Mark Latham Commodity Equity Intelligence Service

Friday 16th September 2016
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    Oil and Gas


    China will shut small coal boilers to cut pollution but LNG oversupply will remain

    China aims to shut almost half a million small-scale coal boilers in its industrial sector by 2018, in what should have been a positive move for the liquefied natural gas (LNG) market.

    However, LNG prices will continue to struggle as massive new supplies come online in an already oversupplied market, ANZ analysts wrote in a recent report.

    The world's second-largest economy aims to cut its use of thermal coalas an energy source, in order to clean up its notoriously polluted air.

    China's annual LNG import growth is expected to increase as the country retires 400,000 small-scale coal boilers in the industrial sector by 2018, some of which will be replaced by gas boilers, ANZ said. A $3-per-mmBtu - mmBtu stands for one million British Thermal Units - reduction in China's regulated gas prices and lower domestic gas prices will also help encourage coal-to-gas switching as the East Asian giant aims to control air pollution, the house added.

    But China's LNG imports will still fall behind those of Japan and South Korea, which together account for almost half of global imports, ANZ calculated. And the forecast rise in Chinese imports will likely be offset by a bigger jump in supply.

    Natural gas prices hit their lowest level in almost two decades earlier this year, in turn hitting LNG, the super-cooled version of natural gas that's made for easier storage and shipping. Depressed oil prices - which hit prices across the commodities complex - did not help LNG prices either.

    Natural gas prices have since rebounded but the longer-term price outlook isn't positive, with global LNG supplies expected to rise 50 percent by 2020, wrote ANZ Research's strategists Daniel Hynes and Natalie Rampono
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    India to invite mineral exploration bids from domestic and foreign agencies

    India’s Mines Ministry will soon be inviting bids for at least 20 mineral exploration blocks from domestic and international agencies to kick-start the New Mineral Exploration Policy (NMEP).

    The bidding process will mark the maiden entry of private domestic and international exploration companies under the newly unveiled NMEP.

    The 20 blocks will be the first lot from the 100 mineral blocks which have been selected for exploration by private domestic and international mineral exploration companies.

    Last month, the Central Empowered Committee under the Mines Ministry met with all stakeholders, including provincial governments, to remove roadblocks to sharing geological data with prospective bidders.

    The NMEP provides for launching mineral explorationprojects through private agencies and, subsequently, the government will auction off the identified explored mineral blocks on a revenue sharing basis if "auctionable" resourcesare discovered.

    Should exploration agencies not find auctionable resources, the policy provides for exploration investments and expenditures to be reimbursed on a normative basis.

    Mines Ministry officials pointed out that the start of bidding was significant in as much as it would be government's first step towards its purported goal of achieving 22% growth in mineral production and, in turn, ramping up the miningsector’s contribution to gross domestic production to 2% from 1% at present.

    As far as the government is concerned the Achilles Heel of Indian mining has been gross underexploration of potential mineral reserves. More so with exploration having until now been the sole domain of government agencies such asGeological Survey of India (GSI) and Mineral Exploration Corporation of India.

    An indication of tardy exploration is evident from data sourced from the Mines Ministry, which reveal that these agencies have grossly missed drilling targets during 2015/16.

    Government data show that GSI drilled 102 814 m during the year, against a target of 121 286 m for minerals such as iron-ore, manganese, rare earths and precious metals.

    According to the data, a drilling target for iron-ore of 12 500 m was set, of which only 5 150 m were completed. For base metals, only 12 022 m of drilling was completed against a target of 17 100 m. For limestone, the target was 11 200 m and 9 850 m were achieved, while for coal the target was 47 500 m and 45 149 m were achieved.

    It was also in this context and as reported by Mining Weekly Online on September 9, that besides inviting specialised domestic and foreign exploration agencies, the government was also pushing its State-owned mineral companies to transform into integrated ‘resource majors’ by undertaking mineral exploration projects.
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    Shipyard order books dry up

    Depressed rates result in decreased orders for new dry bulk mineral vessels in Asia.

    Shipyards will be hit by persistently low rates in the dry bulk, container and offshore markets, with this year expected to set the record for the lowest new building contracts in more than 20 years.

    The reduction in newbuild dry bulk may lift the Baltic Dry Index (BDI),
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    Lula hit with Car Wash charges

    Brazilian prosecutors filed corruption charges on Wednesday against former president Luiz Inacio Lula da Silva and his wife, as well as six others in the sprawling Petrobras kickback scandal known as Operation Car Wash.

    This was the first time Lula - still Brazil's most popular politician despite corruption accusations against him and his leftist Workers Party - was charged by federal prosecutors for involvement in the massive graft scheme at the state-run oil company.

    Prosecutors denounced Lula as the "general" in command of the corruption scheme, allegedly aimed at keeping his party in power.

    Public Prosecutor Deltan Dallagnol told a news conference that the Petrobras scheme caused an estimated 42 billion real ($12.6 billion) in losses.

    Lula's lawyers said in a statement that he strongly denied the allegations and would fight the charges.

    His case will go before crusading anti-corruption judge Sergio Moro, who has jailed dozens of executives and others involved in the scheme.

    Lula could face arrest for receiving a luxury apartment on the coast of Sao Paulo from one of the engineering and construction firms at the centre of the bribery scandal. Lula has denied ownership of the three-floor condo in Guaruja.

    Federal police urged prosecutors last month to bring charges against Lula and his wife, accusing them of receiving some 2.4 million reais ($747,896) in benefits from the builder OAS in relation to the apartment.

    Lula, a charismatic former union leader who was a two-term president from 2003 to 2010, has separately been indicted by a court in Brasilia for obstruction of justice in a case related to an attempt to persuade a defendant in the Petrobras scandal not to turn state's witness.

    Lula's fall, and that of the leftist party he founded in 1980, has been dramatic.

    Last month, his protege and successor as president, Dilma Rousseff, was removed from office in an impeachment trial.

    Rousseff's fall was driven by Brazil's worst recession since the 1930s and its biggest-ever corruption scandal, which has implicated dozens of politicians from her ruling coalition, including several in the Brazilian Democratic Movement Party led by current President Michel Temer.

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    Typhoon Meranti lands in east China

    Typhoon Meranti made landfall in Xiang'an district of Xiamen City, east China's Fujian Province, at 3:05 a.m. Thursday, with gales up to 48 meters per second.

    The world's strongest typhoon so far this year has also been monitored as the strongest one hitting southern Fujian Province since the local meteorological records were kept in 1949.

    The winds shattered windows on high buildings, causing disruption of tap water supplies in many communities in Xiamen.

    "The winds and rain got extremely loud after 3 a.m. The cracking sound of windows and tree branches were also scary. The power went out in the shop for several times," said Su Binglin, a night-shift shop assistant at a 24-hour convenient store.

    He said he had to use a metal plate to strengthen the shop door to prevent it from shattering. He also used boxes filled with mineral water to consolidate the plate.

    At around 6 a.m., the winds abated. Streets in Xiamen are scattered with glass shards, broken tree branches and blown down billboards.

    "It is so wretched. Many trees by road sides are fallen, and there are also pondings blocking traffic," said Hu Rong, a delivery man.

    The Xiamen Power Supply Co. said that the typhoon has made severe damages to the power grid in Xiamen, causing mass blackout. The electricity supply was also disrupted in Xiamen's outlying islands. As the typhoon is further plowing inland, more damages of the power network are likely.

    Thursday coincided with China's Mid-Autumn Festival, which gives a three-day public holiday. Schools and kindergartens in coastal cities of Fuzhou, Xiamen, Zhangzhou, Quanzhou and Putian in Fujian were closed Wednesday in precaution against the typhoon.

    The railway authorities in Nanchang, east China's Jiangxi Province, announced Wednesday to cancel 144 trains that had been scheduled between Wednesday to Saturday to southern and eastern cities in an emergent response to the typhoon.
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    Plans for North Sea mineral mine near Aberfeldy approved

    Perth and Kinross Council today approved plans to develop a mine that will supply the North Sea industry with a vital mineral for decades to come.

    The proposed mine at Duntanlich near Aberfeldy is the UK’s only known commercially viable barite deposit, according to the firm behind the project.

    Oil service company M-I SWACO, a subsidiary of Schlumberger, said the site would be able to satisfy the UK’s barite demand for the next 50 years, producing up to 120,000 tonnes a year.

    Barite is largely used as a weighting agent for drilling fluids in oil and gas exploration, but is also applied in the automobile, medical and civil engineering sectors.

    M-I SWACO said Duntanlich would replace its mine at Foss, which had become increasingly difficult to mine.

    A previous planning application to develop the Duntanlich resource was turned down in 1996.

    But the latest proposals, informed by three years of environmental studies, were deemed fit for purpose by councillors.

    The submission said there would be minimal visibility of the mine from the surrounding area.

    The development is also expected to create about 30 jobs.

    Ian Hughes, project manager for M-I SWACO, said: “The new mine will ensure that the UK is self-sufficient in barite and will not only have a significant positive local economic impact, diversifying the economy of this rural area where employment is largely reliant on tourism and forestry, but will also have national significance in terms of providing vital continuity of supply for the North Sea oil and gas industry.

    “We learnt a lot from the previous application and were able to make significant improvements to our proposals.”
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    China's new yuan loans more than double in August

    China's new yuan-denominated lending in August more than doubled from a month ago to 948.7 billion yuan (about 145.95 billion U.S. dollars), official data showed on Wednesday.

    The M2, a broad measure of money supply that covers cash in circulation and all deposits, rose 11.4 percent year on year to 151.1 trillion yuan by the end of August, the People's Bank of China said in a statement on its website.

    The narrow measure of money supply (M1), which covers cash in circulation plus demand deposits, rose 25.3 percent year on year to 45.45 trillion yuan.
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    Vedanta Wins Cairn Nod for BHP-Style Resources Conglomerate

    Vedanta Ltd.’s plan to create an Indian resources heavyweight to compete with the likes of BHP Billiton Ltd. got a boost Monday after shareholders in its oil unit, Cairn India Ltd., agreed to a proposal to combine the two companies.

    Cairn India’s shareholders “will benefit from exposure to Vedanta’s diversified portfolio of assets while retaining the upside from Cairn’s strong oil & gas assets,” Cairn’s acting chief executive officer, Sudhir Mathur, said in a statement, following the shareholders’ vote. The transaction is expected to be effective by the end of the financial year in March.

    Billionaire owner Anil Agarwal set out his idea to combine Vedanta, India’s biggest base metals producer, based in Panaji, Goa, with its largest onshore oil producer in June 2015, but the plan faltered after the approval of key Cairn shareholders couldn’t be secured. Vedanta, which holds 58 percent of its oil unit, sweetened the deal in July 2016. Cairn UK Holdings Ltd. and Life Insurance Corp. of India are among the largest minority shareholders of the Gurgaon-based Cairn.

    Debt Pile

    The deal will allow India’s most-indebted metals company after Tata Steel Ltd. to access Cairn’s cash pile, which stood at 234 billion rupees ($3.1 billion) at the end of June. Vedanta’s debt at the time was 780 billion rupees while Cairn is debt-free.

    “The deal is definitely good for Vedanta, not exactly for Cairn,” Goutam Chakraborty, an analyst at Emkay Global Financial Services Ltd., said by phone from Mumbai, although he added that the combined entity will benefit from the diversification of its assets.

    London-listed Vedanta Plc’s ownership of Vedanta Ltd. is expected to fall to 50.1 percent once Cairn is absorbed, from 62.9 percent now. Cairn’s minority shareholders will own 20.2 percent of the merged entity and and Vedanta minority shareholders 29.7 percent.

    Merger Approved

    Vedanta Ltd.’s Chief Executive Officer Tom Albanese said last year that the creation of an Indian resources conglomerate was intended to mirror Australia’s BHP -- which holds mining and energy assets -- or Brazil’s Vale SA. Albanese is a former CEO of another mining giant, Rio Tinto Group.

    The merger plan was approved by 65 percent of the Cairn India shareholders -- representing 93 percent of its ownership -- who attended a meeting in Mumbai on Monday, according to the statement. In a postal ballot, 72 percent of shares voted for the deal. Vedanta shareholders and creditors had approved the proposal last week.

    Cairn closed 5.1 percent lower in Mumbai on Monday, leaving it with a market value of 354 billion rupees. Vedanta lost 5.8 percent and is worth 478 billion rupees -- or about a tenth of BHP’s market capitalization. India’s financial markets are shut for a holiday on Tuesday.
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    Taiwan's commodities companies brace for another super typhoon

    Taiwan's commodities industry was preparing on Tuesday for heavy wind and flooding as Typhoon Meranti hurtled towards the south of the island, threatening to disrupt grain and oil shipments from its major port and a lead refinery.

    As the storm strengthened in the Pacific, Taiwan's national weather forecasters predicted it would make landfall in the Hengchun Peninsula on Wednesday.

    Preparing for their second super typhoon in as many months, state-owned Taiwanese oil refiner CPC Corp and Formosa Petrochemical Corp closed their ports in Kaohsiung in the south and Mailiao in the west as a precaution, officials at both companies said.

    Their refineries on the island were operating as normal on Tuesday. Formosa has a 540,000 barrels per day (bpd) refinery while CPC has an existing capacity to produce 500,000 bpd. CPC's 220,000 bpd refinery closest to the storm's path in Kaohsiung was mothballed in November last year.

    Kaohsiung at the southern tip of Taiwan is the island's second most populous city and home to its largest port and the world's 13th largest container terminal.

    It handled 110 million tonnes of cargo last year, almost half of Taiwan's total, according to the port operator's annual report.

    The island is a major importer of corn, wheat and soymeal for animal feed, as well as iron ore and crude oil. Rice and pig farming are among Taiwan's main agricultural sectors.

    Metals industry players were not expecting major disruption, despite the port being a major storage site for metals in the region. LME warehouses there hold more than 42,000 tonnes of nickel, 25,000 tonnes of copper and 28,000 tonnes of aluminum. But a warehouser with operations there said he was not expecting any disruption to activities.

    Thye Ming Industrial Co was ready to adjust shifts at its lead refinery in Kaohsiung if the typhoon hit, said a source familiar with the matter. It sells some 120,000 tonnes of lead and lead products per year.

    Heavy rainfall is more devastating for crops and industrial plants than strong winds, the source said.

    Typhoon Meranti comes just over two months after the deadly typhoon Nepartak cut power, grounded flights and forced thousands to flee their homes across central and southern areas.

    In 2009, Typhoon Morakot cut a swathe of destruction through southern Taiwan, killing about 700 people and causing up to $3 billion of damage.

    Meranti is forecast to hit China's east coast later on Wednesday.
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    China Aug thermal power output up 6.4 pct on mth

    Electricity output from China's thermal power plants – mainly coal-fired – rose 7.5% on year and 6.4% on month to 413.8 TWh in August, showed data from the National Bureau of Statistics (NBS) on September 12.

    By contrast, China's hydropower output climbed 5.5% on year to 110.6 TWh in the month; nuclear power output rose 19.6% from the year-ago level to 20.2 TWh; wind power output rose 16.6% on year to 13.6 TWh; and solar power output rose 24.3% on year to 3.6 TWh.

    Total electricity output in China reached 561.7 TWh in August, rising 7.8% from a year ago and 2.0% from the previous month, the NBS data showed. That equated to a daily output of 18.12 TWh on average in the month.

    Over January-August this year, China's total power output increased 3% on year to 3,877.2 TWh.

    Of this, thermal power stood at 2,863.9 TWh, dropping 0.5% year on year; while hydropower reached 715.7 TWh, up 12% from the year prior; followed by nuclear power output at 136.4 TWh, rising 23.7% on year; wind power at 135.8 TWh, rising 16.3% on year; and solar power output at 25.2 TWh, increasing 28.9% on year.

    Over the period, thermal power generation accounted for 73.86% of the total power generation, while hydropower output accounted for 18.46%.
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    China August factory output, retail sales beat expectations

    China's industrial output grew the fastest in five months in August as demand for products from coal to cars rebounded thanks to higher government spending and a year-long credit and property boom.

    China's steel industry, in particular, has perked up in recent months as capacity cuts and production curbs have boosted prices and profits, while a government infrastructure spree and housing boom have spurred demand for building materials from steel to cement.

    Improvements in August, while only slight, suggest China's third-quarter economic growth is holding up better than expected just a few months ago and likely remains within the government's 2016 target range of 6.5-7 percent, despite an alarming drop in private investment which is leaving the economy more dependant on government spending.

    "In general, today's activity data are in line with the (upbeat) trade data and inflation figures released last week," Commerzbank economist Zhou Hao wrote in a note.

    "It is a good time for China to deliver on structural reform, especially on the SOE side, to restore confidence in China's economy," he said, referring to a long-promised overhaul of the country's often bloated and inefficient state-owned enterprises.

    Industrial output rose 6.3 percent in August from a year earlier, the National Bureau of Statistics said on Tuesday, surprising analysts who had expected it to pick up only slightly to 6.1 percent.

    China's biggest listed steelmaker, Baoshan Iron & Steel (600019.SS) (Baosteel) said earlier on Tuesday it has raised its prices for October.

    Retail sales also handily beat expectations, with growth accelerating to 10.6 percent from 10.2 percent the previous month. Analysts had forecast an increase of 10.3 percent.

    Car sales in particular have been strong in China this year, hitting a 3-1/2 year high in August as buyers rushed to get new wheels before a tax cut expires at year-end.

    Fixed asset investment was unchanged at 8.1 percent over the first eight months of the year, marginally better than expected.

    Still, the rate of growth in investment remained the slowest since December 1999, and details showed a growing imbalance between public and private spending that raised questions about China's longer-term growth prospects.

    Highlighting Beijing's increasing reliance on government spending to drive the economy, investment by state firms surged 21.4 percent in the first eight months of the year, though the pace did ease slightly from 21.8 percent in January-July.

    China's fiscal spending rose 12.7 percent in January-August from the same period last year, and was up 10.3 percent in August alone.

    Property remained a bright spot, however, despite fears that a near one-year-long housing boom may be peaking.

    Property investment rose 6.2 percent in August from a year ago, according to Reuters calculations, compared with 1.4 percent in July. Real estate investment directly affects about 40 other business sectors in China.

    "A property investment rebound means it will continue to contribute positively to gross domestic product this year, albeit probably not as significantly as seen in the first half," said Ma Xiaoping, an economist at HSBC.


    Private investment grew just 2.1 percent over the first eight months of the year, the same pace as in January-July and remaining at record lows.

    However, on a monthly basis, private firms boosted spending 2.3 percent, reversing a two-month slide.

    Chinese policymakers have focused on improving conditions for the private sector this year, including calling for better access to credit and fair market access. But private firms still complain of unfair competition with state firms and restricted market access, especially in key parts of the services sector.

    Trade data last week showed stronger domestic demand as imports rose for the first time in nearly two years, while exports fell less than expected.

    While economic activity in China has cooled this year, it

    appears less at risk of a hard landing than feared in 2015. The broader economy remains relatively stable, albeit sluggish, despite continued weakness in the massive export sector and overcapacity plaguing many industries.

    However, analysts say China may face a renewed slowdown as previous policy support fades and the government holds off on further easing over concerns of rising debt and housing bubbles.

    "We think that momentum behind the economy will fade in 2017, when the property market will be on a downward cycle and the automotive sector likely to be facing overcapacity issues," Tom Rafferty, Asia Economist at the Economist Intelligence Unit, said in a note.
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    Uniper's $4.4 bln listing unveils huge valuation gap

    Investors put a price tag of 3.9 billion euros ($4.4 billion) on power plant and energy trading firm Uniper on Monday, giving shareholders in former parent E.ON insight into the potential writedowns it faces.

    E.ON, which holds 46.65 percent of Uniper after the spin-off, said last month it valued the division at some 12 billion euros in its books and warned further charges might follow once Uniper started trading on the stock exchange.

    In a market debut closely watched by investors, Uniper's shares traded at 10.58 euros apiece at 1100 GMT, above the opening price of 10.015 euros and towards the upper end of potential valuations given by analysts. E.ON slumped 15 percent.

    By midday, about 27 million shares in both companies had changed hands, accounting for about half of all trading activity among German blue-chips.

    "We see a major buying opportunity in Uniper because of the near-term share price volatility based on forced index related selling and investor rotation following the demerger," Macquarie analysts said, starting the company with an "outperform" rating.

    Due to selling pressure from index trackers, who got Uniper stock by virtue of being E.ON shareholders but have to dump it because it will be excluded from Germany's DAX index, analysts had expected Uniper to trade anywhere between 5.50-13.00 euros.

    E.ON hopes that carving out the ailing gas- and coal-fired power plants will unlock the value of its future core businesses - networks, renewable energy and retail - and ultimately raise the value of both companies as separate entities.

    This was reflected in the group's joint market valuation on Monday, which showed a combined 17.4 billion euros, higher than E.ON's 15.9 billion valuation at Friday's closing price.

    Smaller rival RWE is also in the process of spinning off its power grids, renewables and costumer business into a company dubbed Innogy and it said on Monday it would sell shares in a secondary offering alongside a capital increase.
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    Germany: Beginning Of The End Of The Merkel Era?

    The anti-immigration party Alternative for Germany (AfD) surged ahead of Angela Merkel's Christian Democratic Union (CDU) in elections in her home state of Mecklenburg-West Pomerania.

    The election was widely seen as a referendum on Merkel's open-door migration policy and her decision to allow more than one million migrants from Africa, Asia and the Middle East to enter Germany in 2015.

    Merkel rejected any course correction on migration policy: "I am very unsatisfied with the outcome of the election. Obviously it has something to do with the refugee question. I think the decisions that were made were correct." She went on to blame German voters for failing to appreciate her government's "problem-solving abilities".

    Many of the AfD's positions were once held, but later abandoned, by the Merkel's CDU.

    A September 1 poll showed Merkel's popularity rating has plunged to 45%, a five-year low. More than half (51%) of those surveyed said it would "not be good" if Merkel ran for another term in 2017.

    Observers from across the political spectrum seem to agree that the election in Meck-Pomm marks a turning point for Merkel, who has been head of the CDU since 2000 and chancellor since November 2005. Some say her political career may effectively be over if the CDU suffers heavy losses to the AfD in state elections in Berlin on September 18.

    "This was a dark day for Merkel," said Thomas Jaeger, a political scientist at the University of Cologne. "Everyone knows she lost this election. Her district in parliament is there, she campaigned there, and refugees are her issue."

    The CDU's secretary general, Peter Tauber, agreed: "The strong performance of AfD is bitter for many, for everyone in our party. A sizeable number of people wanted to voice their displeasure and to protest. And we saw that particularly in discussions about refugees."

    The leader of the AfD, Frauke Petry, said: "This is a blow for Merkel, not only in Berlin but also in her home state. The voters made a clear statement against Merkel's disastrous immigration policies. This put her in her place."

    German Chancellor Angela Merkel (left) suffered a major blow on September 4 when the anti-immigration party Alternative for Germany, led by Frauke Petry (right), surged ahead of her Christian Democratic Union in elections in her home state of Mecklenburg-West Pomerania.

    Local AfD leader Leif-Erik Holm told supporters: "We are writing history. Perhaps this is the beginning of the end of Angela Merkel's chancellorship. This must be our goal."

    Gero Neugebauer, a professor of political scientist at Berlin's Free University, said:

    "People will see this defeat as the start of the 'Kanzlerdämmerung' (twilight of the chancellor). If a lot of CDU members start seeing this defeat as Merkel's fault, and members of parliament start seeing her as a danger for the party and their own jobs next year, the whole situation could escalate out of control. If the AfD defeats the CDU again in Berlin in two weeks, things could get ugly fast."

    In an interview with Der Spiegel, Ralf Stegner, the vice president of the SPD, said the CDU was in a "state of panic" over the rise of the AfD and that Merkel has become a liability to her party:

    "Merkel has clearly passed her zenith. It is a disaster for her that the CDU has fallen to third place with under 20% in her own state. This is a serious crisis for the CDU and it bears the names of Merkel and Seehofer. Some people now believe that Merkel no longer leads the debate with Seehofer about her 2017 candidacy. Throughout its history, the CDU has been merciless to its chancellors if there was the impression that the party was facing a massive loss of votes."

    Stegner was referring to an August 27 report by Der Spiegel which said that Merkel has postponed an announcement about her candidacy due to opposition from the CDU's Bavarian sister party, the Christian Social Union (CSU), which has been increasingly vocal in its criticism of her migration policy:
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    China vice-premier urges solid efforts to propel supply-side reform

    Chinese Vice-Premier Zhang Gaoli on September 9 called for solid supply-side reform efforts in a bid to adapt to the current economic climate, known as the "new normal", state media Xinhua News Agency reported.

    The reform is a "major innovation" to meet new changes following the global financial crisis and an "inevitable choice" of China to fit into new economic circumstance that features slower but higher quality growth, Zhang said.

    Given a prolonged slowdown and entrenched economic problems, China's policymakers are counting on structural reform to inject vitality into the economy.

    Zhang described the reform as a "significant and urgent" matter, stressing five major tasks of the reform -- cutting excess industrial capacity, reducing housing inventory, lowering corporate leverage, relieving corporate burdens and fixing economic weaknesses.

    Overcapacity reduction in bloated coal and steel industries should be highlighted, Zhang said, adding that governments should make proper arrangements for laid-off workers and handling corporate debt.
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    This doomsday clock tells you when Japan's sex problem will cause the country to go extinct

    According to a countdown clock put together by researchers at Tohoku University, that's the date Japan's population will dwindle to one.

    For 25 years, the country has had falling fertility rates, coinciding with widespread aging. The worrisome trend has now reached a critical mass known as a "demographic time bomb."

    When that happens, a vicious cycle of low spending and low fertility can cause entire generations to shrink — or disappear completely.

    The doomsday clock developed by Hiroshi Yoshida and Masahiro Ishigaki, economists at Tohoku University, relies on population and fertility data from 2014 and 2015. In April of 2014, there were 16.32 million children. By the following year, the total had fallen to 16.17 million, a drop of approximately 153,000.

    Yoshida and Ishigaki's model estimates there are fewer than 16 million children alive in Japan today; the number only continues to fall. Within the next 1,750 years, the Japanese people could be no more.
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    India seeks to transform govt-owned companies into ‘resource majors’

    India is preparing a blueprint for the transformation of government-owned and -operated companies into "resource majors" with each straddling the entire chain of miningoperations.

    Government has identified power generation major NTPC,Steel Authority of India Limited (SAIL), Hindustan Copper Limited (HCL), NMDC, National Aluminium Company(Nalco) and NLC (formerly Neyveli Lignite Corporation) as the companies set for a transformation, a government official with knowledge of the drafting of the blueprint has said.

    While this is a preliminary list, the goal will be to develop integrated resource companies with operational and managerial scope stretching across exploration, mining, extraction, processing and production of products.

    The purpose of such a transformation is to have governmentmining and mineral companies be at the forefront of implementation of the National Mineral Exploration Policy 2016 (NMEP).

    This will enable the mining industry to ramp up yearly mineral production by 20% by 2020, which is the stated objective, which in turn, should increase the sector’s contribution to the national gross domestic product to 2% from 1%.

    Elaborating on the various categories of government companies, the official said that while some, such as SAIL,Nalco and HCL, had their own operational mines, these were solely focused to operate as captive raw material sources.

    However, this group of companies would need backward integration into exploration to supplement exclusiveexploration agencies such as Geological Survey of India andMineral Exploration Corporation.

    At the other end of the spectrum, power utility NTPC is venturing into coal mining for captive consumption and, as such, will enter coal exploration projects along with current efforts to secure proven coal reserves through the auction route.

    The NMEP envisioned the Mines Ministry auctioning identified exploration blocks to private and government sector companies on a cost-sharing basis. If such explorationleads to viable resources the exploration cost will be borne by the successful bidder for those blocks.

    However, if the exploring company does not discover any viable resources, the government will reimburse the expenditure incurred on exploration project.

    A former CEO of a government-owned metal company said that the transformation of government companies into resource major was “desirable” as exploration projects did not yield immediate returns and were unlikely to attract private exploration companies, including international majors.

    However, in sharp contrast, a former Mines Ministry bureaucrat said that the model of integrated resource companies that the government was envisaging would take decades to evolve, citing examples of international majors such Rio Tinto and BHP Billiton. Much of their growth has been as players in global mergers and acquisition.

    Instead, he advocated greater focus on debottlenecking and operationalising existing mines with government companies taking a lead, citing data which show India has 3 900operational mining leases with only 1 800 operating mines.

    Indian mineral production, barring coal, was pegged at 495-million tons in 2015/16 with a growth rate of 9% over the previous year.
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    China Aug PPI edges up slightly on month

    China's Producer Price Index (PPI), which measures inflation at wholesale level, edged up 0.2% month on month but down 0.8% year on year in August, showed the latest data released by the National Bureau of Statistics (NBS) on September 9.

    In August, prices of coal mining and washing industry rose 1.5% on month but down 2.3% on year; prices of oil and natural gas mining industry slid 6.2% on month and 15.6% on year.

    Meanwhile, prices of ferrous metal industry increased 1.8% from July but fell 0.5% from a year ago; and that of nonferrous metals metal industry gained 1.2% from the previous month and 8.6% from the year-ago level.

    During the first eight months this year, China's PPI dropped 3.2% on average from the previous year.

    Of this, the average price of coal mining and washing industry fell 11.7% on year; while the price of oil and natural gas mining industry decreased 25.8% on year; price of ferrous metal industry dropped 9.3% from the previous year; and price of nonferrous metals metal industry fell 2.2% compared to the corresponding period last year, data showed.

    The data came along with the release of the Consumer Price Index (CPI), which rose 0.1% on month and climbed 1.3% from the year prior in August.
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    German Exports Plunge in July

    Germany’s exports plummeted in July, the latest in a string of weak economic data from Europe’s industrial powerhouse that will further fan discussions about tax cuts in Berlin.

    Coming hot on the heels of weak manufacturing production and orders data at the start of the third quarter, the Federal Statistical Office said on Friday that exports dropped 2.6% from June.

    Exports were down a startling 10% from July last year—their sharpest decline since the fall of 2009. But a statistician at Destatis said this was probably down to “a base effect.” July 2015 was one of the strongest months of the entire year for Germany’s exporters, he said, which is “unusual” for the summer holiday season.

    Nevertheless, Germany’s exports haven’t made much progress over the last 18 months. At €71.1 billion ($80.2 billion) in July, adjusted exports are back to their January 2015 level. Germany’s imports paint a similar picture.

    “Either the entire industry took an early and long summer break, or Brexit and a general weakness in Germany’s main export partners left another mark on the economy,” said Carsten Brzeski, an economist at ING in Frankfurt. “A further cooling of the economy in the months ahead should give more support to just started discussions about fiscal stimulus.”

    Finance Minister Wolfgang Schäuble earlier this week floated limited tax relieffollowing next year’s national elections—a concession of sorts after years of pressure from the U.S. and other governments to loosen the purse strings. In a speech to parliament, Mr. Schäuble promised €15 billion in tax cuts starting in 2018.

    A string of weak industrial data already fanned growth concerns earlier this week. Official data showed that German industrial output in July dropped 1.5% from June and the economics ministry cautioned that manufacturing orders “lack zing.”

    Most private-sector economists expect a slowdown in German economic growth in the second half of the year.

    “The unusually-high number of flashpoints is leaving its marks,” said  Anton Börner, president of the BGA federation of exporters and wholesalers. “This creates an enormous uncertainty, attended by a lack of investment.”

    On Thursday, meanwhile, Economics Minister Sigmar Gabriel reiterated the government’s forecast of 1.7% gross domestic product growth in 2016.

    But signs of cooling aren’t confined solely to Germany’s economy. France’s Insee statistics agency said on Friday that industrial production in the eurozone’s second largest economy dropped 0.6% from June, when it already fell 0.7%. Manufacturing output of equipment dropped 3.3% in July from June and transport materials production fell 1.4%.
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    The End of Central Planning.

    The Era of Central Planning is Crumbling... and the Elite Are Terrified

    Phoenix Capital Research's picture by Phoenix Capital... Sep 10, 2016 1:09 PM 0 SHARESTwitterFacebookReddit

    The biggest issue in financial political power structure today is the End of Centralization.

    In the post 2008 era, the Globalists made a major push to hold the system together. The multi-billionaire class, particularly those who made fortunes from crony capitalism and bubble economics joined forces with the Keynesian media shills to convince the world that the only way we would survive would be if trillions of Dollars were given to those who were deemed “systemically important.”

    Warren Buffett was a prime example of this. Buffett amassed a fortune by being a raging capitalist who prided himself on never losing money on an investment. But by the time 2008 rolled around, he faced the very real prospect of seeing his fortune halved.

    Somehow he managed to convince the public that he was still a great guy while pushing for bailouts in the very firms in which he had taken large stakes: Goldman, Wells Fargo, etc.

    Buffett was not the only one. He’s just the best known.

    Let’s be blunt here: the 2008 bailouts and money pumps completely betrayed capitalism. The outcome was precisely what you’d expect from Central Planning:

    1)   Economic stagnation.

    2)   The creation of low quality jobs that offer little upward mobility.

    3)   Concentration of wealth.

    Today, eight years later, the elites are terrified that the game is ending.

    You can see this in many ways. The architects of this mess (Ben Bernanke, Alan Greenspan, Larry Summers and others) have resurfaced with revisionist narratives in which they are not responsible.

    Similarly, those currently at the helm of the Central Banks have begun abdicating their responsibility for what’s coming.

    This is most evident in Central bank Presidents like Draghi and Yellen dropping all pretenses of being able to hit their goals/ targets and instead passing the blame onto political bodies such as Congress.

    ·      Bank of Japan Head Harihiko Kuroda confessed in January that Japan has a limited GDP potential no matter what policy he employs.

    ·      European Central Bank President Mario Draghi admitted that despite FOUR NIRP cuts and €1 trillion in QE the ECB won’t hit its inflation targets for a decade.

    ·      Federal Reserve Chair Janet Yellen has begun implicitly pushing for Congress to step up in terms of policy because the Fed is effectively out of ammunition.

    These are very critical “tells” from those at the top of the Central Planning economic structure. These individuals know the game is about up and they know what is coming. They also know that politically the tides are now against them.

    BREXIT, Trump, Le Pen, Duterte, are all part of a larger global trend away from Centralization towards Nationalism. Whether you like or despise these people/ issues is irrelevant. Their popularity is the product of the last eight years of Cronyism/ Central Planning.

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    Oil and Gas

    Oil Services Firm Linked to Phony Elon Musk E-Mail Starts Probe

    Quest Integrity Group LLC said it’s looking into a claim that its finance chief impersonated Elon Musk in an e-mail to get inside information on Tesla Motors Inc., while calling “absurd” the electric car maker’s allegation of an oil industry conspiracy against alternative energy firms.

    Tesla alleged in a lawsuit Wednesday that Quest executive Todd Katz used the [email protected] to try last month to prompt Tesla’s chief financial officer to give him more detailed data than the the company released in announcing its second-quarter financial results.

    The Seattle-based oil pipeline engineering and inspection firm said Thursday it had started an internal investigation in response to the complaint filed in California state court in San Jose.

    “However, it is clear that unsubstantiated allegations of an alleged conspiracy among Quest Integrity, Team Industrial Services or our major oil company clients are absurd,” the company’s general counsel, Butch Bouchard, said in an e-mail.

    Energy Efficient

    Tesla said in its complaint that the e-mail was part of an oil industry effort to undermine the push for energy efficient transportation alternatives.

    “In recent years, oil companies have spent billions of dollars on legislative efforts and campaigns aimed at blocking progress toward electric cars and other sustainable energy solutions in the United States and abroad," Tesla said.

    Tesla declined to comment on Quest Integrity’s statement.

    In its complaint, Tesla said the e-mail received Aug. 3 by its CFO, Jason Wheeler, was signed “em.” The e-mail read, “Why you so cautious w Q3/4 guidance on call. What is ur best guess as to where we actually come in on q3/4 deliverables. Honest best guess. no bs.”
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    Chesapeake Energy loses appeal in $438.7 million bond dispute

    A federal appeals court on Thursday rejected Chesapeake Energy Corp's effort to avoid having to pay $438.7 million, including interest, to investors in a bond dispute.

    By a 3-0 vote, a panel of the 2nd U.S. Circuit Court of Appeals in Manhattan said the payout was justified after the natural gas company had waited too long to tell bondholders of its plan to redeem $1.3 billion of their debt six years early.

    The court agreed with bond trustee Bank of New York Mellon Corp that hedge funds and other holders of Chesapeake's 6.775 percent notes maturing in 2019 were contractually entitled to a special "make-whole" price because of the early redemption.

    "To hold otherwise would frustrate the noteholders' legitimate expectations regarding their rights," the court said.

    The May 2013 redemption was intended to help Chesapeake reduce a debt burden that the Oklahoma City-based company had accumulated under Aubrey McClendon, then its chief executive, and offset natural gas prices that had sunk to a decade low.

    "We are disappointed with the ruling and will continue to pursue our legal options," Chesapeake spokesman Gordon Pennoyer said. "We were prepared for this potential outcome and have reserved the liquidity to address it."

    The payout comprised $379.7 million of contract-based damages, plus roughly $59 million of interest. That compared with the about $100 million that Chesapeake had hoped to distribute in "restitutionary" damages.

    Bank of New York Mellon acted as trustee on behalf of investors such as Ares Management LLC, Aurelius Capital Management LP, P. Schoenfeld Asset Management LP and Taconic Capital Advisors LP.

    The bank did not immediately respond to requests for comment.

    Thursday's decision upheld a July 2015 ruling by U.S. District Judge Paul Engelmayer in Manhattan.

    McClendon died on March 2 when his vehicle slammed into a concrete bridge abutment in Oklahoma. A medical examiner in June ruled the fiery crash an accident.

    The case is Chesapeake Energy Corp v. Bank of New York Mellon Trust Co, 2nd U.S. Circuit Court of Appeals, No. 15-2366.
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    Noble, Marathon Said to Weigh Bids for Permian’s Silver Hill

    Noble Energy Inc. and Marathon Oil Corp. are weighing bids for Silver Hill Energy Partners, a Permian Basin explorer that could fetch more than $2 billion in a sale, according to people familiar with the matter.

    Occidental Petroleum Corp. is also considering an offer for the Dallas-based company, said the people, who asked not to be identified because the matter isn’t public. Silver Hill is working with Jefferies Group LLC to find a buyer, with bids due next week, one of the people said.

    Representatives for Jefferies, Marathon and Occidental declined to comment, while representatives for Noble Energy and Silver Hill didn’t respond to requests for comment.

    The Permian Basin -- by far the most active shale field in the U.S. by rig count -- has been a hotbed of takeover activity in recent months as explorers seek to expand in an area that is one of the few places in the U.S. where drilling remains profitable amid depressed oil prices.

    Silver Hill was started in 2011, and has since raised more than $725 million from backers including Kayne Anderson Capital Advisors and Ridgemont Equity Partners, according to its website. It controls drilling rights on more than 42,000 net acres on the western shelf of the Permian in an area known as the Delaware Basin.

    Noble Energy expanded into the Delaware last year via its $3.9 billion takeover of Rosetta Resources Inc., which controlled about 46,000 net acres in the region. Occidental is one of the largest landholders in the Permian, with 5.4 million gross acres, according to its website.

    Marathon Oil Corp. has told investors it plans to sell off non-core assets to strengthen its finances and focus on drilling in highly profitable areas, after closing an $888 million acquisition in August of Oklahoma-focused producer Payrock Energy Holdings.
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    ACCC chief Rod Sims exposes gas ban madness

    There is gas under virtually every Australian state and territory. It is one of the country's massive natural comparative advantages. Yet a collective madness seems to have overtaken state governments whereby much of the gas under the continent cannot be exploited amid environmental scaremongering that has conflated coal seam gas extraction through fracking with normal conventional gas drilling.

    The explosion in the development of natural gas over the past few years has put Australia on track to become the world's biggest liquefied natural gas exporter by 2017. Much of the gas has been developed offshore, but the massive increase in volume has meant that for the first time Australia is a big exporter.

    This has put strains on the local market. Domestic Australian consumers are used to gas being priced for domestic consumption only, and so are now struggling with the increased price as domestic consumption competes with demand from abroad. Overall, this is still beneficial for Australia: the increase in price will be offset by the cheaper imports we will be able to buy from the rest of the world.

    Yet this increase in price is not entirely the result of export markets or the gas-hungry Japanese energy sector after the Fukushima nuclear incident in March 2011 supercharged the demand for gas.

    Instead, it is state governments that are driving up the price for Australians, following either effective or complete bans on fracking for coal seam gas in NSW, Victoria and now the Northern Territory. It is a simple supply and demand equation: there is no new available supply to meet a massive increase in demand.

    In Victoria a permanent ban has been placed on both the extraction of coal seam gas, and extraordinarily,  conventional gas, which comes with none of the safety concerns that accompany fracking.

    Risks are manageable

    In addition, NSW has an effective ban on CSG, but as The Australian Financial Review said in August, at least NSW asked its chief scientist to assess the risks -- and found they were both manageable and likely to decrease over time. Victoria and the Northern Territory have opted for simple populism and banned exploration because a populist coalition of the environmental left and the farming right has mounted loud campaigns.

    Now Australian Competition and Consumer Commission chairman Rod Sims has raised the stakes in the debate. What Mr Sims calls a "triple whammy", has hit the gas market in eastern Australia: the introduction of LNG, the fall in oil prices and "regulatory uncertainty and exploration moratoria are significantly limiting the potential for new gas supply".

    In a speech in Darwin, Mr Sims has reinforced the fact that overall the problem with gas is a fundamental lack of supply, which, up until now, consumers in the south-east had been counting on being ameliorated by a supply of conventional gas coming from the Northern Territory.

    Yet Mr Sims said that with the NT's recent ban and the others in the south-east, "it is difficult to envisage where new gas supply will come from in the short to medium term to alleviate high gas prices looming for gas uses in the south". Mr Sims was succinct, saying the high gas prices are being driven by a lack of gas and maybe the absence of a better regulatory regimes for new pipelines

    And this costliness is a broader issue than mere heartburn for retail and industrial gas users. It complicates an already fraught landscape in the national electricity market.

    Gas-fired electricity is far cleaner than coal, yet with state-based mandated renewable energy targets (RETs) in Victoria and South Australia, the lack of new exploration means that gas cannot be part of a clean energy mix. Ironically this means that coal powered-energy may have to be maintained to provide baseload electricity when the wind does not blow in South Australia or Victoria. Alternatively, there is a very real chance the lights will go out.

    Read more:
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    Portugal ready to take bigger LNG transportation role, official says

    Europe could reduce its dependence on Russian natural gas by as much as 30% if it used more of Portugal and Spain’s LNG import capacity, a Portuguese government official told a Washington audience.

    It would not even require more pipelines because the two countries’ terminals could store LNG and ship it by tanker to eastern Europe and other customers, Portugal’s Minister of the Sea Ana Paula Vitorino said at the Atlantic Council on Sept. 14.

    The Sines LNG terminal in southern Portugal has a deepwater port that could be a storage and reexport hub if pipelines aren’t available, she said. “This would reinforce the role of the North Atlantic as a global LNG leader.”

    Noting that Portugal and the US are long-time maritime allies, she said the southern European nation also is interested in developing its deepwater oil and gas potential, more offshore wind and wave energy, and offshore methane hydrates.

    “There’s still a great deal of research and development needed before methane hydrates can be considered economically viable, although the Japanese have been very active in this,” Vitorino said. “It’s not an exaggeration to say that methane hydrates are seen as the kind of future resource today that shale gas was 15 years ago.”

    Developing more offshore energy—whether from traditional or renewable sources—will require dealing candidly with affected stakeholders, particularly municipalities, she said. “Many believe this kind of exploration and production can conflict with tourism and other businesses. We’re trying to explain these activities’ real impacts.”

    She said, “We’re also trying to improve our legal framework to make it more demanding. It’s the only way to assure our population that we’re doing this in the right way. We don’t have the kind of opposition you might see in other European countries because we’re moving slowly and cautiously.”
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    Offshore Drillers Brace for More Pain Even With Bottom in Sight

    Offshore oil-rig operators, grappling with the biggest industry downturn in a generation, say they finally have the bottom in sight. The problem is, they could be stuck there for a long time.

    Transocean Ltd., which owns the biggest offshore-rig fleet in the world, believes utilization for floating units will reach bottom toward the middle of next year, Chief Financial Officer Mark Mey said at a conference organized by Pareto Securities ASA in Oslo. Seadrill Ltd., which owns the third-largest fleet, said utilization could stabilize as soon as the beginning of next year, and that rental rates had already bottomed out.

    Still, it’s impossible to say when those rates, which have dropped to about $200,000 a day from highs of $650,000 in 2013 for the most sophisticated units, will recover, said Seadrill Chief Executive Officer Per Wullf and Tom Kellock, a senior consultant at IHS Markit Ltd.

    “We don’t know where demand is going, and that’s a reflection of the oil price,” Kellock said in an interview. “Rates are going to come back more slowly than oil prices because of the overhang and the degree of competition and the oversupply of rigs, which is not at this stage being tackled.”

    Offshore drillers have been pounded by the collapse in crude prices in the past two years as oil companies slashed spending to protect their cash flow and shareholder payouts. Their predicament has been exacerbated by a wave of new rigs coming into the market that were ordered when demand was strong. Rig operators have reduced costs dramatically, but still have had to cut dividends, defer delivery of vessels and suspend or scrap existing ones.

    Bottoming Out

    The number of floating rigs on contract and working is expected to fall to about 120 in the middle of 2017 from about 160 currently, Transocean’s Mey said in an interview on the sidelines of the conference. It could take as long as a year before utilization bottoms out, IHS Markit’s Kellock said. As many as 60 more floaters need to be permanently scrapped, according to both Seadrill and IHS Markit.

    While Seadrill said utilization rates will need to reach 70 percent across the industry before rates start improving, Transocean and IHS Markit estimated 85 percent. Regardless, a recovery depends on higher, more stable oil prices, Ensco Plc Chief Financial Officer Jon Baksht, said during a presentation at the conference Wednesday.

    “You’ll have flat utilization” from the beginning of next year with operators “hunting” for work, Wullf said in an interview. “Then it’s a matter of the oil price.”

    Longer Glut

    While oil has recovered from the 12-year lows it reached in January, the International Energy Agency said this week that a global glut will last longer than previously expected, persisting into late 2017 as demand growth slows and supply keeps up, driven by record output from OPEC.

    For costly ultra-deepwater rigs, utilization rates of 70 percent won’t be reached until 2018 at the earliest, said Andrew Cosgrove, an analyst at Bloomberg Intelligence. “I agree rates are definitely at or near bottom, but we’re going to be walking along the ‘bottom of the bathtub’ for a while.”

    An extended period at the bottom looks especially threatening for Seadrill, which has the industry’s heaviest debt load, with about $9 billion at the end of the second quarter. The company, controlled by billionaire John Fredriksen, is currently negotiating with its 42 banks before it can be able to include bondholders, Wullf said at the conference. The company aims to have a solution in place by early December, he said.
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    Tanker docks at Libya's Ras Lanuf oil port, Nafoura output resumes

    A tanker arrived at Libya's Ras Lanuf oil terminal on Thursday to load more than 600,000 barrels of crude, the first to dock at the terminal since at least 2014, a port official said.

    Separately, an oil official said production had restarted at the Nafoura field, which was closed in November 2015 due to force majeure at Zueitina port.

    Libya's National Oil Corporation said on Thursday it was lifting force majeure at three ports seized days earlier by forces loyal to eastern commander Khalifa Haftar, including Ras Lanuf and Zueitina.
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    Oil producer Ophir cuts capex again amid crude slump

    Oil and natural gas producer Ophir Energy Plc cut its 2016 capital budget for the second time this year to weather a crude price slump and said it had short-listed four potential partners for the Fortuna project in Equatorial Guinea.

    Ophir, which has producing assets mainly in Asia, said it planned to spend $140 million to $170 million on projects this year, down from its previous estimate of $150 million to $200 million.

    Ophir initially forecast capital spending of $175 million to $225 million for the year in January.  

    A steep fall in crude prices from mid-2014 highs has forced oil producers to rein in costs and develop low-cost projects.

    Ophir said it was ready to recommence its drilling programme and expected to drill three to five operated wells in 2017-18.

    The company, which has been seeking partners to help fund the Fortuna Floating Liquefied Natural Gas (FLNG) project since oilfield services company Schlumberger walked away from a deal in June, said it had short-listed potential partners for the downstream portion of the project.

    Ophir said the upstream part of the project was "technically ready" for a final investment decision and two consortia were still bidding for an engineering contract.

    Ophir said it pretax loss from continuing operations narrowed to $69.6 million for the six months ended June 30, from $123.3 million a year earlier, helped by cost cuts. Revenue fell 39.8 percent to $52.1 million
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    Three firms vie for BP's China petrochemicals plant: sources

    At least three leading chemical companies are set to vie for BP's stake in Chinese petrochemicals joint venture SECCO which could fetch more than $2 billion, sources close to the process said.

    Offers for the 50 percent stake, the British oil and gas company's largest investment in China, will be submitted in the coming days, the sources said.

    SK Chemicals Co Ltd, a pharmaceutical unit of South Korea's SK Group; Austrian plastics group Borealis, owned by Abu Dhabi's sovereign wealth fund IPIC and oil and gas company OMV; and privately-owned Switzerland-based chemicals company Ineos [INGRP.UL] are set to bid for the asset, the sources said, speaking on condition of anonymity as the information isn't public.

    At least one other company is considering entering the bidding round.

    BP's partner in the joint venture, state-owned China Petroleum & Chemical Corp (Sinopec), has a right of first refusal. It has said it is discussing the conditions put forward by BP, but has made no decision.

    BP and the three potential bidders declined to comment or were not immediately available to comment.

    SECCO, a venture formed in 2001, produces ethylene and propylene, which are used to make resins, plastics and synthetic rubbers.

    BP, like other of the world's top oil companies, is in the midst of a divestment drive in order to focus its business and boost cash flow in the wake of the halving of oil prices since mid-2014. It is planning sales worth $3-$5 billion this year.

    The company has sold more than $50 billion of assets since a deadly explosion on an oil rig in the Gulf of Mexico in 2010.

    BP has sold several assets to Ineos in recent years, including the Grangemouth refinery in Scotland as part of a $9 billion sale of the olefins and refining business Innovene in 2005.
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    Terminal decline and value benchmarking of mature US plays

    With the traditional US E&P farm system (smaller start-up companies executing exploration work and then selling successful de-risked operations to larger E&Ps) falling out of favour in the current low-price environment, many private equity-backed buyers have redirected their interest to longer-life, mature assets. We've modelled six mature gas plays to see which assets can offer the most upside to investors.

    This type of upstream investment opportunity is vast, with some estimates suggesting more than US$100 billion in private equity being raised specifically for energy, with nearly all of it concentrated in North America.

    One of the largest private equity-backed deals this year involved Terra Energy Partners (backed by Kayne Anderson) acquiring mature Piceance Basin gas assets from WPX for US$910 million.

    To better understand the opportunities offered by mature wells in producing plays, we benchmarked six US play datasets — aggregated from thousands of mature wells — by terminal decline rates for wells that had been online for more than 48 months. Our model also used common benchmarks fixed at 8% and 10% decline rates to show where the different plays fall.

    Image title

    Terminal decline rates vary widely, and some assets have returns more deeply tied to rising commodity prices and reduced costs than others. In multiple cases, better management of mature wells can offer superior opportunities to undrilled gas acreage.

    Looking at remaining NPV for these mature assets, we recognize that any operator's goal is to produce greater volumes at a lower costs and possibly higher prices, so we compared the upside of our mature wells to that of wells yet to be drilled. The sensitivities we modelled included a concurrent 20% opex reduction and a price increase of 20%. In particular, ArkLaTex Basin assets showcase a lot of potential.

    Attached Files
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    Statoil inks small-scale LNG cooperation deal with Lithuanian duo

    Lithuanian natural gas trading companies Litgas and Lietuvos Dujų Tiekimas, both part of Lietuvos Energija, on Thursday signed an agreement with Norway’s Statoil to boost the development of the small-scale LNG market in the Baltic region.

    The deal enables “reliable and flexible wholesale LNG supplies” at Lithuania’s first LNG import terminal in Klaipeda thus contributing to the development of the small-scale LNG market in the Baltic region, Litgas said in a statement.

    Lithuania, the largest of the three Baltic nations, started importing the chilled fuel via Höegh LNG’s FSRU independence in December 2014 in order to reduce its dependence on Russian pipeline gas supplies.

    The LNG is being imported under a revised deal Litgas has with Statoil.

    “We are very glad that we have strengthened our strategic partnership with Statoil. It is a major step for Lietuvos Energija, Klaipėda’s LNG terminal and for our country. We are entering into emerging Baltic small scale LNG market and the cooperation agreement not only allows to develop a successful business, but creates a potential for Klaipėda’s LNG terminal to become a regionalsmall scale LNG supply center as well,” said Dalius Misiūnas, chairman and CEO of Lietuvos Energija.

    “Important to note that this new activity would increase the usage of the terminal which, in turn, allows to lower its operational costs,” he added.

    According to the statement, the three companies believe that this segment will continue to grow in the coming years as LNG represents the best technology for marine users to comply with Sulphur Emission Control Area (SECA) requirements and competitive supply solutions are becoming more and more available.

    “Based on the latest trends in the Baltic Sea small-scale LNG market, there is a need for a wholesale supply point of LNG for the small scale LNG market to develop here. Klaipėda’s LNG terminal is conveniently located for LNG bunkering: it is based in the center of the Baltic Sea and can be reached in a day from the central part of sea and within three days from its farthest points,” the statement said.

    The chosen business model includes LNG modulation services at the Klaipeda terminal and the natural gas grid from Litgas and LDT and wholesale supply from the LNG terminal by Statoil to clients for further redistribution to the small and medium scale segments in the Baltic region.

    Attached Files
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    Gas E&P Vantage Energy re-files for an estimated $600 million IPO

    Vantage Energy, an oil and gas E&P operating in the Marcellus and Barnett Shale, filed on Tuesday with the SEC to raise an estimated $600 million in an initial public offering.

    The Englewood, CA-based company was founded in 2006 and booked $90 million in sales for the 12 months ended June 30, 2016. It plans to list on the NYSE under the symbol VEI. Vantage Energy filed confidentially on May 14, 2014. Goldman Sachs, Barclays, Credit Suisse, Citi, J.P. Morgan and Wells Fargo Securities are the joint bookrunners on the deal. No pricing terms were disclosed.

    The article Gas E&P Vantage Energy re-files for an estimated $600 million IPO originally appeared on IPO investment manager Renaissance Capital's web site

    Read more:
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    Shell strikes deal for $80m sale of its downstream Danish assets

    Oil major Shell said it has reached an $80million deal with Dansk Olieselskab for the sale of its assets in Denmark.

    The company’s operations in the region consists of the 70 thousand barrels of oil per day producing Fredericia refinery as well as local trading and supply activities.

    The transaction also includes long-term agreements for the supply of crude oil and feedstocks to the refinery.

    Shell currently employs 240 people in Denmark.

    In a statement Shell said it would remai employed by the company as it transfers to new ownership.

    The sale is expected to complete in 2017, subject to regulatory approval.

    The move is part of wider plans by Shell to concentrate its downstream operations on areas where it can be “most competitive” and follows the sale of Shell’s marketing business to Couche-tard earlier this year.
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    China’s oil demand shifting to consumers, not falling, Wood Mac says

    China’s oil demand isn’t really slowing — it’s just changing, and that will help global energy demand to exceed supply by the end of the years, says  energy research firm  Wood Mackenzie.

    The world’s second-largest economy is maturing,  increasingly supported by a growing middle class whose appetite for energy is offsetting wavering demand in Chinese manufacturing, Wood Mackenzie says. Household consumption of gasoline and other petroleum products accounted for 90 percent of the country’s total oil demand growth this year, compared to less than half the demand growth five years ago. Meanwhile, demand growth for diesel and other fuels used by industrial buyers has dropped from more than half to 10 percent over the same half-decade, according to energy research firm Wood Mackenzie.

    “Oil has maintained its growth; in fact, it’s the exact same rate as 2011 despite the slowdown and the collapse in demand we saw in coal and gas,” said Ann-Louise Hittle, oil market analyst at Wood Mackenzie, during a recent meeting with journalists in Houston.

    Chinese car retailers sold 21.1 million vehicles last year, and about 40 percent of those were gas-guzzling SUVs and multipurpose vehicles. Wood Mackenzie estimates China’s oil demand will grow between 350,000 and 450,000 barrels a day this year, the same rate as 2011.

    “Despite the lower [economic] growth, there’s still a rising middle class, and with increasing income there’s a drive for personal mobility,” Hittle said.

    If Wood Mackenzie’s assessment is correct, China’s consistent oil demand growth could be one factor that underpins the oil market’s return to normalcy.

    At first glance, Wood Mackenzie’s conclusion appears starkly different from the recent gloomy report by the International Energy Agency, which on Tuesday predicted oil markets will remain oversupplied for at least the first half of next year, as demand slips further than expected. The report has sent crude prices lower.

    One key element of the IEA’s forecast was its downward revision of global oil demand growth, by 100,000 barrels a day this year. It pointed to China and India as two large players contributing to the slowdown. China, in particular, has had an outsized impact on global energy demand in recent years; crude prices fell to 12-year lows in February in part because of heightened fears that both China’s economy and demand for energy were weakening.

    But the IEA’s revised numbers puts global oil demand growth at 1.3 million barrels a day this year – the same figure Wood Mackenzie has forecast for months.

    The IEA also said increased oil production from the Organization of Petroleum Exporting Countries has “more than offset” declining output from non-OPEC nations like the United States.

    Similarly, Wood Mackenzie believes these offsetting trends will keep oil supply growth flat this year. Where they differ is when they believe the oil market will come back into balance. While the IEA said Tuesday demand and supply will realign after the first half of next year, Wood Mackenzie believes total worldwide oil demand will climb above supply in the fourth quarter of 2016.

    “It’s September, and it’s looking like we’re going to end up with a slight (oil storage inventory) draw,” Hittle said. “We’ve got a rebalancing underway.”
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    Oil Glut Set to Worsen as Nigeria and Libya Fields Restart

    Amid the most enduring global oil glut in decades, two OPEC crude producers whose supplies have been crushed by domestic conflicts are preparing to add hundreds of thousands of barrels to world markets within weeks.

    Libya’s state oil company on Wednesday lifted curbs on crude sales from the ports of Ras Lanuf, Es Sider and Zueitina, potentially unlocking 300,000 barrels a day of supply. In Nigeria, Exxon Mobil Corp. was said to be ready to resume shipments of Qua Iboe crude, the country’s biggest export grade, which averaged about 340,000 barrels a day in shipments last year, according to Bloomberg estimates. On top of that, a second Nigerian grade operated by Royal Dutch Shell Plc is scheduled to restart about 200,000 barrels a day of flow within days.

    While there are reasons to be cautious about whether the barrels will actually flow as anticipated, a resumption of those supplies -- more than 800,000 barrels a day in all -- could more than triple the global surplus that has kept prices at less than half their levels in 2014. It would also come just as members of the Organization of Petroleum Exporting Countries and Russia are set to meet in Algiers later this month to discuss a possible output freeze to steady world oil markets.

    “If you have some restart of Nigeria and some restart of Libya, then the rebalancing gets pushed even further out,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by phone. “It complicates matters a lot before the meeting in Algeria.”

    Libya Shipments

    With a few exceptions, crude in New York and London has been stuck below $50 a barrel for months. The current global oil oversupply is about 370,000 barrels a day, according to data from the Paris-based International Energy Agency.

    The resumption of shipments from the three Libyan ports would allow Libya to double crude output to 600,000 barrels a day within four weeks, National Oil Corp. Chairman Mustafa Sanalla said Tuesday in a statement on the company’s website.

    The exports are possible after a substantial improvement in the security situation there, he said Wednesday in a separate statement. The Tripoli-based NOC lifted a measure called force majeure, which gives the company the right not to meet supply commitments.

    Libya has made at least half a dozen failed pledges to restart shipments. What may be different this time is that the NOC has struck a deal with Khalifa Haftar, commander of forces who took control of Es Sider and Ras Lanuf. He also has control of the oil fields and pipelines that feed them.

    Qua Iboe

    Meanwhile Exxon has filled storage facilities at its Qua Iboe export terminal in Nigeria and is awaiting government clearance to resume shipments, a person familiar with the matter said Wednesday. Exxon declined to provide a timeline for a restart and said that a force majeure, in place since July, still stands.

    In Nigeria, militant groups have repeatedly attacked oil infrastructure this year, making any resumption of flow reliant on pipeline and export terminals being secure from further incidents. Qua Iboe has been under force majeure since a “third-party impact” on a pipeline in July, according to Exxon.

    “If it’s true, it’s another downward pressure for the markets because that would be a large amount to return to the market,” Thomas Pugh, commodities economist at Capital Economics, said by phone, adding that he doubts the resumptions will materialize given the situations in both countries.

    West Texas Intermediate, the U.S. benchmark, was 0.3 percent higher at $43.70 a barrel at 12:56 p.m. in Hong Kong. Brent gained 0.5 percent to $46.09 a barrel on the London-based ICE Futures Europe exchange.
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    BP has no plans to raise annual investments this decade -CEO

    BP does not plan to increase annual investments this decade but still expects to bring nine new projects online in 2017 as it focuses on improving efficiency, Chief Executive Bob Dudley said in an interview on Wednesday.

    Dudley met with government officials during an investment forum in Argentina and said BP was testing in the Vaca Muerta shale area, where U.S. rivals Exxon and Chevron have invested, and expected results next month.
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    Survival, for now, equals success in Eagle Ford

    Now, instead of looking for a pop in oil prices just around the corner, companies working in the 400-mile Eagle Ford Shale oil and gas field in South Texas have shifted their focus to what will keep them alive: trimming costs and making technical improvements.

    “We have to lower our cost to survive in this sub-$50 oil world out there,” said Richard Mason, chief technical director of Hart Energy.

    The company opened its DUG Eagle Ford and Midstream Texas conferences in San Antonio on Monday with a networking reception. The conferences got into the nitty-gritty Tuesday and Wednesday at the Convention Center with an exhibition and talks from energy executives and analysts.

    “Hopefully, prices recover, but I think we need to be prepared to be in this kind of world for some time yet,” Mason said.

    He said the industry is cautiously optimistic that the worst is in the past — likely at $26-per-barrel oil in January and February, though prices haven’t moved high enough to support a big expansion of activity in the Eagle Ford.

    Drilling in the Eagle Ford started in late 2008 during a long period of high oil prices.

    U.S. energy companies had figured out they could unlock oil trapped in tight shale rock with a combination of technologies: horizontal drilling with hydraulic fracturing, which pumps millions of gallons of water, chemicals and sand at high pressure to break the rock and prop open the cracks, releasing oil and gas.

    U.S. production soared, and Texas oil reversed the long death spiral it had been stuck in since the early 1970s. But the price of a barrel of the benchmark West Texas Intermediate peaked around $107 in June 2014. It closed at $45.65 Friday.

    Energy companies have slashed spending and jobs in response.

    In the Eagle Ford, the budget cuts have slowed the flow of oil from the field. Production peaked at more than 1.7 million barrels per day in March 2015 and has fallen to just above 1 million barrels daily this month, the U.S. Energy Information Administration reports.

    Mason said the mood varies from despair to optimism, depending on which sector of the oil and gas industry someone works in.

    On the finance side, people looking to invest in projects have a two- to five-year timeline and have a positive outlook.

    Those who are closest to the oil field, though, continue to feel the pain. Services companies, which supply the workers and equipment for the workaday tasks of the oil patch, are fighting for business and survival.

    “There’s so much excess capacity. People are bidding jobs at below cost,” Mason said. For companies that provide fracking services in particular, “it’s a knife fight at midnight as people try to capture market share.”

    George Wommack, founder and CEO of Petro Waste Environmental, which disposes of solid and water waste in the Eagle Ford and Permian Basin, said service companies of all kinds are under pressure to lower costs to the break-even point.

    “They’re providing services at what they think is break even, and many times it’s not,” Wommack said. “The service companies are having to have those difficult conversations with their operators where they have to say they’re losing money on the account and they can’t keep doing the work at that price. Everyone is of the sentiment that they have to find a way to make money at $40 oil.”

    Wommack said the activity indicator he’s looking for — a healthy rise in the drilling rig count — hasn’t happened in the Eagle Ford.

    The number of drilling rigs in the Eagle Ford soared as high as 259 in 2012, when it took longer to drill shale wells and, in a necessary but time-consuming exercise, rigs raced from ranch to ranch to drill a well before a mineral lease could expire. The rig count dipped into the lower 200s through the end of 2014, as drillers got faster and operators started putting several wells on the same small patch of gravel.

    After oil prices busted, the number of drilling rigs in South Texas spiraled from 200 at the start of 2015 to 29 in late May. It rose to 38 rigs last week, according to the Baker Hughes rig count.

    Mason said there’s reason for optimism in the field, with drilling in the Austin Chalk, the rock layer that sits atop the Eagle Ford, the opportunity to sell natural gas in Mexico and continued technical improvements that squeeze more oil from the Eagle Ford.

    “The Eagle Ford has been a place where the industry has been good about innovating,” Mason said. “We’re getting better at what we do. At $100 oil, we were all geniuses. Everything worked. The other side of $100 is there’s a lot of waste. At $45 to $50 oil, we can make it work.”

    Around 1,500 people are expected at the event, which hosted more than 4,000 attendees during the boom times.

    Attached Files
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    Summary of Weekly Petroleum Data for the Week Ending September 9, 2016

    U.S. crude oil refinery inputs averaged over 16.7 million barrels per day during the week ending September 9, 2016, 200,000 barrels per day less than the previous week’s average. Refineries operated at 92.9% of their operable capacity last week. Gasoline production decreased last week, averaging 9.9 million barrels per day. Distillate fuel production decreased last week, averaging over 4.9 million barrels per day.

    U.S. crude oil imports averaged about 8.1 million barrels per day last week, up by 993,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.2 million barrels per day, 10.1% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 650,000 barrels per day. Distillate fuel imports averaged 140,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.6 million barrels from the previous week. At 510.8 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 0.6 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 4.6 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.0 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 6.0 million barrels last week.

    Total products supplied over the last four-week period averaged 20.6 million barrels per day, up by 5.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.5 million barrels per day, up by 4.2% from the same period last year. Distillate fuel product supplied averaged over 3.6 million barrels per day over the last four weeks, up by 1.3% from the same period last year. Jet fuel product supplied is up 2.7% compared to the same four-week period last year.

    Cushing falls 1.245 mln bbl

    Attached Files
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    US Crude production rises

                                                                           Last Week   Week Before   Last Year

    Domestic Production '000................. 8,493             8,458              9,117
    Alaska ............................................    458                 428                 469
    Lower 48 ....................................... 8,035              8,030             8,648
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    Trudeau said to plan pipeline approval, favour Kinder Morgan

    Canadian Prime Minister Justin Trudeau plans to approve at least one new oil pipeline project in his first term, with Kinder Morgan’s Trans Mountain expansion to the Pacific Coast the most likely candidate, people familiar with his plans said.

    The prime minister is seeking to strengthen environmental standards and build confidence in new regulatory rules while also stoking growth in Canada’s sluggish economy by backing a pipeline. Trudeau therefore plans to neither approve all the projects under consideration nor reject them all, according to the people who spoke on condition of anonymity because the discussions are private.

    Trudeau faces a series of high-profile energy decisions over the next three months, including a final cabinet ruling onKinder Morgan’s Trans Mountain proposal and a legal appeal related to Enbridge Inc.’s Northern Gateway pipeline. Trudeau will also decide on Petroliam Nasional’s PacificNorthWest natural gas project, while TransCanada’s Energy East pipeline is due for a decision in about two years.

    Kinder’s proposal is seen as likeliest to win approval despite opposition among key figures in vote-rich Vancouver, the people said. The Trans Mountain expansion already has conditional regulatory sign-off from the National EnergyBoard.


    Red tape and environmental opposition bogged down major Canadian energy proposals during the nine-year reign of the previous Conservative administration led by Stephen Harper. Northern Gateway, Trans Mountain and EnergyEast have all been delayed in Canada, while the Keystone XL pipeline to the Gulf Coast was rejected by the US government.

    Trudeau’s government believes it must demonstrate to investors the country is capable of reaching consensus to build major energy projects, while not alienating environmentalists who make up a key constituency for the Liberal Party. The government hopes to approve one projectbefore the next election in 2019, the people said.

    The prime minister routinely says, when asked about pipeline issues, that his government is balancing environmentconcerns and the economy. Trudeau didn’t specifically address his plans for Kinder Morgan when asked Tuesday afternoon. “There’s always going to be speculation by one side or the other about what we might do,” he told reporters in Ottawa. “The fact is, we need to get our resources to market in safe and reliable ways.”
    ‘National Interest’

    Natural Resources Minister Jim Carr didn’t directly answer when asked in a recent interview whether the government had decided it must build at least one pipeline.

    “We have an obligation to the proponents and to those people who are involved in each of these major projects to assess it on their own merits, and to determine the national interest on the basis of what’s been proposed, and what has been recommended by the regulator,” he said Aug. 25.

    Trudeau has signaled he doesn’t support Northern Gateway on its current route through British Columbia, and any major new routing could force the company to restart its approval process, the people said. A spokeswoman for National EnergyBoard, however, said that’s not necessarily the case. If a route-change request is made “we will take a look and develop a process for reviewing the application,” spokesperson Sarah Kiley said by e-mail.
    Canadian ‘Alarm’

    Jim Prentice, former Alberta premier and federalenvironment minister, welcomed the news but warnedKinder Morgan’s project alone won’t be enough.

    “We need pipelines, we need pipelines to the West Coast, and most advantageous for Canada of course are pipelines into the Asia-Pacific basin and Trans Mountain would certainly be helpful,” Prentice, a Calgary-based adviser in the energygroup at Warburg Pincus, said Tuesday at the Bloomberg Canadian Fixed Income Conference in New York. “But we also need to bear in mind that Trans Mountain won’t solve the problem” because tankers that can navigate the region are too small to service Asia, he said.

    Canada needs an energy port that can ship up to two million barrels per day to Asia, Prentice said, and Canadians should be concerned that investors are cooling to the country’s oil patch. “The concern that really should alarm us as Canadians is low-cost capital is exiting the Canadian basin,” he said.


    Trudeau is also concerned about the electoral impact o fEnergy East, which is unpopular in Quebec, where the Liberals hold 40 of 78 electoral districts, the people said.TransCanada’s plan would see a new pipeline delivering crude from the oil sands in Alberta to the Atlantic Coast via the second-most populous province, a much longer route than the other proposals.

    The prime minister has spoken favorably about the Kinder Morgan pipeline in the past and his government is said to consider it a net-positive for its so-called “progressive” political movement nationally. Though opposed byVancouver’s mayor, it would be popular in Alberta, where Premier Rachel Notley’s New Democratic Party government is advancing carbon-emissions limits favored by Trudeau.

    Trudeau’s cabinet has until December to make a decision onTrans Mountain. Finance Minister Bill Morneau and Trade Minister Chrystia Freeland are the loudest voices around the table in favor of energy sector development, the people said.

    Kinder Morgan’s C$6.8-billion ($5-billion), 715-mile Trans Mountain expansion would carry Alberta crude toVancouver, tripling capacity of an existing line to 890,000 barrels per day. Vancouver Mayor Gregor Robertson,environmental groups and indigenous leaders have all expressed opposition to the pipeline, though polling shows it’s generally popular in British Columbia and very popular inAlberta.


    “There is no consent there and we are at great risk of impacting Canada’s most successful urban economy,” Robertson told reporters in Ottawa during a June visit to advocate against the pipeline. Fifteen of the 184 Liberal lawmakers elected last year are from the Greater Vancouver area and were “very vocal” in opposing the Kinder Morgan pipeline, the mayor said. “That certainly resonated and helped them get elected.”

    TransCanada’s Energy East proposal has been beset by delays. The members of its regulatory panel resigned last week in the wake of conflict-of-interest allegations stemming from a meeting board members had with former QuebecPremier Jean Charest, who was working for the company at the time. The project also made headlines in last year’s election when it was revealed Trudeau’s campaign co-chair,Dan Gagnier, was advising TransCanada on how to lobby whichever party won the vote.

    Enbridge’s Northern Gateway runs through the Great Bear Rainforest, which the prime minister says regularly is no place for a pipeline. However, Trudeau has also made improving indigenous relations a top priority and Enbridge has expanded the potential stake for indigenous groups in the pipeline. In June, a court rescinded permits for the pipeline that had been approved under Harper. Trudeau has until September 22 to appeal the decision.
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    UK, Argentina to cooperate on Falklands oil and gas restrictions

    Britain and Argentina have agreed to work together towards removing measures restricting the oil and gas industry, shipping and fishing around the disputed Falkland Islands, Britain's Foreign Office said on Wednesday.

    The two countries fought a war in 1982 over the British-run islands in the South Atlantic, known in Argentina as Las Malvinas, and the issue has continued to cause tensions in the two countries' relationship.

    The Foreign Office said London and Buenos Aires had agreed their first positive statement about South Atlantic issues since 1999.

    It said the discussions that had taken place did not affect the sovereignty issue and Britain remained clear in its support of the islanders, the majority of whom want the islands to remain under British control.
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    Patterson-UTI Energy Announces Agreement to Acquire Drilling Technology Company

    PATTERSON-UTI ENERGY, INC. announced today that it has entered into an agreement to acquire Warrior Rig Ltd. and certain related entities.  Based in Calgary, Warrior designs, manufactures and services high-spec rig components with a recent focus on top drive technology for improved drilling performance.  The pending transaction is subject to customary closing conditions, and is expected to close promptly.

    Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "This acquisition will enhance our competitive position within the high-spec rig market and expand our technology portfolio.  We are very excited by the innovative technology that Warrior offers, and we look forward to welcoming the highly talented group of people from Warrior into the Patterson-UTI family."

    Attached Files
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    Iran records sharp rise in exports of gas condensate

    The exports of gas condensate from Iran's South Pars gas field experienced a 67-percent rise in the first five months of current Iranian calendar year, said semi-official Mehr news agency Wednesday.

    "In the first five months of the current year, more than seven million tons of gas condensate were exported to the world markets bringing a profit about 2.9 billion U.S. dollars," Managing Director of Pars Special Economic Energy Zone, Mehdi Yousefi, said.

    Heavy and light polyethylene glycol, diethylene glycol, mono-ethylene glycol, urea, butane, propane, p-Xylene, cement and methanol were among other major products exported from the gas field, he added.

    The overall exports from Iran's South Pars gas field, in the same period, stood at 15.3 million tons and valued at 7.4 billion dollars, he said, adding that the figures show a 55-percent rise in weight and 36-percent rise in value compared with the same time span in the last year.

    The South Pars/North Dome field is a natural gas condensate field located in the Persian Gulf. It is the world's largest gas field, shared between Iran and Qatar.

    According to the International Energy Agency, the field holds an estimated 1,800 trillion cubic feet (51 trillion cubic meters) of in-situ natural gas and some 50 billion barrels of natural gas condensate.

    Attached Files
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    China crude oil imports rebound in Aug despite lower runs, pushes excess to tanks

    China's crude oil imports rebounded in August despite lower crude throughput at both state-owned and independent refineries, implying that the excess imported barrels likely made their way to storage tanks.

    China imported a total of 32.85 million mt, or 7.77 million b/d, of crude in August, up 5.7% from July, the first rebound after three consecutive month-on-month declines since April, when 7.96 million b/d of crude was imported, S&P Global Platts' calculation based on customs data showed.

    China's state-owned oil refiners Sinopec, PetroChina and China National Offshore Oil Corporation, planned to operate their plants at an average of 80% of nameplate capacity in August, down two percentage points from the planned run rate of 82% in July, according to a Platts survey.

    The actual average operating rate in August may, however, be lower than 80%, as some of the refineries under maintenance were not included in the survey, Platts previously reported.

    In addition, the 38 independent refineries in Shandong that were surveyed also lowered primary throughput in August to an average of 46.5% of their processing capacities, down from 47.2% in July, data from Beijing information provider JYD showed.

    Lower crude throughput last month was mainly due to maintenance at some of the refineries, market sources said.

    The excess crude imports in August were likely sent into storage, including tanks at refineries for replenishment after turnarounds as well as the country's strategic petroleum reserves, sources said.


    China is believed to have continued boosting SPR stocks as the number of qualified independent storage operators -- who are involved in leasing tanks for strategic reserves -- has increased, likely resulting in more availability of storage space. This is despite a delay in the construction of some of the state-owned storage facilities.

    Beijing last Friday said that by early 2016, the country had stored 234.34 million barrels of crude for SPR in both state-built and independent storage tanks. The volume had risen by 22% from 191.31 million barrels by mid-2015.

    At least 54.45 million barrels of SPR was stored in independent storage facilities by early 2016, up from as low as 11.42 million barrels as of mid-2015, Platts calculations showed.

    China issued a draft ruling mid-2016 requiring private investment in state oil reserves' storage facilities, which was expected to encourage building of oil stocks.


    China's oil product exports retreated in August due to low crude throughput at the refineries and a recovery in domestic demand, market observes said.

    China exported 3.71 million mt of oil products in August, down 18.8% from a record high of 4.57 million mt in July, though the figure was still up 19.3% year on year, according to Platts calculations.

    Domestic sales of gasoline and gasoil in Shandong province, the home of oil product swing suppliers -- the independent refiners, registered a month-on-month jump of 36.89% and 13.98%, respectively, in August, Platts calculations based on JYD data showed.

    Increased gasoil and gasoline sales indicated higher demand for the two products last month, which were supported by a recovery in the industrial and transportation sectors after heavy rains in July, market sources said.

    In addition, the autumn harvest season began in August, which also likely supported higher demand for gasoil and gasoline, sources noted.
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    Oil Industry May Cut Spending for Third Year in Row, IEA Says

    The oil industry may cut spending for a third straight year in 2017 as lower costs kick in and companies continue to grapple with weaker finances because of crude’s slump.

    Investments in oil and gas fields are set to drop 24 percent to $450 billion this year, the International Energy Agency said in a report, deeper than the 17 percent decline estimated in February. Capital expenditure fell 25 percent last year, taking out more than $300 billion of spending in two years. Investments will have been cut for two consecutive years for the first time in 40 years, according to the Paris-based agency.

    “There are no signs that companies plan to increase their upstream capital spending in 2017,” the IEA wrote in the report. “Many operators have revised downwards their 2016 capital spending guidance throughout the year and, as of September 2016, they plan to maintain 2017 investment at 2016 levels or even” reduce it further.

    With an oil glut seen likely to persist until late 2017, companies including Royal Dutch Shell Plc and BP Plc are preparing for a prolonged downturn. Crude’s slump has hit their earnings and increased debt, while their credit ratings have been cut as the biggest companies continue to maintain their dividend payouts. The curb on investment has meant they are spending less on finding new oil fields, driving discoveries to the lowestsince 1947.

    Exploration spending fell about 30 percent to less than $90 billion last year and is likely to drop further to about $65 billion this year, according to the report. Its share of total spending on oil and gas fields has dropped to 14 percent, the lowest in a decade.

    “Companies are putting more effort into developing proven reserves in order to sustain cash flows that had already been hit severely by lower oil prices,” the IEA said. “The impact of reduced spending on exploration usually materializes only several years later, while delaying or canceling an ongoing development project can have a more immediate impact on an oil company’s finances.”

    In the boom years, when oil prices rose from about $25 a barrel at the turn of this century to over $100 in 13 years, companies allowed costs to swell as they looked to add reserves and production. Between 2000 and 2014, investments in oil and gas fields increased almost fivefold and capital spending grew 12 percent on average per year, according to the IEA.

    The current downturn is now forcing companies to take a long, hard look at their expenditure. Helping them are the lower costs of services and materials, which fell by 15 percent last year and are expected to decline 17 percent this year, according to the agency. Rig-rental rates will probably stay down because of oversupply, while low steel prices are reducing the cost of other equipment, BP Chief Executive Officer Bob Dudley said in July.

    About two-thirds of the industry’s reduced spending is because of lower costs while companies stalling projects and work accounts for the remainder, according to the IEA. As oil prices rise in the future, costs would increase again, taking overall investments higher as well.

    Brent crude has increased 27 percent this year after touching a 12-year low in January as production fell in the U.S. and demand rose, helping erase some of the oversupply. Still, average prices this year are less than half of what they were in 2014.

    The IEA on Tuesday changed its view on the glut, saying the surplus in global oil markets will last for longer than previously thought, persisting into late 2017, as demand growth slows and supply proves resilient. It trimmed projections for global oil demand next year by 200,000 barrels a day to 97.3 million a day and reduced growth estimates for this year by 100,000 barrels a day to 1.3 million a day.
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    Calfrac Weighs Entry Into Big Oil Regions Such as Saudi, Permian

    Calfrac Well Services Ltd., the Canadian oilfield services provider, is considering expansion opportunities into two of the world’s largest producing regions.

    Saudi Arabia and the U.S. Permian Basin are two oil producing areas attracting Calfrac for potential investment, Chief Executive Officer Fernando Aguilar said on Tuesday. The Calgary-based company wants to be in important markets where output is around 10 million barrels a day, he said by phone after a Bloomberg TV Canada interview with Pamela Ritchie.

    “Saudi is an idea, a project,” Aguilar said. “We continue exploring those markets with potential for us to be present where we are not operating today, like the Permian, like Saudi Arabia.”

    Calfrac provides services including hydraulic fracturing, also known as fracking, in parts of Canada, the U.S., Russia, Mexico and Argentina, and is looking for opportunities to grow as a two-year crude market slump shows signs of stabilizing. In the U.S., Calfrac is active in the Bakken, Marcellus, Rockies, Utica and Eagle Ford, according to an investor presentation last week.

    Balance sheet concerns have been raised by analysts including Kurt Hallead at RBC Capital Markets in Austin, who in a research note last week flagged Calfrac’s higher debt levels than peers and negative projected free cash flow through this year and next. Oilfield services activity isn’t poised to increase materially until U.S. crude prices consistently trade higher than $50 a barrel, Hallead said.

    West Texas Intermediate crude has risen about 70 percent since a February low and closed at $44.90 a barrel on Tuesday. Aguilar expects global oil market supply and demand balancing later this year, he said in the TV interview.

    “We are interested and exploring those possibilities as we continue moving forward with the options for the company,” Aguilar said. “But, of course, that’s going to take some time.”

    Attached Files
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    Libya's NOC to 'begin work immediately to restart exports' from seized ports

    Libya's National Oil Corporation (NOC) said on Tuesday it would immediately start working to resume crude exports from ports seized in recent days by forces loyal to eastern commander Khalifa Haftar.

    "Our technical teams already started assessing what needs to be done to lift force majeure and restart exports as soon as possible," NOC Chairman Mustafa Sanalla said in a statement.

    Starting on Sunday, pro-Haftar forces took control of the ports of Ras Lanuf, Es Sider, Brega and Zueitina from a rival force allied to a U.N.-backed government in Tripoli.
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    Oil Stabilizes After API Reports Lower Than Expected Build In Crude Stocks

    The American Petroleum Institute (API) is reporting a 1.4-million-build in US crude oil inventory over last week—bursting the bubble created the week before when official data showed the biggest draw on inventory in a century.

    Still, the build is much lower than expectations of a 4-million-barrel build, in part because the release of shut-in oil following a Gulf of Mexico hurricane.

    At Cushing, crude oil inventories were down 1.12 million barrels, more than expectations.

    Gasoline stocks were also down 2.4 million barrels, against expectations of a 1.1-million-barrel draw.

    For distillates, the picture was gloomier, with the biggest build in eight months, up 5.3 million barrels.

    Tomorrow at 10:30am EST, the EIA will release the official figures, and all eyes will be watching to see if the API’s data holds. In the meantime, the market remains highly volatile.

    The EIA’s latest report had US commercial crude oil inventories down by 14.5 million barrels during the week ended 2 September. This was some 2.5 million more than the API had predicted the day prior, so analysts will be watching tomorrow’s figures closely.

    Last week’s EIA data also showed the API reporting gasoline draw numbers lower than the official figures. On 7 September, the API reported a 2.388-million-barrel draw on gasoline stocks, while the EIA came back with a 4.2-million-barrel draw.
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    Rex Energy to Ship Marcellus Gas to Midwest & Gulf Coast in Nov

    Higher prices for Rex Energy’s Marcellus/Utica gas are on the way. Why? Because the company will, beginning in November, begin to ship some of its gas out of the northeast–to the Midwest and Gulf Coast, where it can get higher prices.

    So says Rex in an update issued yesterday. Rex issued an operational update yesterday to discuss recent results and the next round of drilling they plan to do–4 more wells on the Vaughn pad in Butler County, PA–

    and the news that a new high pressure gathering system is on the way in Butler County. Included in the update is the good news that Rex will begin to ship 100 million cubic feet per day (MMcf/d) of natgas to the Gulf Coast and 30 MMcf/d to the Midwest, starting in November, via two different pipelines.
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    Another Buyer in World’s No. 1 LNG User Resists Resale Curbs

    Osaka Gas Co. is in talks with some suppliers to remove restrictions in existing liquefied natural gas contacts that prohibit resale of the fuel amid a global oversupply.

    The Osaka-based city-gas distributor won’t sign new contracts with so-called destination restrictions, Sunao Okamoto, general manager of the company’s LNG trading department said. Among Japan’s biggest buyers of the fuel, Osaka Gas plans to boost annual LNG fuel purchases to about 10 million metric tons by around 2020 and resell about 2.5 million, Okamoto said, without providing details. He didn’t elaborate on the suppliers with whom the company is in talks.

    “Everyone is demanding destination-free contracts. When it becomes clear to suppliers they can’t sell LNG with such restrictions, we hope it will become the new paradigm,” Okamoto said Monday in Tokyo. “While we want all of our LNG supplies to be destination free, it has to be negotiated with sellers.”

    Osaka Gas is among Asian gas consumers that are using a supply glut and price slump to gain an upper hand in negotiations with suppliers.

    Japan’s Jera

    Qatar’s RasGas Co. last year agreed to revise the pricing formula in its 25-year contract with New Delhi-based Petronet LNG Ltd., resulting in costs for Indian importer to drop almost by almost half. Jera Co., a Japanese utility joint-venture that’s the country’s biggest importer of LNG, has also said it won’t sign new contracts with destination restrictions.

    About 80 percent of long-term LNG contracts between major Japanese and South Korean buyers and suppliers are estimated to include destination restriction clauses, law firm Nishimura & Asahi said in a Feb. 12 presentationfor a study group commissioned by Japan’s Ministry of Economy, Trade and Industry.

    Japan’s Fair Trade Commission is in the preliminary stage of investigating if destination clauses impede competition laws, Bloomberg News reported in July. The probe may lead to the renegotiation of more than $600 billion worth of deals that run until almost the middle of the century.

    Buyers may seek more concessions as a wave of new projects in the U.S. and Australia are set to flood the market. Annual global LNG demand is forecast to increase by 140 billion cubic meters from 2015 through 2021, which isn’t enough to absorb almost 190 billion cubic meters of new capacity slated to become operational, the International Energy Agency said in its Medium-Term Gas Market Report in June.

    Part of Osaka’s supplies for resale will be sourced from the U.S. Freeport LNG development in Texas, Okamoto said. Osaka Gas has a liquefaction tolling agreement with the project for about 2.32 million metric tons a year of destination-free LNG, he said. The project is scheduled to start operations in September 2018.

    “With a big amount of U.S. LNG scheduled to be supplied, it has a huge impact on how sellers think about the market,” said Okamoto. “Major suppliers that have pushed destination restrictions will be forced to change their way of thinking.”

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    Vast Kazakh Oil Field Seen Taking Another Decade to Reach Target

    Kazakhstan’s giant Kashagan oil field has taken 16 years and more than $50 billion to bring to the verge of production. It could take another decade to reach its potential, with initial output at half the forecast level.

    Eni SpA, working with partners Royal Dutch Shell Plc, Total SA and the Kazakh state, expects Kashagan to start in October and pump 370,000 barrels a day within a year. Consulting firm Wood Mackenzie Ltd. contends the field will produce only about 154,000 barrels a day in 2017 and won’t get anywhere near targeted volumes until the next decade.

    “It will take time to reach production capacity,” Samuel Lussac, WoodMac’s research manager for Russia, said in an interview. “We don’t expect Kashagan Phase 1 to produce more than 300,000 barrels a day until the early 2020s.”

    Lussac expects efficiency rates lower than projected by Eni, explaining the difference in forecasts for the vast field in the northern Caspian Sea. The project, initially due to come on stream more than a decade ago, has been plagued by delays and cost overruns caused by multiple setbacks. A 2008 budget estimate of $38 billion jumped to $53 billion by the end of last year following sour-gas leaks that cracked the pipelines.

    Eni said in July that Kashagan would pump 230,000 barrels a day by the end of this year, and plateau at 370,000 barrels by mid-2017. WoodMac sees the plateau -- which it estimates at 380,000 barrels a day -- no sooner than 2026.

    Challenging Project

    In November 2014, Total described Kashagan as “the mother of all projects,” saying “the combination of challenges on this project are without equivalent in our industry.”

    The owners of the oil discovery, the world’s biggest since Russia’s Priobskoye North in 1982, have changed over the years. Kazakhstan’s stake is now 16.88 percent; Eni, Total, Shell and Exxon Mobil Corp. each own 16.81 percent. China National Petroleum Corp. has an 8.33 percent interest and Japan’s Inpex Corp. has 7.56 percent.

    The imminent start of Kashagan has led the Organization of Petroleum Exporting Countries to raise its forecast for non-OPEC supply growth next year by 350,000 barrels a day to an average of 56.52 million barrels. The International Energy Agency also increased its forecast for non-OPEC supply in 2017, predicting growth of 380,000 barrels a day.
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    Nord Stream-2 on track with pipes expected soon

    Pipes to build Moscow's Nord Stream-2 are expected to start being supplied in December or January, in a sign the gas project is going ahead, Ivan Shabalov, owner of Pipe InnovationTechnologies (PIT), told the Reuters Russia Investment Summit.

    The plan, designed to double the capacity of the existing pipeline on the bed of the Baltic Sea from Russia to Germany, has irked the European Union, which is trying to cut the bloc's dependency on energy supplies from Moscow.

    Russian natural gas supplies to Europe, where Kremlin-controlled Gazprom owns a 31 percent share of the market, have become increasingly politicized since 2014 when Moscow annexed Ukraine's Crimea region.

    Although Shabalov's firm does not supply pipes for Nord Stream-2, one of his companies plans to provide cement coating for some of the pipes which are being used in the project and Gazprom is its customer.

    Shabalov, who founded his firm in 2006 and also heads the Russian pipemakers association, said he expected construction of Nord Stream-2, which was due to start in 2018, to go ahead as planned as production of the pipes had already begun.

    "Supplies are seen starting in December-January," he told the Reuters Investment Summit at the Reuters office in Moscow.

    Some 2.2 million tonnes of steel pipes will be supplied by Europipe [AGD.UL] GmbH, a consortium which includes Salzgitter, with 40 percent of the contract and Russian companies OMK (33 percent) and Chelpipe (27 percent).

    Last year Gazprom and its European partners, including E.ON, Wintershall, Shell, OMV and Engie, agreed on Nord Stream 2, which will double the 55 billion cubic metres per year of the existing pipeline.

    Demand from Gazprom's domestic projects will fall to 1.2-1.3 million tonnes of large-diameter pipes (LDP) this year - valuing them at $1.8 billion - from a peak of more than 2 million tonnes in 2015, Shabalov said.

    Gazprom is seeking to bypass Ukraine, a key transit route for Russian gas to the EU and is also pushing on with the plans to build a gas pipeline to Turkey and beyond to Southern Europe.

    The company also plans to complete the Power of Siberia pipeline to China in 2019-2020, part of Moscow's push for closer ties with Asia despite many analysts questioning its economics.

    "When we built a pipeline to Germany in (the) 1970s, it was not profitable in some respects, this was pure political," Shabalov said.

    "The return of projects like this is the beyond the 20 year horizon... The infrastructure project stands out as only the state can venture to build it."

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    Dutch see demand for Groningen gas down sharply from 2020

    Demand for gas from Groningen will "fall sharply from 2020" as production at the northern Dutch field is reduced, Economy Minister Henk Kamp said in a letter to parliament released on Tuesday.

    The Netherlands has been forced to scale back production by roughly half at Groningen, which once met 10 percent of European Union gas requirements, to 24 billion cubic meters per year due to damage from earthquakes.

    Citing a June study by Gasunie, Kamp said a 480 million euros gas conversion facility in Zuidbroek was no longer needed due to falling exports.

    The Groningen gas field is operated by NAM, a joint venture between Royal Dutch Shell and Exxon Mobil Corp.

    Dutch exports of gas have declined already and European countries, notably Germany, had said they would reduce Dutch imports further and seek other sources. The Netherlands had been studying the option of converting gas to meet export requirements.

    "The market conversion abroad has started sooner than we anticipated," Kamp wrote. "Germany, France and Belgium will start the switch from low to high-caloric gas in 2020 instead of 2024.

    That will lead to a reduction in demand for Groningen gas from 2020, he said.

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    Qatar Petroleum eyes stake in Eni’s Mozambique LNG project

    Qatar Petroleum is reportedly interested in the Mozambique gas business of Italy’s Eni and could opt to join ExxonMobil in buying a multibillion-dollar stake.

    Reuters reported on Monday, citing sources familiar with the matter, that Qatar Petroleum is in talks with ExxonMobil and Eni on some kind of involvement in Mozambique which could involve a joint investment with the U.S. major, adding the deal was not a classic joint venture structure.

    According to the report, Qatar Petroleum had been looking at Eni’s Area 4 field as well as adjoining acreage of Anadarko Petroleum but the focus was on Eni.

    Italian oil and gas company reportedly sold a multi-billion dollar stake in the planned Mozambique LNG development to ExxonMobil, but the deal will not be announced for several months due to ExxonMobil’s request.

    The gas reserves already discovered by Eni in Area 4 in the offshore Rovuma basin are large enough to feed a giant land-based LNG export plant. Eni, that is the operator of the Area 4 with a 50 percent stake, has discovered about 85 trillion cubic feet of gas in the offshore block.

    To remind, the Mozambique government in February approved the plan of development for Eni’s Coral FLNG project. The approval relates to the first phase of development of 5 trillion cubic feet of gas in the Coral discovery, located in the Area 4 permit.

    The plan of development, the very first one to be approved in the Rovuma Basin, foresees the drilling and completion of 6 subsea wells and the construction and installation of a floating LNG facility, with the capacity of around 3.4 MTPA.
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    Lights on, commissioning imminent at Ichthys LNG FPSO

    INPEX had provided an update on its Ichthys LNG project. The central processing facility (CPF) and FPSO safely started up their main power generators in the South Korean shipyards where they are being constructed.

    Last week at the Samsung Heavy Industries shipyard in Geoje, the CPF’s three generators run by 25 MW dual-fuel gas turbines energized the facility’s distribution network.

    The CPF milestone followed the July start-up of the FPSO’s main turbo-generators at the nearby Daewoo Shipbuilding & Marine Engineering yard in Okpo.

    Ichthys Project Managing Director Louis Bon said this achievement signaled commissioning was well under way for the two facilities.

    “Starting up the main generators of the FPSO and CPF allows the commissioning to further progress by providing the required power for both massive offshore facilities,” he said.

    Following the successful firing of the main power generation units, the focus will now be on load testing, synchronization, and commissioning of the power distribution systems for both offshore facilities. This will allow the permanent utilities on board each facility to be made fully available.

    The CPF and FPSO will be permanently moored for 40 years of operation in the Ichthys field, located in the Timor Sea about 220 km (137 mi) offshore Western Australia.

    Gas will undergo initial processing on the CPF to extract condensate and water and remove impurities in order to make the gas suitable for transmission.

    Most condensate will be transferred from the CPF to the nearby FPSO for offshore processing, with the remainder sent to Darwin with the gas via the project’s 890 km (553 mi) gas export pipeline.

    More condensate will be extracted from the gas at the onshore plant in Darwin. Once in the field, the FPSO and CPF will be linked by an electric cable, allowing power supply to flow from each facility as a contingency measure as required.
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    EIA releases new estimates of drilled but uncompleted (DUC) wells

    The U.S. Energy Information Administration's (EIA) monthly Drilling Productivity Report (DPR), released today, now includes a supplement that provides monthly estimates of the number of drilled but uncompleted wells (DUCs) in the seven key oil and natural gas producing regions covered by the DPR.

    Current EIA estimates show DUC counts as of the end of August totaling 4,117 in the 4 oil-dominant regions and 914 in the 3 gas-dominant regions that together account for nearly all U.S. tight oil and shale gas production.In the oil regions, the estimated DUC count increased during 2014-15, but declined by about 400 over the last 5 months.The DUC count in the gas regions has generally been in decline since December 2013.

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    When producers are under stress, as has been the case following the large decline in oil prices since mid-2014 that triggered a significant slowdown in drilling and completion activity since late 2014, changes in the number of DUCs can provide useful insight into upstream industry conditions. A high inventory of DUCs also has potential implications for the size and timing of the domestic supply response to a persistent or significant rise in oil prices, since completions of existing DUCs can provide an increase in production with or without any significant changes in the rig count.

    While both drilling and completion activity have declined since late 2014, completions have experienced a deeper decline than drilling in the four DPR regions (Bakken, Niobrara, Permian, and Eagle Ford) that account for nearly all tight oil production, resulting in a growing inventory of DUCs. The differential reduction in drilling and completion rates in these regions may be attributed to several factors, including long-term contracts for drilling rigs and lease contracts that mandate drilling and/or production in order to fulfill commitments made to the landowners and mineral-rights owners. The situation appears to be somewhat different in the other three DPR regions (Marcellus, Utica, and Haynesville) where the production mix skews heavily towards natural gas, in which significant price declines began as early as 2012.

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    Kogas signs MoU with Brazilian state to develop LNG import terminal

    According to Reuters, Korea Gas Corp. (Kogas) has signed a memorandum of understanding (MoU) with the Brazilian state of Ceara to cooperate in the development of an LNG import terminal in Brazil. Specifically, Kogas will transform an existing floating storage regasification unit (FSRU) located at the port of Pecem to an onshore LNG import terminal.

    Reuters claims that this follows an MoU that was signed in August 2016 with the Mexican state of Yucatan to construct a US$1 billion – US$1.5 billion LNG import terminal. With regards to the Brazilian terminal, Kogas is reportedly planning to establish a consortium with a number of private Korean companies to execute the project. The company is also planning to carry out a feasibility study before proceeding with the project.

    In addition to the Brazilian and Mexican terminals, Reuters adds that Kogas is still actively looking to work with a number of countries that wish to import LNG, including South Africa and Bangladesh.
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    Re-balancing the oil market will take longer than we thought: IEA

    Global oil demand growth is slowing at a faster pace than first thought, the International Energy Agency (IEA) said in its latest market update, warning that markets would have to wait "a while longer" for markets to rebalance.

    "Global oil demand growth is slowing at a faster pace than initially predicted. For 2016, a gain of 1.3 million barrels a day (mb/d) is expected," the IEA said in its September report published on Tuesday, equating to a downgrade of 100,000 barrels a day from its previous forecast.

    The downgrade was "due to a more pronounced slowdown" in the third quarter of 2016, it said before forecasting a further slowing next year. "Momentum eases further to 1.2 mb/d in 2017 as underlying macroeconomic conditions remain uncertain."

    The predictions will be worrying for oil markets at a time when a delicate rebalancing of supply and demand is hoped to be taking place. Oil prices have dropped steadily since mid-2014 on the back of a glut in global oil supply and the failure of demand to keep pace.

    The glut was exacerbated by OPEC, a 14-member oil producing group which includes major Middle Eastern producers, to defend its market share in the face of rivals rather than the oil price. The strategy has put pressure on the cartel's members, who have seen oil export revenues fall, while having the planned effect of putting rival non-OPEC producers out of action.

    The IEA noted on Tuesday that non-OPEC supplies continued to decline. "World oil supplies fell by 300,000 barrels a day in August, dragged lower by declines in non-OPEC," the IEA said although it noted that this decline in global supply was offset by a rise in OPEC production, which has defensively kept its own output at record levels.

    "At 96.9 mb/d, global oil output was 300,000 b/d below a year ago, but near-record OPEC supply just about offset steep non-OPEC declines," the IEA said.

    Uphill struggle ahead

    The price of benchmark Brent crude and West Texas Intermediate (WTI) are currently hovering around the $45-$47 mark with prices fluctuating every time a piece of data signals whether oil demand could rise or fall and on how much of the oil glut remains.

    On Tuesday, for example, oil prices fell in early trade on Tuesday on concerns over increased drilling in the United States, Reuters reported, and as investors took profits after oil prices rose close to 1 percent in the previous session.(103934220)

    Ultimately, oil markets are currently in what the IEA called a waiting game, pondering when demand and supply will return to balance. The outlook was not clear or necessarily rosy, the agency cautioned.

    "When will the world oil market return to balance? That is the big question today. With the price of oil at current levels, one would expect supply to contract and demand to grow strongly. However, the opposite now seems to be happening. Demand growth is slowing and supply is rising. Consequently, stocks of oil in OECD countries are swelling to levels never seen before," the IEA said.

    "Our latest numbers provide some clues as to why. Recent pillars of demand growth – China and India – are wobbling. After more than a year with oil hovering around $50 a barrel, the stimulus from cheaper fuel is fading. Economic worries in developing countries haven't helped either. Unexpected gains in Europe have vanished, while momentum in the U.S. has slowed dramatically."

    "The result has been a slump in oil demand growth from a robust 1.4 mb/d in the second quarter to a two-year low of 0.8 mb/d in the third. Even with a modest weather-related uptick forecast for the end of the year, oil demand growth in 2016 will struggle to get above 1.3 mb/d. Refiners are clearly losing their appetite for more crude oil.

    During the fourth quarter, they are expected to process only 0.1 mb/d more crude than a year ago."

    As such, the IEA warned that the data suggested "that this supply-demand dynamic may not change significantly in the coming months."

    "As a result, supply will continue to outpace demand at least through the first half of next year. Global inventories will continue to grow: OECD stockpiles in July smashed through the 3.1 billion barrel wall. As for the market's return to balance - it looks like we may have to wait a while longer."
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    Oil Search, ExxonMobil buy exploration acreage offshore PNG

    Oil Search and ExxonMobil, partners in the US$19 billion PNG LNG project, have agreed to purchase acreage in the Gulf of Papua from a company owned by China’s CNOOC Limited.

    The two companies entered into agreements with Gini Energy Limited to acquire each a 40% interest in PPL 374 and PPL 375, located approximately 150 kilometres south of Port Moresby in the deep water section of the Gulf of Papua. Gini will retain a 20% interest in each licence, Oil Search said in a statement on Monday.

    The licences cover a combined area of 24,936 km2 , with water depths ranging between 1,000 and 2,500 metres.

    Commenting on the farm-ins, Oil Search’s Managing Director, Peter Botten, said: “During 2015/16, we undertook a comprehensive study of exploration opportunities in PNG. This work identified the offshore Papuan Gulf as an area where there is significant gas potential, with several multi-tcf gas leads and prospects already delineated in these licences.

    We are delighted to be partnering with ExxonMobil, which has significant experience in exploration and production in deep water, and we also welcome the opportunity to work with CNOOC Limited for the first time. Entering these licences is consistent with the company’s strategy to focus on areas that have the potential to support the company’s expanding LNG portfolio.”

    The completion of the farm-in agreements and the acquisition of the licence interests is subject to conditions precedent, including regulatory approvals.
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    China Oil Output Drops to 6-Year Low as State Giants Shut Fields

    China’s crude oil output dropped to the lowest in more than six years as the country’s state-run energy giants continued to pump less from aging, high-cost fields.

    Production during August in the world’s largest energy consumer dropped 9.9 percent from a year ago to 16.45 million tons, according to data from the National Bureau of Statistics on Tuesday. That’s about 3.89 million barrels a day, the lowest since December 2009, according to Bloomberg calculations. Output is down 5.7 percent during the first eight months of the year.

    “As crude prices fluctuate at a relatively lower level, there is no incentive for China’s high-cost producers to raise output any time soon,” Tian Miao, an analyst with policy researcher North Square Blue Oak Ltd., said by phone before the data were released. Production will continue to decline through the rest of the year, Tian said.

    Output from China, which was the world’s fifth-biggest producer last year, has been sliding as state-run companies shut fields too expensive to operate after prices fell earlier this year to the lowest since 2003. The country is forecast to lead production declines across Asia, helping tighten the global market as the world’s largest-consuming region relies more on overseas supplies. China’s importsrebounded last month to the highest since April.

    Supply Destruction

    “The global oil market rebalancing is progressing,” said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong. “Massive capital expenditure cuts have translated to more oil supply destruction.”

    The country’s biggest producer, PetroChina Co. cut its 2016 domestic crude outputtarget to 103 million tons (about 2.06 million barrels a day), a drop of about 6 percent from the previous year, as it shuts some high-cost fields. Production from China Chemical & Petroleum Corp., known as Sinopec, is on track to shrink by a similar amount to about 763,000 barrels a day, company forecasts show.

    “China’s crude output won’t see an apparent rebound unless Brent recovers to $60 a barrel level, as most of China’s aging oilfields can’t make a profit below this price,” Tian said. Brent crude, the global benchmark, has lost about half it’s value in the past two years. Prices have averaged almost $43 a barrel this year, compared with $99 in 2014.

    While coal production in August rose 3 percent from the previous month to 278.09 million metric tons, production was down 11 percent from the same period last year, according to the statistics bureau. Coal mining in the first eight months slowed 10.2 percent to 2.18 billion tons.
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    Freeport to sell U.S. Gulf assets to Anadarko for $2 billion

    Freeport McMoRan Inc said on Monday it will sell its deepwater Gulf of Mexico oil and natural gas assets to Anadarko Petroleum Corp for $2 billion as it looks to cut its heavy debt load.

    The sale to Anadarko, which is betting the deal will help more than double its U.S. Gulf production within five years, comes after earlier attempts by Freeport to sell all or part of its oil and gas business failed. In May, Freeport withdrew plans to launch an initial public offering for that business.

    Anadarko said it would offer 35.3 million shares to fund the deal. Secondary stock offerings tend to be unpopular with existing shareholders and shares of Anadarko fell 2.9 percent in after-hours trading to $57.79 per share.

    Shares of Freeport gained 7.7 percent in Monday trading, closing at $11.08, though the stock was not trading in after-hours sessions.

    After the deal closes, which is expected by the end of the year, Freeport's 2016 asset sales will exceed $6 billion, Freeport Chief Executive Richard Adkerson said in a statement.

    Freeport, the world's biggest publicly listed copper miner, said in July it was confident of cutting its $18.8 billion of net debt to as low as $10.5 billion by the end of 2017 on the back of asset sales and cash earned.

    The transaction comes as something of a surprise after Freeport failed to find a buyer for all or part of its oil assets last year and earlier this year, said Clarksons Platou Securities analyst Jeremy Sussman.

    "It was probably a combination of stronger oil prices and better operational results that ultimately led to a transaction that was frankly better than expected," Sussman said.

    The deal, which is effective Aug. 1 and is expected to close in the fourth quarter, will help Anadarko add about 80,000 net barrels of oil equivalent per day.

    Anadarko said it expected to increase its 2016 full-year capital guidance, not including the acquisition, to a range of $2.8 to $3.0 billion, primarily reflecting the increased activity in the Delaware and DJ basins.

    Anadarko plans to add two rigs in the U.S. Gulf by the end of the year, with more in 2017. Within five years, Anadarko said it expects its U.S. Gulf production to more than double to 600,000 barrels of oil equivalent per day.

    Anadarko offers 35.25 million shares in a secondary offering.

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    Halcon Resources Exits Bankruptcy in Just 1.5 Months

    Getting a pre-packaged bankruptcy today is like ordering a McDonalds Happy Meal–just order and drive up to the window and pick it up. Simple.

    In July Halcon Resources, a Utica Shale driller that “guessed wrong” by leasing 140,000 Utica Shale acres in the northern part of the play (in Ohio) and currently doesn’t drill on any of that acreage, filed for a pre-packaged bankruptcy.

    Less than a month and a half after first filing, Halcon has emerged from bankruptcy court with $1.8 billion worth of debt magically erased. When Halcon filed back in July, they listed $3.12 billion in debt and $2.85 billion in assets.

    In August the company’s market capitalization, calculated as the number of outstanding shares of stock times the per share price, otherwise know as the company’s “worth” or “value”–was under $50 million . When debtors have no other choice than to accept a plan turning their debt into equity (shares of stock), it doesn’t take long to file the paperwork and be on your way.
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    Hess: North Dakota ready once oil prices recover

    The oil price recovery isn't quite strong enough to support a program targeting production growth from North Dakota, energy company Hess Corp. said

    Hess last year set a 2016 spending target of between $2.9 billion and $3.1 billion. By January, the company revised its full-year guidance lower to $2.4 billion, 40 percent below 2015 spending levels.

    In July, the company said it was upbeat about the potential for growth in North Dakota, where exploration and production had shown some recovery. Speaking from the podium of an energy conference in New York, CEO John Hess said the market still wasn't ripe enough for a strengthened focus on operations in the state's Bakken shale oil reserve, however.

    "We do not believe that it makes sense to accelerate near-term production in this low-price environment and drill up our best locations at the bottom of the cycle," he said in a transcript provided over email by the company.

    Hess said the company has moved to cut its exploration and production budget considerably as the pressure from lower oil prices endures. In the Bakken, he said the company is nevertheless in a good position once the market recovers.

    "This is all from operating improvements and efficiency," he said.

    The inventory in North Dakota is there to support a stronger portfolio, but the company does not want to "give the oil away" if oil hovers near the $40 range for West Texas Intermediate.

    "As WTI prices approach $60 per barrel, we plan to increase activity which would allow us to both resume production growth and generate free cash flow from the Bakken," the CEO said.

    The price for WTI, the U.S. benchmark price for crude oil, was around $45 per barrel early Monday.
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    The region leading the US oil recovery

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    In the tentative upturn in the US shale oil industry since May, most of the additional drilling and much of the acquisition spending has been focused on one hotspot: the Permian basin of western Texas and eastern New Mexico.

    This formation, about 300 miles long and 250 miles wide, holds some of North America’s most accessible shale oil reserves. Companies that have been lucky enough, or smart enough, to build strong positions there — such as Pioneer Natural Resources and Concho Resources — can expect to have a competitive advantage over other oil producers, in what remains a very difficult market.

    As share prices of US exploration and production companies have rebounded this year, those focused on the Permian have been the best performers. Shares in Diamondback Energy and RSP Permian, for example, have been hitting record highs, up 48 per cent and 66 per cent respectively over the past 12 months.

    Even ExxonMobil and Chevron — the two largest US oil groups, which were left behind by smaller, more innovative rivals as the shale boom took off — now have opportunities in the Permian to make up some lost ground.

    Although the Permian was not immune as activity across the US oil industry slumped after the crude price crash of two years ago, it has proved the most resilient of the “big three” US shale regions. From peak production, crude output has dropped by 40 per cent in the Eagle Ford shale of south Texas, and by 25 per cent in the Bakken formation centred on North Dakota. In the Permian, by contrast, the drop is only 2 per cent.

    In a sign of the region’s attractions, EOG Resources, one of the most successful of the independent US shale producers, last week announced a $2.5bn deal to buy privately-held Yates Petroleum. Yates’ most valuable assets are drilling rights on 324,000 acres of the Permian.

    EOG pioneered oil development in the Eagle Ford, and it is still the largest producer there. But William Thomas, EOG’s chief executive, told analysts on a call last month that it would spend 45 per cent of next year’s capital budget in the Delaware, a sub-basin on the western side of the Permian.

    Since May, the number of rigs drilling horizontal shale oil wells in the US has risen by 77 to 325, according to the oilfield services company Baker Hughes. Of those, 49 were added in the Permian, compared with just four in the Eagle Ford and six in the Williston Basin, which includes the Bakken.

    At the same time, the Permian has been a focus for deals. Of the $30.4bn spent on mergers and acquisitions in the US exploration and production sector so far this year, 48 per cent has gone to the Permian, according to research company Wood Mackenzie.

    Companies have been attracted to the Permian because it holds some of the lowest-cost oil in North America.

    Production costs can vary widely within each area, and the best spots in the Eagle Ford and Bakken are still competitive but overall the Permian has the most attractive economics. At current crude prices, bringing a well in the Delaware basin into production will generate an internal rate of return of about 18 per cent on average, according to Platts Analytics. That is higher than for any other shale region.

    Coming relatively late to the shale party, behind the Bakken and the Eagle Ford, the Permian has offered greater scope for companies to cut costs and raise production. Since 2012, average peak output per well has risen by 122 per cent in the Permian, compared with 67 per cent in the Eagle Ford and 78 per cent in the Bakken, according to data analysis firm NavPort.

    Meanwhile, costs are falling sharply. Concho Resources told investors at a Barclays conference last week that it had cut the cost per foot of its wells by about 40 per cent since the first quarter of 2015.

    Long-term prospects for the region were also underlined last week when Apache, the US exploration and production company, announced the discovery of a “significant new resource play” in the Permian, which could hold more than 3bn barrels of oil and 75tn cubic feet of gas, in a part of a formation that had been neglected by other companies.

    Geologists sometimes describe the Permian as a “layer cake” of multiple different oil-bearing formations, with names such as Wolfcamp, Spraberry and Bone Spring. Companies are experimenting with techniques to optimise production from as many of these layers as possible.

    Exploration in the Permian has a long history, with the first oil struck in 1923, and west Texas has experienced several cycles of boom and bust. Drilling rights are often held by smaller companies that are prepared to sell out, giving larger operators a chance to build positions. That also opens the door for private equity investors such as Blackstone, which last month committed $1.5bn to two oil producers to buy Permian assets.

    Exxon and Chevron also see great potential in the region. Exxon came into the Permian through its takeover of XTO Energy in 2010, and added on subsequent smaller acquisitions, while Chevron has a large legacy position. But they see similarly bright prospects.

    Exxon said last month that it had cut unit development costs on the Permian by 70 per cent over the past two years, and “a large part” of the inventory of wells it could drill would be economically viable with crude at about $40 a barrel.

    Chevron said it had cut unit development costs by 30 per cent since last year, and raised production by 24,000 barrels per day. It was using six rigs there last month, and plans to raise that to 10 by the end of the year.

    Heightened levels of M&A activity suggest other companies will add more rigs, too, even if the oil price remains at its present level of about $45 for US crude. “You don’t typically do a billion-dollar deal and then wait for market conditions to improve,” points out Benjamin Shattuck of Wood Mackenzie. “You get rigs in the field.”

    On that basis, the Permian seems set to remain a hot location for a long time to come.

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    Dongming eyes acquisitions in China's changing refining landscape

    China's biggest independent refiner Dongming Petrochemical is looking at acquisitions of domestic rivals, with the refining landscape in the country set undergo massive restructuring and consolidation over the coming years, Zhang Liucheng, a vice president at the company, said Thursday.

    Speaking on the sidelines of the S&P Global Platts Asia Pacific Petroleum Conference 2016 in Singapore, Zhang also said that a deal between Dongming and two Qatari companies is still being negotiated.

    In April 2015, QID Group and Hamad Bin Suhaim Enterprises announced plans to invest $5 billion in Dongming for a 49% stake.

    "As oil prices fell, the companies have been under pressure for investment, while Dongming's value has grown significantly since the MOU was signed," Zhang said.

    Against the backdrop of consolidation in China's refining sector that will likely eventually leave the country with around 10 big state-owned and independent refining companies, instead of the numerous small ones that currently exist, Dongming is "looking at possibly acquiring some independent refinery," Zhang said.

    Dongming's strategy is in line with the government's guideline to support and upgrade refineries with potential and shut down the ones that cannot be improved, he said, adding that a number of small independent refineries are likely to shut down.

    The independent refining sector accounts for around 25-30% of China's total 15 million b/d refining capacity. In Shandong province, where most of these refineries are located, there are around 38 refineries which have a primary processing capacity of above 1 million mt/year (20,000 b/d), while the number of refineries with lower capacity is even higher.

    In Dongying City, one of the three refining hubs in Shandong, there are about 80 independent big and small refineries.

    In addition to Dongming, independent trading company CEFC Energy is also keen to acquire around 10 million mt/year independent refining capacity in Shandong, a source close to the matter told Platts on the sidelines of APPEC.


    Zhang said oil product exports from independent refineries will rise in the future but this hinges on certainty about the government's export policy, which would enable refiners to invest in the necessary infrastructure.

    "The current [export] volume is limited by concerns about policy issues, which stops us from investing in infrastructure... because we are not sure if the government will still allow us to export after the end of this year," Zhang said.

    The Ministry of Commerce in mid-November last year said it would allow independent refiners that have already won crude import quotas the right to export oil products, but the permission is only effective until end 2016.

    The independent refineries have exported 421,000 mt of oil products so far this year and have total product export quotas of 1.26 million mt, Platts data showed.

    This is only a small proportion compared to China's total oil product exports of 29.74 million mt over the first eight months, according to data from the General Administration of Customs.

    High land freight is a big challenge the sector faces in boosting exports. With no pipeline connecting the independent refineries with the ports, every barrel needs to be transported via trucks.

    However, even if the sector starts to invest in infrastructure, the projects will require long lead times to get approval from all stakeholders.

    For example, the long-expected Yanzi crude oil pipeline for independent refineries in Shandong took five years to build and was completed in July. Zhang said he expects the pipeline to be launched by the end of this year.


    The China Petroleum Purchasing Federation of Independent Refineries, a union of 18 independent refiners, plans to secure 60% of the members' feedstock via term contract in 2017, Zhang, who is chairman of the union, said.

    Currently, Dongming and its Singapore-based trading arm Pacific Commerce has signed three supply agreements on behalf of the union with BP, Shell and Unipec, according to Zhang.

    But these framework agreements are more symbolic than binding as they lack details on price, volume and specification.

    So far, Dongming has only bought 2 million barrels from BP since they signed the agreement in November last year for 8 million barrels of crude supply over a year.

    "In the first half this year, the union has imported around 5.7 million mt (41.78 million barrels) of crude oil -- Dongming took 3.7 million mt while 2 million mt were for the other union members," said Zhang.

    Dongming early this year spearheaded a union of refineries with the purpose of collaborating on crude procurement. It currently has 18 members, all of them independent Chinese refiners. Twelve of them are crude imports quota holders, with total 980,000 b/d quota.

    Zhang also said the company will expand its Singapore trading arm from current over 10 staff to 20 by the end of this year to strengthen its trading ability.

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    Is China Deliberately Trying To De-Rail The Russia/Saudi Oil Deal?

    China, the world’s largest oil consumer, has been increasing oil imports and feasting on the low crude oil prices. Could Russia and Saudi Arabia’s plan to stabilize crude oil prices cut into China’s oil hoarding plans?

    Chinese oil imports have increased to 32.85 million tons in August, the second highest figure after the record 33.19 million tons import figures of December 2015. It’s a 7 percent increase over the same period last year, and a 6 percent increase over July. Currently, the Asian giant imports 66 percent of its crude oil requirements.

    “Chinese oil majors are no longer under orders to increase domestic production, as they were doing so at a loss,” said Adam Ritchie, executive general manager for supply at Caltex Australia Ltd. “China’s change to let economics decide between imports and domestic production is a big change,” reports Bloomberg.

    Russia and Saudi Arabia, the two largest suppliers, have been battling it out to increase their market share in China. While Russia has increased its market share in China from 12.6 percent last year to 13.6 percent this year, Saudi’s have seen their share dip from 15.1 percent to 14 percent during the same period.

    “There’s a market-share battle going on mainly among the Middle East producers and Russia,” Olivier Jakob, managing director of Petromatrix, said by phone from Zug, Switzerland. “Rivals are making a big push into China,” reports Bloomberg.

    An agreement between both the competing producer nations reduces the bargaining power of the Chinese refiners, who had started to choose the spot sales offered by Russia against the long-term contracts policy of Saudi Arabia.

    Nevertheless, the Chinese can breathe easy, because like many other experts globally, even the Chinese analysts are not confident that the deal between Saudi Arabia and Russia will result in any substantive action.

    "It will be very difficult to implement this agreement, as the volume for each exporter country is different. Many countries - producers of oil and gas rely on exports, so they are unlikely to agree to the terms of the agreement," a senior consultant for Sinopec Yang Qixi said.

    However, Saudi Arabia’s Minister of Energy, Industry and Mineral Resources Khalid Al-Falih is optimistic that other large oil producers will join forces with Russia and Saudi Arabia to take appropriate steps to stabilize the markets.

    "We are optimistic that Algiers meeting will provide a forum, and pre-Algiers that consultations which will take place bilaterally and in groups will bring us to Algiers with some sort of coordinated decisions. But the two countries agree that even if there is no consensus, we will be willing to take joint action when necessary," said Al-Falih.

    Along with this, China and the U.S. announced their formal joining of the Paris agreement. China has to wean the economy away from the use of fossil fuels if it expects to achieve its target of carbon emissions by 2030. In order to realize this shift, China will have to make an initial investment of $5.2 trillion in lean energy technologies, which will lead to $8.3 trillion in savings by 2050, according to a study Reinventing fire: China.

    Hence, as a major importer of oil, China will want the recently announced cooperation between Saudi Arabia and Russia to fail so prices will remain low. If that happens, China can postpone investments into fossil fuels and divert that money towards clean technology, which will help it to reduce its carbon footprint.
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    Here's One Sign That 'Peak Oil' Is Dead

    Google Inc. searches for the idea that once helped propel oil prices to nearly $150 per barrel have dwindled to almost nothing, according to a Sanford C. Bernstein analysis.

    The theory that oil prices would have to rise as supply inevitably declined gained hold on popular imaginations in the mid- to late 2000s, but has since languished in internet obscurity, as new discoveries and technology, including the shale revolution that helped push U.S. oil production to a 40-year high, have ensured plentiful amounts of crude in recent years.

    Underscoring the trend is the fact that Google searches for "too much oil" recently outstripped searches for "Peak Oil." Prices per barrel are currently languishing around $45.

    "As interest in shale-led supply peaks, then naturally interest in the old concern of 'Peak Oil' has all but disappeared after the surge in focus on this during the mid-2000s," Oswald Clint and Mark Tabrett, Bernstein analysts, wrote in a note lamenting the "short-termism" of the oil market and its tendency to seize on a particular narrative to predict future price moves.

    While Google searches might not capture the entirety of oil investors — including professional traders who presumably have access to data not available to curious web browsers — they are a useful indicator of the ideas currently capturing the market's collective hearts and minds, Bernstein argues. Since early 2015, for instance, searches for "oil inventories" have dominated and surpassed searches for "oil demand" and "oil supply," as investors attempt to gauge the size of the supply glut — particularly in the U.S.

    "When it comes to oil markets, short-termism remains rife," the analysts said. "This is evident from changes in Google search trends. Shortly after oil prices started to fall, searches for oil inventories picked up and have only increased since. Oil demand related searches have increased over the same time but oil supply searches have hardly changed."
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    Petrobras Cost-Cutting Is Making Traders in Oil-Rig Bonds Uneasy

    Oil giant Petroleo Brasileiro SA’s cutbacks are reverberating in the bond market.

    QGOG Constellation SA, which rents rigs to Brazil’s state-controlled crude producer, has seen its $700 million of notes due in 2019 drop 11 percent in the past three months.

    The slump reflects mounting concern that Petrobras, as the oil company is known, may not renew rig-leasing contracts with QGOG. Petrobras, the world’s most indebted major oil producer, plans to slash investments to $17.5 billion this year, the lowest in a decade.

    That’s a problem for QGOG, which has five contracts expiring in the next two years. The prospect of a decline in revenue means QGOG may need additional financing to repay the bonds, said Lucas Aristizabal, an analyst at Fitch Ratings. QGOG has $700 million in notes outstanding and another $469 million in loans, according to data compiled by Bloomberg.

    “You’re exposed to contract renewals, and it’s looking very difficult for the company because Petrobras has decreased demand for units,” he said.

    In an e-mail, Petrobras said it’s adjusting the size of its drilling fleet to a new level of demand, considering the current scenario in the oil industry. It also said it doesn’t comment on specific contracts. QGOG referred all questions on contract renewals to Petrobras.

    Oil prices are down 62 percent from their high in 2011.

    While QGOG is making bond investors uneasy, its sister company, QGOG Atlantic/Alaskan Rigs Ltd., is inspiring confidence. That’s because the latter is on pace to repay its notes due in 2018 before any of its contracts with Petrobras expire. There’s currently just $201.5 million outstanding of the original $700 million bond. The securities also are backed by the rigs themselves, which means bondholders can seize them if the company defaults. The QGOG Constellation bonds aren’t backed by any physical assets.

    QGOG Atlantic/Alaskan Rigs -- which like QGOG is a unit of of industrial conglomerate Queiroz Galvao SA -- also has surpassed performance targets, said Fitch’s Aristizabal.

    “The cash flow from the contracts pay the debt in full before the expiration,” Aristizabal said. “That’s why its performance is key. The risk of a unilateral cancellation is low if total performance continues to be high.”
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    China fuel exports cast fourth-quarter pall over global oil products

    China's state oil refiners are readying to export more diesel and gasoline in coming months as a bleak outlook for what is typically the nation's period of greatest consumption sends shivers through an already saturated global market.

    Even with winter heating demand looming and drivers expected to hit the roads for a week-long national holiday in October, more than a dozen refiners, traders and analysts in the world's second-largest oil consumer said the fourth quarter will be governed by a supply glut and sluggish local uptake.

    Slackening demand this year and surging output from China's small independent refiners have swollen local inventories and spurred state-owned oil companies to sell refined products abroad. In July, such shipments hit a record, with the country becoming a net exporter of fuel for the first time in at least three years.

    "Sales guys at refiners are now really scratching their heads worrying about meeting monthly targets," said Li Yan, a Zibo Longzhong Information Technology analyst, of the difficulty the state companies are having in their domestic markets.

    Analysts from Zibo Longzhong and China Sublime Information Group now say combined demand for diesel and gasoline will fall in the fourth quarter for the first time on an annual basis since the world economic crisis of 2009.

    Sources at four plants - owned by Sinopec, PetroChina and CNOOC and ranked among China's top ten oil refineries - said the outlook leaves them little choice but to branch out further into foreign markets.

    PetroChina's Dalian plant, its largest with a capacity of 410,000 barrels per day (bpd), illustrates the dilemma the refiners face.

    Instead of preparing for a seasonal uptick in domestic demand, the plant is looking to sell more in foreign markets in November and December as local margins weaken, a senior manager at the plant told Reuters. He declined to be named because he's not authorised to speak to the press.

    Struggling to find local buyers for its products, PetroChina has also already cut the Dalian plant's utilization rate to 80 percent from 85 percent in recent months.

    "The start of the fishing season (in October) will bring more diesel demand for us, but (the) market remains saturated with oversupply," the manager said.


    While refineries along the coast and near big cities are making decent profits as demand is more robust, in the north and south margins have declined as consumption has waned and a supply glut has ballooned.

    "Cutting runs will be our last resort if the overseas markets are full and we cannot export," said a senior manager at CNOOC's major plant in Huizhou in southern Guangdong province.

    China's rising exports and the managers' complaints about low refinery profits are the latest signs of the diverging fortunes and mounting tension between state-owned players and their upstart independent rivals.

    Since Beijing allowed the refiners known as teapots to import cheap crude last year, this small, nimble group of mostly private companies has ramped up output and undercut the state refiners in retail markets.

    That pain has intensified as gasoline and diesel demand fell 7 percent in the first seven months of 2016, according to Reuters calculations.

    That compares with gasoline and diesel demand growth of 3 percent in 2015 and 6 percent in 2014.

    Fourth quarter demand - though expected to be down versus a year ago for the first time in seven years - will improve slightly from the previous quarter, but not enough to wipe out the glut, analysts and industry insiders said.


    Threats of more exports will be tough to swallow for a region already reeling from China's accelerating pace of shipments.

    The shipments also intensify the battle for market share with rivals in South Korea and Japan, sources in those countries said, with repercussions to be felt well beyond Asia.

    "A step up from current levels is sky high. The middle distillates market will die if that's true," said an official with a refiner based in Japan.

    A manager at Sinopec's Guangzhou refinery in South China said that PetroChina's plans to launch its 260,000 bpd plant in southwest Yunnan province in October will exacerbate the market's woes.

    Sinopec has said it expects to cut domestic sales in the second half of the year by 3 percent to 84 million tonnes.

    It made no forecast on overseas sales, but Sinopec's product exports rose 18 percent in the first half of 2016, outpacing a 3 percent rise in home deals.

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    OPEC Flips Forecast to Predict Rebound in Rival Supply Next Year

    OPEC flipped its forecasts for rival supplies in 2017, predicting an increase in output from outside the group instead of a decline, the latest sign that the global surplus is persisting.

    Production from outside the Organization of Petroleum Exporting Countries will grow by 200,000 barrels a day next year, according to the group, which a month ago had projected a drop of 150,000 a day. The gain is driven by the startup of the Kashagan oil field in Kazakhstan. That means the organization’s total output of 33.24 million barrels a day in August was 757,000 a day higher than the average amount the world will need from OPEC in 2017.

    “For 2017, non-OPEC supply growth has also been revised up,” the organization’s Vienna-based research department said in its monthly market report. “This is mostly due to new production from Kashagan next year.”

    Oil climbed above $50 a barrel last week on speculation that OPEC may reach an accordon output levels with competitors such as Russia at informal talks scheduled in Algeria later this month. Prices have since retreated amid doubts that any agreement will mean a reduction of supplies as long as producers are resolved to defend their share of world markets.

    Stockpiles in developed nations remained 341 million barrels above their five-year average in July, OPEC estimated. The surplus is poised to diminish in the coming months as a result of surprisingly strong demand in major consuming nations, according to the report.

    “This, along with a potentially improving oil supply picture, would contribute to a reduction in the imbalance of market fundamentals,” it said.

    Still, the report indicates that the market will continue to be defined by abundant supply in 2017. As a result of OPEC’s increased projections for rival output, the group cut estimates for the volume of crude it will need to provide next year, by 500,000 barrels a day to 32.5 million a day.

    Representatives of producing nations held a flurry of meetings last week ahead of their gathering in Algiers, with Saudi Arabia’s influential Deputy Crown Prince Mohammed bin Salman meeting with Russia President Vladimir Putin on Sept. 4, and OPEC’s Secretary-General Mohammed Barkindo speaking with Saudi and Algerian ministers on Friday.

    Kashagan Boost

    OPEC pumped 33.24 million barrels a day in August, according to external sources compiled by the organization. Output was 23,100 barrels a day lower than July, as a result of declines in Libya, Nigeria and Venezuela.

    OPEC’s revised outlook for Kazakhstan’s long-delayed Kashagan project follows a similar change made by the International Energy Agency, the adviser to oil-consuming nations, in its report a month ago. The startup of the field by a consortium including Total SA and Eni SpA dragged on for more than a decade, prolonged by the need to build remote islands to support drilling equipment. U.S. output is still projected to decline next year by 170,000 barrels a day.

    The organization kept its estimates for world oil demand unchanged, forecasting that consumption will increase by 1.15 million barrels a day next year to average 95.42 million a day, driven by growth in India, China and the U.S.

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    How Does America Keep Finding Vast Stores of Energy?

    Last week, the Wall Street Journal reported on an energy bonanza. A company discovered a new field with “the equivalent of at least two billion barrels of oil” that “has the promise to become one of the biggest energy finds of the past decade.”

    But the discovery wasn’t made by a foreign company in the Amazon, or deep in the waters off the coast off Africa, or in Kazakhstan—or any of the other politically treacherous, high-risk, low-infrastructure places where Big Oil has been prospecting for gigantic new gushers. Instead, the lucky firm was Texas-based Apache Corporation, which struck black gold in Texas’s Permian Basin, one of America’s most prolific and picked-over sources of oil and natural gas for decades. It’s as if vintners discovered millions of acres of previously unknown prime grape-growing territory in the Loire Valley. Or the owners of Vail Mountain suddenly happened upon miles of previously untouched ski slopes.

    What has been dubbed the “Alpine High” is just the latest output of an energy equation that works for America and American firms in a way that doesn’t work anywhere else. You start with an embarrassment of natural resources arrayed across an expansive territory, multiply it by new technology and innovation that allows for the efficient mining and harnessing of the resources, add capital, and then raise it to an exponential power through the propensity to scale. The result? While many parts of the world suffer from energy and power scarcity (I just returned from Tanzania, where only about one-quarter of the population has electricity), and while many companies and countries are looking far beyond their borders for the fuel that can satisfy their customers, the U.S. is solving the problem of expensive energy and forging new domestic industries.

    It’s as if the owners of Vail Mountain suddenly happened upon miles of previously untouched ski slopes.

    Let’s take Apache’s big find first. The oil and natural gas have always been there, locked in the rocks. But it wasn’t until the U.S. developed a new technology (hydraulic fracturing, or fracking) that it became apparent that it could be liberated. That story has been written several times over. But an equally significant story has received less notice. In the last several years, a global glut of natural gas and oil production has developed, thanks to higher U.S. production and the desire of OPEC members to pump more oil in the face of lower prices. But rather than sit on their hands or shut wells, the U.S. fracking industry has evolved and innovated. Fracking has become a cheaper, more refined, and more effective means of getting at fossil fuels. So while the price of both natural gas and oil has fallen sharply in recent years, so too has the break-even point for profitable extraction.

    Rather than go into hibernation, Apache was able to raise capital, hoover up several hundred thousand acres in a new region, and start drilling for resources on a profitable basis. In doing so, it has “discovered” an asset that is essentially reinventing an already large company. “This is a giant onion that is going to take us years to unveil and peel back,” Apache Chief Executive John Christmann IV told theJournal. “The industry dogma about this area, all the fundamental premises that most people had about it, were just wrong.”

    We see evidence that this same cycle is playing out in other sectors of the energy and power industry. America’s oil and natural gas industries got started in Pennsylvania in the 1860s, then petered out in a few decades. But in the past decade, Pennsylvania’s Marcellus Shale has been one of the epicenters of the shale gas revolution. Again, the increase of raw production is a well-told story. But the application of technology and infrastructure at scale—the construction of pipelines and multi-billion-dollar terminals that enable export—is creating new industries. Earlier this year I noted that ethane distilled from natural gas in Pennsylvania is being sent to industrial plants in Europe. You can watch the progress of tankers like the Ineos Inspiration and Ineos Ingenuity as they ply the cold waters of the North Atlantic from the Marcellus Hook Terminal in Pennsylvania to Norway. In February, ahuge terminal in Louisiana constructed at immense expense began shipping natural gas to distant points. By the end of the second quarter, the terminal’s owner, Cheniere Energy, said it had shipped five cargoes of liquefied natural gas. Meanwhile, investments in infrastructure outside the U.S. are encouraging the export gas industry to scale more rapidly. This summer, a tanker that left Cheniere’s Sabine Pass terminal became the first ship to carry natural gas through the expanded Panama Canal.

    It’s happening in renewables, too. Wind has always been a force on the Great Plains, and farmers harnessed it for years on a very small scale. But in recent years, wind has been “discovered” as a major supply of fuel for producing electricity. In the middle of the country, there are abundant wind resources. There’s the availability of land—vast, unused acreage that allows the establishment of extensive onshore wind farms. Companies have developed and harnessed the latest technology—i.e. larger and more powerful wind turbines. Capital has been raised to finance scale—the construction of wind turbines and the build-out of transmission lines that can convey wind power to population centers. So instead of building a few small turbines as an adjunct to the power system, developers in Iowa are now planning to construct a 2-gigawatt field that will make wind a major power source.

    I’m old enough to have lived through more than one energy crisis. It turns out the answers to them were here all along.
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    Oil Bears Dominate Market as Doubt Grows Over Output Limits

    Oil Bears Dominate Market as Doubt Grows Over Output Limits

    Money managers increased wagers on falling prices by the most in three months as a meeting between Russia and Saudi Arabia ended without specific measures to support prices. Producers have pledged to discuss action in Algiers later this month.

    “The more they talk, the less people listen,” said Michael D. Cohen, an analyst at Barclays Plc in New York. “If you look at the actual statements from the Saudis, there’s not a lot of enthusiasm. They’re saying that either they don’t believe a substantial intervention is needed right now or that if other producers want a freeze, they’ll go along.”

    Saudi Arabia’s Energy Minister Khalid Al-Falih said on Sept. 5 that he’s optimistic producers will agree to cooperate in Algiers. He spoke after meeting with his Russian counterpart, Alexander Novak, at the G-20 summit in China. Novak said that a freeze in production by OPEC and Russia would be the most effective way of stabilizing the market.

    The International Energy Forum, including 73 countries that account for about 90 percent of the global supply and demand for oil and natural gas, will meet in the Algerian capital Sept. 26-28. The Organization of Petroleum Exporting Countries will hold informal talks on the sidelines of the gathering.

    Parsing Words

    “Everyone is sifting for clues on whether OPEC will reach an agreement to limit production or leave it uncapped with the potential for higher output,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “At this point we’re waiting for the outcome of the talks. A lot of people are standing to the side while others are building positions with a specific view in mind.”

    A freeze deal between OPEC members and other producers was proposed in February. A meeting in April ended with no accord because Iran refused to join, while Saudi Arabia insisted that its rival take part. Iran has said it’s too soon to cap output as it’s still restoring production curbed by sanctions.

    Speculators bolstered their short position in West Texas Intermediate crude by 34,954 futures and options during the week ended Sept. 6, according to the Commodity Futures Trading Commission. Bets on rising prices declined.

    Prices Drop

    WTI futures dropped 3.3 percent to $44.83 a barrel in the report week and prices lost 1.6 percent to $45.17 at 1:12 p.m. Singapore time Monday.

    Futures surged Sept. 8 after the Energy Information Administration reported U.S. crude inventories fell 14.5 million barrels in the week ended Sept. 2, the biggest drop since January 1999. Prices retreated the next day as speculation grew the supply drop was a one-off caused by a tropical storm that disrupted imports and offshore production.

    Money managers’ short position in WTI climbed to 130,274 futures and options. Longs fell 1.9 percent. The resulting net-long position dropped 19 percent.

    In other markets, net-bullish bets on gasoline declined 32 percent to 11,148 contracts. Gasoline futures dropped 9.1 percent in the report week. Net-long wagers on U.S. ultra low sulfur diesel tumbled 56 percent to 9,840 contracts. Futures declined 4.3 percent.

    Gambling Momentum

    “There’s a lot of gambling taking place,” said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania. “A lot of money managers are betting that a bottom has been put in but I’m skeptical.”

    U.S. crude stockpiles remain at their highest seasonal level in more than 20 years. Refineries plan maintenance programs for September and October when fuel demand is lower. Over the past five years, refiners’ thirst for oil has dropped an average of 1.2 million barrels a day from July to October.

    “The market will probably yo-yo in a range through the maintenance season but there’s downside risk,” Schork said. “If demand isn’t a strong as hoped and crude inventories rise, the market could take another leg lower.”
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    Forces loyal to eastern Libyan commander claim control over key oil ports

    Forces loyal to eastern Libyan commander claim control over key oil ports

    Forces loyal to eastern Libyan commander Khalifa Haftar took control of key oil ports in Ras Lanuf, Es Sider and Brega on Sunday, said Ahmed al-Masmari, a spokesman for the forces.

    But an official from the force that previously controlled the ports, the Petrol Facilities Guard, said there was still fighting at Ras Lanuf.

    Masmari said clashes were continuing at another oil port, Zueitina, and around the nearby town of Ajdabiya.
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    Judge allows Dakota pipeline to move ahead, Obama then stops construction.

    The Standing Rock Sioux Tribe’s attempt to halt construction of the four-state Dakota Access oil pipeline near their North Dakota reservation was denied Friday by a federal judge.

    The tribe had challenged the Army Corps of Engineers’ decision to grant permits at more than 200 water crossings for Dallas-based Energy Transfer Partners’ $3.8 billion pipeline, saying that the project violates several federal laws, including the National Historic Preservation Act, and will harm water supplies. The tribe also says ancient sacred sites have been disturbed.

    U.S. District Judge James Boasberg in Washington denied the tribe’s request for a temporary injunction in a one-page ruling that included no explanation. It ordered the parties to appear for a status conference on Sept. 16.

    The ruling said that “this Court does not lightly countenance any depredation of lands that hold significance to the Standing Rock Sioux” and that, given the federal government’s history with the tribe, “the Court scrutinizes the permitting process here with particular care. Having done so, the Court must nonetheless conclude that the Tribe has not demonstrated that an injunction is warranted here.”

    Attorney Jan Hasselman with environmental group Earthjustice, who filed the lawsuit in July on behalf of the tribe, said in the days before the ruling that it’ll be challenged.

    “We will have to pursue our options with an appeal and hope that construction isn’t completed while that (appeal) process is going forward,” he said. “We will continue to pursue vindication of the tribe’s lawful rights even if the pipeline is complete.”

    Energy Transfer Partners officials didn’t return The Associated Press’ phone calls or emails seeking comment.

    The 1,172-mile project will carry nearly a half-million barrels of crude oil daily from North Dakota’s oil fields through South Dakota and Iowa to an existing pipeline in Patoka, Ill.

    Thousands gathered Friday at the protest over the pipeline, which will cross the Missouri River near the Standing Rock Sioux reservation in southern North Dakota. Judith LeBlanc, a member of the Caddo Nation in Oklahoma and director of the New York-based Native Organizers Alliance, said before the decision that she expected the protest to remain peaceful.

    “There’s never been a coming together of tribes like this,” she said of Friday’s gathering of Native Americans, which she estimated could be the largest in a century. People came from as far as New York and Alaska, some bringing their families and children, and hundreds of tribal flags dotted the camp, along with American flags flown upside-down in protest.

    A rally against the Dakota Access pipeline is scheduled for Friday afternoon at the North Dakota Capitol, and many of those gathered at the protest site are expected to make the about 45-mile trek.

    State authorities announced this week that law enforcement officers from across the state were being mobilized at the protest site, some National Guard members would work security at traffic checkpoints and another 100 would be on standby. The Great Plains Tribal Chairman’s Association has asked the federal Justice Department to send monitors to the site because it said racial profiling is occurring.

    Nearly 40 people have been arrested since the protest began in April, including tribal chairman Dave Archambault II, though none stemmed from Saturday’s confrontation between protesters and construction workers. Tribal officials said workers allegedly bulldozed sites on private land that Hasselman said in court documents was “of great historic and cultural significance.” Energy Transfer Partners denied the allegations.

    Four private security guards and two guard dogs were injured, officials said, while a tribal spokesman said six people — including a child — were bitten by the dogs and at least 30 people were pepper-sprayed. The state’s Private Investigation and Security Board received complaints about the use of dogs and will look into whether the private security personnel at the site are properly registered and licensed, board attorney Monte Rogneby said Friday, adding that he would not name the firms.

    On Thursday, North Dakota’s archaeologist said that piece of private land was not previously surveyed by the state would be surveyed next week and that if artifacts are found, pipeline work still could cease.
    The company plans to have the pipeline completed this year. In court papers, ETP said stopping the project would cost it $1.4 billion the first year, mostly due to lost revenue in hauling crude.

    “Investor appetite for the project could shift and financing may no longer be available,” the company said. “Construction of the entire project would cease and the project itself would be jeopardized.”

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    Oil rig count grows after Hurricane Hermine

    The nation’s oil rig count rose by seven this week as more drilling rigs returned to the Gulf of Mexico after evacuating for Hurricane Hermine.

    The overall count of rigs actively seeking oil or natural gas increased by 11 this week with eight of them offshore and just three on land. Those three came in the gas-rich Marcellus and Utica shale in the Northeast. Texas and Oklahoma offset each other with Texas gaining four rigs and Oklahoma losing the same amount, according to the weekly count from the Baker Hughes oilfield services firm.

    Nearly half of the nation’s active rigs are in Texas — 245 out of 508 rigs. The Permian Basin alone accounts for 200 active rigs.

    The total count of more than 500 rigs is up from an all-time low of 404 in May, according to Baker Hughes. Of the total, 414 of them are primarily drilling for oil. But the oil rig count is down 74 percent from its peak of 1,609 in October 2014, before oil prices began plummeting.

    Oil prices have fluctuated throughout this week, soaring on Thursday but falling Friday. The benchmark for U.S. crude topped $46 a barrel early Friday afternoon, down about $1.50 for the day.
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    GLOBAL LNG-Prices edge up as old and new buyers seek spot supplies

    GLOBAL LNG-Prices edge up as old and new buyers seek spot supplies

    Asian liquefied natural gas (LNG) prices edged up on a crop of fresh tenders expected to add to already brisk demand from Indian and Middle Eastern importers.

    Prices for October and November delivery traded at around $5.55 per million British thermal units (mmBtu) this week, up from $5.30 per mmBtu for October delivery last week.

    India's GSPC and Kuwait are seeking one cargo each for November delivery, while Egyptian Natural Gas Holding wants three cargoes in total spread across October, November and December, trader sources said.

    On top of that, traditional buyer Korea Gas Corp, stung by oversupply and weak domestic demand in recent years, has re-emerged to scout for winter spot shipments, helping tighten supply outlooks.

    Egypt is also gearing up to launch its keenly-awaited 120-cargo buy tender catering for deliveries across 2017, now expected after the Muslim religious holiday Eid al-Adha on Sept. 12, traders said.

    Pakistan plans to issue two tenders for 750,000 tonnes per year of LNG each in the coming month, the head of the country's state-owned LNG company said.

    Adnan Gilani, head of Pakistan LNG, said the specifics of the tenders are being finalised, but they will probably be a five-year and a 15-year offer, as well as a possible spot purchase.

    Russia and Bahrain agreed to expand cooperation in LNG on Tuesday, with Moscow considering LNG supplies to the kingdom.

    Loadings from Nigeria's Bonny Island liquefaction plant resumed normal pace after Shell lifted force majeure on natural gas supplies to the plant earlier this week.
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    CONSOL Energy Scales 52-Week High on Shift to Natural Gas

    CONSOL Energy has shifted its focus to the production of natural gas. Keeping with this, the company continues to acquire acreage in regions that may have a large volume of natural gas reserve. However, the company has lowered its E&P capital budget guidance for 2016 by 25% to the range of $195 million to $205 million from its earlier projection of $205 million to $325 million. On the other hand, 2016 E&P division production guidance has been raised to the 380–385 billion cubic feet equivalent (“Bcfe”) band from the prior expectation of 378 Bcfe.

    CONSOL Energy is presently focusing on the Marcellus and Utica plays. The company currently controls 436 thousand net acres in the Marcellus Shale and approximately 622 thousand net acres in the Utica Shale. In the second quarter of 2016, production volumes and operating costs in both these shales fell from the year-ago levels. CONSOL Energy’s focus on these two plays will drive production and help the company achieve its new production goals.

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    New technology test centre could be a 'big deal' for Sask heavy oil production

    A new Saskatchewan Research Council (SRC) initiative aimed at developing and commercializing new extraction technologies could provide oil producers with access to the billions of barrels of crude buried deep beneath west-central Saskatchewan that can’t be extracted using traditional methods.

    The main method of extracting heavy oil, known as Cold Heavy Oil Production with Sand (CHOPS), has an average recovery rate of about seven per cent, according to Mike Crabtree, head of SRC’s energy division.

    That leaves roughly 23 billion barrels of oil, or about 90 per cent of the 26 billion barrels estimated to reside beneath West Central Saskatchewan inaccessible to producers, he said.

    While new tools are available, risk-averse companies often don’t have the time to experiment with new methods and prefer to optimize existing methods, Crabtree said.

    SRC’s new post-CHOPS Well Test Centre aims to develop technologies to address some of the oil left in the ground, and incentivize producers to adopt it, Crabtree said.

    A Ministry of Economy spokeswoman said in an email that producers will get a royalty incentive to give the Well Test Centre access to their wells. Crabtree said the tax break is vital to taking the riskout of new technologies for producers.

    Funded by the Crown corporation’s existing budget, the Well Test Centre will employ a handful of people to examine new extraction methods and connect technology companies with oil producers working in the province, he said.

    It typically takes years for producers to adopt new techniques, but the Well Test Centre’s incentives could cut that down to months, Crabtree said.

    Even if the tools it helps introduce allow producers to access an additional three billion barrels of heavy crude, it would be a “big deal” for the province and extend its resource base significantly, Crabtree added.  

    “There are literally thousands and thousands of these wells in Saskatchewan … so it’s going to be about mobility, sustainability and economic viability of these technologies, and that’s what we’ll be testing.”
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    Halliburton, Baker Hughes See Rocky, i.e. Shale, Road Leading Recovery

    The oil and gas services industry has begun to pick itself up from the muck and mire from a "100-year low in activity," but it has found its bottom, according to top Halliburton Co. and Baker Hughes Inc. executives.

    Oilfield services are "on the road to recovery," Halliburton President Jeff Miller said at this week's Barclays CEO Global Energy-Power Conference in New York City. "But at the same time, I would describe this as sorting through the wreckage of the worst downturn that we've ever seen. We see the after-effects just about everywhere that we look. There have been more than 350,000 layoffs in the industry, mostly weighted toward oilfield services, some companies laying off as much as 80% of their workforce." Halliburton has laid off about 40% of its global staff.

    "So fundamentally, we've found bottom...We are in the early innings of a recovery." The starting point "is from a 100-year low in activity. But nevertheless, that's 'Step Zero.' That's what it looks like as we begin to climb back."

    Schlumberger Ltd.'s operations chief Patrick Schorn in late August said the global oil supply was tightening, trending to balance by the end of this year, but North American basin pricing remained unsustainable.

    If current global oil production decline rates are conservatively at about 3%, a 14 million b/d gap will grow over the next five years, Miller predicted. "What this model does not consider is what I like to describe as almost capex starvation, which would only serve to exacerbate that gap, meaning more than 14 million b/d." Meanwhile, global oil demand remains steady, growing at a rate of 1-1.5% a year.

    Outlook for Strong Demand Increase

    "If we roll that out over the next five years, what we see is about 6 million b/d in growing demand by 2020," Miller said. "All of this, when added up, adds up to about 20 million b/d in terms of gap...That's what I believe is out ahead of us. To put 20 million b/d in perspective, that's the equivalent of adding two Saudi Arabias between now and the year 2020."

    The takeaway is that the market will recover, "but what may be a more important question than whether the market where does that happen first?" In Halliburton's view, unconventional drilling will lead the recovery, followed by mature field development overseas and finally the most expensive endeavor of all, deepwater.

    "The unconventional barrel is simply put, the fastest incremental barrel of oil to market," Miller said. "That means it will be the first to fill demand, to fill the imaginary supply bucket...In addition though, the unconventional barrel is the shortest cycle return barrel, which makes it an attractive barrel, not only for filling demand, but from a return standpoint.

    "And finally, that unconventional barrel has what I like call the best glide path. I say that because we continue to see efficiency gains in terms of lowering cost. But even more important is the potential gains to be had with respect to recovery factors, which we're in the very early innings of understanding how much can be produced if we consider recovery factor is around 8%. Just moving to 10% is a dramatic move...And we're right in the middle of how to improve recovery factors from a technology perspective."

    Mature fields, the lowest risk opportunities and the largest market in the world, already are well understood. However, they are difficult to ramp up at scale similar to low-cost unconventionals.

    Halliburton views North America's onshore as a mixed bag, as the relationship between the rig count and fracture (frack) crews has changed. The rig count is up about 10% since the beginning of July, "but it's not sufficiently significant to change the underlying market dynamics...It's still a brawl in the market place...The bottom line is, it just doesn't take as many rigs as it used to, to drive frack activity."

    Rigs v. Horsepower

    Improved drilling efficiencies mean it takes more frack crews to keep up with the rigs now running, Miller said. Increasing completion intensity is about three times higher than three years ago too, which means each frack stage uses more horsepower, and in general, there's more horsepower per job.

    "We estimate that there's 3 million to 7 million hp that's leaving the marketplace, either because of attrition or cannibalization, but in both cases increasing demand on remaining horsepower. The point is, it doesn't take 1,900 rigs to get to equilibrium. In fact, there's probably a path toward equilibrium that happens well before that just because of the demand on equipment and the activity."

    As to when OFS pricing might increase, or when more equipment will need to be added, Miller said it's questionable before 2017.

    "Bringing new horsepower into the marketplace for the industry is going to require better pricing than we see today just because it's unsustainable," he said. "The supply of equipment is about where it is until something changes."

    Meanwhile, the oil and gas business in the rest of the world is going to get tougher before it gets better, according to Miller. "The slowest recovery will be deepwater...That’s really a duration question. It’s seven to 10 years from discovery to barrels in the tank...And from an efficiency perspective, we just don't get as many at-bats in deepwater...We get a lot of at-bats onshore, and we're able to drive efficiency quickly."

    Baker CEO Martin Craighead during his presentation at Barclays this week said oil prices would need to be sustainable "in the upper $50s" for a recovery to begin in North America. Current North America activity growth has become limited to the "tier one," or core acreage for most producers. Meanwhile, price recovery is being "dampened by shale producers' ability to quickly ramp up production."

    2017 Outlook “Opaque”

    Craighead elaborated in detail during an investor dinner in New York hosted by Evercore ISI. It's been four months since a mega-merger with Halliburton was terminated, and Baker has since begun to simplify its global organization (see Shale Daily,May 27). The Houston-based operator has moved swiftly to reduce costs and is ahead of an initial $500 million target, in part by shrinking the workforce (see Shale Daily,Sept. 2;July 28). The company expects to achieve more cost savings by flattening the organization, muscling up the core portfolio and developing trade secrets/intellectual property on new business channels.

    "Notably, the company's technology agenda did not slow during the merger process," Evercore analysts led by James West said in a note. "While much recent attention has focused on the 'era of mega-completions' and the increase in fracking horsepower on the well site, the massive increase in sand usage per well and continued increases in lateral lengths and the number of stages, there has been little emphasis on the potential for increases in artificial lift.

    "Transitioning to longer laterals can produce dramatic increases in workover costs, gas processing abilities and chemical demands. As a result, the lift demand is improving significantly...This shift is clearly in Baker's favor."

    The current operating environment may underwhelm, but it pales in comparative importance to the 2017 outlook, which remains "opaque" with respect to when the ramp up may begin, said West. For constructive customer conversations to transition into higher activity levels, commodity pricing needs to improve further, while exploration and production (E&P) spending needs to respond in kind."

    Reports that members of OPEC, the Organization of the Petroleum Producing Countries, may freeze output have dominated the headlines, while rampant merger activity has governed E&P discussions.

    "It's only a matter of time before these conversations shift toward improving oil fundamentals and necessary increases in E&P spending," West said. "We continue to preach patience in this market, as unsustainable market dynamics continue to pave the way for an elongated upcycle."

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    India's Hindustan Petroleum aims 60 mln T refining capacity by 2030

    India's third biggest crude oil refiner, Hindustan Petroleum Corp (HPCL), plans to expand its refining capacity to more than 60 million tonnes annually, or about 1.2 million barrels of oil per day by 2030, according to a senior company official.

    This will not only help the company fill the yawning gap between the volume it refines and the volume it markets through its retail outlets, but also help in meeting the burgeoning fuel demand in the country, said HPCL Chairman Mukesh Kumar Surana at a conference late on Thursday.

    While Hindustan Petroleum, which is largely known as a marketer of fuel products, currently sells 34.20 million tonnes of fuel products every year through its retail outlets and bulk sales, its refining capacity is only about half that.

    According to a 2015 report by the International Energy Agency (IEA), India will require up to 329 million tonnes of oil products annually by 2030. As of last year India consumed 183 million tonnes of fuel products, government data showed.

    Analysts have often pointed out the heavy reliance on outside purchase of fuel products as a double-edged sword for the company. While HPCL is not directly exposed to crude oil fluctuations, it misses out on the refining margins that its peers clock.

    "We would like to have 60 plus (million tonnes) refining capacity by 2030," Surana said.

    Separately, a company official said the internal target is to have not more than 15 percent reliance on outside purchase of fuel by 2030.

    A major chunk of this refining capacity is expected to come from a joint venture project for a 60-million-tonne proposed refinery in the western state of Maharashtra.

    Hindustan Petroleum will own a 25 percent stake in this JV. India's biggest state-owned refiner Indian Oil and No. 2 player Bharat Petroleum will hold 50 percent and 25 percent stakes respectively.

    India's Oil Minister Dharmendra Pradhan said in June that it would also like to bring in a strategic partner in the refinery and Saudi Arabian oil giant Saudi Arabia Oil IPO-ARMO.SE has shown interest in it.

    To meet the 60-million-tonne target the company will have to set up yet another greenfield refinery, HPCL's director of refineries, B K Namdeo, said.
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    Mammoet wins LNG project contract

    Mammoet has announced that it has received a contract for an LNG project in Freeport, Texas, US.

    The scope of the contract includes transporting a substantial number of pieces to two different sites located three miles apart. Mammoet has optimised the transport process by using two different methods of transport, by barge and over the road, depending on the various weights and sizes of the pieces.For this LNG project, Mammoet will utilise barges at three different docks, self-propelled modular transporters (SPMTs) and trailers with a range of axle lines. Transport of the first pieces began in April 2016 and will continue through 2017.

    Pierre Mille, Mammoet USA Sales Director, said “With the project taking place at two different locations and multiple teams responsible for coordination, communication will be the key to success.”

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    Iranian oil output stagnates for third month amid OPEC bargaining

    Iran's steep oil output growth has stalled in the past three months, new data showed, suggesting Tehran might be struggling to fulfill its plans to raise production to new highs while demanding to be excluded from any OPEC deals on supply curbs.

    Iran's oil output soared to 3.64 million barrels per day in June from an average of 2.84 million bpd in 2015 following the easing of Western sanctions on Tehran in January, adding to a global crude glut which has slashed oil prices.

    But since June, output has stagnated and reached just 3.63 million bpd in August, according to fresh OPEC data based on secondary sources, which include consultants and industry media, and seen by Reuters. Iran also told OPEC it produced 3.63 million bpd in August, according to an OPEC source.

    Iran became the main stumbling block to an initiative by OPEC and non-OPEC Russia earlier this year to freeze output globally. Tehran said it needed to first regain market share lost while it was under sanctions.

    OPEC's largest producer Saudi Arabia insisted all nations should join and the freeze deal collapsed in April.

    As Russia and Saudi Arabia are trying to revive the effort to prop up prices again, Iran has signaled it was more willing to cooperate when OPEC and non-OPEC producers meet in Algiers on Sept. 26-28. But it stopped short of saying it would join the freeze.

    "This (production levels) is a million-dollar question," said a source familiar with Iranian thinking. "The shuttle diplomacy is going on to clear which level is considered an aim for Iran."


    Iran has repeatedly said it needs to reach a level of output of at least 4 million bpd before it agrees to any deal, but one OPEC source said on Thursday the latest request from Iran was to set a target as high as 4.2-4.3 million bpd.

    The difference between requested levels and current production would amount to over 0.5 million bpd or half a percent of global oil consumption.

    And even if Iran were unable to produce it immediately, it would give Tehran an upper hand in dialogue with OPEC in the future - if and when Iran manages to bring on board global oil companies to help it develop its massive oil fields.

    Meanwhile, Gulf producers led by Saudi Arabia are insisting that for any deal OPEC members should stick to OPEC's secondary sources data to put everyone on a level playing field, the source added.

    "If we could not do that and accept one system - which is to use secondary sources - it would complicate things further," the source said.

    However, it might be a tough task as those figures show Iran has already returned to pre-sanctions output levels, pumping today as much as it was pumping back in late 2011.

    That chimes with estimates from the International Energy Agency which believes Iran's production capacity is very close to what it is already producing.

    For some in OPEC, the issue is settled. Saudi Energy Minister Khalid al-Falih said on Monday Iran's production has already reached pre-sanctions levels.

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    Alternative Energy

    Aqua Dynamo – An Eco-Friendly Tidal Turbine

    Nofel lzz a Canadian entrepreneur has invented a tidal turbine ‘Aqua Dynamo’ which can harness the kinetic energy found in moving bodies of water and converts tidal energy into electricity. By implementing tidal turbines could lower greenhouse gas emissions by decreasing dependence of large cities on thermal power plants. Due to all of the embedded efficiencies and the unique design, the Aqua Dynamo can generate the equivalent amount of power at a savings of 90% of current costs” says Canadian entrepreneur Nofel Izz.

    Image title

    The powerful blades of the Aqua Dynamo’s turbines are designed to be hydrodynamic. This means the turbines can harness the kinetic energy found in moving bodies of water. These turbines generate enough clean energy to power over three million homes while taking up only 200 acres or less of water space claims Aqua Dynamo website.

    The Tidal Aqua Dynamo Stream Turbines can also be called an “underwater windmill”. These Tidal Stream Turbines generate power from sea currents like wind turbines from the air but are more efficient and more cost-effective than the wind turbines and also than other tidal turbines currently in use. The major advantage these turbines have over windmill is the density of water, which is 832 times more than air and hence can produce the same electricity with 1/10 of the velocity as with a wind turbine. It is designed to incorporate a pod consisting of four blades that harness the power of tidal currents to generate electricity using axial flow turbines that drive generators via gearboxes. They use tidal movements to capture kinetic energy while the surging and ebbing of water currents to generate electricity. This is directly proportional to the amount of the cross-section of flow the system is capable of addressing.

    The exclusive aqua dynamic blade shape, along with its blade design, characterized by mini hydrofoils, increases the efficiency of this invention and increases the efficiency of the spinning blades, as per their website.

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    JinkoSolar Has Signed A Master Module Supply Agreement With Con Edison Development in the U.S.

    JinkoSolar Holding Co., Ltd. , a global leader in the solar photovoltaic (PV) industry, today announced that its wholly owned subsidiary, JinkoSolar (U.S.) Inc., has entered into a  Master Module Supply Agreement  with CONSOLIDATED EDISON DEVELOPMENT, INC. , a New York State-based developer, owner and operator of large-scale renewable energy projects.

    In accordance with the MSA and multiple Purchase Order issued thereunder, JinkoSolar will supply high-efficiency polycrystalline 72-cell modules, totaling approximately 560 MW in capacity, to CED through August 2017. The Company has already begun shipping modules to project sites. JinkoSolar modules will be used to power various CED projects across multiple states in the U.S.

    "We are proud to have reached another significant milestone through this supply agreement with Con Edison Development," said Nigel Cockroft, General Manager of JinkoSolar (U.S.) Inc. "JinkoSolar's strong momentum in the U.S. solar industry is a direct result of our company's dedication to reliability in both module performance and customer support."

    "JinkoSolar has a clear understanding of the energy marketplace in which we operate," said Mark Noyes, President and CEO of Con Edison Development.  "It is important that our company continuously improves solar system efficiency in order to remain competitive with other energy sources. JinkoSolar's product roadmap and operational excellence are perfect fits for our company."
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    Solar, wind developers: U.S. desert plan hurts renewable energy

    The United States on Wednesday unveiled a long-awaited plan for desert renewable energy development that the solar and wind industries said unfairly favors land conservation and severely limits the ability to build projects critical to meeting the nation's climate goals.

    The Desert Renewable Energy Conservation Plan, eight years in the making, was designed to streamline development of wind and solar projects on federal and private lands in California while preserving pristine desert habitats.

    On Wednesday, the U.S. Department of Interior unveiled the first phase of the plan, covering 10.8 million acres of federal lands managed by the Bureau of Land Management. It designates 388,000 acres of those lands as best for renewable energy development. Applications for projects in those areas will receive a streamlined permitting process and possible financial incentives, the agency said in a press release.

    A coalition of five wind and solar energy trade groups said the size of the area set aside for development in the plan falls far short of what California and the United States will need to meet carbon reduction goals.

    "It's just a complete disconnect with our climate change ambitions," said Nancy Rader, executive director of the California Wind Energy Association.

    Environmentalists cheered the move, saying it struck the right balance between preserving wildlife and plant habitats and allowing for ample wind and solar development.

    The desert is not the only place to site renewable energy, said Sierra Club Senior Representative Barbara Boyle, who pointed to efforts to develop projects on private lands in rural areas as well as import renewable energy from other states.

    "The California desert is just one piece of the puzzle, and we believe that this is more than enough acreage."

    Wind and solar developers worry that much of the 388,000 acres set aside for them will not actually make sense for their projects. The areas have not yet been cleared for potential conflicts with military exercises and have yet to be surveyed for impacts to avian species.

    The government also has imposed new environmental restrictions on those areas that will drive up the cost of development, according to Christopher Mansour, vice president of federal affairs for the Solar Energy Industries Association.

    "The BLM has chosen to greatly restrict the where we develop, and also restricted the how we can develop these projects," Mansour said.

    The BLM said another 400,000 acres could be considered for renewable energy development.
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    ExxonMobil and US uni to research solar and battery tech

    ExxonMobil has joined forces with a US university to work on solar energy and battery technology projects.

    The oil and gas firm and Princeton University will look into how new photovoltaic materials, particularly those polymeric in nature, can be applied in forms of coatings and building materials.

    Their second project will focus on battery technologies and will use diagnostic tools to study degradation pathways of electric vehicle batteries and how they might impact follow-on use in applications on the power grid.

    The two organisations will also research plasma physics, Arctic sea-ice modeling and the impact of Carbon Dioxide absorption on the world’s oceans.

    The news follows ExxonMobil’s announcement to invest $5 million (£3.75m) in the university’s energy programme in five years.

    Eric Herbolzheimer, Senior Scientific Advisor and Section Head of Engineering Physics at ExxonMobil Research and Engineering Company said: “Each of the five selected projects is a potential game-changer in terms of new energy development and better understanding of our natural environment.”
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    New solar glut could push solar module prices as low as 30c/watt

    The cost of solar PV modules is likely to fall dramatically in 2017, driven by a glut in the global manufacturing market that could deliver prices as low as $US0.30/Watt, according to a leading analyst at Bloomberg New Energy Finance.

    Speaking at this week’s Solar Power International conference in Las Vegas, BNEF’s head of Americas, Ethan Zindler. said the global solar module industry was headed for one of its worst supply gluts in history, and with no booming Chinese market to mop up the excess.

    “We are on the verge of a new era of substantial overcapacity,” Zindler said on Tuesday – a situation fuelled by a slowdown in China’s domestic solar market while many manufacturers continue to churn out panels.”

    BNEF is not the only analyst to suggest big falls. Deutsche Bank is also expecting a fall to around 40c/watt from current levels above 50c/watt. BNEF experts the same, but says there is a risk that the price could fall even further, to 30c/watt.

    That would be great news for the builders of solar plants, and for people putting solar on the roofs of their homes or businesses. It is less good for the health of manufacturers, although it could spark another round of manufacturing efficiencies. Some, though, may not survive.

    As many would keenly recall, the last downturn wound up contributing to the bankruptcy of dozens of PV manufacturers around the world, including major players like Germany’s Q Cells and China’s Suntech, both later acquired by other companies.

    And as ReCharge News notes, it was brought to an end when China’s own domestic solar market took off, sopping up most of the excess supply and delivering the world’s largest solar market by far, with China adding close to 20GW in the first half of 2016 alone.

    But with no such “solar sponge” waiting in the wings this time around, the fallout could be much worse… for manufacturers, that is.

    For PV installers and end users, however, the news is good, with cheaper modules likely to spur another wave of market growth around the world.

    For Australia, as RenewEconomy observed last month, the combination of the international market glut and local policy incentives could result in one of our biggest ever booms in large-scale solar construction over the next year.

    Locally, the situation in Australia is being enhanced by the continued high price of large-scale renewable energy certificates, the imminent results of a major solar tender by the Australian Renewable Energy Agency, and the growing appetite for solar investments by financiers and equity investors.

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    Danish watchdog asks audit office to investigate DONG Energy IPO

    A Danish political watchdog on Wednesday asked the national audit office to investigate the role of key parties involved in the share market flotation of offshore wind farm developer DONG Energy, including Goldman Sachs.

    DONG Energy's initial public offer (IPO) in June raised a gross 17 billion crowns ($2.6 billion) for the Danish state and a consortium of investors led by Goldman Sachs.

    The sale meant the Wall Street bank doubled an 8 billion- crown investment made just two and a half years earlier, fuelling criticism in Denmark that the previous government sold an 18 percent stake to the Goldman consortium too cheaply.

    The watchdog, the Public Accounts Committee, asked the audit office to investigate a wide range of issues related to the sale and subsequent IPO, including the role of the company's management and the finance ministry in the valuation and sale of shares.

    It also asked to look into DONG Energy's dividend payout to Goldman Sachs and the Danish state since the flotation as well as the share price since the IPO on June 9.

    Having built more than a quarter of the world's offshore wind farms, the company is a major operator in Britain and Germany.
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    New record for cheapest offshore wind farm

    The cost of building offshore wind farms has fallen to a new low, with Sweden's Vattenfall winning contracts to build two projects in Danish waters for just over €60 (£51) per megawatt-hour (MWh).

    That undercuts a previous record set by Denmark's Dong Energy, which in July won a contract for a project in the Netherlands at €72.70/MWh.

    Although the prices are not directly comparable with those awarded in the UK, because they exclude grid connection costs which can be up to €30/MWh, they are nevertheless substantially cheaper than the most recent UK deals, awarded early last year for about £120/MWh.

    Magnus Hall, Vattenfall chief executive, said the deals showed it was "able to reduce the costs of offshore wind faster than had been expected, only a few years ago".

    A turbine being installed last week at Burbo Bank Extension wind farm which has a price of £150/MWh CREDIT: MHI VESTAS

    The award was also seized upon by critics of the Hinkley Point nuclear plant - which has provisionally been offered £92.50/MWh for 35 years - as fresh evidence that the EDF-led project is too expensive.

    Doug Parr, chief scientist at Greenpeace, said: "We can expect more and more offshore wind bids to break records with falling prices in the coming years. This will make the price of electricity guaranteed for Hinkley look even more ill-advised."

    Despite the record-breaking low price of the new Vattenfall contracts, the Danish government has warned it could yet scrap the projects as it is concerned the subsidy bill is still too high.

    Plunging wholesale power prices in Denmark, as in the UK, have pushed up the subsidy required for fixed-price low carbon energy contracts.

    "By not erecting the [wind]mills, we can cut the large bill from the green transition," Lars Lilleholt, the Danish energy minister said on Monday.

    Vattenfall criticised the "very confusing message", telling Reutersit "creates a completely unnecessary uncertainty about what Denmark wants".

    Another factor helping lower the price for the new Danish sites is that they are only about 5 miles offshore, cutting the installation costs compared with some UK projects that are as far as 75 miles offshore.

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    NRG Energy wins auction for SunEdison wind and solar projects

    Houston-based NRG Energy Inc has won the auction for bankrupt renewable power plant developer SunEdison Inc 's wind and solar projects in Texas and other states with a $144 million bid, according to a court filing.

    The sale is one of several that SunEdison, once the fastest-growing U.S. renewable energy company, is holding since filing for Chapter 11 bankruptcy protection in April after an unsuccessful debt-backed acquisition drive.

    Judge Stuart Bernstein in Manhattan will hold a hearing to approve the NRG bid on Thursday, a court filing by SunEdison showed last week.
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    Novel Hybrid Solar PV-Geothermal Energy System Piloted in Sweden

    Research out of the SP Technical Research Institute of Sweden has provided proof of concept for a novel hybrid renewable energy system featuring combined hybridsolar PV and geothermal power.

    The new concept is based around a system integrating hybrid solar PV, ground-source heat pump (GSHP) and borehole thermal energy storage (BTES) technologies. The result is a system in which outputs of each technology are highly complementary to one another, and carry the potential to increase energy efficiency and cost effectiveness of individual components.

    “It’s one of the first demonstrations of hybrid solar combined with GSHP in Sweden,” Pernilla Gervind, one of the lead researchers on the project, told Renewable Energy World.

    A critical feature of the system is the role played by the hybrid solar PV. Unlike conventional solar PV, hybrid solar PV (sometimes referred to as hybrid solar photovoltaic/thermal (PV/T)) is a popular, well-established method for cooling PV cells. Hybrid solar PV modules consist of conventional PV cells with embedded systems containing some form of cooling agent, typically water or air, which is circulated through PV panels. The intention here is to reduce PV cell temperatures, as it is known that overheating — through either solar radiation or ambient temperatures — reduces PV cell efficiency significantly.

    The new system advances the hybrid solar PV concept by making use of the output water within a vertical loop GSHP system to which it flows.

    Pernilla explained: “Having passed through the PV panels, water is heated to around 10-degrees Celsius; it is then directed into the cold side GSHP system and used as heat source; if there is a surplus of heat, this is then directed down into boreholes. Here, the thermal energy of water is absorbed by the surrounding ground as a result of a temperature differential that arises from the ambient temperature of the ground being between 2 to 3 degrees Celsius. The now-cooled water is then cycled back up the system, and re-used in the cooling of PV panels in a closed-loop system.”

    Heating boreholes with direct heat is not new — it’s a process referred to as ‘recharging,’ and is a common method for increasing efficiency of heat pumps in response to temperatures surrounding boreholes declining over time, in part through absorption of thermal energy. Commonly, however, direct heat is generated through more conventional means, or through concentrated solar power (CSP). Using hybrid solar PV in this recharging context is unique.

    The system may be used for the purposes of seasonal storage of thermal energy, as Gervind explains: “In Sweden, seasonal temperatures vary greatly, providing options for how the system can be used accordingly. In the summer we can generate solar thermal energy, but it’s not required for anything — so we can use boreholes to store this excess energy for use during the winter when it is required.”

    The system stands to be especially useful in Sweden, where geothermal energy is dominated by low temperature, shallow systems featuring GSHPs used for space heating and domestic hot water heating. About 20 percent of the Swedish buildings use GSHPs, according to the International Geothermal Association.

    In the study, which was supported by the Swedish Energy Agency together with Energiförbättring Väst, the system was piloted through 2015 on the west coast of Sweden over 70 terraced houses.

    “Our focus was on evaluating the system, and ensuring it worked,” Jessica Benson, Gervind’s co-researcher, told Renewable Energy World. “On this level, we’re very confident in the potential of the system.”

    Monitoring system performance allowed the researchers to make mid-study adjustments. Benson explained an example of those adjustments: “In the original system design, solar heat was first directed down to the boreholes and then to the heat pumps. This was adjusted so that the heat is now first directed to the GSHP and only the surplus is directed to the boreholes.”

    The changes in directing the solar heating first to the GSHP, Benson said, increased the efficiency of the heat pumps due to the increased temperature of the heat source.

    Owing to relative success of the pilot, the researchers are looking towards future studies, as Benson explained: “We have already begun conducting a follow-up study to investigate key performance issues; for instance the effect of cooling on PV cell efficiency, and efficiency of GSHPs. There’s much work to do in studying the dynamics of heat transfer from boreholes to ground and how best to ensure added thermal is retained in a manner optimal for thermal storage solutions.”
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    Tidal energy project launches in Scotland

    Scotland’s First Minister Nicola Sturgeon today launched a 398 MW tidal stream energy project.

    The MeyGen scheme is owned by Atlantis Resources, backed by £23m of Scottish government investment, and located inScotland’s Pentland Firth.

    A fully assembled 1.5 MW Atlantis tidal power turbine with foundations was unveiled today at a ceremony is Nigg before being loaded onto a jack-up vessel and transported to the MeyGen for installation.

    In total, four turbines will be installed this month as part of the first 6 MW phase of the scheme and they will be the first of 269 turbines to be installed at the site.

    Sturgeon said she was “incredibly proud of Scotland’s role in leading the way in tackling climate change, and investment in marine renewables is a hugely important part of this”.

    “MeyGen is set to invigorate the marine renewables industry in Scotland and provide vital jobs for a skilled workforce, retaining valuable offshore expertise here in Scotland that would otherwise be lost overseas. Highly skilled operation and maintenance jobs will also need to be carried out locally, providing strong local employment opportunity for rural areas.”

    She said that “the eyes of the world are on this project, which is why the Scottish government’s investment is so crucially important”.

    And she added that “it is absolutely vital that the UK government honours its earlier commitment to provide a ring-fenced allocation for marine energy in its renewables support scheme. They must tackle the current uncertainty that exists before they cause irreparable damage to the long term prospects for the sector.”

    Atlantis Resources chief executive Tim Cornelius said: “Today marks a historic milestone not just for Atlantis and our project partners, but for the entire global tidal power industry. This is the day the tidal power industry announced itself as the most exciting new asset class of renewable, sustainable generation in the UK’s future energy mix.”
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    Coal India lines up capex for thermal and solar power generation

    CoalIndia Limited (CIL) has committed $758-million in the current financial year for its foray into thermal and solar power generationprojects.

    According to preliminary plans, CIL’s entry into thermal andgreen energy is likely to include two 800 MW coal-basedpower plant in the eastern Indian province of Odisha and anaggregate 600 MW of solar projects spread across four provinces. The company plans to extend its power generation capacity by another 1 000 MW in the second phase of its investment plans.

    However, no clarity is available on whether CIL’s venture intopower generation is linked to falling demand for coal, which is the primary business of the mining behemoth.

    The thermal power project will be implemented through super-critical technology and linked to coal feedstock from CIL’s Mahanadi coalfields in Odisha, a company official says.

    Last month, CIL’s coal production was recorded at 32.4-million tons, down 10.4% year-on-year, while the target for September has been set at 40-million tons. During April to August, coal offtake was recorded at 211.38-million tons, a growth rate of a mere 0.2% year-on-year. Pithead stocks were estimated at around 40-million tons as offtake by thermalpower plants across the country slowed down.

    Government data shows that the country’s thermal powerplants are operating at an average plant load factor (PLF) of 59.28%. CIL estimates that coal offtake will improve the average PLF to levels of above 70%.

    Nonetheless CIL officials are cagey in linking the downturn incoal demand to its foray into energy generation projects, underlining that the miner’s plans to achieve a one-billioncoal production target by 2020 are well on track, and categorically denying recent media reports suggesting that the target was diluted owing to the surplus coal availability in the country.

    CIL’s green energy projects will involve setting up floatingsolar panels on water bodies. The miner has numerous waterbodies, which formed after mines closed down. While the miner is equipped to set up floating solar panels on shallowwater, it is developing in-house technology to put up solarpanels on deep water.

    However, CIL is not the only coal miner venturing into green energy. NLC (formerly Neyveli Lignite Corporation) has drawn up plans to implement aggregate solar powergeneration capacity of  4 000 MW and last month kick-started it by starting a 65 MW solar power plant.
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    Spruce Introduces Residential Solar Loan, Simplifies Solar Sales Process

    Solar Power International, Spruce Finance Inc. is making residential solar finance sales easier than ever by adding a new solar loan to its existing power purchase agreement (PPA) and lease product suite. (The term “loan” includes both traditional loans and retail installment contracts, or RICs, which are available in different geographies.) The loan and PPA are available on Spruce’s new platform, SpruceFlow™, which uniquely allows solar companies to offer homeowners multiple products from a single finance provider, on a single platform, with a single credit check.

    “Sales reps need to have the right product for the right customer, and they need a sales process that’s fast and easy-to-understand,” said Nat Kreamer, CEO of Spruce. “Offering homeowners both a loan and a PPA at the point of sale with a single credit check helps our partners reduce their acquisition costs and close more deals.”

    Spruce’s solar loan is both simple and flexible. It is available for a variety of homes, including townhomes, condos and duplexes, as well as for ground mounts. Sales reps can highlight either lifetime or immediate savings; tailor the product to homeowner preferences with a variety of tenor, APR and payment terms; and close the sale quickly with instant credit and e-signature options. The loan will be available in 25 states in October.

    “Our position as financier allows us to control the terms of our products and make them attractive to both solar companies and homeowners,” said Kreamer. “Spruce is a licensed consumer lender in 50 states and Washington, DC: that and our consistent access to low-cost capital makes us an ideal finance partner for solar companies across the U.S.”

    The SpruceFlow platform makes the sales process more efficient and improves salesforce productivity. Sales reps can prescreen prospects before the sale to improve conversion rates. In addition to qualifying homeowners for multiple products with a single credit check, sales reps can also toggle between products at the point of sale, allowing homeowners to compare their options. The platform intuitively guides the process, and is optimized for mobile and tablet during in-home sales.

    About Spruce

    Spruce™ is a technology-enabled provider of consumer financing for residential solar and home efficiency improvements. Its mission is to empower people to improve their environments. The company’s national network of verified channel and contractor partners offer homeowners Spruce financing for technologies that can help them reduce their total utility spend on power, water, and heating and cooling. A private company headquartered in San Francisco, Spruce has raised more than $2B and serves more than 50,000 homeowners in all 50 states and Washington, DC. To learn more about the company, visit
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    Bids received for SQM stake worth up to $2.5bn – reports

    The sale of a stake in Chile'sSQM, one of the world's biggest lithium and iodine suppliers, has attracted widely differing offers, with the highest worth up to $2.5-billion, local media reported Friday.

    An indirect stake in SQM has been for sale since December, when holding company Oro Blanco invited buyers to make an offer for its entire 88% interest in Pampa Calichera.

    Pampa Calichera in turn owns about 23% of SQM, a major producer of lithium, potash and fertiliser chemicals.

    On Thursday, Chinese lithium producer Tianqi said in a statement that it had submitted a non-binding offer for the entire Pampa Calichera stake, without saying how much it had offered.

    Chinese battery material company Ningbo Shanshan had also been mulling a bid but said recently that the transaction was too "complex and uncertain."

    Newspaper La Tercera said Oro Blanco, which had a board meeting Thursday to consider the offers, had received two bids from unidentified Chinese companies worth between $2-billion and $2.5-billion.

    Separately, newspaper Diario Financiero, citing unnamed sources with knowledge of the process, said that one bidder had offered $35 per share, which would value the stake at around $1.8-billion. But this offer would be dependent onSQM resolving a dispute with the state over royalty payments, it said.

    Another bid was worth a much lower $22 per share, without such a condition attached, it said, adding that a third offer had also been received.

    The bidding process was ongoing, a source with knowledge of the process told Reuters on Friday, without saying how many offers had been received or their value.

    "There is no fixed timetable," the source said. "A prudent time will be taken to analyse closely each one of the bids ... that could be a couple of months, more or less."

    Others that have been linked to SQM include Canada's Potash Corp, which already owns a 32% stake. Israel's ICL had previously expressed interest but ruled itself out this week.
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    U.S. utility solar enjoys building boom in second quarter but residential slows

    U.S. utility solar enjoys building boom in second quarter but residential slows

    Solar panels are shown on top of a Multifamily Affordable Solar Housing-funded (MASH) housing complex in National City, California, U.S. on November 19, 2015. REUTERS/Mike Blake/File Photo

    U.S. solar installations rose 43 percent in the second quarter, according to a new report, as sharp gains in large projects for utilities offset slowing growth in residential systems in top solar market California.

    The United States installed 2,051 megawatts of photovoltaic solar in the second quarter, according to a report by research firm GTM Research and the Solar Energy Industries Association trade group. Systems for utilities made up 53 percent of the market in the first half of this year thanks to sharply lower system prices that are competitive with fossil fuels and state mandates to source more electricity from renewable sources.

    A federal tax credit worth 30 percent of the cost of a solar system has also underpinned the utility market's growth. The credit had been expected to expire at the end of this year, leading to a building boom in 2016. The credit, however, was extended by Congress for five years at the end of last year.

    That means 5.7 gigawatts of projects that had been expected to come on line this year will spill over into 2017, the report said. Nearly 8 GW are expected to come online later this year.

    Meanwhile, residential solar had its largest quarter ever, installing 650 MW. But growth slowed to 29 percent over the same period last year, a significant drop from the more than 50 percent growth rates the sector has enjoyed annually since 2012.

    In California, growth slowed to 19 percent. Throughout 2015, that market had grown more than 50 percent every quarter.

    "Fewer early mover customers remain, and this challenge is limiting growth, especially in California," the report said. California "will provide the rest of the U.S. with an important precedent for how rooftop solar can continue to scale in a more mature market."

    Strength in newer state markets like Utah and Texas helped boost the residential market.

    Overall solar system pricing fell by up to 7.5 percent during the quarter, but increased competition for customers in the residential market drove up the cost of winning new customers during the quarter. Those costs could continue to rise next quarter, the report said.

    The cost of a utility-scale system ranged from $1.17 per watt to $1.30 per watt during the quarter, compared with $3.14 per watt for a residential system. About 65 percent of the cost of a residential system comes from labor, customer acquisition and other non-hardware costs.

    Attached Files
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    Hinkley point goes ahead on...2012 assumptions

    Image title
    This wasn’t an entirely unreasonable proposition in 2006. I believed it myself – then. But by 2012 it was becoming doubtful, but not doubtful enough for DECC who predicted fuel prices based on low, central and high: “scenarios”.  Scenarios are narratives, in short a story.  Scenarios are also predictions, guesses, or bets, but it sounds so much better if the experts, who charge money for them after all, wrap them up as scenarios.

    Attached Files
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    Korea's KEPCO in talks with Toshiba, Engie to buy stake in NuGen -source

    South Korean power utility Kepco in talks with Japan's Toshiba and France's Engie about buying a stake in the Toshiba-Engie British nuclear joint venture NuGen, a source familiar with the situation told Reuters on Monday. The source did not specify whether KEPCO would buy a part or all of the stakes of Toshiba or Engie. Both companies are looking for partners to reduce their share in the capital-intensive project. The NuGen consortium is competing with French power utility EDF's 18 billion pound Hinkley C project in Somerset, southwest England, which is no longer certain to go ahead since the intervention of the UK's new prime minister Theresa May. The Financial Times on Monday reported that Korea Electric Power Corporation (KEPCO) had resumed talks about joining NuGen after negotiations stalled three years ago and is mulling taking an equity stake and a role in constructing the new nuclear plant near Sellafield, northwest England.
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    Farmers must have choice post Bayer-Monsanto merger - EU's Vestager

    European Union anti-trust chief Margrethe Vestager said on Thursday that farmers must continue to have a choice when buying seeds and pesticides after the merger between Bayer and Monsanto.

    The German drug and crop chemical maker on Wednesday clinched a $66 billion takeover of U.S. seeds company Monsanto.

    Vestager added that the agriculture market was already very concentrated with a small number of global players dominating the industry.
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    Monetary Lunacy: The ECB Could End Up Funding Bayer's Purchase Of Monsanto

    One month ago, we were surprised to report that the junk bond issued by French telecom company Numericable would, after its 100%+ upsizing, become the largest high yield bond on record. As we explained this was a direct consequence of the unprecedented intervention by the ECB in the European bond market unveiled one month prior, which courtesy of Mario Draghi's backstop to all non-financial corporate bond issuance, had made a virtual certainty that the European bond corporate market was the next bubble as there was effectively no longer any risk in holding not only investment grade, but also junk paper, now that starved for yield investors would flood into anything that carried even a modest yield premium.

    Today we find an even more striking example of just how broken the global bond market has become thanks to the ECB because as Reuters writes, Bayer could receive financing from none other than the European Central Bank to help fund its takeover of the world's largest seed company, US-based Monsanto, according to the terms of the ECB's bond-buying program.

    As reported yesterday, Monsanto turned down Bayer's $62 billion bid on Tuesday, but said it was open to further negotiations. Bayer, which many were surprised by its eagerness to pursue a quasi-hostile offer, promptly agreed to get more actively involved in the negotiation process. Now we know why: the cost of debt would be funded by none other than the European Central Bank.

    As we documented back in March when describing the terms of the ECB's CSPP, or corporate bond buying program, the ECB can buy bonds issued by companies that are based in the euro area, have an investment-grade rating and are not banks, provided that they are denominated in euros and meet certain technical requirements. The purpose for which the bonds are issued is not among the criteria set by the ECB, which will start buying corporate bonds on the market and directly from issuers next month.

    It now appears the "use of funds" may be M&A, and even LBOs.
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    ChemChina seals combination of Israel's Adama with Sanonda

    ChemChina is selling Israeli crop protection company Adama Agricultural Solutions to a firm it controls for $2.8 billion, paving the way for completing a previously announced combination of the two businesses and listing it on the stock market.

    China National Chemical Corp (ChemChina) [CNNCC.UL], as the state-owned firm is officially called, is selling Adama to Hubei Sanonda Co Ltd (000553.SZ) for about 18.6 billion yuan ($2.8 billion), Sanonda said.

    Israel's Discount Investment Corp (DISI.TA) agreed to sell a 40 percent stake in Adama to ChemChina in July for $1.4 billion including debt, paving the way for the two businesses to combine. ChemChina already owned 60 percent of Adama before the July deal.

    The deal, expected to be fully complete in the first half of 2017 and still subject to various approvals, values Adama at $5 billion including $1 billion in debt.

    It comes as China, the world's largest agricultural consumer, is looking to secure food supply for its population.

    The reverse merger allows Adama, which is 10 times Sandona's size, to be listed on the Shenzhen Stock Exchange and gain a foothold in China, where foreign firm can have a difficult time.

    Global companies have less than a 25 percent share of China's $5 billion agrochemical market, with Adama's share about 4 percent, Adama Chief Executive Chen Lichtenstein said.

    "This is our opportunity in the Chinese market," he told Reuters. "Over time, we should grow organically to more in the line of a double-digit market share five, six years out."

    That compares with 7 percent in Europe, 5 percent in Latin America and 4 percent in North America.

    "We feel we can grow in China faster than growth in the rest of the world," Lichtenstein said, noting all regions were growing.


    Although Adama is a generics firm its success largely stems from taking more than one off-patent ingredient and mixing two, three or four together and selling the mixture to farmers.

    Agrochemicals companies have been consolidating, partly due to falling commodities prices hitting farm incomes.

    ChemChina itself is finalizing a $43 billion takeover of Syngenta AG (SYNN.S), extending by almost two months a deadline for investors in the Swiss pesticides and seeds group to tender their shares.

    Sanonda, based in China's central Hubei province, is issuing 1.82 billion new shares to ChemChina at a price of 10.20 yuan each to pay for Adama.

    Sanonda also said it plans to raise up to 2.5 billion yuan in a private placement of 245.1 million shares at the same price to help fund Adama's production and expansion projects.

    ChemChina was already the biggest shareholder of Sanonda with a 31 percent stake through subsidiary China National Agrochemical Corporation (CNAC) and will own 75 percent after the two share sales, Sanonda said.

    Guotai Junan Securities acted as financial adviser to Sanonda.

    "The listed company aims to boost synergy and enhance overall profitability through a merger with Adama," Sanonda said in the filing.

    Shares of Sanonda, which trades on the Shenzhen stock exchange, have been halted since August 2015, when Adama and Sanonda first unveiled plans for a potential combination.

    Lichtenstein said Adama was building formulation and packaging and research and development facilities in China with the aim of selling within China and the rest of the world.
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    Agrium-Potash Corp Merger Terms Favour Agrium Shareholders

    Given our stand-alone company fair value estimates--$20 per share for Potash Corp and $96 per share for Agrium--the deal terms (52% ownership of the combined company by Potash Corp shareholders) favour Agrium shareholders, in our view. Excluding synergies and using the announced share exchange ratio, our Potash Corp fair value estimate would fall about 10% and our Agrium fair value estimate would rise by a similar percentage. This is a function of our belief that PotashCorp is more undervalued than Agrium. Including our estimate of cost synergies, our Potash Corp fair value estimate remains $20 (CAD 26) and our Agrium fair value estimate jumps to $114 (CAD 149). We don’t think the merger will affect fertilizer pricing much, and our long-term pricing assumptions are unchanged.

    We think management’s synergy target will prove optimistic. The company hopes to achieve an annual run rate of $500 million in operating synergies two years after the deal closes (expected in mid-2017). Although we think opportunities in selling, general, and administrative costs are ripe for cutting, procurement targets, for example, could be harder to achieve. In general, we think it’s best to take merger management synergy targets with a grain a salt, given that enthusiastic targets are difficult to verify ex-post. We include a run rate of roughly $350 million in annual cost cuts in our model.

    We think antitrust regulators will allow the deal to proceed, since fertilizer markets would remain competitive with Agrium controlling less than 3% of global potash capacity. We expect to award the combined company a narrow economic moat rating, based on cost advantages in potash for both PotashCorp and Agrium and Agrium’s solid cost position in nitrogen.

    As we expected, enthusiasm for this deal outside the effects on Potash Corp and Agrium, as exemplified by the positive moves in other fertilizer stocks following the disclosure of deal talks, has faded. In particular, Mosaic’s (MOS) shares, which jumped a surprising 9% when the Agrium-Potash merger rumours surfaced, are now trading below their pre-rumour price.

    We think the likelihood of higher potash prices directly related to the deal is limited as Agrium is a second-tier player in the global potash market. Agrium controls roughly 2 million metric tons of the 60 million metric ton market and already comarkets its potash sales outside North America with PotashCorp and Mosaic. Combining operations would give the merged company a bigger piece of the already concentrated market pie, but through their relationship in Canpotex, PotashCorp and Agrium already comarket potash sales outside North America, which accounts for more than one third of Agrium’s volume.

    Perhaps the North American market would be slightly less competitive, thus leading to higher pricing, but we think the opportunity for price hikes are very limited. Mosaic will still stand as a large North American competitor, and if prices in the region rise too quickly, Eastern European producers would be quick ramp up exports to North America, as they have done in the past to exploit regional pricing differentials.

    The combined company could decide to shut in more potash production to aid prices and tighten the market, but we doubt the shutdowns would be severe enough to catalyze a dramatic rebound in prices. Agrium just doesn’t control a large piece of the total potash market, and each ton shut down obviously means lower sales volume and a hit to profits.

    In phosphate and nitrogen, which are more fragmented markets, the possibility of more concentration leading to higher pricing is even more limited. In nitrogen, Agrium’s largest fertilizer business, the 10 largest nitrogen producers account for less 20% of global ammonia capacity. Compare this with the potash market, where the top 10 producers account for well over 90% of industry capacity. For these reasons, we think this deal could pass antitrust regulators without meaningful asset divestitures.
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    Bayer agrees to acquire Monsanto for $128 per share - source

    Bayer won over Monsanto's management with a $128 per share offer to take over the global seed market leader, a person familiar with the matter told Reuters on Wednesday.

    The companies have agreed on a break-up fee of $2 billion, the person said. The deal is expected to be closed by the end of 2017, the source said.
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    Potash Corp, Agrium to merge to create $36 billion company

    Canada's Agrium Inc and Potash Corp of Saskatchewan Inc said they would combine, a deal that would create a fertilizer and farm retailing giant with proforma enterprise value of $36 billion but also trigger U.S. regulatory scrutiny.

    Potash Corp, the world's biggest crop nutrient company by capacity and Agrium, North America's largest farm retailer, said the combined company will be largest crop nutrient company in the world and third largest natural resource company in Canada.

    The companies had said on Aug. 30 that they were in talks to merge. The merger will create a company dominant in North America, controlling nearly two-thirds of potash capacity, 30 percent of phosphate production capability and 29 percent of nitrogen capacity, National Bank analyst Greg Colman had said at the time.

    The deal would be the latest in a string of agriculture merger attempts, including potential combinations of seed giants Monsanto Co and Bayer AG, and ChemChina [CNNCC.UL] and Syngenta.

    Fertilizer companies have suffered lower profits as crop nutrient prices tumbled due to excessive supply and weak demand. Crop prices have also been hurt, with corn and wheat at seven-year and 10-year lows respectively, giving farmers less incentive to maximize production with fertilizer.

    Potash Corp shareholders will get 0.400 common shares of the combined company for each share they hold and Agrium shareholders will get 2.230 common shares for each share they own, the companies said on Monday.

    Potash Corp U.S.-listed shares were up slightly at $17.03 in light premarket trading. Agrium U.S.-listed shares, which closed at $95.21 on Friday, were untraded.

    Potash Corp shareholders will own about 52 percent of the new company, with Agrium shareholders owning the rest after the deal closes, which is in mid-2017.

    The combined company would have had 2015 net revenue of about $20.6 billion and earnings before interest, taxes, depreciation and amortization (EBITDA) of $4.7 billion before synergies, on a proforma basis, the companies said.

    The companies expect annual operating synergies of up to $500 million from the merger.

    Agrium Chief Executive Chuck Magro will lead the combined company. Potash Corp CEO Jochen Tilk will be its executive chairman.
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    EU regulators halt Dow, DuPont merger review to gather data

    EU antitrust regulators have halted their scrutiny of Dow Chemical Co and DuPont's proposed merger while the companies provide more information regarding their $130 billion deal.

    The European Commission opened a full investigation into the case in August, concerned that the deal to create the world's largest integrated crop protection and seeds company may reduce competition in these sectors as well as certain petrochemicals.

    "The Commission has stopped the clock in its in-depth investigation into the proposed merger between Dow and Dupont," a spokesman said.

    "This procedure in merger investigations is activated if the parties do not provide an important piece of information that the Commission has requested from them."

    The EU antitrust enforcer will set a new deadline for its investigation once it has received the required data. DuPont and Dow Chemicals, which aim to close the deal in early 2017, had previously offered concessions which regulators said were insufficient.

    The agrichemicals industry has seen a wave of consolidation in recent months. ChemChina may seek EU approval next week for its $43 billion takeover of Swiss pesticides and seeds group Syngenta, according to a person familiar with the matter.

    German pharmaceutical and crop chemicals manufacturer Bayer AG is also pursuing U.S. peer and world No. 1 seeds company Monsanto Co.
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    Precious Metals

    Barrick Gold Corporation: Temporary Suspension of Operations at Veladero Mine

    Barrick Gold Corporation today reported that the Government of San Juan province, Argentina has announced a temporary suspension of operations at the Veladero mine pending further inspections of the mine's heap leach area. The company will work with provincial authorities to confirm the integrity and safety of the heap leach facility as quickly as possible, beginning today.

    The safety of people and the environment remains Barrick's top priority at Veladero. On September 8, 2016 a pipe carrying process solution in the heap leach area was damaged when it was struck by a large block of ice that had rolled down the heap leach valley slope. A small quantity of solution left the leach pad as a result. No solution from this damaged pipe reached any water diversion channels or watercourses and the impacted area in the leach valley has now been remediated. The incident did not pose any threat to the health of employees, communities or the environment.

    Environmental monitoring of surface and sub-surface water has been intensified and no anomalies have been detected.

    At this time, we do not anticipate any material impact to Veladero's 2016 operating guidance.
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    Amplats output to be 100,000 oz lower as furnace leaks at Waterval

    ANGLO American Platinum (Amplats) said metal production for its 2016 financial year would be up to 100,000 platinum ounces lower than 2.3 to 2.4 million oz forecast following a furnace leak at its Waterval facilities which would require a R125m, three to four month rebuild.

    It was not possible to recover the production as the group’s other smelters were operating at full tilt, the company said in an announcement today. The affected facility, Waterval furnance number one, accounts for about 20% of Amplats’ smelting capacity, it said.

    “A preliminary assessment of the damage to the furnace has shown that a rebuild of the furnace should be brought forward as the most prudent means of mitigating future potential operational risks,” Amplats said.

    “While the extent of the damage to the furnace has yet to be fully quantified, early indications are that the rebuild, and associated production ramp-up, is likely to take approximately three to four months to complete,” it said.

    “As a result, platinum production for the 2016 financial year is expected to be impacted by between 70,000 and 100,000 platinum ounces,” it added.

    A leak of molten furnace matte was discovered at Waterval furnace number one’s hearth on September 10 which required staff to stop the unit. No-one was injured in the event.

    Amplats said there would be a build-up of concentrate stocks during the rebuild period which would be released as refined metal in the future.

    The cost of the furnace rebuild would take total capital expenditure for the year to reach the upper end of Amplats’ guided range of R4bn. It guided for between R3.5bn and R4bn.

    “The company’s mining and concentrating activities are unaffected, therefore not impacting the previously guided range of produced (metal in concentrate) of 2.3-2.4 million platinum ounces,” it said.

    “Shareholders and key stakeholders will be kept updated on the progress of the rebuilding of the furnace and associated impacts,” said Amplats.
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    Barrick Gold partners with Cisco in bid to boost productivity

    Barrick Gold Corp, the world's biggest gold producer, said on Monday it would partner with Cisco Systems to incorporate digital technology in all aspects of its mining business, aiming to improve productivity and reduce costs.

    Toronto-based Barrick said it planned to spend around $100 million between now and the end of 2017 working with Cisco to embed technology in various parts of its operations to deliver better, faster and safer mining.

    Mining sector players have long lamented the lack of technological innovation in the industry although some miners such as Dundee Precious Metals (DPM.TO) have started using wireless technology and software platforms to track underground operations in real time.

    "Barrick of three years ago is going to be very, very different indeed going forward," Barrick Chief Operating Officer Richard Williams said in an interview.

    "We think actually that all mining companies will have to do the same if they are going to remain in existence," he said.

    The technology project is the latest move by Barrick Chairman John Thornton to transform the miner into a profitable, low-cost producer after cost-blow outs, overpriced acquisitions and a weak gold price knocked 80 percent off its share price between 2010 and late-2015.

    Williams said the technology initiative will help Barrick meet its target of reducing its all-in sustaining costs to below $700 per ounce of gold by 2019.

    Barrick's Cortez gold mine in Nevada will be the first operation where it will roll out new technology. Early projects there include using technology to predict maintenance in its fleet of haul trucks to reduce down time, said Michelle Ash, Barrick's senior vice president of transformation and innovation.

    The company also plans to set up a central data repository where any Barrick employee can access any piece of data across any site.

    "At the moment it sometimes takes us weeks to compile as all our data is in silos and you have to access to that particular silo, and we have hundreds of them," Ash said in an interview.

    Barrick said the technological shift will help it reduce its environmental impact and allow it to be more transparent with indigenous communities, local governments and non-governmental organizations.
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    South African mining output falls sharply

    Statistics South Africa latest report revealed that during July, the country’s mining output contracted by 5.4% year-on-year, dragged down by:

    PGMs (-9,6% and contributing -2.0 percentage points)
    Manganese ore (-24.1% and contributing -1.7 percentage points)
    'Other' non-metallic minerals (-27.5% and contributing -1.1 percentage points)

    In detail, seasonally adjusted mining production decreased by 2.4% in July 2016 compared with June 2016. This followed month-on-month changes of 1.0% in June 2016 and 3.1% in May 2016.

    One of the reasons driving the downtrend is a labour dispute between the Association of Mineworkers and Construction Union and platinum miners, which is expected to move towards a strike action in the coming weeks. “This could potentially have a material impact on production and, in turn, prices,” say analysts at Capital Economics.

    However, seasonally adjusted mining production increased by 4.2% in the three months that ended July 2016 compared with the previous three months. PGMs (3.2%) and iron ore (1.1%) were the largest positive contributors.

    Sales, on the other hand, showed positive numbers with a 15.6% year-on-year increase in June 2016. PMGs (35.6%), gold (20.3%), ‘other’ non-metallic minerals (49.5%), and manganese ore (90.9%) were responsible for the rise.

    Nevertheless, seasonally adjusted mineral sales decreased by 6.8% in June 2016 compared with May 2016. This followed month-on-month changes of 20% in May 2016 and 1.8% in April 2016.
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    Base Metals

    Ravensthorpe could be expanded - EPA

    Members of the public would have until September 20 to comment on Canadian firm First Quantum’s plans to expand its Ravensthorpe operations, in Western Australia.

    The Western Australian Environmental Protection Authority this week released documents in which First Quantum applied to expand its operations by mining the Hale-Bopp and Shoemaker-Levy orebodies.

    First Quantum has also applied for a revision of the alignment of the infrastructure corridor between the Shoemaker-Levy orebody and the processing area.

    Mining operations in the propsed Hale-Bopp openpit would use the same processes as the existing operations, and ore from the pit would be transported via an existing access road to the same processing facility.

    The revised corridor between the Shoemaker-Levy orebody would be used to transport ore from this mine initially via road, and then later by conveyor, to the existing ore processing site.

    Furthermore, First Quantum was also hoping to incorporate neutralized tailings to the reject rocks used to backfill the mine pits and re-establish hill topographies.

    The expansion would mean the clearing of up to 113 ha of land within a 252 ha development envelope.

    The current Ravensthorpe operation includes a 38 000 t/y nickel plant and the project had a mine life of some 30 years.
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    Lundin gets second bid extension on Freeport Congo mine stake

    Canadian base metals miner Lundin Mining Corp has won a two week extension until Sept. 29 to bid on Freeport-McMoRan Inc's stake in the Tenke Fungurume copper and cobalt mine, Lundin said in a statement on Thursday.

    Lundin, previously granted an extension to Sept. 15, said it continues to review, with legal and financial advisors, its ownership in the Democratic Republic of Congo mine, one of the world's largest copper deposits.

    The Toronto-based company would not comment on why it needs more time, but director of business valuations and investor relations Mark Turner repeated that Lundin has credible interest from multiple parties on a number of scenarios.

    Lundin, which primarily produces copper, nickel and zinc, has a 24 percent share of Tenke, while Freeport holds 56 percent and Congo's state miner Gecamines has the remaining 20 percent.

    Phoenix-based Freeport, which has been selling assets to cut its large debt load, agreed in May to sell its Tenke stake to China Molybdenum (CMOC) for $2.65 billion.

    Under a 'right of first offer', Lundin can supplant any bids for the mine by matching them. It can also decide to sell its stake or do nothing and allow the China Moly deal to proceed.

    Lundin, which has hired Bank of Montreal to help it consider options, told Reuters in June that it was weighing interest from multiple parties.

    RBC analyst Fraser Phillips said Lundin is most likely to maintain its 24-percent interest, with China Moly operating the mine. The next likely scenario is that Lundin sells its stake, but with a lower valuation than Freeport, which held a controlling interest, he wrote in a note to clients on Thursday.

    The transaction size makes a counter-bid unlikely, some analysts say. Lundin, whose shares rose 2 percent to C$5.08 on the Toronto Stock Exchange on Thursday morning, has a market capitalization of about C$3.59 billion ($2.72 billion).
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    Philippines delays release of mining audit outcome

    The Philippine government will release the results of a review of the operations of the country's 40 metallic mines on Sept. 22 instead of this week, the mining minister said on Thursday.

    The world's top nickel ore supplier has so far suspended operations of 10 mines, eight of them nickel, for violating environmental rules, and the government has said more mines will be halted.

    Environment and Natural Resources Secretary Regina Lopez, a committed environmentalist who opposes open-pit mining, said the delay was due to scheduling issues, while the operators of additional mines to be suspended had yet to be informed.

    "We are doing three days of show cause, then we suspend," Lopez told Reuters in a text message.

    The crackdown is aimed at enforcing stricter environmental protection measures, with tough-talking President Rodrigo Duterte warning in August that the nation could survive without a mining industry.

    Miners have labelled the review a "demolition campaign", and questioned the inclusion of anti-mining activists in the audit teams which completed their inspections at the end of August.
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    Japanese Q4 aluminium agreed at $75/mt plus LME CIF, for over 5,000 mt

    Several Japanese buyers and producers have agreed to set the premiums for aluminium imports into Japan in the fourth quarter at $75/mt plus London Metal Exchange cash CIF Japan, for over 5,000 mt in total, sources said Wednesday.

    Five deals were reported done between two Japanese buyers and several producers.

    Three deals were for volumes of 1,000 mt/month or greater, for ingot of P1020/P1020A specification with 99.7% minimum aluminium content.

    Two Japanese traders have said they have rejected Q4 offers at $75/mt plus LME cash CIF Japan. One said he was seeking to buy below $70/mt plus LME cash CIF Japan.

    The 5,000 mt settlement is only a fraction of the around 50,000 mt/month of ingot Japanese traders and consumers buy from Rio Tinto Japan, Rusal and three other producers currently in negotiation.

    Nine or more Japanese buyers are believed to be continuing talks with those five producers.

    Japan imported a total 115,000 mt/month of aluminium ingot in the first half of 2016 from 22 countries, customs data showed.
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    Ahead of more suspensions, Philippine miners question review process

    Philippine miners facing more mine suspensions under anenvironmental review backed by President Rodrigo Duterte have stepped up their criticism of the process, questioning the inclusion of anti-mining activists in the review teams.

    The world's top nickel ore supplier has halted operations of 10 mines, eight of them nickel, for environmental infractions, and the government has said more suspensions will be announced this week.

    The crackdown is aimed at enforcing stricter environmental protection measures, with Duterte warning the nation could survive without a mining industry. But miners have labelled the review a "demolition campaign".

    The Chamber of Mines of the Philippines, which groups 21 of the country's 40 metallic miners, said it had "trouble appreciating" the inclusion in mine audit teams of groups such as Alyansa Tigil Mina (ATM), which translates to Alliance To Stop Mining.

    "Why are they part of the audit team when they can hardly be expected to be impartial?" said chamber spokesman Ronald Recidoro.

    "Our members are fairly confident that they have complied with the technical and legal requirements."

    ATM groups non-governmental organisations, church groups and academic institutions working to protect Filipino communities and natural resources threatened by large-scale mining operations, according to its website.

    The mining industry has powerful opponents in the Phillipines, led by the influential Catholic Church, following past environment disasters and the displacement of local communities.


    Environment and Natural Resources Secretary Regina Lopez, who has said openpit mining is madness, said she had committed to involving civic groups in the audit teams along with government experts."Miners need to upgrade their operations so that people don't suffer," Lopez told Reuters, adding that issues such as silt build-up on rivers, fishponds and rice fields around mining sites were "unacceptable."

    "The problem is that mining here has not followed rules."

    ATM's partners in local communities took part in the audit across the country, said Jonal Javier, advocacy officer for the organisation. They told the audit team what to look into and submitted the public's complaints against mines, he said.

    The suspension of nickel mines in the Philippines and the risk of more closures lifted global nickel prices last month to a one-year high above $11 000 a tonne, although the metal has since eased to just above $10 000 a tonne.

    Nickel is used to make stainless steel.

    The chamber's Recidoro said four of its members had been affected and the operations of all four remained suspended despite having addressed environmental violations.

    "How long is this suspension? Because an indefinite suspension is tantamount to a cancellation," he said.

    The Philippines' top gold mine, run by Australia's OceanaGold's, expects a positive outcome from the audit, CEO Mick Wilkes told Reuters in an email.
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    Norilsk's 1942 nickel plant gone but far from forgotten

    Norilsk Nickel, or Nornik as it has just rebranded itself, has just completed the decommissioning of the nickel refining plant in its far-flung Polar operations in the Arctic north of Siberia.

    It was known as the 1942 Plant because that's when it was first commissioned and it has been operating ever since.

    The closure is part of a radical overhaul of the company's nickel operations, with refining operations being refocused on the metallurgical complex on the Kola Peninsula in the west of Russia and the Harjavalta refining complex in Finland.

    It is decidedly good news for the inhabitants of the city of Norilsk itself.

    Located with Soviet practicality within the residential confines of the city, the plant emitted 380,000 tonnes of sulphur dioxide every year, representing around 25 percent of total sulphur emissions in the city.

    Its removal marks a major leap forward in Nornik's programme of improving its environmental record, back in the news with reports of rivers turning the colour of blood due to metallic contamination.

    But the removal of this legacy plant leaves an interesting legacy for the global trade in nickel, much of which is predicated on stocks of "Norilsk Combine H-1" and "Norilsk Combine H1-Y", the two brands produced by the 1942 Plant.


    The 1942 Plant was a monster, producing around 120,000 tonnes per year of refined nickel.

    That's twice as much as either BHP Billiton's Nickel West complex in Australia or Vale's Sudbury operations in Canada.

    Based on International Nickel Study Group figures, it accounted for just over six percent of global refined nickel production in 2014, the last year of full operations before the winding-down process started.

    But its significance in terms of global nickel trading was more than just about its huge output.

    It was a major source of full-plate nickel cathode. This form of the alloying metal is not particularly favoured by industrial users because most have to cut it into more manageable size before transforming it into an intermediate product.

    In the years following the demise of the Soviet Union and the subsequent flow of Norilsk material into the Western market-place, Russian full-plate cathode therefore became one of the most traded and stored forms of nickel.

    It represents much of the nickel market's global inventory as well as acting as the stocks bedrock of the London Metal Exchange's (LME) nickel contract and, more recently, of the Shanghai Future Exchange's (ShFE) contract.

    Its closure won't affect Nornik's own production profile. The company will simply redirect raw material flows through its other refining operations.

    But it does pose a headache for the two exchanges and nickel traders.


    That's because it's normal practice for the LME to delist specific brands of metal if the source plant ceases production.

    That's a problem when those brands constitute a significant part of the exchange's own registered stocks.

    Norilsk metal, and specifically Norilsk full-plate cathode, has historically accounted for much of the LME's stocks base.

    For example, at the end of March 2015, the close of the exchange's warehousing year, over half of LME stocks were classified as originating from Eastern Europe or the former Soviet Union.

    The LME doesn't specify tonnages by specific brand, so it's possible that some of that total came from Nornik's Kola operations but it's certain that there was a lot of metal from the 1942 Plant there as well.

    But the ramifications of an LME listing, or possible de-listing, extend much wider than simply what is already in the exchange's warehousing system.

    An LME listing confers a special status on otherwise generic metal. The ability to deliver a registered brand into exchange warehouses provides a comfort zone for traders, stockists and the banks that finance the physical trade in metal.

    Which is why the exchange has held fire on its normal 90-day delisting rule for legacy brands "due to the significant off-warrant stocks of these brands, and in particular the size of such stocks in comparison to total warranted nickel stocks."

    The LME, it added in a notice to members dated Aug. 26, 2016, "will continue to keep this situation under review, and intends eventually to proceed to delisting when it considers this may be achieved in an orderly manner."

    Don't necessarily hold your breath.
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    Nonferrous industry body refutes claim that Chinese company is evading US tariffs

    The China Nonferrous Metals Industry Association (CNMIA) said on Monday that foreign media accusations that a Chinese company is using transshipping, a method of evading US tariffs, by routing aluminum through Mexico to disguise its origins "seriously deviated from reality."

    The CNMIA rebutted the transshipping claims raised on Friday by the Wall Street Journal. The US-based newspaper said China Zhongwang Holdings, the world's second-largest producer of aluminum extrusions, had stored nearly 1 million metric tons of aluminum worth some $2 billion in a Mexican town, with intentions of shipping it to the US to avoid tariffs on Chinese exports.

    China Zhongwang said in a statement sent to the Global Times on Monday that the company has no manufacturing base in any foreign countries, and that the company always abides by all international trade regulations and relevant government laws on exports.

    Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, said judging from what has been disclosed by overseas media on the matter, the evidence is not strong enough to prove that the transshipping practice really exists.

    "First, overseas reports about the aluminum in Mexico and its origin are not clear enough. Second, overseas media organizations haven't got sufficient proof that the stockpile is used for transshipping instead of for other purposes, such as for sale in Mexico," Bai told the Global Times on Monday.??

    Xu Ruoxu, an analyst from Shenwan Hongyuan Securities, said Chinese companies might export virgin aluminum to Mexico, process it into aluminum ingots, and then ship the latter to the US, because the US charges a high tax on direct exports of aluminum ingots from China.

    But according to the CNMIA, the Chinese government levies a 15 percent tax on all virgin aluminum exports, and therefore Chinese companies can hardly make any profits from virgin aluminum exports.

    It also noted that if China transships virgin aluminum to the US via Mexico, the products can't obtain a legal certificate of origin from Mexico, and the importer will still need to pay duties levied by the US.

    The CNMIA also noted that if the "discovered" aluminum stockpile is composed of processed aluminum products imported from China, it doesn't violate export laws in China or import laws in Mexico.
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    Los Bronces miners down tools

    Miners at one of Chile's largest copper operations walked off the job on Friday morning after rejecting the majority-owner's final offer in collective wage talks.

    Over 1,700 workers at Anglo American's (LON:AAL) Los Bronces copper mine stopped work, after the union and the company failed to reach agreement despite a government-sponsored mediation process during contract negotiations. Anglo had reportedly offered workers a bonus of around $13,000 plus other benefits.

    "The company regrets the rejection of an offer that it considers fair and responsible in the context of the current conditions of the mining industry in general and Los Bronces in particular," the London-listed mining major said in a statement.

    Los Bronces is 50.1 percent owned by Anglo American; Chilean state miner Codelco and Japanese trading houses Mitsui & Co. and Mitsubishi Corp. also have stakes in the Anglo American Sur complex. Anglo's flagship mine is located high in the Andes mountains near Santiago. In 2015 it produced 437,800 tonnes of copper, or about 8 percent of the total output of Chile, the world's top copper producer, according to Reuters.

    Los Bronces workers also went on strike in November 2014, but the issue at the time was working conditions.

    Los Bronces is the second Chilean copper mine to be hit by labour unrest in recent days. Workers at Codelco's Salvador mine are also on strike, having failed to reach a wage agreement with their employer.

    Salvador, which is the state-owned firm’s smallest operation and produced 49,000 tonnes of copper last year, has been battling to turn a profit after dwindling ore grades pushed up production costs, affecting a plan to extend the mine's life.

    In August last year, the mine was hit by an around three-week strike by a different group of contract workers, which cost Codelco more than $15 million in lost production and damaged equipment.
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    Main border crossing for Congo copper exports closed as riots kill three

    Three people were killed in riots on Friday near a border crossing between Democratic Republic of Congo and Zambia that serves as the main export route for Congolese copper, Congo's government said.

    Authorities in both countries closed the border in response, Christabel Mulala, the mayor of the Zambian border town of Chililabombwe, told Reuters.

    Clashes between young protesters and police broke out in the Congolese town of Kasumbalesa after a money changer was killed overnight, Congo's government spokesman Lambert Mende told Reuters.

    It was not immediately clear who the three people killed on Friday were, or how they were killed.

    "The demonstrators accuse the police of being indolent," Mende said.

    Eric Monga, the local president of Congo's chamber of commerce, said trucks were being held 10 km (6 miles) away from the Congolese side of the border after rioters burned vehicles and administrative buildings.

    Congo, Africa's leading copper producer, mined nearly 1 million tonnes of the metal last year. Nearly all of the country's copper exports pass through the Kasumbalesa crossing.
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    Nevsun completes switch to zinc

    Nevsun Resources announced on Friday that it has sold and shipped the first zinc concentrate product from its Bisha mine in Eritrea.

    The ten thousand tonne lot was loaded at the Port of Massawa and sailed on September 7, 2016. The concentrate was sold on the spot market, attracting multiple offers and highly competitive treatment charges, the company said in a statement.

    Nevsun owns 60% (the Eritrean government owns the rest) of the $250 million Bisha mine which started operations as a gold-silver producer in 2010. Three years later Bisha underwent a $110 million expansion to switch to copper concentrate production from supergene ore.

    This year the company pivoted again to expand flotation capacity to produce zinc concentrate. Zinc is the best-performing metal in 2016 rising more than 44% in price since the start of the year. Measured from its six-year low struck in mid-January, the price of the metal mainly used to galvanize steel is up 58% to trade around $2,230 a tonne or $1.05 per pound.

    Cliff Davis, Nevsun CEO commented, “We are pleased to have a high quality zinc product coming to market in an environment of rising zinc prices. Bisha is the only significant new zinc concentrate coming to market in 2016 and we are being aggressively courted for offtake by various customers. We would like to congratulate our partner, the State of Eritrea, for adding another export product to the economy and thank them for their support.”

    Nevsun is scheduled to load additional shipments in the coming weeks and is ramping up to commercial production which is forecast for the fourth quarter this year, the company said.

    Life of mine payable metals at Bisha is put at 470m pounds of copper, 1.7 billion pounds of zinc, 240,000 ounces of gold and 8.2 million ounces of silver.

    Nevsun completed a takeover of Reservoir Minerals in June in a $440 million cash and shares deal. The agreement provided the companies 100% ownership in the upper zone of the Timok Copper Project in Serbia, which had previously been owned by Reservoir and Freeport McMoRan. Nevsun shareholders own two-thirds of the combined company.
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    Steel, Iron Ore and Coal

    Vale: Fortescue blending JV talks stall

     Talks between iron ore giants Vale and Fortescue on establishing joint blending and distribution facilities in China for their product ranges have been delayed, with Vale ferrous minerals division chief Peter Poppinga telling Bloomberg that nothing would happen in 2016.

    Fortescue said negotiations on the JV plan were continuing, and it remained hopeful of concluding an agreement in months.
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    Iron-ore hits the skids as miners, banks wrangle over supply

    After a stellar run in 2016, iron-ore has hit a rough patch. The prospect of a slump below $50 a metric ton is now back in view after the longest losing streak in more than five months as investors, analysts and miners spar over the impact of additional low-cost supply.

    The raw material with 62% content delivered to Qingdao lost 5.8% in the past seven sessions to $55.97 a dry ton, according to Metal Bulletin. That’s the longest run of daily declines since March, and has pegged back this year’s gain to 28% from as much as 62% in April.

    Iron-ore has retreated in September, rekindling speculation that rising supply from mine ramp-ups and new projects may soon drag prices lower. While miners Vale and Cliffs Natural Resources contend that the impact of the new output won’t be severe as expected and see the $50 level holding, Citigroup and Westpac Banking have said that additional production will probably contribute to weaker prices.

    “Prices appear to be responding to the potential for increased supply as we move into the fourth quarter,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “The risk looks to be to the downside now. It’s certainly possible we could see prices below $50 from here.”


    SGX AsiaClear futures in Singapore have dropped for the past five weeks in the longest run since 2014, and the forward curve shows prices back below $50 in December. Financial markets in China, including iron-ore futures in Dalian, are shut for the rest of this week for the Mid-Autumn Festival holiday.

    New supplies are coming from Australian billionaire Gina Rinehart’s Roy Hill mine in the Pilbara, as well as Vale’s giant S11D project, which is expected to ship its inaugural cargoes in January. Roy Hill Holdings CEO Barry Fitzgerald said on Wednesday that it’ll reach full capacity of 55-million tons only in early 2017 instead of late this year.

    Vale said Tuesday that while S11D has capacity to produce 90-million tons a year, constraints mean the net gain will be 75-million tons. It will take four years to reach full output, according to  Peter Poppinga, head of ferrous minerals, who expects the market to be balanced into 2017. Cliffs CEO Lourenco Goncalves has said S11D is a “replacement mine, not addition of more tons.”


    Others are more bearish. BHP Billiton says prices will probably drop as the underperformance of supply this year is reversed over the next 12 to 18 months. Westpac said last month rising supply will drive prices below last year’s nadir of $38.30, while Citigroup expects an average of $45 next year.

    Exports from the top two shippers will expand faster next year than China’s imports, according to the Australian government’s latest outlook. Australia and Brazil will probably ship a combined 1.3-billion tons, 6.5% more than this year, while China’s imports will climb 0.7% to 981-million tons.

    “Iron-ore is susceptible to price weakness because the fundamentals of the sector are not compelling,” said Gavin Wendt, founding director & senior resource analyst at MineLife in Sydney.

    “Supply remains abundant and the strength of Chinese demand remains questionable.”
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    China to support debt-to-equity transfers for steel, coal firms

    China will support asset management companies converting debt into equity stakes for steel and coal firms, and provide credit support to competitive companies with overcapacity issues, the country's top banking regulator said.

    Debt has emerged as one of China's biggest challenges, with the total load rising to 250 percent of gross domestic product (GDP) last year.

    The International Monetary Fund warned in June that China's high corporate debt ratio of 145 percent of GDP could erode economic growth if not addressed.

    In a bid to rejuvenate its economy, China is aiming to eliminate failing, debt-ridden firms, but it has also pledged to help "restructure" companies that are suffering severe operational challenges but remain basically competitive.

    Officials have insisted that the new debt-to-equity programme would not be used to prop up so-called "zombie enterprises", those that would not survive without life support from local banks and governments.

    Speaking at a meeting of Chinese banks, Shang Fulin, head of the China Banking Regulatory Commission, said such zombie firms which have long been loss making and are uncompetitive will be taken out of the market or restructured in an orderly way.

    Competitive firms which have a market and are in sectors hit by overcapacity will continue to get credit support, he added.

    Asset management companies will be supported, in accordance with legal and market principles, to convert debt to equity for steel and coal companies, Shang said.

    His comments were carried on the regulator's website late on Wednesday. There were no details on what kind of support that would involve.

    Shang also said banks have an important responsibility to society to prevent financial risk and need to step up their risk management abilities.

    Chinese banks are struggling with rising non-performing loans, exceeding two trillion yuan ($301 billion) and accounting for 2.15 percent of total bank lending as of the end of May, according to July comments by a official.

    Banks need to put risk management in a more prominent position and "prevent credit risk contagion from expanding", Shang said.

    Banks should drawn up lists of "zombie" firms and those affected by overcapacity, and strengthen stress tests and risk analysis on property loans, he added.
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    BHP-Vale Brazil mine said to weigh missing next bond coupon

    Samarco Mineracao is considering skipping bond coupon payments that are due as soon as this month as the stalled Brazilian iron-ore miner runs out of money, according to people with knowledge of the matter.

    Without knowing when it can restart mining, the venture owned by BHP Billiton and Vale is yet to engage in formal restructuring talks with bondholders, two of the people said, asking not to be named because the matter is private. As a result, there’s not enough time to reach a restructuring deal before the coupons are due, they said.

    Once the world’s second-largest producer of iron-ore pellets, Samarco also is seeking an agreement on about $1.6-billion in bank loans to postpone payments until it restarts mining, people with knowledge said last month. A bankruptcy protection filing is among options being considered, one of the people said.

    Evaluating the prospect of bankruptcy protection, Solitaire Aquila's Patrik Kauffman, who helps manage $11-billion in assets, said “it’s always difficult.”


    “For the moment they are not operating,” Kauffman said by phone from Zurich. “It would be much better to reach out to bondholders and offer them something, and have a proactive discussion with them.”

    Samarco’s mining operations remain on hold ten months after a deadly tailings dam collapse released billions of gallons of sludge into communities and waterways in what the government described as the country’s worst everenvironmental disaster. As many as 19 people died.

    While Melbourne-based BHP, the world’s largest miningcompany, and Rio de Janeiro-based Vale are putting up money for Samarco’s working capital and repair and relief work, they aren’t covering debt payments. BHP, Vale and Samarco declined to comment.

    Coupon payments on dollar-denominated bonds due in 2022 are scheduled for as early as September. The notes were trading at 37.8 cents on the dollar at 11:37 a.m. in New Yorkcompared with about 60 cents in early May after hopes faded for a swift resumption of operations.

    After previously flagging a 2016 restart, the mine may not get new permits until late next year or 2018 amid regulatory scrutiny into the incident.

    A more likely restart date would be by the end of next year, with an earlier forecast of mid-2017 an optimistic scenario,Peter Poppinga, Vale’s head of ferrous minerals, said Tuesday in an interview in London.
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    Indonesia's Adaro sees coal prices, demand improving in 2017

    The CEO of Adaro Energy,Indonesia's biggest coal miner by market capitalisation, said thermal coal prices have bottomed and will increase in 2017 along with rising import demand from China and Southeast Asia.

    Cargo prices for Australian thermal coal from Newcastle, seen as the Asian benchmark, have soared more than a third this year to above $70/t – the highest since a spike in April last year – pushed by surprise increases in Chinese imports.

    China's coal industry is struggling with excess supply and the government has vowed to slash mine capacity by 250-million tonnes this year, as the world's top producer and consumer ofcoal shifts to a more consumer-driven economy.

    "As a result of the closures, supply will decline. If supply declines, they will probably import," Adaro CEO Garibaldi Thohir told reporters.

    "Prices will definitely improve," he said. "They can't just turn off (the power) like that."

    Demand will also increase slightly next year, Thohir said, due to purchases from India, Vietnam, Thailand and others inSoutheast Asia.

    Adaro is on track to reach its production target of 52-million to 54-million tonnes this year, Thohir said, up from output of 51.46-million tonnes in 2015. About three-quarters of the production will be exported.

    "We will stick to our plan," Thohir said, noting that it was not easy for the company to increase output despite improving prices and demand this year.

    Indonesia, the world's biggest exporter of thermal coal, has seen its output fall during a price lull that began early last year, and many of its miners have been unable to raise production due to debt constraints.

    In June, Thohir said he expected fewer than 10 Indonesiancoal producers would survive out of hundreds as cash flows dried up because of low prices.

    The amount of coal-fired power generation under development worldwide has shrunk by 14% this year, driven down by China as it struggles with oversupply and tries to promote cleaner energy, a study showed last week.
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    China Coal Energy Aug coal sales up 17pct on month

    China Coal Energy Co., Ltd, the listed arm of China National Coal Group, sold 12.78 million tonnes of commercial coal in August, sliding 0.6% year on year but up 17.03% month on month, the company said in its latest statement.

    Of the sales, 6.74 million tonnes were self-produced commercial coal, dropping 27.3% from July.

    In the first eight months, the company sold 89.17 million tonnes of commercial coal, falling 1.6% from the year before, with sales of self-produced commercial coal dropping 15.5% to 54.25 million tonnes.

    The company produced 6.37 million tonnes of commercial coal in August, falling 27.9% on year and down 5.21% from July.

    The production during January-August stood at 53.47 million tonnes, sliding 16.6% from the year prior.
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    Baosteel raises Oct steel prices by 100-260 yuan/t

    Baoshan Iron & Steel (Baosteel), China's top listed steelmaker, has decided to raise prices of its steel products by 100-260 yuan/t for October deliveries, the company announced on September 12.

    According to the announcement, Baosteel will raise ex-works price of its hot-rolled plate by 100 yuan/t, plain plate by 150 yuan/t, and hot-dipping zinc galvanized plate by 260 yuan/t.

    The price hike, following the company's steady pricing for the three products futures in August, comes on the back of strong demand for automotive steel, indicating the steelmaker's intention to uphold the market that has seen demand slackening ahead of China's traditional festival Mid-autumn Day.

    On September 13, the ex-works price of Tangshan steel billet stood at 2110 yuan/t, inclusive of VAT, down 130 yuan/t on week and 170 yuan/t on month.
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    Lu'an Group's five coal mines approved as advanced capacity

    Five coal mines of Shanxi Lu'an Mining Group have been approved as part of the first batch of coal mines with advanced capacity by China's top economic planner, according to an announcement released by the company on its website.

    The National Development and Reform Commission (NDRC) approved Yuwu Coal Industry, Gaohe Energy, Zhangcun Coal Mine, Sima Coal Industy and Changcun Coal Mine –subsidiaries of Lu'an – to be advanced coal mines at an industry meeting on stabilizing coal supply and prices.

    By the end of 2015, these coal mines had a combined capacity of 30 million tonnes per annual (Mtpa) under the 330-workday schedule, with respective capacity at 7.5 Mtpa, 7.5 Mtpa, 4 Mtpa, 3 Mtpa and 8 Mtpa, showed data from the National Energy Administration.

    While under the 276-workday reform, total capacity of the five coal mines stands at 25.2 Mtpa.

    The NDRC confirmed 74 coal mines as advanced at the meeting, with 16 in Shanxi, which meet standards of advanced capacity, as well as undertake the task of adjusting coal supply to maintain market stabilization.

    These 74 mines, with annual capacity at 850 Mtpa, is hopeful to contribute additional output of 6-14 million tonnes per month, if they are allowed to increase daily output as much as 0.5 million tonnes.

    This, according to analysts, may help domestic thermal coal prices stabilize around 460-500 yuan.

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    Rinehart’s iron ore mine won’t reach capacity this year

    The target of 55 million metric tons a year is now expected to be reached early in 2017, instead of late this year, Roy Hill Holdings chief executive officer Barry Fitzgerald told reporters on Wednesday at the mine in the Pilbara region. The producer experienced some faults with components at its port and is addressing some construction issues related to the processing plant, he said.

    “We set an aggressive target to try and get there by this year. We have not made that,” Fitzgerald said. “We will go reasonably close to it.”

    Roy Hill is raising output after it began shipments in December from Australia’s largest single iron ore mine. The commodity has rallied in 2016, confounding a slew of predictions earlier in the year that lackluster demand in China and rising low-cost supply would combine to drag prices lower.

    China’s government stimulus is helping to support steel demand, though is aimed more at “maintaining capacity, rather than increasing capacity,” Fitzgerald said. Almost 90% of output from Roy Hill is under long-term contract, including more than half earmarked for partners outside China, the producer said last year.

    Futures on China’s Dalian Commodity Exchange rose to as high as 396 yuan ($59.36) a ton in trading on Wednesday and were 0.1% lower at 393 yuan a ton at 4:15pm in Sydney. Iron ore with 62% content delivered to Qingdao in China declined 2.9% on Tuesday to $56.09 a dry ton, the lowest since July 22, according to Metal Bulletin.

    The impact of new seaborne supply — including from Roy Hill — won’t have as much influence on prices as forecast, according to Cliffs Natural Resources, the biggest US producer. Iron ore will probably be sustained between $50 and $60 a ton, chief executive officer Lourenco Goncalves said in an interview this week.

    BHP Billiton, the biggest mining company and No. 3 iron ore shipper, sees prices as likely to retreat as new supply arrives into the export market from Brazil and Australia.
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    Vale targets profits over volume at flagship Brazil iron ore project

    Peter Poppinga, head of Vale’s iron ore business, said the market had not understood its plans for the ramp-up of S11D, the industry’s biggest new venture, in the Amazonian state of Pará.

    “One thing the market is not getting right is how Vale wants to go about ramping up S11D,” he said. “We decided for a phased approach where we will ramp up S11D not in two years but in four years.”

    While S11D was seen as a 90m tonnes per year project, the capacity of Vale’s infrastructure in northern Brazil meant it would only add another 75mt of the steelmaking ingredient to a market that has suffered a glut of supply.

    “We are not [in] the pure volume game. We think the right approach … is to maximise our margins,” said Mr Poppinga in an interview in London.

    During the so-called commodity supercycle, mining companies ploughed billions of dollars into new iron ore projects as China’s rapid urbanisation saw it suck in ever increasing amounts of the raw material.

    But much of the new supply only came online as China’s growth started to slow, hitting prices that — at roughly $55 a tonne — are down some 70 per cent from their 2011 highs.

    While most of the large suppliers including BHP Billiton and Rio Tinto still have plans to increase production, they are prioritising returns and profitability over volume.

    Once its expansion plans are complete, Vale would have capacity to produce 450mt of iron ore annually. “But it doesn’t mean that we are going to use it,” said Mr Poppinga, who forecast that iron ore will trade at $50-$60 a tonne next year.

    “It will be with a mature eye on the market and we will always have a focus on the maximisation of our margins,” he said.

    Vale, based in Rio de Janeiro, is seeking to cut its net debt by at least $10bn by the end of next year by disposing of non-core businesses and other initiatives.

    As well as the downturn in commodity prices, it has been dealing with the fallout from one of its worst mine accidents. The company and BHP Billiton were partners in the Samarco iron ore venture in Brazil where 19 people died when a dam collapsed last November.

    While initially the companies hoped they might be able to resume production at Samarco this year, those hopes have been dashed by the complexity of obtaining permission for a restart. “Optimistically we are looking at mid-2017; realistically we are looking at something in the second half of 2017,” Mr Poppinga said.

    The companies still face potential legal action in Brazil relating to the dam collapse, which a technical report last month said was due to design and drainage problems.

    Mr Poppinga said Vale was still interested in a venture with another iron ore miner, Australia’sFortescue Metals Group, to combine some of their output for sale.

    A project to blend Vale and FMG ore could produce a mix more suitable for some customers, allowing them to share gains from a premium price for the blend. “We have tested everything … [but] on the commercial side it is taking longer than we expected,” Mr Poppinga said.

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    A 100-year-old coal mine in Australia restarts as prices double

    Jindal Steel & Power has ramped up production at a 100-year-old coking coal mine in Australia and is set to resume operations at another in Mozambique as prices for the commodity more than doubled this year.

    The New Delhi-based company is producing about 100 000 metric t/m at Wongawilli mine in Australia’s New South Wales and has sought regulatory approval for resuming output at the Russell Vale mine in the same area, CEO Ravi Uppal said. The company, which is one of India’s largest steel producers, plans to resume operations this month at its Chirodzi coal mine in Mozambique and produce 300 000 t/m, he said.

    Metallurgical coal prices have surged and thermal coal has rebounded after five years of declines as China seeks to cut its overcapacity and curb pollution. Output from the world’s biggest producer and consumer of the fuel has fallen more than 10% in the first eight months of the year.

    Jindal joins commodity producers including Chinese steel mills and US oil explorers in boosting activity as prices rally, a response that can aid company balance sheets but also sustain the gluts that have plagued the raw materials industry.

    Jindal Steel, controlled by former lawmaker Naveen Jindal, has reported seven consecutive quarterly losses and is counting on its steel and mining operations to help generate profits. The company took an impairment charge of 6.26-billion rupees ($93.5-million) on the Australian mining assets in the quarter ended June 30, according to a stock exchange filing on September 8.

    Jindal Steel needs coking coal for its 1.7-million-ton-a-year blast furnace in the central Indian state of Chhattisgarh. The company’s demand is set to rise after December, when its four-million-ton-a-year blast furnace in eastern Indian state of Odisha starts operation, according to Uppal. The company uses about half a ton of coking coal to produce a ton of steel.

    The Wongawilli mine started operation in 1916, according to the website of Jindal Steel subsidiary Wollongong Coal. Production restarted in July after the mine was placed on care and maintenance status in 2014, the Australian company said.
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    China's steel failure, coal success show prices trump bureaucracy: Russell

    China's steel and coal sectors provide contrasting stories so far this year, with one failing miserably to curb output and the other cutting so successfully it's led to the unintended consequence of higher prices and imports.

    China's steel sector, which accounts for about half of global production, continued its recent strength in August, with output rising for a sixth month to 68.57 million tonnes, the National Bureau of Statistics said on Tuesday.

    This brought the year-to-date total to 536.3 million tonnes, a mere 0.1 percent lower than for the first eight months of 2015, and putting the country on track to produce more than 800 million tonnes of steel for a third year running.

    The resilience of steel output also makes a mockery of official attempts to reduce capacity in the massively oversupplied sector, and questions whether Beijing has the political muscle and determination to actually restructure the sector.

    In contrast, China's coal output dropped 11 percent in August to 278 million tonnes, with production in the first eight months slumping 10.2 percent to 2.17 billion tonnes, according to official data.

    China has met about 60 percent of its target for 2016 of cutting 150 million tonnes of coal capacity, according to state media, as measures to restrict the number of days mines can operate take effect.

    There is little doubt that China's coal sector has met the challenge of removing excess capacity, and the steel sector hasn't.

    This begs the question as to what is different between the two, as they should both be subject to meeting the requirements laid down by the authorities in Beijing.

    The main difference appears to be the dynamics of price and profitability.

    Coal prices started the year at multi-year lows, with the Chinese thermal coal benchmark SH-QHA-TRMCOAL at 370 yuan ($55.39) a tonne.

    It has subsequently rallied almost 540 percent to 515 yuan a tonne on Tuesday, reflecting the tightening domestic market.

    But it's worth noting that most of the gains have come in the past two months, meaning that for the first half of the year, China's domestic coal miners were still labouring under low prices and many were unprofitable.

    The production cutbacks also stoked demand for imported coal, with inbound shipments up 12.4 percent to 155.74 million tonnes in the first eight months of the year compared to the same period in 2015.

    This additional Chinese demand has also fuelled seaborne coal prices, with the Australian thermal benchmark Newcastle weekly index surging 39.5 percent so far this year to $70.61 a tonne for the week ended Sept. 9.


    Unlike coal, steel's gains were made in the first quarter, with benchmark Shanghai rebar jumping 58 percent from the end of last year to its peak so far in 2016 of 2,670 yuan a tonne on April 21.

    Since then steel prices have trended lower, with the contract ending at 2,260 yuan a tonne on Tuesday. However, this is still 33.8 percent above what it was at the end of 2015.

    The rising steel price led Chinese mills to ramp up output, especially from March onwards, culminating in record daily production in June.

    As can be seen from August's robust output, mills have yet to dial back production even as prices start to moderate, and the likely reason is that they are still profitable.

    Steel mills are making profits of about 300 yuan to 400 yuan a tonne at current prices, the highest since November 2014, according to Li Wenjing, an analyst at Industrial Futures in Shanghai.

    The improved profitability for steelmakers illustrates just how challenging it is for the authorities to cut capacity if money is being made.

    China aims to eliminate 100-150 million tonnes of capacity in coming years, with 45 million tonnes planned for this year.

    Even if its does cut this amount, it would still leave about 200 million tonnes of excess capacity in the system, assuming mills operated at 100 percent.

    If mills operated at a more realistic 80-85 percent of capacity, then China's planned cuts would tighten the steel market, assuming domestic demand and exports remain around current levels.

    The market expectation is that Beijing will cajole capacity cuts in the steel sector over the remainder of 2016, but as events so far this year show, this is far from a given.

    If steel prices remain at levels consistent with solid profits, it's likely that the mills will resist attempts to curb their output, and history suggests they are quite good at this.

    If prices do retreat further, then it will be easier to cut steel capacity, but any sustained success is likely to make it harder to cut more capacity, and may in fact encourage mills to ramp up utilisation rates and output.

    So far this year, the Chinese authorities have accomplished what they wanted in coal, but at the cost of higher prices, and failed in steel, because of higher prices.

    This shows that interference in markets seldom comes without side effects, and it will be interesting to see if Beijing allows higher coal output to soften prices and continues to tolerate strong steel production in coming months.
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    Coking coal prices go gang-busters — up almost 150%

    Prices of coking coal, the steel-making kind, keep soaring mainly due to slowing supply growth from China.

    Far seems to be the multi-year lows struck in February, as the commodity has surged almost 150% since then, adding Tuesday a whooping $14.80 per tonne, according to The Steel Index.

    Metallurgical coal, which is now trading at a record $195.70 a tonne, has become the best performing commodity of 2016.

    The rally has been triggered in part by Beijing’s decision to limit coal mines operating days to 276 or fewer a year. In addition, recent heavy rains in the key mining province of Shanxi, have significantly reduced the number of available roads and damaged other transportation infrastructure, curbing local supplies.

    Weather conditions in China’s coal producing regions have given Australian suppliers of coking coal, particularly those in Queensland's Bowen Basin, a much-needed boost.

    However, the incredible price rally may also carry some bad news, especially for Anglo American (LON:AAL), which has now been forced to revaluate the asking price for the two coking mines it has for sale in Australia,the Australian Financial Review reports.

    Such sale is expected to yield more than US$1 billion, even with Anglo taking a $1.2 billion charge against Grosvenor and Moranbah at its July results, and bidders —including the BHP Billiton Mitsubishi Alliance — are said to be now waiting to see where coking coal prices go next.
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    Fortescue repays more debt

    Iron-oremajor Fortescue Metals has undertaken another round of debt reduction, with the miner issuing a $700-million repayment notice for its 2019 senior secured credit facility.

    The company said on Tuesday that the term loan repayment would be made on September 16, and would generate interest savings of around $26-million a year.

    “This $700-million repayment adds to the $2.9-billion which we repaid in the 2016 financial year and further reduces our all-in cost base. We will continue to apply our free cash flow to repay debt, lowering our gearing and strengthening our balance sheet,” said Fortescue CFO Stephen Pearce.
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    China Shenhua Aug coal sales up 9.2pct on mth

    China Shenhua Energy Co., Ltd, the listed arm of coal giant Shenhua Group, sold 34.3 million tonnes of coal in August, down 2.8% year on year but up 9.2% month on month, as sales of outsourced coal rose 23.3% on year and 47.5% from July, the company announced in a statement on September 12.

    The company sold 252 million tonnes of coal over January-August, rising 1.8% from the year prior, it said.

    Coal sales via northern ports in August gained 3.2% from the year prior and up 4.8% from July to 19.6 million tonnes, with those shipped from Shenhua's exclusive-use Huanghua port at 14.1 million tonnes or 71.9% of its total in the month, climbing 42.4% on year and up 8.5% on month.

    Total coal sales stood at 150.6 million tonnes in the first eight months, up 10.3% on year.

    Meanwhile, the company produced 24.6 million tonnes of coal in August, falling 0.4% on year but up 4.2% on month. The output over January-August decreased 0.3% on year to 187.9 million tonnes.

    As the nation's top coal producer, Shenhua's parallel pricing for key customers and spot buyers in August has helped the company to maintain steady price increase, while giving more say to the market by getting prices of its spot coal much closer to the spot levels.  

    It announced that prices of spot coal will be set every 10 days based on the FOB Qinhuangdao of 5,500 Kcal/kg low-sulphur coal (0.6% sulphur) published by industry portal China Coal Resource (, under the principle of market-based pricing.

    After a 16 yuan/t hike in July, Shenhua further increased contract price by 18 yuan/t in August for its 5,500 Kcal/kg NAR coal sold to key customers at 435 yuan/t FOB, including 17%.

    In September, Shenhua lifted contract price of the same-CV material by 25 yuan/t to 460 yuan/t, which, though above the expected 15 yuan/t rise, was still lower than 495-505 yuan/t at northern ports in early September.
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    U.S. says Chinese stainless steel strip, sheet imports being dumped in U.S.

    The U.S. Commerce Department on Monday said it had made a preliminary finding that imports of stainless steel sheet and strip from China are being dumped in the U.S. market at below fair value.

    The department set preliminary antidumping duties ranging from 63.86 percent and 76.64 percent.

    Any final decision to lock in duties would be subject to a finding by the U.S. International Trade Commission that domestic producers had been damaged.

    The companies that had sought an investigation are AK Steel Corp, Allegheny Ludlum LLC, ATI Flat Rolled Products, North American Stainless and Outokumpu Stainless USA LLC.
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    India's Tata Steel reports $477 million first-quarter loss on Europe plant sale

    India's Tata Steel Ltd reported on Monday a $477 million consolidated first-quarter net loss as it sold a business in Europe, and said talks continued for a proposed partnership to run its European plants.

    Consolidated net loss widened to 31.83 billion rupees ($477 million) for the three months to June 30, from 3.17 billion rupees loss a year earlier, Tata Steel, Britain's largest and Europe's second-biggest steel producer, said in a statement.

    The company, which has been hit hard in Europe due to a fall in steel demand, excess capacity and rising imports from China, recorded a loss of 32.96 billion rupees from discontinued operations related to the sale of its long products business in the United Kingdom to Greybull Capital LLP in May.

    In July, Tata Steel halted a planned sale of its British Port Talbot plant which has been hit by huge losses and massive pension liabilities. The company said it would instead look for an alliance, and named biggest German steelmaker Thyssenkrupp AG (TKAG.DE) among potential partners.

    "We continue to progress the conversations," Tata Steel's Group Executive Director Koushik Chatterjee told a news conference on Monday. He said the company was also consulting all stakeholders on the pension liability issue.

    Tata Steel's business in Europe, which accounts for nearly 60 percent of the company's 24 million-tonnes-a-year steelmaking capacity, reported an operating profit of 8.56 billion rupees, Chatterjee said, citing benefits from a weaker pound and an ongoing restructuring exercise that included job cuts.

    Net profit for Tata Steel's Indian operations rose 35 percent from a year earlier to 5.75 billion rupees, the company said. India has set a floor price to prevent cheap imports from China, Japan, South Korea and Russia, helping local steelmakers.
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    China Aug coal output up nearly 3pct on month: NBS

    China produced 278.09 million tonnes of coal in August, down 13.1% year on year but up 2.99% from July, said the National Bureau of Statistics (NBS) on September 12.

    The rise from July was mainly because some coal mines that had halted production previously recovered production amid spiking prices in the domestic market.

    Over January-August, China produced a total 2.18 billion tonnes of coal, down 10.2% on year, compared with a decline of 10.1% in the first seven months this year, showed the NBS data.

    In a move to reduce overcapacity and save the coal industry from further downturn, the Chinese government set ambitious capacity reduction target earlier this year.

    China had cut 150 Mtpa in coal production capacity in the first eight months this year, about 60% of the 250 Mtpa coal reduction target for 2016, according to the National Development and Reform Commission.
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    China's August steel output rises for sixth straight month

    China's crude steel output rose 3 percent in August from a year ago, the sixth straight monthly rise and the latest sign that a rally in prices and pick up in demand spurred mills in the world's top producer to ramp up production.

    Total output for the month was 68.57 million tonnes, the National Bureau of Statistics data showed on Tuesday.

    The rise was the fastest pace in percentage terms since at least June last year.

    Mills increased output even as the government shuttered plants in the eastern city of Hangzhou, which hosted the G20 summit earlier this month, in a bid to guarantee blue skies and clear air for the gathering of the world's leaders.

    "When the mills saw the profits in August, they lost motivation to cut output," said Li Wenjing, an analyst at Industrial Futures in Shanghai, noting increases in northern China offsetting those in the south for the G20.

    Mills' profits hit 300 yuan-400 yuan ($44.92-$59.89) per tonne, their highest since November 2014, and blast furnaces operated at 80.66 percent capacity, up from 78.04 percent, she said.

    Li believes the rapid increase last month may be a one-off as Beijing pushes ahead with market reforms to tackle its steel glut, forcing more cuts before the end of the year.

    For the first eight months of the year, total production edged only slightly lower, by 0.1 percent, to 536.3 million tonnes, casting doubt on that plan. Beijing has said it aims to eliminate 100-150 million tonnes of annual production.

    Average daily steel output rose 2.64 percent from the previous month, according to Reuters' calculation based on NBS data.
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    Panic buying sees coking coal price jump 20% in a week

    The parabolic rise in the price of coking coal showed no signs of slowing last week with the Australian export benchmark hitting $180.90 a tonne up a stomach churning 20.8% for the week. The steelmaking ingredient is now up 136% in 2016.

    The latest gap up for metallurgical coal came after a research report showing levels of "panic buying" not seen since 2011, when floods in key export region in Queensland sent the price soaring to $335 a tonne (albeit not for long).

    The rally was triggered by Beijing’s decision to limit coal mines' operating days to 276 or fewer a year from 330 before as it seeks to restructure the industry. Safety closures and weather related supply curbs in China and Australia only added fuel to the fire.

    Australian Financial Review quotes analystsfrom Macquarie warning that speculation as much as fundamental factors are driving the price with a mere half-a-million tonnes (out of a seaborne trade of 200 million tonnes a year) responsible for the most recent surge:

    "Transactions on the trading platform globalCOAL over the past month, which feed into spot price assessments from various index providers, have totalled just 510,000 tonnes in volume."

    The bank does say "current physical market conditions are very tight and there is a sense of panic amongst buyers," which "looks like it could hold for a few more weeks," but expects prices will slide in the fourth quarter.

    On top of that most producers, with the exception of BHP Billiton which set up globalCOAL a few years back, do not receive the spot price but the ruling quarterly contract price which is still in double digits.

    That will change soon. In a report The Steel Index, a market information provider, notes  speculation that the upcoming quarterly contract negotiations for the October – December 2016 period "may be rather combative."

    According to market participants, Japanese steelmakers will undoubtedly face levels “at least above US$120/t” in the final quarter of 2016.

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    China allows coal miners to adjust output in either direction over Sep-Dec

    Major Chinese coal miners will be able to temporarily adjust their coal output in either direction between September and December after an agreement with the China Coal Trade and Development Association, industry sources said Friday.

    The sources had participated in the September 8 meeting of the National Development and Reform Commission, National Energy Administration, China Coal Mine Safety Administration and CCTDA.

    Annual output of each coal miner will, however, will still need to be no higher than their mining capacity on a 276-workday basis.

    "This will mean that Chinese coal miners will be able to up their coal output during certain periods, but then they will have to cut their output some other times," a Shanxi-based trader said.

    Since May 2016, Chinese miners have been ordered to cut their coal output by about 16%, from a 330-workday basis to a 276-workday basis.

    According to a copy of the agreement obtained by S&P Global Platts, coal miners who have entered into the agreement with CCTDA will adjust their output in line with CCTDA's guidelines. Those failing to abide by the agreement will be blacklisted, it added.

    CCTDA will issue guidelines in accordance with the scheme, under which the price of domestic 5,500 kcal/kg NAR thermal coal, FOB northern China, based on the Bohai Sea coal price index, exceeds Yuan 450/mt and has been rising for two consecutive weeks, and combined coal stocks at the five major coal ports -- Qinhuangdao, Jingtang, Caofeidian, Tianjin and Huanghua -- fall below 12 million mt in a week, CCTDA will allow an increase in national coal output by 300,000 mt/day, which equates to about 9 million mt/month.

    If the price of China's domestic 5,500 kcal/kg NAR thermal coal exceeds Yuan 470/mt and has been rising for two consecutive weeks, CCTDA will allow national coal output to increase by 400,000 mt/day, which equates to about 12 million mt/month.

    If the price drops below Yuan 460/mt and has been down for two consecutive weeks, CCTDA will cancel the directive for output adjustment.

    If the price exceeds Yuan 490/mt and has been rising for two consecutive weeks, CCTDA will allow coal production to increase by 500,000 mt/day, which equates to about 15 million mt/month. If the price of domestic 5,500 kcal/kg NAR thermal coal then drops below Yuan 480/mt and has been down for two consecutive weeks, CCTDA will cancel the directive.

    If the price falls below Yuan 430/mt and has been down for two consecutive weeks, CCTDA will order a cut in output of 500,000 mt/day, which equates to about 15 million mt/month.
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    China completes 60pct of 2016 de-capacity target

    China has reduced coal capacity by 150 million tonnes in the first eight months of the year, completing 60% of its 2016 target for capacity cuts, Xinhua News Agency said on September 9, citing the National Development and Reform Commission (NDRC).

    The rate is nearly 1.5 times progress in the first seven months of 38%, Lu Junling, a senior official with the NDRC, was quoted as saying at an industry meeting a day earlier.

    It is a satisfactory result as the country has made great efforts to shift away from fossil fuels as part of a drive to curb pollution.

    China's coal producers had lobbied the government at the meeting on September 9 to approve a plan to increase output that could add 8-9 million tonnes per month of new supply from some 74 mines that produce high-quality washed coal.

    A proposal was also discussed at the meeting that would allow producers to raise output if domestic prices hit certain levels, state-media Xinhua said.
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    Australian coal soars to premium of more than $10 over Europe

    A 40-percent rally since June in prices for Australian thermal coal due to a jump in Chinese imports has pushed its premium over Europe to more than $10, offering miners with easy access to the Atlantic and Pacific basins opportunities for arbitrage.

    Australian cargoes from its Newcastle terminal, a benchmark for Asia/Pacific, currently cost $70 per tonne, levels last seen over a year ago.

    At the same time, European import prices into Amsterdam, Rotterdam or Antwerp (ARA) are at just $58 a tonne due to strong competition from renewables and cheap natural gas.

    Traders said that the huge price spread between Europe and the Pacific meant that exporters with access to both basins could benefit from arbitrage opportunities.

    "If you're a Colombian miner, who can ship coal through the Panama Canal to Asia, or you're South African, which enjoys easy access to Europe and Asia, then the big price difference between ARA and Newcastle, as well as cheap freight, are an arbitrage opportunity you might want to look into," said a coal shipper with a big trading house. He declined to be identified as he was not authorized to speak with media.

    Thomson Reuters Eikon data shows that export prices from Colombia, known as Bolivar, are trading slightly below $60 per tonne, and South African prices from its Richards Bay export terminal are worth around $63 a tonne.

    Although benchmark dry-bulk freight rates used for coal have risen away from their historic lows earlier this year, at just over 800 points they remain far below their historic average of over 1,900 points.

    The Australian price rise is a result of a regulatory change in China, where the annual hours miners can operate were cut to 276 a year from 330 last April in a bid to reduce rampant overcapacity and industrial smog.

    "The strong rebound in key Asian thermal coal reference prices since the beginning of this year is a function of the Chinese government's regulations surrounding supply management," Fitch Ratings said in a note to investors late on Friday.

    The lower domestic output spurred imports toward the middle of the year and took the market by surprise.

    "Coal has ... enjoyed a strong run ... (and) trading well above Macquarie Commodities teams' forecasts for the next two years," Australian bank Macquarie said.

    Despite the jump in Chinese imports, some traders said the price rally had been overblown.

    "There's been a bit of a squeeze in Newcastle, as some miners take advantage of the bump from China. But with overall coal demand timid, I don't think Newcastle will stay at such a premium over other benchmarks for long, and instead will pull back," said another coal trader.

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    Cash-strapped Mongolia puts giant coalmine back in play

    The long-delayed development of Mongolia's giant coal deposit at Tavan Tolgoi in the south Gobi desert is set to be revived as the North Asian country's new government looks for ways to stimulate its crisis-hit economy.

    Recent attempts to develop the mine were stymied by nationalists in parliament worried about the involvement of foreign firms, but a financial crisis and a change of government in June have brought it back onto the agenda.

    Slowing demand for coal and copper, Mongolia's chief exports, and a plunge in foreign investment have left the world's most sparsely populated sovereign country with soaring debts and a rapidly declining currency, forcing government to hike interest rates and slash spending.

    Executives at Erdenes Tavan Tolgoi (ETT), the state firm in charge of the project, say they are now actively evaluating bids to revive the coal mine, one of the world's most promising, with estimated coking coal reserves of 7.5 billion tonnes.

    "Currently, we're calculating the (potential) profits for Erdenes Tavan Tolgoi, and our lawyers are reviewing multiple proposals," said Samdandobji Ashidmunkh, chief economic development officer of the state firm in charge of the project.

    "We are not ruling out any possibilities," he told Reuters on the sidelines of an investment conference in Ulaanbaatar. "If it's profitable for Erdenes Tavan Tolgoi and beneficial for the Mongolian economy, we're open to cooperate with anyone."

    In 2014, the Hong Kong-listed Mongolian Mining Corp. (MMC) joined a consortium with Chinese state miner Shenhua Group and Japan's Sumitomo Corp. to develop Tavan Tolgoi, but though the deal was blocked by parliament last year amid hostility from nationalist backbenchers, another executive said the parties remained ready to revive it.

    "The consortium still holds together," said Gotov Battsengel, chief executive officer of Energy Resources, an MMC unit that already extracts coal from a mine on the western edge of Tavan Tolgoi.

    "I believe the offer is still on the table," he told the conference.

    A spokesman for Sumitomo declined to say whether there were any new developments, but added: "We believe our preferential negotiating rights are still valid."

    Ashidmunkh of ETT said it was "too early" to say whether this particular consortium represented the best deal.

    The Shenhua Group did not respond to questions on the subject, and Mongolia's mining ministry did not immediately respond to requests for comment.


    About two thirds of industrial output in the first half of this year was generated by the mining industry, according to Mongolia's statistics bureau, and Tavan Tolgoi, along with the $4 billion investment required to develop it, could provide a huge boost to the $12 billion economy.

    But development has been repeatedly delayed amid financing difficulties and concerns about the role played by foreign firms in the former Soviet satellite of 3 million people, which is wedged between China and Russia.

    In 2011, the government awarded the project to a consortium involving Shenhua, U.S. miner Peabody and a team of little-known Russian and Mongolian firms, but it quickly scrapped the deal after unsuccessful bidders from Japan and South Korea complained that the process was not transparent.

    The tender came in the middle of a mining boom that drove double-digit growth in GDP and encouraged politicians to seek more favourable terms with foreign investors. Mongolia also tried to renegotiate the 2009 investment agreement for its Oyu Tolgoi copper-gold mine, now run by Rio Tinto .

    "Some policy mistakes were fuelled by nationalist sentiment," said Mongolia's new mining minister, Tsedev Dashdorj, at the conference on Thursday.

    Legislators opposed to the Sumitomo-Shenhua consortium were voted out of parliament after a landslide election victory for the Mongolian People's Party (MPP) in June.

    "The political dynamics in Mongolia have shifted very favorably for an ETT deal post election," said Nick Cousyn, chief operating officer for Ulaanbaatar-based brokerage BDSec, in a research note.

    "With an MPP super-majority in Parliament and Mongolia in desperate need of investment, we see the odds of an ETT deal as being extremely high," he added.
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