Mark Latham Commodity Equity Intelligence Service

Tuesday 2nd May 2017
Background Stories on www.commodityintelligence.com

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    Macro

    Blockchain: Why it is the second coming of the internet.

    Blockchain networks tend to support principles, like open access and permissionless use, that should be familiar to proponents of the early internet. To protect this vision from political pressure and regulatory interference, blockchain networks rely on a decentralized infrastructure that can’t be controlled by any one person or group. Unlike political regulation, blockchain governance is not emergent from the community. Rather, it is ex ante, encoded in the protocols and processes as an integral part of the original network architecture. To be a part of a community supporting a blockchain is to accept the rules of the network as they were originally established.

    In a blockchain transaction, you don’t have to trust your counterpart to perform their obligations or properly record transactional data, since these processes are standardized and automated, but you do have to trust that the code and the network will function as you expect. And just how immutable are blockchain ledger entries if the network becomes politicized? As it turns out, not very.

    How Blockchain Works


    READ MORE

    Consider the case of The DAO. Short for decentralized autonomous organization, a DAO is software designed to manage the fiduciary obligations of holding and disbursing blockchain assets without any human involvement. The code that was developed for the (confusingly named) The DAO application was called a “smart contract,” and ran as a DAO application on top of the Ethereum blockchain. The DAO issued tokens through its smart contract and traded them for Ethereum’s blockchain tokens, which are called ether. This token sale was done through a widely marketed crowdfunding campaign, raising more than $150 million in ether value.

    The original vision of the Ethereum creators was that computer code should, quite literally, be treated as law in their community and serve as replacement for legal agreements and regulation. The DAO creators embraced this vision and noted that participants should look exclusively to the application’s code as dispositive on all matters. The code was the contract and the law for The DAO. Unfortunately, The DAO’s smart contract was flawed: It allowed a DAO token holder who exploited a bug in the code to siphon off one-third of the value held in the application (roughly $50 million) to their own account. This withdrawal of funds, while unexpected, did not violate either Ethereum’s or The DAO’s rules, naïve as they may have been. Nor does it appear to have violated any laws.

    But, at the end of the day, too many Ethereum community members, including some of its most prominent leaders, suffered losses, having traded their ether for DAO tokens. They felt that action had to be taken to reverse their losses. The Ethereum leadership was able to coordinate with the network stakeholders to create a so-called “hard fork,” a permanent split of the Ethereum blockchain, so that control of the siphoned-off funds would be shifted to a group of trusted leaders.

    This hard fork created a new Ethereum blockchain and was labeled a bailout by critics. The new Ethereum blockchain selectively rolled back losses only for those Ethereum blockchain token holders who had unwisely exchanged those tokens for The DAO application tokens. If you happened to lose your ether tokens in any other way, whether through market manipulation or through another hack, the rigid “code as law” doctrine still applied — and you were out of luck.

    For some members of the community, the decision to hard fork was a wanton violation of the community’s core principles, akin to burning down the house to roast the pig. In protest, they decided to keep running the original Ethereum blockchain unadulterated, and thus there are now two Ethereum networks. Somewhat confusingly, the old Ethereum network has been rebranded as “Ethereum Classic”; the new network retained the original name, Ethereum.

    Blockchain fabulists may claim that smart contract applications like The DAO’s will displace lawyers and disrupt the legal industry. But as this incident amply demonstrated, the reality is that smart contracts have proven to be neither smart nor, for that matter, enforceable agreements. The blockchain is truly an innovative approach to governance for networks and machines. But we must resist the temptation to anthropomorphize code and misapply machine governance to social systems. Code is law for machines, law is code for people. When we mix up these concepts, we wind up with situations like The DAO.

    Consider some of the controversy surrounding bitcoin. First, understand that on the bitcoin blockchain, power is meant to be distributed among all the stakeholders in the community. None of these stakeholders should have any greater influence or power than any other to change the terms of the bitcoin protocol. They are interdependent and incentivized to cooperate in conserving the extant network rules. Any change to the network rules requires coordination and consensus among all of the stakeholders. So when bitcoin software developers began debating about how to increase network capacity, the discussion devolved into a multistakeholder melee that was dubbed a “governance crisis” by the popular media. Some of the developers wanted to incorporate changes to the bitcoin codebase that would not be backward compatible, and thus would split the network into multiple blockchains — a hard fork.

    The majority of bitcoin developers have opposed hard fork scaling proposals in favor of a more conservative approach that assures the continuity of a single bitcoin blockchain. Other stakeholders have begun to view this process as obstructionist, and populist campaigns have sprung up to route around it. But despite much sturm und drang, these efforts to alter bitcoin’s power structure and circumvent bitcoin developer consensus have thus far failed. For many in the community, bitcoin’s ability to resist such populist campaigns demonstrates the success of the blockchain’s governance structure and shows that the “governance crisis” is a false narrative.

    As a blockchain community grows, it becomes increasingly more difficult for stakeholders to reach a consensus on changing network rules. This is by design, and reinforces the original principles of the blockchain’s creators. To change the rules is to split the network, creating a new blockchain and a new community. Blockchain networks resist political governance because they are governed by everyone who participants in them, and by no one in particular.

    The power of blockchain technology is that it can algorithmically enforce private agreements and community principles at a global scale by shifting the cost of trust and coordination to the network. This is what allows blockchains to create new markets where they couldn’t exist before, whether for political or for economic reasons. To do this, we have to be able to trust the blockchain, and to trust that no one controls it.

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    Trump says open to raising gasoline tax to fund infrastructure: Bloomberg


    President Donald Trump said on Monday he would consider raising the federal tax on gasoline to fund infrastructure development, Bloomberg News reported.

    "It's something that I would certainly consider," Trump told the news agency in an interview on Monday. "The truckers have said that they want me to do something as long as that money is earmarked to highways."

    The Trump administration released an outline of a tax plan last week that would slash tax rates for businesses and reduce the number of tax brackets for individuals.

    The plan, however, was silent on gasoline taxes, a potentially delicate issue given the widespread impact any increase would have on U.S. households.

    Trump told Bloomberg his tax proposal was just an opening gambit in a negotiation with lawmakers on Capitol Hill.

    "Everything is a starting point," he said, according to Bloomberg, adding that he was willing to give up on aspects of his plan. He declined to specify where he would yield.

    http://www.reuters.com/article/us-usa-tax-gasoline-idUSKBN17X21S
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    China's manufacturing activity expands for 9th straight month


    China's manufacturing sector continued to expand in April, though at a slower pace, said the National Bureau of Statistics (NBS) on April 30.

    The country's manufacturing purchasing managers' index (PMI) came in at 51.2 in April, lower than the 51.8 recorded in March, according to NBS data.

    The reading fell short of market expectations but still stayed above the boom-bust line of 50 for the ninth straight month.

    The slower expansion was in part due to sluggish growth in both market demand and supply, said NBS senior statistician Zhao Qinghe.

    The sub-index for production stood at 53.8 in April while the sub-index for new orders came in at 52.3, both down from the level a month ago.

    "While both the production and the new orders indices are still in the expansion territory, the gap between them has widened, which needs to be closely watched," Zhao said.

    The lower-than-expected expansion was also a result of contraction in the high energy-consuming industries, lower price at factory gate, and slower expansion in both imports and exports, Zhao said.

    On a positive note, equipment manufacturing and high-tech manufacturing continued robust growth, with the sub-indices coming in at 52.1 and 53.4 respectively, well above the 51.2 registered for all manufacturing industries.

    Consumer goods manufacturing also rose to 52.2, indicating an increasingly important role it plays in the economy, Zhao said.

    http://www.sxcoal.com/news/4555458/info/en
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    Bitcoin, Ethereum Hit New All Time Highs Amid Buying Frenzy, Liquidity Squeeze


    The price of Bitcoin accelerated its recent exponential trend higher, soaring to daily all-time highs over the past few days, rising above $1,300 on Friday, then pushing $1,400 on Monday, and even above $1,500 on the second-largest BTC exchange, and was last trading just above $1,460 on Coinbase amid a buying frenzy attributed to speculative investment across the cryptocurrency sector, coupled with liquidity problem at some exchanges which were having problems processing fiat-based transactions.

    http://www.zerohedge.com/news/2017-05-01/bitcoin-ether-hit-new-all-time-highs-amid-buying-frenzy-liquidity-squeeze
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    Oil and Gas

    Saudi Arabia may cut June light crude prices to nine-month low


    Top oil exporter Saudi Arabia is expected to cut the price of its flagship Arab Light by 40-50 cents a barrel in June to the lowest in nine months, a survey of Asian refiners showed.

    Official selling prices (OSPs) are expected to fall across the board for Saudi crudes sold to Asia in June, after a fall in the Middle East benchmark Dubai crude due to ample oil supplies, the survey of five refiners found.

    "We expect Saudi OSPs to fall as the spot market has collapsed amid oversupply," an analyst with a North Asian refiner said, adding that the June Arab Light OSP will drop by at least 50 cents a barrel.

    Reflecting weak demand, the spread for first and third month cash Dubai prices widened in contango in April from a month ago, traders said.

    In a contango market, prompt prices are lower than those in future months as ample supplies weigh on the spot market.

    Last month, almost all grades of Middle East crude loading in June traded at discounts to their price markers as they faced stiff competition from record flows of oil shipped to Asia from Europe and the United States in recent months, particuarly as U.S. shale production grows.

    Demand from China and Japan has also slowed as some refining units have yet to return from maintenance, while independent Chinese refiners are waiting for more import quotas to be issued by Beijing.

    Most of the survey respondents expect Arab Light crude to be cut by 40 cents in June. The respondents expect smaller price cuts for Arab Medium and Arab Heavy crude as Saudi Arabia could continue to tighten exports of these grades to comply with a deal by OPEC and some non-OPEC producers to cut output.

    The Organization of the Petroleum Exporting Countries will decide in late May whether it will extend output cuts for another six months in a bid to draw down global inventories.Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.

    State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

    Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs.

    http://www.reuters.com/article/us-saudi-oil-prices-idUSKBN17X0ZZ
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    China's oil stockpiling in first-half 2016 slows on tank shortage


    China added 9.34 million barrels of crude oil to Strategic Petroleum Reserves (SPR), worth just over one day's imports, during the first half of 2016, government data showed on Friday, cementing an analyst view that a few tankages were ready for fill during the period.

    Since 2015, China's record amount of crude oil imports have been driven more by flows into the country's independent refineries rather than government stockpiling.

    China boosted its SPR across nine bases by adding 1.28 million tonnes of crude oil in the first half of 2016, the Commerce Ministry said on Friday, in their first update in eight months on one of the world's largest oil reserves.

    By mid-2016, the government had 33.25 million tonnes of crude oil, equivalent to 243 million barrels, up from 31.97 million tonnes at the start of 2016. That equates to an average fill rate of 52,000 barrels per day.

    The government's last update was in September last year.

    Seng-Yick Tee, analyst with consultancy SIA Energy, said 9.34 million barrels of crude oil or 102,000 barrels per day (bpd) were mostly added over a period of three months instead of six.

    Based on data provided from China's National Bureau of Statistics, the country had marked 43 million barrels during the second half of 2015, suggesting a fill rate of around 240,000 bpd.

    "Today's announcements confirm our earlier view that the government's previous update was referring to stockbuild by March 2016 rather than the beginning of the year," said Tee, adding there were a few new tankage space available during the period.

    However, the pace of stockpiling quickened in the second half of 2016 as national oil firms started pumping fuel into two main new bases -- Tianjin in the north and Zhoushan on the east coast, Tee explained.

    SIA Energy estimates the government's stockpile reached around 5.6 million tonnes, or 222,000 bpd, during the second half of 2016, before it drops to 138,000 bpd for this year due to lack of new storage space.

    Reuters has reported that China completed construction of 19 million barrels of new strategic reserve tanks in Zhoushan in August after several delays, and the construction of a large government reserve site in southern Guangdong is taking longer than expected.

    http://www.reuters.com/article/us-china-oil-reserves-idUSKBN17U1CK
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    Libya's oil output hits 760,000 bpd, highest since 2014: NOC


    Libya's oil production has risen above 760,000 barrels per day (bpd), its highest since December 2014, the National Oil Corporation (NOC) said on Monday.

    Chairman Mustafa Sanalla said in a statement the NOC was working on plans to increase production further. He has previously set a goal of boosting output to 1.1 million bpd by August.

    The NOC gave no breakdown for the latest production increase, but it is mainly due to the reopening of the major western field of Sharara last week.

    Sharara was producing more than 200,000 bpd before its operations were halted by pipeline blockades twice in the past two months, causing national output to drop to less than 500,000 bpd.

    The NOC said on Thursday that the lifting of the blockade at Sharara would also allow production to resume at the nearby El Feel field, which can pump 80,000 bpd.

    The news of the restarts contributed to a dip in global oil prices. Libya along with Nigeria was exempted from a recent agreement by the Organization of the Petroleum Exporting Countries (OPEC) to limit output.

    Libya's production remains well below the 1.6 million bpd the North African country was producing before a 2011 uprising, but gains to production remain vulnerable to political turmoil and armed conflict.

    Production has been repeatedly disrupted in recent years by stoppages and port blockades usually linked to demands for salary payments or funds for local development. Closures since 2013 have deprived Libya of more than $130 billion in revenue, according to the NOC.

    Some oil facilities have been badly damaged by previous fighting, and the NOC also faces major technical and financial challenges in returning them toward full capacity.

    http://www.reuters.com/article/us-libya-oil-idUSKBN17X25P
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    Surging Chevron, Exxon profits signal oil industry turnaround


    Rising crude prices helped Chevron Corp and Exxon Mobil Corp easily beat Wall Street's profit expectations on Friday, a sign the oil industry has regained its footing after a two-year price spiral.

    While cost cuts and asset sales provided a boost to both companies, the results highlighted the slowly improving dynamics for the energy industry as oil prices  have climbed more than 50 percent since early 2016.

    The results were especially strong at Exxon, where quarterly profit more than doubled to $4.01 billion.

    Chevron swung to a quarterly profit and turned cash flow positive, earning more than it spent, a milestone Wall Street had long sought.

    Shares of Exxon rose 1 percent and shares of Chevron were up 1.3 percent.

    Their energy peers, BP Plc  and Royal Dutch Shell Plc , are set to report quarterly results next week.

    Looming over the large international oil companies, though, is uncertainty over whether the Organization of the Petroleum Exporting Countries will extend a production cut when it meets next month in Vienna. Should the cut not be continued, oil prices would likely drop, pushing the sector back into recession.

    Chevron and Exxon expanded production in their American shale portfolios during the quarter, with both deciding that the low-cost fields were an easy opportunity to boost profit.

    Chevron, the second largest leaseholder in the Permian Basin, which is the largest American oilfield, has devoted much of its 2017 capital budget to shale projects. Chief Executive Officer John Watson told Reuters earlier this month the Permian was vital to Chevron's growth.

    Exxon doubled its acreage holdings in the Permian Basin of West Texas earlier this year in a deal worth up to $6.6 billion. It was the largest oil industry deal in the first quarter, highlighting how important it was for Exxon to grow in the oil-rich region.

    In Asia, both companies expanded liquefied natural gas operations. Chevron brought a third processing facility online at its Gorgon LNG project in Australia, and Exxon bought InterOil in a $2.5 billion bid to expand in Papua New Guinea.

    Exxon also bought a 25 percent stake in a Mozambique gas field last month in a deal worth up to $2.8 billion.

    http://www.reuters.com/article/us-oil-results-idUSKBN17U20W
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    BP's profit triples on higher oil prices, output


    BP's profit nearly tripled in the first quarter of 2017 from a year earlier thanks to higher oil prices and production, and as its sharp cost cutting drive bears fruit.

    BP joined oil major rivals including Exxon Mobil, Chevron and Total in posting stronger-than-expected quarterly earnings, mostly thanks to higher oil and gas prices.

    The results could assuage concerns among investors, who were jolted when BP in February raised the oil price at which it can balance its books this year to $60 a barrel after a string of investments.

    Investors are now turning their attention to cash generation that will allow companies to cover spending and dividend payouts and reduce ballooning debt.

    London-based BP is set to start up eight projects this year, including in Oman and Azerbaijan, the largest number in the company's history in a single year. It hopes to add 800,000 barrels per day of new production by the end of the decade.

    "Rising production from new upstream projects is expected to drive a material improvement in operating cash flow from the second half of 2017," the company said in its results statement.

    BP reported first-quarter underlying replacement cost profit, the company's definition of net income, of $1.51 billion, exceeding analysts' average forecast of $1.26 billion.

    Its operating cash flow in the quarter rose to $4.4 billion from $3 a year earlier

    Oil prices, a major driver for BP's earnings, averaged around 35 percent above prior-year levels, helping to boost revenue from its core oil and gas production division.

    http://www.reuters.com/sectors/basic-materials
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    BP finds hidden trove of oil in Gulf of Mexico via new subsea imaging


    British oil major BP has discovered 200 million barrels of oil in a hidden cache in the Gulf of Mexico, thanks to a technological breakthrough allowing the company to see beneath geological formations that had befuddled oil exploration for decades.

    The find, worth a potential $2 billion in recoverable oil, is in an undrilled section of BP’s Atlantis field in 7,000 feet of water 150 miles from New Orleans. Long obscured by a salt dome, which distorts seismic waves that oil companies use to map features below the earth, the oil reserves were revealed by using a supercomputer and mathematical algorithm to interpret the seismic data in a new way.

    The Gulf find is another example of oil companies advancing technology to make unexpected discoveries. The advent of seismic imaging allowed oil and gas companies to model mineral layers below the earth’s surface and drill more precisely. The combination of horizontal drilling and hydraulic fracturing unleashed the U.S. onshore shale revolution.  Now, BP’s imaging advance could save drillers hundreds of millions of dollars in false starts and dry wells, and perhaps more important, prevent them from passing up billions of dollars in oil hidden within reach of existing platforms and pipelines.

    Salt has been a barrier

    Salt domes have stumped scientists for years. Such geology in deep water is usually promising because the formations trap oil and gas in underground pockets for easy extraction. But companies hadn’t been able to image under the domes with much clarity.

    Scientists at the BP’s Energy Corridor office park worked for years to improve subsea imaging under salt domes and identify new oil deposits. Then, last year a BP scientist fresh out of out of graduate school asked his bosses if he could borrow the company’s 15,000-square-foot supercomputer to run an algorithm he had developed.

    Xukai Shen wanted to use the machine for two weeks. And in that time he and his team produced a new image with much more detail of the earth layers under Atlantis.  Via traditional methods, such analysis would require at least a year of painstaking data comparison for geophysicists. Shen and his team did it in little more than two weeks, and created a much more accurate model.

    “It produced the best image of the field we’ve ever seen,” said Etgen, the project’s principal researcher. “We basically fell out of our chairs.”

    http://fuelfix.com/blog/2017/04/27/bp-finds-hidden-trove-of-oil-in-gulf-of-mexico-via-new-subsea-imaging/
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    Australia's LNG export control plans raise alarms in Queensland


    The Australian government's decision to enforce export controls on LNG to protect domestic supply has raised concerns among Queensland LNG exporters, which have international contractual commitments for more than 25 million mt, mainly with northeast Asian buyers.

    Exactly how the mechanism will work is not clear yet, but the government is planning to block LNG exports if there is not adequate supply of gas domestically, Prime Minister Malcolm Turnbull announced on ABC Radio Thursday morning local time.

    The move comes in response to concerns that the eastern seaboard of the country could face gas shortages by the end of the decade, but the risk of a lengthy supply deficit in the region is still low.

    "Out to around 2021, we do not think a gas shortage is likely," said Matt Howell, senior research analyst, Australasia upstream oil and gas, with Wood Mackenzie.

    "Supply from the CSG-LNG projects and other existing producers should be available to fill any demand/supply shortfall. However, that is not to say that there might not be short-term shortages in periods of high demand or if there are supply disruptions."

    The risk of gas shortages increases post-2021, Howell said, and alternative sources of supply will need to be developed to prevent a shortage from occurring as existing supply drops off.

    Participants in the Asia-Pacific LNG markets said export controls would have a negligible effect on global trade flows in the near term.

    But a northeast Asian long-term buyer of Queensland LNG highlighted that renegotiating or obtaining supplies from alternative sources would come at a significant cost if such a ruling was eventually enforced.

    According to Platts Analytics, the combined size of eastern and southeastern Australia's interconnected pipeline gas markets is less than half of the export capacity of the three LNG plants on Queensland's Curtis Island, which amounts to around 95 million cu m/d.

    NET DOMESTIC SUPPLIERS

    Turnbull's announcement follows meetings between the federal government and top executives from the country's gas companies in recent weeks, during which two of the three east coast LNG exporters -- Australian Pacific LNG and Queensland Curtis LNG -- committed to being net suppliers to the domestic market.

    Santos, operator of the third east coast LNG exporter, Gladstone LNG, on Thursday said that it will supply more gas into the domestic market than it purchases for its share of LNG exports.

    "Santos will seek clarification of how the new policy will work in practice in order to understand from the government the terms on which it is proposing to introduce this mechanism and how proposals that have been put to the government to address the domestic market situation are being considered," it said in a statement in response to the announcement.

    In the January-March quarter, Santos' share of GLNG sales was 400,900 mt, with its own product making up 172,900 mt of the sales and third-party product contributing 228,000 mt, the company said last week.

    APLNG CEO Warwick King said Thursday that while the company reaffirms its commitment to be a domestic net contributor -- and that it has been since its inception in 2008 -- it does not support the government's move.

    "In the past six months, APLNG completed more than 100 domestic gas transactions, many with Queensland manufacturers, supplying 62 petajoules on long-term contracts and a further 20 PJs in incremental sales," he said.

    "APLNG does not support additional regulation such as export permits, as these sorts of interventions will not increase supply or decrease price in the near or long term."

    "Australian energy market challenges can only be resolved by engaging with all the energy sector. Producers, explorers, transporters, and retailers, not just the Queensland LNG industry, need to work collaboratively together to address ongoing concerns," he said.

    HIGH PRICES

    Turnbull said the move could potentially more than halve domestic gas prices.

    "We have seen that because of these anticipated shortfalls, gas suppliers have been proposing contract prices which are really way too high. They are as much as four or five times the price per gigajoule ... that are being offered in the United States," Turnbull said.

    "[Under the new measures, gas] will be cheaper than the prices being offered now. Now people are being offered prices of [A]$20 a gigajoule. It should be half that or less," he told ABC radio.

    Platts JKM for cargoes to be delivered in June was assessed at $5.75/MMBtu on Wednesday, down 41% since the start of 2017. Platts JKM averaged $7.02/MMBtu for the first three months of the year.

    The Australian Petroleum Production and Exploration Association said the export controls are a short-term measure that risk exacerbating tight market conditions unless accompanied "by genuine reforms."

    "There is no doubt the east coast gas market today is tight," APPEA CEO Malcolm Roberts said Thursday.

    He said the main issue is that state governments, such as New South Wales and Victoria, are preventing the exploration and development of new gas supplies.

    "The only way to ensure long-term energy security is to remove restrictions and make it possible for explorers to find new gas fields and producers to develop these resources. The only solution is more gas, not more regulation," Roberts said.

    http://www.platts.com/latest-news/natural-gas/singapore/australias-lng-export-control-plans-raise-alarms-27822484
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    Total sanctions the development of Vaca Muerta shale resources and increases its participation.


    Total has sanctioned the development of the first phase of the operated Aguada Pichana Este license in the giant Vaca Muerta shale play in Argentina. Moreover, the Group will also increase its interest in the license from 27.27% to 41%.
     
    Gas production from the project will be treated at the existing Aguada Pichana gas plant which will thus reach its full capacity of 16 million cubic meters per day (100,000 barrels equivalent per day).
     
    "Launching this project is a key milestone in the development of the giant Vaca Muerta shale play. Total is also increasing its interest in the East part of the Aguada Pichana concession where the results of pilot wells drilled to date have been excellent. The development will benefit from the use of existing facilities, enabling the production of shale gas at a very competitive cost,” said Arnaud Breuillac, President Exploration & Production. “This is one of the ten major projects that Exploration & Production plans to sanction in 2017-2018, taking advantage of the favorable low cost environment, which is now approved and will contribute to the Group’s production growth beyond 2020.”
     
    Total’s decision follows the announcement by the Argentine Ministry of Energy and Mines of the “Program for Stimulation of Unconventional Gas Developments” which guarantees gas prices until 2021.
     
    As part of the project, the Aguada Pichana partners (Total Austral S.A. 27.27%, YPF S.A. 27.27%, Wintershall Energia S.A. 27.27% and Panamerican Energy LLC 18.18%) have entered into a memorandum of understanding that includes an increase of Total’s participation to 41% in the Aguada Pichana Este project being developed. The agreement remains subject to the approval of Neuquen Province authorities.

    http://www.total.com/en/media/news/press-releases/argentina-total-sanctions-development-vaca-muerta-shale-resources-and-increases-its-participation
     
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    Falcon Oil and Gas flying strong on Australian shale finds


    Global oil and gas group Falcon experienced a “landmark” year in 2016, according to chief executive Philip O’Quigley.

    The Dublin-headquartered firm successfully completed the drilling of the Beetaloo well in the Northern Territory of Australia to a total depth of 3,173metres with “very encouraging results”.

    Hydraulic stimulation of the horizontal Amungee NW-1H well was also completed, indicating a material gas resource.

    However completion of the nine well exploration and appraisal programme will be delayed pending the outcome of the independent scientific inquiry on hydraulic fracturing.

    Processing of Falcon’s exploration license application in South Africa’s Karoo Basin continues to progress and the South African Department of Mineral Resources is expected to issue licences in 2017.

    The firm remained debt free with cash of US$10.1 million at 31 December 2016.

    General and administrative expenses decreased 18% year on year to $2.0 million.

    Total net loss for the year 2016 was $3.6million. The bulk of this came from cash going into operating activities.

    CEO O’Quigley said: “2016 was a landmark year for our company with the first extended production test in the Beetaloo basin and the announcement of a material gas resource.

    “Our 2017 drilling program is delayed pending the outcome of the independent scientific inquiry on hydraulic fracturing, however we are hopeful of a favourable outcome and the resumption of drilling in the not too distant future.”

    https://www.energyvoice.com/oilandgas/137861/falcon-oil-gas-flying-strong-australian-shale-finds/
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    Australian gas pipe builder Jemena plans expanded line to ease supply woes


    The builder of an A$800 million ($600 million) gas pipeline that could ease a looming shortage in eastern Australia said on Friday it will boost the capacity of the planned pipeline if a ban on fracking in Australia's north is lifted.

    Jemena, owned by State Grid Corp of China and Singapore Power, which is building the 622 km (386 mile) pipeline from northern Australia to Queensland state, is also "well advanced" in plans to extend the pipe further east, a company spokesman told Reuters.

    The comments come amid a growing gas supply crisis in Australia that on Thursday prompted the national government to lay out a radical plan for restricting liquefied natural gas (LNG) exports in order to keep a lid on domestic prices.

    Jemena's pipeline from Tennant Creek to Mount Isa is seen as a crucial leg in easing the shortage in the east, by potentially unlocking the vast gas resources in central and northern Australia.

    The Northern Territory government is currently reviewing a ban on fracking in the region, but has set no deadline for making a decision.

    "We do expect to boost the capacity of the pipeline, provided the moratorium in the Northern Territory is lifted and additional gas supplies made available," Jemena spokesman Michael Pintabona told Reuters on Friday.

    "The whole landscape has changed with the release of the forecast that there'd be shortages."

    He added that Jemena is "well advanced in our feasibility studies" to extend the pipeline further east, to connect with the Wallumbilla gas hub, and so reach east-coast markets where gas prices have soared.

    "What our ultimate plan is, is that once that gas supply is shored up in the Northern Territory, we'll be able to pump through as much gas as is required," Pintabona said.

    Rivals had criticised Jemena's decision, taken a year ago, to build the pipe narrower than planning permission allowed.

    That choice was taken in April 2015 ahead of an expected decision to put a moratorium on fracking, which was seen limiting potential gas flows along the pipe, Pintabona said.

    However, the pipeline's capacity could be expanded by duplication, or by increasing the pressure of the gas by installing additional infrastructure, he said.

    Construction of the pipeline is yet to begin, owing to delays securing approvals.

    A spokeswoman for Northern Territory Resources Minister Ken Vowles was not immediately available for comment.

    http://www.reuters.com/article/australia-gas-pipeline-idUSL4N1I02JO
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    Unite Takes Another Step Towards UKCS Strike Action


    UK union Unite takes another step towards strike action on the UKCS, as it serves an official strike ballot notice to the Offshore Contractors Association (OCA).

    UK union Unite took another step towards strike action on the UKCS, as it served an official strike ballot notice to the Offshore Contractors Association (OCA).

    “Our members are growing angry over the behaviour of the OCA employers,” Unite Regional Officer John Boland said in a statement sent to Rigzone.

    “If we are going to settle this dispute, we need substance, not spin. Until we get genuine commitment from the OCA to improve their offer, we will continue to act on our members’ wishes, and give them the chance to have a say on possible industrial action, including strike action,” he added.

    After receiving the notice, the OCA said it remains willing to implement a 2 percent increase in basic pay for offshore employees, despite the trade unions announcing plans to hold an industrial ballot.

    This level of pay increase has already been rejected by Unite members, however, Boland highlights.

    “We believe that our offer balances the need to reward employees while supporting the requirements of each OCA member company and our collective overarching aim; to ensure job opportunities in the North Sea now and in the long-term,” Paul Atkinson, CEO of the Offshore Contractors Association, said in a statement sent to Rigzone.

    “We will continue to do all we can to avoid any disruption. Industrial action will only serve to make investment in the North Sea less attractive and jeopardise the long-term future of the industry,” he added.

    Earlier this month, Rigzone reported that the threat of strike action on the UKCS had increased, after Unite and the Offshore Contractors Association failed to settle a dispute over pay.

    Independent conciliation organization ACAS met with representatives from both Unite and OCA April 19, with Unite confirming after the meeting that it would push ahead with preparations for official industrial action ballots.

    Strike ballots are expected to last for two months, according to a Unite representative.

    http://www.rigzone.com/news/oil_gas/a/149885/Unite_Takes_Another_Step_Towards_UKCS_Strike_Action?utm_source=GLOBAL_ENG&utm_medium=SM_TW&utm_campaign=FANS
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    Rig Count Sees Double-Digit Gains


    More than twice as many rigs active today compared to a year ago

    Drilling activity in the United States continues to increase with the rig count making a double-digit jump in the week ended April 28, 2017, according to Baker Hughes Industries. The total number of rigs in the U.S. reached 870, up 13 from a week ago. The rig count is now 450 rigs higher than at this time last year.

    Rigs drilling for crude oil increased by nine to a total of 697, while those targeting natural gas increased by four to 171. Drilling offshore slowed, with Baker Hughes reporting three fewer rigs offshore week-over-week for a total of 17 offshore rigs.

    The Permian continued to see additions to its rig count this week, but it was the Eagle Ford which recorded the largest week-over-week growth. The Eagle Ford reported five additional rigs this week for a total of 83. The Permian remains the most active, however, with 342 rigs this week, up two from this time last week.

    The Cana Woodford and Haynesville reported four and one additional rigs, respectively. No basins reported fewer rigs from the previous week.

    https://www.oilandgas360.com/rig-count-sees-double-digit-gains/
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    No Slowing the Permian Land Grab: Centennial Resource Development Enters the Northern Delaware


    Raising our 2020 oil production target to 60,000 BOPD: Centennial CEO Mark Papa

    Denver’s Centennial Resource Development, Inc. (ticker: CDEV) said on Monday it is acquiring undeveloped acreage and producing oil and gas properties in the core of the Northern Delaware basin from privately held GMT Exploration for $350 million in cash. The acreage total in the acquisition comes to 11,860, all in Lea County, N.M.

    Pro-forma for the pending acquisition, Centennial is raising its 2020 production target to 60,000 BOPD from the previous target of 50,000 BOPD.

    The company said in its press release that the acquisition increases its Delaware basin position to ~88,000 net acres from ~76,000 net acres at year-end 2016. The acreage is located in Southern New Mexico directly north of the Red Hills area. Centennial said about 67% is held by production and that it expects less than one operated drilling rig is required to hold acreage.

    The company said it is now targeting a four-year compound annual oil growth rate of approximately 80% from 2016 to 2020.

    Acquisition overview

    11,860 net acres in Lea County, New Mexico, 79% operated with 85% average working interest•  77% State Lands, 19% Federal and 4% Fee
    Average net production of approximately 2,100 BOEPS during Q1 2017Approximately 77% oil
    Identified approximately 255 gross horizontal drilling locations in the Avalon Shale, 2ndBone Spring Sand, 3rd Bone Spring Sand and Wolfcamp A formations
    Estimated undeveloped resource potential of over 91 MMBOEAdditional upside potential from the 1stBone Spring Sand, 2nd Bone Spring Shale, 3rd Bone Spring Carbonate and Wolfcamp B formations
    Significant upside potential related to additional zones and future downspacing
    Current inventory includes drilling locations in four zones•  Conservative inventory spacing compared to offset operators•  Potential upside from four additional prospective zones

    No strangers to the Northern Delaware: Papa

    “This is an area where our geoscience and reservoir teams have built their careers and worked these geologic formations,” said Centennial Resource Development Chairman and CEO Mark G. Papa.

    “We expect well results in this Northern area to provide rates of return that are competitive with our existing portfolio. Based on this newly combined entity, we are raising our 2020 oil production target to 60,000 barrels per day. We can achieve this goal while still maintaining some of the lowest debt metrics relative to our peers.”

    Four primary targets

    Centennial said its chief targets are the Avalon Shale, 2nd Bone Spring, 3rd Bone Spring and Wolfcamp A formations.

    Assumptions include 255 gross horizontal locations in the four formations, based on 660-foot to 1,056-foot spacing, the company said. Based on this analysis, Centennial said it foresees additional development and downspacing potential may exist across the acquired acreage position.

    https://www.oilandgas360.com/no-slowing-the-permian-land-grab-centennial-resource-development-enters-the-northern-delaware/
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    Suncor Restarts Heavy Canadian Oil Shipment From Syncrude Oil Sands


    Suncor Energy said on Monday that pipeline shipments from the Syncrude Mildred Lake Oil Sands facility in Canada had resumed after completing repairs following a fire at the upgrader on March 14.

    Over this past weekend, Syncrude completed the necessary repairs and start-up activities, and shipments had begun, Suncor said. Currently, pipeline shipments are at around 140,000 bpd (gross), and are expected to increase as additional units complete turnaround activities. Production at the facility is expected to return to full rates in June, Suncor said.

    On March 27, two weeks after the March 14 incident, Suncor said that Syncrude had advanced the planned eight-week turnaround originally scheduled to begin in April, in order to mitigate the impact of the unplanned outage. In the last update to the market before the announcement of the restart of the pipeline, Suncor said on April 19 that it had launched an accelerated repair schedule to restart pipeline shipments at some 50 percent capacity in early May.

    The suspension of operations at Syncrude’s upgrader in Alberta lifted Canadian oil prices substantially in early April, also strengthening U.S. blends that make up WTI, as the bulk of Canadian synthetic crude and heavy oil sands crude is exported to its southern neighbor. As a result, prices of Canadian heavy crude jumped to the highest in two years, while the price of synthetic crude, which is what the Syncrude facility produces and a lot of oil sands producers use, rose to a four-year high.

    As this supply disruption of Canada’s heavy crude oil supply to the U.S. was coinciding with reduced shipment to the U.S. from OPEC, analysts had expected that Gulf Coast refineries would buy in April as much Mexican crude as they can, because higher Canadian crude prices made the similar Mexican grade cheaper and therefore more attractive.

    http://oilprice.com/Latest-Energy-News/World-News/Suncor-Restarts-Heavy-Canadian-Oil-Shipment-From-Syncrude-Oil-Sands.html
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    Another FERC Commissioner Announces Departure


    Federal Energy Regulatory Commissioner (FERC) Colette Honorable said Friday she will leave the board when her term expires in June.

    “After much prayer and consideration I’ve decided not to pursue another term,” Honorable wrote in a note posted on Twitter.

    “I appreciate the strong bipartisan support I’ve enjoyed over the years and look forward to continuing this important work after leaving the commission.”

    Honorable’s retirement raises the possibility of there being only one FERC commissioner by this summer.

    Trump named Cheryl LaFleur acting commissioner of the energy regulatory board in January, and hours later its previous head, Norman Bay, announced he was leaving FERC. The five-member body currently has two members — LaFleur and Honorable — and is short of a quorum.

    Energy industry groups have pushed Trump to nominate new commissioners for FERC, but the White House has yet to reveal who it might tap to sit on the board.

    “The lack of a quorum since February has prevented FERC from making major decisions regarding applications for crucial infrastructure development and improvement across the energy sector,” five gas industry officials wrote in a Washington Examiner op-ed this month.

    The group predicted it would take up to two months for the Senate to vet and approve any President Trump FERC nominees, a worrying prospect for sectors that rely on FERC’s approval power.

    “That means FERC will have been sitting on the sidelines for half the year. The American people can’t afford even one more day,” the groups wrote.

    Honorable, who was nominated to her FERC position by President Obama in August 2014, was confirmed unanimously by the Senate that December.

    https://www.oilandgas360.com/another-ferc-commissioner-announces-departure/
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    Alternative Energy

    India adds record wind power capacity


    The Indian Government said it has set another record in the amount of wind capacity installed over the last year.

    The Ministry of New and Renewable Energy added more than 5,4000MW in 2016/17, surpassing its target of 4,000MW.

    It was also more than the 3,423MW of capacity added the previous year.

    The leading states were Andhra Pradesh, with 2,190MW, Gujarat (1,275MW) and Karnataka (882MW).

    They were followed by Madhya Pradesh, Rajasthan and Tamil Nadu, with 375MW, 288MW and 262MW added respectively.

    Madhya Pradesh recently signed an agreement for a solar power project with a record low tariff.

    The International Energy Agency said India, China and the US led the 75GW wave of new solar additions last year.

    http://www.energylivenews.com/2017/04/27/india-adds-record-wind-power-capacity/
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    Uranium

    China Nuclear Power 2016 net profit up 14.06pct on year


    China National Nuclear Power Co., Ltd saw its net profit increase 14.06% from the preceding year to 8.11 billion yuan ($1.18 billion) in 2016, announced the company in its annual report late April 26.

    Over half of the total net profit, 4.49 billion yuan, was attributed to shareholders during the same period, gaining 18.71% from the year prior.

    In 2016, CNNP achieved 30.01 billion yuan turnover, up 14.53% from the preceding year, the company also said.

    The total assets of CNNP amounted to 282.05 billion yuan in 2016, up 7.15% from the beginning the year; the gross liability was up to 210.32 billion yuan, 6.28% from the start of 2016; asset-liability ratio was at 74.57% by end-2016; the stockholders' equity stood at 40.68 billion yuan, 8.20% higher than the start of the year.

    A total of 16 nuclear power units of CNNP generated 87.03 TWh of electricity last year, growing 17.18% from 74.27 TWh in 2015; on-grid power stood at 80.99 TWh, up 17.05% from the preceding year of 69.19 TWh.

    In 2016, the installed power capacity of the company stood at 13.25 GW, with 1.74 GW added that year; some nuclear projects were under approval and construction, with expected installed capacity of 10.38 GW, showed data from the report.

    The annual utilization time stood at 7,371.5 hours last year, 212.5 hours less than 7,584 hours in 2015, due to frequent maintenances.

    http://www.sxcoal.com/news/4555397/info/en
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    Uranium producer Cameco posts loss vs year-ago profit


    Cameco Corp , the world's second-biggest uranium producer, posted a bigger-than-expected quarterly loss, partly hurt by the termination of a contract by Tokyo Electric Power Co, operator of Japan's wrecked Fukushima nuclear plant.

    The Canadian company said its results were also hurt by weak uranium prices amid a prolonged glut.

    Spot prices of uranium, used to fuel nuclear reactors, dipped to a 13-year low late last year and have rebounded only modestly in 2017.

    Cameco said severance costs and a strengthening Canadian dollar also weighed on its first-quarter results.

    The net loss attributable to Cameco's equity holders was C$18 million ($13 million), or 5 Canadian cents per share, in the first quarter ended March 31, compared with a profit of C$78 million, or 20 Canadian cents per share, a year earlier.

    Excluding items, the company lost 7 Canadian cents per share, bigger than the average analyst estimate of 1 Canadian cent, according to Thomson Reuters I/B/E/S.

    Revenue at the Saskatoon, Saskatchewan-based company fell nearly 4 percent to C$393 million, with declines stemmed by high revenue from its Nukem unit, which is a nuclear fuel broker.

    Analysts had expected revenue of C$372.345 million.

    http://www.reuters.com/article/cameco-results-idUSL4N1I04XU
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    Agriculture

    India draws up $8.7 billion plan to turn urea exporter


    India aims to become a urea exporter by 2021 as the South Asian nation has drawn up a 555 billion rupee ($8.7 billion) plan to revive mothballed fertilizer plants and set up gas import and pipeline facilities in eastern India.

    The fertilizer plants would raise annual urea production capacity by 7.5 million tonnes, fertilizer minister Ananth Kumar told a news conference on Thursday.

    India produced 24.2 million tonnes of urea in 2016-17. The country's farm sector accounts for about 15 percent of its $2 trillion economy and employ three-fifths of its 1.3 billion people.

    The country imported about 5.4 million tonnes of its fertilizer needs from countries including Iran, China and Iran during the last fiscal year ending in March.

    "From an importing country, we will become an exporting country," said Kumar. "For food security, we need fertilizer security."

    The expansion includes building a 2,650-km (1,590-mile) pipeline, the revival of four urea plants in northern Uttar Pradesh state, eastern Jharkhand, Bihar and Odisha states, and building a liquefied gas import facility all at a cost of about 500 billion rupees, oil minister Dharmendra Pradhan said during the news conference.

    A separate fertilizer project at Ramagundam in southern Indian would cost 55 billion rupees, he added.

    The fertilizer projects will get natural gas as a feedstock from Adani Group's 5 million tonne a year liquefied natural import facility at Dhamra in Odisha.

    "We have derisked the project... all the expansion will be on imported LNG," Pradhan said, adding the projects will be in operation by between 2020 and 2021.

    http://www.reuters.com/article/us-india-fertiliser-idUSKBN17T1HY
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    New U.S. potash player K+S faces warehouse squeeze


    Germany's K+S AG will crack into the U.S. fertilizer market this spring when it opens the first new western Canadian potash mine in nearly five decades.

    But the fifth-largest global potash seller faces a stiff challenge before it makes a single delivery: where to store the pink granular nutrient until farmers need it.

    The U.S. market for potash - a key type of fertilizer used to grow corn and wheat - is already dominated by Potash Corp of Saskatchewan, Agrium Inc and Mosaic. It's also saturated: potash prices are near nine-year lows.

    Not only do these market leaders have an ample supply of potash, they also boast a string of warehouses built strategically across the Midwest where they can quickly distribute their product to U.S. farmers, who have a narrow window every spring to fertilize.

    K+S, which will open its Legacy mine on Tuesday in Saskatchewan, told Reuters it is still in "planning phase" of a warehouse network with Koch Industries Inc [KCHIN.UL], which will sell K+S' potash in the United States under a marketing agreement.

    K+S spokesman Michael Wudonig added the company is confident it will find sufficient storage. Koch spokesman Rob Carlton declined to comment.

    Investors don't have a clear understanding of K+S' missing warehouse link as it opens Legacy, according to analyst Charles Neivert, who covers the fertilizer industry at Cowen.

    “How are they going to get into a U.S. market that effectively is grossly over-supplied already and isn’t growing? Where are they going to find room to put the (potash)?" Neivert asked.

    K+S' success in distributing potash has big market implications, given there is already a glut of global capacity. Even more potash from Legacy will threaten a modest price recovery seen so far this year. For a graphic, click: tmsnrt.rs/2oMvk6G

    Since K+S broke ground on Legacy, U.S. potash prices have fallen roughly in half, to around $250 per ton, according to data published by BMO.

    K+S plans to sell up to 500,000 tons of potash annually in the United States, accounting for some 7 percent of U.S. demand, according to industry estimates. Legacy will also answer a longer-term supply issue K+S faces, as potash at its other mines is depleted.

    WAREHOUSES ALREADY OCCUPIED

    Potash Corp, Agrium and other potash players dominate the U.S. market by leveraging their own warehouses and longtime leases with others to position potash for just-in-time application by farmers.

    The alternative is relying on the 10- to 14-day railway trip for potash to move from mines in Saskatchewan to buyers in the Midwest and northern Plains.

    "Many of the large warehouses already have space consigned, so (K+S') opportunity to get placed in the large facilities could be difficult," said Gary Halvorson, vice-president of retail agronomy at U.S. farm cooperative CHS Inc.

    "That is a very key piece of supply chain," Halvorson added. "For any manufacturer of dry fertilizer, they really need to put their back into having tonnes close enough to end users."

    CHS has nearly 500 U.S. farm retail stores along with warehouse space that it leases to potash suppliers. It has not leased space to K+S, the company said.

    "That's the challenge K+S faces to break into the market," said Joe Dillier, director of supply and merchandising at Growmark, an Illinois-based farm cooperative and distributor that leases some storage space to potash miners.

    K+S partner Koch could store some of K+S' potash in its own fertilizer warehouses, and K+S has said it will take until year end to reach Legacy's full annual output pace of 2 million tonnes. Three-quarters of production will be sold to industrial users or off-shore buyers.

    Legacy is opening as farmers plan to sow less corn, a fertilizer-intensive crop, making crop nutrient sales a bigger challenge.

    To break in, Koch may need to cut prices to sway U.S. buyers, since K+S' logistics will not be as smooth as for established players, said industry consultant Kelvin Feist.

    "There is no easy way in - you have to discount the price," Feist said. "Koch is late to the party."

    Lower costs would be timely for U.S. farmers, struggling with declining incomes and used to dealing with a consolidated farm input sector, said Aaron Heley Lehman, president of Iowa Farmers Union. He welcomes the potash mine.

    "It's long overdue for our farmers to have more choice."

    http://www.reuters.com/article/us-usa-fertilizers-k-s-idUSKBN17X1L1
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    Base Metals

    Freeport Indonesia workers hold rally at start of planned strike


    Thousands of workers from the Indonesian unit of Freeport McMoRan Inc staged a rally near its Papua mine on Monday, a union leader said, protesting against lay offs by the miner due to a contract dispute with the government.

    The union representing a third of the 32,000 workforce sent a notice to Freeport on Monday threatening to strike from May 1 to the end of the month at the Grasberg mine, the world's second-biggest copper mine.

    Freeport is trying to ramp up output and exports at Grasberg after reaching a temporary deal with the government following a 15-week stoppage linked to new mining rules, but customers are concerned that labor unrest could now hit supply.

    Freeport has laid off about 10 percent of its workforce and warned it could cut another 5,000 to stem losses, sparking protests from workers.

    "We are still waiting. We have good intention by opening up in a transparent and fair manner so the problem can be solved. We actually don't want a strike to happen," said the union leader Aser Gobai, adding that about 8,000 workers had taken part in the rally in Timika, the nearest town to the mine.

    A spokesman for Freeport Indonesia did not respond to requests for comment.

    Freeport Chief Executive Richard Adkerson said last month that the company was in talks with union leaders "in an effort to get them back to work", and warned it could punish workers for absenteeism.

    Up to $40 million-per-month of spending on the Grasberg underground development could be cut if contract matters are not resolved, which could lead to more layoffs, he said.

    Any delays in resuming exports could also support copper prices, with London Metal Exchange prices currently around $5,735 a tonne.

    Adding to tensions around Grasberg, several Freeport workers and police were injured in a clash in Papua last month, when officers fired tear gas and rubber bullets at demonstrators in Timika who authorities said had been attempting to free a union leader at a court hearing.

    New rules in Indonesia require Freeport to obtain a new mining permit, divest a 51 percent stake, build a second copper smelter, relinquish arbitration rights and pay new taxes and royalties.

    Freeport insists any new permit must have the same fiscal and legal guarantees as under its 30-year mining contract, and in February it served notice to Jakarta, saying it has the right to commence arbitration if no agreement is reached by June 17.

    http://www.reuters.com/article/us-indonesia-freeport-strike-idUSKBN17X1E9
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    Chile copper output drops 23% in March on Escondida strike: government


    Chile produced 378,261 mt of copper in March, down 23.1% from the year-ago month, as a strike at the world's largest copper mine bit into output, government data showed Friday.

    Workers at the BHP Billiton-controlled Escondida copper mine went on strike for an unprecedented 44 days in February and March in a conflict over pay and conditions, halting all production at the open pit operation. It was the longest strike in the Chilean mining industry for more than four decades.

    Unscheduled maintenance at another major mine also reduced output during the month, Chile's statistics agency INE said in a statement.

    The monthly figure marked little changed from 376,948 mt in February, which also impacted by the strike.

    Copper production during the first quarter totalled 1.208 million mt, down 14.3% Q1 2016.

    The 2,500 unionized employees of Minera Escondida agreed to return to work in late March despite not agreeing to a new contract with management, opting instead for an 18-month extension of their previous contract. The move means that the two sides will have to hold fresh negotiations on a new contract early next year.

    BHP Billiton is currently working to return the mine to its previous production levels but this is expected to take several weeks.

    Earlier this month, Rio Tinto, which owns 30% of Escondida, estimated the mine will not reach capacity levels until July this year, suggesting the strike will continue to weigh on Chilean mine output well into the second quarter.

    BHP Billiton has cuts its production forecast for the 2017 financial year to 780,000-800,000 mt, from 1.07 million mt previously.

    The loss of production at Escondida due to the strike has forced the government to reduce its outlook for Chilean copper production this year. In April, the Chilean Copper Commission cut production forecast for 2017 to less than 5.6 million mt, down from 5.8 million mt estimated in January, as the conflict at the mine lopped 180,000 mt off its previous forecast.

    Chile is the world's largest producer and exporter of copper, accounting for around 29% of global mine output last year.

    The strike has also impacted production of other metals.

    Production of gold, a byproduct at Escondida, fell 24.2% in March to 2,709 kg, compared to 12 months earlier, reflecting both the strike and the closure last year of Kinross Gold's Maricunga mine over environmental issues. Production during the first quarter totalled 8,298 kg, down 22% from 2016.

    Production of silver fell 33.1% in March to 88,945 kg, and 33.1% in the first quarter to 283,385 kg.

    Production of molybdenum, a key byproduct at several of Chile's large copper mines (but not at Escondida) rose 7.6% in March to 5,156mt, although production in the first three months of the year slipped 4.2% to 14,388mt. Given the importance of the Escondida mine to the Chilean economy, the strike has had an important impact on growth figures during the first quarter of the year.

    After GDP contracted by 1.3% in February as a result of reduced mining activity, economists surveyed by the Central Bank earlier this month forecast flat growth in March.

    https://www.platts.com/latest-news/metals/santiago/chile-copper-output-drops-23-in-march-on-escondida-21591153
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    Bougainville region lifts decades-old ban on new mining


    A mineral-rich region of Papua New Guinea has lifted a 40-year-old ban on new mining and exploration, opening the way for iron ore and copper operations.

    The autonomous Bougainville region has a troubled history over resource development, with a bloody secessionist conflict erupting in the late 1980s stoked by dissatisfaction in how benefits from the Panguna copper mine were distributed.

    Global mining giant Rio Tinto Ltd said last year that it would relinquish ownership of Panguna, closed for around 25 years.

    The lifting of the ban allows for applications to mine in the iron ore rich areas of Tore, Isina and Jaba, but does not include Panguna, one of the largest copper mines in the world, Bougainville president John Momis said in a statement on Sunday.

    He added that scrapping the ban would ensure the area's economic development, with the government seeking applications from genuine investors.

    "I look forward to the development of long term economic partnerships to allow Bougainville to fulfill the economic potential she rightly deserves," Momis said.

    The moratorium on exploration and mining had been in place since 1971 - with the exception of Panguna - due to local concerns over revenue-sharing and the impact on the environment.

    http://www.reuters.com/article/us-papua-mining-idUSKBN17Y05E
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    Norway's Hydro ups 2017 aluminium demand growth forecast to 4-6%


    Norsk Hydro is raising its aluminium demand growth forecast for this year, the Norwegian producer said Friday.

    "We are raising our expected 2017 global primary demand growth outlook from 3-5% to 4-6%, and we expect a largely balanced global market," said Svein Richard Brandtzaeg, the company's president and CEO, in its first-quarter results statement.

    Global primary aluminium consumption decreased 3.4% to 14.7 million mt in the first quarter compared to the fourth quarter of 2016, mainly due to seasonal effects with the Chinese New Year and customer destocking, Hydro said.

    Compared with Q1 2016, however, global demand increased 5.9%.

    Outside China, demand seasonally increased 1.9% in the first quarter from Q4 2016, while the year-on-year increase was 3.4%.

    "Consumption outside China amounted to 7.1 million mt for the first quarter of 2017. Corresponding production amounted to 6.7 million mt, a decrease of 2.3% compared to the fourth quarter of 2016," Hydro said.

    "Production outside China experienced a 0.8% increase compared to the first quarter of 2016, largely driven by ramp-up of new production capacity in India. Demand for primary aluminium outside China grew by around 3% in 2016, and is expected to grow by 2-4% in 2017," it said.

    Compared with Q4 2016, Chinese aluminium consumption fell 7.9% to 7.6 million mt, due to seasonal effects, but was up 8.3% year on year.

    "Corresponding aluminium production increased by 1.7% compared to the fourth quarter of 2016, and increased 16.6% compared to the first quarter of 2016," the company said.

    Demand for primary aluminium in China is expected to grow by around 6-8% in 2017 and production is expected to increase by 10-12%. Hydro said.

    Hydro produced 516,000 mt of primary aluminium in the first quarter, down 2% from 526,000 mt in Q4 2016 but up marginally from output of 514,000 mt in Q1 2016.

    The company has sold forward around 50% of its expected primary aluminum production for Q2 2017 at around $1,875/mt.

    Planned maintenance programs at the Paragominas and Alunorte units in Brazil reduced Hydro's bauxite and alumina production volume for the quarter, the company said.

    Alumina production was off 7% from Q4 at 1.523 million mt, but up from 1.517 million mt in Q1 2016, while bauxite output stood at 2.4 million mt, down 22% from 3.063 million mt in Q4 and down 11% from 2.682 million mt in Q1 last year.

    https://www.platts.com/latest-news/metals/london/norways-hydro-ups-2017-aluminum-demand-growth-26723674
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    Sherritt surrenders equity share at Ambatovy to cut $1.4B in debt


    Canada-based nickel miner Sherritt has struck a deal with its partners at the Ambatovy nickel operation in Madagascar, allowing the company to eliminate $1.4 billion in debt.

    In a news release, the Toronto-based firm said it will reduce its stake in the joint venture from 40% to 12%, and remain the mine operator. The nickel-cobalt mine and processing facilities are expected to run until 2024.

    "After months of negotiation, I am pleased to be able to announce a resolution which removes the largest area of uncertainty for both Ambatovy and Sherritt. With this transaction, we eliminate $1.4 billion in debt from Sherritt's balance sheet, and maintain our exposure to Ambatovy with a clean 12 per cent interest and continuity as the operator," CEO David Pathe said in a statement.

    Sherritt didn't say what the mine's new ownership structure would look like, but previously Sumitomo Corp. owned 32.5% and Korea Resources Corp (Kores) had a 27.5% stake.

    In February Sherritt revealed it was looking at exiting Ambatovy  – a mine it spent 90% of the $5.5 billion it cost to develop, with its Asian partners – in an effort to relieve a crushing debtload that had caused red ink to spill.

    To build the mine, Sherritt had to borrow US$650 million from its Korean and Japanese partners, to pay for its 40% share of what is the world's biggest nickel mine, with the capacity to produce 60,000 tonnes of nickel and 5,600 of cobalt a year.

    Sherritt, which also owns oil and gas operations in Cuba and mines cobalt and nickel on the island through its Moa joint venture, reported a net loss of $378.9-million for 2016. 2015 was quite a bit worse, with a net loss of $2.1 billion largely due to a $1.6-billion writedown on Ambatovy.

    The company's stock actually gained 1.11%  on the news, to close at 91 cents in Toronto.

    http://www.mining.com/sherritt-surrenders-equity-share-ambatovy-cut-1-4b-debt/
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    Steel, Iron Ore and Coal

    Iron ore price rebounds


    The Northern China import price of 62% Fe content ore enjoyed another day of solid gains on Friday to trade up 2.1% at $68.00 per dry metric tonne according to data supplied by The Steel Index. Higher grade iron ore with 65% iron ore content topped $80 a tonne for the first time in two weeks.

    Iron ore has recovered 10.6% in value since hitting five-month lows earlier this month and the steelmaking raw material is still trading in positive territory compared to this time last year. The recovery comes on the back of higher steel prices in China which consumes nearly three-quarters of the world's seaborne ore.

    Iron ore's fightback comes despite dire predictions for the price outlook.

    In a report released this week BMI Research forecasts prices are entering a multi-year slump, averaging lower each year through to 2021. The forecasters expect the commodity to average $70 a tonne this year (year-to-date the average price is just under $82), $55 in 2018, and decline to $46 by 2021, on rising supplies from Australia and Brazil.

    On the demand side stockpiles in China has been a major factor behind iron ore's slide from near triple digits in February. According to this week's Umetal's survey of the 42 largest ports in China, total iron ore inventories have stayed near record highs at more than 132 million tonnes.

    Elevated stocks have not dampened importer enthusiasm however with total imports for the first quarter climbing 12% to 271 million tonnes after the second highest cargo volumes recorded in March of 95.6m tonnes.

    http://www.mining.com/iron-ore-price-rebounds/
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    Nippon Steel FY profit falls 13 pct, hurt by surging coal prices


    Nippon Steel & Sumitomo Metal Corp, Japan's biggest steelmaker, said its recurring profit for the year ended March slid 13 percent, hit by higher coking coal costs, and held off from issuing earnings predictions for the current year citing volatility on coal and steel pricing.

    The world's third-largest steelmaker said in a statement on Friday that recurring profit - pre-tax earnings before one-off items - declined to 174.5 billion yen ($1.6 billion) from 200.9 billion yen the previous fiscal year. That beat both its own estimate of 130 billion yen and a consensus of 145.9 billion yen from 14 analysts surveyed by Thomson Reuters I/B/E/S.

    "We can't make reasonable forecast now since it is unclear where prices of coking coal and steel prices are headed," Nippon Steel's executive vice president Toshiharu Sakae said at a news conference.

    "But we'll make various efforts to boost our profit this year," Sakae said. Steady steel demand at home and abroad, plans to cut costs by over 50 billion yen, and scheduled price hikes on some products of about 5,000 yen per tonne would help offset heavier raw materials costs, he said.

    A mean forecast of 15 analysts for Nippon Steel's recurring profit for this year comes to 308 billion yen, according to Thomson Reuters I/B/E/S.

    Higher-than-planned steel shipments and stronger earnings in its overseas units contributed to results beating the company's own estimates, Sakae said. Reflecting that, Nippon Steel raised its annual dividend for the last year by 20 yen to 45 yen per share.

    While Sakae didn't give a detailed outlook on coking coal prices, he said raw material prices will likely become less volatile.

    The price of coking coal - a vital steelmaking ingredient - has been volatile, nearly quadrupling between March and late November 2016, but then halving between that time and the end of March 2017.

    Last month brought a new twist, when Cyclone Debbie hit Australia, cutting rail lines in the world's biggest coking coal export region and sending prices higher again. While rail links have been restored, Japanese steelmakers have had to scramble for alternative supplies.

    On Thursday, JFE Holdings Inc, Japan's No.2 steelmaker, reported recurring profit jumped nearly by a third in the 12 months that ended March, boosted by hefty appraisal gains on inventories of coking coal.

    JFE also increased its annual dividend estimate for the last year by 10 yen to 30 yen per share.

    http://www.reuters.com/article/nippon-steel-results-idUSL4N1I02Z0
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    Russian steelmaker NLMK's earnings more than double on higher prices, sales


    Russian steelmaker NLMK's core earnings more than doubled in the first quarter, beating expectations, on higher prices and export sales and an improving domestic economy.

    Steel manufacturers in Russia, such as market leader NLMK and its closest competitor Evraz, have struggled over the last two years as oversupply helped to push world steel prices to 11-year lows and Russia's economic crisis sapped domestic demand.

    But prices have picked up and prospects for the sector are expected to improve further this year on expectations of the Russian economy returning to growth.

    "In Q1 2017, NLMK Group was able to grow sales in the EU and U.S. markets against a backdrop of higher internal demand," NLMK Chief Financial Officer Sergey Karataev said in a statement.

    NLMK, controlled by Russian billionaire Vladimir Lisin, posted earnings before interest, taxation, depreciation and amortisation (EBITDA) totalled $618 million, beating an average of analysts' forecasts in a Reuters poll of $598 million. EBITDA was $290 million in the first quarter of last year.

    Chief Executive Oleg Bagrin said NLMK's stronger earnings could lead management to recommend a first quarter dividend payout higher than that outlined in its policy.

    Speaking on a conference call with investors, Bagrin said the matter would be discussed at a board meeting on Friday.

    "Probably, given the financial position and performance of the company, the dividend payout proposed by the management will be above the policy targets," he said.

    NLMK's current policy states that dividend payouts are to be made in the range of 50 percent of net income and 50 percent of free cash flow, as long as the company's net debt to EBITDA ratio is one or below.

    Its net debt to EBITDA ratio was 0.4 in the first quarter while free cash flow totalled $208 million, down 24 percent year-on-year.

    NLMK's revenue rose 37 percent year-on-year to $2.2 billion on higher prices for its products, the company said.

    Net profit was $323 million in the first three months of 2017, versus $57 million in the same period last year when the company said its earnings were hit by losses incurred from exchange rate fluctuations.

    http://www.reuters.com/article/russia-nlmk-results-idUSL8N1I059I
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