Mark Latham Commodity Equity Intelligence Service

Friday 8th July 2016
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    Oil and Gas

    Libya to Resume Oil Exports From Biggest Ports Within a Week

    Libya will resume crude exports from two of its biggest oil ports within one week after clashes that forced Islamic State militants to pull out of the area, according to the commander of the petroleum guards in the region.

    Crude exports will resume from Es Sider, the country’s biggest oil port, and Ras Lanuf, the third-largest, and which have been closed since 2014, Ibrahim al-Jedran, a regional commander of Libya’s Petroleum Facilities Guard, said in a phone interview. The exports will be under the authority of the Tripoli-based Government of National Accord, which is seeking to reunify the divided country, he said.

    Some “minor technical problems” related to the transportation network between the oil storage tanks and the Es Sider and Ras Lanuf oil ports due to damage, inflicted during clashes since last year, will be fixed within a few days, al-Jedran said.

    “The oil ports are now safe after Islamic State pulled back away from them toward Sirte,” he said. “The petroleum guards are now capable of guaranteeing the safety and security of oil tankers seeking to use the ports.”

    News of the reopening of the ports that had been exporting more than two thirds of Libya’s oil comes after the Petroleum Facilities Guard captured towns from Islamic State militants last month. Rival leaders of Libya’s National Oil Corp., reached an agreement last week to unify the state company under a single management, a step meant to help end the conflict over who can control the divided country’s crude exports and revenue.

    Libyan oil officials have made multiple predictions over the past few years that crude production or exports were poised to climb only for those increases to fail to materialize. The nation pumped an average of about 330,000 barrels a day this year, on course for the smallest annual supply in decades, data compiled by Bloomberg show.

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    Shell Nigeria lifts force majeure on Bonny Light exports

    Royal Dutch Shell's Nigerian division lifted a force majeure on exports of Bonny Light crude oil on Thursday, the latest sign that Nigeria's oil production is recovering after being hit by militant attacks in its oil-rich delta region.

    The force majeure was lifted from 09:00 a.m. Nigerian time (0800 GMT) on Thursday, the company said in a statement, following restoration of production into Bonny Terminal.

    Two other Nigerian crude oil grades - Forcados and Brass River - remain under force majeure. But the country's oil production has remained resilient despite some of the worst militant attacts in decades on delta region oil facilities.

    Oil prices rose during the attacks, which briefly pushed Nigeria's production to 30-year lows. The country was Africa's largest oil exporter, but dropped into second place behind Angola earlier this year due to the disruptions.

    Still, some fields recovered more quickly than expected so that Nigeria's exports were largely steady from April into May.

    Exports are on track to rise in August, although the Niger Delta Avengers, the group that has claimed responsibility for the worst of the damage, have continued to attack oil installations.

    Bonny Light exports had continued during the force majeure, a legal declaration made on May 11 following the closure of the Nembe Creek Trunk line. But cargo loadings are expected to run more smoothly now it has been formally lifted as these had been subject to repeated delays.
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    Nigerian oil trade union begins strike on holiday, warns of delayed effect

    A Nigerian trade union representing oil workers said it had begun a strike on Thursday, but added that the effect of its industrial action would not be felt for some time because it started on a public holiday.

    The Petroleum and Natural Gas Senior Staff Association of Nigeria said 10,000 of its members, who include refinery workers and office staff, had begun a "gradual withdrawal" from "offices, sites and production facilities".

    In a statement, the union said it was responding to issues that were "critical to the survival of the oil and gas industry in the country" including joint venture funding and cash call arrears, which it said had stalled the creation of new jobs.

    Cash calls are the government's financial obligations to joint venture projects between state oil firm NNPC and international and local oil companies.

    Nigeria, the north of which is predominantly Muslim with mostly Christian southerners, has been observing the Eid al-Fitr holiday. Thursday was the last day of the three day holiday.

    "The strike has started but you know today is a public holiday that is why you may not readily see the immediate impact but I can assure you that the strike has commenced," said Lumumba Okugbawa, the union's acting general secretary.

    Okugbawa said the union had been in touch with the government to hold talks. He said the government had proposed discussions take place on Friday but the PENGASSAN would prefer to meet on Monday instead.

    "Shutting down the refineries, oil production and export would be the last option if all negotiations with government break down," he said, adding: "There are so many steps to that."

    Crude production in Nigeria, an OPEC member, has been pushed to 30-year lows as a result of attacks on oil and gas facilities in the southern Niger Delta.

    The militants behind the attacks have called for a greater share of Nigeria's oil wealth to go to the impoverished region, which is the source of most of the country's oil.
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    Niger Delta Avengers claim fresh attack on Chevron’s oil facilities

    Nigeria militant group, Niger Delta Avengers said  it has blown up more Chevron oil installations belonging to Chevron Nigeria Limited in the creeks of Delta State early Thursday morning.

    In a statement by its spokesperson, Mudoch Agbinigbo, the group said it destroyed manifolds RMP 22, 23 and 24 operated by Chevron in Delta state at about 1:20 am (0020 GMT).

    The group had earlier blown up the RMP 23 and 24 last Friday.

    RMPs or remote manifold platforms are where smaller oil and gas pipelines converge before being sent

    Avengers’ statement read, “Between the hours of 10:50pm to 11:10pm our (Niger Delta Avengers) strike team blew up Chevron Manifolds. The manifolds are RMP 22, 23 and 24.”

    Reports indicated that the attacks which occurred in the Warri North area of Delta state may have been carried out using controlled explosive device.

    Niger Delta Avengers repeated attacks on Nigeria’s oil installations has brought the country’s oil production to a historic low, worsening the financial crisis inflicted on the country by low crude prices.  

    The group has since rebuffed any suggestions of dialogue with the Nigerian government towards stopping its spate of attacks on oil installations.

    President Muhammadu Buhari   had also in the past weeks appeal to the militants to stop their attacks on oil installations.

    But the militant group had insisted that on more autonomy for the Niger Delta and more control of the oil resources as its key demands.
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    Lost Generation of Oil Workers Leaves Few Options for Next Boom

    Already contending with a global price slump, U.S. explorers are also grappling with the demographic hangover of the last great industry downturn in the 1980s, when scores of drillers went out of business. That rout drove a generation away from the business, leaving a shortage of workers in their late 30s to 50s today just as companies try to replace the Baby Boomers who make up much of senior management.

    What the industry calls the Great Crew Change -- the looming retirement of thousands of older workers -- has companies trying to plug the gap by training younger employees, recruiting outside the industry and enticing veterans to hang on longer. It’s also forced drillers into a delicate balancing act amid the current downturn, as they lay off thousands but try to hold on to hard-to-replace scientists and engineers.

    “Everybody that’s going through the process of downsizing their business right now is faced with this extra complication," said Robert Sullivan, a management consultant for New York-based AlixPartners. “Decisions that get made right now on how you right-size the company are going to have a huge impact when the market turns."

    Employers have spent years trying to prepare. Baker Hughes Inc., the oilfield services company, runs a mentoring program for young engineers. Exxon Mobil Corp. has spent about $2.6 million on workforce training initiatives in the Gulf Coast over the last decade, Bill Holbrook, a company spokesman, said. It’s also sponsored ad campaigns to entice more Americans into engineering careers.

    Houston-based Apache Corp. has been bracing for the Great Crew Change for 15 years, Chief Executive Officer John Christmann said by phone. The driller has asked some senior staff to extend their careers past retirement age. It also runs a three-year professional development program for new hires designed to cement their ties to the business. About half the company’s technical staff are 36 or younger; another third are over 50.

    “There’s a big gap from 1985 to 2000 when not very many people entered this business," said Christmann, 50. While Apache is prepared for the transition, the industry as a whole is “reeling a little bit because we don’t have a lot of those managers," he said.

    The wave of retirements comes as the oil sector is already bleeding talent. Worldwide, oil and natural gas companies have cut more than 350,000 jobs since crude prices started to fall in 2014, according to a May report by Houston-based consultant Graves & Co.
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    Noble Energy announces second quarter 2016 sales volumes of 425 MBoe/d

    Noble Energy, Inc. today announced second quarter 2016 expected sales volumes of approximately 425 thousand barrels of oil equivalent per day (MBoe/d).

    The amount represents a record quarterly total for Noble Energy and is more than 3 percent beyond the midpoint of the Company's quarterly guidance range of 405 to 415 MBoe/d.

    The out-performance was driven by continued strong operating performance and execution across the Company.

    Significant contribution to the higher volumes resulted from new wells online in the Eagle Ford, including wells testing various lateral spacing and completion techniques. In addition, Israel gas sales volumes were higher than expected due to continued displacement of coal by natural gas in electricity generation and seasonally warmer weather than normal.
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    Russia’s Novatek says ships first LNG cargo

    Russia’s Novatek said Thursday it has supplied its first ever cargo of liquefied natural gas, marking the company’s first step into global LNG trading business.

    The cargo was sourced from Trinidad & Tobago’s LNG plant in Point Fortin and delivered to the Quintero import terminal in Chile.

    The shipment was made by Novatek Gas & Power, a trading subsidiary of Novatek involved in sales of gas and liquid hydrocarbons on the international markets.

    “This first LNG cargo is an important milestone for Novatek to enter the global LNG market,” said Lev Feodosyev, Deputy Chairman of Management Board – Commercial Director of Novatek.

    “After the launch of the first train of the Yamal LNG project we will enter the LNG market with our own volumes, and gaining spot trading experience is important for us,” Feodosyev added.

    Novatek is the operator of the US$27 billion Yamal LNG project in the Arctic which is expected to produce 16.5 mtpa of LNG at full buildout. The first cargo from Yamal LNG’s first train is scheduled to be shipped during the second quarter of 2017.

    Novatek’s first spot LNG cargo comes just weeks after Russia’s Rosneft delivered its first ever shipment of the chilled fuel to Egypt.

    Gas giant Gazprom is currently the only Russian company that exports LNG from Russia from the country’s sole liquefaction facility in Sakhalin.

    At the end of 2013, Russia approved legislative amendments liberalizing its export regulations for LNG, allowing Rosneft and Novatek to export the chilled fuel.

    As a result, Gazprom and its unit Gazprom Export lost the exclusive right to ship LNG abroad.

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    Eletrobras may never pay some Petrobras debts -official

    Brazil's state-led oil firm Petrobras may never collect some debts owed it by state-run power utility Eletrobras, the energy ministry said on Thursday, acknowledging the government has little cash to provide new capital to the debt-ridden electricity company.

    The government will probably be unable to provide Centrais Eletricas Brasileiras SA, as Eletrobras is formally known, with the estimated 8 billion reais ($2.38 million) it wants to cut debt and revive investment, said Fabio Lopes Alves, electricity secretary at the Energy Ministry. The company's financial woes may force it to let licenses for some money-losing power-distribution units lapse,
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    US oil production sees large drop on Alaska fall

                                                  Last Week      Week Before        Last Year

    Domestic Production '000........ 8,428                 8,622                 9,604

    Alaska '000                        ...........340                   496                    434
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    Summary of Weekly Petroleum Data for the Week Ending July 1, 2016

    U.S. crude oil refinery inputs averaged 16.7 million barrels per day during the week ending July 1, 2016, 8,000 barrels per day less than the previous week’s average. Refineries operated at 92.5% of their operable capacity last week. Gasoline production increased last week, averaging over 10.0 million barrels per day. Distillate fuel production decreased last week, averaging about 5.0 million barrels per day. U.S.

    crude oil imports averaged about 8.4 million barrels per day last week, up by 808,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.0 million barrels per day, 11.6% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 765,000 barrels per day. Distillate fuel imports averaged 61,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.2 million barrels from the previous week. At 524.4 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 0.1 million barrels last week, but are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 1.6 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.7 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 3.4 million barrels last week.

    Total products supplied over the last four-week period averaged over 20.5 million barrels per day, up by 3.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.8 million barrels per day, up by 2.5% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, up by 1.5% from the same period last year. Jet fuel product supplied is up 11.7% compared to the same four-week period last year.

    Cushing down 100,000
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    North Dakota Mineral Resource Director Calls EPA Regulations into Question

    Lynn Helms, director of the Oil and Gas Division of the North Dakota Department of Mineral Resources, testified before the House Committee on Energy and Commerce – Subcommittee on Energy and Power to discuss the effects EPA regulations have had on the state since 2009. Helms’ testimony, which can be read in full here, outlined the ways in which the EPA was creating duplicative and unproductive regulations in the state.

    Helms presented a timeline of nine different topics – all of which have the ability to directly impact the way North Dakota regulates the oil and gas industry, starting with the 2010 EPA study of the relationship between hydraulic fracturing and drinking water, to the most recent 2016 request for emission information for existing oil and gas facilities.

    Helms pointed to a number of issues, from studies which cannot be concluded due to the EPA Scientific Review Board dealing with concerns over the definitions of “widespread” and “systemic,” to rules that “potential conflict with (North Dakota’s Industrial Committee’s) mission to prevent waste, maximize recovery, and fully protect correlative rights (of mineral owners).”

    “It is of great concern to North Dakota that the USEPA rule and guidance would potentially conflict with the Industrial Commission’s mission,” Helms stated in his testimony.

    Helms also pointed out that many of the EPA’s regulation were disproportionately costly compared with the environmental threat. “Many states that run effective regulatory programs and have adopted hydraulic fracturing rules that include chemical disclosure, well construction, and well bore pressure testing should be explicitly exempted from the guidance,” Helms said to the sub-committee.

    North Dakota’s Mineral Resources director encouraged the sub-committee to expand the use of the program FracFocus nationwide, saying it is “by far the best way for EPA to minimize reporting burdens and costs, avoid duplication of efforts, and maximize transparency and public understanding.

    “EPA should consider funding of programs such as FracFocus and Interstate Oil and Gas Compact Commission and Ground Water Protection Council programs such as the State Oil and Gas Regulatory Exchange, UIC Peer Reviews, and National Field Inspector Certification Program,” said Helms. “All of these programs are overseen by governors and state regulators who can provide independent third-party certification, collection of information, and development of best practices about hydraulic fracturing operations in lieu of a new EPA mandatory reporting or voluntary disclosure program.”

    He went on to add that some of the rules proposed by the EPA could have a direct impact on the planned expansion of North Dakota’s gas capture and infrastructure requirements, with changes to regulations like the transportation of drill cuttings potentially costing the state billions of dollars.

    Other witnesses included, Travis Kavulla, Vice-Chairman of the Montana Public Service Commission and David Porter, Chairman of the Texas Railroad Commission.
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    U.S. finalizes Arctic energy development regulation

    The U.S. Department of Interior on Thursday unveiled its final regulations on drilling in the U.S. Arctic Outer Continental Shelf to boost safety in the environmentally sensitive region.

    The rules set safety standards for exploratory drilling on the U.S. Arctic Outer Continental Shelf for vessels on Alaska's Beaufort and Chukchi Seas.

    "The rules help ensure that any exploratory drilling operations in this highly challenging environment will be conducted in a safe and environmentally responsible manner, while protecting the marine, coastal and human environments, and Alaska Natives’ cultural traditions and access to subsistence resources,” said Janice Schneider, the Interior Department's assistant secretary for land and minerals management.

    The rules are a key part of the Obama administration's strategy for energy development in the Arctic region, Schneider said.

    Oil and gas exploration in the U.S. Arctic has been limited. Last year, Royal Dutch Shell pulled the plug on its Arctic oil exploration plans after failing to find enough crude oil, despite getting permission from the United States to drill.

    The company had spent $7 billion exploring in the waters off Alaska's coast. In 2012, Shell interrupted Arctic exploration after an enormous drilling rig broke free and ran aground.

    The new rules require oil operators to submit a detailed operations plan before filing an exploration request. The operators must also demonstrate that they can quickly deploy containment equipment, such as capping stacks or domes, as well as a relief rig in the event of a well accident.

    The Interior Department's environmental enforcement director, Brian Salerno, said the rules were developed to address issues identified after Shell's 2012 rig accident.

    “This rulemaking seeks to ensure that operators prepare for and conduct these operations in a manner that drives down risks and protects both offshore personnel and the pristine Arctic environment,” Salerno said.

    Kristen Miller, conservation director of the Alaska Wilderness League, said the Interior Department released "minimum regulations" - a first step that needs to be further strengthened.

    National environmental groups went further and said the Interior Department should not allow any drilling in the Arctic.

    Rachel Richardson of Environment America said: "The only 'safe' form of drilling for the Arctic and the climate is none at all."

    But industry groups like the American Petroleum Institute quickly reacted to the announcement by saying the regulation is the latest attempt by the Obama administration to stifle offshore energy development.
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    Oil-Sands Crude Returns to U.S. Market When It’s Less Needed

    Canadian oil-sands producers who are restoring production after wildfires are finding U.S. refiners are doing just fine without as much crude from their northern neighbor.

    The U.S. imported 2.6 million barrels a day from Canada last week, the smallest amount since May 13, preliminary data from the Energy Information Administration show. The decline came after producers including Suncor Energy Inc. and Syncrude Canada Ltd. brought back more than a million barrels a day that was shut in May amid the worst wildfire in Alberta’s history.

    U.S. refiners made commitments to import crude by sea from alternative suppliers when the northern Alberta wildfire was out of control, and the duration of disruption to supplies was unclear, John Auers, executive vice president at Turner Mason & Co. in Dallas, said by phone Thursday. Those imports are arriving now, he said.

    “As the supply comes back on, that will displace some of the imports brought in to replace that lost supply,” he said.

    Imports from Mexico, which compete with Canada’s heavy crude, rose to 803,000 barrels a day last week, the highest since April 15, EIA data show. Shipments from Saudi Arabia also increased.

    A wildfire that broke out at the beginning of May prompted the shutdown of as much as 1.4 million barrels a day of oil-sands production, about 40 percent of Canada’s supply. Since then, restarts have restored most of the lost output. Rising output combined with reduced U.S. demand has weakened Canadian heavy-crude prices, with Western Canadian Select trading at its biggest discount to U.S. futures since April.

    Western Canadian Select’s discount to West Texas Intermediate futures grew 10 cents to $14.25 a barrel Thursday, the biggest discount since April 18, data compiled by Bloomberg show. Light synthetic crude, produced from oil sands upgraders, has also weakened, trading at a 30 cent a barrel discount to WTI, the biggest discount since April 22.
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    Riverstone plucks Centennial pre IPO.

    Image title


    7 July 2016


    ("REL" and the "Company")


    REL announces investment in Centennial Resource Development LLC

    Riverstone Energy Limited ("REL") has signed an agreement alongside other funds affiliated withRiverstone Holdings, LLC ("Riverstone") to acquire a majority stake in Centennial Resource Development LLC ("Centennial") from NGP Energy Capital and certain other related coinvestment funds.

    Centennial is an exploration and production company focused on the acquisition and development of oil and liquids-rich natural gas resources in the Permian Delaware Basin, West Texas.

    The investment by REL is expected to comprise up to US$175 million depending upon approval for the transaction by the other Riverstone affiliated funds.

    Closing of the transaction is expected to occur in late September 2016.

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    Alternative Energy

    GE, Senvion prepare bids for French wind group Adwen - sources

    General Electric and German wind turbine maker Senvion are preparing bids for French wind power group Adwen, which is jointly owned by Spain's Gamesa and France's Areva, people familiar with the matter said.

    German industrials group Siemens is due to take over Gamesa's 50 percent stake in Adwen as part of its 1 billion euro ($1.1 billion) deal to buy a majority stake in Gamesa. It has also made an offer for Areva's stake in Adwen.

    However, under the terms of a side-deal agreed in connection with Siemens's buyout of Gamesa, Areva has until mid-September to look for an alternative buyer.

    The companies declined to comment.

    Siemens Chief Executive Joe Kaeser said last month he believed his company's offer for Adwen was compelling.

    "We took a lot of time to discuss the offshore projects in France with customers, where the risks are, where benefits could be, on so-called legacy projects that obviously have their challenges," he said.

    "If we get the 50 percent that is fine, and if we don't, if someone puts a better offer there, they maybe deserve it."

    Gamesa values its 50 percent equity stake in Adwen at 74 million euros, according to its 2015 annual report.

    "Areva has a put option to sell its 50 percent stake to Gamesa for 60 million euros. I would be surprised if the premium offered would be massive," one of the people familiar with the matter said.

    Adwen's products include an 8 megawatt offshore wind turbine, a machine with the largest annual energy production in the industry, for which the group has almost 200 orders already, according to the company website.

    "But it's a prototype with production starting in two years time, and the orders aren't that fixed," one of the people said.

    The merged Siemens-Gamesa wind company will have a market capitalisation of around 10 billion euros, according to analysts, and would overtake Denmark's Vestas to become the world's biggest builder of wind farms by market share.

    Vestas is not interested in buying Adwen, a company spokesman said.
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    Estimated cost of Hinkley Point C nuclear plant rises to £37bn

    The total lifetime cost of the planned Hinkley Point C nuclear power plant could be as high as £37bn, according to an assessment published by the UK government. The figure was described as shocking by critics of the scheme, who said it showed just how volatile and uncertain the project had become, given that the same energy department’s estimate 12 months earlier had been £14bn.

    The latest prediction comes amid increasing speculation about the future of the controversial project in Somerset, whose existence has been put in further doubt by post-Brexit financial jitters.

    Hinkley has been a flagship energy project for the British government and in particular for the chancellor, George Osborne, who lobbied hard and successfully for China to take a stake in the scheme.

    Officials at the Department of Energy and Climate Change (DECC) on Thursday confirmed the £37bn figure, but said it was provisional, set in September 2015, when wholesale power prices were low, and would not affect bill payers.

    “Hinkley will generate enough low-carbon electricity to power six million homes and around £10 [a year] from [each] consumer’s bill will pay for it once it is up and running. We have set the strike price to protect bill payers if energy costs go up or down, so the cost of the project to consumers will not change,” a DECC spokesperson said. “Today’s report from the IPA (Infrastructure and Projects Authority) does not suggest that the lifetime costs of Hinkley have increased. It is a sna shot of the position at the end of September 2015.”

    EDF said the £37bn figure should be disregarded. “Hinkley Point C will generate reliable low-carbon electricity in the future, so a cost estimate based on last year’s depressed wholesale price is not relevant. HPC’s electricity will be competitive with other low-carbon energy options and consumers won’t pay a penny until the plant begins operating.”

    But experts said the extra money, if the cost did remain at £37bn, would have to come from somewhere – probably the taxpayer – or be shaved off other DECC budgets available for different energy projects, such as windfarms and solar arrays. “This whole-life cost of £37bn is a truly shocking figure. It is an extraordinary ramp-up from last year’s figure, and just underlines how hard it is to get a real handle on the long-term cost of Hinkley,” said Paul Dorfman, senior research fellow at the Energy Institute, University College London.

    The latest increase is a new blow to a scheme with an already precarious outlook due to the debt problems besetting its lead developer, EDF, which has been hit by rising costs and delays to another new-build nuclear power station scheme, at Flamanville, in Normandy.

    EDF, a French group part-owned by the state, has high debt levels and has had difficulty convincing some of its own board members to support Hinkley despite the French government’s efforts to help it financially.

    The Brexit vote has made the British commercial environment much more uncertain, and French trade unions, who want the final investment decision postponed, have been pressing independent directors to convince EDF’s chief executive, Jean-Bernard Levy, to ditch Hinkley.
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    Precious Metals

    Order book for Russia's Alrosa share sale fully covered – sources

    The order book for a share placement in Russian diamond producerAlrosa is fully covered, two financialmarket sources told Reuters on Thursday, quoting information from organisers of the placement.

    Russia on Wednesday launched the sale of 10.9% of ordinary shares in Alrosa, the world's largest producer of roughdiamonds in carat terms, as part of a privatisation programme to help bolster government finances which have been hit by weak oil prices.
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    Base Metals

    Sandfire debt-free as DeGrussa delivers strong results

    Base and precious metals miner Sandfire Resources was in a net cash positive position for the first time in four years, following a strong performance at its DeGrussa copper/gold mine, inWestern Australia, which has allowed the company to repay a significant component of its debt early.

    Sandfire reported on Friday that it had fully repaid its amortising facility with its financier, ANZ Banking, ahead of schedule, following a A$20-million payment at the end of the June 2016 quarter. The facility was previously scheduled to be repaid over the next 18 months to December 31, 2017.

    The repayment reduced the total outstanding debt to A$50-million as at June 30. With A$60-million in group cash holdings, Sandfire was in a net cash positive position of A$10-million at financial year-end, meaning the company was debt-free for the first time since development of the DeGrussa project started in 2011.

    “This is a very pleasing result which essentially means that we have greater flexibility and optionality in terms of financing future growth initiatives,” said MD Karl Simich.

    The DeGrussa mine produced 68 202 t of contained copperand 37 612 oz of contained gold in the 12 months ended June 30. This was at the upper-end of a previously announcedcopper production guidance range of between 65 000 t and 68 000 t and at the mid-point of its guidance range for gold of between 35 000 oz and 40 000 oz.

    Copper/gold concentrate sales results for the financial year were 282 012 t containing 68 653 t of copper (65 832 t payable) and 36 042 oz of gold (33 302 oz payable).

    Simich said that Sandfire would continue to assess the optimal financing structure for the organic growth options, such as the Monty copper/gold deposit, for which a feasibility study was under way.
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    Steel, Iron Ore and Coal

    China warns of punishment for delaying coal, steel capacity cuts

    China has threatened to punish regional governments for failing to close unneeded coal mines and steel mills, adding pressure to carry out reforms as the country shifts away from industrial production, Bloomberg reported.

    Provincial governments must set capacity reduction targets by July 15 and submit detailed phase-out plans by the end of this month, said Xu Shaoshi, chairman of National Development and Reform Commission, the nation’s top economic planner, according to a report by official Xinhua News Agency.

    About 800,000 coal and steel jobs are expected to be cut this year amid President Xi's supply-side reforms, the Ministry of Human Resources and Social Security said separately on July 8.

    Provincial governments that fail to stick to capacity cut plans or miss their targets will be "seriously punished," Xu said, according to the report on July 7. Regions shouldn’t waver in the face of slowing economic growth and unemployment and refrain from restarting closed mines and mills, he said.

    China’s coal output will fall by 280 million tonnes this year, and steel capacity will shrink by 45 million tonnes, Xu said at the World Economic Forum in Tianjin last month. The coal capacity cut target was modified in his statements on July 7 to "more than 250 million tonnes," while the steel target remains the same.

    The country plans to eliminate as much as 500 million tonnes of coal production capacity, and consolidate a further 500 million tonnes, and cut as much as 150 million tonnes of steel making capacity by 2020.

    China is still targeting 1.8 million in total job cuts for both industries over three to five years, Xin Changxing, vice minister of the human resources ministry, said at a briefing in Beijing.

    Output from both industries has fallen in the first five months of the year, with coal dropping 8.4% and steel down 1.4%.
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    China government-run steel, coal firms to cut 10 percent of capacity in two years: regulator

    China's central-government run steel and coal firms will cut capacity by around 10 percent in the coming two years, and by 15 percent by 2020, as part of their efforts to tackle gluts in the sectors, the state asset regulator said on Friday.

    The State-Owned Assets Supervision and Administration Commission (SASAC) held a meeting with the 25 coal and steel firms under its jurisdiction at the end of June, it said.

    The SASAC-run firms include China's biggest coal producer, the Shenhua Group, as well as the Baoshan Iron and Steel Group (Baosteel) and the Wuhan Iron and Steel Group, which have recently announced plans to restructure.

    China aims to cut 100-150 million tonnes of annual steel production capacity and 500 million tonnes of coal production capacity in the next three to five years, amid waning domestic demand and a long decline in prices.
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    Daqin June coal transport down 28.9pct on year

    Daqin line, China’s leading coal-dedicated rail line, transported 24 million tonnes of coal in June this year, sliding 6.32% on month and down 28.93% on year – the 22nd consecutive year-on-year drop, said a statement released by Daqin Railway Co., Ltd on July 8.

    In June, Daqin’s daily coal transport averaged 0.80 million tonnes, dipping 3.61% on month.

    Daqin rail line realized coal transport of 157.74 million tonnes in the first half of this year, falling 23.36% year on year.

    The operation of Zhunchi (Zhunger-Shenchi) railway accelerated the transport of Shuohuang (Shuozhou, Shanxi-Huanghua port, Hebei) railway to jump, while squeezed the transport share of Daqin railway to sharply fall. As a result, coal handlings at Huanghua port surged, while those at Qinhuangdao port and Tangshan port plunged.
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    Dalrymple Bay's Jun coal exports hit one-year high

    Coal exports from Australia's Dalrymple Bay coal terminal reached 6.42 million tonnes in June, the highest level year to date, a source close to the Queensland terminal said on July 6.

    The volume rose 1% month on month, but fell 7.23% year on year, port data showed.

    It is also 19% higher from the fiscal average of 5.41 million tonnes.

    Typically, coal shipments in the month of June are strong as producers seek to maximize exports for the last month of the fiscal year in Australia.

    For fiscal year 2015-16 ended June 30, DBCT exported 67.35 million tonnes of coal, the source said, down 5.6% from the year-ago level.

    Anglo American, BHP Billiton, Glencore, Peabody Energy and Rio Tinto are the coal producers that ship product through DBCT.

    China, Japan and South Korea are the largest recipients of coal shipped via DBCT.

    The terminal had nine ships in its offshore vessel queue as of July 7, according to a terminal operating report.
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    India puts power projects based on imported coal under review

    A pall of uncertainty has been cast over Indian thermal power stations running on imported coal, as the country is moving into surplus production and even considering options to export coal.

    The Coal Ministry has directed all government-owned and -operated thermal power generation companies to desist from importing coal for their feedstock requirement, and against this backdrop questions have been raised about costs, risks and the viability of imported coal-based mega thermalprojects currently on the anvil.

    Various government departments had raised questions about the risk that projects based on imported coal would seekfrequent electricity tariff revisions, following changes in the international trading environment.

    These power station projects had been conceived during times of domestic coal shortage; however, continuing with their implementation when the country was moving into a surplus situation was not considered to be prudent, a CoalMinistry official has said.

    Citing examples, the official pointed out that earlier this year, the Appellate Tribunal for Electricity had revoked a 2014 order allowing Adani Power and Tata Power to seek higher or compensatory tariff revisions in the face of the Indonesian government changing benchmark pricing for coal exports. The Indian power plants had been implemented based on the assumption of continued supply of cheap coal fromIndonesia.

    Government officials said that such risks were not necessary any more as India had sufficient domestic coal available.

    The government has awarded ultra mega power plantprojects (UMPPs) to investors through competitive bidding, based on electricity tariffs they proposed. The surplus domestic coal situation had obfuscated plans for UMPPs so much that four such projects with aggregate generating capacity of 16 GW had been cancelled, while the future of one planned in the southern Indian province of Tamil Nadu was uncertain, the official added.

    In a roadmap, the Coal Ministry had proposed complete self-sufficiency in coal within the next three years and such a target had made import-based UMPPs superfluous, the official said.

    Indian coal imports in April and May 2016 were down 5% at 35.85-million tons over the corresponding period of the previous year, according to government data.

    With a target to produce one-billion tons a year, Coal IndiaLimited (CIL) produced 125.65-million tons in the quarter ended June 2016, up 3.5% on the corresponding quarter of 2015 with a total production target of 598-million tons for thefinancial year.

    The surplus situation was indicated by lower offtake of 2.9% during the quarter ended June at 133.19-million tons and a pithead inventory estimated at 30-million tons.

    In a statement, Coal Secretary Anil Swarup said “consequent to record production of coal by CIL, it is now exploring avenues to export coal”.

    For starters, an Indian delegation recently visited Bangladeshto explore opportunities to export coal to the thermal powerplant that India’s NTPC was building in the neighbouring country.

    Coal Ministry officials said that with coal exports on the cards, imported coal-based thermal power plants had lost relevancy and all such projects were under review, starting with scrutiny by the Finance Ministry.

    Attached Files
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    Arch coal in new deal for bankruptcy exit plan

    St. Louis-based Arch Coal said on July 5 it has filed an amended reorganization plan in US federal court that would give cash and stock to unsecured creditors and could help it move out of bankruptcy.

    The reorganization plan includes a global settlement with senior secured lenders holding more than 2/3 of its first lien term loan and the committee that has been negotiating on behalf of unsecured creditors.

    "The global settlement is a momentous achievement that should facilitate a timely and successful conclusion to our financial restructuring process," said John W. Eaves, Arch's chairman and CEO.

    As part of the plan, Arch would offer holders of general unsecured claims 6% of the new common stock of the reorganized company and warrants to buy more of the company stock. Arch also would pay out $30 million in cash to bondholders and general unsecured creditors.

    As part of the global agreement, senior managers would relinquish claims to $6 million in bonuses for 2016, according to court documents. The plan is still subject to court review Wednesday.

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    Iron, steel exports discouraged amid lackluster demand

    The Chinese government has been discouraging iron and steel exports amid lackluster demand in the global market, the Ministry of Commerce said on July 5.

    "China's iron and steel output primarily meets domestic demand. The Chinese government has taken measures, such as increasing the export tariffs on some products, to control exports," said Shen Danyang, spokesman for the ministry.

    Shen said the tax refund rate for iron and steel exports is lower than the 17% value-added tax rate. The percentage of exports, Shen added, is very low compared with total output.

    In the first five months of the year, China's exports of iron and steel increased by 6.4% year on year, stirring further concerns that the global supply will further outstrip the demand.

    "In the first five months in 2015, iron and steel exports increased by 50% compared with the same period the previous year. The growth rate this year has fallen by around 22 percentage points," said Shen.

    "This has shown that China has restrained its exports to maintain the stability of the world's iron and steel market."

    Shen has said previously that the global economic slowdown was the main cause of iron and steel overcapacity. The Chinese government has been making efforts to keep the production capacity down.

    The State Council has issued a plan to reduce crude steel output by 100 to 150 million tonnes within five years starting from 2016.

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    Australia cuts 2016, 2017 iron ore forecasts on supply glut

    Australia on Friday signaled it sees the current rally in iron ore prices coming to an end, cutting its price forecasts over the next 18 months to reflect an industry grappling with oversupply and weak demand.

    The Department of Industry, Innovation and Science cut its 2016 forecast for the country's biggest export earner by nearly 2 percent to an average of $44.20 a tonne and by 20 percent to $44 in 2017.

    Australia, the world's largest exporter of iron ore - forecast to total 818 million tonnes this year - warned the steel-making ingredient will be slower to recover in 2017 than previously expected due to oversupply.

    The department previously forecast 2016 prices to average $45 a tonne in March and earlier predicted 2017 prices to average $55.

    "Despite the large movements in prices, the market fundamentals are broadly unchanged - demand growth is slow and the market remains well supplied," Australia's Department of Industry, Innovation and Science said in its latest quarterly commodities paper.

    Iron ore was trading at $55.20 a tonne, according to the latest quote from The Steel Index. Iron ore averaged $48 in the first six months of 2016.

    The official forecast is also short of the Australian Treasury’s $55 per tonne prediction contained in the national budget released in May.

    The Treasury forecast represented a 41 percent increase on its December view of $39 and took into account a spike in ore prices to almost $70 in April.

    A price closer the Department of Industry calculation would increase the projected national budget deficit for 2016-17 of A$37.1 billion ($27.82 billion) by roughly A$1.5 billion.

    Morgan Stanley recently lifted its 2016 iron ore forecast by 17 percent to $46 a tonne and its 2017 outlook by 13 percent to $42.

    Dragging on sentiment are hefty stocks of imported iron ore sitting at major Chinese ports. Inventories stood at 102.55 million tonnes on July 1, the highest since December 2014, according to data tracked by SteelHome.

    Global iron ore trade is forecast to grow by 0.9 percent and 4.0 percent in 2016 and 2017, respectively, despite relatively flat global consumption, according to the industry department.

    This will occur because imports will displace iron ore mined in China, it said
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    Chinese steel plants bounce back after destocking, CISA

    China's large steel plants saw improved profits and narrowed losses in the first five months of this year thanks to their destocking efforts, according to the China Iron and Steel Association (CISA).

    Major iron and steel enterprises raked in 8.736 billion yuan ($1.31 billion) in the Jan-May period, up over 700% year on year while fewer firms reported losses, according to the national steel association.

    The improvement is a result of the firms' rational response to overcapacity in the sector, as most large iron and steel plants reduced their output in the first five months and tried to stabilize product prices, CISA head Liu Zhenjiang said.

    Total steel production in the first five months of this year dropped 1.4% on year, data from the National Bureau of Statistics showed.

    China, the world's largest steel producer and consumer, plans to cut steel capacity by about 10% -- as much as 150 million tonnes of steel -- in the next few years, with funds set aside to help redundant workers.
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    EU to investigate rise in Russian, Brazilian steel imports

    The European Commission will investigate whether Russia, Brazil and three other countries are flooding the bloc with cheap hot-rolled flat iron and alloy and non-alloy steel products, following a complaint from European rivals.

    The EU executive said the probe, opened on Thursday, will focus on the period July 1, 2015 to June 30, 2016.

    In addition to Russian and Brazilian iron and steel exporters, the Commission is also targeting those from Serbia, Ukraine and Iran. The companies have been given 15 days to contact the EC with their details.

    The European Steel Association (Eurofer), whose members account for more than a quarter of EU iron and steel products, triggered the case with a May complaint.

    "The complainant has provided evidence that imports of the product under investigation from the countries concerned have increased overall in absolute terms and in terms of market share," the Commission said in the Official Journal.

    The EU, which can impose duties on imports if there is evidence that these are sold at below fair market prices and are damaging the businesses of European competitors, now has 10 anti-dumping investigations underway into steel products.
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