Mark Latham Commodity Equity Intelligence Service

Friday 22nd May 2015
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    Oil and Gas


    HSBC Flash China PMI contracts

    Activity in China’s manufacturing sector has contracted for the third month in a row, according to a private survey.

    The HSBC Flash China Manufacturing PMI rose less than expected to 49.1 in the flash reading for May, up from 48.9 in April.

    The reading fell short of a Reuters poll which had the result at 49.3. A reading above 50 on the survey points to expansion, while a reading below 50 indicates contraction.

    Economist at Markit Annabel Fiddes said that softer client demand and job cuts may make it difficult for the sector to expand in the near-term.

    However Fiddes said that deflationary pressures remained strong “leaving plenty of scope for the authorities to implement further stimulus measures if required”.

    The flash reading is a preliminary estimate based on around 85-90 per cent of survey responses from over 420 small-to-medium-sized manufacturing firms.
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    For Caterpillar, This Is What The "Second Great Depression" Looks Like

    According to the latest CAT retail sales data, Caterpillar has now reported an unprecedented 29 months of declining global retail sales, with the month of April seeing a 16% Y/Y collapse in China (after a 25% plunge in 2014 and a 20% plunge the year before), while Latin America just suffered an epic 44% Y/Y crash, the biggest going back to 2009, after a 28% drop the year before.

    Or as far as the industrial and heavy equipment bellwether is concerned, the emerging markets (or BRICS) are in an unprecedented economic collapse.

    To put Caterpillar's ongoing second great depression in context, during the Great Financial Crisis, CAT suffered "only" 19 months of consecutive retail sales declines. As of April 2015, this number is now 29, and there is no hope in sight of seeing an annual re-bounce any time soon.
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    China Jan-Apr rail investment up 22 pct for economy stabilizing

    China’s fixed-asset investment on rail industry surged 22% on year to 132.1 billion yuan ($21.6 billion) over January-April, as the government accelerated investment to help stabilize economy.

    Of this total, 117.2 billion yuan was injected into railway construction, up 20% on year.
    As Chinese authorities adapt to the country's plateauing economy, the National Development and Reform Commission (NDRC) said earlier this year that it would "increase management of investment" in 2015 and give investment a "key role in stabilizing economic growth" .
    And Ma Kai -- vice premier of the State Council -- said that China planned to put over 800 billion yuan into rail construction and build rail lines with total length of 8,000 km.
    On May 18, China's top economic planner – the NDRC -- approved the construction of six railways stretching more than 1,000 km and likely to cost about 250 billion yuan.
    The projects include four high-speed railway lines in eastern provinces of Shandong and Jiangsu, and in northeastern province of Liaoning, and two urban rail transits in the southwestern cities of Chengdu and Nanning.
    China has been promoting public-private partnerships to attract private capital into infrastructure construction and public enterprises, such as in railway investment and fund-raising.
    Though rail investment accelerated, transport demand seemed to decline amid a slowing economy, with 870 million tonnes of rail cargo shipment recorded for the first quarter, down 9% on year, the NDRC said.
    Poor sales led to a high debt ratio of 66.2% for China Railways Corporation (CRC) by end-March, with a total debt of 3.747 trillion yuan, up 1.95% from the end of last year.
    The CRC’s rail transport cost totaled 653.27 billion yuan in 2014, up 9.3% on year.
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    Steel, rare earth sectors face reshuffle amid SOE consolidation

    Mergers among China's central State-owned enterprises (SOEs) will be fast tracked over the next few years as the country overhauls the underperforming sector to deepen economic reforms.

    Experts say sectors such as steel, electricity and railways will bear the brunt amid massive restructuring, the Shanghai Securities News reported on Tuesday.

    Meanwhile, the rare earth industry, with its national strategic significance, will also be consolidated in a bid to streamline the market and improve its competitiveness, said the report, quoting SOE reform expert Zhou Fangsheng.

    According to a document issued late last month by the State-owned Assets Supervision and Administration Commission, the country's SOEs will undergo classified consolidation, with the final number being cut from 112 to 40.

    Mergers and acquisitions (M&As) among State-owned enterprises are surging, with the number hitting 481 last year, a compound average growth rate of 72.9 percent from 2008. The scale of M&As assets exceeded $30 billion last year, according to a report by the Zero2IPO Research Center.

    The number may continue to grow as a new wave of M&As is imminent in the second half of this year, boosted by the country's "Made in China 2025" strategy and the Belt and Road Initiative, the report said.

    State firms' consolidation is at the heart of China's economic transformation that entails a relocation of resources to cut overcapacity amid meager domestic demand, especially in traditional heavy industries.

    Iron and steel, among others, has been struggling in recent years. Statistics show the industry's profit in the first quarter stood at 18.1 billion yuan ($2.92 billion), down 36 percent from a year earlier. About 50 companies shared a loss of 10.3 billion yuan during the same period, said the newspaper.

    The predicament is unprecedented for the sector which can only be saved through restructuring and M&As, the newspaper cited industry insiders as saying.

    For the rare earth industry, necessary restructuring will largely help enhance its competitiveness globally, ensuring sound and sustainable development.

    The country's pricing power of rare earth is of great significance, not just economically, but politically and diplomatically, experts said.
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    China’s energy guzzlers Apr power use down 3% on yr

    Power consumption of China’s four energy-intensive industries dropped 3% year on year to reach 139.4 TWh in April, accounting for 31.6% of the nation’s total power consumption in the month, the China Electricity Council (CEC) said May 19.

    The ferrous metallurgy industry consumed 42 TWh of electricity in April, down 7.1% year on year, compared to the growth of 0.7% in the previous year; while the non-ferrous metallurgy industry used 36.1 TWh of electricity, up 5.2% year on year but lower than the growth of 6.5% a year ago.  
    The chemical industry consumed 34.2 TWh of electricity in the month, up 1.4% year on year but lower than the growth of 4.6% a year ago; while power consumption of building materials industry dropped 11.1% year on year to 27.1 TWh, compared to the growth of 9.8% in the preceding year.
    Over January-April this year, the four industries consumed a total 525 TWh of electricity, dipping 1.8% year on year, holding 30.3% of China’s total power consumption in the same period.
    The ferrous metallurgy industry consumed 163.2 TWh of electricity over this period, down 6.9% year on year; while the non-ferrous metallurgy industry used 139 TWh of electricity, up 3.7% from a year ago.
    The chemical industry consumed 135.1 TWh of electricity, rising 2.9% year on year; while the building materials industry used 87.7 TWh of electricity, down 6.5% from a year prior.
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    $50 Billion Mega Project Could Change South America Forever

    Infrastructure is a critical part of mining -- often making the difference between profitable and pitiful projects.

    And in that respect, one part of the world got a lot more interesting late last week: South America.

    Particularly Brazil and Peru, which are set to get a major new rail corridor. Thanks to a massive investment from China, one of the world's most resource-hungry nations.

    The BBC reported that Chinese and Brazilian interests will construct a rail line running across the continent -- all the way from Brazil's Atlantic coast to Peru's Pacific waters.

    The project will reportedly be backed by a $50 billion commitment from banks in China and Brazil. Which will be officially signed during a visit by Chinese Prime Minister Li Keqiang to Brazil this week.

    Few additional details were given. With Brazil's undersecretary of state for Asia, Jose Graca Lima, quoted as saying that the governments would elaborate on this mega-project at the end of the Chinese visit.

    If the project does indeed offer a rail link crossing from Atlantic to Pacific, it would be a game changer for miners in both Brazil and Peru -- and possibly beyond.

    Brazil is rich in bulk commodities like iron ore. The majority of which is currently shipped from Atlantic ports -- with China being a major buyer.

    The Pacific route would save considerable time in sending supplies to China. And it could also provide an outlet for mines that aren't positioned to ship to the Atlantic coast -- or which lack shipping infrastructure entirely at the moment, both on the Brazil and Peru sides.

    We'll have to wait for more details on the routing of the line to see which projects could benefit. Watch for an announcement prior to Thursday, when the Chinese delegation leaves Brazil for Colombia.
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    Mined Gold, Copper and Iron Ore production falls in last Qtr

    If early production announcements for the three months to end-March turn out to represent the entire mining industry, then there has been a significant fall in quarter-on-quarter production for the three most important mined metals: gold, copper and iron ore.

    However, the production results published to-date suggest that gold and iron ore production is still higher than the year-ago quarter, up almost 12% in the case of iron ore.

    In the State of the Market report for the three months to end-March, published May 18, SNL notes that the 46 most significant gold producers — those with a March quarter output of over 50,000 ounces — reported a combined 11.2 million ounces, compared with an equivalent 12.5 moz in the December 2014 quarter, equivalent to a fall of over 10%.

    Much of this overall decline in reported gold production was due to a significant quarter-on-quarter decline in output from AngloGold Ashanti Ltd., Goldcorp Inc. and Sibanye Gold Ltd. The three miners registered a combined fall in production of 476,000 ounces compared to the linked quarter.

    Another four producers registered quarter-on-quarter reductions in gold production of over 100,000 ounces.

    Compared to the December 2014 quarter, Barrick Gold Corp., whose production of 1.39 moz was the largest for the March quarter, registered a fall of 137,000 ounces. Centerra Gold Inc. saw production drop 130,553 ounces, output by Polymetal International Plc fell 113,000 ounces and Freeport-McMoRan Inc. reported a 109,000-ounce decline.

    While registering a quarter-on-quarter decline in gold production, the top 46 companies still reported a 3% year-over-year rise in aggregate output.

    By mid-May, SNL had recorded production data for the March quarter from 49 copper-producing companies. The 22 largest listed companies — companies with quarterly output of over 10,000 tonnes — had combined production of 2.41 million tonnes, a decline of 4% on the previous quarter, amounting to 88,807 tonnes.

    Of these largest producers, 13 companies, or about 59%, reported lower output between the December and March quarters.

    Glencore Plc booked the largest absolute decline in output compared to the previous quarter, amounting to 46,700 tonnes; Antofagasta Plc's output was down by 41,000 tonnes; and Freeport-McMoRan's output fell by 37,648 tonnes. Nevsun Resources Ltd. booked the largest quarter-on-quarter percentage decline of 28%, while Antofagasta's output was down by 22%.

    Of the top seven copper producers in the March quarter, only the largest, BHP Billiton Group, reported a quarter-over-quarter increase in production, which was up 9%, or 36,300 tonnes, to 460,000 tonnes.

    There has been a welcome decline in iron ore production. According to SNL data, 15 companies have reported iron ore output of over 1.0 million tonnes in the March quarter. These companies produced a total of 308.5 million tonnes, compared to 324.4 million tonnes in the preceding quarter — equivalent to a fall of 5% or 15.84 million tonnes. However, this quarterly tonnage represents a year-on-year increase of almost 12%.

    Of the leading iron ore producers, only BHP Billiton reported a quarter-on-quarter increase in production, but all of them saw significantly higher year-on-year output.

    BHP Billiton reported a rise in iron ore production of 5% compared with the December quarter, rising 2.63 million tonnes to 58.98 million tonnes, and 20% on the year-ago quarter. The company has driven production for the first three quarters of fiscal 2015 to a record 172.4 million tonnes, despite iron ore prices sinking to record lows.
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    Possibly the most confusing Chinese state policy document ever.

     State Council decision to deploy, adapt and take the initiative to lead the new normal economic development, further emancipate the mind, bold exploration and accelerate the introduction of both has annual characteristics, but also conducive to long-term institutional arrangements of the reform, further emancipate and develop social productive forces. To deal with the relationship between government and the market as the core, driven by the government's own revolution important areas of reform, focus their efforts on the ground has been introduced to implement the reform program, launched a number of activation seize the market, the release of energy, is conducive to the steady growth of employment insurance reform and increase efficiency new initiatives to reform the new dividend into development new impetus.

    Firmly grasp the problem-oriented, so that the reform to better serve the steady growth, adjusting the structure, benefit people's livelihood, risk prevention. To effectively solve the problems facing the economic and social development as an important criterion for the effectiveness of economic reform. For economic downward pressure, the development of deep-seated contradictions highlight the old and new problems are stacked up, increase the risk of difficulties and risks and other issues, and promote the steady growth conducive to employment insurance benefits by early introduction of reform measures to speed up the landing, stimulate market dynamism through reform release development potential, resolve potential risks, and promote steady economic advance and to improve quality and efficiency upgrades.

    Insist on top-level design and the combination of grass-roots innovation, and fully arouse social vitality and creativity. Both attach great importance to the reform of the top-level design, but also insist on looking downward, the pace down, fully respect and play to local, grass-roots masses practices and pioneering spirit, good attention from the focus of the masses, the difficulty to find the starting point of reform people's lives, so reform ideas, decisions, measures and develop more in line with the actual needs of the masses, to find the best solutions from practice to promote top-level design and grassroots exploration positive interaction, combination.

    Conscious use of the rule of law and the rule of law way of thinking reform, deepen the reform and the rule of law to achieve the organic unity of security.

    Attached Files
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    Chinese Firm Reveals World's First 3D-Printed Five Story Apartment Building

    While China's stock market continues levitating at an ever more amusing pace, this is happening at the expense of China's far more important housing market, which sadly for three-quarters of China's population (in the US 75% of household assets are in financial products, in China: in real estate) continues to deflate at a ratefaster than US housing in the aftermath of Lehman. And for better or worse, Chinese home prices are likely set to drop even more, and not due to something as arcane as glitches in fiscal or monetary policy, but something far more tangible: technological advances, and specifically - 3D printed houses.

    Meet WinSun: the Chinese company has been documented to print 10 complete houses in 24 hours, using a proprietary 3D printer that uses a mixture of ground construction and industrial waste, such as glass and tailings, around a base of quick-drying cement mixed with a special hardening agent. But while this in itself is impressive, the punchline is the cost: the houses can be produced for under $5,000, which means that if adopted widely, 3D printing can lead to a collapse in prices of new home construction across China, which while good for new buyers could be catastrophic for the economy and the banking sector where nearly $30 trillion in commercial loans are collateralized almost entirely by China's overinflated housing sector.

    Not content with building single-family houses (and WinSun's own office), WinSun recently made history when it demonstrated the world's first entirely 3D-printed five-story apartment building and a 1,100 square metre (11,840 square foot) villa, complete with decorative elements inside and out, on display at Suzhou Industrial Park.
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    China needs more action on growth: Premier

    China's Premier Li Keqiang said the government needs "more forceful" action to stabilise growth, as the economy continues to face considerable downward pressure, the official Xinhua News Agency reported Friday.

    Mr Li cited weak growth in fixed-asset investment in April as a major concern, according to Xinhua.

    Non-rural fixed-asset investment, which includes investments in machinery and factories, climbed 12 per cent year-over-year in the January-to-April period, official data showed Wednesday. It was the lowest year-to-date growth for the measure since late 2000.

    Investment in April grew 9.6 per cent from a year earlier, the slowest pace since December 2011, according to calculations by The Wall Street Journal.

    Mr Li also said there were signs of improvement in the economy, thanks to Beijing's support measures.

    The surveyed unemployment rate dropped in April while industrial output grew at a faster pace, he said.

    "The government is confident and capable of keeping economic growth within a reasonable range," he said.

    China's policy makers have set a growth target of about 7 per cent for 2015. The economy expanded 7 per cent year-over-year in the first quarter, the slowest pace in six years.
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    U.S. industrial output falls for fifth straight month

    U.S. industrial production fell for a fifth straight month in April, weighed down by declines in mining and utilities output, pointing to a lack of momentum in the economy at the start of the second quarter.

    Industrial output slipped 0.3 percent after a revised 0.3 percent drop in March, the Federal Reserve said on Friday.

    Economists polled by Reuters had forecast industrial production edging up 0.1 percent last month after a previously reported 0.6 percent fall in March, which was the biggest drop since August 2012.

    The dour report added to weak retail sales data in suggesting that the economy was struggling to regain momentum after growth slowed abruptly in the first quarter.

    Mining production fell 0.8 percent as oil and gas well drilling plunged 14.5 percent. It was the fourth straight monthly decline in mining output. Utilities production tumbled 1.3 percent, likely as warmer weather reduced demand for heating.

    Manufacturing output was unchanged after an upwardly revised 0.3 percent gain in March.

    Industrial capacity use fell to 78.2 percent, the lowest since January of last year, from 78.6 percent in March.

    Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.
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    Oil and Gas

    Unipec sells crude stored on megatanker as prices rise -sources

    Chinese trader Unipec has sold 2 million barrels of crude held for months on one of the world's largest tankers, industry sources said, as rising oil prices prompt commodity firms to offload cargoes from floating storage.

    Storing crude on unused tankers re-emerged as a trading strategy towards the end of last year when weak demand and strong supply weighed on prices for delivery in the near future, while contracts for later delivery rose to a premium, a market structure known as contango.

    But with a narrowing contango in benchmark Brent crude , traders are trying to sell oil they have stored, re-injecting fuel into an already oversupplied market.

    Unipec, the marketing arm of Chinese oil giant Sinopec , sold 2 million barrels of Nigerian Qua Iboe crude for delivery in July to Indian refiner Hindustan Petroleum Corp , three trading sources said. They declined to be identified as they were not authorised to speak with media.

    Unipec did not respond to requests for comment, while an HPCL spokesman said he could not immediately comment.

    The crude will be delivered from the TI Europe, an Ultra Large Crude Carrier (ULCC) off Singapore. The ship, one of only two remaining ULCCs in the world as they are too big for most ports, is capable of carrying over 3 million barrels, more than 3 percent of daily global crude demand.

    Unipec chartered the vessel last September, just as Brent crude fell below $100 a barrel, the beginning of a dramatic rout in prices.

    Reuters ship-tracking data suggests it has stored crude since January 2015.

    More than 30 tankers were put on long-term charter early this year to trade contango, although most were later used for regular deliveries as prices recovered.

    "Everyone is trying to exit from storage," said a trader with a large trading house.

    At least two Very Large Crude Carriers (VLCC), slightly smaller than ULCCs, have been storing crude off West Africa since February, other traders said.
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    OPEC Refuses to Yield in Battle for Oil-Market Share

    OPEC will stick with the strategy of favoring market share over prices when it meets next month because rival producers are already starting to buckle.

    All but one of the 34 analysts and traders surveyed by Bloomberg said the Organization of Petroleum Exporting Countries will maintain its daily production target of 30 million barrels when it meets in Vienna on June 5.

    Saudi Arabia, the biggest of OPEC’s 12 members, shaped the strategy at the last meeting in November, arguing that the usual response of cutting output to boost prices would not address the threat from shale and other higher-cost suppliers. Prices rose 46 percent since mid-January as producers cut spending plans and the number of active U.S. drilling rigs fell by the most ever.

    “Dramatic cuts in spending and drilling are finally having an impact, so why on earth would Saudi Arabia change course now their strategy is just starting to bear fruit,” Mike Wittner, head of oil research at Societe Generale SA, said by phone . “Anyone who expects anything to happen at this meeting is going to be sorely disappointed.”

    Brent crude, an international benchmark, traded at $66.37 a barrel at 12:26 p.m. Singapore time. While that’s 43 percent below last year’s high, it’s 47 percent more than the low reached Jan. 13.

    OPEC’s 12 members pumped about 31.2 million barrels a day of crude in April, almost 3 million a day more than the average amount the world requires from the group this quarter, according to the Paris-based International Energy Agency.

    While some members, such as Iran and Venezuela, said they opposed the Nov. 27 decision to maintain production, several OPEC officials have signaled this month that the group will continue with its current course. Iranian Deputy Oil Minister Roknoddin Javadi said on May 18 that that the existing production target is appropriate.

    U.S. oil producers idled more than half of the country’s drilling rigs since October, according to data from Baker Hughes Inc. The nation’s crude production fell 1.2 percent to 9.3 million barrels a day last week, the biggest drop since July, Energy Information Administration data show.

    Global investment in oil production might fall by $100 billion this year, according to the IEA.

    Demand growth will accelerate to 1.3 million to 1.4 million barrels a day this year, Chris Bake, an executive director at Vitol Group, the world’s largest independent oil trader, said at a conference in London on May 20. Lower prices and economic growth increased demand in Europe, the Middle East and India, he said. Global oil demand rose 700,000 barrels a day last year, according to the IEA.

    “OPEC doesn’t really have a need to change course,” Francisco Blanch, Bank of America Corp.’s head of commodities research, said by phone . “The strategy has achieved its goal of reining in supply and stimulating demand.”
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    ENOC appeals to Dragon Oil investors with 735p-a-share offer

    Emirates National Oil Co (ENOC) went public with an offer to buy out minority shareholders in Dragon Oil, saying talks with a committee set up by the Turkmenistan-focused oil explorer had not yet produced the endorsement it believed its "full and fair" bid warranted.

    ENOC, which already owns 54 percent of Dragon Oil, had made an approach to buy the remainder on March 15, set at an undisclosed premium to Dragon's closing price of 509.5 pence on March 13.

    ENOC said its latest proposal, which values Dragon Oil at 735 pence a share or 3.6 billion pounds ($5.6 billion) in total, was made to the company's independent committee, set up after ENOC made its first proposal, on May 14.

    It said the offer represented a substantial increase on its opening gambit and it believed it was fit to recommend to shareholders. Dragon Oil said it had received the offer and its committee was still considering it.

    "There is great uncertainty in the sector and we believe, as a long term and supportive shareholder, that Dragon Oil has achieved as much as is possible through its existing upstream strategy," ENOC Chief Executive Saif Al Falasi said in a statement issued shortly before Thursday's London stock market close.

    "Moreover, Dragon Oil stands to benefit significantly from being part of the integrated platform that ENOC offers. To that end, we want to ensure that all of Dragon Oil's shareholders have the opportunity to evaluate the proposal on its merits."

    ENOC said buying Dragon Oil would help it become a fully-integrated global oil and gas company, by adding the target's upstream operating experience.
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    UK offshore workers strike ballot to go ahead

    GMB Strike Ballot Goes Ahead After Talks Fail To Resolve Dispute Over Changes To Terms For Offshore Workers In UK Waters

    We did make some progress today but sadly not enough to enable us to go back to members with proposals to resolve this dispute says GMB.

    GMB and Unite officials held further talks on 20th May on the dispute over unilateral changes to working conditions for workers covered by the Offshore Contractors Agreement (OCA) in UK waters.

    David Hulse, GMB National Officer, said 'We did make some progress today but sadly not enough to enable us to go back to members with proposals to resolve this dispute.

    We will now have to proceed with organizing an official ballot for industrial action as the members asked us to do in a consultative ballot earlier this year.

    We will concentrate now on making the necessary arrangements to enable us to go ahead with EBRS for independent ballot for action. We remain available for talks should the employers want to pull back from going ahead with the unilateral changes to working practices that has provoked this dispute.'

    Bill Murray, chief executive of the Offshore Contractors' Association, said: 'We are extremely disappointed by today's decision by trade union officials to go to an industrial ballot.

    'The industry as a whole recognises the need to make efficiencies and increase productivity in order to extend the life of the UK North Sea and maintain jobs in the sector. The offer we put on the table today - worth between an extra £1,600 and £8,000 per annum per individual - can only be paid for through productivity increases.

    'In its World Economic Outlook the International Monetary Fund highlighted that the UK has the highest operating costs of any oil producing country in the world. Even as the barrel price recovers there are other parts of the world that will be better placed to take advantage of this if we don't manage our costs.'
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    This Innovation Will Help U.S. Companies Win The Oil Price War

    Although some US oil companies are struggling with low oil prices, a new wave of innovation is hitting the oil patch, allowing for a significant reduction in drilling costs.

    Now, one small Denver-based oil company has come up with a whole new model for producing in order to further drive down costs. Described as an 'oil factory,' Liberty Resources LLC and its CEO Chris Wright have developed a novel method for extracting oil. The firm is starting out by doing everything it can to eliminate the need for trucks traveling to and from its site. The company notes that trucks are often an irritant with local residents and more importantly, they add significantly to the cost of producing oil.

    To do that Liberty will build a series of pipelines to its massive 10,000 acre Bakken site. The firm has pipelines that carry water and gas produced by wells, as well as other pipelines to carry oil. This technique is called 'centralized resources' and while other firms like Continental have explored it to some extent, Liberty is pioneering the process. In essence, the firm is trying to bring the efficiency focus of industrial engineering to the production focus of petroleum engineering.

    In addition, like Statoil and a few other larger oil firms, Liberty is also focused on creating a production process than can be stopped and started based on optimal production times, costs, and oil prices. This could be an invaluable capability. Take Russia for example. Russian oil wells will freeze if they are shut down, and the country lacks significant storage capacity. As a result, Russian oil producers cannot respond to price downturns.

    Moreover, Liberty is developing the entire 10,000-acre site to be fracked at once with nearly a 100 oil wells operating simultaneously. By drilling multiple wells at once and controlling inputs and output supply, the firm has significant cost advantages versus traditional ad hoc production methods. Even employee costs are lower, with Liberty citing the use of a third less workers than a conventional production process.

    So what is the combined result of all these efficiency improvements? Liberty says it will still make money even with oil at $50 a barrel. And the firm expects costs to keep falling as oil service companies become more efficient and lower their own prices. At these prices and efficiency levels, US production becomes competitive with virtually any other oil source. And if efficiency gains continue at this pace, the US may weather the onslaught of Saudi oil much better than many expected.
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    LNG players think afresh in face of market 'disaster'

    When famed short seller Jim Chanos described the liquefied natural gas market last month as "a disaster waiting to happen", investors around the world took note.

    Fronting Woodside Petroleum's investor briefing on Thursday,  head of marketing and shipping Reinhardt Matisons told a different story.

    He put the flatlining of LNG demand over the past three years down to a lack of new supply entering the market. That is set to dramatically change, with more than 100 million tonnes of new supply - representing more than 40 per cent of the existing market - set to come on from new projects by 2020.

    Matisons acknowledged those lumpy chunks of new capacity would mean "volatile" prices as they are absorbed. But the longer-term picture still showed the need for major new investment, with demand more than doubling to about 500 million tonnes in 2030 from 240 million now.

    While there's no shortage of prospective LNG ventures aiming to capture that market, depressed oil prices will see off many of them, according to Woodside.

    In the world's biggest importer, Japan, demand is on the decline, but the expiry of several long-term contracts later this decade opens up a major opportunity for new sales. Meanwhile, the proliferation of new LNG importers, from Thailand to the Middle East, means plenty of untapped markets to target.

    Woodside is rounding out its emerging LNG trading business to take advantage, with boss Peter Coleman looking to sign up for capacity at LNG import terminals around Asia.

    Asia's tally of LNG import terminals, currently at 60, is set to surge, with 40 more under development. Access to capacity in a few of those is the missing piece in Woodside's trading division, which already involves a dedicated LNG tanker, LNG available for sale from within its expanding portfolio and through gas from a third-party plant in Texas.

    That US deal brings geographic and pricing diversity into Woodside's LNG portfolio, improving marketing prospects for projects like the Browse floating LNG venture in Western Australia.

    Woodside isn't the only local LNG player thinking of new ways to do business, with revelations from Santos this week that floating LNG may be back on the table for its Bonaparte gas resource off Australia's north. Costs could be halved to $US5 billion using the new design, which would use a plant mounted on a barge within Darwin Harbour, rather than on a larger vessel out in open seas, offering a lifeline to the otherwise stranded gas resource.
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    Bear Head LNG facility might not make it off the ground

    A U.S. energy consultant doubts a planned liquefied natural gas facility in Cape Breton will ever be built.

    The province has approved construction of a $4 billion plant in Richmond County.

    Barbara Shook, bureau chief of the Houston-based Energy Intelligence Group, says the region is competing with massive LNG projects in the U.S. that are ready to go

    "I just don't see how the Nova Scotia project can compete with somebody who actually has money, who actually has a contractor, who actually has customers, who actually has supply," she said.

    John Godbold, the project director for Bear Head LNG Corporation, sees big potential for exporting.

    The company wants to build a plant that would export eight million tonnes a year of liquefied natural gas.

    He says they're getting ahead of other projects in the region.

    "This final approval provides tremendous credibility in the global LNG market and really sets us apart from the others in terms of which project is really going to go ahead first," he said.

    Godbold says the company, with its Australian parent, is investing millions.

    The provincial approval means the company can now move to engineering design, look for customers and secure a source of natural gas.

    The company will make a final decision on going forward next year. Operations could start by 2019.

    Bear Head purchased the Point Tupper site from Anadarko Global Holdings Company in August for $11 million.
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    Inpex’s $34bn Ichthys LNG project due to open in late-2016

    Japanese oil company Inpex has announced that its $34bn Ichthys project is set to open in late-2016.

    Inpex chief executive Toshiaki Kitamura told the West Australian that the Ichthys project was 68% complete.

    Industry speculation is that the project may face potential delays and would fall short of budget in addition to timetable blowouts.

    Inpex is forging ahead with the project development with its 30% project partner Total.

    The Ichthys project, which secured development approval in January 2012, started the deepwater pipelay for its 889km-long gas export pipeline in February.

    The remaining 718km offshore section of the 42in diameter GEP will be laid by Saipem's deepwater installation vessel Castorone.

    As part of the project's ongoing offshore installation campaign, mooring installation works have started in May at the Ichthys Field in the Browse Basin, 220km offshore Western Australia.

    The first of 49 foundation piles, each 66m long and weighing more than 450t, was deployed and driven into the seabed at a depth of 250m.

    According to the company, the Ichthys LNG project had installed 47km of flowlines, more than 30 flowline sleeper structures and a 6,500t riser support structure in the Ichthys Field as of May 2015.
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    Oil Rout Spurs Canadian Pacific to Cut Shipments Forecast Again

    Canadian Pacific Railway Ltd. cut its forecast for moving crude by rail for a second time in four months because of production delays and lower demand for the commodity.

    This year’s total will probably be 100,000 to 140,000 carloads, Chief Operating Officer Keith Creel said Wednesday. Canadian Pacific had forecast 140,000 in January, a reduction from its original outlook of 200,000.

    “The 140,000 number is a question mark, I’ll just be honest about it,” Creel said at a Wolfe Research conference in New York. “We thought we were being conservative when we went from 200 to 140. The world has changed around all of us.”

    The prospect of an even steeper slide in oil shipments showed the widening fallout from the rout in crude prices, which have tumbled 45 percent since a 2014 peak of $107.26 a barrel. In the U.S., first-quarter oil carloads fell 14 percent from the fourth quarter, the Association of American Railroads said Wednesday without giving a tally for the Canadian carriers.

    Two customers, Exxon Mobil Corp. and Plains All American Pipeline LP, will send less crude by rail than first expected, Creel said. Exxon’s facility in Edmonton, Alberta, will rely more on pipelines, while shipments from Plains’ Kerrobert facility probably won’t start until September or October, rather than July or August, he said.

    “With those two headwinds, is 140 possible? Maybe,” Creel said. “It’s not, to me, going to be south of 100, based on the run rate that we see and with some of that business coming on line. So somewhere in between is what I would guesstimate.”
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    ExxonMobil encouraged by oil discovery offshore Guyana

    ExxonMobil recently discovered hydrocarbons offshore Guyana, while drilling the Liza-1 exploration well at the Stabroek block, located approximately 120 miles offshore Guyana. The oil discovery is significant, Exxon said.

    According to Exxon, the well was drilled to 17,825 feet (5,433 meters) in 5,719 feet (1,743 meters) of water with the Deepwater Champion drillship. Stabroek Block is 6.6 million acres (26,800 square kilometers).

    It was drilled by ExxonMobil affiliate, Esso Exploration and Production Guyana Ltd., and encountered more than 295 feet (90 meters) of high-quality oil-bearing sandstone reservoirs.

    “I am encouraged by the results of the first well on the Stabroek Block,” said Stephen M. Greenlee, president of ExxonMobil Exploration Company. “Over the coming months we will work to determine the commercial viability of the discovered resource, as well as evaluate other resource potential on the block.”

    The well was spud on March 5, 2015 and the well data will be analyzed in the coming months to better determine the full resource potential, the company said in the press release.

    Esso Exploration and Production Guyana Ltd. holds 45 percent interest. Hess Guyana Exploration Limited holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
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    Shale 2.0: The Coming Big-Data Revolution in America’s Shale Oil Fields

    With petroleum prices down 50 percent over the past year, many analysts and pundits are predicting the end of America’s shale oil boom.

    It is true that the oil-price collapse was caused by the astonishing, unexpected growth in U.S. shale output, responsible for three-fourths of new global oil supply since 2008. And as lower prices roil operators and investors, the shale skeptics’ case may seem vindicated. But their history is false: the shale revolution, “Shale 1.0,” was sparked not by high prices—it began when prices were at today’s low levels—but by the invention of new technologies. Now, the skeptics’ forecasts are likely to be as flawed as their history. Continued technological progress, particularly in big-data analytics, has the U.S. shale industry poised for another, longer boom, a “Shale 2.0.”

    John Shaw, chair of Harvard’s Earth and Planetary Sciences Department, recently observed: “It’s fair to say we’re not at the end of this [shale] era, we’re at the very beginning.” He is precisely correct. In recent years, the technology deployed in America’s shale fields has advanced more rapidly than in any other segment of the energy industry. Shale 2.0 promises to ultimately yield break-even costs of $5–$20 per barrel—in the same range as Saudi Arabia’s vaunted low-cost fields.

    Shale’s spectacular rise is also generating massive quantities of data: the $600 billion in U.S. shale infrastructure investments and the nearly 2,000 million well-feet drilled have produced hundreds of petabytes of relevant data. This vast, diverse shale data domain—comparable in scale with the global digital health care data domain—remains largely untapped and is ripe to be mined by emerging big-data analytics.

    Shale 2.0 will thus be data-driven. It will be centered in the United States. And it will be one in which entrepreneurs, especially those skilled in analytics, will create vast wealth and further disrupt oil geopolitics. The transition to Shale 2.0 will take the following steps:

    1. Oil from Shale 1.0 will be sold from the oversupply currently filling up storage tanks.

    2. More oil will be unleashed from the surplus of shale wells already drilled but not in production.

    3. Companies will “high-grade” shale assets, replacing older techniques with the newest, most productive technologies in the richest parts of the fields.

    4. And as the shale industry begins to embrace big-data analytics, Shale 2.0 begins.

    In recent decades, developed nations have spent hundreds of billions of government dollars trying, and failing, to invent a cost-effective replacement for petroleum. Yet without taxpayer largesse, American entrepreneurs invented a new method to extract astounding quantities of oil from rock, upending the global hydrocarbon trade in the process. In a world where oil still powers 95 percent of air and ground miles and will remain dominant for decades, this represents a very positive development.
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    BP settles oil spill-related claims with Halliburton, Transocean

    BP Plc has settled with oilfield services provider Halliburton Co and contract driller Transocean Ltd cross claims related to the 2010 Gulf of Mexico oil spill, the worst offshore disaster in U.S. history.

    BP still faces a potential fine of up to $13.7 billion under the U.S. Clean Water Act.

    Transocean, which owned the Deepwater Horizon rig, had settled its Clean Water Act liability for $1 billion. The U.S. government never sued Halliburton under the Act, one person familiar with the case said.

    "We have now settled all matters relating to the accident with both our partners in the well and our contractors," BP spokesman Geoff Morrell said in an email.

    Transocean said BP would pay the company $125 million in compensation for legal fees it incurred, adding the companies will mutually release all claims against each other.

    The company added BP will also discontinue its attempts to recover as an "additional insured" under Transocean's liability policies that will accelerate the company's recovery of about $538 million in insurance claims.

    Transocean also said it would pay about $212 million to a fund set up to pay out claims to people and businesses harmed by the spill, subject to the approval by U.S. District Court for the Eastern District of Louisiana.

    "We applaud Transocean for adding to the settlement funds established in the Halliburton settlement to help compensate people and businesses for their losses," said co-lead plaintiffs' attorneys, Stephen Herman and James Roy.

    Transocean said it intends to make the payments using cash on hand.

    In September, a U.S. judge ruled that BP was mostly at fault and that Transocean and Halliburton were not as much to blame.

    Halliburton, which did the cementing work for BP's well, had earlier blamed BP's decision to use only six centralizers for the blowout that spilled millions of barrels of oil for 87 days.

    Halliburton said in September that it reached a $1.1 billion settlement for a majority of claims related to its role in the oil spill.

    London-based BP has already taken $43.8 billion in pretax charges for clean-up and other costs.
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    Woodside sees Browse LNG opening in 2021 at earliest

    Woodside Petroleum expects the long-delayed Browse gas project off Australia to be commissioned in late 2021 at the earliest, after pushing out a final investment decision to the second half of 2016, its chief executive said.

    Browse is one of four key growth projects for Woodside alongside the Kitimat LNG project in Canada and Wheatstone LNG off Australia, which it bought with some oil assets from Apache Corp this year for $3.6 billion.

    Woodside and its partners last December postponed a decision on the Browse floating liquefied natural gas (FLNG) to mid-2016. On Thursday it said a sign-off is now expected in the second half of next year.

    Some costs on Browse, previously estimated at $45 billion when it was designed as a land-based project, have been cut by between 15 and 30 percent, the company said.

    Chief Executive Peter Coleman said Woodside was well positioned to pounce on opportunities like the Apache deal in contrast to most companies in the industry that are reining in spending and selling assets to cope with an oil price slump.

    "We're in a great situation here at Woodside with our balance sheet and the activities in front of us to put some real distance between ourselves and our peers over the next couple of years," Coleman said.

    Alongside Browse, Kitimat and Wheatstone, Woodside is speeding up work on its Greater Enfield project, a development of some oil fields off Western Australia that were previously seen as uneconomic, but which can now be developed more cheaply as rig and subsea hardware costs have fallen.

    The company now aims to make a final investment decision on Greater Enfield in 2016.

    It is also stepping up exploration, with drilling off South Korea, Myanmar and Cameroon, to help rebuild its reserves and improve the balance of oil and gas in its portfolio, which is heavily skewed to gas.

    "We've got lots of choices in front of us," Coleman said.
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    U.S. motorists continue driving surge in March

    U.S. motorists drove a record number of miles in March, continuing a surprising road renaissance that has now spanned more than a year, newly released U.S. government data shows.

    Motorists logged 261.7 billion miles on U.S. roadways in March, the most ever for the month and a 3.9 percent bump over the year-ago month, according to data released Wednesday by the Federal Highway Administration.

    March marks the 13th consecutive month of year-on-year growth.

    The surge in vehicle miles traveled comes amid a growing U.S. economy and a drop in U.S. gasoline prices, which averaged $2.40 per gallon in March, about $1 dollar cheaper than the year prior.

    Americans' driving habits are watched closely by oil traders, since U.S. gasoline demand accounts for about one-tenth of global oil demand.
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    Total starts gas, condensate production from Russian Arctic field

    Total SA has started production of gas and condensate from onshore Termokarstovoye field in the Yamalo-Nenets autonomous district in the Russian Arctic. The field will produce 6.6 million cu m of gas and 20,000 b/d of condensate, or a combined 65,000 boe/d, the company said.

    Total’s Arctic-adapted infrastructure in the field includes a gas gathering network, a gas treatment plant, a gas condensate de-ethanization plant, and export pipelines.

    Total developed Termokarstovoye field under a joint venture with OAO Novatek, Russia’s largest independent gas producer (OGJ Online, June 25, 2009). The JV company, Terneftegas, operates the field with Novatek holding 51% and Total 49%.
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    Summary of Weekly Petroleum Data for the Week Ending May 15, 2015

     U.S. crude oil refinery inputs averaged over 16.2 million barrels per day during the week ending May 15, 2015, 245,000 barrels per day more than the previous week’s average. Refineries operated at 92.4% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.7 million barrels per day. Distillate fuel production decreased last week, averaging over 4.8 million barrels per day.

    U.S. crude oil imports averaged 7.2 million barrels per day last week, up by 318,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.0 million barrels per day, 0.4% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 542,000 barrels per day. Distillate fuel imports averaged 227,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.7 million barrels from the previous week. At 482.2 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 2.8 million barrels last week, but are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 0.5 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories rose 2.6 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 2.1 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.7 million barrels per day, up by 3.9% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.0 million barrels per day, up by 1.1% from the same period last year. Distillate fuel product supplied averaged over 4.1 million barrels per day over the last four weeks, up by 1.6% from the same period last year. Jet fuel product supplied is up 6.5% compared to the same four-week period last year.
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    Wintershall ceases activities in Qatar due to lack of access to local infrastructure

    Wintershall is ceasing its activities in Qatar and is returning Block 4 North near the North Field off the Qatari coast on 25 May 2015. Wintershall's office in Doha will be closed. In 2013, Wintershall made the 'Al Radeef' gas discovery off the cost of Qatar.

    'During the development planning, it was always clear to us and our partners that an economic development of the discovery, including the processing of the gas, would only be possible if we have access to local infrastructure. This access was not granted. That is why we have decided to take this step', explains Wintershall Board Member Martin Bachmann, who is responsible for exploration and production in Europe and the Middle East.

    Further activities in the Middle East region are not affected by the withdrawal from Qatar. The current focus of Wintershall is on the United Arab Emirates. 'We are also closely following the developments in other countries in the region', explains Bachmann. 'The challenges in the region are increasing with local energy consumption growing rapidly. In order to maintain production in the long term, fields must be exploited more efficiently and technically more complex fields need to be developed.'

    Wintershall has considerable experience in deploying 'Enhanced Oil Recovery' (EOR) technology, which is used to increase the yield from complex reservoirs, especially in mature fields in Germany and Europe. 'In combination with modern exploration techniques, it is precisely this experience that we want to increasingly utilise in the Middle East region.'
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    Venezuelan Investors Seek to Block Alfa Bid for Pacific Rubiales

    A group of Venezuelan investors known as the O’Hara Administration say they may buy additional shares in Pacific Rubiales Energy Corp. to block a bid for the company by Alfa SAB and Harbour Energy Ltd.

    “In opposing the proposed acquisition, O’Hara may take any and all actions it considers advisable, including acquiring additional common shares of Pacific Rubiales, communicating with other shareholders, soliciting proxies and retaining its own financial, legal and proxy solicitation advisers,” the group said Tuesday in a statement released on Marketwired.

    O’Hara and its partners, who own about 19.5 percent of the issued and outstanding common shares of Pacific Rubiales, said it doesn’t currently plan its own bid for the company. The group opposes the C$6.50 a share bid from Alfa and Harbour, which it says is too low.

    Pacific, which trades in both Toronto and Bogota, said May 5 that Alfa and Harbour had offered to buy all of the issued and outstanding common shares not owned by Alfa for about C$2.1 billion ($1.7 billion).

    The two sides have held exclusive talks as Alfa, a San Pedro Garza Garcia, Mexico-based conglomerate, seeks to expand its oil business as its home nation opens production to foreign investment.
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    Saudi Arabia, partners turn down Chinese requests for extra oil

    Saudi Arabia and its main Middle East OPEC partners are turning down Chinese requests for extra oil as they hold back fuel for their own refineries just as demand from the world's biggest crude importer hits new records.

    While the Saudi and other refusals for additional crude supplies may not be part of a new pricing strategy, the rejections to their biggest client help explain a 40 percent rise in oil prices this year as Chinese importers have had to seek more oil from other suppliers in what analysts say is still an oversupplied market.

    Senior Chinese oil traders told Reuters the Saudis have turned down requests from Chinaoil and Unipec - the respective trading arms of PetroChina and Sinopec - for extra cargoes of crude for May and June loadings, forcing them to seek supplies from producers in West Africa, Oman and Russia.

    Saudi Arabia "used to provide as and if we asked for extra cargoes on top of contract during the first four months of the year, but not for May and June," said a trader with one of China's biggest oil importers on condition of anonymity as he had no permission to talk to media.

    Another source with a Chinese refinery that takes Saudi oil said Saudi heavy crude was "a bit tight" in May and June.

    Reuters pricing and trade flow data show a 40 percent rise in Brent crude since January has coincided with a more than 10 percent fall in overall Middle East supplies to China C-CN-ME-FZ, although in historical terms they remain high.

    "Our analysis shows that Saudi flows to China have fallen quite a bit in May and their overall market share in China has also fallen," said Yan Chong Yaw, Director of Thomson Reuters Oil Research and Forecasts in Asia.

    The research group's latest China crude report shows Saudi Arabia's share of Chinese imports dropped to just over 30 percent in May from 36.5 percent in April.

    Saudi Aramco, which was not available for comment, had already reduced contractual supplies to some Japanese and South Korean customers in April.

    The trader with one of China's big importers said requests for more crude to Kuwait and the United Arab Emirates - Saudi Arabia's closest partners in the Organization of the Petroleum Exporting Countries (OPEC) - were similarly turned down.

    Behind the stingier responses to requests for more oil lie mostly domestic factors. Saudi Arabia has traditionally been an exporter of crude oil but an importer of refined products.

    That's changing. Its new 400,000 bpd Yasref refinery became fully operational in April, taking in Saudi heavy crude oil to produce and export petroleum coke, diesel and gasoline.

    Saudi Aramco started up its Jubail refinery of the same size last year and also plans to build a third 400,000 bpd facility by 2018.

    Other Middle Eastern producers such as the UAE's Abu Dhabi National Oil Co are also ramping up refineries, and the region is entering its peak burning season in which it uses more crude to generate power for air-conditioning.

    "Over the summer, Middle East producers, particularly Saudi Arabia and Abu Dhabi, will have limited additional barrels for sale as new refineries continue their ramp up and increased summer burn absorbs supply," said U.S.-based research and analysis provider Pira Energy.
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    Energy explorers bemoan cost of labour disputes in Argentina

    Labour disputes are on the rise in Argentina and costing foreign energy companies millions of dollars as they explore the country's vast but barely-tapped Vaca Muerta shale oil and gas field, company officials said.

    Trade Unions are a powerful force in Argentina, Latin America's No. 3 economy, where the frequency of industrial disputes are a deterrent to explorers already unsettled by President Cristina Fernandez's heavy-handed trade and currency controls.

    Argentina's state-run energy company YPF estimates $200 billion is required over the next decade to exploit Vaca Muerta, which covers an area the size of Belgium, but so far foreign firms have made little more than foothold investments.

    "In the last few years labour disputes have cost us in the region of $10 million, enough to drill a well," Maximiliano Hardie, venture lead and operations manager at Shell Argentina, said at an industry conference in Buenos Aires.

    "Between 2013 and 2014 the number of strike days, and therefore the amount of unproductive time, increased," he said.

    Years of under-investment in Argentina's energy sector have left the South American country a net energy importer. Mired in a decade-long debt battle, the cash-strapped country needs the deep-pockets of energy companies like Chevron Corp, Royal Dutch Shell and Exxon Mobil.

    Investor confidence is unlikely to improve before October's presidential election. Fernandez is constitutionally barred from a third straight term and the three front-running aspirants all tout more investor-friendly policies.

    Javier Iguacel, vice president of business development at Pluspetrol, told the conference an explorer's survival depended on maximizing drilling time.

    "And for this, changes are needed. We have to be working 365 days a year, 24 hours a day," Iguacel said.

    The next disruption, however, is likely to come in the next few weeks.

    An official at Argentina's main oil workers union, the Private Oil and Gas Union of Rio Negro, Neuquen and La Pampa, on Tuesday told Reuters that members would take part in a national strike that is expected to take place in early June.

    The government is currently locked in lengthy negotiations with big business and unions over the size of salary increases in the face of one of the world's highest inflation rates.
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    Flood of new cash sustains US oil firms; energy deal makers gripe

    U.S. oil companies, still smarting from the crude price rout, are attracting a wave of new investment from unlikely sources - hedge funds and private equity firms flocking to the energy market for the first time to bet on a rebound.

    By pouring billions of dollars into energy shares and bonds in the past few months these newcomers, dubbed "energy tourists" by Houston's seasoned dealmakers, have thrown a lifeline to scores of companies that a few months ago looked like potential targets for bigger rivals or distressed debt and restructuring specialists.

    "You've got generalist funds that have never invested in energy coming out of the woodwork," Michael Ames, an energy investment banker at Raymond James, told a meeting of oil and gas executives this month.

    So far this year, 40 oil and gas companies raised $18.7 billion in new share sales, while 35 firms issued $26.4 billion in debt in the first four months, Thomson Reuters data show. The share sales are the highest in at least 15 years while bond issuance is on track to be the heaviest in three years. Ames estimated private equity firms have raised about $35 billion in dedicated U.S. energy sector funds in the past six months.

    Among those that see opportunity in energy are distressed investor Marc Lasry at Avenue Capital Group and hedge fund Och Ziff Capital Management Group LLC.

    With record-low interest rates and stock indexes near record highs, energy assets are one of the few sectors to offer a significant upside because of heavy losses of more than 50 percent suffered during the crude price slide, investors say.

    But local veterans, mindful of past busts, worry a 34 percent rise in U.S. crude since mid-March to nearly $60 a barrel might not continue. Some also point out that debt and equity valuations imply oil prices of $85 to $90 and warn of an industry shakeout if crude prices stall.

    "There's too much money in the system," said one principal at a private equity firm that has long owned oil assets but is holding off now. "We're not living in a world of reality right now."

    He and others question the newcomers' ability to fully assess the risks involved in investing in the sector. The manager recalled how one investor asked him recently to explain how to calculate the worth of oil acreage. "That's like showing up at the Masters and asking how to play golf," he said.

    Yet the buyers say the sell-off in energy stocks was a classic case of market overshooting. They argue that over the next decade demand for oil will grow, fueled by emerging economies' rising energy use.
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    Chevron Australia boss Roy Krzywosinski sounds fresh warning on LNG

    Chevron's head in Australia, Roy Krzywosinski, is set to sound a fresh warning about a lack of progress on improving the competitiveness of its LNG industry, which is threatening a potential $100 billion of projects in the pipeline, especially given the drop in oil prices.

    "As we look ahead, we need to claw back competitiveness and create the investment environment here in Australia that helped us harness the gas boom in the first place," he will tell the APPEA oil industry conference in Melbourne on Wednesday.

    "We can no longer rely on strong commodity prices to bail us out."

    Chevron, which is leading $80 billion of investment in two LNG projects in Western Australia, Gorgon and Wheatstone, has repeatedly raised the alarm over rigid and inflexible industrial relations systems, uncompetitive taxation, red and green tape, high labour costs and inadequate productivity. Its $US54 billion Gorgon project, due to start up later this year, has run $US17 billion over budget.

    The Gorgon partners, which include Shell and ExxonMobil, have delayed moving ahead with an expansion as they focus on bringing the foundation project into production.

    Mr Krzywosinski is also set to raise concerns about the service sector's ability to cope with the rapid surge in LNG production in Australia as the plants built in the $180 billion wave of construction move into production. Australia's LNG sector is set to go from seven producing LNG units to 21, including one floating LNG venture, within little more than two years. The projects will require hundreds of millions of dollars a year of investment, in operations, maintenance and upstream work.

    "The industry's capacity has never before been stretched or tested with the addition of 13 new gas trains," he says.

    Forging a successful services industry, is not just a matter for that sector, but for everyone in the industry. It "requires all hands on the wheel," Mr Krzywosinski will say.

    An updated study by ACIL Tasman carried out for Chevron on the economic benefit of the Gorgon and Wheatstone projects has found that they will contribute more to GDP than originally expected. Across the life of the projects, the GDP contribution from Gorgon is now expected to be about $400 billion, with another $150 billion from Wheatstone.

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    Gazprom Trims 2015 Gas Production Plan Again

    Russia's top natural gas producer Gazprom has cut its 2015 production plan to 450 billion cubic metres (bcm) after warmer weather hit demand, company officials said on Tuesday, the second such downward revision in a week.

    The forecast is still higher than the 444.4 bcm of gas the company produced last year, an all-time low. Last Thursday, Gazprom had revised its production plan for 2015 to 471 bcm.

    "In total we expect around 450 billion (cubic metres) this year," said Vsevolod Cherepanov, a member of Gazprom's management board.

    Vitaly Markelov, another management board member, said Gazprom had suffered from a mild winter, which hit gas demand.

    As of 0900 GMT on Tuesday, Gazprom's shares were down 1.1 percent, underperforming the broader Moscow stock market which lost 0.65 percent.

    Gazprom, which accounts for 8 percent of Russian gross domestic product, has faced stiff rivalry from other domestic gas producers, such as Novatek, as well as from sluggish demand in Europe.

    Sberbank CIB investment bank says Gazprom's rivals have almost doubled their share of the Russian gas market to 35 percent in 2014 from 18 percent in 2009.

    Gazprom said gas pipes initially ordered for the South Stream underwater pipeline that was scrapped in December would now be used for its planned replacement, Turkish Stream.

    Gazprom reached an agreement with Turkey to start gas supplies via the Turkish Stream pipeline in December 2016. It plans to start laying pipes for the project in early June.

    Gazprom plans to supply up to 63 bcm of gas per year via Turkish Stream and to create a gas hub on the Turkish border with Greece, through which it wants to transit 47 bcm annually.

    - See more at:
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    Natural gas rises in prominence

    The IEA has called this era “the golden age of natural gas,” and for good reason. Consumers are increasingly choosing natural gas for its versatility, efficiency and availability as well as its cleaner-burning properties. Global demand for natural gas is projected to rise by 65 percent from 2010 to 2040, the largest volume growth of any energy source. We expect half of that increase will come from the Asia Pacific region, particularly China.

    Natural gas resources are abundant and geographically diverse. Like oil, estimates of recoverable gas have grown over the last decade as the application of horizontal drilling and hydraulic fracturing technology has enabled economic extraction of unconventional gas resources that were previously considered too difficult or too costly to produce. The IEA estimates the world’s remaining recoverable natural gas resources to be about 28,500 trillion cubic feet (TCF) as of year-end 2013 – more than 200 times the natural gas the world currently consumes in a year.

    Full article:
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    Platts Japan-Korea Marker for June-delivered LNG fell 3.5% : A short idea.

    Prices of spot liquefied natural gas to northeast Asia averaged $7.12 per million British thermal units for June, according to latest Platts Japan/Korea Marker data for month-ahead delivery.

    The Platts Japan/Korea Marker is an assessment of LNG prices for spot cargoes delivered to Japan and South Korea, based on the most recent trades and/or bids and offers from buyers and sellers in the open market prevailing at the close of the trading day.

    According to Platts the marker slid 3.5% month over month as demand from end-users remained slow even in the run up to the traditionally stronger summer season – a time when demand from electricity generators rises as air conditioning use increases in the northern hemisphere.

    The Japan/Korea Marker opened the trading month at $6.875/MMBtu, and climbed 15 cents before falling back as prices in alternative markets – such as the UK onshore National Balancing Point (NBP) values – fell.

    Abundant availability from projects in Malaysia, Indonesia, Brunei and Nigeria was largely absorbed by traders and sellers who were looking to cover short positions in both the Atlantic and Asia Pacific basins.

    Coupled with many buy tenders released by newer entrants to the market, a brief production outage at Australia's North West Shelf LNG facility and a rally in NBP values – stemmed the losses on JKM and began to reverse the downtrend.

    The Japan/Korea Marker closed at $7.425/MMBtu as a result, with the bulk of increase seen towards the end of the end of the assessment period. However, prices struggled to move beyond the $7.50/MMBtu mark in northeast Asia, as end-users were seen to be under no pressure to procure cargoes.

    "The North West Shelf outage, coupled with an existing force majeure in Yemen LNG, didn't appear to have much of an impact on the end users," said Stephanie Wilson, managing editor of Asia LNG at Platts. "In fact, it may have actually provided some respite, as many market participants in Japan and South Korea are heard to be grappling with high inventories. Buyers appear to have ample term deliveries and have taken an opportunistic stance in their purchasing."    

    This was particularly apparent in India, which remained the premium market in the Asia Pacific basin. Importers had released numerous tenders for June-delivery and retendered for prompt cargoes when they were unable to find prices that matched their expectations.

    However, with NBP closer to $6.70/MMBtu by the end of the trading month, Indian buyers were forced to show higher bids in order to tempt cargoes over from the Atlantic.

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    San Leon Rawicz-12 update and field reserves

    Following the Company's announcements dated 25 February and 6 March 2015, describing the highly positive preliminary well test results for Rawicz-12, Ryder Scott Company has finalised a Competent Persons Report ('CPR') on the Rawicz Gas field for Palomar Natural Resources ('PNR'), the operator. Ryder Scott has issued an estimate of the gross Proved plus Probable (2P) reserves for the Rawicz field of 50.3 billion cubic feet (Bcf) based upon a five-well development plan (including the Rawicz-12 well). Both San Leon and PNR expect to move reserves to Proved (1P) based upon a signed gas contract, which is currently under negotiation. All estimates produced by Ryder Scott comply with the 2007 Petroleum Resources Management System (PRMS) prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (SPE).

    PNR, together with the Company, is currently in the advanced stages of the planning and design of several development scenarios focused on bringing gas online in early 2016. A development plan will be submitted to the Polish regulators, based on the CPR. The current development plan is based upon building a scalable central processing facility to handle the gas production from adjacent prospects on the Rawicz Concession, which PNR estimates to be in excess of 100 Bcf.

    The Rawicz project is operated by Palomar Natural Resources with 65% equity, and San Leon has no up-front drilling costs for its 35% equity share of the first two wells.

    Oisin Fanning, San Leon Energy Executive Chairman, commented:
    'We are quickly moving forward with the development of the Rawicz gas field, and the confirmation of reserves from the CPR is a very positive step. San Leon and PNR are focused on first production and expanding our development using modern drilling and completion technology to unlock the significant remaining reserves in this under-explored basin, where some of the best gas prices in Europe can be found.'
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    China looks to secure 1st U.S. LNG supplies from Cheniere by 2020

    Chinese buyers are eyeing long-term supplies of liquefied natural gas (LNG) from U.S. company Cheniere Energy, an official from the firm said on Tuesday, in what would be the first LNG deal between the world's two biggest energy users.

    Cheniere Energy is set to become the first U.S. LNG exporter, with shipments to start by the end of this year. However, no Chinese companies have signed up for any U.S. LNG cargoes so far.

    That could change soon: "There's a lot of interest from Chinese buyers for long-term LNG volume, especially for 2020 onwards," said Nicolas Zanen, Vice President for Asia at Cheniere Marketing Pte Ltd, a wholly owned subsidiary of Cheniere Energy Inc.

    Zanen said that some Chinese buyers had already begun moving to secure supplies, although without providing any details.

    "The Chinese market is a very interesting market for us. I wouldn't be surprised if in the future we are delivering LNG to China. And not necessarily small buyers, big buyers as well," said Zanen on the sidelines of the Asia Oil and Gas Conference in Kuala Lumpur, declining to give more information.

    Zanen made the comments following recent controversy in the United States about American companies contracting to ship LNG supplies to China.

    The United States, which is seeing demand for new exports despite an emerging glut, is set to become the world's third biggest exporter of LNG by 2020, behind Qatar and Australia.

    Australia's LNG export capacity is set to more than triple to 86 million tonnes a year before 2020, compared to Qatar's annual 77 million tonnes and U.S. expectations of selling 61.5 million tonnes per year by 2020.
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    Eagle Ford drilling will get a lot cheaper by mid-2016

    Pumping a barrel of oil out of the Eagle Ford Shale could get $10 to $15 cheaper by summer 2016 as service companies cut costs and operators tune up their wells, analysts say.

    The oil slump hasn’t stopped producers in the South Texas play from getting better at targeting oil-rich rock in lateral sections of their horizontal wells, speeding up their pressure pumping systems and adopting better technologies for bringing wells into production.

    Those efforts could help lift wells’ initial production rates by an average 33 percent in the Eagle Ford, even as service companies cut prices for drilling tools, proppant and rigs by an average 16 percent this year, Wood Mackenzie analysts said.

    Those two factors could bring the Eagle Ford’s breakeven oil price down from $56 to as low as $41 a barrel by June next year, putting millions more barrels within reach for producers. Similar trends are emerging in the Bakken Shale in North Dakota and the Permian Basin in West Texas.

    “The death of the unconventional business has been greatly exaggerated,” Wood Mackenzie analyst Cody Rice said. “Operators can still make money in the best portions of the best plays in the lower 48.”

    Oil production across the United States, according to the energy research firm, is likely to grow by 675,000 barrels a day this year, about half of the production growth rate in 2014. But even with crude prices at $55 a barrel, the industry can still afford to scoop up nearly 23 billion barrels of U.S. shale oil, and there are 20,000 prime spots in the Eagle Ford that haven’t been drilled yet.

    So while the oil slump has curbed drilling activity, the industry is improving how it gooses oil. In the Eagle Ford, producers are fracturing shale rock using 55 percent more proppant and 50 percent more water than they were a few years ago, and they’ve adopted the cement lining of the so-called plug-and-perf system, one method of completing wells.

    Oil companies have cut their U.S. shale spending from last year’s $96 billion to $60 billion this year, but a dollar will go a lot further in the oil patch next year if the service companies’ cost cuts hold out, Wood Mackenzie analyst Ben Shattuck said.

    More than half of the service cost reductions are expected to come from drilling tools, drilling services, proppants and rigs. They’re expected to cut costs around 15 percent to 20 percent this year around the United States, but some operators are getting discounts as high as 50 percent. For instance, the price of Wisconsin’s white sand used in hydraulic fracturing has been cut in half in places like the Bakken.

    The Wood Mackenzie analyst said all of this is better news for private companies, small to mid-sized public explorers and independent producers than it is for the oil majors and national oil companies. Small to mid-sized firms own roughly 7o percent of the remaining resource the research firm has estimated in the shale plays, and larger firms tend to own acreage on the fringes of the plays.
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    BP Plans to Sell Part of Its Stake in Australian Oil Venture

    BP Plc plans to sell part of its oil project off southern Australia, before an exploration campaign that’s slated to start late next year at a cost of more than A$1 billion ($800 million).

    BP wants to cut its stake to between 40 percent and 50 percent from 70 percent, with the sales process starting in the second half this year, Bryan Ritchie, vice president of exploration for Asia Pacific, told reporters Tuesday in Melbourne. Statoil ASA owns the rest of the project in the Great Australian Bight.

    “We’ve had a number of companies speaking to us, and hopefully some of the companies will see the potential we see,” he said. “There’s a big opportunity there.”

    The U.K. energy giant is planning to drill in a region it has described as “the last big unexplored basin in the whole world.” It faces oppositionfrom environmentalists worried about the potential for an accident five years after the Gulf of Mexico oil spill.

    BP is also looking for opportunities to work with other companies exploring in the Bight to potentially save money and make their operations more efficient, he said.

    Chevron Corp. and Santos Ltd. are among other companies with holdings in the region.

    The company plans to start drilling in October 2016, Ritchie said earlier in a speech at the Australian Petroleum Production & Exploration Association conference. BP expects to drill a second well and pause before proceeding with another two wells, he said.
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    BP agrees to cut spending on Iraq's Rumaila field after oil price drop

    BP has cut its development budget for Iraq's giant Rumaila oilfield by $1 billion this year after the government warned a slump in crude prices and its battle against Islamic State was making it difficult to pay oil companies.

    The British oil major has agreed with Baghdad to reduce its 2015 spending on the country's largest oilfield to $2.5 billion, from the initially planned $3.5 billion, an industry source familiar with the matter said on Monday.

    International firms operate in Iraq's southern oilfields under service contracts, whereby they are paid a fixed dollar fee for volumes produced.

    But the arrangement has put Baghdad's coffers under immense strain, as a dramatic drop in crude prices since last summer has hammered the revenue it receives from selling oil.

    Oil companies have proposed millions of dollars of budget cuts, a senior Iraqi oil ministry official told Reuters in March.

    It came after the government - wary of a boost in production costs that would further stretch state finances - asked them to revise development plans by considering postponing new projects and delaying already committed undertakings.

    Production from Rumaila is expected to remain steady at around current levels of about 1.4 million barrels per day in 2015.

    Foreign oil companies, already complaining of infrastructure constraints, say they see little chance of a rise in Iraqi production this year or even next.

    Iraq's inability to increase output as fast as it has previously announced could help ease the global oil glut more quickly than anticipated and thus support prices.

    The OPEC producer sought to renegotiate the terms of its contracts with international oil companies.

    In a series of letters sent to companies such as BP, Royal Dutch Shell, ExxonMobil, Eni and Lukoil since January, the oil ministry set out the need for change in response to "the rapid drastic decrease in crude oil prices".

    Attached Files
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    Saudi oil exports reach nine-year high

    Saudi Arabia shipped more crude in March than in any month since November 2005 as the world’s biggest oil exporter battled for market share amid a global glut.

    The kingdom exported 7.9 million barrels a day of crude, up 548,000 barrels a day from February, according to figures published Monday on the website of the Joint Organisations Data Initiative.

    Iraq, the largest producer in OPEC after Saudi Arabia, shipped 2.98 million barrels a day in March, the most since at least January 2007 when it began submitting data to the initiative known as JODI.

    Saudi Arabia and Iraq boosted exports as the Organization of Petroleum Exporting Countries pumped above its official target for the 11th consecutive month in April, data compiled by Bloomberg show. Middle Eastern producers are competing with cargoes from Latin America, North Africa and Russia for sales in Asia, and competition has intensified since OPEC decided on Nov. 27 to keep its output target unchanged at 30 million barrels a day. The group is to meet next on June 5 in Vienna.

    Saudi Arabia produced 10.29 million barrels a day in March compared with 9.64 million in February, according to JODI. The country’s output in the month was the highest since at least January 2002 when JODI started collecting statistics from governments.

    Saudi Arabia burned 351,000 barrels day of crude in March to generate electricity, an 11 percent increase from February, according to the JODI website. The nation processed 1.91 million barrels a day in domestic refineries in March, the lowest level since November last year, the data showed.
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    LNG's adverse impact on Petronas and Malaysia

    The earnings of state-owned Petroliam Nasional Bhd (Petronas) and the country’s current account are expected to come under pressure in the next few months due to the steep drop in the average price of spot liquefied natural gas (LNG).

    LNG prices track crude oil prices and have more than halved, with the average spot price down as of April to US$7.60 mmbtu (million British thermal units)since oil prices started their downward descent last July.

    LNG makes up two-thirds of Petronas’ total oil and gas production, and with contract agreements up for renewal, analysts pointed out that earnings would be hit.

    The average price of spot-LNG in July 2014 was US$13.8MMbtu, and prices rose slightly to US$15.1mmbtu as of Dec 2014. It started adjusting early this year, and as of April, it stands at US$7.9mmbtu.

    Economists believed that the country would face a current account (CA) deficit in the second quarter if countracts negotiated were not favourable.

    Citigroup Inc economist Kit Wei Zheng warned that headwinds from lower oil prices, which have not been as severe based on first-quarter gross domestic product (GDP) data, could increase going forward.

    “The impact of weaker LNG prices on the CA should be maximum in the second quarter, and the CA surplus should recover in the second-half for leading to a full year surplus of 3.2% of GDP,” he said in a report following the release of Bank Negara’s first-quarter GDP data last Friday.

    In 2014, Petronas produced a total of 1,358 kboe (kilo barrel of oils equivalent) of gas out of a total of 2,226 kboe of oil and gas. Gas made up 61% of Petronas’ total oil and gas production that year.

    The LNG sales volume that year increased 4% to 30.12 million tonnes from 28.85 tonnes in 2013, driven by higher trading volume and higher sales from the Petronas LNG complex in Bintulu, Sarawak.

    Not only would that have implications on Petronas earnings, but Petronas’ contributions to government revenue could be impacted. Petronas contribution had dropped to about 22%, from 30%.

    In 2012 and 2013, when the going was still good and Brent crude stood above US$100 per barrel, Petronas had contributed RM80bil and RM73.4bil respectively to the Government.

    For 2014, that contribution has been estimated to drop to around RM68bil with Brent averaging US$99 a barrel. The contribution for 2015 would decrease further with Brent oil now hovering at the US$60 level.

    Petronas had earlier estimated that Brent crude would be about US$55 per barrel for 2015. Brent crude has now recovered slightly to the US$66 level.

    Besides the implications to Petronas earnings and the Government’s revenue, economists have pointed out that the drop in LNG prices could potentially impact Malaysia’s CA surplus.

    However, a Petronas official said recently that the national oil company has a long-term approach to the LNG business, with supply security part of contract negotiations, which could be signed for up to 20 years in some cases.
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    Marathon Oil seeking bids in East Africa onshore blocks

    Marathon Oil is said to be seeking bids for its interest in four onshore exploration blocks in East Africa.

    The company is looking to focus on its blocks in the US shale formations.

    Marathon, like a number of other US oil and gas companies, plans to direct more capital into formations such as the Eagle Ford in South Texas.

    Production growth in the region tends to give higher returns.

    The company will be taking offers for all or part of the properties located in Ethiopia and Kenya according to reports.
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    Tokyo Gas targets more U.S. shale gas investments -exec

    Tokyo Gas Co Ltd, Japan's biggest gas utility, is looking to invest in more U.S. shale gas production as a hedge to liquefied natural gas (LNG) imports from the United States to start next year, a company executive said on Monday.

    The company has inked contracts to buy 1.9 million tonnes per year (tpy) of LNG from U.S. producers and aims to invest in an equal volume in the upstream sector, said Shigeru Muraki, a board member and executive adviser at Tokyo Gas.

    "We try to expand our investment in the shale gas production in the United States. That can be the natural hedge for LNG," he told reporters on the sidelines of an industry conference.

    The company has contracted to buy 1.4 million tpy of U.S. LNG from the Cove Point project, which will start shipments in the second or third quarter next year, and 0.5 million tpy from Mitsui & Co's Cameron project, he said.

    In 2013, Tokyo Gas bought a stake in a shale gas field in Texas' Barnett Basin from Quicksilver Resources that would give it 0.35 million to 0.5 million tpy of gas output.

    Companies seeking to attract investments in U.S. shale projects are offering terms that could work even after oil prices fell, he said, citing a project proposed last month in Houston that would yield fixed revenue of $11 per million British thermal units (mmBtu) for deliveries by ship to Asia.

    Muraki said U.S. gas delivered to Asian destinations is competitive to oil-indexed supplies when oil is at $70 a barrel, but loses its cost competitiveness at $50 a barrel.

    LNG is expected to remain in oversupply through 2020, Muraki said, citing slower growth in China and a possible demand drop of 20 million tpy in Japan once it restarts 24 nuclear reactors.
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    BHP puts Aus LNG project with Exxon on back burner

    BHP Billiton is putting its Scarborough liquefied natural gas project with Exxon Mobil Corp. in Australia on the back burner amid lower prices and increasing competition from the US.

    “LNG prices are down quite a bit from last year,” Tim Cutt, BHP’s petroleum president, told reporters Monday in Melbourne. “We’re probably not moving quite as quickly as we were last year, but it’s still a very important asset” that will be developed at the right time, he said.

    A plunge in oil has forced companies from Royal Dutch Shell to Chevron Corp. to cut or delay spending on projects that supply super-cooled gas linked to the price of crude.

    In September, Cutt said that he backed plans to develop what could become the world’s largest floating LNG project and that BHP was “fully aligned” with partner Exxon.

    Crude oil prices could “firm fairly quickly” if countries including Brazil “wobble in any significant way, Cutt said Monday. Over the next couple of years, the market should stabilize, he said.

    While the company looks at about 200 merger and acquisition opportunities a year, right now M&A isn’t a main focus, Cutt said. BHP doesn’t want to ‘‘put a big premium on the table” to buy another company, he said.

    The oil downturn is allowing BHP, the biggest overseas investor in US shale, to pick up more acreage, he said. Any acquisitions are more likely to be assets, he said.
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    Indian Government to allow market price for some natural gas

    The government may allow a part of the natural gas produced by firms like ONGC and Reliance Industries from new discoveries to be sold at market price as it looks to boost domestic exploration and production.

    The government, while approving a new gas pricing formula based on international hub rates in October last year, had decided that new gas discoveries in deep-water, ultra-deep sea or high-temperature and high-pressure fields will be given a premium over and above the approved price.

    The premium will be in form of allowing a fixed percentage of natural gas produced from difficult fields to be sold at market price and the remaining as per the approved price, an oil ministry source said.

    While the current domestic gas price is USD 4.66 per million British thermal unit, the market price as measured by the rate at which the fuel is imported, is USD 7-8.

    "The percentage of total volumes that can be sold at market price will be different for ultra-deep sea discoveries, deepsea finds and high-temperature and high-pressure (HTHP) fields," the source said without elaborating.

    The formula suggested by DGH was a middle path of balancing the industry expectations of market price for all of the gas and government concerns of not allowing too high a price that could have a cascading impact on cost of fertilizer and power as well as CNG and cooking gas.

    All gas producers including state-owned Oil and Natural Gas Corp (ONGC) have stated that it was uneconomical to produce gas from difficult fields at the current price of USD 4.66 per mmBtu, the source said.

    Oil Ministry, he said, after reviewing the premium formula suggested by DGH, has forwarded the same to the Finance Ministry for vetting.

    An announcement on the premium is likely soon, he said. It however not clear if the industry demand of applying the premium to existing discoveries as well, will be accepted.
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    US rig count decline shrinks to 6 this week, settles at 888

    The trend of shrinking declines in the US drilling rig count continued during the week ended May 15.

    Just 6 units were laid down to settle at a total of 888 rigs working, representing the smallest drop in the 23 consecutive weeks in which the count has dived, easily surpassing last week’s 11 that went offline, according to data from Baker Hughes Inc. (OGJ Online, May 8, 2015). Since Dec. 5, 1,032 units have now gone offline (OGJ Online, Dec. 5, 2014).

    The total of 888 is still higher than the nadir of 876 during the 2008-09 downturn but is 973 fewer units compared with this week a year ago.

    In an energy update early this week, Raymond James & Associates noted that weekly well permits, a primary indicator of rig count activity, “have been relatively stable as of late” despite data usually being “very lumpy.”

    Last week 863 new permits were issued, bringing the 4-week average to 870. “It now seems clear that weekly permits issued have bottomed a couple of months ago; however, the lack of a real upswing seems indicative of what we believe should be a slow recovery in rig activity,” RJA indicated.

    Canada’s overall rig count gained 2 units to 77, down 76 year-over-year and 363 since a recent peak on Jan. 16. Rigs targeting oil increased 5 units to 21, the country’s biggest rise since February, while rigs targeting gas shed 3 units to 56.

    Texas reclaimed the top spot in losses among the major oil- and gas-producing states, losing 6 units during the week to settle at 373, down 518 year-over-year and 533 since a recent peak on Nov. 21. The Permian dropped 4 units to 233, down 313 year-over-year. But that loss was partially offset by a 3-unit rise in the Eagle Ford to 108, representing the South Texas shale play’s first gain of the year.

    Beyond Texas the losses were modest. Wyoming declined 2 units to 22. North Dakota, Pennsylvania, Alaska, and Arkansas each edged down a unit to respective totals of 79, 46, 9, and 6.
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    Brazil's Petrobras' earnings, outlook beat Street

    Brazil's state-run oil company Petroleo Brasileiro SA beat analysts' forecasts on Friday, posting first-quarter profit little changed from a year earlier, as an end to fuel subsidies helped overcome a plunge in crude prices.

    Petrobras, as the oil company is commonly known, said profit in the three months ending March 30 fell 1.2 percent to 5.33 billion reais ($1.78 billion) compared with 5.39 billion reais a year earlier, according to a filing with Brazil's securities regulator CVM.

    The result exceeded expectations of a 2.5 billion-real quarterly profit, the average estimate of seven analysts surveyed by Reuters. One of the analysts predicted a net loss.

    Petrobras also reported net sales, or sales minus sales taxes, of 74.4 billion reais, broadly in line with expectations of 79.4 billion reais.

    Earnings before interest, taxes, depreciation and amortization, a measure of cash flow known as EBITDA, was 21.5 billion reais, more than a third higher than the 16 billion reais expected in the survey.
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    ConocoPhillips says to maintain capex for next 3 years

    ConocoPhillips expects to maintain capital expenditure for the next three years, after reducing it earlier this year due to the oil price drop, Chief Executive Ryan Lance told Reuters on Monday.

    The largest independent U.S. energy company, which cut its 2015 capital budget by $2 billion to $11.5 billion in January, "should hold (investment) flat for three years", despite a slight recovery in oil prices, Lance said on the sidelines at the Asia Oil and Gas Conference in Kuala Lumpur.

    Crude prices have almost halved from $115 a barrel in June 2014 as global supplies grew and demand was dented by slowing economies in places like China.

    ConocoPhillips, like other exploration and production companies, has slashed capital spending in response to persistently lower oil prices, and is further reducing its rig count for fields in the lower 48 U.S. states.

    Production is expected to fall in the third and fourth quarters in the company's shale fields, including the Permian in West Texas and the Bakken in North Dakota. But its total output was still expected to rise 2 percent to 3 percent for the year.

    The company, which is focusing on the Eagle Ford shale in Texas and North Dakota's Bakken shale, has said it would also spend less on major projects, many of which are nearing completion.

    ConocoPhillips is also preparing to sell noncore oil and gas producing acreage in the United States, in the latest sign that oil majors are becoming more accepting of lower oil prices.
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    Nigeria LNG revenue hit by oil prices

    Nigeria LNG, operator of the Bonny export terminal, has reportedly posted a 30% drop in its revenue for the first four months in 2015 as a consequence of weak oil prices.

    “Our prices are indexed to crude, at least a significant portion of our portfolio. The price of gas is indexed to Brent, hence if there is a fall in the prices of Brent, it means we will sell for less,” Guardian newspaper cited Deputy Managing Director of NLNG, Isa Inuwa as saying at the company’s shareholders meeting .

    According to the report, Inuwa also said that NLNG was considering increasing its gas output to help reduce the effects of the oil slump on its business.

    Nigeria LNG’s Bonny Island facility currently has six trains in operation with a total capacity of some 22 mtpa of LNG. It requires about 3.5 bcf/d feedgas intake at full production.

    NLNG is a joint venture compromised of Nigerian National Petroleum Corporation, NNPC (49%), Shell (25.6%), Total (15%), and Eni (10.4%).
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    Wood Mackenzie timeline for Australian LNG projects from FID until delivery.

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    Japan refiners target power business as profits evaporate

    Japanese refiners are accelerating plans to invest billions of dollars in power stations to try to drum up more stable income as flagging oil demand at home erodes their core business, executives and analysts said.

    The slump in oil prices since last summer has caused more pain for the refining sector, with accumulated losses totalling $4.6 billion in the last year.

    Cosmo Oil said it would cut refining capacity by as much as a third by 2017.

    As well seeking to take advantage of an opening up of the 8.1 trillion yen ($68 billion) retail electricity market, refiners are also pushing into more profitable uses of crude by producing petrochemicals.

    The Ministry of Economy, Trade and Industry (METI) has been pushing refiners to cut capacity as domestic demand is forecast to fall by more than 7 percent in the next five years.

    Every week, nearly 20 gas stations close on average in Japan after demand has fallen by about 22 percent over the last decade.

    TonenGeneral Sekiyu KK has been working to build two of its first large-scale power plants.

    "Half (a) floor of people are now thinking about this stuff, so it is a serious undertaking," Managing Director David Csapo said on Friday, after TonenGeneral announced a first quarter loss.

    In the last week, three of Japan's big five refiners reported full-year results for the financial year ended March, while two announced first-quarter earnings.

    The alternative if their investments fail: mergers.

    METI wants no more than two or three major refiners, from five now, and sources say Idemitsu Kosan and Showa Shell Sekiyu are in merger talks.
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    Alternative Energy

    Vestas wins Isle of Wight wind contract

    Danish turbine manufacturer Vestas has been selected as the preferred supplier for an offshore wind farm off the Isle of Wight.

    It will provide its V164-8 turbines for the Navitus Bay Project, which is expected to have a capacity of 970MW.

    Vestas said the project could have a maximum of 121 turbines but is waiting for an order.

    The company has already created more than 200 full time jobs at its blade production facility on the Isle of Wight.

    Andrew Turner, Isle of Wight MP said: “This is great news for our Island economy and the skilled manufacturing base that we continue to build.

    “The selection of MHI Vestas as the preferred wind turbine supplier also displays a commitment from Navitus Bay to materially benefit our local economy and communities. It also further cements the Island at the heart of the green energy revolution.”
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    US retailers to produce 7 billion kilowatt renewable energy by 2020

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    By the end of 2020, Wal-Mart says it wants to nearly quadruple its global production of renewable energy. And in the US, the retailer is leading the push toward greater use of solar energy.

    The world's largest retailer has set a goal of eventually being supplied by 100 percent renewable energy.

    Already, these solar panels produce two-point-two billion kilowatt hours, each year, from panels on top of its stores. That's the equivalent of powering 180,000 US households.

    The director of World Wildlife Fund Marty Spitzer says the plummeting cost of solar panels is helping the push.

    "We're in the middle of a revolution and sometimes it's hard to see what's actually happening around you in the middle of something. Whether it's homeowners putting solar on rooftops, whether it's communities investing in solar at utility scale or in community solar gardens, or whether it's corporations putting solar on their rooftops, we are at the crest of a wave," Spitzer said.

    Wal-Mart aims to go from its current global solar-power generation of two-point-two billion kilowatt hours to seven billion by 2020. That's the equivalent of powering 570,000 US homes.

    To reach its goals, Walmart also need to buy that energy from traditional utility supplies. However, some local utility companies have been resistant to integrating solar fearing it will threaten profits. But, with help from the World Wildlife Fund, Wal-Mart and 34 other major corporations are negotiating with these traditional grid suppliers to embrace solar.
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    Hanergy parent says financial condition "good" after unit's share plunge

    The parent of Chinese solar company Hanergy Thin Film Power Group said on Thursday it is "in good financial condition" a day after shares in its listed unit tumbled nearly 50 percent.

    In a statement posted on its website, the parent company also said it had not sold any of the 30.6 billion shares it holds in its Hong Kong-listed unit, which was suspended from trading on Wednesday following the share plunge.

    The Beijing-based group has not engaged in any financial derivative trading with any institutions or individuals, using its shares in its Hong Kong listed subsidiary, it added.

    Hong Kong-listed Hanergy Thin Film Power lost half its market value of nearly $40 billion in 24 minutes on Wednesday, and a source told Reuters it is now under investigation by Hong Kong's market watchdog.

    Hanergy Thin Film Power Group Ltd appointed Goldin Financial Holdings as a financial adviser in February this year, a stock exchange filing showed, linking companies whose share price values have collapsed in the last two days.

    Hanergy appointed Goldin to advise it on a deal whereby Hanergy would supply solar panels to its parent company, the Hong Kong bourse filing showed.

    Trading in Hanergy was suspended on Wednesday after a plunge that saw its shares lose half their value. Goldin Financial fell by more than 60 percent on Thursday.
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    No new wind projects for areas with much wind power wasting

    New wind projects will not approved the following year in places where more than 20 percent of their wind electricity is abandoned, China's energy regulator said on Wednesday.

    Provinces and cities that aim to tap wind resources will increase electricity transfer through improving grid connectivity, the National Energy Administration (NEA) said.

    To improve its energy mix and battle worsening air pollution, China has tilted increasingly toward clean energy including wind power, hydropower and nuclear power.

    China's newly installed wind power capacity jumped to a record high of 19.81 million kilowatts in 2014. Wind power generated 153.4 billion kilowatt hours of electricity last year, accounting for 2.78 percent of the country's total generated electricity and making it the third-largest source of electricity after thermal power and hydropower.

    However, wind electricity waste is a headache for China thanks to imbalanced distribution of wind resources and imperfect grid system.Wind-rich provinces are mainly in the less developed north and northwest regions where electricity supply exceeds demand.

    An average of 8 percent of wind electricity was abandoned last year, down 4 percentage points from the previous year. Yet, the situation turned worse in the first three months of this year with 18.6 percent of wind power production going to waste, 6.6 percentage points higher year on year.

    The NEA attributed the increased wasting during the period to better wind conditions and weak demand of electricity.
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    Monarch Power Granted Patent for Solar Powered Turbine

    Scottsdale-based Monarch Power has been granted a US-Patent for a revolutionary turbine that can power, heat, and chill homes and businesses using solar or natural gas. The Hui turbine is the invention of Monarch CEO Joseph Hui, Professor Emeritus at Arizona State University.

    Hui, aka Solar Man to those who follow him on social media, believes his turbine will be a “game changer” in the power industry, liberating millions of people from their utility companies.

    The Hui turbine uses heat stored in molten salt for power generation day or night. Homes can also go off-grid, thanks to the Lotus Butterfly™, a solar powered system with natural gas backup, in the final phases of development under Hui’s Steve Jobs-like attention to detail, utility, and beauty.

    Our natural gas grid provides backup energy security more reliably than overhead power lines.”

    Hui predicts that the Edison power grid with centralized generation of electricity will be replaced by personal energy. He invented the term PE for local sourcing, generation, storage, and use of energy. “Energy isn’t just about electricity. Energy is for home heating and cooling, cooking, driving, communicating, lighting, and watering. Electricity is good for transmission but poor for storage. Our sun provides heat storable by molten salt. No battery is needed.”

    PE is made possible with the small, simple, quiet, efficient, and economical Hui turbine. “Industrial turbines and generators are huge, expensive, and noisy.

    “Batteries are uneconomical to balance uneven demand against constant generation. Here in Arizona, power utility SRP imposes punitive demand charges for solar homes, effectively killing rooftop solar,” said Hui, who bitterly opposed SRP in recent rate hike hearings. “SRP is holding the sun hostage. If the sun fails to shine and you use a kilowatt for 30 minutes, SRP can charge peak usage for the entire month at $33/kilowatt!”

    Hui calls his turbine his proudest invention. “It is simple and beautiful. Look to the heavens: galaxy arms spiral logarithmically into the center. The Hui turbine let super-critically heated carbon dioxide spirals exponentially outward through micro-channels engraved in disks,” says Hui, who is writing a physics book called “What’s the matter with energy” which describes many of his inventions. “Key is gradual pressure release of gas pushing the turbine spiral wall. The exponential spiral is the perfect shape for hot dense gas expansion.”
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    Canadian Solar: An inkling of an investable business?

    Image titleThe Yield co process may effectively turn these stocks into solar receivable generators.Image titleBeleive it or not, this is one of the few attempts we've seen at explaining a solar stock as a business. There's still way too many sermons out there on how wonderful Solar is as a technology. Canadian Solar actually has process, strategy and some credibility.Image titleThis is the first time we've really seen a Solar aim at the enormous diesel generation market at remote sites. Now we've seen projects, but this is the first time we've seen it as business strategy. Its highly economic, makes sense, and requires no subsidies.Image titleCanadian Solar actually presents business metrics that we as analysts can comprehend and relate too.

    I am repeatedly asked which stocks are investable as businesses, and I think Canadian Solar is addressing that issue here in these slides from their investor day. 

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    Hanergy shares plunge nearly 50 pct, trade halted

    China's Hanergy Thin Film Power Group said its shares were suspended for trading on Wednesday after its stock fell nearly 50 percent.

    Before the plunge, Hanergy had seen its value soar six-fold in the past year to $37 billion - more than its nearest two dozen rivals combined, even as analysts and market watchers questioned the validity of some of its bullish proclamations.

    Controlled by Li Hejun, the firm has mainly relied on its parent - Hanergy Holdings Group Ltd - for revenue and profits.

    Trade was active with more than 170 million shares traded in the first hour of Wednesday's session, far more than the daily average for the stock over the past month, according to Thomson Reuters data. The broader market was down 0.4 percent.

    The company is involved in the manufacturing of equipment and production lines used to make thin-filmed solar panels that convert sunlight into electricity.
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    GE Launches the Next Evolution of Wind Energy: the Digital Wind Farm

    GE today announced the launch of its Digital Wind Farm, a dynamic, connected and adaptable wind energy ecosystem that pairs world-class turbines with the digital infrastructure for the wind industry. The technology boosts a wind farm’s energy production by up to 20 percent and could help generate up to an estimated $50 billion of value for the wind industry.

    “Every business—including our own at GE—and every industry is being transformed by smarter digital technologies, and the greatest opportunity lies in energy”

    The Digital Wind Farm uses interconnected digital technology—often referred to as the Industrial Internet—to address a long-standing need for greater flexibility in renewable power. The technology will help integrate renewable power into the existing power grid more effectively.

    “Every business—including our own at GE—and every industry is being transformed by smarter digital technologies, and the greatest opportunity lies in energy,” said Steve Bolze, president and CEO of GE Power & Water. “The question is not whether to start down this path … it’s about knowing how to get the most out of your digital transformation. That’s what will separate industry leaders from those left behind.”

    GE is leading the transformation of the wind power industry with today’s launch of the world’s first Digital Wind Farm. This new wind ecosystem pairs world-class turbines with a digital infrastructure to enhance production, reduce costs and boost operating efficiency over the life of the wind farm.

    The Digital Wind Farm ecosystem begins with the production of the turbines themselves. With the next generation of Brilliant wind turbines, GE’s new 2-megawatt platform utilizes a digital twin modeling system to build up to 20 different turbine configurations at every unique pad location across a wind farm in order to generate power at peak efficiency based on the surrounding environment. Additionally, each turbine will be connected to advanced networks that can analyze turbine operations in real time and make adjustments to boost operating efficiencies.

    Once the turbines are built, their embedded sensors are connected and the data gathered from them is analyzed in real time with GE’s Predix software, which allows operators to monitor performance from data across turbines, farms or even entire industry fleets. The data provides information on temperature, turbine misalignments or vibrations that can affect performance.

    As more data is collected, the system actually learns over time, becoming more predictive and “future-proofing” wind farms by maintaining top performance and avoiding the maintenance issues that typically occur as turbines age. It also reduces costs by customizing maintenance schedules to ensure preventive maintenance is done only when needed.
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    Yingli: Not Pretty

    "There is substantial doubt as to our ability to continue as a going concern."

    "Our ability to continue as a going concern is dependent upon our continued operations, which in turn is dependent upon our ability to meet our financial requirements, raise additional capital, and the success of our future operations, which in turn are subject to various risks discussed herein including, among others, risks relating to economic conditions in our target markets as well as the supply and prices of PV modules in the market, our ability to obtain additional capital or other funding to meet our payment obligations under our debt instruments, our ability to renew our short-term borrowings when they mature, our ability to restructure some of our existing debts if needed, the ability of guarantors of our debt to maintain their financial condition, and our ability to comply with all covenants of our loan agreements or obtain waivers if needed."

    "Facts and circumstances including recurring losses, negative working capital, net cash outflows, and uncertainties as to the repayment of debts raise substantial doubt about our ability to continue as a going concern. The audited financial statements do not include any adjustments that might result from the outcome of these uncertainties. If we become unable to continue as a going concern, we may have to liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our audited consolidated financial statements. Our lack of cash resources and our potential inability to continue as a going concern may materially and adversely affect the price of our ADSs and our ability to raise new capital or continue our operations."

    "As of December 31, 2014, we had cash, cash equivalents and restricted cash of RMB2,401.5 million (US$387.0 million) and short-term borrowings, including current portion of medium-term notes and long-term debt of RMB10,112.1 million (US$1,629.8 million). Our two major manufacturing subsidiaries, Yingli China and Tianwei Yingli, both have medium-term notes that will mature and become payable in 2015. Yingli China's RMB denominated unsecured three-year medium-term notes of RMB 1.2 billion matured on May 3, 2015, and the principal and interest payments in the aggregate amount of RMB1.27 billion had been paid in full before its due date. Tianwei Yingli's RMB denominated unsecured five-year medium-term notes of RMB 1 billion will mature on October 13, 2015, and the principal and interest payments in the aggregate amount of RMB1.06 billion will become due and payable on October 13, 2015. Our liquidity is primarily dependent on our ability to maintain adequate cash flows from operations, to renew or rollover our short-term borrowings and to obtain adequate external financings to support our working capital and meet our obligations and commitments when they become due.

    We have carried out a review of our cash flow forecast for the twelve months ending December 31, 2015. In preparing the cash flow forecast, our management has considered our historical cash requirements, our expected debt repayment obligations in 2015, our plan to further reduce operating costs and expenses, as well as the alternative financing plans discussed in detail below. The Company's management also made the assumption that there will be no significant decrease in the Company's shipments of modules and gross profit margin. Facts and circumstances including recurring losses, negative working capital, net cash outflows, and uncertainties on the repayment of the debts raise substantial doubt about our ability to continue as a going concern."

    "We have issued, and may issue in the future, equity securities or securities convertible into or exchangeable for our ordinary shares, the conversion of which may cause our existing shareholders to incur further dilution of their holdings."

    "We have issued, and may issue in the future, equity securities or securities convertible into our ordinary shares. In the event that the securities convertible into our ordinary shares are converted, our existing shareholders may incur further dilution of their holdings."

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    The Swedes Have Created The Most Efficient Solar Energy System

    A technology company in Sweden has installed a solar power plant, which it claims is the most efficient in the world today. It has even managed to double the efficiency of solar panels, making them more viable for general population in the near future.

    Installed by Ripasso Energy in South Africa’s sun-soaked Kalahari Desert, the solar electricity generation machine features a pair of huge, 12-meter mirror dishes that have been synched with Stirling Engine – a closed-cycle regenerative heat engine that was invented way back in 1816. The contraption uses trapped gas instead of water to propel the internal pistons and flywheel. To keep the Stirling Engine in motion, the dishes are hooked to a sun-tracking device that rotates the dishes to capture the maximum amount of solar rays and focus them into a specific point that gets super-heated and drives the gas.

    The Solar Panels Are Programed To Follow The Sun, Maximizing The Efficiency

    Though Stirling Engines might look primitive, they have been steadily adopted by the Swiss Military for use in their submarines. These engines are claimed to be an ideal companion for renewable energy systems because they can function with almost any heat source, are quiet to run, and don’t take up much space.

    Owing to their relatively diminutive footprint, the system requires just two hectares to produce a megawatt of energy. Having licensed the technology from the military, Ripasso Energy has been testing the system for the past four years. The company hopes the desert sun could offer ideal readings about the efficiency of the design. This week, the company has been able to set a new world record, reported the Guardian.

    Conventional solar panels practically turn about 15 percent of the solar energy that strikes them into electricity. But Ripasso Energy has managed to push the efficiency to 34 percent. Independent tests have confirmed the design to be super-efficient. The system in its current iteration can generate 75 to 85 megawatt hours of electricity a year. From an ecological perspective, the solar plant can prevent about 81 tons of carbon dioxide being released into the atmosphere via coal burning.

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    'Revolutionary' bladeless wind turbines oscillate to generate power

    A startup out of Spain called Vortex Bladeless, whose turbines look like stalks of asparagus poking out of the ground, is using pillars that shake back and forth from the vortices created by the movement of air around the structure to generate power, the Verge reported.

    Typically, a structure can only be optimized to oscillate at the specific frequencies caused by a certain wind speed, but Vortex says it is using magnets to adjust the turbine on the fly to get the most from whatever the wind speeds happen to be.

    Once the structure starts vibrating, an alternator in the base of the device then converts the mechanical movement into electricity.

    Vortex claims that energy produced by its turbines will cost around 40 percent less than energy made from today's wind turbines and a large part of that cost reduction comes from maintenance as the Vortex doesn't have moving parts or gears, it should last longer and won't require periodic lubrication.

    The simpler design also means that manufacturing costs are about half that of a traditional windturbine (those massive blades are expensive).

    As per Vortex, its bladeless design captures around 30 percent less energy than a regular turbine, but it's possible to fit more of the "silent" Vortex models in the same area.

    Vortex is working on its "Mini," a 41-foot model that should be ready for commercialization in 2016, while a larger, industrial model is in the works for 2018.

    Its makers boast the fact that there are no gears, bolts, or mechanically moving parts, which they say makes the Vortex cheaper to manufacture and maintain. The founders claim their Vortex Mini, which stands at around 41 feet tall, can capture up to 40 percent of the wind’s power during ideal conditions (this is when the wind is blowing at around 26 miles per hour). Based on field testing, the Mini ultimately captures 30 percent less than conventional wind turbines, but that shortcoming is compensated by the fact that you can put double the Vortex turbines into the same space as a propeller turbine.

    The Vortex team says there are some clear advantages to their model: It’s less expensive to manufacture, totally silent, and safer for birds since there are no blades to fly into. Vortex Bladeless says its turbine would cost around 51 percent less than a traditional turbine whose major costs come from the blades and support system. Plus, Suriol says, it’s pretty cool-looking. “It looks like asparagus,” he says. “It’s much more natural.”

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    Chinese wind earnings under pressure with fifth of farms idle

    China's wind farm firms are feeling the heat as state grid operators deliberately delay hooking them up and cut back on purchases, wasting about a fifth of the total wind power output or enough electricity to run Beijing for 40 days.

    China is now the world's top wind power producer thanks to policies designed to boost renewable energy use, with an installed capacity of over 100 gigawatts - more than a quarter of the world's total and almost enough to light up Spain.

    But capacity has raced far ahead of grid construction, with state grid operators reluctant to connect wind farms in remote areas as long as their profit margins on renewables lag that of coal-generated electricity.

    Instead, they are resorting to a practice known as curtailment, or slowing the connection of wind turbines to their grids and limiting the use of wind power. This in turn is leading to wasted capacity and lower returns on wind power investments.

    "Considering the huge growth in wind installment we saw last year, curtailment is going to be a big problem (for wind power producers) ... China is one of the worst countries affected," said Shanghai-based Shane Sun with international renewable energy consultancy MAKE.

    In the first three months, curtailment almost doubled from a year ago to 10.7 billion kilowatt-hours, nearly a fifth of total wind power generated in China, official data showed. That's equivalent to output generated with about 3.5 million tonnes of coal, or 7 percent of China's first-quarter coal imports.

    Meanwhile, generating capacity expansion continues at breakneck speed. While China still relies on coal for most of its power generation, it has more than doubled its installed wind power capacity in the past five years, and Beijing wants to double it again to 200 GW by 2020 with annual investments of $27 billion.

    Analysts said wind-related stocks like Datang Renewable have risen partly on expectations of higher wind speeds in China this year after they were down 8-12 percent in 2014.

    Even so, all those unused turbines probably won't be switched on until ultra-high voltage lines, designed to enable long-distance transmission of renewable power from the windy, remote north to population and industry hubs in the south and east, are completed in 2017.

    In the meantime, some companies like Huaneng Renewables are building wind farms in the east and south where better grid infrastructure offsets low wind speeds and land shortages.

    Some analysts say investors may be in for an earnings disappointment this year unless wind speeds improve and the government enforces a long-delayed rule requiring grid operators to buy certain amounts of power from renewable sources.
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    China's nuclear power capacity to reach 30 GW by year end

    China will have 30 GW of nuclear power capacity by the end of 2015, said Xu Yuming, deputy director of the China Nuclear Energy Association on May 21.

    Presently there are 23 nuclear power units operating in China, with a combined capacity of 21.4 GW, while 29 units are being built or planned, Xu said.

    The government planned to increase China's total nuclear power capacity to 58 GW by 2020, a rise of 170% from the current level.

    Xu estimated this will require 100 billion yuan ($16.34 billion) of investment every year.

    It is expected that China's electricity consumption will double by 2030, Xu said, adding efforts should be made to promote clean energy including nuclear power.
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    This Key Uranium Player Is About to Shock The Market

    Things appeared to be stabilizing in the global uranium market the last several months. With prices for the metal settling into a comfortable groove between $36 and $44 per pound.

    But he Japan Times reported that the country's key nuclear operator Tokyo Electric Power Co. (Tepco) is preparing to sell part of its uranium stockpiles. With documents obtained from the utility suggesting that more than 750 tonnes of uranium could be sold over the coming months.

    Tepco is considering the move in order to reduce costs associated with holding ever-growing uranium stockpiles. The company has not consumed any uranium since 2011, shortly after the Fukushima disaster resulted in a complete nuclear shutdown across Japan.

    That stoppage has left uranium piling up in storage, as Tepco continues to take delivery of mine supplies purchased under long-term contracts. The company now holds 17,570 tonnes of uranium -- up from 16,805 tonnes prior to Fukushima.

    Tepco says it wants to reduce those stocks to pre-Fukushima levels. Implying that it could divest up to 765 tonnes.

    That's equivalent to 1.69 million pounds of uranium. Or about 1% of yearly demand worldwide -- suggesting that this divestment alone shouldn't be a show stopper for prices.

    But Tepco also said it may take further steps to reduce its uranium stocks -- including terminating uranium purchase contracts it currently holds with miners globally.

    Such a development would represent a significant reduction in demand. And might be enough to cause a drag on the global market.
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    Japan approves third nuclear plant for restart

    Japan's nuclear regulator signed off on the basic safety of a reactor at a third nuclear plant on Wednesday, as the country inches toward rebooting its atomic industry more than four years after the 2011 Fukushima disaster.

    The decision will be a boost for operator Shikoku Electric Power Co, which relied on its sole Ikata nuclear power station in southwestern Japan for about 40 percent of its electricity output before the meltdowns at Fukushima led to the shutdown of all the country's reactors.

    For the government of Prime Minister Shinzo Abe, resuming nuclear power, which provided about a third of Japan's electricity supply before Fukushima, is key to lifting the economy out of two decades of anaemic growth.

    The country has switched to fossil fuels to compensate for the closure of reactors, pushing imports of liquefied natural gas to a record-high 7.78 trillion yen ($65 billion) in the financial year ended March 31.

    The safety approval is still only one of three needed before the Nuclear Regulatory Authority (NRA) gives its final sign off. The consent of local authorities, which is seen as a formality, is also required, along with operational checks.

    At a regular meeting on Wednesday, the NRA's commissioners signed off on a provisional assessment that the Ikata reactor meets new design standards introduced after Fukushima. The decision will be open to public comment for about a month before being formalized.

    Located about 700 kms (660 miles) west-southwest of Tokyo on Shikoku island, the Ikata No. 3 reactor started operations in 1994 and has a capacity of 890 megawatts.

    The future of the Ikata plant's two other reactors, each with capacity of 566 megawatts, is unclear. One is almost 40 years old, which is the lifetime limit for reactors in Japan without a special extension that will be costly to achieve.

    Shikoku Electric hasn't applied for restarts of that reactor or the No. 2 unit, which began operations in 1982.

    Two other nuclear plants operated by Kansai Electric Power and Kyushu Electric Power have passed through the first stage of regulatory checks.

    Operators also have to overcome legal hurdles. Anti-nuclear activists have stepped up petitioning the judiciary to block restarts, with a majority of the public opposed to atomic power.

    Residents near the Ikata plant in December 2011 filed a lawsuit to mothball the station, but a decision will take time.
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    EDF to propose buying Areva reactor unit in coming days-CEO

    French utility EDF will propose buying the nuclear reactor business of fellow state-controlled group Areva but it is too early to put a price tag on it, EDF Chief Executive Jean-Bernard Levy said.

    Levy said on that he would present a proposal to Areva Chairman Philippe Varin in the coming days for EDF to buy Areva's reactors business and that EDF would offer a "market price" for the business.

    The French government has been pushing to find a solution to deep problems in the country's once-mighty nuclear sector.

    Hit by lower demand for nuclear energy after the Fukushima accident in Japan in 2011, the French industry has also suffered from strategic errors and the rise of new competitors.

    "We owe it to our shareholders to pay the right price for these activities," he told Europe 1 radio ahead of EDF's annual meeting.

    A source told Reuters last week that pinning down a precise value for the business was proving difficult, with the figure in a range of 2-3 billion euros ($2.2-3.3 billion).

    EDF, which is 85 percent state owned, will propose putting the reactor business in a separate company. That would be majority-owned by EDF but open to other investors.

    "We already have people who are asking us to be our partner," Levy said.

    The new firm would also would try to win export contracts for Areva's flagship EPR reactor. Areva itself is 87 percent owned by the state.

    "We want to conquer new markets. Several countries, including Egypt, India, China have publicly said they are interested in the EPR," he said.

    In separate comments to Le Figaro newspaper, Levy said EDF planned to make two proposals.

    The first would be a complete takeover of Areva's nuclear reactor division, Areva NP, which employs about 15,000 people, of whom some 10,000 are in France.

    The second would consist of bringing 1,200 Areva engineers who specialise in nuclear safety into EDF.

    Levy said the more ambitious proposal would preserve Areva's technical expertise and create the possibility of partnerships with outside groups from France or elsewhere.

    Levy also told the paper EDF wanted guarantees against any claims against Areva, in particular from its Finnish customer TVO, which claims billions of euros from Areva over delays to the Olkiluoto reactor.
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    Potash Corp evaluating SQM, ICL stakes; other holdings 'strategic'

     Potash Corporation of Saskatchewan Inc Chief Executive Jochen Tilk said on Thursday that he views the company's stakes in fertilizer companies Sinofert Holdings and Arab Potash Company as "strategic," but continues to review whether to keep its shares in ICL and SQM.

    Tilk, speaking at a BMO investor conference in New York, said if Potash Corp could not build on its SQM and ICL minority stakes, it will consider whether it should keep them.

    Potash Corp has control over how Jordan's Arab Potash Company markets its potash, and Tilk said the Sinofert stake gives Potash a window into the Chinese market.

    But the company does not have as much influence as it wants over SQM and ICL.

    Tilk said in an interview that he has not spoken with Israeli Prime Minister Benjamin Netanyahu about whether he would permit a foreign company to take control of ICL, in which the government holds a golden share.

    Potash Corp tried under former Chief Executive Bill Doyle to gain a majority stake in ICL, but ran into strong opposition and backed off in 2013.

    Tilk, who took the Potash Corp helm last July, announced a review in December of the company's four major equity stakes, which at the time were worth $4.5 billion.

    He said on Thursday he did not want to signal any plans for SQM and ICL investments.

    "We can't be counter-productive by doing or acting (to) impair the value of the companies. Timing is everything."

    ICL Chief Executive Stefan Borgas said in an interview that if Potash Corp wants to increase its stake, it should be direct with Israel's government and ICL's biggest shareholder, Israel Corp.

    "Our advice would always be for anybody who has these kind of interests, not just in ICL, but in general, is be as specific as you possibly can so there is actually a concrete proposal on the table, rather than just discussing concepts," he said on Wednesday.

    Borgas said many investors have approached ICL about interest in Potash Corp's stake.

    Potash Corp recently bought a 9.5 percent stake in Brazilian fertilizer distributor Heringer SA, but Tilk said he does not see the same need for control as in the company's other equity investments.
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    Monsanto says would divest all of Syngenta's seed business

    Monsanto Co., the world's largest seed company, said on Wednesday it plans to divest all of Syngenta Ag's seeds and traits businesses as well as some overlapping chemistry assets to get regulatory approval for a takeover of its Swiss rival.

    Monsanto President Brett Begemann said in a statement that U.S.-based Monsanto sees an acquisition of Syngenta as a move toward "redefining the future of agriculture," and is confident it can address regulatory concerns about a combination of the two agrichemical and seed giants.

    Syngenta already has rejected a $45 billion offer, but Monsanto continues to pursue a deal.

    Syngenta officials reacted swiftly to Monsanto's comments, saying a sell-off of its seeds business would not be enough to allay regulators' concerns about the tie-up.

    "The regulatory hurdles are more challenging than implied by the announcement," a Syngenta spokesman said in a statement.

    Several industry sources say acquiring Syngenta is a "compelling need" for Monsanto, as the U.S. seed company known best for its Roundup herbicide and biotech seeds faces mounting threats from both regulatory scrutiny and consumer opposition.

    Though Monsanto has sought to diversify its business platforms, the bulk of its profits are tied to its long-held glyphosate-based Roundup herbicide and genetic alterations to seeds that make crops impervious to glyphosate herbicides.

    But widespread weed resistance to glyphosate has created problems for farmers, and health concerns about glyphosate and glyphosate-tolerant crops are growing.

    If Monsanto takes over Syngenta, it would gain a broad portfolio of fungicides, insecticides and other herbicides.

    Syngenta's new agrichemical products include one that combats rust disease on soybeans in Brazil, another that uses natural soil bacteria in a seed treatment to fight soybean and sugar beet pests, and a seed treatment that combats pest damage to soybeans, corn and sunflower.

    Syngenta's agrichemical portfolio brought in more than $11.3 billion in revenues last year, compared to Monsanto's $5.1 billion from its herbicides. Each company saw total revenues of more than $15 billion in 2014.

    An industry banker familiar with the situation said a Syngenta deal is critical for Monsanto. He said developing just one new agrichemical can take a decade or more and cost $200 million to $300 million, and that Monsanto needs an entire portfolio of new offerings.

    Monsanto officials say glyphosate remains a key part of the company's future, and said it has signed an expanded commercial licensing and technology agreement with Scotts Miracle-Gro Co to extend its Roundup brand herbicide in the lawn and garden industry, a deal that adds $300 million in gross profit contribution for Monsanto.

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    PhosAgro Q1 production volumes increase by 8.3%

    Firming prices and demand-positive forex shifts appear to be pushing PhosAgro in the right direction, despite historically low dollar-denominated crop prices holding down demand for fertilisers. The company continues to focus on operational improvement to increase production and sales volumes.

    Moscow-based fertiliser producer PhosAgro OAO has announced its production results for Q1 2015, detailing 8.3% and 2.8% respective year-on-year (y-o-y) upticks in production and sales volumes.

    Phosphate fertilisers led the jump in production – PhosAgro produced 1.34m tonnes phosphate-based fertilisers in the January to March period of 2015, up 9.2%
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    Precious Metals

    De Beers puts Kimberley diamond mine in South Africa up for sale

    May 21 Diamond miner De Beers Group said it was putting its Kimberley Mines in South Africa up for sale as the operation no longer fits the company's strategic plan.

    De Beers said it hoped to conclude the sale process "in a matter of months". (

    The company, which has been mining at Kimberley for more than a century, said it had invested in the mine to 2018 and that the new owners would need only stay-in-business capital, potentially extending life of the mine to 2030.

    De Beers, Anglo American Plc's second-most profitable unit, produced 722,000 carats of diamonds at Kimberley in 2014. (

    Anglo American said last month that it planned to cut diamond production this year in response to lower prices, as diamond demand has slowed since late 2014 due to middlemen who buy rough stones struggling with a stronger dollar and liquidity problems.
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    Osisko Gold Royalties sees Q1 net earnings greatly improve y/y

    TSX-listed Osisko Gold Royalties has declared first-quarter net earnings from continuing operations of $10.2-million, or $0.15 a share, for the first quarter of 2015. This was a marked improvement on the $3.5-million net loss, or $0.08 a share loss, in the corresponding period of 2014. The company achieved revenues for the period under review of $10.6-million. This was owing to the sale of gold and silver from the 5% net smelter royalty (NSR) received from the Canadian Malartic mine, in Quebec, compared with nil in the first quarter of 2014. 

    The mine produced 135 786 oz of gold during the period under review, as a result of higher than expected recovery rates, which were partially offset by lower than expected grades. “We congratulate the mine's new owners Yamana Gold and Agnico Eagle Mines as they complete the optimisation of the mine and increase Canadian Malartic's production profile," said Osisko chairperson and CEO Sean Roosen in a statement on Friday. 

    The company had not started recording revenues from its Éléonore royalty, while Virginia had received advance royalty payments of US$5-million from 2009 to 2013. Osisko advised that revenues would be recognised once the advance payment received was reduced to nil through royalty payment calculations, expected towards the end of the third quarter. 

    The company reported record quarterly gold ounces earned and sold for the quarter of 6 985 oz, and record quarterly silver ounces earned and sold of 7 825 oz. Adjusted earnings of $8.2-million, or $0.12 a share, were also noted, as were net cash flows provided by operating activities of $5.6-million. Further, cash and cash equivalents for the first quarter increased by $173.2-million to $348.4-million and working capital and marketable securities of $438.9-million were reported. 

    In the eleven months as a new company, Osisko had strengthened the balance sheet by adding over $242-million in cash raised through equity issues, acquired the Éléonore royalty through a friendly transaction with Virginia Mines, and had acquired a stake in Labrador Iron Ore Royalty Corporation (LIORC). Since the beginning of 2015, Osisko had acquired, as of May 14, a 9.75% interest, including a 7.2% interest during the first quarter, in LIORC. LIORC was entirely focused on the operations of Iron Ore Company of Canada (IOC) through a 7% gross royalty on the IOC iron-ore operations, a $0.10/t marketing fee on all products sold by IOC and a 15% direct interest in IOC. IOC was currently a major Canadian iron-ore producer held by Rio Tinto (59%), Mitsubishi Corporation (26%) and LIORC. The mine, in the Newfoundland-Labrador area in Canada, had been in operation for more than 53 years and had reserves to continue operations for 29 years at the current production rate.

    “While our focus remains on precious metals, we will continue to seek out opportunities for the company where we believe Osisko will benefit from domestic, long-life assets with strong cash flow,” Roosen added.
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    Norilsk aims to complete palladium deal with Russia by year-end

    Norilsk Nickel and other investors aim to complete their purchase of palladium from Russia's central bank stockpile by the end of this year, a deputy chief executive of the producer said on Monday.

    The company also hopes to deliver nickel to the Shanghai Futures Exchange, and will explore potential options for non-core assets, including part of its polar division and upstream gas assets.

    Norilsk, the world's largest palladium producer, proposed the scheme to the central bank last year as part of its efforts to guarantee stock availability for long-term customers and to increase market transparency, adding that the pool of potential investors and financing could bring in up to $2 billion.

    "In terms of the existing stockpile, we are working very actively with the Russian central bank because our understanding is that they are a sizeable holder of palladium resources," Pavel Fedorov told Reuters in an interview in London.

    "But (that is) something that is quite digestible by the market, should that be sold," he added.

    Fedorov said capital for the purchase would be raised via cash as opposed to a platinum swap.

    He added that there was agreement from the political level, and that the approval process was being worked through with the central bank.

    "Once that is in place, we will detail the offer mechanisms," he said.

    Fedorov said Norilsk had a number of offers for financing, including from large financial institutions, and would put in up to $200 million of its own equity.

    The volume of palladium held by the central bank is a state secret but the institution holds one of the world's biggest gold and foreign exchange reserves.

    Norilsk, also one of the world's leading Nickel producers, is hoping to agree a deal with the Shanghai Futures Exchange to provide nickel for delivery against its futures contracts in the next few months, Fedorov said.

    "Our long-term focus is to help sponsor the development of the Chinese commodity market and ShFE is our key partner," he said.
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    Namibian mine lifts B2Gold’s Q1 output 20%

    Canada-based gold producer B2Gold has posted record gold production of 115 859 oz in the first quarter, exceeding its target for the first three months ended March 31 by 754 oz and delivering 20% more gold than in the first quarter of 2014. The company said on Friday that the increased production was primarily attributable to the successful start of production at the new Otjikoto mine, in Namibia, in February after a strong start-up following its first gold pour in December. 

    Gold production from the company's Masbate mine, in the Philippines, was 46 241 oz, representing a 9% increase on the same period in the prior year, while the La Libertad and Limon mines, in Nicaragua, produced 25 326 oz and 13 158 oz, respectively. Consolidated cash operating costs were below budget at $701/oz for the quarter, reflecting the successful start-up of Otjikoto, the lower cost of fuel and cost-savings at the Masbate and Limon mines. 

    “Consolidated cash operating costs are forecast to be significantly lower in the second half of the year compared with the first half of the year and average between $630/oz and $660/oz for the full-year,” the group outlined in a results statement. All-in sustaining cash costs for the first quarter were $1 091/oz. 

    The group added that it was projecting a record year for gold production in 2015, with output from its operations likely to be between 500 000 oz and 540 000 oz of gold – an increase of about 35% on 2014 production. Consolidated cash operating costs were expected to be between $630/oz and $660/oz compared with $680/oz in 2014. For the first half of the year, consolidated gold production was expected to between 225 000 oz and 245 000 oz, increasing up to 295 000 oz in the second half of the year, owing to the continued ramp-up of gold production at Otjikoto and higher forecast grades for the Masbate and Libertad mines in the second half of the year. 

    B2Gold ended the quarter with cash and cash equivalents of $128.2-million and working capital of $143.4-million, with cash from operations expected to increase “significantly”, owing to gold production from the new Otjikoto mine. 

    The compamy, meanwhile, remained in discussions with its lenders regarding financing the construction of the Fekola project, in Mali, and expected to complete an updated revolving credit facility to increase the available credit facility from $200-million to $400-million in the second quarter.
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    Nord Gold says Q1 net profit at $88.5m vs $24.6m in Q1 of 2014

    Russian gold miner Nord Gold said on Monday its first-quarter net profit more than tripled year-on-year to $88.5-million from $24.6-million seen a year earlier, positively affected by higher refined gold production. 

    The net profit was also affected by the fact that some gold produced at the end of last year was sold in the first three months of 2014, the company said in a statement. Ebitda, or earnings before interest, taxes, depreciation and amortisation nearly doubled in the first quarter to $189.7-million. 

    Based on its results, the company recommended an interim dividend payout for the first quarter of $6.40 a share and global depositary receipt.
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    Base Metals

    First copper from DRC-China deal due by year end

    A joint venture between Democratic Republic of Congo's (DRC's) State miner and two Chinese companies, signed under a 2009 "minerals for infrastructure" deal, will begin producing copper before the end of 2015, the DRC's government said on Thursday. 

    Under the deal Chinese companies pledged to build $3-billion worth of roads, railways, schools, and hospitals in return for a 68% stake in a joint venture operating copper plants with state miner Gecamines in the southern Katanga province. 

    The Chinese firms involved in the Sicomines joint venture are Sinohydro Corp and China Railway Group Limited. 

    The DRC government office charged with overseeing implementation of the deal said copper output would begin "in the fall of 2015" at a rate of 50 000 t/y, rising to an expected 400 000 t/y over the next two decades. "This mutually beneficial cooperation with our Chinese partners is a strong example for others interested in investment opportunities in (Congo)," Moïse Ekanga, executive secretary of the office, said in a statement. 

    An original $9-billion deal signed in 2007 was reduced to about $6-billion after the International Monetary Fund (IMF) objected to the amount of debt DRC was taking on. 

    Ekanga led a tour of the Sicomines plants taken last weekend by the IMF's resident representative in the DRC, the World Bank's country director and several foreign diplomats. The DRC, which vies with Zambia to be Africa's top copper producer, extracted more than one-million tonnes of the metal for the first time in 2014.

     The mining sector helped power economic growth of 9.5% in 2014, according to the government. However, after two decades of armed conflict, the DRC still ranks 186 out of 187 countries in the UN Human Development Index. The government has predicted 10.3% growth for 2015.
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    Chile strikes BHP Billiton copper project off development timeline

    The Chilean government has removed BHP Billiton's $US4 billion ($5 billion) Spence copper expansion project from its 10-year development timeline, saying it expects the world's largest miner will miss its targeted deadline of first production by 2020.

    While BHP has prioritised the expansion of its massive Escondida copper mine in Chile in recent years, it has also signalled to investors its Spence Hypogene project in the north of the country, could drive its supplies of the red metal over the medium term.

    BHP has conducted a pre-feasibility study to deliver copper from the hypogene ore body that lies beneath its existing Spence mine by 2020 as part of a plan to extend the life of the facility by up to 50 years.

    However, Chile's state-run copper commission Cochilco discounted it as a project likely to take shape in the next decade, saying it expected the timeline to slip, with Escondida remaining the priority.

    In 2012, Cochilco predicted the development of $US105 billion of resources projects in Chile in the following decade.

    Three years on, and with a slump in global commodity prices hitting sentiment, Cochilco revisited its 10-year horizon earlier this week and downgraded the pipeline of projects to $US75 billion by 2025.

    "About $US25 billion of that reduction is down to projects being delayed, meaning we no longer expect them to come into production in the 10-year timeframe," Cochilco's executive vice-president Sergio Hernandez told The Australian Financial Review on Wednesday.

    "We now include the Spence project in that delayed tally."
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    First Quantum launches equity offering of up to C$1.44bn

    Base metals producer First Quantum Minerals on Wednesday announced that it planned to raise up to C$1.44-billion through a common share equity offering. 

    The TSX- and LSE-listed company said it intended to use the net proceeds of the offering to advance and expand existing production facilities, pay back debt and for general corporate purposes, including strategic investments to further improve its returns and growth pipeline.

    RBC Capital Markets and Goldman Sachs Canada would lead a syndicate of underwriters. 

    First Quantum had swung to a net loss of $82-million, or $0.14 a diluted share, for the first three months of the year, as lower copper and nickel sales and prices impacted the bottom line.
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    Entree Gold Welcomes Agreement to Advance Oyu Tolgoi Underground Development

    Greg Crowe, President and CEO of Entrée, stated: "Achievement of this major milestone signals that the parties involved are firmly committed to moving the underground development forward. Oyu Tolgoi's immense size and exceptionally high grades are seldom seen in our industry and this project is poised to benefit the country of Mongolia for decades to come. Successful development of the underground operations is critical to realizing the full potential of Oyu Tolgoi."

    Entrée has a 20% carried interest in mineralization extracted from the Hugo North Extension and Heruga deposits, which are located along the Oyu Tolgoi trend of copper-gold-molybdenum mineralization. Oyu Tolgoi is the world's largest and richest, undeveloped porphyry copper-gold±molybdenum project. Some of the highest grade copper-gold mineralization lies within the Hugo North Extension deposit and the highest molybdenum grades occur within the Heruga deposit.

    Additionally, as a joint venture partner with a carried interest on a portion of the Oyu Tolgoi mining project in Mongolia, Entrée has a unique opportunity to participate in one of the world's largest copper-gold projects managed by one of the premier mining companies - Rio Tinto. Oyu Tolgoi, with its series of deposits containing copper, gold and molybdenum, has been under exploration and development since the late 1990s.

    Sandstorm Gold, Rio Tinto and Turquoise Hill Resources are major shareholders of Entrée, holding approximately 12%, 11% and 9% of issued and outstanding shares, respectively.
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    China's copper demand to warm up in H2 on Beijing's measures

    Consumption of refined copper in China in the second half of 2015 is likely to rise as Beijing's moves to increase liquidity and cut costs to local firms in an effort to stimulate the economy.

    China earlier this month cut interest rates for the third time in six months and is expected to cut rates again as part of Beijing's measures to support the slow economy.

    The recent measures include more IPOs in the equity market and requiring banks to keep funding state projects, increasing the liquidity to local firms.

    Copper is a major indicator for industrial activities, used in power cables to home appliance. Growing demand in the world's top consumer, China could support global prices.

     Chinese copper consumption may rise more than 5 percent from a year ago in the second half, compared to up to 4 percent expected for the first half, said Yang Changhua, senior analyst at state-backed research firm Antaike and executives at a state-owned metal producer and a large maker of copper tubes and rods.

     "Demand in the second half would be better than now," the executive at copper producer said.

    He added that Beijing's anti-corruption checks had delayed orders from state-owned power firms and the orders should rise strongly in the second half.

    Yang at Antaike said demand from home appliance makers had been supporting the consumption, while Beijing's measures were easing worries over the slow economy, prompting investment.

    "We think the worst is over. We may even see a small (domestic) shortage in copper within 2-3 months," said the executive at copper tubes and rods maker.

    He added that China's property market was warming up, boosting demand for home appliances in the third quarter.

    While many expect a rise in copper demand in the second half, some see the growth smaller with Beijing's efforts to stimulate the economy taking a few months.
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    Peru strike spares output at top copper and gold mines

    Peru's production of copper and gold was largely unaffected by a national strike on Monday as unionized workers declined to down tools for fear of losing their jobs and companies used replacements.

    Walk-outs at some mines, however, might have curbed silver, tin and iron output, according to unions in Peru, the world's third biggest copper, silver, zinc and tin producer and the seventh-ranked gold producer.

    The strike, organized by the National Mining Federation that represents about 20,000 workers, aimed to press the government to tighten restrictions on firings and the use of contract workers.

    But plans for an ambitious stoppage across Peru were upended after the government declared the strike unfounded and companies threatened to dismiss strikers or ordered contract workers to fill in, said federation head Ricardo Juarez.

    Copper output from Peru's four top producers, Antamina, Southern Copper, Cerro Verde and Antapaccay, was normal, union bosses at the mines said. The mines together produced about a million tonnes of the red metal last year, or more than three quarters of Peru's total copper output.

    But silver output from Uchucchacua was partially hurt by a strike that began earlier in May, said Carlos Galvez, the chief financial officer of operator Buenaventura . Galvez declined to specify by how much. The head of the Uchucchacua union said 50 percent of the mine's total workforce remained active.

    Operations were normal at other leading silver producers, including Volcan and Antamina, said union leaders there.

    Tin output from Minsur likely slipped as unionized workers went on strike, said union boss Marco Sarca. Minsur did not respond to requests for comment. The mine produced 23,100 tonnes of tin last year.

    The union and management at Peru's second biggest zinc and first biggest lead miner, Milpo, did not answer requests for comment on Monday. Antamina and Volcan are Peru's first and third biggest zinc producers, respectively.
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    Rio Tinto, Mongolia reach deal to build huge Oyu Tolgoi copper mine

    Mongolia and Rio Tinto have reached an agreement paving the way for work to resume on a delayed $5 billion underground copper mine that is expected to underpin the growth prospects of both the country and the global miner.

    The Oyu Tolgoi project, which started producing from a $6.5 billion open pit mine two years ago, is the biggest single foreign investment in Mongolia and has long been seen as a bellwether of the country's openness to foreign investment.

    However, disputes between Rio Tinto and Mongolia over taxes and the costs of building the first stage stopped work on the second phase underground mine, which Rio says will unlock 80 percent of the copper wealth at the project.

    The row has also deterred investment in Mongolia over the past two years and worsened the hit to its economy from sliding commodity prices, leading the country's new prime minister to push hard to resolve the issues.

    "Oyu Tolgoi is a world-class copper-gold asset and its further development is of great economic significance for Mongolia," Prime minister Chimediin Saikhanbileg said in a statement.

    "There is no doubt that moving forward with the Oyu Tolgoi project will improve the investment climate in Mongolia."

    Rio Tinto's Turquoise Hill Resources arm owns 66 percent of Oyu Tolgoi, while the Mongolian government owns the remainder. Rio is operator of the project, located in the Gobi desert near Mongolia's border with China.

    "This is by far the best undeveloped growth project that any of the majors has, and it's in the best commodity - copper," said Deutsche Bank analyst Paul Young.

    The first phase open pit mine has been producing since 2013.

    Before development of the much larger underground mine can begin, Rio Tinto said the project will need to finalise financing, conduct a feasibility study and secure all necessary permits.

    "Our joint announcement today reflects tremendous leadership by all parties and paves the way for work to resume on the underground development, which is expected to deliver significant value to shareholders," Rio Tinto Copper and Coal Chief Executive Jean-Sébastien Jacques said in a statement.

    Rio Tinto gave no details on how soon it expects to complete a final feasibility study on the underground project, secure financing and start digging the mine and did not say when it aimed to start producing copper from underground.

    Analysts estimate the mine will only reach commercial production in 2019 or 2020 at the earliest.

    The agreements address key outstanding matters including the following specific items: tax matters, the 2% net smelter royalty, sales royalty calculation and management services payments. The agreements also address the sourcing of power for Oyu Tolgoi from within Mongolia. The overall value impact for the Company in connection with the agreements is less than 2% of the value of the reserve case of $7.4 billion.

    In 2003, Turquoise Hill acquired a 2% net smelter royalty from BHP Billiton. The enforceability of the royalty has been challenged by the Assistant General Prosecutor of Mongolia under Mongolian law. The Company has conceded that it has no entitlement to receive payment.

    In June 2014, Oyu Tolgoi LLC received a Tax Act (Tax Assessment) from the Mongolian Tax Authority as a result of a general tax audit for the period 2010 through 2012. Oyu Tolgoi appealed the assessment and in September 2014 received a response reducing the amount of tax, interest and penalties claimed to be payable, from approximately $127 million to approximately $30 million. In a separate agreement with the Government of Mongolia, Oyu Tolgoi has agreed, without accepting liability and without creating a precedent to pay the amount of the determination by way of settlement to resolve the tax matter.

    The parties have agreed that Oyu Tolgoi's 5% sales royalty paid to the Government of Mongolia will be calculated on gross revenues by not allowing deductions for the costs of processing, freight differentials, penalties or payables. Oyu Tolgoi will recalculate royalties payable accordingly since the commencement of sales and submit any additional amount payable to the Government within 30 days.

    Notwithstanding the terms of the ARSHA, the parties have agreed that in calculating the Management Services Payment (MSP), the rate applied to capital costs of the underground development will be 3% instead of 6%, as provided by the ARSHA. The MSP rate on operating cost and capital related to current operations remains at 6%.

    Within 30 days of execution of the Mine Plan, Oyu Tolgoi LLC and Turquoise Hill have agreed to prepare and submit working assumptions for a possible credit enhancement mechanism to support Oyu Tolgoi LLC's obligations under a potential power purchase arrangement from the Tavan Tolgoi power plant project.

    Today's announcement is a significant first step towards restarting underground development. The Mine Plan is available on SEDAR and the Company's website.

    Attached Files
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    Southern Copper announces 'pause' in Peru project to end unrest

    Southern Copper Corp on Friday announced a 60-day formal "pause" in its stalled $1.4 billion Tia Maria project in a bid to quell deadly protests against it.

    The decision follows weeks of unrest in the southern region of Arequipa and a presidential address to the country urging peace and demanding the miner do more to build support for the project.

    "In the spirit of recovering the climate of peaceful coexistence the country needs, we ask for the time and terms needed to socialize the project and clear up existing doubts in the next 60 days," Chief Executive Officer Oscar Gonzales said in a statement.

    Peru, the world's third-leading copper producer, is expected to contribute a significant amount to future global supplies. But mining conflicts have held up billions of dollars worth of investments in recent years.

    Tia Maria has faced delays since 2011, when similar rallies by farmers who say the mine will pollute the surrounding agricultural valley also left three dead.

    Southern Copper, controlled by Grupo Mexico, has said it will use the highest standards and promised to build a desalinization plant to ease concerns over water supplies in its revised environmental plan, which was approved last year.

    A construction permit for the 120,000-tonnes-per-year copper mine was pending when renewed protests broke out March 23.

    "Nothing has changed, it should not be the company that makes the decision but the people," said Helar Valencia, one of four mayors in Arequipa opposed to the project.
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    Mining unions in Peru to start national strike Monday -unions

    Workers at several major mines in Peru, including two of the country's top copper producers, plan to go on an indefinite strike on Monday in a country-wide bid to press the government to strengthen labor laws, union bosses said.

    The planned work stoppages at more than 20 mines threaten to curb mineral production in Peru, the world's third-biggest copper, silver and tin producer and seventh-biggest gold producer.

    Unionized workers are demanding the government repeal a law passed last year that eases rules on firing workers and to restrict the use of contract workers by mining companies, said Ricardo Juarez, the president of a national mining federation.

    "We're not asking for a wage increase," Juarez said. "We want a series of norms and decrees that go against mining workers eliminated." Some 20,000 workers are part of the national mining federation, Juarez said.

    The following are some of the mines where Juarez said unionized workers will take part in the strike. Production levels are from the energy and mines ministry.

    -ANTAMINA Produced 362,000 tonnes of copper and 266,000 tonnes of zinc last year. BHP Billiton Ltd and Glencore Plc own 33.75 percent stakes. Teck Resources Ltd controls 22.5 percent and Mitsubishi Corp 10 percent.

    -CERRO VERDE Produced 235,000 tonnes of copper last year. Freeport-McMoRan Inc controls 53.56 percent, Sumitomo Metal Mining Co Ltd 21 percent, Buenaventura 19.58 percent.

    -ANTAPACCAY The Glencore-owned mine produced 167,000 tonnes of copper last year.

    -SHOUGANG Produced 7.2 million tonnes of iron last year. Owned by China's Beijing Shougang Co Ltd.

    -SAN RAFAEL Local miner Minsur SA produced 23,100 tonnes of tin from the deposit last year.
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    Rio Tinto to sell aluminium assets in $1 bln deal -paper

    Global miner Rio Tinto plans to sell some of its aluminium assets in a potential $1 billion deal, the Financial Times reported, reviving a sale plan for its Pacific Aluminium unit two years after it was cancelled.

    The Financial Times, citing "people aware of Rio's plans", said on Sunday that Rio had hired Credit Suisse to find a buyer for Pacific Aluminium, known as PacAl, which comprises a group of smelters in Australia and New Zealand.

    A spokesman for Rio Tinto said the company "doesn't comment on market speculation".

    Rio Tinto first said it could hive off PacAl in 2011. In 2013, it said it was considering selling it, before scrapping efforts, blaming poor market conditions.

    Since then the aluminium market has recovered somewhat. The aluminium price rose 6 percent in 2014 and last year, aluminium surpassed copper as the second biggest contributor to Rio's underlying earnings behind iron ore.

    In aluminium, Rio has been steadily recovering from a disastrous $38 billion acquisition of Alcan in 2007 that brought it close to bankruptcy and helped lead to the dismissal of its previous chief executive, Tom Albanese.
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    BHP spin-off South32 debuts at lower end of expectations

    BHP Billiton's spin-off South32 debuted near the bottom of expectations on Monday as investors awarded only a small premium to the new listing amid concerns about broad weakness in the resources sector.

    Shares in the A$11 billion ($8.81 billion) spin-off first traded at A$2.13 at 0215 GMT, at the lower end of the A$2.00 to A$3.00 range forecast by analysts for Australia's biggest new listing in 15 years and the largest mining listing since Glencore Plc in 2011.

    However, the stock soon firmed slightly to A$2.18, in a weaker overall market, while BHP Billiton shares fell 7 percent.

    Dealers and analysts had said there was strong interest in the shares at the lower end of the range.

    "Looking at the total price of both BHP and South32 it's pretty clear the market's ascribed a small premium to the spinoff," said CMC Markets chief strategist Michael McCarthy.

    "Some are viewing this as the unloved part of BHP's portfolio (and) it's also the part where valuations are at multi-year lows, so there are some concerns that there's not much of an outlook for the stock."

    South32, which is being hived off by BHP Billiton to allow it to focus on its core businesses, lands just as global miners have been enjoying a small rebound in their shares.

    Before Monday, BHP's shares were up 10 percent in the past month, Rio Tinto and Glencore Plc rose about 5 percent and Anglo American was up 13 percent, which could help support the new company's debut, analysts said.

    Interest in the company, named after the line of latitude joining its main assets in Australia and South Africa, is expected to be solid as it fills a gap between the mega-miners and minnows, and offers a diverse suite of assets, from aluminium to silver.

    "There is appetite for that real good size, mid-tier, just below the BHP's and Rio's. For that reason it'll attract interest," said Matthew Keane, a resources analyst at Argonaut Securities in Perth.

    Trading in South32 is tipped to be volatile in the first few days as UK institutions who cannot hold the stock because it won't be included in FTSE indexes may be forced to sell.

    "London shareholders have been talking to Australian brokers about facilitating sales," said one analyst, who estimates South32 is worth A$2.30 a share.
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    Steel, Iron Ore and Coal

    Australia ditches iron ore probe after lobby, China-Brazil supply deal

    Australia’s government has decided to dump plans to conduct a special parliamentary inquiry into its iron ore industry, following a supply agreement between China and Brazil that could drag prices even lower, further affecting the country’s economy.

    “We certainly haven’t made any decision to have an inquiry … the last thing this government would ever want to do is interfere in a free market like the iron ore market,” Prime Minister Tony Abbott said in a brief statement Thursday.

    Announcing the decision, the treasurer Joe Hockey said that “after discussing the issue with regulatory bodies and stakeholders across the resources sector, the Government will not be initiating an inquiry at this time.”

    The move comes on the heels of a fresh deal between China and Brazil, which puts at Vale’s (NYSE:VALE) reach up to US$4 billion to finance its $16.5 billion expansion of its iron ore mines.

    According to the chair of the Australian Latin American Business Council, Jose Blanco, the agreement also implied major Chinese investment in several of Vale's giant iron ore carriers, known as Valemax ships, which can move vastly more resources and reduce transport costs by around 25%.

    The Brazilian company, the world's No. 1 producer of the steel making ingredient, is forecast to crank up production from current levels of 330 million tonnes to 450 million tonnes of iron ore by 2018. The figure is greater than the combined output of BHP Billiton and Rio Tinto.

    Australia’s decision also follows intense lobbying efforts by BHP and Rio Tinto, which warnedsuch a review would have sent a bad signal to Australia’s trading partners about potential government intervention in the market, while giving a “free kick” to competitor Brazil.

    Attached Files
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    China key steel mills daily output down 1.65pct in early-May

    Daily crude steel output of key Chinese steel producers fell 1.65% from ten days ago to 1.778 million tonnes over May 1-10, showed data from the China Iron and Steel Association (CISA).

    China’s total daily output during the same period was estimated at 2.269 million tonnes, down 3.5% from ten days ago.

    The decline was mainly due to persisting weak demand from downstream sectors on the back of slowing Chinese economy.

    As of May 10, total stocks in key steel mills stood at 15.87 million tonnes, up 6.08% from ten days ago.

    The CISA members produced 1.74 million tonnes of pig iron on average each day over May 1-10, down 0.78% from the previous ten days; while output of steel products was 1.63 million tonnes, down 11.63% from ten days ago.

    The price of steel products over the week of May 4-10 dropped 0.3% from the month before, showed data from the Ministry of Commerce.
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    Shanxi upgrade of 3 coal units for pollution: increase capacity.

    Three thermal power projects to be fired with low calorific value coals, with capacity combined totaling 2.1 GW, have been approved, the Shanxi Development and Reform Commission said recently.

    The second phase project of Shanxi International Energy, situated at Shanyin country in north Shanxi, will expand the existing two 0.33 GW supercritical low-CV coal based generating units into two 0.35 GW ones. It will also install flue gas desulfurization (FGD), denitration and dedusting facilities, and put in place a circulating fluid bed boiler (CFBB). The project is estimated to cost 2.93 billion yuan ($0.47 billion).
    Jinneng Group will build the Xinlei project in Yuxian county in east Shanxi, which consists of two 0.35 GW supercritical low-CV coal based generating units, as well as a CFBB and FGD, denitration and dedusting facilities. Total investment is planned at 3.25 billion yuan.

    Datong Coal Mine Group will expand the original two 0.33 GW supercritical low-CV coal based generating units into two 0.35 GW ones, and install a CFBB and FGD, denitration and dedusting devices. The project will cost 3.49 billion yuan or so.

    Attached Files
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    China to put Zhangtang railway into operation in mid-Nov

    China is expected to put Zhangtang railway, which connects Zhangjiakou with major steelmaking base of Tangshan in Hebei province, into operation in mid-November, local media reported on May 20.

    The 528.5 km rail line, starting from Kongjiazhuang station in Zhangjiakou City to Caofeidian North station in Tangshan City, is designed with an annual transport capacity of 200 million tonnes. Construction on the line started in March 2012.

    Zhangtang railway is the first phrase project of the Ordos-Caofeidian port line, China’s third largest energy transporting channel. The opening of the railway is expected to help move Inner Mongolian coal to coastal ports and boost economic development of the cities along the line.

    Currently, the 653 km Daqin railway, which links northern Datong of Shanxi and northern China’s Qinhuangdao port, is the artery of China's rail coal transportation. It has an annual transport capacity of 250 million tonnes.

    Shuohuang rail line, the second coal-dedicated railway linking Shuozhou of Shanxi and Huanghua Port, has a designed annual transport capacity of 350 million tonnes in the short term and 450 million tonnes in the long run.
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    India- Fresh emission limits for new thermal electricity units

    New thermal power plants will have to generate electricity with 25 per cent less soot particles under modified rules of operation announced by the government that will also impose fresh limits on other emissions.

    The Union environment ministry has released a draft notification specifying the revised norms from 2017 to slash emissions of particulate matter, nitrogen oxides, sulphur dioxide and mercury.

    Thermal plants are a major source of air pollution. A survey of 47 coal-powered plants released by the NGO Centre for Science and Environment (CSE) earlier this year found that over half the units violated limits on various emissions.

    The CSE has estimated the new rules will cut particulate emissions by 25 per cent, sulphur dioxide by 90 per cent, nitrogen oxides by 70 per cent and mercury by 75 per cent.

    "The proposed changes may go a long way in safeguarding public health," the CSE said in a release yesterday.

    Under the rules, thermal plants established after 2003 need to meet slightly lower standards, while emissions will be even more relaxed for plants constructed before 2003.

    The CSE said coal-based power plants account for 60 per cent of particulate matter, 45 per cent of sulphur dioxide, 30 per cent nitrogen oxides and 80 per cent mercury emissions spewed by the power sector.

    Two years ago, Greenpeace India had released a document that dubbed coal power as "India's dirtiest energy source", and estimated that between 80,000 and 100,000 people died prematurely from the health consequences of coal-related emissions.
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    China steel plant lauded for capacity was never approved

    A steel plant in Hanzhong that reported record-high production in April was repeatedly rejected over environmental concerns and continues to operate despite multiple failures to receive ministry approval, media reports said.

    The Hanzhong Steel Limited Corp of Shaanxi Steel Group, in Mianxian county, Shaanxi province, which has investment of more than 13 billion yuan ($2.1 billion), was rejected twice by the national environmental watchdog, a report said.

    Shaanxi province's Environmental Protection Bureau said it was aware of the issue but did not comment further on Wednesday.

    The plant produced more than 300,000 tons of steel in April, a record high, Hanzhong Daily, the city's official newspaper, reported on May 15. It also noted that the city and county governments, as well as the parent corporation, celebrated the achievement with a 300,000 yuan award.

    However, a report released on Wednesday on the website of Xinhua News Agency said the plant was operating illegally, despite winning several official government awards after it opened in January 2012.

    The Ministry of Environmental Protection rejected the plant in April 2012, four months after it started steel production, saying it failed to meet required environmental projection standards and failed to follow the province's steel production capacity restrictions.

    The province's Environmental Protection Bureau confirmed the rejection in May 2012 but continued to negotiate with the ministry to get approval of the environmental impact assessment. Since 2011, officials from the bureau have gone to Beijing more than 20 times, Xinhua reported.

    The ministry rejected the plant again in November of last year, saying it was too close to a famous tourist sight, Mount Dingjun, and might generate excessive airborne pollutants, a statement on the ministry's website said.

    The project also did not complete a relocation of nearby villagers, it said.

    Construction of the plant started in 2009. It was one of four national reconstruction projects started after the destructive 2008 Wenchuan earthquake in an effort to support the local economy.
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    China Smog War Seen Dooming Coal on ‘Cheap But Dirty’ Purge

    China’s battle against pollution is threatening the recovery of coal prices from the lowest level in almost nine years.

    China is turning to alternative energy sources as it races to meet emissions targets and eradicate the smog that’s enveloped cities and become a major cause of social unrest. President Xi Jinping has vowed to punish “with an iron hand” those who destroy the environment and his government is abolishing outdated capacity in the most polluting industries while promoting the use of electric cars and solar rooftops.

    The weekly average price of power-station coal at Qinhuangdao, the nation’s biggest port for delivering the fuel, fell to 405 yuan ($65) a metric ton as of May 17, data from the China Coal Transport and Distribution Association show. That’s the lowest level since July 2006 and down from a record 995 yuan. None of the five analysts in the Bloomberg survey forecast prices to climb above 500 yuan before 2020.

    Last year, the amount of electricity generated by coal-fired plants in China declined for the first time since 1974 while output from non-fossil fuel sources, including hydro power, wind and nuclear, rose about 20 percent, according to the nation’s Electricity Council. Xi set a target in November to cap carbon emissions by 2030.

    About 3 gigawatts of new coal-fired capacity will be brought on for every 1 gigawatt that will be retired from 2015 to 2020, compared with a ratio of 6 to 1 in the five years through 2014, said Sophie Lu, an analyst at Bloomberg New Energy Finance.

    Electricity generated by hydro and nuclear cut coal consumption at thermal power plants by as much as 110 million tons last year, according to Wood Mackenzie.

    Thermal power plants operated last year at the lowest level since 1978 and utilization rates, the leading indicator of coal demand, may decline further in 2015, according to the China Electricity Council. These facilities used 1.25 billion tons of the fuel in 2014, down 7.4 percent from a year earlier, data from the Council show.

    “Coal demand in China has peaked,” said Laban Yu, a Hong Kong-based analyst at Jefferies. “It went down last year, it’s probably going down even more this year. Coal prices will never recover, ever.”

    Attached Files
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    Tata Steel sees rebound at home, growth in Europe after Q4 loss

    India's Tata Steel Ltd said it expected a rebound in steel demand in its home market and modest growth in Europe this year, after reporting a $889 million quarterly loss inflated by a hefty impairment on its UK business.

    The consolidated fourth quarter loss from Tata Steel, Europe's second-largest steelmaker, compares with a net profit of 10.36 billion rupees ($163 million)a year earlier. Net sales dropped more than a fifth, hit by weak steel prices.

    The combination of a slowdown in China and a devaluation of the Russian rouble have led to a surge in cheaper steel products on international markets over the past two quarters, pressuring steel prices and squeezing Tata Steel's margins in Europe and India, at a time when demand is also still lacklustre.

    The company has been forced to slash costs and jobs following its ill-timed entry into Europe, where steel demand has languished after the financial crisis and clients have turned to cheap imports, which Tata said remained a worry.

    "(European Union) demand is forecast to grow modestly again and the EU steel industry is in a stronger position to benefit than it was pre-crisis. But surging Chinese exports look set to remain a serious concern," Karl-Ulrich Köhler, chief executive of Tata Steel's European operations said.

    Tata Steel last week said it would take a $785 million non-cash charge in the fourth quarter, mainly related to its loss-making European long products unit, which serves the construction and engineering industries and employs 6,500 people in Britain and elsewhere on the continent.

    The company announced in October last year that it was in talks with Geneva-based Klesch Group to sell that unit, in order to focus on higher value products, like those for the auto industry.

    Group Executive Director Koushik Chatterjee told a news conference in Mumbai on Wednesday that the discussions continued, and Tata Steel hoped to see a "final picture emerging in the next few months.

    Tata Steel has been focusing on shifting to higher-margin speciality steel to propel a turnaround, more than seven years after it entered the continent through the $13 billion acquisition of Corus, formerly British Steel, in 2007.

    In its home Indian market, Tata Steel is "hopeful" that steel demand will rebound this fiscal year on the back of higher investments across key industrial and infrastructure sectors, T.V. Narendran, chief of the company's Indian and Southeast Asian operations, said.

    A string of mining stoppages in recent months led to a number of Tata Steel's iron ore mines in India being shut during the past year, causing its plants to operate below capacity.
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    Ex-Fines iron ore is not in oversupply

    The price of iron ore suffered its seventh down day in a row on Tuesday amid a brouhaha in Australia between the government and producers over a proposed probe into pricing in the 1.3 billion tonne seaborne iron ore trade.

    The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin lost $0.60 or 1% to $58.40 a tonne according to data provided by The SteelIndex, a two-week low.

    Steel mills are unlikely to absorb any further increase in the volume of fines material entering the market

    A slowdown in China which consumes 70% of the seaborne iron ore trade is partly to blame, but most industry watchers have laid the blame for the weakness on the supply side. Led by the Big 3, iron ore miners invested north of $100 billion in new projects and expansions since the start of the decade.

    A trenchant new report by Minerals Value Service, a London-based research firm, urges a more nuanced reading of the iron ore supply picture.

    Fines drive the iron ore price and it makes up the bulk of supply, but MVS points out that concentrate, pellets and lump output has remained fairly consistent since 2010.

    Blame for the current price slump should therefore be laid squarely on fines producers which are on course to almost double output from 2009 to just shy of 800 million per annum by the end of this year.

    Pellet production has hovered around 200 million tonnes per year since 2010

    That compares to lump output of around 280 million tonnes last year, up by only some 20 million tonnes from 2009. Similarly pellet production has hovered around 200 million tonnes per year since 2010, while annual concentrate has only increased by around 10% over the same period according to MVS data.

    In contrast to fines, demand for lump and particularly pellets are expected to rise as steel mills, particularly in China, battle to reduce pollution and increase plant efficiency, the authors note.

    Significantly, according to the report, the abundance of cheap fines – particularly grades between 56%–62% – won't displace other classes at mills:

    Blast furnace operators are reluctant to make large scale, sudden changes to their burden mix due to the risk of an unforeseen negative impact. Therefore, steel mills are unlikely to absorb any further increase in the volume of fines material entering the market.

    Fines material achieves the lowest price in the market, tends to provide the least desirable suite of chemical and physical specifications and is the most readily available iron ore class in the market place. For these reasons, steel mills may continue to use their current lump and pellet supply, regardless of how low the price of fines becomes, as they seek to maintain a consistent blend.
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    Vale signs MoUs with Chinese firms

    Brazil's mining giant Vale, the world's leading iron ore producer, signed memorandums of understanding (MoUs) Tuesday with the Industrial and Commercial Bank of China (ICBC), the Export-Import Bank of China (China EximBank) and two leading Chinese shipping firms.

    According to Vale, the deal with ICBC is for cooperation on global financing arrangements.

    Under the terms of the memorandum, ICBC will provide Vale with up to $4 billion in "syndicated loans, bilateral loans, export credit, trade finance, among other potential financing arrangements and services."

    The document was signed by Murilo Ferreira, president and CEO of Vale, and Yi Huiman, president of the ICBC, during Chinese Premier Li Keqiang's official visit to Brazil. It takes effect immediately for a three-year period.

    In addition, Vale signed two three-party MoUs for potential financing and loans with China EximBank and shipping giants China Ocean Shipping Company (Cosco) and China Merchants Group.

    Vale said both memorandums call for financing cooperation on iron ore shipping and "define the basis for future cooperation between Vale and its Chinese partners."

    "According to each memorandum, China EximBank will consider providing a loan of up to $1.2 billion to both Cosco and China Merchants respectively to facilitate the two shipping companies' provision of iron ore shipping services to Vale," the mining company said.

    Brazil's President Dilma Rousseff and Premier Li Keqiang presided over the signing of the agreements, part of many business deals struck between Brazilian and Chinese companies during Li's visit.
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    China coking coal prices edge up by 5-10 yuan/t

    China’s coking coal prices rebounded a little of 5-10 yuan/t recently, as some major production regions adjusted up prices amid short supply and temporary downstream restocking demand.

    One source said some producers in Luliang, one major coking coal production base in Shanxi, have increased the price of low-ash, low-sulphur lean coal by around 10 yuan/t, as demand improved due to the short supply of imported coking coal.

    One trader from Shouyang, Jinzhong said local lean coal prices have climbed 5-10 yuan/t, as output dropped amid safety checks launched by the provincial government from May 1.

    One Jinzhong-based washing plant said some miners have increased raw coal prices by 5-10 yuan/t amid production cut recently, but the prices of washed coal haven’t ceased falling, which have almost reached to the bottom.

    The ex-washplant price of fat coal with 1.8% sulphur was 410-420 yuan/t, while that of coking coal with 1.6% sulphur was 420-430 yuan/t, VAT-excluded, a second Jinzhong-based source said.

    However, many enterprises expected stable market late this month. One supplier said its end users would not change purchase prices in the short run; another producer said few end users showed buying interests amid high stocks.

    One Hebei-based buyer said the price rebound was in reasonable range and may not last long, as imported products may increase in June. Another Hebei-based buyer said the purchase price may stay unchanged for a while.
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    Anshan Steel produced 450 tonnes of auto plate to Great Wall Motor

    It is reported that Anshan Steel successfully developed high strength CR300/500DP auto plate for the Great Wall Motor, with all the performances meeting relevant standards.
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    Vale to sell 4 large iron ore carriers to China's CMES

    Brazilian miner Vale said on Tuesday it agreed to sell four large iron ore carriers to China Merchants Energy Shipping Co (CMES) , as it looks to raise cash in the midst of an iron ore price slump.

    The world's largest producer of iron ore said in a statement the details of the contract had not yet been finalised and will be released in the coming months.

    In a separate statement on Tuesday, the miner said it had completed the sale of four other large iron ore carriers to China Ocean Shipping Company (Cosco), which was agreed last September. Vale said it expected to receive the $445 million from the sale in June.

    Vale is in the process of selling its ore carriers, known as VLOCs or Valemaxes, as it looks to raise cash and improve relations with China's shipping companies which had previously lobbied to block access of the ships to Chinese ports.

    The 400,000-deadweight-tonnne vessels are some of the largest ships ever built. They were designed to help reduce the cost of shipping ore to China from Brazil, helping Vale better compete with Australian rivals who are closer to the largest market for the steelmaking ingredient.
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    China steel price slumps to 12-year low

    Chinese prices of steel used mostly to build homes and offices fell to a 12-year low as peak construction season begins to ebb in the world’s biggest consumer.

    The average spot price of steel reinforcement bar, or rebar, dropped for a 10th day to 2,458 yuan ($396) a metric ton, the lowest level since January 2003, according to data from Beijing Antaike Information Development Co.

    Spot rebar is 11 percent lower this year after four straight annual drops as a prolonged slump in China’s property sector has hurt steel demand. Prices have fallen after reaching a two-month high in March ahead of the usual peak-demand period from April to June. New home prices slid in 69 of the 70 cities tracked by the government in April from a year earlier, National Bureau of Statistics said on Monday.

    “For downstream industries like construction, we’re already at the peak of the season or already passed it,” said Ginger Ding, an analyst at Metal Bulletin Research in Shanghai.

    China’s steel demand slumped 6 percent in the first quarter and may have peaked over the long term, the China Iron and Steel Association said last month.

    Crude-steel production in April slid 0.7 percent from a year earlier to 68.91 million tons, while investment in fixed assets expand at the weakest in almost 15 years, the statistics bureau said last week. Infrastructure and construction together account for about two thirds of China’s steel demand, according to HSBC Holdings Plc.

    The contract on the Shanghai Futures Exchange fell on April 10 to the lowest since trading began in 2009. Futures retreated 1 percent to close at 2,349 yuan a ton. Iron ore with 62 percent content at Qingdao declined 1.6 percent to $61.31 a dry ton on Friday, according to Metal Bulletin Ltd.
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    Shanxi Jan-Apr coal outbound sales down 33 pct on weak demand

    Outbound coal sales from northern China’s Shanxi province slumped 33.33% on year to 128.45 million tonnes in the first four months, data showed, mainly due to weak downstream demand.

    In April, Shanxi’s outbound coal sales rose 3.66% on month but fell 24.53% on year to 32.44 million tonnes. It was the 7th consecutive year-on-year plummet.
    By Industry
    Over January-April, Shanxi sold 84.29 million tonnes of coal to power industry in other provinces, down 33.66% on year, as coal-fired power output declined and unit coal consumption gradually decreased.
    For metallurgical industry, Shanxi sold 15.53 million tonnes of coal outside in the first four months, down 27.04% on year, as coke and steel producers kept pressing down coal purchase prices.

    Shanxi coal was mainly sold to Hebei, Jiangsu, Shandong, Beijing and Zhejiang provinces, which combined bought 22.92 million tonnes of coal in April, accounting for 70.65% of Shanxi’s total sales and down 14.54% on year.

    Shanxi’s coal sales to Hebei fell 0.79% on year to 8.62 million tonnes in April, while total sales over January-April declined 40.76% on year to 30.09 million tonnes, most of which was used in power and metallurgy industries.
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    Brazil's steelmaker Usiminas to cut output due to lower demand

    Brazil's Usinas Siderurgicas de Minas Gerais S.A. will turn off two of its furnaces to reduce pig iron production by 120,000 tonnes per month and adapt the operation to lower demand in the steel market, the company said on Monday.

    Usiminas, as the company is known, said it will turn off the number 1 furnace at its Cubatao plant in Sao Paulo state and the number 1 furnace at Ipatinga plant, in the state of Minas Gerais, both located in Brazil's center-south region.

    "Such adjustment aims to adapt production to the current rhythm of demand in the steel market," the company said in a filling with the local market regulator in Brazil.

    Usiminas produces some 6 million tonnes of raw steel a year and sells around 80 percent of that in the local market.

    The company, which also produces iron ore, posted a net loss of 235 million reais.
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    BHP chief comes out swinging against Australian iron ore inquiry

    A proposed Australian Senate inquiry into the economic impact of a slump in the price of iron ore could damage the country's economy and drive Asian customers to shift investment to Brazil, BHP Billiton CEO Andrew Mackenzie said on Tuesday.

    Prime Minister Tony Abbott last week threw his support behind a proposal by Senator Nick Xenophon for an inquiry into the impact of the price collapse on government revenue and to consider whether action is needed to ensure healthy competition in the sector.

    In a heated radio interview Mackenzie hit back, blasting an inquiry as a waste of government resources and adding that he was "perplexed" by the conservative government's decision to back it.

    Mackenzie denied that top producers Rio Tinto and BHP had colluded to depress prices and drive smaller producers out of the market, calling the inquiry "an amazing gift to our major competitor, Brazil."

    "Not all inquiries are bad because they can draw people on to the same page, create transparency and trust, but this is a ridiculous waste of taxpayers' money," Mackenzie said.

    "This is red tape and a burden on business, plain and simple."

    The iron ore price slump has caused a A$20 billion ($16 billion) loss in government revenue in the past year and the fiscal 2016 budget released last week hinges on iron ore fetching at least $48 a tonne over the next year.

    Major miners BHP, Rio Tinto, Brazil's Vale and Fortescue have ramped up output as demand growth has cooled in China, which has driven down prices and left smaller, high-cost producers struggling to survive.

    The iron ore price hit $46.70 a tonne in April, its lowest in a decade, although it picked up to around $61 last week.

    Just hours after Mackenzie's interview Abbott appeared to backtrack at least somewhat from his earlier support of last week, telling reporters that he had not made any decision to have an inquiry.

    "The last thing we would want is a one-sided inquiry which degenerates into a witch hunt against some of our best companies," he said.
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    German ministry softens CO2 emission demands for power plants

    Germany plans to force coal-fired power plant operators to reduce their CO2 emissions by 2020 by less than previously planned, according to an economy ministry document seen by Reuters on Monday, bowing to opposition from within the industry.

    Thousands of coal workers marched in Berlin last month to protest against plans to slap a levy on the oldest and most polluting power plants, which unions say could put 100,000 jobs at risk.

    The levy is aimed at forcing coal operators to slash their emissions and stop Germany from falling short of its target to cut greenhouse gases by 40 percent by 2020 compared to 1990 levels.

    But RWE, the country's largest power producer, warned the measure would lead to the immediate closure of its lignite-fired power plants.

    In an attempt to defuse the situation, the economy ministry now plans to require coal plant operators to cut their emissions by 16 million tonnes by 2020, compared with a previous target of at least 22 million tonnes, according to the document.

    Under the original proposal power plants older than 20 years were required to pay a penalty on CO2 emitted above a limit of seven million tonnes per gigawatt of installed capacity, with the oldest power plants receiving even lower exemptions.

    The new proposal has raised the amount of CO2 older power stations are able to emit before the penalties kick in.

    "Increasing the amount that is exempt by almost a third will significantly increase the profitability of older power stations," the document said.

    Generators E.ON and Vattenfall declined to comment. RWE was not immediately available for comment.

    The government now plans to achieve the remaining six million tonnes of CO2 emission cuts for the energy sector by promoting the use of more environmentally-friendly combined heat and power plants, government sources said.

    However the proposal is yet to be approved by the Chancellor's office and other ministries, they said.
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    Nippon Steel says seamless pipe demand to fall 20-30 pct

    Nippon Steel & Sumitomo Metal Corp expects demand for seamless pipes used in oil drilling to fall by up to 30 percent this business year, but aims to offset most of the impact through lower fuel costs, a senior executive said.

    Nippon Steel, the world's second-largest steelmaker, is among the world's top makers of high-end seamless pipes used mainly for drilling oil and gas, along with French steel pipe-maker Vallourec and Italy's Tenaris.

    Executive Vice President Katsuhiko Ota told Reuters in an interview the company was also targetting 50 billion yen ($420 million) in other savings this year, and hoped to boost profits at its overseas units by the same amount over three years.

    "What we can say is that we'll cover a shortfall in seamless pipes by lower fuel expenses, save 50 billion yen from other cost cuts this year," Ota said.

    "In addition, we aim to boost profits of overseas units by 50 billion yen over the next three years."

    Tokyo-based Nippon Steel does not break out the financial contribution of steel pipes in its results, but analysts said the segment contributed more than 20 percent profit.

    "The pipe segment is an important profit driver for Nippon Steel," said Yuji Matsumoto, an analyst at Nomura Securities, who expected the weaker demand to cut recurring profit this year by about 45 billion yen.

    The firm sold 1.19 million tonnes of seamless pipes in the year ended in March, steady on a year earlier.

    "For this business year, seamless demand is likely to fall about 20-30 percent as oil majors have warned that they would cut their orders that much," Ota said.

    "Our product mix will get worse because seamless pipes generate higher margins than other products."

    Global oil prices tumbled to six-year lows in March. Exxon Mobil Corp, Royal Dutch Shell Plc, BP Plc and others have slashed 2015 capital spending plans by 10 to 15 percent, delaying and scrapping projects.
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    China steps up defence of steel industry

    China stepped up its defence of its steel industry on Friday after a new probe into possible dumping added fuel to a growing international trade spat over the country's steel exports.

    Ministry of Commerce spokesman Shen Danyang said China, which produces almost half the world's steel, opposes any measures against its steel exports. The European Commission on Thursday confirmed a fresh investigation into possible dumping of cold-rolled steel coil exports from China and Russia.

    Without specifically addressing the European Union, Mr Shen said Chinese steel exports have been rising sharply because of "higher demand in the global market," and said that "Chinese steel products have strong export competitiveness."

    "Under such circumstances, I feel that it's quite normal for Chinese steel exports to these countries to be rising, and it's quite justifiable," he said.

    The US, Australia and South Korea, have also signaled that they are lining up support for trade action to roll back Chinese steel exports, which rose by 50.5 per cent last year to a record 93.8 million metric tons and have continued at a high level this year, according to General Administration of Customs data.

    At home, Beijing has been pushing its steel industry to slash obsolete productive capacity to cut environmental pollution and to improve the kind of steel products it makes. The government has opened its steel sector to foreign investment, a move that has seen few takers so far.

    As steel prices have slumped, China has also taken measures to try to limit exports, cancelling an export tax rebate on a certain type of popular steel alloy in January. However, that measure was almost immediately circumvented by steelmakers who began to export similar products using a different type of alloy.

    The tenor of Mr Shen's comments suggests China is pulling back from the more conciliatory approach it had adopted last year to manage global trade complaints, analysts say. Though state officials have consistently said they believe Chinese steel exports are globally competitive, last year they said they understood the friction caused by these exports, and had sought to discuss the issue with local steel mills to try to hold down exports.

    Those discussions appear to have borne little fruit.
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