Mark Latham Commodity Equity Intelligence Service

Friday 18th November 2016
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    Oil and Gas

    Steel, Iron Ore and Coal


    China: Smog awful!

    In response to continuous fog and haze, on the 17th night, Shijiazhuang municipal government issued a series of emergency measures, from November 17, 2016 to December 31, 2016, the main city of the implementation of motor vehicle odd and even number lines, steel and other major industries 7 all discontinued, commuting time each unit fault.

    Since mid-September this year, Shijiazhuang City, multiple consecutive heavy pollution weather, 74 major cities in the country ranking continued retrogression of the annual PM2.5 concentrations decreased by 10% of the task extremely difficult. Shijiazhuang city government decided that from now to the end of the use of only 45 days, the city to carry out a sword to cut air pollution control pollution action.

    According to the latest introduction of the "Shijiazhuang Municipal People's Government on carrying out a sword to cut pollution action plan", from November 17, 2016 to December 31, 2016, the Shijiazhuang-fired power plants will be the implementation of "Heat-power" to maximize reducing fired power generation capacity; in addition to undertaking residents heating and livelihood security and other key tasks of the production line, all the city's iron and steel, cement, coke, foundry, glass, ceramics, calcium and magnesium and other seven major industries all shut down; the city's pharmaceutical, chemical, packaging printing, furniture and other industries to implement inventory management, in principle, all volatile organic production processes all the cut, special circumstances can not be fully discontinued, must be reported to the municipal government approved limiting the production of emission reductions.

    Meanwhile, non-residents to assume the task of central heating and 20 tons of steam coal-fired industrial boilers, greenhouses, nurseries, greenhouses livestock production facilities did not use clean fuel fired facilities will be discontinued; all involving gas not stable discharge standards enterprises will be shut down, non-residential coal-fired facilities will be disabled; without government approval, the main city and county built-up areas will be prohibited from building demolition, road excavation, earthwork and concrete mixing, spraying, welding, cutting, etc. have dust and toxic construction jobs harmful gas emissions; all the city's open-air mining, sand mining, stone processing, and aggregate processing industries all downtime.

    During this period, the main city of Shijiazhuang odd and even numbers will be implemented vehicle limit line, the limit line during the free city bus ride. After being submitted to the provincial government approval, Shijiazhuang city all administrative authorities and institutions to implement "nine to five" commuting system at fault.

    Shijiazhuang municipal government Du Chashi to deploy specialized personnel to the county (city), district, and municipal departments in the county (city), the Working Group IMPLEMENTATION uninterrupted area supervision and inspection, focusing on a dark night and assault investigation unannounced visits to check highlighting issues identified will be made public, and serious accountability.

    This article mysteel editing, for use, please contact 021-26093490 application for authorization. Without permission reprint, link, reprint or otherwise use, mysteel right to further pursue legal responsibilities reserved.

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    Glencore Third Quarter 2016 Production Report Production highlights

     Year-to-date production was in line with expectations, reflecting the various operational suspensions / supply reductions announced and actioned notably in coal, oil, copper and zinc.

     Own-sourced copper production of 1,061,200 tonnes was 6% down on the comparable period, due to the curtailment of African Copper volumes, partly offset by higher grades and throughput in South America.

     Own-sourced zinc production of 789,200 tonnes was 30% down on the comparable period, reflecting the volume reductions that were implemented across our portfolio, principally in Australia and Peru.

      Own-sourced nickel production of 82,400 tonnes was 20% higher than in the comparable period, mainly as a result of major maintenance at the Sudbury smelter in 2015.

     Coal production of 91.9 million tonnes was 11% down on the comparable period, due to the divestment of Optimum Coal, scheduled closures of various depleted mines in South Africa and adverse weather conditions in Colombia.

     Glencore’s share of oil production was 6.0 million barrels, 25% down on the comparable period, reflecting natural depletion of the existing fields. Replacement volumes have yet to be drilled as the resource is being preserved for a stronger oil price environment.

     Full year 2016 Marketing EBIT guidance is $2.5 to $2.7 billion.  Full year 2016 production guidance is detailed on page 19.

     Glencore will host an investor update call on 1 December 2016 at 1300 (UK). Further details will be provided on our website closer to the date.

    More info:

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    U.S. Housing Starts Jump 25.5% in October

    U.S. Housing Starts Jump 25.5% in October

    Both housing starts and permits for new construction rose in October, a sign residential construction is ramping up to meet steady demand.

    Housing starts rose 25.5% in October to an annual rate of 1.323 million, the Commerce Department said Thursday, as multifamily housing starts came back with a vengeance.

    Single-family starts also continued to climb, reaching a rate of 869,000.

    Starts in structures with five or more units, such as condos or apartment buildings, posted a 74.5% gain to hit a rate of 445,000 in October.

    Building permits issued for privately owned housing units rose 0.3% in October from the prior month to a seasonally adjusted annual rate of 1.229 million.

    Permits for single-family homes, about 60% of all permits, rose 2.7% to a rate of 762,000.

    Economists surveyed by The Wall Street Journal had expected overall October permits to fall to a 1.20 million annual rate and starts to rise to a 1.15 million pace. Construction typically begins a month or two after a permit is issued.

    Monthly housing figures are often choppy and can be subject to large revisions. September permits were unrevised at 1.225 million. September starts were revised up slightly to 1.054 million from 1.047 million.

    October’s permits figure, based on a survey of local governments, had a margin of error of 2.0 percentage points. Last month’s starts number, based on a survey of builders and homeowners, came with a margin of error of 12.6 percentage points.

    Through the first 10 months of the year, permits were up just 0.7% compared with the same period in 2015, reflecting a drop in permits for buildings with five or more units that nearly erased gains for single-family permits.

    Starts were up 5.9% through October, again led by gains in the single-family sector.
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    China tries carrots as local governments resist reforms

    China will offer preferential treatment, including subsidies, to regions that outperform in areas such as fixed asset investment growth and entrepreneurship, the State Council said on Thursday.

    China will direct more projects and funds to local governments that show clear progress in developing new industries, promoting job growth and with high participation by private investors in joint investment projects, the notice said.

    Central government officials have cited weak implementation of reforms and new policies at the local level as a reason for weaker economic performance, including record low private sector investment growth this year.

    Factors hindering policy implementation include an ongoing corruption campaign that has made many officials nervous about standing out from the crowd, including by taking the lead on new economic reforms, as well as local protectionism.

    The carrots offered to local governments also cover steel and coal capacity reduction targets, controlling financial risks, improvements to the business environment and upgrades to the industrial sector.

    Government departments must deliver specific details of rewards and incentives to the State Council, China's Cabinet, by Nov. 30, and the new policy will go into effect in 2017.

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    U.S. panel urges ban on China state firms buying U.S. companies

    U.S. lawmakers should take action to ban China's state-owned firms from acquiring U.S. companies, a congressional panel charged with monitoring security and trade links between Washington and Beijing said on Wednesday.

    In its annual report to Congress, the U.S.-China Economic and Security Review Commission said the Chinese Communist Party has used state-backed enterprises as the primary economic tool to advance and achieve its national security objectives.

    The report recommended Congress prohibit U.S. acquisitions by such entities by changing the mandate of CFIUS, the U.S. government body that conducts security reviews of proposed acquisitions by foreign firms.

    "The Commission recommends Congress amend the statute authorizing the Committee on Foreign Investment in the United States (CFIUS) to bar Chinese state-owned enterprises from acquiring or otherwise gaining effective control of U.S. companies," the report said.

    CFIUS, led by the U.S. Treasury and with representatives from eight other agencies, including the departments of Defense, State and Homeland Security, now has veto power over acquisitions from foreign private and state-controlled firms if it finds that a deal would threaten U.S. national security or critical infrastructure.

    If enacted, the panel's recommendation would essentially create a blanket ban on U.S. purchases by Chinese state-owned enterprises.

    The panel's report is purely advisory, but could carry extra weight this year because they come as President-elect Donald Trump's transition team is formulating its trade and foreign policy agenda and vetting candidates for key economic and security positions.

    Congress also could be more receptive, after U.S. voter sentiment against job losses to China and Mexico helped Republicans retain control of both the House and the Senate in last week's election.

    Trump strongly criticized China throughout the U.S. election campaign, grabbing headlines with his pledges to slap 45 percent tariffs on imported Chinese goods and to label the country a currency manipulator on his first day in office.

    "Chinese state owned enterprises are arms of the Chinese state," Dennis Shea, chairman of the U.S.-China Economic and Security Review Commission, told a news conference.

    "We don't want the U.S. government purchasing companies in the United States, why would we want the Chinese Communist government purchasing companies in the United States?"

    The recommendation to change laws governing CFIUS was one of 20 proposals the panel made to Congress. On the military side, it called for a government investigation into how far outsourcing to China has weakened the U.S. defense industry.

    The 16-year-old panel also said Congress should pass legislation that would require its pre-approval of any move by the U.S. Commerce Department to declare China a "market economy" and limit anti-dumping tariffs against the country.

    The United States and U.S. businesses attracted a record $64.5 billion worth of deals involving buyers from mainland China this year, more than any other country targeted by Chinese buyers, according to Thomson Reuters data.

    The push into the United States is part of a global overseas buying spree by Chinese companies that this year has seen a record $200 billion worth of deals, nearly double last year's tally.

    CFIUS has shown a higher degree of activism against Chinese buyers this year, catching some by surprise. Prominent deals that fell victim to CFIUS include Tsinghua Holdings' $3.8 billion investment in Western Digital (WDC.O).

    Overall, data do not demonstrate CFIUS has been a significant obstacle for Chinese investment in the United States. In 2014, the latest year for which data is available, China topped the list of foreign countries in CFIUS review with 24 deals reviewed out of more than 100 scrutinized by CFIUS.

    Although the number of Chinese transactions reviewed rose in absolute terms, it fell as a share of overall Chinese acquisitions, the report noted, and the vast majority of deals reviewed by CFIUS were cleared.

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    China Oct power use down 1.5 pct on mth

    China's power consumption stood at 489.0 TWh in October, up 7.0% on year but down 1.51% from the previous month, showed data from the National Energy Administration (NEA) on November 16.

    Over January-October, the country's power consumption totaled 4,877.6 TWh, expanding 4.8% year on year.

    Of this, 684.7 TWh was consumed by the residential segment, gaining 11.6% from the corresponding period last year.

    For the non-residential segment, the primary industries – mainly the agricultural sector – used 92.6 TWh in the first nine months this year, rising 5.3% from the previous year.

    The secondary industries – mainly the industrial sector, consumed 3,435.1 TWh, increasing 2.3% on year.

    Power consumption by tertiary industries – mainly the service sector – increased 11.6% on year to 665.2 TWh.

    Meanwhile, the average of utilization of power generating units across the country was 3,122 hours, 188 hours lesser than the same period last year, according to the NEA data.

    Of this, hydropower plants logged average utilization of 3,069 hours, an increase of 80 hours; the average utilization of thermal power plants decreased 197 hours on year to 3,405 hours.

    In addition, China added 79.72 GW of power generating capacity in the same period, including 8.67 GW of new hydropower and 30.67 GW of new thermal power capacity.
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    2,200 officials in 3 provinces held accountable for lax environmental efforts

    Insufficient pollution control efforts and deterioration in some regions caused by over-exploitation of resources were found by top inspectors in Heilongjiang, Jiangsu and Henan provinces, China Daily reported, citing the inspection results released on November 15 by the environmental protection authority.

    More than 2,200 officials in the three provinces, where top-level inspections by the central government began in mid-July, have been held accountable for the lax environmental efforts, according to the Ministry of Environmental Protection.

    In Zhengzhou, the capital of Henan, air quality has worsened since 2013. Despite its poor environmental performance, the city was assessed as excellent last year for economic growth, which shows that the leadership did not attach great importance to environmental protection, said Wang Wanbin, head of the inspection team for Henan.

    In Jiangsu province, inspectors also found high risk of contamination, noting that only 30% of the more than 6,300 chemical plants were located in industrial zones where the government has installed equipment to reduce pollution.

    The provincial government has required more than 2,700 companies to improve their facilities for environmental protection, and polluting companies in Jiangsu were fined more than 97.5 million yuan ($14.2 million).

    Harbin, the capital of Heilongjiang, was warned about its ineffective restrictions, after nine of its 16 coal-fired power plants discharged pollutants excessively for a long time, said Yang Song, head of the inspection team for Heilongjiang.

    The three provincial governments are to release their plans of environmental protection within a month.

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    French Pollsters Spooked by Trump But Still Don’t See Le Pen Win

    A plain-speaking candidate with a business background was running for president and the polls gave him little chance after a series of outbursts decried as racist. But it was the pollsters who ended up with egg on their faces.

    It’s not just the story of Donald Trump in 2016 America, but also France’s Jean-Marie Le Pen in 2002.

    Far-right leader Le Pen pulled off a surprise by qualifying for the second round of the presidential election where -- this time correctly forecast by pollsters -- he was routed by incumbent Jacques Chirac. Polls had all expected Chirac to face off against Socialist candidate Lionel Jospin.

    France holds presidential elections again in 2017 and after two major political upsets in recent months -- Trump’s U.S. victory followed Britain’s Brexit vote in June -- eyes are on Jean-Marie’s daughter Marine who is on track to repeat her father’s achievement and is promising a referendum on whether to pull France out of the European Union.

    France’s main pollsters are all projecting the National Front leader will take one of the top two spots in April’s first round. But they also see her losing in a run-off to the center-right Republicans’ candidate by a wide margin. Though bookmakers have cut the odds on a Le Pen presidency sharply since Trump’s upset, pollsters say they are confident that snapshot is accurately reflecting the national mood six months out from the vote.

    “I’d never say ‘never’ but I do think we have some advantages that our U.S. colleagues don’t,” said Bruno Jeanbert, deputy managing director at pollsters OpinionWay. “A Trump-style surprise is less likely here.”

    Polls vs Bookies

    According to a BVA poll carried out between Oct. 14 and Oct. 19, Le Pen would win between 25 percent and 29 percent of the vote in next April’s first round. If she faces Bordeaux mayor Alain Juppe -- the favorite to win the Republicans primary -- she’d lose the May 7 run-off by more than 30 percentage points. If it’s former President Nicolas Sarkozy, the margin would be 12 points.

    That’s a much wider advantage than Hillary Clinton held over Trump in days before the U.S. election on Nov. 8, so the chances of an upset are more remote, according to Holger Schmieding, chief economist at Berenberg Bank. All the same, the bookmaker Ladbrokes Plc has cut the odds on Le Pen to 7-to-4 from 5-to-1 before the U.S. election, implying a 36 percent chance of victory.

    “We are fairly confident that Le Pen will not win,” Schmieding wrote in a note to clients Nov. 11. “Still, we need to monitor the political risks very closely.”

    France Is Different

    French pollsters have the benefit of experience. Trump’s candidacy had no precedent in U.S. politics so pollsters had no reference point to gauge whether voters were reluctant to admit they were backing him. The French have had a chance to re-calibrate since 2002.

    “We missed the rising support for Jean-Marie Le Pen,” said Yves-Marie Cann, director of political studies at pollster Elabe. “But we have adjusted our methods and in past elections we were pretty close to the final outcome. That does argue for some confidence in our work.”
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    China gives nod to five railway projects worth $30 bln

    China's top economic planner has approved five railway projects with a total investment of close to 200 billion yuan ($29.23 billion) so far this month, China Business News reported.

    The Ganshen railway, with a total investment of 64.13 billion yuan, connects Ganzhou city of Jiangxi province and Shenzhen city of Guangdong province. The project, with a total length of 432 km and 14 stations, is expected to complete in 2020, according to the National Development and Reform Commission (NDRC).

    The NDRC also approved the Beijing-Tangshan intercity railway, a key part of Beijing-Tianjin-Hebei intercity rail transit network. The 148.7-km rail link has a total investment of 44.9 billion yuan.

    Meanwhile, another three approved projects, Zhangjiajie-Jishou-Huaihua railway, Mudanjiang-Jiamusi railway and a new freight rail line, Shenmu North (Hongliulin) - Fengjiachun section of the Shenwa railway, involved an investment of 38.24 billion, 38.56 billion and 8.75 billion yuan, respectively.

    The government has sought ways to increase investment in infrastructure projects in a bid to shore up the economy.

    The commission approved 15 fixed-asset investment projects with total investment reaching 218.8 billion yuan in October, official data showed on November 11.

    The projects covered transportation and energy, said Li Pumin, secretary general of the NDRC, during a news conference.

    China's fixed-asset investment in the first nine months grew 8.2% year on year, slightly up from the 8.1% registered during the January-August period, according to data released by the National Bureau of Statistics.

    Of this, investment on environment protection, clean energy and transportation among 11 fields reached 7,000 billion yuan, a rise of 400 billion yuan from a month ago.
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    Zijin Mining exec sees M&A opportunities in Australian copper, gold sector

    China's Zijin Mining sees more acquisition opportunities in gold and copper in Australia as the country's miningsector restructures after years in the doldrums, director Qixue George Fang said on Wednesday.

    "M&A is still going on, but how much...depends on the opportunity, it depends on the price and how much (companies) are willing to pay," the executive said, speaking on the sidelines of Metal Bulletin's Cesco copper conference in Shanghai.

    "In Australia, because the mining industry is restructuring, the opportunities will come," he said.
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    Australia's EMR Capital raises $860 mln for mining deals

    Australian private equity firm EMR Capital has raised $860 million for its second fund, as it looks for more investments in copper, gold, potash and coking coal, the firm said on Wednesday.

    EMR Capital, founded by ex-OZ Minerals boss Owen Hegarty, said the fund mainly attracted North American investors and was oversubscribed, as was the company's first fund, which raised $450 million last year.

    "We are actually looking at quite a few things at the moment," said Chief Executive Jason Chang said, adding that EMR was seeing more assets available now than two years ago.

    EMR is keen to snap up copper assets given strong demand for the metal in China and India. It has looked at Glencore Plc's Cobar copper mine in Australia, among others, Chang said.

    "And we love Australia. Anything in copper in Australia we'd like to look at. So we're looking at a range of different things," he said.

    "That's one of the reasons for the rapid establishment of Fund II, because I think investors agree with us that there's a universe of interesting opportunities that we're seeing across all four commodities."

    He said the firm would also be interested in looking at Wesfarmer's Curragh coking coal mine in Australia "if it's high quality coking coal". Wesfarmers said on Wednesday that it could put its Curragh and Bengalla coal mines on the block.

    He said the recent spike in coking coal and other commodity prices was making vendors hold back on asset sales, but EMR Capital had a 10- to 12-year timeframe for its fund, so would be patient on acquiring assets.

    "We have some runway and we are very confident we can deploy (our fund) in the right timeframe," Chang said.

    The firm sees now as a good time for private funds to invest in copper, gold, coking coal and potash as capital for publicly listed companies had dried up with the earlier collapse in commodity prices, Chang told Reuters in an interview last week.

    Its first fund has invested in six assets, including the Martabe gold mine in Indonesia, a coking coal mine in Britain, a copper mine in Australia and Chile, and potash projects in Spain and the United States.
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    Russian minister held over $2m ‘bribe’

    Russian Minister of Economic Development Alexei Ulyukayev has been formally charged after being caught “red-handed” in sting over alleged bribery, according to the country’s Investigative Committee.

    The long-serving politician has also been placed under house arrest as a “preventive measure” following his detention in an early-morning raid on Tuesday in connection with the alleged receipt of $2 million in relation to Rosneft’s purchase of a controlling stake in oil producer Bashneft.

    After earlier on Tuesday revealing details of the alleged bribe and of the action taken against Ulyukayev, the Committee swiftly followed this up with a statement, issued in Russian, praising unidentified Rosneft representatives for their “timely” statement to lay enforcement authorities about the minister’s alleged “illegal actions”, alleged to have taken place on Monday.

    "Thanks to the timely treatment of representatives of Rosneft to law enforcement authorities with a statement about the [alleged] illegal actions … Ulyukayev was arrested red-handed."

    Russian Investigative Committee
    The Committee has charged him with allegedly receiving a bribe of $2 million in return for giving a “positive opinion” in his capacity as minister to the recent purchase by state-owned Rosneft of a holding just over 50% in Bashneft.

    “In this case the defendant expressed threats, using his authority and create further obstacles to the activities of the company,” the Committee said.

    “Thanks to the timely treatment of representatives of Rosneft to law enforcement authorities with a statement about the [alleged] illegal actions … Ulyukayev was arrested red-handed,” the later statement read.

    Ulyukayev, who has held the ministerial post since 2013, was a critic of the state seizing further control over assets. However, having initially been against the proposed acquisition by Rosneft of Bashneft, he then suddenly turned to being for the deal.
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    Dr Copper and Copper,

    Image title

    Codelco cuts China 2017 copper premium to lowest since 2009

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    After frantic rally, China commodities fall hard as speculators panic

    Commodities from coal to soybeans slumped in China on Tuesday as speculators cashed out of futures markets because of concerns that regulators may tighten curbs to tame price swings.

    A selloff in steel and steelmaking raw materials iron ore and coking coal spread to base metals and agricultural products with coke tumbling nearly 9 percent and steel and iron ore each sliding 6 percent.

    Chinese investors renewed their push into commodity futures this month and increased their bets shortly after Republican Donald Trump's shocking U.S. presidential win on Nov. 8 amid a sell-off in global markets. However, that shock proved fleeting and global risk assets surged.

    Tuesday's sharp, broad fall in Chinese commodities "suggests that the crazy jump last week cannot be sustained and so we're seeing self correction," said Wang Di, analyst at CRU consultancy.

    Iron ore on the Dalian Commodity Exchange, which rose as high as its exchange-set ceiling in the previous four trading sessions, fell 6 percent to close at its downside limit of 591 yuan ($86) a tonne.

    Rebar steel and coking coal also each slid 6 percent while coke, made from coking coal, dropped 8.6 percent.

    A flurry of measures from Chinese commodity exchanges from Dalian to Zhengzhou and Shanghai over the past week including increased transaction fees and margins has fuelled a "panic among investors," said analyst Wang Fei at Huaan Futures.

    "With a cap on trading limit, big institutional investors started the sell-off, which was followed by smaller retail investors," said Wang.

    The latest curbs reduced market liquidity, accelerating the price falls, said a Shanghai-based analyst who declined to be named because he was not authorised to speak with media.

    "Hot money from the stock market and programmed trading entered the futures market at the height of the rally. These investors are not familiar with China's futures market. They are the major force in the selloff today and on Friday," he said.

    Chinese commodity exchanges and regulators took similar steps earlier this year to stamp out speculative trading that was also behind the boom and bust cycle in its stock markets last year.

    Going forward, prices of coal and iron ore could remain elevated amid tight Chinese coal supply that has increased appetite for high-grade iron ore, said Wang at CRU.

    Chinese copper futures were not spared from Tuesday's sell-off either, falling 4.3 percent. Tin was down 3.3 percent and aluminium dropped 3 percent.

    In agricultural markets, soybeans slid 4.4 percent, cotton fell 3.6 percent and rapeseed meal slipped 3 percent.
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    ExxonMobil Chemical to increase Beaumont, Texas, PE capacity by 65%

    ExxonMobil Chemical said Monday it will increase polyethylene capacity at its Beaumont, Texas, petrochemical complex by 65%, with new resin production expected to come online in 2019.

    Construction has already begun. Once complete, the project is expected to add 650,000 mt/year of new polyethylene to the Beaumont complex, which currently has capacity of 1 million mt/year, the company said in a statement.

    "The availability of vast new supplies of US shale gas and associated liquids for feedstock and energy is a significant advantage that enables expansion to meet strong global demand growth in polyethylene," Cindy Shulman, vice president of ExxonMobil's plastics and resins business, said in Monday's statement.

    It was unclear Monday which grades of polyethylene would be included in the expansion.

    ExxonMobil Chemical could not immediately be reached for comment.

    ExxonMobil produces high density, low density and linear low density polyethylene at the complex.

    The Beaumont project is the latest planned by ExxonMobil in the US Gulf Coast region as it looks to take advantage of cheaper natural gas liquid feedstock, and is similar to polyethylene lines being constructed at its Mont Belvieu Plastics Plant in Texas, the company said.

    Combined, the projects are expected to add about 2 million mt of new capacity to increase ExxonMobil's US polyethylene production by about 40% and make Texas the company's largest polyethylene supply point.

    Last month, ExxonMobil said it is continuing to evaluate building a 1.8 million mt/year ethylene-capacity steam cracker on the US Gulf Coast with Saudi Arabia's Sabic, but had not reached a final investment decision.

    Sites in Texas and Louisiana are under consideration. The project would also include polyethylene capacity.

    If the companies decide to move forward, the new complex would be unlikely prior to 2023, per market feedback.

    The first wave of new polyethylene capacity in the US and Canada is expected to begin coming online in the first quarter, per market sources, as production in Mexico has ramped up throughout 2016.

    Platts Analytics forecasts new North American capacity to increase by almost 6 million mt through 2019, with that total increasing to more than 8 million mt through the end of its current forecast period in 2026.

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    Trump Foreign Policy.

    US cannot afford to be world's police; let NATO allies pay

    The 28 countries of NATO, many of them aren't paying their fair share. We're defending them, and they should at least be paying us what they're supposed to be paying by treaty and contract. NATO could be obsolete, because they do not focus on terror. We pay approximately 73 percent of the cost of NATO. It's a lot of money to protect other people. I'm all for NATO. They have to focus on terror also.

    Hillary will tell you to go to her website and read all about how to defeat ISIS, which she could have defeated by never having it get going in the first place. It's getting tougher to defeat them, because they're in more and more places, more and more states, more and more nations.

    I want to help all of our allies, but we are losing billions and billions of dollars. We cannot be the policemen of the world. We cannot protect countries all over the world where they're not paying us what we need.

    Source: First 2016 Presidential Debate at Hofstra University , Sep 26, 2016

    Brexit vote means people want to see borders

    Q: Your views on "Brexit," the British exit vote from the European Union?

    DONALD TRUMP: People want to see borders. They don't necessarily want people pouring into their country that they don't know who they are and where they come from. People want to take their country back. They want to have independence, in a sense. And you see it all over Europe. You're going to have, I think, many other cases where they want to take their borders back, they want to take their monetary [system] back, they want to take a lot of things back. They want to be able to have a country again. So I think you're going to have this happen more and more. And I think it's happening in the United States.

    Q: Do you think he's right that there's a parallel?

    SEN. TIM KAINE: There's a couple things you've got to understand. Young voters, those under 50, especially millennials, overwhelmingly voted to stay. And it was older voters who voted to leave [because pf] immigration issues and European regulation.

    Source: Meet the Press 2016 interviews of presidential hopefuls , Jun 26, 2016

    U.S. has become dumping ground for everybody else's problems

    While the Trump and Sanders campaigns both represent insurgencies against party elites, they represent insurgencies aimed at taking America in radically different directions. One way of understanding those different directions is through American exceptionalism. Sanders voters want to make America more like the rest of the world. Trump voters want to keep America a nation apart.

    American exceptionalism today generally denotes Americans' peculiar faith in God, flag, and free market--the Sanders campaign represents an assault on all three [while Trump supports all three].

    Trump's entire campaign is built around the idea that foreign influences are infecting the United States. "The U.S.," he declared upon announcing his presidential campaign, "has become a dumping ground for everybody else's problems."

    Trump's supporters like the fact that he's rich, blunt, and hasn't spent his life in politics. But his pledges to keep the rest of the world at bay are core to his appeal.

    Source: The Atlantic magazine, "War Over American Exceptionalism" , Feb 11, 2016

    Ignore career diplomats who insist on nuance

    The career diplomats who got us into many foreign policy messes say I have no experience in foreign policy. They think that successful diplomacy requires years of experience and an understanding of all the nuances that have been carefully considered before reaching a conclusion. Only then do these pin-striped bureaucrats CONSIDER taking action.

    Look at the state of the world right now. It's a terrible mess, and that's putting it kindly. There has never been a more dangerous time. The so-called insiders within the Washington ruling class are the people who got us into trouble. So why should we continue to pay attention to them?

    Here's what I know--what we are doing now isn't working. And years ago, when I was just starting out in business, I figured out a pretty simple approach that has always worked well for me: "When you're digging yourself deeper and deeper into a hole, stop digging."

    Source: Crippled America, by Donald Trump, p. 31-2 , Nov 3, 2015

    Reimbursement for US military bases in rich countries abroad

    As for nations that host US. military bases, Trump said he would charge those governments for the American presence. "I'm going to renegotiate some of our military costs because we protect South Korea. We protect Germany. We protect some of the wealthies countries in the world, Saudi Arabia. We protect everybody and we don't get reimbursement. We lose on everything, so we're going to negotiate and renegotiate trade deals, military deals, many other deals that's going to get the cost down for running our country very significantly."

    Trump then got into a specific example: Saudi Arabia, one of the more important US allies in the Middle East. Saudis "make a billion dollars a day. We protect them. So we need help. We are losing a tremendous amount of money on a yearly basis and we owe $19 trillion," he said.

    Walking back trade deals and agreements that allow the US military to operate overseas is easier said than done. But Trump has tapped into a powerful anti-Washington populist sentiment.

    Source: Foreign Policy Magazine on 2016 presidential hopefuls , Sep 28, 2015

    Offered himself as Cold War nuclear-arms-treaty negotiator

    [In the 1980s], flying from place to place in his Trump helicopter and Trump jet, he offered opinions on everything from politics to sex, and continually declared himself to be superior in every way. He frequently referred to the many people who thought he should run for president and sometimes acted as if he were a real candidate.

    During one especially tense Cold War moment, he even offered himself to the world as a nuclear-arms-treaty negotiator. His reasoning? A man who can make high-end real estate deals should be able to bring the United States and the Soviet Union into agreement.

    Source: Never Enough, by Michael D`Antonio, p. 10 , Sep 22, 2015

    Support NATO, but it's not us against Russia

    Q: You wrote, "Pulling back from Europe would save this country millions of dollars annually. The cost of stationing NATO troops in Europe is enormous. And these are clearly funds that can be put to better use." Would you want to end the NATO alliance completely?

    TRUMP: I'm a little concerned about NATO from this standpoint. Take Ukraine. We're leading Ukraine. Where's Germany? Where are the countries of Europe leading? I don't mind helping them. Why isn't Germany leading this charge? Why is the United States? I mean, we're like the policemen of the world. And why are we leading the charge in Ukraine?

    Q: So you wouldn't allow Ukraine into NATO?

    TRUMP: I would not care that much. Whether it goes in or doesn't go in, I wouldn't care. Look, I would support NATO.

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    Instead of Gold going up.. the bond market has cratered.

    Image title
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    Why a Coming Gap in the Supply of Oil Is Unlikely

    Amy Myers Jaffe (@AmyJaffeenergy) is executive director of energy and sustainability at the University of California, Davis, Graduate School of Management. She was formerly the director of the Energy Forum at the James A. Baker III Institute for Public Policy at Rice University.

    The oil industry and analysts alike have made a hullabaloo about how capital investment in new oil and gas fields has fallen sharply since oil prices collapsed in 2014. The latest theory about it, reminiscent of scarcity mongering during the run up in oil prices in the 2000s, is that the spending decline is so large it will create a dangerous gap in oil supply sometime between 2018 and 2020. The so-called supply hole thesis was bandied about widely at a recent gathering of senior oil and gas executives in London where the Saudi oil ministercredited concerns about the gap to the kingdom’s willingness to cut its own oil supply now “to signal” other producers to pour more money into exploration and spending budgets now to ensure sufficient oil will be available in the 2020s.  In Houston, belief in the 2018 supply hole is so strong, it is driving cash-starved shale-oil and gas firms to struggle to hang on and not offer their assets into the distressed debt market in the hopes that oil prices will turn back up before they have to close their doors.

    The question is: Is the oil exploration/production (E&P) spending supply hole real or chimera? Data on the inefficiency of capital spending in the 2000s might suggest the latter is more likely. Many of the megaprojects into which the majors dumped so many billions of dollars of capital have not fully panned out, or they have faced major delays for first oil. The new “lean years” environment that is forcing the biggest oil companies to make sure every dollar of spending counts might be more productive, not less productive than the recent past when marginal projects, such as Shell’s $4 billion-plus of wasted capital in Alaska, were greenlighted, only to be axed as outlooks changed.

    Citigroup research in its recent report “A Bumpy Road Ahead for Energy Markets” noted that recent cuts in oil and gas investment have been mostly in line with falling costs for exploration and production activities. The report notes that upward of 15 million barrels a day (b/d)of oil supply growth from non-OPEC countries –  that is, countries other than those with membership in the  Organization of the Petroleum Exporting Countries – will come from new or expansion projects in conventional fields, deep-water developments and to a lesser extent, heavy oil and oil sands projects already receiving the go-ahead to produce new oil between now and 2022.  Russia has been a particular standout, with its recent production reaching 11.2 million b/d, up from 10.7 million b/d a year ago. Russia is typically cited as a place where natural geological decline rates require massive spending to reverse.

    The current low oil-price environment is prompting the oil industry’s largest firms to focus more intently on extending existing fields closer to home in the U.S., and Canada and developing new finds in West Africa rather than taking on riskier, high-cost frontier mega-projects in far-flung places like the Arctic. That is likely to mean that investment dollars will stretch farther and lead to first oil production in shorter time horizons. There will be fewer chances for wasted capital than when the industry poured billions into the Russian Arctic, the Caspian Sea, Iran, Venezuela and Canadian oil sands, only to write down billions in abandoned efforts. Executives say money pouring into the Texas Permian Basin, for example, now favored by the oil patch, could eventually lead to large increases there, with some even predicting that a modest recovery in oil prices could allow the region to reach 5 million b/d, up over 3 million b/d from current output. Sources say its full potential is upwards of 10 million b/d.

    No doubt continuing political troubles in places like Venezuela and Nigeria could continue to shave oil supply from those places and an escalation in such problems could bring about new shortfalls. But so far, other fellow OPEC members like Saudi Arabia and Iran have shown a willingness to grab such markets as they become apparent. If OPEC stays the course on this competition for markets, and the private oil sector spends more wisely as is now promised, the 2018 to 2020 supply hole may be hard to find.

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    Could Trump be OPECs new best friend

    Last week, I wrote that OPEC needs friends and a miracle to re-balance the oil market. Could President Trump be that unwitting buddy, providing the miracle by tearing up the nuclear agreement with Iran and removing almost a million barrels a day of supply at a stroke?

    Trump's number one priority is to dismantle the "disastrous" deal -- although his to-do list might have changed since saying that back in March. As luck would have it, that daily million barrels is about the same size as the cut OPEC needs to make, as I calculated last week.

    Can he do it? Yes, despite assertions to the contrary from Iran's President Rouhani and a slew of analysts. Here's how:

    The Joint Comprehensive Plan of Action, as the deal is snappily titled, wasn't ratified by Congress, but brought into force by President Obama via executive order. Trump could rescind that. The fall-out would be messy, but it could be done (in theory).

    There's another way too, enshrined within the agreement itself. The dispute resolution mechanism allows any signatory to refer a perceived breach of the deal's terms to the joint commission created to oversee the accord. If the complaining party isn't satisfied with the outcome and believes the breach constitutes "significant non-compliance", it can refer it to the U.N. Security Council. The Security Council would then vote -- and here's the killer blow -- - not on whether to re-impose sanctions, but on whether to "continue the sanctions lifting."

    That might not sound like a big difference, but it's critical. By framing the vote this way, the U.S. could, in theory, veto the resolution. All the U.N. sanctions on Iran would then be re-imposed. Simples.

    That just leaves EU sanctions, which prohibited -- among other things -- the importing of Iranian oil into EU countries. We might expect some sort of European backlash against unwinding the deal, but it might not be very effective.

    The tortuous process of re-establishing Iran's oil trade with Europe shows that only too clearly. Although there were willing buyers and a very willing seller, the difficulty came in finding insurers who would underwrite the transactions, or shippers to carry the crude. All the big re-insurers had at least some U.S. involvement and they were extremely hesitant to pick up the business -- even with the apparent backing of the Obama administration. They would drop the business like a scalding hot potato if the new president killed the deal. End of Iranian oil flows to Europe.

    Elsewhere, important Asian buyers were threatened in the past with the loss of access to the U.S. banking system to persuade them to cut their purchases of Iranian. This tactic would probably work again.

    Of course, Iran would treat the move as grounds to abandon its own commitments. Coming shortly before Iran's presidential election in May, it would be a huge boost to Tehran's hardliners. You'd expect life to become more difficult for the Americans in Iraq, where it's engaged alongside Iranian-backed militias in ousting Islamic State from its last stronghold in the country -- another Trump priority.

    But at least the crude price would recover, which would be great for U.S. oil, if not so good for motorists. I guess the new president will have to choose who to please.

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    China power output increases by 8% Y on Y

    Total electricity generated increased to 487.6 TWH in October 8% from a year ago but down 0.75% from the previous month.

    Themal power rose 11.9% on the year whilst hydroelectric fell 7.6%. Nuclear wind ond solar all saw double digit increases over the year.

    Over January to Octiber power output rose 3.9%
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    World CO2 emissions stay flat for third year, helped by China falls: study

    World greenhouse gas emissions stayed flat for the third year in a row in 2016, thanks to falls in China, even as the pro-coal policies of U.S. President-elect Donald Trump mean uncertainty for the future, an international study said on Monday.

    Carbon dioxide emissions from fossil fuels and industry were set to rise a tiny 0.2 percent in 2016 from 2015 levels to 36.4 billion tonnes, the third consecutive year with negligible change and down from three percent growth rates in the 2000s, it said.

    The Global Carbon Project, grouping climate researchers, welcomed the flatlining of emissions amid global economic growth. But it cautioned that the world was not yet firmly on track for a greener economy.

    "It's far too early to say we've reached a peak in emissions," co-author Glen Peters, of the Center for International Climate and Environmental Research in Oslo, told Reuters, referring to the findings issued at U.N. talks on climate change in Marrakesh, Morocco.

    "So far the slowdown has been driven by China," Peters said, adding Beijing's climate change policies would also be the dominant force in future since it accounts for almost 30 percent of global emissions.

    Chinese emissions were on track to dip 0.5 percent this year, depressed by slower economic growth and coal consumption.

    U.S. emissions were projected to fall by 1.7 percent in 2016, also driven by declines in coal consumption, according to the study published in the journal Earth System Science Data.

    By contrast, emissions in many emerging economies are still rising. Carbon dioxide is the main man-made greenhouse gas blamed for trapping heat, stoking disruptions to world water and food supplies with heat waves, floods, storms and droughts.

    The Marrakesh talks among almost 200 governments, between Nov. 7-18, have been dominated by uncertainties about future U.S. policy after Republican Trump's victory on Tuesday.

    Trump has called global warming a hoax and wants to pull out of the Paris Agreement for limiting emissions, reached last year after two decades of negotiations, and instead bolster jobs in the U.S. coal and oil industries.

    Still, Peters said natural gas, wind and solar were likely to continue displacing coal in U.S. electricity production, thanks to new technologies and lower prices.

    Other scientists welcomed Monday's findings.

    "This could be the turning point we have hoped for," David Reay, Professor of Carbon Management at the University of Edinburgh, said in a statement. He added: "The real Houdini work of freeing our economies from carbon has only just begun."
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    Trump, China's Xi establish sense of mutual respect - Trump statement

    Trump, China's Xi establish sense of mutual respect - Trump statement

    U.S. President-elect Donald Trump and Chinese President Xi Jinping established a "clear sense of mutual respect" in a telephone call on Sunday night, Trump's presidential transition office said early on Monday.

    In a statement, the office said Trump thanked Xi for his congratulations after winning Tuesday's presidential election over Democrat Hillary Clinton.

    "During the call, the leaders established a clear sense of mutual respect for one another, and President-elect Trump stated that he believes the two leaders will have one of the strongest relationships for both countries moving forward," it said.
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    India court ruling means firms have to pay up state tax worth billions of rupees

    The Indian Supreme Court on Friday rejected a petition by major firms seeking the withdrawal of a tax on the movement of goods through the states, a decision that would force them to pay an estimated $4.5 billion in back taxes and interest.

    Some 2,000 companies including the Jindal group, Vedanta, Steel Authority of India and Tata Steel had contended that entry tax on goods as they moved from one state to another was against free trade.

    But the top court led by Chief Justice T.S. Thakur said India's federal constitution gave the states the right to impose such a tax, Rakesh Dwivedi, a lawyer representing the state of Uttar Pradesh said.

    "It is a very good judgment that will help the states to collect more revenue," Dwivedi said.

    States have said that companies would have to pay over 300 billion rupees ($4.47 billion) in back taxes along with interest.

    "The industry as a whole will be adversely affected by the judgment," said Ashok Kumar, director finance and marketing, Jindal Stainless Ltd.

    India has a messy plethora of indirect taxes, duties and surcharges, imposed by the federal government as well as the states. But in the biggest single tax reform cleared by parliament in August, all such taxes will be subsumed into a single goods and services tax.

    But that might not become effective until April 2017, and firms would have to comply with the Supreme Court order, experts said.

    "The liabilities would arise on various businesses and could affect their working capital needs," said Prashant Deshpande, partner, Deloitte Haskin & Sells LLP.

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    Trump Transition Team

    #1 Climate Change.
    President-elect Donald Trump is reportedly looking at ways for the U.S. to back out of a landmark climate pact, which would defy an agreement to cut carbon emissions across the globe.

    #2 Federal Reserve
    In almost three years as the Fed’s chairwoman, Janet L. Yellen has led an aggressive campaign to stimulate economic growth. Donald J. Trump, the president-elect, has embraced criticism that the Fed is causing more problems than it is solving, and he has surrounded himself with advisers who would like to rein in the institution that has the greatest influence over the direction of the nation’s economy.

    #3 Trade
    A deeper look into the results of the election that propelled him to the presidency, however, suggests the real fuel behind his victory may have come more from his stand against traditional free-trade agreements, and in his overall call for “change.”

    #4 Tax

    Image titleNever Forget issue #1:
    Image title
    Politics has finally recognised the depression trifecta: too much labour, too much stuff, too much capital!

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    Oil and Gas

    Nigeria reaches a deal to pay $5.1 billion in unpaid bills to oil majors - minister

    Nigeria has reached a deal to pay $5.1 billion in unpaid bills to oil majors including Royal Dutch Shell and Exxon Mobil, the minister of state for oil said on Thursday.

    The Nigerian National Petroleum Corporation (NNPC), the OPEC member's state oil firm, has amassed a total of $6.8 billion in unpaid bills up to December 2015, so-called cash calls, that it was obliged to pay under joint ventures with Western oil firms, with which it explores for and produces oil.

    Oil minister Emmanuel Ibe Kachikwu said the agreed amount, which is $1.7 billion less than the total amount owed, would be paid within five years, interest free.

    Under the arrangement, payment will be in the form of crude oil cargoes but only when Nigeria's production exceeds 2.2 million barrels per day, Kachikwu said, which is the nation's current production when all fields are operating properly.

    "If for any reason we did not meet (the) threshold we will not pay the $5.1 (billion), so that is fantastic," he said of the deal, which has been approved by the National Economic Council, an advisory body to the government.

    Kachikwu last week said Royal Dutch Shell, Exxon Mobil, Italy's ENI, Chevron and France's Total had "accepted" what he described at the time as an "outline settlement".

    All five of the oil majors declined to comment when approached by Reuters.

    The petroleum ministry has for more than a year been trying to reduce its financial obligations, which have accumulated over several years. Kachikwu said there is at least $2.5 billion in additional debt that has accrued this year that it is still working to repay.

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    Eni approves Coral FLNG investment plan

    Eni of Italy has approved the investment plan for the first phase of the development of the Coral gas discovery in the Rovuma Basin (Area 4), offshore Mozambique.

    The project involves the construction of 6 subsea wells connected to a floating LNG production facility, with a liquefaction capacity of over 3.3 million tons of liquefied natural gas per year, equivalent to approximately 5 billion cubic meters, Eni said in a statement on Friday.

    Mozambique authorities approved the project development plan in February.

    The Coral field, discovered in May 2012 and outlined in 2013, is entirely located within Area 4 and contains about 450 billion cubic meters (16 TCF) of gas in place.

    In October, Eni and its Area 4 partners signed an agreement with BP for the sale of the entire volumes of LNG produced by the FNLG Coral South, for a period of over twenty years. It was the first such agreement signed in Mozambique and a step towards developing the 2400 billion cubic meters (85 Tcf) of gas discovered in Area 4, Eni said.

    The approval of the investment plan brings the project closer to reaching the final investment decision, which will come into effect once all Area 4 partners have approved it ad the project financing, which is currently being finalized, has been underwritten, Eni adds in the statement.

    Eni is the operator of Area 4 with a 50 percent indirect interest owned through Eni East Africa, which holds a 70 percent stake in Area 4.

    The other concessionaires are Galp Energia, Kogas and Empresa Nacional de Hidrocarbonetos (ENH), each owning a 10 percent stake. CNPC owns a 20 percent indirect interest in Area 4 through Eni East Africa.
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    U.S. native groups promised input on development as pipeline dispute looms

    The United States plans to gather more input from native people as officials contemplate projects like the Dakota Access Pipeline, according to a White House notice posted on Thursday that could delay the controversial plan.

    The Army Corps of Engineers plans to "revise its regulations" to ensure its consultations with sovereign tribes are "confirmed by the U.S. Constitution, treaties, statutes, executive orders, judicial decisions and presidential documents and policies."

    The proposed change comes in the form of what is known as an Advance Notice of Proposed Rulemaking, which states an agency's intention to issue a new regulation.

    The Army Corps of Engineers, which manages many federal infrastructure projects, did not immediately respond to a request for comment Thursday evening.

    The pending rule is being contemplated in the final weeks of President Barack Obama's term when the administration is mulling whether or not to allow the Dakota Access crude pipeline.

    President-elect Donald Trump is due to be sworn in on Jan. 20. Under federal law, the incoming president has authority to invalidate many last-minute decisions from an outgoing administration.

    The notice, which was posted on the website of the U.S. Office Information and Regulatory Affairs, said the public will be able to comment on the proposal until Jan. 1, 2017.

    The Obama administration has been in a quandary over whether to issue a permit to allow the completion of the final leg of the pipeline.

    Demonstrators fanned out across North America on Tuesday to demand that the U.S. government either halt or reroute the pipeline, while Energy Transfer Partners, the company behind the controversial project, asked a federal court for permission to complete it.

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    Iraq's oil contracts make joining OPEC output cut more painful

    Iraq would have to compensate international oil companies for limits placed on their production, according to industry sources and documents seen by Reuters, further reducing the prospect it will join any OPEC deal to curb the group's output.

    The compensation - stipulated in contracts - would compound the financial hit of losing much-needed revenue from crude sales, if the cash-strapped country were to yield to OPEC entreaties to curtail national production.

    OPEC member Iraq pays developers a fixed dollar-denominated fee for every barrel of oil produced in the south of the country - home to its biggest reserves - under technical service contracts agreed between the international firms and the state-owned South Oil Company (SOC).

    "Immediately after (an) SOC notice of ... production curtailment, the parties shall agree ... a mechanism to promptly fully compensate (the) contractor as soon as possible," according to an excerpt of the contract the ministry signed with BP in 2009 for the company to develop the 20-billion-barrel Rumaila field.

    The compensation, according to the excerpt seen by Reuters, "may include, amongst other things, a revised field production schedule or an extension to the term or payment of all or part lost income to contractor".

    The same clause also applies to other fields covered by the technical service contracts in the south, including fields being developed by Anglo-Dutch firm Shell, U.S. major Exxon Mobil and Italy's Eni, according to industry sources.

    A Shell spokeswoman said it did not comment on contracts. Exxon and Eni did not immediately reply to requests for comment.

    A senior oil official with SOC told Reuters the country would not have to worry about curtailment clauses because it had no plans to limit production.

    "On the contrary, we're encouraging the foreign companies to raise production as much as they can," said the official, who declined to be named as they are not authorized to speak publicly.


    The Organization of the Petroleum Exporting Countries agreed in Algiers in late September to limit its collective output to 32.5-33 million barrels per day (bpd). The group's production hit a record 33.64 million bpd in October.

    Iraq has asked to be exempted from output curbs, arguing it is still trying to regain market share lost when sanctions were imposed in the 1990s during the Saddam Hussein era, and that it needs to keep up a costly battle against Islamic State.

    "OPEC must submit to the fact that Iraq must stay away from any possible output cut deal because the country is in the middle of a tough war and every single dollar is needed to keep it standing on its feet," a senior government official close to Prime Minister Haider al-Abadi told Reuters.

    Iraq put its output at 4.77 million bpd in October and said it would not go back to below 4.7 million bpd.

    "Not for OPEC, not for anybody else," said Falah al-Amri, Iraq's OPEC governor and head of the country's state marketer SOMO.


    Dollar hits 13-1/2 year high, U.S. bond yields gain on Trump stimulus bets
    Euro zone economy to hum at modest pace; ECB to extend QE: Reuters poll

    There is, however, no certainty over how the discussions will play out at an OPEC meeting on Nov. 30.

    As a consequence, the Iraqi oil ministry and oil companies will not be able to finalize their 2017 spending plans until after the meeting, to have enough clarity on what route Iraq will take on its near-term production ambitions, an industry source told Reuters.

    Iraq has been making great efforts to ensure it pays its dues to oil firms promptly and oil minister Jabar Ali al-Luaibi has made boosting production in the country a priority.

    "[Iraq] is one of the countries in the region that doesn't have large foreign reserves, so will want to continue to maximize its revenue," said Jessica Brewer, Middle East upstream oil analyst at UK-based consultancy Wood Mackenzie.

    She added that while most Middle Eastern OPEC members had all or most of their production operated by national oil companies, Iraq was one of the few that relied on international oil companies for the majority of its output.

    Iraq would have to compensate international oil companies for limits placed on their production, according to industry sources and documents seen by Reuters, further reducing the prospect it will join any OPEC deal to curb the group's output.

    The compensation - stipulated in contracts - would compound the financial hit of losing much-needed revenue from crude sales, if the cash-strapped country were to yield to OPEC entreaties to curtail national production.

    OPEC member Iraq pays developers a fixed dollar-denominated fee for every barrel of oil produced in the south of the country - home to its biggest reserves - under technical service contracts agreed between the international firms and the state-owned South Oil Company (SOC).

    "Immediately after (an) SOC notice of ... production curtailment, the parties shall agree ... a mechanism to promptly fully compensate (the) contractor as soon as possible," according to an excerpt of the contract the ministry signed with BP in 2009 for the company to develop the 20-billion-barrel Rumaila field.

    The compensation, according to the excerpt seen by Reuters, "may include, amongst other things, a revised field production schedule or an extension to the term or payment of all or part lost income to contractor".

    Britain's BP declined to comment.

    The same clause also applies to other fields covered by the technical service contracts in the south, including fields being developed by Anglo-Dutch firm Shell, U.S. major Exxon Mobil and Italy's Eni, according to industry sources.

    A Shell spokeswoman said it did not comment on contracts. Exxon and Eni did not immediately reply to requests for comment.

    A senior oil official with SOC told Reuters the country would not have to worry about curtailment clauses because it had no plans to limit production.

    "On the contrary, we're encouraging the foreign companies to raise production as much as they can," said the official, who declined to be named as they are not authorized to speak publicly.


    The Organization of the Petroleum Exporting Countries agreed in Algiers in late September to limit its collective output to 32.5-33 million barrels per day (bpd). The group's production hit a record 33.64 million bpd in October.

    Iraq has asked to be exempted from output curbs, arguing it is still trying to regain market share lost when sanctions were imposed in the 1990s during the Saddam Hussein era, and that it needs to keep up a costly battle against Islamic State.

    "OPEC must submit to the fact that Iraq must stay away from any possible output cut deal because the country is in the middle of a tough war and every single dollar is needed to keep it standing on its feet," a senior government official close to Prime Minister Haider al-Abadi told Reuters.

    Iraq put its output at 4.77 million bpd in October and said it would not go back to below 4.7 million bpd.

    "Not for OPEC, not for anybody else," said Falah al-Amri, Iraq's OPEC governor and head of the country's state marketer SOMO.

    There is, however, no certainty over how the discussions will play out at an OPEC meeting on Nov. 30.

    As a consequence, the Iraqi oil ministry and oil companies will not be able to finalize their 2017 spending plans until after the meeting, to have enough clarity on what route Iraq will take on its near-term production ambitions, an industry source told Reuters.

    Iraq has been making great efforts to ensure it pays its dues to oil firms promptly and oil minister Jabar Ali al-Luaibi has made boosting production in the country a priority.

    "[Iraq] is one of the countries in the region that doesn't have large foreign reserves, so will want to continue to maximize its revenue," said Jessica Brewer, Middle East upstream oil analyst at UK-based consultancy Wood Mackenzie.

    She added that while most Middle Eastern OPEC members had all or most of their production operated by national oil companies, Iraq was one of the few that relied on international oil companies for the majority of its output.

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    US spot methanol remains on upward trend, hits fresh 15-month high

    US spot methanol reached a fresh 15-month high on Wednesday, sustaining an upward trend that has lasted nearly a month.

    US methanol was assessed at 94.75-95.25 cents/gal FOB USG for November and December, the highest level since reaching 96.75 cents/gal FOB USG on August 5, 2015, S&P Global Platts data showed.

    US spot pricing has been flat or higher for each session since October 21, Platts data showed.

    US pricing has gained 16.5% in that span, rising from 81.50 cents/gal FOB USG for front-month material.

    Global spot pricing has also moved higher during that period, with Chinese spot up 5% to $275/mt CFR China and European spot up 25% to Eur263.50/mt FOB Rotterdam, Platts data showed.

    Market sources have discussed concerns about production in Latin America that could impact imports as a potential driver for the firmer pricing in the US market.

    Methanol pricing typically softens during the fourth quarter due to lower demand from key downstream applications and slower trading activity, sources have said.

    US spot pricing has averaged 83.83 cents/gal FOB USG to date in the fourth quarter, up 7% from the Q4 2015 average of 78.34 cents/gal FOB USG.
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    South Korean October LNG imports rise 9.4 pct YoY

    South Korean October LNG imports rise 9.4 pct YoY

    Imports of liquefied natural gas (LNG) by South Korea, the world’s second-largest buyer of the chilled fuel, rose 9.4 percent year-on-year in October, according to the customs data.

    South Korea imported 3.25 million mt of LNG in October, as compared to 2.97 million mt in the corresponding month last year.

    The country paid about US$1.2 billion for October imports, dropping 17.9 percent on year from $1.5 billion in October 2015, the data showed.

    During the month under review, imports of LNG from Australia jumped about 170 percent to 522,406 mt.

    However, the world’s largest LNG exporter, Qatar, remains the dominant source of South Korean imports with 1.17 million mt of the chilled fuel imported in October.

    Although the volumes increased by 11.9 percent, the price decreased 24 percent, when compared to October 2015.

    The remaining volumes imported into South Korea were sourced from Brunei, Indonesia, Malaysia, Oman, Papua New Guinea and Russia.

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    Tesoro to Buy Western Refining in $4.1 Billion Deal

    Oil refiner Tesoro Corp. agreed to buy Western Refining Inc. for about $4.1 billion, creating a company that will account for about 6 percent of U.S. crude-processing capacity.

    Tesoro will acquire Western Refining at an implied price of $37.30 a share, a 22 percent premium to Wednesday’s closing price, the companies said in a joint statement Thursday. The transaction is expected to close in the first half of 2017, subject to regulatory and shareholder approvals.

    The takeover comes as U.S. independent refiners brace for lower margins after two years of strong profits. The benchmark U.S. refining margin has fallen to about $11.81 a barrel from a peak of more than $30 in early 2015, while government-mandated biofuel credits will cost more than $2 billion this year and more in 2017. Billionaire investor Carl Icahn, who controls CVR Refining LP, has warned of a 2008-style financial crisis in the sector.

    We’re at the bottom of the refining cycle so valuations are low,” Gurpal Dosanjh, an analyst for Bloomberg Intelligence, said by phone Thursday. “This is the best time to be buying companies.”

    The combined companies will deliver $350 million to $425 million of annual cost savings within two years. They will have a refining system with over 1.1 million barrels a day of capacity, according to the statement.

    The deal “extends our portfolio into attractive and growing markets,” Greg Goff, chairman and chief executive officer of Tesoro, said in the statement. “Our increased scale and diversity will enable us to leverage and enhance in-house technical capabilities, which we expect will result in cost efficiencies, the ability to drive more growth and increased productivity.”

    The deal value is $6.4 billion including about $1.7 billion of Western debt and the $605 million market value of a non-controlling interest in Western Refining Logistics LP, according to the statement. The partnership owns pipelines in the prolific Permian Basin of West Texas and New Mexico.

    The combination will transform Tesoro into the fifth-largest U.S. refiner behind Valero Energy Corp, Exxon Mobil Corp., Marathon Petroleum Corp. and Phillips 66 and ahead of Motiva Enterprises LLC and Chevron Corp., according to data from the U.S. Energy Information Administration.

    The announcement was made before the start of regular trading in New York. Western Refining rose 1.1 percent to $30.84 at 6:01 a.m. in New York after rising 1.8 percent yesterday. Tesoro fell 0.86 percent to $85 after closing at $85.74 Wednesday.

    Attached Files
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    America’s on Track to Export a Record Volume of Shale Gas

    The U.S. is set to export a record number of cargoes of shale gas this month.

    Nine liquefied natural gas tankers have departed or are scheduled to leave Cheniere Energy Inc.’s Sabine Pass terminal in November, already the most for any month since exports began in February, according to ship-tracking data compiled by Bloomberg and Genscape Inc.

    The exports follow a massive shale boom in the U.S. that’s unleashed a flood of gas supplies from the Marcellus and Utica in the east to the Eagle Ford in Texas. The country is on course to become a net exporter of natural gas next year, a stark turnaround from just a decade ago when it was facing a shortage.

    “The continental U.S. becoming a net natural gas exporter is a milestone of the U.S. energy revolution and transition to ‘energy independence,’” Citigroup Inc. analysts wrote in a note to clients on Wednesday.

    The Sabine Pass complex in Louisiana has exported 40 cargoes totaling about 6.5 million cubic meters of LNG since February, Zach Allen, president of Pan Eurasian Enterprises, said in a research note.

    Cheniere, which became the nation’s first and only exporter of shale gas in February, was cleared by U.S. regulators last month to start loading tankers from a second plant at Sabine Pass.

    Cheniere didn’t immediately return phone calls and e-mails seeking comment.
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    Iran beats Saudi Arabia in India


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    Iran Oil Boom Hangs in Balance as Investors Weigh Trump Risk

    Iran’s resurgent oil industry has confounded skeptics. Production is up by almost a third since sanctions were eased in January and foreign companies are lining up to help boost output further. Yet Donald Trump’s victory in the U.S. casts doubt on whether the momentum can last.

    “The risk is heightened for future projects,” said Robin Mills, who founded Dubai-based consultants Qamar Energy and worked for Royal Dutch Shell Plc in Iran. “It’s gotten more complicated."

    The U.S. president-elect has vowed to tear apart the international nuclear deal with Iran that unlocked the country’s oil exports this year. Such a move could obstruct its plans to pump a further 800,000 barrels a day with $100 billion of foreign investment. The oil market has been counting on Iran as a key new source of supply, and the current uncertainty may see investors step back.

    "International oil companies are likely to adopt a wait-and-see position on Iran until it becomes clear what Trump does," said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former official in the Obama administration.

    No one knows exactly how Trump’s bombastic rhetoric will transform into government policy. Since his surprise election last week, the billionaire real-estate developer has toned down some of his most contentious campaign promises, including building a wall along the Mexican border and prosecuting presidential rival Hillary Clinton.

    Oil companies will take more time to see what direction Trump takes, according to three executives with knowledge of the situation, who asked not to be identified as their deliberations aren’t public. Even before Trump’s win, progress on Iran’s new oil-contract terms had been slow, and producers are still awaiting full details of the tendering process for fields, the officials said.

    Read more: a QuickTake on Iran’s nuclear accord following Trump’s victory

    Iran’s re-emergence into the global economy goes beyond oil. Jetliner maker Boeing Co. this year won a license to sell planes to Tehran for the first time since 1977. The government also has urged European banks to return to the country. Following last year’s agreement with world powers, Iran has held up its side of the bargain by limiting nuclear development, the International Atomic Energy Agency said last week.

    Regardless, Trump has said his “No. 1 priority is to dismantle the disastrous deal with Iran” that President Barack Obama implemented along with the leaders of China, France, Russia, the U.K. and Germany.

    “Trump will be more negative on Iran and more aggressive toward the country,” said Olivier Jakob, managing director of Zug, Switzerland-based Petromatrix GmbH.

    European Stance

    Iranian President Hassan Rouhani has said Trump won’t be able to undo the international deal on his own. Even if the U.S. reimposes sanctions, countries in Europe are unlikely to support renewed curbs. Iranian officials have dismissed some of Trump’s comments as campaign-trail hyperbole.

    “We expect to see more rationality on positions taken by Trump after he becomes president,” Peyman Ghorbani, vice governor for economic affairs at Iran’s central bank, said in an interview in Frankfurt on Wednesday.

    Among investors, Norway’s DNO ASA has signed an accord this week to study development of the Changuleh oil field, saying Iran presents an “obvious” next step in expanding its footprint in the region.

    France’s Total SA had already said it’s still committed to a preliminary agreement to help develop the South Pars gas field, adding that it won’t “do anything breaching international regulations.” In 2008 the company postponed investment in South Pars citing Iran’s strained relations with the West.

    The uncertainty surrounding future investment is heightened by efforts among members of the Organization of Petroleum Exporting Countries to cut the group’s production. Iran, OPEC’s third-largest producer, remains at odds with de facto leader Saudi Arabia, which is pushing its regional rival to accept an output cap.

    Iran has the world’s biggest gas deposits and fourth-largest crude reserves. As well as Total, other European companies including Shell, Eni SpA, Statoil ASA and Repsol SA worked in the country until sanctions forced them to pull out by 2009.
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    Saudi energy minister urges OPEC to cut oil output to 32.5 million bpd

    Saudi Energy Minister Khalid al-Falih said on Thursday that OPEC should cut oil output to 32.5 million barrels per day (bpd), the lower end of a previously agreed range, to balance the market.

    Falih, speaking to Saudi-owned Al-Arabiya TV, said he was optimistic that the Organization of the Petroleum Exporting Countries would formalize a preliminary oil output deal reached in Algeria in September.

    He said the oil market was on a path toward becoming balanced and that "reaching (a decision) to activate that ceiling of 32.5 million bpd will speed up the (market) recovery and will benefit producers and consumers".

    OPEC agreed in Algeria on Sept. 28 to limit supply with special conditions given to Libya, Nigeria and Iran, whose output has been hit by wars and sanctions. The details are meant to be finalised when OPEC ministers meet in Vienna on Nov. 30.

    Falih and other ministers have said previously that OPEC would reduce output to a range of 32.5-33.0 million bpd.

    "I'm still optimistic that the consensus reached in Algeria for capping production will translate, God willing, into caps on states' levels and fair and balanced cuts among countries," Falih said.

    He said talks were ongoing with Qatar's Energy Minister Mohammed al-Sada, who had invited him to Qatar to continue discussions.

    A number of OPEC energy ministers are likely to meet informally in Doha on Friday to try to build consensus over decisions taken by the full group in September in Algiers.

    Russia is ready to support OPEC's decision on an output freeze and sees a good chance that the oil producer group can agree terms by Nov. 30, Russian Energy Minister Alexander Novak said on Wednesday.

    Falih told Al-Arabiya that he hoped an agreement with Russia to cooperate on market stability would correspond with OPEC's meeting on Nov. 30 in Vienna.
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    Suncor Energy expects higher production, lower spending in 2017

    Suncor Energy Inc, Canada's largest oil and gas company, said it expected production to rise by more than 13 percent next year and spending to fall by more than C$1 billion ($746 million).

    Oil producers continue to keep a tight lid on spending to cope with a 60 percent fall in oil prices since mid-2014.

    Suncor set a budget for capital spending of C$4.8 billion-C$5.2 billion for 2017 and forecast average production of 680,000-720,000 barrels of oil equivalent per day.

    A fall in prices for oilfield services, combined with improved productivity and more efficient drilling practices are helping oil producers pump more oil, even as they curb spending.

    The company forecast 2017 cash operating costs at its oil sands operations of C$24-C$27 per barrel, below its 2016 forecast of C$25.50-C$27.50.

    Suncor forecast cash operating costs for Syncrude, a joint venture project majority owned by Suncor Energy, of C$32-C$35 per barrel, also below its 2016 forecast of C$37-C$39.

    The company said on Thursday about 40 percent of the 2017 budget was allocated for exploration and development projects, including Fort Hills and Hebron.

    The Fort Hills oil sands mining project is located in Alberta's Athabasca region, about 90 kilometers north of Fort McMurray, and is expected to produce oil by the end of 2017.

    The Hebron oil field, located offshore Newfoundland and Labrador, is also expected to produce oil by the end of 2017.

    Up to Wednesday's close, Suncor shares had risen 14.8 percent this year.

    Attached Files
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    S.Korea should invest in U.S. oil, gas to counter Trump policy changes: official

    South Korean oil and gas companies should invest more in U.S. exploration projects to limit the impact of possible energy policy changes planned by U.S President-elect Donald Trump, the country's vice energy minister said on Thursday.

    Trump has called global climate change a hoax and has pledged to walk away from the 2015 Paris Agreement, which was strongly supported by outgoing Democratic U.S. President Barack Obama. Trump has also promised to roll back some of America's environmental policies, which he said would revive the ailing U.S. oil and coal industries.

    "Trump administration's energy policy direction contrasts with that of the Obama administration, therefore, substantial changes in domestic and global energy markets are inevitable," Vice Energy Minister Woo Tae-hee said, according to a copy of a speech he was to deliver at an industry forum in Seoul.

    "As a result, uncertainty of energy policy is increasing greatly," Woo said.

    To minimize the impact of U.S. energy policy changes, Woo urged Korean private companies to look for more opportunities to participate in U.S. exploration projects as U.S. shale gas production is expected to rise.

    Woo also suggested that South Korea should expand other cooperation in the oil and gas sector, citing as an example Korea Gas Corp's (036460.KS) long-term shale gas supply deal with U.S. Cheniere Energy (LNG.A).

    The two companies signed a 20-year deal in 2012, and KOGAS is set to start next year to bring 2.8 million tonnes per annum of liquefied natural gas processed by Cheniere to South Korea.

    In the renewable energy sector, which is likely to be hit hard by U.S. policy changes, the vice minister said South Korea should bolster cooperation with the U.S. in clean energy fields, including solar power, despite worries over slow market growth.

    South Korea unveiled an investment plan worth about $37 billion in early July this year to grow renewable energy and related businesses by 2020 with an aim to cut greenhouse emissions and improve the economy.
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    Oil Options Traders Buy Record Bullish Contracts Amid OPEC Moves

    Oil investors traded a record number of bullish options contracts for benchmark U.S. crude, a signal that the market is positioning for a potential OPEC deal to limit production and boost prices.

    The total volume of calls giving investors the right purchase West Texas Intermediate crude rose to the equivalent of 303 million barrels on Tuesday, according to preliminary CME Group Inc. data compiled by Bloomberg. That far exceeded a prior record of 221 million, set five and a half years ago. The heaviest trade was concentrated in the first half of next year, with several individual contracts setting all-time highs.

    “There is definitely somebody that thinks that there is a risk of having higher prices in the first half of 2017,” Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland, said by phone. “It’s saying that somebody in the market is either hedging for potential higher prices in 2017, or somebody is taking a bet that prices will be higher next year.”

    Oil prices on Tuesday had the biggest one-day surge since April as the Organization of Petroleum Exporting Countries embarked on a final diplomatic effort to secure an oil-cuts deal. Its top official is heading on a tour of member states while Russia scheduled informal talks in Doha this week with nations including Saudi Arabia. The producer club, meeting formally on Nov. 30 in Vienna, is under pressure to formalize a deal it set out in September that’s supposed to limit supply.

    The surge in calls trading also helped lift the total number of lots traded to an all time high. A total of 434,879 were transacted, the preliminary data show. The prior all-time high was 430,867 contracts, set in May 2011. Each one represents 1,000 barrels. Of the 10 most active contracts on Tuesday, nine were calls.

    West Texas Intermediate for December jumped 5.7 percent to $45.81 on Nymex on Tuesday. The advance was the largest since April 8. The grade was down 39 cents at $45.42 at 10:06 a.m. in London.
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    North Dakota crude output drops to lowest since February, 2014

    Oil production in North Dakota dropped more than 10,000 barrels-per-day (bpd) in September, the state Industrial Commission reported on Wednesday, citing continued weakness in oil prices.

    The state pumped nearly 972,000 bpd in September, the lowest level since February 2014, data showed. In August, output dropped below the 1 million bpd mark for the first time in over two years.

    The latest figures from November show North Dakota's current drilling rig count is 38, up from 33 in October.

    Going forward, "operators are shifting from running the minimum number of rigs to incremental increases throughout 2017 as long as (U.S.) oil prices remain below $60/barrel," Lynn Helms, head of the state's Department of Mineral Resources (DMR), said in a statement.

    U.S. crude prices hovered just below $46 a barrel on Wednesday.

    The state issued 82 drilling permits in October, a large increase from 63 in September, although down from 99 in August, data showed.

    "Operators are maintaining a permit inventory that will accommodate a return to the drilling price point within the next 12 months," Helms added.
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    Some OPEC ministers likely to meet in Doha on Friday: Algerian source

    Some OPEC ministers likely to meet in Doha on Friday: Algerian source

    A number of energy ministers from OPEC oil-producing countries are likely to meet informally in Doha on Friday to try to build consensus over decisions taken by the full group in September in Algiers, an Algerian energy source said.

    At the September meeting, OPEC agreed on modest, preliminary, oil output cuts in the first such deal since 2008, with special conditions given to Libya, Nigeria and Iran, whose output has been hit by wars and sanctions.

    Doha this week is hosting a meeting of the Gas Exporting Countries Forum (GECF). Industry sources said on Tuesday that the Saudi Arabian and Russian energy ministers might meet on the sidelines of the forum.

    The GECF unites 12 countries including Russia and OPEC members Algeria and Iran. Saudi Arabia is not a member but Energy Minister Khalid al-Falih was due to travel to Doha this week for meetings with peers.

    The agreement made in Algiers is expected to be finalised at the next meeting of the Organization of the Petroleum Exporting Countries on Nov. 30 in Vienna, but disagreements persist among OPEC members and non-OPEC Russia on the details of the deal.

    Iran, which remains one of the main stumbling blocks to a final deal, has refused to cap production below 4 million barrels per day as it seeks to regain market share lost under sanctions.

    Russia has said it prefers to freeze output while OPEC wants Moscow to contribute to cuts.

    Nigeria's Oil minister Emmanuel Kachikwu is the latest to skip this week's Doha meeting scheduled for November 17 and 18. Earlier today we found that Iraq’s oil minister would likewise bypass the energy talks this week in Qatar. Iraqi Oil Minister Jabbar Al-Luaibi won’t be traveling to Doha this week, the ministry’s spokesman, Asim Jihad, said Wednesday by phone. Hamed Al-Zobaie, Iraq’s deputy minister for natural gas affairs, will represent the country instead, Jihad said.
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    Summary of Weekly Petroleum Data for the Week Ending November 11, 2016

    U.S. crude oil refinery inputs averaged over 16.1 million barrels per day during the week ending November 11, 2016, 309,000 barrels per day more than the previous week’s average. Refineries operated at 89.2% of their operable capacity last week. Gasoline production decreased last week, averaging about 10.2 million barrels per day. Distillate fuel production increased last week, averaging 5.0 million barrels per day.

    U.S. crude oil imports averaged over 8.4 million barrels per day last week, up by 981,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.0 million barrels per day, 12.6% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 821,000 barrels per day. Distillate fuel imports averaged 169,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.3 million barrels from the previous week. At 490.3 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 0.7 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 0.3 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.2 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 7.1 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.0 million barrels per day, up by 1.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.2 million barrels per day, down by 0.3% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, down by 1.4% from the same period last year. Jet fuel product supplied is up 3.0% compared to the same four-week period last year.

    Cushing up 700,000 bbls
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    Small fall in US oil production

                                                         Last Week     Week Before    Last Year

    Domestic Production'000............ 8,681              8,692                9,182
    Alaska ............................................    514                  517                   519
    Lower 48 ........................................ 8,167              8,175                8,663
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    Russian joke making the rounds about Rosneft

    "You've reached Rosneft. If you have oil assets and want to sell, press *. If you don't want to sell, press #." (# = behind bars in Russian)

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    China's Generals Won't Back OPEC Forever

    At the risk of stating the obvious, China matters for oil prices. But its role this year and next is less obvious than you might think.

    We all know China was the engine of the bull market in oil for much of the past decade:

    As You Know...

    China has accounted for 46 percent of global oil demand growth since 2005

    Where it gets a little more complicated is beneath those headline figures for oil demand; "oil" isn't always oil.

    For example, while the world used 95 million barrels a day in 2015, according to data from the International Energy Agency, refiners only processed about 79 million barrels a day of crude oil. That gap of 16 million barrels a day -- roughly equivalent to the combined output of Saudi Arabia and Iraq -- was filled via a combination of natural-gas liquids, direct burning of crude oil and biofuels; all stuff that doesn't go through refineries (see this for a more detailed discussion.)

    Here is a different picture of global oil demand, courtesy of Kristine Petrosyan of the IEA's Oil Industry and Markets Division:

    A Refined View

    Demand for products like gasoline hasn't kept pace with output from refineries in the past couple of years

    The thing to notice there is the big disparity between the amount of stuff being pumped out by refiners in 2014 and 2015 -- when cheap crude was boosting margins -- and how much consumers were actually taking. Altogether, it added up to perhaps 400 to 500 million barrels of refined products heading into storage.

    That inventory acts as a source of swing supply, ready to be drawn upon if prices justify it -- and thereby making refiners very sensitive to market moves.

    In its latest monthly report on the oil market, published last week, the IEA went out of its way to note how volatile refinery runs have been this year, with January's year-over-year gain of 1.8 million barrels a day flipping to a 1.8 million-barrel  drop as of May. For the full year, the IEA expects refiners to process just 270,000 barrels a day more crude oil than they did in 2015, the weakest growth since the global financial crisis.

    The good news for oil bulls is that demand for refined products has risen faster than that. So the glut is being drawn down, something that can be seen most frequently in falling, but still bloated, U.S. gasoline and distillate stocks.

    The bad news is that crude-oil production is rising faster than refinery runs. OPEC supply is up as its members jockey for position ahead of this month's supposed deal on a coordinated cut. Moreover, the biggest cuts in non-OPEC supply appear to be behind us, as output from countries such as Russia and Brazil keep climbing and U.S. production shows signs of bottoming out.

    Where is that extra crude going, if not to refiners? The IEA estimates some 700,000 barrels a day has been going to China -- but not for processing into fuels. Rather, all that oil is believed to have gone into the country's strategic petroleum reserve. Like America's SPR, this oil is designed to stay put until there's a war or some other crisis, so it functions like real demand by sucking up barrels from the market.

    Still, it should worry oil bulls that, in terms of growth, Chinese strategic stockpiling has been taking more than two barrels this year for every one taken by the world's refiners to feed underlying demand. China's growth in real oil demand this year is forecast to be just 259,000 barrels a day.

    Beijing has no doubt been taking advantage of relatively low prices to build strategic reserves while it can. Having kept a floor under prices during the crash, though, the flip-side is that stockpiling will likely slow if prices rise too much.

    With China's generals a bigger force than its drivers in this year's oil market, the pressure on OPEC to deliver this month is even greater than you might have thought.
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    Assessment of undiscovered continuous oil and shale-gas resources in the Bazhenov Formation

    Assessment of undiscovered continuous oil and shale-gas resources in the Bazhenov Formation 

    of the West Siberian Basin Province, Russia, 2016

    Fact Sheet 2016-3083

    By:Timothy R. Klett, Christopher J. Schenk, Michael E. Brownfield, Heidi M. Leathers-Miller, Tracey J. Mercier,Janet K. Pitman, and Marilyn E. Tennyson

    Using a geology-based assessment methodology, the U.S. Geological Survey estimated mean continuous resources of 12 billion barrels of oil and 75 trillion cubic feet of gas in the Bazhenov Formation of the West Siberian Basin Province, Russia.

    More details:
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    Libya to Nearly Double Oil Output as OPEC’s Task Gets Harder

    Libya plans to almost double crude production next year even as the producer group tries to implement a deal to trim production and ease a global supply glut.

    The country with Africa’s largest crude reserves currently produces 600,000 barrels a day, state-run National Oil Corp. Chairman Mustafa Sanalla said in a statement posted on the company’s website. It’s seeking to boost output to 900,000 barrels a day by the end of 2016 and about 1.1 million barrels next year, he said.

    Libya, a member of the Organization of Petroleum Exporting Countries, has been working to boost production and exports since the NOC reached an agreement in September with Khalifa Haftar, the commander of armed forces controlling important oil ports. As a result of that deal, the country was able to ship781,000 barrels from the port of Ras Lanuf on Sept. 21, the first international cargo from the terminal since force majeure was declared in December 2014. The country’s largest port, Es Sider, may resume exports within days.

    The North African country’s production recovery highlights the efforts OPEC must make to achieve production cuts needed to rein in the oversupply that has pushed down prices. Brent crude, which traded at more that $115 a barrel in June 2014, has dropped to about $47.

    Libya, along with Nigeria and Iran, has been exempted from the deal OPEC reached in September in Algiers. The more those countries pump, the greater the pressure on other members of the group to make even bigger curtailments of their own if production is to be brought under control. OPEC meets Nov. 30 in Vienna to discuss proposals to limit supply.

    ‘Economic Revival’

    Sanalla said Libya is ”heading toward economic revival” but warned against any military attacks on oil installations that could disrupt plans to increase output.

    Libya produced 1.6 million barrels a day before the 2011 uprising that ousted longtime leader Moammar Al Qaddafi. Output shrank after international oil companies withdrew amid fighting between rival governments and armed groups over the nation’s oil fields, ports and pipelines. The conflict also halted exports from the nation’s main oil ports.

    Es Sider hasn’t exported crude since force majeure, a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control, was declared on loadings almost two years ago. The curbs were lifted in September.

    Attached Files
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    Japan regulator starts formal probe of LNG shipping restrictions: source

    Japan's Fair Trade Commission (JFTC) has ordered the country's liquefied natural gas (LNG) buyers to provide details on contract requirements that prevent them from reselling the fuel to third parties, according to a source with direct knowledge of the inquiry.

    The move suggests the powerful anti-monopoly regulator has launched a formal investigation into whether the so-called destination clauses limit competition and could lead to hundreds of billions of dollars LNG contracts being renegotiated.

    Japan, the world's biggest LNG buyer, and other Asian buyers have complained that the long-established practice of adding the clauses to LNG contracts places unfair restrictions on trading the fuel when it would make more economic sense to sell to other markets.

    The JFTC inquiries were made under the country's anti-monopoly law and companies failing to comply with the order could be subject to penalties, said the source at one of country's main LNG buyers.

    "It looks like the FTC began making a move on destination clause late last month," said the source, who added his company received the order in October.

    The deadline for responses is the end of this month, the source said.

    A spokesman at the JFTC declined to comment, when contacted by Reuters.

    Producers have rebuffed objections to the clauses, but that is changing as U.S. LNG supplies, which are linked to gas prices instead of the traditional connection to oil prices, have become available.

    In the last decade, the European Commission forced through the renegotiation of billions of dollars of LNG contracts after finding destination clauses hurt competition.

    Japan's trade ministry issued a report in May recommending Japan should abolish or relax destination clauses in the future so that the utilities can take advantage of reselling and arbitrage trading opportunities in pursuit of more reasonable prices.

    Japan, Europe, South Korea, China and India, which together account for about 80 percent of the world's total LNG imports, have jointly called for relaxing or abolishing the destination clause, the trade ministry said.

    Attached Files
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    Oil demand won't peak before 2040, despite Paris deal: IEA

    The International Energy Agency expects global oil consumption to peak no sooner than 2040, leaving its long-term forecasts for supply and demand unchanged despite the 2015 Paris Climate Change Agreement entering into force.

    The Paris accord to cut harmful emissions seeks to wean the world economy off fossil fuels in the second half of the century in an effort to limit the rise in average world temperatures to "well below" 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial times.

    But while demand for oil to power passenger cars, for example, may drop, other sectors may offset this fall.

    "The difficulty of finding alternatives to oil in road freight, aviation and petrochemicals means that, up to 2040, the growth in these three sectors alone is greater than the growth in global oil demand," the IEA said in its annual World Energy Outlook.

    From 2020, the European Union will impose much tougher legislation to control vehicle emissions, which many expect to quickly erode use of traditional fuels such as gasoline and diesel, a major source of oil demand.

    In the report, the IEA looks at three scenarios for oil supply and demand. Its central, or "New Policies", scenario assumes signatory countries will attempt to meet the requirements set by Paris, as well as existing environmental legislation, while its "450 scenario" assumes signatories will adhere to the agreement and oil demand will fall off sharply and the "current policies" scenario does not factor in the Paris deal.

    The IEA's central scenario assumes demand will reach 103.5 million barrels per day by 2040 from 92.5 million bpd in 2015, for which India will be the leading source of demand growth and China will overtake the United States to become the single largest oil-consuming nation.

    Overall, under the New Policies scenario, the IEA said it sees non-OECD oil demand growth running at the slowest pace for more than 20 years, but this would still be enough to offset a continued fall in OECD country demand, which will be tempered by policies aimed at improving vehicle fuel efficiency.

    "In the New Policies Scenario, balancing supply and demand requires an oil price approaching $80 a barrel in 2020 and further gradual increases thereafter," the IEA said, leaving its price forecast under this scenario unchanged from last year's World Energy Outlook.


    The IEA's "450 scenario" forecasts rising use of electric vehicles and consumption of biofuels that will cut oil demand.

    "In the 450 Scenario, global oil demand peaks by 2020, at just over 93 million bpd. The subsequent decline in demand accelerates year-on-year, so that by the late 2020s global demand is falling by over 1 million bpd every year," the IEA said.

    "Oil use in passenger vehicles in the 450 Scenario falls from just under 24 million bpd to 15 million bpd in 2040, nearly 10 million bpd lower than the 2040 level in the New Policies Scenario," the agency said.

    Without factoring in implementation of the Paris Agreement and only assuming the measures adopted by mid-2016 will apply, the IEA's "current policies" scenario forecasts a rise in demand to 117 million bpd by 2040.

    On the supply side, in both the New Policies and 450 scenarios, the IEA expects the Organization of the Petroleum Exporting Countries (OPEC) to maintain its strategy of controlling output in order to support prices.

    It sees a gradual decline in OPEC production out to 2040, when it expects the group's output to be around 10 percent lower than its current level of 33.8 million bpd, but says this drop will be much slower than the decline in non-OPEC production, which it expects to fall by nearly a third in this time.

    In the New Policies scenario, global oil output is expected to rise to around 100.5 million bpd by 2040, from 2015's 92.5 million bpd, while under the 450 scenario, supply is expected to fall to around 71 million bpd.

    In its Current Policies outlook, the IEA estimates global supply will rise to 113.6 million bpd by 2040.

    "OPEC provides an increasing share, approaching 50 percent of global production by 2040 – a level not seen since the 1970s – while unconventional production more than doubles between 2015 and 2040," the agency said.

    Attached Files
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    In matters of energy security, gas could be the new oil

    In July, the Greek tanker Maran Gas Appollonia set off on a month-long voyage from the Louisiana Gulf Coast, filled with more than 3 billion cubic feet of liquefied natural gas from Cheniere Energy's Sabine Pass terminal.

    Bound for a port in southern China, the gas - which equaled about half the daily output of Oklahoma - was scheduled for delivery at an auspicious time for the Chinese government. Two years earlier, Beijing had signed a major pipeline deal with the Russian energy company Gazprom, but with economic growth slowing, so were the nation's energy needs. Chinese officials eyed LNG shipped from abroad as a flexible and lower cost alternative to Russian gas.

    This competition for China's business is part of a dramatic change in the workings of natural gas markets and potentially the beginning of fundamental shift in the way the world buys, sells and consumes energy. For decades, natural gas has been bought and sold in a murky realm in which prices are determined in long-term contract negotiations between buyers and sellers and supplies essentially limited to what could be produced in areas close enough to be connected by pipeline.

    But with the development of liquefied natural gas projects here and abroad, countries are gaining access to gas supplies long out of reach, in some cases forcing long-time suppliers to compete on price in a way they never had to in the past.

    That has raised the promise of something that American political leaders -- Republicans and Democrats alike -- and U.S. allies have sought for years: a global, free-flowing and transparent gas market like the one for oil. In the process, that could reduce prices for trading partners in Asia and Europe and cut carbon emissions by replacing coal-fired electricity with gas -- all while undercutting the stranglehold that petro-states such as Russia, Saudi Arabia, and a handful of countries in Middle East, Africa and South America have on energy markets.

    "We have tended to think of energy security as synonymous with oil supplies," Paula Gant, principal deputy assistant secretary of the Department of Energy's Office of International Affairs, told natural gas executives at a conference in Washington last month. "Oil supplies remain core to our thinking, but we also have the opportunity to meet our energy security challenges with a variety of resources, including natural gas, renewables, and efficiency."

    Betting big

    The world has run almost exclusively on oil and coal for more than century. Both are abundant and cheap to transport and store – important factors for countries with limited energy sources of their own. But with climate change regulation taking hold internationally, oil giant BP is projecting that demand for cleaner burning natural gas demand will increase at twice the rate of oil over the next two decades.

    Gas is forecast to make up about 25 percent of the world's energy supply by 2035, exceeding the share of coal and only a few percentage points below that of oil. For Houston and Texas, such a shift could mean an ugly fall out for those oil companies that don't take steps to adjust. But for those that do, it could create incredible opportunity.

    The Eagle Ford and the Barnett are not the only shale deposits in the world - China, Argentina, Algeria and Mexico are among countries with significant fields containing natural gas. With so much of the world's brain power on freeing gas from rock concentrated in Houston and Texas, companies here could play a significant role in helping those countries tap their deposits.

    "We're just about the only country in the world with the necessary infrastructure to provide all the things you need to frack, like chemicals, equipment, expertise and sand," said Charles McConnell, executive director of Rice University's Energy and Environment Initiative. "We have a tremendous lead on the rest of the world."

    To gauge the growing importance of gas, look no further than nearly $50 billion Shell paid earlier this year for the LNG giant BG Group, formerly known as British Gas. Or to the $36 billion Exxon Mobil paid for the Fort Worth-based gas giant XTO Energy in 2010.

    "In terms of future resources there's probably more gas than oil, and climate policy impacts gas differently than oil," said Edward Chow, a former Chevron executive and now a senior fellow at the Center for Strategic and International Studies, a Washington think tank. "So, there's a lot to be said for gas in the long run."

    BP estimates the world's proven gas reserves at more than 600 trillion cubic meters, enough to run the world at current consumption for more than 50 years. But what worries U.S. officials is where the natural gas is located.

    By far the largest share of those reserves are in Russia and Iran, two countries that have strained relations with the United States. Tensions reached their peak in early 2014, when Russia sent troops into neighboring Ukraine, eventually shutting off a natural gas pipeline that not only supplied Ukraine but much of Europe as well.

    Swimming in gas

    In May of that year, leaders from the United States, Canada, France, Germany, Italy, Japan and the United Kingdom met in Rome to discuss the problem of Europe's outsized dependence on Russia for gas. The countries signed on to an agreement to improve global energy security by both diversifying the mix of countries from which energy comes and developing "flexible, transparent and competitive energy markets, including gas markets."

    Fortunately for Europe, the United States and some allies were swimming in natural gas. With the advent of hydraulic fracturing, U.S. natural gas production has increased 50 percent since 2005. Even as domestic prices remain at historic lows for years, U.S. production keeps increasing, hitting a record high last year.

    In addition to Sabine Pass, which opened earlier this year, three more U.S. LNG terminals are under construction on the Texas and Louisiana Gulf Coast - in addition to one on Maryland's Atlantic coast. With more under construction in Australia and Malaysia, countries in Asia and Europe have a an increasing number of gas sources from which to choose.

    The shift is already having an impact across the world's highly regionalized gas markets – where prices have historically been determined by the price of oil or long-term contracts negotiated between buyers and sellers. Three years ago, the average price of LNG on markets across South America, Europe and Asia ran close to five times that on the U.S. Gulf Coast. By last month, the spread had narrowed to less than two times the Gulf price.

    In 2014, the Baltic nation of Lithuania, which had long relied on Russia for all its gas, announced it had renegotiated a 20 percent rate cut with Gazprom – not coincidentally at the same time Lithuania was awaiting delivery on a new floating terminal that would convert LNG back into gas for us by factories and power plants.

    "Even before Sabine Pass opened, the prospect of U.S. LNG exports had already enabled European and Asian purchasers to renegotiate [gas] contracts," said Tim Boersma, director of global Natural Gas Markets at Columbia University's Center on Global Energy Policy. "What we're hoping is natural gas becomes a global commodity, and you'll have a global market, more like crude oil."

    Right now LNG represents about 10 percent of the global gas supply. Even with all the new LNG terminals coming online in the years ahead, that share is only expected to reach 15 percent by 2020.

    The challenge is that liquefying natural gas and putting it on to a tanker is fairly expensive And between all the new LNG and a weaker economic forecast for China, the high prices in Asia that set off the LNG construction boom are moderating.

    Even with increased demand due to climate change regulation, any LNG project not already under construction will struggle to find investors for at least the next few years, said Robert Ineson, managing director of global LNG for the research firm IHS Markit.

    "Oversupply, especially as it grows, will put a lot of pressure on everybody in the market," he said.

    In the meantime, countries are rushing to establish future markets for their gas. Despite U.S. opposition, plans for Russia's Nord Stream II pipeline, which would run beneath the Baltic Sea connecting Russia with Germany, have the support of Western European countries eager to get as much available gas supply as possible. In addition to the pipeline to China - the future of which remains in question - Russia is constructing its own LNG export facility in the northern reaches of Siberia.

    As competition for gas customers intensifies, Cheniere is investing in an LNG import terminal in Chile to support a new power plant project there. In a presentation to investors in September, the company said it would pursue "similar LNG to power projects to stimulate new LNG demand," pointing to small but developing markets as diverse as Panama, Bangladesh and Ireland.

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    USGC distillate exports to Europe at 1.14 million mt in Nov to date

    About 1.14 million mt of distillates have left the US Gulf Coast for arrival in Europe and North Africa in November, according to an estimate based on Platts trade flow software cFlow.

    S&P Global Platts calculates cargo volumes based on the size of each ship and standard diesel export sizes from the US to Europe.

    In October, a total of 1.16 million mt had been tracked loading from the USGC for discharge into European and North African ports.

    This month, the 1.14 million mt are split into 28 clips, 19 of which are currently heading towards Northwest Europe including 10 towards the Amsterdam-Rotterdam-Antwerp hub.

    Of the remaining nine vessels, four -- potentially carrying high sulfur gasoil -- are expected to discharge into Algeria, Egypt and Libya. In October, no USGC cargoes were seen going into North Africa, and in September, only two were spotted discharging into Libya's Zawiyah and Tunisia's La Skhirra ports, according to cFlow.

    While a trickle of cargoes continues to make its way to Europe, the US-Europe arbitrage for middle distillates has been shut for weeks and remains unworkable this week, according to traders.

    "We're not seeing any US [product], but it was the same last month, so there's no real change on that front," a source said.

    Medium Range tanker rates on the USGC to UK Continent trip, basis 38,000 mt, fell to be assessed at Worldscale 80 ($14.16/mt) Monday, according to S&P Global Platts data, after peaking at w135 ($23.90/mt) November 1, the highest rate recorded on that route this year.

    With limited resupplies from the US and reduced flows from the East of Suez of late, the European diesel market was heard to be balanced to tight. But market participants pointed at higher Baltic exports this month and said the market may soften before the year-end, when stock holders typically try to minimize their inventories and as Eastern refineries come out of maintenance and resume exports.

    "I think the market is quite balanced. Destocking may happen and cargoes traded at a fair price," a trader said.

    Another source said: "Obviously we're seeing more volume from Primorsk but I think on top of that we're seeing more material exported from other ports -- Klaipeda, Ventspils from what I hear -- so I think the supply increase is significant from Baltic [ports]."
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    Oil drilling in Permian matches rest of U.S.

    U.S. oil drilling activity is concentrating in West Texas’ Permian Basin. The Permian, which stretches into southeastern New Mexico, now holds nearly as many active oil rigs as the rest of the country combined, including those offshore, the U.S. Department of Energy reported this week.

    The rig count has been rising since this summer, the report shows. But the Permian began seeing rigs increase earlier than the U.S. as a whole, and is adding rigs more quickly. Of the roughly 450 total U.S. rigs, the Permian now accounts for about 220.

    Moreover, the Permian is the only region expected to increase production for the third consecutive month, the report said.

    Permian production has now crested 2 million barrels of oil per day. South Texas’ Eagle Ford oilfield and North Dakota’s Bakken have both fallen to less than 1 million barrels per day.
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    A $900 Billion Oil Treasure Lies Beneath West Texas Desert - U.S. Geological Survey

    In a troubled oil world, the Permian Basin is the gift that keeps on giving.

    One portion of the giant field, known as the Wolfcamp formation, was found to hold 20 billion barrels of oil trapped in four layers of shale beneath the desert in West Texas, the U.S. Geological Survey said in a report on Tuesday. That’s almost three times larger than North Dakota’s Bakken play and the single largest U.S. unconventional crude accumulation ever assessed. At current prices, that oil is worth almost $900 billion.

    The estimate lends credence to Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield’s assertion that the Permian’s shale endowment could hold as much as 75 billion barrels, making it second only to Saudi Arabia’s Ghawar field. Pioneer has been increasing its production targets all year as drilling in the Wolfcamp produced bigger gushers than the Irving, Texas-based company’s engineers and geologists forecast.

    “The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” Walter Guidroz, coordinator for the geological survey’s energy resources program, said in the statement.

    For a look at one explorer’s Wolfcamp bonanza, click here

    Oil explorers have been flocking to the Permian Basin in West Texas and New Mexico to tap deposits so rich that they generate profits despite the 2 1/2-year slump in crude prices. A race to grab land in the Permian has been the main driver of a surge of deals in the energy patch and the industry’s main source of good news.

    Although the Permian has been gushing crude since the 1920s, its multiple layers of oil-soaked shale remained largely untapped until the last several years, when intensive drilling and fracturing techniques perfected in other U.S. Shale regions were adopted. The Wolfcamp, which is as much as a mile (1.6 kilometers) thick in some places, has been one of the primary targets of shale drillers.

    ConocoPhillips, the world’s largest independent oil producer by market value, increased its estimate for the size of its Wolfcamp holdings on Nov. 10 to 1.8 billion barrels from 1 billion last year. A day earlier, Concho Resources Inc. CEO Timothy Leach told investors and analysts on a conference call that two recent wells it drilled in the Wolfcamp were pumping an average of 2,000 barrels a day each.

    Diamondback Energy Inc. disclosed last week that it has been drilling 10,000-foot sideways wells in the Wolfcamp. Production from the wells has been as high as 85 percent crude, according to the Midland, Texas-based explorer.

    For Apache Corp., a slice of the Wolfcamp and another Permian layer known as the Bone Spring are major components of the 3 billion-barrel Alpine High discovery that the company announced in September. Chief Executive Officer John Christmann called Alpine High “a world class resource” during a Sept. 7 presentation at a Barclays Plc conference in New York.

    The Wolfcamp shale also holds 16 trillion cubic feet of natural gas and 1.6 billion barrels of gas liquids, the geological survey said in a statement on Tuesday.

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    Iranian Floating Storage Tankers Exit Persian Gulf

    During the week ending November 11, three vessels, used for floating storage in Iran, left the Persian Gulf for destinations in India and South Korea, according to Genscape. Floating storage is often used to leverage a rising oil price.

    However, Iran’s decision to start exporting from floating storage may indicate the country’s wish to take advantage of oil prices at current levels. As crude output continues to rise in parts of the world, the move may signify the country is preparing for backwardation in the oil price, where prompt prices are higher than those for future delivery.

    - See more at:
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    Exxon in negotiations with Chad over record $74 billion fine: Bloomberg

    An airplane comes in for a landing above an Exxon sign at a gas station in the Chicago suburb of Norridge, Illinois, U.S., October 27, 2016.  Young

    Exxon Mobil Corp is negotiating with Chad over a record $74 billion fine the U.S. oil company was told to pay by a court in the central African nation over unpaid royalties, Bloomberg reported on Tuesday.

    Exxon has appealed the Oct. 5 court ruling, but the appeals court hearing has been delayed because of the talks.

    The court decision fined a consortium led by Exxon over 44 trillion CFA francs ($73.44 billion) - nearly four times BP's Deepwater Horizon settlement and roughly seven times Chad's annual gross domestic product.

    The consortium, which includes Malaysian state oil firm Petronas PETRA.UL and Chadian oil company SNT, were found to owe the country nearly 484 billion CFA francs ($808 million) in royalties, according to the court judgment.

    It did not explain why the penalty amounted to more than 90 times that amount.

    The unpaid royalties stem from a dispute over fees, sources in the Chadian finance ministry have told Reuters. The finance ministry, they said, is seeking a 2 percent royalty fee from the consortium, a rate the defendants have said is higher than the agreed level.

    Exxon did not immediately respond to a request for comment, while Petronas and SNT could not immediately be reached.
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    Who Will be the Next Secretary of Energy?

    Harold Hamm is the legendary CEO of Continental Resources. Hamm is, along with George Mitchell, Aubrey McClendon, and a few others, one of the original pioneers who figured out how to combine fracking with horizontal drilling to access previously-trapped oil in shale deposits.

    Hamm’s claim to fame is drilling in the mighty Bakken oil fields of North Dakota. Harold Hamm is, by all accounts, one of the biggest frackers in the world.

    Hamm addressed the Republican National Convention in July, and tongues immediately began flapping that Hamm was in line to become Trump’s Secretary of Energy if and should he win .

    We eagerly stoked those flames. We think Hamm would be a tremendous Energy Secretary. Apparently those rumors are growing stronger. Although Hamm has publicly said he’s not interested, he’s one of three names under serious consideration for the post. And if we were laying money on a bet, we’d pick Hamm…
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    Bakken Update: Bakken Oil Production Per Well Increasing 27.3%

    Mega-Frac style wells continue to show impressive production results, with an increase of 27.3% from 2013 to 2015.

    Enhanced well designs are still in its infancy, and should continue to accelerate from a production standpoint.

    From 2014 to 2015, the number of completions decreased by 30% but oil production decreased just 16% and natural gas 1.5%.

    These improvements have been seen in all US plays and we will cover the Eagle Ford in our next submission.

    Trump is bullish the US oil industry and we expect protectionist policies will accelerate oil production growth in all US plays.

    Oil and gas has been through significant changes since the price of oil dropped from north of $100/bbl. Prices have stabilized, but volatility is expected. In the short term, prices could pull back to $40, and take the US Oil ETF (NYSEARCA:USO) with it. Longer term we think the price is moving higher. Whether the price of oil stays around $50/bbl. in 2017, or heads to $70/bbl., it is important to know the difference in operator economics. Every operator is unique with respect to costs and production, but the main identifier to success is geology.

    Geology is better understood when isolated by location. Pulling production and cost over several counties is not helpful when looking at one company. Significant changes in production can be seen from one section to the next, so it is important to know the specifics of each prospect to get an idea of value. Each prospect should be examined specifically, as this provides insight to operator viability.

    Each play has a different break-even price, but operators do not drill to break-even. Like any business, operators need to turn a decent profit. Since unconventional production produces a large amount of resource in a short period of time, an operator will not drill wells for oil prices next year. Conventional operators understood wells would produce for decades at a steady rate with low decline. Low prices do not limit these types of wells, as an operator may think prices will be higher next year.
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    Army Corps Decides Not to Make a Decision on Dakota Access Pipeline

    Army informed the Standing Rock Sioux Tribe, Energy Transfer Partners, and Dakota Access, LLC, that it has completed the review that it launched on September 9, 2016,” a press release from the Corps of Engineers states today. “The Army has determined that additional discussion and analysis are warranted in light of the history of the Great Sioux Nation’s dispossessions of lands, the importance of Lake Oahe to the Tribe, our government-to-government relationship, and the statute governing easements through government property.”

    You can read the full letter from the Corps to Energy Transfer Partners, the company trying to build the much-protested Dakota Access Pipeline, below.

    We knew some sort of a decision on the Dakota Access Pipeline was imminent. I guess what we’ve learned now is that the decision was to make no decision at all.

    It’s worth keeping in mind at this junction that the Corps had previously indicated that this easement should be issued. It wasn’t until the Obama administration intervened earlier this year that the easement was delayed.

    So this is pretty blatant political obstruction. Especially when you consider how thoroughly the tribes were consulted during the regulatory process around the pipeline. “The record shows that the corps held 389 meetings with 55 tribes. Corps officials met many times with leaders of the Standing Rock Sioux tribe, which initiated the lawsuit and the protests,” Shawn McCoy wrote in a column over the weekend.

    “The corps alerted the tribe to the pipeline permit application in the fall of 2014 and repeatedly requested comments from and meetings with tribal leaders, only to be rebuffed over and over. Tribal leaders ignored requests for comment and canceled meetings multiple times,” he continues.

    Anyway, these political delays seem like a moot point now. There are just weeks left of the Obama administration, at which point President-elect Donald Trump takes over, at which point approval of this easement seems like a near certainty.

    In the mean time North Dakota officials will continue to grapple with a protest movement that is often unlawful, and often violent, who have disrupted the life and peaceful of people in the region most of whom have nothing at all to do with the pipeline.

    Here’s the letter:
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    Mid-sized Canadian oil and gas producers expanding spending plans for 2017

    Several mid-sized oil and gas producers operating in a range of plays have spiked their capital spending plans for next year by as much as 70 per cent.

    The beefed-up budgets signal the widely held view that 2016 marked the bottom of the oil rout, though companies remain prepared for fluctuating prices, said Jeremy McCrea, analyst with Raymond James.

    “Most companies are under the impression that oil prices will be higher than (they were in) 2016; as a result the budgets we’re seeing are reflective of that higher expected cash flow,” McCrea said.

    “With that said, though, most companies admit that prices do continue to seem extremely volatile and are still emphasizing caution with these budgets.”

    Calgary-based Whitecap Resources Inc. said Monday it would spend about $300 million on capital projects next year, an increase of 71 per cent from its 2016 capital budget of $175 million.

    The company expects to drill 187 oil wells in Western Canada, boosting annual production from the equivalent of 45,700 barrels of oil per day to 57,000 — a 25 per cent jump.

    Whitecap said in a release that it believes oil prices will remain volatile next year and has based its spending plans on West Texas Intermediate trading at US$40 to $60 per barrel.

    The mid-sized producer said it remains flexible to either reduce spending if prices weaken or accelerate capital in the second half of the year if there is a “meaningful and sustained” increase in prices.

    WTI for December delivery dipped nine cents to US$43.32 per barrel on Monday. The price of oil has fallen sharply since mid-2014, when it was over US$100 a barrel, dropping below US$30 at the start of this year.

    Other mid-sized producers are exercising similar caution.

    “(Companies) are remaining cautious with the commodity (prices) and trying to come up with prudent budgets that, even if prices deteriorate here, they won’t have to revise those budgets downward again,” McCrea said.

    Over the next three years, Whitecap plans to spend an estimated $1.2 billion, including $420 million in 2018 and $470 million a year later.

    Thomas Matthews, an analyst at AltaCorp Capital Inc., said in a note that Whitecap’s three-year spending and production growth plan is sustainable at forecast oil prices.

    If prices continue to rise, the company “will be in an enviable position to enhance shareholder returns via an acquisition, dividend bump or additional capex (capital spending) increases,” Matthews wrote.

    Painted Pony Petroleum Ltd., a Calgary-based natural gas producer, said late Sunday it plans to spend $319 million on capital projects next year, a nearly 50 per cent spike over its estimated budget for 2016.

    The company said its partner AltaGas Ltd. has fast-tracked a planned expansion of a natural gas processing facility in northeastern British Columbia, now expected to be operational in October 2017, ahead of earlier plans to build it in 2018.

    With the accelerated construction schedule for the Townsend facility, Painted Pony expects to produce the equivalent of 408 million cubic feet of natural gas per day in late 2017, a 19 per cent jump over previous expectations. It also represents a 70 per cent spike over forecast volumes for late 2016.

    Calgary’s ARC Resources reported last week it will spend $665 million next year, largely on oil and gas drilling in northern and central Alberta, and in northeastern B.C. The spending envelope represents a nearly 50 per cent jump from its $450-million budget for 2016.

    ARC Resources has targeted annual production at the equivalent of 128,000 to 133,000 barrels of oil per day in 2017.

    Enerplus Corp. on Monday announced a preliminary capital budget of $400 million, a dramatic increase from its $215-million envelope for 2016. Most of next year’s spending is expected to flow in North Dakota, where the Calgary-based company will run a second drilling rig in January.

    The oil and gas producer plans to reveal more details about its 2017 spending plan in the coming weeks.

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    US shale oil production declines continue to slow

    US shale oil production declines over the past year and a half are forecast to slow to 20,000 b/d in December, down from a 30,000 b/ddrop in November, US Energy Information Administration data showed Monday.

    December's shale oil output is estimated to be at 4.498 million b/d, compared to 4.518 million b/d in November, the EIA said in its monthly Drilling Productivity Report.

    This compares to a decrease of 118,000 b/d to 4.949 million b/d over the same time period a year ago. Production peaked at 5.618 million b/d in March 2015, according to the EIA.

    But crude oil production in two of the four the main producing shales areas covered by the report, the Permian in West Texas and New Mexico, and Colorado's Niobrara are forecast to increase production, while Texas' Eagle Ford, and the Bakken Shale of North Dakota and Montana are expected to see production fall.

    The Permian is expected to increase production 27,000 b/d to 2.065 million b/d in December, while the Niobrara is forecast to raise output by 2,000 b/d to 404,000 b/d.

    The increases in those two regions would be offset by drops of 33,000 b/d to 978,000 b/d and 14,000 b/d to 918,000 b/d in the Eagle Ford and Bakken Shales, respectively.

    Greater output in the Permian has been expected by analysts due to the dramatic run up in rigs over the last six months.

    The Permian had 218 rigs operating as of last week, which is up by 86 from when the rig count bottomed out there in April this year, according to Baker Hughes.


    Efficiency gains have been a mainstay of the shale boom in the US, with producers able to squeeze out more oil per well and that does not look to slow down in December, the EIA data shows.

    The biggest increase in new-well oil production per rig is forecast for the Niobrara, which should increase by 35 b/d to 1,177 b/d.

    This is likely behind the forecast for greater production as the shale's rig count has remained fairly steady this year bouncing slightly above and below the 16 rig active last week.

    Despite productivity gains in the Eagle Ford and Bakken, they were not enough to offset the overall decline in production in those shales.

    Eagle Ford's new-well oil production per rig is forecast to grow by 27 b/d to 1,307 b/d, while in the Bakken it is predicted to increase 22 b/d to 949 b/d, according to the EIA.

    Permian productivity is expected to increase 7 b/d to 611 b/d in December.

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    Hedge funds turn bearish on oil at record rate

    Hedge funds turned bearish towards oil prices at the fastest rate on record in the first week of November amid growing doubts about whether OPEC will reach a successful deal to curb its growing production.

    Hedge funds and other money managers cut their net long position in Brent and West Texas Intermediate (WTI) futures and options by 149 million barrels in the week ending Nov. 8

    The weekly reduction in net long positions was the largest on record, according to an analysis of data published by regulators and exchanges.

    The sell-off in crude prices, which has been under way for three weeks, was initially led by the liquidation of stale long positions, but the most recent week saw the emergence of a heavy wave of fresh short-selling.

    Hedge funds increased their short positions across the three main crude contracts by 135 million barrels in the seven days to Nov. 8, while long positions were cut by 13 million barrels.
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    Niger Delta Avengers Claim Attack on Nembe Creek Lines

    Niger Delta Avengers Claim Attack on Nembe Creek Lines - Trunk Line has supply capacity of 300,000 barrel per day to Bonny export terminal.

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    Europe sends oil as far as Cuba and Australia as glut grows

    The Mediterranean is rapidly becoming the world's most oversupplied oil market, as exports from OPEC heavyweights Iraq and Iran, rising star Kazakhstan and the return of Libyan crude force traders to get creative in marketing their barrels.

    Supply of virtually every key grade of crude in the region has increased in the last year, in spite of the benchmark oil price struggling to hold above $45 a barrel and showing a year-on-year loss of over 10 percent.

    Low freight rates and fierce competition for buyers have unleashed unusual trade flows of Mediterranean crude and prompted some producers to get creative with blending to expand their client base.

    Looking at combined exports of major grades from OPEC members Iran, Algeria and Libya, together with those from non-OPEC producers Russia and Kazakhstan, shipments of crude towards the Mediterranean have grown by some 2 million barrels per day (bpd) over the past year, according to Reuters calculations.

    "The Med is becoming one of the world's most oversupplied markets and volumes will have to move out of the region," one veteran Med crude trader said.

    Exports of CPC Blend, a light, sweet crude, rose to 1.0 million bpd in October, compared with an average of 600,000 bpd in recent years, largely driven by the first shipments from Kazakhstan's Kashagan field.

    As Kashagan is ramping up output, CPC will be shipping around 1.4 million bpd in the next few years.

    It is not the first time that the Mediterranean market has become oversupplied. Excess barrels have occasionally travelled outside the region to Asia and North America.

    Industry sources, however, say cargoes are now travelling much further.

    Reuters data shows a vessel with Algerian Saharan crude sailing as far as Australia and Cuba, while trader Glencore booked a cargo of Libyan crude for the 20,000-km (12,500-mile) trip to Hawaii and Sweden bought Kurdish oil for the first time.

    CPC is up against the return of Iranian and Libyan barrels, which had been frozen out of the market by international sanctions in the case of the former, and civil unrest and violence in the case of the latter.

    Iran returned as a global exporter in January this year, increasing its exports of oil and ultra-light condensate to near five-year highs of 2.56 million bpd in October, from 1.07 million bpd in the same month of 2015.

    Iraq ramped up exports to 3.89 million bpd in October from around 2.7 million bpd a year earlier, although most of its shipments abroad tend to head to Asia.


    Libyan output has virtually doubled to just shy of 600,000 bpd in the last two months and most of that total is exported.

    Russia, OPEC's largest rival, has increased overall crude output to post-Soviet highs above 11 million bpd and a growing chunk of this has flooded into the Med all the way from the Baltic thanks to cheap freight rates.

    Reuters data shows shipments of Russian crude from the Black Sea port of Novorossisk to the Mediterranean have remained largely steady in the year to date, compared with last year, while those from the Baltic have risen by 12 percent.

    With its diversified pipeline infrastructure, Russia can send crude to the Mediterranean, the Baltic, China and the Pacific. Landlocked Kazakhstan has only one major option for rising supplies - the CPC pipeline to the Mediterranean - unless it expands an existing pipeline to China.

    Traders say they anticipate that more refiners will try to blend CPC with other grades - such as Iraq's heavier Basrah crude - for Asian customers as one potential way of draining the glut.

    But that strategy is not easy to implement given the amount of mercaptan - a harmless, pungent gas - in CPC.

    "You have certain refineries in Italy ... which forbid refining CPC due to the proximity of the beaches and its awful smell," one veteran trader said.

    Also boosting Med exporters is a narrowing of the premium of Brent oil over Dubai crude DUB-EFS-1M, which acts as a benchmark for Asian-based buyers, to its smallest in a year at around $2.05 a barrel. That move gives Brent-linked crudes such as Urals or Saharan an edge in Asia.

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    Chesapeake Sells 882K Acres & 5,600 Conventional Wells in WV, KY

    Chesapeake Energy, which continues to be strapped financially, embarked on a mission to lighten the debt load years ago–first under co-founder Aubrey McClendon, and then more aggressively under his successor, Doug “the ax” Lawler.

    Many pieces of the company have been sold off: the Oilfield Services division, all of its Haynesville Shale assets, all of its Barnett Shale assets…we could go on.

    Chessy loves to do land deals. In December 2014 Chesapeake sold off 413,000 Marcellus acres mostly in West Virginia . 

    Once again Chesapeake is selling off assets in Appalachia. This time they have cut a deal to sell a mammoth 882,000 acres along with 5,600 operating gas wells in West Virginia and Kentucky. However, the land and wells are in the “shallow” Devonian layer. That is, they are conventional (not shale) wells and acreage. Who’s the buyer and how much is Chesapeake receiving?…
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    Genscape Cushing inventory

    Genscape Cushing inventory week ending 11/11: -18,587 bbl w/w

    @Lee_Saks  1h
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    Enerplus Corporation is pleased to announce its results from operations for the third quarter of 2016 and preliminary 2017 outlook.


     - Third quarter production averaged 92,077 BOE per day, with 42,598 barrels per day of liquids
     - 25% reduction in third quarter operating expenses per BOE compared to the same period in 2015
     - Positive initial results from recent Fort Berthold high density test, with average production tracking above type curve expectations
     - Preliminary 2017 capital budget of $400 million; approximately 70% allocated to North Dakota with the addition of a second drilling rig
     - Projecting 2017 North Dakota production growth of 25% and total Company liquids growth of approximately 15% (on a Q4 2016 to Q4 2017 basis)
     - Increased 2017 crude oil hedge protection to 17,500 barrels per day
     - Canadian waterflood portfolio optimization with the accretive acquisition of approximately 3,800 BOE per day (45% liquids) of high net-back production, with strong secondary recovery growth potential (closing expected November 2016)

    'Enerplus' third quarter results demonstrate our continued success in reducing the company's cost structure and driving margin expansion,' commented Ian C. Dundas, President & CEO. 'Combined with our top quartile capital efficiencies and balance sheet strength, Enerplus is well positioned to reinitiate growth in 2017. Our preliminary 2017 capital budget of $400 million is largely focused on accelerating liquids production which is expected to grow approximately 15% on a Q4 2016 to Q4 2017 basis. Importantly, our capital plans are predicated on profitable and sustainable growth; we expect our capital spending and dividends to be approximately balanced with internally generated cash flow at WTI US$50 per barrel,' concluded Dundas.
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    Painted Pony Petroleum expands 2015 capital budget to accelerate production

    Painted Pony Petroleum Ltd. (TSX: PPY) is pleased to announce an expanded 2017 capital budget to accelerate 2017 production. The planned accelerated production, relative to the previously expected 2017 average annual production volumes, is due to a 100 MMcf/d expansion by AltaGas Ltd. of the AltaGas Townsend Facility. Construction is expected to be complete and ready for incremental volumes of natural gas by the end of 2017.


     - Planned accelerated expansion of the Townsend Facility and associated infrastructure by an incremental 100 MMcf/d in 2017;
     - Estimated capital cost reductions for the Townsend Facility expansion are expected to reduce Painted Pony's capital lease fee per Mcfe on the expansion by more than 30%;
     - Increased expected 2017 year-end exit production volumes to 408 MMcfe/d (68,000 boe/d) with a 2017 capital budget of $319 million;
     - Forecasted to deliver annual average daily production growth of approximately 110% through the drill bit, from forecasted 2016 annual average daily production volumes of 138 MMcfe/d (23,000 boe/d) to forecasted 2017 annual average daily production volumes of 288 MMcfe/d (48,000 boe/d); and
     - Participated in the recent Spectra Energy Transmission ('Spectra') open season for the Zone 3 Expansion on the T-North pipeline and secured an incremental 250 MMcf/d of firm transportation with an expected on-stream date in the fourth quarter of 2018.

    Pat Ward, President and CEO of Painted Pony, commented 'the production acceleration, increase in liquids focus in 2017, and upward revisions to Painted Pony's 5-year plan will result in free cash flow in 2019 and 2020 with production expected to average 680 MMcfe/d (115,000 boe/d) in 2020.'


    Townsend Facility Expansion

    Painted Pony has approved the construction by AltaGas of a 100 MMcf/d expansion to the Townsend Facility, expected to be completed and on-stream in October 2017. The Corporation previously expected that an expansion to the Townsend Facility would occur in 2018. The impact of this accelerated expansion is an expected 19% increase in fourth quarter 2017 exit production volumes to approximately 408 MMcfe/d (68,000 boe/d) from previous expectations of 342 MMcfe/d (57,000 boe/d). This will increase annual average daily production by 4% to 288 MMcfe/d (48,000 boe/d) from previously expected annual average daily production volumes of 276 MMcfe/d (46,000 boe/d). With the accelerated expansion of the Townsend Facility, Painted Pony now anticipates 2017 forecasted exit production volumes to be approximately 408 MMcfe/d (68,000 boe/d), a 19% increase in fourth quarter 2017 exit production volumes from previous expectations of 342 MMcfe/d (57,000 boe/d) and exit production growth of 70% when compared to 2016 forecasted exit production volumes of 240 MMcfe/d (40,000 boe/d).The capital cost of this expansion is expected to be 30% - 35% less per MMcf/d of processing capacity than the first phase of the Townsend Facility which was commissioned in July of 2016. The reduced cost is anticipated to reduce the total capital lease fee per MMcf/d for the Townsend Facility by approximately 10%.

    Decreased Well Costs

    Due to ongoing efficiencies, including faster drill times and completions, total budgeted well costs, including drilling, completions, and equipping costs, have decreased to $4.55 million per well from the previously budgeted amount of $4.8 million per well. These cost savings positively impacted the 2016 capital program and the 2017 capital budget which Painted Pony now anticipates to be approximately $319 million which includes an expectation of drilling and completing 61 net wells. The 2017 capital budget is a 9% increase in capital spending, when compared to previously expected 2017 capital spending levels.

    Increased Capital Efficiencies

    Painted Pony's ongoing cost efficiencies provided an ability to optimize field operations by accelerating the drilling of 6.0 net wells and the completion of 5.0 net wells in the fourth quarter of 2016 that were previously planned to occur in the first quarter of 2017. As a result, capital spending in 2016 is forecasted to increase by $14 million to $213 million and estimated capital spending in the first quarter of 2017, which includes drilling 22.0 net wells and completing 12.0 net wells, has been reduced from previous estimates by $23 million to $87 million.

    Improved Cash Costs

    Higher production volumes are anticipated to have a positive impact on Painted Pony's 2017 field cash per Mcfe costs which are now budgeted to be approximately $0.85/Mcfe, a reduction of approximately $0.16/Mcfe or 16% compared to 2016 forecast field cash costs of $1.01/Mcfe. Painted Pony will continue to innovate and streamline field operations as production grows to achieve increasing levels of efficiency while delivering lower operating costs.

    Lower field cash costs combined with lower capital expenditures per well will result in the Corporation's leverage ratio improving to a forecasted 2017 year-end net debt to fourth quarter annualized funds flow ratio of 1.3 times, using November 1, 2016 strip commodity prices.

    Increased Firm Transportation

    Painted Pony recently took part in Spectra's open season for the Zone 3 Expansion on the T-North pipeline and secured a long term transportation agreement for 250 MMcf/d. Construction of the Zone 3 Expansion is expected to be complete in December 2018.

    This agreement, combined with previously announced firm transportation contracts, provide Painted Pony with approximately 570 MMcf/d of firm transportation. The Corporation believes this is sufficient egress capacity to support Painted Pony's growth plans through 2019. Long-term firm transportation and natural gas processing agreements with key third-party service providers combine to underpin Painted Pony's multi-year growth plans.
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    Further tweaks possible as India's marginal oil and gas block bids fall short of expectations

    In a rearguard action, the Indian government is considering further tweaks and changes to the ongoing auction of 67 marginal oil- and gasfields – a week before the extended deadline of November 21.

    While no official information is available on the number of bids or valuations received for these fields, officials, who asked to remain anonymous, have said that these were “far below” government expectations and that work was under way on additional guidelines and changes to the existing ones to woo investors.

    One of the options under consideration is clubbing together some of the 67 marginal oil and gas blocks, wherein more viable blocks could compensate for comparatively less viable ones, an official said.

    However, no information was available about the demands from some prospective investors that the geographical area of each block be increased, which would give investors the option to explore and develop across larger areas than currently on offer.

    It is also possible that the Oil and Natural Gas Ministry will agree to another deadline extension. The initial October 31 deadline has already been shifted to November 21 after bids fell short of government expectations.

    Worried over poor response from domestic and foreign private investors, the government’s last hope is aggressive bidding for the blocks by national exploration and production major, ONGC.

    Interestingly, all the minor oil and gas blocks now up for bidding had initially been allocated to ONGC, but over the years, the company had either surrendered them after finding the blocks unviable or government had seized them owing to delays in development.

    The current auction is the first to be kick-started under the New Exploration and Licensing Policy, under which nine rounds of auction have been completed but the tenth has been nixed to put the Hydrocarbon Exploration and Licensing Policy (Help) in place. Under Help, exploration and production companies will have the freedom to explore and extract any fuel they discover - be it coalbed methane, shale gas, oil or gas - without having to seek fresh approvals for each resource discovered and that too under a compositerevenue sharing agreement.

    The total oil and gas reserves in the blocks up for bidding have been estimated at 625-million barrels of oil or oilequivalent of gas, spread across 1 500 km2.

    Attached Files
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    Hidden in Awful Petrobras Earnings Is a Bit of Really Good News

    Petroleo Brasilerio SA rattled markets last week when it posted a surprise $4.9 billion loss. Buried in the Brazilian oil giant’s 33-page financial statement was a piece of really good news: Its debt levels have tumbled to the lowest in almost three years.

    While there’s still a long way to go, the $16 billion reduction since mid-2014 marks a hard-fought milestone in the company’s plan to claw its way back into investors’ good favor. Petrobras, once the gem of Brazil’s economy, has been battered in recent years by an oil rout, a massive corruption scandal and government policies that forced it to sell fuel at a loss. It’s the world’s most indebted publicly traded oil company with $123 billion in liabilities to pay back.

    “At the moment, the most important thing for Petrobras is the balance sheet,” said Danilo Onorino, a portfolio manager at Dogma Capital SA, which owns Petrobras bonds.

    The surprise loss -- analysts had forecast a profit -- capped a week of extreme volatility triggered by Donald Trump’s unexpected victory in the U.S. presidential race Nov. 8. Investors the world over dumped higher-yielding assets on speculation Trump’s spending plans may push up U.S. inflation and interest rates. In Brazil, five of Friday’s 10 worst-performing Brazilian corporate bonds were issued by Petrobras, according to Bloomberg data.

    Onorino said the meltdown creates a buying opportunity.

    “In my view, they are quite cheap because of the yield and the potential disposals,” he said from Lugano, Switzerland.

    Petrobras has sold or agreed to sell $9.8 billion in assets since 2015 as it tries to win back its coveted investment-grade rating. The deep-water oil producer plans to unload an additional $25 billion in assets through 2018.

    Moody’s Investors Service on Oct. 21 rewarded the company with its first upgrade in five years, raising the rating one level to B2. While that’s still five steps below investment grade, Moody’s said the asset sales and a new fuel-pricing policy are positives.

    If Petrobras succeeds in trimming the fat on its balance sheet, it’ll look more like other state-controlled oil companies, such as Russia’s Gazprom PJSC and Rosneft PJSC, which enjoy lower borrowing costs than Petrobras, Onorino said. Gazprom’s $1.25 billion in notes due in 2037 yield 6.64 percent, compared with 8.47 percent on Petrobras’ $1.5 billion in bonds due in 2040.

    “The difference between Gazprom and Petrobras is Gazprom has a very normal situation with its balance sheet, and Petrobras is getting there,” he said. “I can see Petrobras getting normalized in terms of net debt because of the disposals.”
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    Russia's Russneft shareholder to float up to 20 pct of shares in IPO

    Russian tycoon Mikhail Gutseriyev and his family plan to float up to 20 percent of ordinary shares in mid-sized oil company Russneft in an initial public offering (IPO) by the end of 2016, Russneft said on Monday.

    The stake that Gutseriyev and his family plan to sell on the Moscow Exchange accounts for 15 percent of Russneft's overall share capital, which also includes preferred shares, the company said in a statement.

    A pricing range will be announced on Nov. 18, a person close to the company and market sources told Reuters. The actual IPO price will be announced on Nov. 25, one of the sources said.

    Russian lenders VTB, Sberbank CIB as well as brokerage firms Aton and BCS will organise the IPO.

    The Gutseriyev family controls 75 percent of Russneft's share capital, or 67 percent of all ordinary shares, while the rest belongs to commodities trader Glencore.
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    In Permian land rush, oil companies knock, call and hope for divine intervention

    Last spring, Pastor Jeff Franklin was fretting. He'd committed his congregation to three new international missions and wasn't quite sure where they'd get the money.

    Then an oilman knocked on the door.

    Franklin's church, Kelview Heights Baptist, is on 10 acres in the middle of this West Texas oil capital. Drillers were never interested before. But now acreage around Midland is so precious - and getting so expensive - landmen are dueling to secure leases for mineral rights under parks, restaurants, churches and thousands of Midland's ranch homes.

    "They literally went to every house," said Jim Connell, Kelview's associate pastor. "Who knew we'd get into the oil business?"

    As oil prices have recovered, drillers have flocked back to Midland and the surrounding Permian Basin, one of the most productive oil fields in North America and among the few places where companies can make money with crude hovering between $40 and $50 a barrel. Majors, independents and small private companies are scrambling to secure land and mineral rights in a competition some producers call a "knife fight."

    As a result, land costs have skyrocketed from $2,000 to as much as $60,000 an acre, which one company paid this summer, raising eyebrows even among peers.

    "Oh, yeah, everybody wants the same acreage," Elizabeth Moses, a vice president at Midland-based Diamondback Energy, said after buying 19,000 Permian acres for $560 million. "Landmen are literally knocking on the same doors."

    Franklin wouldn't say how much money Kelview Heights Baptist pocketed. But the competition helped. At one point, negotiations with Midland's Arrington Oil & Gas were slowing down. Franklin sensed the church might get stiffed.

    "Then the Lord led another landman by," he said.

    Arrington cut the deal at the next meeting. Franklin promptly sent the cash to Honduras, for water wells, to Guatemala, for an orphanage and soup kitchen, and to India, for a new wing on a home for widows.

    "It's a miracle," Franklin said.

    Boom. Crash

    The shale revolution came late to the Permian. Operators first perfected horizontal drilling and high-pressure hydraulic fracturing in shale gas fields, like Fort Worth's Barnett and Louisiana's Haynesville, and in newer oil plays, like North Dakota's Bakken and San Antonio's Eagle Ford.

    "Everybody thought the Permian was dead," said Pete Stark, a senior director at research firm IHS Markit.

    Companies eventually tried fracking there, but the rock was more complex - if drillers figured out how to frack in one spot, that didn't mean they'd succeed a few miles away. It took years of trial-and-error to come up with the right horizontal drilling techniques that allowed them to efficiently tap the reservoirs of oil.

    Soon after, drillers began singing the Permian's praises. The basin had dozens of layers of oil-soaked rock, meaning companies could access a lot of oil from one location and dig wells without hardly moving their rigs. Acres of the Permian were still unexplored. And the support that drillers needed - water trucks, service companies and pipelines - were readily available.

    U.S. oil prices were surging then, to well over $100 in 2011, and drillers began pumping at rates unseen in 20 years. But all the success eventually glutted the market; oil prices started tumbling in the summer of 2014, falling to a low of $26 a barrel in February. The U.S. rig count plummeted from 2,000 to just over 400, according to data compiled by oil field services firm Baker Hughes. At least 100,000 workers lost their jobs.

    There was, however, a bright spot: the Permian. As oil prices stayed stubbornly low, producers found few other plays as economical. Companies like Irving-based Pioneer Natural Resources trimmed operations in other fields and focused on the Permian.

    Companies have added about 80 rigs to the basin since May. No other play has grown as much since the bottom of the crash. The closest, Oklahoma's Cana Woodford, is up 16.

    Two years ago, one-quarter of U.S. rigs were in the Permian. Now, more than 40 percent are.

    $60,000 an acre

    The rush for land in the Permian has driven prices to record levels. In 2006, companies spent $2,000 on average per acre of oil land in the Permian, according to IHS Markit. So far this year, they've averaged more than $30,000, almost 10 times higher than prices in the Bakken or Eagle Ford.

    "They're paying absurd amounts of money," said Erik Paulson, 30, a landman who works in Midland.

    In June, Denver's QEP Resources bought 9,400 acres for $60,000 per undeveloped acre, according to analysts at energy research firm WoodMackenzie. In July, Houston-based Silver Run Acquisition bought 38,000 acres for $29,000 an acre. And in August, companies booked four big deals, including Austin-based Parsley Energy's 9,000-acre buy for at least $35,000 an acre.

    The pace slowed in September; it seemed like the big deals had been cut.

    But they returned in October. Dallas-based RSP Permian bought 41,000 acres for $2.4 billion, or as much as $47,000 per undeveloped acre. Then, Denver's SM Energy announced it was buying 35,700 acres from QStar of Houston for $1.6 billion in cash and stock, or at least $42,000 per undeveloped acre.

    The cost is worth it, said Steven Gray, chief executive of RSP Permian.

    "Some of the best wells in the entire basin are out of there," he said

    Ten years ago, substantial Permian deals - those over $10 million each - totaled $1.1 billion, or less than 2 percent of U.S. transactions. This year, oil companies have already spent more than $14 billion, representing more than one-third of all U.S. exploration and production sales.

    Longtime Permian operators now are watching their land sprout in value. Diamondback, a publicly traded company with prime Midland real estate, bought some of its best acreage 10 years ago for about $2,500 an acre. The company now values it at $60,000 an acre or more.

    Discovery Operating of Midland figures some of its leases are worth 30 to 40 times what it paid for them in 1999.

    "There's lots of Wall Street money in the Permian right now," said chief operations officer Jeff Sparks. "They look at it as a good investment. I do, too."

    Sparks isn't selling, and others wished they didn't have to. Eastland Oil, family-owned for 94 years, has tried to cobble together acreage in three different counties around Midland over the past year or so, only to watch big land companies swoop in and offer double the money. Eastland had two choices: Start matching the offers or selling its rights to the competition. It sold.

    "We buy acreage to drill. We don't buy it to turn," said president and owner Robin Donnelly. "So our business model is not functioning right now."

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    Trudeau Clears Path for Canada to Approve Kinder Morgan Pipeline

    Prime Minister Justin Trudeau has set the table for Canada to approve Kinder Morgan Inc.’s Trans Mountain pipeline expansion by announcing environmental measures aimed at placating opposition to the project.

    Trudeau unveiled a national carbon price in October, and over the past few weeks has pumped billions into marine protection and “green” infrastructure, as well as begun an overhaul of the federal energy regulator and granted crown protection to a rainforest that essentially blocks a rival proposal. He regularly says it’s his job to get Canada’s resources to market while balancing the environment and economy.

    The Liberal prime minister has also backed a hydro dam and natural-gas project favored by British Columbia Premier Christy Clark, as any quid-pro-quo support from her for Kinder Morgan would help him claim consensus ahead of the Dec. 19 deadline for a final decision by the Trudeau cabinet. However, opposition from Vancouver’s mayor, indigenous communities and environmentalists will test Trudeau’s resolve to approve the pipeline and defend the decision against a likely court challenge by its detractors.

    “You could interpret all these signs as part of a grand design to make construction of one or two pipelines possible,” said Tom Flanagan, a former adviser to Stephen Harper, Trudeau’s Conservative predecessor. “Let’s hope he has the stomach to see it through if the opposition continues after the announcement of cabinet approval, because I think it will.”

    The election of Donald Trump as U.S. president has also raised hopes that TransCanada Corp.’s Keystone XL pipeline will be revived, giving Canada -- home of the world’s third-largest proven oil reserves -- another option for its growing crude production. While Trudeau supports Keystone, he and his officials regularly stress Canada’s need to get its resources to “tidewater,” suggesting the TransCanada project isn’t enough. Alberta Premier Rachel Notley has echoed that, saying the oil-producing province still wants a pipeline to the ocean regardless of Keystone and will back Trudeau’s carbon pricing plan if he gets “energy infrastructure” built.

    Proposals in Play

    Trudeau believes Canada needs at least one new oil pipeline and is said to consider Kinder Morgan’s expansion -- a 1,150 kilometer (710-mile) route that would roughly triple current capacity -- the favorite of five major proposals. In addition to Keystone, the other projects are TransCanada’s Energy East, currently under regulatory review; Enbridge Inc.’s Line 3, an inland route to the U.S. that Trudeau must approve or reject by Nov. 25; and Northern Gateway, another Enbridge proposal that was approved by Harper only to have its permits rescinded by a court ruling that Trudeau and the company opted not to appeal.

    The prime minister must decide whether to do additional indigenous consultation and reissue Gateway’s permits, but he opposes the pipeline’s current route through the Great Bear Rainforest. The Duke and Duchess of Cambridge added the area to the Queen’s Commonwealth Canopy conservation initiative during a recent visit, effectively bolstering its protection. Trudeau has also proposed an oil-tanker ban along its shipping route and has flatly opposed the project in the past.

    That makes Kinder the only near-term pipeline headed to the ocean, raising expectations Trudeau will approve it after the recent environmental measures. “What they’re doing is trying to soften the ground of resistance,” according to Nathan Cullen, a lawmaker with the opposition New Democratic Party whose district includes part of the Gateway route and the Petroliam Nasional Bhd natural-gas project the government approved in September.

    “A little bit of lipstick on a pig is the most generous I can be right now,” Cullen said in an interview, adding that Trudeau is losing the benefit of the doubt on Canada’s west coast. “He has more than Harper did, but he has less of it than he did a year ago.”

    Electoral Coalition

    The federal decision is the last step that would clear the way for the pipeline to be built -- barring successful legal challenges, as happened with Northern Gateway -- and comes after the National Energy Board regulator granted conditional approval to the project earlier this year. Trudeau faces pressure from environmental advocates to reject energy projects as he seeks to cut emissions.

    Meanwhile, Kinder Morgan Canada’s president, Ian Anderson, recently clarified that he believes fossil-fuel consumption is driving climate change. Trans Mountain cemented support from 41 indigenous communities and expects more endorsements, Anderson said in October. The company will begin construction on the pipeline in 2017 if it’s approved and expects to ship oil by 2019. It declined a request for further comment Friday.

    Trudeau was elected on firm environmental pledges, yet hasn’t detailed how he will meet his Paris climate-conference goals as the country confronts weak economic growth and slumping commodities prices that have hurt Alberta.

    Last week in Vancouver, the prime minister unveiled C$1.5 billion ($1.1 billion) in funding for ocean protection over five years in a move lauded by environmentalists. Critics, however, were quick to say the money doesn’t make the pipeline acceptable.

    Pipeline Detractors

    “The proactive way to prevent massive impact from an oil spill on B.C.’s south coast is to not approve” Trans Mountain, Vancouver Mayor Gregor Robertson said. “I strongly urge the federal government to reject Kinder Morgan’s pipeline proposal.”

    Signing off on the pipeline would be “one in a series of decisions that seem to fly in the face” of the Paris climate plan, according to Josha MacNab, a regional director at the Pembina Institute, an environmental think-tank. “I don’t think he should underestimate the extent to which Kinder Morgan, if approved, will be a flash-point in British Columbia.”

    Trudeau lived in Canada’s westernmost province as a young man and frequently refers to it as his second home. Last week he also announced a C$45 million contribution to an engineering program at Simon Fraser University near Vancouver, saying he was there because “it’s important to stay grounded where your roots are.”

    Canadian lawmakers return to Ottawa Monday after a one-week break, their last before the Kinder Morgan deadline. Trudeau’s cabinet will weigh the project’s political impact, environmental risks and economic benefit in its decision.

    “The government certainly appears to be setting the table for approval,” said Ed Greenspon, president of the Public Policy Forum, an non-partisan think-tank based in Ottawa. “The prime minister has been consistent in saying climate policies and energy development can co-exist, middle class jobs are top of his agenda, and he won’t leave Alberta out in the cold. He’s taken risks before and looks ready to take some flack here.”

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    Shell ‘to sell Norwegian assets’

    Supermajor Shell is reportedly considering putting up for sale assets from its $3 billion Norwegian portfolio in the latest divestment programme move following the merger with BG Group.

    The Anglo-Dutch player launched a programme to reduce its debt after the BG takeover, and announced it is targeting the sale of around $30 billion worth of assets over the next three years from its combined portfolio as it plans to exit around 10 countries.

    The operator has previously said it is seeking to sell a large package of its North Sea assets, from both the UK and Norwegian North Sea.

    Shell has now lined up investment bank Rothschild to conduct a review of its Norwegian unit, the Sunday Times reported.

    According to report, the group is considering selling of part or all of its Norwegian business, which operates several large fields in the Norwegian North Sea and holds smaller stakes in others fields.

    Shell declined to comment on the reports.

    Last month, Shell said it had put 16 assets on the market with each asset worth an average of $500 million - making a total of some $8 billion, however, no details on the projects were given at the time.

    Shell’s chief financial officer Simon Henry said earlier this month that the group’s UK North Sea portfolio is seeing “improvements”, and that “performance is beginning to look considerably better”.

    Henry did not rule out selling assets in this region, saying that, while it is cash generative, “it is not the most profitable asset in the portfolio”.

    Media reports in recent months have linked chemical giant Ineos, Denmark’s Maersk Oil and private-equity backed Siccar Point with the sales process. However, Siccar Point last week agreed to take the UK subsidiary of Austrian player OMV for up to $1 billion.
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    Australian LNG exports hit record

    The value of Australia’s monthly LNG exports rose to AUS$1.75 billion in October 2016, according to independent energy analyst, EnergyQuest.

    In its ‘Monthly LNG Report’, EnergyQuest notes that the LNG sector’s performance in October surpassed the previous monthly record of AUS$1.72 billion in Australian LNG export values from January 2015.

    The ‘Monthly LNG Report’ monitors the growth in Australian LNG by project, together with developments in major markets, progress by competitors and interactions between Australian LNG projects and domestic gas markets.

    Australian LNG export volumes grew by 6.6% (65 cargoes) in October 2016 to 4.3 million t up from 4 million t (61 cargoes) in September 2016.

    EnergyQuest Chief Executive Officer (CEO), Dr Graeme Bethune, said: “There was a particularly strong performance by LNG projects on the west coast […] Western Australian projects in October shipped 2.4 million t (36 cargoes), up from 2.2 million t (33 cargoes) in September […] Woodside’s Pluto project shipped 7 cargoes in October, up from five cargoes in September […] Gorgon, operated by Chevron, continues to ramp up and shipped one additional cargo […] Darwin LNG, operated by ConocoPhillips, shipped 0.3 million t (5 cargoes), up from 0.2 million t (3 cargoes) the previous month.”

    On Queensland’s east coast, the Gladstone LNG project shipped 1.5 million t (24 cargoes), down slightly from 1.6 million t (25 cargoes) in September.

    Dr Bethune added: “Interestingly, the Santos-operated Gladstone LNG project sent its first cargo to Mexico, a country that imports gas from the United States The shipment was delivered to the Manzanillo LNG facility, on Mexico’s mid-west coast, a project which is a joint venture between Mitsui, KOGAS (a GLNG partner), and Samsung […] This consignment means that all three new Queensland LNG projects – QCLNG, GLNG and APLNG – have now shipped one cargo each to Mexico.

    “Asian buyers like KOGAS are increasingly looking to new gas markets and as Mexico imports gas from the US, it is interesting to see Queensland gas being imported into Mexico.

    “From a broader market perspective, rather than new US LNG supply heading west to Asia, which is a major market concern for Australian and South East Asian LNG players, this cargo was yet further demonstration of the Australian LNG sector being able to ship east to America.”

    EnergyQuest also notes that the LNG spot price in Asia stood at US$7/million Btu in October 2016 – the highest it has been this year.
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    Norway's energy minister doubts 2016 natural gas exports will match last year

    Norway may not match last year's record natural gas exports of 115 Bcm in 2016, the country's energy minister said Thursday, but Oslo is confident of its projections of average annual exports of 100 Bcm over the next 20 years.

    In a wide-ranging interview with S&P Global Platts in London, Tord Lien said Norwegian gas exports would remain high in the future through careful exploitation of the vast resources on the Norwegian Continental Shelf.

    "I'm not sure if this year we'll be able to beat last year, but it'll be in that range," Lien said, when asked if supplies would be higher than 2015's record 115 Bcm.

    "You can't have records every year," he said.

    Given the system's downtime each year for planned maintenance, there would always be a variable impact on overall annual flows, he added.

    But, Lien said, given the current technical capacity of the Norwegian gas system of some 130 Bcm/year, "when you are exporting 115 Bcm, that means everything is running smoothly."

    Some analysts have questioned Norway's ability to maintain its gas exports at such high levels, especially given the slowdown in investment in new exploration since the oil price crash of 2014-2015.

    In addition, no new major gas discoveries have been made for many years on the NCS.

    Lien, though, said he was not concerned.

    "We have a very good understanding on the next 20 years where we expect to export on average 100 Bcm/year," he said. "That is less than today, but it's still

    high. It's going to still be more than 20% of the EU's gas consumption."


    Key to future developments on the NCS is the knowledge that there will be a market in Europe for Norwegian gas, Lien said.

    Oslo, he said, was buoyed by the strategy announcement in February by the European Commission that Europe would rely heavily on gas for the coming two decades and beyond in its energy supply mix.

    "That was a strong signal from the Commission, and I will like it even more when it really materializes," Lien said, pointing to the UK's move to phase out coal in power generation over the next decade as an example of concrete action.

    "That is really the kind of signal we need, and if Germany were to proceed with their idea of doing the same, that would be of great importance for future investment decisions, which -- let's face it -- are necessary to be able to export 100 Bcm/year," he said.

    Lien said the 100 Bcm forecast was based on both already discovered resources and those that are yet to be found, including in the relatively remote Norwegian high north and Barents Sea.

    Asked whether he was confident of a major gas find in these new frontier areas, Lien was cautious.

    "If you had asked me that question two years ago, I would've said yes," he said.

    "Some of the companies tend to think there is oil there, not gas, so it looks less likely now than two years ago. But we have to do the drilling," he said, adding that both state-controlled Statoil and Lundin Petroleum planned exploration wells in the spring of 2017.

    Lien was also confident on Norway's ability to build new pipeline infrastructure in the remote Arctic waters if a big gas find was made, linking in with existing infrastructure, provided it was economically sound and sustainable.

    "We have already built a gas pipeline into the Arctic with the Aasta Hansteen field [the Polarled line]," he said, adding that an alternative would always be a new LNG plant or an expansion of the existing Snohvit LNG facility.


    Lien also said that the third development phase of the giant Statoil-operated Troll field would inevitably go ahead as Norway looked to maintain its gas export levels.

    The development would see gas recovered from the Troll Vest structure, which mostly contains oil.

    "It will happen in time, but there is no urgency to do it this year or next year," Lien said. "But it is one of the huge investments that will come on the NCS in the years ahead, obviously. You have to have a plan -- otherwise you lose income either from oil or from gas. So it has to be planned carefully.

    "But that has been the story of the Troll field development," he said. "There has been a huge political debate on this issue, and what we have done so far has worked out very nicely for the Norwegian economy in terms of value creation from in-place resources."

    Asked whether the government backed Statoil's current "value over volume" strategy, whereby some gas production is held back during periods of low prices, Lien said it was up to companies how they manage their resources.

    And that includes majority state-owned Statoil.

    "This has to be one of the real beauties of how we have organized government ownership in Norway -- the fact that there is arms-length distance when it comes to these kinds of decisions," he said.

    Nonetheless, the government is keen to make sure that all operators on the NCS, including Statoil, push forward when it comes to time-critical development projects.

    "You can't have any nonsense from the companies," he said. "There are some obligations that come with being a player of the NCS, and one of them is that you will make decisions that don't waste resources. When it comes to those decisions, Statoil is under the same pressure and expectation from the Norwegian government as everybody else is."

    For new field developments, some delay was not a bad thing, Lien added.

    "It's a good strategy to work hard on getting costs down, and if that means postponing the investment decision by one year, that's a good strategy," he said.
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    Gorgon LNG temporarily shuts down

    According to Reuters, the Gorgon LNG project in Australia is currently undergoing restart activities, following a temporary shutdown.

    Reportedly, the facility was shut down as part of a brief and unplanned outage, and led to the delay, but not the cancellation of, a small number of shipments.

    Cam Van Ast, a spokesman for Chevron, said: “Production on Gorgon LNG Train 1 was temporarily halted for minor maintenance.

    “Train 2 production is unaffected and continues to ramp up.”

    The Gorgon project is located on Barrow Island, located approximately 60 km off of the northwest coast of Western Australia. The LNG facility features three processing units designed to produce 15.6 million tpy of LNG.
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    Large buildup of tankers around Singapore


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    Oil Tankers Used to Store Millions of Barrels as Land Sites Fill

    Oil companies booked tankers to store as many as 9 million barrels of crude in northwest Europe amid signs that space in on-land depots is filling up, a ship-operator said. The glut could get bigger still, given the region is scheduled to load the most cargoes in 4 1/2 years next month.

    There are 14 to 16 Aframax-class tankers now storing crude in the region, Jonathan Lee, chief executive officer of Tankers International, operator of the world’s biggest pool of supertankers, said by phone Friday. Standard cargoes are normally almost 600,000 barrels. Lack of on-land capacity to hold the oil is the most likely cause of the buildup, he said.

    North Sea producers are among a long list of suppliers adding barrels just as OPEC prepares to try and eliminate a surplus. Pressure on the exporter club is piling up because its own members are pumping like never before while nations outside the group including Brazil, Kazakhstan, Canada and Russia are producing more than ever or pumping from new fields.

    Traders began looking for profit at sea again earlier this month, according to a Bloomberg survey, with Tankers International saying at the time that between five and 10 ships had been chartered to hold oil near Singapore, most likely to profit from weak crude prices.

    Doing the Contango

    Those ships are the industry’s biggest supertankers, holding 2 million barrels a piece. The vessels in the North Sea would normally carry about 70 percent less oil.

    Oversupply in the oil market has caused a key oil-price spread that denotes the scale of any surplus to balloon. The difference in the price of January and February Brent contracts rose to $1.18 a barrel this week, the widest since April 2015, excluding days when the price expires.

    When the month-on-month discount gets deep enough -- something called contango -- it sometimes rewards traders to hire ships, keep hold of the oil, and sell it at the later price, because the gap more than covers the cost of booking a vessel. Other times, there just isn’t space to unload, forcing vessels to wait. Inventories in Amsterdam, Rotterdam and Antwerp are the highest for the time of year since at least 2013, according to data from Genscape Inc.

    “The big question is whether it’s contango or whether it’s a lack of physical land-based storage” that’s caused the storage buildup in Northwest Europe, London-based Lee said. “It seems to be the latter at the moment.”

    The Brent price spreads collapsed because supplies are being pushed onto the market that were previously unavailable.

    Libya shipped the most oil since late 2014 in October, while Nigeria’s petroleum minister said the nation is now pumping more than 2 million barrels a day for the first time since the start of the year. That is in addition to new supply from Kazakhstan’s Kashagan oil field and Russian output at a post-Soviet record.

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    U.S. shale firms go back to work buoyed by OPEC deal, Trump victory

    U.S. shale producers are redeploying cash, rigs and workers, cautiously confident the energy sector has turned a corner after Donald Trump's election victory and OPEC's recent signal that it plans to curb production.

    The downturn produced a leaner, more efficient U.S. shale industry that was forced to develop and quickly adapt new technology to compete with conventional oil supplies during a two-year period of depressed prices.

    "You're starting to see a little bit of light at the end of the tunnel," Ryan Lance, chief executive of ConocoPhillips, the largest independent U.S. oil producer, said in an interview last week. "We're beginning to put capital back to work, but we're being cautious."

    Specifics of the deal by the Organization of the Petroleum Exporting Countries - especially what it means for each member - need to be finalized at a meeting later this month in Austria. But the tentative agreement indicated OPEC kingpin Saudi Arabia is keen to end a damaging two-year oil price war. That prodded U.S. producers to action. [nL8N1C42M9]

    The U.S. oil drilling rig count has grown 6 percent since OPEC's September accord, according to oilfield analytics firm NavPort, with additions across the country's top shale fields including the Permian (7 percent) and the Bakken (17 percent).

    Also, Trump's victory is expected to bring to the White House an advocate for oil and gas drilling, who will slash regulations and encourage new energy industry development. [nL1N1DA35B]

    Occidental Petroleum Corp, Chevron Corp, Pioneer Natural Resources Co and ConocoPhillips are among those adding rigs or preparing to do so.

    Oasis Petroleum Inc, a major North Dakota producer, bought 55,000 acres last month from SM Energy Co for $785 million, a bullish bet on the future of oil prices. The company also plans to add rigs. [nFWN1D90K9] [nL4N1CO3K9]

    "This all reflects more of a confidence around our business plan in a lower oil price environment," Oasis Chief Executive Tommy Nusz said in an interview last week.

    "We feel like we can hold our own now in a $40 (per barrel oil) world and grow in a $45 to $50 world."

    Citing its technology and other improvements, EOG Resources Inc raised its growth projections and now expects to boost output 15 to 25 percent each year through the end of the decade if oil prices stabilize near $50 per barrel.

    "After two years of this down cycle, we are more than ready to resume higher-return oil growth," EOG CEO Bill Thomas told investors in early November.

    All that activity will have an effect once things ramp up.

    U.S. unconventional shale oil production is expected to dip 13 percent this year from 2015 levels and continue to slip into 2017 before rebounding 11 percent in 2018, according to data from the U.S. Energy Information Administration.


    Investors in the oil sector are also bullish, eager to see returns grow after lagging for several years.

    "We fundamentally feel that where energy prices are at now are below where they are going to be at some point, and below their long-term equilibrium level," Tony James, president of private equity investor Blackstone Group LP, told reporters in late October.

    James' outlook reflects a broader perception among shale oil producers and their financiers that the industry has turned a corner for the better, analysts said.

    U.S. oil producers have launched initial public offerings, with Extraction Oil & Gas Inc and WildHorse Resource Development Corp filing this fall alone.[nL4N1CH4JV] [nL4N1DB6QR]

    That is good news not only for the oil industry but also for its largest lenders, including Wells Fargo & Co and Bank of America Corp.

    Oil "companies are now entrepreneurial and they've cut costs to become viable at these prices," a senior executive at one of the top private equity firms in New York said last month. The executive declined to be named as he is not authorized to speak to the media. "Those people are going to start producing again."

    To be sure, a resurgence in the U.S. oil industry must still contend with market fundamentals, including a large oversupply and sluggish demand that neither Saudi Arabia nor President-elect Trump can fully control.


    Oil steady near multi-month lows on OPEC output record, U.S. rig count
    China October crude oil output drops to lowest since May 2009

    America's oil inventories rose by more than 14 million barrels in late October, the largest one-week increase on record and one linked to large production of shale oil and natural gas.[nL1N1D30QB]

    If American oil companies continue to increase production, they run the risk of abrogating any OPEC output cuts later this month and pushing down prices on their own accord.

    "Obviously if we pull back to $25 per barrel, that will have an impact upon our investing," said Al Walker, CEO of Anadarko Petroleum Corp.

    Yet demand for the light, sweet oil produced across American shale fields continues to rise globally. U.S. crude oil exports hit an all-time high in September, according to U.S. Census data.

    And many companies have hedged for 2017 at least, taking advantage of the oil price rise this year. That emboldens executives to boost budgets.

    Pioneer, considered by Wall Street analysts one of the best-run U.S. shale oil producers, has hedged 75 percent of its 2017 output at an average price around $50 per barrel.

    "The industry is looking forward to a tepid recovery in early 2017," said John Chisholm, CEO of Flotek Industries Inc, which supplies chemicals used in fracking and other oilfield products.

    Demand for Flotek's CnF, a nontoxic fracking fluid, during the first nine months of 2016 has already eclipsed 2015 sales volumes, with projections higher for 2017.

    "These oil producers have reconstructed their business so they can make money at these low oil price levels. They're pressing forward."

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    U.S. rig count down one this week, first decline in two months

    The number of oil rigs in U.S. fields fell by one this week, the first overall decline in two months, the Houston oilfield services company Baker Hughes reported Friday.

    At the same time, U.S. oil drillers collectively sent two more rigs into the patch.

    The total rig count dipped to 568, up from a low of 404 in May. Totals still lag the same period last year, when 767 drilling rigs were operating in U.S. oil and gas fields.

    The number of active oil rigs rose to 452 this week. Gas rigs slipped two to 115. Uncategorized rigs fell one. The number of offshore rigs stagnated at 21, down 12 year over year.

    Rig counts fell by two in Alaska, two in North Dakota and one in New Mexico, Oklahoma, Pennsylvania and Utah.

    Texas almost made up the difference, adding six rigs — including three in the Eagle Ford, which watched drillers flee after the oil price crash two years ago.

    U.S. drilling activity has followed the modest rebound in prices, from February’s low of $26 a barrel to more than $50 in recent weeks.

    Prices slipped again this week, however, dropping to just over $43 a barrel in trading around noon on Friday.
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    OPEC points to even bigger 2017 oil surplus as its output jumps

    OPEC reported an increase in its oil production in October to a record high led by members hoping to be exempt from the producer group's attempt to curb supply, weighing on prices and pointing to a larger global surplus next year.

    The Organization of the Petroleum Exporting Countries pumped 33.64 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, up 240,000 bpd from September, OPEC said in a monthly report.

    The OPEC figures point to a bigger surplus than those of the International Energy Agency and underline OPEC's challenge in restraining supplies. Oil LCOc1 fell below $45 a barrel after the report was released, having reached a 2016 high near $54 after OPEC's deal was announced in September.

    OPEC made little mention of the surprise election of Donald Trump as the next U.S. president, beyond noting that currency markets had seen "significant" volatility. It left unchanged its 2017 forecasts for U.S. and world economic growth.

    "More data over the coming months will provide further insight to allow a more detailed review of the U.S. economic situation, particularly after the most recent elections," OPEC said in the report.

    To speed up a rebalancing of the market, OPEC agreed at a meeting in Algeria on Sept. 28 to cut supply to between 32.50 million bpd and 33.0 million bpd. The group hopes to finalize further details at a meeting on Nov. 30.

    The latest figures could complicate OPEC talks on how to share out the cuts. OPEC experts meet to discuss this on Nov. 25 and on Nov. 28 will meet officials from non-OPEC countries, OPEC Secretary General Mohammed Barkindo said on Monday.

    According to OPEC's report, October's supply boost mostly came from Libya, Nigeria and Iraq - members that have sought to be exempt from cuts due to conflict. Iran, seeking an exemption as output was held back by Western sanctions, also pumped more.

    OPEC uses two sets of figures to monitor its output - figures provided by each country, and secondary sources which include industry media. This is a legacy of old disputes over how much countries were really pumping.

    Iran told OPEC it produced 3.92 million bpd in October, while the secondary sources put output at 3.69 million bpd. From Iran's point of view, joining the OPEC supply cut deal from the higher figure would be more favorable.

    OPEC issued a revised report on Friday to add Iraq's figure. Baghdad, which has questioned the accuracy of the secondary-source numbers, told OPEC its October output was steady at 4.77 million bpd - 210,000 million bpd more than the secondary sources estimate.

    That aside, OPEC's report is the latest to show output is hitting new peaks. The October figure is the highest since at least 2008, according to a Reuters review of past OPEC reports.

    In the report, OPEC trimmed its forecast of non-OPEC supply this year, although supply growth in 2017 is put at 230,000 bpd, little changed from last month.

    With demand for OPEC crude in 2017 expected to average 32.69 million bpd, the report indicates there will now be an average surplus of 950,000 bpd if OPEC keeps output steady. Last month's report pointed to an 800,000 bpd surplus.

    The 2017 surplus implied by the IEA in its latest report on Thursday is closer to 500,000 bpd.

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    Iran Tells OPEC It Raised Supply by Most Since Sanctions

    Iran, which wants an exemption from OPEC’s accord to cut production, told the group it raised output by the most since international sanctions were lifted, while Iraq -- also insisting it should be spared -- gave no reading at all.

    Freed from curbs on its oil trade in January, Iran said it increased output by 210,000 barrels a day to 3.92 million a day in October from the previous month, according to a report from the Organization of Petroleum Exporting Countries. That’s 230,000 barrels a day more than estimated by OPEC itself, whose members are due to finalize how much each will cut when they gather on Nov. 30. Production from Saudi Arabia, which typically declines at this time of year, remained near record levels.

    Oil prices climbed about 16 percent in the weeks after OPEC’s Sept. 28 meeting in Algiers, where the group ended a two-year policy of pumping without limits to agree a production cut aimed at clearing a global surplus. Yet prices have since retreated on doubts the deal can succeed when key members Iran and Iraq argue they shouldn’t need to cut while recovering from losses to war and sanctions.

    “Estimating a higher domestic number is clearly part of the game they were all very well versed with,” said Abhishek Deshpande, an analyst at Natixis SA in London. “They will either cut back based on these higher numbers, or for some countries like Iran and Iraq, they would like to freeze at those levels.”

    OPEC’s monthly report contains two sets of production data: one submitted by individual members, known as “direct communication,” and another compiled from external sources such as news agencies and intergovernmental institutions, referred to as “secondary sources.”

    Iraq, Iran and Venezuela have said these externally compiled numbers, which will be used when allocating production cuts, underestimate their output, and that their own government data should be used instead.

    Trump Wildcard

    Iran’s reported production increase of 210,000 barrels in October exceeds the combined gains of the previous five months, OPEC’s data show. Secondary sources showed a more modest addition of 27,500 barrels a day for October.

    Still, the country may be more willing to agree to a deal following this week’s U.S. election victory by Donald Trump, who has threatened to scrap the nuclear agreement that brought sanctions relief, according to RBC Capital Markets LLC.

    Saudi Arabia, which has said it wants other nations to cooperate in the production rollback, reported its production was little changed in October at 10.625 million barrels a day, even though supplies typically ease at this time of year as seasonal domestic demand slackens.

    The secondary sources show that OPEC output increased by 236,700 barrels a day to 33.64 million a day in October, as Nigeria and Libya recovered output lost to sabotage, militant attacks and political conflict.

    That means the group would need to cut by 640,000 to 1.1 million barrels a day to comply with the range it set out in Algiers. The organization estimates an average of 32.7 million barrels a day will be needed from OPEC next year, about 100,000 more than it forecast last month due to a slightly weaker outlook for non-OPEC supply.

    For the IEA’s forecast for non-OPEC output growth, click here.

    The organization has sought help in lowering output from non-members such as Russia, which has indicated it may at least freeze if not cut supplies.

    “Adjustments in both OPEC and non-OPEC supply will accelerate the drawdown of the existing substantial overhang in global oil stocks and help bring forward the re-balancing of the market,” the report said. Inventories remained more than 300 million barrels above their five-year average in September, it said.

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    Gazprom says Japanese lender JBIC may help finance Sakhalin-2 LNG expansion

    Gazprom said on Thursday that it has discussed possible financing with the Japan Bank for International Cooperation for the expansion of the Sakhalin-2 liquefied natural gas plant.

    It also said that it discussed with JBIC financing for the Amur gas processing plant in Russia.

    Gazprom plans to add a third LNG production train at the Sakhalin-2 plant in 2021, possibly fed by a newly drilled gas field, as Russian companies seek to boost their share of the global LNG market.

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    India’s fuel demand rose 8.1 percent year-on-year in October

    India’s fuel demand rose 8.1 percent in October compared with the same month last year.

    Consumption of fuel, a proxy for oil demand, totaled 16.49 million tonnes, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed.

    Sales of gasoline, or petrol, were 13.8 percent higher from a year earlier at 2.11 million tonnes.

    Cooking gas or liquefied petroleum gas (LPG) sales increased 10.3 percent to 1.86 million tonnes, while naphtha sales surged 4.8 percent to 1.11 million tonnes.

    Sales of bitumen, used for making roads, were 6.9 percent lower, while fuel oil use edged up 8.3 percent in October.
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    Iran raises oil price


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    China’s Hony Capital buys stake in Santos

    Chinese private equity firm Hony Capital has bought a 2.25 percent stake in Australian LNG player Santos.

    Santos said in a statement on Friday that Hony Capital bought 40 million shares worth A$159.2 million ($121.2 million) after market close on Thursday.

    The Chinese group now owns about 3.2 percent in Santos.

    Hony paid A$3.98 a share, an 11 percent premium to Santos’ closing price on Thursday.

    This acquisition comes just 8 months after Hony Capital sold its 11.7 percent share in Santos for $750 million to China’s ENN Group. Under that deal, Hony Capital also acquired a stake in ENN.
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    From bust to boom: oilfield firm can't get enough staff to cover rising activity

    An oilfield services company that laid off almost two-thirds of its workers over the past two years is now warning it can't find enough new staff to take full advantage of a recent increase in activity.

    Calgary-based Essential Energy Services (TSX:ESN) says it cut more than 400 workers in 2015 and almost 250 in the first three months of this year, dropping its staff count from almost 1,000 to a low point of 343 last March.

    The cuts came as customers in Western Canada reduced spending and their appetite for Essential's well completion and production services.

    Essential says demand has been rising this fall as producers react to modest improvements in commodity prices but it warns that it could be "constrained" in its ability to accept work because it needs to hire another 40 to 50 workers.

    Mark Salkeld, president of the Petroleum Services Association of Canada, said in an interview last week that the length and depth of the current energy industry downturn means many laid-off oilfield workers have abandoned the profession.

    Essential reported Wednesday, after markets closed, that it had a net loss of $3.8 million in the three months ended Sept. 30 on revenue of $30 million, versus net income of $2.9 million on revenue of $48 million in the same period of 2015.

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    Tax rebate signals China's growing confidence in secure oil supplies

    After more than a decade, China has decided to restore tax rebates on exports of gasoline, gasoil and jet fuel, a sign that Beijing is more than comfortable with the domestic supply situation for oil products.

    China's Ministry of Finance and the State Administration of Taxation announced late last week that the entire VAT of 17% would be refunded when those products are exported, effective November 1.

    This implies that products processed from domestic crudes can join the export bandwagon, in addition to those produced from imported crudes.

    Market participants said that while the re-introduction of the rebate, which was removed when China faced a domestic supply shortage a decade ago, would help encourage exports, Beijing could still keep an indirect control on it through the allocation of export quotas and regulate as and when needed.

    "For refiners and exporters, the priority will still be on securing export quotas for gasoline, jet fuel, and diesel with third-party processing deals," Facts Global Energy said in a research note on the latest policy move. Chinese producers can export oil products in two ways -- under normal trade or under processing trade.

    Under processing trade, export quotas are needed and exports are required to be processed from imported feedstocks.

    This is the preferred route for domestic refineries as they are free of taxes.

    Currently 36 refineries, comprising independent and state-owned ones, have been granted export quotas for processing trades.

    Around 85-90% of China's gasoline and gasoil exports as well as 40% of jet fuel exports are under processing trades.

    Under normal trade, there is no feedstock use restriction for oil product exports, but they are subject to taxes including VAT and consumption tariff.

    The latest tax rebate is only applicable to product exports under normal trade.

    With a rebate of 17%, exporters will move a step closer to making exports under normal trades competitive.

    In addition, they will try to find ways to source the most competitive supplies from the market and will no longer be restricted to export products processed only from imported crudes, market participants said.

    "With the latest move, China's oil product exports will become more competitive and will be more in line with the international market, helping to earn better trading profits," a trader with a state-owned company said.


    Over the first nine months of 2016, China exported 26.78 million mt of gasoline, gasoil and jet fuel, surging 58.7% from 16.87 million mt in the same period of last year.

    Most of the exports were products processed from imported crudes. For normal trades, 17% VAT is imposed on the product price over and above consumption tax.

    Gasoline, gasoil and jet fuel are subject to consumption taxes of Yuan 2,110/mt, Yuan 1,411/mt and Yuan 1,496/mt, respectively.

    The government's move to give a VAT rebate is seen by traders and analysts as a step towards the government's long-term plan to completely abolish consumption taxes on exports of the three oil products as the domestic market faces an oversupply situation.

    "The aim to restrict exports so far has been to keep the oil product barrels in the country to ensure domestic supplies. But because of the current oversupply situation, it is not that necessary to keep the barrels," a market observer said.

    The VAT rebate was suspended in September 2005 as the government stepped up efforts to limit oil product exports, although it was once reinstated briefly over January-March 2006.

    "We expect to take less than six months to resume exports under normal trades as no one has done any deals in the last 10 years due to the tax issue," said a Singapore-based trader from a state-owned company, referring to exports without any feedstock use restrictions.

    Traders said the first batch of quota holders for normal trades are widely expected to be those from the trading arms of the five state-owned oil companies -- Sinopec, CNPC, CNOOC, Sinochem and Zhuhai Zhenrong.

    "I don't think it will be a problem for the government to issue normal export quotas to qualified applicants. There is no such quota awarded in the last 10 years and that is only because no company has applied for it due to the tax issue," said another trader.

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    Alternative Energy

    China to boost geothermal power in next five yrs

    China will boost the development of geothermal power in the next five years to reduce coal consumption and improve air quality, Xinhua reported, citing an energy official.

    In particular, China will promote the use of geothermal power in the Beijing-Tianjin-Hebei region to replace coal for heating to reduce carbon dioxide emissions and address air pollution, Li Yangzhe, deputy director of the National Energy Administration, told an international forum on geothermal power on November 17.

    Li said China will provide policy support to boost geothermal power exploitation and consumption during the 2016-2020 period.

    China is expected to more than triple its geothermal power consumption by 2020 to 72.1 million tonnes of coal equivalent from the current level.

    China consumed about 20 million tonnes of coal equivalent of geothermal resources for heating, power generation and other uses in 2015, official data showed.

    By 2020, geothermal power will likely account for about 1.5% of the country's total energy consumption, helping to reduce carbon dioxide emissions by 177 million tonnes.
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    Tesla's Musk closes SolarCity deal, more challenges ahead

    Tesla Motors Inc Chief Executive Elon Musk won approval on Thursday from the electric luxury automaker's shareholders for an acquisition of SolarCity Corp, the solar energy system installer in which he is the largest shareholder.

    The stock swap deal, worth about $2 billion, caps a tumultuous year for Musk and Tesla. The proposed acquisition of SolarCity, a money-losing installer of residential solar power systems, prompted a 13 percent fall in Tesla's share price after Musk outlined the deal in June.

    Tesla said the deal was "overwhelmingly" approved by 85 percent of unaffiliated shareholders. Shares rose 1.3 percent in after-hours trade after gaining 2.6 percent in the regular session to close at $188.66.

    "Your faith will be rewarded," Musk told shareholders assembled at the company's Fremont, California, facility.

    Tesla investors have also been rattled by a federal investigation of the death of a Tesla owner operating his car on Autopilot, a driver assistance system, and by concerns Musk may be overextended between ambitious future goals for Tesla, the work of integrating SolarCity, and his CEO duties at SpaceX.

    The automaker's shares are down nearly 20 percent for the year, and took a hit after Donald Trump's victory in the presidential election. A key Trump advisor on environmental issues, Myron Ebell, has said federal tax subsidies for electric vehicles should be cut off.

    Tesla faces more challenges in the months ahead, as the company tries to make a five-fold leap in its annual vehicle production and launch next year its new Model 3 sedan, aimed at mass-market customers able to buy a vehicle with a starting price of $35,000.

    Tesla last month reported a narrow profit for the third quarter, and Musk said he did not expect the company would have to sell more shares to finance the Model 3 launch. However, most analysts expect the company will have to raise capital next year, possibly with a sale of equity.

    Musk and other company insiders recused themselves from the shareholder vote on the SolarCity acquisition. But Musk campaigned hard for the deal, arguing SolarCity's operations would add $1 billion to Tesla's revenue by 2017, and generate an additional $500 million in cash over three years.

    Musk received a boost for the SolarCity deal earlier this month when Institutional Shareholder Services (ISS) recommended that investors in both companies approve the deal. Under the proposed transaction, SolarCity shareholders will get 0.110 of a Tesla share for each share in the solar company.

    As of Sept. 30, SolarCity had $259.3 million in cash and cash equivalents and $6.68 billion in total liabilities, including debt.

    SolarCity has expanded dramatically in the last five years, but it relies heavily on borrowing money to finance its no-money-down residential solar installations. After expanding installations more than 70 percent between 2014 and 2015, SolarCity ratcheted down its forecast three times this year and now expects just a modest increase compared with 2015.
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    JinkoSolar grows Q3 revenue 39% YoY, ups 2016 guidance

    The Tier-1 solar company once again posted world-leading module shipments of 1,606 MW, generating revenue of $855 million. However, both metrics were down on Q2 despite soaring against Q3 2015.

    JinkoSolar’s Q3 performance was slightly weaker than Q2 on some metrics, but the company is looking ahead to a strong finish to 2016.

    JinkoSolar, the leading Tier-1 Chinese solar firm in terms of module shipments, has posted a set of strong third quarter (Q3) financials that serve to highlight the current challenges facing the solar industry.

    Despite achieving strong shipments and revenue growth against Q3 2015, this year’s third quarter performance sunk slightly below the second quarter, and perhaps hints at a few tougher quarters to come for the firm, as well as other large Chinese module producers.

    Revenue for Q3 hit $855.3 million, which represented a 39% increase year-on-year (YOY), but was down 4.4% on Q2. Falling module prices are only partly to blame for this contraction because shipments were also down sequentially – from 1,716 MW in Q2 to 1,606 MW in Q3 as the effects of China’s second half (H2) slowdown were felt.

    Gross margin, however, improved, reaching 22.1% against 20.4% in Q2 (and 21.3% in Q3 2015), and JinkoSolar reported a strong 29.1% increase in the amount of revenue generated across its power projects business – which totaled $55.8 million.

    Yesterday the company confirmed that it had finalized the sale of 55% of its shares in its downstream business, which has now been fully spun off into Jinko Power. Up to September 30, Jinko’s downstream portfolio amounted to 1,314 MW of solar PV.

    Income from operations in Q3 was $90.1 million, which was approximately 20% higher than in Q2 and almost double that achieved in Q3 2015,while non-GAAP net income attributable to JinkoSolar’s shareholders fell slightly to $45.8 million, leaving shares in the company at $0.92, which was again approximately a 20% reduction on Q2.

    JinkoSolar’s gross profit in the third quarter rose against Q2 to reach $188.6 million, which was a healthy return for the company. Operating margin was 11.5%, compared to 12.9% in Q2 and 11.9% in Q3.

    JinkoSolar CEO Kangping Chen called the solar environment in Q3 “challenging”, but added: “Based on our visibility into Q4, we are once again raising our full year 2016 shipment guidance to 6.6-6.7 GW from our previous guidance of 6-6.5 GW. We are well positioned to continue benefiting from the global adoption of solar energy, which is playing a more important role in the global energy landscape.”

    The $250 million cash sale of Jinko Power to Shangrao Kangsheng, completed this week, will serve to improve JinkoSolar’s balance sheet in Q4, lowering its debt and net gearing ratio. “We expect to report a gain on the sale in Q4,” said Chen. “This injection into our already substantial cash position will also provide us with the extra flexibility for our future operations.

    Ahead to 2017
    The CEO stressed that demand for solar modules in China in H2 remained robust as module prices there stabilized, and the company fully expects an uptick in demand in the first half of next year. Hinting at Donald Trump’s recent election victory, Chen diplomatically stated that “demand in the U.S. is stable despite recent market panic, which we believe is only temporary”.

    “We expect the U.S. market will heat up again during the second half of 2017,” Chen said. Moving on to Europe, and following on from today’s confirmation that JinkoSolar is one of five Chinese firms to be removed from the EU’s minimum import price (MIP) undertaking, Chen said that JinkoSolar’s withdrawal will boost its outlook for European markets.

    “We also reinforced our presence on the ground in India by opening a new office to offer local technical and logistical support to our customers there,” said the CEO. “We expanded our emerging market presence to more than 40 countries, and strengthened our leading position in key markets such as Chile, Mexico and the UAE.”

    On the technology front, JinkoSolar’s mono wafer capacity using diamond-wire cutting is now fully operational, and will be scaled to support its PERC lines in 2017, Chen confirmed.

    For Q4, JinkoSolar is forecasting module shipments in the range of 1.7 to 1.8 GW. The company ended Q3 with $547.3 million in cash.

    Attached Files
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    First Solar to slash 1,600 jobs

    First Solar Inc, the largest U.S. solar equipment maker, said it would slash about 1,600 jobs, or 27 percent of its global workforce, to cut costs as it transitions to production of Series 6 modules.

    The company also forecast on Wednesday 2017 net sales of $2.5 billion-$2.6 billion, well below analysts' average estimate of $2.98 billion, according to Thomson Reuters I/B/E/S.

    First Solar said the restructuring is expected to result in pretax charges of between $500 million-$700 million, anticipated primarily in 2016. (

    The company warned earlier this month of significant challenges next year due to a 30 percent slide in prices, driven by lower demand in China and the resulting oversupply of panels globally.
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    Tesla: crony capital?

    From Enron to Bernie Madoff, at the end of every great American financial scandal, the totality of the perpetrators’ greed seems to be matched only by the public’s incredulity at how such a thing could be allowed to happen.

    And thanks to Elon Musk, there’s a good chance we may all be asking this question again soon.

    The Senate Finance Committee and the House Ways and Means Committee have launched a probe into tax incentives paid to solar companies, according to The Wall Street Journal. The committee probes, led by their respective Republican chairmen, Rep. Kevin Brady of Texas and Sen. Orrin Hatch of Utah, have found an appropriate and disturbing target to begin this work.

    SolarCity, a solar installation company set to be purchased by Tesla Motors Inc., is one of the seven companies named in the initial investigation.

    Already grossly subsidized, Musk’s SolarCity has become an albatross of waste, fraud, and abuse of tax payer dollars. As legitimate earnings and cash become even scarcer for SolarCity, its entanglement in the Tesla empire suggests that a drastic reckoning not only is imminent, but in fact emboldening Musk to become more outlandish and reckless.

    Notably, SolarCity is run by Musk’s cousins, Lyndon and Peter Rive. During his chairmanship at SolarCity, Musk’s family enterprise has taken in billions of taxpayer dollars in subsidies from both the federal and local governments. But the subsidies and sweetheart deals were not enough, as losses and missed projections continued to mount.

    Ultimately, rather than endure the embarrassment of collapse and further damage to the public image of Musk and Tesla, the cousins conspired to have Tesla simply purchase SolarCity this year. The conditions of the deal screamed foul play.

    To say nothing of what sense it might make for an automaker to purchase a solar installation company, Tesla stockholders were being forced to absorb a failing, cash-burning company and pay top dollar to do so.

    While cost cutting and corporate restructuring should have been the priority for a company swimming in debt and burning through available cash, SolarCity in fact has been doubling down on the failed model of taxpayer support. The desperate thirst for handouts has manifested itself in some of the murkiest political waters imaginable.

    Thanks to Musk’s cozy relationship with New York Gov. Andrew Cuomo, a Democrat, the state has granted at least $750 million of its taxpayers’ money to SolarCity, building the company a factory and charging it only $1 per year in rent.

    It would be hard to imagine such an operation would not be lucrative for its shareholders. And yet somehow, SolarCity never has made a profit.

    It’s not just in New York. In this year’s race for Arizona Corporation Commission, the state’s public utilities overseers, only one outside group funneled cash into the contest.

    All of the $3 million donated by that group, Energy Choice for America, came from SolarCity. The beneficiaries are candidates who have signaled their willingness to be part of the “green machine” that greases the skids for lucrative government subsidies.

    Burning through taxpayer dollars, buying elections, and expanding a network of crony capitalism has become so inherent to the SolarCity model that $3 million to a public commissioner’s race, brazen though it may be, is only a drop in the bucket for Musk and SolarCity.

    In 2013 alone, SolarCity received $127.4 million in federal grants. The following year, in which it received only $342,000 from the same stimulus package, total revenue was just $176 million and the company posted a net loss of $375 million.

    Despite an expansion of operations and claims to be the leader in the industry, SolarCity never has been able to survive without serious help from government subsidies and grants. The failure to responsibly turn taxpayer dollars into a profitable renewable energy provider has led to SolarCity’s collapse into the welcoming arms of Tesla.

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    Yunnan power capacity exceeds 80 GW; clean energy at 84pct

    Southwestern China's Yunnan province saw its installed power generation capacity connecting to the grid reach 80.37 GW by November 1, increasing by nearly 10 times from 8.88 GW by end-2006, showed data from Yunnan Power Grid Corp.

    Of this, clean energy capacity accounted for 84%, including 59.01 GW hydropower, 6.82 GW wind power and 1.92 GW solar power. Thermal power capacity stood at 12.62 GW.

    With rich water resources, Yunnan has made great progress in developing hydropower, with capacity surged compared with less than 5 GW in 2006.

    The province's hydropower capacity surpassed thermal capacity for the first time in 2009, signaling a successful transformation of energy mix from dirty fossil fuels to the cleaner hydropower.

    To make full use of clean energy, the Yunnan Power Grid plans to invest 20.1 billion yuan ($2.93 billion) during the 13th Five-Year Plan period to optimize and improve power transmission to end users outside the province.

    It is anticipated that Yunnan will have a power transmission capacity of 31.20 GW by 2020.

    Attached Files
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    GE forges ahead with world’s first wind + hydro + storage project

    Trump or no Trump, the global clean energy train has left the station. A case in point is a new wind, hydropower, and energy storage collaboration between US-based GE and Germany’s Max Bögl Wind AG. The project is on track to connect its four wind turbines to the grid next year, with the hydropower component coming online in 2018.

    The project represents an innovative combo of two different forms of renewable energy with an energy storage bonus thrown in.

    Wind turbines and real estate

    GE dropped a bit of a clue regarding one aspect of the project a couple of years ago, when it introduced its “space frame” turbine tower.

    The company invited me to take a sneak peek of its prototype in California on behalf of CleanTechnica, and one thing I learned is that GE was beginning to think of wind turbine towers in terms of their footprint.

    Our guide on the tour pointed out that the hollow design of the turbine tower provides the potential for piggybacking other uses inside the frame. 

    That’s a lot of useful space, right? The polyvinyl cladding allows daylight to filter through, so you could imagine indoor farming among many other options.

    Wind power and energy storage

    GE’s new project takes the piggyback idea to a whole new level.

    The project is located at the Gaildorf wind farm. It includes four wind turbines with a combined capacity of 13.6 megawatts. The base of each turbine will double as a water storage reservoir, for a total of 1.6 million gallons (to be clear, these are not GE space frame towers — for obvious reasons, they are fully enclosed).

    These storage units will interact with a nearby lake with a 9 million gallon capacity, and a 16 megawatt hydropower plant. In effect, the turbines will act as giant batteries and provide an opportunity for the hydroplant to operate economically:

    During times of peak demand and high electricity prices, the hydro plant will be in production mode. During times of low electricity demand and lower prices, the hydro plant will be in pump mode, pumping and storing water–and hence energy–in the upper reservoir for later use.

    To ice the renewable energy cake, the added storage raises the height of each turbine tower by 40 meters.

    The end result is a “record-breaking” height of 246.5 meters, making these turbines the tallest in the world.

    GE will contribute its new 3.4-137 (3.4 megawatts, 137 meter rotor diameter) wind turbines to the project. That includes the company’s Digital Wind Farm platform with Predix* software to maximize efficiency.

    For those of you new to the wind energy topic, stronger, more consistent winds are located at higher altitudes. So, the taller the wind turbine, the better.

    When the wind is blowing strong, excess energy from the turbines will go directly to the grid. During lulls, the hydropower plant will draw additional water from the turbine towers as needed.

    Onward And Upwards For Pumped Storage

    Compared to other forms of energy storage, conventional pumped hydro has a limited opportunity for global application. Geography is the main limiting factor because two reservoirs are required, and one must be located higher up than the other.

    The innovative approach offered by the GE – Bögl collaboration expands those opportunities to more sites, where an in-ground upper reservoir is otherwise unfeasible.

    According to GE, Bögl is already anticipating that it will engage in one or two similar projects in Germany annually after the Gaildorf project goes online.

    As for GE, the company’s GE Renewable Energy arm has been front and center in the clean energy revolution, especially in the area of wind turbine technology.

    The company positioned its wind turbine business to take full advantage of the federal Production Tax Credit for wind, and now it has been expanding into the wind transmission sector.

    GE recently got back into the high voltage converter business after a 20-year hiatus, just in time to hook up with the proposed 720-mile Plains & Eastern wind transmission line. The company will provide three converter stations for the project, which also has the support of the Energy Department.

    Attached Files
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    US energy department aims to slash costs of solar to just 2c/kWh

    How important is clever federal government policy in pushing down the costs of developing and installing renewable energy?

    In Australia, we have gone to lengths to prove it is not the only thing that matters – sheer demand and clever technology mean it gets there in the end, at least in household solar. But in the US, we have just been offered a pretty compelling reminder of how good federal policy can be a game-changer, a job creator and economic win-win.

    In an announcement that might be a last ditch effort to shore up America’s solar industry before a potentially destructive Donald Trump takes the reins in January, the Obama administration’s US Department of Energy’s has made a new commitment for its SunShot Initiative to cut the cost of solar-generated electricity by another 50 per cent between 2020 and 2030.

    The goal is to slash the cost of energy over the next decade, to bring down the average cost of utility scale solar in the US to US3c/kWh, and the cost in the sunniest areas to just US2c/kWh. That will beat any fossil fuel technology by a wide margin it makes you wonder how a president Trump could ever “save” the coal industry as he has promised.

    The SunShot Initiative was launched in 2011 “with the goal of making solar electricity cost-competitive with traditional energy sources without subsidies by 2020.” But what’s really worth noting is that in just five years the Initiative has achieved more than 90 per cent of that goal to cut the cost of utility-scale solar electricity in the US to $US0.06c/kWh.

    Today, in America, the cost of utility-scale solar averages at $US0.07/kWh. The program has also aced more than 70 per cent of its commercial and residential PV cost targets – also in just five years.

    The SunShot 2030 targets aim to double down; halving utility-scale costs again to $US0.03/kWh; and aiming for $US0.04c/kWh for commercial solar, and $US0.05c/kWh for residential.

    And as the DoE points out, these are just the targets for areas with an average climate and without subsidies. In the country’s sunnier regions, they’re looking to push prices as low as $US0.02c/kWh for utility-scale solar.

    At these prices, the DoE points to recent modelling that suggests the US could more than double the projected amount of nationwide electricity demand that could be met by solar in 2030 and beyond.

    And there’s no reason to suggest they can’t smash these new targets – Congress willing – like they did first time around.

    To support the effort, up to $25 million is being made available to improve PV module and system design, including hardware and software solutions that facilitate the rapid installation and interconnection of PV systems.

    Another $30 million will be made available for projects that accelerate the commercialisation of products and solutions that can help to drive down the cost of solar energy. And $10 million will be put aside for projects focused on improving solar irradiance and power forecasts used by utilities.

    The DoE said it was now accepting applications for the three funding opportunities under the SunShot Initiative’s PV Research and Development Program, Technology to Market Program, and Systems Integration Program.

    But will SunShot be safe under a Donald Trump administration? There has been some speculation about this since last week’s election result. But there is a level of confidence that the property tycoon’s capitalist leanings and “make America great” mantra will see SunShot for what it is: a policy success story.

    “The focus of the Sunshot initiative is to help the American solar industry and companies to reduce their costs to make them more competitive,” said Christopher Mansour, vice president of federal affairs for America’s Solar Energy Industries Association (SEIA), in an interview with PV Magazine last week.

    “That’s a kind of a pro-Capitalist thing that the federal government get involved in.”

    While Trump doesn’t put solar in the same basket with wind (hates it), one of his main quibbles with PV is that it’s “too expensive” – a complaint he shares with some of Australia’s leading Conservative politicians.

    But Mansour is confident this misconception can be cleared up.

    “Part of our job has been is to talk with people on (Trump’s) campaign and his transition, to really point out that this is information that he has which may be a little bit out of date. That costs have come down tremendously, and we anticipate that they are going to continue to come down. We are competitive, and we are getting more competitive by the day,” Mansour told PV Magazine.

    “I think that once we have an opportunity to talk with his people and talk with his incoming team a little bit more, and show him that this is a giant job creator for the United States.

    “We are going to go from having 209,000 Americans working in solar from the end of 2019 to 400,000 by the end of 2020. These are good-paying jobs that are attractive to a lot of American workers. I am very confident they will see the advantages of current policy, and where it is helping the solar industry grow.”
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    Shanxi renewable energy power capacity breaks 10 GW

    North China's Shanxi province, known for its rich coal resources, is boosting development of renewable energy to transfer its economy away from heavy reliance on the dirty fuel and clean the air.

    Renewable energy power generation capacity in the province has surged 47.3% on year to 10.15 GW, including wind power and solar power installed capacity at 7.25 GW and 2.91 GW, respectively.

    As of November 10 this year, power output from Shanxi's wind and solar power plants reached 6.1 GWh, accounting for 28.4% of the province's total power consumption, hitting the record high.

    China plans to increase the share of renewables in total energy consumption to 15% by 2020 from 12% in the 12th Five-Year Plan period, according to the National Development and Reform Commission.

    Installed capacity of wind and solar power will amount to 210 GW and 110 GW over the next five years, with annual growth at 9.9% and 21.2%, respectively.
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    Australia: Records fall as wind, hydro match brown coal generation in October

    In October, renewable energy generators supplied 21.7? of all NEM generation, much higher than any previous month in both absolute and relative terms since complete data became available, with record hydro and wind generation.

    Wind and hydro were just 63GWh (0.4% of total generation) less than the share of brown coal.

    Total demand in the NEM was almost precisely unchanged over the year to October 2016, while demand fell slightly in WA.

    Total emissions from electricity generation in the NEM fell by 0.8% in the year to October 2016, taking emissions back to a level last seen in the year to May 2015. Emissions were, however, still 4% higher than in the year to June 2014.

    The fall in emissions was the result of a fall in both black and brown coal generation, as well as a continuing fall in gas generation. These changes were driven by increased supply from both hydro and wind generators.

    The total share of renewable electricity supply in the NEM increased to 14.7%; its highest share since the mid‐1980s, when electricity demand was less than half the current level.

    Total annual wind generation again set new records in both relative and absolute terms. This was the case in all four states with wind generation, as well as in the NEM as a whole, where it supplied 6.4% of total generation.

    Generation and emissions

    Total annual NEM generation was almost exactly unchanged from September to October, in line with total annual demand (Figure 1).

    However, the coal share of total generation fell sharply, as renewable generation increased (Figure 2). The total coal share of generation was 75.3%, the lowest share since the year ending June 2015.

    The falls in coal generation applied to both black and brown coal; in absolute terms, electricity supplied by black coal generators fell by 0.8% to 53.2% of total NEM supply, while electricity supplied by brown coal generators fell by 0.5% to 22.2% of total NEM supply. Gas generation fell again, and, at 9.8%, supplied less than 10% of NEM electricity for the first time in over six years.

    Lower output from all types of fossil fuel generation means lower total emissions. Estimated emissions from NEM generation in the year to October 2016 were lower by 1.3 Mt CO2‐e, equivalent to 0.8%, than one month earlier.

    This was the lowest annual level for well over a year. It is reasonable to say that this change demonstrates how quickly and effectively emissions could be reduced by increasing the share of renewable generation.

    The driver of falling generation by both coal and gas fuelled power stations was increased renewable generation. In the month of October 2016, renewable generators supplied 21.7% of all generation, much higher than any previous month in both absolute and relative terms, and only just less than the share of brown coal.

    For the year ending October in total, renewable generation was 27.3 TWh, equal to 14.7% of NEM generation, a new record for the NEM and the highest level in the NEM states combined since 1982, at which time, of course, it was all hydro.

    Figure 3 shows that renewable generation supplied just 0.4% of total generation less than brown coal generation in October. This was driven by hydro generation, which was up by nearly 7% compared with one month ago, reaching 8.3% of total NEM supply, which is the highest annual level for two years.

    Hydro generation in the month of October was the second highest monthly figure (after July 2012) since Tasmania joined the NEM in 2005.

    This time last year, Tasmania was in the throes of a record dry winter and spring, whereas rainfall has been abundant this year On the mainland, rainfall has also been plentiful, so that output from both the NSW and Victorian sides of the Snowy is up, as is output from the other Victorian hydro generators.

    For wind generation, the year to October was also a record in both absolute and relative terms, in the NEM as a whole and in all four states with wind generation. Across the NEM, annual wind generation increased by 3.6% over the year to October and wind supplied 6.4% of total NEM generation.

    In SA, wind supplied 36% of total electricity consumed (including electricity supplied from Victoria) in the year to October 2016. In the six months since the Northern coal fired power station closed (on 10 May), wind has supplied 42% of total consumption.


    In October, total annual demand for electricity was virtually unchanged in the NEM, with a decrease of 0.07% (Figure 4). Changes were very small in all five states, with very small increases in three and very small decreases in two.

    Demand did continue to increase in Queensland, but the increase recorded was the smallest for two years, indicating that the current stage of the electrification of the coal seam gas fields has been largely completed over recent months.

    With the commissioning of the second liquefaction train at the Asia Pacific LNG Plant, two trains are operating at each of the three plants.

    Over the past two years, electricity consumption in Queensland has increased by about 5 TWh, which is consistent with load forecasts for this time made two years ago by both AEMO and Powerlink, the Queensland transmission service provider.

    It is unclear at this time whether a further 3 to 4 TWh of annual consumption, forecast by these organisations to emerge over the next two years, will materialise.

    In WA demand decreased by 0.3%. This was the first monthly decrease in annual demand since July 2015. It remains to be seen whether electricity demand growth in WA is ending, or whether it will resume again after a few months, as it has done on several occasions over recent years.
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    Germany lowers CO2 reduction targets for industry: document

    The German government has lowered the CO2 reduction targets for industry and utilities in the final version of its climate action plan, according a document seen by Reuters on Friday.

    The German climate plan now calls for the industrial sector to cut its CO2 emissions by only 20 pct by 2030 compared to 2014, according to the document.

    The reduction targets for power plants were also lowered slightly compared to earlier drafts, it showed.

    The document also did not include a call for the introduction of a minimum price for pollution certificates in the European Union's carbon trading scheme.

    Instead, the plan only calls for more efficacy in the EU's carbon trading scheme.
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    EDF buys Areva reactor business for $2.7bn

    EDF has made a binding agreement to purchase Areva’s nuclear reactorassets, in a deal worth $2.7bn.

    Areva’s financial position has been strained through its involvement in the Olkiluoto nuclear power project in Finland.

    The deal allows Areva to raise a further EUR5bn in new capital largely from the French state.

    The contracts for the EPR Olkiluoto 3 project and the resources required to complete that troubled project, as well as certain contracts relating to components forged in Le Creusot plant, will stay within Areva NP, namely in Areva's scope.

    "This signature marks an important stage in the refocusing of AREVA on fuel cycle activities, our core business. The conclusion of these agreements strengthen our resolve to continue to implement our action plan," said Areva chief executive Philippe Knoche in a statement.

    Attached Files
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    Unfinished US nuclear power plant sold at auction

    The Tennessee Valley Authority has sold an unfinished nuclear power plant in north-east Alabama for 111 million dollars (£89 million).

    Nuclear Holdings purchased the Bellefonte Nuclear Plant at auction, with a sale price more than three times the minimum bid. The company plans to finish the twin-reactor as a nuclear power plant and bring it online, which could mean billions of dollars in spending and hundreds of jobs in the Tennessee Valley.

    Work began at the site in the mid-1970s, but the TVA never finished the two-reactor plant as demand for electricity waned. The utility said it has spent about 5 billion dollars at the plant. The purchaser gets two unfinished reactors, several buildings and 1,600 acres of land on the Tennessee River.
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    Key U.S. senator remains concerned over ChemChina-Syngenta deal

    A powerful U.S. senator said he is concerned that state-owned ChemChina, which is buying Swiss crop protection and seed group Syngenta (SYNN.S) for $43 billion, could use U.S. sovereign immunity laws to shield itself from claims in U.S. courts.

    Some Chinese state-owned entities have argued that they have sovereign immunity and thus can't be sued in U.S. courts under the U.S. Foreign Sovereign Immunities Act (FSIA) of 1976.

    The acquisition by China National Chemical Corp (ChemChina)of Syngenta, the largest global investment by a Chinese company, won U.S. regulatory clearance in August despite concerns from some lawmakers over U.S. food security.

    This week, a U.S. congressional panel urged lawmakers to take action to ban Chinese state-owned firms from acquiring U.S. companies.

    In a Nov. 9 letter to U.S. Senator Chuck Grassley that was posted on his website, ChemChina said its U.S.-incorporated businesses are subject to U.S. civil law, and that FSIA does not apply to commercial activity.

    Grassley, who represents the U.S. agricultural powerhouse state of Iowa, said in a Nov. 16 response that he remained concerned that ChemChina could seek to shield itself from U.S. court jurisdiction.

    "While ChemChina indicated that immunity would not extend to Syngenta's U.S. business, the company failed to note that immunity would otherwise apply to a wholly state-owned entity," he said on his website.

    Some legal experts say the sovereign immunity defense, intended under international law to shield governments from legal rulings made by a foreign power, typically does not apply to commercial cases.

    ChemChina's acquisition is now in the process of gaining approval from the European Commission, and the deal is expected to be closed around the end of March.

    In its letter to Grassley, ChemChina said the Chinese government does not interfere with ChemChina's operations and has not directed ChemChina or any of its affiliates to engage in price-fixing with competitors.

    "Syngenta will continue to have its same strategy, management, people and culture and its headquarters in Basel. No jobs will be lost and no jobs will go overseas as a result of this transaction," it said.

    ChemChina also said the Chinese government does not interfere with its operations and has not directed ChemChina or any of its affiliates to engage in price fixing with competitors.
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    Precious Metals

    Northern Dynasty Rises-- on earnings??

    What happened
    Shares of Northern Dynasty Minerals (NYSEMKT:NAK) are up 10% as of 11 a.m. EST Wednesday after the company released earnings. The thing is, the earnings report doesn't show anything that changes the investment thesis of the company.

    So what
    One thing to keep in mind is that Northern Dynasty doesn't generate any revenue right now. The company is looking to build a multibillion precious-metals mine in Alaska, but so far little progress has been made on that front. This most recent earnings report didn't really change that, either. I could get into the numbers, but they don't matter nearly as much as this statement from management, which gives a good description of what investors need to know about the company right now:

    The Group is in the process of exploring and developing the Pebble Project and has not yet determined whether the Pebble Project contains mineral reserves that are economically recoverable. The Group's continuing operations and the underlying value and recoverability of the amounts shown for the Group's mineral property interests, is entirely dependent upon the existence of economically recoverable mineral reserves; the ability of the Group to obtain financing to complete the exploration and development of the Pebble Project; the Group obtaining the necessary permits to mine; and future profitable production or proceeds from the disposition of the Pebble Project.

    Why today's share price increased is anyone's guess. The numbers the company released didn't even meet analyst expectations, if those numbers mattered much at all anyway.

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    India's gold traders on edge as Modi fights 'black money'

    Some Indian gold traders are placing bulk, short-term import orders on fears that Prime Minister Narendra Modi might soon add curbs on overseas purchases of the metal to his withdrawal of high-denomination banknotes in his fight against 'black money', traders and jewelers said.

    India is the world's second biggest gold buyer, and it is estimated that one-third of its annual demand of up to 1,000 tonnes is paid for in black money - untaxed funds held in secret by citizens in cash that don't appear in any official accounts.

    Modi has said he may not stop at the shock currency move that has led to a massive cash shortage, but has not made clear what his next step would be in his drive to uncover the wealth. That uncertainty is likely to create sharp swings in purchases, affecting world prices.

    "We're uncertain about what the government will do next," said Daman Prakash Rathod, a director at MNC Bullion in Chennai. "No legal business trader is willing to risk very big quantity. (Some) want to buy 2-3 kgs extra so that in future they could conduct their business for a month or two until the situation is sorted out."

    Panicked gold traders and jewelers have circulated messages amongst themselves saying the government could ban import of gold for domestic use from early next year to March, according to several jewelers in New Delhi and Mumbai who have seen the message. India's ongoing wedding season - traditionally a focus for gifting gold - is fuelling the disquiet.

    The All India Gems and Jewellery Trade Federation dismissed the messages among traders as a rumor, but some are nevertheless buying extra gold for the wedding season and to see themselves through the next few months, said an official with the India Bullion And Jewellers Association.

    A finance ministry spokesman did not immediately respond to a request for comment.

    '50 PCT PREMIUM'

    One senior official involved with government policy-making on gold said there has been no discussion on import curbs but that supply has gone up through "unofficial channels".

    "If you see the premiums, you know that there is demand," the official said, speaking on condition of anonymity.

    In domestic markets, jewelers are charging premiums of as high as 50 percent but have not committed to buy any new gold, said several jewelers who declined to be identified.

    The cash crunch has badly hit demand in rural areas, which account for two-thirds of total demand. But in the main gold markets of Zaveri Bazaar in Mumbai and Karol Bagh in New Delhi, there are ready buyers of the metal willing to pay in the old bills.

    The current rate in the trade - illegal since Modi's Nov. 15 move to withdraw the notes - is 45,000 rupees ($663) per 10 gms in Karol Bagh, 53 percent higher than the official price, said one jeweler who has been in the trade for 14 years. The rate is similar in Zaveri Bazaar.

    "I'm getting non-stop calls from unknown numbers from people asking for gold," the jeweler told a Reuters reporter in an interview inside his shuttered showroom.

    "A client last week left a bag full of a few lakh rupees (1 lakh = 100,000 rupees) outside our showroom saying that he had left his (dues) for us to pick up or throw out," the jeweler said.

    "If you see, 750 tonnes used to be the total import a year, this must have happened in the last few days alone."

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    Cash goes in Australia?

    Less than a week after India’s surprise move to scrap its highest denomination cash notes, another front in the War on Cash has intensified down under in Australia.

    Yesterday, banking giant UBS proposed that eliminating Australia’s $100 and $50 bills would be “good for the economy and good for the banks.”

    (How convenient that a bank would propose something that’s good for banks!)

    This isn’t the first time that the financial establishment has pushed for a cashless society in Australia (or anywhere else).

    In September 2015, Australian bank Westpac published its “Cash Free Report”, suggesting that the country would become cashless by 2022.

    In July 2016, Australian payments firm Tyro published an enormously self-serving blog post touting the benefits of a cashless society and saying, “it’s only a matter of time.”

    Most notably, two days ago, Citibank (yes, THAT Citibank) announced that it was going cashless at some of its Australian branches.

    The media and political establishments have chimed in as well.

    In February of this year, the Sydney Morning Herald released a series of articles, some of which were written by officials from Australia’s Department of the Treasury, suggesting that eliminating cash will “save billions”, and that “moving to a cashless society is the next step for the Australian dollar”.

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    Platinum market may see first surplus in six years in 2017: JM

    The platinum market could return to surplus for the first time in six years in 2017 as lower autocatalyst loadings and weakness in Chinese jewelry buying pull demand lower, refiner Johnson Matthey said in a report on Monday.

    Mine supply is expected to be flat next year, but supply of recycled metal from autocatalysts has the potential to rebound, it said.

    "In most industrial sectors, the demand outlook remains firm, but purchases in the autocatalyst industry are likely to dip slightly as lower-platinum-loaded catalyst systems are introduced in increasing numbers in European vehicles," it said.

    "As demand in the Chinese jewelry sector seems set on a downward trend, market balance will likely depend on the extent of growth in autocatalyst recycling and the level of physical investment. Unless the latter remains at similar levels to those seen in 2016, we could see the platinum market return to a surplus for the first time since 2011."

    The platinum market likely recorded a shortfall of 422,000 ounces this year, JM said. Platinum supply is expected to have grown marginally as lower output in major producer South Africa was counterweighed by gains elsewhere and growth in recycling.

    Autocatalyst demand is forecast to have grown just under 2 percent, driven by gains in Europe as carmakers factored in tighter European emissions legislation. Physical investment in platinum bars in Japan is expected to have remained strong.

    However, the Chinese jewelry market, typically the largest single segment of demand, saw further weakness, putting global jewelry demand on track to fall 9 percent.

    The market for platinum's sister metal palladium is tipped to post a 651,000-ounce deficit this year, as autocatalyst demand rose to a record 7.84 million ounces. Mine supply is set to be flat, while investors are expected to have continued to sell out of palladium.

    However the market will likely see another big shortfall next year even if investors continue to withdraw, JM said, as mine output is constrained while autocatalyst and industrial demand rises.

    "With demand in industrial sectors looking set for a strong year, driven by significant capacity expansions in the Chinese chemicals industry, the palladium market looks likely to record another year of significant deficit in 2017, even if physical investment remains firmly negative," it said.
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    Kirkland rejects C$1.44 billion Gold Fields, Silver Standard offer

    Canada's Kirkland Lake Gold Inc said on Friday it rejected a previously unreported takeover offer from South Africa's Gold Fields Ltd and Silver Standard Resources valuing the business at C$1.44 billion ($1 billion).

    Gold Fields and Silver Standard had made three joint, unsolicited bids for Kirkland and recently sweetened their offer to about C$1.4 billion. The names of the bidders had not been previously disclosed.

    Kirkland said that after advice from its legal advisers and three separate financial advisers, it concluded the proposal was "not financially superior" to its own plan to acquire Newmarket Gold Inc for about C$1 billion in stock.

    "As a result Kirkland Lake Gold is precluded by the terms of the arrangement agreement with Newmarket from engaging in any discussions with Gold Fields or Silver Standard concerning the revised proposal or providing any due diligence access to them," Kirkland said in a statement.

    It also "strongly recommended" shareholders vote in favor of the Newmarket deal.

    However, Harry Dobson, the former chairman of Kirkland who remains a shareholder, said he would be voting against the Newmarket deal.

    "It's no secret that I don't like it. I'm not happy with the deal for the same reason the market wasn't happy," Dobson said in an interview, citing a drop in Kirkland's share price since the deal was announced.

    The latest offer for Kirkland Lake represented a premium of more than 50 percent of its value on Thursday. Its shares, which were trading at C$7.42 just ahead of the news, jumped as much as 8 percent to hit C$8.17 before being halted on the Toronto Stock Exchange. The stock closed at C$8.04 on Friday.

    Shares of Silver Standard closed down 13.3 percent at C$12.71. Newmarket fell 1.2 percent to C$3.36.

    In an Oct. 28 shareholders circular filing to discuss that merger, Kirkland said it received two bids without naming the bidders. Shareholders have a Nov. 23 deadline to vote on Kirkland's bid to buy Newmarket.

    Kirkland is a midsized producer operating four gold mines and two mills in a bullion-rich belt of northeastern Ontario.

    With its high-grade production and reserves located in a safe, mining-friendly jurisdiction, Kirkland Lake's appeal is bolstered by a scarcity of growth opportunities in the gold sector. It also has more than C$200 million of cash and equivalents on hand. The company was valued at about C$922 million at close of trade on Thursday.

    Three sources familiar with the bidding process said it is possible new bidders may enter the fray, noting companies such as Yamana Gold Inc and Hecla Mining Co have assets in the area where Kirkland Lake operates.

    Investor advisory firms ISS and Glass Lewis have recommended to shareholders of Kirkland Lake and Newmarket that they vote for the deal.

    Luxor, Newmarket's third-biggest shareholder, said it also supports the deal with Kirkland.

    Kirkland Lake ran a strategic review in 2014 that did not result in partnerships or acquisitions.
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    Lonmin buys Amplats stake in Pandora platinum mine

    Platinum mining company Lonmin Plc said on Friday it would buy Anglo American Platinum's (Amplats) stake in their joint venture Pandora mine for between 400 million rand ($28 million) and 1 billion rand.

    The acquisition of Amplat's 42.5 percent stake, which is subject to regulatory approval, will give London-based Lonmin a 92.5 percent stake in the mine, leaving Northam Platinum Ltd  with 7.5 percent.

    "If you take out Anglo Platinum from the decision making process, it can be easier to progress things for the asset," Peel Hunt analyst Peter Mallin-Jones said.

    The acquisition will be paid for with 20 percent of free cash flow from the Pandora mine over the next six years, with the final price dependant on platinum prices.

    For Amplats, the transaction brings it closer to its goal of offloading its labor intensive mines to focus on mechanized mines. The company completed the sale of the Rustenburg mines to Sibanye Gold last week, with just one mine left unsold.

    "Amplats was not going to go for the development plans for the asset because it had alternate assets to focus on," Mallin-Jones said.

    A recovery in platinum prices XPT= and cost cuts helped Lonmin, which was hit hard by a five-month wage strike in 2014, to post a narrowed annual loss in May.

    Lonmin shares, which have climbed 150 percent this year, fell 10 percent in London. Amplats shares were down 3.16 pct on the Johannesburg Stock Exchange.
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    Base Metals

    Of 22 banks polled NO-ONE sees copper price rally continue

    The surge in the copper price to near 18-month highs following Donald Trump's win in the US presidential election came as a surprise to an industry under pressure since 2011 over growing supply.

    The bullishness about the impact of Trump's $500 billion infrastructure plans on demand for the bellwether metal has cooled down considerably.

    In pre-regular hours trade on Thursday copper for delivery in December declined slightly to trade at  $2.458 per pound ($5,418 a tonne) in New York, a fifth down day in a row. Copper is down 10% from intra-day highs of $2.73 a pound last week.

    After underperforming other metals and steelmaking raw materials in 2016, copper is still looking healthier than pre-Trump with a 15% rise year-to-date.

    However,  according to a new survey of 22 investment banks and other commodity research institutions by FocusEconomics analysts and investors continue to call into question the sustainability of the rally.

    And as the graphs show, the outlook for the copper price has been adjusted downwards for more than a year.

    Of those polled not a single analyst sees copper averaging the final quarter of 2016 above the current spot price. In fact, the median estimate for Q4 is 12% below today's ruling price and sets up copper for a fifth annual average price decline.

    The consensus forecast for Q4 2017 is only a slight improvement over this year with a rise to $2.29 a pound ($5,070 a tonne).

    The most bullish institution is Unicredit which sees copper averaging 2017 at today's price of around $2.45, but the average forecast for the full year 2017 among those surveyed is still a disappointing $2.19 a pound ($4,846 a tonne) and well below the spot price.

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    Al: India to impose minimum import prices?

    InfraCircle on 25 October reported about the Aluminium Association of India—a lobby group with firms such as Vedanta Ltd, Hindalco Industries Ltd and National Aluminium Co. Ltd (Nalco) as members—hiring Mecon to prepare a report to explore the possibility of introducing MIP on aluminium products. 

    “We have recently received a report from Mecon in which it says that MIP shall be imposed on primary aluminium as cost of production of domestic aluminium manufacturers is higher than the London Metal Exchange (LME) prices. We are currently examining the report,” said a senior government official requesting anonymity.

    Another government official, who also did not want to be named, said the consultancy firm will also be submitting a report regarding imposition of MIP taking into account the interests of the downstream industry.
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    Anglo American suspending operations at Los Bronces copper mine in Chile

    Global miner Anglo American said on Wednesday it was suspending all operations at its Los Bronces copper mine in central Chile after protesters seized installations at the mine earlier in the day.

    The company said in a statement that it was implementing an evacuation plan for the 1,500 workers at Los Bronces.

    It said that it had made the decision because "the conditions were not present to guarantee the safety of the workers or operate under the necessary standards."

    Earlier on Wednesday, about 100 hooded protesters illegally entered the mine, seizing installations and setting up flaming barricades.

    Anglo American told Reuters at that time that it was still evaluating whether there would be any impact on production at Los Bronces, its flagship copper mine in Chile.

    "This situation is a serious threat to the security and physical safety of more than 1,500 people who are currently at Los Bronces and presents environmental risks if normal operational processes and controls are not restored," Anglo American said in its earlier statement.

    The company pointed out that events at the mine came as the Federation of Contract Workers union negotiates with service-provider firms that operate at the mine but said it could not confirm the identity of the hooded protesters.

    Several attempts to reach the Federation of Contract Workers at Los Bronces were unsuccessful.

    "Anglo American reiterates its demand for the Federation of Contract Workers at Los Bronces and the service-provider firms to continue their dialogue ... and to immediately suspend the acts of violence that are affecting the operations and people," the company said in its statement late on Wednesday.

    It said the prosecutor's office and police had begun investigations and would take appropriate actions.
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    Gecamines 'strongly opposed' to Lundin's Tenke mine stake sale

    Congo State miner Gecaminessaid on Wednesday it is "strongly opposed" to Lundin Mining selling a 24% stake in the Tenke copper mine to a Chinese company, arguing that it has a preemptive right to buy the stake.

    Canada's Lundin announced on Tuesday it had agreed to sell its stake in the project in the Democratic Republic of Congoto BHR Partners for about $1.14-billion in cash.

    It comes after Tenke's majority owner, US copper miner Freeport-McMoRan Inc, agreed in May to sell its 56% stake to China Molybdenum (CMOC) for $2.65-billion, a deal that Gecamines also objected to because it wanted to buy the stake itself.

    "The concerted withdrawal of Lundin and Freeport, without taking into account Gecamines' rights, would obviously result in forcing Gecamines into a new partnership with totally new and non-chosen companies," Gecamines said in a statement.

    Major miners are selling assets after a global commodities rout last year left them with high levels of debt. China, whose stimulus package spurred this year's commodities rally, is the biggest potential buyer.

    The closing of the Freeport sale has been held up for months while Lundin, which had a right of first offer on Freeport's stake, weighed its options. With the sale of its stake, Lundinhas now waived that right.

    Lundin on Tuesday said the sale is expected to be completed in the first half of 2017. Its CEO Paul Conibear said he hoped it would not be challenged by Gecamines.
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    For global copper miners, era of going it alone may be over

    For global copper miners looking to develop the next big deposit, the era of going it alone may be over.

    As costs escalate to develop new finds, often in remote locations, companies should consider sharing the financial and logistical burden of building infrastructure for projects clustered near each other, a senior executive at influential miner and trader China Minmetals Corp said on Wednesday.

    "We need to be more open, we need to work with more companies when we work abroad," said China Minmetals Non-Ferrous Metals Co general manager Xiaoyu Gao, speaking in a panel discussion at the Metal Bulletin Cesco copper conference in Shanghai.

    "We need to incorporate a 'One Belt, One Road' strategy for undeveloped regions," said Gao, referring to Chinese President Xi Jinping's ambitious drive to build a network of land, sea and air links and opening new trade routes and markets.

    While miners often develop multi-billion dollar mines together, it's unusual to coordinate on the cost of building transportation links and getting power supplies to far-flung sites.

    Gao's comments came as miner MMG, in which Minmetals owns a 74 percent stake, struggles to deal with growing opposition to its Las Bambas mine in Peru where local protests have shut down transportation to the mine.

    "In Peru, we've been thinking about this issue. If we discover new reserves, we have to go to difficult regions," Gao said, adding that environmental regulations and a lack of infrastructure often pose some of the biggest challenges.


    The comments also reflect growing concern among miners about controlling costs after years of declining prices forced them to tighten budgets, while ore grades at ageing mines fall.

    Duncan Wanbald, head of base metals and minerals at Anglo American Plc, agreed at the Shanghai conference that in the era of constrained budgets and complex projects, miners under cost pressure should consider more partnerships to mitigate the risks.

    Five years ago, the mining industry spending was some $50 billion a year, but it's less than a third of that now, Wanbald said.

    The recent surge in metal prices on the London Metal Exchange may spur more spending new greenfield projects, said Chilean miner Antofagasta Plc's Chief Executive Officer Ivan Arriagada.

    But there have been few new discoveries of high-quality deposits that would offer the same potential as Escondida, the world's largest mine, in Chile.

    Based on annual global demand growth projections of 2 percent, Wanbald said, the market would need seven new Escondidas by 2030 in order to keep pace with customer requirements.

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    Prominent Hill life extended to at least 2028

    Copper and gold miner Oz Minerals has released a new mine plan for its Prominent Hill operation, in South Australia, which will see the mine operate through to at least 2028.

    The company told shareholders on Tuesday that underground production at Prominent Hill would increase from a rate of between 2-million and 2.2-million tonnes a year, to between 3.5-million and 4-million tonnes a year by 2019, with mining costs projected to be in the bottom-half of the cost curve.

    The increase would see the Prominent Hill processing plant continue to operate at the current capacity of up to ten-million tonnes a year until mid-2023, by processing stockpiles and underground ore, prior to running full time at a milling capacity of between 3.5-million and 4-million tonnes to 2028.

    Oz Minerals CEO Andrew Cole said that the projected capital costs to de-rate the plant to the lower 4-million-tonne-a-year capacity was expected to be some A$5-million.

    Cole said that the new mine plan provided a definitive statement about the strong future of the Prominent Hill operation.

    “This is a long-life asset that will continue to deliver revenue as proposed new projects come on stream. The mine life extension to at least 2028 directly benefits local communities and shareholders. It will boost the region’s economic development and refutes any perception that Prominent Hill faces a short-term future.”

    Cole said that given Oz Minerals was continuing resource to reserve conversion drilling, there was also the potential for further extensions to the timeline.

    “While the openpit will ramp down, the ore stockpiles we continue to build and the growth in our underground mining operations will see Prominent Hill remain one of Australia’s largest sources of copper.”

    Meanwhile, Oz Minerals reported a 40% increase in the underground ore reserves at Prominent Hill, driven by ongoing drill programmes, mine planning initiatives, and a reduction in the cut-off grade.

    The project is estimated to host a total copper mineral resource of 148-million tonnes and 25-million tonnes of goldresource, while copper and gold reserves are estimated at a combined 75-million tonnes.
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    Congo awards payments from Glencore mine to Kabila’s friend

    The Democratic Republic of Congo’s State-owned copper producer signed over millions of dollars in future payments to an offshore company owned by billionaire Dan Gertler, according to advocacygroup Global Witness.

    Congo’s Gecamines, which holds a 25% stake in the Kamoto project of Katanga Mining , instructed the Glencore unit in January 2015 to transfer the state mining group’s royalties to Africa Horizons Investment , Global Witness said Tuesday by e-mail. Africa Horizons is a unit of Gertler’s Fleurette Group.

    “The contract we have seen provides no reason for Gecaminesgiving away these royalties,” Pete Jones, a campaigner at the London-based advocacy group, said in the statement. “Neither Gecamines nor Gertler’s representatives have told us whether Gecamines received any payment in return.”

    Africa Horizons bought the royalty stream from Gecamines, Fleurette said by e-mail, while declining to elaborate on the particulars of the deal, citing a confidentiality agreement.

    Gecamines said it couldn’t comment in response to e-mailed questions.


    Glencore was contented with the arrangement to pay Gecamines’s royalties to Africa Horizons, the company said by e-mail. It took “reasonable measures in accordance with its procedures to satisfy itself that the sale was authorised by Gecamines and that there was an underlying basis for the sale.”

    Gecamines has faced criticism in the past five years from the International Monetary Fund and advocacy groups including Global Witness for selling assets in non-transparent procedures. In April, it sold its 25% share of Eurasian Resources Group’s Metalkol tailings project without disclosing the transaction, as required by law.

    The Congo expelled two researchers with Global Witnessfrom the country in July.

    A close friend of President Joseph Kabila, Gertler has operated in Congo for almost 20 years. He originally traded in rough diamonds before buying stakes in copper, cobalt, gold and oil projects.


    The Kamoto copper project was the country’s third-biggest producer in 2014, shipping 158 026 metric tons and paying more than $63-million in royalties to Gecamines, according to declarations made to the Extractive Industries Transparency Initiative.

    The potential royalties for Gecamines over the lifespan of the mine, which could produce until at least 2030, could have been as much as $880-million, Global Witness said. Fleurette said this figure was inflated and that the contract only provides for Africa Horizons to receive the royalty stream until “early 2019.”

    “Independent international financial institutions advised both sides, and the transaction was priced in accordance with the valuations provided to the parties,” according to Fleurette’s e-mailed statement.

    Glencore suspended operations at the mine in Sept. 2015 to invest in modernizing processing facilities and production will restart in 2018. The shutdown means Africa Horizons doesn’t expect to receive any further payments from the royalty agreement before the end of the contract in 2019, Fleurette said, and declined to explain the reasons behind the arrangement, the total value of the contract or what Gecamines had received in return.


    In 2013, Fleurette was in advanced negotiations to acquire Gecamines’ stake in the Kamoto project before the deal was blocked by the government, which criticized the state-owned miner for not informing the Ministry of Mines or Ministry of Portfolio of its intentions and questioned the reasons for the proposed sale.

    Earlier in 2013, Fleurette loaned Gecamines $196-million to acquire the untapped Deziwa and Ecaille C miningconcessions, which it now plans to develop in a joint venture with China Nonferrous Metal Mining Group. Information regarding the loan only became public in April 2014.

    Fleurette said it stood to suffer a “huge loss” on the royalty transaction due to the suspension of production at Kamoto and declined to confirm whether the deal was intended as repayment for the Deziwa loan.

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    Lundin Mining to sell stake in Tenke mine owner for $1.14 billion

    A view of processing facilities at Tenke Fungurume, a copper and cobalt mine 110 km (68 miles) northwest of Lubumbashi in Congo's copper-producing south, owned by miner Freeport McMoRan, Lundin Mining and state mining company Gecamines, January 29, 2013. REUTERS/Jonny Hogg

    Canada's Lundin Mining Corp (LUN.TO) said it would sell its indirect stake in TF Holdings Ltd to an affiliate of Chinese private-equity firm BHR Partners for about $1.14 billion in cash.

    Bermuda-based TF Holdings owns an 80 percent interest in Tenke Fungurume Mining SA. Lundin owns an indirect 30 percent stake in TF Holdings, resulting in an effective 24 percent interest in Tenke.

    The Canadian miner said it could also get up to $51.4 million based on the average prices of copper and cobalt during a 24-month period beginning Jan. 1, 2018.

    Freeport McMoRan (FCX.N) holds a 56 percent stake in the Tenke Fungurume copper and cobalt mine, through its 70 percent stake in TF Holdings. Congo's state miner Gecamines owns the remaining 20 percent.

    Lundin, which primarily produces copper, nickel and zinc, said in connection with the deal, it will waive its rights to acquire Tenke mine operator Freeport's stake in TF Holdings.

    In May, Freeport agreed to sell its majority stake in the Tenke mine to China Molybdenum Co (603993.SS) for $2.65 billion to reduce debt.

    Lundin had no option but to either allow the China Moly deal to proceed, supplant the offer, or sell its stake.

    Lundin's agreement to sell its stake comes on the deadline it was given to exercise its right to first offer, after which Freeport said the sale to China Moly would go through.

    Tenke Fungurume, in the southern Congolese copper belt, is one of the world's largest copper deposits.

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    Chilean mining costs highest in the world, despite saving measures

    Mining costs in Chile, the world’s No. 1 copper producer, were among the highest in the world last year even though most companies spent 2015 cutting expenses and placing projects in the back burner, a new study released Monday shows.

    Data from the Mining Council, which groups the largest copper, gold and silver miners operating in Chile, reveal that production costs in the country last year were 5.4% higher than its global peers’ average.

    Production costs in Chile, the world’s No. 1 copper producer, were 5.4% higher last year when compared to its global peers’ average.

    Mine level cash costs in the country that is responsible for nearly 6 million tonnes of global annual copper production of 21 million tonnes fell last year to an average of $1.3 per pound, local paper El Mercurio reports. In the rest of the world, the average was between 82 cents to $1.05 per pound.

    The news comes as a bit of shock for the industry, as the costs of mining copper in Chile last year maintained the downward trend they had been following since 2013, reaching $2.16 per pound, which is about 3.5% less than the $2.24 they hit in 2014.

    But the South American nation has also been hit by high energy costs, which threatens the competitiveness of the country's copper industry and poses a major challenge for new developments.

    Electricity costs in Latin America’s wealthiest economy have climbed 11% per year since 2000, making it one of the most expensive places in the world to secure energy for mining projects.

    And while the nation has the world's richest reserves of copper, grades are falling at its massive but aging copper mines, making it difficult to maintain output and putting pressure on costs.

    Better times ahead

    The future is suddenly looking brighter, with many analysts forecasting a spike in copper prices as the market begins to enter a supply deficit expected to kick off in 2021.

    Copper market is poised to enter a "substantial" supply deficit from 2021 onwards, pushing prices of the industrial metal higher.

    "In the near term, mining companies are not investing in additional capacity and copper demand is growing at a pace of around 2 percent a year," the head of Chile's national mining association Sonami, Diego Hernández, said Monday.

    Speaking at the Copper 2016 industry conference in Kobe, Japan, Hernández said that supply growth will likely begin to drop from around 2019 and the market will face a “substantial deficit” in the next decade, coinciding with a demand recovery.

    He noted that such demand and, therefore, copper price increase will be driven population growth and urbanization in China and other emerging countries, and less fossil fuel use amid climate change, Reuters reports.

    Copper briefly surpassed $6,000 a tonne last week and headed for the biggest weekly rally ever as the metal became the target of Chinese speculators and bets that US President-elect Donald Trump will pour money into infrastructure.

    Goldman Sachs analysts cautioned in a report Monday that such rally is coming "too much too fast," because the impact of Trump's infrastructure plan (he promised a "$1 trillion over a 10-year period" in his victory speech) on global demand was tiny compared to that of China.

    Overall, US copper and steel demand shifts would represent just a 0.4% increase in total demand, with all else constant, the analysts noted.
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    First Quantum faces $1.4bn claim from Zambian firm

    ZCCM Investments Holdings, the state-controlled Zambian company that holds minority stakes in most of the country’s copper mines, plans to claim as much $1.4-billion from First Quantum Minerals after accusing the Vancouver-based company of fraud. The Canadian company’s stock fell.

    The claim includes $228-million in interest on $2.3-billion of loans that ZCCM-IH said First Quantum wrongly borrowed from the Kansanshi copper mine, as well as 20% of the principal amount, or $570-million, according to an internal company presentation, dated November 4, obtained by Bloomberg.

    The company is also seeking $260-million as part of a tax liability the Zambia Revenue Authority said Kansanshi owed it, as well as the cost of the mine borrowing money commercially that ZCCM-IH said could have been avoided.

    ZCCM-IH, in which the Zambian government has a 77% stake, said in papers filed in the Lusaka High Court on Oct. 28 that First Quantum used the money as cheap financing for its other operations. ZCCM-IH also last month filed a notice of arbitration against Kansanshi in London over the same matter. ZCCM-IH owns 20% of Kansanshi. No figure was mentioned in the court filings.

    First Quantum says the claims are “inflammatory, vexatious and untrue,” and that the loans were at fair market rate. First Quantum is in talks with Zambian government representatives to resolve the matter, it said in a November 11 statement. It declined to comment on Monday.

    FQM, as the company is known, is disregarding the rights of minority owners in ZCCM-IH in dealing directly with government, Philippe Bibard, a spokesman for a minority shareholder group based in France, said by phone November 11.
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    Codelco slashes China 2017 copper premium to lowest since 2009

    Global No.1 copper miner Codelco has cut its 2017 term premiums to China by more than a quarter, an executive at the Chilean company said on Tuesday, the lowest level for sales into the world's top consumer of the metal since 2009.

    Senior commercial vice president Rodrigo Toroat said on the sidelines of a conference that Codelco had agreed next year's premium for the physical delivery of metal in China at $72 per ton over the London Metal Exchange benchmark <0#CMCU:>.

    That is down from $98 per ton for this year's contracts and the lowest since 2009, according to Reuters data.

    Traders said it was the first time that Codelco's premium in China had been lower than Europe. The company has offered to cut premiums there to $80-85 per ton.

    The cut will likely stir concerns that demand growth in China is slowing even as copper futures prices have soared in the past week on worries about tightening supplies.

    Investors have also piled into copper futures betting that U.S. President-elect Donald Trump will boost infrastructure spending, spurring demand for the metal.

    Codelco's premiums are viewed as a benchmark for global contracts, with other producers likely to follow suit.
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    Rio Tinto 'cautiously optimistic' about copper market in short term

    Rio Tinto is "cautiously optimistic" about the current coppermarket that has spiked in recent weeks, a senior executive at the world's second-largest miner said on Monday.

    However, Rio holds a stronger outlook for the mid- and long-term copper market, he said.

    Copper prices have surged more than 20% this month, led by stronger economic indicators out of the world's biggest consumer China and expectations that the election of Donald Trump as US president would boost metals markets through increased infrastructure spending.

    Three-month copper on the London Metal Exchange briefly hit $6,025.50 a tonne on Friday, its highest level since June 2015, though it pared some of the gains on Monday.

    "Copper prices have rallied due to a combination of different things," Arnaud Soirat, Rio's chief executive for copper and diamonds, told Reuters on the sideline of "Copper 2016" industry conference being held in Kobe, Japan.

    "People thought demand was higher than they had anticipated, with the Chinese economy showing some good signs of healthy demand," he said, adding that expectations for the positive effect from the US presidential election also lent support.

    Trump has said he plans to fix inner cities, rebuild highways and infrastructure, while erecting barriers against cheap imports, leading to higher consumption of industrial raw materials.

    "But we think the market will be volatile in the near-term and we are cautiously optimistic about the market in a short term," Soirat said, without giving more details.

    Still, copper has attractive long-term fundamentals, he said, due to a limited number of new projects, depleting mines and the declining quality of the ore being mined.

    Asked when Rio expects global supply to exceed demand, Soirat said: "It's difficult to predict whether it will be three years, five years or seven years...But the outlook in the mid- to long-term is pretty healthy."
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    Chinese copper firm buys owner of Hollywood's Voltage, maker of 'The Hurt Locker'

    A Chinese copper-processing company has bought a controlling stake in the Hollywood studio behind Oscar-winning films "The Hurt Locker" and "Dallas Buyers Club", in the latest sign of China's ambitions in global entertainment.

    Based in the city of Wuhu, west of Shanghai, Anhui Xinke New Materials (600255.SS) has no apparent link to entertainment or films. But it announced late on Sunday that it had bought an 80 percent stake in Midnight Investments, the holding company behind the studio, for 2.39 billion yuan ($350.71 million).

    Under President Xi Jinping, China has been broadening its use of so-called soft power, and corporates have led the way with global investments in soccer, skyscrapers as well as movies. Just recently, China's property-to-entertainment conglomerate Dalian Wanda Group bought Dick Clark Productions, the company that runs the Golden Globe awards and Miss America.

    Apart from Wanda - which is seeking to attract Hollywood to its new multibillion-dollar studio in the eastern Chinese city of Qingdao - China's Fosun International and Huayi Brothers Media Corp have also invested heavily in film.

    The latest to join this bandwagon is Anhui Xinke, whose main business is to process copper and make electric wires and cables. Earlier this month, the firm established the Wotaiji International Media Ltd unit to acquire media assets.

    "I think this is a case of Chinese companies that have cash and are looking at overseas investment opportunities, and realizing that staying within their own sector does not offer a lot of room for growth," said Benjamin Cavender, senior analyst at China Market Research Group in Shanghai.

    The global copper market has been mired in a years-long bear run, plunging around 40 percent over the past three years. Prices of the metal have, however, recovered 20 percent so far in 2016 on hopes of U.S. infrastructure spending and firming demand from top consumer China.

    Cavender said companies like Anhui Xinke were likely keen on following the example set by firms such as Wanda with investments in crown jewel brands that will allow them to diversify their revenues and create a global brand.

    But it will not be easy as "film production is very different and requires its own set of management skills that the buying firm likely does not have in-house," he said.

    Midnight owns Voltage Pictures, which has produced more than 150 movies.

    Anhui Xinke was not immediately available to comment, but it said in the statement that the acquisition would enable it to strengthen its position in the domestic and international film business, and would significantly boost its profitability.

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    Steel, Iron Ore and Coal

    China's coal use likely peaked in 2013, global energy report says

    China's coal use is likely to have peaked in 2013, the International Energy Agency's (IEA) World Energy Outlook Report estimated, given China's macro economy trend, environmental protection movement and low-carbon development strategy among other factors.

    It was only a year ago that the IEA concluded that China's consumption of coal was unlikely to peak any time prior to 2020.

    China's coal consumption in 2013 reached over 4.22 billion tonnes, and then fell 2.9% on year to 4.1 billion tonnes in 2014. It further declined 3.7% last year, official data showed.

    During 2000-2013, China's coal use posted an average yearly increase of 8.8%, data showed.

    The reduction of energy consumption caused by a slowdown in China's economy growth in the 12th Five-Year Plan period, especially coal consumption decline, indicated that China's low-carbon development entered into a new stage. That's also meaningful to the world's low-carbon development and addressing on climate change.

    In the 12th Five-Year Plan period ended in 2015, China's average annual growth in energy consumption dropped over 1/3 compared with ten years ago.

    The slump in energy consumption was mainly reflected in power production and consumption. Impacted by the decline in power consumption and the shift to renewable energy power generation, China's coal consumption posted a slump since 2013.

    "Coal generated 84% of all electricity in China in 2014, the IEA's current policy scenario forecasts that market share is going to drop down to 54% in 2040," Institute of Energy Economics and Financial Analysis director Tim Buckley said.

    "Under a more aggressive policy scenario where the transition happens faster, that actually has coal dropping to 26% market share by 2040, so you have coal effectively losing two-thirds of its market share in the space of just 25 years which is obviously a profound shift," Buckley said.

    The IEA predicted a 15% yearly drop in China's coal consumption by 2040.

    Last year, it expected a 26% increase in the amount of power China gets from coal by 2040. Now it sees growth of just 4%.

    Also, the IEA has cut its forecast for China's coal-fired power output in 2040 by 907 TWh, from 5,231 TWh to 4,324 TWh. This is equivalent to the total annual electricity demand of the UK (338 TWh) and France (569TWh) combined.

    Chinese coal demand could fall even faster than the IEA expects, given the waning impact of recent fiscal stimulus and reforms that will force grid operations to purchase minimum supplies from renewable sources.

    The IEA expects China to continue building new coal plants, even though they will run less than 50% of the time. Its outlook has operation rate falling to 43% in 2040.
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    West Virginia regulator sues Alpha Natural on fraud allegations

    West Virginia's environmental regulator sued Alpha Natural Resources Inc's former management on allegations of fraud on Wednesday, saying top executives should be held accountable for an unusual $100 million funding gap that has emerged just three months after the U.S. coal producer exited bankruptcy.

    The lawsuit accused six senior executives including CEO Kevin Crutchfield of making misleading financial projections about Alpha so its bankruptcy plan would get court approval. After the plan was approved in July, the executives joined the management team of Contura Energy Inc, which bought some of Alpha's most productive mines.

    "In knowingly making or allowing to be made, false and misleading projections to obtain confirmation of (Alpha's) chapter 11 plan, each of the named individual defendants committed a fraud upon this court," the West Virginia Department of Environmental Protection (DEP) said in the lawsuit.

    Contura did not respond to a request for comment on behalf of Crutchfield.

    Alpha said in a Nov. 3 court filing it had uncovered $100 million of "unaccounted-for obligations," including taxes, payroll and royalty payments that were not accounted for when it reorganized.

    Bankruptcy attorneys said companies rarely return to court to address such a large liability so soon after exiting bankruptcy.

    West Virginia said the shortfall threatened Alpha's viability and could saddle the state with cleaning up retired mining sites, which is expected to cost hundreds of millions of dollars.

    Lawyers for Alpha and Contura denied the claims in court on Thursday and said they would begin talks with the regulator to address its concerns.

    Alpha and Contura reached an agreement this month to divvy up the obligations and planned to ask for bankruptcy court approval on Thursday for their settlement.

    U.S. Bankruptcy Judge Kevin Huennekens postponed a decision in light of the lawsuit.

    Alpha's reorganization split the company in two, with its lenders forming Contura to operate more productive mines and the remainder of the company focusing on cleaning retired mining sites, mostly in West Virginia.

    Alpha has said it has more than $1 billion in environmental obligations, much of which were covered by a federal program called "self-bonding" that exempt companies from setting aside cash or bonds to restore abandoned mines to their natural setting.

    Alpha and Contura agreed to provide $400 million over the next decade for mine cleanups. In a court filing this week, Contura said it believed that Alpha will have sufficient liquidity to meet its commitment.
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    China Coal Oct output up nearly 13 pct on mth

    China Coal Energy Co., Ltd, the listed arm of China National Coal Group, produced 7.45 million tonnes of commercial coal in October, falling 10.7% on year but up 12.9% from September, the company said in a statement late November 16.

    The month-on-month rise was mainly attributed to the government's directive to boost output to ensure supply ahead of the heating season.

    During January-October, China Coal Energy produced 67.52 million tonnes of coal, sliding 15.5% from the year prior.

    The company sold 10.66 million tonnes of commercial coal in October, dropping 1.2% year on year and down 5.6% month on month, the company said.

    Of the sales, 6.85 million tonnes were self-produced commercial coal, dropping 12.2% on year but up 5.7% from September.

    In the first ten months, the company sold 1111.2 million tonnes of commercial coal, falling 0.8% from the year before, with sales of self-produced commercial coal dropping 14.9% to 67.58 million tonnes.

    Chinese government authorities have been urging coal miners to boost output and help bringing prices back to reasonable levels.

    China National Coal Group and Shenhua Group have signed mid- and long-term thermal coal supply contracts with the nation's top five power generators.

    The contract base price was agreed at 535 yuan/t ($79/t) FOB for 5,500 Kcal/kg NAR coal, and the price would be adjusted monthly based on the market conditions.

    China's top economic planner, the National Development and Reform Commission, on November 16 gave green light to all legal mines meeting safety standard to operate at 330 working days until next March when the heating season ends in northern China.
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    Rio Tinto fires two top executives over Guinea payments

    Rio Tinto has axed two of its top 10 executives sparking a feud with one of them, amid a probe over $10.5 million in payments to a consultant who helped it win rights to develop the world's largest untapped iron ore lode in Guinea.

    There is no suggestion that the officials or consultant acted illegally. But emails detailing payments, which involve two former Rio Tinto chief executives, are a blow to a group that has campaigned for transparency even in complex countries and in projects as tough as Guinea's $20 billion Simandou mine.

    The world's second-largest miner said on Thursday it had terminated the contracts of Energy and Minerals Chief Executive Alan Davies and Legal and Regulatory Affairs Group executive Debra Valentine after reviewing the findings to date of an internal investigation into 2011 contractual arrangements with the advisor.

    It said last week it had alerted U.S., British and Australian regulators about the payments.

    Davies, with Rio Tinto for nearly 20 years, said in an emailed statement there were no grounds for his termination and that he would take legal action. "I have not been privy to Rio Tinto's internal investigation report, nor have I had any evidence of the reasons for my termination of my employment given," Davies said.

    "My rights are fully reserved, and I have been left with no option but to take the strongest possible legal action in response."

    Rio Tinto declined to comment on Davies' statement.

    Valentine, who had been due to retire in 2017 and had already stepped down, could not immediately be reached for comment.


    U.S. authorities have investigated corruption in Guinean mining before, and a former representative of a rival miner, BSG Resources (BSGR), was jailed for two years in 2014. BSGR denied allegations it paid bribes or ordered others to do so.

    Any U.S. investigation into Rio's activities and any payments in Guinea could complicate a move announced late last month to sell its 46.6 percent stake in the Simandou project to the miner's Chinese partner, Chinalco.

    The scandal erupted last week after Rio Tinto said it had become aware of emails from 2011 that referred to payments to a consultant providing advisory services on the Simandou project in the West African nation of Guinea.

    Rio's board concluded that Davies, who was in charge of the Simandou project at the time, and Valentine had failed to maintain the standards expected of them under its global code of conduct, though the decision did not pre-judge the course of any external inquiry into the matter, the company said in a statement.

    Last week Rio Chief Executive Jean-Sebastien Jacques said in an internal email that staff were "shell-shocked" by the discovery and any investigations could take several years.

    The leaked emails showed then-CEO Tom Albanese, then-iron ore boss Sam Walsh, and Davies discussed a $10.5 million payment to Francois de Combret, a former Lazard investment banker with a long history operating in Guinea.

    Albanese was replaced by Walsh in 2013, and Walsh retired in July. Albanese, now head of Vedanta Resources, declined to comment on the situation last week, when asked about it on a Vedanta earnings call.

    Davies said in his statement on Thursday Rio Tinto had made no effort to abide by due process and had given him no opportunity to answer any allegations.

    "This treatment of me and my past and recent colleagues is totally at variance with the values and behaviors of the company to which I have devoted my professional life," he said.

    Davies will be replaced by Bold Baatar as Energy & Minerals chief executive. Baatar had been managing director of marine and vice president of Iron Ore Sales and Marketing.

    Chief Financial Officer Chris Lynch has temporarily stepped in to run the legal and regulatory affairs function while the company looks for a new chief legal counsel.

    Davies and Valentine would not be paid any bonus for 2016 and it would cancel all their unvested awards from previous years, Rio said.

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    Shaanxi power plants see coal stocks surge at the end of October

    Stocks surged 38.4 pct month on month to 3.17 t by the end of October.

    Stock piles are enough to power plants for 27 days compared to 19 days last month.
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    China's Wuhan Steel says completed capacity cuts ahead of schedule

    China's steel producing giant Wuhan Iron and Steel Group said on Tuesday it has achieved next year's target to cut 3.19 million tonnes of pig iron and 4.42 million tonnes of crude steel capacity ahead of schedule.

    China has pledged to reduce crude steel capacity by 100-150 million tonnes from current level of 1.13 billion tonnes by 2020, a move designed to lift the industry out problems caused by mounting overcapacity and production. But capacity cuts so far have done little to rein in output, and Europe and the United States have accused China of dumping its excess steel overseas, hitting producers and hurting global prices.

    The world's largest steel producer ramped up output to 68.51 million tonnes in October, with high profits providing operators little incentive to make cuts. "Steel mills could make a profit of at least 100 yuan per tonne," said Liu Xinwei, steel analyst at Sublime China Information Group.

    "Profit could double if mills use steel scrap to make new steel. Money is driving them to operate under a high load and no-one is willing to shut down."

    By 2025, 60-70 percent of China's steel output will come from 10 big steel groups, Chi Jingdong, vice president of China Iron and Steel Association, said in September.

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    US sheet steel market surprised by third wave of price hikes

    The US sheet steel market was abuzz because of multiple mill price increases on sheet products as well as zinc coating extras, but with the announcements so fresh, buyers on Tuesday could not be sure if the third round of price hikes would be successful.

    Nucor and AK Steel increased sheet prices $40/st on Tuesday, independently following a similar increase by ArcelorMittal USA establishing minimum base pricing of $560/st on hot-rolled coil and $780/st on cold-rolled coil and hot-dip galvanized sheet substrate. USS Steel also increased its quotes, according to market sources.

    A mill source said the other two price increases probably pulled forward demand.

    Two service centers and an end-user agreed that they placed extra orders when they perceived the market bottomed and probably would not have to place any substantial spot orders for the rest of the year.

    The mill source admitted that the price increases were supply driven and meant to recoup increased costs, but that they were not justified by bolstered demand. Even the mill source was surprised by the third round of price hikes.

    "We thought maybe a third round would be after Thanksgiving. This is almost like a back-to-back announcement," he said.

    In the week of November 7, mills announced $30-$40/st price increases.

    The price increases are justified by higher met coal and iron ore prices, another mill source said.

    "With the low level of imports expected in the near term, and low service center inventory, there isn't a lot stopping mills from continuing to increase price unless automotive slows more than expected or mills rush to bring capacity online," he said.

    One service center source said he was surprised that CRC and galvanized sheet have maintained about a $200/st spread over HRC.

    "You would think that gap between HR and coated would have started coming down because automotive seems to be really softening," he said.

    An end-user said even though mills have been aggressive in pushing these price increases, they were still proactively calling customers, trying to get them to commit to larger volume orders.

    Another service center said mini-mills have been able to be a little more choosy with their sales for December and are not competing as aggressively on price as they were before.

    The mini-mills have been pretty firm about the prices last week, the source said, and the price increases Tuesday will help to cement even higher prices.

    With little buy-side interest on Tuesday, S&P Global Platts maintained its daily HRC and CRC assessments at $500-$520/st and $700-$720/st, respectively.

    Both assessments are normalized to an ex-works Midwest (Indiana) basis.
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    Russian Jan-Oct coal output, exports rise

    Coal-rich Russia produced 314.56 million tonnes of coal over January-October this year, a year-on-year rise of 4.45%, showed data from the Energy Ministry of Russian Federation.

    The country's coal output in October dropped by 4.38% on year to 33.19 million tonnes, the second fall compared with the same month last year. But the volume was up 4.40% from September's 31.79 million tonnes.

    During the first ten months of the year, the Asian country exported 135.77 million tonnes of coal, increasing 7.81% compared to the corresponding period a year ago.

    Its coal exports stood at 14.68 million tonnes in October, rising 10.84% from the year-ago level and up 5.64% from 13.90 million tonnes in September.

    Coal output and exports of Russia in 2015 totaled 371.67 million and 151.42 million tonnes, respectively.

    The country planned to increase coal production in 2016 by 10 million tonnes, while the increase of coal exports will also be around 10 million tonnes, said Deputy Energy Minister Anatoly Yanovsky in June.
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    Vietnam Oct coal imports surge 46pct on year

    Vietnam imported 1.17 million tonnes of coal in October, increasing 46.4% on year and up 42.3% on month, showed customs data released on November 14.

    Australia was the largest exporter to Vietnam with 498,272 tonnes in October, up from zero a year ago. Russia followed with exports of 262,177 tonnes to Vietnam, up 102.1% on year. The third biggest supplier was Indonesia, exporting 232,007 tonnes, down 24.4% from a year ago.

    Vietnam's total coal imports soared 131.4% on year to 11.68 million tonnes over January-October.

    Of that, Vietnam imported 3.73 million tonnes from Australia, up over four times from the previous year. Followed was Russia with 3.34 million tonnes, up 3.8 times from a year earlier. Indonesia exported 2.24 million tonnes of coal to Vietnam, up 45.3% from a year ago.

    Vietnam's coal exports fell 16.3% on year to 96,397 tonnes in October, adding up to 827,525 tonnes over January-October, down 46.2% from the year before.
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    Rio gives Christmas gift to itself and the iron ore market

    There are two ways of looking at Rio Tinto's decision to close one of its major iron ore mines over the Christmas period: to take the company's explanation of operational reasons at face value or to see the move as part of a wider strategy.

    Rio told its employees at the Hope Downs 4 mine in Western Australia that it would close the operation for two weeks at the end of the year.

    The 440 workers affected can either take leave, bring forward leave or apply for shifts at Rio's other mines in the remote region of Western Australia, the Australian Financial Review (AFR) reported.

    The reason for the closure was that the mine will have achieved its annual production target early, with the email expressing congratulations "on a fantastic effort throughout 2016 as we safely deliver our planned production at the right cost", the AFR said.

    The face value explanation of Rio's move is quite simple: the mine has achieved its goals and extra output isn't needed at the current time.

    There is also the likelihood that Rio's rail and port capacity wouldn't be able to handle the extra tonnes mined should Hope Downs 4 continue operating as usual over the festive season.

    The face value explanation is certainly plausible, however, it also pays to consider the wider dynamics at work in the iron ore market in order to put Rio's decision into context.

    Iron ore has enjoyed a stellar year, with the spot price almost doubling so far in 2016, notwithstanding a sharp drop on Tuesday as profit-taking finally hit the market.

    Iron ore futures in China, which buys about two-thirds of seaborne supplies, have also rallied hard this year, jumping 161 percent since the end of last year to Tuesday's close of 617 yuan ($90) a tonne.
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    Nippon Steel to pass extra coking coal cost on to customers

    Nippon Steel & Sumitomo Metal Corp, the biggest steelmaker in Japan, expects coking coal prices to stay at $250-$300/t for the next three months after nearly quadrupling this year, Reuters reported on November 15.

    The price of the key steelmaking material has surged as China, the world's biggest coking coal producer, has cut supply to curb overcapacity and pollution.

    Premium hard coking coal prices in Australia, which dominates global exports, rose to $307.2/t last week, up from about $85/t at the beginning of June.

    "Unless China softens its cap on coking coal output or U.S. coal export starts to surge, coking coal prices are likely to remain high," said Toshiharu Sakae, executive vice president of Nippon Steel.

    "We plan to slash our expenses by 60 billion yen ($557.78 million) or more this financial year (to March 31), but this high coal price is too much for us to absorb by our efforts to cut costs," Sakae said.

    Nippon Steel is determined to pass on about 80% of the extra coal cost in price hikes to customers, which will be supported by improving demand.

    With automakers and construction firms as key customers, the firm could be forced to lower profit targets if it failed to implement price hikes.

    Early this month, Nippon Steel posted a plunge in profit for the six months to September, hit by lower steel prices and less competitive exports amid a higher yen. But it surprised investors that it stuck to its annual profit target while the higher material costs have led others to cut theirs.

    The firm's full-year outlook first issued in July is based on an assumption that the coking coal price will stay flat at $200/t over January-March next year, the price agreed between it and Peabody Energy last month as the October-December coal benchmark.
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    New Hope shiploader damaged, faces weeks of delay

    Severe weather conditions have damaged the shiploader at coal miner New Hope’s wholly owned coal terminal in Queensland.

    The miner said on Tuesday that the shiploader was inoperable, and that a preliminary assessment had showed that it could take several weeks for the shiploader to be repaired.

    During this time, the terminal would not be capable of loading coal onto ships.

    New Hope added that the financial implications of the event were being assessed, but noted that delays to shipments could result in lower sales for the current financial period.
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    Steel industry to focus on high quality products

    Foreign companies will be encouraged to participate in the reorganization of Chinese steel companies, under a plan to cut crude steel production released by the Ministry of Industry and Information Technology.

    The development of iron and steel (2016-20) plan, released Monday, states that Chinese steel companies must be further internationalized through equity sharing and holding, to improve product quality and management.

    Chinese steel companies will be encouraged to build production and processing bases in key markets for the Belt and Road Initiative that have good natural resources and market potential, and are also home to high-speed train and power projects.

    Foreign companies are invited to join China to undertake projects in countries along the belt and road.

    Under the plan, the amount of crude steel capacity in China is to be cut by up to 150 million tons, to less than one billion tons by 2020, as demand for the product drops.

    Any project that aims to expand steel production capacity will be banned.

    Xin Guobin, vice minister of the Ministry of Industry and Information Technology, said that the steel industry must adopt intelligent manufacturing to reform itself.

    "We have overcapacity in low-end products while the high quality products are still lacking. The Chinese economy needs more sophisticated steel products for more technology-oriented industrial development," said Xin.

    The domestic consumption of crude steel is expected to be 650-700 million tons by 2020, less than the estimated output of 750-800 million tons.

    The plan also requires energy consumption in the steel industry to be reduced by more than 10 percent while major pollutants must be cut by more than 15 percent.

    The biggest 10 steel companies are predicted to make up about 60 percent of the industry by 2020, up from the current 34 percent.

    The number of steel companies is to be reduced as efforts are concentrated on building high-quality steel bases in Zhenjiang Port (Guangzhou) and Fangchenggang Port (Guangxi Zhuang autonomous region).

    Companies with high ratio of liabilities to assets must prioritize debt reduction.

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    China's key steel mills daily output dips 1.1 pc in late October

    In late October many steel mills began maintenance due to increased feedstock prices such as iron ore and coking coal.

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    Indian steel industry calls for united fight against surging coking coal prices

    Amid unprecedented rise in the prices of coking coal in the global market, the Indian Metallurgical Coke Manufacturers' Association (IMCOM) urged its steel industry to work together to resist the trend, The Hindu Business Line reported on November 14.

    Coking coal prices have increased three-fold from $95/t to $310/t in the past year, hurting the viability of the steel industry, which includes metallurgical coke to the steel plants in India, said the IMCOM in a statement.

    Currently, China, with annual imports of around 35 million tonnes of coking coal from Australia, controls the global coking coal prices, hence a higher price by 5% would not harm the industry in China.

    But such a move can kill the steel industries in countries such as India. India imports more coking coal – about 45 million tonnes every year – than China.

    The Indian steel industry is unable to entirely pass on the increased price of coking coal to the users, as this would result in inflation and a spiralling effect in the user industries in the country.

    Indian steel industry is in a position to dictate and regulate the price of coking coal from Australia by insisting on contractual rate as was done by Japanese steel mills and refuse buying at index-based pricing, the IMCOM said.

    IMCOM also urged the Union Ministry of Finance to abolish the 2.5% import duty on coking coal in the interest of the merchant metallurgical coke producers as well as the steel industry which is today confronted with soaring coking coal prices.
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    Rio Tinto debates Guinea payments at London board meeting

    Rio Tinto called a board meeting on Monday to discuss payments of $10.5 million made to a consultant on its project to develop the world's largest untapped iron ore reserves in Guinea, industry sources said.

    Rio said last week it had alerted Australian, UK and U.S. authorities after becoming aware on Aug. 29 of emails from 2011 that referred to payments to a consultant providing advisory services on its Simandou project in Guinea.

    Spokesmen for the mining company said on Monday they could not comment beyond last week's statement because a legal investigation was underway.

    In an internal email sent at the weekend, Rio Tinto CEO Jean-Sebastien Jacques said he was aware many people in the company were "shell-shocked" by the news.

    He said he had launched an investigation the day he found out there was an issue and that now it was in the hands of external authorities it could take "several years".

    "We are committed to making sure we are not in the same situation again. As you know, over the last five years we have done a lot to strengthen our systems and controls," he said in the email, seen by Reuters.

    Jacques took over as CEO at the start of July from Sam Walsh, who has a track record in iron ore. Jacques has earned kudos for his Oyu Tolgoi project in Mongolia which will be the world's biggest copper mine when completed.

    The Simandou project has huge potential, but Jacques has voiced frustration over the difficulty of funding the massive infrastructure required to develop the mine.

    At the end of October, Rio announced it was selling its Simandou stake to its partner Chinalco, which has declined comment on the investigation.

    Rio's share rose on the news it had found a way out of Simandou and the rally has continued despite the uncertainty of a lengthy legal investigation. So far this year, Rio shares have gained nearly 60 percent.

    The company announced the payments and suspended one senior executive on Nov. 9, the day of the U.S. presidential election won by Republican candidate Donald Trump.

    Any negative impact on Rio's shares from the investigation was wiped out by a strong rally in mining stocks, driven by Trump's promises of major infrastructure projects which are likely to boost demand for raw materials.

    Anti-corruption campaigners asked why the payments had not been questioned earlier.

    "The issue is that the rules are tight and should have been picked up at the time," Peter Van Veen, business integrity director at Transparency International, said.

    Frances Hudson, a director at Standard Life, which holds Rio shares, said the investigation could drag and it was not yet clear whether there would be any financial fallout.

    "The risk of punitive action remains but price movements in the meantime will be determined by other factors," she said.
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    Fortescue strikes Chinese financing deal for $556m ore carriers

    Iron-oremajor Fortescue Metals has struck a partnership deal with China Development Bank Financial Leasing Company (CDB Leasing) over the $556-million price tag for eight very large ore carriers (VLOC) currently under construction.

    The finance lease facility will fund 85% of the VLOC costs for a minimum of 12 years, on highly flexible terms, including early repayment and extension options.

    On delivery of each VLOC, 85% of the payments will be drawn down on the finance lease facility.

    The agreement is the largest direct funding arrangement provided by a major Chinese financier for a non-Chinese company in Australia.

    “This is a groundbreaking finance transaction which builds and broadens Fortescue’s highly valued relationship with China through our first direct funding arrangement with a major Chinese leasing company,” said Fortescue CEO Nev Power.

    “We welcome this important partnership with CDB Leasing, which is a significant milestone in our financial strategy, further extending our debt maturity profile while strengthening our capital structure.”

    The VLOCs are currently being constructed in China and first delivery is scheduled for this month, while the balance of the vessels will be delivered through to mid-2018. Designed to complement Fortescue’s port infrastructure, the fleet will improve load rates, efficiencies and reduce operating costs and when fully operational will provide 12% of Fortescue’s shipping requirements.

    The company will control the vessels for the life of the facility, and will take ownership on maturity or after early repayment.
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    China may meet overcapacity-cut target in advance

    China is likely to meet this year's targets early for reducing overcapacity in the coal and steel sectors, a Chinese official said Friday.

    Li Pumin, secretary general of the National Development and Reform Commission, told a press conference that the steel industry had completed its annual target of reducing production capacity by 45 million tons by the end of October.

    The coal sector is also likely to meet its annual goal of cutting capacity by 250 million tons in advance, Li said.

    At present, both sectors have made encouraging headway in cutting overcapacity, which helps to improve corporate profitability, optimize structure and balance market supply and demand, he said.

    Facing surging coal prices and short supply in some areas, Li added the country would coordinate coal, electricity and heating supply to stabilize market prices while firmly cutting overcapacity and adjusting the sector's structure.

    Cutting overcapacity is one of the major tasks in the country's supply-side structural reform.

    In May, the Ministry of Finance earmarked a special fund of 100 billion yuan ($14.68 billion) to subsidize local governments and state-owned companies in reducing steel and coal overcapacity.

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    Illinois Basin thermal coal export window opens to ARA, but margins tight

    Higher seaborne thermal coal prices have opened the export window for Illinois Basin coal producers, but margins remain tight, sources said Friday.

    Producers remain uncommitted to the export market as sending coal overseas could leave them with short supply in the longer term as the number of domestic requests for proposals has increased.

    Utilities must weigh whether to lock in term deals sooner rather than wait, given the volatility of natural gas prices and the possibility that export markets might take coal out of US supply.

    "Most of the sentiment is that you get it while you can," an IB producer said. "Everybody's looking for some positives."

    S&P Global Platts assessed 15-60 day CIF ARA 6,000 kcal/kg NAR thermal coal at $91/mt Friday, giving Illinois Basin producers a slight margin at least in the short term, sources said Friday.

    That delivered price would leave Platts netback prices at US Gulf Coast ports for 11,500 Btu/lb IB thermal coal at $65.07/st FOB Friday.

    Given IB 11,500 Btu/lb thermal barge coal prices for Q1 2017 were heard at $39.75-$40.25/st, that would leave roughly $3 margins for IB producers

    "Most of these operations need barge prices to get over $40 on the river to be even close to making money," the producer said.

    In its Q3 earnings report October 28, IB producer Alliance Natural Resources said it had contracted 3 million st to be exported into Europe from Q4 2016 through Q1 2017.

    Exporters also were able to sign "decent-sized contracts" to move roughly 1.5 million st of IB coal out of New Orleans into Europe in 2017 at a $2-$4 margin, a US coal industry source said.

    "The stuff is flying," the source said. "It's happening as we speak."

    A second IB producer said has been reluctant to sell coal into the IB market due to the sulfur discount that increases as API 2 prices increase.

    "We are not participating," the source said, noting he was "encouraged" by an increased number of coal RFPs in the domestic market. Producers are reluctant to book much of their production into spot export deals, which take away tonnage from the domestic market.

    Increasing production also can be risky because the export markets could go away later, forcing cutbacks.

    For utilities, the improving export market provides contracting challenges for 2017 given the volatility of natural gas prices, a Southeastern utility source said.

    "It's not as easy as it used to be," the source said. "In years past, we could forecast with some level of certainty. Today, the constant fluctuations between gas prices and demand make it a lot tougher to manage."

    Platts assessed IB 11,500 Btu/lb 5 lbs SO2/MMBtu barge coal for prompt quarter (Q1 2017) at $39.75/st, up 75 cents from last week, and assessed Cal 2017 price at $39.40/st, also up 75 cents.

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    China resists EU steel tariffs

    'Concrete actions' must protect interests of Chinese firms

    China expressed great concerns over the European Union's protectionist measures against Chinese steel products on Saturday, a sign of growing impatience with EU disputes on trade measures and China's market economy status at the WTO, experts said.

    The Ministry of Commerce (MOFCOM) on Saturday said China has expressed great concern and worries over the protectionist tendency the EU has showed in the steel sector.

    "The EU has ignored Chinese companies' positive cooperation and pleas, and continues to use the unfair, unreasonable 'surrogate country' [price and cost reference mechanism] to impose higher tariffs [on Chinese products] and seriously harm Chinese companies' interests," the ministry said in a statement releasing on its official website on Saturday.

    MOFCOM urged the EU to strictly follow relevant World Trade Organization rules, avoid abusing remedy measures and protect the rights of Chinese companies.

    The statement came on the heels of a decision from the European Commission (EC), the governing body of the EU on Saturday, announcing temporary anti-dumping measures against seamless steel products from China for six months.

    This is the latest move the EU has taken against Chinese steel products, amid growing disputes between the world's two largest steel producers which stretch back to 2006, when the global market suffered from a supply glut, according to Wang Guoqing, research director at the Beijing Lange Steel Information Research Center.

    Wang noted that about a dozen disputes between China and the EU over steel have happened since 2006.

    "Steel industries in the EU feel that steel imports from China have hurt their businesses and they claim that China is dumping its steel capacity at a price much lower than the market prices. But it is wrong and unfair for them to blame China for their own problems," Wang told the Global Times on Sunday.

    She pointed out that the EU's claim is based on the "surrogate country" mechanism, under which the price and costs of Chinese steel products are compared to a third-party country.

    "That is unfair because Chinese companies can control cost and price much more effectively than foreign ones because of the scale and progress the industry have achieved, not because they receive subsidies from the government," Wang said.

    Stronger tone

    Experts noted that China has stepped up its opposition against the EU's moves to challenge China not only in the steel industry but on the larger issue of whether the latter is trying to deny China "market economy status" at the WTO and keep the "surrogate country" mechanism.

    On Friday, both MOFCOM and the Ministry of Foreign Affairs voiced strong opposition to a proposal from the EC to scrap a list of "non-market economies," but leave open the option to use the "surrogate country" mechanism in future anti-dumping cases if "market distortion" was found in a third country.

    The two ministries pointed out that the EU's proposal is trying to keep the "surrogate country" mechanism in place with a new regime but not eliminate it at the basics. They urged the EU to execute its obligations under the Article 15 of China's accession to the WTO and eliminate the mechanism.

    "I must stress that China will also maintain its right to take all necessary measures to firmly protect its legal interests," Shen Danyang, a spokesperson for MOFCOM told a briefing on Friday.

    Concrete actions

    Experts also said the EU's "unfair" protectionist measures against Chinese products have caused "great" loss for companies and both the government and companies should focus on taking actions to protect their interests.

    Not just words, but necessary concrete actions should be carried out if the EU and others continue to treat China unfairly, according to He Weiwen, an executive council member at the China Society for the WTO.

    "Addressing the issue through dialogues would be ideal, but if that doesn't work, we must take actions to firmly defend out rights and interests," He told the Global Times on Sunday.

    "They must understand that China has and will strictly comply with WTO rules, and they also must understand China will variously defend itself," He said.

    One action China could take is to start a complaint with the WTO for unfair treatment toward Chinese companies, according to He. "This might take some time, but it is the most reasonable one and there is a high possibility the WTO will rule for China if we provide sufficient evidence."

    Other actions include imposing "some kind of restrictions" on imports from the EU and "temporarily halting" some trade investment cooperation projects with the EU, experts also noted without further elaborating.
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    China Oct crude steel output edges up on mth

    China produced 68.51 million tonnes of crude steel in October, rising 4.0% year on year and edging up 0.5% month on month, showed data from the National Bureau of Statistics (NBS) on November 14.

    Over January-October, the country's crude steel output rose slightly by 0.7% from the year-ago level to 672.96 million tonnes.

    Meanwhile, production of steel products edged down 0.4% on month but up 4.1% on year to 97.68 million tonnes in October; and pig iron output stood at 58.76 million tonnes, down 0.9% from September but up 3.6% on year, the NBS data showed.

    In the first ten months this year, China produced 948.29 million tonnes of steel products, up 2.4% on year; and pig iron output increased slightly by 0.1% on year to 586.35 million tonnes.
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    China Oct coke output up 7.3pct on year

    China produced 39.93 million tonnes of coke in October, up 1.63% from September and 7.3% year on year, showed data from the National Bureau of Statistics on November 14.

    Total coke output over January-October dipped 0.8% on year to 371.76 million tonnes, data showed.

    In October, China's coke exports rose 13% on year and up 40.3% on month to 0.87 million tonnes, with value increasing 21.4% on year and up 48.1% from September to $136.63 million, showed data from the General Administration of Customs.

    Over January-October, China's coke exports amounted to 8.29 million tonnes, climbing 12.6% on year, with value dropping 11.6% on year to $1.06 billion.
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    China coal output extends decline despite government call to reopen mines

    China's October coal output fell 12 percent compared with a year earlier, data showed on Monday, even after the government gave operators the go-ahead to ramp up output and reopen mines in a bid to top up power producers' inventories ahead of winter.

    With the restart of shuttered mines taking time to kick in, the drop highlights concerns about tight supplies in the world's top consumer and producer of the fossil fuel, a factor that has fueled a nearly year-long rally in thermal coal prices.

    For the first 10 months of the year, China produced 2.74 billion tonnes of coal, down 11 percent from a year earlier, the National Bureau of Statistics (NBS) data also showed.

    At 281.85 million tonnes, October output was ahead of September's 277 million tonnes, according to NBS data. But on a daily basis, the October level still meant a drop of 1.5 percent with the shorter month of September.

    "As the government rolled out the policy to push for output increases very recently, we shall wait for November and December to see if the measures take effect," said a Beijing-based coal trader.

    "It's unlikely to see production to be on par with year-ago rates, but we may expect to see month-on-month increases in the coming months."

    Coal inventories at Qinhuangdao, the country's largest coal port, rose to more than 6 million tonnes for the first time this year on Monday, according to industry website

    Production has fallen every month since at least July last year as Beijing obliged mines to close or curb production as part of a drive to combat pollution.

    But starting in late September, Beijing began urging coal producers to boost supplies in a slew of emergency meetings, because the efforts to cut overcapacity and curb pollution had depleted supplies to utilities and triggered rising prices.

    Last week the state planner pressed two top miners to sign long-term supply contracts with utilities at a base price that is a quarter below current spot market rates.

    Traders said the market was looking for clarity on the details of the term prices agreed between the top miners and utilities for a better gauge of supply and demand. The government has said the base price agreed was a reference point that could fluctuate depending on market conditions.

    "The market is keenly looking for guidance as to which benchmark prices will be adopted in the execution of the term supply deals, and how serious the term contracts will be carried out," said the Beijing trader.

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    Brazil court rules Vale, BHP, Samarco to deposit $354m after dam burst

    Brazilian iron-ore miningjoint venture Samarco Mineração and its controllers Vale and BHP Billiton have 30 days to make a deposit of 1.2-billion reais ($354-million) to fund preparatory measures after last year's dam disaster, Vale said on Friday.

    According to a securities filing, a Brazilian federal court ruled that the companies have 90 days to prove that the Mariana dam burst has been fully contained. Over the next six months, they will have to present plans to clean up the remaining waste that spewed from the Samarco mine.
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    Taiyuan Railway increases rail coal freight rate

    Taiyuan Railway increases rail coal freight rate

    Taiyuan Railway Administration (TRA) raised rail freight rates of coal and some other cargoes, effective 18:00 on November 10, the municipal railway administration said in a statement.

    According to the statement, the freight rate of coal delivered via railways in the charge of TRA remains unchanged; while that from TRA's railways to others (except for Xiaoliu line, Wuzuo line and Qinqin line) increased by 10%.

    The TRA also adjusted up freight rates of coke, metal ore, iron and steel, and cement among others delivered via rail lines in the charge of TRA to others back to the country's base rates.

    The measures came after the implementation of China's new truck overloading limitation, which boosted rail transport and tightened rail transport capacity.

    China Railway Corp. decided to increase rail transport of thermal coal recently, aiming at ensuring power supply.

    Meanwhile, the Hohhot Railway Administration raised freight rates by 10% for coal and coke transported via railways under its charge to other railways.
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    Shenhua, China Coal inks term contracts with top five utilities

    China's Shenhua Group and China National Coal Group have signed mid- and long-term thermal coal supply contracts with the nation's top five power generators, in response to the government's call to strength cooperation between miners and utilities.

    The two coal giants reached agreements with China Huaneng Group, China Guodian Corporation and China Datang Corporation on November 11, three days after they signed contracts China Huadian Corp and State Power Investment Corp.

    The contract base price was agreed at 535 yuan/t ($79/t) FOB for 5,500 Kcal/kg NAR coal, and the price would be adjusted monthly based on the market conditions.

    The volume of coal to be supplied in 2017 will be based on actual supply and demand over 2014-2016, according to a document.

    Coal consumption of the top five utilities accounts for about 44% of China's total.
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    China rebar mills cut production on coal shortage, costs

    Chinese steelmakers, who usually ramp up output when steel prices rise, are reacting quite to the contrary now, as tight coking coal supply and soaring costs are forcing a number of them to cut production, market participants said Friday.

    In northern China, rebar makers Fushun New Steel and Jinxi Iron & Steel are idling blast furnaces this month for "maintenance," often a euphemism for unscheduled production shutdowns, said one of their customers in eastern China.

    Mills that have less steel to sell are either keeping offers high or have stopped quoting altogether, a mill source in northeastern China said.

    The climb in coking coal prices, which have risen 275% since the start of the year to $306/mt CFR China Thursday, according to S&P Global Platts data, has seen producers of long and flat steel cope differently, as producers of the latter have seen greater success at passing the higher costs down.

    For instance, while Jiangsu Shagang Group, China's biggest private steelmaker, will idle a rebar production line due to shortage of hot metal, according to one of its customers, no such plans have been heard on their hot strip mills.

    Also in eastern China, Zenith Iron & Steel and Yonggang Iron & Steel said they have plans to conduct maintenance on their rebar lines this month, although they insisted that the outages were routine and conducted annually, and will have little impact on overall output.

    Any production cut will likely have a limited impact on domestic markets, as rebar demand in China typically eases from November due to a slowdown in construction activity during winter.

    Overseas buyers, however, are citing added difficulty in securing material, as the mills that are conducting maintenance are also active exporters, said stockists in Hong Kong and Singapore. With Chinese rebar export offers having risen above $420/mt FOB China actual weight, offers from Taiwan, at similar levels, have suddenly become viable, after four years of being out of the market, a Hong Kong stockist said.

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