accounting for a third of the overall growth in demand.

    Still, renewables provide only 4% of the world's primary energy. China, meanwhile, overtook the United States for the first time as the largest producer of renewable power.

    The slowing growth in energy demand, the shift to cleaner fuels and energy efficiency meant carbon emissions grew by 0.1% last year, similar to the prior two years, making it the lowest three-year average for emissions growth since 1981-83.

    "While welcome, it is not yet clear how much of this break from the past is structural and will persist. We need to keep up our focus and efforts on reducing carbon emissions," BP Chief Executive Bob Dudley said.

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    Secret rebates send European plastics benchmark above true cost

    An unregulated benchmark used to set the price of plastics in Europe has veered above the true cost in recent years, because of secret rebates chemical companies give each other that disguise the price of the main precursor, four sources familiar with the industry say.

    Ethylene, a flammable gas, is the main feedstock used to synthesise the most commonly used plastics, found in the vast majority of all manufactured goods. It is produced in refineries from natural gas or crude oil, as one of the main products of the $400 billion global petrochemicals industry.

    When manufacturers buy and sell plastic, a benchmark of the ethylene price is often written into their purchase contracts, to reflect the raw material cost.

    But the European index is unregulated and, the sources said, has overstated the actual price for the past four years because it does not take into account the now common practice of firms negotiating rebates.

    The sources include one person at a petrochemical company and three people who research the industry.

    The actual price companies charge each other for the chemical is secret, and companies tend to offer big clients discounts from the benchmark to reflect economies of scale, local market conditions, or other factors. But those discounts have grown, making the benchmark a less accurate reflection of the real costs.

    Companies do not have to pass the rebates on to their customers further down the supply chain, who are contractually obliged to pay prices based on the higher benchmark.

    Reuters was unable to assess the degree to which the practice has hurt manufacturers of goods made from plastics. More than 10 companies that buy or sell ethylene, contacted by Reuters, declined to discuss their pricing, including any rebates they offer or receive.

    Most of the sources that spoke to Reuters said they did not believe rebates had made the market unfair. But they say the lack of transparency, and the divergence between the published benchmark and the true price, could create the potential for suppliers to overcharge customers who may be unaware of the practice.

    "There's an understanding that this is not a perfect process," said Matthew Thoelke, senior director of olefins and derivatives at analysis firm IHS.

    The sources said the petrochemical companies that participate in setting the ethylene contract price while giving or receiving rebates include Europe's biggest, such as BASF, Royal Dutch Shell, Total and LyondellBasell. BASF, Shell and Total declined to comment on their pricing. LyondellBasell did not respond to Reuters request for comment.


    The benchmark for the price of ethylene used in nearly all European contracts is produced by the Independent Chemical Information Service, or ICIS, which has published its "ethylene contract price" since 1980.

    ICIS is now a unit of Reed Business Information. Thomson Reuters, parent company of Reuters, competes with Reed as a supplier of benchmark prices for other commodities but does not publish a rival index price for ethylene.

    ICIS senior editor Nel Weddle said the benchmark, published after confirming agreements with at least four companies who buy and sell ethylene, allows everyone to start on a "level playing field" with knowledge of prices.

    However, the figures it uses to compile the index do not include rebates off the benchmark price. ICIS said it is not responsible for collecting information about such rebates, which it called "a common part of any supply or purchase contract".

    Although ICIS is the most widely used benchmark in Europe, it is not the only one. A competitor, Argus, publishes a rival index, which also does not take rebates into account. It declined to comment.

    Another competitor, Platts, has launched a new rival index which it says will better reflect the true market price by taking into account the rebates.

    The sources familiar with the practice said refineries began offering substantial rebates in 2013 to clear their stocks during a period of oversupply of ethylene. But instead of being a temporary measure to deal with local market conditions, the rebates grew after oil and gas prices tumbled in 2014, and have continued to widen since.

    The contract price of ethylene has hovered around 850-1,050 euros per tonne over the past year, down from a range of 1,200-1,300 euros before oil and gas prices fell in 2014. Rebates now run at more than 100 euros a tonne, the sources said.

    One of the sources, at a major research consultancy, said his firm's staff use their own contacts at chemical companies to get a sense of the secret rebates. The rebates are now a key to understanding the profitability of businesses in the sector, which is therefore harder to forecast solely from public data.

    Weddle of ICIS said the company was not aware of complaints from users of its benchmark about its omission of the rebates.

    However, last year ICIS conducted a review of its methodology and posted feedback online from some users of the index. One of three respondents whose views ICIS posted wrote that the published prices should begin to reflect rebates.

    "Otherwise, the reported contract prices do not reflect the real market situation and especially smaller suppliers and consumers are left in the dark," the respondent wrote. ICIS confirmed that the response was genuine but declined to identify who had written it.

    Some in the industry who spoke to Reuters sought to play down the significance of the disparity between the index and the price after rebates, saying the market is competitive enough to prevent customers who rely on the benchmark being overcharged.

    While Europe's benchmarks have their problems, "the situation in general is fair", said Jose Manuel Martinez, the chief executive of the Spanish oil company Cepsa's petrochemicals business.


    Unlike benchmarks for crude oil or the major refined fuel products like diesel and gasoline, the ICIS benchmark for ethylene is not formally scrutinised by regulators, as ethylene contracts are not typically traded on securities exchanges.
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    Brazil graft probe targets former head of Petrobras

    A judge in Brazil has ordered a corruption investigation against Aldemir Bendine, the former head of state-run oil company Petrobras, according to a court document released Tuesday.

    Federal judge Sergio Moro also found Sergio Cabral, a former governor of Rio de Janeiro state, guilty on corruption and money laundering charges and sentenced him to over 14 years in prison.

    Investigators allege that while Bendine was at the head of Petrobras, he asked for and received 3 million reais ($907,770) in bribes from construction firm Odebrecht SA.

    Bendine was tapped by former president Dilma Rousseff to lead Petroleo Brasileiro SA, known as Petrobras, in early 2015, after the public learned about the sprawling "Car Wash" corruption investigation.

    Moro's order suggests corruption may have continued at Petrobras while the Car Wash probe investigated construction firms for paying billions of dollars in kickbacks to politicians and former executives at the oil company in return for lucrative contracts.

    Bendine's lawyers, Bottini and Tamasauskas Advogados, said in an emailed statement that he never received any bribe while at Petrobras or when he was head of state-run Banco do Brasil.

    Petrobras did not respond to requests for comment.

    The accusation against Bendine is based on plea-bargain testimony from Odebrecht's imprisoned former chief executive Marcelo Odebrecht, who testified Bendine was paid in return for helping his company win contracts.

    Odebrecht is among several firms that have admitted guilt and reached leniency deals during the three-year probe, which has expanded to include alleged graft at several other state-run enterprises.

    Odebrecht's media office said in an emailed response that it was fully cooperating with authorities on all investigations, as the leniency deal the company signed demands.

    Bendine resigned from the helm of Petrobras in May 2016 after the impeachment of Rousseff.

    Federal prosecutors late last year accused Cabral of leading a criminal organization they say took 224 million reais in bribes from construction firms in exchange for infrastructure contracts from 2007 to 2014, when he was serving as governor.

    Cabral was specifically found guilty of receiving 2.7 million reais in bribes from construction firm Andrade Gutierrez that was paid in exchange for the company winning building contracts for a petrochemical complex in Rio, according to a court document.

    During his trial, Cabral said he did not receive the bribe. Andrade Gutierrez said it would not comment on the case.

    Cabral, who faces nine other corruption trials, will appeal the verdict, said Rodrigo Roca, one of his lawyers.

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    Argentina signs mining deal to unify regulations, attract investment

    Argentina's national government and the governors of 20 provinces signed a mining deal on Tuesday to harmonize taxes and regulations in hopes of attracting investment, but the action was criticized by industry sources and environmentalists alike.

    The agreement, which needs approval from Congress and the 20 provincial legislatures, sets a 3 percent ceiling on royalties mining companies pay to provinces.

    "It's an activity that could be one of the pillars of job creation," President Mauricio Macri said of mining at the signing ceremony. "We can develop it with perfect care of the environment."

    Latin America's third-largest economy has fallen behind Chile and Peru in attracting mining investment despite rich deposits of copper, gold, silver and zinc. Macri's center-right government has been trying since last year to unify regulations to woo foreign miners.

    Shortly after taking office, Macri eliminated export taxes on metals and lifted a prohibition on companies sending profits overseas, two moves celebrated by the sector. But seven of the country's 23 provinces still prohibit certain practices, like open-pit mining and the use of cyanide, crucial to extraction.

    Despite the limit on royalties, the deal signed on Tuesday would allow provinces to levy a tax of up to 1.5 percent of miners' sales for local infrastructure funds.

    "The new deal doesn't change the regressive nature of the current tax, which is on mineral sales, and furthermore adds another tax of 1.5 percent. It will reduce the sector's competitiveness," said an industry source who spoke on condition of anonymity.

    "Investments will continue to favor Chile and Peru."

    Among the three provinces that declined to sign the deal was Chubut, located in the southern region of Patagonia, where Pan American Silver's Navidad project has been on hold since 2013 when it ran afoul of provincial rules banning the use of cyanide and open-pit mining.

    Manuel Jaramillo, executive director of environmental NGO Fundacion Vida Silvestre, told Reuters that environmental groups were not invited to participate in the crafting of the deal and that the government never requested public comment on the details of the agreement.
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    Rio Tinto CEO sees Canada as less business-friendly than in past

    The chief executive of Anglo-Australian miner Rio Tinto , which owns iron ore, diamond and aluminum mines and processing facilities in Canada, said on Tuesday that it was becoming tougher to do business in the resource-rich country.

    "You know mining well and you understand its value, but to be very frank it has been getting harder to do business here over the years - from employee relations to tax to managing land access," Rio Tinto CEO Jean-Sebastien Jacques said in prepared remarks to be delivered at the International Economic Forum of the Americas in Montreal. Jacques did not elaborate on his comments.

    Calling it the "biggest mining and metals company in Canada," Jacques said Rio Tinto had paid C$3.9 billion ($2.93 billion) in Canadian taxes since 2011 while investing more than C$8 billion.

    Rio Tinto employs around 15,000 people in Canada at more than 35 sites, including the Iron Ore Company of Canada in Quebec and Newfoundland and Labrador, the Diavik diamond mine in the Northwest Territories and an aluminum smelter in British Columbia.

    A Quebec court ruled in 2014 that a C$900 million lawsuit by two Canadian aboriginal communities against a subsidiary of Rio Tinto can proceed. The communities in eastern Canada have said that more than 50 years of iron ore mining in the region has disrupted their traditional way of life.

    Jacques said that investment and growth drove wealth generation, which in turn created higher living standards. Fair trade was also key, he said.

    "The danger in the current climate is that we focus on wealth distribution and not wealth creation. Both are absolutely critical, but without growth we will have no wealth created to fairly distribute," he said.
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    Elliott calls for BHP board overhaul as new chairman looms

    Activist shareholder Elliott Management called on BHP on Wednesday to "upgrade" its board of directors as the mining giant prepares to select a new chairman this week.

    "BHP has an entrenched board, with long-tenured directors having approved the disastrous acquisitions and poorly timed share buybacks that are at the root of much of today's underperformance," Elliott said in a statement.

    "A significant upgrade in directors is needed."

    Elliott, a New York-based fund that has built up a 4.1 percent stake in BHP, has maintained a barrage of criticism of the global miner since releasing a list of changes it wants at the company, including an exit from its U.S. oil shale business.

    BHP's board of directors is currently meeting in Chile, home to the company's vast copper mining business, where it is expected to select a new chairman.

    Australian wealth management group Escala and fund Tribeca Investment Partners have also campaigned for a revamp at the company, with calls for board changes and reviews of the energy divisions.

    In a note last week, AMP Capital, one of BHP's largest shareholders, called on the miner to conduct an "independent assessment" of Elliott's proposal to unify BHP's dual-listed company structure and to "prove the worth of its U.S. onshore business and why it is compatible in the BHP portfolio."
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    Qatar closes helium plants amid rift with Arab powers

    Qatar, the world's second largest helium producer, has closed its two helium production plants because of the economic boycott imposed on it by other Arab states, industry sources told Reuters on Tuesday.

    The helium plants operated by RasGas, a subsidiary of state-owned Qatar Petroleum, were shut because Saudi Arabia closed its border with Qatar, blocking overland exports of the gas, a Qatar Petroleum official told Reuters.

    The official declined to be named under briefing rules. Phil Kornbluth, head of U.S.-based industry consultants Kornbluth Helium Consulting said his sources had confirmed the closure.

    The two plants have a combined annual production capacity of approximately 2 billion standard cubic feet of liquid helium and can meet about 25 percent of total world demand for the gas, according to RasGas' website.

    Among its uses, helium is used to cool superconducting magnets in medical magnetic resonance imaging (MRI) scanners, as a lifting gas in balloons and airships, as a gas to breathe in deep-sea diving and to keep satellite instruments cool. It is derived from natural gas during processing.

    Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut diplomatic and transport ties with Qatar last week, accusing it of supporting terrorism, a charge which Doha denies.
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    Putin Meets With Ethereum Founder To Create National Virtual Currency

    Ethereum, we said "step aside bitcoin, there is a new blockchain kid in town." Actually, we said that for the first time back in February when Ethereum was still trading in the low teens (the return on ETH since then is roughly 3000%), but the most recent glance provided some perspective on where the competition between the two largest cryptocurrencies may culminate, because according to at least two venture capitalists, the market cap of Ethereum - currently roughly $35 bilion - and whose share of the market has been soaring, will surpass that of Bitcoin, at ~$43 billion although it changes by the second, sometime before the end of 2018.

    Two things: first, at the current rate of gains in Ethereum market share (and loss in Bitcoin's), the inflection point between the two will come not in months, or weeks, but perhaps days.

    Second, said inflection point may come in even faster if Vladimir Putin has anything to say about it, because as Bloomberg reports, "Ethereum has caught the attention of none other than the Russian president as a potential tool to help Russia diversify its economy beyond oil and gas." Putin met Ethereum's young founder Vitalik Buterin on the sidelines of the St. Petersburg Economic Forum last week and supported his plans to build contacts with local partners to implement blockchain technology in Russia, according to a statement on Kremlin’s website.

    Speaking at the Economic Forum, Putin said that "the digital economy isn’t a separate industry, it’s essentially the foundation for creating brand new business model" and discussed means to boost growth long-term after Russia ended its worst recession in two decades. As explained repeatedly over the past 6 months, besides being a method of exchange, Ethereum is also a ledger for everything from currency contracts to property rights, speeding up business by cutting out intermediaries such as public notaries. It also does not suffer from some of the size limitations that have paralyzed bitcoin in recent months.

    Furthermore, just like the western Enterprise Ethereum Alliance which consists of JPMorgan, Intel, Microsoft and other leading blue chips, Russia’s central bank has already deployed an Ethereum-based blockchain as a pilot project to process online payments and verify customer data with lenders including Sberbank PJSC, Deputy Governor Olga Skorobogatova said at the St. Petersburg event. She didn’t rule out using Ethereum technologies for the development of a national virtual currency for Russia down the road.

    Adoption of Ethereum in Russia has been brisk also in the private sector: last week, Bloomberg reports that Russia’s state development bank VEB agreed to start using Ethereum for some administrative functions. Steelmaker Severstal PJSC tested Ethereum’s blockchain for secure transfer of international credit letters.

    Blockchain may have the same effect on businesses that the emergence on the internet once had -- it would change business models, and eliminate intermediaries such as escrow agents and clerks,” said Vlad Martynov, an adviser for The Ethereum Foundation, a non-profit organization that backs the cryptocurrency. “If Russia implements it first, it will gain similar advantages to those the Western countries did at the start of the internet age.”

    What about price targets? Pavel Matveev, co-founder of Wirex told CNBC today that Ethereum could reach $600 by the end of the year, leaving bitcoin in the dust. Until just a few short weeks ago, such a forecast would seem ludicrous. However, considering the recent surge in ethereum prices - recall it hit an all time high of $412 earlier today before sharply dropping then again erasing virtually all losses - it may reach that particular target in just a few weeks.
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    Hot ICO: iDice

    iDice is the world’s first mobile gambling platform that offers support for IOS and Android systems. The iDice crowdsale is currently live. The iDice beta has generated 720ETH ($231,000) in user profits without any promotion.

    Ever since the sale of SatoshiDICE in 2013 for a record smashing 126,315 BTC ($315,787,500 USD in today’s prices), Dice betting has played a major role in blockchain history. To investors, iDice represents a revolution in the blockchain gambling sphere. iDice’s revolutionary mobile app brings the long-awaited dice game to mobile devices.

    The timing of iDice is perfect, as Ethereum’s market quickly catches up with bitcoin. iDices is a prime opportunity for crowdfund investors to get in on the growth of Ethereum as it continues to make all time highs.

    iDice’s business strategy is simple. Instead of competing directly with pre-existing betting Dapps on desktop websites, it targets mobile users with its upcoming app. There is currently no mobile blockchain betting platform that exists. Players looking to play from mobile devices have to deal with cumbersome mobile version sites, something iDice is looking to eliminate. Jordan Wong, Founder and CEO of iDice, emphasizes the importance of mobile development not just for gambling but for blockchain technology:

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    I spy an uptick?

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    Trump says anti-dumping bill for steel, aluminium coming soon

    Legislation to address the dumping of foreign steel and aluminium in the United States will come "soon," U.S. President Donald Trump told reporters at the White House on Monday.

    Trump, speaking ahead of a scheduled meeting with his Cabinet, gave no other details about the forthcoming proposal.
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    Trump officials to unveil plan to cut factory rules this week

    The Trump administration intends to unveil this week a plan to trim regulations it believes constrain U.S. manufacturing growth, potentially affecting environmental permits, worker safety and labor rules, an administration official said.

    The U.S. Commerce Department's regulations "hit list" recommendations follow more than three months of study and consultation with industry on ways to streamline regulations and ease burdens on manufacturing firms.

    A Trump administration official with knowledge of the recommendations to be sent to the White House said the Environmental Protection Agency's complex permitting rules will be a key focus, echoing comments to Reuters by Commerce Secretary Wilbur Ross last month.

    The 171 public comments submitted by companies and industry groups offer a strong hint to priorities for Commerce's streamlining efforts, with numerous industry groups and firms complaining that EPA air quality permit rules for new facilities are often redundant.

    The report will analyze the submissions and "will identify a lot of problems and lay out ways to take responsible actions," saidd the official, who declined to be identified by name. The process has looked at many regulations finalized under Trump's predecessor, President Barack Obama.

    A common demand from industry was that the Trump administration should reject a planned tightening of ozone rules under the U.S. Clean Air Act's National Ambient Air Quality Standards, with several groups arguing this would expose them to increased permitting hurdles for new facilities, raising costs.

    3M Co said other permitting requirements under the Clean Air Act contained "overlapping rules, redundant requirements, conflicts between rules and undue complexity."

    The National Association of Manufacturers said the EPA's review requirements for new sources of emissions such as factories can add $100,000 in costs for modeling air quality to a new facility and delay factory expansions by 18 months.

    It added that EPA should find ways to ease burdens for smaller projects and smaller firms.

    Also drawing complaints from construction groups and iron foundries is an incoming Occupational Safety and Health Administration rule reducing by 80 percent the amount of crystalline silica dust that can be inhaled.

    The dust, common on construction sites, can cause lung cancer, according to OSHA, but industry groups say reducing it to those levels will be prohibitively expensive.

    "To meet these much lower levels, new engineering controls and other measures will become necessary within the roofing industry," said the National Roofing Contractors Association.

    Trump has already taken steps to roll back some not fully completed Obama-era environmental regulations such as restrictions on coal-fired power plants and a clean water rule greatly restricting runoff into small streams.

    But the Commerce list may target some rules already on the books.

    "We are at the outset of what we think will be a very intense deregulatory agenda from the Trump team," said Amit Narang, regulatory policy advocate at Public Citizen, a consumer watchdog group. "We are concerned that they are looking to gut regulations that benefit workers and benefit consumers."

    Another OSHA rule that drew industry complaints is one that further reduces worker exposure to beryllium, another potential carcinogen, that became effective on May 20 after a decade-long rulemaking effort.

    Manufacturing groups including auto parts makers have also targeted labor rules that make it easier for unions to organize workers, expand the number of employees eligible for overtime and govern the reporting of workplace injuries.

    The range of industry complaints is vast. Mining giant Freeport-McMoRan argued that planned EPA financial responsibility requirements for hard rock mining operations costing billions of dollars were based on inadequate study and "will have disastrous consequences for the mining industry."

    Guitar maker Taylor Guitars said that permits needed from the Fish and Wildlife Service for mother-of-pearl used to decorate instruments was unnecessarily raising its costs.

    "This declaration requirement does not seem to serve any conservation or other purpose. The shell is not a species that is protected under law," the company said
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    Another Chinese region faked fiscal data, anti-corruption agency says

    Some parts of northern China's Inner Mongolia have fabricated fiscal data, China's anti-corruption agency said, making it the third Chinese region exposed for data falsification after the rust-belt provinces of Liaoning and Jilin.

    The latest finding will bolster long-existing scepticism about the reliability of Chinese economic data, reflects local governments' penchant for inflating statistics amid a protracted slowdown in the world's second-largest economy.

    In a summary of its findings from an inspection tour of eight provinces and government institutions, the Central Commission for Discipline Inspection said on Sunday that "some places" in the autonomous region had faked data.

    It did not provide details.

    In January, the northeastern province of Liaoning said in its annual work report that the government had falsified reporting of fiscal data from 2011 to 2014, a rare incident that prompted authorities to ramp up rhetoric against data fraud and to improve data quality.

    Attached Files
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    Brazil electoral court dismisses case that could have ousted president

    Brazil's top electoral court dismissed a case on Friday that threatened to unseat President Michel Temer for alleged illegal campaign funding in the 2014 election, when he was the running mate of impeached President Dilma Rousseff.

    The ruling gives Temer some breathing room but will not end a political crisis enveloping the beleaguered center-right leader. He is being investigated separately by federal prosecutors for corruption, obstruction of justice and racketeering.

    "We cannot be changing the president of the Republic all the time, even if the people want to," said the court's chief judge, Gilmar Mendes.

    Mendes, who backed the impeachment of Rousseff, said the country should not expect the court to solve the current political crisis.

    The electoral court, known as the TSE, voted 4-3 to acquit the Rousseff-Temer ticket of wrongdoing. That avoided the annulment of their election and the removal of Temer from office. He took over a year ago following Rousseff's impeachment in the midst of Brazil's worst recession on record.

    In a decisive move, that same majority had ruled on Thursday to not allow as evidence in the case plea-bargain testimony from 77 executives of the Odebrecht construction firm, which is at the center of a vast political graft scheme.

    Those witnesses told investigators they funneled millions of dollars in illegal funds into the 2014 Rousseff-Temer ticket. But the testimony was made more than a year after the beginning of the case that concluded Friday, and without it Temer's lawyers argued there was no proof of wrongdoing.

    The acquittal will help Temer, whose government's poll ratings are in the single digits, retain key coalition allies who will support approval in Congress of his fiscal reform agenda. The austerity measures aim to bring a gaping budget deficit under control and restore investor confidence.

    Alexandre Parola, a spokesman for Temer, said after the ruling that the president viewed the decision as an example of effective institutions keeping the country's democracy working.


    Political analysts said the acquittal was disastrous for the credibility of Brazil's judiciary, the government institution that polls show is most trusted by Brazilians. Some warned it would add to growing disillusionment with democracy.

    "This catastrophic ruling prolongs the survival of a government that has lost all credibility and can no longer govern," said Roberto Romano, professor of ethics and political philosophy at Campinas University. He said it would add to a small but worrying trend of Brazilians favoring a return to military rule.

    Temer, a third of his Cabinet and dozens of powerful congressmen are under investigation for corruption.

    The leader is likely to soon face separate charges in the case involving allegations of receiving bribes and condoning the payment of hush money handed over to a potential witness in a massive graft scandal, investigators have told Reuters.

    The Supreme Court approved the investigation into the president late last month.

    But to put him on trial, the charges against the president would have to be approved by two-thirds of the lower chamber of Congress, where Temer's coalition retains a majority.

    With an election year approaching in 2018, however, the governing coalition's majority could shrink if lawmakers break away, concerned about voters punishing them for being part of a government overwhelmingly perceived in polls as corrupt.

    Acquittal by the electoral court could help Temer's main coalition ally, the Brazilian Social Democracy Party (PSDB), convince its younger members who want to bolt from the government to stay put and help push unpopular reforms through Congress.

    But political volatility will not die down.

    "The days ahead will be very difficult for Temer. The corruption investigations are just starting," said Flavia Bahia, professor at the CERS law school and FGV think tank in Rio de Janeiro. "The government can't be sure of its allies anymore."

    The separate investigation by prosecutors into Temer includes a secret recording of a conversation he had earlier this year with a former top executive of meatpacker JBS SA.

    In it, the president appears to condone paying bribes to an imprisoned former lawmaker to keep him from turning state's witness and providing potentially devastating testimony about graft.

    Temer has denied any wrongdoing and insists he will never resign. But a one-time top aide to the leader, Rodrigo Rocha Loures, was caught on a police video released last month picking up a bag filled with 500,000 reais ($152,000) in cash from a JBS executive, allegedly meant to silence the potential witness.

    Temer aides told Reuters they worry that if Rocha Loures decides to reach a plea-bargain deal with investigators, it will strengthen any charges filed against the president.
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    China detains three over zinc-laden waste dumped into river

    China has detained three people suspected to be responsible for the discharge into a river of industrial waste water containing 180 times the maximum safe amount of zinc, state news agency Xinhua said on Saturday.

    The detentions of a factory owner and two managers followed an inspection in Linhai city, in the eastern coastal province of Zhejiang, that revealed the dumping of unprocessed waste water by a plant making auto repair tools, Xinhua said.

    It cited an unnamed city official as saying the water, used for metal polishing and surface treatment, showed excessive levels of zinc, bronze and nickel, with the zinc content at more than 180 times the limit.

    The three suspects face charges of polluting the environment, and could be jailed for up to seven years if convicted, the agency added.

    Worried by the social and political impact of pollution, China has vowed to crack down on lawbreaking companies and the local governments that protect them.

    Efforts to tackle water pollution remain uneven, however, with some areas worsening in 2016, the environment ministry said in April.
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    Energy giants reportedly in merger talks

    China Shenhua Energy Co said in a filing on June 4 with the Hong Kong Stock Exchange that it was informed by its parent company - China's largest coal miner, Shenhua Group Corp - of "a significant matter containing substantial uncertainty that is subject to the approval of the relevant authorities".

    On the same day, Guodian Technology and Environment Group, the listed unit of China Guodian Corp, one of the nation's largest coal-fired power generators, issued a similar statement, saying it was informed of the "proposed planning of a significant event".

    It was believed that the two energy giants were in merger discussions. Neither responded to requests for comment.

    A merger of the energy giants would see the creation of a bigger and more competitive state-owned enterprise in the global market, says Zhou Dadi, a senior researcher at the China Energy Research Society.

    Wu Qi, an analyst at the commercial bank research centre of the research institute of Hengfeng Bank, said that the merger of a power generator and a coal miner would be a win-win solution.

    Economies participating in the Belt and Road Initiative see massive shortages in power generation and supply, and a merger would help the Chinese company better penetrate foreign markets, Wu said.

    China has vowed to further cut its industrial overcapacity to accelerate restructuring of the nation's huge state-owned enterprises sector.

    Peng Huagang, deputy secretary general of the state-owned Assets Supervision and Administration Commission, said recently at a news conference that the government plans to focus on the restructuring of the coal, power, heavy equipment manufacturing and steel sectors, and explore overseas asset integration.

    China is also considering merging two of its nuclear power giants, as the Shanghai-listed units of China National Nuclear Corp and China Nuclear Engineering Corp Group said earlier in March that a strategic reorganization of the companies was underway.

    China's 102 centrally administered SOEs made a combined profit of 825 billion yuan ($121.4 billion) during the first four months of this year, up by 24.8% year-on-year, according to the Ministry of Finance.

    Lin Boqiang, head of the China Institute for Energy Policy Studies at Xiamen University, warns that in addition to increased competitiveness in the international market, there might also be excessive concentration that could damage domestic market competition.

    It might not have a substantial impact on turning the energy companies' losses into gains, he said.
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    Stressed balance sheets cast cloud over Modi-led India rebound

    Vikas Patharkar borrowed $700,000 in 2014 to set up a factory to make electric transformers on the outskirts of Mumbai, buoyed by the promise of massive government spending and hopes of a strong economic rebound.

    Three years later, production has yet to begin. But servicing the debt is cutting into overall profits at his Lustre Engineering, which also offers electrical services, and the 59-year-old may have to sell off assets to repay the bank.

    Patharkar says India's bureaucrats are to blame for denying contracts to small businesses like his, and has taken one state-run power company to court to challenge its tendering process.

    "Government has put in place a very good public procurement policy, but officials on the ground are not implementing it," he said.

    Bureaucracy is only one of the more visible parts of a problem that is vastly more systemic since Asia's third-largest economy started to falter, burdened by $150 billion in bad loans, excess and idle capacity and stalled private investment.

    Private capital investments contracted 2.1 percent in the first three months of this year despite a surge in government spending, dragging economic growth to 6.1 percent, its lowest in more than two years.

    Signs for the current quarter are also not encouraging. According to CMIE, a think tank, new investment proposals in April and May were down by more than half from the same period in both of the last two years.

    The culprit is a so-called twin balance-sheet phenomenon: reduced new investment by stressed private companies, which account for three-quarters of India's total capital spending, and one of the highest bad-loan ratios among emerging economies.

    The bad loans have forced banks to curb overall lending growth and cut their credit exposure to industry, while the share of capital investments in India's GDP has dropped to below 30 percent from more than 38 percent a decade ago.

    "The motivation to invest into new capacities is falling," said Mahesh Vyas, chief executive officer at CMIE.

    Foreign portfolio investors remain bullish about India, pumping $19 billion into Indian stock and bond markets since January, lured by the country's relatively strong fundamentals.

    But the World Bank warned last week that prospects for developing economies like India were being undermined by weak investment.

    If the trend continues, it may thwart India's hopes of replicating the growth that dramatically boosted employment, reduced poverty and increased per capita income in China.

    The downbeat mood is a far cry from the bullish sentiment among businesses three years ago when Prime Minister Narendra Modi was running for India's top job.

    His reputation, built while running the western state of Gujarat, of speeding up implementation of infrastructure projects and promoting manufacturing raised hopes of a similar push at the national level.

    To be sure, his administration has spent billions of dollars on rail, road, port and power projects and pushed through a slew of steps to cut bureaucratic red tape and attract investments, the benefits of which, many believe, are still to come.
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    Japan's Tepco, Chubu eye $910 million cost cut from merging fossil businesses

    Tokyo Electric Power Company Holdings (Tepco) and Chubu Electric Power Co said on Thursday they aim to cut costs by more than 100 billion yen ($910 million) a year within five years after combining their fossil fuel power plants under their JERA Co joint venture.

    The two companies, which had agreed on the integration in March, signed a contract for this on Thursday.

    The biggest and the third-biggest of Japan's regional power utilities aim to combine the businesses in April-September 2019 to form a company that will oversee 68 gigawatts of capacity in the country and account for nearly half of domestic power generation.

    One of the sticking points for Chubu was that Tepco was essentially nationalized after the Fukushima nuclear disaster in 2011, which may put pressure on JERA to provide ample dividends to help pay for decommission and compensation.

    To relieve Chubu's concerns, the two companies agreed to put in place the measures to limit the dividends to the parents so that JERA would receive enough internal reserves to make its expansion goals possible.
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    Hayek would have loved Ether!

    The interesting part here is that despite all of these steps, the minority chain can continue to operate and have value. This function is an underestimated quality of public blockchains, even by some individuals within the public blockchain space, because they miss the philosophical basis of blockchain’s creation.

    Despite what some may have previously said in the blockchain’s early days, the foundations of ethereum, the currency, are not based on fringe thoughts, but on the mainstream insights of a Nobel prize winner, Friedrich August Hayek, who spent much of his life studying money. He states in The Denationalization of Money:

    “The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process… only competition in a free market can take account of all the circumstances which ought to be taken account of.”

    The genius of Nakamoto was to force the creation of free market money through a decentralized mechanism, thus making a checkmate move as it can not be shut down save for by the judgement of the market. By it’s judgement alone eth lives or dies and if some parts of the market think it should split, the best-managed currency rises through market competition, or, alternatively, its mismanagement or lower quality courts the market’s punishment.

    That’s just one aspect, because ethereum is not just money. It is an upgrade of money as it turns paper into pure code. Code we can modify, order around through ifs, thens, while loops. Code we can incorporate into our websites, into our videos, our games, our cars, airoplanes, trains, smartphones, fridges.

    The potentials here we can not quite comprehend. So much will be automated. So much value will be exchanged with no human oversight or action. There will be deep webs of algorithms, too complicated for anyone to understand. Machines moving around on their own, based on if, thens, exchanging value based on our code orders. Cars driving themselves, automatically paying the charging station.

    The efficiency gains might be higher than ever in history. Man, perhaps, will finally be freed. Yet, we pray, he is not instead fully enslaved.

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    BP, Eni, Wien Energie report successful blockchain.

    A trio of major energy firms – oil giants BP and Eni along & Wien Energie, Austria’s largest energy company, have completed an energy trading pilot over a blockchain developed by Canadian firm BTL.

    The ‘intense 12-week pilot, as described by BTL, involved testing an energy trading confirmation solution over BTL’s Interbit blockchain platform. As CCN reported during its launch in January 2016, the Interbit platform is a multi-chain ledger that facilitates transfers of funds and assets for remittance and data sharing.

    The Interbit platform also claims to automate a number of enterprise back-office processes, including confirmations, invoice generations, settlement, audit, reporting, actualizations and regulatory compliance. Benefits include lowered costs, increased efficiency, and reduced risks.”

    The pilot proved successful in all test scenarios in processes involved in an energy trade lifecycle. The next step, BTL reveals, is to bring in additional energy companies as participants for energy trading over the blockchain. The pre-production phase is to last 6 months, where the solution will run alongside energy companies’ existing trade systems. A commercial live blockchain-based energy trading solution in real-world environments is next.

    Guy Halford-Thompson, BTL’s Co-Founder and CEO stated:


    Having demonstrated the reductions in risk and cost savings that are achievable we now have an opportunity to deliver the first successful blockchain based application to the energy market.

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    Project Ubin: Singapore's MAS test's Blockchain successfully.

    Singapore’s central bank has published a post-trail analysis of its blockchain endeavor that saw digital tokens of the national currency issued on a private Ethereum blockchain.

    Get exclusive analysis of bitcoin and learn from our trading tutorials. Join for just $39 now.

    A newly published report by the Monetary Authority of Singapore (MAS), reveals details of ‘Project Ubin’ its blockchain effort “which places a tokenized form of the Singapore Dollar (SGD) on a distributed ledger” platform.

    The project is a part of the central bank’s joint-endeavor with blockchain consortium R3, which notably launched the ‘R3 Asia Lab’ in Singapore in November. Soon after, the central bank announced the development of a blockchain proof-of-concept pilot to facilitate interbank payments. The project was Project Ubin, before it got its name.

    In March this year, the MAS completed the first phase of that pilot and revealed the token powering the interbank blockchain platform – a central bank-issued digital currency. Participating banks deposited cash as collateral in exchange for these digitized dollars, with payments and transfers between member banks settled using the MAS-issued digital currency. Ultimately, the banks would swap the digital currency to cash.

    A Private Ethereum Blockchain

    Now, in its report that goes with the tagline “The future is here”, the MAS has detailed findings of Project Ubin.


    A technical excerpt from findings of Phase 1 of its pilot, which successfully completed the proof-of-concept (PoC) project points to:

    A working interbank transfer prototype on a private Ethereum network…(and) successfully conducted end-ot-end integration between the private Ethereum network and MEPS+.

    MEPS+ is the central bank operated Electronic Payment System, the national payments rail platform which enables domestic and international payments in Singapore.

    Attached Files
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    Oil and Gas

    Qatar Crisis Spills Into Libya, Entangling Glencore Over Oil

    The Qatar crisis is reverberating in Libya, inflaming political divisions in the war-torn oil exporter and dragging commodity-trading giant Glencore Plc into a dispute over crude sales.

    The row involves competing administrations of the National Oil Corp. that are vying to control crude exports from the OPEC member. In eastern Libya, the local military commander is backed by Saudi Arabia, the United Arab Emirates and Egypt, three of the countries attempting to isolate Qatar. The head of the NOC in that part of the nation has accused Qatar of using its 8.5 percent stake in Glencore to control the the Swiss trader’s sales of Libyan crude.

    The chairman of the NOC administration in the western city of Tripoli, Mustafa Sanalla, denied that Qatar has control over Glencore’s operations. He said NOC extended an agreement with Glencore to sell all quantities of Mesla and Sarir crude blends that exceed the needs of local refineries.

    The deal, originally signed in 2015, was renewed in December and now runs through the end of the year, Sanalla said in a June 11 letter addressed to a Libyan legislator and given to Bloomberg.

    “The National Oil Corp. succeeded in selling all the available production from Mesla and Sarir thanks to its contract with Glencore despite the fierce war for consumers in the international markets,” Sanalla said in the letter. “This contract allowed Libya to earn regular foreign currency inflows.”

    Glencore declined to comment.

    Instability Risk

    Qatar, the world’s richest country per capita and biggest producer of liquefied natural gas, faces commercial isolation after Saudi Arabia, the U.A.E., Bahrain and Egypt cut economic and diplomatic ties with the country last week. Their gambit threatens to exacerbate instability in Libya, which is struggling to restore oil output and exports after it collapsed into lawlessness following a 2011 uprising.

    The Abu Attifel oil field, operated by Mellitah Oil & Gas, resumed production after halting in March due to a technical failure and lack of storage space, a person familiar with the situation said Wednesday. In another sign of progress, the Sarah oil field also restarted pumping crude after the NOC announced it has settled differences with Wintershall AG, according to another person familiar with the matter.

    Nagi Maghrabi, chairman of the eastern NOC, accused Qatar of “financing terrorists” in Libya through Glencore’s sales of the country’s crude. Qatar controls Glencore through its shareholding, he said in a June 9 interview with the Cairo-based Youm7 newspaper.

    Qatar Links

    The head of the eastern government, Tobruk-based interim Prime Minister Abdullah al-Thinni, ordered an NOC unit called Arabian Gulf Oil Co. and other companies to immediately halt crude exports and cancel all deals with Glencore or any other business that has links with Qatar. Agoco operates the eastern port of Hariga, which exports the Mesla and Sarir crude blends. Any violators of the order will face legal challenges, Al-Thinni said in a statement dated June 14 and posted on his cabinet’s website.

    Hariga is operating normally, Agoco spokesman Omran al-Zwai said Thursday by phone. Agoco’s board will meet in a few days to discuss the order, he said.

    The Qatar Investment Authority, the nation’s $335 billion sovereign wealth fund, has a stake of less than 9 percent in Glencore. It also has significant shareholdings in Rosneft PJSC, Royal Dutch Shell Plc, Barclays Plc and Volkswagen AG. The QIA has no representatives serving on Glencore’s board so has no operational control over the company, Sanalla said in his letter, addressed to Yousef al-Akouri, a member of Libya’s parliament and president of the committee in charge of NOC affairs.

    For Libya’s remaining crude blends, the Tripoli-based NOC has sales agreements with 15 other companies, Sanalla said. They include Eni SpA, Total SA, OMV AG, Repsol SA, Rosneft Oil Co., Lukoil PJSC, Cepsa, Saras SpA, Socar, Unipec, Vitol Group, Gunvor Group, Petraco SpA and BB Energy, he said.
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    Funds pull back from Permian as U.S. shale oil firms go into overdrive

    Cash, people and equipment are pouring into the prolific Permian shale basin in Texas as business booms in the largest U.S. oilfield. But one group of investors is heading the other way - concerned that shale may become a victim of its own success.

    The speed of the recovery in the U.S. shale industry in the past year has surprised oil investors after a global supply glut led to a two-year crude price slump and bankrupted many shale firms.

    Eight prominent hedge funds have reduced the size of their positions in ten of the top shale firms by over $400 million, concerned producers are pumping oil so fast they will undo the nascent recovery in the industry after OPEC and some non-OPEC producers agreed to cut supply in November.

    The funds, with assets of $286 billion and substantial energy holdings, cut exposure to firms that are either pure-play Permian companies or that derive significant revenues from the region, according to an analysis of their investments based on Reuters data.

    The Permian, which stretches across West Texas and eastern New Mexico, produces about 2.5 million barrels of oil per day (bpd), accounting for more than a quarter of overall U.S. crude production.

    "We'll have to see if these U.S. producers have the discipline to not go crazy and keep prices where they keep making money," said Gary Bradshaw, portfolio manager at Dallas-based investment firm Hodges Capital Management.

    Hodges Capital owns shares of Permian play firms including Diamondback Energy Inc (FANG.O), RSP Permian Inc (RSPP.N) and Callon Petroleum Co (CPE.N). Bradshaw's firm has maintained its exposure to the Permian.

    There is no sign that shale producers will restrain production. They redeployed rigs and personnel quickly since prices began strengthening in 2016 and made shale profitable again; rig counts have risen by 40 percent this year in the Permian, which accounts for about half of all U.S. onshore oil rigs. [RIG/U]

    Hedge funds pulled back in the first quarter, according to the most recently available regulatory filings, and the stocks have continued to struggle as oil prices have come under renewed pressure.

    The value of these funds' positions in the 10 Permian companies declined by 14 percent, to $2.66 billion in the first quarter, the most recent data available, from $3.08 billion in the fourth quarter of 2016.

    Hedge funds have continued to reduce their exposure to energy stocks in the second quarter, said Mark Connors, global head of portfolio and risk advisory at Credit Suisse, though he could not provide figures specific to shale companies.


    Fund managers interviewed expressed concern that volatile oil prices along with rising service costs and acreage prices are not reflected in overly optimistic projections for the Permian.

    The funds analyzed include Pointstate Capital LP, a $25 billion fund with 16 percent in energy shares, and Arosa Capital Management, a $2.1 billion fund with more than 90 percent of assets in energy stocks. Pointstate and Arosa declined comment.

    "Margins will continue to be squeezed by a 15 to 20 percent increase in service costs in the Permian basin," said Michael Roomberg, portfolio manager of the Miller/Howard Drill Bit to Burner Tip Fund.

    A Reuters analysis of 10 Permian producers, including several that almost exclusively operate in Texas, carry an average price-to-earnings ratio of about 35, compared with the overall energy sector's P/E ratio of about 17.8.

    "These are not great returns, but the problem is the market is rewarding them," said an analyst at one of the hedge funds on condition of anonymity, because he was not authorized to speak to the press.

    Concerns about lofty land prices are driving some of the pullback by hedge funds, according to two fund analysts who could not speak on the record. Values for Permian acreage have increased 30 percent from two years ago, according to Detring Energy Advisors in Houston.

    The 10 Permian stocks analyzed have, on average, dropped 18 percent so year, compared with the broader S&P 500 energy sector's 13 percent fall.

    Permian production is expected to reach 2.47 million bpd by July, a 330,000 bpd increase from the beginning of the year, according to the U.S. Energy Department.

    Last month the Organization of the Petroleum Exporting Countries (OPEC) and other key producers, including Russia, extended a historic output cut agreement to combat a global glut.

    However, production from non-OPEC countries, especially the U.S., continues to rise and weigh on prices. U.S. crude prices CLc1 on Wednesday hit a six-month low just above $44 per barrel. [O/R]

    Reuters analysis shows many shale companies reduced hedges in the first quarter, leaving them vulnerable to falling oil prices.

    Still, fund managers say compared to other U.S. plays, the Permian still has the lowest break-even costs.

    "In terms of the time horizon, the economics of the Permian are so good they’re going to keep on drilling," said Colin Davies, senior analyst at oil services company AB Bernstein.

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    In latest sign of crude glut, aging supertankers used to store unsold oil

    Traders are increasingly storing oil in aging supertankers in Southeast Asia as they grapple with a supply overhang that has left the system clogged with unneeded fuel despite an OPEC-led drive to cut production to prop up prices.

    Around 10 very large crude carriers (VLCCs), all between 16 and 20 years old, have been chartered since the end of May to store crude for periods ranging from 30 days to around six months, brokers told Reuters. Each VLCC can carry 2 million barrels of oil.

    These vessels are in addition to around 30 supertankers used for long-term storage around Singapore and Linggi, off the West coast of peninsula Malaysia.

    One of the main drivers for storing oil in tankers is that crude prices for immediate delivery are cheaper than for future sale, a market condition known as contango.

    Brent crude futures, the international benchmark for oil prices, have fallen by 13 percent since late May, to around $47 per barrel. Brent for delivery at the end of 2017 is $1.5 per barrel more expensive <0#LCO:>.

    "Floating storage does seem ... viable assuming time charter rates of under $20,000 per day," said Rachel Yew, oil and tanker market analyst at Oceanfreightexchange.

    Current rates to charter a five-year-old 300,000 DWT for one year are $27,000 per day, according to shipping services firm Clarkson. Rates for VLCCs at least a decade-old are much cheaper.

    "It makes a lot of sense for a trader to pay $16,000-$19,000 per day to take an older VLCC for 30-90 days to store oil," said a Singapore-based supertanker broker, asking not to be identified.

    The festering supply glut comes even as the Organization of the Petroleum Exporting Countries (OPEC) pushes to withhold production until the end of the first quarter of 2018.


    Floating storage is an indicator of oversupply.

    "Too much unsold oil is headed to Asia," said Oystein Berentsen, managing director for oil trading company Strong Petroleum.

    A shortage of spare onshore storage in China, as well as an expectation that new Chinese crude import quotas for independent refineries will be announced soon, are also playing a role in putting crude into tanker storage in Southeast Asia.

    "Once China's quota are released, you want to have oil close to China. Because onshore storage there is pretty full, the next easiest location is around Singapore and Malaysia," said one trader.

    "This expectation of new Chinese orders also helps explain why future crude is more expensive than current crude. That's why we store it for later sale," he added.

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    BP, India's Reliance to invest $6 billion more in offshore gasfields

    BP and India's Reliance Industries Ltd will invest a further 400 billion rupees ($6.2 billion) in their jointly owned KG D6 gas block off India's eastern coast, the heads of the two companies said on Thursday.

    BP Chief Executive Bob Dudley, appearing alongside Reliance Chairman Mukesh Ambani at a news event in New Delhi, said the new investment is expected to produce 30-35 million cubic meters of gas a day, phased over 2020 to 2022.

    "This is an important step forward for BP in India. Working closely together, Reliance and BP are now able to develop these major deep-water gas resources offshore India efficiently and economically," Dudley said.

    In 2011, Reliance agreed to sell a stake in 23 of its oil and gas blocks to BP for $7.2 billion. But output from the D6 block, expected to contribute up to a quarter of India's gas supply, has been falling since April 2010.

    Reliance holds a 60 percent stake in the gas block in the Krishna Godavari (KG) basin and BP owns 30 percent, while Calgary-based Niko Resources Ltd (NKO.TO) holds the rest. Reliance and BP have invested around $1.6 billion to May this year in deep-water exploration and production.

    India, the world's third-largest oil importer, has said it will move gradually to a gas-based economy, and its demand is expected to grow rapidly as the country industrialises.

    BP and Reliance also said on Thursday that they would look to tap new opportunities in India, including developing "differentiated" fuels, trading carbon emissions and advanced low-carbon energies.
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    Santos committed to Narrabri

    Oil and gasmajor Santos has reaffirmed its commitment to developing the Narrabri gas project, in New South Wales, with MD and CEO Kevin Gallagher saying the project could deliver a substantial share of the state’s gas needs.

    Speaking at the American Chamber of Commerce, in Sydney, on Thursday, Gallagher said Santos had spent nearly ten years, and over $1-billion trying to develop the Narrabri project.

    However, he noted that following the company’s recent lodgment of the State Significant Development Application, including the environmental-impact statement, the Department of Planning had received more than 23 000 submissions that needed to be reviewed and responded to.

    “Santos welcomes the opportunity for the community to have their say on the Narrabri gas project and we recognise the important role this part of the assessment process will play in ensuring a robust and thorough assessment,” Gallagher said.

    “However, 98% of the submissions are from people who live outside of the Narrabri community, who have no experience with Santos operations or the project. Their objections highlighted general opposition to coal seam gas and fossil fuels, including concerns about climate change and the need to transition to renewable energy.”

    Gallagher noted that only 500 submissions were received from local Narrabri residents, with the majority of these supporting the project.

    With Santos expected to prepare a report to these submissions, Gallagher lamented the time and resources that this would require, along with the cost to review and respond to the 23 000 submissions.

    However, he noted that despite the challenges, Santos was still committed to the project.
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    India's LNG bunkering plans moving into top gear - IRClass

    India's LNG bunkering plans are on a "fast track" with LNG-fueled river sea vessels and LNG refueling stations likely to emerge in the coming months, Arun Sharma, executive chairman of Indian Register of Shipping, or IRClass, a Mumbai-based globally recognized ship classification society told S&P Global Platts Tuesday.

    IRClass is working with Inland Waterways Authority of India on a number of projects with respect to design approval of LNG-fueled vessels, he said. "We are also working with Petronet for facilitating use of LNG kits on smaller vessels meant for inland waterways which transports cargo such as coal, cement, grain etc.," Sharma added.

    IRClass has a memorandum of understanding with Bureau Veritas in various areas of classification, LNG being one of these.

    The emphasis on LNG comes at a time when the marine industry is gearing up for stricter environmental regulations. Promoting LNG in the country's inland waterways would not only result in lower cost per ton mile transported compared with other options such as road and rail but would also be significantly more environment friendly, Sharma said.


    In terms of geographical footprint, presently IRClass has 48 offices, 24 of which are outside India. "We are aggressively targeting further growth both domestically and internationally," Sharma said.

    "We have on a base of 10 million GRT [gross register tonnage] in January 2015, added about 1 million GRT in 2015, and another 1 million in 2016. As of June 2017, our tonnage stands close to 13 million tons with over 17,000 ships. We are looking at about 15 million tons by early 2018," Sharma said.

    IRClass, which became a full member of the International Association of Classification Societies in 2010 and was recognized by the European Commission in 2016, is presently seeking recognition from the Singapore flag, and flags of Malta, Greece and Cyprus, Sharma said.

    "In Europe, we will need to move in a more strategic manner targeting smaller owners and tonnage. Quality of service and cost competitiveness is our main focus," Sharma said.

    However, IRClass also wants to expand its non-marine segment with a view to diversify in segments other than marine because of tough market conditions. "Shipping markets have become challenging. There is not too much new build taking place either," Sharma said, adding that this was prompting more competition among classification societies with some even resorting to fee cuts to retain market share.

    "But some correction will have to take place sooner or later."

    IRClass also provides services in classifying ship breaking yards in India and Bangladesh. "We ventured in this area about a year and half ago, our main focus being certifying compliance with Hong Kong Convention and verifying compliance as an independent verifier for European Commission," Sharma said.

    IRClass has also been undertaking surveys in Qatar. "In the current situation, we will handle Qatar from our India office instead of Dubai till [the] situation normalizes," he said.

    This comes after a major diplomatic crisis erupted in the Middle East last week, when five countries -- Saudi Arabia, the UAE, Egypt, Bahrain and Yemen -- decided to sever diplomatic ties with Qatar.
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    South Korea’s Kogas fires up Samcheok LNG tanks

    South Korea’s Kogas said Thursday it started commercial operations of three liquefied natural gas (LNG) storage tanks at its Samcheok receiving terminal located some 290 kilometers east of Seoul.

    Kogas has been testing the three 270,000-cbm capacity LNG storage tanks since March this year.

    The company claims that these tanks are the largest of its kind in the world.

    Kogas, the world’s second-biggest corporate LNG importer said in a statement the first storage tank began operating last month with the two other tanks starting operations on June 14 and June 15, respectively.

    The Samcheok import terminal now has a total storage capacity of 2.6 million cubic meters of LNG in twelve storage tanks.

    Including the latest additions, Kogas operates in total 74 LNG storage tanks in South Korea and overseas.

    The company imports approximately 96 percent of Korea’s LNG demand via its four LNG terminals, namely Incheon, Pyeongtaek, Tongyeong and Samcheok.
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    Federal judge orders more environmental analysis of Dakota pipeline

    A federal judge ordered the U.S. Army Corps of Engineers to reconsider its environmental review of the Dakota Access Pipeline on Wednesday, opening up the possibility that the line could be shut at a later date.

    U.S. District Judge James Boasberg in Washington said the Army Corps did not adequately consider the effects of a possible oil spill on the fishing and hunting rights of the Standing Rock Sioux tribe.

    Operations of Energy Transfer Partners LP's pipeline have not been suspended but that could be considered at a later date, the order said. The $3.8 billion line began interstate crude oil delivery in May.

    The parties are expected to meet Boasberg next Wednesday to discuss future steps. The Standing Rock Sioux are expected to argue that pipeline operations should be halted.

    The judge said in a 91-page decision that, while the Army Corps substantially complied with the National Environmental Policy Act, federal permits issued for the pipeline violated the law in some respects, saying in a court order the Corps did not "adequately consider the impacts of an oil spill on fishing rights, hunting rights, or environmental justice."

    "To remedy those violations, the Corps will have to reconsider those sections of its environmental analysis upon remand by the Court," the judge said.

    The tribe had sued the Army Corps over its approval of the controversial Dakota Access Pipeline in North Dakota, arguing the line could contaminate their water source, the Missouri River.

    "We applaud the courts for protecting our laws and regulations from undue political influence, and will ask the Court to shut down pipeline operations immediately,” Standing Rock Sioux Chairman Dave Archambault said in a statement.

    It was unclear whether the judge would agree that the line should be shut. Independent research firm Clearview Energy Partners of Washington D.C. noted in a comment late on Wednesday that Judge Boasberg's order pointed to "omissions" in the Corps' analysis, which the Corps may be able to address quickly, rather than larger errors that might require more study.

    "We think that the Corps may be able to persuade the court to allow Dakota Access to continue operating while the omissions are addressed and the court reviews them for adequacy," they wrote.

    ETP was not immediately available for comment.

    In February, the Army Corps of Engineers granted the final easement needed to finish the controversial pipeline, which had been delayed for several months after protests led by the Standing Rock Sioux tribe and climate activists.

    The controversial pipeline needed a final permit to tunnel under Lake Oahe, a reservoir that is part of the Missouri River.

    Two previous arguments by the Standing Rock tribe - that the construction had threatened sacred sites, and that the presence of oil in the pipeline would damage sacred waters, had been rejected by the court.

    President Donald Trump issued an executive order days after being sworn in directing the Army Corps to smooth the path to finishing the line, prompting complaints by the tribe and environmental groups that it had not done an adequate environmental review.
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    Saudi Arabia's oil exports seen below 7 million bpd in summer: sources, data

    Saudi Arabia's crude exports are expected to fall below 7 million barrels per day this summer, according to industry sources familiar with the matter, and shipping data so far supports those figures.

    Saudi Energy Minister Khalid al-Falih said in May shipments were set to drop from June, particularly to the United States, as the top OPEC producer aims to limit supply to help balance the market.

    Exports in May, when the kingdom's total production was 9.880 million bpd, averaged below 7 million bpd, three industry and shipping sources told Reuters. Early indications suggest that remains the case this month, one of the sources said.

    "I'm only looking at the first week of June, and on the face of it there's not much change," said Roy Mason of Oil Movements, a UK-based firm that estimates supply by tracking tanker shipments.

    Indicating lower Saudi exports, he said tanker movements suggested shipments to the United States were "less than would be seasonally normal."

    Lower exports could help reduce bloated inventories in the United States, the world's largest and most transparent oil market. High stockpiles have weighed on crude prices.

    U.S. oil imports from Saudi Arabia were above 1 million bpd from May-August last year, according to U.S. government data. So far in June, Saudi exports to the United States were below 1 million bpd, according to shipping data and industry sources.

    Overall, Saudi exports are set to be lower than last year, when the kingdom shipped about 7.4 million bpd on average from May to August.

    This is partly because Saudi Arabia usually burns more crude in power stations at home in the summer months to meet extra demand for power as people rely on air conditioners to deal with temperatures that can reach 50 degrees Celsius.

    This year, Saudi Arabia is also leading OPEC and other producers in a pact to cut output, a deal initially due to run during the first half of 2017 and now extended until March 2018.

    Under the deal, the kingdom should not produce more than 10.058 million bpd until March. In the first five months of 2017, its output has been below that target.

    Industry sources with knowledge of Saudi crude exports data said state oil company Saudi Aramco aimed to cut its exports to the United Sates to below 1 million bpd in June and July.

    Aramco has raised its official selling oil prices (OSPs) for its crude to the United States for July, a move seen as discouraging a further buildup in U.S. oil inventories.

    "The high-price numbers prompted U.S. refiners to lower nominations," one industry source said.

    The company has cut allocations in July to the United States by 35 percent and to Europe by 11 percent in July. Allocations to Asia were cut by some 300,000 bpd.

    Reuters shipping data also points to Saudi exports below 7 million bpd in the first two weeks of June, averaging 6.98 million bpd.

    Last year, Saudi Arabia burned 700,000 bpd of crude to generate power in the peak summer months. That figure was expected to fall by about 100,000-120,000 bpd this year, as the kingdom uses more natural gas, one industry source said.

    Two sources said Saudi Arabia could draw from inventories to meet local and export requirements if needed. Saudi inventories rose to 267.854 million barrels in March from 264.704 million in February, according to official data.

    But the kingdom would still keep crude production and supply within its OPEC target, another source said.

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    BP's Dudley seen reigning for years to restore major's might

    When BP boss Bob Dudley clinched a final deal to settle litigation over the deadly Deepwater Horizon disaster, many oil industry executives and investors thought his mission was accomplished.

    But now, two years later, the 61-year-old is showing no sign of easing into retirement. In fact he plans to oversee an ambitious expansion plan and stay at the helm of the British oil major until at least the end of the decade, according to sources familiar with the matter.

    The American CEO has told his leadership team that it is in his family's tradition to not retire until 65 - which would take him to 2020 - and that he could perhaps work even longer than that, the sources said.

    In another signal that there is unlikely to be a change at the top anytime soon, there has been no imminent succession planning at the firm, according to the sources, one of who said succession was "not a live project".

    When Dudley finally decides to go, there will no shortage of candidates to take his place, however.

    BP's chief financial officer, British national Brian Gilvary, 55 and the head of upstream, Irishman Bernard Looney, 46, have been cited as possible successors.

    There has been persistent industry speculation about when Dudley will call time on his BP career since he struck the 2015 settlement deal under which the company agreed to pay out a total of about $60 billion over the disaster that left 11 dead and led to the largest oil spill in U.S. history.

    He had been made CEO in 2010 - the first American to lead BP in its 108-year-old history - to steer the company through the swathe of U.S. litigation, and the deal represented a milestone.

    But rather than stepping back from the fray, he has since embarked on the biggest expansion plan in a generation for BP, even in the face of a collapse in oil prices.


    The company has become the fastest-growing oil major in the world. It will launch seven oil and gas fields this year - more than any other year in its history - and will launch nine more before the end of the decade, adding 800,000 barrels per day (bpd) of oil and gas to its production.

    By 2020 the company, including its stake in Russian oil giant Rosneft (ROSN.MM), will be producing as much as 4 million bpd - the same as before the Deepwater Horizon spill and up from the 3 million bpd it was producing after offloading assets to cover the litigation costs.

    "We are firing on all cylinders," Dudley told a shareholders meeting in May as he aims to catch up with production volumes of its biggest rivals Exxon Mobil (XOM.N) and Royal Dutch Shell RDSa.l.

    Whether this strategy will prove effective in the long-term is by no means certain; BP's large liabilities linked to Deepwater Horizon mean it requires a significantly higher oil price - than the present price and compared with rivals - to pay for its operations and dividends. A sluggish recovery in oil prices could also lead to its already high debt rising further.

    Rating agency Moody's upgraded BP's credit rating last week for the first time in 19 years while, in another sign of confidence, 97 percent of BP shareholders voted to approve Dudley's new pay package last month.

    "Bob hasn't done anything that we wouldn't agree with so far. When times are hard and bad, I would want someone who is pretty sensible and conservative," said Rohan Murphy from Allianz, which holds BP shares.

    "Dudley is a safe pair of hands. He won't do anything too maverick," Murphy added. "The recent rating upgrade shows the story hangs together."


    The calm and softly spoken Dudley was stress-tested more than once before getting the top job. His career included three punishing years fighting a corporate war with Russian oligarchs at the firm's giant Russian venture TNK-BP that forced him to flee the country and go into hiding.

    He became BP chief executive when his predecessor Tony Hayward's tenure ended abruptly following the explosion of the Deepwater Horizon platform in the Gulf of Mexico in 2010.

    Dudley was given a task of steadying the ship as BP struggled with a firestorm from the U.S. government, victims of the spill, environmental groups and shareholders.

    Over the next five years, the company shed more than $55 billion worth of oil fields, refineries and infrastructure to pay for the spill clean-up.

    BP was abandoning low-margin projects and mature markets like Venezuela or Vietnam, often getting top dollar for its sales as oil prices hovered above $100 per barrel.

    In retrospect, BP had unknowingly stolen a march on most of its rivals who had to embark on similar asset sales much later when crude prices began to collapse in 2014.


    Just as BP was slowly emerging from the spill fallout, the collapse in oil prices drove it to its biggest loss ever in 2016. Like its peers, BP responded by slashing thousands of jobs and tightening budgets.

    The efforts bore fruit. In the first quarter of 2017, its profits tripled and its production rose to a five-year high thanks to higher production.

    Dudley's team argues that this will only improve over time as the company's strategic change of tack means it is producing more profitable oil and gas from a smaller number of fields.

    Another metric investors are also closely watching is BP's debt, standing at $38.6 billion, or 28 percent of its total equity including debt - the highest figure among oil majors.

    That ratio is set to improve as Deepwater Horizon cash payments decline over the coming years. They amounted to about $7 billion in 2016 and $4.5 billion in 2017 but will fall to $1-$2 billion from 2018.

    BP can currently balance its books only at $60 per barrel, compared to $50 for most of its rivals, but that figure should also fall as Deepwater Horizon payments decline.

    "Bob Dudley is building something that could be very interesting in the future ... he just gets on with business and that's what investors want," said James Laing, equities fund manager at Aberdeen Asset Management, which holds BP shares.

    "The dividend is still sustainable, debt levels are high but will come down, the cash breakeven has been lowered, the resource base is still increasing," he added. "It doesn't feel like there is a lot of criticism to be made."
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    India's oil imports from Iran plunge over gas field row

    India's oil imports from Iran have fallen to their lowest since June 2016, shipping data shows, in possible retaliation for Tehran not awarding a gas field development to Indian companies.

    India, Iran's top oil client after China, shipped in 487,600 barrels per day (bpd) in May, about 9 percent less compared with April and nearly 40 percent less than a peak registered in October, according to ship tracking data obtained from sources and data compiled by Thomson Reuters Oil Research & Forecasts.

    Most Western-led sanctions against Tehran's nuclear programme were lifted in January last year, and India's Iranian crude imports began climbing two months later in March.

    In the fiscal year to March 2018, though, India has said it plans to order about a quarter less Iranian crude due to a snub over development of Iran's Farzad B gas field.

    "We stood by them in difficult times. We still buy substantial amounts of oil from them, and we expect reciprocity from Iran," Indian oil minister Dharmendra Pradhan told reporters on Wednesday when asked if India was still hopeful of getting the development rights for the Farzad B field.

    Following years of seeming rapprochement over the field, Iran has likely reached an agreement on the concession with Russia's state-controlled gas giant Gazprom, Russian and Indian media have reported.

    Iran last month said India had not offered an acceptable proposal on the Farzad B development.

    Sri Paravaikkarasu of energy consultancy FGE said India's lower Iran imports were a "reaction of Iran's decision to award the gas field to Russia and the availability of cheaper grades like those from Russia."

    India was one of four countries - China, Japan and South Korea being the other three - that continued to import large amounts of Iranian oil after sanctions were toughened in 2012.

    Some of the drop in imports from Iran may be due to lower demand. Overall, India imported about 4.2 percent less oil in May, compared with April, due to a shutdown of the 180,000-bpd Bathinda refinery for upgrades.

    In the first five months of 2017, India's oil imports from Iran still jumped about 64 percent, the data showed.

    While Iran's oil exports to India are stalling, supplies to Europe and Turkey hit their highest level since the lifting of sanctions in 2016.

    Iraq continued to be India's biggest oil supplier for the second month in a row in May, followed by Saudi Arabia.

    Middle Eastern oil in May accounted for 65 percent of India's overall imports, compared to 71 percent a year ago, while the import share of Africa and Latin America have risen, the data showed.

    The shift is likely a result of an effort led by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) to cut production to prop up oil prices.

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    Brazil crude oil on the block

    The coming slate of oil auctions in Brazil will give the industry its biggest crack at developing the country's crude in two decades. But nothing in Brazil comes easy

    A crisis, it is said, is a terrible thing to waste. Brazil seems to have taken it to heart. Mired in its worst recession in a century, deep economic reforms are being pushed through, including to long-untouchable pension and labour rights. Change is coming on the oil front as well, where a massive corruption scheme at state-led oil company Petrobras has cost Brazil hundreds of billions of dollars, and stalled the development of massive offshore resources.

    At the heart of the Temer government's efforts to reset the oil industry is a record slate of 10 oil-rights auctions over the next three years. The extensive and promising rights on offer, along with a reduction of local-content requirements, an end to rules requiring financially-hobbled Petrobras to operate all pre-salt fields and other investor-friendly moves represent Brazil's biggest oil market opening in two decades.

    The industry has long agitated for these changes, and President Michel Temer deserves credit for adopting them. But his Democratic Movement Party's (PMDB's) past opposition to the badly-needed reforms helped spark the crisis in the first place. Before replacing his impeached predecessor Dilma Rousseff last year, Temer and the PMDB were key architects and backers of the nationalist oil policies at the center of Rousseff and her predecessor Luiz Inácio Lula da Silva's 13 years in power. The billions of dollars stolen by the PMDB from Petrobras and through programmes expressly created to facilitate graft was second only to the Rousseff's Workers' Party's take. That Temer and his party are so deeply implicated in the scheme makes it unlikely he or the party will remain in power after the 2018 elections, putting the durability of their policy shift in doubt.

    10 - The number of auctions scheduled in Brazil over the next three years

    Still, the government has high expectations for the round, both for refilling the government's coffers and accelerating development. Oil royalties in 2016 were down more than 40% from 2012 in local currency terms and nearly two-thirds in dollars, thanks to both low oil prices and stagnant output. Saddled with nearly $125bn of debt, Petrobras' pre-salt investment and operation obligation became a recipe for no development at all. Energy minister Fernando Coelho Filho said he expects the four auctions scheduled for this alone to raise 8.5bn reais ($2.72bn) in cash bids and to generate about $60bn in direct investment over a decade.

    Décio Oddone, the head of Brazil's oil regulator, The National Agency of Petroleum (ANP), expects the 10 rounds to spark a drilling revival over the next decade. He sees the rounds resulting in more than 300 new offshore wells, 20 additional rigs drilling around the country, the deployment of more than 17 new offshore production units and the construction of thousands of kilometres of new pipelines. In total, Oddone says, the rounds could uncover 10bn barrels of new resources and lead to 2m barrels a day of new output by 2027.

    Here are the highlights of the upcoming auctions:

    14th Round Oil and Gas Concession Auction, 27 September 2017

    ANP will offer a broad mix of 287 onshore and offshore areas that include mature and frontier areas in the Campos, Espírito Santo, Paraná, Parnaíba, Pelotas, Potiguar, Reconcavo, Santos and Sergipe-Alagoas basins. Under the concession regime, winners get the right to all oil discovered and produced in exchange for royalties and minimum investment commitments. All Campos and Santos areas are outside the pre-salt areas where Brazil's largest prospects are auctioned under production-sharing accords. ANP has estimated the areas could hold as much as 50bn barrels of oil equivalent in place. The 14th Round sale will be Brazil's first serious test of oil-investor interest since the 11th and 13th rounds in 2013 and 2015. The 2013 round saw wide interest from international oil companies, but no winner has yet secured environmental permits to explore their leases, forcing a two-year concession extension last month. The round may act as a cautionary tale for companies interested in new frontier acreage. The 2015 sale largely failed after Petrobras and international majors stayed away as prices were falling.

    2nd Production-Sharing Subsalt Auction, 27 November 2017

    The auction will offer areas subject to unitisation adjacent to the giant Carcará and Gato do Mato prospects and the Sapinho field in the Santos Basin and the Tartaruga Verde Field in the Campos Basin. These fields extend beyond the limits of concession leases into the Presalt Polygon where rights are let under production-sharing contracts. Confusion about how to unitise production between concession and production-sharing leases has blocked development of the concession discoveries for nearly a decade. The round aims to reconcile the contracts and kick-start development.

    4th Production-Sharing Subsalt Auction, May 2018

    ANP plans to offer the Saturno, Três Marias and Uirapuru prospects in the Santos Basin, and a slew of exploration blocks in the Campos Basin under production-sharing terms similar to the 3rd round.

    15th Round Oil and Gas Concession Auction, May 2018

    ANP to offer offshore concessions in the Foz do Amazonas, Ceará and Potiguar basins, ultra-deepwater blocks in the Campos and Santos basins, and onshore blocks in the Paraná, Parnaíba, Sergipe-Alagoas, Recôncavo, Potiguar and Espírito Santo basins under terms similar to the 14th round.

    5th Production-Sharing Subsalt Auction, second half of 2019

    ANP considering the auction of the Aram, Sudeste de Lula, Sul e Sudoeste de Júpiter e Bumerangue, prospects in the Santos Basin, on terms similar to the 3rd and 4th production-sharing rounds.

    16th Round Oil and Gas Concession Auction, second half 2019

    ANP expected to sell offshore rights in the Camamu-Almada and Jacuípe basins, ultra-deepwater blocks in the Campos and Santos basins outside the Presalt Polygon and onshore blocks in the Solimões, Parecis, Sergipe-Alagoas, Recôncavo, Potiguar, and Espírito Santo Basins. Terms similar to the 14th and 15th concession rounds.

    Give and take

    Nearly everything important in Brazil right now and for at least the next decade will depend in large measure on the progress and outcome of the country's Lava Jato, or "Car Wash" scandal.

    The enormous corruption probe began with the uncovering of a massive contract fixing, bribery and political kick-back scheme at state-led oil company Petrobras. So it's no surprise that those connected to Brazil's battered oil and gas business understand the importance of Car Wash better than most.

    The crisis has come with a clear upside for the oil industry. A slew of reforms to fight graft, strengthen the finances of Petrobras, the country's principal oil and gas producer, and open the industry to more foreign investment are real, if far from over. A plan for 10 lease auctions by the end of 2019 is the largest and fastest ever. Restrictions on foreign control of strategic resources and local content requirements have been eased.

    But excitement should be tempered. While the Car Wash crisis has forced the reforms many now applaud, it could also sink them.

    The 2018 elections are expected to boost the prospects of untested, inexperienced and politically extreme candidates

    President Michel Temer's government led the reforms that are behind the growing enthusiasm about Brazil and its oil patch. But his centre-right Brazilian Democratic Movement Party (PMDB) party was also deeply implicated in the Car Wash scandal. Its members not only benefited from the scheme, it was a key architect and cheerleader for the old, failed oil model, including policies that facilitated the graft.

    Temer and his party's involvement in the corruption scandal leaves them legally and politically exposed, threatening to undermine the credibility of the reforms. The courts are looking into potential campaign finance violations from Temer himself, which could see the president ousted from office. Eight ministers and much of the PMDB Congressional delegation, the main support for recent oil-industry change, are under investigation. Even if Temer survives, the PMDB's role in Car Wash makes a return to power in 2018 elections slight. The reforms could go down with them. Investors checking their calendars will notice that nearly a third of the planned auctions are scheduled for 2019.

    Scandal aside, Temer's reforms are hardly popular with the public, or even in his own PMDB, meaning they will need a strong steward. But with all major parties tainted by Car Wash, their leaders under investigation, indictment or in jail, Brazil's political landscape is fracturing. The 2018 elections are expected to boost the prospects of untested, inexperienced and politically extreme candidates. In such an environment, the reform's stability looks tenuous.

    Oil's hold on the national imagination remains strong. The probe's leaders insist Petrobras is blameless, the victim of just a few bad apples. History, however, shows liberalisations born from crisis rarely last in the face of Brazil's deep faith in government control of all aspects of the oil industry. Many still insist Car Wash is nothing more than an attempt by dark foreign forces to steal Brazil's resources. One such person is former president Luiz Inácio Lula da Silva, whose Worker's Party most benefited from the Car Wash fraud. He is mounting an unlikely comeback and leads early polls for president in 2018.

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    France's CGG files for bankruptcy protection

    Oil-services company CGG Group filed for bankruptcy protection Wednesday in the U.S. and France after reaching a restructuring deal with lenders and bondholders that will eliminate about $2 billion in debt from the company's books.

    Under the deal, bondholders will swap nearly $2 billion in debt for most of the equity in a reorganized CGG, the company said. The restructuring plan calls for up to $500 million of new money to be raised from a $125 million rights offering and the issuance of $375 million in new debt.

    CGG's senior lenders, owed about $800 million, will extend the maturity on their loans in return for $150 million payment from the proceeds of the new money investment. Existing shareholders, who will be able to participate in the rights offering, will see their investments reduced to a 4.5% stake in the restructured CGG following completion of the debt swap, according to filings in U.S. Bankruptcy Court.

    Beatrice Place-Faget, general counsel of parent company CGG SA, said in court papers the prolonged downturn in oil and natural gas prices left the company unable to pay its debts.

    CGG's 2016 annual revenue was roughly one-third of what it was before the current downturn began, she said. In 2012, before oil prices dropped, the company had total operating revenues of more than $3.41 billion. By 2016, that number was $1.195 billion.

    In addition, the company has been losing money for years, including losses of $1.14 billion in 2015 and another $404.7 million last year.

    CGG was founded in 1931 as " Compagnie Générale de Géophysique" and focuses on seismic surveys and other techniques to help energy companies locate oil and natural-gas reserves. The company also makes geophysical equipment under the Sercel brand name.

    CGG launched its court-supervised restructuring bid in Paris on Wednesday by opening a "sauvegarde" proceeding, the French equivalent of a chapter 11 bankruptcy filing. Fourteen CGG subsidiaries filed for chapter 11 in U.S. Bankruptcy Court in New York and the parent intends to seek U.S. court recognition of the Paris case under chapter 15, the section of U.S. bankruptcy law dealing with international insolvencies.
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    Refineries' upgrade-related closures to elevate India's gasoil imports

    Traditionally a net exporter of gasoil, India's aggressive push to implement sweeping upgrades to its refineries in an effort to extend the Euro-4 norms, has led to an elevated level of maintenance-related closures, which may trigger unusually high gasoil imports in the near term, traders and analysts said.

    "We do think gasoil imports will continue," said Sri Paravaikkarasu, head of oil, East of Suez, at Facts Global Energy.

    In April, India fully rolled out the Bharat Stage IV vehicle emission and fuel standards for diesel, capping the sulfur limit at 50 ppm across the country. Previously, the country had both BS III specifications, with a maximum sulfur content of 350 ppm, as well BS IV standards, in operation.

    Since then, India's demand for imported gasoil has been robust.

    "Refinery upgrades at IOC [Indian Oil Corp. Ltd.] and CPC [Chennai Petroleum Corp. Ltd.], aimed to meet the Bharat-IV fuel standards implemented on April 1, coincided with a recovery in gasoil consumption, as the impact of demonetization eases," Facts said in a note.

    "This, together with summer demand, called for gasoil imports in recent months. Looking ahead, the early arrival of monsoon in several parts of the country would seasonally weaken gasoil consumption. But, we believe imports should continue, as IOC has scheduled for heavy turnarounds," it added.

    State-run IOC plans to shut its 150,000 b/d Haldia refinery in the Purba Medinipur district of West Bengal for three weeks during November-December. The maintenance shutdown plans are part of the state-owned company's plan to synchronize its refineries to upgrade production capabilities for higher-grade and lower-emission fuels.

    In addition, IOC plans to shut its 160,000 b/d Mathura refinery in Uttar Pradesh for 15 days in mid-August, and half of the the 150,000 b/d refining capacity at its Panipat refinery for planned turnaround in July. It also plans to shut its 120,000 b/d Barauni Refinery in Bihar for five weeks during July-August.

    "There is pretty high probability that there will be heavier-than-average maintenance for IOC refineries in 2017, going by the assumption that refineries typically undergo major maintenance every four-five years and the historical frequency of shutdowns," Platts Analytics said in a note.

    Domestic demand for diesel from India tends to peak just before the monsoon season to meet higher consumption during the harvesting season.


    Tenders by India to import gasoil so far has totaled 595,000 mt for delivery over the May-July period, data from S&P Global Platts showed.

    Gasoil import tenders were mainly from IOC and state-run Hindustan Petroleum Corp. Ltd., with both refiners seeking 40-ppm sulfur gasoil into terminals, such as Chennai, Visakhapatnam, JNPT, and Kandla and Mundra.

    Robust appetite for 40-ppm sulfur gasoil from India has triggered an upward movement in the FOB Arab Gulf 10-ppm gasoil cash differential between late-May and June, data from S&P Global Platts showed.

    On May 29, the 10-ppm gasoil cash differential hit a 10-month high of $1.76/barrel to the Mean of Platts Arab Gulf Gasoil assessment, climbing 46% from May 24, when it stood at a premium of $1.30/b. However, the cash differential has since eased from the lofty levels to $1.70/b on June 6.

    The 10-ppm gasoil cash differential was last assessed higher on July 19, 2016, at a premium of $1.80/b to MOPAG Gasoil assessment.

    Cash differentials for physical gasoil represent the price buyers are willing to pay for the product, below or above the benchmark prices published around the day a cargo loads.

    Recent purchases of 40-ppm sulfur gasoil made by IOC were concluded at premiums in the range of $2.70-$3.20/b to the Mean of Platts Arab Gulf 0.005% sulfur gasoil assessments, CFR basis. IOC then bought two cargoes -- 40,000 mt each -- of 40-ppm sulfur diesel for delivery over the second half of June. The seller could not be confirmed.

    In addition, IOC's most recent buy tender was for two parcels -- of up to 40,000 mt each -- for 40-ppm sulfur diesel, for delivery over the first half of July.


    Even as the country's oil marketing companies seek to buy gasoil from the international market, outflows of gasoil from the country are continuing.

    According to the latest data from IE Singapore, as much as 141,993 mt of gasoil moved into Singapore from India in the week ended June 7.

    The bulk of gasoil exports from India are mainly by private refineries such as Reliance and Essar Oil. The cargoes are shipped directly by the refiners or sold to traders on FOB basis, which are then shipped to the oil-trading hub of Singapore.

    In May, Singapore's gasoil import from India reached 499,945 mt, almost double of April's import level of 254,173 mt. In May 2016, gasoil imports to the city-state from India was 270,701 mt, the same data showed.

    According to Platts Analytics, India's overall export of oil products is estimated to trend lower in 2017, with gasoline and gasoil outflows reducing by about 6% and 3% year on year, respectively.

    It added that the impact of India's demonetization would diminish by the third quarter of 2017, resulting in India's overall projected oil demand growth for 2017 outpacing refinery capacity additions. HPCL-Mittal Energy Ltd.'s Bathinda refinery's expansion from 180,000 b/d to 225,000 b/d is the only one expected this year.

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    TransCanada pushes ahead with $2-billion gas pipeline expansion

    TransCanada Corp. is moving ahead with a $2-billion expansion to its natural gas pipeline system in Alberta and British Columbia as producers in the region struggle with chronic export snarls.

    Calgary-based TransCanada said on Wednesday that the new capacity is backed by firm contracts with producers to ship roughly three billion cubic feet per day of gas on its Nova Gas Transmission Ltd. (NGTL) system.

    The plan adds to a $5.1-billion capital program aimed at boosting pipeline capacity in the Montney and Deep Basin exploration zones, where producers have been hampered by weak prices owing in part to shipping constraints.

    The move comes as plans for major West Coast liquefied natural gas plants have stalled indefinitely, prompting companies to seek alternative outlets for fast-growing production.

    Earlier this year, TransCanada sought clearances from regulators to build portions of its $1.4-billion North Montney line – a project previously tied to approvals of a multibillion-dollar export plant proposed by state-run Petronas of Malaysia.

    TransCanada said the latest expansion comprises numerous projects totalling 273 kilometres of new pipe and related facilities. The company aims to start construction in early 2019, pending approvals from the National Energy Board.

    Royal Bank of Canada analyst Robert Kwan said the announcement provides visible growth through 2021 and enhances the value and stability of the NGTL system.

    TransCanada also said it has contracts totalling 381 million cubic feet a day for new capacity to move gas south to the Pacific Northwest, California and Nevada markets.

    Attached Files
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    US gasoline demand concerns spark selloff across oil complex

    NYMEX July RBOB led the oil complex lower Wednesday, plunging 6.68 cents to $1.4327/gal, after US Energy Information Administration data showed a second straight build in gasoline stocks amid low demand for the time of year.

    With summer just around the corner, traders are focusing on the gasoline market, which made EIA's weekly inventory a market mover as demand failed to rebound from a sharp decline the previous week.

    Over the last two weeks, implied gasoline demand has averaged 9.293 million b/d, compared with 9.763 million b/d during the two weeks prior to that, and 9.665 million b/d in the same period a year ago.

    "The real problem in the market a couple of weeks into June is this gasoline demand story," said John Kilduff, partner at Again Capital.

    The RBOB crack fell further Wednesday, although that alone might not be enough to persuade refiners to slow down, said Kilduff.

    "Refiners are going to still crank out supply because they're hoping that when schools close people are going to hit the road. That's wishful thinking, but it's what they're going to play for," he said.

    "There have been strong employment numbers and a low pump price, which is favorable for refiners, so any business plan would conclude that this should be a good summer, but so far we're not seeing that," he added.

    The front-month NYMEX RBOB crack spread against WTI was down $1.08 at $15.44/b Wednesday afternoon, compared with more than $19/b on June 1.

    US gasoline stocks increased 2.096 million barrels in the week that ended June 9 to 242.444 million barrels, EIA data showed Wednesday. Analysts surveyed Monday by S&P Global Platts were looking for a draw of 600,000 barrels.

    Distillate stocks increased 328,000 barrels last week to 151.416 million barrels, but analysts were looking for a build of 200,000 barrels. That surprise build pulled NYMEX July ULSD down 3.75 cents to $1.4102/gal.

    Inventories fell in 14 of 15 weeks through the week that ended May 19, but have since risen by a total of 5.1 million barrels.


    US crude stocks decreased 1.661 million barrels to 511.546 million barrels in the week that ended June 9. Analysts expected a draw of 2 million barrels.

    "If crude oil inventories decline at the expense of refined product inventories increasing, a balanced market hasn't really been achieved," said Jenna Delaney, senior oil analyst at Platts Analytics.

    With the size of last week's crude draw missing expectations, crude futures fell Wednesday. ICE July Brent settled $1.72 lower at $47/b.

    NYMEX July crude settled $1.73 lower at $44.73/b, off an intraday low of $44.54/b, a low for the front-month contract going back to November 15.

    Another aspect of EIA's weekly inventory report that undermined last week's crude draw was the production estimate for the Lower 48 States, which rose 25,000 b/d to 8.84 million b/d.

    Output in the Lower 48 States has risen almost non-stop this year, and is now 599,000 b/d higher than at the end of 2016.

    Some of that additional production has left the country, but a pick-up in exports has also displaced supply from non-US producers that has struggled to find customers.

    The amount of unsold North Sea crude in floating storage stands at around 7.3 million barrels, up from 5 million barrels on June 6, according to cFlow, Platts' trade flow software.

    US crude exports increased 165,000 b/d last week to 722,000 b/d.
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    Rosneft plans $8.4bn investment with partners

    Rosneft and its partners plan to invest 480 billion roubles ($8.4 billion) in developing Russia's offshore energy industry in the next five years, part of a bid to boost output from new areas, the Russian oil major told Reuters.

    Most Russian oil output comes from western Siberia, where fields are depleting, pushing companies to look for new regions. Sanctions complicate the process, barring Western companies from helping with Arctic offshore, deep-water and shale oil projects.

    Russia is producing almost 11 million barrels per day of crude, slightly down from its peaks last year as the country has joined Opec and some other non-Opec nations in an output cut that runs to March to stabilise global crude prices.

    Of the 480 billion roubles allocated for offshore projects by Rosneft and its partners, the Russian company planned to invest 250 billion roubles in Arctic offshore between 2017 and 2021, the state-controlled company wrote in response to Reuters questions.

    "Development of hydrocarbon resources on the continental Arctic shelf is the future of global oil production and one of the key strategic priorities for the company," Rosneft, the world's biggest listed oil company by output, said in an email.

    It said the Arctic offshore area was expected to account for between 20% and 30% of Russian production by 2050.

    Rosneft did not mention which partners would be involved in the investments. It said it had licences for 55 offshore blocks in Russia's Arctic, Far East and southern regions, which are believed to contain oil and gas resources.

    Andrey Polishchyuk, an analyst with Raiffeisenbank in Moscow, said the allocated sum was big enough for exploration drilling, though actual production could be years away.

    "I would not look at the actual timing of the production launch at the offshore projects, I would rather look at the oil price and feasibility of those projects," he said.

    "For now, Rosneft has been engaging in exploration drilling in the Arctic, and this is right as sooner or later those resources will be needed."

    He also said Rosneft needed to focus on onshore oilfields, such as East Siberia's Vankor, one of its key production clusters.

    The company has sought tie-ups with several global oil players to develop Russia's offshore regions. But a deal to work in the Arctic Kara Sea with US company ExxonMobil was suspended in 2014 after the imposition of Western sanctions.

    Rosneft said in its email that it planned to return to operations in the Kara Sea in 2019 but did not specify whether it would work alone or with a partner.

    The Russian company also has deals for offshore work with Norway's Statoil, Italy's Eni and other companies.

    Rosneft, ExxonMobil, Japan's Sakhalin Oil & Gas Development Company (Sodeco) and India's ONGC are partners in the Sakhalin-1 project off Russia's far east coast.

    So far, Russia's sole Arctic offshore oilfield is Prirazlomnoye in the Pechora Sea operated by Gazprom Neft, where production is gradually rising from about 40,000 bpd last year.

    Rosneft also said it planned preparation work next year at the Wild Orchid gas condensate field in Vietnam at Block 06.1. It did not say when production would start.
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    Fitch: Cash Flows Help Stabilise EMEA Integrated Oil Outlooks

    European integrated oil and gas companies have largely adapted to lower oil prices and most of them should be able to broadly balance their sources and uses of cash in 2017-2018, Fitch Ratings says. This improved outlook is reflected in the rating actions we have taken in the past few months. Since the beginning of the year we have revised Outlooks on Total, OMV and Repsol to Stable from Negative; and BP’s rating has been affirmed with a Stable Outlook.

    Eni and MOL are also on Stable Outlook. Royal Dutch Shell is the exception – its ‘AA-‘ rating has been affirmed but the Outlook remains Negative as the company’s debt remains high following the acquisition of BG. We expect Shell’s FFO-adjusted net leverage to decline from 2.8x at end-March 2017 to 1.8x by end-2019 on continued cost-cutting, disposals and gradually recovering oil prices. However, the Negative Outlook reflects the risk that weaker-than-forecast oil prices, high cash dividends or a resumption of share buybacks could limit deleveraging.

    Our forecasts for other European integrated oil companies show that their leverages should be comfortably below the point at which we may consider negative rating action in 2018-2019. Most companies with higher upstream exposure had leverage above these levels in 2015-2016, but we rate through the cycle and put more emphasis on 2018-2019, when we expect the cycle to be well on its way to normalising. Integrated companies have managed to significantly reduce their opex and capex, benefiting from weaker currencies and cost deflation, but also through simplification and cost-cutting.

    BP and Total, which have greater upstream exposure, also introduced scrip dividends, which allowed them to significantly reduce cash payouts. Disposals have been another important part of the response, particularly for Shell, which has committed to raise USD30 billion through assets sales. Of this, USD20 billion has already been realised or announced and a further USD5 billion is in advanced stages, with 1.5 years of the programme remaining.

    All these measures have allowed integrated oil companies to significantly reduce negative free cash flows. We estimate that the cumulative negative free cash flow of seven Fitch-rated integrated players, after dividends and excluding working capital movements, fell to USD6 billion in 2016 from USD21 billion in 2015. Based on our oil price expectations, we estimate that the cumulative deficit will continue to shrink in 2017 and should turn positive in 2018.

    This is supported by oil majors’ 1Q17 results, with Shell, Total and BP having generated positive post-dividend free cash flows (adjusted for working capital movements). Our base case is for prices of Brent crude to gradually improve from an average of USD52.5 a barrel in 2017 to USD60/bbl in 2019 and USD65/bbl in the longer term. An alternative stress-case assumes USD40/bbl in the long term. If a stress-case scenario comes to pass, ratings of some integrated companies may come under pressure, though rating action is still likely to depend more on the companies’ actions rather than the level of oil prices. We plan to publish more on these topics and other key issues for the EMEA oil and gas sector in a ‘What Investors Want to Know: EMEA Oil and Gas Companies’ report in the coming days.
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    Kinder Morgan Canada invites aboriginal investment as pipeline faces block

    Kinder Morgan Canada invites aboriginal investment as pipeline faces block

    Kinder Morgan Canada Ltd welcomes investment from the country's aboriginals so that they have a stake in its Trans Mountain pipeline expansion, its head said on Wednesday, as the company braces for major obstacles for the project.

    Many aboriginal communities in Canada fiercely oppose energy infrastructure development through their lands, and companies have been trying to court them to ensure smooth completion of projects.

    Touting the company's record in dealing with Canada's native population, Ian Anderson spoke at an indigenous energy conference as Trans Mountain opposition was set to mount after the effective rise of an unfriendly government in the British Columbia province that the pipeline passes.

    "As it relates to equity and ownership, I've always recognized that it is something that we would be open to," he said. "I've worked for a long time, quietly, to try to assemble support for that on this project, and it didn't come to fruition, (but) I've never ruled it out."

    The Trans Mountain expansion of Kinder Morgan Canada, majority owned by Houston-based Kinder Morgan Inc, touches the lands of more than 100 aboriginal communities, some of which have launched legal challenges.

    Some have threatened civil disobedience, efforts that are expected to gain more momentum after last month's political upheaval in British Columbia.

    Anderson said the company tries to listen to aboriginal concerns and form relationships with them based on trust.

    Getting aboriginal investment in the company is a challenge due to the substantial resources required, although the federal government can step in to help the communities "build capacity," Anderson said.

    The Trans Mountain expansion almost triples the capacity of the existing pipeline, which is designed to carry crude from Canada's oil sands to the West Coast.

    Canada's oil producers, who lack export routes, say it helps them to attain better prices.

    The expansion has obtained both federal and regulatory approval and has passed an environmental assessment under British Columbia incumbent Liberal Party. But that party lost its legislative majority in a May 9 election.

    The opposition Greens and New Democrats, both of whom are against Trans Mountain, have sealed a deal to unseat the Liberals.

    While there is some dispute over whether British Columbia has a formal right to a veto, the province can raise hurdles that could effectively make the pipeline impossible to build.
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    BP: global natural gas output stalls, LNG on the rise

    Natural gas production worldwide last year recorded the weakest growth in almost 34 years as liquefied natural gas (LNG) trade rose and continues the upward trend, according to a report by energy giant BP.

    Global gas production increased only 0.3 percent to 21 bcm in 2016, the weakest growth in gas output for 34 years, other than in the immediate aftermath of the financial crisis, BP said in its “Statistical Review of World Energy.”

    Global consumption rose by 1.5 percent or 63 bcm, quite a bit weaker than its 10-year average of 2.3 percent.

    This sub-par growth went hand-in-hand with falling gas prices – Henry Hub prices were 5% lower than in 2015, European and Asian gas markers were down 20-30% as prices continued to adjust to increased LNG supplies, the report said.

    The report notes that much of the lacklustre performance can be traced back to the US, particularly on the supply side where falls in gas and oi) prices caused US gas production to fall for the first time since the US shale gas revolution started in earnest in the mid-2000s.

    Outside of the US, on the demand side, gas consumption in Europe rose strongly to 28 bcm,) helped by both the increasing competitiveness of gas relative to coal and weakness in European nuclear and renewable energy.

    The Middle East and China both also recorded strong increases aided by improving infrastructure and availability of gas. The largest falls were in Russia and Brazil, both of which benefited from strong increases in hydropower.

    On the supply side, Australian production was the standout performer as several new LNG facilities came onstream. Australian production rose 25.2 percent to 19 bcm.

    Looking at the growing market for LNG, although China continued to provide the main source of growth, it’s striking that the increasing availability of supplies has prompted a number of new countries, including Egypt, Pakistan and Poland, to enter the market in the last year or two.

    These new entrants were helped by the increased flexibility afforded by plentiful supplies of floating storage and regasification units or FSRUs, the report said.

    2016 was the first year of the growth spurt we expect to see in LNG, with global supplies set to increase by around a further 30% by 2020. That is equivalent to a new LNG train coming on stream every two months until the end of this decade – quite astonishing growth,” BP’s Chief Economist Spencer Dale said in the report.

    Dale added that as the importance of LNG trade grows, global gas markets were likely to evolve quite materially.

    “Alongside increasing market integration, we are likely to see a shift towards a more flexible style of trading, supported by a deeper, more competitive market structure,” Dale said.

    “Indeed, this shift is already apparent, with a move towards smaller and shorter contracts and an increase in the proportion of LNG trade which is not contracted and is freely traded,” he said.

    Attached Files
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    Report: Egypt scales down LNG deliveries to seven per month

    Egypt, that currently imports ten cargoes of liquefied natural gas per month is set to cut its imports down to seven monthly deliveries by September.

    Speaking to Reuters, an official at the Egyptian Natural Gas Holding Company (EGAS) said the imports will be further reduced to five monthly deliveries with the start-up of production at the Zohr gas field which is expected by the end of the year.

    It was earlier reported that Egypt is looking to cut down on LNG imports with growing domestic production.

    A report by Wood Mackenzie noted that the Egyptian market is set to undergo change over the next five years, as new gas discoveries and production start-ups push the country’s gas market back into surplus.

    With BP’s West Nile Delta and Atoll fields and Eni’s massive Zohr find, the North African country will add a cumulative 41 billion cubic meters a year of gas production by 2022, according to WoodMackenzie.

    The Egyptian company recently decided to relocate one of the FSRU BW Singapore, one of the floating storage and regasification units deployed in Ain Sokhna as import terminals. The FSRU provided by the Singapore-based BW was relocated to the port in Sumed.
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    US Lower 48 oil production increased 25,000 bbls day

                                                            Last Week  Week Before Last Year

    Domestic Production ,000............ 9,330          9,318           8,716
    Alaska .............................................. 490             503              527
    Lower 48 ...................................... 8,840          8,815           8,189
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    Summary of Weekly Petroleum Data for the Week Ending June 9, 2017

    U.S. crude oil refinery inputs averaged about 17.3 million barrels per day during the week ending June 9, 2017, 29,000 barrels per day more than the previous week’s average. Refineries operated at 94.4% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.8 million barrels per day. Distillate fuel production decreased last week, averaging about 5.2 million barrels per day.

    U.S. crude oil imports averaged over 8.0 million barrels per day last week, down by 316,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.2 million barrels per day, 7.1% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 574,000 barrels per day. Distillate fuel imports averaged 61,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.7 million barrels from the previous week. At 511.5 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories increased by 2.1 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 0.3 million barrels last week and are near the upper limit of the average range for this time of year. Propane/propylene inventories increased by 2.4 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories increased by 6.8 million barrels last week.

    Total products supplied over the last four-week period averaged 20.1 million barrels per day, down by 1.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.5 million barrels per day, down by 1.2% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, up by 4.1% from the same period last year. Jet fuel product supplied is up 2.7% compared to the same four-week period last year.

    Cushing down 1,200,000 bbls
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    Big Data and the Shale

    Anadarko is searching for statistically focused Data Scientists in the downtown Denver, CO and Midland, TX locations.  Each Data Scientist will be a part of the Data Science & Analytics teams of the respective cross-functional Integrated Asset Teams (IAT).  The Data Scientists will work closely with domain experts (including engineers and geologists) and data management team members, in applying Statistics and Data Science techniques towards solving key business problems for the IATs.  The Data Scientists will also work with the centralized Advanced Analytics & Emerging Technology organization, including the Data Science & Advanced Analytics team, in applying Advanced Analytic and Technology solutions towards solving key business problems for the IATs.

    Works as a key part of cross-functional teams with various internal customer groups to model and deploy data analytics, data mining, algorithm development and technical solutions. Leverages business acumen to identify, address and resolve a variety of complex business issues and opportunities. Applies advanced analytics, machine learning, and statistical techniques to data to identify areas where the business can gain a competitive edge. Leverages big data to discover patterns and solve strategic and tactical analytic business problems using massive structured and unstructured data sets across several environments.  Manages the design and development of data workflows and processes, technical solutions and statistical processes. Prepares and presents analysis and results to internal decision making audiences, often creating novel and innovative business metrics and solutions to inform and influence senior leadership.  


    New analytical techniques that work with a massive volume of data of extremely wide variety are enabling geoscientists and engineers to understand the nature and extent of reservoirs in ways never possible before. Welcome to an interview with Kamal Hami-Eddine, Paradigm, who explains big data and deep learning as they are being used today in the petroleum exploration and production. Kamal will be presenting at the AAPG Deepwater / Big Data GTW.

    Extracted reservoir bodies using Democratic Neural Network Association
    What is your name and your relationship to big data?

    My name is Kamal Hami-Eddine, Paradigm, and I studied applied statistics, probabilities and stochastic processes. This how I got introduced to big data problematics. I was studying in a city where the plane industry is big, and a big challenge for them was to monitor and learn from all the measures they take during flights, to limit maintenance cost. At that time the problem was unsolvable, but lots of research was done to find ways to transform idle data into information. That being said, I worked a lot on machine learning and neural networks more specifically, so naturally these days, it is all about big data and deep learning.

    Image titleBUT:
    Penseur Rodinson, works at Angola Answered Apr 25, 2016

    I've read the other answers people from outside of the industry. Allow me to give you an answer from within the industry.

    There is currently no machine learning going on and, I don't conceive of an application for it. While we have automated many things, and machines now do much of the above ground manual labor humans previously did, these are simple, well-defined, non-evolving tasks. There is no need for the machines to learn anything.

    Downhole tools already use sensory data and function autonomously. The sensors and data are so simple that the "decisions" made by downhole tools are approximately as simple as the "decisions" made by your car's old fashioned speed control, so simple the programming hasn't changed in years, and doesn't need to. They're much like ballistic missiles. We tell them where to go and, unless they break, they go where told. Their only decisions are made using iterative loops. Downhole machines don't need to learn because their jobs are incredibly simple.

    I witnessed BHP Billiton's attempt to use "big data" to optimize drilling operations. It failed dismally because the data analysts knew nothing about the meaning of the statistics they were accumulating. Because of this they drew lots of wrong conclusions. Big data is of interest when analyzing a large number of data points, as in consumer or voter behavior. When dealing with smaller, more granular data sets, big data's conclusions can be very misleading. An oil company may employ anywhere from a few to a few hundred drilling rigs spread across the globe, many operating in unique circumstances. Drawing conclusions from that kind of granular data isn't best done by algorithms. It's always best done by experienced, knowledgeable humans. I don't see an upstream application for big data. Even our "little data" is usually misused.

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    Surging shale spawns new financing structure for energy infrastructure

    Strong demand for shale oil-and-gas infrastructure is giving rise to an important new financing vehicle for pipeline, processing and storage ventures that are needed to get more shale fuels to market.

    So-called special purpose acquisition companies, or SPACs, seek to fill the gap left by the declining use of master limited partnerships, which historically have helped finance such capital-intensive midstream projects.

    U.S. crude output is expected to rise 4.5 percent this year and another 7.5 percent in 2018, to about 10 million barrels per day, eclipsing a 47-year-old record. Without hefty infrastructure investments - about $30 billion a year through 2020, according to Tortoise Capital Advisors - that increased flow could face a bottleneck.

    As the 2015 oil-price decline lowered U.S. output, energy MLPs failed to deliver promised growth and returns, shutting off one key source of investment.

    Between 2011 and 2014, 60 energy MLPs went public, raising about $23 billion in total proceeds. Since then, only a dozen have done so, according to the MLP Association, a Washington-based trade group. Those offerings raised about $6 billion.

    SPACs offer a way to do large deals for existing companies whose private-equity owners want to sell or who need cash for expansion. SPACs raise money from institutional and retail investors – who invest without knowing what will be acquired – then go shopping for deals.

    Unlike MLPs, SPACs pitch investors on the credentials of their veteran management teams rather than the companies in their portfolios. Investors in SPACs gamble that the executives can find a deal at a suitable price.

    Rising shale output and falling investments in MLPs have whetted appetites for new financing alternatives to fuel the growth of oil firms.

    "We think the market is ripe," said Jim Baker, a partner at Kayne Anderson Capital, which created the first energy-infrastructure SPAC in April.

    Its SPAC raised $377 million through an initial public offering to hunt for large infrastructure businesses in U.S. shale basins.

    "There are a lot of private-equity-backed midstream companies that ultimately need to exit and find a long-term home," said Robert Purgason, chief executive of Kayne Anderson Acquisition Corp, as the SPAC is called.

    Purgason is a former executive with pipeline operators Crosstex Energy and Williams Cos, and he led Chesapeake Midstream Partners through an IPO. At Williams, he ran a business that provided fuels transportation for producers including Anadarko Petroleum, Royal Dutch Shell and Total.

    Kayne Anderson Acquisition expects to build its war chest to buy midstream companies to between $1.5 billion and $2 billion through a combination of borrowing and convincing private equity owners to hold stock in any deal.

    It hopes to have at least one deal in hand before year-end, Purgason said.

    Earlier SPACs have focused on buying shale producers instead of storage and transportation firms.

    Silver Run Acquisition I raised $500 million in early 2016 and months later bought closely-held Centennial Resource Development for about $1.4 billion in cash.

    That deal's success - investors in the IPO have received a 47 percent return in the last year - spawned several copycats this year.

    SPACs have an advantage in the current market because of their potential to compete for larger deals than private equity buyers and their ability to use cash and equity.

    "There are a lot of assets for sale on the midstream side," said Brian Kessens, a managing director at Tortoise Capital, which specializes in energy investments and MLP-backed mutual funds. "For the larger assets, there aren't a lot of larger buyers."


    Master limited partnerships originally won favor among income-seeking retail investors because they are tax-advantaged partnerships that pay profits to individual owners and aren't required to pay corporate income taxes.

    Over time, MLPs are designed to pay the general partner who sets up a business a larger share of its earnings via distributions, similar to dividends, which in turn shrinks the share of future payouts to retail investors.

    The increasing amount paid to the general partner makes it more difficult to raise money from investors for later-stage projects. That's especially true if the firm's overall earnings do not grow rapidly after the influx of investment.

    "It gets burdensome five or 10 years out for a growing MLP," said Greg Reid, president of Salient MLP Complex, a money manager with more than $5 billion in MLP assets.

    The troubles that some MLPs have faced in growing their businesses has led to a consolidation.

    Canadian pipeline firm Enbridge Inc, for instance, this year acquired its natural gas MLP, Midcoast Energy Partners LP, after that business struggled to grow in its U.S. Gulf Coast region and its share price tumbled to $8 from $25 in 2014.

    Michael O'Leary, co-chairman of the corporate securities practice at law firm Andrews Kurth Kenyon LLP, expects consolidation among MLPs to accelerate.

    "The liquidity available for incremental investment by MLPs just is not there to the same degree as before," he said.


    The struggles of MLPs have opened the door for SPACs to finance pipelines, processing plants to separate liquids and storage facilities to hold oil and refined products.

    A SPAC offers owners - including private equity firms that jumpstart many infrastructure startups - faster liquidity because it has publicly traded shares, said Salient MLP's Reid. An investor can sell shares at any time, unlike those in a private equity fund, who face a lockup period or a gamble on the timing of a future IPO.

    If Kayne Anderson's SPAC does well, Reid said, his firm would consider putting together a similar company for energy infrastructure deals.

    A SPAC that has money to spend and is already public has an advantage in the current market for infrastructure deals.

    "The IPO window is open," said Reid, "but it's not as easy as it was two or three years ago."
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    Oil supply seen outpacing consumption in 2018, demand to top 100 million barrels per day

    Growth in oil supply next year is expected to outpace an anticipated pick-up in demand that will push global consumption above 100 million barrels per day (bpd) for the first time, the International Energy Agency said on Wednesday.

    The Paris-based IEA said production outside the Organization of the Petroleum Exporting Countries would grow twice as quickly in 2018 as it will do this year, when OPEC and 11 partner nations have restrained output.

    "For total non-OPEC production, we expect production to grow by 700,000 bpd this year, but our first outlook for 2018 makes sobering reading for those producers looking to restrain supply," the IEA said.

    "In 2018, we expect non-OPEC production to grow by 1.5 million bpd which is slightly more than the expected increase in global demand."

    Brent crude futures extended losses after the report, falling 64 cents on the day to $48.08 a barrel by 0804 GMT, from around $48.26 prior to the release.

    Oil inventories across the world's most industrial nations rose in April by 18.6 million barrels to 3.045 billion barrels, thanks to higher refinery output and imports. The IEA said stocks were 292 million barrels above the five-year average.

    The agency continued to forecast an implied shortfall in supply relative to demand for the second quarter of this year.

    But it said slowing demand growth in China and Europe in particular, as well as increasing supply, meant the deficit should narrow to 500,000 bpd from a prior estimate of 700,000.

    OPEC and 11 rival exporters including Russia have agreed to extend a deal to limit supply by 1.8 million bpd to March 2018, in order to cut global inventory levels.

    Saudi Energy Minister Khalid al-Falih has reiterated the group's commitment to do "whatever it takes" to force a drawdown in global inventory levels.

    "We have regularly counseled that patience is required on the part of those looking for the rebalancing of the oil market, and new data leads us to repeat the message," the IEA said.

    "'Whatever it takes' might be the mantra, but the current form of 'whatever' is not having as quick an impact as expected."

    "Indeed, based on our current outlook for 2017 and 2018, incorporating the scenario that OPEC countries continue to comply with their output agreement, stocks might not fall to the desired level until close to the expiry of the agreement in March 2018," the IEA said.


    The price of oil has fallen 12 percent since May 25, when OPEC and its partners agreed to extend their supply cut, as inventories around the world have been slow to drain.

    Rising output from the United States has been one of the main factors behind the stubbornly high stock levels and the IEA estimates U.S. production will continue to grow aggressively into next year.

    "Our first look at 2018 suggests that U.S. crude production will grow year-on-year by 780,000 but such is the dynamism of this extraordinary, very diverse industry it is possible that growth will be faster," the agency said.

    The forecast for U.S. total oil production for 2017 has been revised 90,000 bpd higher, to average 13.1 million bpd, following further rig additions and increased spending.

    Crude output from OPEC nations rose by 290,000 bpd in May to a 2017 high of 32.08 million bpd, still within the confines of the supply deal, after comebacks in Libya and Nigeria, which are exempt from cuts.

    Compared to May 2016, OPEC crude production was down by 65,000 bpd, the IEA said. Non-OPEC output rose by 295,000 bpd month-on-month in May to 57.8 million bpd, 1.25 million bpd higher than a year earlier.

    Attached Files
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    Oil Search flows gas at Muruk

    Flowrate constrained by tubing limitation and downhole issues

    Australia-listed company Oil Search has competed a production test on the Muruk gas discovery in the Papua New Guinea North Highlands.

    The Muruk-1 sidetrack well was tested over the gas saturated Toro sandstone interval, from 3968 metres to 4065 metres, and produced at a constrained rate of 16 million cubic feet of gas per day on a 0.5-inch choke.

    Oil Search noted the test was constrained by tubing limitations and downhole issues, which it said limited it.
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    W. Africa Crude-Qua Iboe diff plummets on light, sweet oversupply

    Trade in Nigerian grades was slow on Tuesday owing to plentiful alternative light sweet grades in the Atlantic Basin.

    * Exports of Nigeria’s Forcados crude were expected to be 248,000 barrels per day in July, a loading programme showed.

    * Qua Iboe was under pressure and pegged at less than 50 cents a barrel above dated Brent. Earlier this year it was trading at dated Brent plus $1.20 a barrel and higher, several traders said. One said bids were barely above dated Brent flat but sales were not taking place.

    * The grade briefly hit a similar trough in mid January year but otherwise the differential has not been this low since the end of 2015.

    * Bonny Light was still under force majeure following the closure of one of its two pipelines, which is expected to be back up by the end of the month.

    * Angolan grades for July were nearly sold out. Phillips 66 sold a cargo of Girassol to Unipec. The cargo was offered at dated Brent plus 20 cents. The final price did not surface.

    Attached Files
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    North Dakota oil output up 25,000 b/d in April, gas sets record

    North Dakota oil production averaged over 1.05 million b/d in April, up nearly 25,000 b/d from March, the state Department of Mineral Resources said Tuesday.

    Oil production in April was still nearly 177,000 b/d below the all-time monthly record set in December 2014, according to state data.

    April marked the third month in a row that production remained above the 1 million b/d threshold. Since crossing over the 1 million b/d mark in April 2014, statewide monthly oil production has fallen below 1 million b/d just four times.

    Statewide natural gas production averaged nearly 1.84 Bcf/d in April, up from 1.73 Bcf/d in March and an all-time record, according to preliminary data.

    The state reported 13,717 producing wells in April, up 24 from March and also an all-time high. Drilling permits fell from 93 in March to 58 in April but have since climbed to 100 in May, according to state data.

    "Operators are maintaining a permit inventory that will accommodate increased drilling price points within the next 12 months," Lynn Helms, the state's top oil and gas regulator, said in a statement.

    There were 830 wells waiting on completion at the end of April, up 141 wells from the previous month.

    North Dakota's rig count averaged 50 in April, up four from March, but well below the all-time high of 218 set in May 2012. The statewide rig count was 55 on Tuesday.

    "Operators have shifted from running the minimum number of rigs to incremental increases and decreases throughout 2017, as WTI oil price moves above and below $50/barrel," Helms said.
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    China's May oil output lowest on record; refiners churn out more

    China's crude oil production fell to its lowest on record in May, even as refineries in the world's top buyer of crude churned out product at their fastest pace in nearly two years, data showed on Wednesday.

    Crude output fell 3.7 percent in May from a year earlier to 16.26 million tonnes, or 3.83 million barrels per day (bpd), data from the National Bureau of Statistics showed on Wednesday. The figure is the lowest since the bureau began publishing records in 2011.

    The drop in China's crude oil output has slowed as major oil producers raised spending to boost production as oil prices have stabilized in a range between $48 to $55 per barrel. Analysts are forecasting flat or positive production growth for calendar 2017.

    "Declining output this year comes as China's major oil fields Daqing and Shengli announced production cuts at the beginning of the year. The pace of decline in production will ease this year due to higher crude prices," said Gao Jian, a crude oil analyst with China Sublime Information Group.

    PetroChina, the owner of China's largest oilfield Daqing, said in December that it would slash capital spending on the field this year by 20 percent from a year earlier.

    Crude runs, meanwhile, rose in May by 5.4 percent from a year ago to 46.62 million tonnes, or 10.98 million bpd. Overall throughput was down from a record reached in March, but May recorded the fastest rate of year-on-year growth since May 2015.

    The refinery data highlights the concerns of a growing glut of gasoline and diesel in the domestic and Asian market even as demand slows. Sinopec Group, Asia's biggest refiner, is considering cutting refinery runs in the third-quarter because of the excess fuel supply in the country.

    Natural gas output in May dipped to its lowest since October, dropping by one-quarter from April to 12 billion cubic meters. However, compared to a year ago, production rose 10.5 percent.
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    Libya's NOC, Wintershall strike interim deal to resume output

    Libya's National Oil Corporation (NOC) and German oil firm Wintershall have agreed an interim deal to resume production, a step forward in a contract dispute that was blocking up to 160,000 barrels per day.

    NOC said on Tuesday the arrangement would allow an immediate resumption of production at Wintershall's NC 96 and NC 97 concession areas in eastern Libya, as well as connected fields where production has been blocked.

    A Wintershall spokesman confirmed the agreement.

    NOC Chairman Mustafa Sanalla told Reuters by phone from the oilfields on Tuesday that some wells at one of the affected fields, Abu Attifel, had already begun operating and production should resume there by Wednesday.

    Abu Attifel is operated by Mellitah, a joint venture between the NOC and Italy's ENI and has been closed since July 2015. Sanalla said he could see gas flares being relit as he was driving to the field with local officials.

    "Everybody is happy. We are all celebrating," he said.

    Sanalla said the NOC was targeting an increase in national production to one million barrels per day (bpd) by the end of July from 830,000 bpd now. He said Abu Attifel alone should rapidly be able to produce 50,000-60,000 bpd.

    Libya's output remains well below the 1.6 million barrels a day it was producing before the 2011 uprising. Armed conflict, political disputes and local blockades have made production levels highly volatile since then.

    The dispute with Wintershall had caused a rift between the NOC and the U.N.-backed government in Tripoli. The NOC accused the government of siding with the German company and trying to appropriate powers over oil sector contracts in the process.

    The NOC said Wintershall had failed to honour a 2010 memorandum of understanding to convert its concessions to EPSA IV terms, or the standard NOC contract that governs deals with international oil companies in Libya.

    Wintershall had said its concession deals with Libya were still valid.

    The NOC said in a statement that the agreement announced on Tuesday, "allocates to Wintershall an amount of production sufficient to cover its costs, with all remaining production being allocated to NOC".

    "It also provides that during this interim arrangement, the parties will attempt to resolve their dispute regarding the legal framework governing the petroleum operations."
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    OPEC Oil Prodcution Rises Most In 6 Months, Hits Highest Since December

    Well, so much for OPEC's production cut.

    In OPEC's latest Monthly Oil Market Report, the oil producing cartel reported that in May - the same month OPEC met to extend its production cuts - crude output climbed the most in six month, since November 2016, rising by 336.1kb/d to 31.139 mmb/d, the highest monthly production of 2017, as members exempt from the original Vienna deal restored lost supply.

    From the report:

    Preliminary data indicates that global oil supply increased by 0.13 mb/d in May to average 95.74 mb/d, m-o-m. It also showed an increase of 1.48 mb/d, y-o-y. A decrease in non-OPEC supply, including OPEC NGLs represents a contraction of 0.21 mb/d m-o-m but an increase of 0.34 mb/d in OPEC crude oil production, not only offset the decline of non-OPEC supply but also increased overall global oil output in May. The share of OPEC crude oil in total global production stood at 33.6% in May, an increase of 0.3% from the month before. Estimates are based on preliminary data for non-OPEC supply, direct  communication for OPEC NGLs and non-conventional liquids, and secondary sources for OPEC crude oil production

    Specifically, Libya pumped 730k b/d in May, up 178kb/d from 552kb/d in April; Nigeria output jumped to 1.68m b/d vs 1.506m b/d, a 174kb/d increase, while even the biggest producer Saudi Arabia, saw its output grow by 2.3kb/d to 9.94mb/d vs 9.938m b/d in April.

    Not surprisngly, in an attempt to preserve the "reduction" narrative, in its self-reported figures, Saudi Arabia told OPEC via direct communication that it produced 9.88mb/d in May, down 66.2kb/d from April's 9.946mb/d, although these figures are looking increasingly suspect.

    Perpetuating its existence of forced self-delusion, OPEC predicted that surplus oil inventories would continue to decline in 2H 2017 as their cuts (what cuts) take effect and demand picks up. “The re-balancing of the market is underway” OPEC wrote, conceding that it is taking place "at a slower pace" and adding that “the decline seen in the overhang” in developed-nation stockpiles “is expected to continue in the second half, supported by production adjustments by OPEC and participating non-OPEC producers." There was little discussion of the soaring US shale output, which as we wrote last night is expected to hit an all time high next month.

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    FERC to prepare Jordan Cove LNG EIS

    The U.S. Federal Energy Regulatory Commission issued a notice of intent to prepare an environmental impact statement for the proposed Jordan Cove LNG export project in Oregon.

    In addition, FERC will prepare an EIS for the accompanying 233-mile-long pipeline.

    The FERC is the lead federal agency for the preparation of the document. The U.S. Army Corps of Engineers, U.S. Department of Energy, Bureau of Land Management, Bureau of Reclamation, U.S. Forest Service, and the Bonneville Power Administration are cooperating agencies and can adopt the EIS for their respective purposes and permitting actions.

    The commission will use this EIS in its decision-making process to determine whether the Jordan Cove LNG terminal is in the public interest and the Pacific Connector Pipeline is in the public convenience and necessity.

    With the notice, FERC opened the scoping period inviting comments on the proposed project. The scoping period ends on July 10.

    The LNG terminal would include five liquefaction trains and two full containment LNG storage tanks. It would be designed to liquefy about 1.04 billion cubic feet per day (7.8 mtpa) of LNG for export to markets across the Pacific Rim.

    Following the agreement under which Pembina Pipeline Corporation will acquire Veresen in a transaction valued at C$9.7 billion ($7.10 billion), the Jordan Cove LNG project will be 100 percent owned by Pembina.
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    Harold Hamm: Natural gas from the USA is going to have a ‘world impact’

    In a phone interview with CNBC, Harold Hamm, chairman and CEO of Continental Resources, talked about turmoil between Qatar and its neighbors, the price of liquid natural gas and oil, and the latest on the United States' first LNG exports to Northern and Central Europe.

    CNBC: Last Thursday, the White House announced LNG shipments to the Netherlands and Poland — the first American LNG exports into northern and central Europe. You have said in the past that U.S. exports of natural gas to Europe would shake up the geopolitical landscape, because it would relieve Europe from being beholden to Russiannatural gas.

    Hamm: Yes. The world impact news you are talking about is a huge thing, because Poland has been subservient to Russia, because Russia could hold things over Poland's head to get what they want. Now it won't be possible. These exports are also a part of the larger picture of U.S. energy independence. We are now past the point of the U.S. being energy-independent with natural gas. We are shipping around the world, and now with infrastructure being built and put into place, we will continue to export even more through time. This is just the beginning.

    "We have the cleanest fuel in the world, and yet it is being delayed to the consumer. It can offset the pollution of coal, wood."

    CNBC: Let's turn to regulations. LNG facilities needs permits.

    Hamm: Yes, and it does not make sense! Why do we need a special permit for LNG? You don't need a permit for gasoline or oil. To unleash LNG's potential, we can't have this permit slowdown! Our company is bullish on natural gas, and this permitting process is putting LNG exploration and production on the sidelines. There is no reason why LNG can't be exported like crude oil.

    I have had talks with Secretary Rick Perry at the Department of Energy, and the length of time it takes to get permits approved is one of the things he said he will get fixed. There is no reason to have this long permitting delay. Government just needs to go down the boxes and check them, make sure safety measures are in place, and permits should be given. Some of the first permits for LNG facilities took five years to pass. Some permits took seven years! The Obamaadministration held them up. That certainly needs to be remedied. We have the cleanest fuel in the world, and yet it is being delayed to the consumer. It can offset the pollution of coal, wood.

    CNBC: How does this change the landscape of energy exports and what does this mean for Qatar, which is the world's largest exporter of natural gas?

    Hamm: The Qatar situation certainly brings up the delicate situations that are involved in doing business over there in the Middle East Region. All those tribal factions in Qatar are now coming into play. The fact Iran has been so involved with them is what has brought this about. But this conflict provides opportunity for the United States in exporting our natural gas. We are a neutral nation. Other countries like China or other Qatar customers would not have to worry about anything if they wanted to import U.S. LNG.

    "I think we will be north of the average $3.50 (for natural gas) by the end of the year. In 2018, I expect the same. Who knows about where prices go after that?"

    CNBC: The U.S. is in the early innings of LNG exports. The first shipment of U.S. LNG from the lower 48 states left in February 2016. As infrastructure continues to be built out, what kind of LNG export capacity will we be expecting?

    Hamm: It does takes time to build out. With the proposed facilities to be built and facilities already permitted, you can be looking at 11 billion cubic feet a day in the next two years.

    CNBC: Where do you see nat gas prices going?

    Hamm: We are in for very moderate pricing for nat gas for a lot of years going forward. I feel prices are in a fair range. I think we will be north of the average $3.50 by the end of the year. In 2018, I expect the same. Who knows about where prices go after that? I think we have adequate supply for a hundred years. I think north of three dollars may be the new normal. With the quantities of gas that we produce it would give us a good rate of return at Continental from the plays in which we are involved.

    "(OPEC) decided in January to cut back production. But you have to remember, you need more than 120 days to turn around the impact of the cuts. We are now more than 120 days in, and we are seeing fundamentals changing. "

    CNBC: Oil prices have tumbled to their lowest levels this year amid those tensions between Qatar and its neighbors — Saudi Arabia, Egypt, Bahrain and the United Arab Emirates. Do you see a ceiling on oil prices at this moment?

    Hamm: I don't think we speculate on where it will go. Look what has happened to the market. OPEC decided to flood the market in 2014 and it was a big mistake. OPEC saw shale as a threat and tried to quash it. They failed. It was not the wisest thing they did. They now realize it was a mistake. Last time they killed the market was in the 1980's and it took a while to turn things around. They decided in January to cut back production. But you have to remember, you need more than 120 days to turn around the impact of the cuts. We are now more than 120 days in, and we are seeing fundamentals changing. Inventories are on a downward trend, but sporadic week to week.

    CNBC: You said last month in your May 9 shareholder meeting that you saw about a 1 million barrels per day draw-down on oil inventories. How long do you see this playing out to get rid of this overhang in supplies?

    Hamm: The biggest challenge is 60 percent of refineries don't participate in announcing inventories. Only 40 percent participate. It's an inaccurate mechanism from the start. One week versus another, there's going to be a huge variance. Two inventories that everyone looks at are API (American Petroleum Institute) and EIA (U.S. Energy Information Administration), and those two last week showed a 2-million barrel difference (between one another). They don't even jibe. The fact is, this is a choppy situation, but I believe fundamentals are in place. Demand is slightly outpacing supply. Ultimately the production cuts take effect.

    CNBC: The EIA is predicting U.S. oil production could rise to a new high record of around 10 million barrels a day. At the pace U.S. shale production is going, when do you see that record being shattered?

    Hamm: It all depends on price. Continental has been disciplined. Operators across the U.S. have been also. Across the U.S., fields have not been turned on. Seventy-five percent of rigs have been laid down in the industry. Entire fields have gone undrilled, waiting on better product prices. Four hundred thousand people were laid off in the industry, so it's going to take a while to get them back. Every operator has a lot of levers to pull and options. It all depends on price.
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    LNG trade disruption worries ease as Qatari flows to Suez, Egypt resume

    Concerns over the impact of diplomatic blockade on Qatar on LNG trade flows eased this week, following deliveries of Qatari LNG into Egypt and the transiting of several Qatari vessels through the Suez Canal, a key transport route for Middle East LNG shipments to the European markets.

    This came as a relief to LNG traders, who were caught off guard last week when two Qatari cargoes destined for the UK via the Suez Canal turned around off the coast of Yemen and diverted towards South Africa's Cape of Good Hope, raising fears Egypt might have restricted access to the waterway.

    Market experts, however, argued the diversion was likely a move by the Qatari government to avoid transiting the Suez Canal and paying US dollar-denominated canal fees to Egypt, among those to have cut diplomatic ties with Qatar.

    "It was likely Qatar's decision to turn away the two cargoes rather than Egypt's," said an Atlantic-based LNG trader.

    An Asia-Pacific-based LNG shipping analyst said: "As an international waterway, it is very hard to prohibit the transit of vessels, and the Egyptian government would not oppose the transit of Qatari vessels as the canal is a big contributor to the national income."

    "Instead the Qatari government may choose not the transit to avoid paying any US dollars to the Egyptians," the analyst said.

    LNG trade disruption concerns emerged amid rising diplomatic tensions in the Middle East, following a decision by Saudi Arabia, Bahrain, Egypt and the UAE on June 5 to cut diplomatic ties with Qatar, the world's largest LNG supplier, over claims it funds terrorism and extremism.

    Qatar exported 78.8 million mt of LNG in 2016, more than 30% of a total global supply of 257.8 million mt, according to Platts Analytics, and an increasing share of its production is being delivered to emerging Middle Eastern buyers, including Egypt, Jordan and the UAE.


    The 162,000 cu m LNG carrier Golar Glacier and the 160,000 cu m Golar Celsius have delivered cargoes from Ras Laffan to Egypt's Ain Sukhna terminal in the Gulf of Suez since June 10, the first such shipments since the start of the diplomatic fallout.

    Another vessel loaded with Qatari LNG -- the Galicia Spirit -- was entering the Red Sea Tuesday, according to S&P Global Platts trade flow software cFlow, although the destination of the cargo was yet to be confirmed.

    Qatari LNG supply is crucial to Egypt's energy security, with more than 60% of the country's LNG imports in 2016 -- 4.61 million mt of a total 7.26 million mt -- sourced from Qatar and delivered as part of supply contracts between state-owned Egyptian Natural Gas Holding, or EGAS, and traders or portfolio sellers.


    Elsewhere in Egypt, three vessels on long-term charter to Qatar's state-owned LNG exporters Monday entered the Suez Canal through Port Said in the Mediterranean heading for Ras Laffan, easing concerns that Egypt may have prevented previous Qatari vessels from transiting the key waterway.

    The 152,000 cu m Al Marrouna, 210,000 cu m Al Bahiya and 216,000 cu m Al Gharrafa entered the canal unladen, after delivering Qatari LNG cargoes to Rovigo, Rotterdam and Milford Haven, with another two vessels expected to cross the canal in the next couple of days.

    Supply concerns were raised among European LNG buyers last week when two laden UK-bound Q-Max vessels were diverted away from the canal, prompting gas hub prices in Europe to rise sharply.

    The 266,000 cu m Zarga LNG and the 267,000 cu m Al Mafyar had been heading to Milford Haven and South Hook, respectively, via the Suez Canal, before they were diverted off the coast of Yemen and towards South Africa's Cape of Good Hope, a much longer route to the European markets.

    "It was a political decision," the shipping analyst said. "The Qataris have enough shipping capacity of Q-flex and Q-Max so they can afford an extra week of shipping time to the UK."

    The shipping route around South Africa makes sense for loaded vessels heading from Qatar to the Atlantic, but not for those in the Mediterranean, as turning back to Gibraltar and around Africa would make the voyage commercially unworkable, he said.

    With Asia Pacific day rates at around $31,000, the shipping cost of a one-way trip from Qatar to Europe around the Cape of Good Hope would be 10 cents/MMBtu higher than thorough the canal, where one-way fees are estimated at $450,000 for laden Q-Max vessels and $350,000 for unladen ones, above the return transit cost of $600,000 for regular size vessels, the analyst said.


    Restrictions by the UAE, another importer of Qatari LNG, on tankers going to or arriving from Qatari ports remained in place, according to a UAE government notification released Monday.

    But the effect on LNG is limited to Qatari LNG imports into the UAE's only LNG terminal, the 1 Bcf/d FSRU at Jebel Ali in Dubai, and bunkering activity at the UAE's major Fujairah bunkering port -- 37 LNG vessels called in Fujairah on their way to Qatar in May alone, cFlow showed.

    The UAE has not received Qatari LNG since the diplomatic blockade, but the country's diversified supply portfolio means its impact will be limited -- only 30% of Dubai's imports in 2017 to date have been sourced from Qatar, with the rest coming from Africa, Europe and the Americas.

    The effect on bunkering activities is also limited, given there are several alternative bunkering ports along both the Atlantic and the Pacific routes, and the fact that LNG ships have the option of using boil-off gas as bunkering fuel.

    "Singapore is the first alternative for the eastern customers," with Japan, South Korea and Taiwan also having bunkering capacity, the shipping analyst said. "For western customers, South Africa, Gibraltar and Rotterdam are the best options," the analyst said.


    In an unusual step to reassure customers and markets, Qatar Petroleum, owner of Qatargas and Rasgas, said Saturday its operations had so far not been affected by the recent diplomatic crisis.

    "Qatar Petroleum, and its subsidiaries, wishes to affirm that it is conducting business as usual throughout all its upstream, midstream and downstream businesses and operations," the company said in a statement.

    QP President and CEO Saad al-Kaabi underlined Qatar Petroleum's "determined efforts to continue uninterrupted supplies as the world's most reliable LNG supplier."

    The exporter's creditworthiness was reaffirmed last week, with S&P Global Ratings saying its 'A' ratings and stable outlooks on the $4.415 billion senior secured bonds issued by Qatar-based Ras Laffan Liquefied Natural Gas were unaffected by the economic and diplomatic sanctions against Qatar.

    "We do not anticipate that exports of LNG from Qatar to major markets in Asia and Europe will be affected by the sanctions at this point, given that Qatar can access international waters via the Strait of Hormuz without crossing Saudi, Emirati or Bahraini national waters."
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    Oil Resumes Drop on Signs U.S. Crude Stockpiles Extended Gains

    Futures lost as much as 1.4 percent in New York after rising 1.8 percent in the previous three sessions. The American Petroleum Institute signaled U.S. crude inventories probably climbed a second week, ahead of data from the Energy Information Administration which is forecast to show a decline. OPEC output rose in May as Libya and Nigeria revived production halted by attacks and political crises, a report from the group showed Tuesday.

    Oil is extending its slump below $50 a barrel amid speculation increasing U.S. supplies will counter production curbs by the Organization of Petroleum Exporting Countries and allies including non-OPEC member Russia. Output at major American shale fields will reach a record in July, according to the EIA.

    “The market has weakened on the API data,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “Investors will be watching the EIA numbers like a hawk to see if that increase is confirmed. There is an improvement in global demand, but not enough to drive prices at this stage.”

    West Texas Intermediate for July delivery slid as much as 63 cents to $45.83 a barrel on the New York Mercantile Exchange, and was at $45.99 at 12:51 p.m. in Hong Kong. Total volume traded was about 23 percent below the 100-day average. Prices gained 38 cents to $46.46 on Tuesday.

    Brent for August settlement lost as much as 54 cents, or 1.1 percent, to $48.18 a barrel on the London-based ICE Futures Europe exchange. Prices added 43 cents, or 0.9 percent, to $48.72 on Tuesday. The global benchmark crude traded at a premium of $2.11 to August WTI.

    U.S. crude inventories added 2.75 million barrels last week, while gasoline stockpiles increased by 1.79 million barrels last week, the API said Tuesday, according to people familiar with the data. The EIA is forecast to report crude stockpiles slid 2.45 million barrels and motor fuel inventories dropped by 1.15 million barrels, according to the median estimate in the Bloomberg survey.
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    Mediterranean, North African gasoil finds new arbitrage opportunities in Argentina

    Traders with gasoil supplies in the Mediterranean have been heard fixing cargoes to move across the Atlantic to Argentina, amid weakening price differentials in the local Mediterranean market.

    Two vessels have left La Skhirra in Tunisia, where there are distillate storage facilities, and are heading for Argentina, according to S&P Global Platts trade flow software cFlow. Shipping market sources have suggested that both vessels are likely to be carrying gasoil to fill tendered demand in Argentina.

    Argentina regularly seeks high sulfur gasoil supplies for its power generation needs from Europe between May and September, during the southern hemisphere's winter.

    But more typically, loading locations in Europe for Argentinian state-owned Cammesa's gasoil tenders have been Baltic and occasionally Black Sea ports.

    According to cFlow, the Angelica An, a 46,408 dwt vessel, is due to land in Zarate in Argentina on June 28, while the 47,344 dwt Joyce is due on June 25.

    In terms of other unusual fixtures, a medium-range tanker, the Tower Bridge, is scheduled to carry a 40,000 mt cargo of gasoil to Argentina from Lavera in France on June 18, according to shipping sources, who added that the charterer is Glencore.

    Glencore declined to comment on the matter.

    "The Med is low, [and is] opening arb possibilities," one trader said.

    Platts assessed 0.1% gasoil CIF cargoes at a $4.75/mt discount to benchmark low sulfur gasoil futures Monday, down from parity on May 12.

    Meanwhile, the Fidelity, a 46,408 dwt, vessel is also making the more standard journey from Novorossiisk, in the Black Sea, to Zarate. The vessel left on June 6, and is expected to reach its destination on July 3.
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    OMV, Gazprom may revive Black Sea gas pipeline extension: Der Standard

    Austrian energy group OMV and Russia's Gazprom are considering reviving a gas pipeline project through the Black Sea connecting Russia to central and southern Europe, an Austrian newspaper said on Tuesday.

    Austrian Chancellor Christian Kern and Russian President Vladimir Putin discussed the issue during Kern's visit to an economic forum in St Petersburg this month, Der Standard said, citing insiders.

    OMV and Gazprom had signed an outline deal in the Russian city to coordinate "the development of the gas transmission infrastructure required for providing natural gas supplies to central and southeastern Europe".

    A source familiar with the plans told Reuters it was too early to talk about project costs and investments. If realized, the project would likely boost the importance of OMV's Baumgarten gas hub, which distributes around 57 billion cubic meters a year.

    Der Standard said the project would be an extension of the TurkStream pipeline, which Gazprom plans to finish by the end of 2019. The extended line could pump Russian gas to Italy, which currently receives supplies from Baumgarten via the TAG and SOL pipelines.

    Alternatively, Russian gas could go from western Turkey via Greece to Italy.

    Spokesmen for OMV and Kern declined to comment. Gazprom had no immediate comment.

    Russia scrapped the South Stream pipeline project, which would have supplied Russian gas to southern Europe with an undersea pipeline to Bulgaria, in late 2014 because of objections from the European Union on competition grounds.

    The dispute between Brussels and Moscow followed Russia's annexation of Crimea from Ukraine and the imposition of Western economic sanctions on Russia over the Ukraine conflict.
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    Traders keep oil in Asian storage for later sale, undermine OPEC supply cuts

    A 10-percent decline in oil prices since late May could push traders to keep crude in storage, looking to sell down the line when forward prices are higher.

    That would undermine the impact of supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), which partly aimed to force traders holding oil in storage to sell to reduce bloated inventories that have sapped global prices.

    Brent crude futures for delivery in half a year's time were this week around $1.50 per barrel above current prices, a market structure known as 'contango' that makes it profitable to store fuel instead of selling for direct use.

    Shipping data shows that at least 15 supertankers are sitting in Southeast Asia's Strait of Malacca and Singapore Strait, filled with unsold fuel.

    While that is less than in previous months, traders said that volumes in storage could easily pick up.

    "If contango lasts, it's very possible that the amount of tankers used for storage rises back to levels seen earlier this year," said a trader who fixes floating storage deals. He declined to be identified as he was not authorized to speak with media.


    Oil shipments to Asia remain high, stoking the supply glut in the region.

    Trade data shows that 21.5 million barrels per day (bpd) of crude came to Asia on tankers in May. While that is down from a peak in February, it is similar to levels in late 2016, before production cuts were announced.

    OPEC has so far shied away from making significant supply cuts to its biggest customers, most of which are in Asia.

    And other producers, especially from the United States, have stepped up exports, further stoking the glut.

    OPEC's de-facto leader Saudi Arabia now says it will cut July crude allocations to Asia by 300,000 bpd, although many Asian refiners so far say they have received all their allocations.

    Going forward, analysts said that storage levels would be key in determining the health of the oil market.

    "It's the only statistical proof the market can get to confirm or deny OPEC's claim the market is heading back toward balance," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

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    Shale Gas Giants Battle for Dominance as U.S. Supplies Surge

    As natural gas prices rebound from last year’s historic lows, output from the Marcellus shale basin in the U.S. East and the Permian reservoir in Texas is driving a rebound in America’s production of the fuel. Low-cost supply from the Marcellus is surging as new pipelines are built to shuttle gas to markets across the U.S. and Canada. Meanwhile, Permian output is rising as a recovery in oil prices boosts the production of gas that’s extracted alongside crude.

    A deluge of new gas production from Texas and Pennsylvania threatens keep the U.S. awash in excess supply and lower prices nationwide, even as rising exports trim a glut of the fuel in storage. Though the reservoirs are thousands of miles apart, gas competition between the Marcellus and Permian is set to heat up as producers there go after the same customers in major markets like the Midwest.

    “Everyone can’t grow and everyone can’t win,” Justin Carlson, managing director of research at East Daley Capital Advisors Inc., an energy consulting company he co-founded in Centennial, Colorado. “Marcellus producers did not count on the Permian.”

    Marcellus gas output will rise 0.5 percent to 19.4 billion cubic feet a day in July from June, while Permian production will climb 1.9 percent to 8.5 billion, the U.S. Energy Information Administration’s monthly Drilling Productivity Report showed Monday. That’s an all-time high for both shale deposits.

    The Marcellus may end up ceding some ground to the Permian, Carlson said. Output from the Marcellus will probably climb by 11 billion cubic feet by the end of 2019 from last year, well below the guidance given by producers in the region showing a gain of 14.5 billion during the same period, he said. That means the new pipelines crisscrossing the region could take longer to fill.

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    Caelus Energy delays key test on Alaskan North Slope crude discovery

    Caelus Energy delays key test on Alaskan North Slope crude discovery

    Dallas-based independent Caelus Energy will delay a key test well on a promising North Slope discovery due to the crude price outlook and continued uncertainty about state tax policies, a spokesman said Monday.

    Caelus announced the discovery of a possible multi-billion-barrel field at Smith Bay, in the Alaskan Beaufort Sea offshore the National Petroleum Reserve-Alaska, in October 2016, but needs further tests to confirm its production potential.

    Related Capitol Crude podcast: As US energy policy pendulum swings, Trump looks to Arctic and Atlantic drilling

    More drilling and production tests had been planned for next winter -- exploration is mainly done in winter in Alaska -- but that has now been postponed, spokesman Casey Sullivan said in an interview.

    The price outlook is only part of the problem, Sullivan said, although it affects income from Caelus' producing Oooguruk field that would have helped finance the Smith Bay project. Another problem is the state of Alaska's inability to pay money owed explorers like Cealus for tax credits earned under an oil and natural gas exploration incentive program.

    "We've earned about $100 million in tax credits," which is unpaid, Sullivan said.

    "While this is important, it's only part of the picture. There is heated debate in the Legislature as to how to get to closure," on the state production tax and the unpaid tax credits, which now totals an aggregate $700 million for all explorers.

    Alaska is struggling with multi-billion-dollar state budget deficits due to low oil prices, and has been drawing down reserves to fund the state budget.

    Legislators are now meeting in a special session to try to resolve revenue and budget issues, including those for money owed explorers.

    The Smith Bay discovery is one of two finds on the North Slope that have attracted interest because substantial accumulations were found where state and federal geologists had not expected them.

    Caelus drilled two exploration wells in early 2016 and identified a deposit estimated at 6 billion barrels of oil in place and 2 billion to 2.5 billion barrels recoverable over an area of 126 square miles.

    Although the oil was found in reservoir rock that could be technically challenging, the company believes the light oil found could move easily after hydraulic fracturing. Caelus said in 2016 it hoped to have Smith Bay online by 2023, but that schedule may now be impaired.

    The other new find is in the Colville River area west of Prudhoe Bay, near the producing Alpine field, where a joint venture of Repsol and Denver-based independent Armstrong Oil and Gas have found a deposit they believe is capable of output of 120,000 b/d.

    The Armstrong/Repsol "Pikka" project is now in the permitting stage, with a Draft Environmental Impact Statement expected later this year. Neither company has mentioned a potential production startup date, but they have previously voiced concerns on taxes to state legislators that are similar to those made by Caelus.

    Alaskan officials are counting on both projects being online in the early to mid-2020s to help stem long-term declines of North Slope production and flows moving through the Trans Alaska Pipeline System.

    Current producers stemmed the decline in 2016, a result of new projects initiated in 2014 and 2015 when oil prices were still high, but the decline may return in 2017 because of cutbacks in drilling in the large producing fields due to lower oil prices.
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    Pipeline congestion causes spike in crude-by-rail shipments from Canada

    Pipeline congestion causes spike in crude-by-rail shipments from Canada

    Crude coming from the Canadian oil sands faces pipeline congestion on its way to the Gulf Coast, forcing production companies to opt for more expensive rail transport instead.

    The lack of pipeline options partially stems from the controversy, and delay, over the TransCanada Keystone XL pipeline, which was added to a backlog of other pipeline projects crossing the border. Since 2013, crude-by-rail shipments to the U.S. have fluctuated, but starting rising again in 2016 until they reached a record 183,000 barrels a day in March.

    But companies could be stretched more in the coming months to pay for more expensive rail shipments of crude while oil prices remain stubbornly below $50 a barrel, according to Morningstar, a Chicag0-based research firm.

    "Given that no new crossborder pipeline capacity is expected on line before 2019, we expect Canadian crude-by-rail traffic into the United States to continue growing as production increases," Morningstar analysts wrote in a report released Monday.
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    Sinopec Considers Oil Output Drop To Fight Domestic Glut

    State-refiner Sinopec could cut oil output by a third to combat a domestic oil supply glut fueled by competition from independent refiners and slow demand.

    "The company (Sinopec) is facing large pressure in the domestic fuel market as local plants boosted production,"an anonymous official told Reuters. "There were run cuts last year, but the level under consideration for the third quarter is deeper than before."

    Output will fall by three million tons, or 238,000 barrels per day, in the third quarter of this year, the source said.

    "Demand is softening currently and export quotas are limiting Sinopec's export capacity," Michal Meidan of the consulting firm Energy Aspects said. "Around 600,000 to 700,000 bpd of new capacity is set to come on line over the second half (of 2017), so that's why Sinopec is looking to cut back its own runs."

    A second source confirmed the cuts, but did not specify their size due to the possibility of further adjustments to monthly volumes down the line.

    New federal regulations and Beijing’s increased favoritism towards nationalized oil refiners are pushing “teapots”, or small-scale independent refiners, to diversify their revenue sources, according to a report by Reuters in April.

    In the fourth quarter of 2016, teapots suffered the transfer of control over national oil and gas exports to major government refiners—the largest of which is Sinopec—which cut the independent refiners out of foreign markets for refined petroleum goods. The move tempered the rise of the small-but-growing sector, which accounted for over 90 percent of China’s 2016 oil import growth.

    The changes in China’s regulatory landscape comes as the country commits to green energy goals in lockstep with the Paris climate change agreement of 2015. As a result, national fossil fuel consumption is now slumping. Last year, China’s oil demand growth was at a three-year low.

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    US shale oil output projected to rise by more than 100,000 barrels a day for a fourth straight month

    Shale oil production in the United States is expected to jump again in July, marking the fourth straight month the Department of Energy has forecast monthly growth above 100,000 barrels a day.

    The department's U.S. Energy Information Administration on Monday projected crude oil output will rise by 127,000 barrels a day next month in several of the nation's shale basins, where producers use advanced drilling methods like hydraulic fracturing to squeeze oil and natural gas from rock formations.

    In July, total output from these resources is expected to reach nearly 5.5 million barrels a day, according to EIA.

    Output growth in the shale fields has driven a 10 percent recovery in the country's overall crude production since September. More drillers can break even or turn a profit on new production since oil prices rose above $50 a barrel last winter, when OPEC and 11 other exporters agreed to cut their output in order to balance the market.

    The biggest gains are once again expected to come from the Permian basin, the center of the U.S. oil recovery located primarily in western Texas and part of eastern New Mexico. EIA projects production in the Permian will rise by 65,000 barrels a day in July.

    The Eagle Ford area is forecast to be the second biggest contributor to July's gains, with output expected to rise by 43,000 barrels a day next month in the southern Texas oil basin.

    Production gains have been rising in the Permian as drillers become more efficient, squeezing more oil out of wells for each rig they deploy. But there are signs those efficiency gains may have reached their limit.

    Production from new oil wells per rig topped out at 704 barrels a day in August, and is expected to fall to 602 barrels per rig in July.

    This is happening in part because some drillers are moving beyond their best wells as more players pack into the Permian, according to IHS Markit analyst Raoul LeBlanc.

    At the same time, the high demand for labor and equipment is causing producers to turn to workers who got laid off during the downturn and rigs that need investment after sitting idle. At the start of the recovery last year, a pool of workers and rigs that had not been out of the fields for long was still available, allowing production to rev up quickly early in the cycle.

    "Technology marches in one direction. We're not getting dumber, but some of the cyclical factors will unwind. We'll see more of it particularly as costs continue to rise," LeBlanc told CNBC.

    The drilling recovery is beginning to spread beyond the Permian and Eagle Ford to North Dakota's Bakken and the Niobrara, located in northeastern Colorado and parts of three adjoining states. EIA projects production will rise by 6,000 barrels a day in the Bakken and by 11,000 barrels a day in the Niobrara in July.

    But production gains in these areas will be more muted than in the Permian, LeBlanc warned. A small number of specialist drillers are indeed increasing output, but there are just not enough players drilling in these regions to generate the kind of growth Texas is seeing, he said.

    The EIA does not forecast output for the Scoop and Stack, two oil-producing regions in Oklahoma where activity has ramped up in recent years.
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    China issues third set of fuel export quotas under tolling scheme -traders

    China issued 9.06 million tonnes of refined fuel export quotas under so-called processing trade terms in its third batch of quotas, two trading sources with knowledge of the matter said on Tuesday.

    This raises the total number of permits under this category to 24.76 million tonnes in 2017.

    The quotas will be valid till the end of this year and were assigned to China National Petroleum Corp (CNPC), Sinopec Corp, China National Offshore Oil Corp (CNOOC) and Sinochem Group, the sources said.

    These quotas are different from the 7.605 million tonnes of export quotas the Chinese government have issued under a separate general trade category.

    The Ministry of Commerce did not immediately comment.

    Combined, China has granted 32.365 million tonnes of fuel export quotas this year, and all to the same four state oil companies.

    China earlier this year barred the country's independent oil plants from exporting fuel.

    Of the latest batch of tolling quotas, Sinopec won 5.05 million tonnes, followed by CNPC at 2.7 million tonnes, Sinochem at 700,000 tonnes and CNOOC at 610,000 tonnes.

    Under the general trade category, refiners get tax refunds after exports are completed or get a tax waiver on fuel exports, a policy that Beijing granted in 2016.

    Under the processing rules, refiners are exempted from import taxes on crude oil and export taxes for oil products, but have fixed volumes and time slots to export, both under the tight scrutiny of Chinese customs.
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    U.S. shale firms more exposed to falling oil prices as hedges expire

    Cash-strapped U.S. shale firms scaled back their hedging programs in the first quarter, leaving them more vulnerable to tumbling spot market prices just after OPEC reached a landmark deal to curb global supply.

    The pullback in hedging was driven by rising service costs and expectations that prices would continue to rally after the Organization of the Petroleum Exporting Countries extended those cuts in May, analysts said.

    However, rising U.S. production has stymied OPEC's efforts to rebalance markets. Crude oil futures have lost 15 percent of their value since February, raising the risk that unhedged companies are more exposed to market weakness.

    The market peaked at $55 a barrel in January as cuts got under way, but has struggled since, and closed Monday at $48.29 a barrel [O/R], barely changed from the end of November, when OPEC agreed with nonmembers to cut 1.8 million barrels a day in supply.

    For oil traders, hedging data serves as a leading indicator of future supplies. With so little hedged, dealers say producers are now looking to hedge at the next chance possible, a move that will pressure prices in coming months.

    Producers hedge by buying a variety of financial options to secure a minimum price for crude and safeguard future production.

    According to a Reuters analysis of hedging disclosures by the 30 largest U.S. shale firms, most stayed on the sidelines in the first three months of 2017, a stark contrast from a year ago when firms rushed to lock in prices, even though oil was trading $15 a barrel lower.

    In total, 18 companies reduced outstanding oil options, swaps or other derivatives positions by a total of 49 million barrels from the fourth quarter to the first quarter, the data shows. Another 10 companies increased their hedging positions by 91 million barrels; two others did not hedge at all.

    Compared with a year ago, the group is more exposed to falling oil prices, with one-fifth fewer barrels hedged, or the equivalent of 28 million barrels, and three times more barrels rolling off, or the equivalent of 38 million barrels.

        "A lot of producers held back on locking in hedges in the first quarter because OPEC cut their historic deal and they thought there would be a linear shift higher in prices. But then, we saw several pullbacks," said Michael Tran, director of global energy strategy at RBC Capital Markets.

        Prices are too low now for producers to lock in large volumes of future production, Tran said. In addition, pent-up demand for hedging will pressure any moves higher in the oil market, he said.


    Morgan Stanley said in a recent note that producers are hedged at around 12 percent of their 2018 output and 40 percent for their current 2017 output.

    The increases were driven by Hess Corp and Apache Corp, which had previously remained unhedged. They added a combined 54 million barrels.

    Analysts expect U.S. oil drilling to taper off as old hedge positions wind down, leaving smaller producers exposed to market prices at below break-even levels.

    "I think companies are a little bit nervous that they are underhedged right now and they will try to take advantage of any hedging opportunity they get at about $50 per barrel," said Bill Costello, a portfolio manager at Westwood Holdings Group.


    In total, the 30 companies held hedged positions equivalent to about 483 million barrels at the end of March, compared with 441 million at the end of 2016. Excluding Hess and Apache, the two highest hedgers, the group held only 428 million barrels.

    Some large players refrained from building a larger buffer. Anadarko Petroleum Corp - which held 33.2 million barrels hedged for 2017 in the fourth quarter - had 8 million barrels roll off through the first quarter. EOG Resources had nearly 6 million barrels unwind after terminating its hedges.

    Analysts said much of the hesitation has to do with rising service costs. Firms that supply rigs and crews are clamoring to take back discounts extended during the height of the slump early last year, in some cases boosting prices by 10 to 15 percent.

    "Producers are working in an environment where they see service cost increases on the horizon. They see their expenses going up, but their revenues are not going up correspondingly, which is why they do not want to hedge and compress their margins," said Rob Thummel, a portfolio manager at Tortoise Capital Advisors LLC
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    Taiwan to get first LNG shipment from U.S. Sabine Pass

    With a tanker expected to arrive in Taiwan within a day, the United States will increase the number of countries that have received liquefied natural gas from the Sabine Pass terminal in Louisiana to at least 23 of the 35 that can accept the vessels.

    The Cadiz Knutsen tanker will go to the Taichung LNG terminal in Taiwan with a load of supercooled gas from Cheniere Energy Inc's Sabine, according to Reuters and Genscape shipping data.

    The increase in U.S. deliveries coincides with the LNG market worries that Qatar, the world's biggest LNG exporter, could experience problems delivering fuel to some countries after Saudi Arabia and a few other Arab nations severed diplomatic and transport links with the gulf sheikhdom after accusing the country of sponsoring terrorism.

    In May, a record 18 vessels picked up cargoes from Sabine Pass. Those vessels, which had a total capacity of around 59.5 billion cubic feet, went to several countries, including Brazil, the UAE, Mexico, China, South Korea, Argentina and the first exports to the Netherlands and Poland.

    Based on an average price of $3.12 per million British thermal units at the Henry Hub benchmark in Louisiana in May, the value of gas shipped from Sabine last month was about $192 million.

    The first vessel left Sabine in February 2016. Each of the three liquefaction trains operating at Sabine can process about 0.65 billion cubic feet of gas per day. A fourth 0.65-bcfd train is expected to enter service during the second half of 2017.
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    BP violated contract when it blended Texas crude: Monroe Energy

    BP PLC violated its supply contract when it sold oil to refiner Monroe Energy that was a blend of lower-valued Texas crude with premium varieties, Monroe alleged in a federal court filing last week.

    Monroe Energy, a subsidiary of Delta Air Lines that owns a 185,000 barrel-per-day refinery outside of Philadelphia, said the blending of lower quality crudes is prohibited under the supply contract. The company asked a U.S. District Court judge in New York on June 7 to dismiss BP's April lawsuit alleging Monroe wrongfully severed the deal.

    The motion for dismissal has not been previously reported.

    BP was allowed to blend Eagle Ford crudes from different wells under its contract but only if each blend met specific API gravity and vapor pressure requirements. Blending lower-grade crude is an industry tactic used to boost returns on less desirable oil, said Monroe, which filed a motion to have the suit dismissed.

    BP said in its initial complaint that it blended batches of crude out of Texas's Eagle Ford shale play prior to delivery. The company said the two parties specifically discussed such blending before a three-year deal was signed in 2014. Monroe unilaterally ended the deal in June 2016.

    "Monroe Energy has breached the contract for delivered crude product in an apparent attempt to avoid paying the agreed-upon price for the crude BP supplies," BP said in a written statement on Monday, adding that Monroe had accepted the product without complaint.
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    GE wins U.S. antitrust approval for Baker Hughes deal

    General Electric Co won U.S. antitrust approval to merge its oil and gas business with Baker Hughes Inc (BHI.N) to form a new publicly traded company, the Justice Department said on Monday.

    GE and Baker Hughes announced the deal in October, months after Halliburton's (HAL.N) effort to buy Baker Hughes collapsed under pressure from the Justice Department.

    Under the agreement, GE will combine Baker Hughes with its oil and gas business, creating a company with $23 billion in annual revenue, the companies said.

    GE will pay existing Baker Hughes shareholders $7.4 billion for a special dividend.

    Following the approval, shares of Baker Hughes added slightly to gains to close up 1.1 percent at $56.16.

    Energy service companies like Baker Hughes have scrambled to recover from a two-year rout in global oil prices, which pushed the value of U.S. crude CLc1 to around $26 per barrel last year. Services companies were among the hardest hit, laying off thousands of workers and idling equipment.

    A deal among major global oil producers last year to cut production has helped stabilize prices at about $50 a barrel, spurring drilling activity. In the United States, drillers have added some 513 rigs since last year, more than doubling the number in operation, according to data from Baker Hughes.

    GE is already the world's largest oilfield equipment maker, supplying blowout preventers, pumps and compressors used in exploration and production. It has also invested heavily in large data processing services just as the oil industry eyes its potential to boost oil recovery.

    Baker Hughes is seen as one of the world leaders in horizontal drilling, chemicals used to frack and other services key to oil production.

    The deal was approved on condition that GE sell its Water & Process Technologies business, the department said. The asset sale was required because GE and Baker Hughes are two of four companies that sell refineries the specialized chemicals they need to remove impurities from hydrocarbons, the department said in a court filing.

    GE will sell the assets to French waste and water group Suez (SEVI.PA) for $3.4 billion, the company said in a statement.

    Baker Hughes has some 35 percent of the market for refinery process chemicals, while GE has about 20 percent, the department said in a court filing.

    "Today’s milestone represents significant progress toward creating an oil and gas productivity leader," the companies said in a statement.

    The European Union approved the deal in late May.
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    Saudi crude allocations to US and Europe

    Crude allocations to the United States have been lowered significantly and Aramco continued to curtail supply to Europe, two sources said. One source said volumes to the United States would be cut by about 35 percent in July, while Europe supplies will be reduced by about 11 pct compared to June.
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    Rising light crude imports into the US

    As domestic production continues to roar back, the U.S. is still importing light crude at an increasingly strong pace. After light crude imports dipped to around 1 million barrels per day in early 2015 - as U.S. production peaked at 9.6mn bpd - imports have rebounded steadily since, while production waned through the latter half of 2015 and the first half of 2016.

    But production has now turned around, and is now closing in on the highs it made in early 2015. Nonetheless, light crude imports continue to increase to U.S. shores. In fact, last month they clambered back above 2mn bpd for the first time since 2013:  

    Light imports in May have been robust into all three coastal PADDs - the West, Gulf and Atlantic Coasts. On the aggregate, imports have jumped by a third on the prior month, led by a near 300,000 bpd increase into the US Gulf Coast. This strength is attributable to a ramp up in arrivals of Middle East light grades, and particularly of Arab Light and Basrah Light:

    Another key driving force behind rising light crude imports last month has been receipts of North and West African crude, and particularly into the Atlantic Coast.

    Imports from the two regions breached the 400,000 bpd mark in May, with North African deliveries of Libyan and Algerian crude accounting for 130,000 bpd. Nigerian grades accounted for the lion's share of West African barrels, with light sweet Agbami accounting for nearly a half of the Nigerian volume:      

    The increase of flows into the U.S. has been driven by a surging supply side of the picture, as opposed to rampant demand for it. Rising volumes of light crude in the Atlantic Basin is pressuring regional pricing lower. This has encouraged bargain basement prices for this crude - at a level that U.S. refiners cannot refuse, despite rising domestic production.  

    This recent higher availability of light crude comes amid rising total export loadings from North Africa and Northwest Europe, as well as returning flows from West Africa. Rising Libyan, Algerian and Egyptian exports have boosted North Africa flows, while mostly U.K. North Sea barrels have boosted Northwest European flows.

    All the while, West African exports (well, Nigerian exports) have struggled through the last year and a half amid geopolitical tension, but are finally back on par with early 2016 levels, also providing a boost to Atlantic Basin barrels.

    With a third of June already through, Middle East deliveries of light crude are showing a material pullback. Nonetheless, North African, West African and NWE light crude deliveries are looking as strong as an ox.
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    New technology could recover more oil from early Bakken wells

    Companies are refracturing early Bakken wells using today's technology and finding promising results.

    Oil companies are applying new hydraulic fracturing techniques to early Bakken wells, a process industry leaders say has the potential to recover more oil without increasing the footprint on the land.

    Operators are targeting wells drilled between 2008 and 2010, the early years of Bakken development before fracking technology advanced to where it is today.

    Companies are refracturing the older wells using today’s technology and getting promising results, said Justin Kringstad, director of the North Dakota Pipeline Authority, who recently analyzed the wells.

    “On average, they’re getting better performance from the wells,” Kringstad said.

    But the industry believes it’s only recovering about 5 to 15 percent of the oil available, Kringstad said.

    More than 140 wells in the Bakken have been refractured, and most saw an increase in oil production from 200,000 to 250,000 barrels, according to Kringstad’s analysis.

    The newly fracked wells are injected with larger volumes of fluid and sand and the fracture treatments are applied to smaller segments of the well, he said.

    North Dakota legislators also are interested in the potential for refracturing existing oil wells and are planning a study during the interim focused on the fiscal impact to the state.

    Sen. Kelly Armstrong, R-Dickinson, said recovering more oil would mean more tax revenue and more jobs.

    Armstrong, one of the legislators who introduced the study, said legislators plan to invite experts to learn more about refracturing and discuss if there are economic incentives the state could consider.

    “We are only getting a small, small amount of the total potential reserve down there,” Armstrong said. “Everybody would benefit if we could figure out a way to recover more.”

    Monte Besler, a Williston oilfield consultant known as the FRACN8R, said not all wells will be good candidates for refracturing. But it can pay off in wells that were completed with technology now considered outdated, he said.

    Kringstad said companies will typically want to see at least an additional 200,000 barrels of oil to justify the investment.

    Lynn Helms, director of the Department of Mineral Resources, said refracturing oil wells can recover more oil without expanding the footprint of the Bakken.

    “There’s no additional environmental impacts and there’s generally already a pipeline there,” Helms said.

    Kringstad also is studying the impact refracturing could have on the pipeline industry and working to provide oil and natural gas pipeline operators data to help them plan.

    Attached Files
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    Iran exported over 154.2m barrels of gas condensates last year

    The latest official figures show that Iran exported over 154.2 million barrels of gas condensates during the last Iranian calendar year (ended March 20, 2017).

    Abdolrahman Salehi, responsible for planning export of liquids and condensate at Pars Oil and Gas Company (POGC), said over 203.2 million barrels of gas condensates were produced in South Pars gas field during the mentioned period.

    The official said 146.74 billion cubic meters of gas were recovered from South Pars joint field in the previous Iranian calendar year.

    He added the complex made about 125 billion cubic meters of sweet gas which were supplied to consumers.

    He added that over 28 billion cubic meters of sour gas were also deployed to domestic refineries through the fifth national pipelines.

    “POGC produced 1.4 million tons of butane, 899 thousand tons of which were exported while the rest was delivered to Jam Petrochemical Complex,” noted the official.

    Salehi maintained that propane production at South Pars had stood at 1.642 million tons out of which 1.618 million tons had been deployed to international markets.

    Gas condensate output level reached 203.21 barrels at POGC, underlined the official saying “over 154 million barrels of the product were exported while the rest was used domestically.”
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    India to start daily revision of gasoline, diesel pump prices from June 16

    India's public sector oil marketing companies will review daily and revise gasoline and diesel prices at the pump from June 16, according to a press release issued by the largest retailer Indian Oil Corporation last week.

    "Daily price revisions of petrol and diesel will make the retail prices more reflective of current market conditions, minimizing the volatility in the retail selling prices," IOC said.

    "Further, it will lead to increased transparency in the system. This will also enable smoother flow of products from refinery/depots to retail outlets," it added.

    Motor fuel prices at the pumps were revised on the first day and middle of every month before this.

    This would align pump prices more closely with international crude oil prices and help OMCs cut losses. Under the current fortnightly adjustment, the OMCs are vulnerable to fluctuation not only in dollar-linked global crude prices but also foreign exchange rates, local media reported late last week.

    Since May 1, India's three OMCs -- IOC, Hindustan Petroleum Corp. Ltd. and Bharat Petroleum Corp. Ltd. -- have been carrying out a daily revision of retail prices of gasoline and diesel in five cities -- Udaipur, Jamshedpur, Puducherry, Chandigarh and Vishakhapatnam.

    The successful execution of the 40-day pilot project reassured all stakeholders on the efficacy of the implementation of the exercise across the country, IOC said.

    Private retailers such as Reliance India Ltd. and Essar Oil are expected to follow suit, media reports added.
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    China's Unipec to ship jet fuel from Asia to Europe in rare move - sources

    China's Unipec, the trading arm of state oil major Sinopec, is planning to ship jet fuel from Asia to Europe for the first time in several years, three industry sources told Reuters.

    The company has provisionally booked a long-range (LR) 2 vessel to ship jet fuel from Singapore to the United Kingdom-Continent (UKC) and is looking to fix another vessel on a similar route, two of the sources said.

    The last time Unipec did a similar voyage for jet fuel was a few years ago, the sources added.
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    An obscenely large number of tankers & barrels are now present in Singapore.

    An obscenely large number of tankers & barrels are now present in Singapore. This "clog" indicates a brief demand drop in China


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    Attached Files
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    A Bakken Shale-Oil Boomtown Climbs Back From the Bust

    Radio stations here are again running ads from oil-field companies seeking drivers and mechanics. A store is serving up an alligator-and-crawfish lunch to welcome workers from the Gulf Coast. New rigs are rising across the sprawling prairie.

    Drillers are inching back to action in North Dakota’s Bakken shale region, a sign the recovery of the American oil and gas sector is spreading beyond the Texas and Oklahoma fields, where production is cheaper because there is more oil that is easier to tap.

    The revival after a nearly three-year bust is welcomed by local industry leaders, officials and merchants, who are grateful to see new signs of life in places such as Watford City, a community of about 6,400 people that was booming just a few years ago. The area is expected to get a boost from the June 1 start-up of the Dakota Access Pipeline, another conduit for oil out of the region. But some are concerned that too much too soon could send oil prices plunging once again.

    “It’s a nice level of production that we hope will be sustainable,” said Kari Cutting, vice president of the North Dakota Petroleum Council.

    Hess Corp. , Continental Resources Inc. and Oasis Petroleum Inc. are drilling new wells here or finishing ones earlier left uncompleted. Yet despite technological improvements and cost cutting, only some producers can afford to drill in the Bakken at today’s oil prices.

    And while shale companies are slowly recovering, prices remain volatile—crude has declined 9% in the past three weeks, moving decisively below $50 a barrel.

    While some Bakken producers can break even at $40 oil, according to consultancy Wood Mackenzie, most need upwards of $50 and wouldn’t significantly increase activity until oil approached $60.

    Locals believe $60 or $70 oil would be enough to keep the Bakken humming at a reasonable pace. Anything more, they fear, might bring back the chaos of the boom, when a huge influx of people and oilfield traffic overwhelmed parts of North Dakota.

    As oil climbed over $100 in 2014, North Dakota’s unemployment rate—already consistently the lowest in the nation—fell as low as 2.6%. The population grew more than 2% annually from 2012 to 2015, adding 55,000 residents, a big influx for a state that even now has only about 758,000 people, federal estimates show.

    Some workers were making six-figure salaries and regularly dropping hundreds of dollars on shots of Louis XIII cognac in restaurants like the Williston Brewing Company. But skyrocketing rents forced many to live in trailers, tents and boxy, no-frills “man camps.”

    In Watford, residents remembered traffic so heavy that some people couldn’t make left turns out of their driveways. Things are calmer now, though many of the returning rigs are in surrounding McKenzie County.

    “The man camps around here still have people in them,” said Stephen Stenehjem, chief executive of First International Bank & Trust, based in Watford. “There’s more traffic…more rigs in the county, more frack crews in the county, more pipeline getting laid.”

    It is far from the peak of 218 rigs five years ago, but North Dakota’s rig count has rebounded from a low of 27 in May 2016 to 51 today, state data show. Oil output has again topped 1 million barrels a day, after wobbling below that point at the start of this year and for a few months in late 2016.

    Dead sunflowers stood in a field near dormant oil-drilling equipment rigs in Dickinson, N.D., in early 2016, when there was a sharp decrease in drilling and fracking new wells in the Bakken shale region.

    A recent job fair in nearby Williston, a city of about 26,400 people, boasted 60 booths for employers with 1,500 openings, more than twice the number of job seekers that attended, said Cindy Sanford, a manager with the local branch of Job Service North Dakota, a state employment agency.

    “Tons of jobs, not enough people,” she said.

    The increasing activity was apparent at a site about an hour east of Williston, where Hess began operating a rig known as the B04 in March. A crew worked on one of five wells planned for the site, as a trio of pump jacks nodded nearby.

    Hess has four Bakken rigs in place and plans to have six by year-end. It says it has nearly 3,000 locations left to drill in the area—half of which generate a 15% rate of return at $50 oil.

    “We compete very well with the Permian,” said Mike Turner, senior vice president of global production at Hess, referring to the region of Texas and New Mexico where much shale drilling has concentrated during the downturn in prices.
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    As Qatar girds for isolation, its gas buyers seek better deals

    As Qatar grapples with deepening diplomatic isolation, Japanese liquefied natural gas buyers are pushing the world’s largest seller for cheaper supplies.

    Both Jera Co., one of the biggest LNG purchasers, and Tokyo Gas Co. haven’t decided if they’ll sign new deals with Qatar to replace current contracts that begin expiring in 2021, according to executives from both companies. The buyers are insisting on less-expensive cargoes and greater purchasing flexibility from the Middle East nation, which relies on oil and gas for about half its gross domestic product.

    The demands from Japan, its largest LNG customer, may add pressure on Qatar after neighbours including Saudi Arabia severed diplomatic ties and cut travel by land, sea and air. The hard-nosed bargaining tactics aren’t related to the diplomatic tensions, but the result of a global LNG glut that’s forcing producers to offer concessions, which sellers such as Total SA and Anadarko Petroleum Corp. signal may be necessary to lock up customers.

    “LNG buyers believe the position of suppliers like Qatar are weakening and they are demanding more contractual flexibility,” said Junzo Tamamizu, managing partner at consulting and advisory firm Clavis Energy Partners LLC in Tokyo. “But if the market flips to a shortfall, buyers won’t be able to make the same demands.”

    Qatargas, a division of state-run Qatar Petroleum, didn’t respond to a request for comment.

    ‘Important supplier’

    Jera buys about 8 million tons a year of LNG, or 20% of its annual requirement, from Qatar, president Yuji Kakimi said in a 7 June interview in Tokyo. The exporter with the world’s third-largest gas deposits is an “important supplier” for the company and can offer deals that meet the needs of buyers since it’s one of the lowest-cost producers, he said.

    Japan was Qatar’s biggest LNG customer last year, importing 12.1 million tons, followed by South Korea and India, according to the International Group of Liquefied Natural Gas Importers.

    Tokyo Gas, which has a 350,000 ton-a-year contract with Qatar that makes up a fraction of its 14 million-ton annual purchases, will review proposals for new agreements when its current contracts get closer to expiration, paying attention to prices and the ability to resell cargoes, Takashi Higo, senior general manager of the company’s gas resources department said in an interview.

    Qatar warned Japanese buyers that if they push too hard in contract negotiations they could be squeezed out of the country’s LNG projects, Reuters reported last month, citing people it didn’t identify. Japanese trading companies Mitsui & Co. and Marubeni Corp. each own a 7.5% stake in the Qatargas 1 project, while Mitsui has another 1.5% stake in the Qatar 3 project, according to Qatargas’s website.

    “We are not the ones who own a stake. That’s the problem of the trading companies,” Jera’s Kakimi said. “Our contracts are totally different story.”
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    FERC gives Sabal Trail go-ahead to start service on gas pipeline

    The US Federal Energy Regulatory Commission has granted Sabal Trail Transmission permission to start service on part of the 515-mile, 1 Bcf/d natural gas pipeline, which would boost supplies to the Southeast.

    In an order Friday morning, FERC specifically authorized Sabal Trail to place into service about 482 miles of mainline between an interconnect in Tallapoosa County, Alabama, and the southern interconnect in Osceola County, Florida, as well as compressor stations in Alabama and Florida, and several meter and regulation stations.

    The project is meant to provide power-hungry Florida with more gas to feed generation. Its first phase is designed to provide an initial capacity of 830 MMcf/d, and the company's recent in-service request covered about half that volume.

    In approving the request to start service, FERC did not address requests from environmental groups that urged FERC to hold off on allowing the pipeline to enter service while they await a ruling from a federal appeals court on their challenge to FERC's certificate of convenience and necessity.

    Sabal Trail (CP15-17) is part of a trio of projects that include Transcontinental Gas Pipe Line's Hillabee Expansion and the Florida Southeast Connection, collectively known as the Southeast Market Pipelines Project and totaling 685.5 miles, designed to feed growing demand from gas-fired power generation in Florida.

    The Sabal line is being built by a joint venture of Enbridge, NextEra Energy and Duke Energy. It originates in Tallapoosa County, Alabama, and will transport gas to Georgia and Florida and terminate at the new hub south of Orlando. It is intended to supply gas to Florida Power & Light and to Duke Energy Florida.
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    Aramco float

    There has been a rush of recent stories about how America and Britain might cut Saudi Arabia some unwarranted slack to get its vast national oil company to float in either New York or London. Both venues are vying to win a slice of a public offering that is sometimes (if hopefully) said to value Saudi Aramco at $2tn.

    In New York, it seems to be a matter of overturning a law that permits relatives of those killed in the World Trade Center attacks to pursue Saudi Arabia with private lawsuits. In London, by contrast, the machinations are less about high politics than the mundane business of investor protection. They involve loosening the governance rules to shoehorn the Saudis on to the main market board.

    The story has ignited fears of another regulatory race to the bottom in which investors’ interests are sacrificed in the interests of making money for intermediaries. But while that’s certainly a genuine worry, it isn’t the biggest one when it comes to Aramco’s offering. Indeed, the listing rules may be the least of investors’ concerns.

    Before fretting about transparency or investor protection mechanisms in a venture where outsiders will own just 5 per cent of the equity, it is worth studying the structure of the company itself. 

    For all the interest in the scale of Aramco’s reserves, the business doesn’t actually own the oil in the ground like past privatisations, such as BP and Statoil. Its legal rights rest on a concession agreement originally struck in 1933 between the Saudi kingdom and Standard Oil Company of California (SoCal), which created Aramco.

    This gives the company exclusive rights to exploit the nation’s oil reserves (not just those presently discovered but also any found in future) in return for royalties and taxes. As the original concessionaires discovered, when oil is the host’s main source of revenue, these rights must perforce be uncertain. 

    In 1950, in pursuit of more cash for his still impoverished kingdom, King Abdulaziz threatened to tear up the deal if Aramco didn’t accede to his demand for more of the upside. Faced with this prospect, the company promptly capitulated, agreeing to split its profits 50/50 with the state.

    Investors in a future privatised Aramco are in an analogous (if weaker) position. Like the old concessionaires, they are dependent for returns on their relationship with Riyadh. But unlike SoCal, they have no leverage in the form of industrial know-how. Consequently their ability to exploit the company’s hydrocarbon honeypot is even more closely linked to Saudi Arabia’s prosperity than old Aramco’s was.

    New Aramco’s value is umbilically tied to the dividends it generates. To bolster these and inflate the sale value, Riyadh has cut the corporate tax rate it levies from 85 per cent to just 50 per cent. This is a substantial reduction, given its continuing dependence on hydrocarbon sales for state revenue, and will put great stress on public finances already squeezed by lower oil prices.

    Of course, the Saudi government can replace the lost taxes by maximising Aramco’s dividend — a position that arguably aligns its incentives with outside investors. But in a fiscal crisis, it might seek to plug the leakage of funds to shareholders by hiking taxes (all of which go to its coffers). That temptation is likely to increase, the greater the proportion of the equity it sells.

    The privatisation is designed to avert such a crisis by accelerating growth through economic diversification. But getting there means navigating a path that is strewn with political uncertainty. First it will require Saudi Arabia to move to a system where oil is priced rationally in domestic markets, rather than sluiced cheaply at domestic and favoured industrial users. That will create losers whose losses will need to be mitigated.

    Second it will depend on Saudi Arabia making wise investment choices. The company has established a sovereign wealth fund, the Public Investment Fund, that will invest the proceeds of the IPO in non-oil assets. But as with other neighbouring wealth funds in Qatar and Kuwait, the PIF has an apparent fondness for foreign investments, pumping money into international technology businesses such as Uber and SoftBank. It is hard to see this generating many jobs or new industries at home.

    More than on any transparent audit or star-studded board of non executive directors, Aramco’s success as an investment will hinge on Saudi Arabia’s ability to set sound policies and execute them smoothly. Those who buy shares will be implicitly putting their trust in princes. It is a bet worth pondering before buying shares, on whatever market they trade.

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    Qatar begins shipping cargo through Oman to bypass Gulf rift

    Qatar has begun shipping cargo through Oman to bypass Gulf countries that have cut off sea routes to the tiny, energy-rich nation, the latest move by Doha to show it can survive a diplomatic dispute with its neighbours.

    Qatar’s port authority published a video on Monday, showing a container ship loaded down with cargo arriving at Doha’s Hamad Port from Oman’s port of Sohar to a water-cannon welcome.
    Typically, cargo for Qatar stops at Dubai’s massive deep-water Jebel Ali port or in the Emirati capital of Abu Dhabi, then gets put on smaller boats heading to Doha. But since June 5, the UAE has joined Saudi Arabia, Bahrain and Egypt in cutting off sea traffic to Qatar as part of the nations severing diplomatic ties over Qatar’s alleged support of extremists groups and close ties to Iran.

    Qatar’s port authority said its cargo will go through Sohar, as well as Oman’s port at Salalah, bypassing the need to dock in any of those countries that have cut ties. Global shipper Maersk has already said it will begin using Salalah for its shipments to Qatar.

    Meanwhile, Iran’s state-run Irna news agency has said two Iranian navy vessels will stop off in Oman soon as part of an anti-piracy patrol. Oman, which is not among those countries cutting ties to Qatar, routinely serves as a back-channel negotiator for Western governments needing to speak to Tehran.

    The diplomatic crisis, the worst since the 1990 invasion of Kuwait by Iraq and the subsequent Gulf War, has seen Arab nations and others cut ties to Qatar, which hosts a major US military base and will be the host of the 2022 Fifa World Cup.

    Doha is a major international travel hub, but flagship carrier Qatar Airways now flies increasingly over Iran and Turkey after being blocked elsewhere in the Middle East.

    After an initial run on supermarkets by panicked residents, Qatar has secured dairy products from Turkey. Iran also has shipped in vegetables by air and plans to send some 350 tons of fruit by sea to Qatar, with which it shares a massive offshore natural gas field.
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    U.S. Rig Count Continues Its Ascent Unabated

    The number of active oil and gas rigs in the United States rose again this week by 11—making it 21 weeks of consecutive gains—the longest growth streak since at least 1987, which is the earliest date that Baker Hughes Excel data is available.

    As if the 11 rigs added to the U.S. repertoire weren’t enough, Canada added 33 rigs this week as well.

    The number of oil rigs in operation increased by 8, while gas rigs increased by 3. Combined, the total oil and gas rig count in the U.S. now stands at 927 rigs, which is 513 rigs over a year ago today, when oil prices were significantly higher than they were today.

    It would appear that there is no end in sight to the steady stream of oil rigs being put into play in the U.S. shale patch, and according to Rystad Energy, the significant number of drilled but uncompleted wells (DUCs) should serve as sufficient insulation to $40 or even $30 barrel prices, as those DUCs would still be commercially viable for completion at those prices.

    Cana Woodford and the Permian both added 4 rigs each this week, with Marcellus and Utica each adding 2. Barnett, Granite Wash, Haynesville, and Mississippian each added a single rig. The losers this week were Ardmore Woodford, DJ-Niobrara, and Eagle Ford. The Permian now has 142 more rigs in play than this time last year, and Eagle Ford, the second most prolific basin, has 54 more.

    The U.S. Offshore Rig Count is down 1 rig from last week to 22 and up 1 rig year over year.
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    Just as #Nigeria's Forcados#oil exports return, Shell declares force majeure on Bonny Light

    Just as #Nigeria's Forcados#oil exports return, Shell declares force majeure on Bonny Light due to pipeline leak

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    Oil majors submit surveys to develop Iran's Azadegan

    International energy companies including Total, Petronas and Inpex, have presented technical surveys for the development of the Azadegan oilfield, an Iranian oil official was quoted as saying on Saturday.

    Tehran is looking to ramp up its crude output and with 37 billion barrels of oil, the Azadegan field is Iran’s largest, shared with its neighbor Iraq. It is located in southern Iran, 80 km west of the Khuzestan provincial city of Ahvaz.

    The managing director of Iran's Petroleum Engineering and Development Company was quoted by Mehr news agency as saying that France's Total, Malaysia's Petronas, and Japan’s Inpex Corp. have offered their surveys on the field.

    Noureddin Shahnazizadeh added that some other companies like Royal Dutch Shell, Italy's oil and gas group Eni, and China National Petroleum Corp (CNPC) are also interested in the tender for development of the oilfield.

    Iran's oil minister said in May that the international tender for the Azadegan oilfield was underway.
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    Saudi to supply full contracted crude volumes to Asian buyers in July

    Saudi Arabia, the world's top crude oil exporter, will supply full contracted volumes of crude to at least five Asian buyers in July, industry sources with knowledge of the matter said on Monday.

    State oil company Saudi Aramco will also supply full volumes of heavy crude for a third straight month, despite cutting supplies for this grade earlier this year, one of the sources said.

    The normalisation of Saudi oil supplies to Asia comes as the OPEC kingpin seeks to protect its market share, even as OPEC and some non-OPEC producers agreed to extend supply cuts until March next year.

    Aramco also separately agreed to provide additional crude on top of contracted volumes at the request of one of the buyers. Other buyers did not seek extra supplies after Aramco raised prices more than expected.

    Aramco last month notified at least two Asian refiners of its first cuts in crude allocations for regional buyers since OPEC-led output reductions took effect in January.
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    Iran raises oil exports to West, almost on par with Asia

    Iran's oil exports to the West surged in May to their highest level since the lifting of sanctions in early 2016 and almost caught up with volumes exported to Asia, a source familiar with Iranian oil exports said.

    Iran, which used to be OPEC's second biggest oil exporter, has been raising output since 2016 to recoup market share lost to regional rivals including Saudi Arabia and Iraq.

    While many Asian nations continued to purchase oil from Iran during sanctions, Western nations halted imports, halving Iran's overall exports to as little as one million barrels per day (bpd).

    Last month, Iran exported about 1.1 million bpd to Europe including Turkey, almost reaching pre-sanction levels and only slightly below the 1.2 million bpd supplied to Asia, the source told Reuters.

    Iran's exports to Asia last month were the lowest since February 2016, Reuters' calculations showed.

    Oil exports to Asia fell as South Korea and Japan stepped up oil condensate purchases and bought less oil, said the source, who asked not to be identified as the information is confidential.

    "Iran's condensate parked in floating storage has almost been exhausted because of higher purchases by Japan and Korea," the source said.

    Exports to Asia were also hit by India's decision to cut annual purchases from Iran by a fifth for the fiscal year to March 2018.

    After the lifting of sanctions, Tehran added new clients such as Litasco and Lotos and won back customers such as Total (TOTF.PA), ENI (ENI.MI), Tupras (RDSa.L), Repsol (REP.MC), Cepsa CPF.GQ and Hellenic Petroleum (HEPr.AT).

    OPEC member Iran was allowed a small production increase under a December deal to limit output.

    Iran's overall May oil production totaled 3.9 million bpd, the source said.

    Iran is currently producing about 200,000 bpd of West Karoun grade, which the nation blends with other Iranian heavy grades for export, he said.
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    Japan LNG buyers pay $5.70/MMBtu for spot cargoes contracted in May: METI

    Japanese LNG buyers paid an average $5.70/MMBtu for spot cargoes contracted in May, unchanged from $5.70/MMBtu in April, the Ministry of Economy, Trade and Industry said Friday.

    The ministry does not disclose the delivery months of the cargoes.

    JKM averaged $5.589/MMBtu in May, reflecting spot deals for June and July delivery cargoes.

    METI also said the average price of cargoes delivered into Japan in May was $5.70/MMBtu, down from $5.90/MMBtu in April.

    The JKM for May delivery cargoes averaged $5.454/MMBtu. JKM meandered throughout the assessment period, starting at $5.55/MMBtu on March 16 and ended at $5.525/MMBtu on April 13.
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    India’s Torrent Power launches tender for 36 LNG cargoes

    India’s Torrent Power launches tender for 36 LNG cargoes

    Indian power company Torrent Power on Friday released a tender seeking the supply of 36 liquefied natural gas (LNG) cargoes over a period of three years.

    Torrent Power said in a tender document posted on its website it is requiring 3 LNG cargoes per quarter from January 1, 2018 to December 31, 2020.

    The volume of the cargoes needs to be around 140,000 cbm and delivered on an ex-ship (DES) basis to Petronet’s Dahej LNG terminal where the power utility reserved storage and regasification capacity from April 2017 onwards.

    The deadline for bid submissions is June 30. Torrent Power said it plans to complete the evaluation of the offers by July 6.
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    Encana to sell natgas assets to Caerus Oil for $735 mln

    Encana to sell natgas assets to Caerus Oil for $735 mln

    Oil and gas producer Encana Corp said on Friday it would sell its Piceance natural gas assets in northwestern Colorado to privately held Caerus Oil and Gas LLC for $735 million.

    Oil producers have been selling assets to reduce exposure to profit-sapping natural gas assets and to increase liquidity.

    ConocoPhillips, the largest U.S. independent oil producer, in April sold natural gas-heavy assets in the San Juan basin to privately held Hilcorp Energy Co for about $3 billion.

    The Piceance asset sale includes 550,000 net acres of leasehold and about 3,100 operated wells and produced 240 million cubic feet per day of natural gas in the first quarter, Encana said.
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    Rising Kashagan output weighs on Kazakhstan's CPC oil price

    One of the world's fastest growing crude streams, Kazakhstan's CPC, is battling to find new buyers in a market saturated with light grades and with core European customers reluctant to buy more of the pungent oil blend even as its value has plunged.

    It is a familiar picture for oil producers which have struggled with oversupply in the past three years, sending oil prices from above $100 a barrel to less than $50 a now.

    But it is proving a particular challenge for Kazakhstan, which has joined the Organization of the Petroleum Exporting Countries and other non-OPEC nations in a pact to reduce output.

    Under the deal, Astana pledged to keep overall production at 1.7 million barrels per day (bpd). At the same time, it needs to reward investors in its giant Kashagan oil project that produces CPC but which started up last year five years behind schedule.

    So Astana is letting oil firms hike output from Kashagan in the Caspian Sea, which means it must cut from elsewhere. But the extra flows are piling pressure on CPC's already falling value.

    In 2013, light CPC crude traded at an average annual premium of $0.15 a barrel to dated Brent, then during 2014-2016 it slid to a discount of $0.11-$0.18. In the first five months of 2017, the discount had widened further to as much as $1.23.

    "Now it is more expensive to delay Kashagan again rather than sell discounted CPC Blend. Shareholders need the project to work now," said one trader.

    Kashagan oil field has been developed by a consortium of China National Petroleum Corp [CNPET.UL], Exxon Mobil, Eni, Royal Dutch Shell, Total, Inpex and KazMunaiGas. Phase one cost $55 billion.

    Rising output from Kashagan has pushed up oil flows through the Caspian Pipeline Consortium (CPC) pipeline to the Black Sea port of Novorossiisk.

    The pipeline, which also transports oil from other parts of Kazakhstan and Russia, pumped an average of 700,000 bpd in the past decade. But after Kashagan production began at the end of 2016, volumes rose to 900,000 bpd last year.

    That figure could rise this year to 1.2 million-1.3 million bpd, according to Caspian pipeline consortium which manages the pipeline.

    "The CPC Blend market is tough," said one trader in the Mediterranean, traditionally the biggest market for the crude. "What's frightening is that we will have about 10 million tonnes extra of the grade to handle soon."


    Selling any light crude has been made tough due to cuts by OPEC, whose members have tended to reduce output of heavier oil preferred by some refiners, leaving the market awash with lighter grades. But CPC has characteristics that add to the challenge.

    Unlike Russia's main Urals export blend, CPC is a more difficult fit for refiners because it has a high level of mercaptans, a group of pungent gases.

    "In some Mediterranean refineries, CPC Blend processing is simply restricted due to the smell and harmful emissions, while it is also corrosive, so you can only process it if you have anti-corrosive coat on refinery units," another trader said.

    In addition, more larger Suezmax crude carriers are being used to ship CPC as exports from Novorossiisk increase while the number of loading time slots remains limited. Some European ports will only take smaller Aframax vessels, traders said.

    This is pushing the blend to markets further afield.

    "Mediterranean refiners are not very keen on CPC, so the grade is now flowing worldwide, from Poland to Japan," a source with a big European refiner said.

    Reuters Eikon data shows CPC Blend supplies to Asia increased sharply since the start of 2017, heading to markets where bigger Suezmax vessels help reduce transport costs.

    South Korea, India and Japan bought 800,000 tonnes, 700,000 tonnes and 600,000 tonnes of CPC respectively in January-May 2017. In the whole of 2016, those three countries bought 400,000 tonnes, 500,000 tonnes and 600,000 tonnes respectively.

    Elsewhere in Europe, Poland's PKN Orlen bought 700,000 tonnes of CPC this year for its Polish and Lithuanian refineries for the first time.

    But rising CPC shipments beyond its core Mediterranean market have not been enough to support its value. The grade that formerly balanced between premium and discount to BFOE has been traded far below dated Brent crude for six months, the longest period in its history, Reuters Eikon data showed.

    "I don't think CPC Blend differentials will bounce back to a premium to Brent anytime soon. Not in the current market," one trader in the Mediterranean market said.

    Attached Files
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    Canada's Enbridge eyes market share as competitors' pipes in limbo

    Canada's Enbridge Inc will take advantage of the uncertainty facing competitors' pipelines to gain market share, including starting early discussions on a new tolling agreement after 2022, a senior executive said on Thursday.

    Speaking at an investors event in Toronto, Enbridge Executive Vice President Guy Jarvis did not name the rivals, saying only that customers still seek capacity amid the "lingering uncertainty around when and even if competing pipelines will ever come online."

    An election in the Canadian province of British Columbia last month has complicated Kinder Morgan Inc's Trans Mountain pipeline expansion, with the two parties set to take power vowing to block the project.

    TransCanada's Keystone XL pipeline project through the United States has presidential approval, but still needs permission from the state of Nebraska. The company's Energy East project to Canada's Atlantic coast had been mired in controversy, its regulatory review process suspended.

    "We see a window of opportunity emerging now to start early discussions with our customers on a post-CTS tolling agreement," said Jarvis, referring to Enbridge's 10-year competitive tolling settlement for its Mainline system reached in 2011.

    Enbridge, North America's largest energy infrastructure company, has forecast a rise in adjusted earnings this year following its purchase of Spectra Energy Corp.

    Jarvis said the company will take advantage of its now larger scale and plans a possible expansion for its 280,000 barrel-per-day Express Pipeline that had once been Spectra's.

    Enbridge is "laser-focused" in bringing online projects including its Line 3 Replacement Program from Hardisty, Alberta, to Superior, Wisconsin, Jarvis said.

    "It's critical that we get it in service given the continuing uncertainties about competing pipelines," he said. "It then sets the foundation for developing the continued expansion of options on our Mainline."
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    USGS Well Study: Unconventional Oil & Gas Development Having Little or No Effect on Drinking Water Quality

    USGS examines water wells in Eagle Ford, Haynesville, Fayetteville aquifers

    The USGS published a study last week investigating the effects of oil and gas production on drinking water quality.

    The study examined a total of 116 water wells in Texas, Louisiana and Arkansas, in areas were companies are producing from the Eagle Ford, Haynesville and Fayetteville.

    Water samples were tested for methane, benzene and several other chemicals that help determine the age of the groundwater.

    Benzene found in nine wells at low concentrations

    The study found low concentrations of benzene in nine wells. Four wells in the Eagle Ford region, four in the Fayetteville and one in the Haynesville had traces of benzene. The highest concentration was detected in the Haynesville well, where concentrations of about 0.13 micrograms/liter were found. For reference, federal standards require benzene concentrations in drinking water to be below 5 micrograms per liter. Benzene is naturally occurring in trace amounts within petroleum and coal formations, but is also found in some fracturing fluids.

    Biogenic methane found in most wells

    Methane was detected in the vast majority of wells; 91% of those sampled had some methane present. About 10% of wells with methane present had concentrations above the suggested maximum. While methane is not toxic, it is highly explosive and therefore the Department of the Interior has suggested water should have methane concentrations below 10 milligrams/liter. Methane was detected wells in each of the three regions.

    Methane is the primary component of natural gas, and is also often produced by underground bacteria. Scientists can distinguish between methane produced by bacteria and methane produced by heat and pressure, the process that creates shale gas.

    The USGS reports that most of the methane detected in groundwater in this study was from naturally occurring sources at shallow depths rather than shale gas.

    Groundwater age helped scientists determine source of benzene

    The USGS study was able to estimate the age of the groundwater tested, which can help determine the source of any benzene detected. In Louisiana and Texas water mostly had been in the aquifers for several thousand years. This indicates that any benzene detected was either due to natural hydrocarbon migration or oil and gas wells with subsurface leaks.

    In Arkansas, by contrast, water tested was relatively young, and had usually been in the aquifer for less than 40 years. This led the USGS to conclude that one of the wells with benzene present may have been due to a spill on the surface, likely the result of oil and gas production activities.

    Bottom line: development of unconventional resources not a significant source of water contamination

    Overall, however, the USGS concludes that in the regions sampled unconventional oil and gas production is not currently a significant source of methane or benzene to drinking water wells.
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    Alternative Energy

    U.S. EPA expected to unveil renewable fuel plan as soon as this week: sources

    The U.S. Environmental Protection Agency is expected to propose renewable fuel use requirements for 2018 as soon as this week, five sources told Reuters this week, and traders expect no changes to conventional targets and modest increases to biofuel volumes.

    The proposal will mark the first from the administration under President Donald Trump for the controversial Renewable Fuel Standard (RFS), a 2005 law aimed at cutting U.S. oil imports and boosting renewable fuel use.

    The EPA is broadly expected to hold its proposed requirements for conventional biofuel, which is mainly corn-based ethanol, unchanged at 15 billion gallons, the maximum under the RFS, said four Washington sources representing oil and biofuels interests.

    The persons spoke on condition of anonymity because they are not authorized to speak to the media.

    “We are expecting a modest increase in advanced and no change to the 15 billion” for conventional ethanol, said a U.S. biofuels industry source.

    Biofuels credits known as Renewable Identification Numbers (RINs) were gyrating in active trade ahead of the announcement, with prices of the biomass-based diesel RINs jumping as much as 4 cents each, according to traders.

    The credits are used by fuel companies to meet the annual requirements from EPA for the volumes of ethanol and biodiesel that need to be blended in gasoline and diesel used by American drivers.

    The proposal went from EPA to the White House for review last month. It includes targets for conventional and advanced biofuel for 2018 and for biomass-based diesel for 2019.
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    US Q1 wholesale wind sales rise 15.9% on year to 58.2 mil MWh

    A total of 92 wind power generators owning a combined 68,630 MW of capacity reported selling 58.2 million MWh of wholesale wind power in the first quarter of 2017, a 15.9% increase compared with Q1 2016.

    The data reported to the US Federal Energy Regulatory Commission and compiled by S&P Global Platts show 17.2 million MWh of wholesale wind sales -- or 29.6% of the total -- were in the Electric Reliability Council of Texas market.

    Q1 wind sales in ERCOT rose 22.8% compared with the first three months of 2016, as installed capacity increased to 18,865 MW in Q1 from 16,283 MW in Q1 2016, the data show.

    Some 12.5 million MWh was sold in the ERCOT West region in Q1, 21.1% more than in 2016, making that delivery point the most active sales location in the US.

    The third-ranked ERCOT South region saw sales increase 43.1% year on year to 3.2 million MWh in Q1.

    Q1 wind sales in the Southwest Power Pool increased 30.1% year on year to 15.3 million MWh, or 26.3% of the national total. Installed capacity in SPP rose to 15,646 MW in Q1 from 12,017 MW in Q1 2016.

    The second most active sales delivery point in the US in Q1 was the Oklahoma Gas & Electric area in SPP South, where 3.6 million MWh was sold in Q1, the data show.

    The Midcontinent Independent System Operator footprint saw the third most wholesale wind sales in Q1 at 7.4 million MWh, or 12.8% of the total sold in the US.

    Sales in MISO came from 8,286 MW of installed wind capacity, which was up slightly from 7,730 MW a year earlier.

    PJM Interconnection saw 6.8 million MWh of wholesale wind sold in its markets, an increase of 8.2% compared with Q1 2016. Those sales represent 11.7% of the total amount sold in the country.

    By comparison, wholesale wind sales in Q1 in the California Independent System Operator market totaled just 2.3 million MWh, or 3.9% of the total, and came from 4,966 MW of installed capacity. Over the course of the previous 12 months, only roughly 100 MW of new wind was installed in California.

    Far and away the leading seller of wholesale wind power in Q1 was NextEra Energy Resources, which reported sales of 11.3 million MWh in the period, an increase of 16.6% compared with its Q1 2016 sales.

    According to the data, NextEra had a 19.4% market share.

    The perennial runners-up to NextEra, AvanGrid Renewables and EDP Renewables North America, had sales of 3.97 million MWh and 3.52 million MWh, respectively, and a combined market share of almost 13%.

    The 11th ranked wind power seller -- Southern Company's Southern Power merchant unit -- was ranked 23rd a year ago. In the interim, it has made a number of acquisitions that pushed its Q1 sales of wholesale wind power up 424% to 1.5 million MWh.
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    Demand, not supply, is the great unknown for lithium and cobalt

    The number of electric vehicles on roads worldwide rose to a record high of 2 million last year, according to the International Energy Agency (IEA).

    That represented a doubling from the 2015 tally but electric cars still only accounted for 0.2 percent of the global count.

    How many will there be in five years' time? Or in 10 years' time?

    The answer to that question will determine the fortunes of multiple metals over the coming years.

    Battery materials such as lithium and cobalt are already bubbling as supply chains which have historically evolved to meet niche applications adapt to the much bigger demands of the green technology revolution.

    The likes of aluminum and copper can be expected to continue benefiting from greater usage across a transport sector increasingly defined by lightweighting and enhanced electrical circuitry.

    Platinum and palladium, by contrast, could be losers as electrification reduces the need for catalytic converters.

    But both supply and price are going to depend on what happens to demand. And that is the electric elephant in the room.


    Analysts at Swiss bank UBS attempted to answer the question by tearing apart piece by piece a Chevy Bolt, which must top the list of fun things to do if you're a bank researcher.

    They chose the Bolt because it is the first mass-market electric vehicle with a range of over 200 miles. It also "has a price tag and range similar to the upcoming Tesla Model 3, which is Tesla's long-awaited entry into the mass market." ("UBS Evidence Lab Electric Car Teardown - Disruption Ahead?", May 18, 2017).

    Their surprise finding is that the Bolt's powertrain was $4,600 cheaper to produce than they expected "with more cost reduction potential left."

    Their key takeaway is that the Bolt could reach consumer cost of ownership parity with a comparable internal combustion engine vehicle such as the Volkswagen Golf much sooner than expected, as early as next year in Europe.

    That would represent a tipping point for demand and UBS has lifted its electric vehicle (EV) sales projections by around 50 percent accordingly.

    "We now forecast 3.1m EVs sold in 2021 (battery-electric cars and plug-in hybrids) and 14.2m sold in 2025, instead of 2.5m and 9.7m previously."

    Electric vehicles' share of new sales is forecast to rise from that marginal 0.2 percent last year to three percent in 2021 and 14 percent in 2025.


    And if those numbers look a bit on the aggressive side, UBS' forecasts look decidedly pedestrian relative to those of RethinkX, a thinktank founded by Stanford University's Tony Seba.

    "Rethinking Transportation 2020-2030", also released last month, generated a flurry of headlines about the imminent demise of the combustion engine.

    "We are on the cusp of one of the fastest, deepest, most consequential disruptions of transportation in history," the report warns.

    One which "will have enormous implications across the transportation and oil industries, decimating entire portions of their value chains, causing oil demand and prices to plummet, and destroying trillions of dollars in investor value.
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    US Q1 wholesale wind sales rise 15.9% on year to 58.2 mil MWh

    A total of 92 wind power generators owning a combined 68,630 MW of capacity reported selling 58.2 million MWh of wholesale wind power in the first quarter of 2017, a 15.9% increase compared with Q1 2016.

    The data reported to the US Federal Energy Regulatory Commission and compiled by S&P Global Platts show 17.2 million MWh of wholesale wind sales -- or 29.6% of the total -- were in the Electric Reliability Council of Texas market.

    Q1 wind sales in ERCOT rose 22.8% compared with the first three months of 2016, as installed capacity increased to 18,865 MW in Q1 from 16,283 MW in Q1 2016, the data show.

    Some 12.5 million MWh was sold in the ERCOT West region in Q1, 21.1% more than in 2016, making that delivery point the most active sales location in the US.

    The third-ranked ERCOT South region saw sales increase 43.1% year on year to 3.2 million MWh in Q1.

    Q1 wind sales in the Southwest Power Pool increased 30.1% year on year to 15.3 million MWh, or 26.3% of the national total. Installed capacity in SPP rose to 15,646 MW in Q1 from 12,017 MW in Q1 2016.

    The second most active sales delivery point in the US in Q1 was the Oklahoma Gas & Electric area in SPP South, where 3.6 million MWh was sold in Q1, the data show.

    The Midcontinent Independent System Operator footprint saw the third most wholesale wind sales in Q1 at 7.4 million MWh, or 12.8% of the total sold in the US.

    Sales in MISO came from 8,286 MW of installed wind capacity, which was up slightly from 7,730 MW a year earlier.

    PJM Interconnection saw 6.8 million MWh of wholesale wind sold in its markets, an increase of 8.2% compared with Q1 2016. Those sales represent 11.7% of the total amount sold in the country.

    By comparison, wholesale wind sales in Q1 in the California Independent System Operator market totaled just 2.3 million MWh, or 3.9% of the total, and came from 4,966 MW of installed capacity. Over the course of the previous 12 months, only roughly 100 MW of new wind was installed in California.

    Far and away the leading seller of wholesale wind power in Q1 was NextEra Energy Resources, which reported sales of 11.3 million MWh in the period, an increase of 16.6% compared with its Q1 2016 sales.

    According to the data, NextEra had a 19.4% market share.

    The perennial runners-up to NextEra, AvanGrid Renewables and EDP Renewables North America, had sales of 3.97 million MWh and 3.52 million MWh, respectively, and a combined market share of almost 13%.

    The 11th ranked wind power seller -- Southern Company's Southern Power merchant unit -- was ranked 23rd a year ago. In the interim, it has made a number of acquisitions that pushed its Q1 sales of wholesale wind power up 424% to 1.5 million MWh.
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    UK's Carbon Trust launches energy storage platform

    The UK's Carbon Trust has brought together Centrica, DONG Energy, SSE, Scottish Power, Wood Group--clean energy, and Statoil to demonstrate the electricity system benefits of energy storage, project manager Nils Lehmann told S&P Global Platts Tuesday.

    In a first step, the Energy Systems Innovation Platform (ESIP) is to investigate use cases for energy storage that help integrate wind energy into the grid.

    The platform will also look at solutions to regulatory and other barriers preventing investment in storage that, according to a 2016 Carbon Trust report, could save the UK up to GBP2.4 billion ($3 billion) a year by 2030.

    "ESIP will walk the talk of that report, acting on the insight that a multi-stakeholder effort by government and industry is needed to release system benefits," Lehmann said.

    The aim is to balance the business interests of energy companies with government objectives to deliver a secure, decarbonized system at least cost.

    "The potential system benefits are so large that each stakeholder can have a viable business case yet the end customer still wins," Lehmann said.

    For now, viable business models for storage are limited, Lehmann noted, and may even be causing unintended negative consequences to the system as a whole.

    This was the case for solar panel owners using battery storage in the home solely to maximize self-consumption.

    "Residential end users don't compete with the wholesale price, but with the price they would otherwise pay for power from the network," Lehmann said.

    "That includes taxation. However, a business case which depends on avoided taxation is not helpful from a systems perspective," he added.

    The added costs of this are spread across all users, including those who cannot themselves afford storage. This is unfair, Lehmann said, and is likely to attract regulatory intervention.

    If, however, storage benefits the system as a whole, "there is a rationale for government to help end users or industry realize that effort, and it de-risks energy storage efforts," he added.

    The Carbon Trust's storage report shows that, for domestic solar and storage, the best outcome for all is to aggregate the domestic storage solutions. Then home solar/battery systems can provide flexibility services to the network, benefitting the wider system.

    The Carbon Trust analysis shows that this can earn more for the end user than using it solely to maximise self-consumption, Lehmann said.
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    Is This The First Sign Of A US-Chinese Solar War?

    After a banner year for solar power installation in the United States, reports on the progress of solar power in the first quarter of 2017 have industry advocates hopeful that renewable energy will continue to grow throughout the year, despite competition from fossil fuels, U.S. government support for traditional energy sources and resistance towards cheap imported solar panels by domestic manufacturers.

    The first months of 2017 saw 2 gigawatts of photovoltaic panels added, continuing a six-quarter streakand a huge boost in solar installations that came at the end of 2016, when more than 6 GWs were installed. The growth in Q1 of 2017 marks a slight decrease of 2 percent from the level last year, but it’s still indicative of an overall growth trend, as total additions have increased year on year since 2012, according to the Solar Market Insight Report.

    Out of the 2 GWs added, about a quarter came in the form of rooftop panels added in the households segment, while utilities added the bulk of new production. The non-residential solar market has increased 29 percent year-on-year.

    Suniva, an Atlanta-based solar power manufacturer, has argued that imported panels at rock-bottom prices has cut into its bottom line and forced it to lay off hundreds of workers. In late May the U.S. government agreed to hear Suniva’s claims and is now mulling the possibility of a tariff on imported solar panels and modules.

    The U.S. has alerted the World Trade Organization that it is considering tariffs against imported solar panels, with a ruling from the ITC likely to come by November 2017.

    Such an act would be chiefly aimed at China, which leads the world in solar panel production and exports, and it would be an aggressive move from a federal government which has thus far utilized both protectionist rhetoric and attitudes decidedly hostile towards renewable energy.

    It will take some months before the Suniva dispute has any impact. In the meantime, solar power will continue to grow in the United States, driven by low cost, high demand and rising interest in renewable energy.
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    ‘Majors to divert cash to renewables’: WoodMac

    An increasing number of companies see renewables as an investment opportunity, say analysts

    Major oil and gas companies are increasingly expected to divert capital from their upstream operations to build positions in wind and solar sectors, as players see “opportunities” in the renewables energy business, according to analysts at consultancy Wood Mackenzie.

    In its latest report, Could renewables be the Majors’ next big thing?, WoodMac said renewable energy sources pose “a threat to legacy oil and gas operations, but (are) also an opportunity to diversify and future-proof portfolios”.
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    Dubai auction sees record low price for “night-time” solar power

    The United Arab Emirates continue to set record lows for renewable energy power, with an auction for 200MW of solar thermal and storage capacity attracting a new low for the technology of $US94.50/MWh.

    The Dubai Electricity and Water Authority (Dewa) announced this week the prices from four unidentified consortia for the auction, part of the massive 1,000MW Mohammed bin Rashid Al Maktoum solar park.

    The lowest bid is believed to have come in nearly 40 per cent below the previous world-record low price, one newspaper reported, although it is thought that the Solar Reserve bid for the South Africa was around $US125/MWh. It is also above the $US80/MWh hoped for when the bid was first announced last year.

    The three other bids ranged from 10.58 cents to 17.35 cents per kWh. Originally, more than 30 different consortia sent expressions of interest, although only a handful were invited to submit final offers.

    A final decision will be made in the next month, with construction to be complete by 2021. At this size, it would be the biggest solar and storage facility in the world.

    Dubai intends to increase the size of the solar park to 5,000MW by 2030, part of its plan to lift its share of renewable energy to  25 per cent by 2030, and to 75 per cent by 2050.

    “This will transform Dubai into a global hub for clean energy and a green economy. The UAE’s focus on renewable energy generation has led to a drop in prices worldwide and has lowered the price of solar and wind power bids in Europe and the Middle East,” said Saeed Mohammed Al Tayer, the CEO of DEWA.

    The Nation newspaper said that bidders included Saudi Arabia’s Acwa Power and China’s Shanghai Electric, Abu Dhabi clean energy company Masdar with partners EDF of France and Abengoa of Spain, along with Power China, Engie of France and Solar Reserve and the Chinese firm Suncan with Al Fanar of Saudi Arabia.

    Paddy Padmanathan, chief executive of Acwa Power, told the newspaper it was exciting to see CSP technology with storage “offering dispatchable solar energy – day and night, competing with fossil fuel-based alternatives”.

    The biggest solar tower with storage construction is Solar Reserve’s  Crescent Dunes project in Nevada, which is 110MW of capacity with 10 hours storage.

    Solar Reserve is also proposing to build a similar sized plant near Port Augusta, and is believed to be on the shortlist of a South Australia government tender, and will likely be applying, among others, for a $110 million equity offer by the federal government.
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    Enter the Nimble Dragon: China looks to small reactors for nuclear edge

    China is betting on new, small-scale nuclear reactor designs that could be used in isolated regions, on ships and even aircraft as part of an ambitious plan to wrest control of the global nuclear market.

    Within weeks, state-owned China National Nuclear Corporation (CNNC) is set to launch a small modular reactor (SMR) dubbed the "Nimble Dragon" with a pilot plant on the island province of Hainan, according to company officials.

    Unlike new large scale reactors that cost upward of $10 billion per unit and need large safety zones, SMRs create less toxic waste and can be built in a single factory.

    A little bigger than a bus and able to be transported by truck, SMRs could eventually cost less than a tenth the price of conventional reactors, developers predict.

    The global nuclear industry will require around $80 billion in annual investment over the coming decade as countries strive to meet climate and clean energy goals, the International Atomic Energy Agency (IAEA) forecasts, and China is keen to get its hands on a substantial chunk of any new business.

    "Small-scale reactors are a new trend in the international development of nuclear power - they are safer and they can be used more flexibly," said Chen Hua, vice-president of the China Nuclear New Energy Corporation, a subsidiary of CNNC.

    Beijing is now racing the likes of Russia, Argentina and the United States to commercialize SMRs, which include passive cooling features to improve safety.


    Following the meltdown at Japan's Fukushima reactor complex in 2011, the beleaguered nuclear industry has been focused on rolling out safer, large-scale reactors in China and elsewhere.

    But these so-called "third-generation" reactors have been mired in financing problems and building delays, deterring all but the most enthusiastically pro-nuclear nations.

    The challenges of financing and building large, expensive reactors contributed to the bankruptcy of Toshiba Inc's (6502.T) nuclear unit, Westinghouse, and to the financial problems that forced France's Areva (AREVA.PA) to restructure.

    SMRs have capacity of less than 300 megawatts (MW) - enough to power around 200,000 homes - compared to at least 1 gigawatt (GW) for standard reactors.

    China is aiming to lift domestic nuclear capacity to 200 GW by 2030, up from 35 GW at the end of March, but its ambitions are global.

    CNNC designed the Linglong, or "Nimble Dragon" to complement its larger Hualong or "China Dragon" reactor and has been in discussions with Pakistan, Iran, Britain, Indonesia, Mongolia, Brazil, Egypt and Canada as potential partners.

    "The big reactor is the Hualong One, the small reactor is the Linglong One - many countries intend to cooperate with CNNC's 'two dragons going out to sea'," Yu Peigen, vice-president of CNNC, told a briefing in May.


    Others are also pursuing the technology, with around 50 different SMR designs worldwide according to the IAEA. Russia leads the way on floating plants suitable for its remote Arctic regions, and construction underway on the world's biggest icebreaker.

    U.S. firms including Westinghouse and Babcock & Wilcox (BW.N) have been developing their own SMRs, along with smaller start-ups like the Bill Gates-backed Terrapower.

    CNNC is now working on offshore floating nuclear plants it plans to use on islands in the South China Sea, as well as mini-reactors capable of replacing coal-fired heating systems in northern China. Company scientists are even looking at designs that could be installed on aircraft.

    Elsewhere in China, Tsinghua University is building a version using a "pebblebed" of ceramic-coated fuel units that form the reactor core, improving efficiency. Shanghai scientists are also planning to build a pilot "molten salt" reactor, a potentially cheaper and safer technology where waste comes out in salt form.

    The success of new small-scale reactors hinges on investors seeing new large-scale plants coming online and building on those successes, said Christopher Levesque, Terrapower's president.

    "We're not competing with those folks, we're rooting for them," he told an industry forum in Shanghai last month.

    China has had some overseas success already with its Hualong reactor, with Pakistan currently building a plant using the technology. The Hualong is also expected to gain regulatory approval in Britain after China helped finance the $24 billion Hinkley Point nuclear project there.


    Officials acknowledge nuclear still struggles to compete with cheaper coal- or gas-fired power.

    The OECD Nuclear Energy Agency estimates developers will need to build at least five SMRs at a time to keep costs down.

    Taking into account much lower safety, environmental and processing costs, however, the agency said SMRs could be competitive with new, large-scale reactors - particularly in remote regions where the alternative is a costly extension of power grids.

    "Given the delays and cost overruns associated with large-scale nuclear reactors around the world currently, the smaller size, reduced capital costs and shorter construction times associated with SMRs make them an attractive alternative," said Georgina Hayden, head of power and renewables at BMI Research.

    Some developers believe basic SMR construction costs could eventually be cut to $2,000-$3,000 per kilowatt, making it competitive with large third-generation plants and new, low-emission, coal-fired power.

    "The cost of small reactors is a little higher than big reactors right now," CNNEC's Chen told Reuters on the sidelines of an industry expo in Beijing. "But we believe that alongside the further development and bulk production of this technology, costs will decline further."
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    EIA warns more nuclear retirements coming

    The nuclear age continues to be chipped away.

    The U.S. Energy Information Administration reported Tuesday that six U.S. nuclear power plants have plans to retire over the next nine years - with four of those shutting down a full decade before their operating licenses are set to expire.

    The report comes in the wake of Exelon's announcement last month is it shutting down Three Mile Island, perhaps the nation's most well know nuclear facility after a near catastrophic meltdown in 1979.

    The retirements come as the rush of new natural gas plants, wind turbines and solar panels on to the U.S. power grid are pulling down wholesale electricity prices.

    Over the past four years, five nuclear plants have shut down, bringing the nation's total fleet down to 60 plants.

    The trend had power regulators worried, with those in New York and Illinois recently approving subsidies to keep their nuclear fleets operating.
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    China approves two new GMO crop varieties for import, renews 14 -ag ministry

    China approved two new varieties of genetically modified (GMO) crops for import from June 12, after the world's top buyer of GMO soybeans pledged to speed up a review of biotech products as part of a recent trade deal with the United States.

    The approvals of new GMO imports follow an agreement on protocols for shipments of U.S. beef to China that was also promised under the broader trade deal last month.

    The new GMO varieties are Dow AgroSciences' Enlist corn and Monsanto's Vistive Gold soybean, the Ministry of Agriculture said in a statement on Wednesday.

    China does not permit the planting of genetically modified food crops but does allow GMO imports, such as soybeans, for use in its animal feed industry.

    But getting a new GMO crop variety approved for import by China takes around six years, compared with under three in other major markets, forcing leading agrichemical players to restrict sales during China's review process.

    In May, Beijing promised to speed up the evaluations of eight U.S. varieties of GMO crops by the end of the month under a trade deal with the United States.

    Industry comments suggest Beijing could issue additional product approvals in coming months.

    "We are aware of the latest updates of the approval process and are encouraged by the fast progress that the Chinese government has made," said a DuPont Pioneer spokeswoman.

    "We look forward to more products getting approval."

    DuPont Pioneer is awaiting approval for an insect-tolerant corn while Dow AgroSciences' Enlist soybean is also pending approval.

    The agriculture ministry said it has also renewed import approvals for 14 other GMO varieties including Syngenta's MIR162 Agrisure Viptera corn, a Monsanto sugar beet and three Bayer rapeseed products.

    The approvals are for a three-year period lasting to 2020, the statement said.
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    Wheat recovers as USDA rates spring crop behind expectations

    U.S. wheat rose more than 0.5 percent on Tuesday, rebounding from a six-day low touched in the previous session, as the condition of the spring crop was pegged well behind market expectations, stoking fears of widespread production losses.

    * The most active wheat futures on the Chicago Board Of Trade rose 0.7 percent to $4.37 a bushel, having closed down 2.7 percent on Tuesday when prices hit a low of $4.31-1/4 a bushel – the lowest since June 6.

    * The most active soybean futures rose 0.3 percent to $9.33-3/4 a bushel, having closed down 1.1 percent on Tuesday.

    * The most active corn futures rose 0.5 percent to $3.79-1/4 a bushel, having closed down 2.8 percent in the previous session.

    * The U.S. Department of Agriculture pegged the condition of U.S. spring wheat crop at 45 percent good to excellent, well behind market forecasts for 53 percent good to excellent.

    * U.S. soybeans were pegged at 66 percent good to excellent, below forecasts for 70 percent good to excellent.

    * U.S. corn was seen at 67 percent good to excellent, matching analysts’ forecasts.
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    K+S Bethune mine in Canada churns out first tonnes of potash

    K+S Potash Canada, a subsidiary of German giant K+S Group, announced Monday it had produced the first tonnes of marketable potashin its new Bethune mine over the weekend.

    The mine, located in Canada’s potash-rich Saskatchewan province, began operations last month and it’s expected to produce 2 million tonnes per year once at full capacity, which is slated to achieve by the end of the year.

    Bethune is expected to produce 600,000 to 700,000 tonnes of potash this year and 2 million tonnes per year once at full capacity.

    K+S said it intends to produce 600,000 to 700,000 tonnes of potash in the Bethune mine, built in partnership with Amec Foster Wheeler, this year.

    The first potash shipment from the mine to the new harbour terminal at Vancouver should leave during August, the firm noted. From there the potash will be shipped to clients around the world.

    With an investment of around $3.4 billion (3.1 billion euros), the Bethune mine is the largest single project for K+S, the world’s fifth-largest global potash seller.

    Since K+S broke ground on the project, more than five years ago, potash prices have fallen roughly in half, to around $230 a tonne, due to a global oversupply that has prompted layoffs, mine closures and reduced capacity across the sector.

    Saskatchewan is home to 50% of the world's known potash reserves.
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    'Belaruskali’ To Reduce Potash Production, Export

    In the second half of 2017, turnaround maintenance will be carried out at the "Belaruskali" mine management departments.

    This is stated in the message of the Belarusian Potash Company, which is a trader of the Salihorsk enterprise.

    As a consequence, "there will be a decline in output and a corresponding reduction in the export volumes of the Belarusian potash fertilizers,” - writes.

    The turnaround maintenance will be carried out sequentially. In particular, in July it is planned to conduct major repairs at the first mine department of Belaruskali. Its capacity is about 265 thousand tons of fertilizers per month. Both granular and small pink product are produced at 1RU.

    The "Belaruskali" controls about 19% of the world fertilizer market and supplies them mainly to the markets of China, India, Brazil and South-East Asia.

    The total volume of exported Belarusian potash fertilizers in 2016 reached 9,5 million tons against 9,2 million in 2015. However, in monetary terms, the country was short of $ 651 million.

    The authorities of Belarus hoped to increase the export of potash fertilizers to 10 million tons in 2017. In the Belarusian potash company in February, it was believed that 10 million tons could be a very good orienting point in terms of scopes. "However, the BPC in its work is based on the real needs of the market and the profitability of sales. If the market requires a certain reduction in supply, we will act adequately, " - the representative of the company stressed.

    Over the past year, there have been periodic reports of deaths and injuries of people at the territory of Belaruskali.
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    APW wheat prices soar to $212.50/mt on drought hedge, strong Australian dollar

    Australian APW wheat prices hit the highest level so far in 2017 on Thursday at $212.50/mt FOB, according to S&P Global Platts data.

    Market sources ascribed this to higher offers amid worries over new crop prospects, gains in US wheat futures and a stronger Australian dollar.

    On June 8, APW was assessed at $212.50/mt FOB, normalized to Kwinana port for cargoes loading in 60-90 days. The assessment was up $4.50/mt week on week as sellers hiked their offers given worries over new crop production amid ongoing dryness in the country.

    Offers on Thursday for August-September shipments were limited to a handful of sellers with Western Australia offers at $220/mt FOB and above, up $5-7/mt from a week ago, Platts data showed.

    Meanwhile, bulk sellers in South Australia also increased their offers, given firmer domestic prices at $218-220/mt FOB, normalized to Kwinana port.

    Australia's Bureau of Meteorology said June 5 that serious to severe rainfall deficiencies were recorded over March 1-May 31, particularly near the west coast of Western Australia and on the Eyre Peninsula in South Australia, both major wheat growing areas.

    The bureau said rainfall in May was below average in most areas of Western Australia, with large tracts of the west coast and the interior in the lowest decile, or the lowest 10% band of rainfall, based on historical observations.

    Further, a drier-than-average weather outlook for June-August with rainfall forecast to be below average over most parts of Western Australia, western NSW and Victoria, was weighing on prospects for new crop, sources said.

    The latest crop report released by the Grain Industry Association of Western Australia on June 9, where several major wheat producing areas are reducing planted acreage because of the drought.

    GIWA said intended wheat planted area in Kwinana -- the largest wheat producing zone in WA -- might be down by 15-20%, particularly in eastern and central areas amid lack of rain in May.

    Additionally, a reduction wheat planted areas in WA is due to tracts being left for sheep and cattle grazing as extended dryness decreased paddocks area and growth and farmers are carrying higher numbers of livestock into the winter.

    Overall wheat planted areas in WA in May are, however, forecast to be only marginally lower from a month ago at 4.88 million hectares, down 0.4% from April's forecast.

    Barley, on the other hand, is seeing a slightly higher acreage at 1.29 million hectares, up 0.5% from last month's estimates, following a firmer price during the seeding period, GIWA said.

    Meanwhile, a stronger Australian dollar, which hit its highest value against the US dollar in a month on June 7 at $0.76, up 2% from late last week, also boosted wheat prices, traders said.

    Despite firmer offers, major buyers preferred to retreat to the sidelines as several have sufficient volumes until August-September.

    "Australia wheat is currently too expensive. It's more than $30/mt higher than Black Sea wheat, I won't buy now, can wait or defer my September-October needs," commented a major Indonesian buyer.
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    Parched soils threaten Canadian canola, spring wheat: report

    Canada’s western farm belt, dogged by excessive rain in some areas this spring, is now facing parched conditions in others, threatening wheat and canola crops, crop analysts say.

    A large area of southern Saskatchewan and southwestern Manitoba has received less than 40 percent of normal precipitation during the 30-day period leading up to June 5, according to Agriculture and Agri-Food Canada.

    Much of east-central Alberta and west-central Saskatchewan has the opposite problem, having collected more than double the usual amounts of precipitation.

    The southern Prairies need 0.5 to 1.5 inches (13-38 mm) of rain soon – “a $1-million-dollar” shower to accelerate growth, said Dave Reimann, grain market analyst at Cargill Ltd.

    Spring wheat and canola in Saskatchewan, the biggest provincial producer of those crops, are seven to 10 days behind their normal development, despite being planted on time this spring, said Shannon Friesen, cropping management specialist for the provincial government.

    High winds have compounded the problem, drying up what little moisture Saskatchewan and Manitoba have received.

    Some crops have yet to poke through the soil and may not emerge at all without a significant rain in the next week, Friesen said, adding: “Some of those crops could be done.”

    Minneapolis spring wheat futures 1MWEc1 have gained about 12 percent since mid-May on concerns about hot, dry weather in the northern U.S. Plains, which border the southern Canadian Prairies.

    Environment Canada, a government agency, is forecasting hot, dry weather for most of the next week across the southern Prairies, although some dry parts of Manitoba and Saskatchewan may get periodic showers.

    Canada is a major wheat exporter and the biggest global grower of canola, used to make vegetable oil.

    Elsewhere, farmers who are planting later than normal may decide to sow additional acres of short-season crops, such as barley and oats, said FarmLink Marketing Solutions senior market analyst Neil Townsend.

    Other farmers in Alberta’s wet Peace River region may expand canola plantings at the expense of spring wheat, which takes longer to grow, said Neil Arbuckle, national sales lead at the Canadian unit of seed and chemical dealer Monsanto Co (MON.N).

    “Although canola is costlier, even with a wheat price rally, canola could provide a higher return given the excellent yields farmers have been experiencing recently,” Arbuckle said.

    Statscan is scheduled to estimate Canadian plantings on June 29.
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    China cuts corn output forecast on bad weather; prices rally

    China on Friday slashed its 2017/18 corn output forecast to the lowest level in four years after drought and hail hit planting in the northeastern region of one of the world's top producers, spurring a rally in futures prices.

    In its monthly crop report, the agriculture ministry said it expects 2017/18 corn output of 211.65 million tonnes, down 0.7 percent from last month's forecast and 3.6 percent lower than last year.

    The figure in June's Chinese Agricultural Supply and Demand Estimates (CASDE) would make it the smallest crop since 2013, according to the China National Grain and Oils Information Center think tank.

    Farmers in parts of China's northeast corn belt regions switched to soybeans and substitute grains after drought made it hard to plant corn, leading to a drop in corn acreage, the CASDE report said.

    Corn output was also hit by hail in the country's northern Hebei and central Henan provinces, where heavy rains and wind damaged young crops, the report said.

    The most-active Chinese corn futures rose 2.1 percent to 1,672 yuan per tonne, their highest in nearly two months, as some speculators bet on higher prices due to extreme weather.

    Concerns about U.S. crops may also have been a factor behind the fresh buying, which broke the usually volatile market out of a prolonged period of rangebound trade, said Meng Jinhui, analyst at Shengda futures.

    Prices were on track for their best daily performance in three months.

    Weather has also affected crops in the United States, where spot corn futures hit a near one-year high last week on forecasts for potentially stressful crop weather in the Midwest.

    China also reduced its 2017/18 sugar import forecast to 3.2 million tonnes from 3.5 million tonnes previously, according to the CASDE report.

    China's commerce ministry imposed hefty tariffs on sugar imports in a ruling last month, closing the gap between Chinese and global prices.
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    Global food import bill on the rise despite stable markets

    Global food commodity markets are well-balanced, buoyed by ample supplies of wheat and maize and rebounding production of oilseed products.

    However, rising shipping costs and larger import volumes are set to lift the global food import bill to more than USD 1.3 trillion this year, a 10.6 percent increase from 2016, FAO said today in its biannual Food Outlook.

    The food import bills of least-developed countries, low-income food deficit countries and countries in sub-Saharan Africa are on course to rise even faster due to higher import volumes of meat, sugar, dairy and oilseed products.

    Rising import bills are forecast for all food categories except for fish, for which growing domestic market demand in many developing countries is being increasingly met by robust growth in their local aquaculture sectors.

    Global food commodity prices rose for the first time in three months in May, with the FAO Food Price Index – also released today – averaging 172.6 points during the month, 2.2 percent higher than in April and some 10 percent higher than May 2016.

    FAO’s Food Price Index is a trade-weighted index tracking international market prices of five major food commodity groups: cereals, vegetable oils, dairy, meat and sugar. Rising prices were reported in May for all of those groups except sugar.

    Buoyant supplies loom for most food commodities

    The Food Outlook offers fresh forecasts for the markets of major food commodities, all of which appear well-supplied on a global level even if there may be regional or national divergences.

    International prices of wheat should remain stable, especially during the first half of the season, while near-record production of coarse grains will likely keep competition intense among the major exporters. Rice supplies are also forecast to remain ample, although reserves may decline as some exporters reduce their public stockpiles.

    Worldwide oilseed production is expected to leap to an all-time high in 2016/17, due mostly to outstanding yield levels for soybean, allowing further replenishments of global stocks. First indications point to a well-supplied market also in 2017/18, further weighing on prices.

    The report said growth in world meat production is expected to stagnate for the third year in a row, due mainly to an anticipated decline in China, which is expected to ramp up imports from the United States and Brazil.

    Meanwhile, global milk output is expected to grow by 1.4 percent in 2017, led by a rapid expansion in India.

    The Food Outlook also offers an analysis of the impact liquidity may have had on commodity price booms and slumps over the past 20 years, finding evidence that global credit conditions influence benchmark prices of maize, soybean and wheat.

    FAO’s latest Cereal Supply and Demand Brief, also released today, anticipated a 2.2 percent contraction in worldwide wheat production year-on-year, nearly offset by a 1.4 percent expansion in global maize output – led by South America and Southern Africa – and a 0.7 percent increase in world rice production.

    While aggregate global cereal output is now forecast to decline by 0.5 percent to 2 594 million tonnes, FAO also trimmed its May forecast for global cereal utilization to 2 584 million tonnes.

    With demand projected to fall short of production, cereal stocks are on course to stand at 703 million tonnes at the end of seasons in 2018, up marginally from the record high predicted for this year.

    The inventory projections reflect substantial movements in China – which is drawing down its stocks of coarse grains while adding to its wheat and rice stores – but the overall picture is one of ample supplies.
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    Base Metals

    US brass mill imports, exports up in April: CBFC

    US imports and exports of brass mill products increased in April compared with the corresponding 2016 period, according to a report Wednesday from the Copper & Brass Fabricators Council.

    Imports of brass mill products in April totaled nearly 41.4 million lb compared with 39.6 million in April 2016, an increase of 4.5%.

    US exports edged up to about 19.9 million lb in April from 19.8 million lb a year earlier, a 0.5% increase, the Washington-based trade group said.

    In first four months of the year, US imports of brass mill products totaled 155.2 million lb compared with 147.6 million lb in January-April 2016, an increase of 5.2%.

    US exports over the same period totaled nearly 85.4 million lb compared with 79.5 million lb, an increase of 7.4% on the year.

    Mexico was the leading destination for US brass mill exports in April at about 7.8 million lb, followed by Canada at 5.4 million lb, China at 1.2 million lb, South Korea at 918,716 lb and Germany at 630,061 lb, according to the CBFC.

    April brass mill imports from Germany in April totaled about 11.3 million lb, followed by South Korea at 4.4 million lb, Mexico at 3.8 million lb, Canada at about 3.7 million lb and Vietnam at 2.6 million lb.

    US imports of all sheet, strip, plate and foil products totaled 14.9 million lb in April, while exports of those products totaled 7.6 million lb.

    US imports of all pipe and tube products in April totaled just over 14 million lb, while pipe and tube exports totaled nearly 4 million lb.

    April imports of all profiles, rods and bars to the US totaled slightly more than 9 million lb, while exports totaled about 6.4 million lb, the CBFC said.

    US imports of copper alloy wire totaled 3.3 million lb, while exports totaled 1.8 million lb in April.

    Brass mill products are widely used in building construction, automotive products and in electronic and electrical applications.

    Attached Files
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    Russia’s Rusal plans 19 pct aluminium output boost by 2021

    Russian aluminium giant Rusal said it plans to boost its production by 19 percent from 2016 levels to 4.4 million tonnes by 2021, amid rising global demand.

    Rusal, which is controlled by Russian tycoon Oleg Deripaska, said in a presentation it expected global demand for aluminium to grow by 4 to 5 percent per year until 2021 amid higher demand for “green” aluminium and advanced alloys.

    The Hong Kong-listed company also said it aims to use 100 percent non-carbon energy sources for its smelting assets by 2020, up 5 percentage points from the current level.

    Rusal also hopes to increase sales of value-added products by 47 percent compared with 2016 to 2.5 million tonnes in 2020, it said in its May presentation published on its website.

    The value-added aluminium products like alloys in the form of ingots, bars, billets, slabs and wire rod are used in auto and power sectors, Rusal produce them at its Siberian smelters.

    Rusal’s total production plan includes output from its Siberian Boguchansk and Taishet aluminium projects.

    Construction of the Taishet plant began in 2007 but Rusal delayed it when aluminium prices declined. However, global prices have risen 12 percent so far this year, and the company said last month it was preparing to resume the project.

    Rusal plans to agree on financing terms for the smelter in 2017.

    Global demand for primary aluminium is expected to rise by 13.5 million tonnes over the next five years to 73.2 million tonnes, it added.

    Aluminium consumption is relatively low in Russia, at 5.6 kg per capita a year compared with the global average of 8 kg, and Rusal hopes that the total annual consumption will rise to 2.1 million tonnes by 2021 in Russia and the Commonwealth of Independent States (CIS).

    This Moscow-dominated group of post-Soviet countries and Russia currently consume 1.4 million tonnes of aluminium a year, including 1 million tonnes of primary and secondary metal and about 400,000 tonnes of imported semi-finished products.

    The company also said in the presentation it planned to have regular dividend payments and to decrease its covenant net debt to covenant core earnings (EBITDA) ratio to less than 3x within five years from 3.2 at the end of March.
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    Glencore takes up Thalanga copper

    Junior Red River Resources has signed an offtake agreement with mining major Glencoreover its Thalanga zinc project, being developed in Queensland.

    Glencore is expected to take delivery of the copperconcentrate at the Thalanga mine gate, with the offtake agreement running for a period of three years from the start of commercial production at Thalanga.

    The project is expected to produce a yearly average of 21 400 t of zinc, 3 600 t of copper, 5 000 t of lead, 2 000 oz of goldand 370 000 oz of silver in concentrate over five years.

    “We are extremely pleased to have entered into a copperconcentrate offtake agreement with Glencore. This is a key milestone for Red River. Being able to deliver concentrate at the mine gate to Glencore is very advantageous to both companies,” said Red River MD Mel Palancian.

    “This represents the culmination of a highly competitive copper concentrate offtake process that commenced at the end of 2016.”
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    Copper demand for electric cars to rise nine-fold by 2027: ICA

    The growing number of electric vehicles hitting roads is set to fuel a nine-fold increase in copper demand from the sector over the coming decade, according to an industry report on Tuesday.

    Electric or hybrid cars and buses are expected to reach 27 million by 2027, up from 3 million this year, according to a report by consultancy IDTechEx, commissioned by the International Copper Association (ICA).

    "Demand for electric vehicles is forecast to increase significantly over the next ten years as technology improves, the price gap with petrol cars is closed and more electric chargers are deployed," IDTechEx Senior Technology Analyst Franco Gonzalez said in the report.

    "Our research predicts this increase will raise copper demand for electric cars and buses from 185,000 tonnes in 2017 to 1.74 million tonnes in 2027," Gonzalez said.

    Electric vehicles use a substantial amount of copper in their batteries and in the windings and copper rotors used in electric motors. A single car can have up to six kilometers of copper wiring, according to the ICA.

    The global market for copper is around 23.9 million tonnes, according to the International Copper Study Group.

    That suggests electric vehicles could account for about 6 percent of global copper demand in ten years, according to analyst estimates, rising from less than 1 percent this year.

    The electric car market is still concentrated in a limited number of countries, according to a report by the International Energy Agency (IEA) last week.

    Globally, 95 percent of electric car sales take place in just ten countries - China, the United States, Japan, Canada, Norway, Britain, France, Germany, the Netherlands and Sweden - the IEA said.

    Still, the IEA expects there is a "good chance" that electric vehicles in use globally could reach carmaker estimates of between 9 million and 20 million by 2020 and between 40 million and 70 million by 2025.

    While cars using internal combustion engines require up to 23 kg of copper each, the ICA report found that a hybrid electric vehicle uses nearly double that amount at 40 kg of copper, and a plug-in hybrid electric vehicle uses 60 kg.

    Depending on the size of battery, an electric bus can use between 224 kg and 369 kg of copper.

    Charging infrastructure for electric cars was another source of demand, the ICA report said.

    Further out, the expected growth in vehicles that use roof-mounted solar panels would also require copper.
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    Hydro CEO says Qatar aluminium exports go as planned despite tensions

    Qatar's Qatalum aluminium plant is now exporting metals via ports in Kuwait and Oman, as well as a Qatari container port, following a diplomatic row with neighbours that had blocked shipments, Norsk Hydro told Reuters on Tuesday.

    Hydro, which owns 50 percent of the plant, last week said new export routes had been established but declined at the time to say which countries it would go through.

    "There's a recently completed container port in Qatar which we've begun using, and we also have shipments through Kuwait and Oman, solving this for the short term," Hydro Chief Executive Svein Richard Brandtzaeg said on the sidelines of a conference.

    Hydro remains worried however by the regional tensions, Brandtzaeg said, after Saudi Arabia, Egypt, the United Arab Emirates (UAE) and Bahrain on June 5 cut ties with Qatar.

    The Qatalum plant produces more than 600,000 tonnes of primary aluminium per year.
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    Impact of copper strikes fizzles on scrap inflow, mine rebound

    Impact of copper strikes fizzles on scrap inflow, mine rebound

    Disruptions at the two biggest copper mines early this year may have only a muted impact on prices after a surge of scrap metal partially filled the supply gap and a recovery in mine output is due to help in the second half.

    A strike at the world's biggest copper mine, Chile's Escondida, and other disruptions initially prompted worries about shortages of the metal used in construction and powertransmission, pushing up prices.

    Analysts polled by Reuters in April expected a copper deficit this year of 17 000 t versus a consensus forecast in January of an 80 000-t surplus.

    But some analysts now say supplies will be adequate and that the market will end the year with a modest excess of metal.

    "It's a smaller surplus, but it's still essentially a surplus," said Karen Norton, an analyst with Thomson Reuters GFMS.

    "There were enough stockpiles during that critical period and there was also the secondary (scrap) offsetting as well."

    The benchmark copper price on the London Metal Exchange climbed 12% early in the year to a peak of $6 204 a tonne by mid-February as investors fretted over supplies, but it has since given up 7%.

    BHP Billiton lifted force majeure this month at Escondida after a strike that lasted 43 days, the longest in Chilean mining history.

    The second-biggest copper mine, Grasberg in Indonesia, has been ramping up shipments after the government granted an export permit in April following a 15-week outage related to a dispute over mining rights.

    On Friday, Freeport-McMoRan Inc said it was "on a path" to get a new mining deal with Indonesia this year for Grasberg, although the company continued to grapple with labour problems.

    While the Grasberg situation has created some uncertainty, other mines such as Chile's Collahuasi have agreed new contracts.

    "Looking forward, we see limited scope for further major, labour-related supply disruptions this year," analyst Natasha Kaneva at JPMorgan said in a note.

    Kaneva forecasts copper mine production to grow by an average of 2.1% year-on-year from April to December and the copper price to weaken to $5 000 by the end of the year.

    Mining operations could also benefit from having had time during the strike to perform extra maintenance, said analyst Vivienne Lloyd at Macquarie.

    The market remained relatively well-supplied when the two biggest mines were shut after high copper prices late last year drew a wave of scrap metal into the market.

    "It looks as though the scrap inflow into the market really diluted the impact of the primary shortage, because we saw scrap moving in, not so much into smelter furnaces, but in place of cathode being consumed by the fabricators," Lloyd said.

    The flow of scrap is now dissipating, which may support copper prices temporarily, she added.

    "We saw the second quarter as a bit of a deficit, but we think it will move back towards surplus in the second half," Lloyd said.

    In another sign of healthy supply, copper concentrate treatment and refining charges have risen to the highest levels since mid-February, specialist publication MetalBulletin said.

    The charges, paid to smelters to process concentrates into metal, move higher when supply rises.
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    Japan Q3 aluminium import premium at $119/mt plus LME CIF, for over 3,000 mt

    The third-quarter contract premium for aluminium imports into Japan has been agreed upon at $119/mt plus London Metal Exchange cash CIF Japan by three producers and two Japanese buyers, sources involved in the negotiations for the premium said on Friday.

    Around 15 Japanese buyers and five overseas suppliers are in negotiations for the Q3 contract premium that started in end-May.

    The deals were for over 3,000 mt of aluminium ingots in total to be shipped to Japan in Q3, the sources said. The Q3 premium is 7% less than Q2's premium of $128/mt plus LME cash CIF Japan.

    Market sources also said that deals at $118/mt plus LME cash CIF Japan were done, but S&P Global Platts could not confirm that.

    Two Japanese buyers said they were aiming at $115/mt CIF Japan or below and that $119/mt CIF Japan was not acceptable.

    The initial producer offers were at $120-$128/mt plus LME cash CIF Japan, down from Q2's levels due to weakness in the US spot premiums.

    Producers told Japanese buyers that the downside is limited as China is expected to cut production in the second half of 2017, which would tighten global supplies.

    Japanese buyers said China was increasing exports of manufactured and semi-finished aluminium products to Asia, reducing demand for ingots.

    Nothing was conclusive from these discussions as there was no sign of output cuts yet, Japanese sources said.

    "There is no tightness at all," said a producer, who was not participating in the negotiations.

    China's exports fluctuate, depending on LME prices and how they compare with the Shanghai Futures Exchange prices, and may not accurately reflect supply-demand fundamentals, pointed out some sources.

    China produced 10.97 million mt of refined aluminium in Q1 2017, up 10% year on year, according to China Non-ferrous Metals Industry Association.

    As of end-April, the country's total aluminium stock was more than 1.2 million mt, which was a record high, the association also said.

    China's exports of unwrought aluminium and aluminium products in May rose 9.5% year on year to 460,000 mt, preliminary data released on June 8 by the China General Administration of Customs showed.
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    Alcoa restores half its Australian aluminium output in wake of blackout

    Global aluminium maker Alcoa has restarted half the capacity at its aluminium smelter in Australia's Victoria that was crippled by a state-wide blackout six months ago.

    The Portland smelter has been running at a third of its 300,000-tonnes-per-year capacity since a freak storm prompted the power outage in December, causing molten aluminium to solidify in the facility's potlines and freezing production.

    "Getting to the half way point in our bid to restore the business has been a big task, but what I have seen up to now gives me great confidence in our ability to deliver the plan," Plant Manager Peter Chellis said in a statement.

    The plant's resumption has come in part due to a A$240 million ($182 million) government-sponsored rescue package that has secured its future for at least four years in a state that has suffered from a spate of job losses including the shutdown of three major car makers and a power station.

    With local power costs soaring, a cheap source of energy was also needed. The Portland smelter lined up a four-year power supply deal with AGL Energy for 510 megawatts, or about 10 percent of the state's electricity load, earlier this year.

    "We are expecting to have production restored to pre-outage levels by early to mid-August," Alcoa spokeswoman Jodie Read told Reuters.

    The government's financial aid is dependent on the smelter staying open at least until 2021 and output remaining at least 90 percent of pre-blackout levels.

    The plant is co-owned by Alcoa, Australian firm Alumina Ltd , China's CITIC Resources and an arm of Japan's Marubeni Corp.
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    Codelco mines in Chile restart operations after rains

    Chilean copper company Codelco has restarted operations at mines in the northern part of the country after a rain storm caused a series of precautionary closures, the state-owned firm said.

    The company's Radomiro Tomic, Ministro Hales, and flagship Chuquicamata mines had restarted and were operating normally, Codelco said in a statement.

    Various parts of the company's Salvador operation, including an underground mine and a port, were also operating normally, while the company expected Salvador's foundry and refinery to fully restart operations shortly.

    On Wednesday, Codelco said mining activities at Chuquicamata, Radomiro Tomic, and Ministro Hales had been suspended. Other mines in the area, owned by Antofagasta , BHP Billiton, and Poland's KGHM, also reported disruptions.

    Heavy rains in Chile's Antofagasta region, as well as snow at higher altitudes, led the country's emergency services to trigger its highest 'red alert' warning for the area on Tuesday, though damage appears to have been limited.

    The four Codelco mines in question produced 917 000 tonnes of copper in 2016. Codelco said in the statement it was evaluating the storm's impact on production.
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    Freeport 'on path' to new Indonesia mine deal this year, CFO says

    Freeport-McMoRan Inc, the world's largest publicly traded copper miner, is "on a path" to get a new mining deal with Indonesia this year for its giant Grasberg mine, Chief Financial Officer Kathleen Quirk said Thursday.

    The Arizona-based company resumed copper concentrate exports from Grasberg, the world's second-biggest copper mine, in April after a 15-week outage related to a government dispute over mining rights. Freeport had planned to ramp up production, which was cut by around two-thirds during the outage.

    The Indonesian government halted Freeport's copper concentrate exports in January, under new rules that require miners to adopt a special license, pay new taxes and royalties, divest a 51 percent stake in their operations and relinquish arbitration rights.

    Freeport, whose current contract runs until 2021 with two 10-year extensions, will only agree to a license accompanied by an investment stability agreement that replicates current legal and fiscal certainty, Quirk said.

    "We think we're on a path to be able to get that resolved during this year and that's our top priority," Quirk said via webcast from a Deutsche Bank conference.

    Without the agreement, Freeport is unlikely to continue investing in the country, she said, noting the company has already spent $3 billion on a project to transitions Grasberg to underground from open pit mining.

    Production from the project, about half complete, is targeted for 2018 or 2019, she said.

    Meantime, Freeport is grappling with labor problems.

    Its contractor-dominated workforce in Indonesia has been reduced to approximately 26,000 workers currently from about 33,000 at the start of 2017.

    Following the export restrictions, Freeport furloughed some 3,000 workers in the first quarter, Quirk said, sparking a strike and high levels of absenteeism. Freeport later deemed that approximately 3,000 full-time employees and 1,000 contractors had resigned, Quirk said.

    Quirk said Freeport is training additional workers and "offering opportunities for those workers that are deemed to have resigned to be able to apply for open positions through contractor companies."

    While the union said its strike would extend into June, Freeport has not seen additional absenteeism that would cause it to assume the workers had resigned, she added.

    The union, which began a 30-day strike on May 1, said on May 20 that it would extend the strike for a second month.

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    Steel, Iron Ore and Coal

    Korean consortium bids for Australian iron-ore giant Arrium

    A consortium of companies including Korean steel juggernaut POSCO has made a bid for Arrium, a major Australian iron ore miner and steelmaker.

    Split into two divisions, Arrium runs the steelworks at Whyalla, South Australia, and is also a supplier (to Whyalla) and an exporter of hematite iron ore. It is Australia's only manufacturer of long steel products, with capacity of about 2.5 million tonnes a year. Arrium also has steel operations on the east coast.

    The company was forced into "voluntary administration" in April 2016 with debts of over AUD$4 billion.

    But the company was forced into "voluntary administration" in April 2016 with debts of over AUD$4 billion. Voluntary administration is an insolvency procedure whereby the directors of a financially troubled company appoint an external administrator called a "voluntary administrator".

    The shutdown affected about 2,500 steelworkers who lost their jobs.

    Today, however, it was announced that a consortium headed by Newlake Alliance Management and JB Asset Management and supported by POSCO, has bid on the business that was put up for sale by administrator KordaMentha and its advisers Morgan Stanley. A bid figure was not disclosed. The sale would have to be approved by the creditors committee and the Foreign Investment Review Board.

    The consortium outbid rival consortium Liberty Group and Simec.

    The Australian opined that it was the greater firepower brought to the table through POSCO, which is the world's fourth largest steelmaker, that sealed the bid.

    "The opportunity for the Korean steelmaker is thought to be one where a distribution network is created to distribute its own steel products throughout Australia from out of Korea and make it more competitive with Australian steel making champion BlueScope," Australian Business Review wrote.

    POSCO also reportedly is able to produce iron or steel from thermal coal, "which could lower Arrium’s steelmaking costs, and make an acquisition of the loss-making Whyalla a viable proposition," according to an analysis of the deal. A byproduct of the FINEX steelmaking process is natural gas, which could generate up to 250 megawatts, ABC News said.
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    Steel maker Nucor expects 2nd-qtr earnings to fall from 1st-qtr

    U.S. steel-maker Nucor Corp said on Thursday it expects second-quarter earnings per share to decrease from the preceding quarter, partly due to weak demand in its steel mills business.

    Nucor's shares fell nearly 3 percent to $57.41 in morning trading after the company said it expects earnings of $1.00 to $1.05 per share for the second quarter ending July 1.

    Wall Street analysts on average were expecting second-quarter earnings of $1.22 per share, analysts at Cowen & Co said in a client note.

    The company reported a profit of $1.11 per share in the first quarter ended April 1.

    "Market conditions for hot-rolled sheet products have been more challenging than we expected earlier in the quarter when we provided our qualitative guidance due to aggressive competition," Nucor said in a statement.

    Imports continued to hurt the U.S. steel industry, the company added.

    China is the world's largest steel producer and makes far more steel than it consumes, selling the excess output overseas, often undercutting domestic producers.

    Last week, U.S. steel executives said a Trump administration national security review of their industry could provide relief from imports that dozens of U.S. Commerce Department anti-dumping cases have only partly offered.

    Steel stocks have received a boost from Donald Trump's election as president, with optimism that his administration will promote the domestic industry.

    Attached Files
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    Ferrochrome producers cut output following fall in Chinese prices

    Several producers of high-carbon ferrochrome have reduced output following a steep fall in Chinese prices, producers said Thursday.

    At least two Indian producers have cut production following an announcement of China's BaoWu Steel to reduce the June ferrochrome purchase price by 22.5% from May to Yuan 5,500/mt (62 cents/lb), producer sources said.

    One producer with a capacity of 100,000-120,000 mt/year had cut output to 60% of capacity, a company official said.

    Other producers producing silicomanganese along with ferrochrome, had suspended ferrochrome production, sources said, but this could not be confirmed.

    An official from the first producer put the production cost at 80-82 cents/lb adding that 62 cents/lb was not sustainable.

    BaoWu's monthly purchase price is usually followed by other Chinese market participants.

    A South African producer has also cut production, but this is typical for this time of the year as power rates rise during June-August. The producer declined to comment on the current output level or reasons for the cut.

    Chinese producers had also cut output, sources said, but this could not be confirmed.
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    Mongolia Jan-May coal export earnings surge after N.Korea ban

    Mongolia's coal export earnings surged nearly fivefold in the first five months of the year, according to official data, with the country taking advantage of sanctions on North Korea to boost deliveries to China, its major customer, Reuters reported.

    Cash-strapped Mongolia was forced to turn to the International Monetary Fund for support this year following a collapse in foreign investment, declining commodity prices and a downturn in coal demand.

    But it is now reaping the benefits of a ban on exports from North Korea, which has forced China to find alternative coal suppliers. The value of Mongolia's coal exports rose to $1.01 billion in the first five months of 2017, 4.6-times higher than the same period last year.

    The rise in exports contributed to a 69.5% increase in Mongolia's foreign trade surplus, which hit $1 billion, the country's statistics office said on May 13.

    According to the latest data from China's customs authority, Mongolia became China's second biggest supplier of non-lignite coal in the first four months of this year, with deliveries reaching a total of 11.7 million tonnes, more than double the same period of 2016.

    The average price of Mongolian coal delivered to China in April stood at $66/t, double the value in April last year, though still much cheaper than the average $122/t for Australian shipments.

    Attached Files
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    ISS, Glass Lewis approve restructuring at Brazil's Vale: source

    Consulting firms ISS and Glass Lewis have given a nod of approval to a restructuring plan for Brazilian miner Vale SA, boosting the chances of shareholder approval, a source said on Wednesday.

    The corporate restructuring process, announced on Feb. 20, seeks to strengthen the company's compliance and will be voted on at an extraordinary shareholders' meeting on June 27.

    The consulting firms are advising shareholders who will attend the meeting.

    "They approved it unanimously. This is extremely positive because it demonstrates that the operation is well-regarded by the market, which increases the probability of approval significantly," the source said, speaking on condition of anonymity.

    Last month, Vale's board of directors approved a final proposal by Valepar SA, the company's controlling shareholder, for a restructuring that includes plans for the miner to have no defined controlling shareholder and list on the Sao Paulo stock exchange.
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    In reversal of fortune, China's low-value steelmakers beat high-end peers

    Powered by China's infrastructure push, Chinese construction steel producers are seeing their best profits in years, lording it over their high-value counterparts in a setback for Beijing's years-long drive urging steelmakers to move up the value chain.

    As its manufacturing engine sputters, the world's second largest economy is increasingly relying on infrastructure spending to boost growth, spurring demand for construction steel products and lifting producer profit margins to near record levels.

    Combined with recent cuts to low-quality steel capacity amid a war on pollution, this infrastructure drive looks set to brighten the outlook for construction-grade steelmakers just as their more sophisticated peers wrestle with sluggish demand from manufacturers and automakers.

    "Because of capacity cuts and expected stronger infrastructure spending by China, there's a strong upside for long products consumption which can boost rebar makers' profits in the years ahead," said Richard Lu, analyst at CRU consultancy in Beijing.

    The profit margin on construction steel product rebar, also known as long steel, has surged more than 800 percent this year to around 1,100 yuan ($162) per tonne in early June, according to data tracked by brokerage CLSA.

    The margin for cold rolled coil, or CRC - otherwise referred to as flat steel - used in cars and home appliances, has dropped 47 percent to around 437 yuan over the same period.

    Margins for high-end products like CRC have usually been higher than for rebar. Between 2012 and 2016, the average margin for CRC was 341 yuan per tonne compared to 107 yuan for rebar, CLSA data showed.

    That has spurred mills in the world's top steel producer to reopen once-shut rebar production lines to cash-in on soaring prices.

    The strong demand has also cut traders' inventories of rebar by more than half in less than four months.

    "Our boss saw good profit on rebar, so he decided to resume the lines which had been shut for two years," said a sales manager at Rizhao Steel Holding Group, a midsize steel producer in China's eastern Shandong Province.

    "The lines are expected to keep operating as the outlook for construction steel is good."


    Improving infrastructure is high on Chinese President Xi Jinping's agenda as he promotes his ambitious Belt and Road initiative - building road and rail connections with Central Asia and beyond.

    Meantime, manufacturing has struggled, with China's car sales falling for a second straight month in May for the first time since 2015, limiting demand for high-value flat products like CRC.

    The reversal of fortune between Chinese producers of cheap, low-grade construction steel and makers of high-value steel was also triggered by Beijing's crackdown on industrial pollution.

    As it battles smog, China has vowed to eliminate induction furnaces - a highly polluting type of plant that produces mostly rebar - by the end of this month.

    Analysts estimate induction furnaces produced about 50 million tonnes of rebar last year - about a quarter of China's total rebar output.

    So far this year, average margins for rebar were 572 yuan per tonne compared with 91 yuan in all of 2016, CLSA data showed.

    The unexpected resurgence among producers of lower grade, cheaper steel is a setback for China's efforts to modernize its massive steel sector, mainly by pushing the big, sophisticated steelmakers to swallow smaller rivals and shut inefficient ones.

    Last year, China's most technologically advanced steelmaker Baosteel acquired rival Wuhan Iron and Steel, creating the world's second-largest steelmaker behind ArcelorMittal.

    Some Chinese mills that produce both long and flat steel products are making more of the former because of the robust margins, said Daniel Meng, a Hong Kong-based analyst at CLSA.

    "It is quite a general phenomenon," said Meng. "You should see such switching across many mills rather than just a small number of mills."

    But some mills that make only flat steel products could not shut their plants.

    "Although flat producers realize the margin is narrowing, they have no choice but to continue producing since it would cost more money to stop the equipment and turn it on again when profit goes better," said a manager of a unit of state-owned Shandong Iron and Steel Group.

    At around 437 yuan a tonne in early June, the margin on flat steel CRC was less than half of where it was in late January, CLSA data showed.

    While Chinese traders' stockpiles of both rebar and CRC have fallen from this year's peaks, rebar inventory has dropped 56 percent while CRC stocks have fallen only 13 percent, data compiled by SteelHome consultancy showed.


    As domestic appetite slows, more flat steel products from China are being sold overseas. They totaled 14.85 million tonnes during January-April, or 55 percent of total steel exports.

    In 2016, flat steel shipments were 48.03 million tonnes and made up 44 percent of total exports. The increased proportion of high-end steel shipments this year could raise fresh concerns that China may be open to renewed accusations of steel dumping on international markets.

    Chinese steelmakers "have previously been accused of selling material at below cost, in order to offload their excess supply," said Jeremy Platt from UK steel consultancy MEPS.

    "Amid a weak domestic trading environment, Chinese suppliers could be encouraged, in the coming months, to increase their export volumes."
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    Glencore to pitch to Rio board for Australian coal unit – sources

    Glencore will pitch its $2.55-billion bid for Rio Tinto's Australian Coal & Allied unit directly to Rio Tinto's board in Canada on Thursday, two sources familiar with the matter told Reuters.

    The meeting, headed by Glencore's Australian Chief Executive Peter Freyberg, comes five days after Glencoreoutbid Chinese-owned Yancoal for Coal & Allied Industries Ltd, which operates thermal coal mines in Australia's Hunter Valley.

    Glencore's proposal is $100-million higher and fully funded, but Rio Tinto has to give Yancoal the chance to make a counter offer, opening the way for a bidding war.

    A formal response from Rio Tinto to Glencore's offer could come by the end of the week, the sources said, given Glencore's acceptance deadline of June 26. If Glencore's offer is accepted by Rio Tinto, Yancoal will have five days to respond.

    Yancoal and Glencore declined to comment. Rio Tinto could not be reached for immediate comment.

    Freyberg will argue before the Rio Tinto directors, who are meeting this week in Canada, that Glencore's offer provides greater financial certainty than Yancoal's because it intends to fund the acquisition from cash on hand and committed facilities, subject only to regulatory conditions.

    "Glencore thinks it has the better offer because it's higher and there are many be doubts over Yancoal's funding," one of the sources said.

    Yancoal's second-biggest shareholder is struggling commodities trader Noble Group. Yancoal plans a capital raising to help pay for Coal & Allied and Noble would have to invest $260-million in newly issued Yancoal stock to maintain its stake at 13%.

    "This is an element that Glencore will be stressing," the source said.

    Fitch Ratings cut Noble's rating on May 26 on concern over its ability to address about $2-billion of debt maturing over the next 12 months.

    Yancoal said last month it was not concerned at that time over Noble's financial strength.

    Freyberg is also expected to try and assure Rio Tinto that its bid would not run into hurdles from competition regulators in China and Australia.

    The bulk of the coal is sold to power companies in Japan, South Korea and Taiwan, with little remaining in Australia or sold to China.
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    China coke futures surge 4.8%

    The most actively traded September 2017 coke futures on the Dalian Commodities Exchange surged 4.8% or 70 yuan/t on day to 1,518 yuan/t by close of trade on June 14, pushing through the 1,500 yuan/t mark.

    A total 295,300 lots changed hand during the session, with open interest up 13.94% on day to 230,100 lots.

    The spot market has continued to weaken in recent days as steel makers still didn't make obvious buying actions amid high-level stocks.
    Coking plants generally accepted the fifth round of price drop upon request by larger still mills in Shandong and Hebei.
    On June 14, Fenwei assessed the price of Quasi Grade I met coke sold to domestic users via Tianjin port at 1,680 yuan/t FOB, unchanged from a day ago.
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    Rio Tinto’s Silvergrass iron ore mine to begin production by year-end

    Rio Tinto, the world's second largest iron ore producer, will soon be adding more iron ore into an already oversupplied market by kicking off production at its  mine in Australia.

    Construction at the project, which will be Rio's 16th iron ore mine in the Pilbara region, has been ramping up since January, and the $338 million development is expected to create about 1000 jobs until is fully built, a Brazilian news outlet reported.

    Silvergrass is a satellite deposit located adjacent to Rio Tinto’s Nammuldi mine and it’s part of the company’s Pilbara operations, which make up the vast majority of its iron ore production.

    Silvergrass is a satellite deposit located adjacent to Rio Tinto’s Nammuldi mine and it’s part of the company’s Pilbara operations, which make up the vast majority of its iron ore production.

    The initial phase, with a five million tonne per annum capacity, began production in the fourth quarter of 2015, but the second and most important phase — which will take annual mine capacity from five to ten million tonnes — is expected to come into production in the fourth quarter of this year.

    After that, final capacity of over 20 million tonnes per year would easily plug into Rio's existing Pilbara infrastructure and the mine could be in full production in early 2018.

    The mining giant is also moving ahead with its $2.2 billion Koodaideri iron ore project in Western Australia, 110km west-north-west of Newman.

    The project, which Rio says is intended to replace existing production, would begin construction in 2019, creating 1600 jobs during that period and 600 full-time positions once in production, which is estimated to happen in 2021.
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    China's coal output grows fastest in years in May on summer outlook

    China's coal production rose 12 percent in May from a year ago, its fastest pace of growth in years, as miners ramped up output ahead of an expected summer pick-up in demand, official data showed on Wednesday.

    Coal output rose to 297.8 million tonnes in May, the National Bureau of Statistics data showed, slightly above April's 295 million tonnes. For the year to date, coal production has risen 4.3 percent to 1.4 billion tonnes.

    Unusually hot weather at the start of summer has helped spur demand for coal, while miners have enjoyed more relaxed regulations on production. May's production jump was the fastest in at least two years, according to Reuters data.

    Strong Chinese demand has helped push up international thermal coal prices.

    Prompt coal prices for cargoes from Australia's Newcastle export terminal, which are seen as Asia's benchmark, have shot up 18 percent since mid-May to $84 per tonne.

    China's domestic thermal coal prices have risen more than 16 percent this year, reaching record highs on Wednesday of 570.6 yuan ($83.94) per tonne. Open interest also hit a record on Tuesday, reflecting bullish sentiment.

    Inventory at Qinhuangdao port, China's largest coal transportation hub, fell to 5.3 million tonnes by June 12, down from 6 million tonnes month ago.

    As many of China's major cities in north and southern regions brace for a warmer-than-usual June, coal consumption from the largest coal-fired power plants has picked up to provide power for airconditioners.

    Production of steelmaking raw ingredient coke fell 1.5 percent to 37.2 million tonnes in May, but was up 3.7 percent for the first five months of the year to 182.8 million tonnes.
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    World coal production falls off a cliff

    Despite entreaties by the U.S. President, coal production is declining worldwide, putting the new Administration on the opposite side of a trend.

    Trump last week was touting the opening of a new mine in Pennsylvania as having benefitted from his government's coal deregulation measures, even though the mine had actually planned to restart a year ago, prior to Trump being elected.

    Now a new report from BP Plc, which reviews global energy trends every year, says that in 2016, U.S. demand for coal plummeted 33.4 million tons of oil equivalent to 358.4 million – a level not seen since the 1970s. China, the world's largest energy consumer, burned the least coal in six years. Consumption of coal fell in every continent except Africa.

    The upside of the reduced coal production has been lower carbon emissions, which have not grown for three consecutive years, stated Spencer Dale, BP's chief economist, at a media briefing in London today quoted by Bloomberg.The reasons for the decline in coal use are well known: more plentiful, cheaper natural gas, countries switching more to renewable energies, whose costs are dropping, and social pressure to cut coal in favour of cleaner, lower-carbon fuels.

    While coal bulls were elated for awhile earlier this year – when the price of coking coal reached heights not seen since 2011 due to cyclones in Australia and subsequent flooding in Queensland – the price of the steelmaking ingredient fell to an eight-month low yesterday as supplies return to normal levels.

    Yet the world's declining hunger for coal has clearly not been a factor in a recent bidding war between major coal players over coal mines in Australia.

    Chinese-owned Yancoal signalled Tuesday it may be willing to raise its offer and so outbid Glencore after striking an agreement with Mitsubishi to buy its 32.4% stake in Rio Tinto’s coal assets in Australia's Hunter Valley.

    The tag-along deal with Mitsubishi came almost three days after miner and commodities trader Glencore said it had reached an agreement with the Japanese firm to buy the same interests in the same coal mines. However, Yancoal's offer, at $940 million, was slightly higher.

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    China’s coal futures hit 2-month high; Sept open interest at record

    Open interest in China’s most-active thermal coal futures for delivery in September rose to a record high on Tuesday as prices rose to a two-month high, Reuters data showed.

    * Open interest rose 3.6 percent to 491,332 contracts, equal to 49 million tonnes and worth 27.7 billion yuan ($4.1 billion)

    * Prices were up 1.6 percent at 562.8 yuan ($82.80) per tonne at 0306 GMT reflecting more bullish bets as utilities increase stocks to prepare for hot summer.

    * Liquidity across the whole futures structure was at its highest since November last year.

    * Coal stocks at China’s largest coal port Qinhuangdao dropped to 5.3 million tonnes by June 12, down from 6 million tonnes a month ago, data provided by the port showed.

    * Six of China’s largest coal-fire power plants have increased coal consumption in June, data provided by Qinhuangdao port showed
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    No need to cap iron ore prices, plan to expand output: India Govt

    “There is no shortage of iron ore and at present there is no thinking in the mines ministry of capping of iron ore prices,” Mines Secretary Arun Kumar said at a press conference here. “Mines of ministry does not have a plan of fixation for iron ore prices. They (Mines Ministry) are the administrative ministry,” Kumar said.

    The mines ministry today said it has no plans to cap the prices of iron ore as there is no shortage of the key steel-making raw material. It also said the country is looking at expanding the iron ore production and that will take care of market dynamics.

    “There is no shortage of iron ore and at present there is no thinking in the mines ministry of capping of iron ore prices,” Mines Secretary Arun Kumar said at a press conference here. “Mines of ministry does not have a plan of fixation for iron ore prices. They (Mines Ministry) are the administrative ministry,” Kumar said.

    NMDC is the country’s single-largest iron ore producer. “It’s an open market. Our approach in this whole thing is that we want to expand the iron ore production and that itself will take care of market dynamics,” said Piyush Goyal, the minister of state for power, coal, new and renewable energy and mines said.

    He was addressing the media on the achievements of this ministries in the last three years. Kumar said that the country produced 129 MT of iron ore in 2014-15, 156 MT in 2015-2016 and 192 MT in 2016-17.

    “The iron ore production has been going up. We are focusing on that. In the last two-three years we have gone up from 129 million tonnes to 156 MT to 192 MT in the last year (fiscal),” he said.

    “Our’s (iron ore) is growing by 22 per cent and the steel is growing by 8 per cent. So where is the shortage?,” he questioned. The government had earlier formed a panel under the chairmanship of additional secretary steel on iron pricing. The panel also has members from ministries like coal and mines.

    An official on the conditions of anonymity said that mines ministry has recently given its view to the steel ministry that there was no necessity at this time to control price of iron ore. The mines ministry, the official said, has also cited reasons for the same.
    “We have given our view that there is no necessity at this time (for controlling the prices of iron ore). We have given reasons,” the official added. “There is no need to fix the price of iron ore. It is a free market. It is not a regulated market. We cannot go back to the pre 1990- 1991 era,” the official added.
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    Japan's trading houses offload thermal coal assets amid climate concerns

    Japanese trading houses including top-ranked Mitsubishi Corp are offloading thermal coal assets on growing concerns about the fuel's environmental impact, in a move also reflecting a shift in their focus to the more profitable coking coal.

    With networks spanning the globe, trading houses are trying to mitigate global criticism around the harm the fuel causes. Japan, which had to burn record amounts of the dirtiest fossil fuel to generate power after the Fukushima disaster in 2011 paralysed its nuclear sector, seeks to slash its carbon emissions by 26 percent by 2030 from 2013 levels.

    Among recent thermal coal asset sales by Japanese trading houses is Mitsubishi's decision to offload its minority stakes in Hunter Valley Operations and Warkworth mine in Australia, tagging along with Rio Tinto's sale of those assets.

    Last week, miner-trader Glencore said it had offered $2.55 billion cash for the Rio mines, outbidding an offer from Chinese-owned Yancoal.

    "We've decided to sell ... to whichever of the two bidders wins the bid," Mitsubishi said on Tuesday.

    Yancoal has offered to buy Mitsubishi's stakes for $940 million, while Glencore has offered $920 million cash.

    Mitsubishi is also considering selling a stake in the Clermont coal mine in Australia. If sold, the company would be left with a stake in one thermal coal mine.

    "It makes sense to sell thermal coal assets as they generate lower profit than coking coal and given global environmental pressure to shift away from coal, but a key question is whether Mitsubishi could buy better assets at low price," said Nomura Securities senior analyst Yasuhiro Narita.

    After posting its first ever annual loss in the year to March 2016 due to a commodity slump, Mitsubishi has been reshuffling its natural resources portfolio to focus on three core assets: coking coal, copper, and liquefied natural gas (LNG).

    Other Japanese trading houses have also been cutting or freezing investments in thermal coal.

    Last month, Mitsui & Co said it would invest mainly in iron ore, LNG and oil and had no plans to invest in new thermal coal mines amid environmental concerns.

    In 2016, Mitsui said it planned to cut its exposure to coal by a third within three years.

    Sojitz is also limiting investment in coal.

    "We'll continue to seek opportunities to cut some of our thermal coal assets and raise our coking coal exposure," Sojitz President Yoji Sato has said, adding that a recovery in thermal coal prices provides a good opportunity to sell stakes in low-quality coal mines.

    Thermal coal prices more than doubled from January 2016 to a peak of $109.69 a tonne in November, but have since retreated to $80.79. Coking coal, used to make steel, is currently priced at around $146 per tonne.
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    Adani’s ‘pit-to-plug strategy’ is fraying at both ends

    Gautam Adani, the chairman of the Indian conglomerate Adani Group, has long argued that the Carmichael coal proposal in the Galilee Basin of Australia is a key part of his company’s “integrated pit-to-plug strategy.”

    The Adani logic for the Carmichael project assumes that the traded price of seaborne thermal coal is irrelevant to the commercial viability of Carmichael because the coal would be used within the Adani family group of companies.

    The company line is that Carmichael venture needs to be viewed, in other words, strictly in the context of the overall profitability of the pit-to-plug  strategy.

    IEEFA sees Carmichael as both unviable and unbankable if it is tied to actual coal markets (with the forward price of thermal coal back down to US$66/t), which is why the pit-to-plug strategy Adani talks up is the linchpin said to be holding the proposal together.

    It’s a shaky foundation on which to proceed, however. Last week Adani Power reported that its core asset —the 4.6 GW 100 percent import-coal-fired power plant at Mundra—is no longer viable, news that brings what was an already questionable argument for Carmichael into further question.

    In IEEFA’s view, any decision to walk away from Carmichael would require a A$1.4 billion (US$1.05billion) write-off for Adani Enterprises (AEL), a very unpalatable outcome for Adani Group bankers owed a collective US$15 billion, particularly if Adani Power (APL) were forced to also take a US$1 billion write-down on Mundra on top of the US$954 million net loss just reported.

    Adani Power’s financial distress is growing, which is why it has just recorded that US $954 million loss, a result of the Supreme Court of India ruling that the Mundra plant’s contractual obligations to supply electricity are valid,
    notwithstanding the entirely predictable rising cost of imported coal. APL’s 2016/17 result briefing included the statement that APL would undertake negotiations with the government over allocation linkages that “will allow us (APL Mundra) to access domestic coal.” Also telling is that APL’s average tariff realization was Rs3.85/kWh, well above the cost of new solar, which is down 30 percent year on year to a recent record low of Rs2.44/kWh. The company’s huge financial leverage only adds to significant tariff pressures.
    The company’s financial leverage is unsustainable, a point on which the chart below does the talking on how Adani Power’s US$7.6 billion net debt is 16 times equity.

    The Indian national strategic need for Carmichael has disappeared, as evinced by Energy Minister Piyush Goyal repeatedly reiterating policy that would have India cease thermal coal imports this decade. NTPC Ltd., the country’s largest thermal power producer, has reduced its coal imports radically, from 16Mtpa in FY2015 to 1Mtpa in FY2017. Under Goyal’s direction, Public Sector Undertakings or PSUs will cut imports to zero in FY2018. More broadly, Indian coal imports peaked at 212Mt in FY2015 and have declined steadily, with May 2017 imports  down 6 percent year on year to 18.15Mt.

    “Defer, delay and pray,” appear to be the unspoken Adani watchwords now as the company keeps pushing out the Carmichael timetable, offering one excuse after another on why it hasn’t happened yet. ‘First coal’ was due originally by 2014/5, now the company says 2021.

    Attached Files
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    U.S steel association urges better coordination under new NAFTA

    The top U.S. steelmakers' association on Monday called for better coordination and enforcement of rules under a renegotiated North American Free Trade Agreement to guard against Mexico, the United States and Canada becoming a dumping ground for cheap steel from other countries.

    In comments to the U.S. Trade Representative ahead of NAFTA negotiations in August, the head of the American Iron and Steel Institute (AISI), Thomas Gibson, urged updates to NAFTA's rules of origin - how much of a product is made in North American - new measures to curb steel dumped on the market by non-NAFTA countries, and steps to improve customs procedures.

    "The American steel industry views NAFTA as a successful agreement but after 23 years, one that can also be modernized and strengthened," Gibson said in a letter to Edward Gresser, chairman of USTR's Trade Policy Staff Committee.

    The U.S. Trade Representative office asked businesses and industry groups to submit recommendations this week ahead of the NAFTA talks. AISI members include ArcelorMittal USA, Nucor Corp (NUE.N), U.S. Steel and AK Steel Holding Corp (AKS.N).

    Gibson also said "enforceable currency disciplines" should be added to the new NAFTA to avoid trade-distorting currency misalignments or competitive currency depreciation, a complaint often heard by U.S. manufacturers against such countries as China and Japan.

    He said while Mexico and Canada did not manipulate their currencies, a currency clause would be a useful precedent for other trade agreements where it might be more relevant.

    NAFTA should also help level the playing field for North American steel producers, which are disadvantaged by enterprises that are owned or financed by governments, Gibson added.

    After calling NAFTA "the worst trade deal" ever during the presidential election campaign, U.S. President Donald Trump has since softened his stance toward the agreement between the United States, Canada and Mexico.

    Instead of dismantling NAFTA, most U.S. industries and businesses have called for it to be updated and modernized. Like U.S. automakers, the U.S. steel industry has expressed concerns that changes could interfere with existing supply networks.

    In other comments sent to USTR ahead of the NAFTA talks, the U.S. Chamber of Commerce called on the Trump administration to ensure that the negotiations "be conducted in a manner that does not put millions of American jobs at risk."

    "The chamber supports this effort to modernize the NAFTA, taking into account technological, economic, and other changes in the U.S., North American, and global economies in recent years," the chamber's senior vice president for international policy, John Murphy, said.

    Meanwhile, the National Foreign Trade Council said the talks should create more open markets and better rules, not new restrictions.
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    China to speed up closing small-scale coal mines to improve safety

    China will speed up the closure of small-scale coal mines and strengthen inspections on safer production over the next three years, a government plan released on Monday showed.

    Beijing will accelerate closing small-scale coal mines with an annual production capacity of 90 000 t or less, as part of its plan to improve mine safety, according to the 13th five-year plan on the production safety of coal mines, jointly issued by China's State Administration of Work Safety and State Administration of Coal Mine Safety.

    China will reduce the death toll in coal mine accidents by more than 15% by 2020, according to the plan.

    Major coal mines accidents will be effectively controlled by 2020, the document said.

    There were 9 598 coal mines in China at end-2015 and 45.5% of them were small-scale. With poor safety conditions and equipment, most of the mines were vulnerable to disasters, the document said.

    A series of accidents have occurred in the past at coal mines in major production hubs in China, causing fatalities.

    China's coal output rose to 3.75-billion tonnes in 2015, from 3.24-billion tonnes in 2010. The death toll from coal mine accidents dropped 75.4% to 598 during the same five-year period, according to the document.
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    Japan's Nippon Steel adopts indexation for met coal replacing benchmark system

    Japan's largest steelmaker, Nippon Steel & Sumitomo Metal Corporation, has adopted indexation to price premium coking coals for April to June, effectively ending a quarterly price system that has been in place since 2010, sources said Monday.

    A spokesman from the company also confirmed the news to another media source and this has been verified by other market participants including buy and sell-side sources.

    Much of the sharp shift towards indexation has been triggered by the extreme price volatility of metallurgical coal pricing after cyclone Debbie hit Queensland, Australia, on March 27, with prices doubling to $304/mt FOB Australia on April 17 before plunging to $147.50/mt FOB Australia Friday, based on S&P Global Platts Premium Low Vol FOB Australia.

    The buyer and suppliers could not reach to mutual agreement on what the Q2 price would be and this resulted in a move towards indexation, sources said.

    The pricing formula is using the average of March to May pricing of premium coal indices.

    Most of the contracts heard were using the average pricing of S&P Global Platts Premium Low Vol FOB Australia and TSI Premium Hard Coking Coal FOB Australia while there was one with a basket of the above two with a third index.

    Platts Premium Low Vol FOB Australia averaged at $193.26/mt FOB Australia while TSI's Premium Hard Coking Coal was at $194.32/mt by using an average of the daily assessments from March to May.

    TSI is owned by S&P Global Platts, part of S&P Global.

    There appears some uncertainty whether the indexation move is to solve the short term dilemma of Q2 or a permanent change, although most sources indicated that it was more inclined to the latter.


    One miner said it was more of a "long term" thing. Another source said whether it is permanent would become clear as the Q3 price negotiations is about to start soon given July is approaching.

    "We will know in two weeks when Q3 starts," the source said.

    But not all suppliers appeared to have agreed to using indexation, two sources said, with one Australian producer understood to be still willing to negotiate a fixed price outcome.

    In addition, PCI and semi-soft coals were understood to be not going down the indexation route, with sources indicating they would be using the index price settled for premium coals and applying a ratio to it.

    Several other Japanese mills were heard due to meet miners as early as Tuesday to follow up on their own discussions.

    Several sources said they believe other mills would follow suit. But one mill said there might be hesitation on its part.

    "We will discuss which way to proceed, whether to follow Nippon's way or the traditional benchmark. It is not clear now," he said.

    The steel mill buyer also said this is bound to affect mills' pricing strategy in terms of downstream steel sales, as mills also sell based on quarterly benchmark system.

    "It is sure to affect steel pricing, and I'm not sure if this is a good thing or not," said the buyer, adding that the decision on steel pricing would have to involve a larger conversation with steel customers as well.

    Two participants said this would aid the burgeoning swap derivatives market as steelmakers would have a greater need to hedge raw material costs.

    One steelmaker said that should steel pricing strategy still remain on a longer term basis, the only way for them to control volatile raw materials costs is through hedging on the paper market.

    Both Platts and TSI's premium coal index are listed as financial derivatives, with the former at CME and the latter at SGX.

    SGX's paper contracts has a lion's share of the swaps derivative market in 2017. Around 7.2 million mt of coking coal futures were traded at SGX from January to May as compared to 0.94 million mt at CME. CME volumes stood at 4.74 million mt in 2016 while SGX paper volumes were at 0.8 million mt.

    "Swaps market will become more active," a sell-side source said.

    It appears now that the whole ferrous raw materials complex has shifted towards the indexation path after iron ore fines made that switch in Q2, 2010.

    Iron ore lump made the move in Q2, 2014 as a result of the spread between spot and contract prices widening.
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    Henan to shed 20.14 Mtpa coal capacity in 2017

    Henan to shed 20.14 Mtpa coal capacity in 2017
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    Coal India to close 37 mines

    Public sector miner Coal India has decided to close 37 unviable underground coal mines and re-deploy manpower from the sites to cut losses suffered on lifting coal from these mines.

    In a communication to bourses, Coal India said the company and its subsidiaries undertake an exercise every year to assess the performance of the mines.

    At a review meeting with the coal major and its subsidiaries, the coal ministry has found out that a sizeable number of mines are unable to recover the salary of workers. Accordingly the miner was asked to conduct a detailed study of such mines and report the action taken regarding them.

    “In view of the above, an action plan has been prepared by subsidiaries in which 37 unviable UG (underground) mines have been envisaged to be closed in 2017-18,” CIL said in a filing to the Bombay Stock Exchange.

    “The identified surplus manpower from these mines would be gainfully redeployed in nearby mine areas to reduce further loss in these mines,” it said.

    According to a disclosure to the BSE in April, Coal India had said that of 413 mines it owns, 176 are open cast mines, 207 are underground mines and 30 are mixed mines.

    However, bulk of Coal India’s production comes from open cast mines. Industry sources said the exercise to cut down production from the identified mines could yield savings of around Rs 800 crore for the miner.

    Besides high cost, difficult geo-mining conditions, non-availability of large size deposits for adopting mass production technologies, inadequate experience in mechanisation of underground mines, dependence on imported equipment for mass production technologies and long gestation periods are some of the hindrances to augmenting production from underground mines.

    Coal India’s provisional production in 2016-17 was 554.13 million tonnes against a target of 598.61 million tonnes and recording a growth rate of 2.9 per cent. Of this underground mining contributed to around 31 million tonnes.

    Coal India has set a production target of 661 million tonnes for 2017-18 from a combination of its active and future projects.

    The public sector miner has identified 121 major ongoing projects expected to produce 561 million tonnes in 2020.
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    China's key steel mills daily output down 2.99pct in late May

    China's key steel mills daily output down 2.99pct in late May
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    China's Yancoal gets regulatory approval for $2.45 billion RTZ deal... Glencore bid

    China's Yancoal has gained Chinese regulatory approval for its $2.45 billion purchase of Rio Tinto's Australian unit Coal & Allied Industries Ltd, the company said in a stock exchange filing on Sunday which also acknowledged Glencore's counterbid for the assets on Friday.

    The government-controlled Chinese company said it had received approval from China's National Development and Reform Commission and the anti-monopoly bureau of the Ministry of Commerce for the deal.

    In January, Rio said it was selling its interest in Coal & Allied Industries Limited to Yancoal's subsidiary Yancoal Australia Limited for $2.45 billion.

    Glencore on Friday made a counterbid for Coal & Allied offering $2.55 billion cash.

    The terms of the Yancoal agreement allow Rio to engage in negotiations with another party if it made a better offer.

    Glencore's proposal is $100 million higher and fully funded, but Rio Tinto has to give Yancoal the chance to make a counter offer, opening the way for a bidding war.

    "If Rio Tinto determines that the Glencore Proposal is a superior proposal, Yancoal Australia will have a right to match or better that proposal," the company said in the filing on Sunday.

    "Further announcement will be made by the company in accordance with the listing rules if it receives notification from Rio Tinto in relation to whether the Glencore proposal constitutes a superior proposal."

    In addition to receiving Chinese regulatory approvals, the deal has also received the green light from Australia's Australian Foreign Investment Review Board and South Korea's Fair Trade Commission.

    Miner and trader Glencore Plc said on Friday it had submitted a proposal to buy Australian miner Rio Tinto's stake in Coal & Allied Industries Ltd for $2.55 billion in cash.

    Glencore said the deal would be funded from existing cash resources and would be paid in two stages.

    Glencore also said that it plans a possible sale of up to 50 percent of its interest in Coal & Allied Industries.
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    EU sets steel import duties to counter Chinese subsidies

    The European Union has set duties of up to 35.9 percent on imports of hot-rolled flat steel from China to counter what it says are unfair subsidies in a finding challenged by Beijing.

    The European Commission, which conducted an investigation on behalf of the 28 EU members, found a number of Chinese companies had benefited from preferential lending from state-owned banks, grants, tax deductions and the right to use industrial land.

    "We are continuing to act, when necessary, against unfair trading conditions in the steel sector, and against foreign dumping," EU Trade Commissioner Cecilia Malmstrom said in a statement.

    She added that she hoped global discussions on steel overcapacity would eventually convince China to end unfair schemes to ensure a level playing field for all steel producers.

    China's Commerce Ministry said it "strongly" questioned the legitimacy of the EU decision, adding the European Commission had ignored the fact China's steel exports to Europe had declined in 2016. It said it would take all necessary measures to protect the interests of Chinese firms.

    The EU had already set in place anti-dumping duties, to counter excessively low prices, which it has now adjusted to a range of between zero and 31.3 percent.

    Hot-rolled flat steel is used in shipbuilding, gas containers, pressure vessels, tube and energy pipelines.

    The targeted companies include Benxi Group [LNGOVB.UL], with overall anti-dumping and anti-subsidy duties of 28.1 percent, Hesteel Group, with a rate of 18.1 percent, and Jiangsu Shagang at 35.9 percent.

    The duties, applicable for five years, will take effect from Saturday, the EU's official journal said.

    The EU has taken over 40 anti-dumping decisions to aid European steel producers, with measures on cold-rolled flat steel and stainless steel from China. It also has an ongoing investigation into hot-rolled steel imports from Brazil, Iran, Russia, Serbia and Ukraine.
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    Chinese industry insiders appeal for mergers of private steel firms

    The supply-demand situation in China's steel market has basically been in balance, so it's time to facilitate mergers and regroupings of private steel makers, said experts in the third meeting of China Chamber of Commerce for Metallurgical Enterprises on June 8.

    "The rise of steel price index in the first quarter this year indicated a good start of steel industry, yet there were still some problems to deal with," said Zhang Zhixiang, chairman of the chamber.

    Chinese steel industry underwent a five-year tough period. Sales profit rate of the industry hovered around 1% for four consecutive years starting from 2011, and steel output and consumption fell off the peak in 2015, with the whole industry suffering from a loss of 77.9 billion yuan in total, he added.

    In 2016, steel industry witnessed a rebound with total earnings of 30.4 billion yuan, backed mainly by growth of infrastructure, housing constructions, automobile industry, favorable policies and capacity cut campaign.

    However, it was just a recovery growth, as steel sales profit rate logged only 1.8% last year, Zhang said.

    Data from China Iron and Steel Association showed that steel price index slightly increased to 105.3 points in the first quarter of 2017.

    China's key medium- and large steel makers realized 23.3 billion yuan of profit during the period, and sales profit rate climbed to 2.77%, data showed.

    However, steel industry should take the opportunity to seek transformation and innovation for a long-term stable prosperity, as potential economic downside pressure and financial risks remains in the future, Zhang remarked.

    The mergers of private steel firms, clean utilization of energies and transformation and upgrading will be a priority for steel industry in the future, he added.
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