Mark Latham Commodity Equity Intelligence Service

Friday 25th September 2015
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    Oil and Gas


    VW Scandal 'breakout'

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    Glencore CDS surge into the 'killing zone'

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    China plans to launch national cap-and-trade system

    China is preparing to announce plans to launch a national system to limit greenhouse gases and force industries to purchase pollution credits, Obama administration officials said Thursday.

    Beijing plans to put the system known as cap-and-trade into place in 2017 as part of measures aimed to address climate change in cooperation with the U.S. and others.

    A joint statement to be released following Friday’s summit between President Barack Obama and his Chinese counterpart Xi Jinping aims to flesh out how their two countries plan to achieve targets for cutting emissions set at a bilateral summit in Beijing last year.

    The officials, who spoke on condition of anonymity so they wouldn’t pre-empt China’s official announcement, said it’s hoped the announcement will give impetus to a broader global treaty on climate change at a Paris conference in December.

    The announcement will also cover components of the cap-and-trade strategy, including the individual sectors covered under the plan, which range from power production to papermaking, the officials said. Those sectors produce “a substantial percentage of China’s climate pollution,” one official said.

    Cap-and-trade sets an annual limit on the amount of pollution that can be produced, then requires firms to obtain permission to pollute by purchasing credits from less polluting industries.

    Other parts of China’s announcement will include prioritizing low-carbon and efficient electricity production.
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    Brazil 5-yr CDS jump to 7-yr high, dollar bonds tumble 2-3 cents

    Brazilian debt insurance costs jumped to their highest in almost seven years on Thursday and sovereign dollar bonds fell 2-3 cents across the curve on fears of a deepening political and financial crisis.

    Other emerging assets also sold off as world stocks slid towards two-year lows but the biggest losses came in Brazil where the real currency fell another 1.5 percent to fresh record lows, shrugging off central bank interventions.

    Five-year credit default swaps (CDS) rose 33 basis points from the previous close to 513 bps, according to data from Markit. The CDS have risen almost 200 bps since the end of August and last traded above 500 bps in October 2008.

    "Brazil is in a deep economic, currency and confidence crisis. The decline in the currency is unprecedented, similar to the collapse of the (Russian) rouble last year ... accordingly CDS are jumping and bond yields are rising," said Bernd Berg, a strategist at Societe Generale in London.

    Investors have been spooked by news that Brazilian retailer General Shopping has deferred coupon payments on $150 million of subordinated debt and offered creditors a 50 percent write-down on another debt tranche.

    The fear is that another rating agency will follow Standard & Poor's example and cut Brazil's credit rating to junk, forcing many global funds to dump its bonds from their portfolios. Brazilian dollar bond yield spreads over U.S. Treasuries widened 15 bps to 506 bps on the EMBI Global index while dollar bonds maturing 2040 and 2045 fell 3.875 cents and 2.8 cents respectively, according to Tradeweb .

    The broader EMBIG index saw spreads widen 10 bps to 455 bps, the widest in a month.

    A 2020 dollar bond issued by state-run oil firm Petrobras fell 3.3 cents while a 2040 issue lost 2 cents.

    According to calculations by the Bank for International Settlements (BIS), Brazilian non-financial borrowers owe over $300 billion in dollar-denominated debt, double the 2008 levels and amounting to almost a fifth of gross domestic product.

    "With private sector spending slowing sharply, commodity prices in retreat and manufacturing activity contracting, producers across large swathes of the economy are likely to find it increasingly hard to pay their bills in the coming months," said Michael Henderson, head of economics at Verisk Maplecroft.
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    CATERPILLAR WARNS: Bad news is 'converging' and now we have to make some major changes

    Caterpillar has some bad news.

    On Thursday, the industrial giantannounced that it as part of a restructuring plan it will cut up to 10,000 jobs in the face of what it called, "a convergence of challenging marketplace conditions in key regions and industry sectors — namely in mining and energy."

    Caterpillar is seen as a bellwether for the global economy because its equipment is big and expensive and often the kind of investment a company only makes when they feel confident about their prospects and the global economy.

    Additionally, Caterpillar has been seen as one of the leading indicators on China's economic slowdown given the decline in the company's sales in that region over the last several years.

    In its announcement on Thursday, the company notes that 2015 will be its third straight year of sales declines. And with sales also expected to decline in 2016, the company could be looking at its first four-year stretch of sales drops in its 90-year history.

    In a statement, Caterpillar CEO Doug Oberhelman said, "We recognize today's news and actions taken in recent years are difficult for our employees, their families and the communities where we're located. We have a talented and dedicated workforce, and we know this will be hard for them."

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    New S.Africa mines minister faces platinum baptism of fire

    For South Africa's new mining minister Mosebenzi Zwane, until now a little-known provincial agriculture official, it was not the ideal first day in the office.

    Taking over a sector already bleeding jobs due to the commodity price slump, Zwane was confronted with the price of platinum, one of South Africa's most valuable exports, hitting a 6-1/2 year low due to the Volkswagen emissions tests scandal.

    And the platinum sector is still reeling from a five-month strike, the longest in South African history, last year that has forced shaft closures and mine sales.

    Given that ousted minister Ngoako Ramatlhodi, known for his no-nonsense approach, was credited with helping mediate an end to that strike, analysts and mining executives are questioning President Jacob Zuma's wisdom in pushing him out.

    Zwane's previous jobs, which include stints as provincial minister for agriculture and rural development in the Free State, do little to boost confidence in the future of a sector that accounts for 7 percent of South African GDP.

    Investec Securities described the reshuffle as a "key obstacle" to progress. "Just as the minister gets to grips with all/most of the issues in the sector, we start with a new minister," it said in a note.

    Both labour and management lamented Ramatlhodi's exit.

    The National Union of Mineworkers praised him for forcing Glencore's Optimum Coal mine to close after a supply dispute with state power utility Eskom, and "sending a message" to mining companies that they had to follow the rules.

    The militant Association of Mineworkers and Construction Union (AMCU) also said it would miss his tough approach to compliance in regard to affirmative action regulations and black ownership targets.

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    Noble Group says chairman Elman steps down from 2 board committees

    Singapore-listed commodity trader Noble Group Ltd said on Wednesday its chairman Richard Elman has stepped down from two board committees.

    Elman has stepped down as a member of the audit committee and the nominating committee, Noble in a statement.

    Two independent directors have been appointed to head two other committees that oversee remuneration and options as well as corporate social responsibility and government relations.
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    Does VW roil the auto market enough to put us in recession?

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    China Sep flash PMI dips further

    The preliminary Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) further dipped 0.3 from the final figure in August to 47 in September, hitting a 78-month low, data showed on September 23.

    That compared with an expected reading of 47.5, posting the seventh consecutive month below the 50-point threshold separating growth from contraction, suggesting China’s economic conditions are still deteriorating.

    The output sub-index was 45.7 in September, down 0.7 from August, hitting a 46-month low, indicating a slower growth in manufacturing sector.

    The sub-indexes for new orders, new export orders and employment all posted declines, signaling the flat demand and the intensive downward pressure of manufacturing market.

    The slowdown in manufacturing sector in early September was mainly attributed to the decreasing demand and prices in the previous period, which signaling manufacturing sector is in the vital period of structural transformation, He Fan, Chief Economist at Caixin Insight Group said.

    Fiscal expenditure from central government has been greatly increased in August, indicating much more favorable fiscal policies in the sector. We should wait patiently for the effect, he added.
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    VW emissions cheating affects 11 million cars worldwide

    Volkswagen installed software designed to cheat emissions tests in some 11 million cars worldwide, the company said Tuesday, as the scandal surrounding the German car giant continued to escalate.

    The company said it will set aside $7.3 billion (6.5 billion euros) to cover the cost of repairing the cars and “other efforts to win back the trust of our customers.”

    Previously, American regulators had said about 482,000 cars in the U.S. were affected.

    But now VW is acknowledging that the fallout from the scandal will be felt around the world. It will be a major blow to the German car giant, which will have to fix more cars than it sold last year. (Worldwide, it sold 10.2 million vehicles in 2014.)

    EPA: Volkswagen used ‘defeat device’ to illegally skirt air-pollution controls

    In a video message, VW CEO Martin Winterkorn addressed the loss of customer confidence directly.

    “Many millions of people around the world trust our brands, our cars and our technologies. I’m endlessly sorry that we disappointed this trust,” he said. “We will do everything to regain your trust step by step.”

    “Volkswagen is working intensely to eliminate these deviations through technical measures,” VW said in a statement.

    Pressure on the company began mounting Friday, when the Environmental Protection Agency announced VW had admitted to installing software that let its diesel cars detect when they were being checked for emissions and cheat on the test.

    While the cars, from model years 2009 to 2015, passed emissions tests, they spewed nitrogen oxide at up to 40 times federal standards on the road.

    VW says the issue is limited to vehicles with Type EA 189 engines. The company didn’t list which cars use that engine, but the EPA has said it is eyeing VW’s Beetle, Golf, Jetta and Passat models and the Audi A3, made by its luxury sister brand Audi.

    The scandal engulfing Volkswagen has spilled into the precious metals market, reflecting growing fears of a consumer shift away from the diesel engines that account for almost a half of the world's platinum demand.

    Platinum prices dropped 3.6 percent on Tuesday, their biggest one-day fall in more than two years, "whacked" by concerns that the German carmaker's years-long effort to dupe U.S. regulators on diesel emissions will hurt sales of diesel engines, said Ed Meir, metals analyst at INTL FCStone.

    The price of palladium, which is preferred for gasoline-powered engines but less so for diesel, barely dipped 0.6 percent.

    The collapse highlights not only the enormity of the diesel industry's woes, but also the growing threat to platinum markets if, as some analysts now wonder, Volkswagen's scandals coupled with tougher regulations end a decades-long preference for diesel cars in Europe.

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    Glencore CDS explode higher, stock in free fall, the vultures circle.

    Two weeks ago, in a stunning development, Glencore officially folded the towel on not only its global expansion ambitions and its bullish commodity case, but admitted it was far too levered for the current recession in commodity prices. As a result, Glencore CEO Ivan Glasenberg unveiled a $10 billion deleveraging plan in order to prepare for a "doomsday scenario" for commodity prices.

    Sure enough, the company's CDS which Zero Hedge had said back in early 2014 with "Is This The Cheapest (And Most Levered) Way To Play The Chinese Credit-Commodity Crunch?" was the best way to bet against the Chinese blow up currently in progress, tumbled from a level in the mid-400s to 300 bps on hopes Glencore would be able to successfully delever to a 2x net debt level.

    The first crack in these hopes emerged just a few days after the company's deleveraging announcement when Moody's downgraded Glencore Baa2 outlook to negative, despite the proposed equity raise, asset sales and capex mothballing.

    In doing so Moody's merely confirmed our skepticism from September 7 when we said this Glencore's action "merely reinforces our thesis and allows all those who missed the initial blow out in GLEN credit default swaps to put the trade on... at levels not seen since about a month ago. Because as a result of today's asset-stripping and equity-raising activity, Glencore is now a that much better levered bet on China's economy in a broad sense, and copper pricing in a narrow one."

    Our conclusion from the Monday two weeks ago, when GLEN CDS was trading back down at 300 bps:

    "with every passing week that neither China's economy rebound nor copper reverses recent losses, expect GLEN CDS to accelerate its widening once again, and overtake its recent multi-year high level of 445 bps in very short notice."

    Fast forward to this morning when not only did Glencore stock drop below 100p for the first time ever as we noted in our overnight wrap, but according to CMA, the shock that the company's deleveraging will not be enough is now shaking the entire capital structure, and, lo and behold, as of moments ago, GLEN CDS just soared by 74 bps to a whopping 464 bps - the widest since January 2012, and hitting our target in just two weeks.

    We expect this CDS blowout to continue.

    What's worse, if the company is downgraded from investment grade to junk, watch as the "commodity Lehman" scenario for Glencore, which much more than a simple copper miner just happens to be one of the world's biggest commodity trading desks, comes full cricle leading to waterfall collateral liquidations and counterparty freeze-outs as suddenly the world is reminded that there is a vast difference between a real and a rehypothecated commodity, and that all collateral rehypothecation chains are only as strong as the weakest counterparty!

    Incidentally, today's Glencore implosion is a far greater risk to the capital markets and the global economy than Volkswagen: a few executive resignations, a few bribes to US Congress, and the scandal will be promptly snuffed.

    For Glencore, however, which suddenly the entire world realizes is - as we said in March 2014 - the way to trade China, it may now be too late.

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    Three states to kick-start power sector reforms - Report

    Business Standard reported that the National Democratic Alliance government has started the process of setting the power sector right, with Goa, Uttarakhand and Meghalaya taking the lead in joining hands with the Centre. Besides regular rate increases and debt restructuring to clean up their books, these states will also initiate schemes to enable 24x7 power supply to consumers, at a cost of INR 7,563 crore.

    Unlike the United Progressive Alliance government’s financial restructuring plan for distribution companies, the NDA government’s programme will have no grant from the Centre to incentivise reduction in debt and losses. The Centre is pursuing states to tackle these issues by increasing rates and raising funds from the market. Budgetary support from the Centre would be solely for its flagship schemes the Deendayal Upadhyaya Gram Jyoti Yojana and the Integrated Power Development Scheme.

    Till FY19, the overall requirement of funds for Uttarakhand will be INR 4,854 crore, Meghalaya INR 2,553 crore and Goa INR 1,576 crore. Any shortage will be met through external/market borrowings from financial institutions or developmental aid agencies, which the state concerned will facilitate.

    The door to central funds, however, won’t be completely shut. A statement following the signing of agreement with the three states said that “The state can ask for financial support but only when its generation, transmission and distribution utilities abide by the respective state electricity regulatory commission.”

    Earlier, CRISIL had prepared a report on state utilities and suggested measures to reform the system. It had proposed rate increases of 1.7% for Uttarakhand, 11% for Goa and 15% for Meghalaya from the next financial year.

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    Lanxess, Aramco Form $3.1 Billion Venture to Buoy Rubber Unit

    Lanxess AG and Saudi Arabian Oil Co. said they will form a 2.75 billion-euro ($3.1 billion) venture to draw on the Middle East company’s access to raw materials and make a struggling synthetic-rubber division more competitive.

    Each party will hold 50 percent in the business, the two companies said in statements Tuesday. Saudi Aramco will pay about 1.2 billion euros in cash for the stake, adjusted for debt and payables. Bloomberg earlier reported the planned transaction.

    The oil-and-gas major outbid suitors including Ineos Group AG, according to people familiar with the situation. Berenberg in a July report said that Aramco would be among the “very well-fitting potential partners.” On its own, Lanxess suffered from higher costs for raw-materials such as benzene and styrene at a time when the market for its synthetic rubbers is in a phase of oversupply.

    Lanxess Chief Executive Officer Matthias Zachert, who returned to the company to take the helm in April 2014 after a previous stint as finance chief, is transforming the business. As well as seeking a partner for the rubber business to reduce exposure to that industry, he has also cut jobs and streamlined production.

    Shares of Lanxess, which dropped out of the benchmark DAX index this week, rose 1.5 percent to 46.50 euros as of 11:59 a.m. in Frankfurt. The company has a market value of 4.3 billion euros. Proceeds from the transaction will be used for buybacks, repaying borrowings and investments.

    Lanxess will contribute its tire and specialty rubber operations and an elastomers unit. The sale will provide Zachert with the financial flexibility to expand other areas of the business less tied to the automotive industry, such as chemicals to treat water supplies.

    Under the leadership of its new chief executive, Amin al-Nasser, Saudi Aramco is looking to become one of the world’s largest integrated energy companies by the end of this decade. It’s building a $20 billion chemical plant in Jubail with Dow Chemical Co. that will be fully operational next year, and creating special zones to manufacture end products using its chemicals around its new refineries in Jubail, Rabigh and Jazan. It’s building another one around Sadara, its chemical venture with Dow in Jubail, and earlier this year obtained $10 billion in loans to finance mergers and acquisitions.
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    BHP plans multi currency hybrid sale after investor meetings

    BHP Billiton Ltd., the world’s biggest mining company, plans to sell new hybrid securities to institutional debt investors to help refinance existing near- term liabilities following a marketing campaign.

    The company will begin a tour of investors in Europe, Asia and the U.S. next week to gauge the appetite for the multi currency capital instruments, BHP said Tuesday in a statement. Standard & Poor’s said that it assigned its A- long-term issue rating to the proposed securities.

    BHP last month reported a 52 percent drop in underlying full-year earnings, highlighting its challenges as Chief Executive Officer Andrew Mackenzie seeks to boost payouts for shareholders while he also trims capital spending and debt to try and reassure bond investors and ratings companies.

    Among advantages of the hybrid instruments is “an expected 50 per cent equity: 50 per cent debt treatment by the rating agencies,” BHP said. Using the instruments would allow the producer to diversify its debt investor base and bolster efforts to maintain a “solid A credit rating,” it said.

    The company is rated A+ by S&P, the fifth-highest grade, and the outlook on the company is negative. It carries the equivalent A1 score from Moody’s Investors Service with a stable outlook. BHP targets ratings of A+ or A from S&P and A1 or A2 from Moody’s, it said last month.

    Any sale of perpetual notes would be a first for BHP, according to data compiled by Bloomberg. The company has sold several notes with maturities north of 15 years, including $2.5 billion of 5 percent securities that mature in 2043. Those debentures, one of the company’s most heavily traded, were little changed at 104.712 cents on the dollar as of 5:10 p.m. in Sydney versus 113.525 cents at the start of the year.

    The cost to insure BHP’s debt against nonpayment using credit-default swaps rose to the highest in three years earlier this month. The swaps touched 115 basis points on Sept. 1, the most since September 2012, and were last at 105.9 basis points having risen 29 basis points this year. Swaps on Rio Tinto Plc are up 26 basis points since Dec. 31 at 132.5 basis points, according to data provider CMA.

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    China's Banking Regulator: "Worse than 2008"

    AsiaPac stocks are opening mixed after the US session gains. Perhaps the biggest news of the evening is, as China's bankiong regulator has been meeting with foreign banks to express concerns over lack of risk control around non-performing loans. As CBRC said, rather stunningly honest for a government entity, "the current situation is more severe than the time in 2008 during the financial crisis." With stocks up while commodities (Zinc) limit-down, PBOC injects another CNY50 bn and devalued the Yuan fix for the 2nd day in a row.

    CBRC urged foreign banks that aren’t managing risk well enough to increase checks. CBRC officials mentioned in meetings that those banks should control NPL ratio to not more than 2%,

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    Air Products announced pricing increases for North American customers

    Effective October 1, 2015, or as contracts permit, Air Products will increase product pricing and monthly service charges for merchant customers in North America – involving a range of gases.

    The pricing adjustments include increases of:

    Up to 20% for liquid argon and liquid carbon dioxide

    Up to 15% for liquid oxygen, liquid nitrogen, liquid and bulk hydrogen

    Up to 10% for liquid and bulk helium

    Up to 10% for tank monthly service charges

    Some price adjustments may be outside of these ranges based on specific situations.

    These price adjustments are in response to rising costs and will also support continued investments to improve the reliability, security, safety, and efficiency of operations.
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    Progress on cutting fossil fuel subsidies "alarmingly slow"-OECD

    Major nations are "alarmingly slow" in keeping pledges to cut fossil fuel subsidies despite signs of a decline in support worth up to $200 billion a year, the Organisation for Economic Cooperation and Development (OECD) said on Monday.

    Reductions in damaging subsidies for oil, coal and natural gas would reduce air pollution,save cash and help a shift to greener energies before a Nov. 30-Dec. 11 U.N. summit in Paris on limiting climate change, it said.

    "We are totally schizophrenic," OECD Secretary-General Angel Gurria told an online news conference. "We are trying to reduce emissions and we subsidise the consumption of fossil fuels" blamed for stoking global warming.

    "Support for fossil fuels seems to have peaked, but global progress remains alarmingly slow," he said of an updated inventory of subsidies.

    The OECD estimated the annual value of subsidies for 2010-14 at between $160 billion and $200 billion, mostly for petroleum products, in the 34 OECD nations and China, India, Brazil, Russia, Indonesia and South Africa.

    The Group of 20 leading economies agreed as long ago as 2009 to phase out inefficient subsidies for fossil fuels.

    "Support now seems to follow a downward trend after having peaked twice in 2008 and 2011-12," the OECD said, without giving exact annual figures. It said that not all subsidies identified were "unambiguously inefficient."

    Among recent reforms, the OECD pointed to cuts in support by India and Mexico for diesel and gasoline. Gurria said a fall in oil prices should make it easier to phase out support.

    The OECD said it had uncovered about 800 types of subsidy, mainly in national budgets, but said they did not cover all factors causing artificially lower prices.

    The OECD said its findings are not directly comparable with those of the International Energy Agency, which reckons fossil-fuel consumption subsidies worldwide amounted to $548 billion in 2013.

    The OECD has been trying for more than a year to reach agreement on phasing out a form of coal subsidy that helps rich nations export technology for coal generation. Talks in Paris last week again failed to get a deal.

    The negotiations will resume on Nov. 16, EU diplomats said.

    Separately, environmental group Greenpeace said the world could shift to 100 percent renewable energy by 2050.

    Investments of $1 trillion a year would be offset by savings of $1.07 trillion, partly because wind and solar power are free of fuel costs once set up, unlike fossil fuels, it said in a report.
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    Russia: Quick glance at Oil.

    Image titleLukoil suggests little makes money below $50.

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    For the first time Russian Oil drilling has fallen below prior year levels.

    "Due to actual investments in production the volumes are still being added to the market, but the current cuts are starting to have an affect. In the next years the ongoing programs of investment shrinking - primarily from the transnational corporations - will certainly have their effect. As for now, the implementation of their long-term investment programs that started even before the current crisis has expressed in some production growth. But in 2014, the oil majors claimed to reduce the investment in production; in 2015, additional reductions by 10-20% and more were announced by such majors as BP, Shell, Chevron, Total. Overall cutback in global upstream investment was about $140 bln, and it is expected to reach $200-250 bln by 2016 year-end. Within 2-3 years, this will inevitably influence on the production and will have a long-term negative effect.

    It should be noted that the average production costs in 2013 were 5 times higher than they had been 10 years before. As a result high revenues to shareholders were already in question before the recent drop in prices, therefore cutbacks in investments are being made quite actively. We should take into account that the status of the hydrocarbons resource base is permanently getting worse. The growth of world reserves of "conventional" oil and gas in 2014 was the lowest for the past 20 years; the negative trend remains for 4 years. Over 30% of new resources pertain to tight resources (deep water, heavy oil, super-tight reservoir, high content of acid gases).

    A very limited set of countries have the ability to significantly build up oil and gas production now. While in the short to medium term they are mainly the Gulf countries, some African countries and possibly the United States, in the long term the main aspirations to meet the global demand for hydrocarbons are associated with Russia, Venezuela and Iran.

    As a result, we can expect with a high probability that we are likely to witness the comeback of oil prices to a level that ensures a reasonable return on investment during the current investment cycle.

    If compared to 1980s, the current share of the discovered conventional onshore fields reduced from 60% to less than 30% of all new discoveries. At the same time, the rate of more expensive deep-water and shallow-water fields, along with other sources of "high-tech" oil such as tight oil, has substantially grown. Such discoveries will prevail in the future. It is the deep-water oil that will define the full cycle costs and require higher prices for its efficient production.

    Analysts got used to the fact that today Russia is not the absolute leader in the proven reserves of oil and gas being behind such countries as Venezuela, Saudi Arabia and Iran. However, according to a number of current estimates, the potential hydrocarbons resource base of the Russian Federation is the largest in the world.

    Thus, the magnitude of potentially recoverable gas resources in Russia is estimated at 90 - 220 trillion cubic meters which is more than twice than the resource base of the United States (40-62 trillion cubic meters). 

    Though less recognized, the situation is similar with the oil resources. The potentially recoverable oil resources in Russia are estimated at 367-506 billion barrels which is significantly more than the capacity of not only the US but also Iraq, Iran and Saudi Arabia.

    Take note that the major oil production projects in Russia are substantially below their main competitors on the cost curve, and are comparable with the projects the Gulf region. The oil production Opex per barrel in Russia in the recent years was 5-7 dollars, and in the current price environment, taking into account the weakening of the ruble, it went down to 2.8 dollars per barrel. This allows us to supply even at the lowest price scenarios, and the partners that have decided to join the Russian assets may count on a profitable return on investment."


    OAO Rosneft, the world’s largest traded oil producer, increased drilling by 27 percent in the first seven months of the year, according to a statement. That helped the company stabilize output in the first half, Chief Executive Officer Igor Sechin said in Moscow on Friday.

    The Kremlin-backed company is able to buck the international trend of cutbacks in oil projects because the plunge in the ruble and the quirks of

    Russian tax law insulated producers from the crude price slump. The nation’s exports remain just as profitable as they were a year ago when the oil price was about $100, according to Citigroup.

    “We don’t see a financial reason for Russian production to start falling,” Ronald Smith, an oil and gas analyst for Citigroup, said by phone. “If anyone was out there expecting Russia to balance the market, the signal is that’s not going to happen.”

    Brent, the international oil benchmark, is trading at about $50 a barrel, less than half the level a year ago. While oil drilling in the U.S. fell by a record after the Organization of Petroleum Exporting Countries decided last year to defend market share rather than cut production, Russia’s industry has shrugged off the price slump. The nation’s oil production rose to a record in June.

    Rosneft drilled more than 800 new wells through the first half of the year, according to the statement. Total depth drilled rose to 4.59 million meters (15 million feet) compared with 3.61 million meters in the first seven months of last year.

    The company is buying Trican Well Service Ltd.’s Russian pressure pumping business for $140 million. Pressure pumping, also known as hydraulic fracturing, blasts water, sand and chemicals underground to release trapped hydrocarbons.

    Rosneft “needs to drill actively in order to withstand falling production,” said Alexander Kornilov, an oil analyst at Alfa Bank. Results of increased drilling will probably be seen in 2016, he said.

    At the company’s largest unit, RN-Yuganskneftegas, drilling increased by 40 percent including a larger number of wells using more advanced technology, the company said. Rosneft has changed its business plan toward increasing output at existing projects including Yuganskneftegas, Sechin told Prime Minister Dmitry Medvedev on Friday.

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    Australia 'is toast'


    Foreign investors have turned especially bearish on the Australian economy, with one describing it as "toast", a National Australia Bank report says.

    Chief economist Ivan Colhoun said a recent visit to clients in Britain, continental Europe and the Middle East revealed a "uniformly negative view on Australia's prospects".

    "I have never experienced such overwhelming negativity on the outlook for the Australian economy and Australian dollar in all my years marketing the Australian economy offshore," he wrote on Monday.

    "To be fair, one investor did say that they were not that negative on Australia.

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    Foreign exodus from China accelerates?

    Here is the most complete list of foreign Paolu 2015:

    Earlier this year, Microsoft announced the closure of the factory is located in Nokia Beijing and Dongguan. Close Chinese factory, some of the equipment was transferred to the factory in Hanoi, Vietnam;

    Japan Citizen watch company in liquidation before the Spring Festival this year announced the dissolution of the production base in Guangzhou;

    Panasonic washing machine and microwave the vertical transfer of production from China to Shizuoka Prefecture and Kobe City plant;

    Sharp plans to Tochigi yaita Yao City, Osaka plant and factories are producing more models of LCD TV and fridge, advancing to move back;

    Daikin Industries company plans to launch the Japanese domestic market further home air conditioning production back from China factory located in Shiga Prefecture;

    TDK famous brand electronics industry will also take part of the electronic components is expected to shift production from China to Akita Prefecture and other places of the plant;

    Samsung built in China dedicated foundry declared bankruptcy Puguang Suzhou, Dongguan Puguang also dying;

    Uniqlo parent Fast Retailing plans to begin low-cost clothing brand GU, Bangladesh, Indonesia plant increased OEM orders. Fast Retailing Group, about 85% of the product was originally manufactured in China, but with Chinese labor costs continue to rise, now decided outside of China by 20% to 30% of the production rate increased to 50%;

    Muji program three years after the partner factories in China decreased from 229 to 86, from China's purchase rate lowered from 60% in half.

    Moreover, since Recently, even Huawei, millet, Lenovo, TCL and other companies have begun withdrawing from the Chinese nation.

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    China’s energy guzzlers Jan-Aug power use down 2.1pct on year

    Power consumption of China’s four energy-intensive industries declined 2.1% on year to 1,107.3 TWh over January-August this year, accounting for 30.1% of the nation’s total power consumption, the China Electricity Council (CEC) said on September 18.

    Of this, the ferrous metallurgy industry consumed 337 TWh of electricity over January-August, falling 7.9% year on year, compared to the growth of 2% from the previous year; while the non-ferrous metallurgy industry used 287.5 TWh of electricity, up 4.2% year on year, compared a 4.9% growth from the year prior.

    The chemical industries consumed 280.7 TWh of electricity over January-August, up 2.5% year on year, lower than a 4.9% growth a year ago; while power consumption of building materials industry dropped 6.4% year on year to 202.2 TWh, compared to a 7.8% rise in the preceding year.

    In August, the four industries consumed a total 145.2 TWh of electricity, down 2.7% year on year, accounting for 28.3% of China’s total power consumption.

    Of this, the ferrous metallurgy industry consumed 43.8 TWh of electricity in August, dropping 8.6% on year and up 2.1% on month; while the non-ferrous metallurgy industry used 36.2 TWh of electricity, up 0.5% from a year ago but down 0.55% on month.

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    Russian investigators announce jewelry haul in governor fraud case

    Russia's top investigative body said on Sunday it had found more than 60 kilograms of jewellery and 150 luxury watches, some of them worth up to $1 million, in a fraud case launched against a regional governor.

    The Investigative Committee said in a statement it had charged the regional governor of the oil-rich northern Komi region, Vyacheslav Gayzer, and his deputy, Alexei Chernov, with organising a criminal group and fraud.

    It also named more than a dozen other suspects, former and current regional officials and businessmen, whom it said were complicit in crimes including fraud and membership of a criminal group.

    Local news wires said Gayzer and a deputy head of the regional government, Konstantin Romadanov, were detained by a Moscow court on Sunday pending trial.

    Both deny the accusations.

    The committee said its servicemen, along with Federal Security Service operatives, had made searches in the residences and offices of the suspects in Komi, St. Petersburg and Moscow.

    "More than 60 kilograms of jewellery, 150 watches worth from $30,000 to $1 million, 50 seals and stamps of corporates have been confiscated," it said.

    Although corruption is widely acknowledged as a major problem in Russia, arrests of senior officials such as regional governors are extremely rare. Prior to this year, only one governor in post-Soviet history had ever been charged with criminal offences while in office, in 2006.
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    An index that China's leaders use to measure economic growth looks horrible

    The office of China's Premier, currently Li Keqiang, has traditionally been tasked with monitoring the economy.

    And in the past, Li Keqiang has said openly that he doesn't necessarily use GDP to track how fast it's growing. He uses a combination of metrics put together — a composite of electricity output, rail freight and loan growth.

    Right now, all of those metrics are screaming major slow down — something like growth around 2%-4% — despite the fact that the government has said time and time again that the country's GDP is growing at 7%.

    Here's what Premier Li's metric looks like, via Bloomberg economist, Tom Orlik:
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    Looking for reform success, India's Modi readies electricity rescue plan

    India is preparing a rescue package for power utilities owing tens of billions of dollars, but Prime Minister Narendra Modi must first convince states to make politically hard choices as he seeks a victory for reforms needed to galvanise the economy.

    Modi, who has had mixed success pushing through his reform agenda since coming to power 16 months ago, has prioritised tackling a problem that is stifling bank lending needed for a revival in Asia's third largest economy, three senior government sources with direct knowledge of the plan said.

    Problematic utility debts account for a quarter of all restructured bank loans in India.

    In total, utilities owe $66 billion. New Delhi has identified about 1.5 trillion rupees ($22.7 billion) of debt held by financially stretched utilities as most at risk, one of the sources said, adding to the urgency to relieve a banking system weighed down by bad loans.

    Under the proposal, New Delhi wants to persuade state governments to take over some of their utilities' debt.

    In return, the electricity distributors would commit to re-investing interest savings in new lines and metering, improving billing and cutting rampant power theft, the sources said, declining to be named because the plan is not public.

    To make it work, the distributors are likely to come under pressure to raise electricity tariffs for consumers used to low prices.

    One top power ministry official said the proposal was "very close" to being finalised and that states with the biggest problems agreed to back it.

    "The states have a very clear incentive to do this. The interest cost comes down significantly," he said.

    By forcing tougher action at state level to ensure electricity is paid for and supplies are reliable, Modi hopes to avoid a backlash in parliament, where the opposition has already blocked other economic reforms this year.

    Fixing power would temper criticism that Modi's government is not doing enough to improve the lives of common Indians, having made election campaign promises to replicate his success in Gujarat and deliver 24/7 power across India.

    Though New Delhi is convinced more Indians are willing to pay for electricity if offered reliable supplies, sceptics say it will be hard to force states to make people pay, when it risks alienating important vote banks, like farmers.

    There may be other costs to bear, too. The government may have to relax limits on the size of states' deficits if they are to take over distributors' debts, putting pressure on India's consolidated fiscal position as New Delhi tries to improve its finances.

    Modi has made devolving political power a key plank of his agenda, confident individual states will increasingly compete to reform by themselves. After failing to pass legislation to make land purchases easier, for example, central government is encouraging states to enact their own rules.

    Six states have agreed in principle to take over some of their power distributors' debts, one of the government sources said. But some others are far from convinced.

    The chief secretary of Uttar Pradesh, a vast agricultural northern state with a population bigger than Brazil, said taking on utilities' 420 billion rupees of debt would reduce the state's interest burden by five percentage points but more than double its borrowings.

    "We will have to deliberate a lot before taking a final call," said Alok Ranjan.

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    Long Skirts, Victoriana.

    Models swished along in floor-skimming skirts and fitted coats at Marc Jacobs. They were poised in delicately lacy and ruffled, almost doll-like dresses at Alexander McQueen. They promenaded in moody silk jacquard and jeweled velvet at Givenchy. And at Comme des Garçons, a label whose collections are never easily defined, designer Rei Kawakubo enveloped models in yards of black and white lace for a voluminous and avant-garde take on Victoriana that surely never existed circa 1865.

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    Fedex tries 3D printing


    At its hub in Louisville, Ky., United Parcel Service Inc. recently rolled out 100 industrial-grade 3-D printers to make everything from iPhone gizmos to airplane parts.

    UPS wants to find out if 3-D printing centers could shorten supply chains and cut into its $58 billion-a-year transportation business—or give it a leg up in a potentially emerging market for local production and delivery.

    For Atlanta-based UPS, the difference could be existential. It doesn’t want 3-D printing to disrupt its business the way the Internet pulled the rug out from overnight document deliveries more than a decade ago.

    “Should we be threatened by it or should we endorse it?” asked Dave Barnes, UPS’s chief information officer, during a recent presentation to employees and customers. “We saw the capability of a logistics company to be challenged on one side but on the other be an enabler.”

    An Isreali designer just launched an entire collection for 3D printing online. 

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    China consumes..

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    Oil and Gas

    Schlumberger calls off Eurasia Drilling Company stake buy

    Schlumberger, the world’s largest provider of oilfield services, is backing down from an agreement to buy interest in a Russian drilling contractor Eurasia Drilling Company Limited (EDC).

    Schlumberger announced on Thursday that it does not intend to extend the pending agreement to acquire a minority equity interest in EDC, once the current extension expires on September 30, 2015.

    Schlumberger said it would instead focus on other M&A opportunities.

    After it was announced in January 2015 that the world’s largest provider of oilfield services would buy interest in EDC for $1.7 billion, the merger came across obstacles in the form of Russian Federal Anti/Monopoly Service and the Government Commission on Monitoring Foreign Investment as the companies had to wait for Commission’s final written confirmation.

    In light of this, the two companies extended the long-stop date for completion of the transaction four times, the final extension being the one set for September 30, 2015.

    Before Schlumberger’s announcement came to light on Thursday, EDC announced on Wednesday that it would hold a conference call in relation to the transaction with Schlumberger on September 30, 2015.
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    Engie says nobody is making money off US natural gas exports

    Just as gas export-terminals are preparing to start up along America’s Gulf Coast, the oil-price crash has made it unprofitable to send the U.S. fuel abroad, according to the North America head of power and natural gas supplier Engie.

    It costs about $2 to liquefy gas and another $3 to take it from the U.S. to Asia, said Zin Smati, president and chief executive officer of Engie’s GDF Suez Energy North America. Engie changed its name from GDF Suez SA in April.

    Those costs used to leave plenty of profit margin when the gap between LNG prices in Asia and natural gas in the U.S. was more than $14 per million British thermal units. Now, the spread is less than $5, according to data compiled by Bloomberg.

    “You cannot ship gas from the United States anymore,” Smati said at the Council of the Americas energy conference at Rice University in Houston on Thursday. “Nobody really is making money from LNG now. Certainly we are not.”

    Engie, the world’s largest independent power generator, is a partner in the Cameron liquefied natural gas export terminal being built in Louisiana. The company also operates LNG import terminals in the U.S. Northeast.

    Spot LNG cargoes for delivery to Asia fell to $6.80 last week from $19.70 per million British thermal units in February 2014, according to New York-based Energy Intelligence’s World Gas Intelligence publication. LNG prices are generally tied to global oil, Smati said, and crude has fallen more than 50 percent from its 2014 peak amid a global supply glut.

    Cheniere Energy Inc. plans to begin production in December at its Sabine Pass LNG terminal in Louisiana, paving the way for the the first cargo of gas from the lower 48 states. The U.S. will be a net gas exporter by 2017, according to the Energy Department.

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    Former Petrobras executive mentions Transocean in graft probe

    Transocean Ltd., a top offshore drilling company, has been mentioned in testimony in a corruption investigation focused on Brazil's state-run oil firm Petroleo Brasileiro SA, Brazilian court documents showed.

    Former Petrobras executive Eduardo Costa Vaz Musa, who is collaborating with prosecutors in the southern city of Curitiba, said in plea bargain testimony that he was offered payments in 2007, if the Switzerland-based company won a drillship contract.

    According to court documents made public this week, Musa told prosecutors he began receiving payments in 2012 after Transocean won a contract to operate the Petrobras 10,000 drilling rig.

    Among the people Musa said he discussed receiving payments with was a man who identified himself as a representative of Transocean.

    Transocean said in a statement that it has a long-standing commitment to uphold the highest standards for corporate ethics and compliance and requires employees and everyone making visits on its behalf to adhere to high standards for integrity.

    Shares in Transocean fell 4.8 percent on the New York Stock Exchange.

    Prosecutors say more than a dozen foreign firms are being investigated in the Petrobras probe and many are collaborating.

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    YPF Said to Plan 2016 Spending Cut as $77 Crude Disappears

    Argentina’s YPF SA will cut spending by as much as 20 percent next year if a new administration lowers the domestic oil price nearer to international levels, according to three people familiar with the plans.

    The state-controlled company would lower its 2016 budget from this year’s $6 billion, mainly in operations at the Vaca Muerta shale formation, a YPF official said, asking not to be named as the company’s business plan has yet to be approved. The next administration plans to lower the nation’s crude price to $66, triggering the YPF budget cut, said an official from provinces which own shares in YPF.

    YPF will turn more to natural gas as it pulls back from shale, two provincial officials said, asking not to be named as the adjustments will be announced in December when a new president replaces Cristina Fernandez de Kirchner.

    The three people spoke assuming Daniel Scioli, the ruling party candidate, will be elected president. Scioli, the current governor of Buenos Aires province, who has received the support from governors of oil producing provinces, would defeat the opposition candidate Mauricio Macri in the first round of voting on Oct. 25, according to a poll by Hugo Haime & Asociados sent by e-mail Wednesday.

    YPF has only begun to draft its capital expenditure plan for next year and still can’t comment on the matter, the company said in an e-mailed statement. Chubut’s governor Martin Buzzi, who leads the body that represents the 10 oil-producing provinces, didn’t reply to calls seeking comment.

    The Argentine energy producer’s American depositary receipts fell 2.7 percent to $16.57 at 9:38 a.m. in New York, the lowest since August 2013. The ADRs have fallen 37 percent this year.

    While oil majors including BP Plc and Royal Dutch Shell Plc cut spending for more than $40 billion in 2015, YPF kept its capital budget intact from last year, helped by the federal government which fixed a local price for the barrel of oil at $77 a barrel, 61 percent above international benchmark Brent, making motorists subsidize oil drillers.

    The price for new natural gas will be maintained at $7.50 per million BTU as Argentina seeks to cut gas imports.

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    Natural Gas Price Slips Following Massive Inventory Addition

    The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 106 billion cubic feet for the week ending September 18. Analysts were expecting a storage injection (increase) of around 97 billion cubic feet. The five-year average for the week is an increase of around 83 billion cubic feet, and last year’s addition for the week totaled 96 billion cubic feet.

    Read more: Natural Gas Price Slips Following Massive Inventory Addition - ExxonMobil Corp (NYSE:XOM) - 24/7 Wall St.
    Follow us: @247wallst on Twitter | 247wallst on Facebook
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    Russia considers breaking Gazprom's gas exporting monopoly

    Russia is looking at allowing companies other than Gazprom to export natural gas, Energy Minister Alexander Novak said on Thursday.

    Russian energy giants, including the world's top listed oil producer Rosneft and gas producer Novatek, have long been vying for lucrative exporting rights.

    Gazprom, Russia's top gas producer, has had the pipeline gas exporting monopoly since 2006, generating more than half of its revenues from selling gas to Europe.

    "The exporting channel should stay, but in order to increase effectiveness on the whole, we believe that the access (of other than Gazprom companies) should be mentioned in the state strategy," Novak told a conference.

    He added that details of such measures should be discussed.

    Rosneft and Novatek have already successfully challenged Gazprom's monopoly to export seaborne liquefied natural gas. Rosneft has claimed that in order to make its far-flung gas projects in East Siberia viable, it should be allowed to export gas.
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    Repsol said to consider options for its gas natural stake

    Repsol SA, Spain’s biggest oil company, is exploring options including a sale of part or all of its stake in Gas Natural SDG SA to shore up its balance sheet amid low oil prices, according to people familiar with the matter.

    Repsol, whose 30 percent stake in the Spanish natural gas distributor is valued at about 5.2 billion euros ($5.9 billion), is discussing potential deal structures with advisers, the people said, asking not to be identified because the discussions are private.

    As well as a full or partial sale, which could come as soon as this year, options include selling shares in the market and finding partners to join Gas Natural’s shareholder structure, the people said.

    “We deny that we have any plans to sell the Gas Natural stake,” said Kristian Rix, a spokesman for Repsol. A representative for Barcelona-based Gas Natural declined to comment.

    A sale of the stake would help Repsol raise funds to reduce debt and avoid a downgrade of its debt rating, the people said. Oil prices reached a six-year low last month as concern over China’s growth fueled market volatility. Repsol shares have fallen more than 35 percent this year, valuing the company at about 14 billion euros.

    No final decision has been made, and the timing of any deal remains unclear as market uncertainty related to the Catalan and national elections before year-end could affect any transaction, the people said. The company plans to present its 2016 to 2020 strategic plan on Oct. 15.

    Spanish oil major Repsol is not studying any potential sale of part or all of its stake in Gas Natural, a spokesman said on Thursday, denying press reports about such a possibility.

    "Repsol is not studying any stake sale in Gas Natural," the spokesman said.
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    Oil rebounds on Cushing crude draw data

    Oil prices rose as much as 1 percent on Thursday, rebounding from sharp losses in the previous session, after a market data provider suggested more inventory draws from the U.S. crude futures' delivery hub.

    Oil data and market intelligence firm Genscape noted a drawdown of 625,000 barrels out of the Cushing, Oklahoma delivery point for U.S. crude in the week to Sept. 22, according to traders who saw the data.

    Crude futures pared earlier losses prompted by weak U.S. durable goods and employment data.

    Oil had tumbled on Wednesday, with U.S. crude losing 4 percent, after a large build in gasoline stockpiles offset bullish impact from a big crude drawdown announced by the U.S. Energy Information for the week to Sept. 18.

    The Cushing inventory reduction cited by Genscape followed through with the 462,000 barrels-drop the EIA reported for the hub.
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    Oil services boss predicts new opportunities for oil and gas sector

    Major oil and gas players will emerge from the global downturn leaner and greener sparking a new boom for firms in the supporting industries, a respected industry CEO believes.

    Rune Fantoft said the number one priority coming across from operators was a desire to find and secure new efficiencies.

    Far from generating further crises, he believes restructuring will create new opportunity for the industry to strengthen for the future.

    Extending the life of fields, working equipment and technology longer and smarter and delivering on environmental improvements, have all risen closer to top of the industry’s business agendas.

    He said that was already delivering interest for firms like his, Fjords Processing, from companies seeking to tap into their well of expertise in helping maximise returns.

    “I see great opportunities for companies like Fjords Processing who are well positioned during the downturn”, he said.

    Fjords specialises in wellstream processing technology, separation and treatment of oil and gas.

    “It is an attractive proposition to field operators at a time when they are particularly dealing with the pressures of curtailed capital spending and profits,” said Fantoft.

    Fjords has just signed a raft of three new brownfield contracts in recent weeks including in central North Sea, Qatar, Australia worth over $35 million.

    That comes on top of previous announcements in July of a triple contract win for the Johan Sverdrup development, also in the North Sea.

    It will be the ability of the service industry to respond rapidly and tailor solutions that will deliver returns so quickly that he says is seeing a huge lift in what is becoming an increasingly important brownfield sector.

    Fantoft said: “Operators want to produce more oil even though they don’t want to invest that much into production. Our competitors do not have our range of solution capabilities and consequently we will become a more dominant force in that part of the industry.

    The on-going contract in the North Sea, in which Fjords has designed and supplied produced water treatment and sulphate removal unit (SRU) packages in a single module for a major operator, demonstrates its ability to package multiple technologies to save on footprint, weight and cost, said Fantoft.

    “In other words, we don’t just tell the client what they need to do, we do it and that’s something the customers appreciate in today’s economic climate.”

    His comments come after the latest annual economic impact report from trade body Oil and Gas UK confirmed the trend of companies looking at ways of improving performance and efficiency.

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    Iran postpones London oil conference to Feb 2016

    Iran has postponed a crucial conference to present new oil contracts to investors in London to February 2016 from December 2015 as industry sources said Tehran was still waiting for Western sanctions to be lifted.

    The global oil industry has been eagerly watching Tehran's plans for the conference as Iran, OPEC's third largest oil producer, holds the world's fourth largest oil reserves and the largest for natural gas.

    Under a deal reached with six major powers in July, Iran agreed to curb its nuclear programme in exchange for an end to economic sanctions imposed on the country over its disputed nuclear work.

    The sanctions imposed on Iran in 2012 have choked Tehran's oil production. Output is down a million barrels per day (bpd) since the start of 2012 at 2.7 million bpd, depriving it of billions of dollars in oil revenue.

    The conference has been already postponed four times, including the current delay, because of uncertainty over sanctions and as Iranian officials are still working on the model for new contracts.

    Oil majors have said they would go back to Iran if it made a major improvement to the so-called buy-back contracts of the 1990s, which companies like France's Total or Italy's Eni said made them no money or even incurred losses.

    Iran has said the new contracts would be a major improvement not only on the old buy-backs but also on the contracts rival and neighbour Iraq offered to oil majors during 2000s.

    The details of the new contracts have yet to emerge. Iran says it needs foreign know-how and technology to help develop new oil fields and improve pipeline and refinery infrastructure.

    More could emerge when Iran holds a conference in Tehran, where new oil contracts could be unveiled, according to Deputy Oil Minister Roknoddin Javadi quoted last week by Iranian media.

    The new dates for the London conference have been tentatively set for February 22-24, the organisers said on the web site.
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    North Dakota set to extend deadline for gas flaring rules

    North Dakota is poised to give the energy industry up to two extra years to curb the amount of natural gas burned off at oil wells, a move that would ease worries pipeline construction delays make it impossible to meet aggressive flaring standards.

    Governor Jack Dalrymple and the two other members of the North Dakota Industrial Commission (NDIC), who spent months last year finalizing the rules, will mull oil companies' request for the extension at their Thursday meeting.

    "These were lofty goals, but things have changed a bit and we've got to take that into consideration," Doug Goehring, an NDIC member and the state's agriculture commissioner, said in an interview. "We're probably going to have to extend the deadline."

    Goehring, who said low commodity prices will influence his vote, has an outsized influence over oil regulation due to his seat on the NDIC.

    Environmentalists oppose any extension and note the volume of gas flared in the state continues to rise as more oil wells are drilled, despite the best intentions of existing regulations.

    "We're just hoping the Industrial Commission will stand firm," said Wayde Schafer, a spokesman for the Sierra Club's North Dakota chapter.

    The NDIC in June 2014 imposed four increasingly tighter tranches for how much gas can be burned off.

    The state's oil companies flared 20 percent of the natural gas they produced in July, the latest month for which data are available. That went beyond current standards to flare no more than 23 percent.

    The standards tighten to 15 percent in January, a goal the industry says is untenable.

    "Just like any road construction project, we've had unanticipated delays that are frankly no fault of the producers," said Ron Ness, president of the North Dakota Petroleum Council, an industry trade group.

    Ness said a Byzantine web of federal oversight impedes construction of pipelines necessary to connect wells with processing facilities. Oil can be stored in tanks indefinitely, but natural gas must be piped away after extraction.

    Oneok's decision to cancel its Lost Creek pipeline and delays in federal approval for Hess Corp's Hawkeye pipeline dashed hopes the January standards could be met, Ness said.

    Oil producers want two extra years to comply with the rules. Lynn Helms, who advises the NDIC as head of the state's Department of Mineral Resources, recommends a 10-month extension. Goehring, the NDIC commissioner, said he does not have a preferred timeline.
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    August Marcellus wellhead average $1.41

     Response to our newly launched crowd sourced
    at-the-wellhead (ATW) pricing area has been

    We've tallied the recent gas pricing entries,
    and the average ATW pricing reported by our
    members for August is $1.41/Mcf.
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    Credit lines to Oil cut 39%

     Oil producers in the U.S. are about to see their credit lines shrink, just when they need the money most.

    The latest round of twice-yearly reevaluations is under way, and almost 80 percent of oil and natural gas producers will see a reduction in the maximum amount they can borrow, according to a survey by Haynes and Boone LLP, a New York law firm. Companies’ credit lines will be cut by an average of 39 percent, the survey showed.

    "There’s going to be a reduction to the majority of these credit lines," said Neal Dingmann, an analyst at SunTrust Robinson Humphrey Inc. "It’ll make a lot of these companies reduce a bit more on spending."

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    An 'ocean of diesel'

     Add diesel to the commodities flooding global markets from China.

    The nation exported a record volume of the fuel last month after already shipping unprecedented amounts of steel and aluminium overseas. The weakest economic growth since 1990 is sapping domestic demand for commodities, while refineries, mills and smelters grapple with excess capacity after years of

    “A lot of it has to do with slowing demand at a time when companies had plans for much a better demand environment, so capacities had been increased,” said Ivan Szpakowski, a commodities strategist at Citigroup Inc. in Hong Kong. “As demand slows, that’s led to an overcapacity in the domestic market and producers have sought to export the surplus.”

    Exports of Chinese raw materials are exacerbating a global glut that drove prices to the lowest since the 2008 financial crisis and prompted steel and aluminium producers around the world to protest against the deluge. While diesel exports are principally a risk to Asian refiners, the additional shipments threaten to worsen a glut that already extends from Singapore to Europe and the U.S.

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    First gas flows on Curtis Island as Santos starts producing LNG from coal seam gas

    Santos has officially started production of liquefied natural gas (LNG) from its operations at Curtis Island, off the coast of Gladstone, Queensland.

    The company said the first gas flow from the Gladstone LNG (GLNG) project had come online on time and under budget.

    CEO David Knox said it was a significant milestone for the company.

    "We said we'd produce first LNG around the end of the third quarter (of 2015) and that's exactly what we've done," he said.

    "Production from GLNG will be a significant addition to Santos' growing LNG portfolio, which already includes the Darwin LNG and PNG LNG projects."

    The LNG is from coal seam gas (CSG) that is piped from fields in the Surat and Bowen Basins.

    It will be shipped to Asian buyers within weeks, and Santos said when it is fully operational, GLNG will have the capacity to produce 7.8 million tonnes of LNG a year.

    Santos is the operator of the project and joint venture partners are PETRONAS (27.5 per cent), Total (27.5 per cent) and KOGAS (15%).
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    Total Faces U.S. Probe Over Gas Market Trades

    Some of French oil company Total SA’s market trades in the U.S. are under investigation by the Commodity Futures Trading Commission, and the company is in talks to settle the matter, company officials said Wednesday.

    The existence of the CFTC probe emerged a day after a separate U.S. agency, the Federal Energy Regulatory Commission, released a notice accusing a Total subsidiary of making money-losing gas purchases intended to move prices in a way that helped it make profits on other trading positions on at least 38 occasions in the southwestern U.S.

    Asked about the FERC probe in an interview, Total Chief ExecutivePatrick Pouyanné dismissed the allegations, saying the company was settling similar allegations by the CFTC “for a few million dollars.”

    “There was no wrongdoing,” Mr. Pouyanné said, visiting London for an investor conference.

    The CFTC declined to comment. FERC didn’t respond to messages seeking comment. The CFTC regulates the trading of financial securities tied to commodities while FERC oversees the marketplace of physical gas and power products. They often investigate similar allegations.

    It isn’t clear when the CFTC began its investigation. The trades were made between 2009 and 2012, FERC said.

    The company has been transparent and fully cooperated with both regulators and would be ready to discuss a settlement with FERC too, Mr. Pouyanné said.

    “Either we can settle for the right level of settlement and if not we can go to court,” he said.

    In a written statement after the interview with Mr. Pouyanné, Total said the company “is fully cooperating with the authorities and has provided all documents requested. In light of these documents, Total is convinced that none of the allegations has been committed.”

    Total is among the world’s largest oil producers but also has a sizable trading arm that buys and sells everything from crude to refined products and petrochemicals.

    In the U.S., it has been a player in physical and financial natural-gas markets for 25 years.
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    Senex Energy strikes Santos GLNG venture gas deals in Queensland

    Image Source: Glent HuntSydney Morning Herald reported that oil and gas junior Senex Energy has struck a significant gas sales deal with Santos's USD 18.5 billion GLNG venture in Queensland that opens the way for development of its Western Surat gas project and provides some handy cash.

    The deal will hand Senex AUD 42 million in cash plus a host of technical data that will speed a final investment decision on the project, in exchange for a gas-rich exploration permit that sits in the middle of the GLNG venture's Roma coal seam gas acreage.

    Senex also agreed to supply 50 terajoules a day of gas to GLNG over 20 years from the Western Surat project, which is expected to cost several hundred millions of dollars to develop and is targeted for a final investment decision in 2017.

    Mr Ian Davies, MD of Senex, has described the deal as ‘transformational’ for the company, whose shares have been hit had by the slump in oil prices over the past year. Senex reported a AUD 81 million loss in 2014-15, dragged down by write-downs driven by the drop in prices.

    Mr Davies said the Australian Financial Review ahead of a teleconference to present the deal to investors that "It provides us with a real, credible and tangible revenue stream in the very near future."

    He said that the Western Surat project was economic even at current low oil prices and could go ahead even in the absence of a price recovery.

    Mr Davies said that the transaction with GLNG would accelerate the development of a major new revenue stream for Senex, allowing it to accelerate commercialization of its gas resources.

    He said in a statement that "This is a transformational deal for Senex and aligns with our strategy to capitalise on the strength of Australia's East Coast gas market whilst maintaining our financial strength."

    For GLNG, which includes Malaysian national oil company Petronas, giant LNG importer Korea Gas Corporation and French oil major Total, the transaction illustrates the venture's continuing quest to source additional gas from third parties to ensure adequate economic supplies for the large LNG export project over the course of its life. GLNG is due to start production within weeks.

    Mr Davies said that the Maisie permit being sold by Senex to GLNG includes 130 petajoules of proven and probable gas reserves, and sits "smack bang in the middle" of GLNG's Roma acreage making it much more efficient to be developed by GLNG than as part of the Western Surat project.

    He said that the gas sales arrangement means all gas from the Western Surat project will be supplied to GLNG on an exclusive basis.

    The transaction also potentially allows Senex use of GLNG's water processing and gas infrastructure in Queensland.
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    Imperial Cuts Spending on Existing Projects as Costs Drop

    Imperial Oil Ltd. has been able to lower the amount of capital reinvestment needed to sustain the business to about C$1.2 billion ($900 million) a year from C$2 billion a year ago, helped by shrinking supplier costs.

    Imperial expects overall annual spending on expansion and maintenance to average about C$2.5 billion in the coming years as it reduces costs and slows expansion, Chief Executive Officer Rich Kruger said Wednesday in a webcast of the company’s annual investor day.

    The company is basing its operations on the current price for oil, which is helping to create a “challenging” environment for Canadian producers, Kruger said. “If prices rise, so be it,” he said, adding that the company is planning for the “long term.”

    Canadian oil-sands producers have cut budgets along with the sinking price for crude this year. Imperial operates bitumen mining at its Kearl site, in addition to its Cold Lake and Nabiye facilities, and owns a stake in Syncrude Canada Ltd.

    In the meantime, the company is considering options for expanding production on oil-sands leases in Alberta using steam-assisted technology, Kruger said. Imperial has already made applications to the provincial government for new projects, including its Aspen site, he said. No decision has been made to proceed with any of the new projects, he added.

    The company is aiming to reduce cash operating costs at Kearl, currently at less than C$30 a barrel, Kruger said.

    “We’re not going to bet the farm on oil price growth,” Kruger said.
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    Saipem mulls 3 bln euro cash call as state lender eyes stake-sources

    Italian state lender Cassa Depositi e Prestiti (CDP) is in talks to buy a stake in Saipem as part of a restructuring of the troubled oil contractor that could include a capital increase of around 3 billion euros ($3.3 billion), people familiar with the matter said.

    A deal is expected to be announced next month, when Saipem, currently 43 percent owned by oil major Eni, is due to present its turnaround plan, the sources said.

    "The idea is to make a joint announcement on the cap hike and the CDP deal at the end of October," one of the sources said.

    Saipem has seen margins and orders hit by lower oil prices and needs fresh capital to keep afloat. It has issued two profit warnings in just over 30 months and in July announced cost cuts including 8,800 redundancies to bolster its balance sheet.

    Management has ruled out asset sales and the company has said it is studying a possible capital increase.

    "The capital increase will be substantial, around 3 billion euros, that will help get the company back on its feet," a second source said.

    Eni, which funds Saipem debt under the umbrella of its own A- credit rating, wants to sell down its stake in the oil contractor so that it can get Saipem's 5.5 billion euro debt off its books.

    Eni is currently in talks with CDP about a possible stake sale and several options are on the table, a third source said.

    "A solution will be found in the early part of October and an announcement made at the industrial plan on October 27-28," this source said.

    Eni and Saipem declined to comment.

    Saipem shares closed down 3.9 percent, after earlier being halted limit down for excessive losses.

    At least five banks, including Goldman Sachs, have been contacted about the capital increase, a fourth source said.

    "The letter was sent to the banks, two foreign and three domestic, yesterday," the source said.

    One option being considered is for Eni to first cut its stake to around 28 percent and then reduce it further by not taking part in the capital increase, the source said.

    But bankers close to Saipem said they believed Eni would end up participating in the rights issue given the substantial size.

    Sources had previously said foreign investors from China and the Middle East had expressed interest in Saipem, which is a market leader in subsea cable-laying.

    But the government of Prime Minister Matteo Renzi is said to consider the contractor a strategic company and the sources said only CDP was involved in the deal at this stage.

    Eni brought in veteran oilman Stefano Cao in May to turn Saipem round and put it on a firmer footing to secure its own credit rating to refinance debt and fund development.
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    US domestic oil production recovers slightly

                                                  Last Week    Week Before   Year Ago

    Domestic Production.....'000    9,136              9,117            8,867
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    Summary of Weekly Petroleum Data for the Week Ending September 18, 2015

    U.S. crude oil refinery inputs averaged 16.2 million barrels per day during the week ending September 18, 2015, 310,000 barrels per day less than the previous week’s average. Refineries operated at 90.9% of their operable capacity last week. Gasoline production increased last week, averaging over 9.5 million barrels per day. Distillate fuel production increased slightly last week, averaging 5.1 million barrels per day.

    U.S. crude oil imports averaged 7.2 million barrels per day last week, down by 13,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.4 million barrels per day, 2.0% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 504,000 barrels per day. Distillate fuel imports averaged 164,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.9 million barrels from the previous week. At 454.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.4 million barrels last week, and are in the upper half of the average range. Finished gasoline inventories stayed same while blending components inventories increased last week. Distillate fuel inventories decreased by 2.1 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories fell 0.6 million barrels last week but are well above the upper limit of the average range.

    Total commercial petroleum inventories decreased by 2.9 million barrels last week. Total products supplied over the last four-week period averaged 19.7 million barrels per day, up by 1.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.2 million barrels per day, up by 3.0% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the last four weeks, up by 1.3% from the same period last year. Jet fuel product supplied is up 5.7% compared to the same four-week period last year.
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    Sunshine Oilsands announces first steam at West Ells project

    Sunshine Oilsands Ltd. is pleased to announce that it has successfully commenced steam injection into the target formation at the West Ells project located in the Athabasca region of Alberta.

    'First steam injection represents a significant achievement for the West Ells Project as it represents the major milestone before oil production,' said Mr. Sun Kwok Ping, Executive Chairman of Sunshine. 'We are pleased that the West Ells facilities have been successfully commissioned and that first steam was delivered to the well pads and reservoir in accordance with our schedule. We look forward to achieving first production by the fourth quarter of 2015.'

    Sunshine is fully committed to advancing its corporate initiatives to ensure that West Ells achieves a smooth startup of the Phase 1 facilities and achievement of nameplate capacity of 5,000 bbls/day. The Corporation has a 100% working interest in its West Ells asset area with an ultimate development potential of 130,000 bbls/day.
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    Beijing Gas Group set for first LNG cargo

    Beijing Gas Group is set to receive the first of two cargoes of liquefied natural gas from Engie as part of a deal signed in July.

    According to sources, the 150,000 cbm cargo that is scheduled for November will be delivered to PetroChina’s receiving terminal at port Caofeidian, near Beijing, Reuters reports.

    The July deal between Beijing Gas’ parent company Beijing Enterprises Holding and Engie, former GDF Suez, stipulates the second cargo to be delivered in January, 2016.

    Sources reveal that the company is looking to become longer-term LNG buyer, and it was reported in July that the cooperation between Beijing Gas and Engie could develop into a 10-year LNG supply deal.

    China is on the path of reforming the LNG trade which would allow private companies to invest in the industry and engage in importing and exporting liquefied natural gas.

    Already in 2015, privately-held companies have imported six cargoes of liquefied natural gas, banking on lower prices caused by the supply increase and oil price drop
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    U.S. gasoline sales surge at fastest for over a decade

    Gasoline sales to U.S. motorists rose by more than 5 percent in July compared with the same month a year before, according to the U.S. Energy Information Administration (EIA).

    Gasoline sales are rising at the fastest year-over-year rates for more than 14 years as demand surges.

    Continued economic expansion, rising employment and cheaper fuel are putting a record volume of traffic on U.S. roads as well as encouraging motorists to upgrade to larger and more fuel hungry vehicles.

    Gasoline sales were up 5.1 percent in July 2015 compared with July 2014, according to the EIA's Prime Supplier Report published on Tuesday 

    Sales for the first seven months as a whole were up 4.4 percent compared with 2014.

    The Prime Supplier Report is based on a census of around 200 firms that produce, import or transport across state boundaries selected fuels and sell the products to local distributors, local retailers or end users.

    Fuel consumption is being boosted by more traffic on the roads. Vehicle-miles travelled were up 3 percent in the first half of the year compared with 2014, according to the Federal Highway Administration.

    Motorists are also opting for larger vehicles. Car sales fell almost 3 percent in the first eight months of 2015 but sales of light trucks, which include sport utility vehicles, surged by 10 percent, according to WardsAuto.

    Light trucks typically use nearly 40 percent more fuel for the same journey, according to U.S. government statistics, so the changed sales mix is boosting consumption ("Summary of fuel economy performance" 2014).

    Attached Files
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    OPEC focuses on rival mega projects, lives with shale swing output

    After almost a year of painfully low oil prices, OPEC members are beginning to believe they are winning against upstart U.S. shale producers in a short-term market share contest.

    Yet insiders and experts say OPEC is looking for a longer-lasting impact on other high-cost production oil field plans, many in deep oceans, with bigger time scales, even if that means a period of cheap oil prices lasting for years.

    Privately, OPEC's core Gulf members say they have resigned themselves to the idea that the U.S. shale industry's high-tech flexibility means it will respond quickly when prices start rising again, making the United States the new swing producer in world oil, the role held for so long by Saudi Arabia.

    "The oil surplus is slowly being drawn from the market. U.S. oil production is expected to fall to less than 9 million barrels per day by the end of this year or early next year," said an OPEC delegate from a Gulf oil producer.

    "But there is one point that no one is looking at which is the delay in the longer-term oil projects, these are 4-5 year projects. The postponement of these projects will impact the overall supply in the market."

    The short investment cycle of U.S. shale, where it takes about few months before returns are seen, make it the most sensitive to oil price fluctuation -- either way.

    Thus the spike in oil prices in June where U.S. crude was trading above $60 a barrel drew out more shale output but the price drop in August will reverse that, OPEC sources say.

    And even if rising prices pushed supplies up again, in the long run, higher production from shale is expected to be offset by lower production from conventional high-cost offshore projects from countries such as Brazil and Mexico, the sources say.

    "Shale will be a new swing producer of sorts," said Yasser Elguindi of economic consultants Medley Global Advisors. "Because of its shorter investment cycle, when prices fall shale producers will be the ones to cut first, but likewise when prices go up, they will also be the first to bring up production.

    "This complicates life for those who are looking at investments that have a 2-5 year investment horizon. But again, the idea is to find the price level that slows down the rate of growth considerably to something more sustainable -- and that takes more than 2 to 3 quarters of lower oil prices."

    The drop in oil prices has forced companies to free up capital to help balance their books at the expense of allocating cash to expensive new projects. In some cases, investment decisions have been delayed to allow more time to reset cost structures on projects.

    Companies such as BP, Total and Norway's Statoil have postponed projects ranging from the Gulf of Mexico to the UK North Sea, Nigeria and Indonesia and dozens of other projects would be also likely delayed, according to Norwegian consultancy Rystad Energy.

    Consultancy Wood Mackenzie estimated around 10.6 billion barrels of oil equivalent potentially retrievable from deep and ultra-deep offshore projects has been deferred, followed by 5.6 billion barrels trapped in oil sands.

    "We've slowed the pace in deep water." Ben Van Buerden, chief executive of Royal Dutch Shell's, said in January.

    Global deepwater production reached 8.8 million barrels per day in 2014, almost 10 percent of global demand.

    Gulf oil sources believe that low oil prices have so far been successful in stimulating demand for crude and will gradually impact the oversupply which will start to be more visible towards 2016 and beyond, a sign that Saudi Arabia's new market share strategy was working.

    "Remember what the Saudi oil minister said last year, even if prices fell to $20, OPEC will not cut," said one Gulf oil source.

    Attached Files
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    India ready to invest over $15 bln in Iran; seeks cheaper gas

    India is ready to invest more than $15.2 billion to build projects in Iran including taking up full-scale development of Chabahar Port if Tehran offers better terms including cheaper gas, Shipping Minister Nitin Gadkari said on Wednesday.

    India is one of the handful countries that continued trade links with Iran, isolated by Western countries against its disputed nuclear programme. New Delhi is Tehran's second biggest oil client after Beijing.

    "We are ready to make a huge investment in Iran and this is mainly linked to gas pricing offered by Iran ... Gas price is a crucial issue," Gadkari told a news conference.

    Days before the historic nuclear deal between Tehran and the West in July, President Hassan Rouhani offered India a greater role in infrastructure projects including overall development of Chabahar port.

    India hopes to take a decision on Iran's latest offer by early October after obtaining reports from other ministries including petroleum, chemical and fertiliser, and steel by Monday, Shipping Secretary Rajive Kumar said.

    The port of Chabahar in southeast Iran is central to India's efforts to circumvent arch-rival Pakistan and open up a route to landlocked Afghanistan where it has developed close security ties and economic interests.

    The port can also serve as a gateway to the resource-rich countries of Central Asia.

    In May, Gadkari and his Iranian counterpart, Abbas Ahmad Akhoundi, signed an $85 million deal for India to lease two existing berths at the port and use them as multi-purpose cargo terminals.

    With the easing of sanctions New Delhi is hoping for a greater and stronger role in Iran's development by taking up projects including building urea and petrochemical projects using gas produced in the OPEC-member nation.

    India is seeking gas at $1.50 per million British thermal units (mmBtu) compared to $2.95 offered by Iran for building a urea plant there, Gadkari said.

    He said building a plant in Iran and importing urea from there to India will help save a part of the 800 billion rupees ($12.13 billion) in subsidies and halve the prices for farmers.

    "If the gas price is reasonable then all departments in India can together take up projects in the special economic zone there and investment will be more than 1 trillion rupees," he said.
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    Total to cut spending; reassures on dividend

    French oil company Total said on Wednesday that it plans to cut its capital and operating spending next year on concerns that the drop in crude oil prices will persist.

    In a presentation to investors and media, Total said it will further reduce investment to $20-21bn in 2016 from $23-24bn this year, before returning to a sustainable level of $17-19bn from 2017 onwards.

    In addition, the group said the start-up of three projects – the Ichthys in Australia, Martin Linge in Norway and Tempa Rossa in Italy — has been postponed to beyond 2017.

    Total also lifted its opex target by 50% to $3bn from $2bn by 2017.

    It said production is planned to grow by 6-7% per year between 2014 and 2017 and by an average of 5% per year between 2014 and 2019. The main drivers for production growth include twenty major start-ups, eight of which are in 2015, and increasing production efficiency, the company said.

    "We lose about 200,000 bpd in comparison to the initial target. About 100,000 bpd come from projects which are facing some delay. An additional 100,000 bpd is due to the lower capex programme," de la Chevardiere told reporters.

    Total also took the opportunity to reassure investors over its dividend. “Capital discipline, further opex reduction and growing production will deliver improving cash flows. The group confirms that organic free cash flow will cover the dividend by 2017 at $60 per barrel.”

    "The break-even price is decreasing sharply. The objective is to by 2017 decrease the break-even price. To cover the existing dividend you need something like a $45/bl assumption by 2019," de la Chevardiere said.

    - See more at:
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    Saudi Arabia leaves world oil market at risk of price shocks due to low spare capacity at only 1.1 MM bbl/d

    The world's safety cushion to compensate for sudden disruptions of global production is historically low, as Saudi Arabia's spare crude production capacity stands at only 1.1 mm bbl/d, Rystad Energy concluded in its latest oil markets analysis.

    'The oil market is at risk of price spikes despite the focus on oversupply. Current spare capacity is far lower than the 2.1 mm bbl/d of spare capacity the Kingdom held in 2009, when the oil market last demonstrated a significant misbalance in supply and demand', says Nadia Martin, Senior Analyst at Rystad Energy.

    Rystad Energy forecasts that when the oil market rebalances next year, it will be with limited capacity to increase production meaningfully in the event of a sudden disruption, leaving the market vulnerable to price shocks.

    Key findings of the Rystad Energy report conclude:

    Saudi Arabia will again be the world's largest crude oil producer in 2015, tied with Russia, at 9.9 mmbbl/d production. The US will this year be the world's third largest crude oil producer. Saudi Arabia last held the position of world's largest crude producer tied with Russia in 2008, when both countries produced 9.3 mmbbl/d. At that time, Saudi Arabia had implemented a strategy of providing maximum assistance to the market in a year when Brent shot up above 145 USD/bbl. Saudi Arabia's output level dropped by 1 mmbbl/d the year after, down to 8.3 mmbbl/d.

    Saudi Arabia has held the position of holding the largest share of spare capacity in the market. As recently as 2012, Saudi Arabia increased crude exports to ease market tightness as the US embargo against Iran took effect and as EU sanctions were introduced while Libyan exports had collapsed during the Arab Spring. As a result, according to Rystad Energy's calculations, Saudi Arabia's spare capacity had fallen to 0.1 mmbbl/d in 2012. The Kingdom was slow to rebuild spare capacity thereafter, increasing levels to 0.4 mmbbl/d in 2013 and 0.8 mmbbl/d in 2014. For a time when there is a 'historic glut' in the oil market, Saudi Arabia's current spare capacity of 1.1 mmbbl/d is low.

    Besides Saudi Arabia, the US is the remaining producer who can meaningfully increase output in the near-term. Rystad Energy forecasts US crude production of 8.2 mmbbl/d for 2015 and 8.35 mmbbl/d for 2016. In the case of a supply crisis, the US response will occur in three steps: first, within weeks, producers will connect already completed wells to increase output by 100 kbbl/d; second, within a month, producers will complete and connect already drilled wells, so called DUCs, to increase output by 0.5 mmbbl/d; third, with a response time of around a year, producers will increase rig count to increase output by 1 mmbbl/d. While the US supply response to a supply shock could be significant, the resulting oil market volatility could be far greater than expected. The US is a non-crude-exporting nation, and hundreds of companies make individual production decisions.

    Attached Files
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    Deal between trio of LNG firms scrapped after negotiations reach stalemate

    A trio of companies have ended their planned merger after the parties failed to agree on terms.

    The deal would have created one of the largest floating LNG infrastructure companies between Flexlife LNG, Geveran and Exmar.

    The companies had agreed on main terms for the transaction in July this year but it was still awaiting due diligence as well as agreement on some finer details.

    However a statement from Flex LNG said the companies have since withdrawn from completing the transaction.

    A spokesman said: “The parties have failed to agree on the definitive transaction documents and the previously announced transaction will not be completed.”

    The construction of two LNG carriers alongside Geveran is set to continue.

    Flex said it would now be considering “strategic alternatives” to add value to the company including considerations of opportunities across the LNG value chain.

    The spokesman added: “The current condition of the LNG market could give interesting consolidation and growth opportunities for the company.”
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    ConocoPhillips Said to Be Near Deal to Sell Canadian Assets

    ConocoPhillips, the third-largest North American oil and gas producer, is nearing a deal to sell several Western Canadian assets to various buyers including Canadian Natural Resources Ltd., people with knowledge of the matter said.

    An agreement could be reached as early as this week, said the people, who asked not to be identified because the discussions are private. A deal hasn’t been finalized and talks could still fall apart, the people said.

    Production from the properties, located in Alberta, British Columbia and Saskatchewan, represents about 20 percent of the Houston-based company’s Canadian volumes outside of oil sands.

    The properties produce the equivalent of almost 35,000 barrels of oil and gas a day and include a net working interest in 2.4 million acres for future drilling, according to the marketing material for the assets, an area slightly larger than Yellowstone National Park. Based on that, the group of assets could be valued at $ 1 billion or more, according to data compiled by Bloomberg.

    A spokesman for ConocoPhillips declined to comment, as did a spokeswoman for Canadian Natural.

    ConocoPhillips is among producers that have turned to asset sales to shore up their balance sheets and focus on core areas after oil prices plunged by more than half since last year’s highs.

    Earlier this month, the company said it plans to reduce its workforce by about 10 percent, or 1,800 jobs.
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    North Dakota oil producers, regulators spar over new rules

    North Dakota's oil producers and their federal regulators spared at an industry conference on Tuesday over a raft of new rules with broad implications for energy development, the latest escalation in a war of words that has both parties aiming to sway public opinion.

    The public spat at the North Dakota Petroleum Council's annual meeting comes as federal agencies move to exert greater control over how oil companies extract crude from shale formations and how even small bodies of water are used nationwide.

    Both proposals, from the Bureau of Land Management and U.S. Environmental Protection Agency (EPA), respectively, as well several other unrelated measures have sparked condemnation from energy executives, though environmentalists say they are crucial.

    The oil industry sees such efforts as the egregious overreach of a group of regulators setting their sites on a new target after tightening oversight of coal-fired power plants.

    "Now that that's over, they're going to be focusing on us," Dawn Coughlin, an environmental affairs manager at oil producer Hess Corp, said at the conference as federal regulators sat in the audience. "We're next."

    Wayne Stenehjem, North Dakota's attorney general and a rumored candidate for governor in 2016, touted a dozen lawsuits opposing the new regulations that he said he would pursue "with zeal."

    "We really don't need the EPA to tell us they love our land more than we do," Stenehjem said. "We're the ones who live here."

    Regulators from five federal agencies then took the stage for a panel discussion where they politely shot back.

    Dennis Neitzke of the U.S. Forest Service asked why oil producers couldn't work together more to construct shared pipelines rather than try to each build their own, a step that delays approval and heightens regulatory oversight.

    "Right now we're reviewing three or four pipelines for three or four oil companies," Neitzke said. "What would it take for companies to say, 'I wonder if we could use the same pipe?'"

    Wendy Hart Ross, superintendent of Theodore Roosevelt National Park, said the industry must do more to mitigate light and sound damage to national park land.

    "I get more comments on a daily basis about oil and gas impacts on the park," said Ross.

    Coughlin, the Hess manager, did cite one recent regulatory decision as signs of a possible detente: the Obama administration's decision on Tuesday to deny Endangered Species Act protection to the greater sage grouse.
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    Alberta should strengthen environmental rules -leader

    The Canadian oil-producing province of Alberta wants to strengthen its environmental regulations and bend the curve on its rapidly-rising greenhouse gas emissions, Premier Rachel Notley said in a radio interview broadcast on Tuesday.

    Notley said her government is proceeding with promises to review royalty rates paid by the oil and gas industry and improve its climate change policies. Her left-leaning New Democrats were elected in May, ending 44 years of Conservative rule in the western Canadian province.

    Alberta's oil sands, vast deposits of tar-like bitumen, are the world's third-largest crude reserves, but also carry some of the highest costs globally because of the scale of projects and energy-intensive production methods.

    The federal environment department has estimated that the oil sands industry is Canada's fastest growing source of heat-trapping greenhouse gas emissions, making it difficult for the country to meet Canadian Prime Minister Stephen Harper's international climate change commitments.

    Notley told CBC radio that Alberta's industry was suffering globally in part because people did not believe it was adequately protecting the environment. Her government, which raised the cost of greenhouse gas emissions for large industrial plants in June, is now waiting for an expert panel to advise it on a comprehensive climate change strategy.

    She said the end result would likely be somewhere between the demands of industry and environmentalists.

    "Are we going to immediately get to the same standards that everyone else is at? Probably not," she told the CBC. "But what we need to do is put together a credible, science-based plan that will sustain the review of experts, that bends the curve and sets Alberta on the right path."

    She said her government recognized it should not "pile on" with changes when oil and gas companies are struggling due to the plunge in global crude prices that have prompted thousands of layoffs.

    But she said the NDP was less dependent on the industry for political support than the Conservatives were, and her government intended to ensure that Albertans are getting their fair share of resources at the end of a royalty payments review, expected to conclude in December.

    Notley's government has also pledged to phase out coal-fired electricity generation, and has said it would introduce new plans to promote energy efficiency and more renewable energy.
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    Petrobras Selling Stake in Natural Gas Distributor to Mitsui

    Petroleo Brasileiro SA, Brazil’s state-controlled oil company, is in the final stages of selling a stake in a natural-gas distribution holding company to Mitsui & Co. as it seeks to raise cash by divesting assets.

    The sale of a 49 percent stake still needs final approval from the board of directors and regulators, Rio de Janeiro-based Petrobras said in a statement Tuesday. Financial terms of the deal weren’t disclosed.

    Petrobras has more than 7,000 kilometers (4,350 miles) of gas pipelines in Brazil that supply residential and industrial users, according to its website. The company is cutting spending at peripheral businesses to focus on its most promising oil fields in deep waters in the South Atlantic.

    Chief Executive Officer Aldemir Bendine said Monday that the company is working to reduce costs to withstand a combination of lower oil prices and a weaker local exchange rate, which has increased costs to service the company’s debt. Petrobras joins other major oil companies including Chevron Corp. and ENI Spa in selling assets amid a rout in oil prices to raise cash and reduce operating expenses.
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    Alta Mesa sells Eagle Ford acreage for $125 million

    Small U.S. oil producer Alta Mesa Holdings is selling an Eagle Ford Shale unit for $125 million to shore up cash for its balance sheet.

    The sale of subsidiary Alta Mesa Eagle to EnerVest, which is expected to close by the end of the month, includes 7.8 million barrels of oil equivalent in reserve, most of which are in Karnes County, one of the most active regions within the South Texas shale play. After the deal, Alta Mesa will have sold off all of its assets in the region.

    Analysts expect oil-company asset sales to increase in coming months as lenders reassess the loans they made to oil producers when crude prices were higher.

    In late July, Moody’s Investors Service downgraded the Houston company’s credit rating saying low commodity prices will keep the company struggling with its “weak liquidity, high leverage and limited cash flow generation” through 2016.

    Alta Mesa said it also signed paperwork that could grant its Oklahoma subsidiary an option to buy about 1,700 net acres in Kingfisher County, Oklahoma by the end of the year.
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    US Gas pipeline flows jump in September

    Bloomberg graph below which shows US natural gas pipeline flows in billions of cubic feet per day (bcf/d).
    Image title

    If my comments in the graph end up being true, then that would suggest the cheaper Marcellus gas will soon be displacing Canadian natgas in the US Midwest—which would mean a larger discount (lower price) is coming for Canadian gas to stay competitive in North America. And natgas storage on both sides of the 49th are very healthy; not quite burgeoning but close.

    Attached Files
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    Halcon Resources Corp's Day of Reckoning Might Be Closer Than You Think

    Halcon Resources Corp investors need to mark this date on their calendar: December 31, 2018. That's the date the company expects to survive through given its current liquidity. That said, the hope is that by that time oil prices will be much higher making it a moot point. However, if oil doesn't improve the company's day of reckoning could be much closer than the end of 2018 because its liquidity isn't quite as solid as the company boasts.

    Some breathing room
    Over the past year Halcon Resources has undertaken a handful of initiatives to improve its liquidity and remove debt from its balance sheet. These initiatives include raising equity, engaging in a debt-for-equity exchange, and issuing new debt to pay off its credit facility and buy back some of its senior notes. According to CFO Mark Mize,

    The end result of these efforts is that we have no near-term maturities and we have sufficient liquidity to fund our operations and service our debt for years to come. We continue to look for ways to further strengthen our balance sheet as it relates to leverage and liquidity. We ended the second quarter with just over $900 million of liquidity and we can comfortably operate the company through 2018 at the current drilling pace with the current financial resources available to Halcon Resources.

    What Mize is saying is that Halcon Resources has crunched the numbers and it can survive through 2018 on $900 million plus the cash flow it expects to generate from its oil and gas wells. That cash will enable the company to fund its daily operations, drill new wells to at least keep its production flat, and pay the interest on its debt. That sounds great, however, there's just one problem. That $900 million number he mentioned could easily vanish well before 2018.

    When liquidity isn't quite so solid
    The reason its liquidity could dry up well before 2018 is because that liquidity consists almost entirely of the availability under the company's revolving credit facility. It's a borrowing base that the company's banks actually revisit each spring and fall, meaning they could theoretically reduce it a number of times between now and 2018 should oil remain weak.

    In fact, that number recently slipped to $850 million after the company's most recent debt refinance where it exchanged $1.02 billion in new 13% notes for $1.57 billion in lower yielding notes. This is because as part of the agreement the company also reduced its borrowing base by $50 million. Any future debt agreements could result in additional slices being taken out of its credit facility.

    Further, while Halcon Resources expects that new $850 base to stick this fall during its regularly scheduled redetermination, there are no guarantees. There is a very real possibility that its banks could show it a cold shoulder this fall as analysts expect $10 billion in credit to be withdrawn from the oil patch with credit facilities seeing an average reduction of as much as 15%. Now, that doesn't necessarily mean that Halcon's will be cut as it probably has a good idea from its banks that the $850 number will stick. However, it can't be so sure that the number will stick this spring when its banks redetermine that number once again. If oil prices remain weak, and/or we have a rash of bankruptcies in the oil sector, there could be deep cuts in oil company credit lines next spring. That suggests that Halcon Resources can't really count on its bank credit line being a solid source of liquidity through 2018.
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    Asian LNG prices seen sinking as low as $4 in ‘ugly’ market

    The slump in LNG prices still has further to go, even after a plunge of 60% from last year’s peak, according to FGE, an energy consultant.

    LNG prices may sink as low as $4 per million British thermal units by 2017 because of a glut and probably won’t rise above $8 before 2020, FGE Chairman Fereidun Fesharaki said in a phone interview. That compares with the latest spot price of $7.10 for LNG shipped to northeast Asia, according to New York-based Energy Intelligence Group.

    “It’s an ugly environment,” Fesharaki said.

    While the International Energy Agency four years ago envisioned the possibility of a golden age of gas, Japan’s return to nuclear power after the 2011 Fukushima disaster and cheaper alternatives are threatening demand. LNG producers, meanwhile, are forecast to add 50 million metric tons of new capacity next year, the largest single annual increase and equivalent to a fifth of current global demand, according to Sanford C. Bernstein & Co.

    The bulk of the new supply is coming from Australia, where companies including ConocoPhillips, Origin Energy Ltd., Chevron Corp. and Royal Dutch Shell are spending more than $150 billion on export ventures. Most LNG projects have long-term contracts with customers linked to the price of crude oil, which has slumped about 50% in the past year.

    “But as we go forward, the outlook looks better and better in the early 2020s,” said Fesharaki, whose firm advises big oil companies and banks. “The challenge is to persuade your board to go forward and put the money up. Nobody wants to spend that kind of money in this environment.”

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    RIL may have to sell coal bed methane gas at USD 3.8

    Times of IndiaTimes of India reported that the Mukesh Ambani-led Reliance Industries has received a setback with the government clarifying that the prevailing natural gas prices will apply to coal bed methane producers as well. This means RIL will have to settle for 1/3 of the USD 12 per million British thermal unit it had sought for gas set to be generated from next month at its Madhya Pradesh CBM blocks.

    Mr Dharmendra Pradhan, Oil Minister of India, said that "We don't come out with company-specific policy. It is a government of India policy and applies to all players, including Reliance and there is no change."

    The current natural gas price in India is USD 5.1 per million British thermal unit, approved by the NDA government and is expected to come down to USD 3.8 per million British thermal unit when it is revised in September-end. This will be much below the USD 4.2 per million British thermal unit that the companies were getting until last year under the UPA regime.

    Declining to comment, an RIL official said that the company has not received any official notification from the government.

    RIL is on the verge of commencing gas production from its CBM blocks in Madhya Pradesh and Chhattisgarh and is awaiting the completion of its pipeline to transport gas to users. The company is expected to produce 4 to 5 million standard cubic meter of gas per day of gas from its blocks, taking India's CBM gas production to 6 million standard cubic meter of gas per day from 1.1 million standard cubic meter of gas per day being produced by Essar Oil and Great Eastern Energy Corporation.

    With the revision of gas prices from October 1st, RIL may not have to deposit the surplus amount to the gas pool account of the government as the new prices will be lower than USD 4.2 per million British thermal unit, a price RIL is authorized to recover from the buyers.

    The company, which is currently producing 11 million standard cubic meter of gas per day of gas against a target of 80 million standard cubic meter of gas per day, has maintained that the company will not be able to invest in augmenting production in the future unless it gets marketlinked prices.

    Currently, GEECL's Raniganj South and Raniganj East held by Essar Oil are the only 2 blocks under production. ONGC's Jharia block started test production but is yet to achieve commercial stage. The petroleum ministry has already received inputs from the industry about non-viability of CBM operations at a lower gas price. In contrast, GEECL sells gas from its CBM block at USD 1011 million British thermal unit as the government has approved a minimum floor price for these fields.
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    Cheniere requesting to start commissioning of Train 1 at Sabine Pass LNG

    The United States Federal Energy Regulatory Commission revealed that Houston-based Cheniere requested permission to introduce fuel gas within train 1 and the outside battery limits at its Sabine Pass liquefaction facility, in order to begin commissioning.

    More specifically, Cheniere requested authorization to introduce fuel gas within the areas identified as Phases 3 – 5 with phase 5 to include the fuel gas systems for the refrigerant compressor turbine drivers of the first train, stands in the filing.

    When commissioned, the train 1 at the Cheniere’s Sabine Pass liquefaction facility in Cameron Parish, Louisianna will have the capacity to produce 4.5 mtpa of LNG.

    All six of Sabine Pass liquefaction trains are expected to be commissioned by 2018.
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    Halliburton cuts jobs in Williston, North Dakota

    Halliburton Co, the world's No. 2 oilfield services provider, said on Monday it has laid off staff in Williston, North Dakota, blaming plunging crude oil prices.

    The company provided no details on the number of employees affected.

    "Halliburton will continue to monitor the business environment and will adjust the size of our workforce to align with current business demands as needed," the company said in an emailed statement to Reuters.
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    This Breakthrough Could Spark An Oil Sands Revival

    Riding high on its first clean oil sands project at Utah’s Asphalt Ridge, MCW Energy Group (traded in the US under MCWEF and in Canada under MCW.V) has now closed another key acquisition that will give it ownership of oil sands deposits and a place to build a much larger extraction plant as the company moves quickly to consolidate its unique position in this market.

    MCW Energy is changing the way people view oil sands with a breakthrough, commercially viable technology that is cleaning up Utah’s tens of billions of barrels of oil sands without creating the toxic wastelands that have resulted from oil sands projects in Western Canada. And they’re doing it at a cost that can still turn a profit in today’s oil price slump.

    The breakthrough technology uses a solvent that pulls the oil out of oil sands in much the same way that soap washes grease from plates, according to MCW CEO Dr. R. Gerald Bailey, former Exxon (NYSE:XOM) president of Arabian Gulf operations. Once the oil sands are washed with the solvent, they come out 99 percent clean before being returned to the earth. The process is not reliant on water, high temperatures or pressures, nor does it emit any greenhouse gases.

    At Asphalt Ridge, in the heart of the western Green River Formation, MCW has been cleaning Utah’s oil sands and selling it off since the beginning of this year.Asphalt Ridge alone is believed to hold some 1 billion barrels of recoverable oil, and MCW’s plant here is producing 250 barrels a day right now at a reasonable $30 per barrel.

    Now MCW is taking operations further, with the 8 September 2015announcement that it closed the acquisition of TMC Capital, LLC. This deal gives MCW an oil sands deposit lease called the Temple Mountain Project, which will supply more oil sands for Asphalt Ridge and also serve as the location for the company’s next extraction plant—a much larger version that will further drive down production costs.
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    Cheniere, EDF sign another LNG supply deal

    Cheniere Energy’s unit, Cheniere Marketing has entered into another sales arrangement with France’s EDF for the delivery of LNG cargoes on an ex-ship basis (DES) from its Sabine Pass terminal in the U.S.

    The deal covers the delivery of up to 24 cargoes, or up to approximately 89 million MMBtus total, from 2017 through 2018.

    As previously reported, the sales price for the LNG cargoes is linked to the Dutch Title Transfer index (TTF).

    With this latest agreement, Cheniere Marketing has executed agreements for the sale of up to a total of 92 cargoes, or up to approximately 340 million MMBtus, to buyers in Europe and Asia through 2018, Cheniere said on Monday.

    Cheniere Marketing’s LNG portfolio is expected to have approximately 9 mtpa of LNG available from Trains 1 through 6 of the Sabine Pass liquefaction project and Trains 1 through 3 of the Corpus Christi project.
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    Key debt ratios for selected US E&P's

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    The Battle for China Oil Market Spoils

    The race among the top sellers of crude to the world’s biggest energy-consuming nation got a little tighter last month.

    Iraq overtook Russia to become the third-largest supplier to China, while Oman edged past Iran in sales of oil to Asia’s biggest economy. Saudi Arabia kept the lead in the race even as its shipments slipped, data from General Administration of Customs in Beijing on Monday show. Cargoes from Angola rose, helping the African producer hold onto the No. 2 spot.

    China remains the main safeguard against a further price meltdown as a drive to boost its strategic petroleum reserve helps alleviate a market glut. As a shale boom in the U.S. shrinks America’s need for overseas crude, producers are competing to supply the world’s second-biggest oil consumer, which is forecast by the International Energy Agency to account for about a quarter of growth in global demand next year.

    “Iraq, with its booming domestic output, will make sure it stays ahead in the game to compete with its Middle East counterparts,” Gao Jian, an analyst at SCI International, a Shandong-based energy consultant, said by phone. “With U.S. demand for imports dwindling, all the major suppliers will look to Asia and China is the biggest market here.”

    Russia’s shipments slipped to 3.1 million tons in August from 3.77 million a month earlier, the data show. The nation in May briefly held the status of leading supplier, as a direct pipeline to northern China boosted exports of its East Siberia-Pacific Ocean crude and helped it race past Saudi Arabia.

    Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, has since regained its top spot as it pumps near record amounts of crude in a bid to defend market share from competitors.

    Cargoes from Iran surged 61 percent from a year earlier to 2.14 million metric tons in August. The Persian Gulf state is preparing to increase output and exports once international sanctions over its nuclear program are eased and has vowed to take back market share lost due to the measures.

    China’s imports from Angola climbed 9.4 percent from a year ago to 3.52 million tons, the customs data show. Crude from Africa’s second-largest oil producer has a lower sulfur content than Middle East supplies, and refineries that run one variety will also need to process the other to balance the quality of feedstock, Tushar Tarun Bansal, a senior oil analyst in Singapore at industry consultant FGE, said earlier this month.

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    Total sells 10% interest in Fort Hills to Suncor Energy

    Total has signed an agreement to sell a 10% interest in the Fort Hills oil sands mining project to the operating partner Suncor Energy. The total aggregate consideration at the time of the announcement is C$ 310 million (around US$ 230 million). The transaction is subject to regulatory approval.

    'As a result of a full comparative analysis of its global asset portfolio in the context of lower oil prices, Total has decided to reduce its exposure to Canadian oil sands projects. Following the suspension of the Joslyn project at the beginning of 2015, the sale of this minority interest will reduce our Capex outlay in the Fort Hills project by over C$ 700 million (about US$ 530 million) from now until end-2017, and help us deliver on our global Capex reduction target', said Arnaud Breuillac, President Exploration & Production.

    Upon closing, expected in the fourth quarter of 2015, Total will hold a 29.2% interest in the Fort Hills project, alongside Suncor Energy (50.8%, operator) and Teck Resources (20%). The sale also includes the transfer of a 10% interest in associated logistics in Alberta.

    Located in Alberta, Canada, some 90 kilometers north of Fort McMurray, Fort Hills has a planned capacity of 180,000 barrels per day. Construction activities are approximately 40% complete. The operator's target is to start up the project by end-2017.
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    Jet fuel stays at sea as imports overwhelm Europe

    A jet fuel market in Europe saturated by imports from Asia and the Middle East has forced sellers to keep their oil offshore on tankers or chose longer voyages as they seek out buyers.

    Jet fuel and diesel stocks in Europe have been steadily building as refineries around the world operate at near-maximum capacity to benefit from a rare run of strong profit margins driven mainly by global gasoline demand. [ID: nL5N10W2KN]

    In a sign of the growing pressure, the 90,000 tonne tanker Mindoro anchored for nearly two weeks of the southern coast of England, according to shipping brokers, traders and Reuters ship tracking.

    The Mindoro is en route to the port of Fawley, where it will discharge part of its cargo before returning to anchor at sea as it seeks buyers for the rest of its fuel.

    A second 90,000 tonne tanker, the STI Lombard, arrived from South Korea and has been anchored off the coast of the Netherlands since last week and still has no dicharging options, according to traders.

    Europe, where refineries do not produce enough jet fuel and diesel to meet demand, has become a major destination and storage hub for huge modern refineries such as SK Energy's 840,000 barrels per day Ulsan refinery in South Korea, Reliance's 660,000 bpd refinery in Jamnager, India, and the 400,000 bpd Satorp refinery in Saudi Arabia, a joint venture between Saudi Aramaco and France's Total.

    While these imports have taken storage tank levels in Europe's Amsterdam-Rotterdam-Antwerp hub to record highs, future prices are not high enough for most traders to make money from taking out long-term charters on ships to store the oil.

    The six-month forward curve on ICE gasoil futures, for example, is in a contango of just under $20 per tonne, a third of where it stood in 2009 when floating storage became widespread.

    So traders are adapting, and in some cases have opted to sail tankers from Asia to Europe around Africa instead of the conventional route via the Suez canal, extending the voyage by at least 10 days to around 45 days, a move tantamount to floating storage, but without the long-term commitment or costs.

    Tankers carrying some 600,000 tonnes of jet have in recent weeks opted to sail via Cape Horn, according to traders and ship tracking.

    "It is still good to have jet in the tanks, but there is not much room left currently," one trader said.

    The outlook looks dim, with around 2.4 million tonnes of jet fuel already booked for arrival in Europe in October from Asia and the Middle East, compared with an average of around 1.8 million tonnes in recent months, which had already outweighed demand.

    The build in jet fuel stocks in the region comes despite a significant pick-up in air traffic worldwide in recent months as economic growth accelerates.

    According to the International Air Transport Association (IATA), European carriers saw passenger demand rise by 5.3 percent in July from a year earlier, more than double June's growth. Figures from the International Energy Agency showed jet fuel demand across the developed world growing by 4-5 percent in the first two quarters of this year.

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    Oil Price Rout Seen as Threat to $1.5 Trillion of New Projects

    New investments uneconomic at $50/bbl, Wood Mackenzie says
    Operators seeking to reduce costs by an average 20-30%

    About $1.5 trillion of potential investment in new oil projects isn’t viable with crude prices at $50 a barrel, highlighting the need to reduce costs, according to consultant Wood Mackenzie Ltd.

    The proposed projects, including spending on North American shale, are “now out of the money, or in starker terms, uneconomic at $50 oil,” James Webb, upstream research manager at Wood Mackenzie, said in a statement Monday. “This spend is very much at risk.”

    While operators want to cut costs by 20 percent to 30 percent on new projects, supply-chain savings will only achieve cuts of 10 percent to 15 percent on average, according to Wood Mackenzie.

    A drop of about 50 percent in crude prices over the past year has forced oil companies to cut spending and defer new projects. Brent, the benchmark for half the world’s oil, was trading at $47.78 a barrel, up 31 cents, at 1:06 p.m. in Sydney. A glut may keep oil prices low for the next 15 years, according to Goldman Sachs Group Inc.
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    EQT attracts offers for Dutch oil storage firm Koole

    Swedish buyout group EQT has received offers for its Dutch oil storage group Koole Terminals valuing the business at more than 1 billion euros ($1.1 bln), several people familiar with the deal said.

    The investor last week collected more than 10 tentative bids, mainly from infrastructure investors, and will now pick several groups to submit final bids, the sources, who declined to be identified, said on Monday.

    A consortium of Canadian pension fund OTPP and Wren House Infrastructure has made an offer, as has Borealis, the infrastructure arm of pension fund OMERS, bidding alongside First State Investments, they said.

    The infrastructure arms of Goldman Sachs, JP Morgan and Macquarie are also in the running as are infrastructure-focused private equity groups like ArcLight Capital, they added.

    Morgan Stanley is advising EQT on the sale, the sources said.

    EQT, Morgan Stanley and the bidders declined to comment or were not immediately available for comment.

    Since the collapse in oil prices in mid-2014, there has been strong demand for mid-stream storage and pipeline assets due to their stable valuations compared to oil exploration and production assets.

    Investors speculating to sell oil at higher prices in the future have also increased demand for storage assets and made the business of storing oil highly profitable.

    Koole is expected to post earnings before interest, taxes, depreciation and amortization of roughly 80-90 million euros this year, the sources said.

    EQT is hoping to reap 14-15 times that in a potential deal, in line with the multiples paid in Vopak's sale of U.S. terminals to Kinder Morgan earlier this year and of ANZ Terminals to Macquarie last year.

    EQT bought Koole in 2011 and has expanded the business with several bolt-on acquisitions such as terminals from Westway, NOVA and BP, which in January also announced the sale of another European oil storage asset.

    Koole is held by EQT's fully invested fund Infrastructure I, which has divested three companies this year - Denmark's NORD, U.S.-based RTI and Sweden's Swedegas.

    Bankers are preparing debt packages of around 6.5 times core earnings to back infrastructure bidders, totalling up to 585 million euros of debt financing expected to be in the form of loans.

    The loans could comprise a five-year facility and a three-year bridge facility, which will be taken out via the bond market. Any debt financing backing a private equity firm is likely to involve higher leveraged multiples.
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    Gazprom proposes out-of-court settlement on EU antitrust case -Interfax

    Russia's top natural gas producer Gazprom has sent proposals to the European Commission regarding an out-of-court settlement of an antitrust case against the company, Interfax news agency quoted a Gazprom official as saying on Monday.

    After more than two years of investigation, EU antitrust regulators charged the Russian gas giant in April with abusing its dominant position in Poland, Hungary, and six other countries in Eastern Europe, to overcharge by up to 40 percent.

    State-run Gazprom, which supplies a third of EU gas needs and generates more than half its revenues there, has denied the charges and said it has already made significant concessions.

    However, it also said in May that it would consider offering Europe new concessions, including on pricing, to settle the antitrust case, and thereby avoid a long legal battle which could result in billions of dollars in fines.

    Interfax did not say what was in the proposals but quoted Alexander Medvedev, Gazprom's deputy chief executive officer, as saying on Monday that Gazprom would soon set up a meeting with EU antitrust chief Margrethe Vestager, the news agency reported.

    Gazprom has to submit a written response, or statement of objections, by Sept. 28 to the claims by the European Commission.

    "We sent our proposals about the settlement of the claims, which were formally lodged to Gazprom," Interfax quoted Medvedev as saying.

    "In the nearest future, we will discuss it with Mrs Vestager in order to find an out-of-court solution," he added.

    Medvedev also said that Gazprom would send its statement of objections on Sept. 28 as he did not expect to resolve the issue by that date.
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    Saudi Arabia's Crude Stockpiles at Record High as Exports Fall

    Saudi Arabia’s crude stockpiles rose to a record in July after exports by the world’s biggest oil shipper declined for the third time in four months.

    Commercial petroleum stockpiles increased to 320 million barrels, the highest since at least 2002, from 319.5 million barrels in June, according to data Sunday on the website of the Riyadh-based Joint Organisations Data Initiative. Crude exports slumped 1.2 percent to 7.28 million barrels a day after hitting a record 7.9 million barrels in March. Overseas shipments declined every month since then except in June.

    Brent crude oil prices have slumped 17 percent this year as Saudi Arabia led the Organization of Petroleum Exporting Countries in boosting production to keep market share amid a global supply glut. The failure of producers to cut output fast enough may require prices to fall near $20 a barrel to clear the surplus, Goldman Sachs Group Inc.estimates. Brent was at $47.84 on Monday.

    Saudi Arabia cut back on oil production by 1.9 percent in July, the first drop since February, to 10.36 million barrels a day, according to the JODI data. Saudi Arabia told OPEC its June production of 10.564 million barrels daily was a record, exceeding a previous all-time high set in 1980.

    “It seems that the Saudis are determined to keep their market share at above 10.2 million barrels a day,” Essam al-Marzouq, Kuwait-based independent oil analyst and former vice president at Kuwait Petroleum International, said by phone on Sunday. “In the case when exports are down, they will not scale back on production and will store the crude at home or even abroad."

    Saudi Arabia boosted diesel exports in July to 441,000 barrels a day from 308,000 barrels in June even as production declined to 941,000 barrels from 1.01 million barrels, JODI data show.

    The nation wants to keep storage tanks full, partly to feed two new refineries, a person with direct knowledge of the matter said in July. Refineries processed 2.21 million barrels a day in July, up from 2.09 million barrels in June, according to JODI. Saudi Arabia has built storage tanks with new refineries at Yanbu and Jubail, and domestic capacity will increase after the new Jazan refinery starts in 2017, the person said.

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    Exxon Said to Be on the Hunt for West Texas Shale Bargains

    Exxon Mobil Corp. is adjusting the way it structures shale acquisitions as the global energy giant expands in West Texas, the largest U.S. oil-producing region.

    Executives with Exxon’s shale-drilling unit, XTO Energy, are meeting with small,closely held producers in the Permian Basin to negotiate possible purchases and joint ventures, according to three people familiar with the talks. The company is expanding its use of a new strategy first deployed in the region last year that offers operators a cut of future proceeds rather than big upfront stock or cash payouts, say the people, who asked not to be named because the meetings were private.

    Stung by the 58 percent plunge in U.S. oil prices since June 2014, many drillers face stark choices: shut down rigs to conserve capital and wait out the bust, or surrender some independence to a deep-pocketed savior in exchange for a shot at a future windfall. Exxon is expanding at a time when $40-a-barrel crude is crippling more-indebted companies.

    “You’re going to see more pain,” Ted Harper, a senior fund manager who helps oversee $10 billion at Frost Investment Advisors LLC in Houston, said in a telephone interview. “Some folks are going to be scrambling for alternatives.”

    The XTO executives dispatched from the unit’s Fort Worth, Texas, headquarters have been working since last year to structure prospective deals to provide long-term returns rather than upfront riches, the people said.

    The company is offering to cover all drilling and appraisal costs on a given parcel; in exchange, Exxon promises as much as one-third of revenue from any discoveries to its partner, with Exxon keeping the rest, the people said.

    The Permian Basin is a cluster of oil fields beneath Texas and New Mexico that pumps more crude than half the nations in the Organization Of Petroleum Exporting Countries. Oil production across the region probably will rise more than 1 percent next month to 2 million barrels a day as technological advances enable drillers to extract more crude from each well, Bloomberg Intelligence analysts Vincent Piazza and Gurpal Dosanjh said in a note on Friday.

    For Exxon investors, the new deals strategy provides an added bonus: because the company isn’t using stockpiled common shares to fund the transactions, there’s zero dilution to individuals’ portfolios.

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    Russian finance ministry proposes move to raise tax on oil extraction - RIA

    Russia's finance ministry has proposed changing the calculation method for Mineral Extraction Tax for oil companies by including a so-called "rouble deduction" that would significantly boost revenues, news agency RIA reported on Saturday, citing finance ministry documents.

    The plan would raise an additional 1.6 trillion roubles ($24.1 billion) in revenues in 2016-2018, RIA reported.

    The reported plan comes as Russia is struggling to find ways of making its budget numbers add up, following a renewed slide in the price of oil that has blown a hole in government revenues largely dependent on energy taxes.

    RIA said the oil tax proposal would involve changing the method used to calculate a so-called cut-off price of $15 per barrel that determines what proportion of oil companies' revenues is not subject to the extraction tax.

    Presently the cut-off price is converted into roubles using the exchange rate that exists when the tax is paid. This is forecast by the finance ministry at 63.5 roubles per dollar in 2016, 64.8 roubles per dollar in 2017 and 65.8 roubles per dollar in 2018, RIA reported.

    Under the new proposal the conversions would instead by made using the 2014 exchange rate indexed by inflation, implying a dollar/rouble exchange rate of 43.8 in 2016, 47.1 in 2017 and 49.8 roubles in 2018, as a result of which more of oil companies' revenues would be subject to the tax.
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    NNPC secures financing

    Nigeria's state oil company has secured a $1.2 billion multi-year drilling financing package to contribute to the running of 36 oil wells to be operated as part of a joint venture deal, according to reports.

    The Nigerian National Petroleum Corporation (NNPC) said the package, financed by a consortium of Nigerian and International lenders, would be used to supplement its contribution to a joint venture operation with Chevron Nigeria, Reuters reported.

    The $1.2 billion package is to be channelled into the development of 23 onshore and 13 offshore wells in two stages over the next three years.

    The first stage, comprising of 19 wells, is projected to deliver 21,000 barrels of crude oil and condensate per day alongside 120 million standard cubic feet of gas each day in 2015 and 2016.

    And the second stage, comprising of 17 wells, is projected to yield 20,000 barrels of crude oil and condensate per day alongside gas production of 7 million standard cubic feet of gas each day between 2016 and 2018.

    Nigeria is Africa's top oil producer and relies on crude sales for around 70% of government revenues.

    The state oil company's ability to maintain its contributions to joint ventures has been hit by the fall in oil prices, and the resulting drop in revenues from crude sales, over the last year.
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    Producers breathe new life into Alaska’s Prudhoe Bay

    Alaska’s Prudhoe Bay producers are using innovating production and drilling techniques—some invented or first applied on the North Slope—to boost ultimate expected recovery rates.

    Producers had originally estimated a 40% recovery rate when Prudhoe was first discovered in 1968. But now they estimate a 60% recovery, or as much as 14.1 to 14.2 billion barrels.

    Gas re-injection for pressure maintenance and a miscible injectant made with natural gas liquids, used in enhanced oil recovery, have also been major factors in improved recovery, along with a field waterflood, said Bruce Laughlin, BP’s manager for Alaska reservoir development. BP is the operator and part-owner of Prudhoe Bay. Other owners include ConocoPhillips and ExxonMobil.

    As an oil field, Prudhoe is showing its age. The Prudhoe Oil Pool, the field’s largest oil reservoir, is now producing about 250,000 b/d, or one-sixth of its original rate of 1.5 million b/d. Its wells once produced 10,000 b/d or more but many are now at 1,000 b/d or less.

    The underlying reservoir, however, is still the largest slope producer and one of the largest US producing fields. It is also the economic linchpin of the North Slope, producing half of the overall slope output of about 500,000 b/d. It would be economically difficult to operate the Trans Alaska Pipeline System without Prudhoe, Laughlin said.

    Over the years Prudhoe has become a kind of laboratory for new technologies, mainly because the field is big enough, and the returns great enough, that the producers can afford to take risks.

    New technologies that Prudhoe Bay has fostered include “multi-lateral” wells, or a single surface well with several underground producing legs, which are in effect several wells drilled below surface. As many as six underground wells, or “sidetracks” are now drilled off a single surface well. These were first done on the slope and are now a mainstay of shale drilling that enabled US shale production to blossom.
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    U.S. Oil-Rig Count Falls in Latest Week

    The U.S. oil-rig count fell by eight to 644 in the latest reporting week, the third-straight decline after six consecutive weeks of increases, according to Baker Hughes Inc.

    The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year.

    The rig count dropped for 29 straight weeks before climbing modestly in recent weeks.

    Despite recent increases, there are still about 50% fewer rigs working since a peak of 1,609 in October.

    According to Baker Hughes, the number of gas rigs rose by two to 198.

    The U.S. offshore rig count was 31 in the latest week, unchanged from last week and down 31 from a year earlier.

    For all rigs, including natural gas, the week’s total was down six to 842.
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    China's CNOOC sells one LNG cargo each to BG Group and BP

    China National Offshore Oil Corporation has sold one liquefied natural gas (LNG) cargo each to BG Group and BP, marking the completion of its first ever sell tender, trade sources said.

    CNOOC is selling both cargoes from Australia's newly launched Queensland Curtis export plant.

    The first cargo loads in late October and the second in November.

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    Iran to unveil new oil contracts "in coming weeks"

    Iran's deputy oil minister Rokneddin Javadi was quoted as saying the country would unveil new oil contracts in the coming weeks, earlier than previously expected.

    The prospect of sanctions-free Iran adding more barrels to an already oversupplied market is fueling bearish momentum. Javadi also reiterated Iran's plans to regain its oil production share once Western sanctions are removed.
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    Russia actively deploying troops/tanks/helicopters into Syria

    Image title
    There's no question that Tanks and support vehicles are arriving in Syria.

    The troops and equipment are coming out of southern Russia, the U.S. officials said. The first passenger flight flew over Bulgaria and Greece, but after that route was shut down all subsequent flights have gone over the Caspian Sea and through Iran and Iraq.

    A couple of Russian amphibious ships have also unloaded equipment at its naval base in Tartus, Syria, which is about 60 miles away from Latakia.

    Moscow, which has backed Syrian President Bashar Assad throughout the nation's 4 1/2-year civil war, said its military experts are in Syria to train its military to use weapons supplied by Russia.

    Russian Foreign Ministry spokeswoman Maria Zakharova accused the West of creating "strange hysteria" over Russian activities there, saying that Moscow has been openly supplying weapons and sending military specialists to Syria for a long time.

    "Russia has never made a secret of its military-technical cooperation with Syria," she said, adding that she could "confirm and repeat once again that Russian military specialists are in Syria to help them master the weapons being supplied."

    President Vladimir Putin and other Russian officials have sought to cast weapons supplies to Assad's regime as part of international efforts to combat the Islamic State of Iraq and Syria, or ISIS, and other militant organizations in Syria.

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    India not making subsidy payments

    Federal Government's failure to meet its obligations on petrol subsidy claims, which has accumulated to over N500 billion is putting pressure on the marketers and the banks, THISDAY’s investigation has revealed.

    THISDAY gathered that the current administration had not made any subsidy payments as against the sporadic payments of its predecessors. The last time marketers were paid was in March 2015 and that was for deliveries made in October 2014.

    Investigations at Ministry of Finance revealed that the main reason for non-payment of subsidy claims was the massive reduction in government revenues as a result of the slump in oil prices and the belief by the Buhari government that there was still a large amount of waste in the administration of the subsidy payments.

    A marketer who declined to be named declares: “This long period of non-payment is a real threat to the health of the financial system, the companies involved in petroleum products importation and to whom subsidy payments are owed and the sustenance of uninterrupted and stable supply of petroleum products to the country.”

    The CEO of a major oil marketing company said: “The government is putting companies in a position where they will fail because it is not meeting its obligation. We are keeping a subsidy system that we obviously have difficulty maintaining and which we are maintaining at the expense of the operators. The issue is that these operators are now dying. This could lead to another round of defaults in the banking sector and a devastation of the downstream marketing sector."

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    Alternative Energy

    China's Solar Power Analysts Can't Agree Why Shares Are Plunging

    Since peaking in May, the NYSE Bloomberg Global Solar Energy Index of 127 companies has plunged 47 percent, more than quadruple the pace of the MSCI World Index. Yet panel makers anticipate record installations this year and have mostly recovered from a plunge in prices that slashed margins at the beginning of the decade.

    So why are shares not following industry fundamentals? Analysts offer a number of explanations ranging from the slump in oil prices hurting confidence in all energy companies to the fact that developers in China, the world’s biggest market for the technology, aren’t getting paid on time.

    “The environment for China’s photovoltaic power market is bad,” said Louis Sun, an analyst at BOCOM International Holdings Co. in Shanghai. “This will spread to the entire industry chain, especially those producers with a larger market share in China.”

    Yingli Green Energy Holding Co. is the worst performer among big panel makers in the last quarter, losing two-thirds of its value after saying in August that its outlook for profit and sales would be lower than previously expected for the rest of the year. It hasn’t recovered from the drop in solar panel costs that started in 2009.

    Shunfeng International Clean Energy Ltd. is down 57 percent in the past three months and Trina Solar Ltd., the leading panel maker, by 31 percent. Canadian Solar Inc. has fallen 47 percent in the past three months, while JA Solar Holdings Co. is down by 15 percent.

    Supply Glut Worries

    The industry “is still worried about a continuing supply glut, and competition is intense,” leaving investors less certain the companies will benefit from rising installations worldwide, BOCOM International’s Sun said.

    The world may install as much as 61 gigawatts of solar panels in 2015, up 36 percent from the previous year, according to Bloomberg New Energy Finance. The London-based researcher expects installations to rise to almost 70 gigawatts next year.

    Net income in JA Solar more than triple in the second quarter from a year ago. Trina in August posted its biggest profit in four years as surging demand prompted the company to boost its shipment forecast by as much as 16 percent.

    Even so, China’s solar companies are tumbling because of systematic risks, said Nick Duan, an analyst at New Energy Finance in Beijing.
    “Orders are concentrated on top manufacturers as demand grows, while one or two of them have cash flow issues,” Duan said.

    Oil Prices

    The relatively unknown profile of Chinese solar companies may also be behind the declines, some analysts say.

    "Overseas investors aren’t familiar with Chinese solar stocks listed in the U.S. and may ignore them" even as some report profit gains, said Steven Han, a Shanghai-based analyst from SWS Research Co.
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    Renewable energy outstrips coal for first time in UK electricity mix

    Renewable energy has for the first time surpassed coal in supplying the UK’s electricity for a whole quarter, according to government statistics released on Thursday.

    The revelation of the surge in wind, solar and bioenergy to a record 25% comes in a week when the government has been heavily criticised by business leadersand Al Gore for cutting support for clean energy.

    The high performance of renewable electricity between April and June, the latest period data is available for, was due to both more wind and sun and more turbines and solar panels having been installed, compared to the same period the year before, when renewables contributed 16.4% of electricity.

    Gas-fired power stations provided the most electricity - 30% - with renewables second. Nuclear power was third with 21.5% and coal - the most polluting fuel - fell back to fourth, with 20.5%. Ageing coal and nuclear plants have been closing in recent years, while renewable energy has been rapidly rolling out.

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    Customers ‘could self-supply by 2020’

    It will be “common” for customers to self-supply energy and go off the grid by 2020.

    That’s according to a survey by Vlerick Business School’s Energy Centre in partnership with KPMG.

    It asked energy executives from 24 countries, which represent 70% of the European consumers, about the changes they foresee in the industry in the next five years.

    More than a third of them believe self-supply would be a typical choice for customers and it would affect supply-demand balance.

    Almost all respondents, 98% think the trend towards more decentralised electricity generation will continue.

    It also found 86% expect big changes in innovation while 75% see progress in asset management.

    Asked about policies, nearly 94% expect important changes on a regulatory level but 50% think that regulatory commissions have a good understanding of the complexity and challenges the industry faces.

    Daniel Dobbeni, Chairman of Vlerick’s Energy Centre said: “Decentralised and renewable electricity as well as customers becoming self-suppliers will change the power sector like never before. Industry actors must therefore quickly acquire new knowledge and experiences. We believe that dedicated education, networking and research will support DSOs in achieving their ambitious objectives.”

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    Indebted Abengoa gets creditor backing for cash call

    Spanish energy company Abengoa said on Thursday its major creditors had agreed to back most of a 650 million euro ($728 million) share sale in a deal providing vital funds to cut debt and cover cash flow needs.

    The Seville-based engineering and renewable energy firm, which has biofuel and solar-heated power plants in the United States, had lost over half its market value since the share issue was announced in early August on concerns banks would not underwrite it.

    Banks Santander, HSBC and Credit Agricole would back the cash call for up to 465 million euros ($522 million), the company said on Thursday. Its shares rose over 10 percent when the market opened before retreating to Wednesday's closing levels. Bonds rallied strongly.

    "This is a positive development for Abengoa after (previous) news that the banks were not willing to underwrite the capital increase. However we think it will take time and delivery of the goals to regain investor confidence," said Nuno Estacio, analyst at Haitong Research.

    Shareholder Inversion Corporativa, run by the founding Benjumea family, will invest at least 120 million euros in the capital hike, while U.S. fund manager Waddell & Reed will invest 65 million euros through its funds, the company said.

    Inversion Corporativa has agreed to cap its voting rights at 40 percent after the share issue and will lose its majority status.

    Executive Chairman Felipe Benjumea, whose father founded the company, will step down after 25 years in the position to be replaced by Jose Dominguez Abascal, the company's former chief technology officer, in a non-executive role.

    Abengoa, which issued a profit warning in July, said it would cancel its dividend, step up asset sales and cap investments as part of the refinancing plan while making debt reduction a priority.
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    CHORUS Clean Energy revives flotation plans

    German wind and solar park operator CHORUS Clean Energy revived its plans for an initial public offering (IPO) on Thursday, more than two months after putting its flotation on ice due to the Greek crisis and jittery markets.

    "The environment stabilised enough that we could launch another attempt," Chief Executive Holger Goetze told Reuters.

    CHORUS is the latest in a series of German firms to announce plans for an IPO, including automotive supplier Schaeffler and Bayer's plastics division Covestro, as companies try to take advantage of robust equity markets.

    CHORUS said it would offer investors up to 12 million new shares from a capital increase, in addition to 914,058 existing shares held by stockholders and an over-allotment of up to 1.9 million existing shares.

    At the mid point of the price range of 9.75 euros to 12.50 euros, gross proceeds of the IPO will be up to about 125 million euros. CHORUS said its stock would start trading on the Frankfurt stock exchange on Oct. 7.

    Wind park operators such as CHORUS and larger peer Capital Stage, have benefited from rising demand for energy assets, most of which offer stable returns in times of record-lowinterest rates.

    CHORUS, founded in 1998, has said it would use the proceeds from the initial public offering to expand its portfolio -- more than 250 megawatt (MW) of capacity in five European countries including Germany and Italy.

    "We want to grow significantly and expect that we can more than double the portfolio in a relatively short time," CEO Goetze said.

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    US renewable energy output to drop in 2015 on hydropower

    Despite substantial jumps in solar- and wind-derived power, the U.S. Energy Information Administration (EIA) expects a sharp drop in U.S. hydropower generation will drag down total renewables used in the electric sector this year by 3.5%. The drought in California is the culprit behind the anticipated 10.4% drop in hydropower generation, the EIA says in its September Short Term Energy Outlook (STEO).
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    Just do it! Nike commits to 100% green energy

    Nike, Starbucks and Johnson & Johnson are among 36 companies that have pledged to source 100% of their electricity from renewables.

    They have committed to reducing carbon emissions as part of the ‘RE100’ global campaign led by The Climate Group in partnership with CDP.

    The campaign aims to encourage major businesses towards solely using green energy.

    Other major companies that have made the pledge this week include Goldman Sachs, Procter & Gamble, Walmart and Steelcase.

    The news sends a “timely reminder” ahead of the COP21 climate talks in Paris, stated The Climate Group.

    CEO Mark Kenber added: “Research shows that the most ambitious companies have seen a 27% return on their low carbon investments – no wonder new names keep joining RE100.

    “Lowering risk, protecting against price rises, saving millions and boosting brand is what shaping a low carbon economy is all about. Today these companies are signalling loud and clear to COP21 negotiators that forward-thinking businesses back renewables and want to see a strong climate deal in Paris.”

    Previously M&S, IKEA, H&M and Mars also committed to using 100% of renewable energy.

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    China calls for better management of small hydropower stations

    Officials said that China still has vast potentials to develop small hydropower plants but better management should be in place to minimize their environmental impact.

    Mr Tian Zhongxing, an official with the Ministry of Water Resources said that China had 47,000 small hydropower stations, each with an installed capacity of less then 50,000 KW, at the end of last year,

    The aggregate installed capacity of the small hydropower stations hit 73 million kW with an annual electricity output of 220 billion kWh, which accounted for one fourth of China's total hydropower output.

    Mr Tian said that however, the small stations represent only 41% China's small hydropower potential, lagging far behind developed countries,the rate stood at 97% in Switzerland and France, 96% in Spain and Italy, and 84% in Japan.

    Mr Tian called for more efforts to develop hydropower as most of China's untapped hydro resources are based in 832 impoverished counties. Related projects can stimulate local economic growth.

    Mr Liu Huan, director of the International Center of Small Hydro Power under the MWR said that there are dissenting voices on the construction of small hydro stations. But the environmental impact, such as soil erosion, is resulted from a lack of oversight and management.

    Mr Tian said that "With scientific planning and management, we can minimize or even eliminate the adverse effect on the environment."

    China aims to bring the installed capacity of small hydropower stations to 75 million kW by 2020.
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    Biggest IPO in Danish history may price Dong at $11billion

    Biggest IPO in Danish history may price Dong at $11billion

    Denmark is preparing what may become the biggest initial public offering in the nation’s history as it sets a road map for the sale of state utility Dong Energy.

    The government is giving itself a maximum of 18 months, but Finance Minister Claus Hjort Frederiksen made clear he wants the process to be swift. “The sooner we get started, the better,” he said in a phone interview from Copenhagen.

    The whole company, which comprises units in oil, gas, wind parks and distribution networks, could be worth as much as 70 billion kroner ($11 billion), according to Jacob Pedersen, an analyst at Sydbank. It will be a “huge” IPO and likely to attract “enormous attention,” he said. Frederiksen, who said the state will hold more than 50 percent after the IPO, declined to give a valuation when asked.

    Denmark had initially earmarked Dong for a public sale by 2018. The company was at the center of a dispute that resulted in a junior coalition member quitting the previous administration in protest after part of Dong was sold to Goldman Sachs last year. The Wall Street bank paid about $1.5 billion for an 18 percent stake. A number of lawmakers questioned the price, which they argued was too low. The government at the time said the cash injection Goldman delivered came at a crucial moment and under terms others weren’t ready to accept.

    Dong said the IPO process will include a review of its Exploration and Production unit, which “operates in a structurally different market environment currently characterized by the significant drop in oil prices over the past 12 months.”

    Credit analysts have argued in favor of a sale of the unit, which Bloomberg Intelligence estimates may be worth between $3.6 billion and $8 billion. “It’s a very wise move for utilities like Dong to sell their upstream units because they are becoming riskier,” Elchin Mammadov, an analyst at Bloomberg Intelligence in London, said by phone. “However, the timing is bad now, and they should probably wait a bit for the oil price to go up.”

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    Wind farms, solar to be 'key part' of Australiia's Government's energy strategy

    Josh Frydenberg says renewables will be "key part" of energy policy
    Renewable energy sector says comments are "extremely encouraging"
    The industry has lost 88 pc of investment in past year

    Former prime minister Tony Abbott was vocal in his opposition to the sector, describing wind farms as "visually awful" and saying he wished the Renewable Energy Target (RET) had never been introduced by the Howard government.

    The industry, which lost 88 per cent of investment over the past year, amid uncertainty over the RET,had been hopeful the Government's attitude would change under new Prime Minister Malcolm Turnbull.

    However Mr Turnbull, who lost the party leadership in 2009 over his support for the Rudd government's proposed Emission Trading Scheme, said he was in favour of retaining the Government's current climate change policies.

    "The climate policy is one that I think has been very well designed that was a very, very good piece of work," he said after he took the leadership last week.

    But today, Mr Frydenberg told 774 ABC Melbourne that "clearly renewable energy is a key part of our energy platform".

    "I think wind farms, I think solar, I think they all have a role to play," he said.

    Mr Frydenberg was asked by host Jon Faine if describing renewable energy as a "key platform" represented a u-turn for the Government.

    "Don't play it up to be bigger than it is Jon, what I'm saying is that we as a Coalition Government have entered into a bipartisan agreement with the Labor Party, on a 23.5 per cent renewable energy target by 2020, this will see a doubling of large scale renewable energy," he said.

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    SunEdison Receives A Big Bite Of India's Growing Wind, Solar Energy Pie

    U.S. company SunEdison , one of the world's largest global renewable energy development names, has announced it has signed a Memorandum of Understanding with the provincial government of Tamil Nadu in India to develop 2 gigawatts of wind and solar energy in the next five years. The 2 gw are part of SunEdison's larger plan to develop 15.2 gw of renewable energy in India by 2022.
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    Potash Pessimism Clouds Prospects for BHP's Jansen Project

    BHP Billiton Ltd.’s prospects of building potash into the fifth pillar of its portfolio of big-ticket businesses is looking a long way off. That’s the view of Macquarie Group Ltd., which has a “very pessimistic view” of the market.

    The world’s biggest miner’s Jansen project in Canada, which has already consumed about $3.8 billion in capital, is unlikely to be developed unless prices rise, according to Macquarie. The bank has cut its long-term price forecast by 16 percent to $280 a metric ton.

    “Our base-case scenario for BHP assumes the indefinite deferral of Jansen’s development,” Macquarie analysts wrote in a note to clients dated Sept. 21.
    The company will probably favor development of less capital intensive petroleum and copper projects, they said.

    Mosaic Co., the largest U.S. producer of potash fertilizer, said Monday it plans to reduce output as low crop prices continue to erode farmer demand for agricultural products. The company, along with rivals including Potash Corp. of Saskatchewan Inc., have endured a 17 percent drop in spot potash prices and are bracing for further declines amid a wave of new capacity.

    For Jansen to proceed, prices would need to rise to at least $400 a ton to achieve an acceptable rate of return and probably to about $500 a ton to compete for capital with the company’s other projects, Macquarie said. It forecasts the potash price will average $254 a ton this year.

    Potash demand could slide 8 percent next year, leading to a record surplus with new low-cost projects being developed in Russia to England, according to Macquarie. The bank has cut its forecast for 2016 potash spot prices by 7.6 percent to $254 a ton, and to $250 a ton in 2017. BMO Financial Group analysts on Monday forecastthe lowest prices since 2009 for potash and urea fertilizers.

    Melbourne-based BHP has flagged potash as a potential key division for future growth, identifying the fertilizer as a priority alongside existing coal, copper, iron ore and petroleum units to tap rising consumption and an expanding middle class across Asia. Jansen remains the world’s “best undeveloped potash resource,” BHP said Tuesday in an e-mailed statement in response to the note.

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    Precious Metals

    Gold miners cut back global hedge book in second quarter

    Gold mining companies trimmed their outstanding global hedge book by 17 t in the second quarter, an industry report showed on Thursday, as two of last year's biggest hedgers, Fresnillo and Polyus Gold, closed out positions. 

    In their quarterly Global Hedge Book Analysis, Societe Generale and GFMS analysts at Thomson Reuters said the global producer hedge book stood at 177 t at the end of June, down 9% from the quarter before. "Polyus Gold and Fresnillo, holders of the two largest hedge books, were the largest contributors to the de-hedging activity, on a combination of scheduled deliveries into forward sales contracts, and options reaching maturity," the report said. 

    "Significant de-hedging was also seen from Detour Gold, Northern Star Resources and St. Barbara. In total, 30 companies reduced their delta-adjusted hedge books during the period. This activity was only partially countered by new hedges from other gold miners."

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    Gold: Parabolic chart is good indicator.


    Gold prices soared to a one-month high Thursday as fears of a global slowdown have investors seeking so-called safe haven assets like bonds and bullion. And according to Dennis Gartman, often referred to as the "commodities king," the rally in gold could just be starting.

    "There's a real strength in the gold market when you look at it in non-U.S. dollar terms," the publisher of The Gartman Letter said Thursday in an interview with CNBC's "Futures Now." "The difference is enormous.Image title

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    Argentine judge lifts order against Barrick Gold's Veladero mine

    An Argentine judge on Thursday lifted his order forbidding Barrick Gold Corp's from pumping cyanide solution for the leaching process in its Veladero mine, saying a leak had not contaminated water in the surrounding area.

    Barrick had said that the Sept. 13 leak, due to a faulty valve, was detected almost immediately and that there had been no contamination of nearby rivers.

    Throughout the suspension, the miner had been able to use cyanide solution already pumped into the leaching system, meaning production was not impacted.

    "The water did not contain cyanide or other contaminating metals, so I decided to lift the cautionary measure," Judge Pablo Oritja, in the western San Juan province where the open-pit mine is located, told television channel TN.

    He added, however, that a special committee would spend 30 days investigating if there was any contamination in the region in order to reassure the local population.

    The Veladero mine produced 722,000 ounces of gold last year and is forecast contribute about 10 percent of Barrick's 2015 gold output, according to RBS Capital.
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    Gemfields mine in Zambia richer than initially thought

    Emeralds and rubies miner Gemfields said Wednesday an independent report by consultancy firm SRK shows the Kagem mine in Zambia is set to produce 1.10 billion carats over a 25 year mine life, which is more than initially anticipated.

    The company said the total amount of indicated and inferred mineral resource at the emerald mine, 75% owned by Gemfields, is now estimated at 1.8bn carats worth of the green gemstone and beryl.

    According to SRK, the company needs to spend $84 million over the first four years of the project, and a total of $516million over Kagem mine’s life to create and operation that will initially process around 90,000 tonnes of ore per year. By 2018 output would ramp up to 180,000 tonnes per year, as it will add the Fibolele pit to the project.

    Over its mine life, Kagem is now expected to produce 44.7 million carats per year on average.

    Over its mine life, Kagem is now expected to produce 44.7 million carats per year on average.

    Gemfiels said it would continue exploring the asset "over the next few years" to determine the further resource potential.

    "As I have said on many occasions over the past few years, this operation has a bright future, is still maturing as an established producer, with much more yet to come," said Chief Executive Ian Harebottle.
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    Miners turn to alternative finance to cut debt as downturn grinds on

    A niche form of mining industry finance is emerging as the new go-to funding for miners bowed by debt, another sign of the sector's distress as it plods through the fourth year of a commodities' downturn. 

    Glencore, the world's third-biggest miner, is in talks to raise more than $1-billion in so-called "streaming" deals, coming on the heels of transactions by No 1 gold producer Barrick Gold and diversified miner Teck Resources. More such deals are expected as shareholders, ratings agencies and lenders pressure miners to slash debt amid a gloomy commodity price outlook and as other debt-cutting tools such as asset sales, dividend cuts and share issues are not enough. 

    Until now so-called "streaming" finance - upfront funds for miners in exchange for a portion of a mine's future output - has most commonly been used by mid-sized miners with limited access to capital to fund mine builds. That the world's biggest miners are now prepared to do deals that see them giving up a portion of their future production, earnings and cashnflow to cut debt is a reflection of their limited options. 

    "It is a sign of the times," said Andrew Kaip, an analyst at BMO Capital markets. "Equity markets are to a large degree closed... Miners are looking for alternatives. Unfortunately this is an alternative of last resort," he said. 

    Companies providing stream financing, including US-based Royal Gold Inc, Toronto's Franco-Nevada and Vancouver-based Silver Wheaton, say they have never been busier. "We have never seen a market as attractive as we have seen it for the last six months or so," said Tony Jensen, Royal Gold's CEO. 

    Most of the streaming opportunities right now are for repairing balance sheets, said Silver Wheaton CEO Randy Smallwood. "If I look at all the opportunities out there that I find appealing... it is probably between $4-billion to $5-billion worth," Smallwood said in an interview at the Denver Gold Forum, an annual gold mining industry conference. 

    All three CEOs expect streaming companies may have to start teaming up on deals as transaction sizes get too big for anyone to fund alone. But they say miners do not like syndication as it reduces competition for deals, making them more expensive. 

    At end-June, streaming companies had some $4.5-billion of cash and credit available for new deals, BMO's Kaip said. Besides Glencore's potential $1-billion deal, Teck Resources, whose credit rating was slashed to junk this month due to its heavy debt load, has said it is open to more deals. Debt-laden copper miners First Quantum Minerals and Freeport McMoRan are also possible streaming candidates, sources said.

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    Diamond jewelry sales rise to record in 2014 - De Beers

    Diamond miner De Beers said global diamond jewellery sales grew by 3 percent last year to a record of over $80 billion, helped by strong demand in the United States, but warned 2015 will be tough for the industry.

    De Beers said sales of polished diamonds rose 7 percent in the United States, while demand in China and India grew by 6 percent and 3 percent in local currency terms, respectively.

    "Growth would have been almost five percent had it not been for the strengthening of the U.S. dollar against the currencies of several of the major diamond consumer markets in the latter part of 2014," De beers said in a report.

    The company, a subsidiary of global miner Anglo American , warned growth would be muted in 2015 as the strong dollar and an economic slowdown in China weigh.

    De Beers chief executive Philippe Mellier said many industry participants started the year with more inventory than planned due to weak demand for diamond jewellery at the end of 2014.

    "This led to a period of 'indigestion' in the diamond value chain and as a result we expect 2015 as a whole to be a more challenging year," Mellier said.

    De Beers said global rough diamond production fell by 3 percent in volume terms in 2014 to about 142 million carats, remaining well below the 2005 peak of around 175 million carats.

    The company said expected output from expansion projects currently under way in the sector would lift total carat production to levels similar to the mid-2000s.

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    Volkswagen could face fines of up to $18 billion, vehicles gave false emissions data,

    Volkswagen shares fell by up to 14 percent on Monday, after it told U.S. dealers to halt sales of some 2015 diesel cars, following regulators' discovery that software it designed for the vehicles gave false emissions data,

    In a statement published by the carmaker on Sunday, Chief Executive Officer Martin Winterkorn said, "I personally am deeply sorry that we have broken the trust of our customers.

    "Volkswagen has ordered an external investigation of this matter," he said.

    The U.S. Environmental Protection Agency (EPA) said on Friday the software deceived regulators measuring toxic emissions, adding that Volkswagen could face fines of up to $18 billion as a result.

    Volkswagen told to recall nearly 500K vehicles

    "This is not your usual recall issue, an error in calibration or even a serious safety flaw," Bernstein analysts wrote in a note on Sunday. "There is no way to put an optimistic spin on this - this is really serious."

    Cynthia Giles, an enforcement officer at the EPA, said on Friday the cars in question "contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test".

    The feature, which the EPA called a "defeat device," masks the true emissions only during testing. When the cars are on the road, they emit as much as 40 times the level of pollutants allowed under clean air rules meant to ensure public health is protected, Giles said.

    "We have admitted to it to the regulator. It is true. We are actively cooperating with the regulator," a Volkswagen spokesman said on Sunday.

    Volkswagen could face civil penalties of $37,500 for each vehicle not in compliance with federal clean air rules. Some 482,000 four-cylinder VW and Audi diesel cars sold since 2008 are involved in the allegations.

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    Base Metals

    MMG Las Bambas to start copper output in 2016

    MMG Ltd's USD 7.4 billion Las Bambas project in Peru is on track to start commercial production in May or June of 2016 that will ramp up to 400,000 tonnes of copper in 2017

    Construction of the mega mine in Peru's Apurimac region is almost complete and funding for remaining investments secured

    Mr Luis Rivera, vice president of operations at Las Bambas said that copper production will likely total about 200,000 tonnes in all of 2016

    He said that “A copper slump has led the company to trim operating costs but has not hurt the company or cut its spending on social projects in nearby towns. Mining investments like Las Bambas are very long-term and so our mission is to get through the different cycles that the price of copper is going to have.”

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    Freeport McMoRan: Peruvian mine prepares to double production

    The expansion of Freeport-McMoRan's Cerro Verde copper deposit in Peru is nearly finished and should double the mine's copper output after an April or May 2016 start, Reuters reports.

    The expansion will add some 270,000t to annual output from the mine, currently at about 230,000pa and expected to lift to about 500,000tpa, a company spokesman has confirmed.

    Freeport-McMoRan has 53.56% of Cerro Verde, Sumitomo Metal Mining 21% and Buenaventura 19.58%.
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    Indonesia puts 500,000 tonnes copper concentrate in doubt

    Newmont's Indonesian copper export permit, which expired on Tuesday, will not be renewed because the company failed to meet government stipulations for developing a domestic smelter, government officials said.

    Chief Executive Gary Goldberg said on Tuesday Newmont is in talks with the Indonesian government and he said he expected it would take "a couple of weeks" to sort out," according to the report:

    "In the meantime we continue to operate at full capacity. The last export shipment was earlier today," Goldberg said in an interview at an industry conference in Denver.

    Newmont, the country's number two exporter behind Freeport, is forecast by the Indonesian government to produce 500,000 tonnes of copper and gold concentrate in 2015.
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    Congo drops objections to Ivanhoe Mines' copper deal

    Democratic Republic of Congo's government supports Ivanhoe Mines' $400 million sale of a stake in its Kamoa copper mine to China's Zijin Mining , it said on Tuesday, dropping earlier objections to the deal.

    The sale is a pre-requisite for the development of Kamoa, which is thought to be the world's largest untouched high-grade copper discovery. A feasibility study on the Kamoa project is expected at the end of next year.

    In a statement, mines minister Martin Kabwelulu and portfolio minister Louise Munga Mesozi added that Ivanhoe had agreed to sell an additional 15 percent stake in the mine to the government, which currently controls five percent.

    The government said in June that Vancouver-based Ivanhoe's sale in May of a nearly 50 percent stake in the copper project in southeastern Congo to Zijin for $412 million should be suspended until concerns over the purchase of its own stake were addressed.

    It was not exactly clear what the government's objections were, although industry sources said they wanted guarantees on their own stake first.

    The conditions of the sale to the government still needed to be finalized in a contract with Ivanhoe subsidiary Kamoa Holding Limited and the mine, the statement said.
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    Mining Bears: 2 more lean years say SNL.

    Image title

    The report compares the current downturn to the previous bear market in mining which ran from 1997 to 2002 and argues that capex cutbacks are far from over.

    Instead the industry should brace itself for at least another two years of shrinking budgets and outlays with the first signs of a "subdued" recovery only appearing early in 2018.

    But even this prediction could be too bullish.

    "Worryingly, metal prices have already fallen 12% further than they did during the bear market in the 1990s. In the last bear market, capex only recovered to its pre-crash (1997) level after seven years (2004)," according to Fellows.

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    UK mining cos slammed as EM growth scare grips stocks again

    ** Shares in UK-listed mining cos Anglo-American and Glencore down more than 8 pct, among top losers on the FTSE 100 as well as across top European stocks.

    ** Broker Credit Suisse takes a grim view of sector's prospects, says challenging to find floor on commodity prices till China demand and EM currencies stabilize

    ** Bellwethers Rio and BHP down about 3.5 pct

    ** CS cuts TP of Rio Tinto to 2500p from 2800p; downgrades Anglo to Neutral from Outperform; Antofagasta reduced to Underperform from Neutral with TP moved to 510p from 640p

    ** CS downgrades Vedanta Resources to Underperform from Neutral, TP at 430p from 690p; cuts TP of BHP Billiton to 1250p from 1350p; Randgold Resources TP cut to 4040p from 4270p

    ** Glencore TP reduced to 175p from 235p, citing co suffered a complete loss of confidence from investors following the recent dividend cut and equity placing

    ** The rout in commodity prices is putting pressure on credit ratings and dividends across the mining sector, prompting reductions in capex, operational costs and jobs
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    CSRC: 40bn RMB losses

    Image titleThe scene outside the main Beijing exchange yesterday am.

    From August:

    Furious investors have kidnapped the head of a Chinese exchange for minor metal trading from his hotel and handed him to police, the Financial Times (FT) has reported.

    The investors were angry that authorities had failed to find out why their funds had been frozen and believed by handing over Fanya Metals Exchange boss Shan Jiuliang to police they could spark an investigation.

    The FT reported investors had been protesting for weeks about their funds being frozen at the exchange which is based in the southwestern city of Kunming and traded minor metals. It also offered high interest investment products from offices in Shanghai and Kunming.

    Shan had been holding regular meetings with exchange backers and was on the way to Guangzhou for a business trip when he was captured.

    Shan had been holding regular meetings with exchange backers and was on the way to Guangzhou for a business trip when he was captured. Photo: Weibo

    The exchange, which had purchased minor metals for above market prices, has faltered as China's economy slowed.

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    Private equity firm EMR teams up to buy Australian copper miner

    Private equity firm EMR Capital has teamed up with the former head of Equinox Minerals to buy a small Australian copper mine for up to A$15 million ($10.75 million) plus taking on about A$40 million in rehabilitation bond costs, the companies said in a joint statement.

    The mine in Queensland state will be bought from Aditya Birla Minerals Ltd, a unit of India's Hindalco .

    The deal comes despite copper prices currently being mired near six-year lows around $5,000 a tonne, which has forced some companies to suspend production.

    EMR is working with Lighthouse Minerals, a mining company set up by Crag Williams, the former chief executive of Equinox Minerals, a Zambia-focused copper producer that was taken over by Canada's Barrick Gold for $7.5 billion in 2011.

    EMR and Lighthouse aim to turn the Mt Gordon mine, which has been on care and maintenance since April 2013, into a mid-tier Australian copper producer.

    The mine, which will be run by managing director of Lighthouse Minerals Carl Hallion, is expected to produce approximately 1.4 million tonnes a year of copper concentrate.

    "The primary focus for now will be building up and making sure we have a successful restart at Mt Gordon," Hallion told Reuters, adding that the company was open to further acquistions should the restart prove a success.

    EMR executive chairman Owen Hegarty, a former managing director of Rio Tinto Asia, will be chairman.

    "While commodity prices and markets remain challenging, we are confident of the medium- and longer term outlook for copper," Hegarty said in a statement.
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    Glencore inventory sale could sink world zinc prices further

    Substantial amounts of base metal zinc could be released onto world markets, weighing further on fast falling prices, as major producer Glencore implements a plan to liquidate some of its commodity inventories to help pay off debt.

    The overhang of inventories in London Metal Exchange (LME) storage facilities, which has surged more than 40 percent since early August, has wrong-footed investors who had earlier this year targeted zinc as a top bet in metals due to closures of big mines that would create shortages.

    Zinc, mainly used to galvanize steel to protect against rust in autos and construction, has slumped from being one of the best performing industrial metals earlier in the year to one of the worst due to the inventory change.

    "It's been a big shock to the market, this massive flood into the LME warehouses," said Stephen Briggs, metals strategist at BNP Paribas.

    But mining and trading company Glencore may add further to a plentiful supply situation after announcing a raft of measures to slash its net debt of $30 billion.

    At interim results last month, Glencore said it was cutting "readily marketable inventories" by $1.5 billion. Last week it said it was further reducing working capital by an additional $1.5 billion, partly from liquidating more inventories.

    Swiss-based Glencore gave no details about which inventories it was selling off and a spokesman declined to comment.

    Glencore had inventories worth $23.6 billion at the end of June, but financial statements did not provide a breakdown of inventories by commodity. Glencore has operations ranging from metals to coal to grains.

    Glencore is one of the world's biggest producers of both zinc concentrate, or partially processed ore, and the refined metal. It increased its overall output of zinc by 12 percent in the first half of the year to 730,300 tonnes.

    "I can't confirm it (Glencore selling metal stocks) ... but it is much easier to liquidate LME (refined) metals than concentrates," Briggs said.


    LME zinc inventories MZNSTX-TOTAL have surged 43 percent to 608,885 tonnes since August 7, with the bulk of metal arriving at warehouses in New Orleans.

    Glencore's warehousing unit, Pacorini Metals, dominates activity in New Orleans, owning nearly two-thirds of the 42 depots in the city.

    Benchmark zinc on the London Metal Exchange jumped to an eight-month peak of $2,404.50 a tonne in May, but has since slid nearly 30 percent to $1,740.

    Analysts said some of the material appearing in LME sheds was probably being shifted from non-LME facilities, but some was also likely to be the result of Glencore selling off stocks.

    Glencore, whose biggest refined zinc output is in Europe, would be keen to send material to the United States to keep premiums firm in its key European market, an industry source said.

    "They may want to move the inventory off their balance sheet and also provide a bit of a prop, or a floor, to European premiums," said the source, who declined to be named.

    Industrial consumers pay a premium or surcharge over the LME cash price for immediate delivery of metals.

    The heavy flow of inventories is dampening the impact of the closure of big mines this year, which had been expected to tighten the supply balance and create a deficit.

    This year, China-owned MMG is closing its Century Mine in Australia while Vedanta Resources is shutting down its Lisheen Mine in Ireland.

    "It's (inventory rises) creating negative sentiment around zinc," said analyst Vivienne Lloyd at Macquarie in London.

    "The market remains in a technical deficit for refined metals, but the stocks should be able to easily feed any actual shortfall in the marketplace."

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    Freeport-McMoRan Completes $1 Billion at-the-Market Equity Offering, wants more

    Freeport-McMoRan Inc. announced today the completion of its at-the-market offering of common stock announced on August 10, 2015. FCX raised $1 billion in gross proceeds through the sale of 96.7 million shares of FCX common stock in open market transactions since August 10, 2015. The shares were issued pursuant to FCX’s shelf registration statement.

    FCX also announced today that it has filed with the Securities and Exchange Commission (SEC) a prospectus supplement under which it may offer and sell additional shares of common stock having aggregate gross proceeds of up to $1 billion from time to time through designated sales agents. Sales of the common stock, if any, would be made by means of ordinary brokers’ transactions or block trades on the New York Stock Exchange at market prices or as otherwise agreed with its agents.

    FCX intends to use the net proceeds from these offerings for general corporate purposes, which may include, among other things, the repayment of amounts outstanding under its revolving credit facility and other borrowings and the financing of working capital and capital expenditures.

    FCX also announced that it continues to engage in discussions to partner with strategic investors interested in investing capital in the development of its oil and gas properties and to consider the previously announced potential initial public offering of a minority interest in Freeport-McMoRan Oil & Gas Inc. (FM O&G) as market conditions warrant. These actions, together with previously announced capital cost revisions, are being pursued as required to fund oil and gas capital spending within cash flow for 2016 and subsequent years.
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    Investor Groups Balk at Glencore’s Share Sale

    Two British investor groups on Thursday criticized commodities giant Glencore PLC for not considering all of the company’s shareholders on an equal basis when it issued $2.5 billion worth of new shares to cut its net debt.

    The Investment Association and the National Association of Pension Funds said 22% of the new shares were bought by Glencore employees, including Chief Executive Ivan Glasenberg and Chief Financial Officer Steven Kalmin, with the rest being offered to select institutional investors by three banks. Many regular Glencore shareholders were left out of the sale, the associations said.

    Glencore chose to issue the shares as part of a series of measuresaimed at cutting its net debt by a third to around $20 billion and safeguarding its investment grade credit rating. The company has been hit hard by a commodities price rout that has affected nearly all of the materials it buys, sells and producers, from copper to oil to zinc.

    The two associations said Glencore’s board agreed at the company’s annual shareholders’ meeting in May to adhere to the “principles of pre-emption,” a business practice in which companies consider all shareholders equally when issuing new stock that could dilute the value of current shareholders.

    “Whilst shareholders generally recognize that the company needed to strengthen its balance sheet, the use of the authority [to issue shares] in this manner is a serious and unnecessary breach of the principles,” the associations said. “This sets a very damaging precedent for market practices.”

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    Steel, Iron Ore and Coal

    China coal production drops 4.8%

    China's coal output delivered a year on year drop of 4.8% to 2.41 billion tons in the first eight months of this year, according to figures released by the National Development and Reform Commission (NDRC).

    In the first eight months of this year, China's coal imports plunged 31.3% year on year to 140 million tons, while its coal exports declined 16.3% to 3.29 million tons.

    China's national coal storage at major power plants stands at 65.6 million tons and will be available for 20 days by the end of Aug.

    In the Jan-Aug period, China's total electricity consumption rose a meager of 1.3% to 3,678 terawatt hours, China Knowledge reported earlier.

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    Heilongjiang Longmay Group to slash 100,000 jobs in 3 mths

    Heilongjiang Longmay Mining Holding Group Co. Ltd., or Longmay Group, the biggest met coal miner in northeast China, will cut 100,000 jobs in three months amid great losses, it said on its website September 22.

    The group has established an enterprising training center for all employees, vowing to complete employee placement by end-June 2016.

    Impacted by the slump in coal prices, the group saw its loss over January-August surged more than 1.1 billion yuan ($17.2 million) from the year before.

    The provincial government has taken various measures to aid the state-owned miner, which has 248,000 workers and shoulders many social responsibilities, making it more difficult to weather through the industry downturn.

    The provincial finance department would help Longmay to auction non-core assets to supplement cash flow, the statement said.

    The company would also boost sales by taking advantage of winter heating demand and expand market share across the country.

    Under coordination of relevant government authorities, power plants in Heilongjiang signed thermal coal supply contracts in excess of 12 million tonne this year, the largest volume since 2009, said provincial governor Lu Hao.

    The miner said it would strengthen internal management and eliminate corruptions to reduce losses, while actively seeking for policy and financial supports from the government.

    Based on its own resources, Longmay would work to make breakthrough in the transition to primary and tertiary industries, improving efficiency of staffs and solve human resource allocation problems fundamentally.

    The group closed eight coking coal mines in the first half of the year, most of which had approached the end of their mining lives, due to poor production margins amid bleak sales.

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    China’s Aug coking coal imports up 8pct on year

    China’s coking coal imports in August rose 8.1% year on year to 4.15 million tonnes, according to the latest data released by the General Administration of Customs.

    But August imports were down 37.7% from 6.66 million tonnes in July, which was the highest monthly volume so far this year.

    The share of imports from Australia was 63%, the highest since February 2014, with volume jumping 62% on year but falling 35% from July to 2.6 million tonnes.

    Coking coal imports from Mongolia, China’s second-largest supplier, fell 37% on the year to 840,000 tonnes. This was below the monthly average of 1.08 million tonnes for the first seven months of the year.

    But Mongolian coal managed to maintain a 26% share of Chinese imports year-to-date similar to that for the same period last year.

    Canada’s exports to China in August rose 11% year on year to 450,000 tonnes, but was less than half of the 1 million tonnes in July.

    Imports from Russia were 260,000 tonnes in August, 11% lower than the previous year.

    China’s coking coal imports posted a 19% drop to 32.44 million tonnes for the first eight months, compared to the same period last year.
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    Hebei Steel plans to build plant in South Africa in 2017

    Hebei Steel plans to build plant in South Africa in 2017

    China's Hebei Iron and Steel Group is planning to build a 5-million tonne per year steel plant in South Africa in 2017, an official said on Wednesday.

    "We are now choosing a location," Zhang Hai, vice president at Hebei Iron and Steel, told an industry conference.

    Zhang said the company is also aiming to take over steel mills in eastern Europe, but added that talks are still at an early stage.
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    Latin American steel imports represent 35% of regional consumption

    Latin American steel imports represent 35% of regional consumption

    Alacero (Latin American Steel Association) announced that figures corresponding to the first seven months of 2015 show a 3% drop in steel consumption in Latin America. 

    Meanwhile, crude steel production fell 1% while finished steel output decreased 3% versus Jan/Jul 2014. Finished steel imports supplied 35% of the regional consumption and continue to increase their share at the local markets. The trade balance of the region continues to deteriorate during the first seven months of 2015 deficit (in tons) deepened 1% vs same period of 2014.
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    China coal miners face harsher times ahead: official

    China's coal miners will continue to feel the pinch from flagging demand, excessive capacity and relatively large coal imports this year, said an senior official on September 22.

    The sector faces starker challenges than a year ago, Peng Jianxun, deputy head of the State Administration of Coal Mine Safety and the China National Coal Association, said at an energy forum.

    With China's economic slowdown and push to save energy and cut emissions, the coal mining sector has been on the decline since the latter half of 2012.

    In the first eight months, China's coal imports dropped 31.3% to 138.6 million tonnes, but that was still a very high level given the weak demand and overcapacity at home, Peng said.

    The sector has been suffering from high inventories and dropping prices since the beginning of this year.

    By end-August, coal stocks at coal enterprises across the country stood at 110 million tonnes, up 11.9% year on year and 27.1% higher than the start of the year.

    The Fenwei CCI 5500 Index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed at 381 yuan/t with VAT on September 22, FOB basis, falling 24.7% from the beginning of the year.

    Peng said the sector had to steer the focus from quantity and growth speed to quality and efficiency and continue to eliminate outdated capacity.

    Coal is the most important energy resource in China. In 2014, however, the share of coal in total primary energy consumption dropped to 64.2% from 66% a year earlier.

    The country is aiming to bring the share of coal in total energy consumption down to below 62% by 2020 and to raise the share of clean non-fossil fuel to reduce emissions and improve air quality.

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    Vale vows deeper iron ore cost cut as China's steel demand peaks

    Iron ore miner Vale said it will cut its production cost to less than $13 per tonne by 2018, as the world's largest producer of the commodity maximises profit margins in an era of weak prices.

    A global glut and falling Chinese steel demand have dragged iron ore prices to less than $60 a tonne from a high of nearly $200 in 2011. The price is forecast to drop to $50 over the next two years, a Reuters poll showed.

    "Vale is progressing to reach the lowest cash cost of the industry and will be competitive at any price scenario," Claudio Alves, global director of marketing and sales at Vale, told a conference in China's port city of Qingdao.

    The cost reduction will come after the completion of Vale's 90-million-tonne expansion project known as S11D in the Brazilian Amazon, Alves said, as the miner focuses on producing more high-quality material.

    Vale's overall cost stood at $15.80 per tonne by the second quarter.

    That compares with $16.20 for Rio Tinto Ltd and $17.01 for BHP Billiton Ltd for the first half of the year, and $22.16 for Fortescue Metals Group Ltd by the second quarter, said Alves, citing estimates from the miners' latest profit reports.

    BHP expects to reduce iron ore unit costs at its Western Australia operations by 21 percent to $16 per tonne in the 2016 financial year.

    The end of the mining boom has forced Vale and its Australian rivals to focus on costs amid sliding iron ore prices.

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    China Aug thermal coal imports down 24% on yr

    China imported 7.2 million tonnes of thermal coal in August, down 24.4% on the year but up 1% from July to a four-month high, according to the latest data released by the General Administration of Customs.

    The volume included 5.16 million tonnes of bituminous and 2.04 million tonnes of sub-bituminous coal, but excluded imports of lower CV lignite material.

    The largest shipper of thermal coal to China in August was Australia at 3.71 million tonnes, although the volume dropped 35% on the year and also fell 7% from July to a six-month low.

    China imported 2.38 million tonnes of Indonesian thermal coal in August, down 16% from the same month in 2014, but up 12% on the month to a four-month high.

    Thermal coal imports from Russia rose 21% on the year to 961,468 tonnes, while there were no shipments from South Africa or Colombia and just 38 tonnes from the US.

    Total lignite imports for the month slipped 19% from July to 4 million tonnes, of which 3.76 million tonnes was from Indonesia.

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    Roy Hill on target to ship 55 MPTA iron ore in 15 months – Mr Fitzgerald

    Image Source: The West AustralianThe West Australian reported that Ms Gina Rinehart’s $10 billion Roy Hill project has accumulated more than 19 million tonnes of high-grade iron ore in stockpiles as it gets ready for first shipments.

    CEO Mr Barry Fitzgerald reiterated that Roy Hill should be exporting first cargoes from Port Hedland some time next month, in line with the adjusted timetable of a one-month delay to the original target.

    Bloomberg quoted Mr Fitzgerald as saying on the sidelines of the China International Steel & Raw Materials conference in Qingdao “We’re on target to increase mining capacity to 55 million tonnes a year in 15 months.”

    The much anticipated start-up of Roy Hill comes at a tough time for the iron ore industry, which has seen the price of the steel-making commodity fall from above USD 150 a tonne 2 1/2 years ago to below USD 60/t.
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    Goa sells only 37% of iron ore 11th E auction

    Image Source: fm-baseTimes of India reported that low iron ore prices in the international market have resulted in just 37% of iron ore being sold at the eleventh e-auction held on Tuesday.

    The directorate of mines and geology had identified over 1.1 million tonnes of iron ore for the eleventh e-auction out of which only 417,000 tonnes were sold. The base price for the e-auction varied between 500 to 900 for different grades.

    DMG senior officer said that during the initial auction, the state government had sold entire lots of iron ore for higher price, but as international ore prices have now collapsed, there is no enthusiasm among buyers, thus resulting in the low prices.

    1.5 million tonnes of ore will be e-auctioned during the twelfth e-auction fixed tentatively for September 29.

    The state government has till date e-auctioned around over six million tonnes of iron ore and collected a revenue of over 800 crore.
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    Coal futures drop to $50/T first time since 2003 as Goldman calls peak

    Coal futures are trading at $50 a tonne for the first time since 2003 as the commodity downturn deepens, and U.S. investment bank Goldman Sachs says the resource will never gain enough traction again to lift it out of its slump.

    Tumbling coal and metals have weighed heavily on mining shares this week, led by the world's biggest thermal coal producer Glencore, which saw its stock fall to a record low of 106.35 pounds ($163.19) on Tuesday. Glencore shares are down 82.1 percent since the firm was listed in 2011 and two-thirds lower than at the start of this year.

    Benchmark coal futures hit historic peaks in 2008, when coal traded above $200 per tonne, and like most commodities has not returned to such heights.

    Yet the plight for coal has been worse than for other fuel as its latest downturn started in 2011, while the current slump for oil and natural gas only started in 2014.

    Coal's fall has also been steeper, plunging 77 percent since 2008 and 63 percent since 2011, compared with 69 percent and 60 percent drops for oil since the same two years.

    Asian natural gas prices (LNG) are down two-thirds since their peak, which came later than in other commodities, in 2014.

    Goldman Sachs said coal is in terminal decline.

    "Peak coal is coming sooner than expected," Goldman said in a note to clients this week, adding that its consumption would peak before the end of the decade.

    "The industry does not require new investment given the ability of existing assets to satisfy flat demand, so prices will remain under pressure as the deflationary cycle continues," Goldman said.

    As a result the bank, which sold its coal mines in August, has cut its coal price forecast.

    Goldman set its forecast for Australian thermal coal at $54 per tonne for 2016, $52 for 2017, and $51 for 2018.

    "We also reset our long-term forecast to $50/T, down 23 percent from $65/T, to reflect what we see as the remote likelihood that the market will tighten ever again," it said.

    Coal's weakness started in developed economies, where natural gas and renewables eroded its market share, but spread in 2014 to emerging markets like China and India - which rely largely on coal to meet energy demand.

    The biggest impact has come from top commodity consumer China, where the economy is now growing at its slowest in decades, pulling down January-August coal imports by nearly a third from a year ago, with talk of China becoming a net coal exporter.

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    LME gets industry execs on board ahead of steel contracts launch

    The London Metal Exchange (LME) has appointed four new members to its steel committee, including leading industry executives who are backing the exchange's new steel rebar and scrap contracts ahead of their launch in November.

    The newcomers include Goldman Sachs' Philip Killicoat and William Schmiedel from Sims Group, the world's largest listed scrap metals recycler.

    Also joining are Spencer Johnson from broker INTL FCStone and Gianpiero Repole from Liberty Commodities, a trade house.

    The LME, the world's biggest marketplace for trading base metals, is also close to sealing deals with market makers to guarantee liquidity for the new contracts.

    "There's a lot of interest in hedging scrap and rebar ... what's preventing us is a lack of liquidity in (existing) contracts so having a market maker would be lovely to see," said Antonio Novi, a director at Levmet, a metals trader that also provides hedging services to industrial companies.

    The LME said it has also appointed Christian Schirmeister, a metals veteran formerly at JP Morgan, to help promote the contracts.

    However, Novi said he was not yet entirely confident the contracts would succeed.

    Industry experts say that for real longevity, the contracts will need support from several major banks and the participation of top steelmakers and institutional investors.

    Steel derivatives have failed in recent years, including the LME's own billet future, partly because steelmakers outside China shunned them.

    This attitude is slowly changing, though, especially in iron ore, a key steelmaking ingredient.

    "Steelmakers have been looking at trading iron ore as a way of covering their price risk, but a lot of them don't have a mandate (from management) to trade because trading is seen as speculation," said an industry participant.

    According to the LME website, Tata Steel, Europe's second-largest steelmaker, will take part in a ferrous metals panel during the LME Week industry event in London this October.

    Sources told Reuters last year the steelmaker had taken a board level decision to start using iron ore derivatives, adding that the world's biggest steelmaker, ArcelorMittal, was already dipping its toes into the market..
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    Daqin autumn maintenance to last 20 days from Oct 8

    China’s leading coal-dedicated Daqin rail line, connecting Datong City of coal-rich Shanxi province with northern Qinhuangdao port, will start routine autumn maintenance from October 8, sources said.

    The maintenance will last 3-4 hours each morning for 20 days, and repair work will cover rail tracks replacement, reconstruction on signal lamps and contact lines, several sources told China Coal Resource (CCR).

    One insider with the Taiyuan Railway Administration, operator of Daqin line, said the administration has yet to release a notice officially.

    Usually, utilities would increase coal shipment from northern ports before the maintenance to build up stocks to ensure supply during the maintenance, which would bolster the coastal coal demand to some extent.

    But that was the case seen in recent autumn maintenances. The coal market situation has been worsening this year, with average daily coal haulage by Daqin in August down to 1.09 million tonnes, close to the level during the 2014 autumn maintenance over October 9-24.

    Most utilities ran low coal burn and had comfortable stocks of 26 days’ coverage on average, with no urgency to stock up on coal before the maintenance.

    Coal vessels waiting for loading at the benchmark Qinhuangdao port stayed low at 37 on September 22, 6 less than a week ago, showed the CCR data.

    Coal stocks at power plants under the six coastal utilities fell 0.37% from the previous week to 13.48 million tonnes on September 21, enough to cover 26 days of consumption, flat with a week ago; daily coal use declined 3.77% on week to 0.51 million tonnes.

    Market participants generally held that this upcoming maintenance may provide limited support to the coastal coal market.

    Prices of thermal coal at the coastal market have been slowly sliding since entering September, and the Fenwei CCI 5500 Index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed at 381 yuan/t with VAT on September 22, FOB basis, falling 4.5 yuan/t from the start of the month.

    The CCI 5000 Index was assessed at 335 yuan/t, inclusive of VAT, FOB Qinhuangdao, for domestic 5,000 Kcal/kg NAR coal on the same day, down 1 yuan/t from the month beginning.

    Even so, coal inbound railings to northern ports by Daqin are expected to decrease during the maintenance, which may cause tightness in supply of some coal varieties, especially low-sulfur and low-CV coals for blending purpose.
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    Fortescue says "open" to selling stakes in mines, infrastructure

    Australian miner Fortescue Metals Group is "certainly open" to selling stakes in its mines as well as its rail and port infrastructure, the company's chief executive said Tuesday.

    "If we have the right value and the right terms then we are prepared to look at it with a strategic partner," Neville Power told Reuters in an interview in the Chinese port city of Qingdao.

    Power said he expected demand for the firm's iron ore in China, the world's biggest consumer of the steelmaking raw material, to remain very strong.
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    TECO sells coal unit for $0.

    TECO Coal sale complete

    TECO Energy Inc. has closed the sale of its coal mining subsidiary, TECO Coal LLC, to Cambrian Coal Corp. There were no up-front purchase payments for the sales agreement, however the agreement does include future contingent consideration of US$60 million if certain coal benchmark prices meet particular levels over the next five years.

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    Finland's Outokumpu warns of bigger third-quarter loss

    Outokumpu, Europe's largest stainless steel maker, has warned its quarterly loss will be deeper than expected, citing weak demand from distributors amid high stock levels and low nickel prices.

    Shares in the company fell more than 9 percent after it forecast its third-quarter core operating loss would deepen from the second quarter, compared with its previous estimate of a smaller loss.

    "In both key markets, Europe and USA, destocking continues and distributors continue to hold back orders," the company said in a statement on Tuesday, adding that a one-day general strike in Finland last week also had an impact.

    The Finnish company, 26 percent owned by the state, is struggling to turn around its business following its unsuccessful acquisition of Thyssenkrupp's stainless business Inoxum in 2012.

    Analysts noted EU's anti-dumping duties, launched in March, had so far given little support to the European industry, which is battling poor demand and a China-led growth slowdown.

    "We were expecting that the second quarter would have been the bottom for the firm, but it wasn't, and the fourth quarter doesn't look too good either," said Inderes analyst Antti Viljakainen, who has an "increase" rating for the stock.

    "It is very rare from them to revise a guidance given to one quarter only."

    Viljakainen said competitors had managed to cut costs more successfully, while Outokumpu is still trying to fix problems from the past.

    Outokumpu in 2013 partly reversed the Inoxum deal after the EU demanded an important mill in Italy to be left out as a condition for its approval.

    "They have been restructuring for almost four years now... It was a mistake to put together those two companies with weak profitability," Viljakainen said.

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    US raw steel production in Week 38 down by 9% YoY

    AISI announced that in the week ending September 19, 2015, domestic raw steel production was 1,706,000 net tons while the capability utilization rate was 71.4 percent. Production was 1,878,000 net tons in the week ending September 19, 2014 while the capability utilization then was 78.1 percent. The current week production represents a 9.2 percent decrease from the same period in the previous year.

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    Severstal introduces new product - Steel Cashmere

    Severstal introduces new product - Steel Cashmere

    Russian steel giant Severstal has introduced a new product: Steel Cashmere. Steel Cashmere is polyurethane coated galvanized steel sheet with the highest degree of resistance to UV radiation. Owing to the increased thickness and greater strength of the polyurethane coating, with prime and top coat layers which are 35-50 mkm thick and the zinc layer, which weighs 180 gsm, the new product is highly resistant to environmental and mechanical impacts, including corrosion. The new product has a highly attractive finish with a slightly textured coating which feels like cashmere.

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    Australia's New Hope sees coal deals accelerating in next 12 months

    Australian coal miner New Hope Corp, which has a war chest for potential acquisitions, said it expects coal mine deals to pick up over the next year as buyers' and sellers' views on the outlook for the battered sector start to converge.

    New Hope, with more than A$1 billion ($713 million) available for acquisitions, is looking to snap up good quality operating energy coal and steel-making coal mines in Australia and western Canada.

    It is in a strong position after reporting a 25 percent rise in profit to A$51.7 million before one-offs for the year to July 2015, as cost cuts outweighed a drop in sales with energy coal prices slumping to more than six-year lows.

    The result matched a forecast from broker Morgans.

    In contrast to its rival Whitehaven Coal, which paid no dividend, New Hope raised its final dividend by 25 percent to 2.5 Australian cents a share and announced a 3.5 cents a share special dividend.

    Managing Director Shane Stephan said different coal producers' outlooks were starting to shift, leading to more overlapping views on coal asset valuations.

    "So I think that the potential for transactions to occur over the next six to 12 months is greater than what it has been over the previous 12 months," he told Reuters in an interview.

    New Hope has been reported to be looking at Rio Tinto's assets in the state of New South Wales, vying with Glencore Plc and former Xstrata boss Mick Davis' X2 Resources, among others. Stephan declined to comment on that auction or any others.

    Anglo American is looking to sell stakes in four Australian mines.

    "There are certainly a significant number of potential opportunities evolving over the next 12 months or so," he said.

    While environmentalists see coal in decline, Stephan contrasted flat demand in Europe and falling demand in North America with growth forecasts for Asia over the next 15 to 20 years, as coal delivered to north Asia costs half the price of gas per unit of energy.

    "Over that period of time there will be a very strong future for good quality thermal coal into Asia," he said.

    But he sees no demand for any new energy coal mines in Australia for at least five years.

    New Hope expects its output in 2016 to be flat at around 5.7 million tonnes.
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    China 52 coal firms output exceeding 10 mln T in 2014

    There were 52 coal firms produced over 10 million tonnes of the fossil fuel in 2014, accounting for 83.4% of the country’s total output, the China National Coal Association (CNCA) said on its website on September 18.

    Nine out of the 52 coal firms produced over 100 million tonnes of coal last year, with the top three being of Shenhua Group, China National Coal Group and Datong Coal Mine Group, producing 473.51 million, 183.04 million and 167.54 million tonnes of coal, respectively.

    Seven coal firms, including Shanxi Lu'an Mining Group, Kailuan Group, Yangquan Coal Industry Group realized output between 50 million and 100 million tonnes, showed the list published by CNCA.

    Coal-rich Shanxi province had six coal firms that produced more than 50 million tonnes of coal last year -- Datong Coal Mine Group, Shanxi Coking Coal Group, Lu'an Mining Group, Yangquan Coal Industry Group, Jingneng Group, and Jincheng Anthracite Mining Group.

    Over 50 mln T:
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    Baltic Dry Index jumps most since '09 on speculated ship shortage

    The Sydney Morning Herald reported on Saturday that the Baltic Dry Index – a measure of shipping costs for commodities – had its biggest two-day gain since 2009, over speculation that Chinese iron ore purchasing will cause a shortage of vessels, thereby increasing freight rates. The London-based index rose 18 percent, with costs for capesize vessels that transport iron ore from Brazil to China, climbing 16 percent.

    "There's a misunderstanding among investors that China isn't buying iron ore: it is," Jeffrey Landsberg, the managing director of Commodore Research in New York, told SMH. "China is still buying every single ton that global miners want to sell."

    Shipping costs have been in a slump this year as shipbrokers predict too many vessels chasing too few cargoes due to slowing economic growth in the world's biggest commodities consumer.

    Meanwhile the steelmaking ingredient rose for the second straight day on Monday, with benchmark iron ore for immediate delivery to the port of Tianjin, China trading at US$57.10 a tonne. Iron ore hit a 10-week high on September 10, trading at $58.50 a tonne, 30-percent above record lows for the spot market reached on July 8.
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    Patriot Coal says in talks with new bidder - Lawyer

    Image Source: Patriot CoalA company lawyer said that Bankrupt Patriot Coal Corp. is in "advanced stage" talks with a new potential bidder for the bulk of its assets, which could set up a contested auction on Monday.

    Patriot lawyer Stephen Hessler told the U.S. Bankruptcy Court in Richmond, Va., that if the unidentified party made a bid, it would likely be similar to the deal proposed by Blackhawk Mining LLC. He did not elaborate.

    Bids are due Friday for Patriot's assets, which includes mines in West Virginia and reserves in other states. An auction, if necessary, will be held on Monday.

    Patriot said that it will run out of cash as soon as next month and needs to close its sale and confirm a plan to exit bankruptcy on an unusually tight schedule.

    Judge Keith Phillips on Wednesday scheduled a confirmation hearing for Oct. 5 and overruled creditors who said they need much more time to investigate if the bankruptcy exit plan, which will be amended on Friday, is fair.

    The judge said that "There is a liquidity crisis and I don't think that is being made up."

    Blackhawk initially proposed acquiring Patriot's assets not for cash but by issuing to Patriot's creditors new debt and a stake in the company that will own the assets.

    Due to financing problems, Blackhawk's proposal is being reworked, and the final details will be in the plan that Patriot has said it will file on Friday.

    Creditors told the judge on Wednesday that they are going to receive much less than what they had been initially promised.

    Jeffrey Jonas represents investors holding some of Patriot's USD 250 million term loan, and he said his clients' investment "went up in smoke literally overnight" under the revised bid from Blackhawk.

    Mr Ken Ziman, who represents the agent for a USD 200 million credit facility, said that due to the new Blackhawk bid, he would file a motion to convert the case to a Chapter 7 liquidation if Patriot failed to confirm its plan on Oct. 6.
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    Ailing steelmaker SSI halts production at Redcar plant in Britain

    Britain's second-largest steelmaker SSI UK said it was halting iron and steelmaking operations at its Redcar plant in northeast England as its business has suffered from a sharp slide in steel prices.

    Media reports this week said up to 2,000 jobs were at risk after SSI UK, a unit of Thailand's Sahaviriya Steel Industries (SSI), missed several debt repayments to banks, calling its future into question.

    "It is with great regret that we have had to make this announcement. Our decision follows a major deterioration in steel prices affecting our business during the course of this year," said Cornelius Louwrens, SSI UK Business Director and Chief Operating Officer.

    "We are taking this pause in production in order to re-evaluate and assess the situation following the outcome of ongoing discussions with our various stakeholders, including Government and suppliers."

    Louwrens did not mention job losses but said discussions will be held as soon as possible with trade unions and employee representatives.

    Britain's steel industry is in crisis, the government said on Thursday during a debate on the sector that followed reports of problems at SSI.

    SSI, Southeast Asia's largest fully integrated steel sheet producer, bought the Redcar plant in Teeside, northeast England, from Tata Steel in 2011, bringing cheer to locals as it revived 160 years of steelmaking.

    Permanent closure of the plant could put tens of thousands of jobs in the economically deprived north of England at risk.

    Producing steel profitably in Britain has become increasingly difficult due to cheap imports and a strong currency, plus relatively high energy costs and "green" taxes imposed on heavy industry that are some of the highest in the world. Tata Steel announced last month that it would mothball a plant in south Wales due to tough market conditions.
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