Mark Latham Commodity Equity Intelligence Service

Monday 23rd May 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    G7 fiscal dies.

    No G7 stimulus

    G7 finance ministers have met in Japan to discuss the global economy ahead of next week's G7 meeting. Japanese Finance Minister Taro Aso said the biggest problem the world faces is a lack of demand.




    A rift on fiscal policy and currencies has set the stage for G7 advanced economies to agree on a "go-your-own-way" response to address risks hindering global economic growth at their finance leaders' gathering that kicked off on Friday.

    Japan backed away from its previous calls for coordinated fiscal action to jump-start global growth with Finance Minister Taro Aso saying on Friday that while some G7 countries can deploy more fiscal stimulus, others cannot "due to their own situations."

    That chimed with Washington's stance made clear by a senior U.S. Treasury official that there was no "one-size-fits-all" for the right mix of monetary, fiscal and structural policies.

    "Countries with fiscal space have different choices than countries that lack fiscal space," the official told reporters on the sidelines of the G7 finance leaders' meeting in Sendai, northeast Japan.


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    Oil and Gas

    Iranian Floating Oil Storage

    Image title
    Now: 50.593 MMBBL



    Windward’s Iranian Floating Storage Indicator tracks the amount of oil from Iran stored on ships in the Persian Gulf. The Indicator is calculated daily and goes back to April 2014. It is comprised of all ship classes and tracks all vessels in the Gulf, those transmitting their location as well as those that are not. 
    http://foresea.windward.eu/g/fs-iran

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    Oil Supply Disruptions Quickly Fading As Canada, Libya, And Nigeria Resume Production


    In a surprising twist, it appears that virtually all three of the main disruptions choke points are being resolved far quicker than expected.

    First on Canada and its ongoing wildfire, the WSJ reported thatthe threat from forest fires in northern Alberta receded further on Thursday with the blazes moving away from oil-sands production facilities and a nearby evacuated town as cooler, wetter weather aided firefighting efforts, provincial officials said. The out-of-control wildfire spread to more than 1.25 million acres, up from just over one million acres on Wednesday, but the front line moved away from critical infrastructure to a remote area on the border of neighboring Saskatchewan province, the officials said.

    This means that oilsands production is gradually coming back online and full capacity will likely be fully restored in the coming days:

    No production facilities have been damaged by wildfires, but the threat has forced several large oil sands producers to shut down mining and well sites for more than two weeks, reducing Canadian oil production by at least one million barrels a day, or about 40% of the country’s total oil-sands output. The spread of fires forced some operators to abandon plans laid last week to restart. Late Thursday, Exxon Mobil Corp.’s Canadian unit Imperial Oil Ltd. said it had partially restarted operations at its Kearl oil sands mine about 47 miles northeast of Fort McMurray.

    Just as important is that the long-running export crisis in Libya also appears to be on the verge of a solution. According to Bloomberg, oil exports are set to resume Thursday from the port of Hariga in eastern Libya, easing a bottleneck and allowing for crude production to increase after competing administrations of the state-run National Oil Corp. reached an agreement in the divided country.

    The tanker Seachance is loading 650,000 barrels of crude at Hariga for the U.K., Omran al-Zwai, a spokesman for NOC unit Arabian Gulf Oil Co. known as Agoco, said by phone on Thursday.The cargo would be the first international shipment from Hariga since the United Nations blacklisted a tanker last month following complaints from authorities in the west of the country. NOC’s competing leaderships reached an agreement to resume exports from Hariga earlier this week. Agoco will be able to boost crude output to 120,000 barrels a day from 90,000 before the shipment, Al-Zwai said, as the company’s production has been limited by a lack of storage at the port. Libya produced a total of 310,000 barrels a day in April, data compiled by Bloomberg show.

    The competing NOC administrations agreed to restart shipments from Hariga after holding talks in Vienna earlier this week, Elmagrabi said Monday. Officials at the western NOC administration in Tripoli couldn’t immediately be reached for comment. The shipment from Hariga comes after Agoco reached an agreement on Wednesday with the NOC’s eastern administration to restart international exports from the port, said Nagi Elmagrabi, chairman of the eastern NOC.

    Finally, and perhaps most importantly, is Nigeria, whose offline high quality bonny light crude has been seen as a major catalyst for the recent spike in prices due to the actions of such groups as the Niger Delta Avengers, and where Bloomberg notes that an oil tanker was said to have finally loaded up Nigeria’s Qua Iboe crude today, when a shipment was made on the SCF Khibiny, a 1 million bbl carrying Suezmax. It adds that the ship signals today that its status is "under way" having previously been anchored.

    The reason: "people who had blocked bridge access to Qua Iboe terminal no longer there" according to Bloomberg.

    We are curious how long it will take the upward momentum-chasing oil algos to realize that the near-term supply picture has just changed dramatically.

    http://www.zerohedge.com/news/2016-05-20/oil-supply-disruptions-quickly-fading-canada-libya-and-nigeria-return-production
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    Something Stunning Is Taking Place Off The Coast Of Singapore


    Back in November, when the world-record crude inventory glut was still in its early innings, we showed what we then thought was a disturbing image of dozens of oil tankers on anchor near the US oil hub of Galveston, TX, unwilling to unload their cargo at what the owners of the oil thought was too low prices.

    Little did we know that just a few months later this seemingly unprecedented sight of clustered VLCCs would be a daily occurrence as oil producers, concerned by Cushing hitting its operating capacity, would take advantage of oil curve contango to store their oil offshore indefinitely.

    However, while the "parking lot" off Galveston has since normalized, something shocking has emerged and continued to grow half way around the world, just off the coat of Singapore.This.

     Image title

    The red dots show ships either at anchor or barely moving, either oil tankers or cargo, which have made the Straits of Malacca, one of the world's most important shipping lanes which carries about a quarter of all seaborne oil primarily from the Persian Gulf headed to China, into a "bumper to bumper" parking lots of ships with tens of millions of barrels in combustible cargo.

    it is also the topic of the latest Reuters expose on the historic physical crude oil glut which continues to build behind the scenes, and which so far has proven totally immune to dissipation as a result of the sharp increase in oil prices over the past three months.

    Indeed, as Reuters notes, prices for oil futures have jumped by almost a quarter since April, lifted by severe supply disruptions caused by triggers such as Canadian wildfires, acts of sabotage in Nigeria, and civil war in Libya. And yet flying into Singapore, the oil trading hub for the world's biggest consumer region, Asia, reveals another picture: that a global glut that pulled down prices by over 70 percent between 2014 and early 2016 is nowhere near over, and that financial traders betting on higher crude oil futures may be in for a surprise from the physical market.

    "I've been coming to Singapore once a year for the last 15 years, and flying in I have never seen the waters so full of idle tankers," said a senior European oil trader a day after arriving in the city-state.

    As Asia's main physical oil trading hub, the number of parked tankers sitting off Singapore's coast or in nearby Malaysian waters is seen by many as a gauge of the industry's health.  Judging by this, oil markets are still sickly: a fleet of 40 supertankers is currently anchored in the region's coastal waters for use as floating storage facilities.

    The glut is not only constant but is rising with every passing week: the tankers are filled with 47.7 million barrels of oil, mostly crude, up 10 percent from the previous week,according to newly collected freight data in Thomson Reuters Eikon.

    http://www.zerohedge.com/news/2016-05-20/something-stunning-taking-place-coast-singapore

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    BP's oil search strategy shrinks with budget cuts


    The surprise departure of BP's exploration boss has turned the spotlight on an oil search strategy that, after years of spending cuts, is focusing mainly on expanding existing fields rather than venturing expensively into the unknown.

    That caution reflects a firm chastened by the $55 billion cost of its 2010 Gulf of Mexico spill, and needing to squeeze every last drop out of a sharply reduced exploration budget at a time of low oil prices.

    "Exploration doesn't necessarily have to look like (nature broadcaster) David Attenborough standing on a brand new frontier," a BP source told Reuters.

    While BP's total reserves and fields coming onstream in the next four years look healthy compared to the other majors, its long-term project pipeline is the slimmest among its peers and its break-even costs are the highest, according to some analysts, among them Macquarie.

    Several BP sources said Chief Executive Bob Dudley and his team were hammering out a new long-term strategy, with investors expecting an update on its post-2020 plans later this year or early next. The plan is likely to chime with a phrase that Dudley is fond of using: "Big is not necessarily beautiful."

    After asset sales forced on it by the Gulf disaster shrank the company by a third, BP is today focusing its operations on five regions -- Angola, Azerbaijan, Egypt, the Gulf of Mexico and the North Sea.

    It was in Angola, Egypt and the North Sea, already BP core regions, that Richard Herbert notched up his main successes during his two years as head of exploration.

    BP said his departure followed its decision to bring exploration and field development under one upstream team, headed since February by Bernard Looney.

    But Herbert, who worked with Dudley in Russia in the 2000s, had also seen his annual budget shrink from $3.5 billion in 2013 to $1 billion this year - not enough to drill even a dozen complex deep-water wells, and certainly not enough to throw at a frontier exploration with potential high gain, but also a high risk of coming out empty-handed. Royal Dutch/Shell (RDSa.L) sank $7 billion into an Alaskan exploration that it abandoned last year - something BP simply cannot afford.

    While BP's existing resources are not small compared to its peers, analysts say the lack of a long-term project pipeline is a worry.

    http://www.reuters.com/article/us-bp-exploration-idUSKCN0YE0HB
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    Gazprom’s LNG portfolio on the rise


    Russian gas giant Gazprom said its LNG portfolio more than doubled over the past years, reaching 3.56 million tons in 2015.

    Gazprom said in a statement on Thursday that its production and LNG procurement is “highly relevant” as the company is boosting competitiveness and diversifying its export routes.

    The expansion of currently the only Russian LNG plant, built within the Sakhalin II project, which currently has an annual production capacity of 9.6 million tons has been given a “high priority”, Gazprom said in the statement.

    Earlier in May, Gazprom noted the FEED process for adding the third liquefaction train to the Sakhalin II project is ongoing. Once completed, the third train will up the plant’s production capacity up close to 14.5 mtpa of LNG.

    Additionally, Gazprom has said the proposed 10 mtpa Baltic LNG project is also “another priority project”.  The plant will be built near the seaport of Ust-Luga. Currently, the work is underway to prepare the Baltic LNG project for the investment stage, according to Gazprom’s website.

    The statement also reveals that Gazprom is aiming to put more focus in the future on small-scale LNG developments.

    Targeting competitiveness in the long term, Gazprom is looking to enhance the flexibility in its export policy and diversify export routes as well as sales markets, the company added.

    http://www.lngworldnews.com/gazproms-lng-portfolio-on-the-rise/
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    French CGT union calls for refinery shutdown in labour protest


    France's CGT union called on Friday for workers to halt production at the country's oil refineries in an ongoing nationwide protest aimed at forcing the government to drop a controversial labour reform.

    Oil major Total's five refineries in France have already been running at "minimum output" since May 17, a CGT union official told Reuters on Thursday, after oil sector workers decided to join the rolling protest that began in March.

    The union members will meet in a general assembly on Friday afternoon to decide whether to continue the strike action and harden their stance with a complete shutdown of refineries, the CGT official said.

    "The goal is not to create (fuel) shortages but to obtain the withdrawal of the labour bill," Emmanuel Lepine, an official at the CGT's oil industry section, told France Info Radio.

    Fuel shortages were, however, reported in some parts of France on Thursday, and a Total spokesman said that although its refineries were running normally, it was facing supply disruption because striking workers were blockading refineries.

    A similar prolonged strike in France in 2010 led to a glut of crude in Europe because it could not be delivered to refineries, and a spike in refined products prices due to low output from refineries.

    http://www.reuters.com/article/france-politics-protest-oil-idUSL5N18H1FK
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    Israel's government approves Leviathan natural gas deal


    Israel has approved a deal it hopes will fast-track development of the huge Leviathan offshore natural gas field and end years of regulatory uncertainty that has stifled the country's nascent oil and gas industry.

    The Leviathan project hit a major obstacle in March when Israel's Supreme Court blocked a previous agreement that bound the state to the terms of the deal for 10 years. The agreement had meant the government would be committed not to change taxes, export quotas or other regulation.

    On Wednesday Energy Minister Yuval Steinitz announced a new deal that gives the state more leeway while offering enough stability for the Leviathan partners, Texas-based Noble Energy and Israel's Delek Group, to resume investments.

    The deal was approved on Sunday at the weekly cabinet meeting. Steinitz hopes the new phrasing, which allows future governments to decide if policies need to be changed, will stave off other court objections.

    Leviathan, one of the largest offshore discoveries of the past decade, was found in the eastern Mediterranean in 2010 and has been mostly earmarked for exports.

    The court's objection also rattled the broader exploration sector where companies have been waiting to see how the saga plays out before investing in new offshore drilling.

    "After a delay of six years, the revised stability clause will allow not only the advancement of Leviathan's development, but also open the sea to exploration for new gas fields, and ensure Israeli gas exports to neighboring countries and Europe," Steinitz said.

    Yossi Abu, chief executive of Delek subsidiaries Delek Drilling and Avner Oil, said the government approval gives "tremendous tailwind to our continued activity to promote the development of Leviathan, in order for Israeli gas to flow from the reservoir by the end of 2019".

    http://www.reuters.com/article/israel-natgas-idUSL5N18J096
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    Argentina seeks to spur natural gas production with incentives


    Argentina is seeking to rebuild natural gas production after years of decline, offering higher prices on output from new developments, an Energy Ministry source said Friday.

    "The program is designed to encourage exploration and increase production," the source said on the condition of not being named.

    The program took effect Thursday and will run until December 31, 2018, according to a resolution in the Official Bulletin, the newspaper of record.

    The output from new projects can be sold at $7.50/MMBtu, according to the resolution. That's up from a current average of $5.20/MMBtu.

    "It is necessary to continue with programs to increase gas production in the short term, reduce imports and encourage investment in exploration and production from new deposits that will make it possible to recover reserves," the Energy Ministry said in the resolution.

    Argentina has been ramping up gas imports since production started to decline from a record 143 million cu m/d in 2004, now down 16% at 120 million cu m/d. This has led to shortages as consumption has surged to 130 million cu m/d, with peaks of 180 million cu m/d during the cold months of May to September.

    The country is importing about 30 million cu m/d from Bolivia, Chile and off the global LNG market to help make up the shortfall, and plans to bring in more supplies next year from a floating regasification terminal in Uruguay.

    Argentina relies on gas to meet 50% of its energy needs.

    Recent hikes in wellhead prices to an average of $5.20/MMBtu from around $3/MMBtu have pushed up gas utility rates, sparking protest.

    Mario Das Neves, governor of the southern province of Chubut, called on the national government, which handles energy pricing, to backtrack on the hikes.

    "My position is that the increases must be rolled back," Das Neves said in a statement Friday, adding that other governors are demanding the same.

    While the national government said the hikes in gas utility rates would be around 300%, some consumers have said that they've been much higher.

    http://www.platts.com/latest-news/natural-gas/buenosaires/argentina-seeks-to-spur-natural-gas-production-21508725
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    Gulf Keystone gains debt time


    Gulf Keystone Petroleum has secured an extension of a standstill agreement with lenders, giving the Kurdistan-focused player more time to address its debt challenges.

    http://www.upstreamonline.com/live/1433117/gulf-keystone-gains-debt-time?utm_source=twitterfeed&utm_medium=twitter
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    Shale Drillers Hold Off Retiring Oil Rigs as Cash Flows Improve


    Oil explorers in the U.S. put a pause on their rig cancellations this week as improving technology and rising prices make some basins more profitable.

    Rigs targeting crude in the U.S. were unchanged at 318, after 10 were idled last week, Baker Hughes Inc. said on its website Friday. Explorers have dropped more than 1,000 oil rigs since the start of last year. Natural gas rigs were trimmed by 2 to 85, bringing the total for oil and gas down by 2 to 404.

    Spending on drilling and completing wells in the lower 48 states is expected to be cut to $40 billion this year, compared to $133 billion in 2014, Jud Bailey, an analyst at Wells Fargo, wrote earlier this month in a note to investors. At today’s oil prices, cash flow for explorers and producers is roughly $7 billion to $9 billion higher than estimated in January, Bailey wrote.

    "Essentially, with depressed levels of D&C spending and E&P cash flow, every $1 increase in oil price will have an outsized impact on cash flow that can be re-invested through the drill bit," he wrote in the note titled, "Adding 200 Rigs by 4Q16? It’s Not as Hard as You Think."

    http://www.bloomberg.com/news/articles/2016-05-20/shale-drillers-hold-off-retiring-oil-rigs-as-cash-flows-improve
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    Hess Corporation Avoids Layoffs, Maintains Operations Despite Downturn


    We've been hearing for months about declining oil production in the Bakken, along with layoffs and state budget shortfalls because of reduced tax revenues.

    What you might not have heard is that some companies are finding ways to survive and maintain operations while waiting for crude prices to go back up.

    Last week Energy Reporter Allyssa Dickert was able to go on a Hess Corporation rig that's still drilling.

    Oil companies are adjusting to a weak market and plan to use the efficiencies they've now implemented to come back, even stronger, when prices recover.

    These roughnecks continue to work through tough economic times in the Bakken. This rig is one of three drilling rigs still operating for Hess. Two years ago that number was 17.

    To make those numbers work, Hess has tightened production budgets and found ways to supplement income.

    "We've been here a long time we intend to be here for the long run. We are looking to sustain our capabilities through this knowing the prices will go up eventually," said Vice President of Bakken Operations for Hess Corporation, David McKay.

    McKay says one of the ways Hess is riding out the current economic challenges is by tapping into other sources of energy that go up in flames.

    "We got more and more of our gas out of flaring and into pipeline and that's been a big boom for us and the wells we've drilled are really productive wells," said McKay.

    Even with the reduced rig count in the Bakken, Hess has had no layoffs in their production operations.

    "As a whole we've maintained a base and the production operations we actually now have a very large base of wells we need to maintain and operate so I actually have a couple vacancies in my staff we are looking to fill," said McKay.

    McKay says the company has a total of 1,400 wells producing approximately 140,000 barrels of oil per day.

    Efficiency due to advanced technology has also played a role in maintaining current output. Back in 2011 it use to take about 35 days to drill one horizontal hole, which is two miles deep and two miles out. Now it only takes up to 15.

    "We absolutely intend to maintain that core capacity so that when we come back up it's an orderly, safe, and economical ramp back up," said McKay.

    No one knows when the recovery will begin, but Hess is confident that day will come. Because of the increases in productivity they've had to implement when prices rebound.

    When oil prices come back McKay expects Hess Corporation's Bakken wells will be even more profitable than before.

    Hess has maintained steady production despite the slowdown. McKay says oil prices will have to rebound to $60 a barrel before they consider adding more rigs in the Bakken.

    http://www.kfyrtv.com/home/headlines/Hess-Corporation-Avoids-Layoffs-Maintains-Operations-Despite-Downturn-380188081.html
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    Freeport's oil and gas business scraps IPO


    Freeport-McMoRan Inc's oil and gas business has withdrawn its initial public offering as weak oil prices dent valuations of oil producers.

    Oil prices have slumped 24 percent since the unit filed for the offering in June 2015.

    The unit did not specify a reason for pulling the IPO.

    Freeport, the biggest U.S.-based copper miner, was looking to sell a minority stake in the wholly owned oil and gas subsidiary to raise funds for project development. (reut.rs/1W70iE4)

    The miner said earlier this month that it was in talks to sell more of its assets to reduce its debt to $10 billion over the next two years.

    Most recently, the miner agreed to sell its majority stake in the Tenke copper project in the Democratic Republic of Congo to China Molybdenum Co Ltd (603993.SS) for $2.65 billion in cash.

    http://www.reuters.com/article/us-freeportmcmoran-oil-ipo-idUSKCN0YB2N6
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    Eight shuttered work camps reopening in Canada's scorched oil lands


    Authorities in Canada have announced the reopening of eight shuttered work camps south of the wildfire-ravaged oil town of Fort McMurray, paving the way for energy firms to restart production.

    Municipal authorities announced Sunday evening a "phased re-entry" for camps near Nexen's Long Lake and ConocoPhillips's Surmont facilities, both of which have stopped production due to the fire.

    "Assessment work to return ... camps to operations may begin immediately," the Regional Municipality of Wood Buffalo, which oversees Fort McMurray, said in a statement.

    The municipality is also reopening camps near Enbridge Inc's Cheecham terminal, which the company has said was returning to full service.

    It is not immediately clear when any of the oil facilities themselves will be fully operational. A ConocoPhillips spokesman said the company does not yet have a timeline. Nexen and Enbridge did not immediately respond to requests for comment.

    The inferno in northern Alberta, which by Sunday evening was more than 500,000 hectares, has caused the evacuation of Fort McMurray's entire population of nearly 90,000 since it began early this month.

    It also caused the evacuation of oil facilities and work camps around the city and triggered a prolonged shutdown that has cut Canadian oil output by a million barrels a day.

    Producers have since signaled a gradual increase in operations as rain and cold weather helped firefighters beat back the flames.

    The announced re-opening of the work camps came two days after the municipality lifted the evacuation orders on Suncor Energy Inc and Syncrude oil sites and some nearby work camps north of Fort McMurray.

    It is unclear when either will resume full production, though Suncor has said a limited number of staff will be back at some of its sites on Monday at the earliest and that all will return "in a phased manner over the next few weeks".

    Some of the evacuees from Fort McMurray may be allowed to return as soon as June 1, if air quality improves and other safety conditions are met.

    http://www.reuters.com/article/us-canada-wildfire-idUSKCN0YE05R
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    Alternative Energy

    India implements new 40 GW rooftop, small PV plant program


    India's solar market has long been dominated by large utility-scale projects but the government is now looking to boost rooftop solar in the country with an ambitious new initiative.

    India offers subsidy schemes for rooftop solar in residential, social and institutional sectors but not in the industrial and commercial sectors.
    Flickr/fredericknoronha

    India has unveiled a new grid-connected rooftop and small solar power plant program with the aim of installing up to 40 GW of grid interactive rooftop solar (RTS) PV plants by 2022.

    The new program follows recent news that India’s total installed PV capacity had surpassed the 7 GW mark.

    India’s Ministry of New and Renewable Energy (MNRE) said Thursday that as part of its new rooftop and small PV plant initiative, RTS plants would be set up in residential, commercial, industrial, institutional, government and state-owned enterprise sector ranging from 1 kW to 500 kW capacity.

    Until now, 26 of India’s 36 states and territories have net/gross metering regulations. In addition, the government offers a 30% subsidy scheme for RTS projects in residential, social and institutional sectors and a 15 to 25% incentive for projects in the government and state-owned enterprise (public sector undertaking, or PSU) sector. Accordingly, the MNRE-run Solar Energy Corporation of India (SECI) is processing tenders for 500 MW and 1 GW, respectively.

    However, India currently offers no government subsidies or incentives for RTS projects in the industrial and commercial sectors. As a result, the MNRW is counting on the participation of the private sector through channel partners, which it sees as “crucial.”

    “Channel partners are expected to participate and liaise with units in industrial and commercial sectors to take up RTS projects where consumption is more than RTS generation,” the MNRE said.



    Read more: http://www.pv-magazine.com/news/details/beitrag/india-implements-new-40-gw-rooftop--small-pv-plant-program-_100024678/#ixzz49BjeFiNP
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    Portugal runs on 100% renewables for 4 days


    One hundred per cent renewable resources helped power Portugal for four days last week.

    According to a report from Portugal sent to CleanTechnica, hydro, wind, and solar power helped push the European country to run on 100 per cent renewable electricity for 107 hours straight.

    The article said that, from May 7 at 6:45 am, to 5:45 pm on May 11, Portugal’s electricity use was powered by only wind, solar, and hydro sources.

    “If rain and wind allow these records in the spring, it is imperative to encourage and assess the sun’s energy use of capital gains and thus ensure that in the summer too we will have significant contributions from energy sources not gas stations pollutants,” environmentalists from the country noted.

    Notably, this is all with rather weak and limited connections to other grids.

    “These data show that Portugal can be more ambitious in a transition to a net consumption of electricity from 100% renewable with huge reductions of emissions of greenhouse gases, which cause global warming and consequent climate change,” said Portugal’s Sustainable Land Association (ZERO), which worked with the Portuguese Renewable Energy Association (APREN) to analyze data from the National Energy Network (REN) in order to announce this new record.

    Both ZERO and APREN also said electric vehicles should have emphasis in helping to transition towards a low-carbon economy, as they are now the main sector responsible for Portuguese emissions.

    Portugal has some great renewable energy sources. Portugal’s solar potential is very strong, but so are its wind and hydro resources.

    http://reneweconomy.com.au/2016/portugal-runs-on-100-renewables-for-4-days-29784
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    Massive new £2.6billion Beatrice windfarm gets go-ahead off Scottish coast


    A consortium of developers led by SSE have committed the final investment decision for the 588MW 84-turbine Beatrice offshore wind farm in Scotland.

    New windfarm expects to provide an average annual gross employment in Scotland of over 890 jobs during construction and is one of Scotland’s largest private infrastructure projects.

    The project is expected to power roughly 450,000 homes; approximately three times the number of homes in the Moray and Highland regions.

    The consortium, SSE (40%), Copenhagen Investment Partners (35%) and SDIC Power of China (25%) – have given the go-ahead to the 84-turbine, £2.6bn project in the outer Moray Firth off Caithness.

    The wind farm is being developed with a tier 1 supply chain comprising Seaway Heavy Lifting, Subsea 7, Nexans and Siemens and is expected to deliver an estinated £680m into the UK and Scottish economy via employment and supply chain opportunities during the construction phase and arything between £400m – £525m during the wind farm’s 25 year operational life.

    Work at the operations and maintenance facility in Wick and the transmission works in Moray will commence this year. Offshore construction will begin in 2017.

    Siemens 7MW turbines will generate the power. Siemens has formed a consortium with Nexans to deliver the project’s grid connection work.

    SSE director of renewables Paul Cooley said: “We are delighted that Beatrice has achieved financial close and we are extremely grateful for all of the support received throughout the development of the project from stakeholders such as the Scottish government, DECC, HIE, the Highland Council, Moray Council and local communities.

    “Contracts have already been placed with many UK based suppliers, and Siemens intend to undertake turbine blade construction from its new manufacturing facility in Hull.”
    Wick will serve as the project’s O&M base.

    Around £10m of investment is planned at Wick Harbour to house the wind farm’s operations and maintenance facilities and improving the existing RNLI facilities.

    SSE expects a peak of around 65 jobs during construction of the O&M base with around 90 long-term jobs anticipated during the operational phase.

    SHL/Subsea 7 have secured the EPCI contract at Beatrice worth more than $1.3bn.

    The scope of work includes turbine foundation and array cable installation as well as the transport and installation of transmission modules.

    The company will use heavylift vessels Stanislav Yudin and Oleg Strashnov on the job.

    SHL chief executive Jan Willem van der Graaf said: “The Beatrice project is a major step forward in achieving our ambition to be a leading EPCI contractor in the offshore renewables industry.”

    https://www.energyvoice.com/otherenergy/110145/new-2-4billion-mega-windfarm-gets-go-ahead-scottish-coast/
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    Agriculture

    Bayer sets $62 billion cash offer for Monsanto



    German drugs and chemicals group Bayer AG said it had made an offer to buy U.S. seeds company Monsanto Co for $122 per share in cash, or a total value of $62 billion, to create the world's biggest agricultural supplier.

    Bayer said on Monday that the offer represented a 37 percent premium over the closing price of Monsanto shares on May 9, before rumors of a planned bid emerged.

    Monsanto had disclosed last week that Bayer had made an unsolicited takeover offer for the group, triggering an investor backlash in which one of the German pesticides and drugs company's major shareholders called the move "arrogant empire-building".

    Bayer's offer values Monsanto at 15.8 times its 12-month earnings before interest, tax, depreciation and amortization (EBITDA) as of Feb. 29.

    Bayer said it planned to finance the deal with a combination of debt and equity, which would include a rights offering.

    It expects annual earnings contributions from synergies of around $1.5 billion after three years, plus additional future benefits from integrated offerings.

    http://www.reuters.com/article/us-monsanto-m-a-bayer-idUSKCN0YE0DZ
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    Tanzania to begin building $3 bln fertiliser plant this year


    Tanzania said on Friday it plans to start building a $3 billion fertiliser factory in partnership with a consortium of investors from Germany, Denmark and Pakistan this year.

    "The factory will use natural gas to manufacture fertiliser and will be built in joint venture with a group of investors," the president's office said in a statement.

    The east African country said in February that an additional 2.17 trillion cubic feet (tcf) of possible natural gas deposits has been discovered in an onshore field, raising its total estimated recoverable natural gas reserves to more than 57 tcf.

    Natural gas is one of the hydrocarbon sources of Ammonia, a key fertiliser ingredient.

    "The plant, which will become Africa's biggest fertiliser producer, will have a capacity of producing 3,800 tonnes per day and will employ up to 5,000 people," the statement said.

    The plant will built in southern Tanzania near big offshore gas finds is expected to be commissioned in 2020.

    Officials said the state-run Tanzania Petroleum Development Corporation (TPDC) has signed a joint venture agreement with German firm Ferrostaal Industrial Projects, Danish industrial catalysts producer Haldor Topsoe and Pakistan's Fauji Fertilizer Company to develop the plant.

    Fertiliser produced by the plant will be used to boost agriculture output in Tanzania, while surplus capacity will be exported to foreign markets.

    Tanzania currently imports most of its fertiliser.

    Agriculture contributes more than a quarter of Tanzania's gross domestic product (GDP) and employs around 75 percent of the labour force, but growth is stifled by low crop yields.

    http://www.reuters.com/article/tanzania-investment-idUSL5N18H192
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    Base Metals

    Sluggish Chinese demand, new battery tax weighs on lead


    Lead, the worst performing industrial metal on the London Metal Exchange this year, is set to stay under pressure due to weak demand in China, where a new tax has been slapped on lead-acid batteries and authorities are cracking down on electric-bikes.

    Lead depends on lead-acid batteries for about 80 percent of demand in top consumer China.

    The global lead market saw its surplus more than double in the first quarter to 29,000 tonnes from 13,000 tonnes in the same period last year, data showed this week.

    "This year demand looks more worrying. And that's the key reason we remain relatively bearish towards lead's price outlook," said analyst Wenyu Yao at consultancy Thomson Reuters GFMS.

    Benchmark lead futures on the London Metal Exchange (LME) have shed 5 percent so far this year to around $1,700 a tonne compared with a 17-percent jump in prices of zinc, the best LME performer.

    Yao said the lead-acid battery sector in China has been struggling due to heavy price competition and was further hit after the country imposed a tax of 4 percent in January on batteries, with cleaner types such as nickel-hydrogen and lithium-ion batteries exempt.

    Also weighing on lead is a crackdown by Chinese municipal authorities on electric or e-bikes, which account for about one-third of Chinese demand for lead-acid batteries, amid some concerns about the bikes' impact on road safety.

    Guangzhou is proposing a ban on e-bikes while other large cities are hunting down e-bikes that fail to meet regulations, Yao told the Reuters Global Base Metals Forum.

    An indication of lacklustre demand in China has been trade data, which show a 120 percent surge of net exports of refined lead in the first quarter.

    The strongest period for lead is when battery makers stock up in the run-up to winter, when cold weather can cause failure of batteries, forcing people to buy replacements.

    "Lead is not that bad fundamentally, however, I think it's a relatively balanced market, so I don't think the price will fall out of bed," Bhar added.

    http://www.reuters.com/article/lead-outlook-idUSL5N18E49D
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    Hongqiao starts China's first overseas alumina production in Indonesia


    China Hongqiao Group, the world's largest aluminium producer by capacity, formally commenced its 1 million tonne per annum alumina production line in Indonesia's Borneo on Saturday, in a bid to boost the production capacity cooperation between China and Indonesia.

    The production line is part of the 2 million-tonne-a-year smelting plant with a total investment of 1 to 1.5 billion U.S. dollars which is operated by PT Well Harvest Winning Alumina Refinery, a joint venture which Hongqiao holds a 56 percent stake.

    The factory, integrated with a self-produced power plant and seaport in West Kalimantan Province's Ketapang Regency, processes local bauxite into alumina, a material for production of aluminium.

    Zhang Shiping, Hongqiao's president, said at the opening ceremony that the plant is Hongqiao and China's first overseas investment in alumina refining as well as the first alumina factory in Indonesia.

    Sun Xiushun, president of Winning International Group, the shipping arm and shareholder of the joint venture, told Xinhua that the alumina will be mainly used to supply the raw material needs of Indonesian local smelters while the remaining will be exported to China, the Middle East and other regions.

    Indonesia, the world's main nickel ore exporter and supplier of bauxite, banned raw ore export in early 2014 to encourage the building of smelters and shift exports from raw materials to higher-value products.

    Hong Kong listed Hongqiao aims to produce 6 million tonnes of aluminium by the end of 2016, from 5.19 million tonnes last year. Hongqiao enjoys a much lower production costs than its rivals as it has its own power plants, in-house upstream materials and other production facilities.

    http://en.chinamining.com.cn/Investment/2016-05-23/1463971060d76429.html
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    Steel, Iron Ore and Coal

    "Everything Is Plunging" - China Commodity Carnage Continues


    Hot on the heels of Trumpian-size tariffs imposed by The Obama administration on a desperately glutted and mal-invested steel industry, the entire panic-buying "well the market is always right", "China is recovering" narrative based rally in Chinese commodities has crashed back down to earth with an incredible thud. As one veteran trader in the China commodity markets put it"everything is plunging... except cotton," with Iron Ore, and Rebar down 7% today...

    At least one industry executive "got it" - Baosteel's Zhang: "The price rebound is not beneficial to the overcapacity situation.... It will delay the shutdown of (inefficient) capacity."

    How right he was...

    Dalian Iron Ore has collapsed 30% in a month, down 7% today...

    Steel Rebar has crashed 32% in a month, down 5% today... (it seems the brief BTFD support has completely collapsed)...

    Hot Rolled Coil -28% in a month, down 6% today...

    Makes one wonder what the world's only marginal-buyer-of-crude could do 'retaliate' to a nation imposing tariffs like that which is also dependent on a bounce in oil prices to supports its 'wealth-creating' stock market?

    http://www.zerohedge.com/news/2016-05-22/eveertyhing-plunging-china-commodity-carnage-continues
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    No coal shortages for power plants in India: minister


    There are no power plants in India currently facing coal shortages due to an increase in domestic coal output, Power and Coal Minister Piyush Goyal said Friday.

    "Today, not a single power plant faces a shortage of coal," Goyal was quoted as saying in a statement issued by the ministry.

    Goyal also made reference to the power crisis of 2014 when two-thirds of major power plants had critical coal stocks of less than seven days.

    The government has completely eliminated coal shortages in the country, the minister said.

    In line with achieving the target of doubling coal production to 1 billion mt by 2020, the last two years saw the highest ever growth in coal production of 74 million mt, he said.

    As of May 18, not a single coal-based power plant of the 100 plants monitored by the Central Electricity Authority (CEA) has a coal deficit. A year ago 11 plants had coal stocks of less than seven days.

    On May 18, 2014, 43 power plants had less than seven days of coal stocks, according to CEA data.

    Indian state-run Coal India Limited (CIL), which accounts for over 80% of the country's domestic coal production, produced 536 million mt of coal during the last fiscal year that ended March 31 against a target of 550 million mt, registering a growth of 8.5% year on year.

    At present around 50 million mt of coal stocks are lying at various CIL coal mines, according to sources. For the current fiscal year, CIL has a target of 598.60 million mt. Of this, around 540 million mt will be supplied to power utilities.

    http://www.platts.com/latest-news/coal/newdelhi/no-coal-shortages-for-power-plants-in-india-minister-27585642
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    Shanxi to select two state-owned mines as experimental withdrawal


    Shanxi will select two mines at Shanxi Coking Coal Group and Yangquan Coal Industry Group by the end of June as experimental withdrawal ofmine capacity to accumulate experience for future work, the provincial government said on May 18.

    The move, part of the government efforts to address overcapacity, was announced in a detailed measures for the optimization of retained capacity and withdrawal of excess capacity in the coal industry.

    The provincial government, however, didn’t elaborate on which mine will be chosen for trial and how big its capacity could be.

    Earlier, Shanxi said it will phase out 100 million tonnes of capacity within 2016.

    The provincial government has said it will strictly control newly added mine capacity, and stop approving new mine projects and technological transformation project of newly added capacity.

    For mine projects under construction with approval, they should be designed in line with the 276-workday requirement, or 84% of the previously approved capacity, which was based on 330 working days.

    Shanxi will shut down a batch of mines according to law, including phasing out mines built in natural reserve areas and water conservation districts by the end of this year. Coal mines with annual capacity below 600,000 tonnes and major accidents occurred will be shut within 1-3 years.

    It will also close "zombie" mines, mines with depleting resources, high-sulphur and high ash mines and badly insolvent mines.

    The province is also to slim down the bloated coal sector by consolidating mines, replacing existing mines with new ones of the same capacity, and postponing construction and production at some mines.

    Shanxi produced 202.19 million tonnes of coal in the first quarter this year, down 2.2% year on year.

    http://en.sxcoal.com/0/146366/DataShow.html
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    South Korea Apr thermal coal imports down 9pct on year


    South Korea imported 7.28 million tonnes of thermal coal in April, falling 9% year on year and down 7% from March, according to the latest customs data.

    Of the total, 6.71 million tonnes was bituminous coal, while the remaining 565,499 tonnes was sub-bituminous coal.

    For the first four months of 2016, South Korea imported 30.57 million tonnes, down 2% on the year.

    The highest volume of imported thermal coal in April stood at 3.23 million tonnes from Australia, rising 14% on year but down 9% from March’s three-month high.

    Imports from Indonesia in April fell 22% year on year to 2.52 million tonnes, the lowest level since November. The volume was also down 13% from the previous month.

    Imports from Russia in April slipped 19% year on year and 7% month on month to 1.09 million tonnes, a six-month low.

    http://en.sxcoal.com/0/146502/DataShow.html
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    Hebei Mar coal output down 11.1pct on year


    Eastern China’s coal-rich Hebei province produced 6.47 million tonnes of raw coal in March, falling 11.09% year on year, the latest data from the provincial Coal Industry Association showed.

    Washed coal output stood at 3.36 million tonnes in March, climbing 2.14% on year, data showed.

    In the first quarter of the year, the province produced 18.85 million tonnes of raw coal, down 6.65% on year, while washed coal output down 1.27% on year to 9.38 million tonnes.

    The province sold 16.44 million tonnes of commercial coal in the first quarter, down 0.66% year, with March sales up 5.54% to 6.37 million tonnes.

    Over January-March, commercial coal sales price at Hebei’s key state-run mines averaged 282.51 yuan/t, steady from December 2015 while slumping 22.19% from the same period last year.

    Specifically, sales prices of washed coking coal fell 21.62% on year to 489.42 yuan/t; that of washed thermal coal dropped 20.17% to 404.64 yuan/t.

    By end-March, coal stocks at Hebei’s mines stood at 3.74 million tonnes, down 28% on month.

    In the first quarter, combined fix-assets investment from Hebei’s two leading producers – Kailuan Group and Jizhong Energy – decreased 20.85% on year to 1.1 billion yuan ($169.4 million), with investment in Kailuan and Jizhong down 12.56% and 26.79% respectively.

    Besides, total coal industry output value slid 11.1% on year to 17.64 billion yuan; total loss in the sector stood at 553 million yuan, compared with a 741 million yuan loss in the same period last year.

    http://en.sxcoal.com/0/146498/DataShow.html
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    Vale readies for iron ore price war


    On Friday the Northern China benchmark iron ore price was unchanged at $55.70 per dry metric tonne according to data supplied by The Steel Index. After a steep selloff over the first two weeks of May, the resilience of the 62% Fe CFR Tianjin port assessment has come as a surprise to many industry observers.

    While down sharply from its April high of $68.70 as the made-in-China speculative bubble in the steelmaking raw material reached its peak, iron ore is holding onto 50% gains from a more than eight-year low struck mid-December.

    This will present some pressure in terms of price, but we'll be on the left side of the curve

    But now top producer Vale, speaking to an annual industry gathering in Singapore, is warning competitors that the rally is unsustainable and according to global director of iron ore marketing and sales Claudio Alves the Brazilian giant is "prepared to operate at any price level"reports Bloomberg:

    “We’ll have to prepare for tougher periods. We still see some additional capacity coming into the market.

    "This will present some pressure in terms of price […] but we'll be on the left side of the [cost] curve.”

    Vale's not-so-secret weapon in the current and coming price wars is called S11D. The $17 billion Carajas Serra Sul mine expansion and railway project in northeastern Brazil is 85% complete. According to Alves, S11D may produce between 30 million and 40 million metric tonnes next year and reach 80% of capacity by 2018.

    Vale told investors S11D would push the company's cash costs per tonne to below $10 from the current $12.30

    The following year the complex in Pará and Maranhão states should produce at full tilt – that's more than 90 million tonnes a year. That compares to Rio de Janeiro-based Vale's overall target of 340–350 million tonnes in 2016.

    Last year Vale told investors S11D would push the company's cash costs per tonne to below $10 from the current $12.30. Another factor in Vale favour are freight rates for dry-bulk carriers which recently fell to a record low.

    According to Steel Index data the Brazil–China route adds only $8.30 cost per tonne and implied free-on-board price in Brazil at the moment is a healthy $47.70 a tonne and compares well with Australian FOB prices of $51.45 as of Friday.

    Vale's landed cost in China for fines and pellets is $28 a tonne, not far off its Pilbara competitors. Vale's recent deal with world number four producer Fortescue Metals adds another competitive  edge to the Brazilian giant (the relative underperformance of the real also helps).

    According to an estimate by investment bank Jeffries combining Vale's high Fe-content fines (for which it does not receive enough of a premium at the moment) with FMG's lower quality ore will add a net $2–$4 a tonne to its value.

    http://www.mining.com/vale-readies-iron-ore-price-war/
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