Mark Latham Commodity Equity Intelligence Service

Monday 4th July 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Is the long cycle finally turning in resources favour?

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    A century of the ten year US bond yield: touching the lows. 

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    Austrian Court Orders Rerun Of Presidential Election After Finding "Widespread" Voting Fraud


    In yet another slap in the face for an already reeling Europe, moments ago Austria's Constitutional Court ruled on Friday that the presidential runoff election must be held again, handing the Freedom Party's narrowly defeated candidate another chance to become the first right-wing head of state in the European Union. Norbert Hofer of the anti-immigration FPO lost the May 22 vote to former Greens leader Alexander Van der Bellen by less than one percentage point, or around 31,000 votes, all due to mailed-in ballots.

    This prompted a loud outcry of allegations that the vote had been rigged. As it turns out the allegations were spot on.

    As a reminder, one month ago - in the aftermath of the Freedom Party candidate's loss by a negligible margin in the Austrian presidential runoff election - five voting districts were being investigated over postal vote irregularities in the close-run presidential election. Allegations of fraud arose from the far-right Freedom party of defeated candidate Norbert Hofer, after the Green candidate Alexander Van der Bellen just scrapped ahead with 31,000 votes when the postal ballot was counted. As a result, the anti-immigrant Freedom Party had challenged the election result earlier this month, alleging “catastrophic” violations of election law, especially in how mail-in ballots were processed.

    Many were sceptical that anything of substance would be found, and yet that is precisely what happened: as the WSJ reports, the court found law violations in “many districts” in how the May 22 second-round vote was carried out, Mr. Neuwirth said. “It is for the [Constitutional Court] completely clear that the laws that regulate an election must be applied rigorously.”

    “The challenge is granted,” chief justice Gerhart Holzinger said in announcing the verdict in Vienna

    The decision comes a week after Britain delighted anti-EU groups such as the Freedom Party (FPO) by voting to leave the bloc. Concerns about immigration and jobs featured prominently in the Brexit referendum, as they did in Austria's knife-edge election.

    However, if the Freedom Party does end up winning after a recount, it will confirm that in addition to using fearmongering tactics, the Euro-faithful resort to such blatant measures as outright vote fraud (in addition to rigging bookie odds) in order to preserve a dying status quo. Which would mean that any and all future polls and referenda in which the future of the EU is at stake will be even more closely scrutizined, while concerns about a "rigged system" will rise to unseen levels.

    http://www.zerohedge.com/news/2016-07-01/austrian-court-orders-rerun-presidential-election-after-finding-widespread-voting-fr
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    Counting to resume in Australia’s election cliff-hanger


    Vote counting is scheduled to resume on Monday in a dramatic Australian federal election that failed to produce a clear winner on the weekend, raising the prospect of prolonged political and economic instability.

    The exceptionally close vote leaves Prime Minister Malcolm Turnbull’s centre-right Liberal Party-led coalition in a precarious position, potentially needing the support of independent and minor parties to reform government.

    It has also opened the door to the possibility, albeit less likely, that the main opposition Labor Party could win enough backing from the smaller parties to form government itself.

    Turnbull said on Sunday he remained “quietly confident” of returning his coalition to power for another three-year term but the key independents who have become the powerbrokers after winning a greater share of the vote than anticipated are yet to declare their allegiance for either side.

    With counting expected to take several days, possibly weeks, the uncertainty is likely to put downward pressure on the Australian dollar and the share market as analysts warned Australia’s triple A credit rating could be at risk.

    Both Turnbull and opposition Labor Party leader Bill Shorten began talking on Sunday with the independents, whose election campaigns ranged from anti-foreign ownership and economic protectionism to anti-gambling and policies to improve the treatment of asylum seekers.

    The election was meant to put a line under a period of political turmoil which has seen four prime ministers in three years. Instead it has left a power vacuum in Canberra and fuelled talk of a challenge to Turnbull’s leadership of the Liberal Party, less than a year after he ousted then prime minister Tony Abbott in a party-room coup.

    “I can promise all Australians that we will dedicate our efforts to ensuring that the state of new parliament is resolved without division or rancour,” Turnbull, whose coalition will rule as a caretaker government in the interim, said on Sunday.

    If the coalition fails to form a government, it would be the first time in 85 years an Australian ruling party has lost power after its first term in office.

    Official electoral data for the House of Representatives showed a 3.4% swing away from the coalition government, with about two-thirds of votes counted before counting was paused early on Sunday.

    Electoral Commission projections give the coalition 67 seats in the 150-seat lower house, against Labor’s 71 and five to independents and the Greens. A further seven seats were in the balance.

    The Liberal-National coalition and Labor Party require 76 seats in the House of Representatives to form majority government.

    Small parties are also likely to do well in the Senate, with Pauline Hanson’s One Nation on track to win between two and four seats, marking the return of the right-wing anti-immigration activist to parliament after an almost 20-year absence.

    http://www.mineweb.com/news-fast-news/counting-to-resume-in-australias-election-cliff-hanger/
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    Russian tycoon Prokhorov's Onexim Group selling all its assets -Vedomosti


    Russian tycoon Mikhail Prokhorov's Onexim Group is selling all its assets, the Russian newspaper Vedomosti reported on Monday, citing sources.

    Onexim owns stakes in aluminium giant Rusal, potash firm Uralkali and power generator Quadra , among other firms.

    Prokhorov, the owner of U.S. basketball franchise the Brooklyn Nets, has a net worth of around $8 billion, according to Forbes magazine. Onexim manages his assets.

    Russian law enforcement officials in April conducted searches of Onexim's offices.

    Officials said the searches were related to a tax investigation
    . But at the time, two sources told Reuters they believed they were linked to Prokhorov's RBC media holding, which had published revelations about people with ties to President Vladimir Putin.

    The Kremlin said then it was "absolutely inappropriate" to link the searches to articles published by RBC.

    Putin's spokesman Dmitry Peskov, when contacted by Vedomosti, called claims Onexim was selling its assets on a recommendation from the Kremlin "sheer folly".

    Vedomosti's sources, which included two people in Onexim Group, an acquaintance of Prokhorov and someone who had received an offer to buy several assets, did not say whether Onexim's decision to sell up was linked to the searches in April.

    Onexim was not immediately available for comment to Reuters outside business hours.

    Sources told Reuters in June that Prokhorov was preparing to sell his stake in Quadra.

    http://www.reuters.com/article/russia-onexim-idUSL8N19Q035

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    Yuan lower again.

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    Oil and Gas

    Iraq's June oil exports fall as domestic usage rises


    Iraq's oil exports from the southern ports fell slightly in June as power generators burning more fuel to keep up with demand for air conditioning increased domestic demand, an official at the state-run South Oil Company said on Friday.

    Loadings from Iraq's southern oil terminals, on the Gulf, ran at an average daily rate of 3.175 million barrels, compared with 3.2 million barrels per day (bpd) in May, he said.

    Crude supply to local oil refineries rose due to the increase in demand for electricity for cooling during summer in OPEC's second-largest producer, he said.

    The southern region produces most of the OPEC nation's crude oil. The northern Kurdish regional government exports about 500,000 bpd through a pipeline to the Turkish port of Ceyhan, on the Mediterranean, but independently from the central government in Baghdad which oversees crude sales from the south.

    Iraq, which relies on oil for nearly all its revenue, made$3.845 billion in revenue from oil exports in June, selling at an average price of $40.37 a barrel, an oil ministry spokesman said. June's revenue was higher than April as prices increased.

    Iraqi officials and oil analysts expect further growth in the country's exports this year, but at a slower rate than 2015 when it was the fastest source of supply growth in OPEC.

    http://www.reuters.com/article/us-iraq-oil-idUSKCN0ZH4G5
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    Libya’s rival oil company leaders reach deal to unify sector


    Once-rival leaders of Libya’s National Oil Corporation (NOC) have agreed on a structure for the group that aims to put to rest squabbles over who has the right to export the country’s oil, according to a statement.

    Oil industry leaders in OPEC-member Libya have said they could quickly double production to over 700,000 bpd if conditions stabilized. Before a 2011 revolution, Libya was producing 1.6 million bpd.

    The rival oil officials agreed in principle to unify the oil sector in May, but the agreement on the structure and leadership of a joint group took weeks of meetings to iron out. (here)

    Mustafa Sanalla, who led the Tripoli-based NOC, will remain chairman of the group, while the head of the eastern-backed NOC, Naji al-Maghrabi, will serve as a board member, according to a statement seen by Reuters.

    A UN-backed unity government that arrived in Tripoli in March is seeking to replace two rival governments that were set up in Tripoli and the east, and to unite Libya's many political and armed factions.

    A united oil sector would be a key support for the unity government. Libya relies heavily on oil exports as a source of income and hard currency.

    “This agreement will send a very strong signal to the Libyan people and to the international community that the Presidency Council is able to deliver consensus and reconciliation,” Sanalla said in the statement.

    Al-Maghrabi said both men “made a strategic choice to put our divisions behind us” as there is “no other way forward”.

    Oil production sank to around 200,000 bpd in May after a political dispute between the eastern and western factions blocked loadings at Marsa al Hariga for more than three weeks.

    A unified NOC structure could also smooth negotiations to reopen the El Sharara and El Feel fields, which are closed due to disagreements with local groups.

    The two sides also agreed a budget for the remainder of the year, taking steps to “address any imbalances resulting from the period of division”, they said.

    They also identified infrastructure rehabilitation as a big goal, particularly in the eastern city of Benghazi, "in preparation for the relocation of NOC's headquarters".

    NOC aims to hold meetings of its board of directors meetings in Benghazi "if security conditions permit”.

    The joint NOC will also submit periodic reports to committees established by both the Presidential Council and the House of Representatives, which it recognized as the highest executive and legislative authorities within Libya.

    http://www.reuters.com/article/us-libya-energy-idUSKCN0ZI0UB
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    Niger Delta Avengers group claims five attacks in Nigeria's southern Delta


    The Niger Delta Avengers, a militant group that has been carrying out attacks on Nigerian oil facilities in the past few months, claimed responsibility on Sunday for five new attacks in the southern energy hub since Friday.

    The group had previously not laid claim to any attacks in the Niger Delta - the source of most of the OPEC member's oil - since June 16.

    Petroleum Ministry sources said in late June that a month-long truce had been agreed with militants. But the Avengers said they did not "remember" agreeing to a ceasefire.

    Attacks in the Niger Delta have pushed Nigerian crude production to 30-year lows, although the Nigerian National Petroleum Corporation (NNPC) said last week that output was rising because of repairs and a fall-off in attacks.

    In messages posted on Twitter in the early hours of Sunday, the Avengers said they had attacked a pipeline connected to the Warri refinery operated by NNPC on Friday night.

    They added that they blew up two lines on Saturday night close to Batan flow station in Delta state run by NPDC, a subsidiary of NNPC.

    The militants also said two Chevron facilities close to Abiteye flow station, in Delta state, came under attack early on Sunday.

    Residents in some of those areas reported hearing blasts.

    "All five operations" were carried out by an Avengers "strike team", the group said.

    Garba Deen Muhammad, a spokesman for state oil company NNPC, whose managing director is the oil minister, confirmed that the crude facilities identified by the Avengers had been attacked.

    "Government will not be deterred in its efforts to find a lasting solution to these attacks," he said.

    Chevron spokeswoman Isabel Ordonez said that "as a matter of long-standing policy," the company did not comment on "the safety and security" of its personnel and operations.

    The militants say they want a greater share of Nigeria's oil wealth, which accounts for around 70 percent of national income, to be passed on to communities in the impoverished region and for areas blighted by oil spills to be cleaned up.

    On Thursday, President Muhammadu Buhari hosted a group of community leaders from the Delta and urged them to pacify people in the restive region where anger is widespread.

    Eric Omare, of the Ijaw Youth Council (IYC), which represents the Delta's biggest ethnic group, said the "resumption" of attacks was "worrisome", adding that the government had failed to build on goodwill generated by the oil minister's visit to the region in June.

    "The federal government has not taken any practical step toward resolving the issues," said Omare, adding that the IYC urged the Avengers not to carry out further attacks in order to "give room for constructive dialogue".

    http://www.reuters.com/article/us-nigeria-delta-idUSKCN0ZJ01L
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    July 3rd, 2016 - Iranian Floating Oil Storage Update


    Floating Storage Update

    The amount of Iranian oil on floating storage has increased by

    1.9 M Barrels

    as the Diamond joins the fleet

    The Current Amount Of Oil Stored

    48.6 M Barrels 

    From Windward
     
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    Norway oil workers agree wage deal, avoid strike


    Norwegian offshore oil workers and employers signed a new wage deal on Saturday, avoiding a strike that would have cut the output from western Europe's top oil and gas producer by about six percent, employers and unions said.

    Some 755 workers at fields operated by Statoil, ExxonMobil and Engie had threatened to strike if the talks had failed. A conflict would initially have capped Norway's daily oil and natural gas output by 229,000 barrels of oil equivalents.

    "We've beaten back all attempts at weakening our terms," Safe union leader Hilde-Marit Rysst told Reuters. "On pay, we got a deal we can live with for this year," she added.

    Unions were seeking pay increases in line with other industries while producers wanted workers to refrain from seeking such increases and to accept more flexible work practices, citing still weak oil prices.

    In 2012 a 16-day strike among some of Norway's oil workers cut the country's output of crude by about 13 percent and its natural gas production by about 4 percent.

    http://www.reuters.com/article/us-norway-oil-strike-agreement-idUSKCN0ZI027
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    BP announces final investment decision to expand Indonesia's Tangguh LNG facility


    Project will create 10,000 new jobs and support economic growth in Papua Barat Province

    BP, on behalf of Tangguh Production Sharing Contract Partners, today announced that the Final Investment Decision (FID) has been approved for the development of the Tangguh Expansion Project in the Papua Barat Province of Indonesia.

    'The Tangguh Expansion Project demonstrates BP and its partners' continued confidence in Indonesia and our commitment to work closely with the government to meet the country's energy needs, while creating thousands of jobs,' said Bob Dudley, BP Group Chief Executive.

    The Tangguh Expansion Project will add a third LNG process train (Train 3) and 3.8 million tons per annum (mtpa) of production capacity to the existing facility, bringing total plant capacity to 11.4 mtpa. The project also includes two offshore platforms, 13 new production wells, an expanded LNG loading facility, and supporting infrastructure.

    The Tangguh Expansion Project will play an important role in supporting Indonesia's growing energy demand, with 75% of the Train 3 annual LNG production sold to the Indonesian state electricity company PT. PLN (Persero). The remaining volumes are under contract to Kansai Electric Power Company in Japan, the other foundation buyer for Train 3.

    The Tangguh Expansion Project will also bring a positive contribution to Indonesia and the Papua Barat Province starting in 2016, supporting economic growth and providing 10,000 valuable jobs spread over the project period.

    Tangguh is currently making positive local social and economic impacts through its comprehensive community development programs and providing much needed electricity for the Teluk Bintuni Regency. Train 3 will enhance this with a portion of the gas committed for the electrification of Papua Barat, and further development of Tangguh's Papuan workforce to meet the 85% Papuan skilled workforce commitment by 2029.

    Commenting on the decision, Christina Verchere, BP Regional President Asia Pacific said, 'This final investment decision marks the culmination of many years of hard work by BP, our partners, and the Indonesian Government. We are pleased to reach this major milestone and look forward to continued cooperation as we progress the largest upstream project in the eastern part of Indonesia.'

    This FID decision follows the Government of Indonesia's approval of the Plan of Development II in late 2012. Awards for the project's key engineering, procurement and construction (EPC) contracts are expected in the third quarter of 2016 with construction to begin thereafter. Operation is expected in 2020.

    http://www.oilvoice.com/n/BP-announces-final-investment-decision-to-expand-Indonesias-Tangguh-LNG-facility/19706dd115f7.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Chevron says suspends output at Australia's Gorgon LNG operation after leak


    Chevron said it had suspended production at Australia's Gorgon liquefied natural gas (LNG) export terminal after a leak but remained on track to make a second shipment in coming days.

    "Chevron Australia plans to undertake some minor repair work on the low pressure flare system at the acid gas removal unit before recommencing production in the coming week," it said in a statement. "Plans remain on track to load the second cargo of Gorgon LNG in the coming days."

    http://www.reuters.com/article/idUSL4N19N2Y1
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    Stronger North Asian demand, Gorgon gas leak lift Asian LNG prices


    Asian prices for liquefied natural gas (LNG) rose to their highest since February this week on rising Asian imports and a gas leak at Australia's Gorgon export site, as well as higher prices in Britain.

    Asian spot LNG prices LNG-AS were valued around $5.50 per million British thermal units (mmBtu) by traders, about one-third higher than their 2016 lows from April.

    Traders said that prices were supported by strong demand and also by Chevron's huge but troubled Gorgon LNG plant in Australia, with the latest technical incident a gas leak reported on Friday, although Chevron said the facility "remains on track to load the second cargo of Gorgon LNG in the coming days."

    Prices were also supported by firm Asian demand. Driven by upticks in Japanese, Taiwanese and also Chinese imports, LNG shipments into North Asia have risen from weekly levels of around 3 billion cubic metres (bcm) to 4 bcm between mid-May and mid-June, according to Eikon data.

    Volatile financial markets this week after Britain's vote to leave the European Union also pushed up gas prices.

    With the British pound falling against other currencies, UK gas prices were pushed higher across the curve .

    That lifted Asian spot LNG prices since international gas traders look towards Britain's gas market for guidance as it can take in supplies from multiple sources, including continental European pipelines and overseas LNG imports.

    Also, Qatar's RasGas this week signed an agreement with France's EDF to deliver up to 2 million tonnes per year of LNG to EDF's new terminal in Dunkerque starting in 2017, pulling supply away from Asian markets.

    With the opening of the extended Panama Canal last week, traders said LNG markets would become better connected, improving trade flows between the Atlantic and Pacific basins.

    "The expanded Panama Canal increases LNG's reach and flexibility," Singapore's exchange SGX said.

    The British Merchant LNG tanker, loaded with gas from Trinidad & Tobago, is scheduled to be the first LNG tanker to travel through the expanded Panama Canal.

    But traders said that recent gas price rises might not last, with downward pressure building in both Europe and Asia.

    With the start of the monsoon season, likely lasting through September, traders expect lower LNG orders from India.

    In Europe, analysts said that recent price rallies might also fizzle out.

    "The rally in European... gas prices is unlikely to be sustained and we expect global gas prices to remain low in an oversupplied market over the second half of 2016," analysts at BMI Research said.

    "Markets have tightened in recent months but global supply is still robust at a time when there is limited demand-side pressure on prices," they added.

    http://in.reuters.com/article/global-lng-idINL4N19N1YD
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    Russia's Russneft plans to raise $500 mln in November IPO: source


    Russian oil company Russneft plans to hold an IPO on the Moscow Exchange in November, aiming to raise $500 million for 10 percent of its shares, a source close to the deal told Reuters.

    "A request for proposal has been sent to banks, and most likely organizers of the deal will be chosen next week," the source said.

    Western banks are not taking part in the IPO. Invitations to take part were received by Russian lenders Gazprombank, VTB and FC Otkritie.

    http://www.reuters.com/article/us-russia-russneft-ipo-idUSKCN0ZH4BV
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    Qatargas, RWE in LNG supply deal


    World’s largest liquefied natural gas producer, Qatargas has expanded its European client portfolio by signing a seven-year sales and purchase agreement with German utility RWE Supply & Trading.

    According to Qatargas’ statement, it has agreed o deliver 1.1 million tons of LNG per year, supplied from the Qatargas 3, the joint venture between Qatar Petroleum, ConocoPhillips and Mitsui & Co.

    Khalid Bin Khalifa Al-Thani, chief executive officer of Qatargas noted that the company is working to expand its European client portfolio.

    With the emerging export volumes from the United States and Australia, Qatar is looking to reinforce its position as the leading supplier of liquefied natural gas.

    It was reported in March that Qatargas is looking to expand LNG supply deals with Uk and Dutch terminals.

    However, it is not only the European market that Qatargas is adding new supply deals in. On June 30, the company signed a 20-year contract with Global Energy Infrastructure (GEIL) of Pakistan for the supply of 1.3 mtpa of LNG per year.

    Andree Stracke, chief commercial officer at RWEST noted that the deal with Qatargas adds to the diversity of the company’s European gas portfolio.

    http://www.lngworldnews.com/qatargas-rwe-in-lng-supply-deal/
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    Chile Just Gave Cheniere a Big Reason to Build Another LNG Plant


    Chile this week gave Cheniere Energy Inc. a good reason to build another plant to export U.S. natural gas by clearing the final environmental hurdle for a proposed floating import terminal.

    Approval was granted for the Penco Lirquen LNG project, which comprises a floating storage and regasification unit, Juan Jose Gana, executive director of Biobiogenera SA, the developer behind the project, said in an e-mail Thursday. The 1,200-megawatt Central El Campesino power plant, which will be supplied by the gas import vessel, “should be approved” in July or August, he said.

    This approval marks a milestone for Cheniere, which has a 20-year agreement to supply gas to the power plant. Cheniere is also a co-owner of the LNG import project with Biobiogenera, according to Hoegh LNG Holdings Ltd., which is building the terminal.

    Success in Chile may help Cheniere find other new buyers needed to sign long-term contracts before it makes a decision on an additional liquefaction plant at its Corpus Christi facility in Texas, according to Energy Aspects Ltd. and Hennessy Funds.

    “This a positive development for U.S. exports,” Alex Tertzakian, an analyst with Energy Aspects in London, said by e-mail Thursday. Although the contract to supply the terminal and the connected power plant “is relatively small volume-wise,” the latest developments will “undoubtedly increase the chances” of Cheniere moving ahead with building the third liquefaction plant at Corpus Christi, he said.

    Local Protests

    Although it got the environmental nod, the project has stirred up controversy in the local community. Police used a water cannon to break up protests in the Chilean city of Concepcion on Tuesday after the regional environmental commission unanimously approved the LNG project, Radio BioBio reported on its website. Two local towns plan to team up to seek a court injunction to block the project, La Tercera reported, citing Valentina Escalona, the mayoress of Penco, 262 miles south of Santiago.

    Cheniere’s marketing unit has an agreement to supply to the El Campesino power plant with 32.3 million British thermal units a year, the equivalent of nine cargoes, the company said in a June 27 presentation. Shipments are slated to start in 2019 from Corpus Christi. This contract would represent about 17 percent of the marketing arm’s projected LNG available from seven liquefaction plants over two decades.

    Cheniere has two liquefaction plants under construction at Corpus Christi. While a third one is fully permitted, the company said on its website it is seeking additional contracts before making a final investment decision. Cheniere is building four plants in Louisiana.

    “The more contracts that they can sign up to service their growth for the Texas project, the better because they don’t have it fully subscribed,” said Skip Aylesworth, who manages $1.5 billion in holdings at Hennessy Funds in Boston. “They are trying to develop markets that are closer to Texas and Louisiana than Europe and Asia because the smaller they can make that transportation cost the more it helps them.”

    http://www.bloomberg.com/news/articles/2016-06-30/chile-just-gave-cheniere-a-big-reason-to-build-another-lng-plant
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    Petrobras' Indian partners fight delay in troubled Brazil oil project


    Petrobras has warned its Indian partners in a huge offshore project to not expect oil from the site until 2022, according to sources, a fresh sign of how low oil prices and the state-owned company's corruption scandal and mountain of debt are dragging on Brazil's energy industry.

    The previously unreported, four-year delay in the "super-giant" discovery off the northeastern coast of the Brazilian state of Sergipe is forcing India's Oil and Natural Gas Corp and IBV Brasil Petroleo Ltd to seek ways to speed up the Petrobras-led project which has cost them $2.1 billion with no return in sight.

    The delay and pressure from the Indian partners is just one of many challenges for new Petrobras Chief Executive Pedro Parente, named by Brazil's interim-President Michel Temer in late May amid an ongoing financial crisis.

    In the face of a massive bribery and kickback scandal and Petrobras' $126 billion of debt, Parente has pledged to run the company in a more market-friendly way but has declined to comment on individual projects. He has also promised a revamped investment plan by the end of October - though it is unclear whether it will address the Sergipe offshore standoff.

    In April, Petrobras told IBV, a 50-50 joint venture between state-owned Bharat Petroleum Corp and privately held Videocon Industries Inc, that there will be no oil output from Sergipe "until at least 2022," an IBV executive told Reuters. A year ago, Petrobras' promised first oil by 2018.

    Hoping to speed up development, IBV told Reuters it has offered to arrange up to $10 billion in loans from Indian and other international development banks to finance the Sergipe development - Brazil's biggest oil prospect outside the prolific subsalt region near Rio de Janeiro where Brazil is pinning hopes of energy independence.

    "It's a common and simple loan structure, if Petrobras is willing to provide future output as collateral, it won't have to pay a penny until oil starts flowing, something we could can probably do by 2020," the IBV executive said.

    "But we get the feeling that Petrobras has yet to accept its new, more restricted circumstances," the executive added.

    Petrobras told Reuters it has yet to receive a formal proposal from its Indian partners to finance the project. Asked about the delays, Petrobras said in a statement it has invested about $3.5 billion on exploration in the Sergipe blocks it owns with ONGC and IBV. It expects to complete a development plan for the areas by 2020 but has no date for the first production of oil.

    All development decisions have been made in conjunction with its partners, Petrobras said, and delays have been the result of "considerable" deepwater technical challenges, efforts to reduce costs and a lack of infrastructure to transport the area's natural gas.

    After investing $2.1 billion in the offshore finds since 2007, the Indian partners are getting impatient.

    "We can't put off a return forever," the IBV executive, whose company has spent $1.6 billion in Sergipe, told Reuters. "We've been investing for nearly a decade. They now say we'll have to wait at least four years more. In our experience with Petrobras, it will probably be longer."

    An ONGC executive, who also declined to be named, said the partners hope the new Parente regime will speed up development plans "so that we can monetize and unlock the potential at the earliest."

    The company did recently relinquish its stake in one of two proposed production areas in the Sergipe block that it owns a quarter of to partner Petrobras.

    SHARED BLAME FOR DELAYS

    In nine years, ONGC has invested $500 million exploring with Petrobras off the coast of Sergipe. It has spent another $2 billion elsewhere in Brazil and produces about 12,000 barrels a day in the country, a small amount considering the outlay so far.

    The expected prize, though, is Sergipe. The BM-SEAL-11 block, 40 percent controlled by IBV, holds more than 3 billion barrels of oil and equivalent natural gas, enough to supply all the world's petroleum needs for more than a month. There are no public estimates for the two adjacent blocks, one fully owned by Petrobras and the other owned 25 percent by ONGC, but people involved with them say the volumes of oil and gas are very large.

    The Sergipe project's problems have also been compounded by IBV and ONGC's own failures. Two sources involved with the Indians in Sergipe exploration said IBV and ONGC often missed deadlines to pay their share of costs, only paying after Petrobras threatened legal action.

    The Indians confirmed the delays, which they blamed on partner Videocon, which has cash flow problems and may sell its IBV stake. Videocon executives were not available for comment.

    Venugopal Dhoot, chairman of Videocon told the Business Standard Newspaper in June that his company was considering the sale of its oil and gas assets to pay debt.

    Both IBV and ONGC also declined to invoke clauses in the blocks' contracts allowing them to move ahead with development on their own if Petrobras demurred.

    "Unfortunately, everybody in Brazil is afraid to challenge Petrobras, even if they have a case. They know Petrobras, and perhaps the government, will retaliate," said John Forman, a geologist and former director of Brazil oil regulator ANP. "Court fights can drag on for years, so you lose even if you win."

    Whatever the reason for delay, Brazil may be the biggest loser. While ONGC and IBV bought their Sergipe stakes in 2007 from existing leaseholders Petrobras and Encana, Brazil's oil regulator ANP has allowed partner Petrobras to delay a start to production by extending exploration rights in the areas repeatedly.

    Had the ANP enforced tighter deadlines, designed to prevent companies from hoarding assets without developing them, Sergipe might be producing, or near first production, today and providing revenue for Brazil's cash-strapped Treasury, Forman said.

    The tendency to give Petrobras such wide latitude underlines Brazil's conflicted priorities as it tries to revive both its economy and largest company, he noted.

    "In Brazil we say 'the oil is ours', that it belongs to the people. In reality we act like it belongs to Petrobras," he said.

    http://www.reuters.com/article/petrobras-offshore-partners-idUSL1N1911RJ
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    U.S. Drillers Bring Back Rigs as Oil Market Seen Stabilizing


    Shale drillers brought back the most oil rigs of any week this year as confidence in a stabilized market is prompting talk of expansion throughout 2016.

    Rigs targeting crude in the U.S. rose by 11 to 341, after 7 were dropped last week, Baker Hughes Inc. said on its website Friday. It’s the fourth time in the past five weeks that producers have added oil rigs. Explorers in the Permian Basin of West Texas, the nation’s busiest oil patch, again led the activity climb by adding 4 for a total of 154 oil rigs working in the region.

    "You’re seeing rig counts added in the right places, like the Permian," Luke Lemoine, an analyst at Capital One Southcoast in New Orleans, said in a phone interview. "There have been a lot of cuts in the industry, so a lot of wounds to heal. It’s understandable that the first steps would be small."

    Supply disruptions and falling U.S. output have helped cut a global surplus, with both the International Energy Agency and theOrganization of Petroleum Exporting Countries forecasting that the market is heading toward balance as demand growth outpaces supply.

    "With oil prices approaching $50 per barrel for WTI as supply and demand move into balance, operational visibility is beginning to improve," Patrick Schorn, president of operations at Schlumberger Ltd., told investors last week at the Wells Fargo West Coast Energy Conference in San Francisco. "The rig count is now expected to increase on land during the next two quarters."

    http://www.bloomberg.com/news/articles/2016-07-01/u-s-drillers-boost-activity-as-oil-market-seen-stabilizing

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    U.S. gasoline consumption shows surprise fall in April


    U.S. gasoline consumption was significantly lower in April than reported at the time, new data published by the Energy Information Administration on Thursday show.

    Gasoline supplied to the domestic market averaged 9.213 million barrels per day (bpd) during April according to an estimate included in “Petroleum Supply Monthly” published on June 30 (tmsnrt.rs/297g3p8).

    Gasoline supplied was significantly lower than the four-week average of 9.474 million bpd contained in the final “Weekly Petroleum Status Report” for April published on May 4 (tmsnrt.rs/297q5L8).

    The downward revision in estimated consumption has encouraged analysts to reassess the strength of gasoline demand in the world’s largest driving market.

    Strong demand for gasoline in the United States, as well as emerging markets including India and China, has been cited as the main reason for strong growth in oil consumption in 2016.

    Strong gasoline demand underpins the argument for oil market rebalancing so anything that triggers a re-evaluation has important implications for the wider oil market.

    But the most reasonable interpretation of the data suggests that gasoline consumption was slightly understated in April after being overstated in March, while the underlying growth trend is little changed.

    DATA REVISIONS

    Most analysts regard the monthly gasoline supplied data as more reliable than their weekly counterparts.

    Both are estimates and calculated as residuals from reported domestic gasoline production plus imports minus exports minus stock changes.

    Data on production, imports and stock changes are reported to the EIA in weekly and monthly surveys of the industry. Export data however is not reported to the EIA but to the U.S. customs service.

    EIA has to estimate exports at the time of producing the weekly data; by the time it has to produce the monthly numbers it has hard figures on exports from U.S. customs.

    Largely because of the problems associated with estimating exports in real time, most analysts regard the monthly data as more accurate.

    CAVEAT LECTOR

    Despite the differences, the gap between the daily consumption reported in the weekly surveys and the monthly survey for April amounts to just 260,000 bpd or 2.75 percent (tmsnrt.rs/297qsVG).

    The gap is not especially large and actually represents a high level of accuracy given the enormous flows of physical oil which both the weekly and monthly surveys have to capture (tmsnrt.rs/297hAM0).

    The lower level of gasoline consumption reported in the monthly survey is consistent with other data showing slower refinery run rates and an unusually high level of gasoline stocks in April.

    Even at the lower level reported in the monthly survey, gasoline consumption was still up by 74,000 bpd compared with 2015 and only 2,000 bpd below the record rate set in 2007.

    Moreover, there are some reasons to be cautious in relying on the monthly survey for April which comes after the previous monthly survey showed an exceptionally high level of consumption in March.

    Monthly data put gasoline supplied at 9.4 million bpd in March, an increase of more than 340,000 bpd compared with the same month in 2015.

    According to the monthly surveys, gasoline consumption then declined by 186,000 bpd between March and April, which if true, would be highly unusual.

    Gasoline supplied normally increases significantly between March and April: the average increase over the last 70 years has been more than 160,000 bpd.

    Gasoline supplied has only dropped between March and April in 10 years between 1945 and 2015. The last significant decline was back in 1995 (tmsnrt.rs/297qehl).

    A reasonable conclusion is there is some noisiness in the data and that gasoline supplied was overstated in March and understated April.

    The unusual decline in estimated consumption, and discrepancy between the weekly and monthly surveys for April, are a reminder about the dangers of over-interpreting noisy time series.

    The broad picture, however, remains basically unchanged. U.S. gasoline consumption continues to grow significantly compared with 2015 and is on course to exceed the previous peak set in 2007.

    http://www.reuters.com/article/us-usa-gasoline-kemp-idUSKCN0ZH5C2
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    US Propane exports surge to 1/3 of global market.

    In a first, U.S. oil-and-gas companies are on track this year to export more propane than the next four largest exporting countries combined—OPEC members Qatar, Saudi Arabia, Algeria and Nigeria, which have long dominated the trade—according to analytics provider IHS Inc. U.S. exports already account for more than a third of the overall market for waterborne shipments, IHS said.
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    Alternative Energy

    Tesla’s deliveries miss due to ‘extreme’ production ramp-up


    Tesla Motors Inc. delivered 14,370 vehicles in the second quarter, missing its forecast of 17,000 units because of what it called an “extreme production ramp” that saw half of the quarter’s production in the final four weeks.

    The maker of electric cars and energy storage devices now expects to deliver about 50,000 cars in the second half, according to a statement Sunday. That means 79,180 Model S sedans and Model X sport utility vehicles shipped for the full year, slightly below its previous range of 80,000 to 90,000.

    Even after increasing its production, the carmaker has had trouble getting its vehicles to customers fast enough to meet its targets. Tesla said that 5,150 cars are still on trucks and ships making their way to clients who ordered them, and will be delivered in the first part of the third quarter. Tesla is ramping up production at its Fremont, California, factory with an eye toward making 500,000 cars a year by 2018 — an ambitious timeline that also depends on the carmaker’s battery factory east of Reno, Nevada, coming online with battery cell production.

    Tesla delivered 9,745 Model S vehicles and 4,625 Model X vehicles in the second quarter. The smaller, less-expensive Model 3, which is slated to start at $35,000 before incentives, is scheduled to begin deliveries in late 2017.

    It’s the second time in a row that the carmaker’s deliveries come in short this year. In the first quarter, Tesla had blamed the shortfall on what it called “hubris” in adding too much new technology that led to part shortages for the Model X.

    http://www.mineweb.com/news-fast-news/teslas-deliveries-miss-due-to-extreme-production-ramp-up/
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    France rolls out tenders for 20GW solar capacity by 2023


    The new tenders will aim to boost France’s DG, BIPV and large-scale storage sectors over the coming decade.
    Sunways

    French environment and energy minister Segolene Royal greenlights raft of new tenders for solar energy, including a three-fold increase in installed PV capacity, eyeing 20 GW by 2023.

    The French environment and energy minister Segolene Royal announced this week the introduction of a number of new solar tenders in France for the development of various PV applications.

    Chiefly, France is aiming to triple its solar PV capacity to 20 GW by 2023, with the tenders expected to hit incremental goals of 10.2 GW by 2018, and between 18.2 to 20.2 GW by 2023.

    Other tenders announced aim to support France’s stuttering building integrated photovoltaics (BIPV) sector, with the French government earmarking 450 MW of BIPV tenders over the coming three years. Another tender will be aimed solely at the country’s self-consumption sector, particularly in C&I and agriculture, while 1 GW of tenders for ground mounted PV will be issued annually for the next six years.

    An additional 50 MW tender for solar+storage has also been introduced for France’s overseas territories.

    This latest suite of support for solar development follows the previous round of tenders – first introduced in 2014 – that have collectively attracted more than $1 billion in investment into France’s solar PV industry. Experts in the country believe that the certainty offered by this approach will curry further favor with investors, and should particularly help boost France’s ground-mount and BIPV sectors.

    http://reneweconomy.com.au/2016/france-rolls-tenders-20gw-solar-capacity-2023
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    Agriculture

    BHP said to be after Potash Corp again


    Shares in Potash Corp., the world’s second-largest producer of the fertilizer, soared as much as 6.6% in Toronto on Thursday to $22.18, closing at $21, on fresh rumours that BHP Billiton had made an unsolicited takeover offer for the Canadian miner.

    In 2010, Canada rejected BHP's $40 billion hostile takeover bid for Potash Corp. saying the offer failed to provide a net benefit to the country.

    According to The Fly website, the word among traders was that the Saskatchewan-based miner had hired an investment bank to analyze the proposal.

    In 2010 the Canadian government's rejected BHP's $40 billion hostile takeover bid for Potash Corp. saying the offer failed to meet the criteria of providing a net benefit to the country. Analysts believed at the time the move would deter any potential suitors from approaching the company in the future.

    But ever since BHP has been developing its own Canadian potash mine — the Jansen project — in Potash Corp's backyard, and has already invested about $3.8 billion on it.

    And while the Melbourne-based firm is sinking shafts and installing some infrastructure, it has not fully committed itself to the project, nor received board approval for Jansen, which is expected to begin operations sometime “in the decade beyond 2020.”

    The mine would be a game-changer in the industry, as it is expected to generate eight million tonnes of potash a year, which would amount to nearly 15% of global supply.

    Jansen would be a game-changer, as it is expected to generate eight million tonnes of potash a year, which would amount to nearly 15% of global supply.

    By comparison, the Mosaic Company’s (NYSE:MOS) Esterhazy mine will produce about 6.3 million tonnes per year once its latest expansion is complete, while most Saskatchewan operations churn out between three and four million tonnes per year.

    BHP has also said it would not join Canpotex — the overseas marketing arm of Saskatchewan's three largest potash producers — and would set instead its own sales strategy. In that sense, Jansen and BHP would also be disruptive to the Canadian potash market.

    Prices for the fertilizer ingredient have tumbled amid increased productionand as farmers spend less on fertilizer amid lower agricultural commodity prices.

    http://www.mining.com/bhp-said-to-be-after-potash-corp-again/
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    Precious Metals

    Silver tops $21 for first time since ’14 as investors seek haven


    Silver vaulted $21 for the first time in two years and gold advanced for a fourth day, as investors sought precious metals as haven assets following the UK’s vote to leave the European Union.

    Spot silver surged as much as 7% to $21.1377 an ounce, before paring the increase to $20.3311 by 11:50 a.m. in Singapore, according to Bloomberg generic pricing. Gold rose as much as 1.2% to $1,357.63 an ounce, near the highest level in more than two years, and traded at $1,346.31.

    Bullion has benefited as the post-Brexit vote turbulence in financial markets added to speculation that global central banks may act to boost stimulus, with interest rates in the U.S. set to remain low. Holdings in silver-backed exchange traded funds expanded to a record last month, and assets in gold ETFs are now at the highest since August 2013.

    “There is a huge momentum in buying silver on the way up,” Bob Takai, chief executive officer and president of Sumitomo Corp. Global Research Co., said by phone from Tokyo. “Those who are a little bit reluctant to increase investment in gold are now flowing into the silver market which is very cheap.”

    Gold bought as few as 64.2 ounces of silver on Monday, the least since August 2014, after purchasing as much as 83.8 ounces in February, which was the most since the global financial crisis in 2008. Silver will continue to outperform gold until the market turmoil from the Brexit issue subsides, said Takai, who’s been following silver since 1980.

    Silver has jumped 47% this year, outpacing gold’s 27% advance. Funds have boosted their net-long futures and options positions in the two metals to the highest since the data began in 2006.

    Global gold holdings in exchange-traded funds have expanded by more than 500 metric tons since bottoming in January to 1,959.1 tons, the highest since 2013, while silver assets climbed to a record 20,232.1 tons in June, according to data compiled by Bloomberg. While silver’s rise is not overdone for now, that could change, said Sumitomo Corp.’s Takai. If gold reverses, silver will decline much more heavily, he said.

    http://www.mineweb.com/news/silver/silver-tops-21-first-time-since-14-investors-seek-haven/
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    Base Metals

    Adani plans $1.5 bln copper smelter to boost solar ambitions - source


    Indian billionaire Gautam Adani-controlled conglomerate Adani Enterprises plans to build a copper smelter with an eye to furthering its ambitions in the solar sector, said a source familiar with the plan.

    The company recently sought environmental approval to set up a 1-million-tonne-per-year copper smelter in the western state of Gujarat, according to an application submitted by the company which was reviewed early this month by the Environment Ministry.

    The smelter is expected to cost 100 billion rupees ($1.47 billion) and will source copper concentrate through imports, the application stated, without providing the reasoning behind the new foray.

    The source, who spoke on condition of anonymity, said that the smelter however, is expected to feed into its proposed solar panel manufacturing capacity, fueling the company's ambitions of becoming an integrated solar power company.

    The project will not be an entry into the commercial copper business for Adani, also India's biggest coal importer, but will be primarily for ensuring secure supply of raw material for the group's proposed venture into solar photovoltaic equipment manufacturing, said the source.

    The company did not respond to requests for comment on the plans.

    A second source from an international trading firm familiar with the smelter project said the first stage of 300,000 tonnes is expected be completed within the next two years.

    Adani Enterprises, which has interests in coal mining, oil & gas and logistics, has bet big onsolar power riding on Prime Minister Narendra Modi's solar mission that targets setting up of 100 gigawatts of solar power generation capacity by the end of 2022.

    As part of the push, the government has also incentivised setting up of exclusive parks for domestic manufacturing of solar PV modules. That would equate to around 600,000 tonnes of additional copper demand based on the thumb rule of 6 tonnes of copper required for one megawatt of solar cell capacity.

    Adani plans to have a share of 10 percent of the national target by the same time and has said it plans to set up a solar PV module plant in Gujarat.

    The gamble could also get a boost from the $1 billion loan promised Thursday by the World Bank for India's solar energy programme as Modi sought climate change funds from the international lender.

    http://www.reuters.com/article/adani-ent-copper-solar-idUSL4N19K3H6
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    Kenmare able to proceed with capital restructuring


    Aim-listed Kenmare Resources announced on Friday that it had secured new equity commitments of $275-million, enabling the company to commence with capital restructuring and an open offer. 

    This offer comprised $100-million in a cornerstone placing, $145.7-million cash commitments under a firm placing, and $29.3-million under a lender underwriting. The issue price was $3.132 per new ordinary share, equivalent to 1.566c before the impact of the proposed 1 for 200 consolidation.  

    An open offer of up to $122.7-million would proceed at the same price as all other funds raised, a full subscription under which would reduce gross debt to nil.  Based on the agreed terms of the debt restructuring, announced in June, completion of the capital raise would reduce debt from no less than $292.5-million to no more than $100-million, providing the company with $75-million for working capital and to cover expenses.   

    "The capital raise and capital restructuring provides Kenmare with an excellent platform to deliver strong returns to its shareholders. The strengthening of the balance sheet, allied to falling cash costs and vastly increased power stability, allows Kenmare to benefit from the strong improvement in the titanium feedstock market we are currently experiencing," said MD Michael Carvill.

    http://www.miningweekly.com/article/kenmare-able-to-proceed-with-capital-restructuring-2016-07-01
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    Steel, Iron Ore and Coal

    Biggest private coal producer in US warns of cutting 80 pct of workforce


    Murray Energy Corp., the largest privately held coal miner in the U.S., has warned that it may soon undertake one of the biggest layoffs in the sector during this time of low energy prices.

    In a notice sent to workers this week, Murray said it could lay off as many as 4,400 employees, or about 80% of its workforce, because of weak coal markets. The company said it anticipates “massive workforce reductions in September.”

    The law requires a 60-day waiting period before large layoffs occur.

    The American coal industry, especially in Appalachia, has languished as cheap natural gas replaces coal as fuel for power plants. World-wide demand for coal has also slumped, and new environmental regulations are making many coal mines unprofitable to operate.

    The Central Appalachian coal price benchmark is $40/t, or half its level from five years ago. Almost all of the biggest coal producers in the U.S. have declared bankruptcy in the past 18 months, including Peabody Energy Corp., Arch Coal Inc. and Alpha Natural Resources Inc.

    http://en.sxcoal.com/0/149015/DataShow.html
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    Rio Tinto shelves $US20bn Simandou iron ore project


    A $20 billion project to develop the world’s biggest untapped deposit of iron ore has been shelved by Rio Tinto, in the latest twist in a long-running and contentious saga.

    Simandou, in Guinea, has more than two billion tonnes of iron ore, and the colossal scheme has the potential to double the size of the west African country’s economy.

    But Jean-Sebastien Jacques, who starts work today as chief executive of Rio Tinto, has told The Times that the enormous cost of developing the mine could not be justified in an iron ore market that is suffering from huge overcapacity.

    Mr Jacques’s comments mark an abrupt change in tone from his predecessor, Sam Walsh, who had repeatedly insisted that the mine would be developed.

    The move risks exacerbating relations with the Guinean government, which has responded by saying it would not let the project be derailed by “a global agenda that actually has nothing to do with the project economics”.

    ASX-listed Rio Tinto shares had jumped by 1pm (AEST), gaining $3.58 per cent to $47.72 against a 0.31 per cent rise in the benchmark index.

    The Simandou project has become a notorious example in the mining industry because of accusations that a rival of Rio Tinto corruptly gained control of half the concession. The accusation, which was upheld by a review by the Guinean government but denied by the company, has led to criminal inquiries and several civil court actions.

    Mr Jacques said: “We’ve been very clear that it’s a very expensive project. We did deliver the BFS (bankable feasibility study) to the government as per the agreement a few weeks ago and we’ve been very clear that in the current market environment we don’t see a way forward in relation to Simandou.

    “We’ve been absolutely on record on this one. It’s not the right time to develop this project from a Rio standpoint. The other stakeholders might have different perspectives on this one.”

    http://www.theaustralian.com.au/business/mining-energy/rio-tinto-shelves-us20bn-simandou-iron-ore-project/news-story/6892bbc041453e1ab372b618ed6eeaef

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    Vale says sold three Valemax iron ore ships to ICBC for $296m


    Brazil's Vale SA said it has sold three of its giant "Valemax" iron-ore ships to a group led by Industrial and Commercial Bank of China, continuing efforts to unload assets to cut debt and focus investment on its main mining activities. 

    Vale will receive $269-million for the ships when they are delivered to the Chinese-led group, likely in August, Vale said in a statement late on Thursday. 

    Vale said it was also seeking to sell other Valemax ships. The vessels, also known as Very Large Ore Carriers (VLOC's) are about 300 m (984 ft) long and carry up to 400 000 deadweight tonnes, making them some the largest ships afloat.

    http://www.miningweekly.com/article/vale-says-sold-three-valemax-iron-ore-ships-to-icbc-for-296m-2016-07-04
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    Europe must protect itself against Chinese steel exports: German minister


    Europe needs to protect itself against Chinese steel exports, German Economy Minister Sigmar Gabriel said on Saturday at a conference of his Social Democrat (SPD) party.

    "Europe needs to organise its markets in such a way that it not only creates competition but also social security," said Gabriel, leader of the SPD.

    "And that includes Europe confidently protecting its markets if others - in this case China - try to destroy our industrial foundations with government funds. Europe's steel workers have a right to that," he said.

    China is by far the world's biggest steel producer and its annual output is almost double that of the EU, with rival producers accusing China of selling into export markets at below cost after a slowdown in demand at home, causing a crisis for the industry that has led to job cuts and plant closures.

    http://www.reuters.com/article/us-europe-china-steel-idUSKCN0ZI0E5
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