Mark Latham Commodity Equity Intelligence Service

Wednesday 3rd June 2015
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    BHP Billiton warns global commodity supply glut to persist

    BHP Billiton warns global commodity supply glut to persist

    BHP Billiton , the world's biggest mining company, warned on Wednesday that a global oversupply of commodities that is putting pressure on prices is likely to be be prolonged.

    In metals markets, newly installed low-cost supply can now be stretched to meet growing demand, BHP Billiton Chief Executive Andrew Mackenzie told a gathering of sector executives and Australian lawmakers.

    "Incremental supply, induced during periods of higher prices, will take longer to absorb and this means over-supply may persist for some time," he said.

    Prices for most commodities are now lower than the extreme highs of the recent past and closer to more sustainable longer term levels, Mackenzie said.

    BHP is also battling multi-year low prices for coal, copper, nickel and other minerals it mines.

    BHP's iron ore division president Jimmy Wilson said on Wednesday that BHP's share of the seaborne iron market has reamined steady at about 17 percent despite its major investments.

    "Fortescue Metals has grown its share of seaborne exports to 11 percent since entering the market in 2007 - they have been the world's most prolific iron ore growth story between 2007 and the end of 2014," he wrote in a comment piece for The Australian newspaper.
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    Oil and Gas

    Iran seeks to take back its share of OPEC production

    Iran will try to persuade OPEC countries to reverse production increases they implemented to fill a gap left by sanctions on Iran, the country's OPEC delegate Mehdi Asali was quoted as saying, ahead of a potential nuclear deal that could see sanctions lifted.

    Iran, once the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia, has seen its exports halved since 2012 to just over 1 million barrels per day (bpd) due to sanctions imposed by the European Union and the United States.

    "Production decreases for those countries which raised their production during Iran's relative absence will be a topic of discussion at the 167th meeting (of OPEC)," the Shana news agency quoted Iran's OPEC delegate as saying on Monday evening.

    "Some countries, which increased their production in the last two or three years during sanctions on Iran and insecurity in North Africa, are now not willing to reduce their production," he said, ahead of an OPEC meeting in Vienna on Friday.

    Iran's Oil Minister Bijan Namdar Zanganeh made similar comments in April, but Gulf OPEC members, including Saudi Arabia, have refused to cut output.

    The Islamic Republic hopes to quickly boost crude exports by as much as 1 million bpd if Tehran and six major powers finalise a nuclear agreement by a June 30 deadline, but oil industry experts say that figure is likely to be unrealistic.

    "My view is that within maybe 6 to 9 months they could add up to 800,000 bpd -- so not as much or as quickly as they say," Robin Mills, non-resident fellow for energy at the Brookings Doha Center, said.

    "They won't get back to pre-sanctions level immediately, as they must have lost some capacity since then."
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    Russian oil production surges in May ahead of OPEC meeting

    Russian oil output neared a record in May, damping speculation before OPEC meets this week that major producers may cooperate to curb a global supply glut.

    Production of oil and natural-gas condensate climbed 1.6 percent from a year earlier to 10.708 million barrels a day, close to January’s post-Soviet record of 10.713 million barrels a day, according to preliminary data from the Energy Ministry’s CDU-TEK unit.

    “Russian output has proven to be pretty resilient to the fall in prices, and they will not have a problem keeping production up for the next year or two,” said James Henderson, who researches the Russian oil industry at the Oxford Institute for Energy Studies.

    The Organization of Petroleum Exporting Countries, meeting June 5 in Vienna, will probably maintain its output target of 30 million barrels a day, according to a Bloomberg survey. Global supplies have continued to outpace demand six months after the group adopted a policy aimed at keeping its market share. Saudi Arabia and Russia are both pumping oil at near record levels.

    Russia’s May crude exports reached 5.06 million barrels a day, rising 1.95 percent from a year earlier while falling 5.7 percent from April, according to ministry data.

    Production increases were driven by condensate output from SeverEnergia, a Siberian joint venture between OAO Novatek and OAO Gazprom Neft. Novatek and Total SA also started their Termokarstovoye project in May and expect to pump 800,000 metric tons of condensate there this month.

    Russian output has continued to grow even after oil prices sank and the U.S. and Europe imposed sanctions against the industry over the government’s role in the conflict in Ukraine.
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    How Much does it cost to produce Oil?

    Image title

    As I have noticed in one of my articles, cash flow situation does not look wellfor the majors. In the long term, a profitable company must be able to generate enough cash flow to cover its capex and to pay money back to its shareholders (either via dividends or share buybacks). Therefore I included operating cash flow and total capex in my data. Operating cash flow and capital expenditure both refer to the whole company. Capital expenditure is investment in assets as well as in subsidiaries if they are not consolidated. This number does not include any subtractions because of the selling of assets.

    When the numbers for all 143 companies are summed up, operational cash flow amounts to $710 billion, while capital expenditure amounts to $706 billion and assets worth $105 billion were sold (a certain part of this amount can be found in capital expenditure of other companies). The industry as a whole seems to be able to fund its investment. However, there are at least two things to consider with regard to these numbers. Firstly, the data refer to 2014, a year that saw an average oil price of more than $96 per barrel. Secondly, cash flows refer to the whole company. As for many companies upstream is only one segment, the numbers are somehow biased. Other, less volatile business fields may introduce some error (e.g. ExxonMobil that also has divisions in refining and chemical engineering)

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    Gazprom says China started its part of Power of Siberia construction

    China has started pipeline construction last week to receive Russian gas from the Power of Siberia pipeline, Russian state gas company Gazprom said on Tuesday.

    Russia and China clinched a $400-billion gas deal last year, which requires construction of the pipeline. It requires $55 billion in investment for the Russian part only, including bringing on stream new gas fields.

    Gazprom also said that talks on the so-called Western route which would connect operating fields with China were moving forward at a good pace.
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    Korea Gas Corp to buy few spot cargoes this year, inventory to grow

    Korea Gas Corp, the world's single biggest buyer of liquefied natural gas (LNG), expects to purchase few spot LNG cargoes this year, with low demand expected to push inventories towards capacity by the third quarter, a senior official said.

    The company's LNG inventories held at four receiving terminals are currently 50-60 percent full but they are expected to reach tank-top by the third quarter, Kunho Lee, commercial manager for LNG procurement and trading, said.

    "The supply will be overflowing at that point but it's difficult to pin down the exact order of magnitude, an educated guess is that we are unlikely to be in the market for the rest of the year," Lee said.

    Last year Kogas, as the company is known, embarked on a major selling spree after low demand and healthy supply forced it to get rid of incoming shipments.

    Thai PTT seeks to secure LNG imports with global suppliers

    Thailand's PTT PCL said it plans to negotiate arrangements for import of liquefied natural gas (LNG) with several gas suppliers, including Chevron Corp, to offset a decline in domestic resources and to secure long-term supply.

    State-controlled PTT also plans to expand its partnership with Qatar Liquefied Gas Co Ltd, a major long-term LNG supplier, PTT chief executive Pailin Chuchottaworn said in a statement released while attending the World Gas Conference in Paris this week.

    PTT, Thailand's sole gas supplier, has a 20-year contract to buy 2 million tonnes of LNG a year from Qatar starting this year.

    The company has so far not revealed the names of the firms with which it is talks for LNG supplies, except for Anadarko Petroleum Corp, an operator of a Mozambique gas field in which PTT's unit has a stake

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    North Slope pay day for Repsol

    Repsol has made a series of “significant” oil discoveries on Alaska’s North Slope after carrying out an extensive 16-well exploration drilling campaign.

    The latest pair of wells drilled in the Nanushuk formation, Qugruk 8 and Qugruk 301, tested at respective flow rates of 2160 and 4600 barrels per day of oil, according to a statement from the Spanish explorer on Tuesday.

    It said the “production tests yielded good-quality crude from wells which have encountered multiple pay areas”.

    Repsol stated the flow tests underpin positive results from winter drilling efforts over the past four years since it acquired the acreage in 2011 that “indicate an area of significant potential”.

    Another three wells drilled in the Alpine formation struck oil-productive sands in two penetrations with an estimated oil pool covering about 15,000 acres (61 square kilometres), according to partner Armstrong Oil & Gas.

    Armstrong claimed that all 16 wells drilled in the campaign, including sidetracks, “have found hydrocarbons, most with multiple pay zones”.

    The company stated the Nanushuk reservoir,where seven appraisals have been drilled, has an oil pool spanning 25,000 acres (101 square kilometres) with an oil column of more than 650 feet and up to 150 feet of net pay, with an average porosity of 22%.

    While additional drilling is needed to confirm the size of some of the finds, Armstrong said permits are now being sought for development of two fields – one in Nanushuk and one in Alpine.

    Repsol holds a 70% operating stake in the exploration consortium, with Armstrong on 22.5% and GMT Exploration on 7.5%.
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    China goes for gasoline

    China's shift to consumer-led growth is accelerating demand for gasoline in the world's biggest energy user, with the fuel on track to challenge the dominance of diesel as an increasing number of middle class consumers buy bigger family cars.

    Diesel production is still forecast to be some 33 percent higher than gasoline this year, but the gap is on course to halve in five years, according to calculations based on data from consultancy Wood Mackenzie.

    This gap could disappear in the next decade, said a trader, citing general industry estimates.

    The importance of diesel and gasoline varies globally, largely due to the usage in cars and industry. Most cars in China use gasoline, a similar picture to North America where almost 90 percent of private vehicles run on gasoline, while in Europe more than half of new cars are diesel powered.

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    Peruvian regulator in dispute with Shell over LNG royalties

    PeruPetro is in dispute with Anglo-Dutch oil firm Shell over royalties related to the export of seven Peruvian liquefied natural gas (LNG) cargoes last year, the regulator said, adding it hoped to reach a deal soon or would resort to arbitration.

    Supplies from Peru's 4.45 million tonne per annum LNG export plant are handled by Shell, which acquired the asset from Spain's Repsol in 2014.

    Under the terms of its contract, Shell must pay the Peruvian government a royalty based on the final destination price of where it sells the LNG, PeruPetro's promotion and communications manager Oscar Quesada told Reuters in an interview.

    But Shell in 2014 exported seven cargoes to the United States, paying Peru a royalty based on the U.S. gas futures benchmark, one of the lowest prices in the world. It then re-sold the LNG to be exported to Asia, pocketing a much bigger sum and not sharing the proceeds with Peru, Quesada said.

    "In 2010 there were 10 cargoes that Repsol sold and did not share the full royalties. Shell did something similar last year. Right now Shell and PeruPetro are talking to solve this," Quesada said.

    Quesada could not give an indication of how much it wants Shell to pay Peru, but said the talks with Shell were progressing and it was hopeful a deal could be reached soon. If not, PeruPetro will resort to arbitration courts, he said.

    Peru recently settled a similar long-standing dispute over inadequate royalty payments related to 10 LNG cargoes exported in 2010-2011.

    The World Bank's International Center for Settlement of Investment Disputes ruled last week against PlusPetrol, operator of a Peruvian gas field that supplies the LNG plant.

    The ruling was a victory for PeruPetro, which is set to collect compensation for the lost royalties.
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    Lured by discounts, Canada's Come By Chance refinery taps Nigerian oil

    Canada's Come By Chance refinery, located on the eastern island of Newfoundland, has bought Nigerian oil for the first time in at least a decade, the latest addition to the facility's diverse crude slate, according to Reuters customs data.

    The purchases come as West African crude producers are courting new suitors in the face of weak demand from a U.S. market awash with cheaper, domestic crude.

    The search for new buyers has forced West African producers to compete aggressively on price, so light sweet Nigerian crude grades like Qua Iboe are being heavily discounted relative to global benchmark Brent crude.

    "I suspect the West African crude is priced to sell given the continuing reduction in U.S. imports of light sweet African crude," said Sara Emerson, a managing principal at ESAI Energy.

    The crude's relatively cheap price has drawn interest from the 115,000 barrel-per-day Come By Chance refinery, according to a source familiar with the refinery's operations.

    The latest shipment arrived aboard a Bahamas-flagged ship named M.V. Jiaolong Spirit, which carried 1 million barrels of Qua Iboe crude that arrived at the refinery on May 27, according to vessel tracking data available on ThomsonReuters' Eikon.

    The refinery has made one additional purchase of Nigerian crude, according to the person familiar with the refinery's operations who said future buys could be expected.

    Shale oil is not a perfect fit for the refinery, which prefers a medium-sour grade, but the owners are willing to run at slightly reduced rates to take advantage of the competitive pricing for U.S. crude oil. The same goes for White Rose, which must be blended with other crudes before its processed.

    The team negotiated a new supply and offtake agreement with BP Plc and overhauled operational management at the site.
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    Shell CEO warns on Coal/Renewable mix

    Shell CEO Ben van Beurden is set to warn a major conference Tuesday that the energy industry must guard against the development of a coal/renewables-based energy mix at the expense of natural gas.

    Speaking at the opening day of the World Gas Conference in Paris, van Beurden is expected to say that a failure to properly price carbon dioxide emissions is allowing coal to maintain or grow its share in the energy mix alongside renewables, at the expense of cleaner-burning gas.

    A coal/renewables mix can already be seen in European countries such as Germany and could spread to Japan, he argues, according to a section of the speech released earlier Tuesday.

    "Key gas and LNG markets have ... failed to create carbon pricing systems that lead to a switch from coal to gas in power generation," the prepared speech says.

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    Ivanhoe Energy declared bankrupt after failing to restructure

    Ivanhoe Energy Inc., a company that proposed using a unique heavy oil technology to develop its Tamarack thermal oilsands project in northern Alberta, has been declared bankrupt after it failed to reach a restructuring proposal under the Bankruptcy and Insolvency Act.

    In a news release Tuesday, the Vancouver-based company backed by mining promoter Robert Friedland said it worked “diligently” with major creditors and its court-appointed trustee, Ernst & Young, since filing a notice of its plan on Feb. 20 but no “viable restructuring proposal” resulted.

    Ivanhoe suspended work on the estimated $1.37-billion, 20,000-barrel-per-day Tamarack project last year after it was one of five projects affected by an Alberta Energy Regulator review of shallow thermal projects over worries about cap rock integrity. It bought the property from Talisman Energy Inc. in 2008 for $105 million.

    “Ivanhoe’s decision is based on the uncertainty that there is no timeline defined … for a new regulatory framework for shallow SAGD projects, and that there is no clarity as to a path for approval for its Tamarack application,” the company said in a news release in March 2014.

    Tamarack was to use the company’s proprietary heavy-to-light or HTL technology to partially upgrade the bitumen.
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    US told of bribery evidence in Brazil probe

    Prosecutors investigating Brazil's largest corruption scandal have reportedly notified the US Department of Justice (DOJ) of evidence that at least four foreign companies allegedly paid bribes to win Petrobras contracts.

    The allegations are against units or affiliates of Samsung Heavy Industries, Skanska, AP Moeller-Maersk and Toyo Engineering, Bloomberg reports, citing Carlos Lima, the senior prosecutor in a nine-member task force.

    Companies could face charges in Brazil that would restrict local operations as well as possible sanctions under the US Foreign Corrupt Practices Act, he told the news wire.

    "We've had a meeting in the US about it. The Americans like to know who are involved," Lima said. "These companies can be accountable under the FCPA."

    Samsung Heavy Industries told Bloomber it "has not been contacted by any law enforcement authorities regarding this issue".

    Toyo and its Brazilian affiliate "are entirely unrelated to the bribery scandal of Petrobras", the Japanese firm said.

    Maersk said bribes are strictly forbidden for any employee or third party, commissions were paid within industry norms and it found no indication of improper activity. The Copenhagen-based company added that it has not been contacted by authorities.

    Skanska told Bloomberg that it has zero tolerance for unethical business practices and is undertaking an internal investigation.
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    Chesapeake could return to 68 percent of its wells to refrack

    Out of Chesapeake Energy’s 6,750 wells, 4,600 of them have the potential to be refracked. Investopedia reports that since the 4,600 wells, or 68 percent of all of its wells, were drilled before 2012, they weren’t drilled using the latest fracking technology, so they have the potential to be refracked.

    In the past few years, fracking technology has improved, so well performance and production have improved. Refracking allows oil and gas companies to reap the benefits of returning to previously-fracked wells to have another turn at production.

    Refracking has the potential to improve company revenue, so investors should keep an eye on trends in the months and years to come.
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    The Great Edmonton Propane Giveaway

    Yesterday (June 2, 2015) spot prices for propane at Edmonton, Alberta were assessed by OPIS at an average of -0.625 cnts/gal (-26.25 cnts/Bbl). Yes you read correctly – the price was negative – meaning that producers will PAY YOU to take their propane away in Edmonton. Prices at Edmonton have been below zero before at least twice in the past 2 weeks and they averaged just 2.4 cnts/gal during May. Propane has fallen on hard times in the U.S. as well with Mont Belvieu Gulf Coast trading hub prices reaching13 year lows under 33 cnts/gal last week (back up to 44 cnts/gal yesterday) and the ratio of propane prices to U.S. benchmark West Texas Intermediate (WTI) crude hitting an all time low under 24%. Today we begin a new series on propane with a look at the Edmonton market.

    Propane is one of the five “purity” natural gas liquids (NGLs) produced from natural gas processing plants, typically accounting for about 28% of the NGL mix. It is also produced by refineries. About 60% of demand for propane in Canada is non-seasonal use as fuel in industrial markets and as a feedstock for petrochemical plants. Another 35% of demand is highly seasonal use for residential and commercial heating and agricultural crop drying. Because of the seasonal element, demand peaks occur in the fall and winter and propane storage plays a critical role in buffering supplies over the course of the year. On the supply side, about 85 - 90% of Canadian propane is produced from natural gas processing – mostly in Alberta. According to a 2014 Canadian Energy Research Institute (CERI) report, Canada produced 242 Mb/d of propane in 2013 and consumed 152 Mb/d – with the remaining 90 Mb/d going to the export market. Propane exports from Canada primarily supply the U.S. Midwest and the East Coast – for seasonal heating and crop drying.
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    1Q15 Ohio Production Numbers Released: Natgas Production Up 11%

    The Ohio Dept. of Natural Resources (ODNR) released their first quarter 2015 production report yesterday. It shows natural gas production in the Buckeye State was up 11% from the previous quarter. That rate of increase has slowed (but is still good, all things considered).

    In 4Q14 production numbers were up 25% from the previous quarter. The production number increase for 1Q15 slowing to only 11% is a reflection of less new drilling in the state.

    There’s plenty of Utica wells already drilled awaiting completion and connection to pipelines–so production will almost certainly continue to increase in Ohio for the foreseeable future–albeit at a slower pace.

    According to yesterday’s report, Ohio produced 183.6 billion cubic feet (Bcf) of natural gas, and 4.4 million barels of oil in 1Q15. Note that NGLs are part of the natural gas figures–Ohio doesn’t break out NGLs in a separate number, unfortunately.
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    Crude processed by U.S. refiners gets lighter and lighter.

    U.S. refineries are processing the lightest cocktail of crudes for almost a quarter of a century, as they run out of room to switch light imported oils with domestic shale production.

    In March, U.S. refineries processed crude with an average gravity of 31.95 degrees API, the lightest combination since April 1991, according to data from the U.S. Energy Information Administration (EIA).

    Higher numbers on the API scale correspond to lighter crude oils. API gravity is a scale employed for measuring the density of fluids such as crude and refined fuels. API gravity of 31.95 degrees corresponds to roughly 864 kilograms per cubic metre.

    The average density of crude processed at U.S. refineries has fallen by 3 kilograms per cubic metre over the last 12 months and 10 kilograms since 2008, which may not sound much, but density has varied in a narrow band of just 16 kilograms over the last 30 years.

    Most units in a refinery are constrained by volume and designed to operate with maximum efficiency only if the average quality of the feedstock can be kept within a fairly narrow range.

    For example, the trays in an atmospheric distillation tower are arranged to produce cuts in roughly fixed proportions.

    A crude cocktail lighter than intended will produce more gases and very light fractions at the top of the tower, which the refinery may not be able to handle efficiently, and less heavy residual, leaving vacuum distillation and coking units underemployed.

    For this reason, refiners try to keep average feedstock quality stable within a fairly tight range to squeeze the maximum efficiency from their plants.

    The shale revolution has challenged refinery efficiency because it has forced U.S. refineries to process a large volume of very light oils.

    North Dakota's Bakken crude can be a light as 810-820 kilograms per cubic metre, which is 50-60 kilograms per cubic metre lighter than the long run U.S. refinery average. Oils from Eagle Ford are even lighter.

    U.S. refiners have tried to keep average density steady by reducing the amount of light oil they buy and purchase from North and West Africa (Nigeria, Algeria and Angola) as well as the North Sea.

    But imports of light crudes have now been reduced close to zero which means that refiners are reaching the limits of this strategy.

    One alternative is to blend very light domestic crude with very heavy oils, for example from Canada, to achieve the same average mix.

    Even as imports of light oils from West Africa have been almost eliminated, the United States is importing record quantities of mostly heavier oil from Canada.

    Clever blending has not been enough to stop the average feedstock from becoming lighter and lighter over the last year.

    There are questions about how much longer this trend can continue before it starts to have a significant impact on refinery efficiency.

    Attached Files
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    Alternative Energy

    Expansion in U.S. ethanol on hold after blending targets slashed

    Expansion in the U.S. ethanol industry, stuck in neutral for more than a year as the government debated biofuel blending requirements, is now likely to come to a screeching halt.

    With the U.S. Environmental Protection Agency last week essentially maintaining the so-called blend wall that mandates nearly every gallon of gasoline sold in the United States contain 10 percent ethanol, there is little need for new plants in a saturated market, industry sources said.

    Ethanol makers are putting expansion plans on hold as profit margins sag, threatening corn producers already suffering from low grain prices and massive supplies.

    Existing ethanol facilities can supply as much as 15.75 billion gallons, according to Scott Irwin, an agriculture economist at the University of Illinois specializing in biofuels.

    That is more than enough to meet demand for domestic blending for this year of about 13.4 billion gallons of corn-based ethanol as well as export demand, on pace to reach roughly 1 billion gallons.

    "We have the supply handled - we're a little long on supply," said Mark Warren, chief financial officer at consultancy Ascendant Partners.

    An ethanol plant in North Dakota that began operating last month was the first such startup in five years and, possibly, the last for the foreseeable future.

    Ethanol stockpiles of 20 million gallons ET-STK-T-EIA are the largest in about three years, prices of $1.50 per gallon hovering near the lowest levels in a decade.

    Dakota Spirit AgEnergy, a $155 million project, is fine-tuning the ethanol plant that will be able to produce 65 million gallons annually, said Jeff Zueger, chief executive officer of Midwest AgEnergy Group.

    Top producer Archer Daniels Midland Co, which closed an ethanol plant in North Dakota in 2012, has no plans to expand ethanol operations, company sources said.

    Producers still are earning money, benefiting from record supplies and the lowest corn prices in five years. But current profit margins of about 30 cents per gallon pale in comparison with the record profits of $2 per gallon last year and are a dime below average returns from the last eight years, according to Iowa State University.
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    Federal officials approves for three solar power farms

    The Hill reported that federal officials have approved the first 3 proposed solar power farms under a streamlined permitting program for solar projects on federal land.

    The 3 projects are all on Bureau of Land Management property in Clark County, Nevada and will together have a capacity of 440 MW, enough to power about 132,000 homes.

    BLM said that the projects benefitted from the Western Solar Plan, which identified 19 specific areas that could benefit from solar power, and set up streamlined permitting processes for them. The permits took less than 10 months to process.

    The Interior Department, of which BLM is a part, said that the process shows that officials can effectively encourage solar power by reducing barriers.

    Ms Sally Jewell, Interior Secretary, said in a statement that “Through thoughtful planning and upfront public participation, these solar projects demonstrate we can reduce permitting times, create certainty for energy developers, and achieve better outcomes for communities and the environment.”

    She said that “Through a landscape-level approach, we are cutting carbon pollution and creating jobs through responsible solar development on our public lands.”

    Mr Neil Kornze, Director of BLM, said that “Projects like these demonstrate that regional planning and mitigation can achieve much faster permitting times and better outcomes. The Western Solar Plan provides a win-win approach for communities and for our public lands.”

    The projects are being built by Invenergy, First Solar Inc and NV Energy. Each company won the project rights in a June 2014 auction that brought in USD 5.8 million for the federal government.
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    State Power Investment comes into being, holding 700 bln yuan asset

    State Power Investment Corporation (SPIC) formally came into being by incorporating China Power Investment Corporation (CPIC) and Statenuclear Power Technology Corporation (SNPTC) on May 29, after approved by the State Council.

    With an asset of over 700 billion yuan and annual revenue of more than 200 billion yuan, the SPIC will become another power giant in China, together with long-existed China National Nuclear Corporation (CNNC) China General Nuclear Power Group (CGNPG).

    "The founding of SPIC is one of the moves of the central government to deepen the reform of central enterprises, and it marks a new breakthrough in the reform of nuclear power system since the turn of the century”, said Tang Zide, former Deputy Director with the Nuclear Power Development Office under the State Council.
    The incorporation is deemed as a win-win option, because the CPIC is one of China’s top five power groups and capable of earning profit continuously, while the SNPTC is known for advanced technological innovation ability in nuclear power.

    The SPIC will integrate both the upstream and downstream sectors, and it will break the duopoly of the SNPTC and CGNPG in nuclear power sector. The IPO will also be put on agenda.
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    Base Metals

    Vedanta to extend life of Skorpion zinc mine

    Vedanta Resources is extending the life of its Skorpion mine in Namibia by two years to financial year 2019, which could mean higher-than-expected supplies of zinc.

    Skorpion produced about 102,000 tonnes of refined zinc metal in the last financial year, Vedanta said last month.

    "At Skorpion, plans are in place to extend mine...FY2017 to FY2019," the miner said in its annual results report.

    "This is being achieved by deepening of current open pit to access additional resources. Mine production will end in FY2019 and oxide ore processing will continue until FY2020 from stockpile."

    Higher zinc supplies are likely to dampen the enthusiasm of zinc bulls expecting higher prices on the basis of mine closures this year.

    A recent Reuters survey showed analysts expect the zinc market to see a 145,300 tonne deficit this year and a 200,000 tonne deficit in 2016.
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    Steel, Iron Ore and Coal

    China's top coal firms raise prices again as supply tightens

    Chinese state coal firms have raised prices for the second time in a month after a long sequence of cuts, but analysts said a seasonal spike in demand was unlikely to improve the sector's long-term prospects.

    China is the world's biggest coal producer, but slower economic growth and a state-led effort to switch to cleaner energy have hurt the sector, with 80 percent of firms suffering losses, according to industry data.

    The China Coal Transport and Distribution Association (CCTD) said on its website (www. that Shenhua, together with China Coal Energy and Inner Mongolia Yitai Coal, had raised the June price for most grades of coal by another 5-15 yuan ($0.8-$2.42) per tonne.

    The firms raised prices of lower-grade coal by 10 yuan per tonne in mid-May, anticipating a surge in demand for power over the summer.

    "More air-conditioner usage in summer raises demand for power coal, but substitutes like hydropower or wind power are likely to dissipate demand, so I think it is only a test price adjustment to see how the market reacts," said Zhang Xiaojin, an analyst with China's Everbright Futures.

    The price of Shenhua's 5,200-kilocalorie/kilogram grade of coal now stands at 395 yuan per tonne. The price of its highest 5,500 kcal/kg grade of coal remains unchanged at 462 yuan.

    Benchmark 5,500 kcal/kg spot prices at the port of Qinhuangdao, which have lost 22 percent since the start of the year, were unchanged on the week at 410 yuan per tonne.

    CCTD said end-user stocks were at a three-year low and the prices of low-grade coal were recovering, but the turnaround was likely to be limited.

    "As well as the serious supply and demand imbalance, other non-conventional factors - including a worse-than-forecast economic slowdown, a huge increase in hydropower, a mild winter and rapid downstream destocking - have also piled on the downward pressure," CCTD said.

    The National Development and Reform Commission, China's state planner, said on Wednesday it would strengthen efforts to curb illegal production and take action against users that buy coal produced in violation of regulations.

    Output in the first four months of the year reached 1.15 billion tonnes, 6.1 percent lower over the same period of 2014, official data showed last month.

    But government actions were unlikely to have a quick impact, said Zhang of Everbright, noting that the market was expected to remain oversupplied for three to five years.
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    Anglo American sees surge in iron ore sales to India

    Global miner Anglo American said its iron ore sales to India have more than tripled over the past year as Asia's third-largest economy embarks on a once-in-a-generation urbanisation drive.

    "India is around 15 percent of our (iron ore) sales portfolio, or about 6 million tonnes (a year)," David Trotter, Anglo American's global head of iron ore sales, told Reuters at the Metal Bulletin iron ore symposium in Vienna.

    India's iron ore imports jumped to a record high above 15 million tonnes in the fiscal year to end-March as tumbling global prices and limited domestic supply pushed steelmakers to buy more of the raw material overseas.

    Trotter expects India to account for 20 percent of Anglo American's iron ore sales over the next two to three years, a significant but not equally stellar rate of sales growth.

    Formerly the world's No. 3 supplier of iron ore, India has been importing it over the past three years due to court-imposed restrictions aimed at curbing illegal mining in the major producing states of Karnataka and Goa.

    But according to some industry experts, the reopening of iron ore mines in key producing states such as Odisha, Jharkhand and Goa may reduce India's imports in the current fiscal year.
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    Anglo American to start hedging iron-ore in second half

    Global mining company Anglo American said it will start using iron-ore derivatives to hedge its exposure from the second half of this year in a move that should help further boost volumes in the fast growing financial market. 

    "In the second half of this year we will definitely implement that (iron-ore hedging)," David Trotter, global head of iron-ore sales for Anglo American told Reuters at the Metal Bulletin iron-ore symposium in Vienna.

    Iron-ore derivatives traded on the Singapore Exchange have roughly doubled in volume each year since their launch in 2009, but are still roughly half the 1.3-billion tonnes of physical seaborne iron-ore traded globally each year. "There's three or four people who will be directly involved in trading (iron-ore derivatives). They're based in Singapore," said Trotter. 

    He added, however, that the miner will start off hedging just a small part of its total iron-ore production. The iron-ore derivatives market has gained popularity among financial players and trading houses in the last few years. However, the market still lacks the participation of most iron-ore producers, and is not that popular amongst Western steel mills, the natural buyers of ore whose input is needed for the market to mature.

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