Mark Latham Commodity Equity Intelligence Service

Friday 12th June 2015
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    Oil and Gas


    Colombia's FARC rebels step up infrastructure attacks, kill 3 police

    Colombia's FARC rebels shot dead three police officers on Thursday and brought down an energy pylon, cutting off power to half a million people in the country's south, the military said, as the Marxist group steps up attacks amid stumbling peace talks.

    Members of the FARC, or the Revolutionary Armed Forces of Colombia, opened fire on the three police officers patrolling a stretch of the southwestern Pan-American Highway on Thursday and detonated explosives a few kilometers away on the same road.

    The 8,000-strong FARC lifted a unilateral ceasefire about three weeks ago and has since hit almost daily at roadways, power networks and crude oil trucks and pipelines, polluting water supplies in the rebels' southwestern stronghold.

    The insurgent group has been in talks with the government for the last 30 months, seeking to end a 51-year conflict that has killed almost a quarter of a million people. The negotiations have continued despite the intensified attacks.

    Months of relative detente ended in April when the FARC killed 11 soldiers in Cauca province who were sheltering from the rain, essentially breaking a ceasefire it began in December. Government troops then killed 27 rebels, prompting the FARC to renew hostilities.

    The talks have advanced despite a near-constant backdrop of fighting since they began. The five points on the agenda include victim reparations, agricultural reform, eliminating the cocaine trade, demobilization and rebel political participation.

    The FARC, which began in 1964 as a peasant movement, wants President Juan Manuel Santos to agree to a bilateral ceasefire, and analysts reckon the latest attacks are aimed at angering Colombians so they pressure him to call a truce.

    He has so far refused and has condemned the attacks as irrational and having no explanation. Defense Minister Juan Carlos Pinzon has slammed FARC leaders as having the "mentality of idiots."

    Television networks have shown footage recorded on cellphones of oil tanker truck drivers being forced by the FARC to empty the thousands of barrels of crude they were carrying onto the highway. Nineteen trucks were forced to unload on Monday, then several more on Thursday.

    Several thousand barrels of crude oil spilled into a river in southwest Colombia on Monday after the FARC bombed a pipeline owned by state-run oil company Ecopetrol. Its chief executive officer, Juan Carlos Echeverry, has called the damage an "environmental tragedy."
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    Brace for ore rivals: BHP chief

    BHP Billiton chief executive ­Andrew Mackenzie has warned Australian miners to expect a surge of competition from rival countries selling to China, as the Asian giant strengthens business and diplomatic ties with a number of mineral-producing nations.

    In Beijing, Mr Mackenzie told The Australian China’s growing relationship with Latin America, especially Brazil, could be a risk to Australia’s export levels in future.

    Mr Mackenzie said Australian producers needed to ensure their Chinese customers were con­fident that security of supply would not be affected over the next few years.

    Mr Mackenzie chaired a high-level meeting with Premier Li Keqiang and 14 top global chief executives at the Great Hall of the People on Tuesday to examine China’s economic transformation. The Chinese government has put in place an official target for the economy to grow by 7 per cent this year.

    Mr Li recently returned from a lengthy trip to Brazil, where the two countries signed trade deals worth $US50 billion ($64bn), ­primarily in improving export ­infrastructure.

    “I think the risk has always been there, but one of the things is that when we think about how the world is evolving ... the Brazil, Russia, India and China (BRICs) countries are becoming more ­interesting,” Mr Mackenzie said.

    “There are strengthening ties between the countries where they want to have a lot more independence. We have to recognise the growing sphere of influence the BRICs have, and they are becoming a little bit less dependent on doing things the Western way.”
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    Guangdong's quarterly carbon auction undersubscribed

    The latest auction on China's largest carbon market in Guangdong province sold little more than 10 percent of the permits on offer on Wednesday, with companies able to buy allowances more cheaply on the secondary market due to an economic downturn.

    The local carbon bourse, the China Emissions Exchange, said it sold 315,000 permits at a minimum bidding price of 40 yuan in its last quarterly auction of the compliance year, during which companies must buy permits to cover their carbon emissions.

    Some 3 million permits were on sale, a large share of the 7 million supplied during this compliance year, which is due to end next Saturday.

    Only two local companies participated in the auction, according to the exchange, with the impending deadline doing little to raise the appetite for more than 200 companies covered by the Guangdong market.

    "It is an expected result -- the available permits trading on the market are much cheaper," said a market player who did not want to be named because he is not authorised to speak to media.

    The closing price on the secondary market stands at just 17.7 yuan, down from a high of 71 yuan last June.

    Daily trading volumes have mostly been low in Guangdong, with the economic downturn leading to a surplus of permits.

    However, trading picked up this week, with 266,000 permits changing hands in the last three days -- 20 times last week's volumes.

    Huaneng Power International Corporation a state-owned power supplier covered by the Guangdong carbon market, signed a swap contract to change 10 percent of its permits issued in Guangdong for eligible offset credits offered by Anglo-Dutch energy company Shell in China on Wednesday, according to the traders involved in the deal.

    A total of 900,000 offset credits have been traded so far in Guangdong.
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    The Humble Hot Water Tank

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    Forget expensive high-tech silver bullets such as nuclear fusion and carbon capture and storage; the solution to climate change lies in the humble electric immersion heater that sits in the hot water tank under your stairs. That's the view of Dr Mark Barrett, senior researcher at the UCL Energy Institute, who will present his analysis at a meeting in the House of Commonson 18 June .

    A tank with an immersion heater may be just an oversized kettle, but there are thought to be around 19m in Britain's homes, which collectively have the ­capacity to store huge amounts of energy as hot water. And this could be key to achieving an almost wholly renewable electricity supply.

    Dr Barrett says the heaters could be switched on and off rapidly to compensate for the erratic output of wind turbines and solar panels, each heater controlled by a gadget that responds to signals sent through the electricity grid – a system used since the second world war. "Everybody is always looking for a shiny new silver-bullet solution" says Dr Barrett, "but this idea is cheap, safe, and based on technology that's been around for decades".

    (Guardian 2009)

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    Solar trashes LNG demand.

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    In a similar statement reported by The Financial Times, The Guardian and Bloomberg, Saudi Arabia’s influential oil minister Ali Al Naimi recently said, “In Saudi Arabia, we recognize that eventually, one of these days, we’re not going to need fossil fuels. I don’t know when - 2040, 2050 or thereafter. So we have embarked on a program to develop solar energy. Hopefully, one of these days, instead of exporting fossil fuels, we will be exporting gigawatts of electric power.”

    So what happens when the biggest global exporter of petroleum liquids starts vouching for the power of the sun?

    What we are witnessing now is a major shift in thinking by some of the biggest stakeholders in oil, who have started laying out a well-planned future investment strategy for their respective energy sectors, with solar taking the lead. One of the main reasons behind this is that solar technology is becoming more affordable and popular with each passing day. Given this scenario, let us now examine the top five emerging solar energy markets from an investment point of view.

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    China May PPI down 4.6pct on yr

    China's Producer Price Index (PPI), which measures inflation at wholesale level, dropped 4.6% year on year and down 0.1% month on month in May, the National Bureau of Statistics (NBS) said on June 9.

    It was the 39th straight year-on-year decline, due to persisting sluggish demand from downstream sectors.

    Factory prices of production materials declined 5.9% from the previous year and down 0.1% from the month before, the NBS said.

    The price of coal mining and washing industry dropped 14.0% on year and down 3.1% on month; the price of oil and natural gas mining industry fell 36.1% on year but up 4.4% on month. Besides, prices of ferrous metal industry dropped 22.5% from the previous year and down 1.0% from April, data showed.

    The data came along with the release of the Consumer Price Index (CPI), which rose 1.2% year on year but down 0.2% from the month before in May.
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    Reviving oversight concerns, China port says iron ore stocks missing

    A subsidiary of China's Tianjin port said some iron ore stored in a private warehouse had been illegally released by an undisclosed agent and trading firm.

    The move led Tianjin Port No. 5 Stevedoring Co. Ltd to block the release of some iron ore stocks and has prompted checks by customers on the fate of their holdings of the commodity stored at the port.

    Oversight of China's ports has been under scrutiny since a scandal last year at Qingdao port involving commodity financing where a private trading firm is alleged to have duplicated warehouse certificates to pledge a metal cargo multiple times as collateral for loans.

    Using commodities as collateral to raise money is common in China and not illegal, but duplicating receipts to repeatedly mortgage the full value of an asset is fraud and could leave more than one creditor holding claims to the same collateral.

    New examples of irregularities at ports will raise fresh concerns about the risks of storing commodities in China and commodity financing, traders say.

    Tianjin Port No. 5 Stevedoring Co., a unit of the listed port operator, Tianjin Port Holdings Co. Ltd, said in a memo sent to clients and dated May 29, 2015, that an unnamed logistics agent had acted with a trading firm, also not named, to release cargoes without authority or paying port fees.

    "This matter was caused completely by the illegal operations of the agent and a related downstream trader and the port company did not itself sign...or participate in any unauthorised cargo release," Tianjin Port No. 5 said in the memo, seen by Reuters.

    "Hence, the port company was not involved in any transgression. Furthermore, to protect its legal rights, the port company has already initiated legal proceedings," it said.

    An agent is normally required to obtain a certificate issued by the port, pay management fees and present paperwork issued by a shipping firm and customs to take away stocks, said the memo, whose contents were verified by the company's lawyer.

    The memo did not name any parties or the nature of the transgression. A manager at the trading firm identified by some traders as being involved declined to comment.

    A call to the parent firm of the agent, which was also named by traders as being involved, was referred to a branch in Tianjin, where the manager was not available when a Reuters reporter visited.

    A spokesman for the main Tianjin port operator said the company was still looking into the matter and calls to the customs agency in the city were not answered.

    According to a source with knowledge of the situation, a unit of Zhejiang Materials Industry Group had imported iron ore on behalf of a small trading company after receiving a deposit, but the ore was then removed from the private warehouse without the state-owned firm's knowledge before a full payment was made.
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    Cairn India Set to Touch Six-Year Low on Vedanta Merger Report

    Cairn India Ltd., operator of the nation’s biggest oil field on land, headed for its lowest price in more than six years in Mumbai following a report Vedanta Ltd. plans to announce it will absorb the unit.

    The stock dropped 4.3 percent to 173 rupees as of 2:42 p.m. local time, poised for the lowest close since March 2009. The shares have lost 28 percent this year, compared with a 3.7 percent drop in the benchmark S&P BSE Sensex index.

    Absorbing Cairn India will give billionaire Anil Agarwal’s Vedanta access to its unit’s cash and help reduce group debt, The Economic Times reported today, citing two people it didn’t identify. Cairn India had 168.7 billion rupees ($2.6 billion) of cash and cash equivalent as on March 31, the company said on April 23. The merger process would be completed by March, one of the people said.

    “Investors are taking a narrow view on the misuse of Cairn’s cashpile,” Deven Choksey, managing director of K.R. Choksey Shares & Securities Ltd., said by phone. “The long-term view is positive as more than one product in your portfolio will mitigate risks of price volatility.”

    In 2011, Vedanta acquired majority control of Cairn India for $8.67 billion. It held 59.9 percent in the oil explorer through its various units as on March 31.

    A merger with Cairn India could be considered as a reverse takeover, Vedanta Resources told the London stock exchange in a statement Tuesday.

    Cairn India, which produces oil and gas from three of its seven blocks in India, is delaying plans to boost output to focus on becoming profitable after crude’s slump led to its first quarterly loss in more than seven years.
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    Canada’s Railroads Confront Market Gravity: Stocks Go Down, Too

    Investors are rediscovering a stock-market lesson in Canada: Shares of the country’s two biggest railroads don’t always go up.

    Canadian National Railway Co. and Canadian Pacific Railway Ltd. are falling this year, raising the prospect of their first annual decline since 2008. Known for prominent shareholders including Bill Gates and Bill Ackman, the companies are among the country’s worst-performing industrial stocks of 2015.

    The carriers, like their U.S. counterparts, are grappling with widening fallout from the global rout in crude prices, which is eroding oil-train shipments faster than either had forecast. They’re also facing coal mine closings and a decline in grain shipments as the remnants of a bumper harvest fade.

    “We’ve had a bit of a reality check this year,” said Andrew Pyle, a fund manager at ScotiaMcLeod Inc. in Peterborough, Ontario, who oversees about C$300 million ($241 million) and owns Canadian National stock. “There were probably some investors who felt that these things never did go down. The fundamentals that have been supporting the valuations in the rails haven’t necessarily disappeared, but they are changing.”

    Canadian National’s 9.9 percent drop through Monday made it the country’s fourth-worst-performing industrial stock, while Canadian Pacific fell 8.3 percent. Both declines are bigger than the 6.8 percent decrease of a benchmark gauge of Canadian industrials. An annual drop would be their first since 2008; Canadian National hasn’t even had a first-half decline in 10 years.

    “Being a railroad isn’t as easy right now as it was,” Steve Groff, a fund manager at the Cambridge Global Asset Management unit of CI Investments Inc., said by telephone from Toronto. “There’s a more challenging environment that investors have to be aware of.”
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    G-7 Calls for Zero Fossil-Fuel Emissions by End of 21st Century

    Some of the world’s richest nations threw their weight behind a plan to stamp out fossil-fuel emissions by the end of the century in an unprecedented show of unity on climate change.

    The Group of Seven is pushing to “decarbonize,” meaning any polluting gases from burning oil, gas or coal must be canceled out by carbon-capture or other technologies by 2100. Nations should aim for emission cuts near 70 percent of 2010 levels by mid-century, the G-7 said Monday in a statement.

    German Chancellor Angela Merkel attends the 2015 G-7 Summit in Germany.
    Photographer: Robert Michael/AFP via Getty Images

    “Deep cuts in global greenhouse-gas emissions are required with a decarbonization of the global economy over the course of this century,” the group said following a summit in Germany hosted by Chancellor Angela Merkel.

    The G-7 has been under pressure to act on climate change after the world’s biggest polluter, China, took steps to curb its carbon output. The group’s solidarity on the issue is significant ahead of a United Nations meeting in Paris in December, where more than 190 nations will aim to broker the first global emissions-reduction deal that’s binding for all countries.

    “This long-term decarbonization goal will make evident to corporations and financial markets that the most lucrative investments will stem from low-carbon technologies,” said Jennifer Morgan, global director of the climate program at the World Resources Institute in Washington. “Today G-7 leaders have stepped up to the plate with serious climate commitments.”

    Those commitments include expanding renewable energies in Africa and getting 400 million people access to insurance against the negative effects of climate change, the G-7 said.

    The group also called for greater efforts to provide climate aid. Wealthy nations and private investors agreed in 2009 to hand $100 billion a year to developing nations by 2020 to nudge them toward greener development. Few rich countries have set out exactly how they will reach that goal.
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    Scud Attack on Saudi Marks New Phase of Conflict in Yemen

    Limits to the progress of the Saudi Arabia-led war on Yemen’s Shiite rebels were on full display this weekend.

    The Saudi military said on Saturday it shot down a Scud missile fired into the kingdom from Yemen. Saudi troops also repelled an attack on the border, killing dozens of gunmen. Four Saudi soldiers lost their lives in the battle, state-run media reported.

    The Scud attack marked an escalation in the two-month conflict and undermined Saudi Arabia’s announcement in April that it had destroyed the rebels’ missile arsenal. The coalition retaliated by bombing the headquarters of the pro-Houthi Yemeni army in the capital Sana’a, killing more than 40 people, according to the Saba news agency.

    Saudi Arabia, the world’s top oil exporter, has said its military campaign in Yemen seeks to restore the rule of President Abdurabuh Mansur Hadi. The kingdom and its allies have portrayed the Houthis as tools of Shiite-ruled Iran, a claim viewed with skepticism by European and U.S. diplomats.

    “The war was supposed to crush the Houthi movement and get them out of not only Aden but Sana’a and bring the former president back, and that’s clearly not happening,” Toby Matthiesen, a research fellow at the University of Cambridge and author of “The Other Saudis: Shiism, Dissent and Sectarianism,” said by phone.

    The rebels are being aided by former President Ali Abdullah Saleh and have taken over large swaths of the country, a small oil producer but one located on an important oil transit route.

    The latest escalation risks undermining efforts by the United Nations to hold peace talks in Geneva, due to start on June 14. The Houthis and Hadi’s government said they’ll attend the meeting.

    “It definitely eliminates the possibilities of peace and a cease-fire, there’s no doubt about that,” Farea Al-Muslimi, a visiting scholar at the Carnegie Middle East Center in Beirut, said of the escalation. The Saudis “will go as far as they need to,” he said by phone from Riyadh, the Saudi capital.
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    China's May imports including oil and iron ore slide

    A bigger-than-expected slide in China's imports in May strengthened expectations more policy stimulus may be needed to avert a sharp slowdown in the world's second-largest economy.

    point to a slackening domestic economy. Meanwhile, erratic global demand and a relatively strong yuan, also cast doubts over the government's ability to hit its full-year trade growth target of six percent.

    Annual exports in May fell 2.5 percent while imports tumbled 17.6 percent, data from the General Administration of Customs showed on Monday.

    "The data shows the Chinese economy is still in the process of seeking a bottom. We expect trade conditions to continue to be sluggish in the following 4-5 months, with more government policy rolling out to stabilise (the economy)," said Liu Yaxin, macro strategist at China Merchants Securities in Shenzhen.

    Liu added that Chinese companies were being outflanked in global markets due to a relatively strong yuan currency.

    China posted a near record trade surplus in May of $59.49 billion, but weak imports highlight slowing domestic consumption.

    In May, exports to the United States, China's top export market, rose 7.8 percent from a year earlier, while shipments to the European Union, the second largest market, dipped 6.9 percent, customs data showed.

    China's leading index on exports fell in May, the third straight month of decline, heralding "the relatively big pressure" on exports this year," customs said.

    Imports of oil and iron ore in May fell 11 percent from a year earlier, underscoring soft demand at home and oversupply. Bloated stocks could take months to draw down, prompting steel mills to pump up exports of steel even at weak prices.

    Overseas purchases dropped to 23.24 million metric tons in May, according to preliminary data released by the General Administration of Customs in Beijing on Monday. That’s the lowest level since February 2014 and equivalent to 5.5 million barrels a day, down from a record 7.4 million a day in April.

    China’s record appetite for crude had bolstered OPEC’s strategy of pumping into an oversupplied global market, and a slowdown in buying could worsen the glut. Purchases declined amid increased refinery maintenance and as port storage facilities filled up, according to ICIS China, a Shanghai-based commodities researcher. The U.S. imported about 6.9 million barrels a day in May, based on weekly data from the government.

    “The fall in single-month imports may be a result of peak refinery shutdown,” Amy Sun, an ICIS analyst, said by phone from Guangzhou. “Crude oil trading ports, especially Dalian, are also pretty full after the buying spree in April, leaving limited space for more stockpiles.”

    China’s top refiners shut a total of 882,000 barrels a day of processing capacity in May, the most this year, according to ICIS.

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    Oil and Gas

    Russia Fails to Rule on Schlumbergers Eurasia Drilling bid

    Russia failed to rule on a planned purchase of the company by Schlumberger Ltd.

    Russia’s foreign-investment commission met Thursday yet didn’t make a decision on Schlumberger’s bid, Natural Resources Minister Sergei Donskoi said by phone, without giving a reason. Investors had hoped a ruling would clear the way for the deal’s $1.7 billion first phase, which has already been delayed months.

    Schlumberger, based in Houston and Paris, announced the planned purchase in January as the U.S. and Russia faced off over President Vladimir Putin’s support for a separatist insurgency in Ukraine. U.S. and European sanctions on Russia include curbs on exports of drilling technology.

    The acquisition was pushed back as Russia’s antitrust authority sought additional information. That led Eurasia to miss a February deadline for completing the first phase, under which core investors would buy out the 45.65 percent held by minorities at $22 a share. At a later stage Schlumberger would gain an option to acquire the rest.

    A discussion of the bid was originally on the commission’s agenda for Thursday, two officials said earlier this week. It was unexpectedly removed before the meeting, RBC reported, citing two unidentified people with knowledge of the matter.

    “The government probably decided to be more cautious amid rising tensions in Ukraine and statements from U.S. and EU politicians on extending sanctions against Russia,” said Ildar Davletshin, an energy analyst at Renaissance Capital in Moscow.

    - See more at:
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    Bill to Ease Petrobras Pre-Salt Burden Seen Passing by Senators

    Senators of Brazil’s largest party expect the upper house to approve a bill that relieves state-controlled Petrobras of its role as sole operator and compulsory stakeholder in so-called pre-salt oilfields.

    “I don’t see any difficulty for this project to be approved in the Senate,” Eunicio Oliveira, leader of the PMDB, said in a telephone interview from Brasilia this week. “It’s an important project for the country and would aid Petrobras.”

    Changes would help the most indebted oil company in the world by reducing necessary investments in future oil rounds, said PMDB Senator Ricardo Ferraco, the sponsor of the bill. Humberto Costa, Senate leader of President Dilma Rousseff’s Workers’ Party, said only a widespread social movement could stop the bill from being approved.

    While Rousseff herself is resisting deregulation, her Energy Minister Eduardo Braga said in a recent interview in Houston that he supports allowing Petroleo Brasileiro SA, as the company is formally known, to opt out of the obligation to assume at least 30 percent ownership of all pre-salt projects and operate them. The company lacks the money to cover its share of development after racking up $125 billion in debt. The pre-salt is the jewel in Brazil’s vast offshore oil reserves.

    The bill, authored by Senator Jose Serra of the opposition PSDB party, would still have to be approved by the lower house. Brazilian legislators often don’t vote along party lines, making the outcome unpredictable.

    Ferraco said he has spoken to fellow congressmen and is certain of the majority of votes. He plans to place the bill on a fast-track that would put it to a vote on the floor without going through committees.

    While most members of the Workers’ Party oppose the bill, some will vote for it, said Costa.

    “We will have to rally our constituency against it because there are strong lobbies behind the push to change the rules,” Costa said.
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    Petronas approves FID on Pacific LNG plant.

    Pacific NorthWest LNG has committed to doing business in British Columbia.

    The consortium planning to export liquefied natural gas from Price Rupert announced Thursday it has made a positive Final Investment Decision on its proposed $36 billion project.

    If built (the project still needs to pass federal environmental assessments, agree to deals with opposing First Nations and have government ratify of the Project Development Agreement in Victoria), PNW LNG would represent the biggest capital investment in B.C. history.

    While the final design of the LNG facility on Lelu Island is still to be determined, it is envisioned that the initial phase of the facility would include:

    • Two liquefaction plants: A series of process equipment situated in a line (called “trains”) that acts as a large refrigerator to convert natural gas into LNG by chilling it to -162 degrees Celsius.
    • Two LNG storage tanks: Stores LNG at atmospheric pressure prior to being transferred onto LNG carriers.

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    Saudis say could raise output to meet demand

    Oil futures dipped on Friday after Saudi Arabia said it was ready to raise output further to meet strong demand.

    But the rally was halted by a dimming global economic outlook as well as top crude exporter Saudi Arabia saying it was ready to increase its oil output in coming months to a record high to meet a rise in global demand.

    In Japan, the world's third-biggest economy, May crude oil purchases by its big utilities fell 47.4 percent compared with the same month last year, and they also bought less natural gas and coal.

    Thanks to relatively cheap crude oil, refiners have enjoyed high margins as demand for refined products has been strong, but there are early signs that overproduction will pull down margins as product oversupply emerges.

    Independent stocks of oil products at Europe's Amsterdam-Rotterdam-Antwerp hub rose 5 percent in the week to Thursday to hit a record high of 5.845 million tonnes.

    While gasoline refining margins remain near three-year highs and surprising diesel demand growth underpinned its margins, the profitability of European jet fuel has declined as thousands of tonnes in surplus cargoes land from new refineries in the Middle East. Some analysts and traders say jet fuel's fate could foretell margins for other oil products, particularly diesel.

    Should demand for refined products fall due to emerging oversupply, analysts have said that would spill back into the crude market and pull down prices there as well, as refineries slash orders and reduce output.
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    Gazprom and Shell talk LNG

    Alexey Miller of Gazprom and Shell’s CEO Ben van Beurden met in Milan on Wednesday where they discussed the status of Sakhalin II and the future collaboration within the project.

    They also addressed the prospects for cooperation in the oil and gas sector, as well as the current situation in the LNG markets, according to a statement by Gazprom’s press office.

    As part of Sakhalin II, Russia’s first LNG plant with the annual capacity of 9.6 million tons of LNG was commissioned in 2009.

    Sakhalin Energy is the Sakhalin II project operator with the ownership distributed among Gazprom (50 per cent plus one share), Shell (27.5 per cent minus one share), Mitsui & Co. (12.5 per cent) and Mitsubishi (10 per cent).

    In 2014, Gazprom and Shell signed the memorandum-roadmap to prepare FEED documents for the third LNG production train within the Sakhalin II project.
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    Cheniere reveals plans for additional LNG projects

    Cheniere plans to expand its liquefied natural gas empire, adding two additional production units in Corpus Christi and partnering with a smaller Houston-based LNG company to build new projects in Louisiana.

    The company on Wednesday announced that it has filed paperwork seeking federal approval to build two more liquefaction trains near its proposed LNG export terminal in Corpus Christi, where construction has started on two of the five proposed trains.

    Cheniere also agreed to team up with Parallax Enterprises to complete two mid-scale projects already under development in places close to pipelines and deep water access. The company unveiled Live Oak LNG on the Calcasieu Ship Channel in southwestern Louisiana earlier this year and in April, acquired Louisiana LNG on the Mississippi River south of New Orleans.

    The projects each have two trains with a capacity to produce 2.5 million metric tons of the supercooled gas per year.

    Altogether, the expansions would boost Cheniere’s LNG production capacity to 60 million metric tons per year within a decade.

    In a statement, CEO Charif Souki said Cheniere expects to fund the developments with internally generated cash flows, which allows the company to remain a low-cost supplier while giving Cheniere more flexibility in making deals to sell LNG to global buyers.

    If the plans are approved by the federal government, Cheniere expects to start construction on the projects by 2017 and could begin producing the first batches of LNG as early as four years later, the company said in a statement.
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    Hess Sells Half of Bakken Pipeline Unit for $2.68 Billion

    Hess Corp., the most active oil driller in the Bakken last year, agreed to sell a 50 percent stake in its pipeline and processing unit in the area to private equity firm Global Infrastructure Partners for $2.675 billion in cash.

    The companies are forming a midstream joint venture called Hess Infrastructure Partners, New York-based Hess said in a statement Thursday.

    “The joint venture with its strategically located assets will be one of the largest midstream operators in the Bakken,” Chief Executive Officer John Hess said in the statement. “The joint venture will be in a strong position to fund future energy infrastructure investments and continue to grow its midstream business.”

    Hess will get a total of $3 billion in cash from the transaction, including $300 million from a debt sale by the joint venture that will help it close a cash flow gap expected this year because of lower oil prices. Fracking and horizontal drilling in the Bakken formation have made North Dakota the nation’s largest oil-producing state behind Texas, according to the Energy Information Administration.

    The company said it will continue with plans for an initial public offering of units in Hess Midstream Partners LP.
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    China natgas output drops for 2nd month, price cut eyed

    China's natural gas output fell 2 percent in May from a year earlier, official data showed on Thursday, its second straight month of decline as the market expects Beijing to announce another price cut in the coming months to lift slowing demand.

    Output recorded a 2.9-percent year-on-year drop in April, to 9.4 billion cubic metres (bcm), the lowest since July 2014 in outright volumes. Such drops in output have been rare.

    Production was 9.9 bcm in May, slightly higher than April on a daily basis. Total output in the first five months of 2015 climbed 2.1 percent from the same period the year before to 53.2 bcm, the National Statistical Bureau (NSB) said.

    China, the world's largest energy guzzler, is keen to boost the use of natural gas to cut emissions and fight air pollution.

    But demand has been hit since last year as domestic prices, which are regulated by the government, were not cut until April, lagging the steep declines in global oil markets that Beijing uses as a benchmark for gas pricing.

    In the first four months of 2015, China burned 62.9 bcm of gas, up a tepid 2.4 percent from the same period last year, according to the National Development & Reform Commission.

    Industry sources said Beijing may move to cut city-gate, or wholesale gas prices again in the coming months to lift demand.

    Factories that produce items such as ceramics and glass have curbed gas purchases, while the use of gas as a transport fuel has also eased as its price competitiveness relative to diesel narrows hugely.
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    Cenovus resumes operations at Foster Creek oil sands site

    Cenovus Energy Inc said it had resumed normal operations at its Foster Creek oil sands site in Alberta after a forest fire led to a precautionary shutdown on May 23.

    Canada's No. 2 independent oil producer had evacuated about 1,800 workers and shut down production at the site, which it operates as part of a joint venture with ConocoPhillips.

    The project averages production of about 135,000 barrels per day.

    Cenovus said it expects production in the second quarter to be reduced by 10,500 bpd and in the full year by about 2,600 bpd due to the shutdown.

    The company's total production in the first quarter ended March 31 averaged 218,020 bpd.

    The company said its Athabasca natural gas operations, which were also shut down due to the forest fire, have resumed.

    At least 233,000 barrels per day of oil sands production, 9 percent of Alberta's total oil sands output, had been suspended because of the fire risk.
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    Apache Corp. CEO Isn’t Afraid of OPEC or Low Oil Prices

    Apache Corp. CEO John Christmann didn’t just get a new job when he took charge of one of the world’s biggest shale producers in the dark days of the oil market crash in January, he signed on to a corporate makeover.

    In the past six months Christmann has focused on transforming Apache from a high-flying global explorer into a ruthlessly efficient production machine rooted deeply in West Texas shale fields. Under his watch, Apache has set the pace for an industry intent on moving beyond basic cost-cutting to reset priorities on regions and projects that can thrive with $50-a-barrel oil.

    Christmann has now accomplished what none of his other major peers have yet managed: he’s making more cash from operations than he’s spending. That compares to the two years preceding the 2014 oil market crash, when Apache was among a group of 18 producers on the Standard & Poors 500 Index spending a total of $36 billion more than the cash they generated.

    Christmann and his peers have used the downturn as a catalyst to turn shale drilling from a money-losing technology into the future of global oil, said Les Csorba, partner at executive search firm Heidrick & Struggles.

    “This new generation of leaders was really anticipating the downturn, even before prices began falling, focusing on standardization and driving efficiency,” said Csorba, who helped Apache select Christmann and placed other energy CEOs in the past two years. “They’re engineers who are very focused on returns, more than on production growth.”

    Apache moved faster than anyone, reducing its operating drilling rigs initially by 70 percent and finally by 87 percent, to 12 from 91, a cut equivalent to some producers’ entire rig fleet.

    By February, Christmann had cut spending so severely its planned 2014 production increase fell to zero from a previous 18 percent -- a daring move in an industry investors value mainly for growth prospects.

    With his emphasis on profits, Christmann was returning Apache to its roots. The company was among the top-performing oil and natural gas producers from 2001 to 2010, nearly tripling in value as it focused on turning tired-out oilfields into cash engines.

    As the shale boom was taking off in the U.S., Apache began pursuing developments from Argentina to Australia, sinking billions into projects that wouldn’t show returns for years. The company’s market value fell 21 percent from 2010 to mid-2014, while peers such as EOG more than doubled in value during the same period, according to data compiled by Bloomberg.

    Under Christmann’s guidance, Apache’s service costs have fallen 40 percent in some regions, contributing to free cash flow that is expected to reach up to $1 billion in 2015, according to the average of analyst estimates compiled by Bloomberg. Apache sold off all but two of its major overseas operations, in Egypt and the North Sea, and Christmann is refocusing the company on North America.

    The 3.3 million gross drilling acres the company controls in the Permian Basin of West Texas are now the “heart and soul” of Apache, he said.

    EOG can now make the same profit with oil at $65 a barrel that it could with $95-a-barrel crude two years ago.

    The overall decline in costs may outpace early industry hopes of realizing 25 percent reductions, according to analysis by Bloomberg Intelligence. After six months of oil prices hovering between $50 and $60, producers in the top three drilling regions of the Permian Basin have dropped the so-called breakeven price -- which includes a 10-percent profit -- to about $42 a barrel, a decline of 19 percent from last year, according to Bloomberg New Energy Finance.
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    BP's annual statistical review

    BP Plc released its yearly Statistical Review of World Energy on Wednesday. Used for decades as an industry benchmark, this year's edition laid bare the seismic shifts taking place in global energy markets.

    1) The rise and rise of U.S. oil production

    The rise in U.S. crude output has simply been explosive. America added 1.6 million barrels a day in 2014, taking production past its previous peak in 1970. It also made the U.S. the world's largest crude producer, knocking Saudi Arabia off its perch.

    While there are signs shale production will fall back slightly this year because of the slump in oil prices it's marginal compared with the longer-term trend. Energy independence is getting closer: U.S. energy production met almost 90 percent of consumption last year, the most since the Reagan administration.

    2) China's energy slowdown

    China -- the motor of global energy demand since the turn of the century -- is trying to change course. A slowing economy and shift away from heavy industry meant 2014 saw energy consumption grow just 2.6 percent, less than half its recent average and the smallest increase since the Asian crisis of 1998. The country's energy intensity -- the amount of fuel it needs to consume to generate each dollar of GDP -- is getting closer to U.S. and European levels.

    If, and BP says it's quite a big if, China keeps a lid on new steel mills and cement factories, it'll have a big impact on global demand in the years ahead.

    3) The global solar boom

    Renewable energy is now a force to be reckoned with. Last year non-fossil fuels, including nuclear, accounted for more of the increase in global energy consumption than oil, gas and coal combined. Particularly notable are record installations of solar panels.

    The combination of slower energy demand growth and more renewable power meant global emissions expanded just 0.5 percent in 2014, the slowest pace since the financial crisis. increasing just 0.5 percent.
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    Pemex unveils biggest oil find in years, sees 200,000 bpd boost

    Mexican state oil company Pemex said on Wednesday it had made one of its biggest discoveries in years, unveiling new shallow water oil fields in the southern Gulf of Mexico that could produce 200,000 barrels per day (bpd) by mid-2018.

    The total proven, probable and possible reserves of the fields could be as high as 350 million barrels of crude-oil equivalent, Pemex's Chief Executive Officer Emilio Lozoya told an oil conference in Guadalajara.

    The new fields off the coast of Tabasco and Campeche states comprise three of light crude and one of heavy crude, and could start coming onstream in 16 months, Pemex said.

    The fields would take around three years to reach their full 200,000 bpd capacity, Jose Antonio Escalera, director of exploration for Pemex, told Mexican radio.

    Pemex described the finds as its biggest exploration success in the last five years after the discoveries in Tsimin-Xux and Ayatsil, also in the southern Gulf.

    Located near the super giant Cantarell oil field found in the 1970s and Pemex's most productive current field Ku Maloob Zaap, the finds could boost revenue for the government, which relies on Pemex income to provide about a third of the federal budget.

    CEO Lozoya said the discoveries could also make the company reconsider its production forecasts.

    The new hydrocarbon finds were also expected to generate production of 170 million cubic feet of gas per day.

    Output at Pemex has fallen from a peak of 3.4 million bpd in 2004 to less than 2.4 million bpd currently.

    Mexico will auction 14 oil and gas exploration and production blocks not far from the new fields this summer, and Energy Minister Pedro Joaquin Coldwell said at the Guadalajara event that the finds would make the tenders more attractive.
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    China's May crude runs up 7.4 percent y/y - stats bureau

    China's crude througput grew 7.4 percent in May from the same month a year ago to 43.92 million tonnes, data from the National Statistical Bureau showed on Thursday.

    Crude oil output rose 2 percent on year last month to 18.14 million tonnes.
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    Gulfport Energy to buy more Utica acreage in Ohio

    Gulfport Energy Corp., Oklahoma City, has agreed to acquire 35,326 net acres in the Utica shale in Ohio from American Energy-Utica LLC, a subsidiary of American Energy Partners LP.

    The purchase price for 6,198 net undeveloped acres in Belmont and Jefferson counties is about $68.2 million, subject to adjustment. The acreage is near or adjacent to acreage in Gulfport’s pending acquisition of Paloma Partners III LLC (OGJ Online, Apr. 16, 2015).

    In a second agreement with AEU for about $319 million, Gulfport will acquire 27,228 net acres in Monroe County, including 14.6 MMcfd of net production, 11.3 net drilled but uncompleted wells, a fully constructed four-well pad location, and an 11-mile gas gathering system.

    Gulfport also has agreed to acquire from AEU an additional 1,900 net acres in Monroe County for $19.4 million if completed within 30 days of the closing of the other Monroe agreement.

    The pending Paloma acquisition includes 24,000 net acres. Gulfport said its holdings of Utica shale leasehold are expected to total 243,000 net acres.
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    Islamic State expands near Libya’s largest oil terminal

    Islamic State strengthened its hold in central Libya, taking territory near Libya’s largest oil terminal and repelling efforts by militias to halt its advance.

    The jihadist group had been tightening its grip on Sirte over recent months. It claimed on Tuesday to have finally succeeded in taking Muammar Qaddafi’s hometown, after overrunning a nearby power station.

    Islamic State already controls the desert town of Naufaliya, about 30 miles from Libya’s largest export terminal of Es Sider and neighboring Ras Lanuf, the third-largest. Controlling Sirte helps cement those positions on the west side of the so-called Sirte Basin, which is home to about 70 percent of the country’s crude reserves.

    “It’s becoming clear that they’re getting more structure and their control of this region is getting more serious,” said Riccardo Fabiani, senior North Africa analyst at the London-based Eurasia Group.
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    U.S. Petroleum Balance Sheet, Week Ending 6/5/2015

    Production rose once again (up 0.25%) to new record highs at 9.61mm bbl/day.
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    Summary of Weekly Petroleum Data for the Week Ending June 5, 2015

    U.S. crude oil refinery inputs averaged 16.6 million barrels per day during the week ending June 5, 2015, 169,000 barrels per day more than the previous week’s average. Refineries operated at 94.6% of their operable capacity last week. Gasoline production increased last week, averaging 10.0 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day.

    U.S. crude oil imports averaged over 6.6 million barrels per day last week, down by 750,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.0 million barrels per day, 2.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 666,000 barrels per day. Distillate fuel imports averaged 181,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 6.8 million barrels from the previous week. At 470.6 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 2.9 million barrels last week, but are in the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 0.9 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.7 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 0.6 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.7 million barrels per day, up by 5.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 3.8% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, down by 1.7% from the same period last year. Jet fuel product supplied is up 8.7% compared to the same four-week period last year.
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    Why EIA, IEA, and BP Oil Forecasts are Too High

    When forecasting how much oil will be available in future years, a standard approach seems to be the following:

    Figure out how much GDP growth the researcher hopes to have in the future.
    'Work backward' to see how much oil is needed, based on how much oil was used for a given level of GDP in the past. Adjust this amount for hoped-for efficiency gains and transfers to other fuel uses.
    Verify that there is actually enough oil available to support this level of growth in oil consumption.

    In fact, this seems to be the approach used by most forecasting agencies, including EIA, IEA and BP. It seems to me that this approach has a fundamental flaw. It doesn't consider the possibility of continued low oil prices and the impact that these low oil prices are likely to have on future oil production. Hoped-for future GDP growth may not be possible if oil prices, as well as other commodity prices, remain low.

    It is easy to get the idea that we have a great deal of oil resources in the ground. For example, if we start with BP Statistical Review of World Energy, we see that reported oil reserves at the end of 2013 were 1,687.9 billion barrels. This corresponds to 53.3 years of oil production at 2013 production levels.

    If we look at the United States Geological Services 2012 report for one big grouping-undiscovered conventional oil resources for the world excluding the United States, we get a 'mean' estimate of 565 billion barrels. This corresponds to another 17.8 years of production at the 2013 level of oil production. Combining these two estimates gets us to a total of 71.1 years of future production. Furthermore, we haven't even begun to consider oil that may be available by fracking that is not considered in current reserves. We also haven't considered oil that might be available from very heavy oil deposits that is not in current reserves. These would theoretically add additional large amounts.

    Given these large amounts of theoretically available oil, it is not surprising that forecasters use the approach they do. There appears to be no need to cut back forecasts to reflect inadequate future oil supply, as long as we can really extract oil that seems to be available.

    There is clearly a huge amount of oil available with current technology, if high cost is no problem. Without cost constraints, fracking can be used in many more areas of the world than it is used today. If more water is needed for fracking than is available, and price is no object, we can desalinate seawater, or pump water uphill for hundreds of miles.

    If high cost is no problem, we can extract very heavy oil in many deposits around the world using energy intensive heating approaches similar to those used in the Canadian oil sands. We can also create gasoline using a coal-to-liquids approach. Here again, we may need to work around water shortages using very high cost methods.

    The amount of available future oil is likely to be much lower if real-world price constraints are considered. There are at least two reasons why oil prices can't rise indefinitely:

    Any time oil prices rise, economies that use a high proportion of oil in their energy mix experience financial problems. For example, countries that get a lot of their revenue from tourism seem to be vulnerable to high oil prices, because high oil prices raise the cost of airline travel. Also, if any oil is used for making electricity, its high cost makes it expensive to manufacture goods for export.
    When oil prices rise, workers find that the cost of food tends to rise, as does the cost of commuting. To offset these rising expenses, workers cut back on discretionary spending, such as going to restaurants, going on long-distance vacations, and buying more expensive homes. These spending cutbacks adversely affect the economy.

    The combination of these two effects tends to lead to recession, and recession tends to bring commodity prices in general down. The result is oil prices that cannot rise indefinitely. The oil extraction limit becomes a price limit related to recessionary impacts.

    The cost of oil is currently in the $60 per barrel range. It is not even clear that oil prices can rise back to the $100 per barrel level without causing recession in many counties. In fact, the demand for many things is low, including labor and capital. Why should the price of oil rise, if the overall economy is not generating enough demand for goods of all kinds, including oil?
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    Lukoil First-Quarter Profit Slides 60% Following Crude Drop

    OAO Lukoil, Russia’s largest non-state oil producer, said first-quarter profit dropped 60 percent after crude prices slumped.

    Net income fell to $690 million from $1.73 billion a year earlier, the Moscow-based company said Wednesday in a statement. That missed the $1.04 billion average estimate of seven analysts surveyed by Bloomberg.

    Oil companies have been hurt by tumbling prices for output amid a global supply glut. Brent, the benchmark for more than half the world’s crude, has slumped 40 percent in the past year after the Organization of Petroleum Exporting Countries chose to maintain production to defend market share.

    Oil’s partial recovery since January helped Lukoil post a profit after reporting a loss in the fourth quarter of 2014. Results were also buoyed by a weaker ruble, which reduced costs, and spending cuts. Russian peers OAO Gazprom Neft and OAO Novatek also returned to profit in the first quarter following losses in the fourth.

    Lukoil signed an agreement on the sale of 50 percent of Caspian Investment Resources Ltd. to China Petrochemical Corp., or Sinopec, for $1.07 billion. The agreement will halt arbitration, which the Russian company began in London this February, Lukoil said in the statement.

    Lukoil’s oil and natural-gas output rose 7 percent from a year earlier to 2.37 million barrels a day, it said. The company pumped 2.03 million barrels of oil and liquids a day as it ramped up an Iraqi project.

    Refining throughput in Russia fell 12 percent due to a decrease in margins as a result of tax legislation.

    First-quarter capital spending fell 25 percent to $2.43 billion from a year earlier, it said.
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    Indonesia 30-day fuel reserves plan to cost up to $24 bln -official

    Indonesia's plan to develop 30 days' worth of fuel and oil emergency reserves is expected to cost up to $24 billion, and would be in addition to plans to boost operational reserves, an energy ministry official said on Wednesday.

    The government hopes funding for the emergency reserve facilities would come from the private sector, but it may also come from state-owned firms, Oil and Gas Director General Wiratmaja Puja also told reporters.

    He estimated that 45 million barrels of crude and fuel would be needed for the emergency reserves, assuming demand of 1.5 million barrels per day.

    "The function of this storage buffer is for emergencies, like when there was a tsunami in Aceh, or wars. This requires a lot of fuel, so when there's an emergency we're ready for at least a month," Wiratmaja said.

    The government hopes to begin designing the facilities next year, he said. The estimated investment cost of $17 billion-$24 billion would cover construction costs as well as the fuel and crude to fill new oil storage tanks, he said.

    Regulations for the emergency reserves plan are currently being drafted and are expected to be released this year.

    Indonesia also plans to develop operational fuel reserves to cover 30 days, up from around 22 days at present, Wiratmaja said, and has asked state oil and gas firm Pertamina and other companies to assist.

    Last month Pertamina announced plans to build a fuel depot in Jakarta as part of this programme.

    The government is also considering hiring storage from other firms and utilising facilities that oil and gas contractors are no longer using, he said.
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    Weir expects full-year results to be weighted toward H2

    Weir Group Plc said it expects its full-year results to be more weighted towards the second half, as a drop in orders at its oil and gas division and weak trading at upstream businesses hurt second-quarter performance.

    The Scottish company, which makes valves and pumps for the energy and mining industries, has been hit by a slowdown in North American oilfield activity as crude oil prices remain depressed and explorers and producers slash capital spending.

    The company said its oil and gas order input was 34 percent lower in the first five months of 2015 than in the prior year period.

    Weir, whose North American operations accounted for about a third of its 2014 revenue, said it had temporarily suspended operations for a week at its Fort Worth, Texas facility to cut costs.

    "The overall tone of the update suggests a possibly tougher Q2 than management had thought... Some improvement is expected in H2, but the statement will likely create some small downside risk to consensus EPS," UBS analysts wrote in a note.

    Weir Group told Reuters in April that it planned to cut another 125 jobs, mostly in its North American oil and gas business. The company first began taking cost-saving measures in November.
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    Pioneer Natural Resources to sell 640,000 acres of Colorado oil and gas leases

    Pioneer Natural Resources Co. says it wants to sell 640,000 acres of mineral rights it holds in eastern Colorado.

    That word comes a month after Irving, Texas-based Pioneer announced plans toshut its Denver office and halve its workforce in Trinidad in southern Colorado.

    Pioneer, like many oil and natural gas companies, has been cutting staff, closing offices, and selling “non-core” assets in order to focus on what executives consider to be their best operations as crude oil and natural gas prices continue to be stubbornly low.

    The eastern Colorado oil and gas leases Pioneer has put on the market are in what has been considered an exploration area in recent years, a place where companies sought to replicate the success found in northern Colorado.

    There, mostly in Weld County, companies using horizontal drilling and hydraulic fracturing techniques have produced oil previously trapped in the Niobrara and Codell shale rock formations some 7,000 feet underground, contributing to record-setting oil production in recent years.

    The leases Pioneer wants to sell are in several eastern counties — Bent, Cheyenne, Crowley, Elbert, Kiowa, Kit Carson, Lincoln, Prowers and Washington —and include rights to drill for oil and gas in the Niobrara, Cherokee, Atoka, Mississippean and Morrow rock formations.
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    Wood Mackenzie: China Faces Weaker Gas Demand and Oversupply Till 2017

    Wood Mckenzie reported Wednesday that Chinese national oil companies (NOCs) are assessing how best to optimize their diverse supply portfolios as gas demand disappoints, leading to an oversupplied market with weaker prices. Wood Mackenzie says there are three major levers China can focus on to adjust with market movements and how these levers are used to manage oversupply will impact liquefied natural gas (LNG) prices and suppliers to China.

    Gas demand growth in China has been reduced significantly with demand now expected to reach around 12.71 trillion cubic feet (Tcf) or 360 billion cubic meters (Bcm) and 19.77 Tcf (560 Bcm) in 2020 and 2030 respectively compared to 14.83 Tcf (420 Bcm) and 22.59 Tcf (640 Bcm) previously. This is due to short-term and structural drivers. Gavin Thompson, Wood Mackenzie’s principal gas consultant explains, “Short-term drivers include low oil prices and high domestic gas prices, reversal of environmental policies, competition from coal and hydro and warmer winter weather. Structural factors include the switch from industrial production to the service sector as a driver of economic growth.”

    Chinese companies have signed around 2.33 Tcf (66 Bcm) per annum of term LNG contracts. Of this total, new contracts will ramp up through 2015, ultimately supplying an addition of approximately 812.1 billion cubic feet (Bcf) or 23 Bcm per annum of gas into the domestic market by 2018. Given the significant downward revision in demand, China’s NOCs are now pursuing numerous channels to reduce volumes. This includes efforts to renegotiate ramp up schedules and pricing terms and reselling volumes into the Pacific market where agreement can be reached with suppliers. Despite weakening demand growth, Central Asian volumes into China also continue to rise. Thompson says. “As a result, there is an oversupply of contracted LNG into the market, particularly during periods of low seasonal demand. We expect China will be over-contracted by about 635.6 Bcf (18 Bcm) from 2015 till 2017.”

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    Murkowski releases road map for countries to seek U.S. crude exports

    A top Republican senator on Tuesday provided a blueprint for foreign countries to acquire U.S. crude, as oil companies push for an end to the nation’s longstanding ban on exporting it and the Senate nears votes on the issue.

    The document, prepared by Republican staff on the Senate Energy and Natural Works Committee and released by the panel chairwoman, Sen. Lisa Murkowski of Alaska, notes that the Obama administration can allow greater oil exports to U.S. allies already — without any changes by Congress.

    “Exempting certain countries on a case-by-case basis, as the statutes and regulations currently allow, would be a partial and helpful step toward the modernization of U.S. energy policy,” the white paper says.

    Under a change made by former President Ronald Reagan, oil shipments to Canada are exempted from the broader crude export ban. And the Obama administration is under increasing pressure to make a similar change for Mexico.

    But the paper suggests there are many other potential beneficiaries around the globe with deep ties with the United States.

    “Many U.S. allies and trading partners are interested in purchasing American oil to diversify away from Russia, Iran and other problematic sources,” the paper says. “Allowing such shipments would send a powerful signal of support and reliability at a time of heightened geopolitical tensions in much of the world. The mere option to purchase U.S. oil would enhance the energy security of (these countries) even if physical shipments did not occur.”

    The document also offers case studies for six countries — including Poland, Japan and India — that are seen as particularly well-positioned candidates to seek U.S. crude, given their dependence on foreign sources of oil.
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    China becomes largest buyer of Brazilian oil: report

    Brazil's oil exports to China increased threefold in the first five months of this year, making Beijing the largest consumer of Brazilian oil in the world, said daily Folha de Sao Paulo on Tuesday.

    According to Folha, Brazil exported 5.4 million tons of oil to China from January to May, accounting for 35 percent of Brazil's total oil exports in the same period. The amount of oil shipped to China is twice as much as that to the United States.

    The rise in China's purchase of Brazilian oil came at a time when Brazil's state-controlled oil giant Petrobras tried to boost its relations with China. Petrobras signed some financing agreements with China during a recent visit to Brazil by Chinese Premier Li Keqiang.

    China's higher demand for oil also helped Brazil achieve record oil exports of 15 million tons from January to May, up 80 percent from the same period last year.

    However, as oil prices have fallen significantly over the past months, the record sales did not generate corresponding high revenues.

    With increased oil purchases, China has become the largest buyer of four major Brazilian products. The other three are soybeans, iron ore and cellulose.

        China replaced the United States to become Brazil's largest trade partner in 2009. The Sino-Brazilian trade value amounted to 86.67 billion U.S. dollars in 2014.
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    Glencore in 1 Million Ton Singapore Fuel Spree as Premiums Slump

    Glencore Plc has bought more than 1 million metric tons of fuel oil in Singapore this month as prices tumble from a record premium in the world’s biggest bunker market.

    The company has purchased at least 925,000 tons of 380-centistoke fuel oil and 140,000 tons of the 180-centistoke grade so far in June on the so-called window run by pricing service Platts, a unit of McGraw Hill Financial Inc. Glencore’s cargoes, loading this month and in July, account for about 36 percent of the total transacted volume of 2.95 million tons, data provided by Platts show.

    Francis de Rosa, a Sydney-based spokesman for Glencore, said on Tuesday the company declined to comment.

    Under the Platts process, traders report bids, offers and deals through e-mails, instant messages and phone conversations in a defined period each day, which are then used to create end-of-day price assessments for various commodities and used as benchmarks for transactions around the world.

    “It’s the high volume of cargoes traded recently that has caught the market’s attention,” Harry Tchilinguirian, the London-based head of commodity markets strategy at BNP Paribas SA, said by phone. “The fuel oil inventory data in Singapore indicates very ample supplies.”

    Singapore’s onshore stockpiles of residual fuels, including fuel oil, rose to a record in the week to June 3, according to International Enterprise, a unit of Trade and Industry Ministry. The city-state is the world’s largest port for bunker, or ship fuel, with sales of about 42 million tons in 2014, data from the Maritime and Port Authority show.
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    PIRA: LNG supply challenging coal

    According to the latest analysis from PIRA Energy Group, the LNG supply side seems focused on challenging coal for a lead in the race to join forces with renewable energy to meet incremental power generation demand.

    LNG scorecard

    The supply side, led by LNG players with portfolio volumes looking for end-user markets, seems focused on challenging coal for supremacy in the race to join forces with renewable energy to meet incremental power generation demand. In summary, key figures attending the World Gas Conference in Paris, France, are offering a policy-driven solution to solve a commercial problem.

    European gas prices

    PIRA’s analysis noted: “Sometimes it's difficult to think of European gas markets as a proving ground for the next phase in the evolution of the global gas industry. After all, this market was dragged kicking and screaming into the spot market era, and even today large portions of the market remain relatively uncompetitive by oil market standards.”

    The European gas market has shown that being resistant to change in one area does not prevent change from occurring elsewhere. This has been witnessed in the gas market for power generation over the past five years, and the next phase of testing will occur in the form of integrating more LNG into the supply mix.
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    Baghdad makes $430 million budget payment to Kurds-finance minister

    Iraq made a $430 million budget payment to the Kurdistan region for May, the finance minister said on Tuesday, potentially putting further strain on a deal over oil exports.

    The December deal was hailed as a breakthrough in a long-running dispute over exports between the federal government in Baghdad and Kurdish regional authorities, but both sides accuse each other of violating it.

    Finance Minister Hoshiyar Zebari said Baghdad had paid 508 billion dinars ($430 million) to the region in May as expenditure had been lowered across the board, and sought to play down any impact on the oil deal.

    "All the amounts for all ministries and state departments have been lowered," Zebari said. "There are no negative effects on the deal: it is standing and still ongoing."

    Under the deal, the Kurds committed to export 550,000 barrels per day (bpd) of oil in return for the reinstatement of budget payments to the region, which Baghdad slashed in early 2014.

    Kurdistan's minister of natural resources Ashti Hawrami said in a conference in London on Tuesday that the region had met its target and remained committed to the deal despite receiving only 35 percent of the funds it should have to date.

    Baghdad says the region has failed to hand over the volumes they agreed upon to state-run oil marketing firm SOMO.

    The Kurds say they have not received the monthly 1.2 trillion dinars to which they are entitled in the 2015 budget and have threatened to sell more oil independently to make up for the shortfall.

    Iraqi Prime Minister Haider al-Abadi said in an interview on May 30 that even if the Kurds exported their full share of oil, they could not expect to receive the 1.2 trillion Iraqi dinars to which they say the budget entitles them because it was drawn up when the price of oil was higher.

    The Kurds said they exported an average of 577,621 bpd via pipeline to Turkey in May, of which 448,889 bpd was handed over to SOMO.
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    Production from Iraq's West Qurna Two Now at Around 402,000 Barrels

    Production from Iraq's West Qurna Two oilfield is at around 402,000 barrels per day and is expected to rise to 420,000 bpd by the end of the year, senior vice president of Lukoil Overseas Gati Al-Jebouri said at a conference in London.

    "There is no more curtailment and we were at 402,000 bpd yesterday so we are very happy and we hopefully will go up to 420,000 bpd by end of the year," he said at a conference in London, adding that was due to the split in exports of Basrah crude grades to heavy and light.

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    Gazprom gets EU trial extension

    Gazprom has been granted six extra weeks to respond to charges launched by European Union (EU) antitrust regulators that it had abused its dominant market position, the Russian gas giant said on Tuesday.
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    North American oil production flush with increasing efficiencies

    When OPEC left production unchanged in November last year many understood it to be US or Canadian tight oil producers who would suffer, but thanks to technological advances — to paraphrase Mark Twain — the reports of the death of the tight boom have been greatly exaggerated.

    In October 2014, the average new-well oil production per rig in the Bakken was 486 b/d, in the Eagle Ford it was 599 b/d, and in the Permian 207 b/d. In the ensuing seven months to June, the same basins saw new well output per rig increase to 631 b/d in the Bakken, 720 b/d in the Eagle Ford, and 296 b/d in the Permian, according to the EIA’s Drilling Productivity Report.

    How did the companies do it? The answers differ from company to company and basin to basin, but there were some common themes.

    Several companies reported a reduction in spud to well drilling days, allowing the potential for drilling more wells at the same cost, in turn yielding more production. Oxy has seen a 40% decrease in spud to rig release time in the Wolfcamp area of its Permian holdings from 43 days in 2014 to 26 days in March this year with a target of eventually reaching 16 days, according to the company’s Q1 earnings presentation.

    To that end, the company is using a process called “mechanical specific energy” which looks at the formations to be drilled and designs “exactly how much we should do,” said soon-to-be Oxy CEO Vicki Hollub in its earnings call, including “how fast we should rotate the bit and how much weight we should put on it by interval.”

    Pioneer Natural Resources is experimenting with efficiencies on several fronts in the Permian. For example, it is modifying the casing design in drilling its core Spraberry/Wolfcamp formation operation. Now in test phase, the technique offers $500,000-$1 million savings per well and shaves off 10-15 days per well, Pioneer officials have said.

    Another savings comes from expanded use of dissolvable plugs in the Eagle Ford Shale, the company said. The plugs isolate fracture intervals along horizontal wells, and using them avoids having to drill them out after a well is fractured. The savings is about $300,000 per well and completion time is reduced by three days per well.

    The efficiency gains, big and small, are why internal rates of return for basins across the shale-scape are over 10% even with WTI at $50/b, according to Platts’ Bentek Energy calculations. WTI settled at $59.13/b Friday.

    Those returns are ultimately what matters and keeps tight oil pumping. OPEC’s actions were a wake-up call, but now the tables have turned and, as ConocoPhillips CEO Ryan Lance warned last week, OPEC needs to prepare for even more competition on the “real possibility” the US crude export ban gets lifted.
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    Iraq is raising a new army to defend its oil from Islamic State

    Business Insider reported that Iraq is committing 27,000 security personnel to protecting its oil and energy industry from the advance of Islamic State.

    The Telegraph reports that Iraq's oil minister Adel Abdel Mahdi outlined plans for the new oil army at the Organisation of the Petroleum Exporting Countries meeting in Vienna over the weekend.

    Iraq is now the second largest oil producing nation in OPEC after Saudi Arabia and there are fears that ISIS, which operates in parts of Iraq, Syria and Iran, could disrupt supply through terrorist attacks.

    The terrorist state could also look to annex more oil resources to help fund its campaigns. It already controls several oil assets in northern Iraq and industry officials estimate ISIS could be making at least USD 1 million a day from oil exports.

    Armed forced have been trying to take back key oil fields and refineries from ISIS in Iraq in recent weeks. Iranian and US forces have been working together to try and retake the Beiji refinery in Iraq.

    Abdel Mahdi said the final structure of the new oil security forces will be finalised over the next few weeks.
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    Former Centrica boss to head $5 bln energy investment fund

    The former boss of British energy company Centrica Sam Laidlaw will head a new $5 billion fund backed by private equity firms Carlyle Group and CVC Capital Partners to buy oil and gas assets worldwide.

    The London-based platform, Neptune Oil and Gas, will focus on investing in large-scale fields and companies in the North Sea, North Africa and Southeast Asia struggling in the wake of the sharp drop in oil prices over the past year.

    Laidlaw, who stepped down as Centrica's chief executive late last year, said the fund aimed to complete one or two large deal totalling around $5 billion within the next two years to build a new exploration and production (E&P) company of 75,000-100,000 barrels per day, similar to the output of London-based Tullow Oil.

    "Very few people have actually invested in scale because there haven't been any large-scale private equity funds really devoted to international E&P," Laidlaw told Reuters on Tuesday.

    A raft of oil and gas assets have been put up for sale in recent months as energy firms ranging from majors Royal Dutch Shell and Total to small exploration companies seek to boost balance sheets.

    "The timing is good, a lot of the super majors are going through portfolio restructuring and national oil companies might be pulling back because of the lower oil price," Laidlaw said.

    Global private equity firms in recent years have formed a number of partnerships led by high-profile industry executives in a bid to turn around assets by introducing efficiencies and cost cutting.

    Siccar Point is headed by former Conoco and Centrica executive Jonathan Rogers, while Scotland-based Verus Petroleum is led by Alan Curren, a North Sea veteran with Wood Group and Lundin Petroleum.

    "We're expecting to deliver value through improving efficiencies, adding reserves, improving operating uptime and bringing in new technologies to ensure we can deliver a sensitive risk return on that basis," Laidlaw said.

    "This isn't a bet on the oil price, because it could be with us for a while," he added, referring to recent lower prices.
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    Bechtel Ready to Quadruple Queensland LNG Production This Year

    Bechtel is on track to complete the construction of an additional three liquefied natural gas (LNG) production trains on Curtis Island by the end of 2015, quadrupling Queensland's LNG production.

    Bechtel is constructing the state's first three LNG plants, the first in the world to convert commercial quantities of coal seam gas into liquid form ready for export. When complete, the operators of the plants - Queensland Curtis LNG (BG Group), GLNG Plant Project (Santos, PETRONAS, Total & KOGAS) and Australia Pacific LNG (ConocoPhillips) - will produce the commodity for export to their global customers.

    "The projects will begin producing LNG in rapid succession over the second half of 2015," said Alasdair Cathcart, Bechtel's global LNG general manager. "It's certainly a time of significant milestones on Curtis Island, as we move though final commissioning and eventually into handover of these projects to the operating teams.  It's all part of a carefully planned program to deliver unprecedented capacity to our customers, further building on our extensive global LNG experience."

    Six production trains will be operational when Bechtel hands over the LNG plants to the owner teams for long-term operation. Queensland Curtis LNG Train 1 has been producing LNG since December 2014, filling more than 16 ships with cargo to date. Bechtel is now working on delivering the second train for that project. Concurrently, Bechtel teams on the GLNG and Australia Pacific LNG plants recently introduced gas into their systems and began producing their own power as part of commissioning the first of two production trains on each site. The second production trains on each of these projects are expected to be operational in early 2016.
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    YPF finds unconventional gas in southern Argentina

    Argentine state-controlled oil company YPF said Monday it found unconventional gas in the Vaca Muerta shale play in the southern province of Neuquen.

    The La Ribera x-1 well is located about 25 kilometers (15 miles) from the town of Añelo and some 90 kilometers (56 miles) from the capital of the province, YPF said in a statement.

    "This discovery raises the expectations about the wealth and productivity of the Vaca Muerta formation in areas near those currently undergoing massive development," YPF said.

    Initial tests indicate high potential for gas production, the oil company said.

    This is the second unconventional resource discovery made in less than a month in Argentina.

    YPF said on May 25 that it discovered unconventional oil in Rio Negro, another province in southern Argentina.

    YPF announced the discovery of non-conventional oil and natural gas reserves in Vaca Muerta in 2011 after successful results in the exploration phase.
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    U.S. shale production set to fall again in July, EIA says

    The federal forecast of U.S. shale production is sinking again for the third month in a row, but the decline is still just a thin layer off the top.

    Daily oil production at the nation’s six biggest shale plays is set to slip by 91,000 barrels from June to July, the Energy Information Administration says. That’s roughly 2 percent of the 5.48 million U.S. barrels anticipated next month, hardly the kind of decline oil-industry stakeholders had expected for after drillers sidelined nearly 1,000 oil-drilling rigs in the last six and a half months.

    “It’s a pretty resilient industry,” said Bill Herbert, an analyst at Simmons & Co. International in Houston. And given the billions that oil producers have raised this year — they still have generous equity investors waiting in the wings — it’s not inconceivable that crude production could start to rise again early next year, especially with oil prices flirting with the $60-to-$65 a barrel range, Herbert said.

    “If you send the right price signals, the oil producers are going to start reinvesting, and production will respond,” he said.

    Oil traders are watching the shale industry and Baker Hughes’ U.S. rig count closely to see whether the nation’s production, which helped feed a glut of crude and send oil prices plummeting in the last 12 months, will ease up enough to lift prices again. Despite the falling rig count, not much has changed on the production side of the business, largely because oil companies are moving rigs to the sweetest shale acreage and because their rigs are more efficient, analysts say.

    So far, falling production from older, deteriorating wells is outpacing the output from newly drilled wells, especially in the Eagle Ford Shale in South Texas, which is expected to see daily production decline by 49,000 barrels by July. Daily output at the Bakken Shale in North Dakota and the Niobrara formation in Colorado, Nebraska and surrounding states is supposed to fall by 29,000 and 17,000 barrels a day, respectively.

    The Permian Basin in West Texas, so far the nation’s stalwart oil patch, still pumping out adding crude, is slipping close the point at which its net production will be in the red. Its month-over-month production is expected to be 3,000 barrels a day by July, the EIA estimates.

    West Texas Intermediate, the U.S. benchmark crude, fell 99 cents to $58.14 a barrel on the New York Mercantile Exchange. The international standard, Brent, dipped 62 cents to $62.69 on the ICE Futures Europe.

    Meanwhile, the nation’s natural gas production is shrinking in all but the Utica Shale in Ohio. From Texas to Pennsylvania, old wells are expected to bring down gas production by 221 million cubic feet a day, or 0.5 percent of the nation’s gas output.
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    Big Star sees big results from Wolfcamp well

    Big Star Oil & Gas, LLC  today announced that its first Howard County horizontal well, the Ryder Unit A2H, has been successfully drilled and completed in the Wolfcamp A shale.  The well has a productive lateral length of 7500', and was completed using a 30-stage hybrid hydraulic fracture stimulation.  The well achieved a peak 24-hour IP rate of 1725 boepd (2-phase) and had a 30 day IP rate of 1469 boepd, consisting of average rates of 1358 bopd and 670 mcfd (92% oil).

    Based upon production data as reported to the Texas Railroad Commission, the Ryder Unit A2H has achieved the highest reported 30-day average rate of any Howard County Wolfcamp horizontal well to date.  According to Railroad Commission data, Big Star's Ryder Unit A2H well produced 23% more oil and gas in its first month than the previous top horizontal Wolfcamp well, Athlon Energy's Tubb 39 #5H.  The Ryder Unit A2H is also performing significantly above the company's 752 MBOE Wolfcamp type curve.

    Bradley Cross, President and Partner, Big Star Oil & Gas, said, "We are pleased with the record results that we have been able to achieve to date.  The successful drilling and completion of our Ryder Unit A2H horizontal shale well strategically positions Big Star among a small population of private, independent oil companies with the technological capabilities and resources to be a top-tier shale player in the Midland Basin."

    Big Star is currently completing two additional Howard County horizontal wells, one in the Wolfcamp A shale and one in the Lower Spraberry shale.  The company has identified 207 gross development locations within the Wolfcamp A, Wolfcamp B, and Lower Spraberry shale horizons across its approximately 11,000 net acres of Midland Basin leasehold, and is seeking additional horizontal well development opportunities in the Middle Spraberry and Cline formations.
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    Japan skips LNG spot price data due to lack of trades

    Tuesday skipped publishing monthly data on the average spot prices paid by
    buyers in the country for liquefied natural gas (LNG) due to a lack of trades in May, the latest sign of tepid global demand for the fuel.

    The LNG market has been struggling with oversupply as Australian projects ramp up output, ahead of more new developments coming online in the United States over the next year.

    Japan's Ministry of Economy, Trade and Industry (METI) publishes the price average only when there is a total of at least two spot LNG trades from two companies. A ministry official declined to say whether there had been any trades at all in May.

    This marks the first time that no prices have been published since Tokyo started surveying spot LNG prices in March 2014, looking to add transparency to the market amid concerns about rising fuel costs in the wake of the shutdown of nuclear plants after the Fukushima crisis.

    Earlier METI data had shown that spot LNG contracted in April for delivery to Japan averaged $7.60 per million British thermal units (mmBtu), down from $8 the month before, less thanhalf the level a year ago.

    Asian spot liquefied natural gas (LNG) prices for July were broadly stable late last week as lower production from some export plants still left plenty of supply to meet weak global demand.

    The trade ministry survey looks at samples of fixed prices for LNG sold to power companies and utilities among others, and excludes spot deals linked to benchmark prices such as the U.S. natural gas Henry Hub index.

    The following table lists monthly prices for LNG per million British thermal units for spot cargoes contracted during the month and those that arrived during the month.
      Year   Month   Contract price   Arrival price
      2015     May              n/a             n/a
      2015   April            $7.60           $7.90
      2015     Mar            $8.00           $7.60
      2015     Feb            $7.60          $10.70
      2015     Jan           $10.20          $13.90
      2014     Dec           $11.60          $15.10
      2014     Nov           $14.40          $14.30
      2014     Oct           $15.30          $12.40
      2014    Sept           $13.20          $11.30
      2014     Aug           $11.40          $12.50
      2014    July           $11.80          $13.80
      2014    June           $13.80          $15.00
      2014     May           $14.80          $16.30
      2014   April           $16.00          $18.30
      2014   March           $18.30             n/a
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    US distillate cargoes arrive in Mediterranean as spot market soars

    The proportion of distillate cargoes making their way to the Mediterranean from the US has more than doubled this month from the January-May average, according to data on vessels tracked by Platts, drawn by premiums at a 28-week high over Northwest Europe.

    Over the first five months of this year about 25% of USGC-originated cargoes bound for Europe discharged into the Mediterranean. So far this month, 54% have done so.

    Meanwhile, Mediterranean ultra low sulfur diesel cargoes climbed to a $9/mt premium above Northwest European cargoes Friday, the widest spread between the two regions since November 24 on the back of supportive buying interest in the south against an oversupplied cargo market in the north.

    CIF Mediterranean cargoes were assessed at $14.25/mt over front-month low sulfur gasoil futures Friday while CIF NWE cargoes were at a $5.25/mt premium.

    "The Med [diesel] market is balanced and north is oversupplied," a source said Monday.

    In the Mediterranean, demand remained strong in eastern destinations and the buying interest displayed in the Platts MOC failed to attract sellers.

    Refinery turnarounds in Greece and Israel were contributing to tilt the balance to the short side, with firm seasonal demand emphasizing the tightness, notably in Turkey where Tupras was said to have issued a buy tender for 40,000 mt of diesel Friday.

    Gasoil 0.1% demand in the Mediterranean has been a significant contributor to the market strength and the pull for distillate cargoes from the US, sources said.
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    Cyprus gas field to produce 8 bcm a year with pipeline to Egypt

    The Aphrodite natural gas field off Cyprus is commercially viable and plans call for producing 8 billion cubic metres (bcm) a year and construction of a pipeline to Egypt.

    Cyprus, which required an international bailout in 2013, is hoping for an economic turnaround based partly on offshore reserves.

    Texas-based Noble Energy and Israel's Delek Group discovered the deposit, estimated to hold 128 bcm of gas, in Cyprus's offshore Block 12 in 2011. It also contains 9 million barrels of condensate.

    Plans call for a floating production storage and offloading vessel (FPSO) to process 8 bcm of gas a year and the construction of underwater pipelines connecting the well to Cyprus and Egypt, Delek said in a statement.

    The planned Egyptian exports were made possible by a cooperation agreement the countries signed in February, Delek said, adding that the partners would submit their plans to the Cypriot government in the near future.

    Noble is the project operator with a 70 percent stake. Delek, through two subsidiaries, holds the remaining 30 percent, but is in early-stage talks to buy an additional 19.9 percent for about $155 million.

    Cyprus is seeking to develop its energy sector to bolster an economy that relies mostly on tourism, business services and shipping. The island has, for now, shelved plans to create its own liquefied natural gas terminal.
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    Governments under pressure to adjust upstream fiscal terms

    In a new two-part study, Wood Mackenzie explores the implications of the current low oil price for upstream fiscal terms. Governments dependent on oil taxation income are wrestling with lower oil revenues for public spending and pressure from oil and gas companies for more lenient terms.

    Wood Mackenzie's analysis of fiscal changes from 2014 to date concludes that while there has been much talk of fiscal change in response to low oil prices, only a few governments have followed through, most notably the UK, which has made the most extensive changes, encompassing all assets.

    "Governments which are less dependent on oil tax for income can afford to play the long game and will be more likely to reduce tax rates or introduce incentives to try to maintain investment while companies cut back on new projects elsewhere. However, their ability to do this may be restricted by contracts with oil and gas operators, which insist that the fiscal terms remain as they are," Kellas added.

    Regressive fiscal terms—such as royalty, export duty, cost recovery ceilings and indirect taxes—have the most negative impact on future investment decisions. These are the most obvious targets for fiscal changes, especially in systems where the minimum government share of revenue is particularly high. Equally, high marginal tax rates reduce companies' interest in incremental opportunities and may need to be lowered, or other allowances introduced.

    "It's important to note that governments facing declines in oil production would be considering how they can stimulate investment in any circumstances, and depressed oil prices makes this task more difficult and more necessary. Indonesia, in particular, may need to offer more attractive terms to try and stem its expected decline in oil production. Fiscal incentives for new investment—particularly challenging projects such as unconventional resources—are likely to become common," Kellas said.

    In fact as Wood Mackenzie's study shows, several countries were already in the process of reviewing their fiscal terms before the oil price plunge, but this is an added complexity.

    "Governments now launching exploration licensing rounds face stiff competition in what is a buyers' market. The fiscal terms on offer will play a critical role in determining how attractive the opportunities are perceived," Kellas concluded.
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    OPEC faces up to new oil price reality; Badri says era of $100/b is gone

    OPEC must live with the reality of oil prices remaining well below $100/barrel, a level the market no longer recognizes, OPEC secretary general Abdalla el-Badri said as the oil producer group maintained official output at 30 million b/d for the next six months.

    Badri stopped short of saying how this new reality might translate to actual price levels. Brent crude appears to have found a trading range -- for the time being, at least -- of $60-$65/b, although this falls considerably short of the $75-$80 suggestions from ministers polled over the past few days in Vienna.

    Indeed, current Brent prices are closer to the $65/b plus-or-minus $2-$3/b preferred by key consumer India.

    "Now the cycle is down, we have to live with it," Badri told a press conference. "We have to adjust to the new reality. The market does not recognize $100 anymore."

    In a communique, OPEC said the sharp decline in oil prices caused by oversupply and speculation had now abated, with prices moving higher in recent months.

    But it also noted that stock levels "lie well above the five-year average in terms of absolute volumes, indicating that the market is comfortably supplied."

    Member countries, OPEC said, had "confirmed their commitment to a stable and balanced oil market, with prices at levels that are suitable for both producers and consumers," but did not define a suitable price.

    Iranian oil minister Bijan Zanganeh, however, said most members believed that $75/barrel was reasonable.

    But still smoldering away below the surface are the tensions that run along the fault lines of OPEC's geographical and geopolitical map.

    These tensions continue to separate the richer members from those without the financial wherewithal or production capacity to help them ride the tide of what could turn out to be years of below-breakeven prices as world oil markets re-balance alongside changing supply patterns.

    OPEC may be congratulating itself for having, through its November decision not to cut output despite the oil price plunge, dealt a blow to US shale oil production, which is now growing more slowly.

    Over the longer term, though, shale is likely to continue to challenge OPEC, especially if the United States government decides to allow the export of light crude.
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    US jury acquits BP’s executive of lying about Deepwater Horizon oil spill quantity

    The US New Orleans jury has acquitted BP exploration former vice-president David Rainey of lying about the quantity of oil that spilled into the Gulf of Mexico following the explosion of the Deepwater Horizon rig in April 2010.

    The US Government filed the case based on David Rainey's statement given to FBI and US Environmental Protection Agency (EPA).

    Justice Department lawyer Robert Zink told Reuters that the text messages and testimony from witnesses proved that Rainey understated the flow rate intentionally.

    According to Zink, Rainey termed a 5,000-barrel-a-day estimate as BP's 'best scientific guess' at the flow rate and sent it to Congress on 24 May 2010.

    The Department of Justice said that a group of government and independent scientists assessed the situation and concluded that a total of over 60,000 barrels per day of oil leaked.

    Following the rig explosion, BP said that approximately 1,000 barrels of oil per day were flowing into the Gulf of Mexico.

    Rainey's lawyer Reid Weingarten was cited by Reuters as saying that the prosecutors could not prove Rainey will lie to investigators.

    "Under the Clean Water Act, BP is facing up to $13.7bn in penalties."

    In 2012, the company paid a $4bn settlement to the US and has also put aside $43.8bn to pay for the disaster.

    In a regulatory filing in April, BP said it already paid more than $28bn in response, cleanup and compensation. Under the Clean Water Act, BP is facing up to $13.7bn in penalties.
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    Nigeria could boost oil output with changed funding, Seplat says

    Nigeria can boost its oil and gas production by changing the way capital investments are funded in its joint ventures with energy companies, according to Seplat Petroleum Development Co.

    State-owned Nigerian National Petroleum Corp., or NNPC, holds an average 55 percent stake in five joint ventures with Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni

    SpA that pump more than 80 percent of the country’s crude. It pays the same share of capital contributions for the operation of the oil ventures.

    Seplat, a Nigerian producer now running a joint venture with NNPC after buying assets sold by Shell, wants the current funding arrangement in Africa’s biggest oil producer scrapped in favor of a method less dependent on the government.

    The “cash call” requirements are a “constraint” affecting production, Ambroise Orjiako, the company’s chairman, said in a June 5 interview at the World Economic Forum Africa in Cape Town.

    “We need to find a situation where the joint-venture partners sit down and agree on what percentage of production should be dedicated on operation and capital expenditures,” Orjiako said.

    “That way you ensure that growth in the industry is guaranteed, that the production will increase, that the reserves will be increased and that there will be room for exploration activities as well,” he said.

    The Nigerian government struggles to meet its share of funding to the operation of the joint ventures with energy companies, thereby limiting the scope for increasing production. It is currently indebted to companies including Shell, Exxon Mobil, Total and Eni, which had provided loans in the past to fill the funding gap.

    “We would like to see government also thinking about divesting some of its joint-venture assets such that the private sector will drive the industry,” Orjiako said.
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    Aphrodite gas discovery declared commercial

    Cyprus government has welcomed Noble Energy’s declaration of commerciality of the “Aphrodite” natural gas offshore field.

    Noble Energy operates a license for the exploration of hydrocarbons in Block 12 of Cyprus’ Exclusive Economic Zone (EEZ). Other partners are Delek Drilling Limited Partnership and Avner Oil Exploration Limited Partnership.

    The declaration of commerciality confirms the existence of substantial recoverable natural gas reserves in exploration Block 12 of Cyprus’ EEZ.

    According to the government, the declaration constitutes a significant milestone to Cyprus’ transition from the hydrocarbons exploration phase to that of exploitation.

    The submission to the Cypriot Government of a Development and Production Plan for the “Aphrodite” field will follow.

    The Development and Production Plan is expected to include the Licensees’ proposal with regard to the method and the timeline for development and production, as well as the planning for the sales and marketing of the hydrocarbons produced. The Plan is subject to final approval by the Government of Cyprus.

    If and when an agreement is reached and the Plan is approved, the Council of Ministers will be called upon to grant the Licensees the relevant Exploitation License.
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    Thousands fill downtown St. Paul to rally against proposed Sandpiper pipeline

    Thousands of activists filled along the state capitol lawn to rally against pipeline and fossil fuel infrastructure projects that would accelerate development of the tar sands oil fields in Canada.

    Regulators approved a certificate of need Friday for the Sandpiper from North Dakota's Bakken Oil fields to Superior, Wisc.

    The hot topic was what else flows south, in this case, out of North Dakota andCanada.

    Activists came to St. Paul from across the Midwest for one giant mega rally to oppose oil drilling and the tar sand fields of Canada, which they all say are doing a lot of damage.

    Calgary, Alberta-based Enbridge argued that Sandpiper is necessary to move the growing supply of North Dakota crude safely and efficiently market.

    There's so much oil being found to the north, which is going to keep this as a hot topic for a while.

    “Bringing in really toxic oil is a little bit suicidal it's kind of scary.” Susu Jeffrey said.

    The Sandpiper Pipeline being approved was only step one, the commission voted that the 610 mile pipeline is needed and in the public interest, the next step is to figure out where it should run, which could take a while.
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    US rig count continues steady but shrinking decline

    The US drilling rig count dropped 7 units during the week ended June 5 to settle at 868 rigs working, according to data from Baker Hughes Inc.

    For the second straight week, the decline represents the second-smallest of the now 26-week slump, during which time the count has lost 1,052 units. Compared with this week a year ago, the count is down 992 units.

    During the week, oil-directed rigs dropped 4 units to 642, down 967 from a recent peak on Oct. 10, 2014, and 894 year-over-year. Gas-directed rigs dropped 3 units to 57.

    Land rigs declined 7 units to 837, down 960 year-over-year. Representing its smallest decline of the year, rigs engaged inhorizontal drilling edged down a unit to 673, down 699 from a recent peak on Nov. 21, 2014, and 577 year-over-year. Rigs drilling directionally jumped 6 units to 96.

    Offshore rigs dropped 2 units to 27, down by more than half since the beginning of the year and year-over-year. Rigs drilling in inland waters doubled to 4.

    After jumping 26 units last week, Canada’s rig count added 18 more to reach a total of 116, down 98 year-over-year. The rise was again boosted by a 15-unit jump in oil-directed rigs to 59. Gas-directed rigs gained 3 units to 57.

    The average Canadian rig count for May was 80, down 10 from April and 82 from May 2014. All units laid down were on land.

    A 5-unit loss to 364 in Texas represented the largest of the major oil- and gas-producing states. That downward movement was carried by a 7-unit drop in the Eagle Ford to 103. The state is now down 542 units since a recent peak on Nov. 21, 2014 and 532 units year-over-year. The Permian, however, edged up a unit to 233.

    New Mexico and Colorado each lost 2 units to 46 and 39, respectively. North Dakota, Pennsylvania, Ohio, and Arkansas each edged down a unit to respective totals of 76, 46, 22, and 5. Arkansas’ total is its lowest in a decade.

    Unchanged from a week ago were Oklahoma at 106, Wyoming at 22, Alaska at 10, and Utah at 7.
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    Kuwait vows 40% hike in production

    Kuwait wants 40% hike in oil and gas production by 2020

    Kuwait wants 40% hike in oil and gas production by 2020 thumbnail

    Kuwait’s oil minister has confirmed plans to hike hydrocarbon production to 4 million barrels per day, by 2020, almost 40 percent more than the current level. 

    “We have discovered new reserves… that contain both oil and gas. This will support Kuwait’s plans to increase its production levels to a stable level of 4 million barrels per day by 2020,” Oil Minister Ali al-Omair said during an OPEC seminar Thursday.

    Kuwait’s April production was 2.86 million barrels per day, according to the latest OPEC report.
    The minister said it was important to optimize the cooperation with foreign partners, including energy exporters, stressing that the country needs significant investment.

    The Organization of Petroleum Exporting Countries (OPEC) is widely expected to maintain its production target of 30 million barrels a day at its June 5 meeting in Vienna, opting to maintain market share rather than cut production to boost prices.

    Crude oil prices have fallen to about half of their June 2014 peak, when Brent crude was trading at $115 per barrel. OPEC’s decision not to reduce output in November sent prices temporarily below $50 per barrel.

    In Friday morning trading, Brent crude was at $61.65 per barrel and WTI was down at $57.51.

    Attached Files
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    Iran hopes to begin Russia oil-for-goods exports this week

    Russia will begin importing Iranian oil under a long-heralded oil-for-goods barter arrangement in the coming week, Iran's oil minister was quoted as saying, more than a year after negotiations began.

    The Kremlin announced in April it had begun to implement the deal, in which Iran would export up to 500,000 barrels per day (bpd) of crude oil to Russia in exchange for goods of an equivalent value, but traders said they saw no signs of it.

    "We agreed with (Russian Energy Minister) Alexander Novak in Vienna that Russia will buy less than 500,000 bpd from Iran in exchange for cash, and Iran will use this cash to buy Russian goods such as steel, wheat and oil products from Russia."

    Iran's oil exports have fallen by more than half to around 1.1 million bpd since 2012, when Western powers imposed sanctions aimed at curbing the Islamic Republic's disputed nuclear programme.

    Iran and six countries, including Russia, reached an interim agreement in early April and are working towards a final deal by the end of this month that could see sanctions lifted.

    But the two sides still disagree on several issues, and Tehran has been working in parallel to develop what its leaders call a 'resistance economy' that can survive under sanctions.

    Sources told Reuters more than a year ago that Iran was working on the barter deal with Russia, which they said could be worth up to $20 billion.

    Russia also lifted a self-imposed ban on selling the advanced S-300 surface-to-air missile system to Iran shortly after the interim nuclear agreement, a move criticised by Western powers.
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    Conoco stops its shale gas exploration in Poland

    ConocoPhillips, the U.S. energy company, is withdrawing from shale gas exploration in Poland as it has not encountered commercial volumes of the gas, the company said on Friday.

    ConocoPhillips said its subsidiary Lane Energy Poland has invested around $220 million in Poland since 2009. It drilled seven wells over its three Western Baltic concessions.

    "Unfortunately, commercial volumes of natural gas were not encountered," Tim Wallace, ConocoPhillips country manager in Poland, was quoted as saing in a statement.

    ConocoPhillips was the last major oil company looking for shale gas in Poland, after Chevron withdrawal at the start of this year.
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    IEA doubts near-term Africa LNG hopes

    No new LNG projects will come online in Africa before 2020 due to falling commodity prices and competition from Australia and the US, where construction has already begun on facilities that will add significant volumes of gas to the market, according to researchers with the International Energy Agency (IEA).
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    Iraq capable of crude production of at least 6 million b/d by 2020: minister

    Iraq hopes to boost its crude exports to 3.3 million b/d by the end of this year, oil minister Adel Abdul-Mahdi said Friday, though Baghdad has revised down its 2020 crude production target from a previous 9 million b/d to around 6 million b/d.

    Speaking ahead of a meeting of OPEC ministers in Vienna, Abdul-Mahdi also said the Kurdistan region had yet to boost northern exports to the agreed level of 550,000 b/d in 2015.

    Last month, Iraq's crude exports averaged 3.145 million b/d, up 68,000 b/d from April, marking a record high for the second consecutive month.

    "I think we are approaching 3.2 [million b/d] and maybe by the end of the year we will hit 3.3 [million b/d]," Abdul-Mahdi said.

    Current Iraqi production is around 3.6 million b/d, according to the latest Platts' estimates.

    Asked if Iraq was still hoping to boost production to an ambitious 9 million b/d by 2020, Abdul-Mahdi said he thought that target was "exaggerated."

    "I think Iraq is capable of producing at least 6 [million b/d] by 2020. This is our scheduled planned target," he said.

    While the majority of the country's production comes from fields in Basra province in the far south, the largest increase in exports has come from northern Iraq.

    This followed a January budget agreement that brought some of the independent Kurdistan exports under federal control and allowed for export of previously stranded Kirkuk oil to reach Ceyhan as well.

    Under a temporary agreement from December, the KRG is expected to export 250,000 b/d of crude from its own fields in Kurdistan on behalf of Iraq's state-owned SOMO and 300,000 b/d from fields in the Iraq-controlled Kirkuk region via the Turkish port of Ceyhan.

    In return, the agreement confirmed that Baghdad would provide the KRG with 17% of the Iraqi national budget.
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    Gazprom Neft to export 2.7 mln t of oil to Asia in 2015

    Russia's Gazprom Neft, the oil arm of gas producer Gazprom, plans to ship 2.7 million tonnes of oil (54,000 barrels per day) to Asia this year, with around a third to China, company executives said on Friday.

    Anatoly Cherner, deputy chief executive, also said shipments to China would be settled in the yuan currency, a practice that began last year.

    Russian companies and banks, especially those under Western sanctions imposed over Moscow's role in Ukraine such as Gazprom Neft, are trying to limit transactions in U.S. dollars.

    Alexander Dyukov, Gazprom Neft's chief executive officer, said the company used most of its yuan revenue for settlements with Chinese contractors.

    "We are paying in yuan for machinery which we are getting from Chinese equipment producers. There may be some conversion (of yuan to other currencies) but in general yuan is being used to pay our contractors," Dyukov said.

    The company, Russia's fourth biggest oil producer, started to use the yuan as a settlement currency for exports of crude oil and oil products with China last year.

    Gazprom Neft's spokeswoman said pricing was still U.S. dollar-based. Gazprom Neft shipped around 1 million tonnes of oil to Asia last year, including China.
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    OPEC agrees to keep pumping as global oil glut fears persists

    Oil group OPEC agreed to stick by its policy of unconstrained output for another six months on Friday, setting aside warnings of a second lurch lower in prices as some members such as Iran look to ramp up exports.

    Concluding a meeting with no apparent dissent, Saudi Arabian Oil Minister Ali al-Naimi said the Organization of the Petroleum Exporting Countries had rolled over its current output ceiling, renewing support for the shock market treatment it doled out late last year when Saudi Arabia, the world's top supplier, said it would no longer cut output to keep prices high. The group will meet again on Dec. 4, Naimi said.

    With oil prices having rebounded by more than a third after hitting a six-year low of $45 a barrel in January, officials meeting in Vienna saw little reason to tinker with a strategy that seems to have resurrected moribund growth in world oil consumption and put a damper on the U.S. shale boom.

    Naimi, emerging from the talks, said he was happy with the decision. He told reporters ahead of the meeting that he was confident production from marginal fields would fall even at current prices.

    "The decision taken in November was the right one," United Arab Emirates energy minister Suhail bin Mohammed al-Mazroui said earlier, referring to OPEC's previous meeting. "It will take time for the markets to rebalance."

    Friday's decision defers discussion of several tricky questions set to arise in the coming months as members such as Iran and Libya prepare to reopen the taps after years of diminished production.

    Iranian oil minister Bijan Zanganeh had promised to press the group for assurances that other members will give Tehran room to add as much as 1 million barrels per day (bpd) of supply once Western sanctions are eased. But most delegates had seen little reason for Tehran to pick a fight now.

    "When the production comes, this matter will settle itself," one OPEC delegate told Reuters. That may not occur until 2016, according to many analysts who question how quickly Tehran will win relief from sanctions and be allowed to sell more crude.

    Libya, still afflicted by a crippling civil war, hopes to double production to some 1 million bpd by September if key ports resume working, but past efforts have failed to deliver a sustained recovery in shipments.

    "The markets are moving in OPEC's favour," said Dr. Gary Ross, executive chairman of PIRA Energy Group. "Prices are stimulating robust demand growth and slowing capex. This was the objective of the Saudi strategy and it's working."

    The U.S. tight oil industry has been more resilient than many had expected, with falling costs helping sustain the revolution and possibly setting up another downward spiral.
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    Alternative Energy

    L.A. won't buy power from Mojave Desert solar plant, after all

    The city of Los Angeles has dropped plans to buy electricity from a controversial solar plant proposed for the Mojave Desert, delivering a serious blow to the most environmentally sensitive renewable energy project in the state.

    City officials said Thursday that the Soda Mountain Solar Project would be too damaging to bighorn sheep, desert tortoises and other wildlife near the site along Interstate 15, just south of Baker and less than a mile from the Mojave National Preserve.

    The decision was made after a Department of Water and Power review found that other proposed renewable energy projects would charge the city less for electricity and would have fewer challenges in delivering the power to Los Angeles.

    Bechtel Corp., developer of the plant, had hoped that Los Angeles would buy most of the power. Ron Tobler, project development manager for Bechtel, said the company is negotiating with other prospective customers for the electricity.

    If the project does not get a power purchase agreement signed soon, "it will be extremely difficult for it to proceed with development," said Cory Honeyman, a senior solar analyst at the consulting firm GTM Research. That's largely because the window is closing on eligibility for a 30% federal tax credit for the project.

    "The Sierra Club is delighted to see the city do the right thing and choose not to sign a power purchase agreement with this harmful project," said Sarah Friedman, a senior campaign representative with the organization. "We support clean energy, but this is the wrong place to do it."
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    Amazon backs USD 150 million solar power project in Virginia

    Amazon Web Services, the e-commerce giant's cloud-computing business, will support the building and operation of a roughly USD 150 million solar farm planned in Virginia, with the project being named Amazon Solar Farm US East.

    An Amazon representative declined to specify Amazon's financial commitment to the project, saying the company wouldn't comment beyond a press release sent out Wednesday.

    Amazon's announcement comes a week after Greenpeace disclosed a letter from 19 AWS customers, including the Huffington Post, Upworthy and Tumblr, calling on the business to publicize more information on what kind of energy sources are powering its cloud-computing data centers. Greenpeace, an environmental advocacy group, has previously gone after Amazon for its alleged lack of transparency in this area, claiming other cloud-infrastructure firms, such as Apple and IBM, have provided far more information on their energy use and goals.

    Amazon responded to Greenpeace's claims a few days later in a blog post, saying its cloud-computing customers use fewer servers and less energy than when businesses run their own data centers. It also repeated AWS's goal of having 40% of its infrastructure powered by renewable energy sources by the end of 2016. As of April, the company said that it had about 25% coming from renewable sources.
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    Southern Power Distribution Company calls for bids for solar power

    Times of India reported that the Southern Power Distribution Company of Telangana Limited has called for Request for Selection (RFS) for procuring 2,000 MW of solar power on long-term basis through reverse tariff-based competitive bidding. The last date for the bids is June 30th.

    According to a press release by Mr G Raghuma Reddy, CMD of TSPDCL, the bids were divided into group-I and group-II based on the injection voltage levels.

    The CMD said that the capacity under group-I bids is 500 MW and group-II bids will be 1,500 MW. While the tariff ceiling for group-I bids is INR 6.450 per KWh and group-II bids is 6.320 per KWh.
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    Hybrid device combines solar and wind energy

    Production facility in Maheshwaram to roll out the products in large numbers soon. The devices are designed to work in both on-grid and off-grid environments.

    In an enterprise which could bring hybrid renewable energy to Indian rooftops, WindStream Technologies, a U.S.-based renewable energy technologies manufacturer, has launched its trademark product – SolarMill, at its newly inaugurated facility in Maheshwaram mandal of Ranga Reddy district on Wednesday.

    The prototype of the portable device consists of three vertical axis wind turbines fixed beneath one or more photovoltaic panels, to produce 2.5KW of renewable energy. The turbines need a minimum wind speed of two metres per second for generation.

    Based on the climatic conditions, wind speeds and local needs, the devices may be integrated seamlessly, representatives of the company said. A solar and wind analysis will be done before arriving at the combination of solar and wind components.

    The devices are designed to work in both on-grid and off-grid environments, hence, are suitable for mini or micro grids in remote locations, Venkat Kumar Tangirala, president of WindStream Technologies India & South Asia said.

    A 50,000-sq ft production facility in Maheshwaram will soon begin to roll out the products in large numbers. Thousand units are likely to come out next week, Dan Bates, president and CEO of the company, informed.

    Besides claiming that this is the first fully integrated hybrid renewable energy device, the company also cites lowest cost per installed watt (35 sq ft for one kilowatt), flexibility between battery and inverter, and easy plug-in facility to attach two devices as its USPs.
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    First Solar, SunPower: 8point3 Energy Partners IPO Expected to Price at $19-$21/Share

    First Solar gained after announcing its 8point3 Energy Partners LP IPO is expected to price at $19-$21 per share. SunPower shares also advanced. A related press release is below.

    8point3 Energy Partners LP, a limited partnership formed by First Solar, Inc and SunPower Corporatio to own and operate a portfolio of selected solar energy generation assets, announced today that it has commenced an initial public offering of Class A shares representing limited partner interests in 8point3 Energy Partners. 8point3 Energy Partners is offering 20,000,000 shares to the public. In addition, the underwriters have a 30-day option to purchase up to an additional 3,000,000 shares from 8point3 Energy Partners at the IPO price, less the underwriting discount. The IPO price is currently expected to be between $19.00 and $21.00 per share. The shares are expected to be listed on the NASDAQ Global Market under the symbol "CAFD."

    8point3 Energy Partners intends to use all of the net proceeds of the IPO to purchase the common units of 8point3 Operating Company, LLC ("8point3 Operating Company"), the entity that holds 8point3 Energy Partners' project assets. 8point3 Operating Company intends to use the proceeds from the sale of its common units (i) to make a cash distribution to each of First Solar and SunPower and (ii) for general corporate purposes, including to fund future acquisition opportunities.
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    Swansea Bay tidal energy scheme wins planning permission

    The energy and climate change secretary has given planning permission to one of the most ambitious and potentially expensive “green” energy schemes ever seen in Britain.

    Amber Rudd agreed the £1bn project to provide power for 150,000 homes from a tidal lagoon at Swansea Bay, although she has become embroiled in a separate but connected row over a super-quarry to provide stone for the Welsh project.

    Mark Shorrock, chief executive of Tidal Lagoon Swansea Bay, said his marine power project was a “game-changer” that should trigger a much wider industry in tidal energy around the UK.

    “The tidal lagoons that follow – at Cardiff, at Newport, elsewhere in the UK and overseas – must each make their own compelling social, environmental and economic case to proceed. But they have a pilot project to guide them and a blossoming technical and industrial network to support them.”

    Planning permission is essential to the Swansea Bay tidal lagoon scheme but its future ultimately depends on a separate decision by the department on subsidies.

    The Conservative party has made clear that it wants to end subsidies for onshore wind schemes but is understood to see opportunities for jobs and exports from the potentially more costly Swansea Bay scheme.

    But energy and climate change and Wales office minister Lord Bourne, who announced the green light for the scheme, said: “We need more clean and home-grown sources of energy, which will help to reduce our reliance on foreign fossil fuels. Low-carbon energy projects like the tidal lagoon in Swansea Bay could bring investment, support local jobs and help contribute to the Welsh economy and Swansea area.”
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    Prison labour helps U.S. solar company manufacture at home

    One of the largest companies to manufacture solar panels in the United States uses a surprising resource to keep costs low and compete against producers from China: prison labour.

    Suniva Inc, a Georgia-based solar cell and panel maker that is backed by Goldman Sachs Group Inc, farms out a small portion of its manufacturing to federal inmates as part of a longstanding government program intended to prepare them for life after prison.

    Suniva does not actively publicize its work with the prisons, saying it prefers to talk about its in-house factories in Georgia and Michigan, which handle most of its production and employ more than 350 people.

    But the company's arrangement with Federal Prison Industries, known as Unicor, has helped Suniva move all of its solar panel assembly to the United States from Asia over the last 18 months, said Matt Card, vice president of global sales and manufacturing. The company says prison labor accounts for less than 10 percent of its panel manufacturing.

    By making panels in the United States, Suniva has been able to capture lucrative federal contracts, avoid U.S. government tariffs on Chinese-made panels, and appeal to private sector customers who want American-made products. The company is the third-biggest producer of solar modules that are made in the United States, according to GTM Research.

    "As a U.S. company you have to be very, very smart about where you manufacture," Card said.

    Inmates working for Unicor, which has existed since the 1930s, have long made things like license plates and goods for the military. Solar panels were added to its list of products so that inmates could acquire skills in a new and growing industry and help government efforts to use more renewable energy.
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    New Report Shows Explosive Growth in Residential Solar Installations

    With a majority of Americans considering solar power to be theirNo. 1 energy choice, it’s no wonder more households than ever before are going solar.

    Today, GTM Research and the Solar Energy Industries Association (SEIA) released the latest edition of the U.S. Solar Market Insight Report, which revealed the first three months of 2015 as the best quarter for residential solar system installations — ever.

    In fact, solar represented a whopping 51 percent of all new electric generating capacity brought on-line in the first quarter of 2015, outpacing even natural gas.

    The U.S. installed 1,306 megawatts (MW) of solar photovoltaics (PV) in Q1 2015, marking the sixth consecutive quarter in which the U.S. added more than 1 gigawatt (GW) of PV installations.

    Residential solar led the way, growing by 76 percent over the first quarter of 2014, with 437 megawatts (MW) of residential PV installations. That’s an 11 percent jump over last quarter, the market segment’s previous high-water mark.

    But the other solar market segments showed strength, too. In fact, the industry as a whole is on track for another record year in 2015, with 66,440 total individual solar systems coming on-line this quarter. That means nearly 700,000 systems are now generating solar power in the U.S.

    The non-residential segment installed 225 MW in the first quarter of the year, with five of the six largest non-residential state markets growing over Q1 2014.

    Continuing to carry the largest share of the market, the utility segment installed 644 MW which represents 49 percent of new PV capacity brought on-line in Q1 2015. Despite this being the smallest quarter for the segment since 2013, utility PV installations have now surpassed 500 MW for eight consecutive quarters. What’s more, the report notes that there are now 25 project developers with projects in development of 100 MW or more.

    Attached Files
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    Egypt's Renewable Energy Drive Gains Steam

    There's a lot of action in Egypt's rapidly developing solar and renewable energy market space. Nearly 5 GW worth of solar power development agreements have been signed so far this year, while Egypt 's New and Renewable Energy Authority (NREA) announced it would partner with 67 companies to see these agreements through to fruition.

    With a young, fast-growing population of some 90 million, Egypt remains one of Africa's largest economies despite recent social and political turmoil. “With social structures now returning to stability...securing an adequate power supply is a top priority as frequent blackouts impede industrial development and stir discontent. Solar and wind power are expected to play a key role in this process,” according to Berlin-based Apricum’s March 2015 Egypt country profile.

    Having launched a renewable energy feed-in tariff (FIT) program and other keystone elements of a strategic plan to develop what's considered a very rich base of renewable energy resources, Egypt's government “is sending a message that Egypt is a stable country for investment,” said Dr. Moritz Borgmann, an Apricum partner.

    The Egyptian government has set the ambitious goal of renewable energy supplying 20 percent of national electricity by 2022 — double the current share. Renewable energy deployment is viewed by the Egyptian government as an equitable and cost-effective means of addressing a range of critical social and ecological issues while at the same time boosting job creation and the national economy.  “That's why [renewable energy] is so high on the government's agenda,” Dr. Borgmann pointed out.

    Attached Files
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    2014: Record growth for solar sector

    Last year 40GW was connected worldwide, beating the previous year’s record of 38.4GW, according to SolarPower Europe’s new report.

    China, Japan and the US led the world’s solar market in 2014, while Europe installed 7GW, with the UK leading the way – contributing 2.4GW.

    James Watson, CEO of SolarPower Europe said: “The success of the UK, set to be the largest European market again in 2015, reinforces the evidence solar power is a versatile and cost-efficient energy source in any climate.

    “Solar power could grow by 80% in Europe by 2020.”

    Michael Schmela, SolarPower Europe’s Executive Advisor said: “If today’s global solar momentum continues and being supported by the right frameworks, we could see over half a Terrawatt (TW) of solar power capacity installed by 2020.”

    Solar covers more than 7% of the electricity demand in Germany, Italy and Greece, SolarPower claims.
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    First US Offshore Wind Farm Reaches FID.

    What is likely to become the nation's first offshore wind farm has closed on more than $290 million in financing, which will allow a five-turbine demo of the renewable energy system to be completed.

    The Block Island Wind Farm is a 30-megawatt offshore wind farm that will be located about three miles southeast of Block Island. Being developed by Deepwater Wind, the renewable energy system will initially consist of 5 turbines capable of producing 30 megawatts (MW) of power.

    "We're ecstatic to reach financial close," Deepwater Wind CEO Jeffrey Grybowski said in a statement. "We're full speed ahead and moving ever closer to 'steel in the water.'"

    If all goes well, Deepwater Wind plans to follow the Block Island Wind Farm with the Deepwater ONE project, a 150-200 turbine project also in Rhode Island Sound that will be capable of generating from 900MW to 1,200MW. Deepwater ONE will produce enough electricity to power about 350,000 homes and eliminate more than 1.7 million tons of carbon dioxide emissions annually. That's the equivalent of taking 4 million cars off of the road or 40 million barrels of foreign oil imports.

    Construction of the Block Island Wind Farm has already begun. Alstom, a turbine maker based in France, has already completed fabrication of five 6MW offshore wind turbines for the project, along with 15 windmill blades.

    Deepwater Wind plans to begin offshore installation of the Block Island project this summer. The wind farm is expected to online by the end of 2016.

    Electricity from the wind farm will be transferred to the mainland electric grid via the 21-mile, bi-directional Block Island Transmission System, a submarine cable proposed to make landfall in Narragansett, R.I.

    Deepwater Wind Block Island has received the financing from Mandated Lead Arrangers Societe Generale of Paris, France, and KeyBank National Association of Cleveland, Ohio.

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    India's solar power at 4,000 MW and Rajasthan in the lead

    Business Standard reported that India’s solar installed capacity has crossed the 4,000 MW mark. With close to 1.128 MW of projects, Rajasthan has taken the lead ahead of all other states. It has elbowed out Gujarat, which has 957 MW of solar power projects, from the top-slot for the first time. Following closely behind are Madhya Pradesh, Maharashtra and Tamil Nadu.

    Apart from the regular solar power-rich states, Uttar Pradesh, Punjab and newly formed Telangana have now joined the solar bandwagon.

    By December, an additional 1.7 GW is likely to be added, said a study by Bridge to India, a leading consultancy firm monitoring foreign investment in Indian renewable energy space. The report said, with 2.7 GW of expected capacity addition in 2015, India might surpass Germany and secure a position in the global top 5, for new-yearly capacity addition.
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    Thai Superblock to invest $884 mln in 2015 on expanding solar farm business

    Thai Superblock to invest $884 mln in 2015 on expanding solar farm business

    Thailand's electricity distributor Superblock PCL said on Monday it planned to invest 30 billion baht ($884.43 million) in 2015 on expanding solar farm business both at home and overseas.

    The company is in talks with a potential partner in Japan to invest in a 300-megawatt solar power project and is seeking approval for the project, it said in a statement.
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    JA Solar CEO offers to take company private

    Chinese solar panel maker JA Solar Holdings Co Ltd has received a takeover offer from Chief Executive Baofang Jin that values that company at about $489 million.

    The cash offer of $9.69 per American depositary share represents a 20 percent premium to the JA Solar's Thursday closing.

    The stock was trading at $9.27 before the bell on Friday.

    The deal value is based on the number of JA Solar's outstanding ADRs as of March 30.

    Jin, who currently owns about 15.6 percent of the company's shares, said he intends to finance the acquisition with a combination of debt and equity capital.

    Jin's offer comes after Yingli Green Energy warned of potential solvency issues last month and later reassured the market on its debt repayment plans.

    Chinese solar companies have been hurt due to anti-dumping import duties imposed by the United States and Europe on solar panels.

    JA Solar said it intends to form a special committee of independent directors to consider the proposal.

    JA Solar's profit more than halved in the first quarter, and the company forecast second-quarter cell and panel shipments of 680-720 MW, below the 681.5 MW shipped in the first quarter.

    Skadden, Arps, Slate, Meagher & Flom LLP is the U.S. legal counsel for Jin.
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    Yingli Green revenue rises on strong solar module demand

    Yingli Green Energy Holding Co Ltd reported an 8.5 percent rise in first-quarter revenue, helped by strong demand for its solar panels.

    The company, which last month raised "substantial doubt" about its ability to continue as a "going concern" due to indebtedness, said total revenue rose to $468.7 million in the quarter from $432.2 million a year earlier.

    The company, which has not reported a profit in the last 14 quarters, said total module shipments rose to 754.2 megawatts (MW) from 630.8 MW.

    Net loss attributable to Yingli widened to $58.6 million in the first quarter ended March 31, from $55 million a year earlier as cost of revenue rose more than 10 percent.
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    Rio Tinto mulling impairment charge of $300 mln

    Rio Tinto Ltd said it was assessing an about $300 million non-cash impairment charge related to its shareholding in Energy Resources of Australia Ltd .

    ERA, in which Rio Tinto has a 68.4 percent stake, said earlier on Thursday that it would not proceed with the final feasibility study of its Ranger 3 Deeps uranium project in Australia, citing weak market conditions.

    Rio Tinto said it agreed with ERA's decision not to progress with the study "due to the project's economic challenges." (

    Uranium prices plunged after the March 2011 meltdown at Japan's Fukushima nuclear plant. Japan idled its entire industry in response, exacerbating a worldwide supply glut.

    Rio Tinto also said it would assist ERA in funding the rehabilitation program at the Ranger mine near Kakadu National Park, following a toxic spill in December 2013.
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    Areva's chairman says EDF must make better offer for nuclear reactor unit

    Utility Electricite de France must improve its offer for nuclear engineering group Areva's reactor unit and relations between the two firms need to improve in order to reach a swift agreement, Areva's chairman said on Wednesday.

    Last week, the French government approved EDF's plan to take a majority stake in Areva's nuclear reactor business and gave the two state-owned firms a month to do a deal.

    Relations between the two state-owned firms have been strained for years over EDF's desire to take control of Areva's reactor design and lead France's nuclear export drive, and the state put new management in place at both firms to end the strife.

    Varin was appointed as Areva's new chairman in January and was also made a board member of EDF to smooth relations with EDF's new chief executive, Jean-Bernard Levy.

    But in unusually blunt comments on Wednesday Varin said relations between the two firms would have to improve "radically" for them to reach a deal within a month as the government wants.

    Varin did not say how much EDF had offered for the reactor unit and did not confirm media reports of a 2 billion-euro ($2.3 billion) bid, well below the 2.7 billion euros which the unit is valued at in Areva's accounts.

    He did say, however, that EDF would have to agree to share responsibility for the long-troubled Olkiluoto 3 EPR reactor project in Finland. Main contractor Areva and its Finnish customer Teollisuuden Voima (TVO) are suing one another for billions of euros in damages over construction problems and soaring costs.

    "We need to find an equitable sharing of the risk of the Finland project, which is a sword of Damocles that has weighed on the group for a long time and which can compromise any future scenario," Varin said.

    Varin added that current discussions with China were mostly technical - about two EPR reactors being built in Taishan and a project to build two EPR reactors in Hinkley Point, Britain - but the possibility of Chinese investment in Areva could not be ruled out.

    "We cannot exclude that the Chinese option is one of the options for the recapitalisation either for (reactor unit) Areva NP or the group," Varin said.

    He declined to comment on how much new capital Areva needs to rebuild its balance sheet after four years of losses. Analysts and industry sources have estimated the requirement to be 5 to 7 billion euros between now and the end of 2017.

    Meanwhile the planned takeover of Areva's reactor arm would not be finalised before the second half of 2016, Varin said, because the European Union will have to give anti-trust clearance.
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    U.S. weather forecaster sees El Nino likely to last into 2016

    A U.S. weather forecaster warned on Thursday the El Nino weather pattern that can cause droughts in Asia and heavy rain in the Americas will likely last into next year, longer than previously expected and potentially roiling crops and commodity prices.

    The Climate Prediction Center (CPC), an agency of the National Weather Service, pegged the chances of El Nino weather conditions continuing into the Northern Hemisphere's 2015-16 winter at 85 percent, becoming the first major forecaster to say the event is highly likely to last into next year.

    CPC previously saw a more than 80 percent chance El Nino would last through 2015.

    Government forecasters have been heightening their warning calls for a stronger and longer El Nino. Japan's weather bureau on Wednesday also said it sees the possibility of El Nino lasting into the winter.

    The event, the warming of Pacific sea-surface temperatures, can have devastating consequences for global agriculture, triggering heavy rains and floods in South America and scorching weather in Asia and as far away as east Africa.

    In the United States, El Nino increases precipitation in key agricultural regions and reduces the likelihood of a busy hurricane season from June to November that can disrupt energy operations in the Gulf of Mexico.
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    Precious Metals

    Chai Tai Fook Misses, cuts diamond prices.

    how Tai Fook Jewellery Group Ltd. dropped the most in five months after the world’s largest listed jewelry chain reported earnings that missed analyst estimates.

    The stock fell 6.5 percent to HK$8.58 at the close of trading in Hong Kong, the biggest decline since Jan. 9. The benchmark Hang Seng Index rose 0.2 percent.

    Net income at the Hong Kong-based jeweler fell 25 percent to HK$5.46 billion ($704 million) for the year ended March, as sales weakened in China and major markets such as Hong Kong and Macau, it said Friday. That missed the HK$5.9 billion average of 23 analyst estimates compiled by Bloomberg.

    “We are turning more concerned on the company’s outlook,” UBS Group AG analysts led by Spencer Leung wrote in a note on Friday. Hong Kong, which contributed 45 percent of the company’s total, “might have entered a new era as tourism peaked out,” they wrote.

    Chow Tai Fook is cutting prices for some diamond jewelry in Hong Kong as it looks to reduce its gem-set jewelry inventories bloated by the weaker-than-expected sales, according to Catherine Lim, an analyst at Bloomberg Intelligence.

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    Newmont to buy Colorado mine from AngloGold

    Newmont Mining Corp has agreed to buy the Cripple Creek & Victor gold mine in Colorado from AngloGold Ashanti Ltd for $820 million, giving the world's No. 2 gold producer an expanding asset in a mining-friendly jurisdiction.

    The acquisition is an opportunity for Colorado-based Newmont to improve its mine life and costs at a time when the mining industry has been in a slump for nearly four years.

    For South African-based AngloGold, the world's third-biggest gold producer, the cash from the sale will help reduce its $3.1 billion debt pile and lower financing costs.

    "This deal significantly de-risks the balance sheet without diluting our shareholders, and places us in a much stronger position," Srinivasan Venkatakrishnan, AngloGold's Chief Executive said in a statement.

    In addition to the cash payment, AngloGold will also receive a net smelter royalty on future underground production at the mine.

    Newmont will issue 29 million shares in a public offering to help fund the purchase.

    Reuters reported last week that Newmont was in exclusive talks with AngloGold on the acquisition, citing two sources familiar with the matter.

    "Consistent with what we've achieved elsewhere, we believe we can lower direct mining costs by up to 10 percent through improved productivity and optimization," Gary Goldberg, Newmont's CEO said in a statement.

    An expansion of Cripple Creek is around two-thirds complete with the mine expected to produce between 350,000 and 400,000 ounces of gold a year in 2016 and 2017 at all-in sustaining costs of between $825 and $875 an ounce, Newmont said.

    The sale means AngloGold will no longer have to fund the remaining capital of about $200 million required to finish Cripple Creek's expansion.

    Large gold producers globally, including world No. 1 Barrick Gold Corp, are selling non-core assets as they try to reduce debt and slim down operations amid weaker gold prices.

    Other players that had been vying for the Cripple Creek asset were Canadian gold miners IAMGOLD Corp, Kinross Gold Corp, Goldcorp Inc and Yamana Gold Inc .
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    The CME Intersected 130.2 m at 2.08 g/t Au

    La Compagnie Miniere Esperance ("CME") is pleased to announce positive results from its first diamond drilling program of 2015 on its mining concession Esperance in French Guyana. It is also pleased to announce the undertaking of additional drilling program of 2000m to start in June.

    HIGHLIGHTS first drilling campaign of 2015

    S016 intersect 130.2m at 2.08 g/t Au from 86.60 to 216.80 meter

    S012 intersect 212.6m at 1.44 g/t Au from 73.0 to 285.60 meter
    Including 17.05 meters at 8.89 g/t

    S014 intersect 65.2m at 2.51 g/t Au from 85.55 to 150.75 meter

    S020 intersect 207.3m at 1.42 g/t Au from 12 to 219.3 meter

    S013 intersect 150 m at 1.92 g/t Au from 32 to 182 meter

    14 diamond drill holes (HQ in Saprolite & NQ in fresh rock)

    2935 meters of diamond drilling

    14 intersected significant gold mineralization on 14 holes

    Mineralization confirmed over 1 Km strike length

    Mineralization confirmed from surface down to a vertical depth of 220 meters

    Mineralization confirmed over an horizontal width of 140 m

    Deposit open along strike and at depth
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    Trouble brewing in South Africa’s gold mining sector

    South Africa's radical Association of Mineworkers and Construction Union (Amcu) is planning to start wildcat strike in the gold sector if its rival union and mining companies extend wage deal to its members.

    "If NUM (National Union of Mineworkers) and Chamber of Mines want extend their deal to us, we will sit down whether it's legal or not. We will strike," Amcu’s President, Joseph Mathunjwa, said Sunday, Reuters reports.

    The Amcu is the same union that last year led a five-month strike that crippled the country’s platinum industry.

    Its members are demanding to be paid more than double at gold mining firms including AngloGold Ashanti and Harmony Gold .

    According to the country’s labour law, deals between the majority union and employers can be extended to smaller unions.

    South Africa's annual season of labour strikes often turns violent, but a recent wave of deadly xenophobic attacks has heightened fears that this year's protests could fuel further aggression towards migrant workers.
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    OceanaGold gains fourth NZ mine as Newmont formalises pact to sell

    US gold producer Newmont Mining has formalised a $106-million deal that has increased Australasia-focused OceanaGold's operating mines in New Zealand to four. 

    The Waihi gold mine is about 150 km south-east of Auckland on the Oceania-nation’s North Island and will expand OceanaGold's output by about 100 000 oz/y.

    “The sale of Waihi further strengthens Newmont’s balance sheet and improves our financial flexibility as we continue to sell select assets for cash at fair value,” Newmont executive VP for strategic development Randy Engel noted in a statement on Friday. 

    Both companies’ boards had accepted the deal, which, subject to satisfying conditions precedent and regulatory approval, was expected to close in the third quarter. OceanaGold was paying for the transaction with about $60-million cash on hand, as at the end of the third quarter, and had drawn about $77.8-million from its recently increased $225-million revolving credit facility. 

    Triple-listed OceanaGold had for decades owned and operated New Zealand's largest gold mine, the Macraes openpit, as well as the Frasers underground and the Reefton openpit mines, located on the pristine South Island of the country.

    Under the terms of the deal, the price would include a $5-million contingency payment and a 1% net smelter royalty on a recent discovery north of Waihi’s current operations. OceanaGold acquired the entire mine's openpit and underground mining assets and liabilities, including all social, environmental and employee obligations. 

    Having been mined from 1988 and adding underground operations since 2005, the Waihi gold mine had ore reserves of about two-million tonnes, grading 5.25 g/t for about 360 000 oz of gold. The mine produced 132 000 oz of gold last year at all-in-sustaining costs of between $760/oz and $820/oz.
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    Base Metals

    First Quantum mulls $1.5bn power plant to power Zambian mine

    First Quantum Minerals will consider investing as much as $1.5 billion to build a power plant in Botswana that will supply its mine in neighboring Zambia, a venture partner of the copper producer said.

    Current plans for a 300 megawatt coal-fired plant with an estimated cost of $750 million at the Sese power project in Botswana could be doubled, Frazer Tabeart, chief executive officer of African Energy Resources Ltd., said Wednesday in an interview in the capital, Gaborone. First Quantum is increasing its stake in the Sese project to 75 percent for A$12 million ($9.3 million), he said.

    First Quantum needs power for its 80 percent-owned Kansanshi mine in Zambia, the largest copper mine in Africa, which is expected to produce about 350,000 metric tons of the metal a year. The Vancouver-based company’s additional investment with African Energy will fund a study to determine whether to build the larger plant, Tabeart said.

    “They will decide on whether they are going ahead with a 300 megawatt or 600 megawatt project early next year,” Tabeart said at a resources conference. Perth-based African Energy has the right to export any power from the plant that First Quantum doesn’t take up, he said.

    John Gladston, a spokesman for First Quantum in Zambia, said he couldn’t make any immediate comment and requested that questions be e-mailed to him.
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    China alumina prices drop on growing supply as production costs fall

    Prices of alumina in China have fallen more than 10 percent since January and are unlikely to recover this year as lower production costs encourage refineries to boost output, industry sources in the country said.

    Refiners usually sell alumina to aluminium smelters as it is the key ingredient in the production of that metal, which is used in everything from cars to cooking utensils.

    Weaker prices for the raw material could boost aluminium output in the world's top consumer and producer of the metal, curbing demand for imports. Alumina typically accounts for around 40 percent of costs in primary aluminium production.

    Spot alumina traded at about 2,350 yuan to 2,550 yuan ($379 to $411) a tonne in China this week, compared to around 2,800 yuan in January, smelter sources said. The prices were lower than about 2,550-2,650 yuan for duty-paid imports, traders said.

    A spot alumina shipment was sold to China at $347 a tonne this month, compared to over $350 in April.

    In contrast, the price of primary aluminium in China had risen more than 1 percent from this year's low in January to 12,785 yuan on Thursday, supported as large smelters limited spot sales.

    "The cost of imports has been higher than local alumina prices this year and most of the inflows were term shipments," said a trading manager at a state-owned aluminium smelter. He declined to be identified as he was not authorised to speak with media.

    China's alumina imports dived 40 percent from a year ago in the first four months of 2015.

    The trading manager said production costs at many alumina refineries in China had dropped due to lower prices for coal and power. He estimated current production at around 1,600 yuan to 2,300 yuan a tonne.

    That is down by about 200 yuan from the final quarter of 2014, with higher profits prompting refineries to produce more alumina, said Xu Hongping, analyst at China Merchants Futures.

    China's alumina production stood around a record 4.8 million tonnes in March and April. If that level of output was annualised it would equate to around 57.6 million tonnes of the country's annual production capacity of more than 60 million tonnes.

    Xu estimated at least 2 million tonnes of new capacity started production in May and June. But she said most of that was owned by aluminium smelters, cutting their alumina purchases.

    Increased output would weigh on domestic alumina prices in the second half, even though some 2 million tonnes of new aluminium capacity may begin production, she said.

    Two tonnes of alumina are typically used for one tonne of aluminium.

    But declining alumina prices could be a sign of slowing aluminium production growth in China, said Nic Brown, commodity research head at Natixis.

    Attached Files
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    Tiger mulls Kipoi debottlenecking after hitting output high

    Copper miner Tiger Resources has reported record production during May, some 12 months after the Stage 2 solvent-extraction and electro-winning (SXEW) plant was introduced at its Kipoi project, in the Democratic Republic of Congo. 

    The plant was commissioned in May 2014 and reached its nameplate capacity of 25 000 t/y of copper cathode in August of the same year. During May this year, the plant returned a record output of 2 306 t of copper cathode. 

    Tiger told shareholders on Thursday that with a full year of operations under its belt at the SXEW plant, the company has identified areas where the plant could be debottlenecked to increase production and reduce operating costs. 

    The initiatives, which include minimising material rehandling by using an overland conveyor, the addition of extra electro-winning cells, and bringing forward the heavy mineral sands fines delivery through the addition of a small modular tank leach, would be assessed with a view of being rolled out over the next 12 months.
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    Gigantic copper mine reaches milestone

    Gigantic copper mine reaches milestone

    The giant Las Bambas project high in the Peruvian Andes took another step closer to completion on Wednesday with the signing of a $490 million transportation deal.

    The contract between operators MMG and Perurail is expected to commence on January 1 2016 for an initial period of 15 years to carry concentrate to the port of Matarani 295km away.

    Las Bambas is set to deliver 400,000 tonnes of copper per year during the first five years of production placing it within the top three copper mines globally.

    The mine located at 4,000 metres in the south of the South American country will also produce significant amounts of silver, gold and molybdenum over its 20-year mine life. Las Bambas boasts 6.9 million tonnes of copper reserves and a 10.5 million tonne resource.

    Melbourne-based and Hong Kong-listed MMG says the project was 90% complete at the end of March and pre-stripping commenced at Fuerobamba, one of the four deposits that make up the complex, already in January.

    Las Bambas is majority owned by China's Minmetals with two other Chinese concerns holding the remaining 37% in the venture.

    Minmetals acquired Las Bambas from Glencore in April last year in a controversial $6 billion deal tied to the Swiss giant's merger with Xstrata.
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    Ivanhoe Mines update on Kamoa Copper Project in DRC

    Image Source: Ivanhoe MinesMr Robert Friedland, Executive Chairman of Ivanhoe Mines and Mr Lars-Eric Johansson, Chief Executive Officer, said that positive discussions are continuing with the government of the Democratic Republic of Congo about Ivanhoe's recent announcement of an agreement with China-based Zijin Mining Group to strategically co-develop Ivanhoe's Kamoa copper discovery in the DRC's southern province of Katanga.
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    Low metals prices force Canadian First Nickel to idle Ontario mine

    Canadian miner First Nickel announced Monday it is idling its Lockerby nickel and copper mine near Sudbury, Ont., after current supplies of ore are used up, which it is expected to happen in the fall this year.

    The Toronto-based company said that while it was planning further development at the mine weak nickel prices and low production levels at Lockerby made them re-think the decision.

    The Lockerby mine will either be put on "care and maintenance" for a possible restart or closed.

    First Nickel says the Lockerby mine will either be put on "care and maintenance" for a possible restart or closed.

    The miner, which acquired Lockerby in 2005, had halted operations in 2008 also due low commodity prices, but it restarted it in September 2011.

    The announcement didn't say what impact its decision will have on its workforce. According to regulatory documents, the firm had 165 employees plus contractors at the end of last year and reduced that by 30% in January.

    The Lockerby property formerly belonged to Falconbridge, a Canadian mining giant that is now part of commodities traders and mining giant Glencore.
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    Asian aluminium premiums remain in downward slide

    Image Source: Hindu reported that Asian aluminium premiums extended their downward slide in May as swelling China exports piled more pressure on the already swamped region. However, traders said premiums, the surcharge for obtaining physical metal, would not drop much further.

    Premiums were quoted at USD 100-110 on top of LME cash aluminium for in-warehouse Singapore last week extending a slide from USD 150 a tonne two weeks ago, and down from more than USD 400 in December.

    Asia has been particularly hard hit by a global collapse in premiums partly due to its proximity to China which has ramped up exports this year. Supply has also flooded out after the London Metal Exchange forced warehousing companies to shorten delivery times, slashing historic queues that had inflated costs and angered consumers. The sharp fall in premiums has also forced traders to dump stock to curb exposure to further losses, fuelling the downward spiral.

    A trader said “While signals are emerging that premiums in Europe may be stabilising, the process might take longer in Asia. In Asia it might take more time for the flux to settle, because there is too much stock here.”

    China, the world’s top producer of refined metal, has ramped up exports of semi-manufactured products, a type of export that effectively sidesteps duties that apply to other shapes. Some shipments are then re-melted in countries like South Korea, which, traders say, is faced with stocks of nearly 0.5 million tonnes.
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    Peru copper output grew 18.47% in April 2015

    Copper production in Peru expanded in April this year due to positive results. Gold, zinc, lead and tin output experienced a recovery as well, the Ministry of Energy and Mines (MEM) reported.

    According to the Mining Promotion Directorate, recent results show an increase in production growth of copper (18.47%), gold (14.91%), zinc (17.70%), lead (27.28%) and tin (15.06%).

    April’s metals report also states that silver and iron maintain same production levels from the same month last year.

    Domestic production of copper was 463,164 metric tons, which suggests sustainability in favorable results of past two months. Such figure also features a cumulative growth rate of 3.79% in 2015.

    This trend is verifiable in the year-on-year monthly comparative analysis, which showed an increase of 18.47% in April.

    At the regional level Ancash is the leader, as it accounts for 25.58% of the national production (118.466 metric tons), but it recorded a 8.28% decline over the previous year.
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    Mt Polley could re-open by July: mines minister

    Workers at the Mount Polley mine in central British Columbia could be back on the job as early as July 1st, which should come as a relief to nearly 400 employees who have been off work since a tailings breach last summer shut down the copper-gold operation.

    That is according to Bill Bennett, B.C. mines minister, who told the Vancouver Sun on Friday that Imperial Metals (TSX:III), the mine owner and operator, has provided all the information needed for the province to issue a mining permit needed for a restart.

    The Sun quotes the minister saying that the company has spent nearly $70 million on cleaning up the damage caused after the collapse of a tailings impoundment last August sent millions of cubic metres of water and silt into local waterways.

    Imperial applied for a restricted operational permit in January that would allow it to start up the mill and process ore at about half the normal rate. The company was also asking permission to deposit a maximum 4 million tonnes of tailings into the Springer Pit, so as not to include the use of the tailings storage facility to impound tailings from the operation.

    If approved, the mine would be allowed to operate through most of 2015.

    The tailings breach was a major black eye for the mining industry in B.C. and the provincial government, which faced criticism over perceived lack of oversight in the monitoring of tailings ponds. In March the province drafted a fresh set of rules, developed in collaboration between the ministries of environment and mines, ordering mining companies to consider the possibility of a tailings disaster and to evaluate the environmental, health, social and economic impacts of an accident.

    The new requirements apply to all mining companies with applications under environmental assessment and are an interim measure while the Ministry of Mines completes a review of current mining regulations.

    Last month, a new report found a number of changes in the local ecosystem caused by the massive spill.
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    Alaska judge refuses EPA request to throw out Pebble mine lawsuit

    A federal judge has rejected the U.S. Environmental Protection Agency's request to dismiss a lawsuit by the Pebble Limited Partnership mining company that accuses the agency of acting improperly in trying to block a large copper and gold project.

    The ruling made on Thursday by U.S. District Judge Russel Holland allowed part of the company's lawsuit to go forward alleging the EPA violated transparency requirements as it considered the proposed mine.

    The ruling sets the stage for a prolonged legal battle between the EPA and Pebble, which is seeking to build a multibillion-dollar open-pit mine that would produce significant amounts of copper and gold for decades to come.

    The Pebble Limited Partnership said in federal court the EPA formed three advisory committees and then failed to adhere to specific transparency requirements under the Federal Advisory Committee Act.

    Pebble said the committees are part of a predetermined effort to kill one of the world's largest copper projects, located some 200 miles (320 km) southwest of Anchorage near the headwaters of the world's largest salmon fishery.

    Those committees influenced the outcome of a watershed report that ultimately placed additional restrictions on the company's efforts to obtain permits, Pebble said.

    "We are convinced the EPA has pursued a biased process against our project that then drove their actions toward a predetermined outcome," Pebble Chief Executive Officer Tom Collier said in a statement.

    The appalling answer can be found in a 138-page briefing paper Pebble Limited Partners filed last year with its lawsuit against the EPA in the U.S. District Court of Alaska.

    The secret behind the EPA’s pre-emptive strike against Pebble Limited Partners was a three-pronged cabal–lavishly funded by left-leaning environmental groups–of environmentalist coalitions, anti-mining scientists and anti-mining assessment consultants who were secretly given illegal access to and power over EPA strategy and decision-making, according to the Pebble group’s brief.

    Big Green’s devastating, years-long anti-Pebble campaign was the second-most-expensive environmentalist assault ever, right behind the ongoing war of climate alarmists against climate skeptics. Green forces assumed Pebble was dead.

    Attached Files
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    Steel, Iron Ore and Coal

    China May thermal power output down 1.7 pct YoY

    Electricity output from China’s thermal power plants – mainly coal-fired – fell 1.7% year on year and down 1.0% from April to 344.4 TWh in May, showed data from the National Bureau of Statistics (NBS) on June 11.

    Weak industrial demand continued to weigh on coal-fired power generation, which was also impacted by hydropower output, which rose 2% year on year and 9.3% month on month to 76.7 TWh in May.

    Total electricity output in China stood at 456.2 TWh in May, unchanged from a year ago but up 2.5% month on month, the NBS data showed. That equates to daily power output of 14.72 TWh on average, unchanged on year but down 0.7% from April.

    Over January-May this year, China produced a total 2,218.7 TWh of electricity, up 0.2% year on year, with thermal power dropping 3.1% on year to 1,739.3 TWh while hydropower output increasing 11.5% to 318.2 TWh.
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    Japan's environment ministry pushes back on shift to coal

    Japan's environment ministry is pushing back on the growing use of coal to generate power after the Fukushima nuclear disaster led to the shutdown the country's reactors, as concerns mount over greenhouse emissions.

    Environment Minister Yoshio Mochizuki told reporters on Friday he will submit an objection over plans for a 1.2 gigawatt coal-fired plant to the powerful industry ministry, which has been promoting use of the fuel to cut costs.
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    Atlas plans A$180 mln capital raising to battle tough iron market

    Struggling Australian mining company Atlas Iron Ltd said on Thursday it is planning to raise capital via a placement of new shares at a heavily discounted price to key contractors, existing and new shareholders.

    After a near collapse due to a slump in iron ore prices, Australia's fourth-largest iron ore miner has recently resumed some mining operations and is now trying to raise cash to keep it afloat.

    The share issue, at price of A$0.05 Australian dollars each, represents a 58 percent discount to the last traded price before the shares were suspended and is much lower that Atlas shares have ever traded, the company said.

    On Apr. 7, Atlas suspended trading in its shares and all mining operations, entering crisis talks with its creditors and contractors as the price of iron ore was below its $50 a tonne break-even level.

    "The company now is focusing on the next step in its restructuring and growth strategy. This involves a capital raising, with the funds raised strengthening Atlas' balance sheet and assisting the company in managing periods of volatility in market conditions," the company said in a statement.

    The plan involves placements of shares to new and existing shareholders to raise up to A$50 million ($39 million), a placement to key Atlas contractors to raise up to A$30 million, and a participation offer to eligible Atlas shareholders to raise up to A$100 million.

    Contractors have already committed about A$23.9 million, the company said.

    Some analysts, however, doubted investors appetite for the new shares given the gloomy outlook for iron ore.

    "It's surprising to see such marginal tonnes coming back on given most people expect iron ore prices to fall again," said Liberum Capital analyst Richard Knights. "It would be surprising to see people willing to put their hands in their pocket for something like this, but I wouldn't rule it out either."
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    China May coal output down 6.1pct on yr: NBS

    China produced 309.39 million tonnes of coal in May, down 6.1% year on year but up 3.8% month on month, said the National Bureau of Statistics (NBS) on June 11.

    Over January-May, total coal output of China stood at 1.46 billion tonnes, down 6% on year, showed the NBS data, as miners scaled back production to avoid losses caused by low prices as supply continued to exceed demand in the domestic market.

    Coal miners have been hit hard by prolonged weakness in domestic demand, as the release of more production capacity after years of expansion coincided with a slowdown in the Chinese economy and the government’s effort to increase the use of clean energy to reduce pollution.

    The Chinese government has vowed to further curb illegal coal production by carrying out an overall inspection on coal mines construction and production in main producing areas, according to a document published on the NDRC's website on June 3.

    Coal mines illegally built, producing beyond approved capacity or with safety issues would be asked to shut operation to rectify within a time limit, and those fails to do so will be forced to close by the provincial government.

    China’s domestic coal prices showed signs of stabilizing in the second half of May, but overall market conditions remain discouraging, as the country is expected to see further rise in hydropower output while industrial power demand shows no signs of apparent improvement.
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    BC Iron set to pay off debts

    The share price of iron-ore miner BC Iron jumped by 8% on Thursday after the company announced that it complete the repayment of a $130-million bank facility with the ANZ and Commonwealth Bank 18 months ahead of schedule. 

    The miner announced to shareholders that it would repay the remaining $30.8-million outstanding on the secured term loan by the end of June this year. 

    The original $130-million facility was entered into in 2012 to partially fund the acquisition of an additional 25% interest in the Nullagine joint venture from partner Fortescue Metals. 

    Since then, the company has moved to repay the facility ahead of schedule, taking advantage of the higher iron-ore price environment. 

    MD Morgan Ball said that the repayment of the debt facility would de-risk and simplify BC Iron’s balance sheet, providing a solid platform for the company to consider any future opportunities that could arise.

    “Prudent cash management and ongoing cost reduction success has allowed this repayment to be made comfortably from existing cash reserves. We continue to focus on productivity and cash management at each of our projects to ensure BC Iron is in the strongest possible position,” Ball said. 

    Following the repayment of the facility, BC Iron’s only remaining debt would be a $5-million interest-free and security free facility with offtake partner Henghou Industries, which was due at the end of December this year.
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    China key steel mills daily output down 2.2pct in late-May

    Daily crude steel output of key Chinese steel producers fell 2.21% from ten days ago to 1.766 million tonnes over May 20-31, showed data from the China Iron and Steel Association (CISA).

    China’s total daily output during the same period was estimated at 2.228 million tonnes, down 2.49% from ten days ago.

    The decline was mainly due to persisting weak demand from downstream sectors amid a supply glut in domestic market.

    As of May 31, total stocks in key steel mills stood at 15.83 million tonnes, down 4.45% from ten days ago.

    During May 25-31, the price of domestic steel products dropped 0.7% from the previous week, with rebar prices down 1%, showed data from the Ministry of Commerce.
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    China May steel products exports up 7.7pct on mth

    China exported 9.2 million tonnes of steel products in May, increasing 14% year on year and up 7.73% from April, the second consecutive monthly increase, showed data from the General Administration of Customs (GAC) on June 8.

    Over January-May, total steel products exports reached 43.52 million tonnes, up 28.2% from the previous year, the GAC data showed.

    More Chinese producers turned to international market to ease sales pressure amid a supply glut and low prices in the domestic market.

    The value of May exports was $5.338 billion, down 16.24% on year but up 1.89% on month; total value over January-May was $27.42 billion, up 1.8% on year, said the GAC.

    That translated to an average export price of $580.22/t in May, down 26.53% on year and down 6.42% on month.

    During May 25-31, the price of domestic steel products dropped 0.7% from the previous week, with rebar prices down 1%, showed data from the Ministry of Commerce.

    However, steel mills continued to expand output despite high stocks and oversupplied market. Daily crude steel output of key Chinese steel producers increased 1.59% from ten days ago to 1.806 million tonnes over May 10-20, said the China Iron and Steel Association (CISA).

    China’s total daily output during the same period was estimated at 2.285 million tonnes, up 0.7% from ten days ago.

    As of May 20, total stocks in key steel mills stood at 16.57 million tonnes, up 4.62% from ten days ago.

    The CISA predicted further price decline, as demand may further shrunk during the slack consumption season in summer; steel mills may cut output from late-May amid low profit.
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    China's top coal firms dismiss merger rumours

    China Shenhua Energy Co., Ltd. and China Coal Energy Co., Ltd., the nation's leading coal producers, on Tuesday dismissed reports of a merger.

    The two companies said neither they nor their parent companies have been informed on the matter of merger from government departments; meanwhile, neither company has talked with other companies or departments about any merger, according to separate statements by the two companies filed to the Shanghai Stock Exchange.

    In the mainland stock market on Tuesday, shares of both companies surged by the daily limit of 10 percent. In Hong Kong, China Shenhua rose more than 3.6 percent; China Coal Energy gained nearly 7.5 percent.

    There were rumours last month that China was considering massive mergers and acquisitions of its biggest state-owned enterprises (SOEs) to prevent in-fighting and build industrial giants able to face global competitors. A total of 112 centrally-administered SOEs were said to likely be cut by more than half to 40.

    However, the State-owned Assets Supervision and Administration Commission later said reports about such massive M&As were "unverified."
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    POSCO named world’s most competitive steel maker’ for 6 consecutive years -

    POSCO has ranked first in the “world’s most competitive steel companies” that are selected by World Steel Dynamics, a global steel market analysis agency, for six consecutive years. As WSD made the list twice in 2010 and 2013, POSCO has ranked No. 1 in the rankings for eight consecutive events.

    WSD announced on Tuesday the rankings of 36 steel companies worldwide by evaluating 23 items, including production volume, profitability, technological innovation, pricing capacity, cost cutting, financial soundness, and acquisition of raw materials as of June in New York.

    POSCO received high marks due to its activities to boost fundamental competitiveness in steel, including sale of high value-added products and expansion of technology-based solutions, and acquired 7.91 points out of possible 10 points.

    POSCO was trailed by Nucor of the US, Nippon Steel and Sumitomo Metal of Japan, Gerdau of Brazil, and Severstal of Russia. Hyundai Steel of Korea ranked ninth this year again after last year.

    POSCO Chairman Kwon Oh-joonn is emphasizing solution marketing as way to distinguish itself from rival firms in order to overcome the economic recession. This refers to activities to deliver products that consumers want, and provide technology that customers can most efficiently utilize, and thereby increase the value of products in the end.

    A POSCO source said, “Sales in projects that adopted solution marketing targeting industrial customers, including shipbuilding, home electronics, and construction, in the first quarter (January to March) of this year increased 9 percent from the fourth quarter of last year (October – December), while sales of ‘world premium’ product group also gained 8 percent during the same period.”
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    9 suitors show interest in purchasing US Steel Canada plants reported that more than three dozen suitors have shown interest in United States Steel Corp.'s Canadian operations, according to a document filed by the company's court-appointed monitor.

    According to the report, a financial adviser working for USSC contacted 102 potential interested parties, which included global and North American steel producers, coke producers, steel and metal industry participants, land redevelopers and private equity and financial investors. Of those contacted, 39 executed a nondisclosure agreement with the company and were provided access to its confidential information memorandum.

    U.S. Steel has said it would like to sell its Canadian subsidiary by the end of the year. Multiple letters of intent were received ranging from acquiring one or both of Lake Erie Works and Hamilton Works, according to the report. None of the interested parties were identified.

    USSC went into bankruptcy protection in September and announced its plans to sell operations in Hamilton and Lake Erie. U.S. Steel purchased the former Stelco Inc. operations in 2007.
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    China May coke exports hit new high

    China’s exports of coke and semi-coke hit a new high of 1.23 million tonnes in May, surging 73.24% on month and up 23.4% from the year before, showed data released by the General Administration of Customs (GAC) on June 8.

    It was the tenth consecutive year-on-year increase, as Chinese producers boosted sales to the overseas market amid weak domestic demand, in addition to the government’s cancellation of a 40% export tariff from January 2013.

    The value of the May exports stood at $209.25 million, up 7.3% year on year and 69.5% higher than April. That translates into an average price of $170.12, down $3.74/t from the month prior and down $24.83/t from a year ago.

    Over January-May, China exported a total 4.25 million tonnes of coke, up 26.5% on year, with total value falling 2.8% from the previous year to $736.74 million.
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    Russia's MMK says Q1 sales reach $1.5 bln, down 19.6 pct y/y

    Russian steel producer MMK said on Monday first quarter revenue had fallen 19.6 percent year-on-year to $1.5 billion largely because of the rouble devaluation, and that net profit reached $196 million.

    The company, controlled by businessman Viktor Rashnikov, said its EBIDTA - earnings before interest, taxation, depreciation and amortisation - had risen by 60 percent year on year to $470 million.

    In a statement, MMK said it expected a fall in sales in the second quarter due to an earlier than usual restocking by metal traders and a deceleration of business activity in the construction sector.

    But this would be compensated by recovering domestic prices, maximum capacity utilisation in key production facilities and a decrease in the company's expenses, it said.
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    China coal imports slump further in May as policies bite

    China's coal imports slumped 41 percent in May from a year earlier to 14.25 million tonnes and were down sharply on April despite industry expectations of a pick-up in seasonal demand, data showed on Monday.

    Total imports in the first five months of the year reached 83.26 million tonnes, down 38.2 percent compared with the previous year, according to preliminary data from China's General Administration of Customs.

    May's imports were down 28.6 percent on April, according to the data, while Reuters calculations showed that imports were down 40.6 percent compared to May 2014.

    Imports normally improve over summer, but analysts said any upturn would be limited despite relatively low inventory levels at thermal power plants, with hydropower likely to meet a large share of the increase in power demand.

    "Imports are constantly decreasing compared to last year due to new policies, and the use of new (renewable) energy," said Zheng Nan, an analyst with China's Shenyin Wanguo Securities.

    The import data includes lower-grade lignite, a type of coal with lower heating value that is largely supplied by Indonesia.

    In previous summers, southern coastal power plants would often turn to foreign markets because of severe transportation bottlenecks, but weaker demand and improved rail capacity means that is unlikely to be a factor this year.

    With domestic coal consumption expected to fall around 5 percent this year as a result of the slowing economy, China has been trying to prop up prices by tackling oversupply.

    It has urged big domestic producers to cut output and tightened quality inspections at ports with the aim of limiting low-grade foreign supplies.
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    India imposes anti-dumping duty on some steel from China, others

    India's finance ministry has imposed anti-dumping duties ranging from $180 to $316 per tonne for some industrial-grade stainless steel imported from China, Malaysia and South Korea in a bid to stem surging imports and protect the domestic industry.

    The move comes after India's trade ministry said in March the domestic industry was suffering "material injury due to such dumped imports" and that a definitive measure was required to stop it.

    The anti-dumping duties will be effective for a period of five years, the finance ministry said in a statement late on Friday.

    "It's a welcome move and a necessary one to save the domestic industry which (is) at the suffering end," said N.C. Mathur, president of the Indian Stainless Steel Development Association.

    India consumes about 1 million tonne of this type of stainless steel and more than 40 percent of that is imported, mainly from China.

    Steelmakers from Asia to Europe are facing increasing pressure from a rise in cheap imports as Russia and Ukraine, armed with weaker currencies, join China in pushing surplus output on to world markets.

    Many steel companies in India, such as Tata Steel, JSW Steel and Kalyani Steels, have seen profits come under pressure.
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    Indonesia to push consolidation of coal mining sector, review licences

    Indonesia will push for consolidation in its mining sector while coal prices are low and may soon revoke more than 4,000 licences that have caused problems, mining and energy minister Sudirman Said said on Monday.

    Indonesia is the world's top exporter of thermal coal but wants to keep more of the power station fuel to feed its ballooning domestic power demands.

    "We will install a good system for licensing," the minister told a coal industry conference in Bali, noting that Indonesia had issued around 10,100 of the newer mining licences known as IUPs.

    "We enjoyed huge profits that were abnormal. Abnormal money drives abnormal behaviour," Said said, referring to the commodity boom. Sanctions could be imposed where rules have been infringed, he said.

    The review will only apply to the IUPs. Larger, older-generation firms with so-called Contracts of Work such as Bumi Resources and Berau Coal Energy will be unaffected.

    "This is the perfect time to consolidate," Said said, referring to depressed coal prices. "We will create opportunities for players who are serious, who want to invest and who always comply with government rules."

    According to the energy ministry, there were around 960 coal firms at production stage in Indonesia. Around 900 of these are IUP permit holders that contribute about 80 million tonnes, or approximately 20 percent of Indonesia's total production.

    "This month we will decide whether their permits will be revoked," Coal Enterprise Director Adhi Wibowo said, referring to the 40 percent of IUPs with problems such as overlapping permits and unpaid royalties.

    This year the mining ministry plans to hand over licensing to the investment coordinating board (BKPM), he said.

    The government of President Joko Widodo plans to build 35 gigawatts of new power stations by the end of the decade and a further 35 gigawatts by 2025, although critics say the ambitious target is unlikely to be met.

    The plans could increase coal consumption from around 90 million tonnes a year at present to 250 million tonnes, Said said, including by pushing coal miners to build power stations. "(We) will reach a new balance. The domestic market will be strong while the rest we can play with on the export market, but that won't be the dominant market."

    Attached Files
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    Russia's VTB says reaches preliminary deal with indebted miner Mechel

    Russian lender VTB has reached a preliminary agreement with mining company Mechel on restructuring its debt and is ready to postpone some of the company's debt repayments until 2018-2019, Chief Executive Andrey Kostin said on Friday.

    Mechel, controlled by businessman Igor Zyuzin, has been discussing a debt restructuring with its main lenders, including VTB, Sberbank and Gazprombank.

    The indebted miner, which employs 72,000 people, borrowed heavily before Russia's economic downturn, deepened by Western sanctions over the Ukraine crisis and a collapse in global oil prices, the country's main export commodity.

    "In principle, we have agreed on initial plans with Mechel," Kostin told reporters at a banking conference in Russia's second city of St Petersburg. "They are that (Mechel) will restructure the amortisation of its main debt in 2015-2016 and we will postpone (payment obligations) until 2018-2019."

    Mechel will be required to meet a number of conditions, including payment of around 4 billion roubles ($71.4 million) in debt arrears and providing additional collateral and guarantees, Kostin said.

    "If Mechel meets these conditions, we plan to sign an agreement on debt restructuring by the end of June or early July," Kostin said. "If not, then we will return to the legal action that we have postponed but not cancelled."
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