Mark Latham Commodity Equity Intelligence Service

Monday 6th June 2016
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    *BREAKING* China stimulus chapter 2.

    <We will provide sources when we see some official confirmation>
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    Lew says excess capacity 'corrosive' for China growth

    China's excess industrial capacity will have a "corrosive" impact on its future growth and efficiency unless it is reduced, U.S. Treasury Secretary Jack Lew said on Sunday, adding that it was also causing distortions in global markets.

    Lew, speaking to students in Beijing, said he hoped to make progress on the excess capacity issue in bilateral meetings with senior Chinese officials starting on Monday in Beijing. He noted that past discussions had eased currency tensions between the world's two largest economies.

    "Excess capacity is not just a domestic issue in China," Lew said at Tsinghua University. "The question of excess capacity is one that literally has an enormous effect on global markets for things like steel and aluminum, and we're seeing distortions in global markets because of excess capacity."

    A flood of Chinese steel into the United States has prompted the U.S. Commerce Department to impose anti-dumping and anti-subsidy duties on a wide-range of Chinese steel products, while U.S. business groups have complained about new Chinese regulations they say favor local firms.

    China, which now produces more than half of the world's steel, has criticized U.S. anti-dumping duties targeting Chinese steelmakers as irrational and harmful to diplomatic ties. Beijing has said it needs time to address its excess capacity problem.

    Lew said excess Chinese steel capacity was causing problems for steel-producing economies worldwide, and government subsidies were at the root of the problem by encouraging overbuilding.

    "Excess capacity ultimately is corrosive of an economy's efficiency," Lew said. "It means you have misallocation of resources, it means that ultimately, the only way to clear the market is to sell things at a price that is below what the world market price would otherwise be."

    Lew credited past sessions of the annual U.S.-China Strategic and Economic Dialogue talks with helping to reach understandings that have made currency less of an irritant for the two countries. The Treasury did not designate China as a currency manipulator in its recent currency report because it found that China's recent interventions were not problematic, he said.

    China's latest interventions have been aimed at supporting the yuan's value, not pushing it down.

    "It's fundamentally in China's interest not to have an undervalued exchange rate," Lew said, adding that a market-driven yuan would benefit Chinese consumers' purchasingpower.

    "Having a strong consumer in China is central to the future of China's growth," Lew added.

    Lew also said he hoped to make progress on market access, including efforts to open China's financial services and health care markets.

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    China State Grid ready for tech exports, official

    China's top electricity supplier, State Grid Corp, is set to export its ultra-high-voltage (UHV) technology to India soon, as it pushes to expand its large-scale network both at home and abroad, China Daily reported, citing a senior official at the utility company as saying.

    Ultra-high-voltage technology, or UHV technology, provides large-scale power delivery over long distances and can reduce energy loss during transmission.

    "We have been having talks in India about testing some ultra-high-voltage projects. Concerning UHV technology, those talks are at an early stage, but there is a great chance that some Chinese technology will be used," said Li Peng, head of the high-voltage division at China Electric Power Research Institute, a unit of the State-owned utility company.

    "China is a country with rich experience in building large-scale power transmission infrastructure, so it has become the first choice for other countries in need," he said.

    Li made his remarks at a forum in Tianjin, where a 1,000-kilovolt transmission project is expected to be completed by October, marking the latest effort by State Grid to ease power shortages in the Beijing-Tianjin-Hebei region.

    After its completion, Tianjin will be able to receive as much as 50 billion KWh of renewable energy, including solar and wind power, from Inner Mongolia autonomous region, said Wang Bin, manager of the Tianjin transmission project. He said that would slash coal consumption by 9 million metric tons.

    Beijing-based State Grid is building a UHV cross-country transmission network in the world's biggest energy-consuming market, which will link major hydropower plants and coal-fired plants in the far southwest and northwest with big energy-consuming regions in the east.

    The company plans to use its domestic experience to win more exports of its technology and equipment. Last year it inked framework deals with Russia and Kazakhstan for cross-country electricity transmission lines.

    State Grid also scored with its bid to build and operate two transmission lines connecting the Belo Monte Amazon dam in northern Brazil to the southeast of the country, the first UHV transmission project it won overseas.

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    Australian storm disrupts everything from internet to shipping

    A weekend of wild weather in Australia disrupted everything from the internet to shipping and banking, while pummeling coastal towns and exposing insurance companies to hefty payouts.

    Stocks in Australia biggest insurers, including QBE Insurance, Insurance Australia Group and Suncorp, were lower on the Australian Securities Exchange, with the wider market trading in positive territory.

    A clean-up was underway on Monday after a low pressure system that brought flooding and strong winds combined with high tidal surges along much of the Australian east coast started to ease.

    Australian websites including Channel Nine, Foxtel Play and Domino's Pizza went down on Sunday when Amazon Web Service's Sydney zone experienced a two-hour poweroutage, according to Australian website ITnews.

    Amazon first warned of the outage affecting Elastic Compute via its status page on Sunday afternoon and an hour later confirmed the issue was related to a power problem, the website said.

    An Amazon spokesman declined to comment on the matter but Amazon Web Services’ status page on Monday showed several connectivity issues in Sydney had been resolved.

    The New South Wales state emergency services said it had received more than 9,250 calls and had conducted 280 flood rescues.

    A spokeswoman for the Port Authority of New South Wales state said the Newcastle port, the world's largest exit point for seaborne thermal coal and used by global miners Glencore, Rio Tinto and Anglo American, was placed on restricted ship movements over the weekend but did not sustain any damage.

    Port Kembla, the largest vehicle import hub in Australia remained closed, as the storm moved south, according to the spokeswoman.

    Big waves were expected to pound the coast on Monday, with the Bureau of Meteorology predicting another day of dangerous conditions, chiefly south of Sydney.

    Banks also needed to restore services to automated teller machines that went down.

    Mobile, ATM and point-of-sale banking services had been restored after an outage late on Sunday, Westpac said.

    “While we aim to ensure continuity of our systems, the severe storm system created disruptions across our network which impacted our services," it said.

    Commonwealth Bank said some of its customers were affected by intermittent problems with another ATM provider.

    Jan Van Der Schalk, a CLSA analyst said IAG and Suncorp faced few catastrophes in fiscal 2016, ending on June 30.

    "Hence, there should be no earnings impact because of this event," Van Der Shalk said.

    Insurers said it was too early to tell what the impact might be.
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    Oil and Gas

    Nigerian militants warn of 'zero' oil output in new attacks

    The Niger Delta Avengers militant group claimed three new attacks on the country's battered oil infrastructure overnight, promising to bring Nigeria's oil production to "zero."

    Early on Friday, the group said via its Twitter account that it had blown up a pipeline in Nigeria's Bayelsa state owned by Italy's ENI, hours after attacks on another ENI pipeline as well as one belonging to Shell Petroleum Development Company of Nigeria Ltd (SPDC).

    "At about 3:30am our (@NDAvengers) strike team blew up the Brass to Tebidaba Crude oil line in Bayelsa," the group said on a Twitter feed it uses to claim attacks.

    The pipeline is used to transport Brass River crude, which was placed under force majeure after an attack last month, to an export terminal.

    Hours earlier, the group said it blew up the Ogboinbiri-Tebidaba and Clough Creek-Tebidaba pipelines in Bayelsa and a Shell Forcados export pipeline. That grade has been under force majeure since an attack on a sub-sea pipeline in February.

    Because the attacks were on infrastructure for oil streams already under force majeure, the immediate impact on Nigeria's exports was limited. The country's oil minister said on Thursday its production was close to 1.6 million barrels per day (bpd).

    ENI did not immediately respond to a request for comment. A spokesman for the SPDC, which operates the Forcados line, said the company was "investigating reports of an attack on its pipeline in the Western Niger Delta."
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    Saudi Aramco Raises Asia Oil Pricing

    Saudi Arabia, the world’s largest crude exporter, raised pricing on most oil grades for sale to Asia and the U.S. in July after the nation’s energy minister said demand was robust.

    State-owned Saudi Arabian Oil Co. increased its official selling price for Arab Light crude by 35 cents a barrel to 60 cents more than the regional benchmark for sales to Asia, it said in an e-mailed statement. The company, known as Saudi Aramco, was expected to raise the premium for shipments of Arab Light crude by 40 cents a barrel to 65 cents a barrel more than the benchmark for buyers in Asia, according to the median estimate in a Bloomberg survey of five refiners and traders in the region last week.

    Oil has rallied about 80 percent since January, making ministers of the Organization of Petroleum Exporting Countries confident that their two-year strategy of trying to win market share is working. OPEC agreed on Thursday to stick to its policy of unfettered production with ministers united in their optimism that oil markets are improving. The July pricing sets Aramco’s light crude grades at the highest levels for Asia since at least September 2014, before OPEC adopted its market share strategy.

    “This shows that they’re getting more bullish on demand,” Robin Mills, chief executive officer at consultant Qamar Energy in Dubai and a non-resident fellow at the Brookings Institution in Doha, said Sunday by phone. “India is showing a lot of strength and we’re still seeing very robust demand from China.”

    Aramco raised pricing on most grades for sale to Asia, leaving only the Extra Light blend unchanged, according to the statement. It raised the premium for Super Light crude by 10 cents, to $4.05 a barrel more than the benchmark. Medium crude will sell at a $1 a barrel discount in July, 30 cents higher than in June, according to the statement.

    The company also increased pricing for U.S. buyers on all grades except Extra Light. Arab Light crude for U.S. buyers increased by 20 cents a barrel, to 55 cents more than the regional benchmark, according to the statement. Aramco deepened discounts for all grades to buyers in Europe, it said in the statement.

    Saudi Arabia pumped 10.27 million barrels a day in April, according to data compiled by Bloomberg. It produced a record average of 10.2 million barrels daily last year, it said in its annual review last month.

    Saudi Arabia’s Energy Minister Khalid Al-Falih, who is also chairman of Saudi Aramco, told reporters in Vienna on Thursday that demand is robust and that non-OPEC supply is declining. Global demand is expected to expand by 1.2 million barrels a day this year after growing 1.5 million barrels a day last year, according to OPEC’s final press statement on Thursday.

    Middle Eastern producers are competing increasingly with cargoes from Latin America, North Africa and Russia for buyers in Asia, its largest market. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades and for North America the marker is the Argus Sour Crude Index.
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    JX Nippon buys stake in ninth Bintulu LNG train from Petronas

    Malaysia’s’ Petronas said Friday that Japan’s JX Nippon Oil & Energy will buy a 10 percent stake in its unit that owns a liquefaction train within the Bintulu LNG complex in Sarawak.

    Petronas LNG 9 Sdn Bhd (PL9SB) owns the ninth liquefaction train, with a production capacity of 3.6 million tonnes per annum, within the Petronas LNG complex in Bintulu, Malaysia.

    The train is expected to commence commercial operations in the first quarter of 2017, according to a joint statement by the two companies.

    JX NOE’s entry into PL9SB marks its second participation in Petronas’ LNG projects, in addition to its existing 10 percent equity interest in MLNG Tiga.

    With the addition of the liquefaction plant owned by PL9SB, the Petronas LNG complex in Bintulu will now have the capacity to produce approximately 30 million tonnes per annum, the statement said.
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    Total readies sale of German chemicals maker Atotech: sources

    French oil and gas producer Total has begun preparations for the sale of its specialty chemicals and equipment division Atotech, which may be valued at about 3 billion euros ($3.4 billion), sources said.

    Total said in February it was planning sales of mostly non-core assets worth about $4 billion this year and Chief Executive Patrick Pouyanne said last month that Atotech no longer fell within the company's strategic vision.

    The chemicals sector has seen a surge of mergers and acquisitions in the last year, with a tie-up between U.S. peers Dow and DuPont and ChemChina buying Swiss pesticides group Syngenta.

    The deal bonanza is driven by large corporates striving to bulk up in higher-margin specialty chemicals and rely less on commodity chemicals. At the same time, they are trying to focus on key areas and divest sub-scale activities, while the cheap funding has facilitated deal-making.

    Total is expected to ask Barclays to lead the divestment, the sources said, adding that a final mandate has not yet been assigned but was imminent.

    An auction of Berlin-based Atotech, which generates annual sales of about $1 billion from the manufacture of specialty chemicals and equipment for printed circuit boards and semiconductors, would likely to kick off after the summer, the sources said, after sales documentshad been prepared.

    About a dozen private equity groups are looking at the Atotech, which is expected to be sold to a buyout group as there are no obvious strategic buyers, the sources said.

    People familiar with the company said they expect Atotech to generate earnings before interest, taxes, depreciation and amortization (EBITDA) of 250 million euros this year and that the company may be valued at 12-13 times that in a sale.

    That would be a slight discount to the multiple of 13.9 times core earnings that U.S. peer Platform paid for its acquisition of Alent last year.

    Companies buying a direct peer are usually able to reap synergies from an acquisition, allowing them to pay more than buyout groups which do not have such cost savings potential.

    Atotech is Total's sole remaining specialty chemicals unit after the sale of Bostik in 2014.
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    Report suggests Shell may be about to reveal more cost-cutting

    Oil giant Shell may be about to announce further cost cutting and a possible delay to its plans to offload assets, a report said yesterday.

    Chief executive Ben van Beurden is under “increasing pressure” to justify the firm’s £35billion takeover of BG Group in the middle of a severe oil and gas industry slump, it added.

    Shell is holding a capital markets day for investors tomorrow and it is thought it may update on its sale plans and fresh cost-cutting then.

    Last month, Shell chief financial officer Simon Henry said cost levels in the North Sea needed to come down “substantially”.

    Action already taken to integrate BG within Shell’s operations, including job cuts, were “probably about it for now” but he did not rule out further headcount reductions.

    The Anglo-Dutch company has been under pressure from shareholders to cut costs and safeguard its dividend.

    Shell has already scrapped multi-billion-pound projects during the past year, including controversial exploration in the Alaskan Arctic.
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    Russia Almost Doubles Gas Exports to the U.K.

    Russian media reports say the county’s gas giant Gazprom has dramatically increased its exports to the United Kingdom during the first five months of 2015, nearly doubling shipments.

    The 91.5-percent increase in natural gas exports to the UK--which equates to 3.85 billion cubic meters--was reported by the company’s CEO Alexei Miller on Wednesday.

    Other countries in the European Union—desperate to reduce dependence on Russian gas--have also begun importing more energy supplies from Russia.

    Gazprom’s business with Poland jumped by 35.6 percent from January to May 2016, while Germany (10.4 percent), France (35 percent), Austria (21.3 percent), Greece (85.8 percent), the Netherlands (103.8 percent) and Denmark (139.3 percent) also upped their orders by significant amounts.

    The European Council on Foreign Relations published a report calling Russia an “unreliable partner” and outlined possible alternatives to Russian energy resources.

    It suggested increasing natural gas imports from the Middle East and North Africa region, “intensifying collaboration” with Azerbaijan, Kazakhstan and Turkmenistan all of which host the Southern Gas Corridor, and getting a hold of liquefied natural gas from the United States, Australia and East Africa.

    In order to implement the three-pronged strategy, the report suggested appointing a Special Envoy on International Energy Affairs to begin discussing energy trade deals.

    “Although diversifying away from Russian gas is not unrealistic in the medium term, several technical and political obstacles must be overcome,” the authors said, pointing out that “most” of the European Union’s energy contracts with Russia will expire by the year 2025.

    The analysis leaned towards offering energy contracts to Iran, had its oil industry not been bombarded by international sanctions at the time. The nuclear deal’s success could mean the recovering country could receive new European contracts.

    The document also suggested increasing its energy imports from Algeria – the North African country that already the continent’s second-largest non-EU gas supplier behind Russia.

    Other OPEC members from Latin America and the Middle East were also listed as new potential energy partners.
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    French strikes offer Atlantic refiners lifeline

    Refiners' profits in Europe and the United States are getting yet another lifeline from protracted strikes in France that have cut into the world's excess of diesel, jet fuel and gasoline.

    A strike in France entering its third week shut four of Total's five refineries, knocking out most of the country's fuels production and forcing distributors to truck in fuel from neighbouring countries and tap stored volumes.

    The disruption has roiled global markets, pushed prices for diesel and gasoline higher and boosted rivals' refining margins just as they had come under huge pressure from a daunting supply overhang.

    French fuels production is down by more than half, with diesel output down by around 320,000 barrels per day (bpd) and gasoline by some 170,000 bpd due to the industrial action, according to consultancy Energy Aspects.

    "This volume is enough to materially affect balances," said Robert Campbell, refined products analyst at consultancy Energy Aspects.

    "France is running through a lot of inventory and though there is plenty of stock at hand, this is changing the picture and is fundamentally bullish."

    The government also released at least 1.5 million barrels of products from its strategic storage, traders said.

    The outages have had a more significant impact on gasoline prices, particularly in the U.S. East Coast, which absorbs most of France's excess production.

    Gasoline appears on the front foot once again as U.S. gasoline demand over the past four weeks rose by 4 percent from a year ago to 9.66 million barrels per day.

    The strikes, the worst since 2010, are set to lead to material losses for Total. But for other refiners in the region and overseas, the timing was perfect.

    Oliver Jakob, managing director of Swiss-based consultancy PetroMatrix, estimates the French outages will support the Atlantic basin refining market over the next two months.

    "It makes a better margin for refineries - and a more stable margin ... France will have to import at a high level for the next two months."

    Global inventories of diesel and gasoline have risen to multi-year highs in recent months as refiners around the world pumped at full throttle ahead of the peak summer demand season. The large product builds, particularly for diesel, put refining profits under heavy pressure.

    Global gasoline stocks declined last week by 1.3 percent to 273 million barrels, BNP Paribas data shows. At this level the stocks are nevertheless still up 11.4 percent from last year.

    Diesel inventories registered a smaller 0.3 percent last week, holding 12.9 percent above last year's levels at 200 million barrels, according to the Paris-based bank.

    Total said on Thursday it plans to restart its 220,000 bpd Donges refinery after workers there voted to end the strike, and said 62 percent of workers at the 101,000 bpd Granpuits refinery also voted to end strike action. Restarts could ease the crunch, but not erase it.

    "France will have to rebuild its stocks," Jakob said.

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    Brazil Said to Delay Petrobras, Other Asset Sales Until 2017

    Brazil’s Acting President Michel Temer will prioritize infrastructure concessions this year as a way to showcase an improving political environment and rule of law, before offering stakes in state companies in 2017.

    Several highways and airports are almost ready to be put up for tender. Such deals are less controversial than those involving strategic assets, like units of oil company Petroleo Brasileiro SA, according to a Temer aide who participates in key policy discussions. Temer’s team is also identifying regulatory improvements needed to pave the way for asset sales, said the aide, who asked not to be named because the information isn’t public.

    Amid the impeachment trial of President Dilma Rousseff and the worst economic recession in over a century, the Temer administration will need more time to structure asset sales and reassure investors wary of years of market volatility and a heavy government hand in the economy, the aide said.

    Among the assets that may head for the auction block are Petrobras’s oil and gas unit Transpetro, as well as state airport operator Empresa Brasileira de Infra-Estrutura Aeroportuaria, or Infraero. The company’s stake in recently auctioned airports, including Sao Paulo’s Guarulhos, could be spun off separately, according to the government aide.

    The main goal of the privatizations is to shrink a growing public debt and downsize government to make room for private sector participation. Finance Minister Henrique Meirelles has said that slowing public debt growth is one of the administration’s main priorities.

    Privatization is still considered a political taboo by many legislators in a country that has been ruled by the leftist Worker’s Party for more than 13 years. Given that Temer still relies on senators to confirm him in office by impeaching Rousseff, his administration must tread lightly in pushing unpopular measures in Congress, another senior government official said.

    The government is still analyzing whether it will sell just a minority stake or a controlling share of power utility Furnas Centrais Eletricas SA and BR Distribuidora, a unit of Petrobras, the official said.

    Eletrobras subsidiaries Eletrosul Centrais Eletricas SA, known as Eletrosul, and Cia Hidro Eletrica do Sao Francisco, known as Chesf, are also candidates for divestment.

    Some members of Temer’s administration also support the idea of selling the government participation in Itaipu Binacional, a hydroelectric owned by Brazil and Paraguay, although the proposal is in the very initial stages, the official said.
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    Lukoil First-Quarter Profit Drops 59% After Crude Prices Slump

    Lukoil PJSC, Russia’s second-largest oil producer, said profit dropped 59 percent in the first quarter as oil prices declined to a 12-year low.

    Net income fell to 42.8 billion rubles ($651 million) from 104 billion rubles a year earlier, the Moscow-based company said in a statement on its website. That beat the 41.3 billion-ruble estimate of six analysts surveyed by Bloomberg.

    Russian producers have been partially buffered against the rout in crude by a weaker ruble, which has reduced costs, and taxes that decline with lower prices. While higher output helped smaller rivals Bashneft PJSC and Gazprom Neft PJSC boost profit in the first quarter, Lukoil’s production in Russia has dropped.

    Oil and gas output fell to 2.35 million barrels of oil and gas a day, according to the statement. Revenue fell to 1.18 trillion rubles. Free cash flow was 36 billion rubles compared with 63 billion a year earlier, the company said in the statement.

    Earnings before interest, taxes, depreciation and amortization fell to 145 billion rubles, missing the 158 billion-ruble estimate of seven analysts.
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    Chile starts up second stage of gas exports to Argentina

    Chile has begun exporting natural gas to Argentina along a second pipeline over the Andes Mountains, state energy company Enap said Friday, tripling the flow of gas to its neighbor after the initial start of exports via a separate pipeline last month.

    The 450 kilometer-long GasAndes pipeline will export 3 million cubic meters/day of gas from central Chile to western Argentina, using gas supplied by Enap, power company Endesa Chile and gas distributor Metrogas.

    The three companies receive the fuel under long-term contract with BG Group via the Quintero LNG import terminal.

    The exports to Argentina will continue throughout the southern hemisphere winter, June to September.

    Last month, France's Engie began exports of 1.5 million cu m/d of gas from its Mejillones LNG import terminal in northern Chile to northwest Argentina via its NorAndino pipeline. These exports are also expected to continue through the winter. Engie owns 63% of the terminal, with Chile's state copper company Codelco holding the balance. Enap said that the latest exports from central Chile could be increased by 1 million cu m/d at Argentina's request if gas were available, which would boost overall exports to 5.5 million cu m/d.

    The two countries are linked by seven pipelines built in the 1990s to transport gas from Argentina to Chile.

    At that time, Chile hoped cheap and plentiful Argentinean gas, up to 22 million cu m/d, would wean it off drought-prone hydroelectric dams. However, from 2004, Argentina began limiting supplies to a trickle to cover its own domestic shortages.
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    Chile environmental watchdog investigates GeoPark for illegal fracking

    Chile's SMA environmental regulator said on Friday it was investigating Latin America-focused oil and gas explorer GeoPark Ltd for alleged violations, including fracking activities without having the necessary permits.

    Inspections in 2014 and 2015 of GeoPark's hydrocarbon project in the Fell block, located in the southern Magallanes region, detected "hydraulic fracturing activities in different wells, without the environmental permits required by law for this type of activity," the regulator said.

    GeoPark is also accused of having faulty systems in place for avoiding soil erosion and managing spills of hazardous materials, and of damaging archaeological findings.

    GeoPark has 10 days to present a compliance plan to the SMA or 15 days to present a legal defense.
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    Australia's UGL faces more provisions on work for Ichthys LNG

    Australian contractor UGL Ltd warned on Monday it may have to book a provision of up to A$200 million ($146 million) for losses on its work for the Ichthys liquefied natural gas (LNG) project, knocking its shares down 35 percent.

    Ichthys, off northwestern Australia, is running at least six months behind its original schedule due and is now not expected to start producing until September 2017 due to changes in the scope of the project, mainly owned by Japan's Inpex Corp and France's Total SA.

    That has led to cost blowouts for the UGL-Kentz joint venture handling construction of onshore facilities and claims against the project's main contractor, the JKC joint venture formed by JGC Corp, KBR and Chiyoda Corp .

    UGL said on Monday it had not yet settled those claims, even though it said UGL and its partner Kentz had accommodated their client's delays to the project. UGL threatened to pursue a formal dispute process if necessary.

    "This is very disappointing given the co-operation of the JV to ensure client delays to the project were, and continue to be, accommodated," UGL Chief Executive Ross Taylor said in a statement.

    The company said if talks failed and it did have to resort to a formal dispute process, it may have to book contract loss provisions of up to A$200 million, all or part of which may be recoverable from JKC.

    That would be on top of a A$175 million provision it has already booked for delays on apower plant for the project.

    UGL's shares sank as much as 35 percent to A$2.24, their lowest since February and on track for their biggest one day loss ever.
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    SeaEnergy placed in administration

    Aberdeenshire-based SeaEnergy has been placed in administration as marine engineering services specialist James Fisher & Sons acquired the firm’s Return to Scene (R2S) business.

    Trading in the shares of SeaEnergy have been suspended since April, pending clarification of its financial position. Blair Nimmo, Geoff Jacobs and Tony Friar of KPMG have been appointed administrators.

    Prior to the administrators’ appointment its SE Innovation Limited (SEIL) business, assets and 10 employees (including the Return to Scene forensic, and Max & Co businesses) were sold to R2S by the Sea Energy directors, and seven employees of SeaEnergy were transferred to R2S.

    In March, SeaEnergy, which has its headquarters at Westhill, said it had entered into discussions with a number of parties for acquisition of its R2S Visual Asset Management business as well as other group assets.

    It said was facing significant cash flow difficulties and would need to consider a sale of its main assets, or the group businesses would be unable to continue trading beyond May 2016.

    SeaEnergy began to experience cash flow challenges in late 2015, due to the ongoing oil price decline adversely impacting R2S activity levels. Client orders were cancelled or postponed, and the number of new business enquiries reduced significantly.

    James Fisher has struck a £1.9 million deal to acquire the Return to Scene business. Return to Scene provides visual asset-management photographic capture services, digital media services and forensic services to the oil & gas and security sectors.

    In response to these challenges, the SeaEnergy directors secured additional funding in November 2015 via a £1 million working capital loan. In early 2016, trading conditions began to deteriorate even further.

    James Fisher will pay £1.9 million upfront for the business and another £100,000 if R2S wins certain contracts before the end of 2016.

    All 33 R2S employees have been transferred under the James Fisher deal.

    Bob Donnelly of Return to Scene, added: “We are delighted to be part of the James Fisher family. This is an exciting time for our team. The uninterrupted provision of services to our clients is of key importance and as part of James Fisher, we’ll continue to innovate and deliver efficiencies for our clients.”

    Of the remaining seven employees of SeaEnergy, three have been made redundant following the appointment of KPMG as administrator and four have been retained to assist the administration process.

    Nimmo said: “We are pleased to have concluded the sale of R2S to James Fisher, which will safeguard the majority of jobs within the group, maintain customer service, and provide the best outcome for SeaEnergy’s creditors.

    “Based on the information available at present, it is unlikely there will be any recovery for the shareholders,” said Blair Nimmo, joint administrator for SeaEnergy and UK head of restructuring at KPMG.
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    U.S. Shale Drillers Restart Oil Rigs as Market Improves

    Oil explorers put drilling rigs back to work in U.S. fields for only the second time this year as supply and demand come closer into balance.

    Rigs targeting crude in the U.S. rose by 9 to 325 this week, Baker Hughes Inc. said Friday. Explorers have idled more than 1,000 oil rigs since the start of last year. Natural gas rigs were trimmed by 5 to 82 this week, bringing the total for oil and gas up by 4 to 408.

    Oil prices extended declines immediately after the release of the Baker Hughes report. Futures in New York have climbed about 85 percent from the lowest level since 2003 earlier this year on signs the global glut is easing.

    "The uptick for rigs might have prompted some people to think that there’s a supply side reaction to $50 oil," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "This is just one week’s data. This doesn’t change the fact that the rig count is down a great deal or represent the beginning of a recovery."

    West Texas Intermediate oil for July delivery fell 55 cents to settle at $48.62 a barrel on the New York Mercantile Exchange. Prices climbed as much as 24 cents, or 0.5 percent, earlier in the session.

    The worst downturn in decades led oil producers to scrap projects and cut spending on drilling, signaling that supply and demand are getting close to being in balance. Disruptions in Canada and Nigeria took 50 million barrels out of the market last month, Geneva-based trading house Mercuria Energy Group Ltd. estimated.

    “The rebalancing is happening a bit faster than anticipated because of the disruptions,” Mercuria Chief Executive Officer Marco Dunand said in an interview. “Demand is also stronger than expected” in countries from India to the U.S., he said.

    The International Energy Agency forecasts oil demand will increase this year by 1.2 million barrels a day, while Dunand said growth is likely to top 1.5 million, perhaps rising as high as 1.8 million.

    America’s oil drillers have been idling rigs since October 2014 as the world’s largest crude suppliers battle for market share. Despite the cutbacks, U.S. production has only recently begun to falter as new techniques that increase efficiency keep the oil flowing.

    U.S. output declined for a 12th week and crude stockpiles dropped in the week ended May 27, according to a report from the Energy Information Administration.
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    Canada's NEB revises, lowers production estimates due to wildfires

    Canada's upgraded bitumen output for May is expected to be more than halved, with yearly output dropping below the 1 million b/d mark, according to the National Energy Board's revised production estimates released Friday.

    The NEB now estimates May upgraded bitumen at 492,550 b/d, down from 1,019,472 b/d in its last update in January. June production was revised to 651,358 b/d, down from 1,019,940 b/d over the same period. The agency expects 987,195 b/d in upgraded bitumen for 2016, down from an earlier estimate of 1,047,698 b/d.

    Non-upgraded bitumen estimates for May similarly fell to 1,056,551 b/d in the latest update, compared with a projection of 1,464,640 b/d pre-fire. June production was revised to 1,409,473 b/d from 1,476,504 b/d over the same period. That drives down the NEB's 2016 estimate of 2016 non-upgraded production to 1,454,366 b/d from 1,481,888 b/d.

    Still, the latest production estimate revision only changes western Canada's 2016 output to 3,698,693 b/d from 3,707,860 b/d.

    NEB Supply Analyst Peter Budgell said the bulk of the revisions were due to the wildfires, including reports of June Syncrude delivery cuts and the typical one- to three-week restart time of steam assisted gravity drainage oil sands facilities also factored. He said it's unlikely producers could recoup the majority of lost production in later months, but that it was too early to revise those estimates.

    The wildfires, which began May 1, knocked as much as 1.27 million b/d of production offline, according to a Platts analysis. Companies began announcing restarts last week as the fires moved east, away from production sites.

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    Oregon derailment likely to reignite oil-by-rail safety concerns

    A Union Pacific train carrying crude oil derailed and burst into flames along Oregon's scenic Columbia River gorge on Friday in the first major rail accident involving crude in a year.

    While no injuries were reported, the train remained engulfed in flames six hours after the derailment, officials said. The accident has already renewed calls for stronger regulation to guard communities against crude-by-rail accidents.

    Union Pacific Corp, owner of the line, said 11 rail cars from a 96-car train carrying crude oil derailed about 70 miles (110 km) east of Portland, near the tiny town of Mosier.

    Oil spilled from one car, but multiple cars of Bakken crude caught fire, said Oregon Department of Transportation spokesman Tom Fuller. Firefighters were still fighting the flames several hours later.

    The crude was bought by TrailStone Inc's U.S. Oil & Refining Co and bound for its refinery in Tacoma, Washington, some 200 miles (322 km) northwest of the derailment, the company said.

    Television footage showed smoke and flames along with overturned black tanker cars snaking across the tracks, which weave through the Columbia River Gorge National Scenic Area.

    "I looked outside and there was black and white smoke blowing across the sky, and I could hear the flames," said Mosier resident Dan Hoffman, 32, whose house is about 100 meters (328 ft) from the derailment. "A sheriff's official in an SUV told me to get the hell out."

    While rail shipments have dipped from more than 1 million barrels per day in 2014 as a result of the lengthy slump in oil prices, the first such crash in a year will likely reignite the debate over safety concerns surrounding transporting crude by rail.

    "Seeing our beautiful Columbia River Gorge on fire today should be a wake-up call for federal and state agencies – underscoring the need to complete comprehensive environmental reviews of oil-by-rail in the Pacific Northwest," said U.S. Representative Earl Blumenauer of Oregon.

    Ecology officials from Washington state said there was no sign of oil in the Columbia River or Rock Creek.

    Since 2008, there have been at least 10 major oil-train derailments across the United States and Canada, including a disaster that killed 47 people in a Quebec town in July 2013.

    The incident comes eight months after lawmakers extended a deadline until the end of 2018 for rail operators to implement advanced safety technology, known as positive train control, or PTC, which safety experts say can avoid derailments and other major accidents.
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    Alternative Energy

    US to lease land for offshore wind

    As part of President Obama’s climate plans, huge swathes of water off New York state are to be used to build offshore windfarms.

    The Department of Interior aims to offer more than 81,000 acres, an area equivalent to the size of  Milton Keynes, located around 11 miles south of Long Island.

    The Proposed Sale Notice, which will present details on the area, proposed lease conditions and the auction, will be published next week. It will also include a 60-day public comment period.

    Secretary of the Interior Sally Jewel said: “This is another major step in broadening our nation’s energy portfolio, harnessing power near population centres on the East Coast. Offshore wind power marks a new frontier in renewable energy development, creating the path for sustainable electricity generation, job creation and strengthening our nation’s economic competitiveness.”
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    German battery maker sonnen GmbH wins backing from GE

    German battery maker sonnen GmbH on Monday said it has secured financial backing from GE Ventures, General Electric's venture capital subsidiary, to develop its brand of residential power storage systems.

    Sonnen, formerly called Sonnenbatterie, is a start-up which besides producing storage batteries has also launched a scheme to connect households with solar panels and other consumers in Europe's first online energy sharing platform.

    GE and existing investors in sonnen had together put up a double-digit million-euro sum in growth capital for sonnen, it said in a statement.

    "Sonnen is helping to reshape the energy industry," said Jonathan Pulitzer, managing director at GE Ventures. "We believe in sonnen's vision and that is why we are excited to partner to provide clean and affordable energy for all."

    Sonnen, whose backers also include German E-Capital and Czech firm Inven Capital, has to date sold 11,000 lithium battery units, making it the European market leader in that segment, said Philipp Schroeder, one of sonnen's managing directors.

    He said since the sharing platform, called "sonnenCommunity" was introduced last November in Germany and Austria, some 1,500 households had signed up for the scheme, which is aimed at making users independent of conventional suppliers.

    He also said that sonnen was growing in the United States and Italy, where the community scheme would be launched by the end of 2016.

    Battery technology allows usage of clean energy even when weather conditions are not favourable.

    Long seen as expensive, it is moving into a price range which makes it increasingly affordable to ordinary householders.

    Incentives for German solar power producers to feed surplus supplies into the national grid are set to end in 2021, providing a reason for them to store more power themselves.

    Apart from energy, California-based GE Ventures also invests in healthcare, software, aviation, transport and appliances.
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    IOI hit by Greenpeace

    Amazing work! We just got off the phone with General Mills, makers of Betty Crocker cake mixes, and they've agreed to stop buying from destructive palm oil giant IOI.

    This is brilliant news - as more customers desert IOI, they'll be forced to take action and protect Indonesia's forests. Have a slice of victory cake to celebrate!

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    Precious Metals

    Bitcoin has been on an explosive rally — and it's back through $500

    The cryptocurrency has been surging in US dollar terms over recent weeks, surging back through the $US500 mark, up around 170% from its lows of January last year. And in the past few weeks it has exploded by $US100 from the price on May 19th.

    A watershed is approaching for the Bitcoin marketplace, when the reward for “mining” a block of Bitcoin using computing power will be halved from the current 25 Bitcoins at some point in the coming weeks. This will reduce the rewards for Bitcoin miners, potentially leading to a fall in supply. The website currently estimates the cutover for the reduced rewards will now be on July 10.

    There has also been talk of increased Chinese demand. As Beijing has been weakening the yuan, canny Chinese have been looking at ways to place their money into offshore assets. The Australian property market has been one suspected beneficiary of this, and what’s happening with Bitcoin may be a bit of the same, as the digital currency can be easily exchanged for US dollars.

    Now to how that all looks:
    Image title

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    Base Metals

    Congo copper production down 20% in Q1 amid market slump

    Copper production in Democratic Republic of Congo, Africa's top miner of the metal, dropped 20% in the first quarter of 2016, while cobalt and gold output also slumped amid low prices and production cutbacks, the central bank said on Saturday. 

    The declines are hammering Congo's economy, which derives 98% of its export earnings from extractive industries. Last month, the government proposed a 22% cut to the current year's budget due to lower-than-expected revenues from the mining sector and fears of inflation due to exchange rate pressures. 

    Congo mined 219,009 tonnes of copper in the first three months of the year compared with 274,201 tonnes over the same period last year, the central bank said in a monthly bulletin. 

    Meanwhile, output of cobalt, the metal used in lithium-ion batteries and of which Congo is the world's leading producer, fell over 19% to 16,396 tonnes in the first quarter of 2016. 

    Glencore's Katanga unit, one of the country's largest copper and cobalt producers, announced an 18-month suspension of operations last September and other large mines have laid off workers. 

    Quarterly gold production declined to 7 166 kg this year from 7 801 kg last year, an 8% slide. Large new gold mines opened by companies like Randgold Resources, AngloGold Ashanti and Banro Corporation in the last five years boosted Congo's industrial gold output from near zero in 2011 to over 30 tonnes last year. Spot gold prices are up 14% this year but Randgold says it expects production at Kibali, the country's largest gold mine, to fall 5% this year because it is mining lower grade ore.
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    Steel, Iron Ore and Coal

    Japan Apr thermal coal imports down 16.29pct on year

    Japan’s thermal coal imports (including bituminous and sub-bituminous coals) stood at 7.56 million tonnes in April, down 16.29% year on year and down 17.82% month on month, the latest customs data showed.

    In April, Japan imported 6.6 million tonnes of bituminous coal, down 18.33% on year and down 20.75% on month.

    Australia was the largest supplier to Japan with 5.52 million tonnes, down 22.73% on year and down 20.02% on month.

    It was followed by Indonesia with 533,575 tonnes, up 24.65% on year and climbing 35.64% on month.

    Imports from Russia stood at 307,030 tonnes, down 38.21% year on year and dropping 63.21% on month.

    Sub-bituminous coal
    Japan imported 967,341 tonnes of sub-bituminous coal in April, edging up 0.94% on year and rising 9.77% on month.

    Indonesia, the top supplier of this material, shipped 594,418 tonnes of sub-bituminous to Japan in April, climbing 8.19% on year but down 22.67% on month.

    The Russia followed with 225,624 tonnes, surging 177.67% on year and almost doubling March’s 112,500 tonnes.
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    Adani may abandon Australian coal mine project: NGO victory??

    Adani Group may abandon its plans of building the world's largest coal mines in Australia amid a series of legal challenges and protests by environmental groups. The company's proposed rail and mine project in Australia is estimated to be worth $21.5 billion.

    Stating that he was “disappointed”, the company’s founder and chairman Gautam Adani said the project was yet to receive the green light after six years of environmental assessments and court battles.

    "You can’t continue just holding. I have been really disappointed that things have got too delayed,” Mr. Adani said.

    Mr. Adani said he hoped the court challenges to Australia’s largest proposed coal mine would be finalised in early 2017.

    However, with one court case yet to be heard in the Federal Court, and at least two groups threatening High Court action, Mr. Adani warned he could not wait indefinitely.

    Mr. Adani said that he was already scouting alternatives to feed his power stations in India.

    Confirming he had met Australian Prime Minister Malcom Turnbull in December 2015 to seek to deliver greater certainty on such projects, Mr. Adani said, “We were suggesting how to bring in the certainty of the timing.

    "We were asking how we get certainty of the time schedules... that is the most important for us in committing all of our resources.”

    "It’s just covering up the real fact that what is damaging the reef is an increase in the temperature of the seas through climate change,” he said.

    Another new Federal Court challenge to the mining lease for Carmichael, issued by the Palaszczuk Labour government, will be heard this year.

    Mr. Adani said he originally believed the approvals process would take two to three years and that he has already spent $3 billion buying the tenements and the Abbot Point port lease.

    The company is still exploring the financing issue of the project.

    Mr. Adani said if there were no more unexpected delays, he had confidence that the project would get financing and “still be competitive” against other alternative sources of coal in India and Indonesia.

    Adani Australia chief executive Jeyakumar Janakaraj said the co-ordinated campaign by anti-coal activists to block the mine had damaged Australia’s international reputation.

    He said the business community in India had expressed concern about future investment in Australia. “I think it has already turned off a lot of switches. I am not saying it is going to be permanent, but there has been damage.”

    Mr. Turnbull’s office did not comment on June 5 about Mr. Adani’s call for greater certainty to the approvals process. But the government has argued that all commonwealth approvals are in place and there are no remaining federal obstacles to the project proceeding.

    Adani’s coal mines plan in Australia has been hampered time and again. A federal court in August 2015 had revoked the original approval due to environmental concerns.

    In October 2015, the project got a new lease of life after the Australian government gave its re-approval.

    Australia’s Queensland State government in April 2016 gave Adani permission to mine coal reserves estimated at 11 billion tonnes and to build roads, workshops, power lines and pipelines associated with the mine.

    Environmentalists are fighting the approvals, saying the project will jeopardise the State’s future and destroy national treasures like the Great Barrier Reef.

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