Mark Latham Commodity Equity Intelligence Service

Friday 27th May 2016
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    Oil and Gas


    Mozambique said to be hours away from default as talks stall

    Mozambique is hours away from defaulting on its debt as talks about rescheduling a loan from Russia’s VTB Bank PJSC to a state-owned company falter, according to a person familiar with the situation.

    A grace period for a state-guaranteed loan given to Mozambique Asset Management after it missed a May 23 deadline to make a $178 million interest payment will end Thursday, said the person, who asked not to be identified because they’re not authorized to discuss the matter publicly. The company has about five hours left before the grace period expires, the person said at 11.37 a.m. Maputo time.

    A person who answered the phone at Mozambique’s Finance Ministry referred questions to a phone number that didn’t connect, while a second call was cut off when Bloomberg called four times seeking comment. Finance Ministry spokesman Rogerio Nkomo didn’t immediately respond to an e-mailed request for comment.

    A government official said on May 24 the government is unwilling to convert the loan extended to MAM into sovereign debt to avoid a default. A failure by MAM to reschedule the loan by the end of the day may trigger a sovereign default by Mozambique on its other obligations, including its $727 million Eurobond due in January 2023 and a $622 million loan made to state-owned Proindicus, the person said.

    The Proindicus loan and the $535 million MAM facility are among $1.4 billion of debt that the Mozambican government had previously kept hidden before disclosing their existence to the International Monetary Fund last month. While Proindicus made a $24 million interest payment on its debt on March 21, Finance Minister Adriano Afonso Maleiane said last week MAM won’t be able to honor its interest payment.
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    Panama Canal suspends third draft restriction indefinitely

    The Panama Canal Authority has suspended a third draft restriction for vessels transiting the canal indefinitely, due to the "arrival of the rainy season," it said in a shipping advisory.

    As a result, the maximum authorized draft for transiting vessels will remain at 11.74 meters (38.5 feet) "until further notice", the authority, also known as the ACP, said in the Wednesday advisory.

    The third draft restriction was originally scheduled to start on May 9, but was postponed twice -- first to May 25 and then to June 6 -- due to recent rainfall in the area.

    This is the third in a series of recent curbs at the canal that began April 18 due to El Nino-related droughts in the region -- the first such restrictions in nearly 20 years.

    Usually, the maximum allowable draft for vessels transiting the canal is 12.03 meters (39.5 feet).
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    Trump vows to undo Obama's climate agenda in appeal to oil sector

    Donald Trump, the presumptive Republican presidential nominee, promised on Thursday to roll back some of America's most ambitious environmental policies, actions that he said would revive the ailing U.S. oil and coal industries and bolster national security.

    Among the proposals, Trump said he would pull the United States out of the U.N. global climate accord, approve the Keystone XL oil pipeline from Canada and rescind measures by President Barack Obama to cut U.S. emissions and protect waterways from industrial pollution.

    "Any regulation that's outdated, unnecessary, bad for workers or contrary to the national interest will be scrapped and scrapped completely," Trump told about 7,700 people at the Williston Basin Petroleum Conference in Bismarck, the capital of oil-rich North Dakota. "We're going to do all this while taking proper regard for rational environmental concerns."

    It was Trump's first speech detailing the energy policies he would advance if elected president. He received loud applause from the crowd of oil executives.

    The comments painted a stark contrast between the New York billionaire and his Democratic rivals for the White House, Hillary Clinton and Bernie Sanders, who advocate a sharp turn away from fossil fuels and toward renewable energy technologies to combat climate change.

    Trump slammed both rivals in his speech, saying their policies would kill jobs and force the United States "to be begging for oil again" from Middle East producers.

    "It's not going to happen. Not with me," he said.

    Trump's comments drew quick criticism from environmental advocates, who called his proposals "frightening."

    "Trump’s energy policies would accelerate climate change, protect corporate polluters who profit from poisoning our air and water, and block the transition to clean energy that is necessary to strengthen our economy and protect our climate and health," said Tom Steyer, a billionaire environmental activist.

    "It’s simple. If Trump wins, oil field workers will be happy. If Clinton wins, oil workers will be unhappy," said Derrick Alexander, an operations manager at oilfield services firm Integrated Productions Services.

    Trump hit Clinton hard in his speech, saying the former secretary of state would be more aggressive than Obama on regulations. He repeated several times Clinton’s March comments that her policies would put coal miners out of work.

    "Hillary Clinton's agenda is job destruction," Trump said.

    Trump said slashing regulation would help the United States achieve energy independence and reduce America's reliance on Middle Eastern producers. "Imagine a world in which oil cartels will no longer use energy as a weapon," he said.

    The United States currently produces about 55 percent of the oil it uses, with another quarter of the total coming from Canada and Mexico, and less than 20 percent coming from OPEC, according to U.S. Energy Department statistics.

    Trump's advisers, including U.S. Representative Kevin Cramer of North Dakota, have said they suggested Trump examine the role of OPEC in the global oil price slump since 2014, which has contributed to the demise of a handful of smaller U.S. oil companies. Saudi Arabia and other OPEC members have declined to cut production to support prices.

    Until Thursday, Trump had been short on details of his energy policy. He has said he believes global warming is a hoax, that his administration would revive the U.S. coal industry, and that he supports hydraulic fracturing - an environmentally controversial drilling technique that has triggered a boom in U.S. production.

    Earlier this month, he told Reuters in an interview that he would renegotiate "at a minimum" the U.N. global climate accord agreed by 195 countries in Paris last December, saying he viewed the deal as bad for U.S. business.

    He took that a step further in North Dakota. "We're going to cancel the Paris climate agreement," he said.
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    US Government Quietly Cuts Historical Capex Data By Billions Of Dollars

    As it turns out, the Department of Commerce decided to quietly revise all the core data going back all the way back to 2014. In doing so it stripped away about 4% from the nominal dollar amount in Durable Goods ex-transports, where the March print was slashed from $154.7 Billion to $148.3 Billion...

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    ... and, worse, the government just confirmed what many had said for years, namely that capex spending had been far lower than reported all along when it revised the capital goods orders nondefense ex-aircraft series lower by a whopping 6%, taking down the March print from $66.9 billion to only $62.4 billion, the lowest absolute number since early 2011.

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    China sets Yuan at lowest rate since 2011

    The People's Bank of China fixed the Chinese yuan to its lowest level since March 2011.

    The PBoC set the midpoint of its yuan fix at 6.5468 per dollar, down 0.34% from Tuesday.

    This decision comes as the central bank looks to soften the blow of a potential Fed interest-rate hike. Members of the FOMC have hinted that the hike could come as early as June 15.
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    China Wants to Set Prices for the World's Commodities

    China has put the world’s traditional financial centers on notice that it wants to develop its raw material markets as hubs for setting prices, seeking to marry the country’s commercial heft with a much greater say in determining how much commodities cost.

    “We’re facing a chance of a lifetime to become a global pricing center for commodities,” Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Shanghai Futures Exchange’s annual conference in the city on Wednesday. “On the way to realize this goal, we’ll see very intense competition. We have the advantage of trading size and economic growth, but our legislation is still not sound and we lack enough talent.”

    China is the world’s largest user of metals and energy, but its traders and companies rely on financial centers outside the country -- typically London and New York -- to set benchmark prices for most of the commodities they handle and consume. While raw materials trading in the nation remains largely off-limits to overseas investors -- who also face currency restrictions -- China has long pledged to open up. Fang vowed to press on with that process, while also seeing tough challenges from rival centers as it does so.

    ‘Starting Point’

    “We plan to use crude oil, iron ore and natural rubber futures as the starting point in our efforts to open the domestic market to more foreign investors,” Fang told the audience. China shouldn’t underestimate “the determination of current pricing centers to maintain their status,” he said.

    Raw-material futures markets in Asia’s top economy became a focal point earlier this year after being engulfed in a speculative frenzy, with a rapid run-up in prices and unprecedented volumes in March and April. The outburst prompted a crackdown from the CSRC and exchanges, which tightened rules and raised fees. The intervention was successful, and for China to now expand its role as a global center, effective supervision is critical, according to Fang.

    “Recently, we experienced huge volatility and trading volumes in some commodity futures,” said Fang. “We supervised the exchanges to take measures, which have seen a notable effect.”

    Data from the three biggest commodity exchanges in China show that aggregate volumes are less than half of what they were at the peak of the fever. Still, Chinese speculators will probably continue to seek very short-term commodity exposure thanks to easy credit access and the poor performance of alternative investments, according to Morgan Stanley.
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    Brazil's new government loses key minister to scandal

    Brazil's interim government was rocked on Monday by the loss of one of its key figures, Planning Minister Romero Juca, who stepped aside amid accusations he had conspired to obstruct the country's biggest-ever corruption investigation.

    Interim President Michel Temer was counting on Juca, a close confidant and experienced senator, to steer a budget bill through Congress to avoid a government shutdown next month.

    However, a recording of his conversation with a suspect in the investigation threatened to stain the new, center-right administration, already unsettled by a series of policy reversals during its first week in office.

    The scandal weakened Brazil's currency on fears of further instability less than two weeks after President Dilma Rousseff was suspended to stand trial in the Senate for allegedly breaking fiscal laws, leaving former Vice President Temer to lead the country.

    "Starting from tomorrow, I will step aside," Juca, appointed by Temer after Rousseff's suspension, told reporters in Brasilia. He denied any wrongdoing and insisted that his recorded comments had been distorted and taken out of context.

    In the recording, made before Rousseff was put on trial and published by newspaper Folha de S. Paulo on Monday, Juca told a friend he agreed on the need for a "national pact" to limit the graft probe rattling the political establishment.

    Asked for help by his ally, ex-senator Sergio Machado under investigation in the probe, Juca replied: "The government has to be changed in order to stop this bleeding," Folha reported, adding that the conversations were taped "secretly."

    Juca said the conversation happened either at his home or at his office but it was not clear how the hour-long recording was made. Local media reported it may be connected with Machado who has been negotiating a plea bargain deal with prosecutors. Machado was not immediately available for comment.

    Juca and other ministers in Temer's new government are under investigation for their alleged roles in the massive bribery scheme stemming from state-run oil company Petrobras.
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    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

    Saudi Aramco says discovers new fields, to continue energy investments

    Saudi Arabia's state oil giant Aramco discovered new oil and gas fields last year and the kingdom is committed to continue investing in its energy sector to meet future demand, its new energy minister said.

    Khalid al-Falih, who was appointed energy, industry and mineral resources minister on May 7 and is also Aramco's chairman, said that despite low oil prices, the company has reached record levels of oil production and gas processing.

    "Declining investments by energy producers raise concerns about another cycle of supply constraints and therefore more market volatility," Falih said in Aramco's 2015 annual report.

    "Saudi Arabia ... is committed to sustaining its investments in hydrocarbon-based energy to meet future demand and power sustainable economic growth at home and around the world."

    His comments are a further sign that Saudi Arabia, the world's largest oil exporter, does not intend to restrict supply as it battles for market share with other top producers.

    Aramco, the world's largest oil company, which is preparing a stock market listing to sell a small portion of its shares, has discovered three new oil fields, it said in the report. They are Faskar, offshore in the Arabian Gulf near the Berri field; Janab, east of the Ghawar field; and Maqam, in the eastern Rub’al-Khali.

    It has also found two new non-associated gas fields - Edmee, located west of Haradh, and Murooj in the Empty Quarter.

    The company pumped an average of 10.2 million barrels per day in 2015, a new all-time record. Its exports averaged 7.1 million bpd, up from around 6.8 million bpd in 2014.

    Saudi Aramco remained the No. 1 one crude supplier to six major Asian countries - China, Japan, South Korea, Taiwan, the Philippines, and India - it said in the annual report. Asia accounted for 65 percent of its total oil exports; an increase from 62.3 percent a year earlier.

    "Despite competition from shale oil, the company’s exports to U.S. markets maintained their level of 1 million barrels per day," Aramco said.

    Aramco's CEO told Reuters in an interview on Thursday that the company is gaining market share and pushing for greater efficiency.

    As part of efforts to maximize revenues and expand market share Aramco is building new refineries to secure long-term agreements to sell its crude.

    It said its crude oil and condensate throughput to its domestic wholly owned and joint venture refineries rose 9 percent in 2015, mainly due to the commissioning of its new Jubail refinery, known as Satorp, and the full operation of its Yanbu Sinopec refinery, Yasref.

    Its exports of refined products rose 38 percent last year.

    Aramco said it was moving ahead with its program to explore for gas in the shallow waters of the Red Sea as well as unconventional gas.

    Its proven crude oil reserves were stable at 261.1 billion barrels in 2015, while gas reserves rose to 297.6 trillion standard cubic feet from 294 billion standard cubic feet in 2014.

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    Oman ups tax on LNG companies

    The state of Oman has increased its tax on liquefied natural gas (LNG) companies, according to local media reports.

    The Times of Oman reported on Thursday that the tax has been raised from 15% to 55% in a joint meeting of the State Council and Majlis Al Shura, the country’s Consultative Council.

    Additionally, the Omani newspaper said that Oman approved a 35 percent tax on petrochemical firms. The joint session resulted in a 63 percent vote for the increase of the petrochemical tax, the report said.

    The decision comes on the back of OMR4.5 billion budget deficit. Despite spending cuts and tax increases, Oman’s revenue was severely hit by the drop in oil and gas prices.

    Oman exports chilled gas through Oman LNG, a joint venture company established by a Royal Decree in 1994. The company owned 51 percent by the government, exports LNG from its terminal in Qalhat near Sur with a 10.4 mtpa capacity.

    LNG World News contacted both Oman LNG and Shell that owns a 30 percent stake in the company, seeking comment on the matter, however, no responses have been received by the time this article was published.

    Other shareholders in Oman LNG include Total (5.54%) Mitsubishi Corp. (2.77%), Partex (Oman) Corp (2%), Korea LNG (5%), Mitsui & Co. (2.77%) and Itochu Corporation with a 0.92% stake

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    Seadrill Drops as CEO Says Drillship Firesale Was Overpriced

    The offshore drilling market is in such bad shape that when a rival recently bought a rig for less than a 10th of its new-build cost, it probably overpaid, according to Seadrill Ltd. Chief Executive Officer Per Wullf. Shares in his oil-services company reversed gains to become the biggest losers in Oslo trading.

    Shipping tycoon George Economou paid just $65 million for the 2011 vessel Cerrado last month, but it was still “probably too much” for a rig that hasn’t worked for a year, Wullf said in a phone interview. In the current market, the asset represents a “pure liability.”

    Those comments, which illustrate how the collapse in crude prices has driven down the value of offshore drilling equipment, “would suggest that Wullf thinks that his own stock is grotesquely overvalued,” said Alex Brooks, an analyst at Canaccord Genuity Group Inc. The shares dropped 7.4 percent to close at 27.2 kroner in Oslo after trading up most of the afternoon following the publication of earnings that beat analyst estimates.

    “He’s basically saying that the drilling units are worth about $50 million, or possibly nothing at all, if they haven’t been working recently,” Brooks said in an e-mail. Seadrill’s current share price would imply that similar rigs controlled by the company should be valued at about $175 million each, he said.

    The Cerrado sale, which had been seen by analysts including Brooks as bad news for rig owners and their creditors, won’t have any effect on Seadrill’s current efforts to restructure almost $10 billion in debt, Wullf said earlier. Seadrill wouldn’t be interested in acquiring rigs of this type given its current funding situation and the market outlook, the CEO said.

    “A rig like this, that hasn’t worked for a year, that’s had different owners, it would probably be very hard to justify to pay more than was paid for it -- and it was probably too much, to be honest,” Wullf said. “When you look at stacking cost, classing, reactivation, financing and all that stuff, then I’d rather take a distressed asset from a shipyard.”

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    CNPC Plans Backdoor Listing of Engineering Arm Amid Shakeup

    China National Petroleum Corp., the country’s biggest oil and gas producer, plans a backdoor listing of its engineering assets through a Shanghai-listed petrochemical material supplier and processor it controls.

    Xinjiang Dushanzi Tianli High & New Tech Co., based in western China’s autonomous Xinjiang region, reached a preliminary agreement with CNPC to buy the producer’s engineering assets, according to a statement filed with the Shanghai stock exchange on Thursday. A final decision hasn’t been made, it said.

    CNPC Chairman Wang Yilin said in February the company plans to spin off its oilfield services business amid efforts to become more efficient. The state-run energy giant will be among the firstof the nation’s sprawling government-run enterprises to undergo reforms that will transform CNPC into a strategic holding company and no longer manage day-to-day operations of subsidiaries, people with knowledge of the situation said in March.

    “The capital markets are very much still closed for sizable energy IPOs due to poor market sentiment,” Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong said in an e-mail. “Oil prices have almost doubled from the February bottom, but they remain too low for generating profits for oil companies.”

    Xinjiang Dushanzi is looking at buying engineering assets from CNPC units including China Petroleum Engineering & Construction Corp. and China HuanQiu Contracting & Engineering Corp., it said in the statement. Shares of Xinjiang Dushanzi were suspended in February.

    CNPC rival China Petrochemical Corp. used a similar backdoor-listing strategy to inject oilfield service assets into smaller listed unit Sinopec Yizheng Chemical Fibre Co. in 2014 amid a push by authorities to restructure state-owned companies and allow markets greater sway in resource allocation.

    The China Securities Regulatory Commission has approved just 46 initial public offering applications from more than 700 submitted so far this year, according to data from the commission and information compiled by Bloomberg.
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    Niger Delta Militants Take Entire Chevron Terminal Offline

    According to Nigerian media, militants used explosives to blow up the Escravos terminals main electricity feed pipeline, rendering the terminal inoperable.

    Reuters has also reported that it has received confirmation from company sources that the terminal has been shut down following the attack.

    “It is a crude line which means all activities in Chevron are grounded,” the source told Reuters, without elaborating.

    The attack is being attributed to the Niger Delta Avengers (NDA), the group responsible for a string of recent attacks on oil installations. Reuters cited a tweet ostensibly put out by the group, claiming responsibility for the Escravos attack.

    The Niger Delta Avengers have fiercely stepped up assaults on the likes of Chevron, Shell and Eni in recent weeks. Oil prices have increased over the same time period as the disruptions – combined with the major outages in Canada – have erased the global glut for crude oil.

    Nigeria’s oil production has plunged by 40 percent, falling to just 1.4 million barrels per day, the lowest level in decades
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    Rosneft, Pertamina Sign Deal With Option for New Indonesia Plant

    PT Pertamina, Indonesia’s state energy company, and Russia’s Rosneft OAO signed a cooperation agreement that includes a plan to build a new oil refinery in the Southeast Asian nation, the companies said Thursday.

    Pertamina, which hasn’t built a new refinery since 1997, will be the majority shareholder in the facility at Tuban, East Java, it said earlier this month. The two companies may invest $12 billion to $13 billion in the refinery project which includes a petrochemical unit, Dwi Soetjipto, president director of Pertamina, told a press conference after signing the accord.

    Completion of the Tuban refinery is targeted by the end of 2021, the companies said in a statement. Capital expenditure will be based on the feasibility study and on engineering designs, they said. As part of the deal, Rosneft has offered to share proprietary data and exclusive rights to assess partnership opportunities in upstream oil and gas assets in Russia, they said.

    Aging refineries and declining domestic production have turned Indonesia, a member of the Organization of Petroleum Exporting Countries, into a net oil importer. Expansion of refining capacity, including the construction of new plants, is part of a broader strategy by President Joko Widodo to overhaul the energy industry and reduce costly imports.

    “Focusing strictly on the project, Indonesia won’t mind whether their partner is Russia or Saudi Arabia, as long as they can fund the investment needed to move the project forward,” said Peter Lee, a Singapore-based analyst at BMI Research. Cooperating with Rosneft may help Indonesia diversify its sources of crude as the refinery may secure most of the oil from Russia, he said.

    Pertamina has an agreement with state-owned Saudi Arabian Oil Co. to expand processing capacity at its Cilacap refinery to 370,000 barrels a day from the current 340,000 barrels. The plant will source 70 percent of its crude from the Middle East producer.
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    Cheniere sees first cargo from Sabine Pass Train 2 in August

    Houston-based LNG player Cheniere expects first cargo from the second train at its Sabine Pass liquefaction and export plant in mid-August.

    According to the company’s monthly report filed with the Federal Energy Regulatory Commission, the project progress “supports the substantial completion for Trains 1 and 2 by late May 2016 and September 2016, respectively”.

    Trains 3 and 4 targeted substantial completion dates are April 2017 and August 2017, respectively, with schedule recovery expected in the summer of 2016 as labor resource is transitioned from Stage 1 (Trains 1 and 2) onto Stage 2 (Trains 3 and 4).

    Cheniere revealed that the Train 1 completed performance tests in April while tests continued on the second train. During April pipe pressure testing, air blows, and restoration continued while mechanical runs for the LNG compressors were completed.

    Cheniere shipped the first cargo from Sabine Pass Train 1 in February while the first commercial cargo left the facility earlier this month under the 20-year offtake agreement with Shell.

    Sabine Pass is the first facility of its kind to export U.S. shale gas overseas.

    Cheniere is developing up to six trains, each with a production capacity of approximately 4.5 mtpa of LNG, at the Sabine Pass terminal in Louisiana, adjacent to the existing regasification facilities
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    ONGC’s Profit Rises as Rebounding Oil Reverses Impairments, core earnings remain weak

    Oil & Natural Gas Corp.’s profit rose after two quarters of declines as the company reversed earlier writedowns and as a weakened Indian currency cushioned the slump in crude prices for nation’s biggest energy supplier.

    Net income increased 12 percent to 44.2 billion rupees ($658 million) in the three months ended March 31, the New Delhi-based company said in a statement Thursday. That beat the 23.8 billion-rupee mean estimate from 20 analysts compiled by Bloomberg. Fourth-quarter sales dropped 24 percent to 161 billion rupees.

    ONGC reversed an impairment loss of 8.52 billion rupees as crude rebounded. Brent, the benchmark for half of world’s crude, has climbed more than 70 percent from a 12-year low in January. In addition, the company wrote back 15.48 billion rupees set aside as provisions on some exploratory wells. It also reversed a subsidy paid to state-run oil refiners for selling fuels below cost after the government refunded the money, resulting in a profit before tax of 5.35 billion rupees.

    “The one-off reversals in impairment, subsidy and exploration costs helped the company post profit which was better than estimates, but the core earnings remain weak,” said Sachin Mehta, an analyst at Centrum Broking.

    The state-run company also gained from the rupee’s fall against the dollar. It sells its oil and natural gas in U.S. dollars and gets a sales boost as the Indian currency weakens. The rupee averaged 67.49 a U.S. dollar last quarter, 8.4 percent weaker than the same period a year earlier.

    ONGC’s impairment reversal was based on an increased oil price forecast in the range of $42 to $54 a barrel over the next few years, Chairman D.K. Sarraf said at a post-earnings press conference in New Delhi today. It sold crude oil to refiners including Indian Oil Corp. at $34.88 a barrel last quarter, compared with $55.63 a year earlier and $44.34 in the preceding three months.
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    Oil tankers backed up at southern French port due to strike

    Nearly two dozen vessels were queued outside the French oil import terminal in Fos, southern France on Thursday, held up by a strike organised by the hardline CGT and FO unions over planned labour reforms.

    A spokeswoman for the port of Marseille told Reuters that yesterday 29 oil, LNG and chemicals vessels were waiting between the wharf and harbour on Wednesday.

    This morning, 21 vessels including 12 carrying oil, LNG or chemicals, were waiting. During normal busy operations, about 5 vessels would be waiting, the port authority said.

    CGT port workers and dockers joined the nationwide rolling strike on Thursday and Friday. The stoppages hitting the power, fuel and transport sectors is aimed at forcing the government to withdraw the planned labour reform bill.

    CGT oil refinery and oil depot workers at Fos-Lavera have been on strike since Monday and have blocked oil terminals, preventing some fuel deliveries and leading to shortages.

    The terminals supply PetroIneos Lavera, Total's La Mede and Exxon's Fos refineries on the southern coast.
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    Saudi offers more oil to Asian clients ahead of OPEC meet

    Saudi Arabia is offering extra crude to customers in Asia, a sign the world's largest oil exporter does not intend to cut output as it battles for market share with other top producers.

    Saudi's offers of more oil come after it recently completed maintenance programmes that had reduced supplies from some fields during the second quarter, traders said. The kingdom will also soon increase its Arab Extra Light crude output in an expansion of the Shaybah oilfield.

    But some Asian refiners said they are not rushing to buy more Arab Extra Light after Aramco raised the oil's official selling price (OSP) by 80 cents a barrel in June, making it more expensive relative to similar Abu Dhabi grades.

    In a market that still has the most growth potential and in which many producers, including Iran, Iraq and Russia, are trying to increase sales, that does not portend well for Saudi Arabia as it begins to bring new output online in June.

    "It will be challenging (for Saudi Arabia). One of the things that will come into play is whether they will start cutting OSPs to attract customers and keep volumes intact," said Sushant Gupta, downstream oil analyst at energy consultancy Wood Mackenzie in Singapore.

    State oil company Saudi Aramco plans to ramp up output from the Shaybah field over the next two weeks to 1 million barrels per day (bpd), fully utilising its expanded capacity, Saudi media reported on Thursday, quoting the company's chief executive.

    This month, Saudi Aramco has asked at least two Asian refiners if they will lift more oil in June on top of contract volumes, two trading sources familiar with the matter said.

    However, "their latest OSP is not attractive to refineries," a trader with an Asian refiner said, adding that grades from the United Arab Emirates, of quality similar to Arab Extra Light, were more competitively priced.

    A second trader with an Asian refiner said: "Refining margins are so-so, so I don't think there is a big drive to take more prompt oil."

    Complex refining margins in Singapore have risen slightly from five-year lows touched earlier in May, with ample fuel supplies continuing to cap refiners' profits.

    Iran and Iraq have also said they will increase output, slimming hopes that the Organization of the Petroleum Exporting Countries (OPEC) will agree to any long-term plan to curtail supplies when it meets in Vienna next week.

    Russia's oil shipments to China hit a record in April, as it took the top spot as largest crude exporter - ahead of Saudi Arabia - to the world's No.1 energy consumer for the second time this year.

    Iran said on Sunday it aims to raise its exports to 2.2 million bpd by mid-summer after it cut June prices to Asia to the biggest discounts to Saudi and Iraqi oil since 2007-2008.

    Iraq said its exports have hit an all-time high of 3.9 million bpd on increased output from southern fields, and that it is still on track to triple production by 2020.
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    Cartel or talking shop? OPEC awaits Saudi ruling

    For those seeking guidance on Saudi Arabia's thinking regarding the future of OPEC, the last few weeks' agenda of the new Saudi energy minister, Khalid al-Falih, might offer a few clues.

    Since his appointment on May 7 as head of a new mega-ministry - overseeing energy, industry, mining, atomic power and renewables - Falih has toured six state firms, met the South Korean premier, the Canadian foreign minister and Gulf industry ministers, and opened a gas turbine plant.

    To fellow members of the Organization of the Petroleum Exporting Countries, that speaks volumes. Unlike his predecessor Ali al-Naimi, Falih may not have much time for OPEC. The group meets on June 2, its first talks with the new minister in attendance.

    For oil-price hawks such as Iran, Algeria and Venezuela, fears are growing that the 56-year-old OPEC is losing its role as an output-setting cartel and turning into a talking shop.

    "Saudi Arabia killed OPEC and buried it," a senior OPEC source from a non-Gulf producer said.

    "In OPEC, they go for (including) Indonesia and Gabon to convert OPEC to a forum," the source said, referring to OPEC's decision, supported by Riyadh, to include minor producers.

    As a historic reminder, OPEC last decided to change output in December 2008, when it cut supply amid slowing demand due to a global financial crisis. Between 1998 and 2008, OPEC made 27 changes to output.

    For decades, Saudi Arabia, Vienna-based OPEC's largest producer and de facto leader, had a preferred range for oil prices and, if unhappy, would try to orchestrate a group-wide production cut or increase.

    But a technology-driven spike in non-OPEC output such as that of U.S. shale and growing fuel efficiency led Riyadh to conclude that the era of fast oil growth might be ending.

    Hence, in the past two years Riyadh has stuck to a strategy of fighting for market share, thinking that pumping more oil now at low prices is better than producing less in the future.

    Many OPEC members - apart from Riyadh's allies in the Gulf, such as Qatar, Kuwait and the United Arab Emirates - were unprepared for that shift, with their finances crippled by heavy debts and stagnant production.

    Earlier this year, Iran refused to join an initiative to freeze output but signaled it would be part of a future effort once its production had recovered sufficiently.

    An OPEC watcher said: "Other producers are going to want to come and revive the freeze agreement. Iran is now at pre-sanctions levels. And though the worst has been avoided, the reality is that many of these producers remain under real stress."

    Saudi and Iranian OPEC delegates clashed earlier this month over long-term strategy, with Riyadh saying OPEC should not manage the market and Tehran arguing that the group had been created to perform precisely that task.

    Falih's tasks - his ministry is to oversee half of the economy, not to mention plans for a share listing in state oil giant Saudi Aramco - are likely to divert more of his time away from OPEC.

    "That is going to keep Falih busy and I imagine his priorities will be economic reforms and integrating new portfolios," said Richard Mallinson, geopolitical risk analyst at the think-tank Energy Aspects.

    OPEC has no supply target. At its last meeting in December the group scrapped its output ceiling of 30 million barrels per day, which it had been exceeding for months.

    OPEC sources and analysts say they expect the group's meeting next Thursday simply to roll over output policy, which OPEC lacks anyway as its members pump at will.

    "I don't think there will be a change in position. There will be no agreement on an output freeze," said another OPEC delegate from a key Middle East oil producer.

    For a busy man such as Falih, long discussions among fellow ministers with no guaranteed serious outcome might seem pointless.

    So could he simply stand up and say Saudi Arabia sees no need to remain part of OPEC?

    "Leaving international groups isn't something most countries do lightly. I don't believe the Saudis think OPEC will never be relevant again. Plus, it is hard to see what they would stand to gain from it," Mallinson said.

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    World’s Biggest LNG Buyer Becomes Seller as Gas Glut Builds

    Japan’s Jera Co., one of the world’s largest buyers of liquefied natural gas, agreed to sell the fuel to a unit of France’s Electricite de France SA.

    Jera, a joint venture between Tokyo Electric Power Co. and Chubu Electric Power Co., will sell as much as 1.5 million metric tons of LNG between June 2018 and December 2020, it said in a statementThursday. The price of the LNG will be linked to European gas market prices, according to the statement.

    Jera’s debut as a seller to Europe underscores how the oversupplied market has challenged traditional exporters, who have relied on steady, one-way demand from buyers in countries like Japan, the world’s largest consumer of the fuel. Japan’s new role as a middleman adds further pressure on LNG producers, who are losing bargaining power because of the glut.

    “This deal represents an entry point for Jera into the European market, at a time when the company’s LNG contracts from the U.S. will be ramping up significantly,” Michael Jones, a Singapore-based gas and power analyst at Wood Mackenzie Ltd., said by e-mail. “The demand outlook in Jera’s home market remains uncertain, so EDF gives Jera the ability to offload some flexible U.S. volumes into Europe.”

    Japan’s LNG consumption is expected to fall to 72 million tons in 2020 and 62 million tons in 2030, compared to 85 million tons in 2015, according to data compiled by the government and the International Energy Agency. Global demand is expected to grow by 45 percent between 2014 and 2020, according to a government presentation from earlier this month.

    Chubu Electric Power, along with Osaka Gas Co., struck a deal in 2012 to purchase supplies from the Freeport LNG project in the U.S., which is expected to ship its first cargo in 2018. The agreement doesn’t have a destination clause and the price of the fuel will be based on Henry Hub benchmark.

    “We aren’t just in talks with EDF, we are thinking of cooperating with many different companies,” said Hiroki Sato, vice president of fuel procurement at Jera. “The Asian premium has been shrinking.”

    Attached Files
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    Santos starts up second unit at GLNG

    Oil and gas company Santos has started producing liquefied natural gas (LNG) at the second unit of the GLNG joint venture project, on Curtis Island, in Queensland, marking the successful delivery of the $18.5-billion two-train project. 

    Santos MD and CEO Kevin Gallagher on Thursday described the start-up of train 2 as a milestone for GLNG, which had already produced over two-million tonnes of LNG and shipped 32 cargoes. 

    First LNG production from train 1 occurred in September 2015, with the first GLNG export cargo having been shipped in October. The GLNG project involved the development of gasfields from the Bowen and Surat basins in south-western Queensland and transporting the gas through a 420 km underground pipeline to a two-train LNG plant on Curtis Island, off the coast of Gladstone, with the capacity to produce 7.8-million tonnes a year of LNG at full capacity. 

    Santos’ LNG portfolio also included the Darwin LNG and Papua New Guinea LNG projects. Australian major Santos is the operator and has a 30% interest in the project, while Petronas and Total hold a 27.5% interest each, and South Korea’s Kogas holds the remaining 15%. “GLNG train 2 start-up adds to Santos’ LNG portfolio, which also includes the Darwin LNG and PNG LNG projects,” Gallagher said.
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    Iran Floating Storage Update

    The amount of Iranian oil on floating storage has decreased by

    1.9 M Barrels

    As the Diamend leaves the fleet

    The Current Amount Of Oil Stored

    48.6 M Barrels

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    For Tanker Owners, Shrinking Oil Glut Is Least of Their Worries

    Tanker owners hauling the world’s crude were among the few big winners from an oil-price crash that started in mid-2014. Now for the flip side.

    The slump was caused by most enduring oil glut in a generation, flooding shipping companies with more cargoes than they could handle and driving down fuel costs that are the industry’s biggest expense. Rates got so high that owners embarked on the biggest fleet expansion spree in half a decade. Now, just as that wave of new orders swells the fleet, the glut of crude that lifted rates in the first place is starting to dissipate.

    There will still be lots more oil shipped. About 445 million more barrels will be pumped out of the ground by the world’s producers in 2017 compared with last year, of which about two-fifths moves by sea. The trouble is that, by then, the enlarged fleet will be able to deliver at least an extra 1.5 billion barrels annually.

    "Shipowners rushed to order new tankers to benefit from the surging rates in mid-2014 and 2015,” said Burak Cetinok, senior consultant at Hartland Shipping Services Ltd. in London. “But the market dynamics have changed since then and this huge amount of ships may not have enough crude to carry around. This will of course soften their daily rates.”

    Rates for the three main types of crude tanker will all be lower in 2017 than this year, according to the medians of 12 analyst estimates compiled by Bloomberg for each vessel. The industry’s biggest ships, so-called very large crude carriers or VLCCs, will earn $37,750 a day next year, which would be the least since 2014.

    The fleet of the world’s three biggest tanker types is projected to grow by about 11 percent in the two years through 2017, according to data from Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker. Production of oil will expand by about 1.3 percent over the same period, according to the U.S. Energy Information Administration.

    Hartland estimates 137 crude oil tankers, including 64 VLCCs and 38 Suezmaxes will be delivered this year, Cetinok said. Next year’s deliveries are estimated to be 148, including 47 VLCCs and 63 Suezmaxes, he said.

    The extra tankers will carry an equivalent of about 370 million barrels. Ships normally make between 5 and 12 deliveries a year, depending on their size and trade. The U.S. Energy Information Administration forecasts about 1.2 million barrels a day of more oil will be produced in 2017 compared with last year.

    Rates for oil tankers boomed at the end of 2014 as Saudi Arabia led members of the Organization of Petroleum Exporting Countries in a strategy of defending market share rather than propping up prices. The approach flooded markets with cargoes as the world’s biggest exporter ramped up exports to the highest in decades while shipments from Iraq, the United Arab Emirates and Kuwait also surged.

    Attached Files
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    Militant group purportedly claims new attack in Nigeria's Delta

    A militant group has purportedly claimed a new attack on a Chevron oil facility in Nigeria's restive Delta region, a message on a Twitter feed previously used by the group to take credit for strikes against oil facilities said.

    There was no immediate confirmation of the attack from residents of the area or Chevron.

    A militant group called Niger Delta Avengers has claimed a string of attacks in the southern region which have helped reduce Nigeria's oil output to nearly a 20-year low. "We Warned #Chevron<here but they didn't Listen. @NDAvengers<> just blow up the Escravos tank farm Main Electricity Feed PipeLine," the message on the Twitter account in the name of the group said. The same account was previously used by the group to claim attacks on Chevron and Shell oil facilities.

    The message was tweeted to @reuters and other foreign and local media.

    A Chevron spokeswoman had no immediate comment. It was not possible to get confirmation from residents after the message was issued late on Wednesday night.

    The Avengers, who say they are fighting for a greater share of oil profits, an end to pollution and independence for the swampy southern region, have warned oil firms to leave before the end of the month, according to a series of statements issued on its website or Twitter feed.

    Nigeria has moved in army reinforcements to hunt the militants but British Foreign Minister Philip Hammond said this month President Muhammadu Buhari needed to deal with the root causes of the conflict.

    Crude sales from the Delta account for 70 percent of national income in Africa's biggest economy but residents, some of whom sympathize with the militants, have long complained of poverty.

    Buhari has extended an amnesty deal signed with militants in 2009 that stepped up funding for the region. But he has cut funding for the deal and canceled contracts with former militants to protect the pipelines they used to attack.
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    Third leg of Sacagawea pipeline approved, will be largest pipeline out of the Bakken

    North Dakota regulators on Tuesday approved the third leg of a pipeline that will provide a link across Lake Sakakawea to the $3.8 billion Dakota Access pipeline, which is now under construction and will be the largest crude oil pipeline out of the Bakken.

    During a special meeting, the Public Service Commission voted 3-0 to grant a route permit for Sacagawea Pipeline Co. for a 15-mile, $22.8 million pipeline in McKenzie County.

    Most of the 16-inch-diameter pipeline approved Tuesday will extend from a service site near Johnson’s Corner to the Keene crude oil terminal owned by Paradigm Midstream Services.

    But a supplemental 2-mile-long segment also will extend from the service site to an interconnection with the 1,168-mile Dakota Access pipeline, which will export up to 450,000 barrels per day of Bakken crude to a hub in Patoka, Ill., with a capacity of up to 570,000 barrels per day or more.

    Commissioners said construction began last week on the North Dakota portion of the Dakota Access pipeline, which still needs U.S. Army Corps of Engineers’ approval for water crossings, including two Missouri River crossings. Dallas-based Energy Transfer Partners, the company building the pipeline, expects it to be in service by the fourth quarter of this year, pending regulatory approvals.

    Commissioners granted permits earlier this year for Sacagawea’s $125 million, 70-mile pipeline under Lake Sakakawea and an $18 million, 8-mile leg that will transport oil from the Palermo Rail Facility owned by Phillips 66 to the Enbridge oil terminal in Stanley.

    Commission chairwoman Julie Fedorchak said the pipeline approved Tuesday is expected to initially transport 75,000 barrels per day, with a maximum capacity of 100,000 barrels per day, and will be continuously monitored from a control center in Oklahoma.

    “We’ve given this a thorough review,” she said.

    In total, the Sacagawea pipeline connecting the Dakota Access and Enbridge facilities will have a maximum capacity of 100,000 to 200,000 barrels per day, Fedorchak said. She noted it’s one of the only new pipelines crossing the Missouri River and will be bi-directional.

    “It just offers them the flexibility to get the oil where their customers want it to go,” she said.

    Sacagawea Pipeline Co. is a joint venture between Irving, Texas-based Paradigm Energy Partners, Phillips 66 and Grey Wolf Midstream, which is owned by the Three Affiliated Tribes and is an investor in the project.
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    Shale Boom Royalties Come Back to Bite Chesapeake

    Chesapeake Energy Corp. has agreed to pay nearly US$53 million dollars to settle a suit over unpaid royalties in north Texas, according to Oklahoma state media reports.

    A total of US$29.4 million in cash will be paid to the plaintiffs in the class-action suit and another US$10 million will be distributed through a promissory note payable in three years. French Total SA, Chesapeake’s joint venture partner, agreed to pay US$13.1 million on top of its partner’s offerings.

    “We are pleased to have reached a mutually acceptable resolution of this legacy issue and look forward to further strengthening our relationships with our royalty owners,” Gordon Pennoyer, a spokesperson for Chesapeake said in a statement carried by the Oklahoman.

    At least 90 percent of the plaintiffs have to approve the deal for the money to be split and distributed. If adopted, the agreement would end the lawsuit lodged by landowners in Tarrant and Johnson counties. The plaintiffs said the company underpaid royalties for natural gas extraction on their land in the Barnett Shale by several hundred million dollars.
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    Another small fall in US production

                                                  Last Week    Week Before     Last Year

    Domestic Production '000........ 8,767             8,791               9,566
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    Summary of Weekly Petroleum Data for the Week Ending May 20, 2016

    U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ending May 20, 2016, 92,000 barrels per day less than the previous week’s average. Refineries operated at 89.7% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.9 million barrels per day. Distillate fuel production decreased last week, averaging about 4.7 million barrels per day.

    U.S. crude oil imports averaged over 7.3 million barrels per day last week, down by 362,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.6 million barrels per day, 10.9% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 933,000 barrels per day. Distillate fuel imports averaged 193,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.2 million barrels from the previous week. At 537.1 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 2.0 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories remained unchanged while blending components inventories increased last week. Distillate fuel inventories decreased by 1.3 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories fell 0.1 million barrels last week but are above the upper limit of the average range. Total commercial petroleum inventories decreased by 0.9 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.4 million barrels per day, up by 3.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.6 million barrels per day, up by 3.9% from the same period last year. Distillate fuel product supplied averaged 4.1 million barrels per day over the last four weeks, down by 0.9% from the same period last year. Jet fuel product supplied is up 5.5% compared to the same four-week period last year.

    Cushing inventories drop 700,000 bbl

    Attached Files
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    BP cuts investment in Tangguh’s third LNG train

    UK-based energy giant BP has decided to cut the investment in its Tangguh Train 3 expansion due to low oil prices, according to BP Indonesia country head DharmawanSamsu.

    Samsu said the investment, previously set at US$12 billion, has been cut down to between $8 billion and $10 billion, Reuters reports.

    A tender for engineering, procurement and construction for the third LNG train is currently being held by BP with the final investment decision on the project expected by mid-year, according to Samsu.

    In April, BP signed a deal with the Indonesian power utility Perusahaan Listrik Negara (PLN) to supply 20 LNG cargoes annually from 2017 to 2019. Additionally, from 2020 to 2033, BP will increase the number of cargoes per year to 44.

    With the PLNG deal, total production capacity from Tangguh’s third liquefaction train has been booked.
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    Apache sues former executive over trade secrets

    Apache Corp. has filed suit against the former head of its Egyptian operations, alleging that the executive  misappropriated sensitive trade secrets earlier this year when he left the Houston oil and gas company to help create a start-up firm that would compete with Apache for business.

    At Apache’s request, Harris County District Judge Jeff Shadwick issued a temporary restraining order Tuesday prohibiting Thomas M. Maher and the start-up, Apex International Energy Management, from using or disclosing any of Apache’s trade secrets and ordered  them to surrender the trade secrets to their lawyers.

    “Apache is very concerned with the information it has confirmed regarding the actions and details of Mr. Tom Maher’s departure from the company,” Apache spokeswoman Castlen Kennedy said in a written statement. “We take the security of our proprietary, confidential, and trade secret information seriously, which is why we have requested immediate court action.”

    Houston attorney Craig Smyser, who is defending Maher and Apex, declined to comment on the lawsuit, but said his clients agreed to the terms of Tuesday’s court order.

    Maher is former head of Apache’s Egypt operations, and left the company for Apex earlier this month, the lawsuit says. Apache alleges Maher downloaded more than 230,000 Apache files to as many as nine portable USB drives between February and has last day at Apache on May 9 and brought the files over to his new job at Apex, where he serves as president and chief operating officer.

    Among other things, the files include Apache’s “well, seismic survey, concession-bidding and financial information,” the lawsuit says.

    According to Apache, Maher began communicating with Apex executives as early as November of last year, including Apex CEO Roger Plank, who is a former Apache president.

    In addition to misappropriating trade secrets, the lawsuit alleges that Maher “played double agent, cementing his position at Apex while simultaneously remaining privy to the most sensitive of Apache internal discussions at the executive and board levels.”

    This included meetings Maher arranged on behalf of Apex with top Egypt officials to inform them of “Apex’s intent to do business in Egypt as an Apache competitor and to begin to solicit” the Egypt officials, which include the minister with ultimate authority of oil and gas operations in Egypt, especially with respect to foreign investment, the lawsuit says.

    “As a direct and proximate result of defendants’ conduct, Apache will suffer irreparable harm,” the complaint says. “Specifically, defendants are using Apache’s confidential, proprietary and trade secret information to gain an illegal advantage over Apache.”

    Besides the restraining order, Apache’s lawsuit asks for monetary damages to be awarded, including any compensation Maher and Apex received “as a result of their misappropriation of Apache’s trade secrets.”

    The temporary restraining order expires on June 24. Apache’s request for further injunction of the defendants from using its trade secrets will be determined at a June 20 hearing.
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    Iran-Saudi row threatens any OPEC deal, puts role in question

    OPEC's thorniest dilemma of the past year - at least from a purely oil standpoint - is about to disappear.

    Less than six months after the lifting of Western sanctions, Iran is close to regaining normal oil export volumes, adding extra barrels to the market in an unexpectedly smooth way and helped by supply disruptions from Canada to Nigeria.

    But the development will do little to repair dialogue, let alone help clinch a production deal, when OPEC meets next week amid rising political tensions between arch-rivals Iran and oil superpower Saudi Arabia, OPEC sources and delegates say.

    Earlier this year, Tehran refused to join an initiative to boost prices by freezing output but signaled it would be part of a future effort once its production had recovered sufficiently. OPEC has no supply limit, having at its last meeting in December scrapped its production target.

    According to International Energy Agency (IEA) figures, Iran's output has reached levels seen before the imposition of sanctions over its nuclear program. Tehran says it is not yet there.

    But while Iran may be more willing now to talk, an increase in oil prices has reduced the urgency of propping up the market, OPEC delegates say. Oil has risen toward a more producer-friendly $50 from a 12-year low near $27 in January.

    "I don't think OPEC will decide anything," a delegate from a major Middle East producer said. "The market is recovering because of supply disruptions and demand recovery."

    A senior OPEC delegate, asked whether the group would make any changes to output policy at its June 2 meeting, said: “Nothing. The freeze is finished.”

    Within OPEC, Iran has long pushed for measures to support oil prices. That position puts it at odds with Saudi Arabia, the driving force behind OPEC's landmark November 2014 refusal to cut supply in order to boost the market.

    Sources familiar with Iranian oil policy see no sign of any change of approach by Riyadh under new Saudi Energy Minister Khalid al-Falih - who is seen as a believer in reform and low oil prices.

    "It really depends on those countries within OPEC with a high level of production," one such source said. "It does not seem that Saudi Arabia will be ready to cooperate with other members."

    Iran has managed to increase oil exports significantly in 2016 after the lifting of sanctions in January.

    It notched up output of 3.56 million barrels of oil per day in April, the IEA said, a level last reached in November 2011 before sanctions were tightened.

    Saudi Arabia produced a near-record-high 10.26 million barrels per day in April and has kept output relatively steady over the past year, its submissions to OPEC show.

    Iran, according to delegates from other OPEC members, is unlikely to restrain supplies, given that it believes Saudi Arabia should cut back itself to make room for Iranian oil.
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    Putin blesses Gazprom Neft's oil loadings from new Arctic field

    Russia's Gazprom Neft, under the gaze of President Vladimir Putin, has started loading a tanker with crude from its new Novoportovskoye field in the Arctic, which will help Moscow maintain record-high oil production.

    The project will help the company to reach its target of 100 million tonnes per year, or 2 million barrels per day, of oil production by 2020.

    It will also help Russia to keep its oil production at more than 10 million barrels per day, a post-Soviet record-high, and adding further to the global oil glut which has pressured prices since mid-2014.

    Putin watched the launching ceremony via video link from the Kremlin. The oil will be shipped from a terminal called the Arctic Gates with capacity of 8.5 million tonnes per year.

    Gazprom Neft has planned to produce 2.5 million tonnes of oil at Novoportovskoye this year, however sources told Reuters that the volumes would be smaller.

    The company has put the field's oil reserves at more than 250 million tonnes of oil and gas condensate as well as more than 320 billion cubic metres of natural gas.

    The relatively high volumes of the field's light low-sulphur oil could also allow the creation of a new oil grade to feed refineries in northwest Europe.

    Alternatively, oil could be shipped to Asia, though this could only be done over short periods because of difficulties navigating through winter ice.
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    Shell to cut 2,200 more jobs in face of weak oil prices

    Royal Dutch Shell will cut a further 2,200 jobs, taking its target for layoffs to 12,500 by the end of the year, the Anglo-Dutch oil firm said on Wednesday, as it cuts deeper in the face of weak oil prices.

    Shell let go 7,500 staff and direct contractors last year and previously said 2,800 jobs would be cut with the integration of BG Group.

    Whilst the cuts are small in comparison to the overall amount of people employed in the oil and gas industry, Shell's 12,500 job reductions are equal to the entire workforce of social media company Facebook.

    The combined Shell-BG company employed around 94,600 staff at the end of 2015.

    Shell announced that out of the additional 2,200 job losses, 475 will come from its upstream UK and Ireland business.

    "Despite the improvements that we have made to our business, current market conditions remain challenging," said Paul Goodfellow, Shell's vice president for UK & Ireland, after breaking the news to employees in Scotland's Aberdeen.

    The oil major has significantly reduced its annual spending target to below $30 billion and is selling $30 billion worth of assets to weather weak oil prices which brought its 2015 earnings to the lowest in over a decade.

    Shell said it expects net job losses in 2016 to be lower than 5,000 due to recruitment in IT and at the graduate level.

    Shell started offering employees in Britain and the Netherlands voluntary redundancy last month.
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    A fracking license in England!

    An English county government on Monday approved an application for what could be the first permit to frack for shale gas in Western Europe since 2011.

    The North Yorkshire County Council voted 7-4 to allow U.K.-based Third Energy to use hydraulic fracturing to extract shale gas from an existing natural gas well in Kirby Misperton in northern England.

    “This approval is a huge responsibility. We will have to deliver on our commitment…to undertake this operation safely and without impacting on the local environment,” said Rasik Valand, chief executive of privately held Third Energy.

    Attached Files
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    Suncor Energy provides update on restart of operations in Regional Municipality of Wood Buffalo

    Suncor today announced it has begun the remobilization process of its employees to support the staged restart of its operations in the Regional Municipality of Wood Buffalo (RMWB). The evacuation order was lifted by the Regional Emergency Operations Centre the evening of May 20, 2016.

    In addition, Suncor continues to assess the situation, including fire risk, air quality, employee mobility, accommodations and services for employees and contractors.

    'Given our current assessment, we are confident we can safely return people to the region to begin the process of restarting operations,' said Steve Williams, Suncor president and chief executive officer. 'We believe that getting our employees back to work is an important part of the process to get things back to normal in Fort McMurray.'

    Suncor employees currently in the region are completing the pre-work necessary for the safe and staged restart of our operations.

    There has been no damage to Suncor's assets and enhanced fire mitigation work has been conducted at all of our sites. Fire risk close to our base plant facility has been significantly mitigated as little fuel to support a fire remains in the area. Critical third party pipeline and power infrastructure have largely been restored and we expect lodges near our base plant facility to be ready to house workers within a few days.

    Suncor will continue to work closely with the province, region and industry to monitor and manage the fire risk.
    Construction activities at Suncor's Fort Hills mine continued ramping up over the weekend.

    Syncrude is also in the process of planning its return to operations.
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    Chesapeake swaps debt for equity for second time in May

    Chesapeake Energy Corp, the second-largest U.S. natural gas producer, said on Monday it had issued or agreed to issue about 5 percent of its outstanding shares in exchange for debt over the past week, the second such transaction this month.

    Chesapeake and other oil and gas producers have been undertaking debt-for-equity swaps or bond swaps to reduce interest payments and debt, taken on during a frenzy of shale development.

    The company, which has more than $9 billion in debt, said on Monday it issued or agreed to issue about 37.1 million shares between May 16 and May 23 in exchange for senior notes worth about $166 million. The notes are due in 2017, 2019, 2037 and 2038.

    Chesapeake swapped $153 million of debt for about 4 percent of its equity earlier this month.

    Up to Monday's close of $3.67, Chesapeake's stock had lost more than three-fourths of its value over the past year.
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    India seeks bids for oil, gas fields in first auction since 2010

    A successful auction of the small oil and gas fields is seen as crucial to a recently announced hydrocarbon policy, which India hopes will unlock energy resources worth USD 40 billion by simplifying rules and offering pricing incentives. 

    India is putting up for auction nearly four dozen small oil and gas fields in the first such sale in six years, oil ministry said in a newspaper advertisement on Tuesday. A successful auction of the small oil and gas fields is seen as crucial to a recently announced hydrocarbon policy, which India hopes will unlock energy resources worth USD 40 billion by simplifying rules and offering pricing incentives. 

    The world's fourth-biggest oil and gas consumer imports nearly three-quarters of its energy requirements, but Prime Minister Narendra Modi has set a target of cutting its fuel import dependency to two-thirds by 2022 and to half by 2030. 

    India is auctioning a total of 46 oil and gas fields, the oil ministry said, with 26 on land, 18 offshore in shallow water and two in deep water. The deadline for submitting the bids is on October 31, with companies free to try for more than one exploration block. 

    The mostly small, marginal discoveries on offer were originally controlled by two state-owned exploration companies, Oil and Natural Gas Corporation and Oil India Ltd. The fields have remained undeveloped for years due to their small size and the high cost of development. The current low crude oil prices - now around USD 48 a barrel - will also likely make it hard for the government to attract bids for the fields. 

    Some exploration consultants have also criticised the revenue-sharing model being used by India as most countries auction oil and gas blocks based on a cost-recovery model. In a revenue-sharing model a company operating an oil and gas field has to share revenue from any sales with the government from first production. 

    In a cost-recovery model a company starts sharing income with the government only once its exploration and development costs have been covered.

    Read more at:
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    China Sinopec to triple Chongqing shale gas capacity to 15 Bcm/year by 2020

    China's Sinopec said Monday it targets tripling its shale gas capacity in Chongqing in southwest China to 15 Bcm/year by 2020 from the current 5 Bcm/year.

    It also aims to increase its shale gas output in Chongqing to 10 Bcm/year by 2020, the end of China's 13th five-year plan that runs 2016-2020, according to a news release on a strategic cooperation agreement signed with the Chongqing city government that was posted on Sinopec's website.

    The targets are in the line with Sinopec's plan unveiled in March to double its total domestic gas output to 40 Bcm in 2020 from 20.81 Bcm in 2015, with 10 Bcm to come from shale gas -- all of it from Chongqing -- 29.5 Bcm from conventional gas and 0.5 Bcm from coal bed methane.

    The company completed construction of the 5 Bcm/year Phase I of its flagship Fuling project in Chongqing last year and will begin building the second phase this year, Platts reported earlier.

    The proven developed reserves in Fuling stood at 28.77 Bcm at end 2015, more than doubling from 13.37 Bcm a year earlier, according to the company's annual report. Proven undeveloped reserves surged to 5.13 Bcm from 2.49 Bcm over the same period.
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    Russian oil exports to China hit record high in April

    Beijing has ramped up imports of Russian oil by 52.4 percent last month compared to a year earlier. China's General Administration of Customs calculated a record 4.81 million tons.

    In March, China bought 4.65 million tons of oil from Russia.

    Russia, Saudi Arabia and Angola were China¡¯s three major oil suppliers last month.

    April imports from Saudi Arabia fell by 22 percent year-on-year to 4.12 million tons. In March, China imported 3.98 million tons of oil from the country.

    China increased year-on-year oil imports from Angola last month by 39 percent to 3.98 million tons. Imports from Iran in April fell by 5.1 percent yoy to 2.76 million tons.

    An International Energy Agency report showed that at the end of 2015 Russia overtook Saudi Arabia as the biggest crude exporter to China.

    Russian exports to China have more than doubled over the past five years, up by 550,000 barrels a day. Moscow and Beijing have significantly increased energy cooperation, with a wide range of multibillion dollar projects.

    Russian oil transport monopoly Transneft¡¯s Vice-President Sergey Andropov said in March that China is ready to import 27 million tons of Russian crude this year via the Eastern Siberia-Pacific Ocean (ESPO) pipeline. Supplies to China through the ESPO pipeline started in 2011 after Rosneft, Transneft and China National Petroleum Corporation (CNPC) signed contracts two years earlier. Currently five million tons of crude are supplied through the pipeline annually, and this is expected to rise to 15 million tons a year.

    Experts say Chinese imports of Russian oil are likely to stay high over the coming years due to long-term crude supply contracts and rising demand from the world's second biggest oil consumer.
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    Tankers Run in Circles Off China

    Tankers Run in Circles Off China

    In late February, the tanker Jag Lok loaded oil from Equatorial Guinea in western Africa and set sail for the Chinese port of Qingdao, the gateway to the world’s newest buyers of crude, a journey of more than 12,000 nautical miles.

    After reaching its destination in early April, the ship churned in circles for 20 days before it got a chance to deliver its cargo. That’s because the port in Shandong province was struggling to handle a record number of vessels arriving to supply the privately held refineries called “teapots” that dot the region, ship-tracking data compiled by Bloomberg show.

    The backup illustrates the challenges facing the independent refiners, which have emerged as a bright spot of rising demand amid a global glut. The processors are forecast by ICIS-China to purchase a combined 1 million barrels a day of crude from overseas this year, up from 620,000 barrels in 2015. While small individually, together they account for almost a third of China’srefining capacity. Any curb on imports would threaten oil’s rebound from a 12-year low, according to Nomura Holdings Inc. and Samsung Futures Inc.

    “If teapots’ intake of crude slows down, the global oil demand and supply re-balancing might take longer,” said Gordon Kwan, head of Asia oil and gas research at Nomura in Hong Hong. “If demand from teapots is lower, then oil prices might rebound to just $55, instead of $60 a barrel next year.”

    From being dependent on state-owned energy giants for their feedstock needs as little as a year ago, teapots are now driving Chinese crude purchases after the government allowed them to buy overseas supplies directly. As of end-February, 27 of the companies had received or applied for annual import quotas totaling 89.5 million metric tons, or about 1.8 million barrels a day, according to Zhang Liucheng, chairman of the China Petroleum Purchase Federation of Independent Refinery, a group of 16 processors.

    Total purchases from overseas into the world’s second-largest oil user climbed to a near record 7.96 million barrels a day in April, while shipments to Qingdao surged to unprecedented levels in April.

    Still, with infrastructure not developing as fast as oil purchases, imports are at risk of slowing because of the ship traffic and lack of storage capacity, according to BMI Research. Concern about the creditworthiness of companies with no prior experience in international trade is also deterring some sellers. Slowing refining profits mean the plants may have to cut processing rates, weakening their appetite for cargoes from overseas, while the implementation of higher fuel quality standards could force some of them to shut.
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    U.S. refiners see surprise surge in diesel demand

    U.S. refiners are enjoying their strongest diesel margins in months as surprisingly robust overseas demand, combined with lower domestic production has triggered an unusually large drawdown in inventories for this time of year.

    The surge in appetite for U.S. diesel comes on the heels of a mild winter that sapped demand for heating oil and punished margins as products went straight into bulging storage tanks. U.S. independent refiner profits dropped 74 percent in the first quarter compared with last year.

    The strong demand for diesel comes at an odd time for U.S. refiners, who have shifted their production focus on gasoline ahead of the busy summer driving season that kicks off with the upcoming Memorial Day holiday weekend.

    Notably, the U.S. diesel crack spread 1HOc1-CLc1, a measure of how much refiners profit from converting crude oil into diesel, has risen by roughly 40 percent since early this month, touching $14.90 a barrel on Monday, the highest level since February when strong demand for heating oil boosts profits.

    Last week, U.S. distillate inventories dropped by an estimated 3.2 million barrels, the fifth consecutive week of declining inventories and the second largest weekly draw for the month of May since the U.S. Energy Information Administration began collecting the data in 1982.

    Philadelphia Energy Solutions, the largest East Coast refiner, has recently booked at least six cargoes of diesel totaling 1.8 million barrels for exports in June, with vessels bound for Europe and South America, according to a source familiar with the plant's operations.

    The refiner booked 9 cargoes for export in May and April, totaling 2.7 million barrels, which represent about a fifth of the diesel volumes the region exported all of last year.

    "Demand from India is very strong," the source said, noting that India is pulling barrels away from Latin America and Europe. "I am not sure this refinery has ever seen a run of diesel exports like this."

    Inventories USOILD=ECI, which include heating oil and diesel fuel, are expected to fall by another million barrels when new EIA figures are released Wednesday, a Reuters poll of six analysts released Monday shows.

    Diesel prices react more globally when there is a disruption in one region, such as elevated demand in India or in Europe, where refining strikes have cut local production.

    Mark Broadbent, a analyst with Wood Mackenzie, said refiners switched to gasoline mode earlier this year as gasoline margins significantly outpaced diesel. As a result, refiners produced roughly 300,000 fewer barrels-per-day of diesel in April compared to last year, Broadbent said.

    He said the combination of decreased supply and the uptick in demand has the market pulling barrels out of storage to meet the gap, supporting cracks.

    "The most important factor to watch will be crude runs," Broadbent said. "Refiners will likely increase runs over the summer and push (production) to record rates once again, which should close the gap between supply and demand and put a stop to the storage draw."

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    DJ Basin beats 'Big Three' plays on the commerciality of the fracklog

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    The heart of the DJ Basin, Weld County, exhibits the most commercial fracklog with an average completion cost per barrel of 4.7 USD/bbl, a study by Rystad Energy has shown.

    Simultaneously, Weld County also tops the ranking list by inventory size with almost 600 oil wells awaiting completion crews. The large size of the inventory is primarily driven by intentional completion delays initiated by Anadarko Petroleum, which operates almost half of Weld County's fracklog. PDC Energy, Noble Energy and Whiting Petroleum operate ~10% of the fracklog each.

    Rystad Energy estimates that the DUC inventory in the Weld County turns economical at an average WTI price of just ~30 USD/bbl. Other counties that exhibit favorable fracklog economics are Reeves County in Permian Delaware and McKenzie County in Bakken, with an average completion cost per barrel of 4.8 and 5.1 USD/bbl, respectively. This implies that the major part of the US shale DUC inventory is commercial in the current oil price environment, and significant support to the US Lower 48 oil supply can be expected in the near months as market sentiment gradually moves in a positive direction.

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    France's CGT says will block Elengy's LNG terminals

    France's hardline CGT union said on Monday that workers at Elengy, which operates three liquefied natural gas (LNG) terminals in France, will go on strike from midnight until May 26 midnight included.

    The union said that from Tuesday morning, its members will block two out of three Elengy terminals at Montoir-de-Bretagne on the Atlantic coast and at Fos Tonkin on the Mediterranean coast, where no trucks or vessels will be allowed to load or unload.

    The CGT said its members at Elengy will be joining oil sector workers, whose rolling strikes over planned labour reforms have intensified in recent weeks and led to fuel supply disruptions in France.
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    Genscape sees 1mln bbl draw on Cushing last week

    Market intelligence firm Genscape reported a drawdown of nearly 1 million barrels at the Cushing, Oklahoma delivery point for U.S. crude futures in the week to May 20, traders said.
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    Oil will soon stage a ‘fundamental price recovery’: Analyst

    Jefferies' Jason Gammel told CNBC on Monday the oil market had swung from oversupply to undersupply in April thanks to disruptions in production in Nigeria and Alberta, Canada, taking around 2 million barrels per day out of the market.

    "I think with continued demand growth over the course of this year and continued declines in non-OPEC supply that we are already seeing in places like the United States, the market actually comes into much better balance by the end of the third quarter and that's the stage for fundamental price recovery," he told CNBC television in London.

    As global crude output fell, demand from China — a massive consumer of energy — rose in April. Its crude imports reached 8 million barrels a day, up 7.6 percent from a year earlier, according to official Chinese data cited by Reuters on Monday.

    "In the case of China, what is encouraging is that their imports are still very high, because I really think that, from a supply-and-demand standpoint, you need to have strong Chinese demand growth in order for the market to become more balanced by the end of the year," Gammel said.

    According to a UBS commodity strategists' forecast published Monday,Brent crude will trade at around $49 per barrel in the fourth quarter of 2016 and then rally further to average $55 through 2017.

    They added that a recovery in WTI oil prices to above $50 per barrel would incentivize renewed U.S. energy exploration and this projected increase in supply would limit price upside.

    Light crude futures for July traded at around $47.80 on Monday.

    Gammel agreed $50-plus prices would spur U.S. rigs back online, but said this increase would be insufficient to offset lower output from shale gas wells.

    "I think if the U.S. rig count doesn't go above, let's say, 500, that the U.S. production is going to continue to decline," he concluded.
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    Unions dig in heels to disrupt fuel supply in France

    France's hardline CGT and FO unions launched a 24-hour strike at the Fos-Lavera oil terminals and blockaded a fuel depot in the southern port city of Marseille on Monday as they toughened their stance against labour market reforms.

    The rolling strikes, which began in March and have gathered pace in recent weeks, have disrupted fuel supplies in France since Friday with protesting workers blockading petrol depots and halting production at refineries.

    French oil and gas company Total, which operates five of the eight refineries in France, has started the process of shutting down three - at Normandy, Donges and Feyzin - while its Grandpuits refinery was running at minimum output.

    Rival Exxon Mobil said the strike has not affected output at its two refineries but striking workers had blockaded the oil terminal at Fos-sur-Mer in Southern France.

    Oil sector workers in the CGT, which is France's biggest trade union, and at the third biggest FO, said on Monday they planned to intensify the action until the government withdraws a labour reform law, because they say it will hurt workers.

    "It is clear that the dissatisfaction with the law is unwavering," the unions said in a statement.

    As part of efforts to force the government to withdraw the bill, the union launched a strike at the Fos-Lavera oil terminals on Monday.

    "No ship is operating at the installations," Pascal Galéoté, CGT Secretary General at Marseille port told Reuters.

    The terminals supply PetroIneos Lavera, Total's La Mede and Exxon's Fos refineries on the southern coast. They also supply Total's Feyzin; Varo's Cressier in Switzerland and the MiRO refinery in Karlsruhe, Germany, via pipelines.

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

    The French government has moved to reassure the public that France was not running out of fuel after shortages at hundreds of petrol stations in several regions sparked panic buying.

    Finance Minister Michel Sapin accused CGT of holding France hostage, saying the government would take the necessary action to end the blockades and restart production at refineries.

    Total said in a statement it had began the procedure of shutting down its 247,000 barrels-per-day (bpd) Normandy; 220,000 bpd Donges and 117,000 bpd Feyzin refineries. Its 101,000 bpd Grandpuits refinery was running at minimum output.

    It said 612 out of its 2,200 petrol stations across France had partially or completely ran out of fuel, while striking workers were blockading two out of its nine fuel depots. There are 78 primary fuel depots in mainland France.
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    Africa’s Busiest Oil Industry Is Running Hard to Stand Still

    Algeria has more drilling rigs than the rest of Africa combined, yet oil production still isn’t recovering after years of decline. It’s little wonder the nation remains one of the most vocal supporters of action to increase prices by curbing output at the OPEC meeting next month.

    The Organization of Petroleum Exporting Countries has been hit hard by the decline in oil prices. Algeria, like other members, is rolling out economic reforms to deal with the consequences of the slump, which include the nation’s first current-account deficit in more than a decade. Unlike Saudi Arabia and Iraq, it’s been unable to soften the blow by boosting output.

    “In the short term, for sure, the only hope is for prices to rise” because Algeria has little flexibility on production, said Alexandre Kateb, chief economist at Algiers-based financial services company Tell Group. “What it can do is on the level of diplomacy. Trying to influence other members within the organization and achieve some consensus.”

    Decades after the discovery of Algeria’s first major oil fields in the 1950s, the nation’s exploration success rate has fallen to less than one well in five, according to data from state oil company Sonatrach Group. Last year, it drilled 149 wells and only made 22 minor finds. Crude output for the past two years has remained at about 1.1 million barrels a day, data compiled by Bloomberg show.

    Algeria had 36 rigs drilling for oil last month, two thirds of the total for the African continent, according to data from Baker Hughes Inc. Nigeria, which produced 600,000 barrels a day more crude than Algeria in April, had just six operating rigs, the data show. While Algeria plans to buy eight more rigs this year, it isn’t making greater discoveries.

    Algeria’s income from oil and gas exports, which account for nearly 60 percent of the economy and 95 percent of foreign receipts, has plunged by almost half since crude prices tumbled. While large currency reserves and low levels of foreign debt have helped the nation to weather the storm, a prolonged slump could threaten subsidies on housing and basic foodstuffs that curbed internal dissent since the Arab Spring.

    Algeria’s economy is “facing a severe and likely long-lasting external shock,” the International Monetary Fund said May 19. The price of international benchmark Brent crude was about $48 a barrel Monday. That’s an increase of 77 percent from a 12-year low in January, but still well below the $87.60 the IMF says Algeria needs to balance its budget.
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    Oil Traders Are Borrowing From Banks to Store Crude at a Loss

    Unlike previous oil storage trades, however, this one is unusual in that current oil prices and storage costs ought to make it unprofitable. Morgan Stanley estimates that the one-month Brent storage arbitrage currently produces a loss of $0.48 per barrel, while its six-month equivalent loses $6.11 per barrel.

    That suggests "no incentive to store oil on ships," the analysts write. "Yet, banks are seeing a sharp uptick in interest to finance storage charters. This storage is not happening for profit. Rather, the market is looking for places to store oil. To profit, traders need to hope for oil prices to rise enough to pay for the new debt incurred for this storage."

    The prospect of debt-fueled oil storage trades may raise concern should crude prices fail to rise enough to offset costs. Moreover, the 'Singapore supply glut' means the recent price rally may prove fragile.

    "The increase in floating oil comes despite disruptions in the Atlantic Basin and an out-of-the-money floating storage arb[itrage], suggesting markets are not as healthy as sentiment suggests," the Morgan Stanley analysts write. "It also highlights the speculative nature of much of the oil bounce this year."
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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.
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    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.

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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.
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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."
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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".
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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.
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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. (

    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.
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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.

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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.
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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.
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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.
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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.
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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.
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    Alternative Energy

    Dong Energy IPO Set to Value Company as High as $16 Billion

    Dong Energy A/S may be valued as high as 106.5 billion kroner ($16 billion) in an initial public offering, marking what looks set to become Denmark’s biggest public share sale in decades.

    Dong plans to sell between 15.1 percent and 17.4 percent of its existing shares in an IPO with trading set to take place in the second week of June, the utility said in a statement to the stock exchange on Thursday. No new shares will be issued at the IPO, though there is room for an over-allotment, Dong said.

    The company is targeting a share price of 200 kroner to 255 kroner, corresponding to an implied valuation of the whole company of 83.5 billion kroner to 106.5 billion kroner, it said. The offering period starts on Thursday with the first trading day set as June 9.

    Chief Executive Officer Henrik Poulsen said the company has been “encouraged by the positive feedback we have received so far in the process from the investors that we have seen around the world over the past couple of months,” in comments made during a conference call after the announcement.

    The Danish state, which currently holds 59 percent of Dong, plans to maintain a holding of just over half the company after the IPO. Goldman Sachs is the second-largest owner of Dong, with an 18 percent stake. The Wall Street bank has consistently underscored its commitment to being a long-term holder of the company.

    The IPO puts an end to years of hand wringing, with successive governments since 2004 planning, and then pulling, a sale of Dong as markets shifted. Dong has tried, and so far failed, to sell its oil unit and wants to rebrand itself as a company focused on greener technology. It’s already the world’s biggest offshore wind-farm operator.
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    Saudi Arabia to Revive Its Solar Power Program at Smaller Scale

    Saudi Arabia is seeking to revive its stalled solar-power program, scaling back more ambitious targets it set four years ago after making little headway in transforming the energy supply of the world’s biggest oil exporting nation.

    The kingdom plans to install 9.5 gigawatts of renewable energy under its Vision 2030 program announced last month, about a quarter of the previous goal. The new target is about 14 percent of the country’s current generating capacity and is achievable because of a plunge in the cost of photovoltaics, government officials said.

    “Solar should be the fundamental solution for Saudi Arabia,” Ibrahim Babelli, the country’s deputy minister for economy and planning, told reporters at a conference in Dubai.

    The goals reflect work by Prince Mohammed bin Salman to overhaul the economy of Saudi Arabia, selling off a stake in the state owned Saudi Arabian Oil Co. to diversify away from fossil fuels as a primary revenue source. The desert kingdom relies on oil and natural gas for almost all of its power generation, sapping what it earns from crude it could export.

    The energy ministry is working to establish the framework for the new renewable energy plan and needs more time to complete its planning, said Babelli, who directed strategy at the body previously responsible for renewable energy policy. Currently, the nation has almost no solar power.

    The solar program at one point envisioned more than $100 billion pouring into renewables over the next two decades. The government scaled back the program once before, in January 2015, saying it needed more time to assess the technologies it would use.

    Babelli was previously chief strategist at the King Abdullah City for Atomic and Renewable Energy, the body set up by Saudi Arabia’s former monarch in 2010 to push into renewables.

    Its plans failed to take off because Saudi Arabia’s state-owned utility didn’t want to allow private companies to build power plants and aimed to control the process itself, he said.

    Now, the kingdom is returning to its effort to tap new energy resources that would free up more crude for export and provide affordable power for industry and homes. The cost of building solar power plants is declining globally as Chinese panel makers boost manufacturing capacity and slash costs.

    “The trend will continue,” Timothy Polega, a manager in the renewables department at state-owned oil company known as Aramco, said at the conference.

    Aramco is waiting for further details about the kingdom’s energy plan before deciding on its own renewable energy plans, Polega said. The price of solar power in projects in the Persian Gulf over the last year has plunged by about 50 percent and plant developers will be able to achieve similar prices in Saudi Arabia,
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    German power firms to partner carmakers in electric future -RWE

    German utilities are likely to partner with automakers to tap into a 1 billion euro ($1.1 billion) government incentive scheme for electric cars, an RWE executive said.

    Driven by fear that energy will be dominated by the likes of Google and Apple, both of which have made forays into the sector, power firms are focusing on vehicle-to-grid communication as a possible source of revenue.

    "We assume there will be partnerships between utilities and carmakers in the near future," Thomas Birr, head of strategy at RWE, Germany's second-biggest utility, told Reuters.

    This could involve integrating electric cars into the grid and using their power to satisfy peak demand or to store surplus energy, a market expected to grow to $7.5 billion by 2020.

    Earlier this month Nissan said it was launching a trial this year with Italy's Enel to allow electric car owners in Britain to sell electricity back to the National Grid and potentially make money in the process.

    While there has been little uptake for electric cars in Germany so far, a government support programme announced last month raised hopes that demand will improve and drive the need for infrastructure, including charging stations.

    RWE, which is in the process of pooling its renewable, grid and service units into an entity separate from its loss-making power plant business, has already installed more than 3,100 such stations, more than half of Germany's roughly 5,800.

    But rather than just focusing on building more, RWE is looking at how it can earn money by integrating the rising number of electric vehicles into the power grid, which already needs to cope with a major surplus in renewable energy output.

    "What you don't want is the power grid to collapse if there happen to be three electric cars charging in the same street at the same time," Birr said.

    Utilities say that selling power alone will not be enough to keep them going in the future and are banking instead on their expertise in managing power grids at a time when Germany's energy supply becomes more decentralised.
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    Japan’s Program to Boost Clean Energy Starts to Show Progress

    Japan’s program to encourage more clean sources of energy in the wake of the Fukushima nuclear disaster in 2011 is seeing signs of progress, with the latest government data showing that the nation produced 45 percent more electricity from renewables such as solar and wind in the fiscal year ended in March compared with a year earlier.

    Clean energy output, excluding hydro power, increased to 39.2 terawatt hours in the 12 months ended March 31, according to data released Wednesday by the Ministry of Economy, Trade and Industry. Solar outpaced other renewable sources, increasing 61 percent to 31.3 terawatt hours. Wind inched up 7 percent to 5.4 terawatt hours.

    By comparison, the Fukushima Dai-Ichi nuclear plant that melted down in March 2011 produced 29.3 terawatt hours in 2010 before the disaster, according to figures from the International Atomic Energy Agency.

    Overall, Japan derived 4.7 percent of its electricity from renewables last fiscal year when hydro isn’t included, according to the Federation of Electric Power Companies of Japan. The government is aiming to derive about 14 percent of its electricity by 2030 from sources such as wind, solar and geothermal.

    The increase comes after the introduction of a feed-in tariff program that boosted installations of clean energy, especially solar. But the boom is now showing signs of weakening, with domestic shipments of solar modules falling 23 percent last fiscal year, marking the first annual drop since the introduction of the incentive program.

    The system where feed-in tariffs are offered to any developer whose project qualifies has led to quick booms in installations from Germany to Spain along with other markets where it’s been tried.

    Attached Files
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    Hounslow Council expects to save £145k a year through solar

    The London Borough of Hounslow has installed more than 6,000 solar panels on a wholesale market rooftop.

    The £2 billion project is a “great scheme” for the public sector, according to Energy Manager Charles Pipe.

    He told ELN the 1.7MW solar installation will lead to significant savings: “By installing the solar panels we can cut the consumption by nearly half – 40% to 45% – which is huge and we are probably looking at a saving of £145,000 in electricity bills.

    “That coupled up a FiTs [Feed-in Tariff) incentive gives us a saving and an income of about a quarter of a million pounds a year. So knowing all of these in the background we knew we had to go ahead with it but in terms of austerity, in terms of budget cuts, where are we going to get the money from? With various discussions in the council and finance they actually came up and said look we can fund this from our capital reserve so that was fantastic.”

    The council expects to get returns in five years’ time.

    The solar panels are connected to a battery storage system which stores the electricity generated during the day to power the market at night.

    Mr Pipe added the project will also help the region achieve it’s carbon reduction target as it saves 780 tonnes of emissions per year.
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    Could UAE solar push lead a trend for the Gulf?

    As the Gulf states take steps to expand their use of clean energy, a bold plan by the United Arab Emirates to boost its use of renewable electricity from less than 1 percent to 24 percent in the next five years could be a game-changer for the region, experts say.

    The IEA predicts that by 2019, the region – which holds one-third of the world's proven crude oil reserves – will still be generating nearly one-third of its electricity from oil, with Kuwait and Saudi Arabia leading the way.

    But dropping oil prices and growing concerns about climate change have exposed the downsides of relying on oil. As the Gulf's demand for power continues to rise, the UAE is leading the way in shifting to greener energy resources.

    At the Middle East and North Africa Renewable Energy Conference in Kuwait last month, the Gulf Cooperation Council (GCC) states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – pledged to mobilize $100 billion into renewable energy projects over the next 20 years.

    One of the projects in the UAE's renewables push is the $13.6 billion Mohammed bin Rashid Al Maktoum Solar Park in Dubai, which aims to become the biggest solar power plant in the Middle East.

    It is expected to generate 5 gigawatts of electricity – enough to power 1.5 million homes – by 2030.

    Dubai also plans to install around 100 electric car charging stations as part of its Green Charger Initiative.

    By 2050, Dubai wants to reduce its carbon emissions by 6.5 million tons every year, with the aim of becoming the city with the world's lowest carbon footprint, according to the Dubai Electricity and Water Authority.

    Meanwhile, Saudi Arabia has said it wants to add another 9.5 GW of renewable energy capacity to its current capacity of 80 GW by 2030, And Oman's power sector regulator, the Authority for Electricity Regulation Oman, has announced it will expand rooftop soar installations across residential homes, industrial and commercial buildings.

    In Qatar, French energy giant Total SA has announced a joint venture worth $500 million with state-run petroleum, electricity and water companies to develop a solar-power project with a capacity of 1,000 megawatts (MW).

    And with a 70 MW solar project due to be operational by 2017, Kuwait plans to meet 15 percent of its energy needs with renewables by 2030, according to the Kuwait Institute of Scientific Research.

    It won't be easy for the Gulf to wean itself off of fossil fuels. In a report released earlier this month, the Arab Petroleum Investments Corporation, a multilateral development bank, said the Gulf Cooperation Council states need to add 69 GW of electrical production to their current total capacity of 148 GW in the next five years to meet demand.

    But experts say the sunny region is in a prime position to use renewable energy – particularly solar power – both to meet its own energy needs and bring in much-needed revenue.

    Experts said they hope the rest of the Gulf States will look to the UAE as an example of how to tap into clean energy's potential.

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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.”
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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.
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    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.

    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:
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    Strike cuts 4,000 MW in French nuclear power capacity - grid operator

    French nuclear power capacity was cut by at least 4 gigawatts (GW) on Thursday after hardline CGT union workers joined a rolling nationwide strike against planned government reforms, grid operator RTE showed on its website.

    CGT members at 19 nuclear power plants voted on Wednesday to join the strike which has paralysed French businesses and disrupted fuel supplies in the past week.

    RTE's website showed that at least 9 nuclear reactors reported unplanned outages after the workers voted on Wednesday evening.
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    EU agency wants 65 pct cut in farm use of last-ditch antibiotic

    Agricultural use of a last-resort antibiotic should be cut by two-thirds to limit the spread of dangerous drug resistance, European medicine regulators said on Thursday.

    The demand for strict curbs on giving colistin to animals is the latest in a string of warnings about antimicrobial resistance. It follows the discovery last year of a gene that makes bacteria resistant to the drug.

    The European Medicines Agency (EMA) said farm use of colistin should be limited to a maximum of 5 mg per adjusted kilogram of livestock. The drug is currently widely used in farming.

    "If successfully applied at an EU level, the above threshold would result in an overall reduction of approximately 65 percent of the current sales of colistin for veterinary use," the EMA said.

    Ideally, consumption should be even lower and the EMA said 1 mg or less was a "desirable" level, adding that Denmark and the Netherlands already achieved this goal. Other countries, including Spain and Italy, have far higher consumption.

    Colistin, which has been used for more than 50 years in both animals and people, is given in human medicine as a last-line treatment for infections caused by multidrug-resistant bacteria, or so-called "superbugs".

    Medics around the world were alarmed last year by the discovery in China of a new gene that makes bacteria highly resistant to it.

    Drug-resistant superbugs are growing threat worldwide and a major review published last week called for new steps to address the problem, including limits on antibiotic use in agriculture and investment in finding new drugs.

    Former Goldman Sachs chief economist Jim O'Neill, who led the review, said antimicrobial resistance could kill an extra 10 million people a year and cost up to $100 trillion by 2050 if it is not brought under control.

    The exact quantity of antibiotics used in food production globally is hard to estimate, but experts believe it is at least as great as the amount used by humans.

    Such routine use in farming drives drug resistance as bacteria are exposed more often to antibiotics and drug-resistant strains can then be passed to humans through the food chain.

    The Health for Animals trade body, whose members include veterinary companies such as Zoetis, Bayer, Merck and Eli Lilly's Elanco, says it backs responsible farm use but antibiotics are sometimes needed.

    Attached Files
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    Chile, SQM head to court after failing to reach agreement

    Chile said on Wednesday that it would bring a recent dispute with fertilizer supplier SQM to court after a meeting with the company's executives failed to produce an agreement.

    The government's statement follows an announcement on Monday in which it said it was beginning a new arbitration procedure against SQM due to alleged "serious contract breaches."

    SQM, which was privatized in the 1980s under dictator Augusto Pinochet and is still controlled by businessmen with family links to the ex-strongman, is one of the world's largest suppliers of nitrates and lithium, with access to vast brine deposits in northern Chile.

    But it has had a rocky relationship in recent years with Chile's center-left government. In addition to the procedure announced Monday, the company is already in arbitration with state economic development agency Corfo over leasing payments.

    In the most recent dispute, Corfo has alleged "serious, varied breaches of obligations in the project contract, in particular regarding the protection of Corfo's mining property" by SQM.

    In an email Corfo said that it was contractually obligated to meet with SQM before taking the most recent arbitration to court. However, the meeting ended without an agreement.

    "After a brief meeting, the parties did not overcome their differences, leaving this stage of the proceedings exhausted," Corfo said.

    SQM has previously defended its record and said it would collaborate with Corfo and the arbitrator.

    However, it has also flagged interest in developing ventures outside Chile in recent months, and in March signed a lithium exploration deal in neighboring Argentina.
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    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.
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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.
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    Precious Metals

    Triple digit Silver?

    By Natalie Obiko Pearson
    (Bloomberg) -- A major Japanese electronics maker
    approached First Majestic Silver Corp. for the first time last
    month seeking to lock in future stock, a sign of supply concerns
    that could boost the metal’s price ninefold, according to the
    best-performing producer of the metal.
    “For an electronics manufacturer to come directly to us --
    that tells me something is changing in the market,” said Keith
    Neumeyer, chief executive officer of First Majestic, the top
    stock in Canada and among its global peers this year. “I think
    we’ll see three-digit silver,” he said, predicting the metal
    could surge to $140 an ounce by as early as 2019.

    That’s a bold forecast. While silver has rallied 19 percent
    this year to leapfrog gold as the best-performing precious
    metal, it settled lower Wednesday at $16.26 an ounce on the
    Comex in New York and reached a record of just under $50 in
    2011. The highest projection among analysts surveyed by
    Bloomberg is $57 an ounce in 2019.
    “That seems aggressive,” Dan Denbow, a portfolio manager at
    the USAA Precious Metals & Minerals Fund in San Antonio, said by
    e-mail. “There has been a lack of investment in silver
    exploration, but with significantly higher prices you will get
    new supplies. The current cost curve wouldn’t support that
    For recent projections on global silver production, click
    Still, there are other optimistic signs for silver rising.
    Hedge funds expanded their bullish bets on the metal to an all-
    time high earlier this month. Because the commodity holds appeal
    both as a store of value as well as for its multiple industrial
    uses, it surged earlier this year on speculation that the pace
    of U.S. interest-rate hikes will slow and that Chinese
    manufacturing may be improving.
    First Majestic is the second-biggest silver producer in
    Mexico, which supplies more of the precious metal than any other
    country. As such, the company has been a primary beneficiary of
    the silver rally after choosing not to diversify into other
    metals like many of its peers. The company earns more than 63
    percent of its sales from silver and its share price has more
    than tripled this year, more than any other company on the S&P/TSX
    Composite Index. The stock rose 2.2 percent to C$14.65 at 9:51
    a.m. in Toronto, giving it a market value of C$2.36 billion
    ($1.82 billion).

    ‘Strategic Metal’

    While long coveted for use in jewelry, coins and utensils,
    silver is increasingly in demand for its industrial
    applications. Last year, about half of global silver consumption
    came from such use, including mobile phones, flat-panel TVs,
    solar panels and alloys and solders, according to data compiled
    by GFMS for the Washington-based Silver Institute.
    “Silver is not a precious metal, it’s a strategic metal,”
    Neumeyer said in an interview in Vancouver, where the company is
    based. “Silver is the most electrically conductive material on
    the planet other than gold, and gold is too expensive to use in
    circuit boards, solar panels, electric cars. As we electrify the
    planet, we require more and more silver. There’s no substitute
    for it.”
    For a Bloomberg Intelligence overview of the silver market,
    click here.
    Industrial demand is set to increase, driven by rising
    incomes and growing penetration of technology in populous,
    developing nations, as well as thanks to new uses being found
    for silver’s anti-bacterial and reflective properties in
    everything from hospital paints to Band-Aids to windows.
    “Over the next 10 or 20 years, more and more people are
    going to be using these devices, and silver is a very limited
    commodity,” Neumeyer said. “There’s just not a lot of it
    Use of silver, including investment demand, coin sales and
    what goes into inventories to settle trades, has outstripped
    annual supply of the metal in every year since 2000, according
    to data from GFMS, a research unit of Thomson Reuters Corp.
    Still, not everyone agrees that the world is headed for a
    shortage of the metal.
    “I would tend to disagree that silver is rarer than
    thought,” David Lennox, a resource analyst at Fat Prophets in
    Sydney. “Silver cannot be easily substituted but there’s been no
    need as it’s in abundance. I’d expect the search for silver
    would intensify and the search for substitutions would happen
    long before silver got to” $140 an ounce.

    ‘Market Penetration’

    About 50 percent of global demand last year came from
    price-sensitive sources such as retail coins, jewelry and
    silverware, which would help curb price increases, said Erica
    Rannestad, a senior analyst at GFMS in Chicago. “Increased
    market penetration in emerging economies certainly will result
    in higher per-capita consumption of silver in industrial uses,
    but this is over the long run and would not happen overnight.”
    Neumeyer said his company has no immediate plans for
    acquisitions, dividends or to take on any debt. The company
    raised C$57.5 million from a share sale earlier this month. It
    plans to use funds internally for development and exploration of
    its mines, which had suffered from underinvestment during the
    recent downturn. “The capital will be used to look internally,”
    he said.
    Neumeyer acknowledges his forecasts aren’t always correct.
    First Majestic had estimated silver at $14 an ounce for this
    year’s budget. “I think I’ve been wrong every year for the past
    four or five years.”
    Still, he’s unfazed by his past record.
    “The silver rally is just beginning,” Neumeyer says. “What
    we’ve seen in the last two months is just the beginning of the
    next bull market.”
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    The gold mine Barrick may regret selling

    K92 Mining is poised for production at its Papua New Guinea (PNG) gold project and lists on the TSXV today under the symbol KNT.

    The gold mining startup came together during one of the toughest periods in mining history.

    K92’s main asset is the Kainantu project in PNG, which has a large high-grade gold resource (1.84Moz @ 11.6 g/t AuEq. Inferred, and 240,000oz @ 13.3 g/t AuEq. Indicated, Nolidan, April 15th, 2016) and extensive infrastructure including underground mine development, a mill processing facility, a fully permitted tailings pond and paved roads to the site. The infrastructure means K92 can target to re-start mining in the near-term with minimal capital costs, and look to grow through cash-flow funded exploration on the roughly 405-sq-km property, considered prospective for additional discoveries.

    The Kainantu project was acquired from Barrick Gold (ABX.T), the world’s top gold miner, in 2015. At the time, Barrick was undergoing a corporate rationalization and selling non-core assets. K92 paid Barrick an initial US$2 million to buy the mine and could make up to an additional US$60 million in future payments to Barrick if certain milestones are reached, such as producing more than 1 million ounces of gold over the next nine years.

    Source: K92 Presentation

    K92 picked up the project at a fraction of the cost of prior investment in it, reflecting the depressed state of mining when K92 negotiated the acquisition. Barrick paid US$141.5 million in cash for the asset in December 2007, then spent US$100 million upgrading infrastructure and on other expenses, and an additional $41.3 million on exploration and expansion efforts, including drilling 78,935 metres of core. That’s on top of the estimated US$80 million spent by the previous owner on development. Barrick operated the mine for six months in 2008 before shutting it down to focus on exploration at the property.

    K92 plans to re-start the mine using experienced contract miners, and is targeting near-term production. The roughly $47-million market cap company (fully diluted at $0.35 per share) had $10.7 million in working capital at March 31, 2016 and has arranged the full financing required for the re-start.

    A serious group of mining executives came together to form K92. The team is led by CEO Ian Stalker, a Scottish-born engineer and mine developer with nearly 40 years experience building and operating mines. The former AngloGold Ashanti managing director helped increase gold production there more than tenfold during the 1990s. He was CEO of Uramin when it sold to Areva for US$2.5 billion in 2007, and has worked on mining projects throughout Africa, Asia and Europe. Chairman Tookie Angus has been involved in several successful mining ventures including Ventana Gold and Nevsun Resources. President Bryan Slusarchuk, an ex-Canaccord broker, is helping the company raise money and tell its story. There’s a deep bench of operational talent in PNG, and advisors include Doug Kirwin, a mine finder previously with the Ivanhoe Group, and Alex Davidson, a former Barrick Executive Vice-President.

    K92 plans to start by mining the Irumafimpa deposit, which was previously in production. The nearby Kora deposit will then be explored targeting an expansion of mining operations, as will several untested targets on the broader property, Stalker told CEO.CA in a recent interview.

    “There’s a real chance of a very large mine popping out of this little company,” Stalker said. “And PNG is already the land of large mines,” he added.
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    Base Metals

    A Key Indicator In The Copper Market Suggests The Bottom Is Near

    Big news in the copper market this week, with the government of Peru saying it has now passed Chile as the world’s top supplier of copper to China.

    That follows an 81 percent increase in Peru’s China-bound exports during January to April of 2016.
    But despite that change in the rankings, Chile still remains the world’s most critical spot when it comes to copper production. And this week we got one very important number on the state of the mining industry here.

    That’s cash costs for copper production. With Chilean government agency Cochilco releasing its “Cash Cost Observations” report for the full-year 2015.

    Cochilco gathered data from the 19 largest copper mining operations across Chile — representing about 90 percent of the country’s total output, and looked at the average direct, or C1, costs for producing a pound of copper.

    The final average for 2015 came in at $1.532 per pound - up slightly from the $1.524 per pound cash cost that Chilean producers saw in 2014.

    That’s a very important figure for a few reasons. First, it shows that producers have not yet begun to benefit from cost deflation in the mining sector — with overall production costs still continuing to rise during the past year.

    However, the pace of cost inflation was much slower than previous years. Suggesting that 2016 could finally see a fall in production costs for the industry.

    This cash cost figure is also a critical benchmark for copper market observers to keep in mind. Especially given that copper prices have fallen notably over the last few weeks — down nearly 10 percent since late April, to a current level around $2.10 per pound.

    That’s had some analysts concerned about just how far copper could fall. And in that regard the $1.50 mark looks like a potential floor for prices — given that these numbers show most of the producers in the world’s top mining nation would be broke at that level.

    All of which suggests we could see more weakness, but not that much more. It’s still not cheap to produce copper — and the world still needs metal. Watch for prices to track these supply and demand dynamics.
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    Mining in hard times: small teams and big trucks for BHP's Olympic Dam

    A vast copper and uranium lode in Australia's parched outback, global miner BHP Billiton's Olympic Dam was long emblematic of the industry's boom year projects: complex, ambitious and - until 2012 - slated for a $20 billion expansion.

    Like its rivals, BHP is still betting on copper, and the ore under Olympic Dam's red desert sand is key to that.

    But in an age of unprecedented mining pain, it needs to reverse years of underperformance at one of its richest mines on a much tighter budget.

    On the ground, that means cheaper supplies, bigger trucks and fewer staff; on a visit this week, more than half the desks and offices at the mine's administration centre were empty.

    Last year, the mine cut 600 jobs, around 15 percent of its workforce, a blow to the purpose built town of Roxby Downs that services the mine.

    Thanks to rich ore grades underground, cuts have already helped the mine halve its production costs to $1 per pound of copper by 2017. That puts it on par with the world's biggest copper mine, BHP's Escondida mine in Chile.

    And those savings - plus the use of slower but cheaper heap leaching techniques to process the complex ore - could be Olympic Dam's saving grace.

    "Olympic Dam, over time, has really struggled to maintain its niche in terms of being globally competitive," said Jacqui McGill, who runs the mine for BHP.

    As costs fall, however, McGill says she is in a position to fight for funding to eventually double the tonnes mined to around 450,000 tonnes from 2025.

    "I think at a dollar a pound we've earned a seat at the table."

    Sprawling across 18,000 hectares of arid plains, it is set to use drones to inspect facilities, and move workers underground faster by zooming them down a lift shaft rather by a 15-minute drive down a ramp.

    Olympic Dam has about 470 km of tunnels and plans to drill a further 120 km over the next five years to open a new underground seam that will give it some of the richest ores in the world.

    BHP expects that will improve the grade by around 20 percent to more than 2.2 percent copper within the next five years - compared to average grades of less than 1 percent anticipated elsewhere by then.

    That would position Olympic Dam to be able to hike output from 200,000 tonnes this year to 230,000 tonnes by 2021.

    "The curveball is it's got uranium and all the daughter isotopes," said Justin Bauer, head of resource planning and development at Olympic Dam.

    Because of the uranium, BHP has to process all the ore at the site, from grinding to smelting and refining to produce sheets of copper and containers full of uranium yellow cake, instead of just shipping out copper in concentrate.

    To simplify the operation, McGill is running a pilot study of heap leaching, which BHP has used for years at mines in Chile, expecting to lower the operating costs at Olympic Dam by around 10 percent.

    If it works, the site would not need as much expensive equipment, would need less extrapower and could use saline water - reducing the need for costly desalination.

    "This is a significantly less intensive process, both from a power and a water perspective than the original expansion big bang," McGill said.

    Results of the trials of a whole range of ore are not due until 2019 and BHP has yet to disclose how much the expansion is expected to cost, leaving analysts somewhat in the dark.

    "In theory, the heap leach should work," Deutsche Bank analyst Paul Young said. "But the question becomes can you actually double the size of the underground and what do the economics look like?"
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    Jiangxi Copper says China should prevent excess imports -exec

    China should prevent excess imports of copper to offset output cuts by domestic smelters, a senior executive at Jiangxi Copper said on Thursday.

    Wu Yuneng, vice-president of China's top producer of the metal, also told a conference in Shanghai that banks should not lend to inefficient companies suffering overcapacity.
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    Indonesia renews Newmont Mining's copper export licence for six months

    May 24 Indonesia's mining ministry has issued the local unit of U.S. copper and gold miner Newmont Mining Corp with a recommendation to continue copper concentrate exports for the next six months, a ministry official said on Tuesday.

    Newmont, Indonesia's second-biggest copper miner, will be allowed to export "around 400,000" tonnes of copper concentrate from its mine in eastern Indonesia, Coal and Minerals Director General Bambang Gatot told reporters, without providing further details.
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    India’s Hindustan Copper reduces capex to $59m

    India’s sole State-owned integrated copper producer Hindustan Copper Limited (HCL) has lowered its capital expenditure (capex) for the current financial year, owing to delayed clearances for reopening and expanding three of its captive copper mines. 

    Data sourced from the government showed that HCL had planned capex of $100-million for 2016/17, when it developed its strategic plan last year. However, two months into the new financial year, HCL had reduced its capex to $59-million as the expansion of the three mines was not expected to gain momentum during the current year. 

    In the previous financial year, HCL had also failed to deploy its entire planned funds for capex. Government data showed that HCL only spent $43-million during 2015/16, compared with planned capex of $70-million. 

    A Parliamentary Committee, designated to oversee government-owned companies, at a recent meeting criticised HCL, saying the company should review the practice followed in framing yearly capex targets. 

    The delays in securing the mandatory approvals, including environmental approval, to reopen the Rakha, Chapri Siddeswar and Kendadhi mines, in Jharkhand, The three mines were forced to close down almost a decade and half ago in the face of depressed global copper price and HCL's high production costs.
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    First permanent infrastructure being built at new DRC tin mine

    The first permanent infrastructure is being built at the proposed new tin mine at Bisie, in the Democratic Republic of Congo (DRC), for which $130-million is being raised. 

    Alphamin Resources CEO Boris Kamstra said the return airway drive being built would be used to acclimatise mining crews to safety at the Mpama North prospect in North Kivu, where a definitive feasibility study points to a 380-employee operation that will produce at a rate of 9 000 t of tin in concentrate a year from 2019. 

    Kamstra said the company would make use of the infrastructure to allow 26 artisanal miners to undergo training in hazard identification and risk mitigation, ahead of the full development of what will be an underground mine. 

    To date, about $50-million has been invested in the project, which will require capital expenditure of $120-million and working capital of $10-million. “$130-million will be the final hurdle we have to get over,” Kamstra told Mining Weekly Online. 

    The all-in cost of production of $8 448/t compares with a tin price of $16 465/t at the time of going to press and a definitive feasibility study tin price of $14 800/t, which allows for payback in 22 months. Results of a drilling programme have lifted the quantum of contained tin to 230 000 t at an in situ grade of 4.5% from a previous 194 000 t at 3.5%. 

    At the current tin price, it has a probable 18-month payback for a mine that will have a life of ten to 12 years. “We’ve got terrific margin, just as a consequence of this most extraordinary grade and this really unique deposit,” Kamstra commented. 

    The supply charts of the tin industry currently resemble those drawn up during South Africa’s energy crisis to depict the coal supply cliff that Eskom was facing. The only difference in Kamstra’s view is that this time, the tin supply cliff is going to eventuate, owing to major tin producers experiencing grade deterioration, greater mine depths, ore reserve depletion and profitability challenges. 

    Even if the supply from Myanmar, which has been unpredictable, remains at 40 000 t/y, Kamstra’s view is that question marks over supply adequacy will remain. He insists that new operations are desperately needed to fill the supply gap.

    Bisie’s past has been one of the reasons why tin was included in the Dodd-Frank legislation, which was introduced by the US to stop DRC warlords from using metals to finance their conflicts. The legislation means that Alphamin will now be forced to demonstrate to the likes of Apple, Microsoft and Samsung that its tin is 100% conflict-free. 

    “We will comply,” Kamstra assured Mining Weekly Online.
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    China's aluminium market shrouded by statistical smoke and mirrors

    The latest figures from the International Aluminium Institute (IAI) showed a collective annualised run-rate outside of China of 25.1 million tonnes in April. That was the lowest level since August last year, reflecting the ramp-down of capacity in the U.S., where local producer Alcoa has shuttered its Warrick and Wenatchee smelters.

    The world outside of China is widely believed to be in supply deficit.

    China, on the other hand, is widely believed to be still in production surplus, the resulting imbalance generating continued flows of semi-manufactured products into international markets.

    There were signs that Chinese smelters were also curtailing capacity at the end of last year but with Shanghai aluminium prices staging an impressive rally, the fear is that production discipline will be lost and that Chinese exports will increase again to fill any supply gap in the rest of the world.

    So is Chinese production going up, going down or is it largely unchanged?

    It should be an easy question to answer but unfortunately it's not because of the volatility in the recent figures supplied to the IAI by China's Nonferrous Metals Industry Association (CNIA).

    If the figures are to be believed, Chinese output slumped by an annualised 6.6 million tonnes in the December-February period only to surge back by 5.2 million tonnes in March and April.

    Except anyone who knows how an aluminium smelter works will tell you the figures don't make any sense.

    Looking for example at the apparent 4.8-million tonne increase between run-rates in February and March, Paul Adkins of consultancy AZ China noted wryly that the month-on-month jump was equivalent to "10 smelters running at full speed on March 1 after being idle on February 29".

    Volatility is nothing new to these Chinese aluminium production figures, particularly around the turn of the year, both calendar and lunar, but this year's variance is unprecedented.

    Perhaps the best way to penetrate the statistical smoke is to look at annualised production over a longer period.

    On this basis April's run rate was 31.3 million tonnes, down a net 1.79 million tonnes from September last year.

    That would tally with the anecdotal evidence that capacity was indeed curtailed as local prices fell below 10,000 yuan per tonne in November, lower even than during the worst of the Global Financial Crisis in 2008-2009.

    The figures for March and April would also suggest, however, that restarts may already be happening, albeit not on a scale implied by that month-on-month explosion in output in March.

    And Chinese smelters right now have every incentive to lift output rates, given the strength of the rally in Shanghai prices.

    The strength of the rally since November's trough has dispelled all the earlier talk of coordinated production cutbacks in return for government help in setting up an aluminium stockpile.

    There is no hard evidence that the proposed scheme ever got off the ground, although it may have played a part in deterring the short-sellers who were swarming over the Shanghai market at the end of last year.

    But while other over-heating commodities such as steel rebar and iron ore have collapsed in the wake of the regulatory intervention, Shanghai aluminium has recouped most of its immediate losses and is trending upwards again.

    This does in part reflect an improving demand picture in China, AZ China's Adkins for example noting that "several sectors are showing good growth signals, including high voltage cables, automobiles, white goods and consumer durables".

    What is not in doubt is the outperformance of the Shanghai aluminium contract relative to the London market this year.

    The Shanghai price has risen by 16 percent, while the price of three-month aluminium on the London Metal Exchange (LME) is up by a far more modest 6 percent.

    That doesn't bode well for producer discipline since Chinese smelters have in the past responded first and foremost to domestic price signals in terms of capacity utilisation.

    It in turn will depend on the underlying supply-demand drivers in the country. Just a shame they are currently so obscured by statistical smoke and market mirrors.
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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.
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    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.
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    Steel, Iron Ore and Coal

    Bid deadline for Anglo's coking coal mines set at June 6

    Final bids for Anglo American's metallurgical coal mines in Australia, valued at up to $1.5-billion, must be submitted by June 6, three sources close to the matter said on Thursday. 

    Anglo American, like its peers, is selling off prized assets after a prolonged commodities rout has left it with high levels of debt. It aims to sell between $3-billion and $4-billion of assets this year. Analysts said the appeal of its two metallurgical or coking coal mines in Australia could have increased after one operation delivered coal months ahead of schedule. 

    Private equity firm Apollo has teamed up with Pennsylvania coal exporter Xcoal Energy & Resources, founded by Ernie Thrasher and Chris Cline, the billionaire coal entrepreneur often dubbed the King of Coal, and have made it through to the second round of bidding, according to the sources. 

    BHP is also through to the second round and a likely frontrunner, although the sources said Japanese steelmakers reliant on coking coal could raise competition concerns as BHP already dominates. 

    Other interested parties could include Indian, Japanese and America suitors, the sources said, declining to be specific. "There are lots of interested parties...everybody in the world looked at these assets," one said.
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    Iron ore price back below $50

    On Thursday  the Northern China benchmark iron ore price dipped to just below the $50 per dry metric tonne level for the first time since February according to data supplied by The Steel Index.

    Iron ore is down 27.4% from its April high near $70, but is still trading 16% higher than at the start of they year.

    The correction is the result of near and longer-term supply and demand dynamics (in short: rising output in Australia and slowing demand in China) and many factors are  stacked against a seaborne iron ore price above $50.
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    EU 2015 coal consumption down 3pct on year

    The European Union (EU) consumed 690 million tonnes of coal in 2015, dropping 3% year on year, according to the latest market report released by European Coal Association.

    Of the total, hard coal output produced by 28 countries in the union was 100 million tonnes, or 14.49% of the total consumption, falling 5.1% from 2014; the domestic lignite consumption stood at 398 million tonnes, down 0.65% on year; and the rest was 192 million tonnes of imported coal, dropping 6.49% from the year-ago level.
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    Hebei bans reopening of mills ordered closed, slashes more production

    Provincial authorities in Hebei pledged to ban the reopening of steel mills that had been previously ordered to shut down, punish closed mills that reopen and investigate and sack local officials who allow the reopening of mills and approve illegal projects, Xinhua News Agency reported.

    A jump in steel prices this year has encouraged many producers in China to rekindle their furnaces and ramp up production, potentially exacerbating a global steel glut that has sparked trade friction with other producers including the United States, Britain and Australia.

    Some mills in China have been ordered to close as part of the government's efforts to trim overcapacity. Xinhua quoted a notice from the Hebei government as saying officials were not allowed to permit these facilities to restart production "under any circumstances."

    Other mills, facing losses, cooling demand and tighter credit conditions, have trimmed output or suspended production for economic reasons. It was not clear if these mills were included in the ban on resuming production.

    Hebei province, by far the world's top steel producer and consumer with its steel production accounting for just under a quarter of China’s total, has also raised its targets for cutting iron and steel production this year, another effort made to tackle the supply glut haunting the industry.

    Iron production will be reduced by 17.26 million tonnes, up from a previous target of 10 million tonnes set in January. About 14.22 million tonnes of steel manufacturing will be phased out, up from an earlier target of 8 million tonnes, said provincial governor Zhang Qingwei on May 26.

    The new targets came after heavy criticism from a central government environmental inspection group, which exposed more than 2,800 environmental concerns.

    Production-slashing responsibilities have been distributed among cities, including Tangshan, Handan, Qinhuangdao and Langfang, the four major industrial cities in Hebei.

    In April, steel prices picked up sharply, with the domestic steel price index gaining 11.29 points since March to 78.42, and also up 4.43 points from a year earlier. Many steel mills have resumed production.

    Zhang said city and county governments need to prevent heavily polluting equipment from operating again. Production of steel, cement and glass has also been widely blamed for the worsening air pollution in Hebei.

    The province has previously said that it will cut a combined 160 million tonnes in steel, cement and coal production, and another 36 million weight cases of glass by 2017 compared with 2013 levels.
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    China key steel mills April steel products sales down 8.53 pct

    China’s key steel mills sold 47.39 million tonnes of steel products in April, down 8.53% year on year, according to the latest data released by the China Iron and Steel Association (CISA).

    In the first four months this year, the sales volumes of steel products by these key steel mills stood at 179.16 million tonnes, down 3.10% compared with the year-ago period.

    Meanwhile, China’s key steel mills sold 2.75 million tonnes of steel billets in April, down 8.24% on year. Total sales of steel billets reached 10.26 million tonnes during the January-April period, slipping 16.86% year on year.

    Stocks down
    Stocks of steel products in China’s key steel mills stood at 12.84 million tonnes by the end of April, down 20.63% year on year and down 2.68% on month.

    Steel billet stocks dropped to 2.92 million tonnes by the end of April, down 27.24% from a year ago but up 4.33% from a month ago.
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    China says "resolutely opposes" US trade secret theft probe over steel

    China resolutely opposes a probe by the U.S. International Trade Commission (ITC) into complaints of trade secret thefts by Chinese steel companies and will encourage its firms to legally defend themselves, China's commerce ministry said on Friday.

    Citing unnamed officials from the ministry, the statement on the Ministry of Commerce's website said trade remedy measures recently being taken by the U.S. were protectionist, and would artificially interfere with trade rather than solve the industry's current problems.

    The ITC on Thursday said that it is investigating complaints by United States Steel Corp that Chinese competitors stole its trade secrets, fixed prices and misrepresented the origin of their exports to the United States.

    U.S. Steel, in its complaint under section 337 of the main U.S. tariff law, is seeking to halt nearly all imports from China's largest steel producers and trading houses.
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    Shenhua Jan-Apr coal sales up 15pct on year

    China Shenhua Energy Co., Ltd, the listed arm of coal giant Shenhua Group, sold 119.6 million tonnes of coal over January-April, rising 15% on year, mainly attributed to soared sales of outsourced coal, data showed from the company’s announcement on May 25.

    Of this, sales of self-produced coal rose 4.9% on year to 89.4 million tonnes during the period, while those of outsourced coal stood at 30.2 million tonnes, up 60.6% on year.

    Coal sales in April stood at 27.1 million tonens, falling 13.1% on year and down 44% on month. It was mainly due to the sharp rise last month and a 37.4% decline of coal sales via northern ports amid reduced coal consumption at utilities in rainy season.

    Sales of self-produced coal and outsourced coal reached 20.7 million and 6.4 million tonnes, sliding 20.7% and up 25.5% on year, respectively.

    Coal sales via northern Chinese ports stood at 72 million tonnes over January-April, rising 34.6% on year, with those in April fall 14.2% on year and down 37.4% on month to 16.9 million tonnes.

    Coal shipped from Shenhua’s exclusive-use Huanghua port stood at 10.7 million tonnes or 63.3% of its total shipment via northern ports in the month, increasing 23% on year but down 44.6% on month.

    That over January-April soared 89.1% on year to 48.6 million tonnes.

    Coal shipped from Tianjin port fell 34.6% on year and down 24.4% on month to 3.4 million tonnes; the volume over January-April increased 7.2% on year to 13.4 million tonnes.

    The company produced 23.3 million tonnes of coal in April, falling 5.7% on month but up 1.3% on year, the third straight yearly rise. The output over January-April increased 2.5% from a year ago to 94.6 million tonnes.

    China Shenhua announced in its statement that it has been cutting coal production in recent three years, and its coal output was reported at 318 million, 307 million and 281 million tonnes in 2013, 2014 and 2015, respectively.

    Its coal production target for 2016 is 280 million tonnes, sliding 0.3% on year, with the volume over January-April realizing 33.8% of the total, it added.
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    China's Hebei province pledges 14.22 million ton steel capacity cuts in 2016: Xinhua

    Hebei, China's top steelmaking province, has pledged to close a total of 14.22 million tonnes of capacity in 2016 as part of the country's efforts to tackle a price-sapping glut in the sector, the official Xinhua news agency said on Thursday.

    This represents just over 1 percent of official capacity of 1.13 billion tonnes.

    Xinhua said the province would close the first batch of 8.2 million tonnes before November and the rest by the end of the year. Most of the mills lined up for closure are situated in the cities of Tangshan, Handan, Qinhuangdao and Langfang.

    The smog-plagued province, which surrounds China's capital Beijing, had previously promised to cut its total crude steel capacity by 60 million tonnes over the 2014-2017 period in order to reduce air pollution.

    It has already shut 41.06 million tonnes in 2014 and 2015, according to the provincial steel industry association.

    The province had a total of 286 million tonnes of annual capacity in 2013, around a quarter of the national total. It aims to bring the total down to 200 million tonnes by the end of the decade.

    China as a whole is planning to cut steelmaking capacity by 100 million to 150 million tonnes in the next five years, with the industry facing widespread losses as a result of slowing demand.
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    China’s coal prices to rise 20pct amid production cut, Citi says

    China’s coal price may rise 20% by the end of this year, as government steps to reduce production outpace a decline in demand, according to Citigroup Inc, citing from Bloomberg.

    Power-station coal at the northeastern port city of Qinhuangdao may rise to 450 yuan/t ($69/t) by December from 376 yuan/t now, bank analysts Jack Shang and Claire Jie Yuan said in a research note on May 24. The government has asked domestic mines to cut output by 16% and reduce their operating days to 276 from 330 annually, the report said.

    "We believe the new regulation to reduce operating days is a measure taken in desperate times by the government to avoid too many bankruptcies in the coal industry," the analysts wrote. "We expect the new regulation will be strictly enforced in the coming quarters."

    Raw coal production may fall by 9% this year, more than offsetting a 3.4% decline in demand, Citi said. The world’s largest coal producer is seeking to ease a glut of industrial capacity as it shifts toward consumer-led growth and tries to curb pollution. China plans to shut 500 million tons of nationwide production capacity, or about 9%t of its total, within five years, the country’s state council said in February.

    Separately, four Chinese coal companies including China Coal, China Shenhua Energy Co., Datong Coal Mine Group Co., and Inner Mongolia Yitai Coal Co. may raise retail coal prices by 5-10 yuan/t in June, said Lin Xiaotao, a Guangzhou-based analyst at researcher ICIS C1 Energy. The four companies didn’t respond to requests for comment.

    China’s central bank is tightening financing for coal projects to help accelerate the government’s culling of industrial overcapacity, while encouraging companies to export products and projects overseas.

    Shanxi province, which produces more coal than any other nation, aims to cut at least 100 million tons of production capacity by 2020 as overcapacity, falling prices and losses at miners hurt its economy, the provincial government said in a statement on its website last month.
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    U.S. levies hefty duties on Chinese corrosion-resistant steel

    Corrosion-resistant steel from China will face final U.S. anti-dumping and anti-subsidy duties of up to 450 percent under the U.S. Commerce Department's latest clampdown on a glut of steel imports, the agency said on Wednesday.

    The department also issued anti-dumping duties of 3 percent to 92 percent on producers of corrosion-resistant steel in Italy, India, South Korea and Taiwan, it said in a statement.

    The department hit producers of the flat-rolled steel, which is coated or plated with zinc, aluminum or other metals to extend its service life, with anti-subsidy duties in China, South Korea, Italy and India. Taiwan was exempted.

    The final U.S. anti-dumping duties on the Chinese products replace preliminary ones of 256 percent issued in December 2015.

    China's Commerce Ministry said it was extremely dissatisfied at what it called the "irrational" move by the United States, which it said would harm cooperation between the two countries.

    "China will take all necessary steps to strive for fair treatment and to protect the companies' rights," it said, without elaborating.

    Last week the U.S. Commerce Department slapped punitive tariffs of more than 500 percent on Chinese cold-rolled flat steel, which is widely used for car body panels and appliances.

    China has come under increasing fire from industrialized countries worldwide that have accused it of dumping steel at prices far below production costs to avoid cutting excess capacity in the sector, which faces slowing demand at home.

    Beijing has insisted that it would eliminate 100 million to 150 million tons of annual capacity and said last week it would persist with a steel tax rebate plan to support the sector's restructuring.

    The escalating steel trade fight has grown into a major irritant as senior U.S. and Chinese officials prepare for bilateral economic and foreign policy meetings in Beijing in early June.

    The Commerce Department issued anti-dumping duties of 210 percent on all Chinese-produced corrosion resistant steel. Final anti-subsidy duties ranged from 39 percent for many producers to 241 percent for some of the largest ones including Baosteel (600019.SS), Hebei Iron & Steel Group (000709.SZ) and Angang Group.

    Anti-dumping duties for Indian producers were far lower at 3 percent to 4.4 percent, while their anti-subsidy duties ranged from 8 percent to 29.5 percent for JSW Steel Ltd JSW.NS.

    Italian producer Marcegalia SpA was hit with anti-dumping duties of 92.1 percent, while other Italian steelmakers faced 12.63 percent. Anti-subsidy duties on Italian steelmakers ranged from 0.5 percent to 38.5 percent on Ilva SpA.

    In 2015, U.S. imports of corrosion-resistant steel products from the five countries totaled $1.87 billion, the Commerce Department said. About $500 million of that came from China.

    The original anti-dumping and anti-subsidy complaint was brought by major U.S. steelmakers.

    Attached Files
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    Steel industry calls on G7 to protect it from China

    Twelve global steel associations urged the Group of Seven advanced economies, which meet in Japan this week, to prevent cheap Chinese steel distorting world markets and inflicting further pain on producers.

    Steelmakers have been hit by a plunge in steel prices, which Europe and the United States have blamed on a surge in cheap exports from China that has exacerbated the impact of a collapse in demand following economic crisis.

    Among the casualties are Tata Steel, which in March announced it was selling its British operations as it could no longer sustain deep losses, prompting a political scramble to save the thousands of jobs at stake.

    The White House has already said discussion of actions to reduce global industrial overcapacity, with an emphasis on the steel glut, would be on the agenda for Japan talks starting on Thursday.

    Open letters made public on Wednesday to world leaders from 12 steel industry bodies and other manufacturers said that discussion must include action against countries that do not respect market economy conditions, especially China, and oversupply had to be tackled.

    "If global overcapacity borne of state-supported enterprises' uneconomic operations continues it will threaten the survival of efficient companies operating in environments with little or no government support," Axel Eggert, director general of the European steel body EUROFER, said in an emailed statement.

    Earlier this month, EU lawmakers overwhelmingly rejected any loosening of trade defences against China, whose eligibility for market economy status is being debated by the European Union.

    Beijing says the status is its right, 15 years after it joined the World Trade Organization, and says it is blamed unfairly for a steel crisis by nations it accuses of protectionism.

    Granting market economy status would make it hard for the EU to impose trade restrictions to protect its own industry.

    EUROFER says it is clear China is the root cause and that the nation had built up a 50 percent share of total global steel capacity by 2015, compared with 15 percent in 2000.

    In addition to the steel industry letter, AEGIS Europe, the alliance of manufacturing industries in Europe, wrote to the political leaders of Britain, France, Germany and Italy, as well as EU leaders Donald Tusk and Jean-Claude Juncker, urging them to resist "unjustified demands for treating China as a market economy".

    Attached Files
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    US thermal coal market to drop to 500 million-550 million st/year: CEO

    The US thermal coal market will shrink to about 500 million to 550 million st/year from roughly 800 million in 2015, Murray Energy CEO Bob Murray said Monday.

    Murray, speaking at the 37th annual Virginia Coal and Energy Alliance conference in Kingsport, Tennessee, said in a wide-ranging keynote speech that he also met last Monday with presumptive Republican nominee Donald Trump in the candidate's New York office to discuss energy policy.

    "I said we need to get these 20 permits for LNG ports, get that [natural] gas out of the country, then he said, "What's LNG?" said Murray. "He'll get there. He'll surround himself with people that know the industry. But he's all we've got, he's the horse to ride, and he's got his head on right."

    With regard to the current coal market, Murray said he believes the market remains oversupplied and further turmoil is likely, given that producers aren't doing more to shut down mines.

    Murray said he thinks 2017 will be worse than 2016, and "I don't know about 2018 because I can't see that far."

    Murray said he thinks the Powder River Basin "is going to be hit very hard" by market dynamics, partly because he doesn't believe the economics of moving low-heat coal with lots of moisture great distances across the country by railroad. "It's [an artificial market] created by the Clean Air Act of 1990," Murray said.

    Murray said he believes Central Appalachian coal production will drop to 60 million st from 200 million st as recently as 2011, that both Northern Appalachia and Illinois Basin will show declines, and the Western coal market has been "destroyed" by West Coast states moving away from coal-fired power. Murray owns mines in CAPP, NAPP, the Illinois Basin and Utah.

    The outspoken CEO said he expects to mine 60 million st this year, down from early projections of roughly 90 million st, and that he's working Sundays to keep his company out of bankruptcy.

    "Our electricity power generators cannot dispatch their power plants and we cannot sell our coal," said Murray.

    Murray said bankruptcies strip away employer liabilities and push coal prices lower, "and we all get sucked into the bankruptcy sewer." But because producers who file for bankruptcy aren't shutting down mines, "these zombie mines, I call them, still exist," he said. "They are being unloaded of all their obligations and makes it so none of us can stay out of bankruptcy."

    Murray said he's hopeful several of his lawsuits against the Environmental Protection Agency and other government agencies will be successful, but that he plans to be around whatever the future holds.

    "I'll be 100 million st, I can be one-sixth of the coal industry," said Murray. "I have low-cost mines with 17 longwalls, and good reserves, so my plan is to be in there, with one-sixth of what's left."

    Attached Files
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    Shanxi April raw coal output drops 21.3pct on year

    Shanxi April raw coal output drops 21.3pct on year

    Shanxi province, a major coal production base in northern China, produced 58.19 million tonnes of raw coal in April, falling 21.3% on year, the local government said on its official website on May 23.

    Coal output over January-April stood at 260.51 million tonnes, sliding 7.3% from the previous year, data showed.

    Meanwhile, Shanxi produced 11.02 million tonnes of pig iron during the same period, down 9.8% year on year, with April output down 7% on year to 3.07 million tonnes.

    Shanxi’s crude steel output in the first four months was 11.58 million tonnes, down 10.1% on year, with April output down 7.3% to 3.23 million tonnes. Steel products output fell 12.2% on year to 12.17 million tonnes, with April output down 6.9% to 3.59 million tonnes.

    The falling output hinted the resolution of the province to tackle the oversupply haunting the whole market led by the national supply-side structural reform.

    A work document was released by provincial government and Party committee on April 24, to require the capacity elimination of over 100 million tonnes per year in an ordered way by 2020, and further reaffirm the decision of not approving new coal projects in next five years.

    Attached Files
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    China’s eight ministries issue notice to substitute power for coal-fired heating

    China’s eight ministries including the National Development & Reform Commission jointly issued a notice lately, aiming to prompt the substitution of electricity for coal burns in four major sectors –residential heating in northern China, manufacturing, transportation, power supply and consumption.

    It will help alleviate severe air pollution haunting the country for a long period, which is mainly caused by the wide coal burns and fuel use. It, in line with the energy consumption reform and national energy strategy, will also push for the development of clean energies.

    The electricity used to substitute coal mainly comes from renewable energies and some coal-fired power units with ultra-low emissions, according to the notice.

    Residents in suburbs, rural areas as well as those urban areas where heating network is not yet available in northern China are encouraged to use regenerative electric boilers, regenerative electric heaters and other electric heating facilities.

    The notice guides industrial and agricultural sectors to generalize the use of electric boilers and other facilities fuelled by power.

    The substitution of electricity will be comprehensively promoted in the above four sectors during the "13th Five-Year Plan" Period (2016-2020), and consumption equivalent of 130 million tonnes of standard coal will be saved.

    The share of power coal consumption is expected to rise 1.9% of the total coal use, and that of power energy will increase 1.5% to around 27% of the total energy consumption of end users.

    The electricity use is likely to increase 450 TWh, and emissions of dust, sulphur dioxide and nitric oxide will be reduced by 0.3 million, 2.1 million and 0.7 million tones, respectively, during the period.
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    Techint pours $54 mln into Brazil's Usiminas in capital plan

    May 23 Italian industrial conglomerate Techint Group on Monday bought 193.5 million reais ($54 million) worth of shares in Usinas Siderúrgicas de Minas Gerais, as part of a capital plan aimed at shoring up the Brazilian steelmaker.

    Techint, through several units, including steelmaker Ternium SA, bought 38.7 million shares in Usiminas, as the company is known, to help bolster the ailing steelmaker, as it struggles with slumping sales and a swelling debt burden. Techint and Japan s Nippon Steel & Sumitomo Metal Corp are the two top shareholders in Usiminas.
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    CIL implements new pricing strategy, slashes e-auction reserve price

    Reacting to oversupply pressures and rising stockpiles, Coal India Limited (CIL) has taken the first step to adjust the price of coal and meet the volume demand of consumers. 

    In a significant change in pricing strategy, Western Coalfields Limited (WCL), a wholly owned subsidiary of CIL, has decided to reduce the reserve price of coal sold through e-auctions to attract higher-volume bids from consumers. Instead of pegging the e-auction price 20% higher than the notified price for coal supplied to thermal coal plants under supply agreements, 

    WCL has decided to peg the reserve price for e-auction at 20% less than the notified price. The benefit of a lower price would apply to both e-auctions and forward e-auctions for captive and noncaptive power plants, WCL said in a statement. 

    Last month, Mining Weekly Online reported that CIL had slashed the price of high-grade coal by up to 40%, also scrapping the system of charging consumers a premium once supplies exceeded 90% of contracted volumes under fuel-supply agreements with large consumers. 

    To cope with rising production and stockpiles, CIL now planned for a higher-volume offering of up to 120-million tons through e-auction sales during the current fiscal year, which was expected to benefit captive and noncaptive thermal power producers by ensuring there were fuel supplies without the need to get into long-term fuel-supply agreements. 

    Responding to oversupply in the market, CIL was forced to prune its April dispatch to 42.5-million tons during April, which was about 1.5-million tons lower year-on-year. Stockpiles at its pitheads during April were estimated at 53-million tons, only marginally down from the 55-million estimated tons in January. 

    CIL officials said that, while increasing production from the company’s mines would not be difficult, the current priority of the miner was to hasten liquidation of existing stockpiles, as there had been several incidents of stocks self-igniting during the peak summer temperatures and heatwave conditions in several parts of India.
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    "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?
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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.
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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.
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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.
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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.
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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.
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