Mark Latham Commodity Equity Intelligence Service

Friday 9th September 2016
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    Mexico 2017 budget cuts to squeeze Pemex, primary surplus eyed

    Mexico's government on Thursday set out plans for a bigger-than-anticipated cut in public spending in 2017, with struggling state oil company Pemex earmarked for a 100 billion peso ($5.36 billion) reduction in funding.

    New Finance Minister Jose Antonio Meade said the budget foresaw planned spending cuts of 239.7 billion pesos ($12.83 billion), targeting a primary surplus of 0.4 percent of gross domestic product (GDP) in 2017. It would be the first such surplus since 2008.

    Of the cuts, 100 billion pesos fall on Pemex [PMX.UL], which is already facing a funding squeeze and has racked up multi-billion dollar losses for years. Since the government ended its oil and gas monopoly nearly three years ago, Pemex has faced stiff competition from the private sector.

    "Pemex is making the biggest contribution to the cuts," Meade said, presenting the budget proposal to Congress a day after he was sworn in as finance minister following the resignation of Luis Videgaray.

    In late 2013, the government threw open the industry to private capital to reverse a protracted slide in oil production, but falling crude prices have undermined those efforts.

    Currently running at some 2.16 million barrels per day (bpd), Mexican oil production will slip to an average of 1.928 million bpd in 2017, the budget forecasts. The last time Mexican crude output fell below 2 million bpd was in 1980.

    Still, the budget does foresee changes aimed at easing Pemex's heavy tax load.

    Less than two years remain before the next presidential election, and President Enrique Pena Nieto's government is struggling to ramp up economic growth, having fallen well short of its original ambition to achieve annual rates of 5-6 percent.

    Hurt by uneven U.S. demand for its goods, Mexico's economy shrank in the second quarter for the first time in three years.

    Next year, the budget foresees growth of between 2 and 3 percent, compared with 2.0-2.6 percent in 2016.

    Despite the 2017 cuts - well above the 175.1 billion the government eyed in April - non-discretionary spending was expected to rise by 144.3 billion pesos, inflated by higher financing costs and a slide in the peso's value.

    Next year the government foresees an overall deficit of 2.9 percent of GDP, 0.6 percentage points less than the 2016 target.

    The budget foresaw the peso averaging 18.2 per dollar in 2017, and an average price of $42 per barrel for Mexican crude, in line with the government's hedging program.

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    Chinese Central Bank Crushes Yuan Shorts, Launching Bitcoin Buying Spree

    With the Yuan having traded within fractions of what many consider a key psychological level for the USDCNY at 6.70, many traders expected that following the just concluded G-20 meeting in China, the PBOC would finally relent in its devaluation defense, and let the currency slide on through to the other side. Not only did that not happen, but overnight the Chinese Central bank unleashed one of the most furious attacks on currency Yuan shorts since the January devaluation scare when the cost of borrowing yuan in Hong Kong soared to a seven-month high amid.

    The overnight HIBOR, or Hong Kong Interbank Offered Rate, jumped - seemingly without reason - by 3.88% points to 5.45%, the most expensive since February, according to Treasury Markets Association data. Other tenors joined with the one-week rate rose 2.09% points to 4.06%.

    As Bloomberg confirms, the PBOC "may have tightened liquidity in the offshore yuan market to control declines following speculation that it would allow depreciation now that a Group of 20 summit is over, according to Mizuho Bank Ltd. The monetary authority drove offshore yuan borrowing costs to unprecedented levels in January in an effort to punish bears."

    The mechanics of the move, used often in January and February when the Yuan was seemingly sliding every day, are as follows (courtesy of Bloomberg): China’s central bank influences funding costs in Hong Kong by encouraging state-owned banks to hold back from loaning their excess yuan. A surge in yuan Hibor hurts bears in two ways: by increasing the cost to borrow the currency and sell it, and also by prompting lenders that want to avoid paying the higher rates to buy the yuan they need in the spot market instead, bolstering the exchange rate.

    Meanwhile, the bogeyman for China, capital outflows, continue, and as China reported on Wednesday, the latest foreign reserve total dipped by $16 billion to $3.185 trillion.

    While capital outflows have eased from record levels last year, firms and individuals still appear uncomfortable with exposure to China’s currency. A Bloomberg gauge of local companies’ willingness to convert foreign currencies into yuan is near a record low, while an unprecedented overseas acquisition binge suggests strong demand for exposure to foreign assets. A net $55 billion flowed out of China in July, compared with $49 billion in the previous month, according to calculations by Goldman Sachs.

    For now the PBOC has won the battle, however it will likely lose the war: as Frances Cheung, head of rates for Asia ex-Japan at SocGen told Bloomberg, "front-end forward points coming off earlier highs suggests the squeeze could be temporary. The less flush offshore yuan liquidity conditions - as various flows subside - could amplify the movement in front-end rates should there be a sudden need for liquidity."

    Meanwhile, just as the PBOC intervened in the FX market, a new leak sprung in a totall different place: just as the central bank was squeezing Yuan shorts in Hong Kong, Bitcoin soared higher by another 3%, driven by a surge in buying on the Chinese Huobi exchange, sending the price for the digital currency back to a 1 month high.

    As we first reported over a year ago, when it was trading at $230, bitcoin has become the "capital outflow alternative" of choice for numerous Chinese, and based on historical patterns, any time Chinese capital outflows spike, or the PBOC engages aggressively in preventing these, the price of bitcoin jumps, just as it did overnight.

    Going forward the PBOC may be forced to intervene not only in the spot FX markets but also to short BTC as the local population gets increasingly creative in finding ways to bypass China's great monetary firewall.

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    La Nina Odds Dim, Clouding Winter Forecast for U.S. Gas Traders

    La Nina Odds Dim, Clouding Winter Forecast for U.S. Gas Traders

    The U.S. Climate Prediction Center has dropped its La Nina watch and now says there is a greater chance the weather-changing event that can boost U.S. natural gas prices won’t happen.

    There is a 35 to 45 percent chance a La Nina, characterized by cooling equatorial Pacific waters, will form by the end of the year, down from 75 percent in June, according to Michelle L’Heureux, a forecaster with the center in College Park, Maryland. Prospects for La Nina dimmed after models suggested the Pacific has reached its coolest phase for this cycle and will moderate through rest of 2016.

    La Ninas often deliver colder winters to the northern U.S., which can trigger higher gas prices by boosting demand for the power plant fuel. The event can also cause flooding in Australia’s coal belt or drought in Brazil’s soybean fields that can cut crop yields. If La Nina fails to arrive, predicting the weather in general becomes more difficult, according to L’Heureux.

    “We’re dropping the La Nina watch, but the chance of a La Nina itself is definitely not zero,” L’Heureux said.

    La Ninas typically occur every two to seven years when cooler sea surface temperatures trigger a reaction in the atmosphere. When the same area warms, its an El Nino. Either phenomenon makes weather forecasting easier, according to L’Heureux.

    Forecasters haven’t seen any changes in thunderstorms, winds or ocean temperatures pointing to a La Nina in the last month, according to the center’s monthly update Thursday.

    Greater Predictability

    When the Pacific is in its normal state, other harder-to-predict patterns set the stage for wetter or drier seasons or temperatures above or below historical norms. In North America, twin patterns known as the Arctic and North Atlantic Oscillations could hold sway over how cold the winter gets and how much gas is burned to heat homes and businesses. If the oscillations turn negative, more cold air will pool over the continent.

    In some cases, such weather patterns give forecasters only a few weeks before changes that can dominate North America’s weather move in.

    “We like El Nino and La Nina,” L’Heureux said. “It gives us predictability.”

    La Ninas can also decrease wind shear across the tropical Atlantic allowing more hurricanes to form. Shear, when winds blow at opposite directions or varying speeds at different altitudes, will often rip apart tropical systems.

    Last year’s El Nino was one of the three strongest on record, generating the hottest global temperatures in more than 130 years, according to the U.S. National Centers for Environmental Information in Asheville, North Carolina.
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    China Aug imports rise for first time in nearly two years, export drop eases

    China's imports unexpected rose in August for the first time in nearly two years while exports fell at a more modest pace,

    suggesting demand at home and abroad may finally be perking up and putting the world's second-largest economy on a more balanced footing.

    Exports fell 2.8 percent from a year earlier, the General Administration of Customs said on Thursday, adding that pressure on shipments was expected to ease further in the fourth quarter.

    Imports rose 1.5 percent from a year earlier, ending a 21-month stretch of declines, suggesting domestic demand is picking up along with firmer commodities prices.

    That resulted in a narrower trade surplus of $52.05 billion in August, versus a $58 billion forecast and July's $52.31 billion.

    If it proves sustainable, a trade recovery would help ease fears that China's economy is becoming increasingly lopsided, and give feeble global growth a much-needed shot in the arm.

    China's policymakers have become more reliant on higher government spending on infrastructure and a housing boom to drive economic growth as private investment fizzles and exports remained sluggish.

    Economists polled by Reuters had expected trade to contract but show some signs of improvement.

    August exports had been expected to fall 4.0 percent, similar to July's 4.4 percent decline, while imports had been expected to ease 4.9 percent, moderating significantly from a sharp decline of 12.5 percent in July.

    A surge in commodity prices, due in part to Beijing's efforts to reduce excess capacity in heavy industries and mining, has also supported trade figures and given a badly needed boost to business confidence.

    Some Chinese steel plants are turning in the best margins in at least three years as prices rise and demand for building materials increases.

    G20 leaders pledged on Monday to work together to address excess steel capacity that has punished the global industry with low prices for years while raising tensions between China and other major producers.
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    China Southern Power Grid Jan-Aug power sales up 3.1pct on year

    China Southern Power Grid, a state-owned company that transmits and distributes electricity to China's five southern provinces, reported that total power sales reached 592.3 TWh over January-August, up 3.1% on year, compared with an increase of 2.8% in the first seven months, showed the latest data from the National Development & Reform Commission (NDRC).

    Of this, power consumption of Hainan and Guangdong rose 6.9% and 4.7% on year, compared with increases of 7% and 4.8% over January-July.

    Guangxi and Guizhou followed with power use climbing 1.8% and 1.7% on year, compared with a rise of 1.2% and a decline of 0.9% over January-July, the NDRC data showed

    Yunnan posted a decline of 1.7% in its power consumption in the first eight months, compared with a drop of 2% over January-July.

    In August, electricity sales of the company stood at 86.5 TWh, up 4.1% from the year-ago level.

    Guizhou, Guangxi, Hainan, Guangdong and Yunnan all saw climbing power use in August, with year-on-year growth at 10.9%, 5.9%, 4.3%, 3.2% and 0.1%, respectively.

    Guangdong power grid of the company registered the sixth new high of power load in August since this year, which was 100.07 GW, up 7% from the highest level last year.

    The volume, equaling to 4.5 times of the full generating capacity of the Three Gorges Dam, also exceeds the electricity loads of Germany, Australia and South Korea among other developed countries.

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    Top Saudi cleric says Iran leaders not Muslims as haj row mounts

    Saudi Arabia's top religious authority said Iran's leaders were not Muslims, drawing a rebuke from Tehran in an unusually harsh exchange between the regional rivals over the running of the annual haj pilgrimage.

    The war of words on the eve of the mass pilgrimage will deepen a long-running rift between the Sunni kingdom and the Shi'ite revolutionary power. They back opposing sides in Syria's civil war and a list of other conflicts across the Middle East.

    Iranian Supreme Leader Ayatollah Ali Khamenei, in a message published on Monday, criticized Saudi Arabia over how it runs the haj after a crush last year killed hundreds of pilgrims. He said Saudi authorities had "murdered" some of them, describing Saudi rulers as godless and irreligious.

    Responding to a question by Saudi newspaper Makkah, Saudi Arabia's Grand Mufti Sheikh Abdulaziz Al al-Sheikh said he was not surprised at Khamenei's comments.

    "We have to understand that they are not Muslims ... Their main enemies are the followers of Sunnah (Sunnis)," Al al-Sheikh was quoted as saying, remarks republished by the Arab News.

    He described Iranian leaders as sons of "magus", a reference to Zoroastrianism, the dominant belief in Persia until the Muslim Arab invasion of the region that is now Iran 13 centuries ago.


    Al al-Sheikh's remarks drew an acerbic retort from Iran's Foreign Minister, Mohammad Javad Zarif, who said they were evidence of bigotry among Saudi leaders.

    "Indeed; no resemblance between Islam of Iranians & most Muslims & bigoted extremism that Wahhabi top cleric & Saudi terror masters preach," Zarif wrote on his Twitter account.

    Saudi authorities normally seek to avoid public discussion of whether Shi'ites are Muslims, but implicitly recognize them as such by welcoming them to the haj, and by accepting Iranian visits to the Saudi-based Organisation of Islamic Cooperation.

    Tensions between the two countries have been rising since Riyadh cut ties with Tehran in January following the storming of its embassy in Tehran, itself a response to the Saudi execution of dissident Shi'ite cleric Nimr al-Nimr.

    Custodian of Islam's most revered places in Mecca and Medina, Saudi Arabia stakes its reputation on organizing haj, one of the five pillars of Islam which every able-bodied Muslim who can afford to is obliged to undertake at least once.

    Riyadh said 769 pilgrims were killed in the 2015 disaster, the highest haj death toll since a crush in 1990. Counts of fatalities by countries who repatriated bodies showed that more than 2,000 people may have died, more than 400 of them Iranians.

    Iran blamed the 2015 disaster on organizers' incompetence. Pilgrims from Iran will be unable to attend haj, which officially starts on Sept. 11, this year after talks between the two countries on arrangements broke down in May.

    The split between Islam's main sects dates to a dispute among Muslims over who would rule their community after the death of the Prophet Mohammad, and Shi'ites still regard his descendents as a line of imams blessed with divine guidance.

    Today such disagreements over history remain emotive points of tension between the sects, but they are also divided over day -to-day issues including differing interpretations of Islamic law and the role and organization of the clergy.

    In the Wahhabi teaching of Sunni Islam followed by the Saudi clergy and government, Shi'ite doctrine about imams is seen as incompatible with the concept of a monotheistic God.

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    China's capital outflows continue as PBOC props up yuan

    China’s foreign exchange reserves declined by $15.9bn in August to a five-year low, which was marginally more than economists expected and is likely to put further pressure on the country's currency.

    After its efforts to intervene in the market to support the renminbi, the People’s Bank of China (PBOC) said on Wednesday FX reserves had shrunk to $3,185bn by the end of last month, the lowest level since 2011.

    China's hoard of overseas funds peaked at $4trn in June 2014 and have been shrinking at pace in recent months as forex markets react to growing speculation of an interest rate hike by the US Federal Reserve.

    Economist Julian Evans-Pritchard at Capital Economics said the PBOC was intervening heavily to prop up the currency and that ouflows were likely to continue to weigh on the yuan.

    "Today’s data suggest that capital outflows from China remain sizeable which is likely to put further downward pressure on the renminbi in the coming months," he said.

    Adjusting for the impact of valuation and exchange rate effects, Capital Economics calculated that FX sales by the PBOC were around $30bn last month, not much changed from July, while a likely $20bn increase in the current account surplus pointed to the largest capital outflow since the panic about the renminbi and China at the start of the year.

    "Looking ahead, outflows may ease somewhat this month given that disappointing US data has pushed back expectations for a Fed rate hike," Evans-Pritchard said.

    "Nonetheless, the key takeaway is that although concerns about China are no longer front page news, capital outflow pressures haven’t gone away. We expect the PBOC to respond to these pressures by continuing to allow gradual renminbi depreciation."

    He said he expected the currency to end the year at 6.80 against the dollar, from 6.67 now, before dropping to 7.00 by the end of 2017.

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    Rio versus BHP boils down to investors' choice of commodity

    The backgrounds of the leaders of the world's top mining companies illustrate the choice facing investors, with BHP Billiton's chief executive having worked in the oil industry and Rio Tinto's new boss more focused on copper.

    After aggressive cost-cutting and asset sales to drive down debt, the two mining giants are positioning themselves to capture growth as commodity markets begin to recover from a crash that dented company balance sheets.

    French-born Jean-Sebastien Jacques has led Rio only since July, while his counterpart at BHP , Scotsman Andrew Mackenzie, has been in place for the turbulent past three years.

    Both men sang from the same songsheet when presenting financial results last month.

    They ruled out the reckless spending of the past that almost led to financial ruin and promised to be safe, boring and disciplined, buying assets only when the price was right and maintaining the focus on lowering costs.

    Rio is widely regarded as the better pick, with more analysts rating it a "Buy" than BHP, according to Reuters data.

    Rio has the advantage of having cut debt faster, while investors have also been put off BHP by a dam burst at an iron ore mine in Brazil last year that could lead to years of litigation.

    But there are signs of a shift in sentiment as investors weigh the two miners' exposures to different commodities.

    Since the start of the year, BHP has rallied more than Rio -- 31 percent versus 17 percent on the London stock market -- and some analysts see better potential for BHP's coking coal and oil assets, compared with Rio's greater exposure to iron ore.

    "It's pretty much a tie. Both are cautious and both have had big failures in the past," one industry source said, speaking on condition of anonymity. "Oil is the swing factor and that's a fairly safe bet longer term."

    Chris LaFemina, managing director at Jefferies, upgraded his recommendation on BHP to "Buy" from "Hold" last month, having already rated Rio a "Buy".

    He cited BHP's potential to cut costs further and its bigger exposure to coking coal and oil.

    Coking coal has rallied because of demand in top consumer China, while oil needs an output agreement from the Organization of the Petroleum Exporting Countries to get a meaningful boost.


    Frances Hudson, investment director, at Standard Life says it is pragmatic to have exposure to at least one of the two big miners given their heavyweight presence on the FTSE index of leading British stocks.

    Rio's market capitalisation is 43.7 billion pounds ($58.7 billion), while BHP's is almost 59 billion pounds, according to Reuters data.

    Reuters lists Standard Life Investments as the 15th largest investor in Rio's London-listed share. It does not appear among the top investors in BHP, but does have a smaller stake.

    Not everyone feels it is time to reinvest in the mining companies after BHP plunged more than 40 percent last year and Rio lost around a third of its value.

    Liberum investment bank rates both Rio and BHP a "Sell".

    Liberum analyst Richard Knights said BHP's Samarco Brazilian joint venture, liable for last year's dam burst, was a small asset for the company in financial terms. However, the concern is that no one can rule out massive damages being awarded after legal arguments.

    Rio has been boosted by its greater exposure to iron ore which has rallied by around a third this year on the Dalian Commodity Exchange.

    Iron ore, used in making steel, results in higher profit margins than oil because it requires less reinvestment to maintain output, analysts say, so it provides cash to improve Rio's balance sheet and boost dividends.

    Analysts, however, question the durability of the iron ore rally given the global oversupply.

    "Rio has the best assets in iron ore and aluminium, but those are commodities have two of the worst supply/demand outlooks in my opinion," Knights said.


    Jacques got the top job at Rio after winning praise for his work on the Oyu Tolgoi project in Mongolia, which when completed will be the world's third-biggest copper mine.

    Known as "JS", he is the first copper man in decades to run the company and his appointment was seen as a shift away from iron ore.

    Rio gets less than 10 percent of its core profit from energy and roughly 60 percent from iron ore.

    BHP's boss Mackenzie held a number of senior roles at oil company BP, and also headed the diamond and minerals division at Rio.

    For BHP, iron ore makes up roughly 40 percent of its EBITDA - earnings before interest, tax, depreciation and amortisation - and oil assets around 30 percent. Coal, including thermal and coking, accounts for some 5 percent.

    BHP last month listed the swing factors that could affect its core profit.

    The firm would receive a $42 million boost for each $1 increase on the price of a tonne of coking coal.

    Another dollar on the oil price would add $79 million to EBITDA in the current financial year, while an extra $1 per tonne for iron ore means $217 million in extra profits.

    This year hard coking coal has nearly doubled, while oil has increased roughly 25 percent.

    Rio sets out its exposure differently. "Rio Tinto's exposure to commodity prices is diversified by virtue of its broad commodity base," it said in its results statement.


    Analysts say its geographical reach takes Rio into riskier parts of the world than BHP, which is focused on OECD countries, giving Rio more potential to grow and broaden that base, especially in copper.

    Combined with diamonds, copper now provides some 11.5 percent of Rio's EBITDA.

    Essentially flat since the start of the year, copper has failed to match rallies elsewhere, but analysts and executives say the laggard could become a leader.

    In an interview with Reuters shortly after becoming CEO, Jacques said he believed copper could be the first commodity to "get out of the over-supply environment".

    At the end of 2015, Rio had 252 million pounds of copper sales provisionally priced at 217 cents per pound.

    A 10 per cent change in the price of copper from provisional prices, would increase or reduce net earnings by $36 million.

    For some investors, the sluggishness of copper, regarded as a commodity bellwether, fuels their doubts about further gains even if low interest rates have renewed interest in miners.

    Roger Jones, head of equities at London and Capital, said he believed investors had limited their exposure to the mining sector for the last few years "but the magnitude of the underweight has been reduced".

    London and Capital, which has around $3.2 billion of assets under management, does not hold share in either Rio or BHP.

    "In our view, both share prices are assuming a strong recovery in end markets which we believe is unlikely as current commodity markets are likely to move sideways at best over the medium term," he said.
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    Renault sees diesel disappearing from most of its European cars

    Renault expects diesel engines to disappear from most of its European cars, company sources told Reuters, after the French automaker reviewed the costs of meeting tighter emissions standards following the Volkswagen scandal.

    The sober reassessment was delivered at an internal meeting before the summer break. It shows how, a year after VW (VOWG_p.DE) admitted engineering software to cheat U.S. diesel emissions tests, the repercussions are forcing major European car makers to rewrite strategic plans that will shape their futures for years to come.

    Renault and domestic rival Peugeot (PEUP.PA), both heavily invested in diesel technology, initially scrambled to defend its future viability after the VW crisis erupted.

    But in the July meeting, Renault's Chief Competitiveness Officer Thierry Bollore said the diesel investment outlook had dimmed significantly, according to two people who were present.

    "He said we were now wondering whether diesel would survive, and that he wouldn't have voiced such doubts even at the start of this year," said one of the people.

    "Tougher standards and testing methods will increase technology costs to the point where diesel is forced out of the market," the source summarized Bollore as saying.

    Diesel engines, pricier but more efficient than gasoline, had already vanished from the smallest 'A'-segment vehicles like Renault's Twingo well before VW's so-called 'dieselgate', as their extra expense outstripped savings on fuel.

    By 2020, Renault now predicts that the toughening of Euro 6 emissions rules will push diesel out of cars in the next 'B'-segment size category, including its Clio sub compact, as well as some 'C' models such as the Megane hatchback, the sources said.

    Models in those first three size categories accounted for most of the group's 1.6 million European deliveries last year, and more than 60 percent were diesels.

    "Everybody is backtracking on diesel because after 2017-18 it becomes more and more expensive," said Pavan Potluri, a power train analyst with consulting firm IHS Automotive.

    While the VW scandal centered on the German carmaker's cheat software, it also focused public attention on an industry-wide disparity between nitrogen oxide (NOx) emissions on the road and those recorded in regulatory tests.

    Mass-market diesels that meet legal NOx limits in approval tests commonly emit five times as much or more in everyday use. The gases contribute to acid rain and respiratory illnesses blamed for hundreds of thousands of deaths globally each year.

    Starting in 2019, however, vehicle approvals will be based on emissions performance during real driving. This is forcing manufacturers to install costlier emissions treatment systems.

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    Let’s dump Hinkley C and invest in Plan B

    One outcome from Brexit is the need for Great Britain to confidently reinvent itself to the wider world. Good leadership demands decisiveness whether popular or not. Decisiveness creates confidence and respect and it’s time we were bold.

    Raw deal

    The UK Government has agreed with EDF that they’ll be able to sell power at £92.50/MWh when the plant is running but this is double the current wholesale price. Some believe this will become a good deal as inflation kicks in but it won’t be the case since the deal will be inflated by the Consumer Price Index.

    As a result the actual price could be 40%-50% more at say £130/MWh. Furthermore, if the wholesale price actually falls below £92.50/MWh then we, the taxpayer, will pick up the bill to cover the shortfall.

    Here’s a new proposal: We dump Hinkley Point C and walk away. The project dubbed by Greenpeace as “the most expensive project on earth” is a bad investment deal that’ll land our kids and grandkids with long term debt for decades to come, let alone handing them a radioactive waste problem.

    The Germans and Belgians have said no to nuclear in the long term. Italy and Spain is rolling back nuclear ambitions and even France is having second thoughts. So let’s be decisive say ‘no thank you’ and make a better choice.

    Plan B: The Energy Investment Fund

    Hinkley C is expected to generate 7% of the UK’s energy needs by the mid 2020s so why don’t we invest to save the same amount or more? A 1% fall per year target from now would exceed the planned generation from Hinkley C and rather being saddled with the long term debt repayment, we have a long term investment programme in energy efficiency.

    The government could set aside the Energy Investment Fund (EIF) for organisations to claim grants against investments. Whether they’re changing the lights, installing solar panels or training staff, it wouldn’t matter as long as they could prove sustainable savings. A similar model, the Energy Demand Reduction scheme, has already succeeded in minimising peak demand so let’s expand the idea to energy efficiency measures in the EIF programme.

    The outcome

    Admittedly we’d miss the alleged 25,000 cement mixing jobs for 10 years in nuclear construction but we’d create more variable jobs elsewhere in the energy efficiency industry demanding a wider range of sustainable skills way beyond the 10-year lifespan of the nuclear construction employment. We’d also avoid the long term debt, the need to hide nuclear waste and make a decision to protect future generations, not burden them.

    Should we should stop wasting our time on Hinkley C and invest in Plan B: The Energy Investment Fund? What do you think?
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    Saudi Arabia Said to Weigh Canceling $20 Billion of Projects

    Saudi Arabia is intensifying efforts to shrink the highest budget deficit among the world’s biggest 20 economies, aiming to cancel more than $20 billion of projects and slash ministry budgets by a quarter, people familiar with the matter said.

    The government is reviewing thousands of projects valued at about 260 billion riyals ($69 billion) and may cancel a third of them, three people said, asking not to be identified as the discussions are private. The measures would impact the budget for several years, two of the people said.

    A separate plan includes merging some government ministries and eliminating others, two people said, also speaking on condition of anonymity.

    The world’s biggest oil exporter has taken unprecedented steps to rein in a budget shortfall that ballooned to 16 percent of gross domestic product last year, curtailing fuel and utility subsidies as well as cutting billions of dollars in spending. The International Monetary Fund expects the shortfall to drop to below 10 percent of GDP in 2017.

    The Finance Ministry declined to comment, while officials at the Ministry of Economy and Planning weren’t available for comment when contacted by Bloomberg. Several senior government officials are accompanying Deputy Crown Prince Mohammed bin Salman on an Asian tour.
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    Glencore to sell first euro bond since Sept 2015 share price fall

    Glencore is selling its first euro bond today since a dramatic fall in the price of its shares and bonds in September last year, which was fuelled by a rout in commodity prices and investor fears over its debt load.

    At their nadir in September 2015, Glencore’s euro bonds maturing in 2025 were trading at 63 cents on the euro. They have since recovered to 96 cents after the miner and commodities trader launched a wide-ranging debt reduction programme,reports capital markets correspondent Gavin Jackson.

    The Switzerland-based company sold a small Swiss franc bond in April in a move that was widely interpreted as signalling to investors its continued ability to access financing.

    Glencore reported its first half results two weeks ago. The company told investors it was stepping up its debt reduction programme and was aiming to resume dividend payments next year.
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    Mining exploitation of Arco generate new resources to Venazuela

    Mining exploitation of Arco generate new resources to Venazuela

    Google translate:

    Exploitation of Mining Arco offers a wide range of possibilities to increase the inflow of resources to the country for the benefit of all Venezuelans, I assure Ecological Mining Development Minister, Robert Mirabal.

    In an interview with Venevision, he said that "the State will own at least 55% stake in each of these industries.

    He expanded that is also the income tax that is typical of the activity, there Royalties ranging from 3 to 13% are calculated according to the degree of economic sensitivity of each of these projects and there are special benefits set the standard for further of all income, generate a factor of social development around the area of influence of each of these projects. This means that between 67 and 71, 72% of the total income of the activity will for the Republic ".

    The headline said that "this is a plan that has been done with a lot of dedication to be seriously developed technical scientific way seeking care environment.Whatever you do today will benefit or goes looking for the balance of the environment "
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    G20 baulks at ending fossil fuel subsidies, “dumbest” policy of all

    G20 baulks at ending fossil fuel subsidies, “dumbest” policy of all

    The G20 meeting in China may have been notable for the decision by both China and the US – the two biggest carbon emitters on the planet – to ratify the Paris climate treaty, an initiative that will almost certainly see the deal come into force by 2017, three years earlier than anticipated.

    But the grouping of the world’s most powerful nations is still taking little action on ending fossil fuel subsidies, despite agreeing to the move in 2009 to end what has been described as the “dumbest policy” in the world.

    The International Energy Agency estimates that countries spent $US493 billion on consumption subsidies for fossil fuels in 2014, while the UK’s Overseas Development Institute suggests G20 countries alone devoted an additional $US450 billion to producer supports that year.

    Throw in the unpaid environmental and climate impacts, and the International Monetary Fund puts total annual subsidies for fossil fuels at more than $5 trillion.

    Last week, the Bloomberg Editorial Board said fossil fuel subsidies were the dumbest policy they could find in the world, saying that the “ridiculous” outlays would be economically wasteful even if they didn’t also harm the environment.

    “They fuel corruption, discourage efficient use of energy and promote needlessly capital-intensive industries,” the Bloomberg team wrote. “They sustain unviable fossil-fuel producers, hold back innovation, and encourage countries to build uneconomic pipelines and coal-fired power plants.

    “Last and most important, if governments are to have any hope of meeting their ambitious climate targets, they need to stop paying people to use and produce fossil fuels.”

    The Bloomberg team said the G20’s pledge in 2009 is “no use” and “too vague”, and called on the governments to first agree on a standard measure to report various subsidies (Australia, for instance, rejects the claims by NGOs and others that it has $7 billion a year in fossil fuel subsidies) and to set strict timelines for eliminating them.

    They didn’t; despite the call being echoed by 200 civil society groups, and multi-national insurers with $1.2 trillion in assets, led by Aviva, who called on the G20 leaders to “kick away the carbon crutches” and end fossil fuel subsidies by 2020.

    “Climate change in particular represents the mother of all risks – to business and to society as a whole,” said Aviva CEO Mark Wilson. “And that risk is magnified by the way in which fossil fuel subsidies distort the energy market.  These subsidies are simply unsustainable.”

    But the G20 only went so far as to “reaffirm our commitment to rationalise and phase-out inefficient fossil fuel subsidies  …  recognising the need to support the poor, even though most analysis says such subsidies mostly support the well off.  We … look forward to further progress in the future,” the G20 said.

    NGOs are now hoping that Germany, which will take over the chairmanship of the G20 for the next year, will deliver a tight deadline by the time the next summit. Some say it will be the “last chance” to agree on an end date.
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    Ball Bearings: Uk Economy loves Brexit?

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    G20 a success for China, but hard issues kicked down the road

    G20 a success for China, but hard issues kicked down the road

    China is lauding its successful hosting of the G20 summit in scenic Hangzhou, with open confrontation largely avoided and broad consensus reached over the fragile state of the global economy and the need for a wide range of policies to fix it.

    There was even a joint announcement by China and United States that they would ratify the Paris climate change agreement, a significant step for the world's two biggest emitters of greenhouse gases.

    But scratch beneath the surface, and the gathering of the world's most powerful leaders was not all plain sailing - from the distraction of a North Korean missile test to the failure of the United States and Russia to reach agreement over Syria, and diplomatic faux pas to double speak over protectionism.

    Chinese state media, while largely basking in the glory of a summit that happened without being too overshadowed by disputes such as the South China Sea, also let slip Beijing's frustrations at what it sees as Western efforts to stymie its economic ambitions.

    "For the world's major developed economies, they should curb rising protectionism and dismantle anti-trade measures as economic isolationism is not a solution to sluggish growth," China's official Xinhua news agency said late on Monday.

    "In order to build an inclusive, rule-based and open world economy, protectionism must be prevented from eroding the foundation for a faster and healthier economic recovery."

    In the run-up to G20, China has been particularly upset by what it sees as unwarranted suspicion of its overseas investment agenda smacking of protectionism and paranoia.

    A few weeks before the summit, Australia blocked the A$10 billion ($7.63 billion) sale of the country's biggest energy grid to Chinese bidders, while Britain delayed a $24 billion Chinese-invested nuclear project.


    Behind the scenes, Western countries have been accusing China of not sticking to its own goals.

    Before the summit, European G20-sources doubted that the Chinese agenda would mark a real new chapter to create more sustainable growth for the global economy.

    China, asking in public for more openness and steps to counter protectionism, is still giving Western investors only very limited access to their market, a European official said.

    A big concern for foreign investors in China is what they see as the increasing difficulty of doing business in China, driven by concern that new laws and policies are seeking to effectively shut out foreigners or make life very hard for them.

    "President Xi accurately raised the alarm on the need to counter the increase in protectionism around the world," said James Zimmerman, chairman of the American Chamber of Commerce in China.

    "But actions speak louder than words and the ball is in China's court to implement its own needed domestic reforms and to provide greater market access for foreign goods, services and technology."

    And calls to utilize innovation as an economic driver should reflect policies that encourage an environment promoting fair and market-driven innovation that is open to all participants, and not just a few domestic champions, Zimmerman said.

    Several diplomats familiar with the summit said China had resisted the idea of putting steel on the final communique, though it did make an appearance in the end with G20 leaders pledging to work together to address excess steel capacity.

    For countries like Britain, whose steel industry crisis has been directly blamed on a flood of cheap Chinese imports, the issue is key.

    An official from British Prime Minister Theresa May's office said they and the United States had pushed for language in the communique on the importance of working together at G20 to tackle excess production.

    "We have, despite resistance from some countries, secured some language on the importance of doing that," the official said.

    Asked if China was one of those resisting, she just repeated "in the face of some resistance".

    Another shadow over the G20 has been the rise of popular opposition to free trade and globalization, embodied by phenomenon like Britain's summer vote to leave the European Union and Donald Trump becoming the Republican presidential candidate in the United States.

    "We agree with the G20's analysis that the benefits of trade and open markets must be communicated to the wider public more effectively," said John Danilovich, Secretary General of the Paris-based International Chamber of Commerce.

    "It's vital that business and governments work together to explain how and why trade matters for all."
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    Brazil police launch operation into fraud at state pension funds

    Brazil's federal police launched an operation on Monday to investigate fraud at pension funds of major state-run companies, carrying out seven arrest warrants, over a hundred search warrants and freezing assets worth 8 billion reais ($2.46 billion), police said in a statement.

    The pension funds under investigation are those of state-run banks Caixa and Banco do Brasil, oil company Petrobras and postal service Correios, the police said.

    The funds did not immediately respond to requests for comment.

    The warrants were issued by a judge in the capital of Brasilia, with police operations being executed in eight states as well as the federal district of Brasilia.

    Police said the investigation was focused on 10 cases which had racked up losses worth billions of reais (dollars). Of these, eight were related to reckless or fraudulent investments made through connected investment funds, police said.
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    AfD beats CSU: anti elite, again.

    CONFIDENT of a strong showing, the Alternative for Germany (AfD), a right-wing populist party, splurged on a visually impressive venue to watch the results of an election in Mecklenburg-West Pomerania on September 4th. Its candidates and supporters gathered in a thatched-roof beach house on a lakeside in Schwerin, overlooking the castle that houses the state assembly. “We tack into the wind,” ran the message on the sail of a boat on the water. And how the cheers went up when the exit polls came in. The party won 21.9% of the vote, putting it second after the Social Democrats (SPD), which got 30.2%—and beating the Christian Democrats (CDU) of Chancellor Angela Merkel, who got just 19%.

    This result is the latest in a string of advances for the AfD. It has no hope of entering a governing coalition anywhere in Germany; other parties view it as toxic. Instead, it positions itself as collecting protest votes against a politically correct elite. It will now be represented in nine of Germany’s 16 federal state parliaments. “Finally there is a real opposition again,” bellowed Leif-Erik Holm, the party’s top candidate in Mecklenburg, to his cheering supporters in the beach house. “Maybe today is the beginning of the end of the chancellorship of Angela Merkel.”

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    China allocates 100-billion yuan for tackling industrial overcapacity

    China has allocated 100-billion yuan in structural adjustment funds for the steel and coal industries, making the country one of the first major economies to tackle excessive industrial capacity, said Chinese vice finance minister Zhu Guangyao on Sep. 2, two days before the G20 Hangzhou Summit opening.

    Zhu, at a press conference on Sep. 2, said China has implemented the strongest measures to tackle industrial overcapacity, including enterprise mergers and reorganizations based on market rules or bankruptcy laws.

    China is also promoting the use of nationwide bankruptcy courts, he added.

    Zhu said the G20 Hangzhou Summit comes at a time when world economic recovery is slow and unbalanced. The world economy is full of uncertainties, such as Brexit, is increasingly divided by the develop world’s monetary policies, and is experiencing downward pressure.

    He expressed his hope that the world can come together to spur economic growth.

    “This is also why the world sets its eyes on Hangzhou and expects the summit to boost global economic growth and improve global financial market stability,” said Zhu.

    Specifically, Zhu pointed out that one of the key focuses of this year’s summit will be international tax reform, especially on the coordination of policy on tax evasion, baseerosion, and tax havens.

    China announced that the G20 Hangzhou Summit will, for the first time in history,encourage the establishment of a new international tax system that is fair, just, inclusive,and orderly.

    Zhu stressed that under China’s presidency, much discussion has focused on the use of taxes to support economic growth and increase government tax revenue.
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    Uniper sets $4.5 bln listing date as spin-off from E.ON nears end

    Uniper, the power plant and energy trading unit to be spun off from Germany's top utility E.ON, is set to start trading on Sept. 12, in the final phase of an expected 4 billion euro ($4.5 billion) listing.

    The flotation is being closely watched by investors and the industry for insight into the standalone market value of ailing coal and gas fired power stations and trading activities.

    E.ON said in late 2014 it would pool and list its struggling power plants and volatile trading business, hoping this would free up enough cash for future investments, and give a boost to its renewable and grid business which it is now focused on.

    There will be no advance price range released for Uniper shares, but an expected dividend yield of 5 percent suggests an opening price of 11 euros and a market capitalisation of about 4 billion, a person familiar with the spin-off said.

    Since the spin-off announcement, shares in E.ON have fallen by 43 percent, with investors pointing to substantial liabilities in relation to the storage of Germany's nuclear waste, which will remain with the company.

    "The new energy world is so vastly different from the traditional one that they need completely different entrepreneurial strategies," E.ON Chief Executive Johannes Teyssen said.

    E.ON shareholders will receive one Uniper share for every 10 E.ON shares they hold. E.ON will spin off 53.35 percent in Uniper in a first step and has previously said it does not plan to divest additional stakes before 2018.

    In response to the crisis in conventional energy generation, caused by overcapacity and a rise in renewable capacity, Uniper plans to cut about 500 million euros in costs and sell at least 2 billion euros of assets
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    Argentina seeks to unify regulations to spur mining investments

    The Argentine government wants to unify mining regulations under a proposed federal law that would permit open-pit mines to operate throughout the country as part of an effort to jump-start investment in the sector, a government official said.

    Argentina has fallen behind its mineral-rich neighbors Chile and Peru in mining investment, despite containing rich deposits of copper, gold, silver and zinc. Local regulations are tough, and seven of the country's 23 provinces prohibit open-pit mining altogether due to environmental concerns.

    "We have decided to invite the provinces back into the system by way of a federal agreement," Argentine Secretary of Mining Daniel Meilan said in an interview last week. The government plans to send its mining bill to Congress early next year, he added.

    The country's mining sector attracted scant investment under the 2007-2015 government of Cristina Fernandez, who increased the state's role in Latin America's No. 3 economy. She was succeeded by free-markets advocate Mauricio Macri, who has eliminated mining sector export taxes.

    He also lifted Fernandez's prohibition on foreign mining companies sending profits made in Argentina out of the country.

    Analysts say there is some $400 billion worth of untapped mining resources underground in Argentina.

    Ricardo Martínez, head of Buenos Aires-based mining consultancy Viento Andino, said Peru and Chile are each expecting $30 billion to $50 billion in mining investment over the next five years, dwarfing current expectations in Argentina.

    The lack of a nationwide mining law "is perhaps the only impediment to investment" in the sector, said Hugo Nielson, secretary general of the Latin American Mining Organization, a regional grouping.

    Gaining the backing of provincial governors is expected to be challenging, as many local officials prefer not to cooperate with the sector, mining sector experts said.

    Meilan said details of the proposal will be hammered out with local officials before the bill is sent to Congress.

    The first step will be to draft the bill with input from the Federal Mining Counsel (Cofemin), a grouping of regional mining officials.

    "Then we we'll sit down with the governors and negotiate an agreement of the proposal that will be sent to Congress," Meilan said.
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    Oil and Gas

    Total Exercises Its Pre-emption Rights on Barnett Shale Assets

    Total E&P USA today announced that it is exercising its pre-emption right to acquire Chesapeake’s 75% interests in the jointly held Barnett Shale operating area located in North Texas. Total E&P USA has owned the remaining 25% in the Barnett Assets since December 2009. With the preemption, Total E&P USA will be the 100% owner and operator of the assets.

    Properties in the proposed transaction include approximately 215,000 net developed and undeveloped acres, wells, leases, minerals, buildings and properties (the “Barnett Assets”). Associated 2016 net production is approximately 65 000 barrels of oil equivalent per day (boe/d).

    The preemption and associated transactions are subject to a number of conditions, including the receipt of third-party consents, and are expected to close in the fourth quarter of 2016.

    Under the terms of the transaction, Chesapeake will pay $334 million to Williams, the gatherer and processer of 80% of the gas from the Barnett Assets, to terminate its gathering agreement, projected Minimum Volume Commitment (MVC) shortfall payments and fees pertaining to the Barnett Shale assets. Total E&P USA will supplement Chesapeake’s payment with $420 million to Williams for a fully restructured, competitive gas gathering agreement, free of any MVC and with a Henry Hub-based gathering rate instead of a fixed per Mcf fee. Total E&P USA will also pay $138 million to be released from three midstream capacity reservation contracts.

    José Ignacio Sanz, President & CEO Total E&P USA commented: “Over the six years that we have been involved in the Barnett, we have gained an in-depth understanding of the play and the technology. With the new conditions created by the exit of Chesapeake and the associated restructuring of the midstream contracts, we believe that we can extract significant value from the substantial, well located resource base of the play by combining focused upstream operating efficiency, streamlined midstream contract management and marketing savvy through Total’s trading affiliate Total Gas & Power North America. As an operator, we look forward to working with all stakeholders, our leaseholders, the Dallas Fort Worth and other authorities, Williams and other midstream partners, and our customers. Increasing our stake in the Barnett shale supports Total’s global strategy to be a leader in natural gas.”
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    Permian oil output could grow 300,000 b/d/year at current price range: Pioneer CEO

    Production in the Permian Basin, the US' most active oil play, could grow significantly at current or slightly higher prices, but boosting Eagle Ford and Bakken output requires a step change in crude prices, Scott Sheffield, CEO of major Permian player Pioneer Natural Resources, said Thursday.

    Located in West Texas and New Mexico, the Permian could add 300,000 b/d a year at a $47/b to $57/b WTI price to domestic supply, Sheffield said in webcast remarks at the Barclays 2016 CEO Energy-Power Conference in New York.

    "I don't think the Eagle Ford or Bakken at a price of $47 are going to start up," Sheffield said of those basins respectively sited in south Texas and North Dakota/Montana. "I think [they] will be flat at a $50 price," he said. "Once you get to $55-$60, I think the Eagle Ford and Bakken start up at that time."

    But Permian production, which is just under 2 million b/d, will grow at $50/b, even though US conventional oil will decline, he added.

    "You start moving toward $60, and it will take a year to get going, but the US could easily [incrementally] supply 500,000-750,000 b/d" annually, Sheffield said. "At $60, rigs will come back to work and the Eagle Ford and Bakken will take off."

    That volume growth level is "way too much" but it "could easily happen," depending on where crude prices go.

    Eagle Ford and Bakken production currently supply about 1 million b/d of oil each. But production in the plays has dropped in the last 18 months by about 700,000 b/d and 200,000 b/d respectively.


    The world may need some incremental US unconventional and shale supplies in 2018-2020, Sheffield said. But if those plays really gear up again they will produce "too much oil too fast," he said, since it takes several months to start and stop the growth engine.

    Longer term, "we'll see $80 again and maybe higher, but we'll see $30 and $40 again too," he said.

    Also, Sheffield believes the market may eventually add a $5/b to $10/b political premium to crude oil. The reason: Apart from the US, there are only four other countries that are really equipped to supply large volumes globally in a lower price environment -- Russia, Iran, Iraq and Saudi Arabia.

    The Permian could hold as much as 150 billion barrels of recoverable oil equivalent, about equally split between the eastern Permian known as the Midland Basin and the western Permian called the Delaware Basin.

    The Permian has produced about 35 billion boe to date, Sheffield said, during nearly a century of oil exploitation.

    The basin's oil output, which has largely stood still for several months, is forecast to start growing again either late this year or early 2017 since its rig count is climbing.

    Last month, the US Energy Information Administration reversed its projections for very slight declines in Permian oil output in recent months. For September, the agency projected a 3,000 b/d gain for the play, and some forecasters believe volumes are bound to further rise in late 2016 because of ramping activity in the basin.

    Since late April, industry has added 70 Permian rigs for a total 202 last week. Pioneer will add five rigs there in second-half 2016, for a total of 17.

    And with mergers and acquisitions in the basin picking up, its rig count could increase even more, Sheffield said. For example, just this week, EOG Resources announced it will acquire producer Yates Petroleum for $2.5 billion which nearly doubles its Permian acreage position.

    "It wouldn't surprise me if another 100 rigs are added in next 12 months," Sheffield said. "Every time a deal is done, people add three to five rigs. So the Permian could easily get up to 300 rigs."


    Aside from being the US' largest oil field, the Permian also produces about 6 Bcf/d of natural gas.

    Pioneer, which favours the Midland basin for its greater amount of infrastructure and less broken-up geology than the Delaware, has 800,000 Midland acres.

    The company plans to grow its total company-wide production -- which was 223,000 b/d of oil equivalent in the second quarter -- at 15%/year through 2020 at $46/b, he said.

    "We could do this for 10 years," Sheffield added.

    Midland's playing field is about 9 million acres, he said, whereas Delaware has about 5 million acres--a number that Sheffield said has likely increased by 500,000 acres because of the Alpine High discovery that Apache Corp., also a top Permian player, unveiled Wednesday.

    The find, located in remote southwest Reeves County, Texas, holds an estimated 3 billion barrels of oil in place and 75 Tcf of natural gas, Apache said.

    "It's basically on the western side of the Delaware, where most of us thought there was no oil and gas," Sheffield said. "They made a very, very important discovery."

    Attached Files
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    U.S. refiners revamp operations as renewable fuel costs surge

    U.S. oil refiners, beset by the weakest profit margins in six years, have been laying off workers, revamping operations and ratcheting up pressure on regulators and lawmakers to tweak the renewable fuel program, whose costs have ballooned.

    The top 10 U.S. independent refiners look set to take a record hit on renewable fuel credits this year. They spent $1.1 billion on the credits in the first half of the year, just short of a record $1.3 billion in all of 2013.

    Refiners without operations dedicated to selling blended fuels to consumers, must purchase credits to prove compliance with U.S. clean-fuel mandates.

    These "merchant refiners" are required to blend biofuels like ethanol with gasoline or other petroleum products, or else meet those obligations by purchasing paper "credits" called Renewable Identification Numbers (RINs) in an opaque market.

    Meeting these standards once cost just pennies a gallon. But costs have risen in recent years and become a pressure point for independent refiners and fuel importers.

    Biofuels advocates and the EPA have said refiners ultimately recoup RIN costs by including them in the price of the products they sell.

    Federal regulators are due to finalize next year's mandates for biofuel use within months. Refining executives have long chafed at these requirements, and have been pointing to rising clean-fuel costs as one reason for cutting staff or overhauling operations while a glut of gasoline has squeezed margins.

    Ethanol RINs are "a much higher cost than they used to be. Add to that this low-margin environment, any which way a refiner can save costs, they are going to be doing it," said Timothy Cheung, vice president at ClearView Energy Partners in Washington.

    Trade sources said the situation has widened the divide within the petroleum industry between those who want to pressure regulators to tweak the existing program and those who want to push for a legislative overhaul.

    Philadelphia Energy Solutions Inc, a merchant refiner, on Wednesday told employees in a letter it was cutting benefits and seeking job cuts to offset renewable fuel costs. They, and other refiners such as HollyFrontier Corp have said regulatory costs are outpacing labor costs.

    "Refiners that are integrated into the retail space take money from their left pocket and put it to their right pocket - their retail arm - so they do not suffer. But merchant refiners don't have a 'right pocket'," PES CEO Phil Rinaldi said in the letter.

    In 2013, refiners' complaints of rising costs caused the Obama Administration to dial back biofuels targets, sparking criticism from advocates of ethanol and other renewable fuels.

    Refiners are pressuring lawmakers back from August recess to consider reforming the renewable fuel program. More than a decade old, the program has been a battleground between entrenched oil and corn interests. The U.S. Environmental Protection Agency has a Nov. 30 deadline to finalize next year's biofuels targets.

    Refiners like Valero Energy Corp have pressed regulators to tweak the program so more of the obligation rests with companies blending the fuel. These are often the larger integrated companies one step removed from the gasoline pump. That change would likely reduce costs for the merchant refiners.

    The alternative is for merchant refiners to increase their ability to blend ethanol. PBF Energy is the latest refiner to take this approach.

    PBF has asked Delaware regulators to expand its ethanol handling capacity at its Delaware City refinery to 420,000 gallons from 84,000 gallons to defray some of the renewable-fuel costs.

    PBF paid $160 million for renewable fuel credits in the first half of 2016, more than double the $72 million it paid in the first half of 2015.

    Also taking PBF's approach are the likes of Marathon Petroleum Corp and Tesoro Corp. Tesoro this week announced plans to produce a renewable biocrude to ultimately help meet its obligations.

    "Unlike others in our industry, we prefer to take rational, business-oriented steps to mitigate against risks posed by the RFS rather than write to, or file meaningless petitions for review with, the EPA," said Stephen Brown, vice president and counsel at Tesoro.
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    Suncor Looks To Abandon Oil Sands Assets

    Canada’s largest oil producer is looking to abandon some of its high-cost and greenhouse gas intensive oil sands assets, according to Suncor Energy’s CEO Steve Williams.

    Williams mentioned the move at the Barclays convention in New York, stating: “We’ve begun to have conversations with the government of Alberta and the current regulators about the design of their policy, which actually requires the maximum amount of resource to be extracted regardless of the economic or environmental value.”

    Suncor wants to abandon the deposits in question in order to ease the effect of rules that were created to maximize the output from oil sands on land leased from the government. The plan to abandon the sites is being utilized as a cost-cutting measure not just by Suncor, but other oil companies as well who continue to look for money-saving measures in the face of declining commodities prices.

    Not only are the sites among the highest in carbon emissions, but they are expensive to run. That expense will only increase in the near future, since the province of Alberta is planning to double its carbon tax and has announced that it will cap the greenhouse gas emissions of tar sands operators at 100 million metric tons.

    Oil sands operations emit around 70 million metric tons per year, which is about a quarter of the emissions for Alberta. Operators are concerned about what effect the moves will have on their ability to develop their leases in the long haul.

    Despite the new measures, the government of the province has not explained how it will allocate any room left under the cap. In the past, the province has tried to maximize the production on its public lands so as to glean as much as it could from royalty payments.
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    More Montney assets hit market in wake of Seven Generations' Cdn$1.9bn deal

    Two Canadian producers are seeking to capitalize on the enduring pulling power of the Montney play by putting assets up for sale, according to CanOils' newest report focused on M&A activity in August.

    RMP Energy Inc. (TSX:RMP) and Chinook Energy Inc. (TSX:CKE) have healthy balance sheets and a good inventory of development assets. Both have extensive holdings in the Montney shale. They form the bedrock of the total 12,700 boe/d of publicly disclosed Canadian assets put up for sale in August 2016. The listings follow the recent Cdn$1.9 billion acquisition by Seven Generations Energy Ltd.'s (TSX:VII) of predominantly Montney assets from Paramount Resources Ltd (TSX:POU), which showed Montney assets can still attract strong interest for high value deals.

    RMP Energy Inc.

    The largest Canadian asset listing in August involved RMP Energy initiating a strategic alternatives process, retaining Scotia Waterous and FirstEnergy Capital Corp. The majority of RMP's production is derived from the Ante Creek and Waskahigan fields. RMP produces 8,425 boe/d (43% liquids) based on Q2 2016 production figures. The company owns 24.6 million boe of 1P reserves (36% liquids).

    Chinook Energy Inc.

    has also initiated a strategic alternatives review and has retained Peters & Co. as its exclusive financial advisor. Chinook is predominantly Montney-focused with 2,890 boe/d of production during Q2 2016 and 12.9 million boe (16% liquids) of 1P reserves. Chinook said it is open to expanding its core operations via acquisitions or by establishing a new core of operations. They will also entertain a merger, sale or JV with a well-capitalized entity to help develop existing assets.
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    LNG Investment Swings to North America - Global Capex to Total $284 billion

    The LNG industry is undergoing a dramatic transformation. North American activity (the majority of which is committed spend) is driving a return to growth in global capital expenditure. A wave of new LNG carrier newbuilds will also be required to support a huge increase in traded base-load LNG volumes.

    Douglas-Westwood's new World LNG Market Forecast 2017-2021 indicates global LNG expenditure will total $284 billion (bn) between 2017 and 2021. This represents a 50% growth compared with the preceding five-year period.

    Report author, Mark Adeosun, commented, 'Liquefaction terminals will remain the principal driver of expenditure with spend in the segment totalling $192bn. This will subsequently lead to a 42% increase in liquefaction capacity by the end of the forecast period. Despite challenging times for shipyards, with only four LNG carriers ordered in 2016 (YTD) - unit orders are expected to bounce back in the near-term. Over 150 additional carriers yet to be ordered are likely to be required for additional export capacity coming onstream in the latter years of the forecast. Overall we expect expenditure on LNG carriers will represent 19% of global expenditure.

    'As the final set of Australian LNG projects start operating in 2017, global LNG expenditure will be concentrated in North America. This regional swing in investment will result in the United States (US) & Canada accounting for 17% of global liquefaction capacity by 2021 - with capex totalling $105bn, 36% of global expenditure over the forecast period. Of the six liquefaction terminals in the US, four of the facilities are currently under construction, with additional trains to be added before the end of the period. Beyond the forecast, some export terminals currently in the planning and approval stages will continue to support expenditure. We have, however, taken a conservative view on additional projects, given the current economic climate, and expect many of the early-stage projects not to progress past the initial planning/consent phase.

    'Over the long-term, LNG demand will continue to grow, as countries seek to diversify their energy supply. It is expected that delays in committing to new nuclear capacity and limitations of renewable technology in base-load applications will support continued newbuild of combined-cycle gas power plants. This, in addition to declining local production in some key consumer nations, will be a compelling driver for continued investment in these capital intensive projects.'
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    Williams Reorganizes to Focus on NatGas and “Drive Value”

    Williams continues to tread water as it is under assault by corporate raiders who want to toss out Williams management, fire a bunch a people and sell the company.

    We’ve chronicled the chaos endlessly. It seems like every day there’s something new in this soap opera.

    Here’s the latest: Williams announced yesterday the company is streamlining its operations by consolidating what is currently five business units into three units: (1) Atlantic-Gulf, (2) West and (3) Northeast Gathering & Processing. The stated purpose is to “advance a natural gas-focused strategy” and to “drive value.”
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    Summary of Weekly Petroleum Data for the Week Ending September 2, 2016

    U.S. crude oil refinery inputs averaged over 16.9 million barrels per day during the week ending September 2, 2016, 315,000 barrels per day more than the previous week’s average. Refineries operated at 93.7% of their operable capacity last week. Gasoline production increased last week, averaging about 10.2 million barrels per day. Distillate fuel production increased last week, averaging over 5.0 million barrels per day.

    U.S. crude oil imports averaged about 7.1 million barrels per day last week, down by 1.8 million barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.2 million barrels per day, 7.4% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 607,000 barrels per day. Distillate fuel imports averaged 108,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 14.5 million barrels from the previous week. At 511.4 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 4.2 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 3.4 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.6 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories decreased by 13.7 million barrels last week.

    Total products supplied over the last four-week period averaged 20.7 million barrels per day, up by 2.4% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.6 million barrels per day, up by 3.2% from the same period last year. Distillate fuel product supplied averaged 3.7 million barrels per day over the last four weeks, down by 0.1% from the same period last year. Jet fuel product supplied is up 6.1% compared to the same four-week period last year.

    Cushing down 430,000 bbl

    U.S. Gulf Coast crude imports fall to lowest weekly level: EIA
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    Alaska clouds rising US lower 48 oil production

                                                                         Last Week  Week Before  Last Year

    Domestic Production '000............... 8,458             8,488           9,135
    Alaska '000    ................................... 428                473              452
    Lower 48 '000................................ 8,030             8,015           8,683

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    Russian average oil output close to 11 mln bpd in Sept 1-7 - sources

    Russian average oil production was close to 11 million barrels per day (bpd) in the period of September 1-7, two industry sources told Reuters on Thursday.

    One of the sources said the increase was due to restored output volumes at joint projects, known as production sharing agreements, between some Russian and foreign companies, as well as other factors. Russian oil output was down to 10.71 million bpd in August from 10.85 million bpd in July.

    The increased output in September - which may not be sustained throughout the month - comes as Russia and Saudi Arabia are talking about cooperation to stabilise global oil markets.
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    India Gas Output Seen Rebounding to Peak by 2022 on Price Reform

    India’s efforts to revitalize natural gas exploration will help the country’s output rebound to peak levels in less than a decade, according to IHS Markit Inc.

    The country’s gas output peaked between 2010 and 2011 at about 5 billion cubic feet per day, according to Rebecca Keller, Singapore-based associate director at IHS. Production has declined since then in part due to aging fields, as well as a dearth of new discoveries by explorers discouraged by policies that were seen hampering profitability. Keller sees the country’s output returning to its peak level by 2022.

    Energy reforms from Prime Minister Narendra Modi’s government with a more liberalized pricing structure that allow companies to charge higher rates is one of the main reasons behind the expected recovery, she said. The nation’s cabinet approved measures earlier this year including a gas price cap linked to alternate fuels liquefied natural gas, fuel oil, naphtha and imported coal for deepwater development.

    “They’ve made a lot of progress on upstream policies this year, if they keep with this reform agenda they will see results,” Keller said in a phone interview Tuesday. “We have seen a few projects already sanctioned or players talking about sanctioning them, so we are seeing that response happening. But it takes a few years for these projects to start up even if they are sanctioned today.”

    State-run Oil and Natural Gas Corp. has embarked on its largest ever exploration campaign as it plans to invest about $5 billion in its block in the Krishna-Godavari Basin off the east coast of India to produce 530 million cubic feet a day of gas and 77,000 barrels a day of oil in about five years. Overall, the company plans to invest 11 trillion rupees ($166 billion) by 2030 to expand oil and gas production.

    Reliance Industries Ltd. and partner BP Plc are looking to produce 1 billion to 1.2 billion cubic feet a day of gas by 2022 from their east coast block after they develop three new fields, Sashi Mukundan, BP India unit head had said in August. Gas production from KG-D6 averaged about 307 million cubic feet a day in the April to June quarter, Reliance had said in a July 15 presentation. Production from the KG-D6 block, discovered in 2002, has tumbled since hitting a peak in 2010 of around 2.2 billion cubic feet a day.

    “India does have gas reserves that it could be tapping into,” Keller said.
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    Strike threat at Norway facilities

    Strike risk: Hammerfest LNG plant

    Norwegian oil union Safe has warned of possible strike action by more than 800 workers at onshore facilities after it decided to reject a pay deal offered by employers.
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    Russia energy minister predicts winter oil price drop

    Russia’s energy minister has said there was a risk oil prices would drop in winter due to market volatility, according to a media report.

    Alexander Novak told Russian news website TASS: “It is hard to forecast supply on the market due to contingencies that emerge. A risk of cheaper oil prices remains in general.

    “We used to say earlier that a balance between supply and demand of oil will be achieved only in 2017, and we stick to these forecasts.

    “In general, we expect that demand will rise by 1.1-1.3 million barrels (per day) compared to the previous year.”
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    Adios Algiers, oil options hint output deal may lie further ahead

    The oil options market indicates traders are not betting big on OPEC and rival Russia clinching a meaningful deal this month to control output, although investors have turned more optimistic.

    The oil price is heading for its first weekly rise in nearly a month after Saudi Arabia and Russia said on Monday they would work closely to monitor fundamentals and to recommend measures to ensure market stability, including a potential production freeze.

    OPEC member countries and Russia will meet on the sidelines of the International Energy Forum in Algiers later this month and have signalled a freeze could be on the agenda.

    The initial $2.50 gain in oil to a high of $49.40 a barrel after the Saudi-Russia news was short-lived, not least because of the failure of the two sides to reach any deal on output at a special meeting in Doha back in April.

    But the derivatives market shows that investors could well be holding out for a deal further down the line and are displaying a lot more optimism, as demand and supply come closer to falling into balance.

    The options market has seen a near-across-the-board rise in the implied volatility, a measure of the price, in buy options relative to sell options this week.

    "The overall situation in oil, in my view, is stabilising. The stock draw should be with us as we head into the fourth quarter," said asset manager RCMA's chairman Doug King, whose Merchant fund runs some $220 million in commodities.

    "One would say that there is a distinct chance in the next six months that we do get into some of the inventory, which would act as a catalyst for investors to increase exposure to the oil market"

    When supply is expected to outstrip demand in the longer term, buy, or "call" options tend to be cheaper than sell, or "put" options as investors generally bet on the greater likelihood of oil prices falling rather than rising.

    Puts are still pricier than calls, but by far less than they were just a couple of weeks ago, particularly those that are said to be close-to-the-money, or likely to be profitable.

    The premium of a put maturing in one month, around the time of the Algiers meeting, is around 422 basis points more expensive than a call expiring at the same time, compared with 550 basis points a week ago.


    A major sticking point at Doha was getting Iran to join any group initiative on production.

    Iran has said that while it supports joint efforts to stabilise the market, it will not freeze production until its own output reaches pre-sanctions levels of around 4 million barrels per day, from an estimated 3.6-3.8 million bpd now.

    "The timeframe to reach any agreement to freeze is not necessarily in September. It will need to include Iran and that will be more likely to be at the end of the first quarter of next year," Petromatrix strategist Olivier Jakob said.

    For puts maturing in May next year, when a supply agreement might theoretically materialise, their premium over calls has fallen to 570 basis points from 600 basis points last week.

    Money managers, who in early August had built the largest short position in crude futures since the start of the year, have now cut those bets in half.

    "Rebalancing is definitely taking place, to some degree or another. It's most definitely seen in the European market ... where inventories really have been coming down a great deal since the beginning of the year," said Christian Gerlach, who helps run around $350 million in commodity-related funds for Swiss & Global Asset Management, part of Julius Baer.

    OPEC and Russia are pumping at, or close to, record rates, while U.S. production has started to pick up after months of decline, making investors wary about the effectiveness of a freeze, especially given uncertainty over the global economy.

    Regardless of whether the market believes there could be any freeze, regular verbal intervention is paying off.

    From the first whispers of possible coordination in February, the price has risen by 51 percent and the premium of oil for delivery by December 2017 over that for December 2016 has slimmed down to $3.60, from closer to $5 a month ago.

    The International Energy Agency believes the market will show no oversupply over the second half of 2016.

    "We have no real spare capacity in OPEC at all. It's 'full blast'," RCMA's King said.

    "The stock situation gives a slightly false comfort just because there is no capacity spare around the world apart from U.S. shale and the question everyone will want answering is, at what price does this new supply meaningfully reappear?"
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    Bloated, glutted and static, Asia's LNG market keeps disappointing

    The liquefied natural gas (LNG) industry has morphed from energy's golden child to black sheep in the last two years, with demand slumping just as supplies soars.

    While low prices are a boon for consumers, the lack of demand and lowered revenue will threaten the efforts of companies to recoup investments in LNG export terminals in the United States and Australia. Further, future projects will have a hard time gaining approval.

    Asia demand was expected to soak up this supply but the region has turned to alternative and cheaper fuels. LNG imports to Japan, the world's biggest consumer of the fuel, are down 5.3 percent for the first seven months of 2016, government data shows. Meanwhile, South Korea's imports in July dropped 15.2 percent from the same time a year ago.

    These numbers mirror the lacklustre global LNG demand growth that Dutch bank ING said was only 1.5 percent over the past five years.

    At the same time, ING said existing LNG exporters from the U.S., Australia, and Qatar plan to add 190 billion cubic metres (bcm) per year of liquefaction capacity by 2020, a 50 percent increase from current levels, taking total global capacity to 600 bcm a year.

    "To maintain current LNG utilisation rates, we need to see LNG demand grow at 7.6 percent between now and 2020," the bank said in a report on Wednesday.

    While coal and oil, LNG's competitors, have risen this year, LNG's ties to the fuels limit its gains. LNG's common price link with crude oil keeps a lid on gas while coal is a cheaper alternative for power generation than LNG.

    Once one of the hottest commodities, Asian LNG spot prices LNG-AS almost tripled between 2010 and 2014 to over $20 per million British thermal units (mmBtu), attracting huge investment and triggering new LNG trading desks opening from London to Singapore.

    But soaring output from Australia and the United States, as well as the general commodities slump, pulled LNG prices back by almost 75 percent to under $5.50 per mmBtu.


    Huge reserves off Africa's east coast, in the eastern Mediterranean, and in Canada are waiting to be developed, and current exporters like Qatar, Russia, Australia, and the United States have large reserves they could ramp up.

    Traders hope the glut will create a liquid LNG spot market, a much talked about affair that has not happened.

    Yet there are stumbling blocks here too. While some buyers including Japan's Jera - the world's biggest LNG importer - have said they want to reduce their long-term contract volumes in favour of more spot LNG trading, other importers remain reluctant.

    "We need security of supplies as we rely entirely on LNG imports, so long-term supply contracts suit us well. We don't like trading," said Jane Liao, Deputy Chief Executive at Taiwan's CPC Corporation, a top five global LNG importer, and an event in Singapore last week.

    Yet not all is doom and gloom. Sustained low prices along with spreading environmental awareness against the use of coal mean that LNG demand will rise, especially in economically growing Asia.

    "We're expecting total LNG demand to double by 2030, and for Asia to account for 40 percent of that demand growth," Steve Hill, Executive Vice-President for Gas and Energy Marketing and Trading at Shell, said at the FT Commodities Summit in Singapore this week.

    "China has the most significant upside potential in terms of gas demand. China's gas share is only around 6 percent. But that share will only grow from now so that's the market to watch in Asia," he added.

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    EnQuest announces 2016 half-year report


    EnQuest is delivering against its strategic priorities in the continuing low oil price environment. Further action to reduce opex and capex has been accompanied by sustained strength in operations. High production efficiency has driven EnQuest's highest H1 levels of production, with a well implemented drilling programme and with first oil from the Kraken development on schedule for H1 2017.
    Production averaged 42,520 Boepd in H1 2016, strong growth of 43% on H1 2015, with production increases in every operated asset:

    UK production grew by 22%, before inclusion of production from the new Alma/Galia development. Malaysian production was also up by over 20%.

    Alma/Galia delivered an average net production of 6,433 Boepd in H1 2016. Post first oil optimisation of production levels has continued in H2 2016, including two well interventions and acid treatments. Following which, between 5 and 31 August gross Alma/Galia production averaged 18,785 Boepd.

    With the extended period of production build up for Alma/Galia, full year 2016 production guidance is now anticipated to be in the range of between 42,000 and 44,000 Boepd, around the lower end of previous guidance, at the mid-point representing strong growth of c.18% over 2015.

    Revenue of $391.3 million and EBITDA*** of $242.9 million, reflecting the strong operational performance. The $182.6 million of cash generated from operations was $99.3 million or 119% up on H1 2015, reflecting the production growth.

    Continued further reductions in operating costs, H1 2016 unit opex was ahead of target at $23/bbl, benefiting from additional cost saving initiatives, including savings from EnQuest's offshored procurement hub. Full year unit opex is now expected to be around the lower end of the $25-$27/bbl guidance; this reflects the impact of the Alma/Galia well interventions in H2.

    2016 EnQuest cash capex outflow is being reduced by a net c.$30 million, predominantly as a result of the further phasing of milestone payments.

    The Kraken development is continuing on schedule. EnQuest today announces a further c.$150 million decrease in full cycle gross project capex, in addition to the c.$425 million of cost reductions announced since project sanction, giving a new gross full cycle project capex cost of c.$2.6 billion. Sail away of the Kraken FPSO is expected in H2 2016, as planned, ahead of first oil in H1 2017.

    In July 2016, EnQuest announced that it was conducting negotiations for the farm out of a 20% working interest in the exploration and production licences in the Kraken Field, to the Delek Group. EnQuest will provide further details in the event either of transaction documents being signed or of it becoming apparent that a binding agreement cannot be reached.

    Scolty/Crathes is both ahead of schedule and under budget, with first oil now expected around the 2016 year end.

    Net debt at the period end, was $1,681 million.
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    Deep investment cuts will slow rebound for offshore oil services-Bourbon

    French oil services company Bourbon said on Thursday that any rebound in oil and gas prices will take a while to reach companies in the offshore marine sector because of deep cuts in investments during the prolonged oil downturn.

    Bourbon, whose fleet of about 513 vessels provides offshore services for oil and gas companies, said its net loss in the first half widened to 104.3 million euros ($117 million)compared with a net loss of 19.2 million in the same period a year ago.

    Adjusted revenues fell 21 percent to 599.2 million compared with the first half of 2015, the company said.

    "After the drastic reduction of the level of investments of oil and gas companies over the past couple years, oil producers are now thinking of the future, particularly to maintain their level of production in the medium term," the company said.

    "However, the inevitable rebound in activity will take some time to reach offshore marine services," it said in a statement, adding that deepwater and shallow water segments of the industry will continue to be affected by overcapacity of vessels.

    Bourbon said a rebalanced demand and supply outlook for the oil market in 2017 will have a positive effect on the company.
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    Iraq oil freeze threshold

    Iraq has given other OPEC members a number at which it can freeze its output, Falah Al-Amri, head of Iraq’s Oil Marketing Co., says

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    Ex Shell exec's granted DOE export permit for LNG.

    NextDecade on Wednesday said it has been granted authorization by the U.S. Department of Energy to export liquefied natural gas to free-trade agreement countries from its proposed Rio Grande LNG facility.

    DOE awarded a 30-year export permit, allowing NextDecade to export up to 27 mtpa from the facility at the Port of Brownsville, the company’s statement shows.

    Alfonso Puga, NextDecade chief commercial officer noted the DOE authorization is a step towards making the final investment decision in 2017.

    The company has already signed non-binding agreements in November 2015, to sell 14 mtpa of LNG to customers across Asia and Europe. Since then the number has grown to 30 mtpa.

    NextDecade expects to receive FERC approval for Rio Grande LNG in 2017 with initial LNG exports shipping by the end of 2020, the statement reads.

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    U.S. judge halts fracking plan for federal lands in California

    A U.S. judge on Wednesday halted a plan to allow fracking on public lands in central California, saying a federal agency's environmental plan should have taken a "hard look" at the potential impact of the process.

    The ruling, by U.S. District Judge Michael Fitzgerald, was at least the second setback in three years for fracking in California and came as the Obama administration's rules for hydraulic fracturing on federal lands have been tied up in another court.

    The U.S. Department of the Interior's Bureau of Land Management (BLM), which periodically leases out land to private producers, offered a plan that would have allowed fracking on about a quarter of new wells drilled on some 1 million acres across central California.

    The final outcome is not clear as Judge Fitzgerald asked both sides for a further briefing on Sept. 21 as the case enters its remedy phase.

    But it could be similar to that a 2013 case in which a federal judge ruled that the BLM violated the National Environmental Policy Act when it issued oil leases in California's Monterey County without considering the environmental dangers of fracking.

    Since that ruling, the BLM has refrained from holding any lease sales in that area until it completes an environmental review of the risks of fracking, said one of the plaintiffs in the cases, the Center for Biological Diversity.

    California has long had an oil and gas industry, but it has trailed Texas, Oklahoma and North Dakota in fracking. Industry experts say that stems from regulatory uncertainty and more complex geology in California.

    Fracking, currently regulated by states, involves injection of large amounts of water, sand and chemicals underground at high pressure to extract oil or natural gas.

    A federal judge in Wyoming in June struck down the Obama administration's rules for fracking on public lands, holding that Congress had not delegated to the BLM the authority to regulate it. That ruling is under appeal.

    The BLM's rules, issued in their final form in March 2015, required companies to provide data on chemicals used in hydraulic fracturing and to take steps to prevent leakage from oil and gas wells on federally owned land.

    Environmental groups, while acknowledging that most fracking happens on private lands, said the BLM rules should be stronger.

    The case is No. CV-15-4378 in United States District Court, Central District of California.
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    Oil extends gains after data shows huge stock draw

    Oil prices extended gains by more than 1.5 percent on Thursday after industry data showed what might be the largest weekly drawdown in crude stocks in over three decades.

    U.S. crude stocks surprisingly plunged by 12.1 million barrels last week, data from the American Petroleum Institute showed after market settlement on Wednesday, compared with expectations for an increase of around 200,000 barrels. [API/S]

    If official data released from the U.S. government later on Thursday confirms the draw, it would be the largest one-week decline since April 1985.

    U.S. crude stocks have been at record highs in the last two years, thanks in part to the shale oil boom that boosted output. Some analysts said Tropical Storm Hermine, which threatened the Gulf Coast refining region late last week before moving to the U.S. East Coast, may have skewed the figures.

    "I'm surprised at the big draw," said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. "Despite a possible temporary effect (from the tropical storm), it raised concerns of supply/demand tightening significantly."

    Analysts said a large decline in U.S. gasoline stocks also supported oil.

    Gasoline stocks fell 2.3 million barrels, compared with expectations for a 171,000-barrel decline, the API data showed. Distillate stockpiles, which include diesel and heating oil, rose 944,000 barrels, compared with expectations for a 684,000-barrel gain.

    Crude was also supported by robust Chinese trade data. China raised its crude oil imports by 5.7 percent in August from a month earlier, while its August imports marked the first rise in nearly two years.

    Oil hit a one-week high on Monday after Russia and Saudi Arabia agreed to cooperate on stabilizing the oil market. Prices have since fallen due to uncertainty over a possible deal by producer nations to freeze output, particularly after a meeting in Doha in April ended without such an agreement.

    The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia are expected to discuss the issue at informal talks in Algeria from Sept. 26-28.
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    China's August crude imports surge to second-highest ever

    China's crude imports in August surged to 32.85 million tonnes, the second-highest amount ever, as a drop in prices spurred buying, while fuel product exports retreated from a record high in July, customs data showed on Thursday.

    On a tonnes basis, the August imports were just under the record of 33.19 million tonnes recorded in December, the data showed.

    On a daily basis, the country took in 7.74 million barrels per day (bpd), the most since Apirl, according to calculations by Reuters. Imports in August jumped 23.5 percent from a year ago, or the equivalent of almost 1.5 million bpd more.

    The jump was partly driven by independent refiners as they rushed to cash in on low oil prices before their import quotas expire in December.

    A total of 19 Chinese private refiners have received 2016 crude import quotas of 75 million tonnes, or 1.5 million barrels per day as of Aug. 18, a Chinese refinery executive said on Thursday. That volume contributed 20 percent of China's incremental crude imports in the first eight months.

    China took in 250.45 million tonnes (7.49 million bpd) of crude in the January to August period, up 13.5 percent from the year ago period.

    "August import was a bit surprise for us," Li Yan, oil analyst with Zibo Longzhong Information Technology Co said. "The high volume suggested some of the crude is flowing into state reserves, because demand from teapots and other refiners would not be enough to support such a high volume."

    Anticipation of pent-up gasoline demand as China heads to a week-long national holiday in October may have also spurred imports, according to Li.

    The government data was 4 million tonnes higher than the 28.79 million tonnes in imports that Reuters Supply Chain & Commodities Research assessed for the month based on tanker tracking and pipeline data.

    Refined products exports rose 19.3 percent from a year ago to 3.71 million tonnes, or 837,742 bpd, though it fell sharply from a record of 4.57 million tonnes in July.

    China flipped into a net exporter of refined products in July for the first time since at least 2013, Reuters calculations based on customs data showed.
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    U.S. advances oil reserve revamp plan, potential crude sale

    The Obama administration has sent Congress a plan to modernize the country's emergency oil reserve, a step that could set in motion a sale of about 8 million barrels from the stash later this year to help pay for the revamp, the Energy Department said on Wednesday.

    Under the $1.5-$2 billion revamp plan, three dedicated marine terminals would be added to the Strategic Petroleum (SPR), a string of 60 heavily-guarded underground caverns on the Texas and Louisiana coasts.

    Also, aging equipment for oil processing, firefighting and security would be fixed or replaced at the SPR, which was last updated in the late 1990s.

    "This equipment today is near, at, or beyond the end of its design life," the plan said.

    Congress created the SPR in 1975, after the Arab oil embargo spiked oil prices and spurred shortage panics. It now holds 695 million barrels of crude, the amount the country burns in about five weeks. It is the world's largest government-owned emergency oil reserve.

    Besides equipment corrosion from salt air breezes and heavy downpours, this decade's U.S. oil boom has also been hard on the ability of the reserve to speed oil to markets in the event of a disruption. Production hikes in Texas and the central United States have congested pipeline systems, making it difficult for the SPR to release crude without shutting in domestic output.

    If left unaddressed, the problems could hurt the country's ability to quickly meet international obligations to ship oil in the event of a major global supply crisis, according to the Energy Department review.

    Congress would need to approve a series of oil sales worth $2 billion from fiscal 2017 to 2020 to pay for the modernization. Those would be in addition to the 124 million barrels in SPR sales from 2018 to 2025 Congress recently authorized to pay for highway projects and balance the budget.

    The Obama administration is eager to start fixing the reserve after a roof collapsed at a tank in 2015 and a water pipe burst this year. In April, President Barack Obama requested from Congress $375 million in sales, more than 8 million barrels at current prices, in fiscal 2017 to pay for the modernization.

    Congress could approve that initial sale in a spending or energy bill later this year. Senator Lisa Murkowski, a Republican and the head of the energy committee, has said she wants to see the plan before supporting any sales.
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    Oil supply-demand almost balanced, inventory overhang remains

    Oil supply and demand are rebalancing and the market may even have started drawing on the large overhang of crude and product stocks, top industry executives said during opening addresses at S&P Global Platts Asia Pacific Petroleum Conference 2016 in Singapore Tuesday.

    US shale oil production remained the biggest wild card, they also said.

    "Supply and demand are near balance, but the balance is precarious," Andy Milnes, CEO, Integrated Supply & Trading (Eastern Hemisphere), BP, told delegates.

    The market has been carrying an enormous inventory overhang, but BP believes that starting June/July "we might have started to draw [on stocks]," he said, adding that meant consumption was above supply and has to stay above for a long time for the market to start seeing the affect.

    "There is a light at the end of the tunnel. The world is demanding more hydrocarbons than it is producing," Milnes said.

    Statoil echoed a similar sentiment.

    Speaking to reporters on the sidelines of the event, Statoil senior vice president and chief economist Eirik Waerness said rebalancing was already taking place but it was impossible to predict how that will affect prices because of the oil in storage.

    "Fundamentals indicate that prices should gradually come up now," Waerness said, adding there were a lot of drivers that support higher prices but the inventory overhang was keeping prices capped.

    "We have probably the lowest spare production capacity in OPEC," he said, adding there were also supply disruptions and these are factors that would normally cause prices to go up.

    "On the other hand, we have maybe 500 million extra barrels of oil in storage compared to what we have had on average in the past," Waerness said.


    According to Milnes, the fact the supply shock occurred in the US -- a disaggregated market with lots of small producers that have a small cost base and tremendous ability to innovate quickly -- has had a dramatic impact on the way things have shaped up.

    According to data from the International Energy Agency and independent consultancy Rystad, at $60/b, US shale production will stay stable.

    But a price above that will lead to a rise in US production and a price below it will result in a drop, Milnes said.

    "Any price recovery will be banded by the ability of [US] shale producers to bounce back," he said.

    Milnes said companies like BP and other big explorers have stopped exploring in many areas and, while this was not affecting the supply situation today, it could in future.

    "In 5-15 years, if the demand carries on rising, and the energy sector is not continuing to invest through the cycle, then OPEC will become more important again," Milnes said.

    According to projections by Waerness, oil demand could grow up to 14.9 million b/d and gas demand by up to 625 billion cu m by 2040 from 2013 levels. "There is a real risk that if the current sentiment [of under-investment] prevails we could have a spike in prices because there could be a shortage in oil and gas supply," he said.
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    ONGC’s Profit Falls 21% as Oil Prices Slump, Output Drops

    Oil & Natural Gas Corp.’s quarterly profit declined 21 percent as oil prices slumped and output fell.

    Net income at India’s biggest energy explorer dropped to 42.3 billion rupees ($638 million) in the three months ended June 30 from 53.7 billion rupees a year earlier, the New Delhi-based company said in a statement to exchanges. Sales dropped 21 percent percent to 176.70 billion rupees.

    The state-run explorer is key to Prime Minister Narendra Modi’s goal of increasing the nation’s energy security and reducing import dependence by 10 percent in the next six years. Declining earnings will weigh on ONGC’s plans to invest billions of dollars to develop oilfields and boost flagging output from aging fields. It could also hinder efforts to add assets in India and overseas.

    ONGC sold crude oil to refiners including Indian Oil Corp. at $46.10 a barrel in the quarter, compared with $59.08 a barrel a year earlier after adjusting discounts to state refiners, according to the statement. The rebate, for selling fuels below cost when oil is expensive, amounted to 10.96 billion rupees in the year-earlier period. The company didn’t give any discounts on crude oil in the quarter ended June 30. ONGC sold gas at $3.06 per million British thermal units from $4.66 per million Btu a year ago.

    Benchmark Crude

    Brent crude, the benchmark for half of world’s crude including India’s, averaged $47.03 a barrel in the three-month period ended June 30, 26 percent lower than a year earlier. The contract traded at $47.16 a barrel at 1:44 p.m. in London.

    ONGC’s total oil output fell to 6.34 million tons in the first quarter from 6.48 million a year ago, while gas production slipped 5.6 percent to 5.49 billion cubic meters.

    The company’s shares rose 2.7 percent to 244.95 rupees at the close in Mumbai on Wednesday. The stock has risen 1.3 percent this year, compared with a 11 percent gain in the benchmark S&P BSE Sensex.
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    Shell lifts FM on supply to Nigeria LNG

    Shell has lifted the force majeure, announced a month ago on August 8, on its feed gas supply into the Nigeria LNG export complex.

    A spokesman of Shell Petroleum Development Company of Nigeria (SPDC) said: “SPDC lifted the force majeure on gas supply to NLNG effective today, September 7 2016, following repair of the leak at the Eastern Gas Gathering System (EGGS-1) and re-opening of the line. A joint investigation team comprising community people, regulatory agencies and SPDC representatives found that the leak was from a hole drilled by unknown persons.”

    Traders had said that the disruption to Shell's feed gas supplies into NLNG meant that the latter was exporting at roughly half its normal capacity.

    The Nigeria LNG terminal at Bonny Island, with the tanker LNG Akwa Ibom berthed at its jetty (Photo credit: Shell)

    On September 6, Shell lifted the force majeure on its Bonny Light crude oil export terminal, but has yet to do so for its Forcados oil terminal. The Forcados FM has been in place since February.

    In other news, Reuters reported that Nigeria's military had arrested a suspected leader of the Niger Delta Avengers and other men accused of attacking oil and gas infrastructure.
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    Will ExxonMobil Have to Pay for Misleading the Public on Climate Change?

    Last fall, ExxonMobil executives hurried along the hushed, art-filled halls of the company’s Irving, Texas, headquarters, a 178-acre suburban complex some employees facetiously call “the Death Star,” to a series of emergency strategy meetings. The world’s largest oil explorer by market value had been hit by a pair of multipart investigations by InsideClimate News and the Los Angeles Times. Both reported that as early as the 1970s, the company understood more about climate change than it had let on and had deliberately misled the public about it. One of Exxon’s senior scientists noted in 1977—11 years before a NASA scientist sounded the alarm about global warming during congressional testimony—that “the most likely manner in which mankind is influencing the global climate is through carbon dioxide release from the burning of fossil fuels.”

    The two exposés predictably sparked waves of internet outrage, some mainstream media moralizing, and the Twitter hashtag #ExxonKnew. The Washington Post editorial page, for one, chided Exxon for “a discouraging example of corporate irresponsibility.” Bill McKibben, the founder of the environmental group, which spearheaded protests against the Keystone XL pipeline, wrote an impassioned article in the Guardian accusing Exxon of having “helped organize the most consequential lie in human history.”

    Kenneth Cohen, then the company’s vice president for public and government affairs, convened near-daily meetings to form a response. “We all sat around the table and said, ‘This feels very orchestrated,’ ” says Suzanne McCarron, who succeeded Cohen when he retired at the end of last year. McCarron still seems shocked that her company could come under sustained attack. “We wanted to know who’s behind this thing,” she says. While Exxon tried to identify its new nemesis—made difficult, perhaps, by the release of the two reports being coincidental—the executives also decided to nitpick the journalism and sent lobbyists to Capitol Hill to argue their side. That didn’t go so well. “I couldn’t get any journalist to actually evaluate the coverage,” Exxon spokesman Alan Jeffers says, with evident frustration.

    The crisis might have died down, a week or two of bad PR and nothing more, but several politicians saw an opening. On Oct. 14, four weeks after the first InsideClimate report, Democratic Representatives Ted Lieu and Mark DeSaulnier, both from California, asked U.S. Attorney General Loretta Lynch to launch a federal racketeering investigation of Exxon. “It occurred to me that this looks like what happened with the tobacco companies a decade ago,” Lieu says. Democratic presidential candidate Hillary Clinton added her support for a Department of Justice inquiry. “There’s a lot of evidence that they [Exxon] misled people,” she said two weeks later.

    Stoked by 40 of the nation’s best-known environmental and liberal social-justice groups—including the Environmental Defense Fund, Sierra Club, and Natural Resources Defense Council—the anti-Exxon animus only intensified. And if there wasn’t a coordinated campaign before, now there was: The groups all signed an Oct. 30 letter to Lynch also demanding a racketeering probe. (Lynch has since asked the FBI to examine whether the federal government should undertake such an investigation.) The same day, Lieu and DeSaulnier tried to interest the Securities and Exchange Commission in a fraud probe against Exxon, a request that’s pending. Five days later, on Nov. 4, New York Attorney General Eric Schneiderman opened a formal investigation into whether Exxon had misled investors and regulators about climate change.

    “We cannot continue to allow the fossil fuel industry to treat our atmosphere like an open sewer or mislead the public about the impact they have on the health of our people and the health of our planet,” former Vice President Al Gore said at a subsequent news conference organized by Schneiderman. Compelled by the New York AG’s subpoena, Exxon has so far turned over some 1 million pages of internal documents.

    Hours after Schneiderman issued his subpoena, Exxon Chief Executive Officer Rex Tillerson went on Fox Business Network. “The charges are pretty unfounded, without any substance at all,” he said. “And they’re dealing with a period of time that happened decades ago, so there’s a lot I could say about it. I’m not sure how helpful it would be for me to talk about it.” These remarks themselves weren’t terribly helpful—certainly not to Tillerson’s company.

    McCarron and her colleagues can sound a tad overwrought when discussing all this. “The goal of the coordinated campaign is to delegitimize the company by misrepresenting our history of climate research,” she says. “Tackling the risk of climate change is going to take a lot of smart people, and we’ve got some of the best minds in the business working on this challenge.”

    A company that has 73,500 employees and reported $269 billion in 2015 revenue would seem not to have much to fear from a bunch of tree-huggers and a grandstanding state AG. And yet the #ExxonKnew backlash comes at a financially perilous time for Big Oil. A glut-driven collapse in crude prices has rocked the entire industry. On July 29, Exxon announced second-quarter profit of $1.7 billion, its worst result in 17 years. That followed a rocky spring when ferocious wildfires reduced production in the oil-sands region of western Canada. (The frequency and intensity of such fires may be related to climate change, Exxon’s Jeffers acknowledges, adding, “But we just don’t know.”)
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    Iran Oil Output Near Target Means Freeze Is ‘Political Decision’

    Iran hinted that it may soon drop its opposition to an oil-production freeze, with a senior official saying the OPEC member’s crude output is closing in on its pre-sanctions level and that limiting supply is “a political decision.”

    The Persian Gulf exporter is pumping 3.8 million barrels a day, approaching its daily target of 4 million barrels, Mohsen Ghamsari, director for international affairs at the National Iranian Oil Co., said Wednesday at a conference in Singapore. He said earlier in the week that Iran could reach its target in two to three months.

    “Iran is close to the 4 million target, but the freeze is a political decision,” Ghamsari said, referring to Oil Minister Bijan Namdar Zanganeh. “We are now close to previous production levels, so now it depends on the minister’s decision.”

    Members of the Organization of Petroleum Exporting Countries will hold talks with producers from outside the group, including Russia, during a conference in Algiers at the end of the month. Some ministers have called for an agreement to cap output in a joint effort to prop up crude prices amid a global glut. Saudi Arabia and Russia, the world’s top two crude-oil producers, pledged on Monday to cooperate to stabilize global markets, while failing to announce any specific measures to bolster prices.

    A previous attempt to freeze output in April fell through when Saudi Arabia insisted that Iran join before its output had recovered to levels seen before world powers tightened sanctions on Iran’s economy.
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    China's oil majors to divulge pipeline details in government reform plan

    China's three oil majors will have to divulge intricate details about their vast networks of oil and gas pipelines, the government said on Wednesday, a key step towards increasing transparency for potential new entrants and customers.

    The energy ministry said on Wednesday Sinopec, CNOOC and China National Petroleum Corp (CNCP) were required to release data, such as opening dates, pipeline type, capacity, route and pricing formulas before Oct. 31.

    The announcement underscores Beijing's new push to reform the pipeline market, according to Lin Boqiang, director of Xiamen University's energy institute.

    "Pipelines have many add-on costs, such as maintenance fees going back two to three decades. The details will help third parties to better adjust cost and profit of a project and make the market more transparent," Lin said.

    Upstream and downstream users can also request other data such as unused capacity, quality and safety standards of a pipeline, the National Energy Administration said on its website.

    Experts and analysts say Beijing is pressing ahead with its plan to separate pipeline transportation from the hands of crude producers and lowering the cost to consumers, in a move to open the network.

    In August, Sinopec announced it would sell half of its premium natural gas pipeline business to investors.

    The state planner has also drafted a rule to lower transportation costs of natural gas pipelines.
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    Apache makes “significant” find in Delaware Basin

    Apache said it has made a “significant” find in the US after more than two years of extensive geologic and geophysical work.

    The company said the find, Alpine High, is in the southern portion of the Delaware Basin.

    Its hydrocarbons in place on the acreage are said to be 75 trillion cubic feet of rich gas and three billion barrels of oil in the Barnett and Woodford formations alone.

    Apache said it also sees “significant” oil potential in the shallower Pennsylvanian, Bone Springs and Wolfcamp formations.

    Chief executive John Christmann said: “With the contribution of Alpine High to our global portfolio of world-class international and North American assets, Apache clearly has more profitable-growth opportunities than at any other time in the company’s 60-year history.

    “Today’s announcement is the culmination of more than two years of hard work by the Apache team. While other companies have focused on acquisitions during the downturn, we took a contrarian approach and focused on organic growth opportunities.

    “These efforts have resulted in the identification of an immense resource that we believe will deliver significant value for our shareholders for many years.”

    Apache has secured 307,000 contiguous acre at an attractive average cost of $,300 per acre.

    Alpine High has 4,000 to 5,000 feet of stacked pay in up to five distinct formations including the Bone Springs, Wolfcamp, Pennsylvanian, Barnett and Woodford.

    The US oil and gas firm said between 2,000 and 3,000 future drilling location have been identified in the Woodford and Barnett formations alone.

    These formations are in the wet gas window and are expected to deliver a combination of rich gas and oil.

    Initial estimates for the Woodford and Barnett zones indicate a pretax net present value range of between $4million and $20million per well.
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    Devon Energy announces third successful STACK spacing test and high-rate extended-reach oil wells

    Devon Energy Corp. announced today it has successfully tested its third Meramec spacing pilot and commenced production on two high-rate, extended-reach lateral oil wells in the core of the over-pressured oil window of the STACK.

    The Pump House spacing pilot tested a seven-well pattern across a single-section interval in the upper Meramec. Initial 15-day production rates averaged 2,200 oil-equivalent barrels (Boe) per day per well (55 percent oil) and cost $6 million per well. The Pump House wells were drilled with 4,700-foot laterals and utilized a completion design that deployed 2,200 pounds of proppant per lateral foot across 35 frac stages with perf clusters spaced 25 feet apart. To manage pressure and maximize value, these wells were brought online using an engineered choke management approach starting at a 14/64-inch choke and gradually increasing to a 26/64-inch choke over the initial 15-day period.

    The Pump House wells are located in Kingfisher County adjacent to the Born Free pilot and three miles north of the Alma pilot. Production from the two-well Born Free pilot (announced first-quarter 2016) continues to perform exceptionally well, averaging a 120-day rate of 1,400 Boe per day per well. The five-well Alma pilot has achieved a 60-day average rate of 1,300 Boe per day on a per well basis.

    'Results from our initial three Meramec spacing tests are outstanding, with flow rates exceeding type-curve expectations and minimal interference between wells,' said Tony Vaughn, chief operating officer. 'These positive results indicate the potential for tighter spacing and increased inventory in the core of the over-pressured oil window. We continue to advance several additional Meramec spacing tests that will help us accelerate learnings and further prepare for full-field development in 2017 across our industry-leading position in the STACK.'

    To determine the optimal spacing approach for the stacked-pay intervals in the Meramec, the Company is participating in more than 10 additional spacing pilots during the remainder of 2016. The spacing pilots are focused in the over-pressured oil window and are testing up to eight wells in a single Meramec interval and evaluating the joint development of multiple stacked-pay intervals through staggered well pilots. Initial production rates from several of these spacing pilots will occur during the second half of 2016.

    Extended-Reach STACK Wells Deliver High Production Rates

    The Company also recently brought online two extended-reach Meramec wells in eastern Blaine County, within the core of the over-pressured oil window. The Marmot 19-1HX and Blue Ox 3130-4AH were drilled with 10,000-foot laterals and achieved average peak 24-hour rates of 3,700 Boe per day per well (70 percent oil).

    The Marmot and Blue Ox wells utilized a larger completion design that deployed 2,600 pounds of proppant per lateral foot across 50 frac stages with perf clusters spaced 30 feet apart. The peak 24-hour rates for these wells were attained with a 28/64 choke.

    'These successful extended-reach oil wells help us further understand the optimal development scheme for Devon's industry-leading STACK position,' said Vaughn. 'As we progress to full-field development in 2017, it is our expectation that we will develop the majority of our stacked-pay Meramec position with extended-reach laterals, which will significantly increase rates of return from this world-class reservoir.'

    Accelerating Investment in the STACK

    As previously announced, Devon is accelerating activity in the STACK play by adding as many as four operated rigs in the second half of 2016. This plan could bring the Company's operated rig count to as many as six in the STACK by year-end 2016. Due to the increased activity, Devon expects to invest approximately $450 million in the STACK during 2016, an increase of 40 percent from previous guidance. This additional capital investment positions the STACK asset to deliver strong growth in 2017.
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    Argentina to propose 203% natural gas tariff hike to help boost E&P

    Argentina's government will propose increasing residential natural gas tariffs by 203% with twice yearly hikes of less than 10% at a September 16 public consultation, as it seeks to spur investment in building gas production, Energy Minister Juan Jose Aranguren said.

    "The increase being proposed is an average of 203%," Aranguren told reporters late Monday, according to state newswire Telam.

    Aranguren's office did not have further information on the plan when contacted Tuesday.

    The 203% is less than the 400% that the government increased residential tariffs on April 1, a hike that was annulled last month by the Supreme Court after complaints by consumer rights groups. The Supreme Court told the government to hold a public consultation before raising the tariffs, as required by law.

    The new hike is to take effect October 1, with biannual increases thereafter, Aranguren said.

    This will help reduce state spending to subsidize the tariffs, which now covers 81% of the bill, while consumers pay the rest. With the increase, consumers will pay half of the bill and the rest will come from the state, Aranguren said.

    With the gradual increases, the government wants to eliminate the subsidies by 2019 for most of the country. It will take longer, however, in the colder southern region of Patagonia, where a slower increase in tariffs means the subsidies won't be eliminated until 2023, according to Aranguren.

    In terms of wellhead prices, which account for about half of the gas bill, the 203% increase means that households will pay $3.42/MMBtu, up from $1.29/MMBtu currently. That is less than the $4.72/MMBtu it would have reached with the 400% increase.

    With the gradual increases, the wellhead price paid by residential consumers will reach $6.78/MMBtu in October 2019.

    Households account for 24% of the 130 million-180 million cu m/d gas consumption, meaning that higher hikes on tariffs for factories and power plants, which account for 63% of the consumption, will limit the impact on overall wellhead prices.

    The conservative government of President Mauricio Macri doubled wellhead prices to an average of $5.30/MMBtu after taking office in December.

    The higher pricing is key for encouraging a ramp-up in production after years of shortages pushed up imports to a third of consumption. Macri has said he wants to replace imports of liquefied gas, now at about 25 million cu m/d, with local production by 2021-2022.

    Gas production rose 7.5% to 122.2 million cu m/d in the first half of 2016 from a 10-year low of 113.7 million cu m/d in 2014, according to Energy Ministry data. This was helped by a government-incentivized price of $7.50/MMBtu for new developments, including in the country's huge shale and tight plays like Mulichinco and Vaca Muerta.
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    Murphy Said to Lead Group for Deepwater Mexico Oil Lease Bidding

    Murphy Oil Corp., Petroliam Nasional Bhd. and Sierra Oil & Gas are in talks to form a group that would bid jointly for the first opportunity in more than seven decades to independently operate offshore fields in Mexico’s deep Gulf waters, a person with direct knowledge of the plan said.

    The three producers are in the process of signing a joint study and bid agreement, a step to form a consortium for Mexico’s sale of deepwater leases on Dec. 5, according to the person, who asked not to be identified because the information isn’t public.

    Mexico, which ended a monopoly on oil exploration as it struggles to arrest declining production at its aging fields, expects the historic sale of deepwater drilling rights in the Gulf of Mexico will bring in investment of as much as $44 billion. About three quarters of Mexico’s prospective resources are located in the deep waters of the Gulf, according to government data.

    More Interesting

    A total of 16 operators and 10 financial companies have already qualified to bid for the December auction. The sale has lured more interest than an opportunity to partner with state-owned Petroleos Mexicanos to develop the Trion field in the Perdido area.

    Murphy Oil, which is approved to act as an operator should the company win an oil block, will not "reveal information about the upcoming lease round at this time," Kelly Whitley, the Houston-based company’s vice president of investor relations and communications, said in an e-mailed response to questions. Ivan Sandrea, chief executive officer of Mexico’s Sierra Oil & Gas, declined to comment. Petronas, as the Malaysian state-run oil producer is known, didn’t respond to e-mails seeking comment. The company is also qualified as an operator.

    The aspiring bidders have joined forces before. Murphy Oil and Petronas bid together for two blocks in Mexico’s first shallow-water oil auction in July last year, though their offer fell short of the minimum 40 percent stake the government required to retain in the fields.

    Sierra Oil & Gas, which bid in a consortium with Talos Energy LLC and Premier Oil Plc, won rights to explore for crude in two blocks in the same auction. Petronas and Sierra Oil & Gas bid in consortium groups in the country’s second auction, though neither were awarded contracts.

    Bidder’s Backing

    Sierra Oil & Gas, a recently formed company in Mexico that qualified as a financial partner for the Dec. 5 auction, has received funding from BlackRock Inc., Riverstone Holdings Ltd. and EnCap Investments LP. Chevron Corp., Exxon Mobil Corp. and Hess Corp. have also agreed to bid together at the upcoming auction, a person with knowledge of the plans said last month.

    Joint agreements to bid can be dissolved if one of the companies withdraws its intention to participate in the contract, and the companies may opt not to bid even if the consortium is still in place.
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    Brookfield group to buy Petrobras pipeline unit for $5.2 billion: source

    Brazil's Petroleo Brasileiro SA agreed to sell 90 percent of its natural gas pipeline unit to a group of investors led by Canada's Brookfield Asset Management Inc for $5.2 billion, a source with direct knowledge of the deal said on Tuesday.

    The investor group includes British Columbia's pension fund and Chinese and Singaporean sovereign wealth funds CIC and GIC. The agreement will be submitted to the Petrobras board and the transaction is expected to close in late September, the source said. Petrobras declined to comment and Brookfield didn't immediately comment.
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    ‘We are committed’: Petronas hopes to secure environmental license for Canadian LNG project by year-end

    Malaysia’s state-owned oil and gas company Petronas is on track to get its US$27 billion refining and petrochemical complex in the south of the country up and running in 2019, the head of the group’s downstream operations told Reuters.

    Petronas has earmarked heavy spending cuts to contend with low oil prices that have sent profit tumbling, but the company remains committed to the Refinery and Petrochemical Integrated Development (RAPID) project it aims to turn into a regional oil and gas hub by 2035.

    “By the end of the year we should have completed more than 50 percent of the complex and we’re on track to start operations in the first quarter of 2019,” said Md Arif Mahmood, Petronas downstream CEO and group executive vice-president.

    The project, launched in 2012 at Pengerang in the southern state of Johor, will consist of a 300,000 barrel per day refinery and petrochemical complex with combined annual chemical output capacity of 7.7 million metric tonnes.

    Other facilities include a liquefied natural gas (LNG) regasification terminal.

    “There are four billion people in southern Asia and future growth will be there as the number of middle-class income makers grows,” Mahmood said.

    Like other energy companies, Petronas has cut costs, laid off workers and deferred investments to offset the slide in crude prices.

    It has earmarked more than 10 billion euros (US$11.2 billion) of capital expenditure cuts over the next three to four years and is looking to maximize other revenue streams outside upstream exploration.

    “With the new norm for crude at US$40 to US$50 a barrel, downstream has become a critical component, it flies the flag of the company,” Mahmood said.

    In Italy to attend the Formula 1 Grand Prix at Monza (Petronas is sponsor of the Mercedes F1 team), Mahmood said that the company’s growth in Europe would be focused on expansion of its lubricants business.

    “We have an aggressive plan to grow in Germany, the UK, Ireland and Italy,” he said.

    Europe is one of the company’s main lubricant markets, generating 28 per cent of the group’s total volumes. Italy is the biggest market, accounting for 48 per cent of European sales.

    In chemicals, Mahmood said the group would maximize benefits from its partnership with Germany’s BASF, though a planned joint venture in synthetic rubber with Italian oil major Eni’s Versalis has been abandoned.

    “We’ve both decided not to go ahead because of market conditions,” Mahmood said.

    Besides the RAPID project, Petronas has ambitious plans in LNG and Mahmood said it hopes to gain long-awaited environmental clearance for a US$35 billion LNG export terminal in western Canada by the end of the year.

    Petronas has been waiting more than three years for a permit to start building the Pacific NorthWest terminal and some analysts have said that LNG oversupply and lower oil and gas prices now threaten to make the project unattractive.

    “We are committed at the moment, but first we need to see what the conditions of approval are,” Mahmood said.

    The company, which is one of the world’s largest LNG producers, is also on track with construction of a US$12 billion offshore LNG plant that it touts as the world’s first floating liquefaction facility.

    “You’ll see production at the end this year or early next,” Mahmood said, adding that commissioning is also under way for a ninth production line at the group’s Bintulu LNG complex in Malaysia.
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    Suncor sells oil storage stake to Fort McKay First Nation‎

    Suncor Energy Inc is selling a stake in an oil-storage facility to the Fort McKay First Nation‎ in a $350-million deal.

    The aboriginal group will buy a 34.3-per-cent interest in Suncor's East Tank Farm once it becomes operational in 2017, Suncor said in a statement Tuesday, with proceeds paid upon closing.

    The facility will handle crude from Suncor‎'s $15-billion Fort Hills mine, which is due to add 180,000 barrels per day of new capacity in northern Alberta starting later next year.

    Under the deal, Fort McKay will finance the transaction with revenue from terminal fees. Suncor will remain operator.

    It's expected to close in the second quarter of 2017 subject to some conditions.
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    Shell starts production at Stones in the Gulf of Mexico

    Shell announces today that production has started from the Stones development in the Gulf of Mexico. Stones is expected to produce around 50,000 barrels of oil equivalent per day (boe/d) when fully ramped up at the end of 2017.

    The host facility for the world’s deepest offshore oil and gas project is a floating production, storage and offloading (FPSO) vessel. It is the thirteenth FPSO in Shell’s global deep-water portfolio and produces through subsea infrastructure beneath 9,500 feet (2,900 meters) of water. Stones underscores Shell’s long-standing leadership in using FPSOs to safely and responsibly unlock energy resources from deep-water assets around the world.

    “Stones is the latest example of our leadership, capability, and knowledge which are key to profitably developing our global deep-water resources,” said Andy Brown, Upstream Director, Royal Dutch Shell. “Our growing expertise in using such technologies in innovative ways will help us unlock more deep-water resources around the world.”

    Stones, which is 100% owned and operated by Shell, is the company’s second producing field from the Lower Tertiary geologic frontier in the Gulf of Mexico, following the start-up of Perdido in 2010.

    The project demonstrates Shell’s commitment to realizing significant cost savings through innovation. It features a more cost-effective well design, which requires fewer materials and lowers installation costs; this is expected to deliver up to $1 billion reduction in well costs once all the producers are completed.

    The FPSO is also specially designed to operate safely during storms. In the event of a severe storm or hurricane, it can disconnect and sail away from the field. Once the weather event has passed, the vessel would return and safely resume production.

    Shell’s global deep water business is a growth priority for the company and currently produces 600,000 boe/d. Deep-water production is expected to increase to more than 900,000 boe/d by the early 2020s from already discovered, established reservoirs. Three other Shell-operated projects are currently under construction or undergoing pre-production commissioning: Coulomb Phase 2 and Appomattox in the Gulf of Mexico and Malikai in Malaysia.
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    EOG Resources and Yates Petroleum agree to combine in transaction valued at $2.5 billion

    EOG Resources, Inc. and Yates Petroleum Corporation today announced definitive agreements under which EOG has agreed to combine with Yates Petroleum Corporation, Abo Petroleum Corporation, MYCO Industries, Inc. and certain other entities (collectively, Yates). Under the terms of this private, negotiated transaction, EOG will issue 26.06 million shares of common stock valued at $2.3 billion and pay $37 million in cash, subject to certain closing adjustments and lock-up provisions. EOG will assume and repay at closing $245 million of Yates debt offset by $131 million of anticipated cash from Yates, subject also to certain closing adjustments.

    'This transaction combines the companies' existing large, premier, stacked-pay acreage positions in the heart of the Delaware and Powder River basins, paving the way for years of high-return drilling and production growth,' said William R. 'Bill' Thomas, Chairman and Chief Executive Officer of EOG. 'We are excited by this unique opportunity to advance EOG's strategy of generating high-return growth by developing premium wells at low costs that enhance long-term shareholder value.

    'Additionally we are thrilled to welcome Yates' 300 employees to the EOG family and look forward to continuing the important presence Yates has established in the community of Artesia, N.M.'

    Yates is a privately held, independent crude oil and natural gas company with 1.6 million net acres across the western United States. Since 1924, when it drilled the first commercial oil well on New Mexico state trust lands, Yates has amassed a rich acreage position across the western United States. Highlights of Yates' assets are summarized below:

    Production of 29,600 barrels of crude oil equivalent per day, net, with 48 percent crude oil
    Proved developed reserves of 44 million barrels of oil equivalent, net
    Delaware Basin position of 186,000 net acres
    Northwest Shelf position of 138,000 net acres
    Powder River Basin position of 200,000 net acres
    Additional 1.1 million net acres in New Mexico, Wyoming, Colorado, Montana, North Dakota and Utah.

    EOG is the largest oil producer in the Lower 48, with average net daily production of 551 thousand barrels of crude oil equivalent and a reputation for technological leadership in the development of unconventional resource plays.'EOG is our partner of choice as we look to extend Yates' 93-year legacy,' said John A. Yates Sr., Chairman Emeritus of Yates Petroleum Corporation and son of founder Martin Yates Jr. 'As we enter a new era of unconventional resource development, we are excited to join forces with another pioneering company like EOG.'

    Douglas E. Brooks, Chief Executive Officer of Yates Petroleum Corporation, added, 'This is a tremendous opportunity to combine EOG's strong technical competencies with the enormous resource potential of the Yates acreage to create significant value for Yates and EOG shareholders alike.'

    Yates immediately adds an estimated 1,740 net premium drilling locations in the Delaware Basin and Powder River Basin to EOG's growing inventory of premium drilling locations, a 40 percent increase. A premium drilling location is defined by EOG as a direct after-tax rate of return of at least 30 percent assuming a $40 flat crude oil price. EOG plans to commence drilling on the Yates acreage in late 2016 with additional rigs added in 2017.

    'Through this transaction, our premium drilling strategy is gaining added momentum. With improving well productivity and this newly enhanced resource base, our organization can generate further increases in returns and capital efficiency,' Thomas said. 'The combination enhances the size and quality of EOG's existing portfolio of oil resource plays.'

    Doubles Position in Delaware Basin and Adjacent Plays

    Yates has 186,000 net acres of stacked pay in the Delaware Basin in New Mexico that is highly prospective for the Wolfcamp, Bone Spring and Leonard Shale formations. This brings the combined company's total Delaware Basin acreage position to approximately 424,000 net acres, a 78 percent increase to EOG's existing holdings.

    Additionally, Yates has 138,000 net acres on the Northwest Shelf in New Mexico that is prospective for the Yeso, Abo, Wolfcamp and Cisco formations. These shallow plays have the potential to contribute additional amounts of premium inventory with the application of EOG's advanced completion and precision targeting technologies and low cost structure. Along with EOG's existing acreage, the newly combined company will have 574,000 net acres in the Delaware Basin and Northwest Shelf.
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    Oil-Market Rescue Seen No Nearer Amid Saudi-Russia ‘Lip Service’

    An international agreement to cap crude-oil output in a way that would restrict actual supply and support prices looks no nearer after the two largest producers pledged to cooperate.

    Most members of the Organization of Petroleum Exporting Countries that can raise production have indicated they will aim to do so, while others are already close to short-term limits.

    Monday’s joint statement by the oil ministers of Saudi Arabia and Russia, billed as a “significant” announcement, was “without any substance for market balances,” Amrita Sen, chief oil analyst at consulting firm Energy Aspects Ltd., said in Singapore.

    Although both nations committed to discuss measures to help the oil market, including a potential output freeze, Saudi Arabia said there’s no current need to limit production. Russia’s Energy Ministry also expressed doubt last week that a cap is needed. Further reducing hopes of a meaningful accord, the two failed to agree on whether Iran has fully restored pre-sanctions output, key to determining whether it should take part in any freeze.

    Impossible Cooperation

    “There is not even a little chance for a real cooperation between Russia and Saudi Arabia,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by e-mail. “It’s clearly just a lip service, since the real cooperation between these competitors is just impossible.”

    OPEC members are due to meet other producers for informal talks in Algeria later this month. One major issue undermining the impact of a potential freeze deal is that both Saudi Arabia and Russia are already pumping a lot of oil. The Saudis produced a record 10.69 million barrels a day in August, according to a Bloomberg survey of analysts, oil companies and ship-tracking data. Russian production has been running at a post-Soviet high all year, Energy Ministry data show.

    "A freeze doesn’t resolve anything if Saudi Arabia and Russia are both freezing when their production is at a record high," Saad Rahim, chief economist at oil-trading house Trafigura Group Pte, said in Singapore.

    For a QuickTake explainer on how oil prices are determined, click here.

    While Russia appears willing to join an international agreement to steady the market, it’s reluctant to lead the process of negotiating a freeze. Deputy Prime Minister Arkady Dvorkovich has said all OPEC members must reach consensus on a cap before Russia will participate. Even if a deal is on the table, Iran, Nigeria, Libya and even Iraq could reasonably seek exemptions.

    Iran showed Monday that it’s ready to pump more crude, with state-run National Iranian Oil Co. saying the country can raise production to 4 million barrels a day in two to three months from the current daily level of about 3.8 million. Iran’s unwillingness to take part in a previous freeze plan negotiated in April led Saudi Arabia to walk away from the deal.

    Nigeria may also demand the right to restore production after militant attacks curbed output, while Libya will want to boost volumes that shrank to a fraction of pre-conflict levels. In Iraq, Prime Minister Haidar Al-Abadi has said he’d support a freeze deal though new Oil Minister Jabbar Al-Luaibi previously called on oil companies to increase production to boost national revenue.

    Most of the rest of OPEC’s members are already pumping as much as they can.

    Saudi Arabia and Russia were keen to publicize their rapprochement on Monday, saying their joint statement showed a growing trust and understanding that collaboration is vital to oil’s recovery. Yet analysts remain skeptical a meaningful deal can be reached in Algiers.  

    "Talk is cheap but they could pay a dear price for crying wolf too often," Commerzbank’s Weinberg said.
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    Iran supports $50-60 oil price, stability measures-state TV

    Iran supports $50-60 oil price, stability measures-state TV

    Iran supports an oil price of $50-60 per barrel and any measure to stabilise the market, state TV quoted the country's oil minister as saying on Tuesday.

    "Iran wants a stable market and therefore any measure that helps the stabilisation of the oil market is supported by Iran," Bijan Zanganeh said after meeting OPEC Secretary-General Mohammed Barkindo in Tehran.

    OPEC's third-largest producer, Iran has signalled willingness to support the possible revival of a global deal on freezing production levels only if fellow exporters recognise its right to regain market share lost as a result of sanctions.

    Under a deal reached with six major powers in 2015, international sanctions imposed on Iran ended in January in exchange for Tehran curbing its nuclear programme.

    Efforts by OPEC and non-OPEC oil exporters to reach an agreement on freezing output earlier this year foundered because Iran declined to participate.

    Members of the Organization of the Petroleum Exporting Countries will meet on the sidelines of the International Energy Forum (IEF), which groups producers and consumers, in Algeria on Sept. 26-28, during which they are expected to discuss a possible output freeze.

    Non-OPEC member Russia is also expected to attend the IEF.

    Hit by global oversupply, oil prices collapsed to as low as $27 per barrel earlier this year from as high as $115 in mid-2014, but have since recovered to around $47.

    "We support oil prices between $50 and $60 per barrel," Zanganeh said.

    A senior Iranian official said on Monday Iran was ready to raise its output to 4 million barrels per day in a couple of months depending on market demand.

    OPEC kingpin Saudi Arabia and Russia agreed on Monday to set up a task force to review oil market fundamentals and to recommend measures and actions that would secure market stability.
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    Enbridge to Buy Spectra Energy in $28 Billion Deal

    Canadian pipeline company Enbridge Inc. on Tuesday agreed to buy Houston’s Spectra Energy Corp. in an all-stock deal valued at about $28 billion, creating a major North American energy-infrastructure company at a time when energy-industry operators continue to deal with the fallout from low oil prices.

    Under the deal, announced jointly by the companies, Spectra Energy shareholders will receive shares of Enbridge valued at around $40.33 each, or a premium of about 11.5%, based on the closing price of Enbridge shares on Friday.

    The arrangement has an enterprise value of about $127 billion and the deal, which has the full support of the boards of both Enbridge and Spectra, is expected to close in the first quarter of 2017, the companies said in a release.

    On closing, Enbridge shareholders are expected to own about 57% of the combined company, to be called Enbridge Inc., and Spectra Energy shareholders will own the remaining 43%. The merged company will have assets spanning crude oil, liquids and natural gas pipelines, terminal and midstream operations, a regulated utility portfolio and renewable power generation operations.

    “Bringing Enbridge and Spectra Energy together makes strong strategic and financial sense, and the all-stock nature of the transaction provides shareholders of both companies with the opportunity to participate in the significant upside potential of the combined company,” said Al Monaco, Enbridge chief executive.

    “Together, the merged company will have what we believe is the finest platform for serving customers in every region of North America and providing investors with the opportunity for superior shareholder returns,” added Spectra Energy Chief Executive Greg Ebel, who will become chairman of the merged company.
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    New LNG bunkering brand launched

    ENGIE, Mitsubishi Corp. and NYK Line have announced the launch of a new brand for their joint marketing of LNG as a marine fuel around the world: Gas4Sea.

    Gas4Sea aims to lead innovation through the ship-to-ship (STS) supply of LNG for the maritime sector.

    The companies concluded a framework agreement for a partnership to develop LNG bunkering services in 2014. By combining NYK's shipping expertise with ENGIE and Mitsubishi Corp.'s LNG supply portfolio and terminal access under the brand Gas4Sea, the partners will offer a cleaner, reliable, safe, and cost-effective service to shipping customers worldwide. The companies will also be able to tailor their LNG supply chains to their customers' needs.

    The partners will begin operations in 4Q16, using a purpose-built LNG bunkering vessel with a 5000 m3 LNG capacity. Designed to adapt to the largest range of customers, it will be able to bunker vessels at the Belgian port of Zeebrugge, as well as other nearby ports.

    The partners will expand their LNG bunkering services under Gas4Sea to meet more customers' needs into other regions, in collaboration with stakeholders including shipping companies, port authorities, terminal operators, regional suppliers, and local governments and regulators.

    Philip Olivier, CEO of ENGIE Global LNG, said: "Continuing ENGIE's long history of innovation, we are proud to launch this first global LNG bunkering service together with our longstanding partners. In the general framework of energy transition, we believe LNG has a key role to play in developing a more sustainable shipping activity. In the coming months, we will start supplying United European Car Carriers' new dual fuel car carriers operating in the North Sea and Baltic Sea."

    Jun Nishizawa, SVP and Deputy COO of Mitsubishi Corp.'s Natural Gas Business Division, said: "At Mitsubishi Corp., we continue to strive as a responsible energy supplier to contribute to the reduction of environmental impact leveraging on our half an century experience in LNG. We are at the juncture of achieving substantial emissions reductions in the maritime sector. Through our partnership with ENGIE and NYK, we hope to expedite shipping companies' transition to LNG by placing ourselves as a key piece in the global marine LNG supply chain."

    Hitoshi Nagasawa, Senior Managing Corporate Officer of NYK Line, added: "As a leading global shipping company, NYK is also striving to find reliable and environmentally sustainable solutions to help address society's need to reduce emissions. We believe that the use of LNG as a marine fuel is a key innovation in this search and through Gas4Sea, using the world’s first purpose-built LNG bunkering vessel, we and our partners ENGIE and Mitsubishi Corp. will offer ship owners and operators the opportunity to participate in this innovation and further enhance our industry's ability to operate in a more environmentally responsible way."
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    CNPC selling $11 billion in financial assets to listed unit in reform push

    CNPC selling $11 billion in financial assets to listed unit in reform push

    China National Petroleum Corp (CNPC), the country's largest state energy group, will sell $11 billion worth of financial assets to a listed unit as part of the state giant's reform plan to restructure its non-core businesses.

    Under Beijing's broad reform agenda to make its state-owned enterprises more efficient and competitive, CNPC has said it will restructure non-core departments, such as oilfield services, engineering and financial operations, and list them on stock exchanges.

    Jinan Diesel Engine, a unit under CNPC, said late on Monday that it plans to buy certain financial assets in CNPC for 75.5 billion yuan ($11.3 billion) via cash, asset swaps and a share issue.

    The unit, listed on the Shenzhen exchange, said it aims to raise up to 19 billion yuan in a private placement of shares to fund the acquisition.

    CNPC is also the parent of PetroChina <0857,HK>, Asia's largest oil and gas producer.

    "It's part of the company's stated restructuring of non-core units. CNPC is using the Jinan firm as the shell for listing its financial assets," said a Hong Kong-based oil and gas analyst, who declined to be named due to company policy.

    The assets CNPC is selling to the listed unit include the state group's holdings in CNPC Finance, Bank of Kunlun, Kunlun Financial Leasing, Bank of China International and others, according to a filing by Jinan Diesel Engine.

    In a similar move, Sinopec Group in 2014 transferred its oilfield service business to listed unit Sinopec Yizheng Chemical Fibre Co Ltd.

    Earlier expectations had been for a radical "big bang" shake-up of China's state energy firms, but Beijing has instead taken smaller steps such as pilot privatization projects and letting companies restructure assets internally.
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    Tankers: UKC-East VLCC freight rates fall to lowest recorded level on abundant supply

    The cost of sending fuel oil cargoes to Singapore from Rotterdam on VLCCs has dropped to the lowest level in more than 10 years due to a large supply of available ships in the UK Continent, sources said.

    The UK Continent-East route, basis 270,000 mt, was assessed $200,000 lower at a $2.3 million lump sum Friday, according to S&P Global Platts data, the lowest since Platts started assessing the route in January 2006.

    On the fixture front, VLCCs were booked at $2.25 million and $2.3 million last week for Rotterdam-Singapore fuel oil runs in September. The current freight rates represent a major downward movement from January, when rates were as high as $6.4 million.

    The dwindling returns attainable by shipowners on the route this year have been reflected across the VLCC spectrum, with freight rates near historic lows in a variety of regions.

    The main factor behind the dropping rates has been an increase in global VLCC supply, with a large number of newbuilds joining the existing fleet.

    According to data from Affinity Research, there are 37 new VLCCs due to be delivered this year, with 24 having already joined the fleet. There are a further 39 VLCCs expected to be added in 2017, which is likely to heap further downward pressure on what are already historically low freight rates.
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    Colombia's Cano Limon pipeline hit by leftist ELN rebel attack

    A leftist rebel bomb attack has halted pumping operations along Colombia's second most important oil pipeline, the Cano-Limon Covenas, state oil company Ecopetrol said on Monday.

    The attack by National Liberation Army (ELN) guerrillas occurred on Saturday in a rural area of northern Norte de Santander province, close to the border with Venezuela, the company said.

    The incident did not halt production or exports.

    The 485-mile (780 km) pipeline has the capacity to transport up to 210,000 barrels of crude daily from oil fields operated by U.S.-based Occidental Petroleum to the Caribbean port of Covenas.

    Attacks on oil installations by the ELN, a group of about 1,500 combatants, have been a frequent occurrence during a conflict that has taken more than 220,000 lives and displaced millions over the past 52 years.

    President Juan Manuel Santos sought to begin peace talks with the ELN in March, but negotiations have stalled until the group frees all its hostages.

    The Revolutionary Armed Forces of Colombia (FARC), the biggest rebel group in the South American country, agreed to a peace accord with the government on Aug. 24.
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    Saudi Aramco-Motiva in lead to buy Lyondell's Houston refinery: sources

    Saudi Aramco-Motiva in lead to buy Lyondell's Houston refinery: sources

    Saudi Aramco IPO-ARMO.SE and its U.S. refining joint-venture Motiva Enterprises lead the race to buy LyondellBasell Industries Houston refinery, according to three sources familiar with the matter.

    An announcement of the sale by Lyondell is expected this week, the sources said.

    Lyondell spokesman Michael Waldron declined on Monday to discuss a sale of the refinery.

    Reuters reported on Aug. 25 that Dutch chemical company Lyondell had retained Bank of America Merrill Lynch to help with a sale of the refinery.

    A company spokeswoman said in August, "the refinery may be more valuable as part of a larger refining system. We are exploring all options."

    Lyondell uses the Houston refinery to produce feedstocks for its chemical plants. The refinery can run a variety of cheaper high-sulfur crude oils. In the past few years it has been running a large amount of Canadian oil.

    The 263,776 barrel per day (bpd) Houston refinery was restoring production on Monday after an early Thursday morning power outage, the latest in a string of fires, shutdowns and power outages that have cut the plant's production throughout year.

    Saudi Aramco-Motiva emerged as the leading contender over the weekend, when Lyondell's management evaluated proposals from potential buyers, the sources said.

    Aramco-Motiva and Canada's Suncor Energy Inc were exchanging proposals with Lyondell in the past few days, according to the sources.

    Little was heard about another potential buyer, Valero Energy Corp, the sources said.

    Saudi Aramco, Motiva, Suncor and Valero did not reply to messages seeking comment.

    The refinery has been valued at about $1.5 billion based on an average price between $5,000 and $6,000 per barrel of refining capacity in recent sales of U.S. refineries.

    Lyondell's refinery supplies dry gas to Shell's joint-venture refinery seven miles (11.25 km) east in Deer Park, Texas. Aramco and Shell announced plans in March to divide Motiva’s three refineries, distribution terminals and retail networks between them. Aramco is to keep the Motiva name.

    It was unclear if the Lyondell refinery will remain with the post-breakup Motiva once the split takes place on April 1, 2017.

    Negotiations on the final distribution of assets after the breakup were continuing as of last week, according to Motiva.
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    Iran plans to complete new oil export terminal by year-end

    Iran expects to complete a pipeline and a terminal to export a new grade of crude by year-end, boosting the country's drive to ramp up oil production to pre-sanctions levels.

    A senior official from the National Iranian Oil Company said late on Monday that the terminal near Kharg Island in the Gulf would be ready to export the new grade of crude, known as West Kharoon, after the facilities were completed "sometime by the end of this year".

    Iran oil officials have said it will be ready to enter talks on a possible oil supply freeze with other OPEC members once it returns output to levels before sanctions were imposed on its crude imports over the country's disputed nuclear programme.

    "As soon as (the pipeline and terminal are) completed, we will be able to segregate and export this crude," Seyed Mohsen Ghamsari, director for international affairs at the National Iranian Oil Company, told Reuters.

    Initial production of the new grade may be just under 300,000 barrels per day, making it key in boosting Iranian production, he said. The grade was originally expected to be introduced to the market earlier this year.

    The crude blend will be of similar quality to Iraq's Basra Heavy crude, with an API gravity of between 22 and 26 degrees and a sulphur content higher than 2 percent.

    Ghamsari said earlier on Monday Iran is producing just over 3.8 million bpd of crude and could reach 4 million bpd in a few months.

    "We are ready to negotiate the level of production as soon as we come back to the production before sanctions," Ghamsari said, adding that output was a little higher than 4 million bpd before sanctions.

    A nod from Iran is key in getting members of the Organization of Petroleum Exporting Countries to agree to a deal to freeze production which could curb excess supply globally and support oil prices .

    Tehran's aggressive moves to recoup market share, lost under international sanctions, have paid off in Asia with July crude imports up 61 percent at 1.64 million bpd from a year ago.

    Still, crude exports to Asia and Europe, Iran's key markets, are expected to stabilise in September after sharp rises in the first half.

    For Iranian crude exports to Asia "there won't be significant change from July", Ghamsari said. He expects September exports to Europe to rise to 500,000 bpd, up 100,000 bpd from July.

    Iran remains in talks with Arab Petroleum Pipelines Company (SUMED) to lease storage tanks, although the producer has been able to increase exports to Europe without the facilities, Ghamasari said. Low freight rates have also reduced the cost of shipping Iranian crude to Europe, he added.

    In Iran, NIOC will reduce its gasoline imports and condensate exports once the first phase of its Persian Gulf refinery starts up by end-March 2017, he said.

    Gasoline imports have fallen this year as Iran uses more compressed natural gas to fuel cars, Ghamsari said without providing volumes.

    Separately, NIOC increased fuel oil exports this year to meet robust demand, especially for the straight-run 280-centistoke grade, he said.
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    Gazprom says 2 Bcm of natural gas sold at winter 2016 auction

    Russia's Gazprom Export sold 2 Bcm of natural gas to 11 companies during auctions Tuesday- Friday last week for 3-4 Bcm of gas offered for winter 2016-17 (October-March) delivery in Germany and Austria, the company said Monday.

    This was 1 Bcm more than was sold at the first ever Gazprom auction last year when the company sold 1.2 Bcm to 16 companies at German delivery points only.

    This year, the delivery points were offered at auctions on a take-or-pay basis for next winter included delivery in Austria and were: German Greifswald NEL or GASPOOL hub, Greifswald OPAL exempted, Olbernhau II, and Austrian Baumgarten or Arnoldstein.

    Most of the volumes were sold at the Greifswald NEL delivery point in Germany, almost one quarter or 500 million cu m was sold at Austria's Baumgarten, while nothing was sold at Greifswald Opal exempted point, a spokeswoman told S&P Global Platts Monday.

    Unlike last year, Gazprom did not reveal the details of the volume sold at each delivery point, nor the average price from the auctions.

    Last year, the prices turned out higher than spot and forward prices at European gas hubs, Gazprom said.

    But the company said it was satisfied with the auction results this year and it intends to pursue new auctions in parallel to its oil-indexed long-term contracts.

    "The fact that once again we have been able to sell additional gas volumes at the direction where we tested the first auction sales last year proves that this trading model worked not only once but is able to be used regularly," Gazprom Export director general Elena Burmistrova said Monday.

    "Gas sales on an auction basis complements our deliveries within the long-term contracts. We are aiming at conducting gas auctions in the future," she added.

    Gazprom said last year it could offer some 10% of its total supply to Europe via auctions in the 2017-2018 period. But it has not repeated this target so far this year.

    Some European gas traders polled by Platts said most of the volume might have been sold on Friday, when most reserve prices were below hub prices, or "in the money".

    On Friday for instance, some Czech traders told Platts the reserve price at Oberhau point was at German NCG hub price level, so in the money.

    But traders also said Monday they were surprised by the significant volumes sold at the Baumgarten delivery point.

    That delivery point gave an option for buyers to take delivery at Arnoldstein, opening the opportunity of onward transportation to Italy.

    But Italian traders told Platts last week the reserve prices had been too high given the transportation costs to reach Italy's PSV hub for winter.

    "This is surprising [the Baumgarten result]. Maybe the volumes will stay in Austria," said a European gas trader who participated in the auctions.

    On the Greifswald OPAL exempted, Gazprom's auctions were once again unsuccessful, with no gas sold.

    The Opal pipeline connects the Russian Nord Stream pipeline with Europe's gas transportation network. However, the European Commission allows Gazprom to use only half of the pipeline capacity for Russian gas to be delivered across Germany to the Czech Republic, with the other half reserved for third parties.

    Katja Yafimava, Senior Research Fellow at the Oxford Institute for Energy Studies told Platts Friday: "Such auction will reveal whether there is indeed any demand for capacity at OPAL exempted -- in terms of volumes and time periods -- and therefore whether the continuing refusal to allow Gazprom to use capacity is reasonable."
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    Petronet LNG’s net profit climbs 55 pct

    Petronet LNG, India’s largest importer of the chilled fuel, reported a 55 percent rise in its net profit for the quarter ended June 30.

    The company posted a net profit of 3.77 billion rupees for the quarter ended June 30, 2016 as compared to 2.44 billion rupees in the corresponding period a year ago.

    Total income decreased 36 percent to 53.86 billion rupees for the June quarter, Petronet said in a filing to the stock exchange on Monday.

    Petronet LNG recently commissioned the regasification facilities under the Dahej LNG terminal’s expansion project.

    The terminal has been expanded from 10 mtpa to 15 mtpa, with the remaining part of the expansion project, the two LNG storage tanks expected to be completed by October 2016.

    The company also owns the Kochi LNG terminal 5 mtpa Kochi liquefied natural gas terminal at Kochi, Kerala.
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    Saudi Oil Minister Says No Need Now to Freeze Crude Output

    There is currently no need to limit oil output, Saudi Energy Minister Khalid Al-Falih said on Monday, after signing an energy agreement with his Russian counterpart Alexander Novak.

    “There is no need now to freeze production,” Al-Falih said in an interview with Al Arabiya television in Hangzhou, China. “It is among the preferred options, but it is not necessary today. The market is improving day by day.”

    Crude prices gained more than 5 percent before Al-Falih and Novak made a joint statement, amid speculation that the two oil producers could reach an agreement to cap output. A similar proposal in April failed after Saudi Arabia insisted that Iran also participate. Russian President Vladimir Putin and Saudi Arabian Deputy Crown Prince Mohammed bin Salman met Sunday in Hangzhou and agreed to work together to ensure stability in the oil market.

    Al-Falih described Saudi Arabia’s agreement with Russia as “important” and said the two producers would continue to cooperate. The countries discussed several options to stabilize oil markets including a joint freeze on output, he said.

    Attached Files
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    Russia's Yamal LNG project on track and on budget, says Novatek

    Russia's Yamal LNG project, to build the country's second gas liquefaction plant, is on track and on budget with Novatek and its partners having invested $18.5 billion so far, Novatek's CEO said.

    The first phase of the project, in which Novatek is in partnership with France's Total and China's CNPC and the Silk Road Fund, is due to start operation some time next year and Novatek's chief executive said it was 76 percent ready.

    Russia is the world's biggest producer of conventional gas after the United States but wants to increase its production of liquefied natural gas (LNG), which currently accounts for less than 5 percent of world output.

    Investment in the Yamal project, which will require $27 billion in total, was at risk after Novatek came under Western sanctions over Moscow's role in the Ukraine crisis, but the project has since secured funding from Chinese and Russian banks, as well from the Russian government.

    "To date, we have resolved all issues related to Yamal LNG's financing," Leonid Mikhelson, Novatek's chief executive and a major shareholder, told reporters in comments cleared for publication on Monday. "In my opinion, we should implement similar projects on our own, not using (Russia state) budget financing in the future."

    The Yamal facility will have three production lines when it is completed, each with an annual capacity of 5.5 million tonnes of LNG.

    In April, Yamal LNG signed loan deals with Chinese banks worth over $12 billion. It also secured Russian state funds worth 150 billion roubles ($2.3 bln) from a rainy day fund and 3.6 billion euros ($4 bln) from state-controlled Russian lenders Sberbank and Gazprombank.


    Russia currently operates just one LNG plant, on the Pacific Island of Sakhalin, led by Gazprom, with an annual capacity of around 10 million tonnes.

    Sakhalin-2 plans to expand to add a third production line with 5 million tonnes of annual capacity some time in the future. The United States, Qatar and Australia, however, are also all expanding LNG production.

    Novatek, Russia's second biggest producer of conventional gas, plans to commission its second LNG project, Arctic LNG-2, by 2025 with planned LNG production of up to 16.5 million tonnes a year.

    Mikhelson declined to give a cost estimate for Arctic LNG-2 project and said that Novatek was not in a hurry to choose partners for the project.

    Japan Bank for International Cooperation (JBIC), which has signed up to help finance the Yamal project, is also ready to support the Arctic LNG-2 project, he said.
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    Despite cuts, Big Oil to expand production into the 2020s

    Never mind the drop in crude prices, huge spending cuts and thousands of job losses - the world's top oil and gas companies are set to produce more than ever for some time.

    While top oil companies struggle with slumping revenues following a more than halving of prices since mid-2014 after years of spectacular growth, their production has persistently grown as projects sanctioned earlier in the decade come on line.

    Overall production at the world's seven biggest oil and gas companies is set to rise by around 9 percent between 2015 and 2018, according to analysts' estimates.

    With an expected recovery in prices, the increased production should boost cash flow and secure generous dividend payouts, which had forced companies to double borrowing throughout the downturn.

    "There are a lot of projects coming on stream over the next three years that will support cash flow and ultimately dividend," Barclays analyst Lydia Rainforth said.

    And despite a drop in new project approvals, companies have throughout the downturn cleared a number of mammoth undertakings such as Statoil's Johan Sverdrop oilfield off Norway and Eni's Zohr gas development off the Egyptian coast.

    Others opted to acquire new production, such as Royal Dutch Shell, which bought smaller rival BG Group for $54 billion this year, and Exxon Mobil through investments in Papua New Guinea and Mozambique.

    Shell is expected to see the strongest growth among its peers over the next two years at 8 percent, according to BMO Capital Markets.

    Production is unlikely to drop after 2020, and could post modest growth as companies continue to bring projects onstream, albeit at a slower pace, BMO analyst Brendan Warn said.

    French oil major Total, for example, plans to clear three major projects by 2018 - the Libra offshore oilfield in Brazil, the Uganda onshore project and the Papua LNG project - that will begin production after 2020.

    "We won't see 5 to 10 percent growth that we've seen from companies in recent years. It will be closer to 1 or 2 percent," Warn said.


    Capital spending, or capex, for the sector is set to drop from a record $220 billion in 2013 to around $140 billion in 2017 before modestly recovering, according to Barclays.

    But companies have learnt to do more with the money after slashing expenditure and tens of thousands of jobs, while the cost of services such as rig hiring dropped sharply throughout the downturn.

    "2017 is the sweet spot for integrated companies. It took two to three years to adjust to the drop in oil prices, and a lot of the efficiencies introduced in recent years will roll into 2017, when projects kick in and free cash flow will improve," Rainforth said.

    The resilience is mostly due to new gas projects coming on stream as companies shift towards the less polluting hydrocarbon that is expected increasingly to displace oil demand in coming decades.

    The slower pace of project development after a decade of rapid growth that was accompanied by soaring costs will help companies, Warn said.

    "That is much more sustainable for a major that will reduce the number of large capex projects."
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    China's oil refineries running below 70% capacity

    China's oversupply of petroleum products will worsen, as its oil refineries are running below 70 percent capacity, said an industry insider Sunday.

    "Overcapacity has long plagued refineries, and the dipping of the global crude price has made overcapacity ever more prominent," said Cui Guanglei, deputy head of the refinery division of Sinopec Group, China's largest petroleum refinery.

    On the consumption side, China is using more gasoline and less diesel, Cui said. Sinopec saw overall petroleum sales rise 3.1 percent in the first half of the year, with gasoline up 12.5 percent but with diesel falling.

    Sinopec has been adjusting its production, trying to decrease the diesel-to-gasoline ratio of its products, but it is still under significant and increasing pressure from the consumption trend, Cui said.

    As a comparison, refineries in the United States have been operating at around 90 percent capacity this year, according the US Energy Information Administration.
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    After brief resurgence, China's oil demand falters yet again

    China's oil demand fell to 11-month lows in July on the back of erratic weather and feeble industrial growth, crushing hopes of a recovery in consumption which the market had expected after the country in June pulled itself out of the red for the first time in many months.

    But analysts are hopeful that the fall would be temporary and demand would recover in the remaining months of the year.

    Total apparent oil demand in the world's second-largest oil consumer fell to 10.75 million b/d in July, dropping 6.9% from June and witnessing the steepest year-on-year decline of 5.4% since January 2009, S&P Global Platts calculations showed.

    China's apparent oil demand in June had increased 1.8% year on year to 11.54 million b/d, which was 6.1% higher from May.

    "Apparent demand was dragged down by record high oil product exports in July, at around 860,000 b/d, a further reflection of overflowing supplies, overwhelming refiners," said Song Yen Ling, senior analyst at Platts China Oil Analytics.

    Demand for key oil products grew either in single digits or fell year on year in July.

    LPG, naphtha and jet fuel have largely been registering double-digit year-on-year growth in recent months.

    The slowdown in July pulled down apparent oil demand over the first seven months by 1% year on year to 11.12 million b/d, lower than the average of 11.19 million b/d seen in the first half of the year.

    Analysts said China's July real economic activity had disappointed, but they thought that would be temporary.

    Manufacturing PMI edged down to 49.9 last month from 50 in June, dipping below the 50 mark for the first time since March 2016, with value-added industrial production growing at 6% year on year, which was slower than the growth rate of around 6.2% in June.

    Fixed asset investment growth also softened to 8.1% in the year to date, slowing significantly from 9.8% in June and from 9.6% in May.

    Growth in fixed asset investment and industrial output are related to energy consumption.

    The National Bureau of Statistics partly attributed the slowdown to extremely hot weather and heavy rains following flooding.

    Citing government data, Standard Chartered Bank said around 60 million people were affected by flooding in July.

    The bank expects a modest pick-up in growth in H2, supported by post-flooding reconstruction, although sluggish private investment poses downside risks.


    Beijing does not release official data on oil demand and stocks. Platts calculates apparent or implied oil demand by taking into account official data on monthly product output at Chinese refineries and net imports.

    Apparent demand for gasoline in July fell by 4.1% year on year to 2.62 million b/d, the sharpest year-on-year fall since March 2010. It was also 5.45% lower than the average of 2.78 million b/d over the first seven months. Actual consumption would probably still witness single-digit growth because of destocking.

    In addition, extremely hot weather encouraged gasoline consumption for air-conditioners, which could partly offset the fall in demand because of heavy rains.

    The National Reform and Development Commission on August 26 said China's gasoline consumption in July increased 5.8% year on year.

    Gasoline demand also found some support from a 25.3% year-on-year increase in sales of gasoline-guzzling sport utility vehicles, which jumped 47.8% year on year in July, according to data from the China Association of Automobile Manufacturers.

    Moreover, gasoline stocks at the end of July retreated by 2.2% from the end of June, according to Xinhua.

    Actual gasoline demand also include blended gasoline, in addition to the barrels produced from the refining sector. Blended gasoline is not included in apparent demand calculations because of a lack of official data.

    It is hard to tell how many barrels of blended gasoline flowed in to domestic market in July, but heavy imports of mixed aromatics in 2016, used as blending material for gasoline, indicated the volume was unlikely to be low. China in July imported 669,737 mt of mixed aromatics, helping total inflows in the first seven months to surge 160% year on year to 7.41 million mt, data from the General Administration of Customs showed.

    Almost all of China's mixed aromatics imports go into the gasoline blending pool, with 3 mt of mixed aromatics needed to blend 10 mt of gasoline.


    Gasoil in July was also hit by hot weather and heavy rains, which disrupted construction, mining and transportation, pulling down apparent demand by 8.8% year-on-year in July to 3.17 million b/d, lower than the average of 3.3 million b/d in the first seven months and only slightly higher than the recent 70-month low of 3.14 million b/d recorded in May.

    The NDRC said that China's gasoil consumption in July fell 4.1% year on year.

    According to data compiled by Xinhua, China witnessed a 3.53% month-on-month gasoil inventory increase by the end of July, following a 6.29% stock draw at the end of June, It suggested that actual consumption would be lower than implied demand.

    Sinopec's chairman Wang Yupu said Monday that demand for gasoil was expected to fall further in line with structural changes in the Chinese economy.

    Apparent demand for jet fuel edged up by 1.5% year on year to 766,000 b/d in June, lower than the average demand growth of 7.4% year on year to 753,000 b/d in the January to July period.

    The slow growth in July was mainly due to heavy rainfall in the central and eastern regions in China, which resulted in widespread flight cancellations.

    The latest data from the Civil Aviation Administration of China showed that overall aviation traffic turnover continued to register growth, rising 14.1% year on year in June and by 12.5% in the first six months.


    Apparent demand for naphtha in July was at 949,000 b/d, with year-on-year growth dropping to 0.6% from double-digit levels over the previous eight months.

    But the slower growth rate was mainly because of a high base registered in July 2015.

    Apparent demand was still considered healthy, with average consumption hovering at 978,000 b/d in the first seven months, gaining 15.6% year on year. The growth was attributed to increasing production from independent refineries, which are increasingly using light feedstock to generate more light-end products than before. Production of naphtha rose 9.7% from July 2015, to 822,000 b/d.

    Inflows were mainly used as feedstock to produce ethylene, output of which grew 0.3% in last month to 1.46 million mt. This may explain the reason for the 34.7% year-on-year decrease in naphtha imports in July.

    Apparent demand for LPG rose 9.1% year on year to 1.48 million b/d in July, which was actually the lowest since March, and lower than the average of 1.51 million b/d for the first seven months of 2016.

    Market sources said actual consumption in July should be higher despite demand from the residential sector remaining low. Propane dehydrogenation plants were actually running at very high operation rates because of healthy profit margins, but the plants were consuming their existing stocks which were imported in previous months instead of processing new inflows.
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    Woodside buys Scarborough stake from BHP Billiton

    Australian energy company Woodside has entered into binding sale and purchase agreements to acquire half of BHP Billiton’s Scarborough area assets in the Carnarvon Basin, located offshore Western Australia.

    The acquisition includes a 25% interest in WA-1-R and a 50% interest in WA-62-R, which together contain the Scarborough gas field. Woodside will also acquire a 50% interest in WA-61-R and WA-63-R which contain the Jupiter and Thebe gas fields.

    Woodside will operate WA-61-R, WA-62-R, and WA-63-R. ExxonMobil is the operator of WA-1-R.
    Woodside will pay BHP Billiton $250 million on completion of the transaction and a contingent payment of $150 million upon a positive final investment decision to develop the Scarborough field. The effective date of the transaction is July 1, 2016.

    According to Woodside, the Scarborough area assets include the Scarborough, Thebe, and Jupiter fields, which are estimated to contain gross 8.7 trillion cubic feet of gas resources at the 2C confidence level. Woodside’s net share of the resources is estimated to be 2.6 trillion cubic feet of gas.

    Woodside CEO Peter Coleman said that adding Carnarvon Basin volumes to the Australian portfolio would complement Woodside’s growth strategy and leverage the company’s deepwater and LNG capabilities.

    “We look forward to working with ExxonMobil and BHP Billiton following completion of the transaction to progress commercialisation of these world-class resources,” he said.

    BHP Billiton President Operations, Petroleum, Steve Pastor said: “BHP Billiton considers the proposed sale to Woodside to be a positive outcome for all parties. Woodside is a strong partner with substantial LNG experience in Western Australia, and we believe they will contribute positively to the future development of the Scarborough resources.”

    Completion is subject to pre-emption rights and customary regulatory approvals and is targeted by year end 2016.
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    Permian Fields Profitable With Oil Below $30, Pioneer CEO Says

    Oil wells in the biggest U.S. oil field remain profitable even when crude prices drop below $30 a barrel, said Pioneer Natural Resources Co. Chairman and Chief Executive Officer Scott Sheffield.

    The so-called break-even price for drilling in the Permian Basin in Texas is “sub-$30” a barrel, Sheffield said during a Bloomberg Television interview on Friday. For shale drillers such as Irving, Texas-based Pioneer, “break-even” typically means operating costs plus a 10 percent or 15 percent return.

    Pioneer closed a $435 million acquisition of drilling rights across 28,000 acres in the Permian region from Devon Energy Corp. earlier this week. When the transaction was announced in June, Pioneer said wells drilled in the acquired assets will generate returns of 50 percent or more.
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    Texas drillers added jobs in July for first gain in 19 months

    Drillers across the state added about 100 new jobs in July, the first monthly gain since the Texas energy industry’s employment figures began falling dramatically in January 2015, economist Karr Ingham says.

    Texas upstream companies – oil producers, service companies and rig contractors – had shed more than 102,000 jobs since the beginning of last year, piling on losses month after month, but July’s small increase may be a sign things are finally turning around for the state’s energy workforce.

    “It’s not spectacular, but it’s a gain rather than a loss,” Ingham said. Ingham has not yet released the Texas Petro Index, a monthly report he prepares for the state’s oil industry. “I believe it’s a recovery in the making, but it’s a slow, frustrating and torturous one because prices aren’t going up as much as most people hoped. But the first thing was the bleeding had to stop, and it looks like we may be at that point.”

    A worker waits to connect a drill bit on Endeavor Energy Resources’s Big Dog Drilling Rig 22 in the Permian basin in 2014. (Brittany Sowacke/Bloomberg)

    Ingham noted the Texas Petro Index, which measures drilling and related activity in Texas, still contracted in July. August and September may yield bigger bumps in drilling activity metrics and jobs, though: Oil companies have resurrected 68 rigs across Texas in the past four months, bringing the state’s rig count to 241. Drilling permits in Texas also are on the rise.

    In the downturn, falling oil prices forced Texas oil companies to set down 733 rigs across the state as they cut jobs by the thousands. It was “a set of falling dominos,” Ingham said. “They’re being set up again.”

    Ingham, an Amarillo economist who studies the upstream oil industry in Texas, makes adjustments to Texas Workforce Commission numbers to reach his conclusions, stripping out some official figures associated with statewide mining jobs.
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    Oil rig count sees small hike despite rigs evacuating the Gulf

    Fourteen drilling rigs were added to onshore oil and gas fields this week, while seven offshore rigs were evacuated the Gulf of Mexico as Tropical Storm Hermine took shape.

    The net gain for the amount of rigs actively drilling is eight rigs — including the addition of one inland waters rig — with seven of the net additions drilling for natural gas and one primarily seeking oil, according to the weekly count from the Baker Hughes oilfield services firm. However, the oil rig count’s net gain is skewed because most of the evacuated offshore rigs likely were drilling for oil.

    The biggest gains came in Texas, Oklahoma and Wyoming. Texas’ Permian Basin and Eagle Ford shale regions each saw three rigs added this week. Nearly half of the nation’s active rigs are in Texas — 241 out of 497 rigs. The Permian alone accounts for 202 active rigs.

    The oil rig count stayed flat in the week prior after eight previous weeks of increases.

    The total rig count now is 497, up from an all-time low of 404 in May, according to Baker Hughes. Of the total, 407 of them are primarily drilling for oil. But the oil rig count is down 75 percent from its peak of 1,609 in October 2014, before oil prices began plummeting.
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    Petrobras Rises Most in Three Weeks After Cutting Workforce

    Petrobras rose the most in three weeks after completing a voluntary dismissal program to help reduce debt and adjust operations to lower oil prices.

    The dismissal plan ended on Aug. 31 with 11,704 employees signing up, Petrobras said in a statement Friday, adding that the numbers may change. It is in line with the offshore-producer’s original plan to save 33 billion reais ($10 billion) through 2020 by shedding 12,000 jobs. The initial severance cost is estimated at 4 billion reais, it said.

    Shares rose as much as 4.5 percent, the most since Aug. 11, and were up 3.7 percent at 13.88 reais at 11:32 a.m. local time. The company has slashed investments and kept domestic fuel prices stable amid the oil rout to improve cash flow and cut the largest debt load in the industry. The administration of President Michel Temer has pledged to reduce government interference in the state-run producer and implement policies aimed at lowering costs and increasing competition in the industry.

    Petrobras’s stock price has doubled in price this year after sinking to the lowest since 1999 in January.

    The country’s main oil union says the cuts are causing a brain drain at a company that needs experienced staff to extract crude from deep waters of the Atlantic Ocean. In 2013, Petrobras and its subsidiaries had a payroll of about 86,000.

    "The company is giving up a work force of 20,000 in only two, three years. You would need more than a decade to restore this kind of knowledge," Jose Maria Rangel, a leader at the FUP oil workers’ federation, said in a phone interview from Rio.

    Petroleo Brasileiro SA, as it is formally known, said it has implemented management training programs to guarantee the continuity and safety of operations as it cuts staff.
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    Oil Slips as Saudi-Russia Agreement Stops Short of Output Plan

    Oil fell as two of the world’s biggest producers stopped short of making concrete proposals to coordinate output, pledging instead to cooperate to ensure market stability.

    Futures lost as much as 0.9 percent in New York. Saudi Arabia and Russia agreed to work together to stabilize prices, without offering details on joint action, after Deputy Crown Prince Mohammed bin Salman and President Vladimir Putin met in China on Sunday. Crude rose the most in two weeks on Friday as Putin said he’d like OPEC and Russia to agree to an output freeze.

    Oil rallied last month amid speculation members of the Organization of Petroleum Exporting Countries and other producers would agree to a plan to limit output when they meet later this month in Algiers. A similar proposal, originally put forward in February, was derailed in April after Iran declined to cap its production.

    “At this stage, markets are probably just going to take the view that it needs to see some evidence, some tangible idea on what the agreement might actually amount to before responding to it,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “We will get a lot of statements about it but probably nothing really concrete until we get to the stage of the Algiers meeting.”

    OPEC Record

    West Texas Intermediate for October delivery fell as much as 38 cents to $44.06 a barrel on the New York Mercantile Exchange and traded at $44.28 at 1:52 p.m. in Hong Kong. The contract rose $1.28 to $44.44 on Friday, the biggest gain since Aug. 18. Total volume traded was about 48 percent below the 100-day average.

    Brent for November settlement lost as much as 43 cents, or 0.9 percent, to $46.40 a barrel on the London-based ICE Futures Europe exchange. The contract added 3 percent to $46.83 a barrel on Friday. The global benchmark crude traded at a $1.85 premium to November WTI.

    Putin said in an interview last week in Vladivostok that other producing countries now recognize Iran should be allowed to continue raising output since it was freed just months ago from international sanctions. The Russian president said at the time that he may recommend such a plan when he met with Prince Mohammed.

    Saudi Arabia led OPEC’s decision in 2014 not to cut output amid a global glut in order to protect market share and force out higher-cost producers. Group production rose to a record 33.69 million barrels a day in August, just under a third of global demand, a Bloomberg survey showed last week.
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    Oklahoma rocked by one of its strongest earthquakes

    One of the strongest earthquakes ever recorded in Oklahoma rattled the area northwest of Pawnee on Saturday, fuelling growing concern about seismic activity linked to energy production, a federal agency said.

    The magnitude 5.6 quake, which was felt from South Dakota to Texas, prompted the closure of some 35 wastewater disposal wells in the area, officials said.

    It shallow quake struck 9 miles (14 km) northwest of Pawnee in north-central Oklahoma at 7:02 a.m. CDT (1302 GMT). Its 5.6 magnitude matched a 2011 earthquake for the biggest on record in the state, the U.S. Geological Survey said.

    There were no immediate reports of injuries in Pawnee, where about 25 percent of the residents are Native Americans. Damage in the town appeared to be minor, and the Pawnee Nation declared a state of emergency for its area.

    Stonework litters the sidewalk outside an empty jewelry store at the corner of Sixth and Harrison in Pawnee, Oklahoma, U.S. September 3, 2016 after a 5.6 earthquake struck near the north-central Oklahoma town. REUTERS/Lenzy Krehbiel-Burton

    "You heard it before it happened," Pawnee resident Jasha Lyons Echo-Hawk said. "Watching my drawers all shake out and my headboard rattle, it felt like I was watching 'Paranormal Activity.' It felt like I was in a movie."

    Pawnee Mayor Brad Sewell said the tremor lasted nearly a minute, far longer than previous ones that lasted only a second or two. Part of the facade of an early 20th-century bank building fell into a downtown street, he said.

    The earthquake, which was only 4.1 miles (6.6 km) deep, could fuel concerns about the environmental impact of oil and gas drilling, which has been blamed for a massive spike in minor to moderate quakes in the region.

    Following the tremor, the state Corporation Commission ordered 35 wastewater disposal wells within a 500-square-mile (1,295-square-km) area to shut down, Governor Mary Fallin said via Twitter.

    Oklahoma has been recording 2-1/2 earthquakes daily of magnitude 3 or greater, a seismicity rate 600 times greater than before 2008, the Oklahoma Geological Survey (OGS) said.

    Oklahoma's economy is heavily dependent on energy production, which accounts for one of every four jobs in the state.

    Oklahoma geologists have documented links between increased seismic activity in the state and the injection into the ground of wastewater from oil and gas production, according to a report from a state agency last year.

    The drilling technique known as hydraulic fracturing, or "fracking," also generates large amounts of wastewater. The OGS report said fracking is responsible for only a small percentage of the total volume of injected wastewater.

    Zachary Reeves, a seismologist with the USGS National Earthquake Information Center in Golden, Colorado, said the agency had received reports of the Oklahoma quake from South Dakota, Wisconsin, Kansas, Missouri, Arkansas and Texas.
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    Russia's Gazprom, China's CNPC ink pipeline construction deal

    Russian gas giant Gazprom said on Sunday it had signed a contract with China National Petroleum Corp (CNPC) to build a section of the Power of Siberia gas pipeline under the Amur river.

    Gazprom CEO Alexei Miller and CNPC President Wang Yilin inked the deal at a meeting on the sidelines of the G20 summit in the eastern Chinese city of Hangzhou, Gazprom said in a statement.

    CNPC's pipe-building unit, China Petroleum Pipeline, will carry out the construction, Gazprom said.
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    Iran ready to raise oil output to 4 mln bpd depending on demand -NIOC

    Iran is ready to raise its oil production to 4 million barrels per day (bpd) in the next two to three months depending on market demand, a senior official from the National Iranian Oil Company (NIOC) said on Monday.

    "We can increase crude production based on market requirement," Seyed Mohsen Ghamsari, the director for international affairs at NIOC, said at the Argus Crude Forum.

    Iran's plans to return output to pre-sanctions levels of more than 4 million bpd comes just ahead of an informal meeting later this month among members of the Organization of the Petroleum Exporting Countries (OPEC) in Algeria, where they are expected to seek to revive a deal on freezing global output.

    OPEC's third-largest producer is currently producing a little over 3.8 million bpd, Ghamsari said.

    Attempts by OPEC and non-OPEC oil exporters to reach a pact on stabilising output levels earlier this year foundered because Iran, which is anxious to increase exports after the lifting of international sanctions, declined to participate.

    Tehran's aggressive moves to recoup market share that was lost under international sanctions targeting its nuclear programme has paid off in Asia, where its four biggest buyers raised their imports by 61 percent in July versus a year ago.

    Iran is also eyeing shipping supplies to new Chinese crude buyers via trading company Trafigura.

    Looking ahead, NIOC may raise its production capacity to 4.3 million bpd in the first quarter next year and eventually reach 5 million bpd in two to three years, Ghamsari said, noting that the bulk of any new production would be heavy crude.

    "We believe that the market is more in favour of heavier grades and that's why we are going to introduce a new one."
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    GLOBAL LNG-Prices slip as Nigeria shakes off output problems

    Asian liquefied natural gas (LNG) prices fell in a slow week as traders awaited the outcome of two tenders and Argentina turned away shipments due to mild weather curbing demand.

    A major tender expected from Egyptian Natural Gas Holding (EGAS) to buy 120 cargoes for 2017, which sources said could be launched this weekend, was the market focus.

    Bids under the Brent-priced tender will be due by October and awards are to be finalised by the end of November at the latest, one trading source said.

    "They are trying to extend credit terms to 120 days," he added. In December EGAS extended payment terms to 90 days from the previous 15 days due to a foreign currency crisis.

    Asian spot prices for October delivery traded at $5.30 per million British thermal units (mmBtu), 20 cents below last week's levels, trading sources said.

    Gail India is set to award a purchase tender for one October cargo on Friday, while Exxon Mobil's Papua New Guinea LNG export plant is offering a cargo loading in late September.

    Several cargoes changed hands in tenders.

    Indian Oil Corp bought two for October, and Conoco Phillip's Darwin project in Australia sold one each to Trafigura and Gunvor on a free-on-board basis, at $5.10 per mmBtu, traders said.

    BP sold a October cargo to Turkey's EGE Gaz for around $5.20 per mmBtu, trade sources said.

    On supply, Indonesian liquefaction plants at Bontang and Donggi Senoro offered additional shipments to their long-term partners and possibly spot buyers.

    The giant Gorgon facility in Australia is also set to offer more cargoes though spot tenders. The second production line at Gorgon is due to start up in the fourth-quarter and the third is to begin in the second-quarter 2017, a Chevron spokesman said.

    Angola LNG, shut for maintenance since July, may resume output before late September as two vessels, the Lobito and Soyo, are due to arrive at the plant by mid month, shipping data shows.

    Nigeria LNG shook off production disruptions caused by a pipeline leak last month with vessels now leaving the plant regularly.

    "The September loading programme shows no disruption to supply," one source said.

    In mid-August the plant canceled cargoes earmarked for project stakeholders, including 4-5 cargoes for Shell, 1 for Enel and 2 for Total, trade sources said.

    Algeria's Sonatrach was still heard offering cargoes for October loading, traders said.

    Argentina's state-run buyer Enarsa said it had canceled one shipment and delayed three cargoes until next year because of one of the warmest Augusts in a decade.
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    Ohio 2Q16 Utica Production – Who Produced O&G Where & How Much

    The Ohio Dept. of Natural Resources (ODNR) has just issued production numbers for the second quarter of 2016. 

    Compared with second quarter 2015, production numbers in 2Q16 were a mixed bag. Oil production in 2Q16 dropped by 19%–that’s the bad news. But natural gas production from shale is up 51% year over year–that’s the good news. 

    CONSOL Energy’s CNX Gas division had the #1 producing gas well in Monroe County, the Brewster well, producing 1.6 billion cubic feet of natgas during 2Q16. 

    Eclipse Resources had the #1 producing oil well in Guernsey County, the monster Purple Hayes, which produced an astonishing 71,072 barrels of oil in 2Q16. 

    Below we have the ODNR’s high level overview of the numbers, along with MDN’s own exclusive analysis showing: the top 25 producing gas wells, the top 25 producing oil wells, and then the top 25 gas and oil wells as ranked by average production per day.

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    Attached Files
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    Rice Energy Prime Prospect for M&A Buyout?

    One of the lowest cost producers that gets some of the highest prices for its natural gas in the Marcellus/Utica is Rice Energy.

    The difference between what it costs Rice to produce gas ($0.90/thousand cubic feet, or Mcf) verses what they sell it for (an average $3.12/Mcf) means Rice makes a whopping 247% internal rate of return, or IRR–which is THE most profitable driller among 10 of the largest Marcellus/Utica drillers surveyed

    The Rice boys’ stellar performance has not gone unnoticed by analysts at investment and research firms. In fact, one such analyst, from Wolfe Research, says Rice “could be” a target for takeover/buyout by a larger competitor.

    Attached Files
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    Enbridge announces delay of Sandpiper Pipeline Project

    Enbridge Inc, Canada's largest pipeline company, said it will withdraw its regulatory applications pending with the Minnesota Public Utilities Commission for the Sandpiper Pipeline Project.

    The long-planned and often-delayed Sandpiper pipeline project will be put on hold until crude oil production in North Dakota recovers sufficiently to support the pipeline's capacity, Enbridge said on Thursday in a statement.

    This comes against the backdrop of a dramatic decline in oil prices that has weighed on production in North Dakota's Bakken play.

    The company also said its $1.5 billion investment or 27.6 percent stake in the Bakken pipeline system, will be jointly funded 75 percent by Enbridge and 25 percent by subsidiary Enbridge Energy Partners.

    The Enbridge-Marathon Petroleum Corp joint venture will pay $2 billion to Energy Transfer Partners and Sunoco Logistics Partners for a 49 percent stake in the holding company that owns 75 percent of the system.

    Phillips 66 owns the remaining 25 percent of the Bakken Pipeline System. Once in operation, Sunoco Logistics will be the pipeline operator.
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    China's state crude oil reserves at 31.97 mln T by start of 2016

    China increased its strategic crude oil reserves by 22.5 percent between the middle of last year and the start of 2016, taking the total to 31.97 million tonnes (233 million barrels), the National Statistical Bureau said on Friday.

    The volume, equivalent to about 33 days of net oil imports to China, was higher than analysts had estimated.

    "Stockpiling over the second half of 2015 was faster than our calculation," Sengyick Tee of SIA Energy said. "The numbers look like more till the first quarter, mostly likely also including stockpiling by some independents."

    In its last update in December 2015, the government said it had 26.1 million tonnes, or about 190.5 million barrels, stockpiled by mid-2015.

    The world's largest consumer bought the crude as global prices sank 40 percent in the second half of 2015 to below $40 per barrel, testing fresh multi-year lows on evidence of a growing worldwide glut.

    The reserve is closely watched by analysts as a gauge of what proportion of China's oil imports is going into the reserves and how much is being refined and consumed.

    Stockpiling should pick up significantly in the fourth quarter, but slower oil demand and some delays in preparing storage tanks will likely drag on the growth rate, according to Michal Meidan of Energy Aspect.

    The current data includes strategic and some commercial stockpiles, the statistic bureau said. The government did not release a breakdown of the figure.

    Reuters reported that a private company has signed a preliminary agreement to provide oil storage for 2.6 million barrels of commercial state crude reserves.

    China intends to build crude reserves of 550 million barrels by 2020.
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    Canada’s Small-Cap Energy Stocks Set to Outpace U.S. in Catch-Up

    Canadian small-cap oil and gas stocks are poised to outperform U.S. peers as their moves to cut costs and lower debt begin to gain traction with analysts and investors.

    Analysts have increased their price targets for Canadian producers with market valuations of up to C$2 billion ($1.5 billion) more than equivalent U.S. peers. Canadian companies are expected to gain 21 percent over the next 12 months, compared with 13 percent for U.S. competitors, according to data compiled by Bloomberg.

    That valuation gap has made Canadian companies including Bonterra Energy Corp., Torc Oil & Gas Ltd. and Vermilion Energy Inc. attractive buys relative to U.S. peers, said Swanzy Quarshie, a money manager at Sentry Investments in Toronto.

    “There’s a lot more value in Canada because Canadian businesses’ capital requirements have gone down significantly,” said Quarshie, who helps oversee C$18 billion in assets. “The stocks are really well priced.”

    The higher price targets suggest the Canadian energy stocks may reverse six months of lagging returns. U.S. stocks have gained 34 percent more than their Canadian peers in the six months to Aug. 31, according to the data, which analyzed 59 Canadian companies.

    Two years into a commodity-price downturn, executives in Canada’s oil and gas hub have sold assets, raised equity and looked for ways to scale back costs. Investment since the slump began in 2014 has been slashed the most since 1947, according to the Canadian Association of Petroleum Producers.

    Low Costs

    Canadian companies remember the importance of controlling debt and keeping costs low from the collapse of petroleum prices after 2008 and the recession that followed, said Robert Mark, director of research at MacDougall, MacDougall, McTier in Toronto, which oversees C$6 billion in assets.

    “There’s definitely better upside on the Canadian side,” he said “The Canadian guys learned their lesson post-2008.”

    Investors gave a boost to U.S. shale producers over the past two quarters as crude almost doubled from a 12-year low in February to almost $50 a barrel in June. That encouraged some companies including Oklahoma City-based Continental Resources Inc. to return crews to finish wells left uncompleted when prices began to tumble two years ago.

    Continental’s shares have more than doubled over the past six months, while Oasis Petroleum Inc. of Houston has gained 69 percent. Canadian share gains have been modest in comparison.

    Vermilion Gains

    Vermilion has risen 26 percent over the past six months. The company, while posting a loss in the second quarter, has targeted as much as C$50 million in cost reductions and has lowered per unit expenses by 18 percent. Vermilion has exposure to global prices and “flexibility to allocate capital,” said Kyle Preston, a company spokesman. The producer expects a “modest” increase in spending next year, he added.

    Torc Oil & Gas Ltd. has gained 21 percent over the same period. The Calgary-based producer arranged financing worth C$75 million as part of a bought deal, has a bank facility of C$400 million and has hedged as much of 60 percent of its production against commodity price fluctuation. Chief Financial Officer Jason Zabinsky wasn’t available to comment.

    “The Canadian oil and gas space continues to look more attractive than the U.S. space on most 2017 metrics,” Chris Feltin, an analyst at Macquarie in Calgary, wrote in a note. “Many companies have taken dramatic steps over the last year to address their leverage issues, including asset sales, more focused capex programs, and opportunistic hedging.”

    Birchcliff, which has gained 74 percent in the past six months, is the “most attractive name” in North America, Feltin said. The company in July purchased assets from Encana Corp. in Alberta’s Gordondale region, giving a boost to the stock whose largest shareholder is resource investor Seymour Schulich.

    Price Sensitive

    Smaller oil producers are generally more responsive to fluctuations in commodity prices than larger companies such as Suncor Energy Inc. and their prices have more potential to rise along with petroleum, analysts said.

    Still, there may yet be trouble ahead for Canadian petroleum companies. The rebound in U.S. crude prices from a low of about $26 a barrel this year hasn’t pushed oil high enough for most companies to start investing in new production.

    Oil has recovered almost 70 percent from the February doldrums, and recently fell below $45. Most companies say they need prices to rise to between $50 and $60 before new investment can be considered.

    In addition, investors have raised concerns about a sinking Canadian dollar, pipeline access and increased regulation. Those have helped keep stock gains in check.

    For now, if oil continues its slow climb back to more than $50 by the first quarter of 2017, as forecast by analysts surveyed by Bloomberg, Canadian producers’ parsimony and careful approach will pay off.

    “There’s more impetus for Canadian companies to be prudent,” said Quarshie. “They’re at the back of the line in getting product to market.”
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    Rosneft, BP, Schlumberger Sign Seismic Exploration Deal

    Rosneft, BP and Schlumberger have reached a deal on joint research and development of seismic exploration technologies.

    A RIA Novosti correspondent reported Friday from the signing ceremony. The document provides for Rosneft to become a full partner in a project carried out by BP and Schlumberger subsidiary WesternGeco on wireless seismic data acquisition on land.

    Read more:
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    Alternative Energy

    Dong installs world's largest wind turbines off UK coast

    Dong Energy has installed the first of the world's largest wind turbines, which are taller and wider than the London Eye, at its Burbo Bank windfarm off the coast of Britain in the Irish Sea, it said on Thursday.

    The 32 turbines, made by Vestas, will each be able to generate 8 megawatts (MW) of electricity, stand 195 metres tall from sea level and have a rotor diameter of 164

    "This will be the first commercial deployment of the world's largest wind turbines," Benj Sykes, Dong's UK country manager for wind power, told Reuters.

    Combined, the 32 turbines will create enough electricity to power around 230,000 homes.

    The largest turbines currently installed, at Dong's Westermost Rough wind farm off the Yorkshire coast, in the North Sea, have a 6 MW capacity and are around 177 metres tall.

    Britain is seeking new electricity generation to replace its aging coal and nuclear power stations and has said around 10 gigawatts of offshore wind capacity could be installed by the end of the decade.

    The extension to the existing Burbo Bank wind farm, which comprises of 25 smaller 3.6 MW turbines, will likely be completed by the first half of 2017.

    "Using larger turbines is a critical part of the industry's drive in getting costs down," Sykes said.

    "Each turbine needs foundations, cables to an onshore substation and maintenance, so the more megawatts you can generate from each turbine, the lower the overall cost per MW."

    Dong has a target to drive down costs of offshore wind power to 100 euros ($112.48) per megawatt hour (MWh) by 2020.

    The Burbo Bank extension has already secured a minimum price for the electricity generated through Britain's contracts for difference (CfD) scheme of 150 pounds ($200) MWh for 15 years.

    Britain's government has said its next round of CfD renewable funding will focus on offshore wind, but the subsidies will be dependent on the wind industry's ability to drive down its costs.
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    France plans to tender 1.35 GW rooftop solar plants to reach PV goals

    France plans to launch tenders for 1,350 MW of new solar rooftop panels to reach its ambitious solar PV targets, French energy minister Segolene Royal said Tuesday on her twitter account.

    According to a press report, this will comprise three tenders for 450 MW each to be held in 2017, 2018 and 2019. Royal's ministry officially launched last month the tender process for the construction and operation of 3,000 MW of new ground-based solar PV power plants.

    Those tenders are divided into six 500 MW rounds, with one to be held every six months and the first round of bidding to end on February 1, 2017.

    Realization of the ground-based projects that will benefit from the new support mechanism will be between 2017 and 2020 with the timing ensuring stability and visibility for the entire chain contributing to the creation of green jobs, it said.

    Royal hopes to boost solar capacity from a current 6,700 MW to 10,200 MW by the end of 2018, with an even more ambitious target for over 20,000 MW by 2023.

    Last year, France added some 900 MW of new solar capacity, including Europe's biggest solar farm -- Neoen's 300 MW PV project near Bordeaux which was completed in less than a year.

    In the first half of 2016, some 570 MW of new solar projects were connected to the grid bringing French solar capacity to around 6,700 MW by the end of June, data from grid operator RTE shows.

    According to Platts Renewable Power Tracker, solar output in the first eight months of 2016 was up 8% at 6 TWh with July and August the first months with above 1 TWh solar output and midday solar peaks now at 4.7 GW.
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    A flue gas first for South Korea

    A new chapter in flue gas cleaning technology has opened in South Korea with the successful performance test of a flue gas desulphurization plant based on circulating dry scrubber technology,

    Two years ago, South Korean electricity company Gunjang Energy decided to install a new unit, called Seagull, at its existing power plant at Gunsan city.

    The circulating fluidized bed (CFB) boiler size was 275 MW and it needed to fulfil strict emission requirements which came into force in January 2015. Therefore, a suitable flue gas desulphurization (FGD) technology to meet this limit became mandatory. Gunjang Energy wanted to install the most economical FGD technology for these demands, and therefore selected circulating dry scrubber (CDS) technology. The contract was awarded to Hamon Korea in June 2014 and commercial operation started on 18 May 2016.

    The basic principle underlying a CDS is the removal of gaseous components and a downstream filter for dust removal. The flue gas from the upstream boiler flows through the CDS and then a filter, and is released into the atmosphere via induced draft fans and stack.

    The main component for the removal of waste gases is the CDS with the high solid concentration situated inside it. These solids contain the dust brought in by the raw gas, a metered quantity of hydrated lime as the absorbent, and over 90 per cent of FGD product, recirculated from the downstream arranged filter. Figure 1 shows the arrangement of the whole CDS system.

    The FGD is located downstream of the air preheater in the power plant arrangement. The CDS system itself consists of a CDS absorber, a low pressure fabric filter with eight chambers for dedusting downstream of the CDS absorber, the connecting ductwork including the recirculation duct, the ID fans downstream of the fabric filter and the connection to the stack. All equipment has been installed in a compact and space-saving way.
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    Cost of renewable may keep falling, IRENA

    The cost of renewable energy has fallen dramatically and will continue to do so, while investment has reached record levels and additions to global capacity have set new highs, said Adnan Amin, director-general of the International Renewable Energy Agency.

    According to a report published by IRENA, by 2025, average electricity costs for solar photovoltaics could fall by 59%, offshore wind power costs could fall by 35%, and onshore wind power costs could see a 26% reduction, compared with the level last year.

    The improvements can be attributed to the G20's strong commitment to non-fossil fuels, said Amin.

    G20 energy ministers and officials met in Beijing in June, ahead of the upcoming G20 Summit in Hangzhou, capital of Zhejiang province, acknowledging the progress made in scaling up renewable energy.

    By 2025, the global average cost of electricity from solar PV and onshore wind power sources will be roughly 5 to 6 US cents per kilowatt-hour.

    Electricity prices for concentrated solar power could also fall by as much as 43%, depending on the technology used, according to the report, which highlighted the significant cost differences that exist today and signaled strong potential for future cost reductions for G20 members.

    "Given that solar and wind are already the cheapest source of new generation capacity in many markets around the world, this further cost reduction will broaden that trend and strengthen the compelling business case for switching from fossil fuels to renewables," Amin said.

    As of 2016, 173 countries have set renewable energy targets, up from 43 in 2005.

    To facilitate the sharing of best practices, IRENA and the International Energy Agency continually update their joint IRENA/IEA Policy and Measures Database, which contains more than 700 policies for G20 members.

    The continuing cost reductions have resulted in growing investment in the renewable energy sector. Last year, a record $286 billion was invested in renewable sources, 3% higher than the previous record in 2011, according to IRENA.

    "But to increase deployment of renewable energy to the levels needed to meet global climate and development goals, this figure must double by 2020 and more than triple by 2030," the report said.

    China is playing a vital role in the global renewable markets by leading investment and newly installed generation capacities.

    Globally, investment in fossil fuels was less than half the amount invested in renewable energy last year, and it's estimated that by 2040 two-thirds of energy projects valued at $11.4 trillion will be in the renewable sector.

    Since 2009, the price of solar PV modules has fallen roughly 80%, while the price of wind turbines has declined by 30%-40%, mainly as a result of the expansion of generation capacity.

    IRENA said that by 2025 cost reductions for renewable energy will increasingly depend on technological innovation, operating and maintenance costs, and quality project management.
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    Coal India pushes into solar

    Coal India is diversifying its core business through a plan to install 600 megawatts of solar power in four states.

    The announcement, is part of an agreement with the Solar Energy Corporation of India (SECI) to build 1,000 megawatts of solar capacity throughout the country between 2014 and 2019.

    "In the first phase, CIL is going to set up 2×100 MW solar power plants in the state of Madhya Pradesh. In the second phase CIL is going to develop a capacity of 600 MW in the solar parks of Madhya Pradesh, Chhattisgarh, West Bengal and Maharashtra for which NIT [Notice Inviting Tender] has already been floated by SECI," the world's largest coal producer said in its annual report.

    India is the third-largest producer of coal, behind China and the U.S. Yet it relies heavily on imports because of mismanagement and an onerous bureaucracy in coal exploration, production and power generation. As a result, nearly a quarter of India's 1.2 billion people have no electricity, according to the World Bank.

    The Indian government is well aware of the problem and has been actively pushing to not only produce more coal domestically, but also to diversify its energy mix.

    “The world must turn to (the) sun to power our future,” Prime Minister Narendra Modi said at the 2015 COP21 climate conference. “As the developing world lifts billions of people into prosperity, our hope for a sustainable planet rests on a bold, global initiative.” That plan is to derive 40 percent of its energy from renewable sources by 2030, including 100 GW of solar energy by 2022. The target is ambitious, since India currently only has about 8 GW of installed solar.

    However strides are being made. A new report by Mercom Capital Group says that India is likely to install 4.8 GW of solar capacity in 2016. The clean energy communications and research firm also said the solar project pipeline in India is now about 21 GW, with 14 GW under development and 7 GW scheduled to be auctioned, as reported Sunday by Economic Times.
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    Wind Power Curtailment in China Expected to Increase in Second Half of 2016

    Aggregate wind power curtailment across China grew to 32.3 billion kWh during the first seven months of 2016, an increase of 14.8 billion kWh over the same period of 2015, according to data from the National Energy Administration of China (NEA). The number was very close to the 33.9 billion kWh recorded for the whole of 2015. The country’s average wind power curtailment rate grew by 6 percentage points year on year to a record 21 percent.  

    In particular, wind power curtailment in the northwestern part of China was 15.5 billion kWh, representing an average curtailment rate of 38.9 percent. In three regions — Ningxia Hui Autonomous Region, Xinjiang Uyghur Autonomous Region and Inner Mongolia — the amount of curtailment for the first six months of the year was equivalent to or exceeded that recorded for the whole of 2015.  Curtailment in Gansu province surpassed that recorded for the first half of 2015. Several factors, including the amount of available heat supply for the upcoming winter and the decline in electricity load, point to the level of curtailment across the entire country showing a further rise during the second half of this year, according to industry analysts.

    Statistics show that China’s installed capacity of wind power as a result of the completion of new facilities grew by 9.03 GW to 138 GW during the first seven months of this year. Aggregate wind power production reached 120.9 billion kWh, a rise of 14.8 percent over the same period of 2015. July production jumped 25.9 percent year on year to 14.9 billion kWh.

    According to data from the NEA, the country’s grid-connected wind power capacity showed a year on year gain of 30 percent to 1.37 GW during the first half of 2016. Accumulated on-grid electricity from wind totaled some 120 billion kWh, a year on year rise of 23 percent, while the average utilization time of wind farms declined by 85 hours to 917 hours.

    In particular, wind power production in the northwestern part of China was 24.4 billion kWh during the first half of this year, accounting for 8.2 percent of the region’s total power production. Grid-connected wind power capacity also climbed by 0.4 GW to 37.4 GW, accounting for 18.7 percent of the total installed capacity. The region’s average utilization time of wind farms clocked in at 688 hours.

    Notably, Yunnan province ranked first across China in terms of the growth in grid-connected wind power capacity during the first half of this year, with grid-connected capacity jumping by 2.15 GW, followed by Jiangsu province with 0.68 GW, Jilin province with 0.61 GW, and Shandong province with 0.54 GW. Yunnan province, with average utilization time of 1,441 hours, laid claim to be the most productive region across the country, followed by Sichuan province with 1,377 hours, Tianjin with 1,266 hours and Fujian province with 1,166 hours. The poorest performers were Xinjiang with 578 hours, Gansu with 590 hours, Jilin with 677 hours and Ningxia with 687 hours.
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    Blowing bubbles to catch carbon dioxide

    Sandia National Laboratories and the University of New Mexico (UNM) have created a powerful new way to capture carbon dioxide from coal- and gas-fired electricity plants with a bubble-like membrane that harnesses the power of nature to reduce CO2 emissions efficiently.

    The CO2 Memzyme design captures carbon dioxide from coal-fired power plants and is 10 times thinner than a soap bubble. CO2 is a primary greenhouse gas, and about 600 coal-fired power plants emitted more than a quarter of total U.S. CO2 emissions in 2015.

    When you include emissions from natural gas plants, the figure goes up to almost 40 percent.

    Current commercial technologies to capture these emissions use vats of expensive, amine-based liquids to absorb CO2. This method consumes about one third of the energy the plant generates and requires large, high-pressure facilities.

    The Department of Energy has set a goal for a second-generation technology that captures 90 percent of CO2 emissions at a cost-effective $40 per ton by 2025. Sandia and UNM’s new CO2 Memzyme is the first CO2 capture technology that could actually meet these national clean energy goals. The researchers received a patent for their innovation earlier this year.

    It’s still early days for the CO2 Memzyme, but based on laboratory-scale performance, “if we applied it to a single coal-fired power plant, then over one year we could avoid CO2 emissions equivalent to planting 63 million trees and letting them grow for 10 years,” said Susan Rempe, a Sandia computational biophysicist and one of the principal developers.

    Membranes usually have either high flow rates without discriminating among molecules or high selectivity for a particular molecule and slow flow rates. Rempe; Ying-Bing Jiang, a chemical engineering research professor at UNM; and their teams joined forces to combine two recent, major technological advances to produce a membrane that is both 100 times faster in passing flue gas than any membrane on the market today and 10-100 times more selective for CO2 over nitrogen, the main component of flue gas.

    By combining a water droplet loaded with CO2 enzymes in an ultrathin nanopore on a flexible substrate, researchers at Sandia National Laboratories realized the first technology that meets and exceeds DOE targets for cost-effective CO2 capture.Stabilized, bubble-like liquid membrane

    One day Jiang was monitoring the capture of CO2 by a ceramic-based membrane using a soap bubble flow meter when he had a revolutionary thought: What if he could use a thin, watery membrane, like a soap bubble, to separate CO2 from flue gas that contains other molecules such as nitrogen and oxygen?Thinner is faster when you’re separating gases.

    Polymer-based CO2 capture membranes, which can be made of material similar to diapers, are like a row of tollbooths: They slow everything down to ensure only the right molecules get though. Then the molecules must travel long distances through the membrane to reach, say, the next row of tollbooths. A membrane half as thick means the molecules travel half the distance, which speeds up the separation process.

    CO2 moves, or diffuses, from an area with a lot of it, such as flue gas from a plant that can be up to 15 percent CO2, to an area with very little. Diffusion is fastest in air, hence the rapid spread of popcorn aroma, and slowest through solids, which is why helium slowly diffuses through the solid walls of a balloon, causing it to deflate. Thus, diffusion through a liquid membrane would be 100 times faster than diffusion through a conventional solid membrane.

    Soap bubbles are very thin – 200 times thinner than a human hair – but are fragile. Even the lightest touch can make them pop. Jiang and his postdoctoral fellow Yaqin Fu knew they would need to come up with a way to stabilize an ultra-thin membrane.Luckily, his colleague Jeff Brinker, another principal developer who is a Sandia fellow and regent’s professor at UNM, studies porous silica.

    By modifying Brinker’s material, Jiang’s team was able to produce a silica-based membrane support that stabilized a watery layer 10 times thinner than a soap bubble (JACS, "Sub-10 nm Thick Microporous Membranes Made by Plasma-Defined Atomic Layer Deposition of a Bridged Silsesquioxane Precursor"). By combining a relatively thick hydrophobic (water-fearing) layer and a thin hydrophilic (water-loving) layer, they made tiny nanopores that protect the watery membrane so it doesn’t “pop” or leak out.

    Enzyme-saturated water accelerates CO2 absorptionEnzymes (the –zyme part of Memzyme; the mem– comes from membrane) are biological catalysts that speed up chemical reactions. Even the process of CO2 dissolving in water can be sped up by carbonic anhydrase, an enzyme that combines CO2 with water (H2O) to make super soluble bicarbonate at an astounding rate of a million reactions per second. This enzyme can be found in our muscles, blood and lungs to help us get rid of CO2.
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    Turkey formally announces nuclear energy agreement with China

    Turkey published in its official gazette a deal with China for cooperation in the peaceful use of nuclear energy on Friday, a step needed to open the way for China to potentially build Turkey's third nuclear power plant.

    The deal was originally signed in 2012 but such international agreements only go into effect in Turkey once they are published in the gazette.

    Russia is building Turkey's first nuclear plant, while a Japanese-French consortium will build its second in the north. China is among countries interested in building a third plant.
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    Bayer exploring sale of dermatology business to push forward its deal with Monsanto

    German chemicals and crop pesticides firm Bayer AG is exploring the sale of its dermatology business to push forward its deal with Monsanto Co, Bloomberg reported, citing sources.

    Bayer is working with JPMorgan Chase & Co (JPM.N) on the sale, which could fetch more than 1 billion euros ($1.12 billion), the report said. (

    Bayer said on Monday it was willing to offer more than $65 billion, a 2 percent increase on its previous offer for the world's largest seeds company Monsanto.

    The dermatology business could attract interest from existing makers of skincare products including Nestle SA's (NESN.S) Galderma, Allergan Plc (AGN.N) and Almirall SA (ALM.MC), as well as private equity firms, according to the Bloomberg report.

    Bayer and J.P. Morgan were not immediately available for comment.
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    Not Everyone Will Be Onboard If Potash Corp Acquires Agrium

    While it's true that the merger of equals being considered between PotashCorp (NYSE:POT) and Agrium(NYSE:AGU) won't run into many regulatory hurdles in Canada, that's not to say that everyone will be supportive of the two crop nutrition giants joining together. In particular, U.S. farmers would likely be outspoken critics of the deal.

    One-stop shopping

    PotashCorp and Agrium say they're discussing a merger, but nothing concrete is on the table. A deal might not happen. But if it did, Reuters reports that analysts at National Bank estimate the result would be a massive crop nutrient producer that controlled 62% of potash capacity, 30% of phosphate, and 29% of nitrogen.

    Pick up a bag of fertilizer and you'll see the letters N-P-K on the packaging, referring to the percentages of nitrogen, phosphorus, and potassium it contains. These crop nutrients are essential for plant growth whether in a backyard garden or on biggest commercial agricultural operations, and the trio of PotashCorp, Agrium, and Mosaic (NYSE:MOS) are the leading producers in North America. They also jointly own Canpotex, the potash marketing and distribution association that negotiates with foreign purchasers.

    It's because the three companies already work in concert in selling potash that many industry observers suspect a merger between PotashCorp and Agrium would have little impact on pricing, as their output would continue to go through Canpotex. And because both companies are Canadian, the deal wouldn't run afoul of the country's Investment Canada Act, which ultimately prevented Australia-based BHP Billiton (NYSE:BHP) from acquiring PotashCorp in 2010.

    Seeding the fields of doubt

    Potash -- and much of the rest of the fertilizer market -- is suffering from a period of depressed pricing that was brought on by the collapse of the commodities bull market, and then deeply exacerbated by the 2013 breakup of the other big international potash cartel, between the Russian and Belorussian producers. As the two vied for market share, supply outpaced demand, causing prices for the crop nutrient to plunge.

    Belorussian producer Belaruskali, which had been half of that cartel, recently signed contracts with India and China for potash at prices  30% below those from 2015, which were already discounted from the price when the cartel disbanded. The depressed market has caused producers to try to take capacity offline to balance supply with demand and bolster prices. BHP Billiton, for instance, may not move forward with its massive Jansen mine in Saskatchewan if the pricing environment doesn't improve, and Mosaic recently laid off 330 workers after suspending production at its Colonsay mine. PotashCorp has also temporarily closed some mines.

    What PotashCorp really wants

    Yet it's not so much Agrium's crop nutrient production PotashCorp is interested in: Agrium is also the largest farm retailer in North America, with $5.8 billion in reported retail sales in the second quarter. That's a 6% drop year over year, but the decline mostly stemmed from the lower prices crop nutrients were getting. Segment gross profits, on the other hand, were up 1.2% year over year, at near-record levels.

    Agrium's retail operations comprise more than 1,400 outlets, 63 terminals, seven plants, and 17 distribution centers in North America, South America, and Australia. They generated $12 billion in revenues last year -- more than three times the sales it generated from its global wholesale business, which produces, markets, and distributes all major crop nutrients for agricultural and industrial customers. It just announced it was acquiring two more retail operations that would add 34 more stores in the U.S. and Canada.

    PotashCorp doesn't have a retail network like that, and gaining access to Agrium's would help it weather the volatility of the commodities market better. Over the past five years, Agrium's stock has returned some 12%, while PotashCorp shares have experienced a 70% decline.

    Not a bumper crop of profits

    U.S. farmers, though, are already under pressure from their own low-pricing environment for their crops. Corn today goes for a little more than $3 per bushel, nearly half of what it was getting just a few years ago, while wheat has fallen by a like percentage. They're also being cornered by consolidation underway in the seed and chemicals markets: Syngenta is being acquired by China National Chemical; Dow Chemicaland DuPont are looking to merge; and GMO seed giant Monsanto (NYSE:MON) is being pursued byBayer.

    The Justice Department is also trying to thwart John Deere's (NYSE:DE) plan to acquire Monsanto's precision planting technology business for being anticompetitive, too, so a situation in which there were fewer companies from which to buy fertilizer and crop protection products doubtless wouldn't sit well with them. Canadian farmers probably wouldn't be ecstatic either.

    The deal may still get a pass from regulators because there are low-cost international suppliers, but the idea of Canadian and U.S. farmers being forced to shop for those vital supplies in Eastern Europe may not sit well. It could end up being the tractor lobby that causes this merger of equals to fall apart.
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    BASF warns crop protection markets to remain challenging

    BASF warns crop protection markets to remain challenging

    BASF, the world's third-largest crop chemicals supplier, became the latest player in the industry to warn that agricultural markets would remain volatile and challenging.

    The German group reiterated that its crop protection unit would seek to match last year's profitability in 2016, "which is a stretch but that's our commitment," the unit's head Markus Heldt said at a news conference at BASF's Ludwigshafen headquarters.

    Among farmers, there is "a wait and see mentality with regard to investment and spending on crop protection," said BASF's Harald Schwager, management board member in charge of the unit.

    The crop protection and seeds industries have been hit by low prices for agricultural produce, Latin American farmers struggling to get bank credit for procurement expenses and weak emerging-market currencies.

    BASF's crop protection division in 2015 chalked up earnings before interest and tax (EBIT) before special items of 1.1 billion euros ($1.23 billion) over sales of 5.8 billion euros, a margin of 18.7 percent.

    The group, which also produces industrial chemicals, engineering plastics, oil and gas, has remained on the sidelines of major consolidation moves in the agricultural industry. It said on Tuesday it would lie in wait for antitrust-related selloff of businesses as rivals merge.

    German rival Bayer said over night that merger negotiations with Monsanto Co had advanced and that it was willing to sweeten its offer to more than $65 billion to acquire the world's largest seeds company.
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    ChemChina extends public tender offers for Syngenta to November 8

    ChemChina extends public tender offers for Syngenta to November 8

    ChemChina on Tuesday extended by almost two months the deadline for Syngenta investors to tender their shares as the Chinese company seeks to complete a $43 billion takeover of the Swiss pesticides and seeds group.

    Investors in Basel-based Syngenta now have until Nov. 8 to tender their shares unless this is further extended, ChemChina said in a statement. The previous deadline, which had already been prolonged, was Sept. 13.

    "All of the other terms and conditions of the tender offers remain unchanged and ChemChina continues to expect to conclude the transaction by the end of the year," ChemChina said.

    The companies are awaiting some regulatory approvals for the deal and need to keep the tender offer open during this period, a Syngenta spokeswoman said.

    Syngenta stock had eased 0.1 percent to 432.30 Swiss francs by 0905 GMT (0505 ET), still below the offer price of $465 per share in cash plus a special dividend of five Swiss francs.

    At current exchange rates, the offer is worth nearly 461 francs a share including the special dividend.

    Clearance for the takeover last month from a U.S. national security panel removed significant uncertainty over the deal.

    Several U.S. lawmakers and groups representing farmers had expressed fears over a Chinese state-owned company being in a position to influence the U.S. food supply.

    The United States reviewed the deal because more than a quarter of the company's seeds and crop protection revenue last year came from North America.

    The current discount to the offer price, stemming from some uncertainty whether the deal will go ahead, has slowed down the tender process, one asset manager said.
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    Bayer sweetens Monsanto bid as talks enter final stretch

    German pharmaceutical and crops manufacturer Bayer AG said on Monday that its negotiations with Monsanto Co had advanced, and that it was now willing to offer more than $65 billion to acquire the world's largest seeds company.

    Bayer's announcement came as the gap in price expectations between the two companies has narrowed significantly, although important terms, including potential divestitures in case of antitrust scrutiny, have yet to be agreed on.

    Bayer in a statement said that it was prepared to offer $127.50 per share in connection with a negotiated deal, up from its previous offer of $125 per share. The Bayer statement confirmed a report by German daily Rheinische Post earlier on Monday.

    Rheinische Post also reported, citing sources which it did not identify, that an offer of $130 per share may be necessary to clinch a deal with Monsanto "in a swift and friendly way."

    In a brief statement, Monsanto said on Monday it had been engaged in "constructive" negotiations with Bayer, during which it received the updated non-binding acquisition proposal for $127.50 per share in cash.

    The Saint Louis-based company added that it was continuing these conversations as it evaluated Bayer's offer, as well as proposals from other parties it did not name. It cautioned that there was no certainty that any deal would occur.

    Bayer's bid was already the largest all-cash proposed takeover on record. A deal with Monsanto would give the German company a shot at grabbing the top spot in the fast-consolidating farm supplies industry.

    ChemChina agreed earlier this year to buy Switzerland's Syngenta for $43 billion, after the latter rejected takeover approaches from Monsanto. Dow Chemical Co and DuPont are forging a $130 billion merger, which is to be followed by a break-up into three businesses.

    In July, Bayer raised its earlier offer of $122 per share to $125 to put Monsanto under pressure to engage further.

    Monsanto subsequently turned down Bayer's $125 a share offer, but said it was open to further talks with the German company, as well as other parties.

    Reuters reported last month that Monsanto's talks with Bayer were making progress, with the latter receiving some limited access to Bayer's books.

    Since then, negotiations have advanced further, with more information exchanged between the two sides and the chief executives of the two companies engaging in direct discussions, according to people familiar with the matter, who asked not to be identified because of the confidentiality of the talks.

    However, while the two companies are close to reaching an agreement on price, they have yet to agree on a strategy on how to jointly tackle potential antitrust challenges, the people said.
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    Israeli fertiliser maker ICL won't bid for stake in Chile's SQM

    Fertiliser maker Israel Chemicals (ICL) will not be bidding for an indirect stake that is for sale in Chilean potash and lithium producer SQM, a spokesman for the Israeli company said.

    ICL Chief Executive Officer Stefan Borgas said in May that ICL was interested in investing in SQM, which is 30 percent held by Potash Corp of Saskatchewan, but noted SQM was too big for ICL to buy outright.

    A share-based merger of ICL and SQM, or ICL buying a stake in SQM, could be attractive, but would need to involve Potash Corp, which is also a shareholder in ICL, Borgas said in May.

    SQM's controller Julio Ponce in December began the process of selling the bulk of his shares in the company. His holding firm Oro Blanco is looking to sell its majority stake in Pampa Calichera, which in turn owns around 23 percent of SQM. Bids are due on Monday.

    "We will not be in involved in this process," ICL's spokesman said.
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    Interim waste water report prolongs uncertainty for K+S

    The interim results of a German environmental regulator's probe into waste water discharge by K+S will keep the potash mining company in limbo, with hundreds of thousands of tonnes of potential potash production at risk.

    Authorities in the city of Kassel, where K+S is headquartered, are working on a computer model to predict the impact on drinking water caused by K+S's facilities, and preliminary results from March this year pointed to unacceptably high salt levels, a spokesman for the regulator said.

    But the predictive model was unreliable at the time and is still being worked on, the spokesman for Regierungspraesidium Kassel cautioned.

    "It is everybody's goal" to refine the model and to decide whether K+S will receive a permit by the end of the year, when a preliminary approval scheme expires, he added.

    Weekly magazine Der Spiegel first reported the interim study results.

    The regulator has missed the initially expected November 2015 deadline to decide on whether to give K+S a permit to dispose of waste water via deep-well injection into porous layers of rock.

    That has left discharge into the Werra river as the only option, where K+S already faces other restrictions.

    Salty waste water emerges when potash ore is processed into fertilizer products.

    Under a preliminary permit, K+S has been forced to suspend production intermittently at major mines. It said last month it could not yet foresee when permanent approval would be given.

    That has dimmed its earnings prospects, with K+S warning at the time that full-year core profit would plunge by as much as three quarters, hurt also by weak global prices for potash.

    A K+S spokesman said the company was still addressing questions from the regulator and it remained convinced its request for waste water discharge was fully approvable.
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    Seaweed farming, a sudden slimy success, needs greener rules: U.N.

    Seaweed farming needs tighter regulation to limit damage to the environment after booming into a $6.4 billion business with uses in everything from sushi to toothpaste, a United Nations study showed on Sunday.

    Led by China, South Korea, Indonesia and the Philippines, seaweed's surge in recent years has seemed environmentally friendly since it needs no fertilisers and has created both jobs and food in remote coastal areas of developing nations.

    But emerging evidence shows that seaweed can sometimes cause harm and spread diseases and pests, the U.N. report said. One Asian seaweed brought to Hawaii has smothered some coral reefs by out-competing local plants.

    "There's very little regulation" in many nations, Elizabeth Cottier-Cook, lead author of the U.N. University study who also works at the Scottish Association for Marine Science, told Reuters.

    "You can take a plant from the Philippines and plant it in East Africa. There are pests, there are pathogens that can go along with that plant. There is no quarantine," she said.

    A damaging bacterial disease known as ice-ice, for instance, has spread with a red seaweed from the Philippines and infected new farms in nations such as Mozambique and Tanzania.

    Cuts in production caused by ice-ice caused losses estimated at $310 million in the Philippines alone from 2011 to 2013, according to the report.

    Globally, about 27.3 million tonnes of farmed seaweed were produced in 2014, worth $6.4 billion and up from almost nothing in 1970, the U.N. University said.

    Seaweed is used in foods such as soup, sushi wraps and spaghetti, as fertilisers and as feed for animals. Seaweed extracts are used in products from skin care to toothpaste.

    The report urged governments to learn from the pitfalls of other aquaculture businesses.

    A virus that infected farmed salmon in Norway in 1984, for instance, wiped out up to 80 percent of fish at some farms and led to tighter laws. A virus that harms shrimp has spurred some nations to ban imports from all but bio-secure hatcheries.

    Nidhi Nagabhatla, an author at the U.N. University's Canada-based Institute for Water, Environment and Health, said seaweed could have extra benefits such as helping combat global warming because plants soak up carbon dioxide from the atmosphere.

    The report recommended measures such as seed banks to help preserve stocks, better monitoring for disease, long-term investments and perhaps government-sponsored insurance schemes in case of natural disasters such as typhoons.
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    Precious Metals

    Lundin Law PC Announces Securities Class Action Lawsuit against Goldcorp Inc.

    Lundin Law PC announces a class action lawsuit has been filed against Goldcorp Inc. concerning possible violations of federal securities laws between March 31, 2014 and August 24, 2016. Investors, who purchased or otherwise acquired shares during the Class Period, should contact the Firm in advance of the October 24, 2016 lead plaintiff motion deadline.

    To participate in this class action lawsuit, click here. You can also call Brian Lundin, Esquire, of Lundin Law PC, at 888-713-1033, or e-mail him [email protected]

    No class has been certified in the above action. Until a class is certified, you are not considered represented by an attorney. You may also choose to do nothing and be an absent class member.

    The complaint alleges that during the Class Period, Goldcorp made false and/or misleading statements and/or failed to disclose: that Goldcorp's mine in Penasquito was leaking selenium into the groundwater well near the mine as early as October 2013; that the Company informed the Mexican government about the rise of selenium levels in the groundwater in October 2014; that in August 2016 the Company informed the Mexican government of contaminated water found in other properties near the mine; and as a result of the above, Goldcorp's public statements were materially false and misleading at all relevant times. When this news was disclosed to the public, shares of Goldcorp decreased in value, causing investors harm.
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    Zuma’s nephew to pay R23m for South African mine ruin

    Khulubuse Zuma, a nephew of President Jacob Zuma, agreed to pay R23-million ($1.6-million) to settle a lawsuit that found him partly responsible for the destruction of gold-mining assets nearJohannesburg.

    Zuma has already paid R5-million and will settle the rest in monthly installments, trade union Solidarity said in an e-mailed statement Wednesday. The organisation represents some of the 5 300 employees at the Pamodzi and Grootvleigold mines who lost their jobs when the assets were ransacked after Aurora Empowerment Systems took control in 2009.

    Zuma was chairman of Aurora and was found jointly liable for all losses after December 1, 2009, by a High Court in June last year. At the time, he claimed he didn’t have an executive or operational role in the business. The liquidators of Pamodzi, who brought the suit against Zuma, are also seeking damages from Zondwa Mandela, a grandson of Nelson Mandela, and members of the Bhana family who were also involved in running Aurora.

    Through Aurora, Zuma and Mandela gained control of the Pamodzi mines in 2009 when its previous owner was placed under provisional liquidation. When Aurora failed to raise the required funds to get the mines up and running, they fell into disrepair and were ravaged by illegal miners. The assets were valued at about R1.7-billion, according to Solidarity.

    “Righteousness has at last happened and Zuma’s and the Bhanas’ moment of penance has arrived,” Gideon du Plessis, general secretary of Solidarity, said in the statement.

    The Bhanas have so far failed to comply with an agreement to pay R5.9-million in damages and so the North Gauteng High Court on Wednesday issued a sequestration order, which allows the funds to be raised from a debtor’s assets, Solidarity said.

    An application to liquidate the assets of Zondwa Mandela and others involved in the case will be brought in due course, Solidarity said.

    Vuyo Mkhize, a spokesperson for Zuma, and the Bhanas didn’t immediately respond to requests for comment.Etienne van der Merwe, who represents Mandela and the Bhanas in the main case but not the sequestration orders, said he’s awaiting a court process for liquidators to prove their damages. Solidarity claims the losses amount to R1.7-billion.
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    Eldorado Gold exits China, sells Jinfeng mine for $300 million

    Canada’s Eldorado Gold said Tuesday has completed the sale of its 82% stake in the Chinese Jinfeng mine to a wholly-owned subsidiary of China National Gold Group for US$300 million in cash.

    Jinfeng mine is expected to generate 95,000-105,000 ounces of gold this year, as the operation transitions fully into the underground.

    The move marks the Vancouver-based miner exit from China, as the company announced earlier this year it was also selling its other three operations in the country — White Mountain, Tanjianshan and Eastern Dragon — for US$600 million in cash. That deal is expected to close before the end of the year, Eldorado said in the statement.

    The transactions, said the company’s president and CEO Paul Wright, will add “meaningful value” to Eldorado and further strengthen the firm’s financial flexibility to advance its internal project pipeline.

    Jinfeng produced 149,655 ounces of gold in 2015 and is expected to generate 95,000-105,000 ounces of gold this year, as the operation transitions fully into the underground.

    Eldorado Gold, which also has operations in Turkey, Greece, Romania and Brazil, said it would use the money obtained from its Chinese mines to “continue to grow” the business based on “long-lived, low-cost assets.”
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    AMCU, platinum mines fail to reach wage deal

    South Africa's biggest platinum mine-workers' union and the industry have failed to reach a deal on workers' pay, the union said on Monday, raising the prospect of industrial action in the world's top producer of the white metal.

    The Association of Mineworkers and Construction Union (AMCU), which led a crippling five-month strike in 2014, has been in talks with Anglo American Platinum, ImpalaPlatinum and Lonmin since July this year.

    "To date no progress has been made," AMCU said in a statement. "The union has therefore officially declared deadlocks with all three companies."

    The companies were not immediately available to comment.

    AMCU said it would next week separately meet Impala and Anglo American Platinum to seek a resolution. No meeting with Lonmin has been confirmed, it said.

    Declaration of a dispute is the first step towards launching a strike and if next week's meetings fail to find a solution, the dispute would be referred to a government mediator in a bid to break the impasse, failing which AMCU could give the industry a 48-hour notice to down tools.

    AMCU is demanding pay hikes of more than 50% for its lowest pad members, who home take around R8 000 ($557) a month, and a 15% hike for its higher paid members.

    The demands are well above inflation at 6%.

    South Africa has the biggest and most lucrative platinumreserves but labour unrest and regulatory uncertainty have dampened investors' enthusiasm.

    The strike in 2014 hit the industry hard, costing it more than 20 billion rand in lost output and forcing the companies to cut jobs, shed mines and in some cases seek cash from investors.
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    Russia's Polyus considering placing GDRs in London says CEO

    Russia's largest gold producer Polyus is considering placing global depository receipts (GDRs) in London in the future, its chief executive said on Friday, less then a year after it left the London market.

    Polyus, controlled by the family of Russian tycoon Suleiman Kerimov, delisted shares of its Jersey-registered parent company from the London Stock Exchange (LSE) in late 2015 amid Western sanctions imposed on Moscow.

    "We consider the possibility of placing depository receipts in (the) future," its Chief Executive Pavel Grachev told Reuters on the sidelines of a business conference in Vladivostok, when asked if the company could return to London.

    The company is preparing for the placement of 5 percent of its shares on Moscow Exchange as it needs to raise its free float to at least 10 percent from five percent to meet a requirement of Moscow Stock Exchange.

    Polyus is planning a public deal with either existing or new shares and the placement is expected towards the end of this year or early next year, Grachev said. The funds from the placement will go to Polyus.

    In the first half of the year, Polyus financed a $3.4 billion buyback of shares from its controlling shareholder. As a result its net debt jumped to $3.5 billion at the end of June, from $364 million at the end of 2015.

    Grachev said that Polyus did not see any need to refinance this debt now, adding "We have quite comfortable repayment schedule, the main weight of its is after 2021."

    The CEO also said that Polyus' 2016 gold production may exceed its previously announced range of 1.76-1.80 million of troy ounces.
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    Base Metals

    Glencore, Origin put Chile hydropower business up for sale

    Glencore and Origin Energy have put their hydropower business Energia Austral in Chile on the block, with Standard Chartered advising on the sale, two people familiar with the process said on Thursday.

    Energia Austral includes three hydropower projects with a capacity of 1 000 MW, the biggest being the Cuervo asset at 550 MW, according to a flyer seen by Reuters.
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    Indonesia evaluating mining rules as 2017 deadline on metal exports nears

    Indonesia's mining ministry is scrambling to find a way around a deadline on mineral processing that could prevent some miners, including U.S. copper mining giant Freeport-McMoRan Inc, from exporting minerals from the country from 2017.

    Under a government regulation introduced in 2014, miners of copper, zinc, lead, manganese and iron are restricted to exporting partially processed minerals until January 2017, after which only shipments of refined metals will be allowed.

    The export curbs - which have cost Indonesia billions of dollars in lost revenue - were intended to shift sales from unprocessed raw materials to higher-value finished metals, but smelters have been slow to materialise as low commodity prices have made them economically unviable.

    The government is now "comprehensively evaluating (the requirements) for each commodity," coal and minerals director general Bambang Gatot said on Thursday, referring to meetings on the rule with acting mining minister Luhut Pandjaitan.

    Uncertainty over Indonesia's mining rules have been a flashpoint between miners and the government for years. The sector accounted for almost 6 percent of Indonesia's GDP before the 2014 ban on metal ore exports, and has since slipped to about 4 percent.

    Also of concern to Jakarta, the government's non-tax revenue from mining missed its target by 43 percent last year.

    "There will definitely be a solution ... at least by January," Gatot said, noting that the government was discussing whether it needed to change the law or revise a regulation.

    Earlier this week, acting mining minister Pandjaitan said the government had been too slow in implementing domestic processing requirements mandated in Indonesia's existing 2009 mining law.

    "The implementing regulation only came in 2014, so there's no way they could build smelters (in time), and what's more commodity prices were down," Pandjaitan said.

    "Now we are trapped with how to continue applying the mining law properly. We can't change the law just like that," he said.

    The 2017 deadline would not apply to nickel ore or bauxite, exports of which have been completely banned since 2014.

    The rules on those ores were also "still being discussed," Pandjaitan said.

    The government has been rolling out new measures to re-energise Southeast Asia's largest economy after growth cooled to its slowest in 6 years in 2015, partly as a result of weaker returns from commodities.

    The government is also seeking new revenue sources, with a fiscal deficit expected to widen to 219 trillion rupiah ($16.8 billion) this year.

    Freeport, Indonesia's largest copper miner and an important source of government revenue, has said it is confident the government will not push ahead with the 2017 deadline, as the move could harm Southeast Asia's biggest economy.
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    PT Antam welcomes export changes in Indonesia

    Diversified miner PT Antam has welcomed plans by the Indonesian government to relax mineral export constraints.

    In August this year, Indonesia’s Chief Economic Minister said that the government was looking to relax export rules which would prevent certain companies from exporting semi-processed minerals from January next year.

    Under the 2014 rule, metals miners were only allowed to ship partially processed minerals until January 2017, at which point exports of only refined metals would be allowed.

    PT Antam’s president director Tedy Badrujaman said on Thursday that an unprocessed ore, which was produced as a byproduct from its mining activities, had proven uneconomical to process in its own plants or at other domestic smelters.

    However, should this ore be exported, value could be generated.

    “As a state-owned enterprise in which we represent the government’s mineral resources management, we are committed to supporting the government’s mineral resourcesmanagement, we are committed to supporting the government’s mineral downstream policy,” Badrajuman said.

    He noted that if Antam was given credentials to export nickel ore, the company would allocate its high-grade ore to support domestic smelters, while unprocessed nickel ore, which could not be consumed domestically, would be exported.

    “This unprocessed nickel ore have a better nickel grade compared with a nickel ore from the Philippines, so it will be substitute to the Philippines ore if it can be exported.”

    Antam has some 988.3-million tonnes of reserves and resourcs, of which 580-million tonne is considered high-grade nickel ore and a further 408-million tonne is considered low-grade nickel ore.

    Attached Files
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    Malaysia extends bauxite mining ban until year-end

    Malaysia extended a moratorium on bauxite mining to the end of the year, from Sept. 14, and said the government could stretch the ban by another six months if the current high stockpiles of the aluminium-making commodity were not cleared by Dec. 31.

    Malaysia's largely unregulated bauxite mining industry has boomed in the past two years to meet demand from top aluminium producer China, filling in a supply gap after Indonesia banned exports. But the frenetic pace of digging has led to a public outcry with many complaining of water contamination and destruction of the environment.

    Late last year, bauxite mining was blamed for turning the waters and seas red near Kuantan, the capital of Malaysia's third-largest state and key bauxite producer Pahang, following which, in January, the government imposed its first three-month ban on mining the commodity.

    Despite extensions to the moratorium, 4.13 million tonnes of stockpiles remain uncleared in three sites around Kuantan, Malaysia's environment minister said on Wednesday.

    "If come Dec. 31 and the stockpiles are not cleared, I'm going to ask for (another) six months moratorium," Wan Junaidi Tuanku Jaafar, Malaysia's natural resources and environment minister, said at a press conference.

    China imported nearly 24 million tonnes of bauxite from Malaysia last year, its top supplier then. But Malaysia's bauxite exports to China have slipped since the moratorium, falling to 5.4 million tonnes over January to July, or only about half of the volumes shipped a year ago.

    The extended mining ban will give industry players and authorities time to comply with improved regulations and take steps to mitigate pollution across the mining and export supply chain, the environment ministry said in a statement.
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    Congo State miner submits offer for Freeport's Tenke copper project

    Democratic Republic of Congo's State mining company Gecamineshas submitted an offer to buy Freeport McMoRan's majority stake in the Tenke copperproject, Gecamines' interim director-general Jacques Kamenga told Reuters on Wednesday.

    Freeport agreed in May to sell its 56% stake in Tenke, one of the world's largest copper mines, to China Molybdenum for $2.65-billion.

    Toronto-based Lundin Mining, which holds a 24% stake, has until September 15 to exercise its right of first offer before the deal goes through.
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    Chile says wins better terms for copper concentrates in deal with India

    Chile has obtained improved terms for the copper and molybdenum concentrates it exports to India under a new trade deal between the two countries signed Tuesday in New Delhi, it said.

    The new deal expands a Partial Trade Agreement signed in 2007, granting preferential tariff terms to 474 products not included in the original deal and increasing the tariff preference margin by between 80% and 100%, Chile's office of economic relations, DIRECON, said in a statement.

    "This means at least 80% of the products we can export to India, a market of more than 1.2 billion people, will obtain preferential market access," said DIRECON head Andres Rebolledo.

    The deal will principally benefit Chilean farmers, but will also improve the terms on which copper concentrates and molybdenum concentrates enter the Indian market.

    In 2015, Chile exported 372,100 mt of copper in concentrate to India, making it Chile's fourth most important market for copper exports behind China, Japan, and South Korea.

    But the deal will not improve access for exports of more refined forms of copper from Chile to India, which uses tariffs to protect domestic smelting and refining operations.

    In 2015, Chile exported 3,300 mt of copper metal and 4,000 mt of blister and anode to India.

    Copper accounted for almost 95% of the $1.841 billion worth of Chilean goods exported to India last year.

    However, India is not a key market for Chilean molybdenum. In 2015, India imported $11.8 million of molybdenum oxide from Chile, representing 2% of Chile's total molybdenum exports.
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    Codelco warns strike at Salvador mine risks division’s future

    Salvador, Codelco’s smallest mine, produced 49,000 tonnes of copper last year. 

    Chile’s Codelco, the world's No.1 copper producer, said a strike over contract terms initiated Monday by members of Union No. 2 of its Salvador mine, threatens the division’s feasibility.

    Salvador, which is the state-owned firm’s smallest operation and produced 49,000 tonnes of copper last year, has been battling to turn a profit after dwindling ore grades pushed up production costs, affecting a plan to extend the mine's life.

    Salvador, Codelco’s smallest operation, has been battling to turn a profit after dwindling ore grades pushed up production costs, affecting a plan to extend the mine's life.

    “As is public knowledge, the general situation at Salvador is critical,” Codelcosaid in the statement (in Spanish). “To impede work at the Salvador division — at a time when we need to guarantee its continuity, increase production and intensify efficiency efforts — prevents us from ensuring its viability.”

    The stoppage was illegal until late Monday, when one of the unions accepted Codelco’s final contract offer. After that, it became legal, which means most workers have now downed tools. This partly as those who did not take part in the initial strife were unable to get to work after striking colleagues blocked access to the mine.

    Operations at the mine, located in northern Chile, remained shut at about 9 a.m. local time Tuesday, local radio station reported (in Spanish).

    With copper prices down more than 30% since early 2014, Codelco offered last week a wage increase limited to inflation, as well as signing and efficiency-related bonuses. But members of Union No. 2, which covers Salvador's refinery and smelting workers, voted 346 to 228 against it.

    In August last year, the mine was hit by an around three-week strike by a different group of contract workers, which cost Codelco more than $15 million in lost production and damaged equipment.

    Attached Files
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    China ex-works Shanxi alumina gains Yuan 20/mt to Yuan 1,870/mt

    China's spot alumina prices firmed further Monday as offers remained high on strong short-term sentiment, market participants said.

    The Platts ex-works Shanxi alumina spot assessment was Yuan 1,870/mt ($280/mt) full cash terms Monday, up Yuan 20/mt from Friday, and also up Yuan 30/mt on the week and Yuan 140/mt on the month.

    In neighboring Henan province, tradeable spot alumina prices were also heard mostly higher at Yuan 1,900/mt cash, up from Yuan 1,880-1,900/mt, with ex-works Guangxi prices pegged at Yuan 1,830-1,850/mt cash, up from around Yuan 1,800/mt previously.

    Market sentiment continued strong on talks of potential smelter restarts in the fourth quarter, expected new metal capacity ramp-ups, and recent transport problems in Shanxi due to increased coal deliveries, sources said.

    A surge in coal traffic?has led to congestion and delays in the domestic rail services, and availability of wagons, sources said.

    Smelters indicated buy ideas at Yuan 1,800-1,850/mt cash ex-works Shanxi, while sellers eyed Yuan 1,900-1,950/mt on Monday.

    "Offers are going up again today, more around Yuan 1,950/mt cash for both Shanxi and Henan now. No trades have been reported but it will be hard to conclude below Yuan 1,900/mt now," a Beijing trader said.

    One Shanxi refiner quoted Yuan 1,920/mt cash on Monday and said he would not sell below Yuan 1,900/mt now, while another indicated tradeable prices at around Yuan 1,890/mt cash ex-works Shanxi.

    A South China smelter agreed offers remained high on strong sentiment, but expected the uptrend to be short-lived.

    "Prices went up earlier mainly due to the Wanji and Chalco Shanxi refineries shutdowns, but those have resumed, so there's less pressure. The transport issues in Shanxi are also temporary, so this uptrend won't last," the South China smelter source said.
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    Japan aluminium buyers to turn to spot markets, could crimp annual contracts

    Japanese aluminium buyers are looking to crimp the amount of the metal they purchase via annual contracts, instead turning to spot markets where premiums have in recent months dropped to their lowest in over seven years amid a persistent supply glut.

    Most aluminium buying by Asia's biggest importer of the metal is carried out through annual contracts, with premiums for delivered metal set each quarter via negotiations that act as a benchmark for the region.

    But with spot metal premiums falling since hitting this year's highs around March, sources at buyers said quarterly negotiations had locked them into prices well above those in the market.

    "Lots of inventories are out there and we can get better deals if we buy them in spot," said a source at a fabricator, adding that the company would likely buy less via annual contracts in 2017. He declined to be identified due to the sensitivity of the issue.

    Aluminium stocks at three major Japanese ports slid to about 300,000 tonnes in July from a record above 500,000 tonnes in May 2015, but that is still above 230,000-270,000 tonnes in early 2014.

    Less contract purchases could be a blow to suppliers such as Rio Tinto , Alcoa and South32 as they would likely lose guaranteed sales. Rio declined to comment on the issue, while Alcoa and South32 did not immediately respond to requests for comment.

    Japanese contract premiums are expected to hit the lowest in seven years in October-December, with key producers offering $80-82 per tonne, down 9-14 percent from the previous quarter. But buyers are seeking even lower levels, bidding for the low $70s given weakening spot premiums at around $70, according to sources.

    Premiums are paid over the London Metal Exchange cash price .

    Major Japanese buyers include traders like Marubeni and Mitsubishi and fabricators such as UACJ and Kobe Steel.

    "We intend to ask smelters to change the way we do business," said a source at a Japanese trading house that was hit by heavy losses on aluminium inventories in the last financial year.

    But a producer warned that "without annual deals, buyers may not get as much metal as they want at a time they want if supply gets tighter".

    A Singapore trader who deals into Japan said that the country was likely to shift to greater spot purchases gradually, at first buying only limited amounts via spot.

    Meanwhile, a few buyers said they could push for prices under annual contracts to be based on a spot premium index, removing the need for quarterly negotiations that have been used for decades.

    But most suppliers and buyers said such a shift would be difficult as finding an index that accurately reflected the state of Japanese markets could be tricky.

    Japanese buyers and global producers are poised to start negotiations over 2017 contracts in November.
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    As Nyrstar hedges forward, should zinc bulls be worried?

    Zinc continues to glow red hot amid the general gloom pervading the industrial metals sector.

    On the London Metal Exchange (LME) three-month metal closed last week valued at $2,364 per tonne, up 50 percent on the start of the year and the highest it's been since May last year.

    Everyone, it seems, is still buying into the galvanising metal's enticing narrative of supply shortfall, something of a stand-out in a sector that is more worried about the weak state of demand.

    So too is Nyrstar, the Belgian zinc smelting giant. "We believe that the zinc price should continue to rise on the basis of improving supply and demand fundamentals", said the company's chief executive officer, Bill Scotting.

    Except that statement accompanied a notification that the company has just initiated a hedging programme, essentially locking in forward prices through the end of the first quarter of next year.

    Which raises the question as to whether Nyrstar thinks this year's rally might be about to run out of steam.

    Should zinc bulls be worried?


    Nyrstar has used the options market to mitigate the potential for lower prices over the coming months.

    The "collar structures", as they're called, involve the purchase of put options, which confer the right to sell, and the simultaneous sale of call options, which confer the right to buy.

    The net effect, as Nyrstar explained, is to eliminate price exposure outside of a $2,137-2,437 per tonne price band through the end of this year.

    A similarly structured hedge over the first quarter of next year will do the same in a $2,100-2,457 price band, with exposure kicking back in at a price above $2,800 per tonne.

    There are several points worth noting here.

    Firstly, Nyrstar has done this sort of thing before. Similar short-term "strategic" hedges on the zinc price were put in place in both 2013 and 2014, while the company has this year also hedged its foreign exchange exposure.

    Secondly, the latest hedges cover only a small part of the company's production, around 8,000 tonnes per month of metal. Production guidance this year is 1.0-1.1 million tonnes, equivalent to 83,000-92,000 tonnes per month.

    Thirdly, Nyrstar is going through a wholesale financial restructuring, including the disposal of its zinc mining business, as it tries to shore up its balance sheet in the wake of zinc's plunge to a multi-year low of $1,444.50 per tonne in January this year.

    Given Nyrstar's trials and tribulations, locking in a degree of pricing certainty on part of its output is understandable.

    But it also means that Nyrstar's zinc hedges may say as much about the company as they do about the zinc price.

    The more interesting question, though, is whether other producers are thinking, and doing, the same.


    Because the other unique thing about Nyrstar's hedges is that the company publicly discloses them in explicit detail.

    Plenty of other producers don't.

    But there are signs that others may also be capitalising on zinc's super-strong rally to, quite literally, hedge their bets.

    Take the LME options market, for example.

    Back in June all the excitement was about what was happening on the upside, with super-bullish plays being put on strike prices as high as $3,000 per tonne in June 2017.

    Those call options are still open, by the way, but in the interim the overall tenor of the LME options market has changed.

    Back in June open interest on calls through January 2018 totalled 42,582 lots, while open interest on puts stood at just 26,200 lots.

    Fast forward a couple of months, however, and the playing field has shifted in favour of put options.

    There are now 48,679 lots of open interest on put options through January 2018, exceeding the 44,914 lots of open interest on the calls.

    The last few days in particular have seen some fairly heavy volumes go through on puts at the $2,000, $2,100 and $2,175 strike prices across the front three months.

    The scale of the shift in positioning goes way beyond anything that could be attributable just to Nyrstar's hedging.

    The increase in put option open interest since June represents almost 562,000 tonnes.

    Evidently, others are thinking the same about the sustainability of the zinc rally as Nyrstar, even if they don't have the Belgian company's specific balance sheet pressures.

    Moreover, options are only one way of hedging forward price exposure.

    The more conventional path is in the form of forward sales and here too, the shape of the forward zinc curve on the London market should give pause for thought.

    Beyond January next year the curve is firmly backwardated, which seems to bear out chatter on the LME "Street" about what one broker, Kingdom Futures, has called "aggressive forward producer hedging programs".
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    D-day looms for nickel market as top shipper checks on mines

    The global nickel market will discover the severity of the Philippines’mining audit next Thursday as PresidentRodrigo Duterte’s government presents the findings of the checkup and announces support for communities affected by any further suspensions. Benchmark prices surged.

    The audit in the world’s largest mined nickel supplier has been completed after 16 teams fanned out across the country to assess compliance with environment and welfare rules, according to Leo Jasareno, the official in charge of the examination. The results and community-support program will be presented by Environment Secretary Gina Lopez, Jasareno said in an interview in Manila.

    “It’s not about money, it’s about happiness,” saidEnvironment Undersecretary Jasareno, a former head of the mines bureau with almost four decades’ of experience in the industry. The government and Lopez “would not want to see a mine profitably operating but filled with complaints,” he said.

    The crackdown helped to lift nickel to the highest level in a year last month as some mines were suspended, tightening global supplies and fanning speculation that more significant disruption could follow. Cargoes from the Southeast nation are a vital source of nickel for China’s stainless-steel industry, and account for about 20% of global mined output. Duterte, a plainspoken politician who was sworn in June 30, has said his country can do without the mining industry entirely, while Lopez has also been a critic.

    “The administration would want only those who really practice responsible mining,” said Jasareno. “It’s a greater emphasis on environmental protection, more than anything else. More than anything, the president would want that theenvironment would not suffer, that the people would not suffer.”

    Nickel rallied as much as 1.3% to $10 035/t on the LondonMetal Exchange, and traded at $10 025 at 11:36 a.m. inManila, 14% higher this year. The metal peaked on Aug. 10 at $11 030 before giving up some of its gains as concern about the Philippine audit eased, with Citigroup Inc. saying the checkup has had only a modest effect.

    The probe comes after global nickel demand exceeded supply in the first half, with a deficit of 80 800 t compared with a surplus of 45 200 t in all of 2015, according to the World Bureau of Metal Statistics. Stockpiles in LME-tracked warehouses have fallen 16% to 369 096 t this year.

    So far eight nickel operations have been suspended in the audit as well as an earlier examination under the previous administration, according to Jasareno. UBS Group AGestimated these accounted for 10% of the country’s nickel output, or 2% of global supply, according to an Aug. 12 report.

    The country shipped 33.1-million t of ore in 2014 and 32.3-million last year, according to official data. Volume next year would depend both on the audit’s outcome and the response of miners to shifting prices, according to Jasareno, who said mines that were suspended may reopen if they fixed shortcomings.

    “They will have to retrofit, they have to prove that they can pass the grade,” he said. After a mine is suspended, the department will assess the situation and then make a decision on whether or not it can be lifted, he said.

    The government is optimistic that the drive to clean up the industry will act as lure to stimulate investment, rather than a deterrent. The Chamber of Mines of the Philippines has been advising members – at least four of which has been suspended – that they should follow all environmentalcompliance.

    “It’s a different way of attracting investors,” said Jasareno. “You are not attracting investors because of incentives. You are not attracting investors because of permits that can be easily secured. But you are attracting investments because investors are assured that when they put their money on the ground, there’s sustainability.”

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    Steel, Iron Ore and Coal

    NDRC loosens coal production restrictions

    Faced with surging coal prices, the National Development and Reform Commission (NDRC) will roll out a plan to allow some domestic coal companies to increase coal production under certain circumstances, domestic media reported on Thursday.

     The plan shows that the NDRC wants to balance domestic coal supply and demand, but is not willing to overly loosen its grip on the production of domestic coal companies by extending their annual working time, fearing that such a move might run counter to the government's goal of cutting overcapacity in the coal industry, experts told the Global Times on Thursday.

    "If the government loosens production restrictions too much, it might suppress the coal price, and the government does not want that to happen," Guan Dali, a coal analyst from the industry portal, told the Global Times on Thursday.

    The NDRC held a meeting on Thursday with representatives from a number of major domestic coal companies and workers from the China National Coal Association (CNCA), with an aim of stabilizing coal supplies and preventing coal prices from surging too quickly, according to a report from on Thursday.

        Surging prices

    The NDRC meeting convened at a time when China's coal prices are surging fast. The benchmark Bohai-Rim Steam-Coal Price Index (BSPI) rose to 515 yuan ($77.25) per ton by the end of Tuesday, compared with 494 yuan per ton at the end of August 30, the largest increase since the weekly index was released, according to a report by on Wednesday.

     According to a report from the Securities Times on Thursday, the price of thermal coal has surged by about 25 percent since the beginning of July, while the price of coking coal has risen roughly 30-90 yuan per ton in provinces like North China's Hebei Province and Shanxi Province in July.

    Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, told the Global Times on Thursday that the surging coal price was a result of the government's shortening of domestic coal mines' annual working days, which largely suppressed coal supplies.

    The NDRC stipulated in February that domestic coal mines can operate no more than 276 working days in one year, down from 330 working days in the past.

    About 1.9 billion tons of coal was produced in China from January to July, down 10.1 percent year-on-year, data from showed on August 31.

    According to Guan, as a result of the hot summer weather, electricity companies' demand for coal is increasing, but coal production and supplies are shrinking, which has resulted in a rise in coal prices in recent months.

    He also noted that the rainy weather around July blocked coal transportation corridors in certain regions such as Shanxi Province, causing some electricity firms to run short of coal.

    Striking a balance

    According to the report, dozens of domestic coal companies and coal mines will reach an agreement in the future under the guidance of the NDRC.

    The agreement stipulates that domestic coal companies and coal mines should increase their coal production when the BSPI reaches a certain level. But when coal prices fall back down, increasing production will have to cease and the government-demanded working days will be reinstated.

    Guan said that the BSPI lags a little behind the market price, but so far it is the most reliable parameter to formulate relevant policies in the coal sector.

    Lin stressed that the main objective of the NDRC's plan is to strike a balance between supply and demand, as well as prevent coal prices from fluctuating too greatly.

    The NDRC's decision runs counter to some market speculation that on Thursday it might allow domestic coal mines to resume working 330 days annually.

    According to Guan, returning to 330 annual working days for domestic coal mines might effectively suppress coal prices. "The government does want coal prices to rise, just not in a too abrupt manner," Guan said, adding that a rise in coal prices would help boost profitability for domestic coal companies.

    Guan also noted that if the government brings back the extended 330 working-day requirement, it might impact the efforts of cutting excessive capacities.

    "With the rising coal price, some private coal mines have already secretly restarted production," Guan disclosed.

    Zhao Chenxin, the spokesman of the NDRC, said at a press conference on August 16 that about 95 million tons of coal had been cut by the end of July, accounting for 38 percent of the yearly target for cutting excessive coal capacities.

    The CNCA couldn't be reached for comment, while an employee of the NDRC said he didn't know about the meeting when contacted by the Global Times.
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    China Aug coke exports surge on year

    China exported 1.04 million tonnes of coke in August, surging 62.5% from a year ago, but dropping 5.45% on month, showed data from the General Administration of Customs (GAC) on September 8.

    Total value of the steelmaking material in the month rose 44.46% on year to $146.34 million, equivalent to an average export price of $140.71/t, up $8.02/t.

    Over January-August, China's coke exports amounted to 6.89 million tonnes, climbing 16.3% on year, with value dropping 15.4% on year to $844.28 million.
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    Australia's thermal coal exports to drop in next 20 yrs

    Australia's thermal coal exports will probably face a sharp decline over the next 20 years, as countries worldwide steps up its attack on carbon emissions, the Australian reported.

    Australia's exports of thermal coal used for power generation will slump to 135 million tonnes by 2035, compared with 210 million tonnes this year, estimated Wood Mackenzie, a leading industry consultancy.

    Key markets in Asia, Europe, and the Americas are all expected to record sharp falls of demand, as they step up efforts to meet energy demand mainly through enhancing energy efficiencies, developing alternatives like nuclear power, renewables and battery storage.

    The seaborne trade of thermal coal is expected to collapse from 900 million tonnes this year to 527 million tonnes by 2035, which would also be a key factor in thermal coal's forecasted share of power generation diving from 41% in 2013 to 16%.

    Yet it is not all gloom for the Australian industry, the nation's higher quality coal will be more resilient compared with low energy lignite-type coals, said Prakash Sharma, director of Wood Mackenzie's global coal markets research.

    Australian thermal coal exports are expected to fall at a slower pace than other countries. Indonesian exports will decline from 340 million tonnes in 2016 to 193 million tonnes by 2035.
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    China hits 60 pct of 2016 target for coal output cuts

    China has reduced its coal production capacity by 150 million tonnes in the first eight months of the year, representing 60 percent of its 2016 target for capacity cuts, state media said on Friday citing the state planner.

    The rate is nearly 1.5 times progress in the first seven months of 38 percent, Lu Junling, a senior official with the National Development and Reform Commission (NDRC), was quoted as saying at an industry meeting on Thursday to discuss market stabilization measures.

    The country is the world's top coal consumer but demand has been on the wane as economic growth slows and as the country shifts away from fossil fuels as part of a drive to curb pollution.

    China's coal producers have lobbied the government to approve a plan to increase output that could add 8-9 million tonnes per month of new supply from some 74 mines that produce high-quality clean coal.

    That was discussed at the meeting on Thursday and included a proposal that would allow producers to raise output if domestic prices hit certain levels, state-media Xinhua said.

    According to the proposal, selected mines would be able to increase average daily production by 200,000 tonnes if the benchmark price, the Bohai-rim steam-coal price index (BSPI), trades above 460 yuan per tonne for two weeks.

    That would rise to 300,000 tonnes of coal a day if prices go up to 480 yuan per tonne, and would increase to 500,000 tonnes if prices hit 500 yuan for two weeks, Xinhua said.

    The BSPI is currently at 515 yuan, according to industry website

    Any increases would be pulled if prices fall below trigger levels respectively at 460 yuan, 470 yuan and 490 yuan also for as long as two weeks.
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    China Aug coal imports soar 52pct on year

    China imported 26.59 million tonnes of coal in August this year, the highest since December 2014, soaring 52.03% from a year ago and up 25.37% from July, showed data from the General Administration of Customs on September 8.

    Chinese buyers boosted imports last month, as domestic prices surged on the back of extremely tight supply and strong demand from utilities to meet air-conditioning demand in the hot summer.

    On August 31, the Fenwei CCI Thermal index for domestic 5,500 Kcal/kg NAR coal was assessed at 509 yuan/t FOB with 17% VAT, up 57 yuan/t from the end of July, showed data from China Coal Resource (  

    The value of coal imports in August reached $1.37 billion, surging 39.66% on year and up 29.9% on month. That translated to an average price of $51.51/t, falling $4.56/t on year but up $1.8/t from July.

    Over January-August, coal imports of China reached 155.74 million tonnes, rising 12.4% on year, data showed.

    The value totaled $7.63 billion over the same period, a year-on-year decline of 11.9%.

    Over January-July, China produced 1.9 billion tonnes of coal, down 10.1% on year, showed the NBS data.
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    China to relax 276-day limit on coal mine operations, say market sources

    China's central government is likely to relax its strict 276-day annual operating limit on coal mines after meeting with major domestic producers and customers Thursday, market sources said.

    National Development and Reform Commission officials agreed action was needed to cool escalating spot prices for domestic thermal coal after hearing from power utility and end-user customers, market sources said.

    The main outcome of the meeting convened by the NDRC in Beijing was that the restriction on domestic coal mines operating for a maximum of 276 days a year would remain in place for the foreseeable future, but producers could be granted permission to increase production in response to sharp rises in spot prices and to decrease it if prices fell, sources said.

    Some mines could also receive permission to operate for six days a week, up from the current five, sources said.

    The analogy of turning a tap on and off was used to describe the Chinese central government's new approach to controlling domestic coal prices through adjustments to domestic coal production, sources said.

    China's Coal Association will oversee any variation in coal output volumes at individual mines, the sources said.

    At Qinhuangdao port in north China, spot prices for September cargoes of 5,500 kcal/kg NAR domestic thermal coal have traded as high as Yuan 550/mt FOB this week, up from Yuan 400/mt in June, traders said.

    One coal trader in China said the potential for producers to vary production levels could impact traditional winter re-stocking patterns in China as producers caught offguard by any changes in spot prices could adjust their production levels accordingly.
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    China steel, iron ore extend losses as supply builds after G20

    Chinese steel futures extended losses to touch a six-week trough on Thursday, pressured by increased supply as mills around the eastern city of Hangzhou resume production after the G20 summit.

    Those mills were ordered by government authorities to suspend output ahead of the event earlier this week to clear the skies.

    "Steel is pressured by a short-term rise in additional supply post-G20," said a Shanghai-based iron ore trader.

    The most-traded rebar, a construction steel product, on the Shanghai Futures Exchange was down 1.3 percent at 2,341 yuan ($351.13) a tonne by 0324 GMT, adding to Wednesday's 4-percent slide.

    Rebar touched a low of 2,321 yuan, its weakest since July 26.

    The weakness in steel prices helped drag down raw material iron ore, with the most-active January iron ore on the Dalian Commodity Exchange down 2.1 percent at 407 yuan a tonne. It fell as far as 402.50 yuan, the lowest since Aug. 1.

    Talk of possibly more mills being shuttered in China's major steel making city of Tangshan as the government steps up an environmental crackdown to address overcapacity also curbed demand for forward iron ore cargoes, said the Shanghai trader.

    "Several of our customers already have enough stocks until mid-October after recent purchases," he added.

    Chinese markets are shut for the Mid-Autumn festival on Sept. 15-16 and on Oct. 3-7 for the National Day holiday.

    Iron ore for delivery to China's Tianjin port .IO62-CNI=SI eased 0.5 percent to $58.30 a tonne on Wednesday, the lowest since July 27, according to The Steel Index (TSI).

    The declines in ferrous futures sent buyers of physical iron ore cargoes "running for the hills," said TSI, which compiles information on deals done in China.

    Data on Thursday showed China's iron ore imports slipped 0.8 percent in August from a near record level in the previous month, while steel exports also dropped.

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    China steel exports fall to six-month low, in brief respite for world

    China's steel exports fell to the lowest in six months in August amid stronger domestic prices, offering relief to rivals overseas angered by a flood of cheap Chinese products.

    But the global reprieve could be temporary as Chinese steel producers could easily boost exports to ship surplus output amid gradual efforts to address its chronic overcapacity.

    Elsewhere, China's August trade data on Thursday showed higher imports of crude oil and coal, while arrivals of copper, iron ore and soybeans eased.

    China's overall imports unexpectedly rose for the first time in nearly two years, suggesting domestic demand may be picking up and putting the world's second-largest economy on a more balanced footing.

    Exports of steel products from China, a sore topic with global trade partners, fell to 9.01 million tonnes in August from 10.3 million tonnes in July, data from the General Administration of Customs showed.

    It marked a second month of lower exports and the volume was the smallest since February's 8.11 million tonnes. However, shipments over the first eight months were still up 6.3 percent from a year ago at 76.35 million tonnes.

    "It's a welcome development but there's still a long way to go in terms of Chinese exports falling sharply because of their massive excess capacity and export tax rebate policy," Roberto Cola, vice president of the ASEAN Iron and Steel Council, said.

    China, with an estimated excess capacity of around 300 million tonnes - thrice the 2015 output of No. 2-ranked Japan - has said it will continue its tax rebates to steel exporters as it tries to finance a costly capacity closure plan.

    The fall in exports indicates the difficulties faced by Chinese steel producers amid anti-dumping tariffs imposed by other countries such as the United States and India, said Cola.

    But Richard Lu, analyst at CRU consultancy in Beijing, said the drop was in response to firm domestic prices, rather than China giving in to the pressure from the rest of the world.

    "We may see exports flat month-on-month or perhaps post a slight uptick in September because domestic prices may still rise because of seasonal buying as well as some restocking," said Lu.

    Chinese steel prices have risen 20 percent from late May due to low inventory levels and slower output from mills, some of which have been ordered shut by Beijing.

    As of July, China had achieved 47 percent of its target to cut steel capacity by 45 million tonnes this year.

    G20 leaders at this week's meeting in China have pledged to address excess steel capacity that has punished the global industry with low prices for years.

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    Study links 2˚C rise in global temperature to 40% fall in thermal coal trade

    A 2˚ Celsius rise in global temperatures could result in a 40% reduction in global thermalcoal trade by 2035, new analysis by Wood Mackenzie has found.

    According to Woodmac, the reduction in trade in thermalcoal, from an estimated 900-million tonnes for 2016, to 527-million tonnes by 2035, will also likely lead to unintended consequences for prices if market consolidation occurs, the commercial intelligence firm advised.

    The report follows the US and China formally ratifying the COP21 Paris climate agreement over the weekend at the G20 summit in China.

    "Putting things into context for thermal coal trade, Wood Mackenzie's proprietary modelling suggests seaborne import demand to shrink by 40% by 2035. Asia, Europe and theAmericas will import 433-, 80- and 15-million tonnes, respectively, in 2035 from 673-, 170- and 39-million, respectively, estimated for 2016,” research director of globalcoal markets Prakash Sharma stated.

    According to Sharma the impact on prices is hard to predict in a carbon-constrained world, however, they will undoubtedly be lower.

    Wood Mackenzie's modelling suggests a sub $50/t FOB Newcastle (real terms) benchmark pricing post-2020. However, the market may well consolidate, which could result in producers having more power over prices.

    Other factors such as a global price on carbon and greater demand for premium thermal coal could sharply increase supply costs, which could also lead to higher prices.

    450 SCENARIO
    Woodmac advised that according to its analysis of theInternational Energy Agency (IEA) 450 Scenario, which sets out an energy pathway consistent with the goal of limiting the global increase in temperature to 2°C by limiting concentration of greenhouse gases in the atmosphere to around 450 parts per million of CO2, a 2°C limit on temperature rise would mean a sharp reduction in the share of coal-fired generation from 41% in 2013, to 16% by 2035.

    Further, Australia would be impacted less than most of its competitors owing to the higher quality of its coal, however, it would still see exports decline by 35% by 2035 from current levels.

    Woodmac also revealed that prices would likely fall significantly and stay below real $50/t in the long term, and the industry could undergo a massive consolidation as a result.

    The IEA 450 Scenario for 2035 is based on massive improvements in energy efficiency and an increased share ofnuclear, renewables and gas in supplying power. The IEA 450 Scenario assumes that carbon capture and storage will become commercial from 2020 onwards and will potentially support 980-million tonnes thermal coal consumption in 2035. Without this technology breakthrough, the Scenario would appear more severe on thermal coal demand, according to Woodmac.

    Meanwhile, the IEA 450 Scenario presents a bearish coalimport outlook for Japan, South Korea, Taiwan andSoutheast Asia, where domestic reserves are either non-existent or exhausting. China and India have options to support domestic coal industry and restrict imports.

    "Our analysis suggests demand for high-energy bituminous coals will be more resilient compared with low energy lignite-type coals. As a result, we expect Australian exports to fall more slowly than the rest. Australian exports will decline from 210-million tonnes in 2016, to 135-million tonnes by 2035," Sharma explained.

    In comparison, Indonesian exports will decline from 340-million tonnes in 2016, to 193-million by 2035. Colombia,Russia and South Africa combined will export less thanAustralia in 2035.

    "Thermal coal trade in a 2˚C-world looks very challenging. Many unintended consequences for energy supply security,power generation costs and fuel prices may emerge that have not yet been evaluated nor integrated in corporate strategies and governmental plans, despite the two major nation's formal ratification over the weekend,” Sharma cautioned.
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    Domestic steel output headed for further contraction: report

    Domestic steel output fell in August and is likely to contract further during the rest of months this year, an industry report said on Tuesday.

    Experts noted the trend is a result of sagging market demand and the government's pledge to cut overcapacity.

    Daily production for the China Iron and Steel Association (CISA)'s member companies amounted to 1.76 million tons in early and mid-August, according to a statement published on the CISA website on Tuesday.

    Based on that number, it is estimated that the daily output of crude steel was 2.23 million tons nationwide in early and mid-August, the CISA said.

    The figure represented a 3.3 percent increase from July, but it still lagged behind the average of 2.3 million tons of daily output in the second quarter of 2016. In the first seven months of 2016, national pig iron output dropped 2.25 million tons year-on-year to 467 million tons, said the report.

    The China Iron Ore Price Index also declined in August after two months of consecutive gains. It dropped 2.86 percentage points from July to 212.77 points at the end of August, the statement noted.

    One of the reasons behind the phenomenon is the plunge in steel demand amid global economic weakness, as the amount produced is determined by the demand side," Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, told the Global Times on Tuesday.

    For example, steel exports decreased 5.8 percent from June to 10.3 million tons in July, according to statistics published on the website of the General Administration of Customs.

    Meanwhile, China is increasingly confronted with steel protectionism in foreign markets.

    In August, the EU imposed anti-dumping duties ranging from 19.7 percent to 22.1 percent on China's cold-rolled steel, according to a statement published on the Ministry of Commerce's website.

    Such measures will impose difficulties on China's steel exports in the rest months of this year, but what's worse is "the rapid drop in domestic demand brought about by the slowdown in infrastructure construction," said Lin.

    Besides, a number of second-tier cities, like Xiamen in East China's Fujian Province and Wuhan in Central China's Hubei Province, rolled out housing purchase limits or tightened loan policies in August, in a bid to cool the housing market.

    "Typically, the use of steel in the construction sector represents around 40 percent of total consumption," Wang Guoqing, research director with the Beijing-based Lange Steel Information Research Center, told the Global Times on Tuesday. Wang said fewer apartments will be built by developers in response to local government policies.

    This means domestic demand for steel will continue to decrease in the rest months of this year, Wang said.

    Cutting overcapacity, an agenda that was in the spotlight during the G20 summit, has also played an important role, experts said.

    The Chinese government has already stepped up efforts to address the issue. It vowed to cut steel capacity by about 10 percent or 150 million tons of steel in the next few years, with aims to reduce steel production by 45 million tons this year alone.

    As of July, the country had only achieved 47 percent of its annual steel reduction target.

    "For the government, to fulfill its promises will be challenging this year, and more work needs to be done to meet the schedule," Wang said. "As more measures against overcapacity take effect, steel output is likely to see a rapid decline in the rest months of this year."
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    China's key steel mills daily output down 4.3pct in late Aug

    China's key steel mills daily output down 4.3pct in late Aug

    Daily crude steel output of China's key steel mills slid 4.34% from ten days ago to 1.68 million tonnes over August 21-31, according to data released by the China Iron and Steel Association (CISA).

    The decline was mainly impacted by stricter inspection by central government since late August, as well as environmental protection requirements during the G20 summit held in Hangzhou.  

    The average daily crude steel output across the country was estimated at 2.21 million tonnes during the same period, down 3.48% from ten days ago, the CISA said.

    By August 31, stocks of steel products at key steel mills stood at 12.39 million tonnes, down 7.02% from ten days ago, the CISA data showed.

    By August 26, total stocks of major steel products in China reached 9.41 million tonnes, down 11.65% on year, which, however, was the six consecutive rise on weekly basis since late July.
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    Shandong Aug coal output down 40.86pct on year

    Shandong produced 8.39 million tonnes of raw coal in August, down 40.86% year on year and 11.83% month on month, showed the latest data from the Shandong Administration of Coal Mine Safety.

    Over January to August, raw coal output of the province totaled 84.20 million tonnes, sliding 16.03% from the corresponding period of 2015.

    Of this, 64.61 million tonnes were produced by provincial-owned mines, down 13.31% on year; and the remainder was from mines owned by municipal and lower-level government, down 23.92% from a year ago.

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    China's top steel city cuts industrial production to clear air

    A worker walks past a pile of steel pipe products at the yard of Youfa steel pipe plant in Tangshan in China's Hebei Province November 3, 2015. REUTERS/Kim Kyung-Hoon/File Photo

    China's top steel making city of Tangshan has told industrial plants to cut production for two weeks from Saturday, its third such suspension since July, as Beijing battles overcapacity and pollution, according to a document seen by Reuters.

    The environmental crackdown will affect steel mills, power plants, coking producers and cement producers that have failed to meet standards.

    The city in the northern province of Hebei, which accounts for more than a fifth of China's steel output, enforced similar cuts in July and August, and will strengthen inspections of emissions.

    The Tangshan city government could not immediately be reached for comment.

    The overcapacity has brought China under fire as its record overseas shipments have stirred tension with other major producers.

    Following complaints and increased anti-dumping duties, leaders of the G20 group of countries have pledged to work together to tackle excess steel capacity.

    China has promised to cut steel capacity by 45 million tonnes this year, as it tries to rejuvenate an industry suffering from slowing demand and a massive supply glut.

    Steel capacity cuts in the first seven months of the year amounted to just 47 percent of the annual target and China will accelerate the pace over the rest of the year.
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    Gladstone Australia coal exports to China ease in Aug to 749,000 mt

    Shipments of coal to China from the Port of Gladstone in Queensland, Australia, sank below 1 million mt in August for the first time since April, at 749,000 mt, Gladstone Ports Corporation data showed Tuesday.

    Exports to China from Gladstone averaged 1.14 million mt/month from May to July following restrictions from Beijing on domestic production, which sent Chinese buyers shopping on the seaborne market.

    The shipments to China slid 29% month on month in August, but remained almost double the monthly average of 379,000 mt/month for the first quarter of the year, the data showed.

    A similar trend was seen in export figures from Australia's Port Waratah Coal Services terminals at the port of Newcastle, which fell from an 18-month high of 1.80 million mt in July to 549,000 mt in August.

    A trader told S&P Global Platts last week that China's demand for coal has slightly weakened recently due to a drop in temperatures. Power plants were consuming stocks in 20-21 days now, compared with 15 days previously, he said.

    Gladstone Ports Corporation handles 42 coal types with the majority being metallurgical coal and approximately 30% being thermal coal, it says.

    China had received 18% of all Gladstone coal exports in July but that fell to 12% in August, while exports to Japan, India, South Korea and Taiwan all rose month on month in August, the data showed.

    Japan -- which takes the lion's share of Gladstone coal exports -- saw its largest monthly volume from Gladstone for the year to date in August, rising 9% month on month to 2.30 million mt, according to the figures. It's the most the country has been sent since 2.45 million mt in December last year and is 300,000 mt more than the 12-month rolling average of 2.00 million mt/month, Gladstone data shows.

    India also received its largest monthly volume for the year to date with exports rising 56% month on month to 1.50 million mt in August, which is the most that has been sent since 1.68 million mt in September, 2015, and it breached the 12-month average of 1.28 million mt/month.

    Exports to South Korea were up 22% month on month at 965,000 mt in August, but were still lagging the 12-month rolling average of 1.14 million mt.

    Taiwan, which took just 3% of Gladstone's coal exports, saw shipped volumes surge 164% to 198,000 mt, but remained lower than the 12-month average of 265,000 mt, the data said.

    The boost in exports to the four countries helped offset the decline in shipments to China, to take total coal exports from Gladstone up by 8% month on month to 6.14 million mt, which is the most since May's 6.29 million mt. The 12-month rolling average for total coal exports from Gladstone is lower at 5.93 million mt.

    The volumes were sent via 59 cargoes in the month and on Monday Gladstone's RG Tanna coal terminal had two vessels at berth and five at anchor, down from three at berth and six at anchor last week, Gladstone Ports Corporation said.

    Fifteen mines, operated by companies including BHP Billiton-Mitsubishi Alliance, Ensham Resources, Jellinbah Resources, Wesfarmers and Yancoal Australia, supply coal exports to Gladstone port and its three coal terminals in Queensland -- Barney Point, RG Tanna and Wiggins Island.

    GPC was not reporting any vessels at berth or at anchor for Barney Point or Wiggins Island.
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    Adaro presents positive outlook despite revenue fall during H1

    Adaro presents positive outlook despite revenue fall during H1

    Indonesian coal company Adaro Energy recorded a 16% fall in revenues from its coal mining and trading activities in the first half of 2016, as the average selling price for its coal fell 17%, showed data from the company's latest financial press release.

    Lower production costs enabled the company to increase in coal business profit, however, by 15% to $134 million.

    The company sold 17.1 million tonnes of coal over January to June, flat on year. While its coal production stood at 25.9 million tonnes, keeping the company on track to hit the lower end of its annual target of 52-54 million tonnes.

    Cost of revenue fell, however, by 21% as the company benefited from lower strip ratios and good operational productivity.

    In addition, the company said it had hedged 30% of its fuel requirements – the most significant cost item at Indonesia's truck-reliant coal mines – for the rest of year at well below its 2016 budget.

    Thermal coal market improved recently on the back of supply rationalisation in major coal producing countries and sustained demand.

    Adaro was positive on future demand, according to Garibaldi Thohir, the company's president director and CEO, believing the current market downturn is cyclical and that the long-term fundamentals for coal remain intact.

    The company is optimistic with the prospect from Indonesia and other Southeast Asian countries as these countries will continue to depend on coal to fuel their surging energy needs to achieve stronger economic growth, said Thohir.
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    Global coal-fired power capacity falls, led by China, India

    The amount of coal-fired power generating capacity under development worldwide has shrunk by 14% to an estimated 932 GW in July this year, compared with 1.09 TW at the start of the year, Reuters reported, citing a study released on September 7.

    It was mainly driven down by China as it struggles with oversupply and tries to promote cleaner energy, according to a Global Coal Plant Tracker run by non-government and anti-coal group CoalSwarm.

    The study also attributed it to India's policies of curbing plans for coal-fired plants introduced in the first half of 2016, partly due to under-utilization of existing plants.

    The overall decline, of 158 GW, was almost equal to the coal generating capacity of the European Union, at 162 GW, it said.

    China saw the biggest drop of 114 GW to a total 406 GW proposed in its pre-construction pipeline so far, followed by India with a decline of 40 GW, it estimated.

    The Chinese government vowed in February to shut coal capacity of 500 million tonnes per annum in the next three to five years to reduce oversupply. Profits also shrank in the first half of the year because of sagging power demand and higher coal prices.

    The Philippines and Indonesia had also curbed coal, while countries such as Egypt and Mongolia raised their planning.

    Coal plant retirements are increasing worldwide, especially in the United States and Europe, but are still only a fifth the size of new plant construction, a study by CoalSwarm and other non-governmental organizations said in March.

    From 2003 to 2015, for instance, the United States added 23 GW of coal capacity and retired 54 GW.
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    BHP-Vale mine bondholders said to hire lawyers for debt talks

    Samarco bondholders hired US law firm Hogan Lovells for help with debt-restructuring talks as the stalled Brazilian iron-ore miner runs out of money, according to people with knowledge of the matter.

    With a coupon payment looming, Hogan Lovells is seeking a Brazilian law firm to work with it on negotiations to alter repayment terms, said the people, asking not to be named because the matter is private.

    The mining venture owned by BHP Billiton and Vale is exploring options with creditors as its mining operations remain on hold ten months after a deadly tailings dam spill. While Melbourne-based BHP and Rio de Janeiro-based Valeare putting up money for Samarco’s working capital and repair and relief work, they aren’t covering debt payments.

    Samarco, Vale, BHP and Hogan Lovells all declined to comment.

    The mine – the world’s second-largest producer of iron-orepellets before the spill – is also seeking an agreement on about $1.6-billion in bank loans to postpone payments until it resumes mining, people with knowledge said last month.

    While its dollar-denominated bonds don’t start maturing until 2022, coupon payments are scheduled for as early as September. The notes are trading at about 36c on the dollar from about 60c in early May, after hopes faded for a swift resumption of operations.

    After previously flagging a 2016 restart, the mine may not get new permits until late next year or 2018 amid regulatory scrutiny into an incident that killed as many as 19 people and was described by authorities as Brazil’s worst-everenvironmental disaster. Vale is eyeing a mid-2017 restart at Samarco, investor relations director Andre Figueiredosaid last week.

    Samarco hired JPMorgan Chase & Co to help it with restructuring talks, BHP hired Rothschild & Co., Vale has Moelis & Co. advising it, while banks holding the mine’s debt are working with FTI Consulting, people with knowledge said in June.
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    India’s iron-ore output bounces back but policy uncertainty resurfaces

    Indianiron-ore production bounced back to positive territory, recording growth of 8% during 2015/16, and is forecast to increase by 29% in the current financial year, despite policy uncertainty looming over the sector.

    Data sourced from the Steel Ministry shows that Indian iron-ore production hit the 139-million-ton mark in 2015/16. The recovery during the year was significant, considering the six-year production low of 128-million tons in 2014/15.

    Barring 2013/14, when iron-ore production was positive, Indian iron-ore production has persistently declined, with 2011/12 registering a 20% contraction, followed by a 19% contraction in 2012/13 and a 15% contraction in 2014/15.

    Provisional production estimates for the current financialyear show iron-ore production is expected to increase to 180-million tons, with officials claiming that the final figure could be even higher, as several provinces are ramping up production and many of them, such as Odisha, are seeking a relaxation of the yearly production ceiling imposed by the Supreme Court.

    Citing examples to back such a claim, an official pointed out that Odisha’s production of 80-million tons in the lastfinancial year was at a ten-year high.

    Similarly, in western India, miners in Goa are seeking a relaxation of the 20-million-ton-a-year production ceiling, with Vedanta leading the charge for a relaxation of the restrictions. Vedanta is not allowed to produce more than five-million tons a year, but has already extracted about three-million tons in the current financial year.

    Meanwhile, the sustainability of India’s iron-ore turnaround is unclear, owing to a failure to reconcile conflicting claims about the country’s export future.

    The debate got a fresh lease on life last month with the SteelMinistry indicating that it is willing to engage the FinanceMinistry on a pending proposal to prune the export tax oniron-ore fines and lumps.

    While the government has slashed export tax on low gradeiron-ore fines to 10%, a higher rate of 30% was maintained for all other grades despite repeated pleas of miners for a reduction to maintain the momentum of revival.

    Quick to nip any such move in the bud, the Indian SteelAssociation, the representative body of domestic steelproducers, has in a communication to the Ministry, demanded that the higher rate be maintained to “preserve natural resources for domestic use and ensure adequate raw material security, keeping in view long-term growth plans and investments in domestic steel capacity growth”.

    Making a case against easing exports, steel companies have pointed out that over the past five years, steel production has registered a compound annual growth rate (CAGR) of 6.5% while the CAGR of iron-ore production during the same period was a negative 6.51% indicating dire long-term availability of the critical raw material.

    For their part, miners represented by the Federation of Indian Mineral Industries (FIMI), said that after becoming largely a minor player in international markets, Indian iron-ore needed fiscal support from the government to mark a renewed presence among global buyers.

    FIMI claimed that higher exports would not result in scarcity now or in the future. On the contrary, higher exports would lead to higher production and higher exploration and discovery within the country.

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    Premium hard coking coal spot price more than doubles so far this year on tight supply

    Spot premium hard coking coal prices from Australia surged 11% Monday, in what was the biggest day-on-day rise since January 11, 2011 on domestic Chinese coal supply anxieties and eager mill pre-winter re-stocking.

    S&P Global Platts assessed premium low-vol hard coking coal shipped from Australia up $15.75/mt from Friday at $157/mt FOB Australia Monday, the highest level since March 19, 2013.

    Prime hard coking coal FOB Australia prices have now more than doubled this year, from $76.45/mt FOB Australia on January 4.

    There were only four other sessions since Platts started daily assessments in October 2010 that a larger day-on-day increase was observed.

    The cost of using met coal in the blast furnace hit 51.5% of total input costs on Monday, more than that of iron ore. It was the first time coking coal costs have been higher than iron ore since Platts started assessing met coal in October 2010.

    Market participants reported a significant surge in buying interest at higher price levels at the start of the trading week.

    "Buyers who need to restock are desperate to buy regardless of how high the offers are," a northeast China steelmaker said. "That is why prices can rise several dollars a day."

    A deal was reported done Monday for an Australian premium low-vol with 71-73% CSR, 80,000 mt, early-November laycan at $157/mt FOB Australia.

    A second transaction was concluded at $160/mt FOB Australia for November laycan with 75,000, November laycan.

    A firm offer was reported for an Australian premium low vol with 73-75% CSR, 75,000 mt, also November laycan, at $165/mt CFR China. Keen buying interest was heard close to the offer level.

    Although these cargoes laycans fell outside the Platts 7-45 days loading window assessment, sources said there was little price difference between November and October laycans.

    There was also an index deal heard done late last week for a premium low-vol with 69-72% CSR at a small premium to Platts Premium Low-vol FOB Australia for a November laycan cargo and a sub-Panamax-size shipment.

    "This market is like what we saw before during the rise. You either match the offer price or bid above it if there is no offer," a Chinese trading source said. "Despite us bidding high, we lost out and could not get any cargoes as its not an easy market because supply is elusive."


    Among factors behind the price increase was persistent premium low-vol and mid-vol spot tightness for October and November laycans, as well as talk of a recent roof collapse at one large Queensland premium coking coal mine.

    That coincided with Chinese mills gearing up for a pre-winter re-stocking cycle and, hence, actively eyeing November laycan material, a Chinese source said.

    "There is firm Chinese demand...The market is changing very fast," the source said, adding prices were being refreshed on a daily basis.

    Also, trading firms were battling to obtain forward laycan shipments in anticipation logistics issues in north China could continue, sources said.

    For tier-two HCC, there was an offer for half a Capesize cargo of Australian 62-64% CSR HCC at $155/mt CFR China, or a 3-4% premium above Platts HCC 64 Mid Vol CFR China. This was for an October laycan material.

    Indicative bids for such coal were at $145/mt CFR China.

    Prices for second-tier material were assessed up $11/mt up to $150/mt CFR China, or $143/mt FOB Australia on a Panamax freight back-calculation.

    There was also a PCI deal done for an Australian PCI with 21-23% VM and 9-10% ash at a 2-3% premium to Platts Low Vol PCI CFR China index Friday. This was for a 60,000 mt cargo for an end-September laycan.

    Meanwhile in the futures market, there was a deal done Monday for Q1 2017 at $143/mt FOB Australia, for a 15,000 mt contract or 5,000 mt per month.


    Looking ahead, "this is not sustainable at all," an international source said. "Other mines will start opening very soon," the source said, adding US miners were offering products in the spot market, suggesting that swing suppliers could erode the recent price uptick.

    The source also said the pace of price upticks suggested buyers have no market power and it was firmly a sellers' market.

    Another source said mills had to consider cheaper coal alternatives than Australian or they would need to cut production.

    While there was no downside pressure in the short term, the rate of price rises suggested speculative bubbles should be, or have already started to appear, the mining source said.
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    Shanxi awards coal, steel producers for cutting production

    Shanxi awards coal, steel producers for cutting production
    Shanxi, China's leading coal-producing province, has awarded nearly 1 billion yuan ($15 million) to six State-owned coal producers for cutting production.

    The six pledged to slash coal production capacity by a combined 10.6 million tons per year, with Datong Coal Mine Group promising the biggest cut of 3 million tons per year. The group received 312 million yuan, according to the Shanxi provincial department of finance.

    The central Henan province plans to award 2.18 billion yuan to coal and steel producers this year for cutting production, with three State-owned coal producers already receiving a portion of the funds.

    The funds will compensate workers whose employment has been affected due to cuts in overcapacity, said the Henan provincial department of finance.

    The country has adopted a combination of measures to make cutting overcapacity an economic priority.

    Last week, a furnace capable of producing 1.33 million tons of iron every year, or enough iron to build an Eiffel Tower in three days, was demolished in Baogang Group in north China's Inner Mongolia Autonomous Region.

    The furnace, which was built in 1959, is the largest to be demolished since China initiated supply-side reform to tackle industrial overcapacity last year.

    The country has vowed to cut steel capacity by 100 to 150 million tons by 2020, including 45 million tons in 2016. This year's target to slash coal capacity is 250 million tons.

    Time is limited, as China's top economic planner had ordered local governments to speed up measures to cut excess coal capacity.

    "Local governments should strive to fulfill their targets by the end of November, while central and provincial state-owned coal producers should complete them in early November," Lian Weiliang, deputy head of the National Development and Reform Commission, said in August when addressing an internal meeting.
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    Rio Tinto sells stake at South African anthracite mine

    Rio Tinto had completed the sale of its 74% stake in underground mine Zululand Anthracite Colliery (ZAC) in South Africa to Menar Holding, for an undisclosed sum, the company announced on its website.

    The rest stake of the mine is still held by Rio Tinto's Broad-Based Black Economic Empowerment partner, Maweni Mining Consortium Pty Ltd.

    ZAC produces premium quality anthracite for international and domestic customers and has more than 1300 employees and contractors.

    Rio Tinto acquired the mine in 2010 when the group paid $3.9 billion to take over Riversdale Mining at the height of the global boom in coking coal.

    Rio Tinto was only interested in acquiring the Mozambique coal assets and resources owned by Riversdale but the deal turned out to be one of the worst the group had ever done because it ended up selling the Riversdale Mozambique operations in 2014 for just $50m to India's International Coal Ventures.

    Riversdale also owned ZAC which Rio Tinto immediately earmarked for disposal as "non-core" and initially sold to Forbes & Manhattan Coal (Forbes) in 2012. That deal was never completed because Forbes subsequently cancelled it on the grounds of non-performance by ZAC.

    Menar has a proven track record of operating and investing in South Africa through its controlling interest in Canyon Coal, which owns three coal mines in Mpumalanga and other coal projects in Mpumalanga and Gauteng.

    Rio Tinto has a long-standing relationship with South Africa and continues to invest in Richards Bay Minerals and exploration for other minerals in the country.
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    Vitol said to mull Gupta stake in South Africa coal terminal

    By one account the deal is already done.

    Swiss commodities trader Vitol Group is interested in buying a stake in South Africa’s Richards Bay Coal Terminal from a company controlled by the Gupta family, according to a person with knowledge of the matter.

    Buying the stake in Africa’s biggest coal export facility from Optimum Coal Holdings Ltd. would give Geneva-based Vitol rights to ship eight million metric tons of the fuel annually.

    While South Africa has high-quality coal reserves and is well positioned to export the fuel to India and China, shipments are constrained by limited port capacity. Only shareholders have an automatic right to export through Richards Bay, which accounts for almost all of South Africa’s coal shipping capacity.

    The Guptas and South African President Jacob Zuma’s son Duduzane bought Optimum through Tegeta Exploration & Resources Ltd. for 2.15 billion rand ($148 million) from Glencore Plc in December. Optimum also owns two coal mines.

    Cabinet allegations

    While Vitol is interested in the purchase, it’s concerned about the negative publicity around the Gupta family, who have been accused by some ruling party officials of trying to influence South African cabinet appointments, the person said. They asked not to be identified, because the information is private. Vitol spokeswoman Andrea Schlaepfer declined to comment.

    Vitol has trading and marketing operations in South Africa, where it’s building a fuel-storage facility with Malaysia’s MISC Group in Cape Town. In 2012, it formed a coal trading company in neighboring Mozambique by buying a stake in a terminal that exports coal from South African mines. Vitol traded more than 20 million tons of physical coal in 2015, according to its website.

    The Gupta family spent more than two decades building up a South African business empire spanning mining, computers, engineering, media and a safari lodge. As well as befriending Zuma, they included Duduzane as a shareholder in several of their companies, including the firm that acquired Optimum.

    Asset Sales

    They announced that they would sell their South African interests on Aug. 27. “At this time it would be inappropriate to comment as far as the detail of any such transaction,” Gert van der Merwe, a lawyer for the Gupta-controlled Oakbay group of companies, said by phone Friday.

    Nazeem Howa, the chief executive officer of their holding company, Oakbay Investments, said in a Bloomberg Television interview on Aug. 30 that there has been “tangible” interest from an international investor in the assets.

    The Gupta family has become embroiled in a power struggle between Zuma and Finance Minister Pravin Gordhan over control of spending by state-owned companies. Gordhan’s team is probing contracts between a company controlled by the Gupta family and state-owned power utility Eskom Holdings SOC Ltd.

    Other shareholders in the Richards Bay terminal include Glencore, South32 Ltd., and Anglo American Plc.
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    Indonesia's September HBA thermal coal price hits new high for 2016

    Indonesia's Ministry of Energy and Mineral Resources has set its September thermal coal reference price, also known as Harga Batubara Acuan or HBA, at $63.93/mt FOB, which is up 9.5% from August, 9.8% higher year on year and the peak level for 2016 so far.

    The HBA price rally since May was largely driven by a mix of supply cuts and strong demand from China.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg gross-as-received assessment; 25% on the Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    In August, the daily Platts FOB Kalimantan 5,900 kcal/kg GAR coal assessment averaged $57.19/mt, up from $50.28/mt in July, while the daily 90-day Platts Newcastle FOB price for coal with a calorific value of 6,300 kcal/kg GAR averaged $67.37/mt, up from $62.29/mt the previous month.

    The HBA price for thermal coal is the basis for determining the prices of 75 Indonesian coal products and for calculating the royalties Indonesian coal producers have to pay for each metric ton of coal they sell locally or overseas.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash as received and 0.8% sulfur as received.
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    BHP expects iron-ore price to notch declines on new mine supply

    BHP Billiton, the world’s largest mining company, expects iron-oreprices to begin retreating as “well-telegraphed” new supply hits the market fromAustralia and Brazil.

    “Some of that supply is late, but we have every confidence it will arrive,” Huw McKay, BHP’s vice president of market analysis and economics, said Friday in an interview in Singapore.

    “We do expect it will weigh on price from where we are, and we’ll be closer to the middle of the range that we think about, rather at the top of the range, which is where the price is now.”

    The remarks by BHP add to a chorus of banks calling time on an unexpected rally after prices soared in 2016 to trade around $60 a metric ton over the last month after three years of declines. Citigroup and Morgan Stanley have flagged iron-ore weakening toward the end of the year as more supply is shipped, with Westpac Banking predicting a slump below last year’s low of $38.30.

    After a “unique” year, the under-performance of supply is expected to reverse over the next 12-to-18 months, McKay said at a media briefing earlier on Friday. “We still see new low-cost tons reaching the market later this year and definitely through calendar 2017.”


    There are prospects for increased ore supply from Vale SA, which is expected to start output from its S11D project before the year-end, and from Australian billionaire GinaRinehart’s Roy Hill, according to Morgan Stanley. The bankhas estimated that prices may drop back to $40 as the approach of winter in China typically blunts steel demand and output.

    “The market has been caught short in China because delivery towards supply targets had been so – almost metronomic – in recent years,” McKay said in the interview. “I don’t think there was much allowance for the fact that supply might undershoot.”

    Ore with 62% content delivered to Qingdao has rallied 36% in 2016 to $59.39 on Friday, according to Metal Bulletin. This year, policy makers in China added stimulus, presiding over a revival in the property market and boosting the outlook forsteel consumption and prices.

    'DOING OK'

    “For next year, whilst we see end-use quite stable, we see the composition in end-use a little different,” McKay said. “Machinery is actually very weak at the moment still, it’sinfrastructure and housing and automobile that’s doing ok. We expect machinery to catch up a bit next year but housingwill be slower.”

    McKay is part of BHP’s marketing team in Singapore, which oversees the supply chain of the company’s products from asset to market and is responsible for defining its long-term view of market fundamentals. The team is led by the president of marketing and supply, Arnoud Balhuizen.

    Apart from iron-ore, the oil market is also set to rebalance over the next 12-to-18 months, with high volatility expected, Balhuizen said at the briefing when BHP launched its new blog series Prospects. Oil prices slumped to the lowest since 2003 in February, forcing BHP to cut operating rigs in the US and trim its capital expenditure by about 44% for this fiscal year.

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    Japan July thermal coal imports down 14.24pct on year

    Japan's thermal coal imports (including bituminous and sub-bituminous coals) stood at 9.32 million tonnes in July, down 14.24% year on year but up 9.44% month on month, the latest customs data showed.

    In July, Japan imported 8.55 million tonnes of bituminous coal, down 10.33% on year but up 15.29% on month.

    Australia remained the largest supplier to Japan with 7.05 million tonnes of the material, falling 13.14% on year but rising 18.83% on month.

    This was followed by Russia at 841,900 tonnes, dropping 26.76% on year and 17.38% on month.

    Imports from Indonesia stood at 417,700 tonnes, surging 161.06% year on year and increasing 23.69% on month.

    Imports from Canada soared 96.23% on year to 177,000 tonnes in the month, and those from China almost doubled on year to 61,300 tonnes.

    Meanwhile, Japan imported 773,400 tonnes of sub-bituminous coal in July, down 42.13% on year and 29.89% on month.

    Indonesia, the top supplier of this material, shipped 390,600 tonnes to Japan in July, falling 65.36% on year and 50.18% on month.

    Russia followed with 182,000 tonnes, 6.6 times from a year earlier and up 19.19% from the previous month.

    Japan imported 68,900 tonnes of sub-bituminous coal in July, rising 39.2% on year, against none in June.

    Additionally, Japan imported 494,100 tonnes of anthracite coal in July, dropping 20.88% from a year ago but increasing 28.07% from June.
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    G 20: Japan PM Abe calls for structural reforms to address steel overcapacity

    Japanese Prime Minister Shinzo Abe told the G20 summit on Monday that the issue of steel overcapacity should be addressed by pressing ahead with structural reforms based on market mechanisms, a senior Japanese government spokesman said.

    "Regarding overcapacity of steel and others, market distortion by subsidies and export credit is the fundamental problem... I would like to urge structural reforms based on market mechanisms, while maintaining transparency," Abe was quoted by Japanese Deputy Chief Cabinet Secretary Koichi Hagiuda as saying.

    Abe also urged that freedom of navigation and overflight be thoroughly observed according to law, Hagiuda said. He said Japan has lodged a stern protest to North Korea over its latest missile launches.
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    China's Dongbei Special Steel delays disclosing H1 financial information

    Unlisted Dongbei Special Steel Group Co Ltd, having defaulted on several bonds earlier this year, said on Monday it would delay the disclosure of its interim financial information.

    The troubled Liaoning province-owned steelmaker was scheduled to publish its first-half information on August 31.

    "The company is accelerating debt restructuring, and will audit and disclose relevant financial information when the final restructuring plan is settled," the company said in a statement published on website of China's foreign exchange trade platform, or Chinamoney.

    The troubles of Dongbei Special Steel, whose original default in March helped trigger a broad-based Chinese bond market sell-off in April, have sparked a rare public battle in China between creditors, a local government and a state-owned company even as concerns mount about growing debt levels in the economy.
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    Hubei to close 124 coal mines in 2016

    Hubei to close 124 coal mines in 2016

    Central China's Hubei province planned to close 124 coal mines in 2016, in response to the government-led capacity cut policy to tackle the overcapacity in domestic coal industry, said the province in its latest notice.

    The province will make efforts to slash coal capacity of 8 million tonnes per annum (Mtpa) by closing 80-100 mines in the next three to five years, according to a notice released on August 3.

    The de-capacity target was further divided, with 4 Mtpa, 2 Mtpa and 2 Mtpa of capacity cuts to be completed in 2016, 2017 and 2018, respectively, said the notice.

    Over the next three to five years, 15,429 laid-off coal workers in the province will be resettled.
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    Brazil's August iron ore exports rise 27% on year: ministry

    Brazilian iron ore shipments amounted to 34.5 million mt in August, up 27.2% from 27.12 million mt in the year-ago month, Ministry of Development and Trade data showed Friday.

    The overall sales value increased 29.3% to $1.25 billion FOB from $971.29 million FOB a year earlier, as the average price increased to $36.40/mt FOB from $35.81/mt FOB.

    Compared to July, Brazil's iron ore exports increased 14.1% from 30.25 million mt, while the sales value rose 26% from $996.43 million FOB.
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    China coal exports from Newcastle terminals slump in Aug

    Australian coal exports from the Port Waratah Coal Services (PWCS) terminals (Carrington and Kooragang) at Newcastle to China plunged to 549,000 tonnes in August, PWCS said in a performance report on September 1.

    The volume was down from 1.80 million tonnes in July — which was the most shipped since January 2015, when 2.16 million tonnes was sent, as well as almost half the year-to-date monthly average of 1.07 million tonnes, data from PWCS showed.

    The coal terminals exported 8.59 million tonnes of coal in August, down from 9.31 million tonnes in July.

    Of this, 3.97 million tonnes were shipped to Japan, according to the data, down from 4.23 million tonnes in July, and the lowest monthly volume since April 2015. South Korea received 800,000 tonnes compared to 1.30 million tonnes in July, which was also the lowest monthly volume since April 2015.

    After two months of no shipments, India was sent 80,000 tonnes, which is in line with the year-to-date monthly average, PWCS data showed. Exports to Taiwan rose from 839,000 tonnes in July to 1.39 million tonnes in August, it said.

    Of the total shipments in August, 86% were thermal coal and the remainder was coking coal, PWCS said.

    Over January-August, PWCS shipped 71.30 million tonnes of coal, which is an annualized rate of 109.9 million tonnes, up from a rate of 107.4 million tonnes for the same period last year, the operator said.

    Newcastle port has another coal terminal operated under the Newcastle Coal Infrastructure Group banner that does not publish regular information on its shipping data.

    The NCIG terminal has a capacity of 66 million tonnes per year and is operated by five coal producers including BHP Billiton, Peabody Energy and Whitehaven Coal.
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    China Aug steel sector PMI slid to 50.1

    The Purchasing Managers Index (PMI) for China's steel industry slid to 50.1 in August, compared with 50.2 in the previous month, showed data from the China Federation of Logistics and Purchasing (CFLP).

    It, however, posted the second consecutive reading above the 50-point mark that separates growth from contraction on a monthly basis, indicating an improvement of domestic steel industry amid the accelerated de-capacity campaign.

    In August, the steel industry output sub-index was 50.5, gaining 0.4 from 50.1 in July.

    The new orders sub-index reached 52.1, compared with 50.2 in the previous month, encouraged by rising steel prices amid the national capacity cut drive.

    The purchase price index bounced up from 55.3 in June to 61.4 in August, the highest level in recent four months, indicating increasing demand for steel-making materials from steel mills.

    In August, the market sentiment was unexpectedly bullish, mainly boosted by increasing exports and falling production amid several checks made by central environmental panels and strict measures at Tangshan to improve air condition.

    China's steel prices are likely to further go up in the next two months, as the demand from end users will probably rebound in peak season, and oversupply may be properly curbed following the stricter enforcement of the national capacity cuts policy in the rest months of this year.
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    Russia July coal output and exports rise on demand

    Both Russian coal output and exports rise in July, boosted by the Asian country's effort to expand its share of coal exports to Asian-Pacific markets, amid the slowing down demand in Western Europe.

    Russia produced 30.51 million tonnes of coal in July, rising 4.55% year on year and 4.75% month on month, showed the latest data from the Energy Ministry of Russian Federation.

    Over January-July, the country's coal output totaled 217 million tonnes, up 6.15% compared to the corresponding period last year.

    In July, Russia exported 13.85 million tonnes of coal, increasing 4.71% from a year ago and edging up 0.26% from June.

    In the first seven months this year, total coal exports of the country gained 7.44% on the year to 92.93 million tonnes.

    Analysts attributed the rises to construction of port facilities and affiliated railways in 2013-15, which helped Russian Far East out of transport woes in exporting coal.

    In July, Russian coal shipments to China reached 1.98 million tonnes, rising both on year and on month for the third straight month. The volume surged 133% from July in 2015 and increased 48% from June.

    South Korean imports of Russian coal rose 17.98% year on year and 32.44% month on month to 2.58 million tonnes in July, hitting a record high of the year.

    Meanwhile, Japan imported 120,200 tonnes of coal from Russia, falling 13.86% from June, after monthly rises of 78.36% and 45.53% in May and June, respectively.

    Russian coal exports may continue to rise, supported by recovering demand from Asia-Pacific region.
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