Mark Latham Commodity Equity Intelligence Service

Friday 17th June 2016
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    Islamic State Iraq should be split in three: top Kurdish official

    Once Islamic State is defeated, Iraq should be divided into three separate entities to prevent further sectarian bloodshed, with a state each given to Shi'ite Muslims, Sunnis and Kurds, a top Kurdish official said on Thursday.

    Iraqi troops have expelled Islamic State from some key cities the militants seized in 2014, and are advancing on Mosul, the largest city under IS control. Its fall would likely mean the end of the group's self-proclaimed caliphate.

    But even if Islamic State was eliminated, Iraq would still be deeply divided. Sectarian violence has continued for years and a power-sharing agreement in Baghdad has only led to discontent, deadlock and corruption.

    Masrour Barzani, head of the Kurdistan Regional Government's (KRG) Security Council and son of KRG President Massoud Barzani, said the level of mistrust was such that they should not remain "under one roof".

    "Federation hasn't worked, so it has to be either confederation or full separation," Barzani told Reuters in an interview on Wednesday in the Kurdish capital Erbil. "If we have three confederated states, we will have equal three capitals, so one is not above the other."

    The Kurds have already taken steps toward realizing their long-held dream of independence from Iraq, which has been led by the Shi'ite majority since the overthrow of Saddam Hussein, a Sunni, in 2003, following a U.S.-led invasion.

    They run their own affairs in the north and have their own armed forces, the Peshmerga, which have been fighting Islamic State militants with help from a U.S.-led coalition.

    Sunnis should be given the option of doing the same in the provinces where they are in the majority in the north and the west of Iraq, said Barzani.

    "What we are offering is a solution," he said. "This doesn't mean they live under one roof but they can be good neighbors. Once they feel comfortable that they have a bright and secure future, they can start cooperating with each other."

    His father has called for a referendum on Kurdish independence this year as the region is locked in territorial and financial disputes with the central government.

    Baghdad has cut off payments from the federal budget to the KRG to try to force the Kurds to sell crude produced on their territory through the state oil marketing company and not independently. The Kurds also claim the oil region of Kirkuk, in northern Iraq, as part of their territory.

    Barzani said that the Sunnis' feeling of marginalization by the Shi'ite leadership had facilitated the takeover of their regions by Islamic State militants.

    In addition, Iraq endured months of wrangling and chaos over a government reshuffle that was to curb corruption. In May, frustration over the delays culminated in the unprecedented breach by protesters of the Green Zone, which houses parliament, government offices and many foreign embassies.

    Ahead of the battle for Mosul, Barzani said the city's different communities should agree in advance on how to handle the aftermath. Mosul's pre-war population of 2 million was mostly Sunni, but included religious and ethnic minorities including Christians, Shi'ites, Yazidis, Kurds and Turkmen.

    Almost all non-Sunnis fled the Islamic State takeover, along with hundreds of thousands of Sunnis who could not live under the militants' harsh rule or could not endure Baghdad's financial blockade imposed on IS-held regions.

    "I think the most important part is how you manage Mosul after Daesh is defeated," he said, referring to an Arabic name of Islamic State. "We don't want to see the gap of liberation and then a vacuum, which probably will turn into chaos."

    Iraqi Prime Minister Haider al-Abadi at the end of last year expressed hope that 2016 would be the year of "final victory" over Islamic State with the capture of Mosul.

    The army, counter-terrorism forces and Shi'ite Muslim paramilitary fighters backed by air strikes from a U.S.-led coalition are also in a major operation to retake the mainly Sunni city of Falluja, an hour's drive from Baghdad.
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    French govt steps in as unions, employers spar over jobless benefit

    France's government stepped in to ensure payment of unemployment benefit on Thursday after talks aimed at securing rollover funds before a June 30 deadline collapsed, signalling further deterioration in fraught relations between unions and employers.

    Labour Minister Myriam El Khomri, who is already struggling to arrange a truce over contested labour law reforms, said she would make sure a separate dispute between the two sides did not disrupt payouts from a national unemployment insurance fund.

    "The government will take the necessary steps to ensure that benefit payments continue as of tomorrow," El Khomri said in a statement.

    Normally, the country's jobless benefit fund is co-managed by unions and employer groups, but talks aimed at organising the rollover of those fund from June 30 onwards ran into trouble in recent weeks amid broader tensions in industrial relations.
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    Gold breakout, and fade.

    Gold Surges To 2-Yr. High Above $1,315, But Then Backs Well Off Daily High as U.S. Equities Recover

    Thursday June 16, 2016 13:18

    (Kitco News) - The gold market early Thursday pushed to a two-year high of $1,316.80 an ounce, basis August Comex futures. However, prices had backed well down from the daily highs in early afternoon trading, as U.S. stock indexes rebounded from their session lows and as the key “outside markets” were in a bearish daily posture for the precious metals—lower crude oil prices and a higher U.S. dollar index. August Comex gold was last up $8.20 an ounce at $1,296.90. July Comex silver was last up $0.077 at $17.58 an ounce.

    Gold is being supported by the perceived dovish FOMC statement on Wednesday and on safe-haven demand amid wobbly world stock markets and falling world government bond yields. World stock markets were mostly weaker Thursday, amid some keener risk aversion in the marketplace. U.S. stock indexes were just slightly lower and well up from their daily lows in early afternoon New York trading.

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    The Met goes all coy.

    UK Outlook for Tuesday 21 Jun 2016 to Thursday 30 Jun 2016:

    Cloud and outbreaks of rain will clear eastwards on Tuesday to give drier and brighter conditions for many, albeit with a scattering of showers in the northwest, and some southeastern parts could hang onto the cloud and rain all day. Thereafter there is a higher than usual level of uncertainty in the forecast, but it seems likely that most parts of the country will see changeable, often unsettled weather prevailing. Spells of rain are likely at times, perhaps accompanied by stronger winds in the north, but there will also be some drier, sunnier periods with the risk of a few showers. Temperatures will generally be near or slightly above average, possibly becoming warm at times, especially in the south.

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    Oil and Gas

    Russia’s Novak Sees No Need Now to Cooperate With Saudis on Oil

    It makes no sense now for Russia and Saudi Arabia, the world’s biggest oil suppliers, to work together to influence the market, even as U.S. shale production is poised to rebound next year, Russia’s Energy Minister said.

    Without a “force majeure with prices,” there’s no point in talking about joint action, Alexander Novak said in an interview on Bloomberg TV on the sidelines of the St. Petersburg International Economic Forum. “The door is always open,” but there should be “a desire and a need” for cooperation, which is not the case now, he said.

    The collapse in Brent crude prices to a 12-year low in January squeezed out high-cost producers, helping to reduce oversupply and ultimately boost prices. A tentative deal between Russia, Saudi Arabia and other major producers to freeze output in order to stem the glut was abandoned in April, in part because a Saudi-led OPEC policy of pumping without limits seemed to be paying off.

    “We are in a global period of low oil prices now and such periods may last 10 to 15 years,” Novak said. Still, today’s price of about $50 a barrel is enough to proceed with investments, which suits both producers and customers, he said.

    At current prices, U.S. shale production will probably start recovering early next year, Novak said. “Shale production can pick up quickly,” he said. “A recovery cycle may take six to nine months on a price increase.” There are also risks that prices will fall if crude production in Canada, Libya or Nigeria rebounds after supply disruptions in those countries. “We just should watch the market closely now,” he said.

    Novak met Venezuela’s Oil Minister Eulogio Del Pino to discuss cooperation between members of the Organization of Petroleum Exporting Countries and non-members, including a Venezuelan proposal for an output “band” system, according to an e-mailed statement from the South American country’s oil ministry.

    Novak was expected to meet new Saudi Minister of Energy and Industry Khalid al-Falih in Beijing this month at the G20 energy summit. While the meeting is possible, it’s not confirmed yet, Novak said.

    While the government in Moscow prepares to draft the nation’s 2017 budget using an average oil price of $40 a barrel, Novak said it may reach $50. Brent crude this year has averaged about $40 a barrel.

    In a later interview, Novak reiterated a plan to increase crude output to about 540 million metric tons this year and set next year’s target “somewhere in the range” of 525 million to 545 million tons. Crude exports may rise about 3 percent this year to roughly 252 million tons, and the trend is likely to continue next year, he said.

    Attached Files
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    China and US in close race for title of Worlds biggest oil importer

    The world’s biggest oil importer. The title nobody wants.

    For decades the U.S. held undisputed rights to the crown. Last year, China squeaked ahead for the first time amid growing demand and as rising U.S. shale production displaced overseas deliveries. The Middle Kingdom looked poised to become the center of the crude importing world.

    Then $30 oil happened. U.S. drillers shut the most rigs in modern history, production began to fall and imports have rebounded. Chinese oil firms also shuttered output and kept demand growing. Now the two are neck and neck.

    “I don’t think any country would want to boast about being the world’s largest importer of crude,” said John Driscoll, chief strategist at JTD Energy Services Pte in Singapore. “Who gets more nervous during OPEC meetings? Who’s more vulnerable to supply disruptions, geopolitics or resource nationalism?”

    The one group with no reason for dismay is the Organization of Petroleum Exporting Countries, which needs buyers to soak up a supply glut that has cut prices in half from two years ago.

    The U.S. imported 8.04 million barrels of oil a day in March, according to the Energy Information Administration, the most since August 2013 and about 330,000 more than China did in the same period. U.S. output has fallen 5.9 percent since peaking in April 2015, and drillers have idled 80 percent of the country’s oil rigs since October 2014.

    The increase in U.S. imports comes after years of declines due to increased shale production. Meanwhile Chinese economic growth has boosted imports four-fold since the beginning of 2005, making the country the second-largest consumer in the world. China imported more oil than the U.S. in a month for the first time in April 2015 and again in February.

    China’s crude production dropped by the most in 15 years in May as producers from PetroChina Co. to Cnooc Ltd. reduce drilling in unprofitable fields. Lower domestic output will increase the country’s dependence on imports from the Middle East and Russia, Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong said in an e-mail. China also recently allowed smaller independent refineries, known as teapots, to begin importing oil directly, creating new buyers.

    “I don’t see the U.S. overtaking China on a consistent basis,” said Amrita Sen, chief oil economist for Energy Aspects Ltd. in London. “Especially since China now has sustainably higher crude demand from teapot refineries.”
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    Norwegian oil unions threaten drilling rig strike

    Nearly 300 employees on oil and gas drilling rigs off Norway could go on strike unless a wage deal is agreed by June 22, the country's state-appointed mediator said on Thursday.

    Rowan Companies' Viking and Gorilla rigs will be affected, one of the unions involved in the wage talks said. It was not clear if other rigs would be affected.

    The mediator said that around 3,000 workers could join a long-term strike.

    Labour disputes on drilling rigs typically halt oil and gas exploration and drilling of new production wells at existing fields, but do not affect current production at wells.

    One of the unions, Safe, said 79 of its members working on Rowan Companies' Viking and Gorilla rigs would go on strike if no agreement is reached.

    Unions and the rig owners are due to meet to negotiate an annual wage deal on June 20 and have set a deadline to reach an agreement by midnight on June 21. They have not publicly disclosed the terms demanded.

    The Viking rig currently does work for Swedish oil firm Lundin, while the Gorilla works for oil major ConocoPhillips, Rowan said recently.

    In addition to the 79 Safe members, another 190 workers represented by the Industri Energi union and 14 members of DSO would be part of the first wave of a strike, the state mediator said.

    A spokesman for ConocoPhillips said on Thursday that the Gorilla rig is currently engaged in the plugging of abandoned wells on its Ekofisk field in the North Sea, and that oil output would be unaffected by a strike.
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    Gasoline appeal fades as refiners chase the next profit boost

    Just as drivers hit the road for summer holidays, refiners are turning the taps down on gasoline as a global excess cuts into their profits.

    Refiners in Europe, Asia and the United States, from the mighty ExxonMobil down to smaller players such as Italy's Saras, amped up the proportion of gasoline they churned out to cash in on record driver demand.

    But now they are moving back to the diesel, jet fuel and heating oil that for more than a year had become a "by-product" they did not want.

    "The pendulum of profitability between gasoline and diesel is set to swing back toward the latter during the next 12 months," ESAI analyst John Galante said in an annual forecast. "Tightness in the global gasoline market has run its course."

    Already, Europe's refineries are moving towards diesel, traders said, while Asian units are maximising jet fuel. In the United States, Husky Energy in Lima, Ohio, is making more diesel, while Delta Air Lines is considering switching its Trainer, Pennsylvania refinery to maximise diesel.

    The shift is due in part to the success of their own efforts to do everything they could - from choosing different crude oil to tweaking the way they ran their units - to capitalise on booming gasoline and naphtha demand.

    Most can only shift a small amount of production from one product to another - less than 5 percent, even in a best-case scenario - but the worldwide effort had a big impact.

    Physical supply of so-called light-end products built quietly on ships, at refineries and in storage tanks, with even China exporting gasoline to the United States. The figures are now showing up in official data.

    According to Euroilstock, gasoline inventories in Europe clocked a counter-seasonal build of 3 million barrels from April to May, while even the U.S. Energy Information Administration has shown some builds in gasoline stocks despite record demand from drivers.

    "It has become clear that this is really not 2015 anymore and that the effects of yield-shifting exercises across the globe have more or less taken care of what we assume to still be strong demand growth for gasoline," analysts at JBC wrote.

    At the same time, an unexpected shortfall in diesel and jet fuel crept in, buoyed by strikes that closed four French refineries and extreme heat from El Nino that boosted distillates burned in power generators in India, Pakistan and Vietnam.

    Last week, premiums for gasoline over ultra-low-sulphur diesel fell to flat on a per-barrel basis for the first time since March, in Europe, and November, in Asia, according to JBC. U.S. gasoline traded at a discount to diesel on Wednesday for the first time seasonally in three years 1RBc1-HOc1.

    Still, the shift could prove to be only a short-term profit aid. One trader said the change "makes little sense historically", while analysts warned it could simply crush diesel margins.

    "If they are forced to make more diesel it will undermine those economics, particularly as August is typically a slow period for demand," said Robert Campbell, head of oil products with Energy Aspects.

    Attached Files
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    Oil Bosses See Volatility Easing With Crude Around $50 a Barrel

    Crude is stabilizing around $50 a barrel and may only average $55 next year as the global oversupply continues to cap prices, according to two of the world’s top oil executives.

    The past few weeks have seen prices “more or less” steady at around $50, Rainer Seele, chief executive officer of Austria’s OMV AG, said Thursday in an interview in St. Petersburg. Central Europe’s largest oil company forecasts crude will average $40 a barrel this year and $55 in 2017, he said.

    Benchmark Brent futures have rallied more than 70 percent from a 12-year low in January as the global glut is trimmed by unexpected outages and a slide in U.S. output. Yet the recovery remains “fragile” as disrupted supplies return to the market and OPEC members pump more than expected, Goldman Sachs Group Inc. said this week.

    The kind of volatility that saw prices top $100 in 2014 and sink below $28 in January won’t be repeated in the “medium term,” Vagit Alekperov, CEO of Russia’s Lukoil PJSC, said at the St. Petersburg International Economic Forum. Oil will average $50 this year and $55 to $60 in 2017, he said in an interview.

    That’s more optimistic than Russian Energy Minister Alexander Novak, who forecast next year’s price at an average $50 a barrel.

    “It is very unlikely that the prices are going to be high in the forthcoming few years,” he said in an interview with Bloomberg Television. “There is a lot of oil in the world.”

    For a QuickTake explainer on how oil prices are determined, click here.

    Oil companies have sold assets, canceled projects and cut thousands of jobs to weather crude’s collapse over the past two years. BP Plc, which has long warned prices will stay “lower for longer,” now sees oil above $50 a barrel by the end of 2016.

    The current level is “very sustainable,” CEO Bob Dudley told reporters in St. Petersburg. The market will be balanced by the end of the year, he said.
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    Gazprom, Fluxys advance talks on small-scale LNG cooperation

    Russia’s Gazprom said it is looking the possibility of cooperating in the small-scale LNG market with Fluxys of Belgium.

    Representatives of the two companies, Gazprom’s head, Alexey Miller, and Pascal De Buck CEO of Fluxys, discussed the cooperation at a meeting in St. Petersburg, Gazprom said in a statement.

    Among other issues, Miller and De Buck discussed the possibility of jointly participating in the construction and operation of LNG receiving terminals, LNG filling stations and bunkering infrastructure in Europe.

    Additionally, the two companies discussed the option of using LNG as an energy resource for autonomous gasification purposes.

    The talks are a continuation of a framework agreement signed at the end of March, showing the two companies’ intentions to cooperate in the European small-scale LNG market.
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    Suncor Offers to Buy C$1.5 Billion of Notes in Bid to Cut Debt

    Suncor Energy Inc. is offering to repurchase about C$1.5 billion ($1.2 billion) of its own notes from bondholders as the company takes advantage of cash on hand to lower its debt load.

    Suncor Energy Ventures Holding Corp. has offered cash for notes with maturities between 2019 and 2042 with coupons as high as 8.2 percent, the company said Thursday in a statement. The offer will expire on June 22. HSBC Securities and J.P. Morgan Securities LLC are the dealer managers.

    Chief Executive Officer Steve Williams has focused on maintaining enough cash -- about C$3 billion at the end of the first quarter -- to get the company through the two-year long commodity downturn while allowing it to continue expanding projects, like the Fort Hills bitumen mine, and making purchases including the takeover earlier this year of Canadian Oil Sands Ltd. Suncor has about C$15 billion in total debt, according to data compiled by Bloomberg.

    Companies offer to buy back bonds before they mature as a method of reducing overall debt. Borrowing costs for energy companies have fallen relative to similar maturity government debt, as the price of oil has surged since February while global economic concerns push sovereign yields to record lows.

    Suncor’s debt-to-capitalization ratio was 29 percent, while net debt to cash flow was 2.5 in the first quarter, Chief Financial Officer Alister Cowan said during an April 28 conference call with analysts. The company has also identified as much as C$1.5 billion worth of assets it can sell.

    “We are rigorously managing both our operating and capital expenses while maintaining the strength of our balance sheet,” Cowan said at the time.

    The Calgary-based company’s widely traded 7.75 percent coupon notes due in 2019 were trading at 111 cents on the dollar with a 3.74 percent yield, according to data compiled by Bloomberg.
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    Mexico gas demand will increase 30% by 2021

    Mexico gas demand will increase 30% by 2021, underpinned by growing gas-fired generation in the power sector.

    Wood Mackenzie
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    EU ethylene imports surge 235%, PE imports up 52% over first four months of 2016: Eurostat

    EU imports of ethylene in the first four months of the year surged 235% compared with the first four months of 2015, according to the latest Eurostat data.

    Imports rose from 42,557 mt in January-April 2015 to 142,590 mt in the same four months of 2016.

    This import figure is expected to rise further.

    At the end of May a broker reported that a 6,700 mt ethylene cargo had been fixed for delivery from Houston into Europe, arriving in early June, with an open arbitrage window between the regions.

    EU polyethylene imports in the first four months of the year rose 52% compared with Jan-April 2015, according to the latest Eurostat data released.

    Imports rose to 1,181,435 mt in the first four months of this year from 777,961 mt over the same 2015 period.

    High density PE imports rose to 528,475 mt from 365,554 mt. Low density imports rose to 248,620 mt from 180,202 mt. Linear low density polyethylene imports rose to 404,340 mt from 232,204 mt.
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    Group challenges approval of Santos’ Queensland CSG well expansion

    A community group is taking on Federal Environment Minister Greg Hunt’s approval of 6 100 coal seam gas (CSG) wells in Queensland, a move which the industry has slammed as “delaying tactics”. The Western Downs Alliance on Thursday started legal proceedings to challenge oil and gas major Santos’ Gladstone liquefied natural gas (GLNG) gas field development, which is related to the GLNG project and involved the progressive development of CSG resources in Surat and Bowen basins. 

    The community group lodged a case in the Federal Court of Australia against the approval under the national environmental law, arguing that the Minister’s approval was unlawful because he ignored plans by Santos to discharge large volumes of CSG waste water into the Dawson river. 

    “The Santos plan for 6 100 new CSG wells in Queensland is a recipe for disaster for the Great Artesian basin and for landholders who depend on it,” said Western Downs Alliance spokesperson Sarah Moles. She stated that the environmental-impact statement for the project predicted that it would impact on 73 water bores used by landholders in the area, and would extract 219-billion litres of water over the life of the project, producing 22-billion litres of salty brine as waste.

     “Minister Hunt assessed and approved this development under the Water Trigger that was put into the national environmental law in June 2013 specifically to protect our water resources from large coal and CSG development. “However, in this case it appears from the documents that Minister Hunt didn’t assess the impact that the inevitable release of large volumes of waste water from the CSG project into the Dawson river would have,” Moles stated.
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    Halliburton, Schlumberger bid for fracking jobs in Ukraine: UkrGazVydobuvannia

    Halliburton, Schlumberger and Weatherford are among nine companies that submitted bids to carry out hydraulic fracturing operations for Ukraine's largest natural gas producer UkrGazVydobuvannia (UGV), the company said Thursday.

    UGV, a 100% owned subsidiary of state-owned Naftogaz Ukrayiny, plans to start using fracking techniques in 2016-2017 in order to boost domestic gas output as Ukraine seeks to eliminate gas imports by 2020.

    "Service companies with well-known names, teams of experienced professionals and decades of accumulated experience in the most extreme conditions are willing to come to Ukraine," Oleksandr Romaniuk, the head of UGV, said in a statement. "They believe our company can make a breakthrough in the Ukrainian gas production."

    UGV plans to buy 100 fracking jobs, but will increase the practice if the technique achieves good results.

    Ukraine aims to increase gas output by 7.5 Bcm to 27.4 Bcm/year in 2020 that together with energy conservation measures would eliminate the need to import gas, energy and coal industry minister Ihor Nasalyk said last month.

    UGV plans to invest Hryvnia 80 billion ($3.2 billion) in exploration and drilling during the next four years in order to increase output to 20 Bcm/year in 2020, up from 14.5 Bcm/year in 2015, the company said.
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    EPA Bans Disposal of Frack Wastewater at Public Sewer Plants

    Not long after Michael Krancer was appointed Secretary of the Pennsylvania Dept. of Environmental Protection in 2011, he “requested” (which was more order than request) that municipal sewage treatment plants still accepting and processing Marcellus drilling wastewater stop the practice.

    At the time there were 15 plants accepting Marcellus wastewater. Under pressure from Krancer, they ended the practice in May 2011 . His prescience was rewarded. A year later there were far lower bromide levels in PA rivers .

    That’s how things should work: the state looks after its own environment. But that means less power for the power-mad bureaucrats in Washington, DC. Right on cue, before Obama is ejected from office next January (thank God!), his out-of-control EPA has issued rules that do what Krancer did without a new law back in 2011.

    The EPA has issued a new regulation (i.e. unlegislated law) that declares no municipal sewage treatment plant in any state (not just PA) can accept and process shale wastewater…
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    Canada's energy regulator starts review of oil pipeline to east

    Canada's energy regulator on Thursday officially launched its 21-month review of TransCanada Corp's Energy East pipeline, which would carry crude from Alberta's oil sands to refineries and export terminals in Eastern Canada.

    The National Energy Board, which has faced public criticism over its reviews of major energy infrastructure projects, said its review of the C$15.7 billion ($12.1 billion) pipeline will be unique in that the general public will be given the opportunity to provide input.

    The review will also consider upstream gas emissions, following new rules introduced by the ruling Liberals in January on the grounds that public trust needed to be restored in the process for assessing big energy projects.

    Prime Minister Justin Trudeau, speaking to reporters on Thursday, said his government had revamped the review process to ensure that all voices were heard and that any decision would be in the best interest of the entire country.

    A final recommendation to the federal government, including any proposed conditions on construction, is expected by March 2018, though the regulator said the legislated timeline could be extended if needed.

    Canada's resource minister has asked for six-months to review the recommendation before a final federal decision. The pipeline is expected to be in service by 2021.

    "This marks an important milestone for the project and is a culmination of TransCanada's efforts to actively communicate and seek input since announcing Energy East three years ago," TransCanada said in a statement.

    The 4,500-km Energy East pipeline is supported by Canada's energy industry, which is eager to find new and more lucrative markets for its crude, but opposed by many aboriginal and environmental groups, who worry its construction will hasten the development of Alberta's oil sands.

    The province of Quebec has also expressed concerns over the 1.1 million barrel-per-day pipeline, leading TransCanada to scrap plans for an export terminal on the St. Lawrence River and to agree to a provincial environmental review.

    The NEB said it will also concurrently review TransCanada's 279 km (173 mile) Eastern Mainline natural gas pipeline, noting that the projects are connected and best served under a single review.
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    Pioneer to expand Midland basin drilling

    Pioneer Natural Resources Co. will increase its rig count for horizontal drilling in the northern part of its Midland basin Spraberry-Wolfcamp play to 17 from 12 after an acquisition from Devon Energy Corp. and in response to its “improving outlook for oil prices.”

    Pioneer agreed to acquire 28,000 net acres, mostly undeveloped, from Devon for $435 million, subject to normal closing adjustments. The acreage is in Martin, Midland, Upton, Reagan, Glasscock, Andrews, Dawson, Gaines, and Howard counties. Net production is 1,000 boe/d, of which 70% is oil.

    About 15,000 net acres is in the Sale Ranch area of Martin and northern Midland counties, where Pioneer is active. Combined with its existing acreage, the acquisition will add 70 locations targeting the Permian Wolfcamp B shale to Pioneer’s Sale Ranch drilling inventory in an area where lateral lengths average about 9,000 ft.

    A separate 8,000 net acres in the Sale Ranch area and northern Midland County will add about 80 Wolfcamp B locations where lateral lengths are less than 7,500 ft.

    Pioneer said it will use the remaining 13,000 net acres acquired from Devon and existing acreage in trades to consolidate its land positions in core areas.

    It expects to add its first rig in the area in September, followed by two rigs each in October and November.
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    ExxonMobil refinery evacuated in California as wildfire surges

    A wildfire spurred by strong canyon winds north of Santa Barbara has forced the evacuation of an ExxonMobil refinery.

    The blaze broke out about 3:30 p.m. Wednesday in Los Padres National Forest and by nightfall surged to 250 acres.

    Mandatory evacuations were ordered for Refugio Canyon, Venadito Canyon and Las Flores Canyon, which includes the refinery, the Santa Barbara County sheriff’s office said.

    ExxonMobil spokesman Todd Spitler said the company has evacuated nonessential employees, and those that remain are there to help with fireprotection.

    “Our primary concern is for the safety of our employees, contractors and the environment,” Spitler said.
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    Alternative Energy

    GE in talks to buy offshore wind joint-venture Adwen -Figaro

    General Electric is in talks with the French state and several companies about acquiring Areva-Gamesa's offshore wind joint venture Adwen, GE chief Jeff Immelt told French daily Le Figaro.

    GE has contracts to build 1,500 megawatts of offshore wind on the French coast for utility EDF following the U.S. company's purchase of energy assets from Alstom last year. These are due to be built by 2019.

    Asked whether GE was interested in acquiring Adwen, Immelt said France deserved a strong offshore wind industry.

    "Being bigger would be useful for us. Talks are underway with different parties: Siemens, Areva, Gamesa, us and the French state," he said.

    Adwen also has contracts to build 1,500 MW of offshore wind on the French coast for utilities Engie and Iberdrola .

    Siemens is negotiating a tie-up with Spanish renewable energy group Gamesa and has not made clear whether it wants to buy out Areva's stake in Adwen.

    The German company is already the dominant player in EU offshore wind and buying Adwen would push its market share close to 70 percent.

    GE is a small player in offshore wind in Europe and buying Adwen would make it a third biggest group in that market. But in France, GE would become the only major player in offshore wind.

    At the end of 2015, Siemens had 63.5 percent of Europe's installed offshore wind capacity, followed by MHI Vestas with 18.5 pct. Adwen accounted for just 5.7 pct of installed capacity.

    Last month, French-based GE renewables head Jerome Pecresse said GE wanted to become a major player in the offshore wind industry and was interested in buying Adwen.
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    VW plans 30 electric vehicle models after sales battered by diesel scandal

    VW plans 30 electric vehicle models after sales battered by diesel scandal

    German car-maker Volkswagen has responded to a slump in sales following the emissions-cheating scandal over its diesel engines by announcing plans to spend more than $11 billion and launch 30 all-electric models, including autonomous and ride-sharing vehicles.

    Matthias Mueller, the CEO of Europe’s biggest carmaker said huge investments would be needed as the firm moves beyond the “dieselgate” scandal – an event that is widely considered to represent the beginning of the end of diesel engines, and quite possibly the internal combustion engine.

    VW was forced to write off $US18  billion as a result of the scandal and its obligation to replace millions of cars, and its new vehicle sales are down 13 per cent in the first five months of 2016.

    “The future program we’re unveiling today ushers in the biggest change process in the history of Volkswagen,” Mueller said at a news conference in Germany. “We are building a new, a better and an even stronger Volkswagen.

    VW said there will be a “special emphasis” on “e-mobility” – an area that encompasses electric vehicles, autonomous cars and ride sharing.

    “The new unit will develop and acquire offerings tailored to customer requirements – centering on and starting with ride hailing, i.e. on-demand mobility services,” it says. “Other services such as robotaxis, carsharing and transport on-demand will then be grouped around this nucleus.”

    It expects its first “fully autonomous car” will be built in house by 2021.

    Mueller said VW expected that all-electric cars would account for up to one quarter of its annual sales by 2025, or several million vehicles.

    It is also looking at creating a new battery storage division to meet its expected demand of 150GWh a year. “The strategic options for participating in the potential revenue stream associated with this and developing battery technology into a new Group competency will be carefully examined,” it said in a media release.
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    US activates first nuclear reactor in two decades

    The first nuclear reactor in the US in nearly two decades has been connected to the grid.

    An initial test is currently being undertaken at Tennessee Valley Authority’s (TVA) Watts Bar Unit 2, with a team collecting data to ensure the generating equipment is prepared for full operation later this summer.

    That will be followed by full-plant testing of systems and controls to increase reactor power levels up to 100% generation.

    Once all tests have been completed, the facility will provide up to 1,150MW of electricity.

    Combined with Watts Bar Unit 1, roughly 1.3 million properties will be powered.

    Joe Grimes, TVA Chief Nuclear Officer said: “This is another major step in fully integrating Watts Bar Unit 2 as the seventh operating unit in TVA’s nuclear fleet. It is rewarding to see TVA taking the lead on delivering the first new nuclear unit of the 21st century and providing safe, affordable and reliable electricity to those we serve.”

    In the UK, EDF plans to build two reactors at Hinkley Point in Somerset but it hasn’t made a final investment decision yet.
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    Monsanto to form sorghum joint venture with private company

    U.S. seed and agrochemicals company Monsanto Co said on Thursday it is selling its U.S. sorghum production assets to Remington Holding Co LLC and will roll its sorghum breeding business into a joint venture with the privately held company, in transactions valued at about $169.5 million.

    Monsanto's global sorghum breeding business will be a part of the joint venture calledInnovative Seed Solutions LLC, which will initially be focused on sorghum, a drought-tolerant grain crop that is used as animal feed and to produce ethanol biofuel. Remington will contribute cash to the venture.

    The move comes in a period of heightened dealmaking in the agricultural seeds and chemicals industry. Monsanto last month rejected an unsolicited $62 billion takeover bid by Germany's Bayer AG, but the companies have since met to try to negotiate a deal.

    The sorghum transaction is Monsanto's first spin-off of an entire crop space since the sale of its sunflower seeds unit to Syngenta in 2009, a Monsanto spokesman said.

    It is unclear how the deal could impact any negotiations with Bayer. Monsanto declined to comment on how long it had been negotiating the sorghum deal with Remington.

    A Remington subsidiary will take full ownership of Monsanto's U.S. sorghum production facility in Dumas, Texas. Monsanto will assume a 40 percent stake in the joint venture, with Remington owning the remaining share.

    "We recognize that our sorghum business has great potential to expand and grow both domestically and internationally," Mike Frank, Monsanto's chief commercial officer, said in a statement. "We believe by partnering with Remington in the joint venture, we can bring an increased level of focus, investment and resources into this crop space."

    Remington could not be immediately reached for comment.

    Innovative Seed Solutions LLC will be governed by an operational board including senior executives from both companies, with Monsanto veteran Dan Zinck as its chief executive.

    Monsanto will continue to sell sorghum seeds via its Asgrow, Dekalb and Channel seed brands and through regional seed dealer networks.
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    Steel, Iron Ore and Coal

    South Korea May thermal coal imports down 15pct on year

    South Korea imported 6.49 million tonnes of thermal coal in May, falling 14.7% from 7.61 million tonnes in the same month of 2015 and down 10.76% month on month, the latest customs data showed.

    Of this, 6.05 million tonnes was bituminous coal, while the remaining 447,200 tonnes was sub-bituminous coal shipping from Indonesia.

    South Korea’s highest volume of imported bituminous coal in May stood at 2.58 million tonnes from Indonesia, rising 10.94% on year and up 21.52% from April.

    Imports from Australia in May rose slightly by 0.06% on year to 1.85 million tonnes, but down 39.53% from the previous month.

    Imports from Russia in May slipped 28.65% from the year-ago level to 1.26 million tonnes.

    The other main suppliers in the month included Columbia with 160,900 tonnes; Canada with 158,200 tonnes, plunging 75.82% on year and down 3.96% from April; and China with 39,900 tonnes, sliding 5.69% on month and down 52.43% on year.
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    Shanxi works hard on coal supply-side structural reform

    North China's Shanxi province, one of the major coal producers in China for the past decade, has issued implementation guidance and some detailed regulations to advance its coal supply-side structural reform.

    A package of reform measures will be carried out to ensure a fundamental change in the province's coal industry that helped the local economy boom over the years but is now in tremendous difficulties.

    Data from the Shanxi Statistics Bureau show that the province produced 944 million tons of raw coal in 2015 but lost up to 9.42 billion yuan ($1.43 billion) in the coal industry. This means the province, with the coal industry the pillar of its economy, lost 10 yuan for each ton of coal it sold.

    By the end of 2015, the debt ration of Shanxi's five major coal producers had risen by up to 81.79 percent.

    The severe situation has exerted great pressure on Shanxi's economy and desperately calls for a structural reform of the coal supply.

    "Overcapacity is the key and the biggest problem that must be dealt with," said Li Xiaopeng, governor of the province.

    There are 50.76 million tons of coals in stock, three times more than that held by the end of 2011, Li said at the 2016 national two sessions. So a combined measure of limiting coal production increases and reducing inventory is the only option for Shanxi's coal industry to stop loss and ensure transformation.

    Shanxi will work hard to reduce coal overcapacity by 100 million tons by 2020, said Niu Jianming, vice-director of the province's coal industry department. This amount is expected to be larger than the total sum of overcapacity reduction of the Inner Mongolia autonomous region and Shaanxi province.

    In addition to great efforts in reducing capacity, the reform also emphasizes the cleaning, low-carbon, and efficient use of coal. Shanxi plans to build coal power bases and develop the coal chemical industry to realize industrial transformation.

    The reform also includes technological innovation and increases in production efficiency to ensure the sustainable transform of the coal industry.

    Attached Files
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    Dalian iron ore rebounds after two-day drop, but outlook shaky

    Chinese iron ore futures climbed nearly 3 percent on Thursday to recover from a two-day drop, but prices appear vulnerable to more weakness ahead as supply increases both inside and outside China.

    Goldman Sachs expects major global iron ore miners to add another 10 million tonnes to the seaborne market in the third quarter and smaller producers would also contribute slightly.

    But China¡¯s domestic iron ore mines, many of which were shut by the years-long decline in prices, appear to be more resilient than before, with output rising in May for the first time in two years, the U.S. bank said in a note.

    "We do not think this growth is sustainable as most producers are once again operating at a loss, but this modest increase in domestic output will compete with imported ore and is likely to add pressure on seaborne prices in the second half of 2016," Goldman said.

    The most-traded iron ore on the Dalian Commodity Exchange was up 2.9 percent at 369 yuan ($56) a tonne by midday, after earlier rising as far as 372 yuan.

    China is at a seasonally slow period for steel demand as construction activity weakens during summer, limiting appetite for ingredient iron ore as supply increases.

    Output curbs in the top steel-making city of Tangshan to improve air quality during an international conference there this week lifted Shanghai rebar futures to a five-week high on Monday. But prices have fallen since.

    Still, Goldman estimated the production loss from the Tangshan cuts may be material, equivalent to 1.3 million tonnes of crude steel.

    "However, looking beyond the conference, we see limited downstream activity to support steel prices," the bank said.

    Construction-used rebar on the Shanghai Futures Exchange rose 1 percent to 2,095 yuan a tonne, but below Monday¡¯s five-week top of 2,189 yuan.

    Appetite for spot iron ore cargoes has been lean this week, traders said, citing wide gaps between bids and offers.

    Iron ore for immediate delivery to China¡¯s Tianjin port  fell 1.2 percent to $50.20 a tonne on Wednesday, the lowest since June 3, according to The Steel Index.

    While the spot benchmark has found strong short-term support around $50, ANZ commodity strategist Daniel Hynes said it may be "susceptible to being broken through if the Chinese housing market weakens".
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    Samarco iron ore won't restart this year

    Samarco iron ore won't restart this year

    The Samarco iron ore mine  in Brazil – a joint venture Vale and BHP Billiton – is unlikely to resume operations before the end of the year.

    Samarco Mineracao ceased operations in November following a deadly tailings dam burst. Benedito Waldson, the company's head of human resources told Reuters the uncertain timing of  a new licence from the South American nation's environment authorities to restart operations "had forced the company to move to lay off over 1,000 workers."

    At 30 million tonnes per year before the disaster Samarco's pelletizing operations supplied roughly one-fifth of the seaborne trade in the steelmaking raw material that  attracts a premium price over iron ore fines and lump ore. Earlier Samarco said that should the mine reopen output would likely be capped at 19 million tonnes per year.

    The uncertain timing of  a new environmental licence to restart operations had forced the company to move to lay off over 1,000 workers  

    A Brazilian judge on Tuesday dismissed a civil lawsuit brought by the National Humanitarian Society in December seeking environmental and property damages amounting to billion reais (roughly $5.8 billion) against Samarco, in which Vale and BHP each own 50%.

    Another civil lawsuit brought by Brazilian prosecutors for 155 billion reais (around $45 billion today) against the two companies and Samarco, Brazil’s federal government along with the Minas Gerais and Espirito Santo state governments is still being considered. Demands include an upfront payment of $2.2 billion.

    In March Vale and BHP reached a deal with Brazilian authorities and the mine owners agreeing to pay an estimated 24 billion reais or $6.2 billion spread out over several years. Samarco committed to providing $1.1 billion through 2018 into a fund for clean up costs and amounts between $200 million and $400 million to 2021.

    Attached Files
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    Best metal bond gets even better as Cliffs cashes in on rally

    Cliffs Natural Resources’s borrowing costs fell to the lowest in almost two years as it capitalises on the best stock rally among iron miners to raise money and declared itself out of the woods after a price rout. 

    The Cleveland-based company’s notes due 2018 rallied Thursday, pushing down its yield to 8.7% at 12:31 pm in New York. That represents the smallest gap with average material company yields tracked by Bloomberg since November 2014. 

    Cliffs registered to sell $300-million in new shares, partly for debt repayment, it said in a  statement Thursday. A day earlier, Lourenco Goncalves said the most critical threats he assumed when he took over as chief executive officer via an activist campaign in 2014 had been neutralised. “We have removed all of the death threats,” Goncalves, 58, said in an interview in New York, referring to the sale of the Bloom Lake mine in Canada, renewal of a supply contract with ArcelorMittal and the failure of Essar Steel Algoma to undertake its own competing North American iron expansion. 

    “I positioned Cliffs to be successful in an environment that’s not so strong.” Steel prices have rallied this year, lifting the fortunes of Cliffs, which provides the principal raw material in the metal’s production. 

    Hot-rolled steel coil, the benchmark product, has climbed 64% this year as demand improves while trade cases and the threat of tariffs have limited imports. The domestic steel price probably will stay around current levels for the remainder of the year, Goncalves said. 

    Goncalves began his term as CEO by replacing most board members and promising to divest assets not directly related to Cliffs’ US iron-ore operations. He has sold US coal mines, put Canadian mines into court-supervised reorganisation and attempted to sell Australian assets. 

    Cliffs’ bonds have returned 86% this year, the best performance among more than 300 notes issued by mining and metal companies globally, according to data compiled by Bloomberg. Last year, the company’s notes lost 36%, about three times the average loss by metal producer debt, the data show. 

    The stock market tells a similar story, with Cliffs surging 201 percent this year to lead the BI Global Iron Ore Mining Valuation Peers index after slumping 78% last year. The shares fell as much as 7.1% on Thursday.
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    Russia says problems with EU steel anti-dumping probe - Ifax

    Russia says problems with EU steel anti-dumping probe - Ifax

    Russian Economy Minister Alexei Ulyukayev said on Thursday a European Union steel anti-dumping investigation had been carried out incorrectly and Russia would seek an adequate response, Interfax news agency reported.
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