Mark Latham Commodity Equity Intelligence Service

Monday 7th November 2016
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    China Prepares To Impose Curbs,

    Last September, when we predicted that Chinese consumers, investors and savers would flock to bitcoin as a medium of facilitating capital outflows (it was trading at $230 then, it is now three times higher), we also warned that bitcoin's upside would ultimately be capped by Beijing, when China's authorities realized how the digital currency was being used to bypass capital controls, and launch a crackdown on bitcoin, as they have with most other capital outflow measures .

    It appears that the time has come because, as Bloomberg reports, China’s regulators are studying measures to limit transactions that use bitcoins to take funds out of the country, citing people familiar with the matter.

    According to Bloomberg sources, Chinese officials are considering policies including restricting domestic bitcoin exchanges from moving the cryptocurrency to platforms outside the nation and imposing quotas on the amount of bitcoins that can be sent abroad. Further indicating that Chinese regulators were "just a little behind the curve", they allegedly noticed only recently that some investors bought bitcoins on local exchanges and sold them offshore, evading rules on foreign exchange and cross-border fund flows, the report further reveals.

    A quick look at the uncanny correlation between the decline in the Yuan and the rise in the bitcoin, confirms that the digital currency has indeed been largely used to evade capital controls.

    As we have repeatedly noted, and as BBG repeats, "Bitcoin has surged 21% since the end of September as the yuan’s declines accelerated, boosting speculation Chinese investors were buying the cryptocurrency as a hedge against further weakness. With the risk of quicker depreciation rising along with the odds of an impending U.S. interest-rate hike, policy makers are seeking to restrict outflow channels. Just a week ago, China limited the use of China UnionPay Co.’s cards to purchase insurance products in Hong Kong -- another way of taking cash out of the country."

    In intraday trading, bitcoin erased a gain of as much of 2.6% overnight which had taken it to the highest level since June, before rebounding, although it now appears that news of the report is starting to spread.

    As a reminder, back in 2013, the government classified bitcoin as a commodity and not currency, placing it outside the purview of the foreign-exchange regulator, the people said.  That does not mean, however, that China is powerless at limiting bitcoin's upside.

    Several Chinese government bodies including the People’s Bank of China and the financial regulators said in a joint notice that year that bitcoin functioned like a digital commodity without the legal status of a currency. The central bank said in January it is studying the prospects of issuing its own digital currency and aims to roll out a product as soon as possible.

    While China dominates bitcoin mining and trading, the government has shown caution over its spread in the nation. In 2013, the PBOC barred financial institutions from handling bitcoin transactions.

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    China's top polluter Hebei to adjust mills' production in winter

    China's smog-ridden Hebei province has asked steel, cement plants and utilities to adjust their production schedule between November and January as part of its battle against pollution, the Xinhua News Agency reported on Wednesday.

    Companies ranging from petrochemical firms to metal producers will reduce output or shut down on heavy pollution days, Xinhua reported, citing the environmental watchdog of Hebei province.

    There are no details on how the provincial government will implement the policy or the companies involved.

    Hebei is China's biggest steelmaking region, accounting for a quarter of the country's steel output.

    The province has already pledged to impose what it called "special emission restrictions" on local mills by setting up tough standards for sulphur dioxide and other pollutants,a policy document seen by Reuters showed.

    Hebei is expecting weather conditions that will help trap pollutants and worsen its problems in winter, Xinhua said.
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    French power 'most likely' to hit Eur3,000/MWh this winter: Engie trader

    French power prices hitting the Eur3,000/MWh maximum price cap this season has become "almost a certainty" amid the current environment of low nuclear availability as France braces itself for imports from more expensive neighbours such as the UK, Nicolaj Janss Lafond, senior cross-border trader at Engie, told the audience at the Emart conference in Amsterdam Friday.

    "That this winter we will hit that price cap in France is almost a certainty," Lafond said during a power trading panel at Emart. "At some point this winter France is going to have the need to import from the UK in the most expensive hours."

    UK network operator National Grid's Strategic Balancing Reserve, a tool that allows the TSO to ensure lights stay on at times of high demand, can only be used when power prices hit GBP3,000/MWh.

    In France, power prices are capped at a maximum of Eur3,000/MWh and a minimum of -Eur500/MWh, according to the Epex Spot power exchange.

    The interconnection capacity between France and the UK currently stands at only 2 GW and can flow both ways.

    "How is it going to work if the cap is Eur3,000/MWh and we will not be able to extract the strategic reserve from the UK which stands at GBP3,000/MWh," Lafond said.

    The UK's electricity margins will be "tight but manageable" for winter 2016-17, with an improved de-rated margin expectations of 6.6%, which includes the 3.5 GW of contingency balancing reserve services procured for the period, National Grid said last month. National Grid said in October that it expected a total maximum technical capacity of 73.7 GW of generation, with a de-rated generation capacity of 55 GW, after accounting for any unplanned outages, breakdowns and/or any other operational issues that might stop the plant from producing power.

    "I believe the French cap is too low and should be much, much higher," Lafond said.

    Asked by S&P Global Platts what would be a more appropriate French power price cap, he said: "Let's start at Eur10,000/MWh and see where that takes us."

    Lafond said the cap should increase in future to reflect that conventional power generators will have to cover their costs even running only "a few hours a year."

    "In the future more and more capacity will go down and we will have more situations when we will hit these prices," he said.

    Lafond acknowledged that the current French tightness is a unique situation, but said the market is not ready to face uncertainty.

    "You can have these kind of accidents, like in France, and in Switzerland we will see with the referendum -- are we actually planning for these events?"

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    Oil and Gas

    Prepare for North Sea oil flood as OPEC plans output curbs

    Oil producers in the North Sea, home to one of the world’s key crude-price benchmarks, are poised to ship the most crude in more than four years. The surge takes place just as OPEC tries to contain a global surplus with coordinated output cuts.

    Shipments of North Sea grades will increase 10 percent month-on-month to about 2.16 million barrels a day in December, according to data compiled by Bloomberg. If all the cargoes load as planned it would mark the most crude oil shipments from the region since May 2012. The increase just from September, when there was field maintenance, would be almost 360,000 barrels a day.

    The surge poses yet another challenge to the Organization of Petroleum Exporting Countries as it seeks to curb production to steady markets in a world with plenty of oil. OPEC ministers will meet in Vienna on Nov. 30 to decide how to trim output to a range of 32.5 million to 33 million barrels a day. Libya, Nigeria and Iran are claiming exemption from cuts because of their own circumstances, and Iraq has contested how its output has been measured.

    “Rebalancing the market is going to be an uphill task,” in part because North Sea supplies are adding to the surplus, Ehsan Ul-Haq, senior market consultant KBC Energy Economics, said by phone. “If OPEC is really interested in reducing stocks and bringing the market into balance, they’ll have to make deeper cuts than promised before.”

    Brent crude fell extending its slide to a sixth day. It was down 7 cents at $46.28 a barrel at 8:41 a.m. in London.

    While supplies from some nations outside of OPEC are indeed falling, non-members boosting their crude output include Kazakhstan, Brazil and Russia, which last month pumped oil at a post-Soviet era high. OPEC itself increased production to a record 34.02 million barrels a day in October, according to a Bloomberg survey of analysts, oil companies and ship-tracking data. In addition, the U.S. is now freely shipping its oil across the globe, following the removal of export restrictions last year.

    The wave of North Sea crude will come just as a pile-up of tankers storing or transferring oil in the region dwindles, clearing out a previous surplus. Only one supertanker, Front Ariake, remains floating with North Sea crude off the coast of England. This compares with as many as five Very Large Crude Carriers last month which were holding crude, or preparing to receive it via ship-to-ship transfers.

    While shipments of Brent crude are expected to slow in December — due to maintenance at the Cormorant Alpha platform north of Scotland, scheduled to begin later this month — exports of other grades are set to increase. Loading plans are subject to significant change and reorganization.

    At least 25 shipments from the U.K.’s Forties field are now scheduled for December, the most since February 2011. Loadings from Norway’s Grane field next month are set to rise to 10, the most since Bloomberg began tracking the grade in 2010. The programs show December exports of 483,871 barrels a day for Forties and 193,548 for Grane.

    Further new North Sea oil production may be on the way. Statoil ASA this week submitted to the Norwegian government its plan for development of the Trestakk field. Lower-than-expected costs and a low-risk operating environment are providing a “window of opportunity” for more investment in the region, analysts at BMI Research, a unit of Fitch Group Inc., said Thursday in a note to clients.

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    Exxon's bid for InterOil in doubt after Canadian court ruling

    Exxon's bid for InterOil in doubt after Canadian court ruling

    InterOil Corp said on Friday an appeals court in Canada had overturned approval of the natural gas producer's $2.5 billion sale to Exxon Mobil Corp, throwing the deal's viability in doubt.

    The Supreme Court of Yukon ruled for Phil Mulacek, InterOil's founder and second-largest shareholder, who had objected to the all-stock deal announced in July.

    The Supreme Court approved the deal in early October, but Mulacek filed an objection saying it did not properly remunerate InterOil shareholders.

    InterOil is incorporated in Yukon, Canada, with operations in Papua New Guinea and headquarters in Singapore.

    An InterOil representative said on Friday that Canadian approval was all that remained to close the deal.

    Exxon representatives were not immediately available for comment. A representative for Mulacek was not immediately available for comment.

    InterOil said it still believed that the Exxon deal represented "compelling value" for its shareholders and was considering options to close the deal.

    Shares of InterOil fell 5.8 percent to close at $45.75, and Exxon edged down 0.1 percent to $83.57.

    InterOil owns a 36.5 percent stake in Papua New Guinea's Elk-Antelope gas field, which is operated by Total

    The acquisition would give Exxon interests in six licenses in Papua New Guinea covering about four million acres and help the world's largest publicly traded energy company supply liquefied natural gas (LNG) to Asian markets.
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    UAE's ADNOC cuts Murban crude premiums for Q1 2017

    Abu Dhabi National Oil Company (ADNOC) has finalised the sale of some Murban crude supplies for the first three months next year at lower premiums than the second half of 2016, four sources familiar with the matter said on Monday.

    The price cuts came after the producer shortened the duration of its sales period to accommodate ongoing oilfield concession talks and as traders suffered losses for most of 2016 when they re-sold the cargoes.

    "The market situation is very bad. It's oversupplied and there's high stocks, one of the sources said.

    ADNOC has reached an agreement with some buyers to sell Murban crude in the first quarter at 17-19 cents a barrel above the grade's official selling price (OSP), the sources said.

    The premiums for the cargoes, which do not have a fixed destination, are down from the 20-cent premium for second-half 2016 supplies, they said, without indicating the volumes being sold under that pricing.

    "Everyone is complaining that OSPs are too high. Based on OSPs, traders are not making money," another source said.

    ADNOC could not be reached for comment.

    The producer has been selling a portion of its Murban output via six-month agreements after concessions at the field operator Abu Dhabi Company for Onshore Petroleum Operations (ADCO) expired in January 2014.

    To accommodate the ongoing talks, ADNOC shortened the duration of its Murban sales by three months, the sources said.

    Separately, ADNOC is in talks to sell first-quarter Upper Zakum crude supplies.

    It last offered Upper Zakum at 20 cents a barrel above the grade's OSP, but some traders said it would be tough to make a profit over the short period.
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    U.S. crude oil exports hit record high in September: data

    U.S. crude oil exports rose to about 692,000 barrels per day in September, the highest on record, from about 657,000 bpd in the previous month, foreign trade data from the U.S. Census Bureau showed on Friday.

    Canada took in the most exports at 243,000 bpd, followed by Singapore at 99,000 bpd. Exports to Europe were also high, with Italy receiving some 81,000 bpd and Spain 41,000 bpd. Other prominent destinations included South Korea and the Netherlands.

    The previous record was set in May when the United States exported about 662,000 bpd, according to U.S. government data.

    U.S. crude exports have climbed since the lifting of a decades-old ban late last year.

    The discount of U.S. crude to Brent crude had widened to as much as $2.67 a barrel in late August, the widest since February.

    The U.S. Energy Information Administration will release its closely watched monthly crude figures, which are based on the U.S. Census data, at the end of this month.
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    U.S. drillers dispatch 9 oil rigs, with 6 in Permian Basin

    Drillers put nine oil rigs back to work in U.S. fields last week, with the majority heading to the Permian Basin in West Texas, Baker Hughes said Friday.

    The increased drilling activity brings the fleet of U.S. oil rigs up to 450, up by 134 machines since the count fell to its annual low in late May.

    Six oil rigs began work in the Permian Basin; two, in the Bakken Shale in North Dakota, and two others became active in the Eagle Ford Shale in South Texas and the Colorado’s DJ Basin. One oil rig went idle in an unnamed field, the Houston oil field services company said.

    The number of oil rigs working across the nation has increased in 20 of the past 23 weeks, a reaction to the price of U.S. oil climbing to $50 a barrel last month.

    Since reaching an annual peak in mid-October, U.S. crude prices have fallen 15 percent. In mid-day trading Friday, the benchmark price fell 65 cents to $44.01 a barrel on the New York Mercantile Exchange.

    Drillers also dispatched three natural gas rigs last week, one to Oklahoma’s Arkoma Woodford basin, another to the Eagle Ford and a third to the Haynesville in Louisiana. The nation’s total rig count has climbed to 569 units, up from 404 in May.
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    It’s Getting Tougher for Shale Drillers to Impress Investors

    Wall Street’s oil analysts are getting harder to impress.

    After two straight quarters when the U.S. shale industry posted outsized oil production figures that clobbered expectations, explorers are finding it more difficult to be overachievers. Once-innovative engineering tricks such as drilling two-mile long sideways wells and cracking the rocks with mountains of sand are becoming routine, depriving oil companies of methods to deliver shockingly big output numbers.

    For every third-quarter outperformer like Marathon Oil Corp. or Chesapeake Energy Corp., there have been production duds such as Cimarex Energy Co. and Rice Energy Inc., which were slammed by investors on Thursday after their output fell short of analysts’ targets. Cimarex tumbled as much as 7.6 percent for its worst intraday loss in eight months after reporting an output miss; Rice fell as much as 2.6 percent.

    “Whereas in the last couple of quarters, everybody smoked expectations, now we’re starting to see more and more misses,” said Gabriele Sorbara, an analyst at Williams Capital Group LP in New York. “I think these companies are reaching limitations on how long they can drill lateral wells.”

    For the past 2 1/2 years, shale explorers have been retrenching and reinventing their business plans as the worst oil crash in a generation wiped out trillions in market value and made many of their most ambitious drilling prospects worthless.

    As headcounts dwindled and management teams focused on asset sales and keeping lenders at bay, geologists and engineers devised more intensive ways of tapping deep layers of crude, boosting volumes enough in some places to make fields profitable despite low prices.

    Target Miss

    Cimarex disappointed investors when it reported third-quarter output equivalent to 157,768 barrels a day, below the 162,483-barrel average of 19 analysts’ estimates in a Bloomberg survey. The Denver-based driller also lowered its full-year production target by 2.5 percent, assuming the mid-range of the company’s forecast. Cimarex closed 5.3 percent lower in New York at $121.53.

    Rice likewise reported less-than-stellar production numbers, pumping the equivalent of 747 million cubic feet of natural gas a day, below the average estimate of 759.7 million. The shares rebounded somewhat before the close to settle 0.4 percent higher at $21.74.

    Notable Outperformers

    While the underpeformers wallowed, Marathon jumped as much as 15 percent for its biggest intraday gain in nine months. Investors rewarded the company for exceeding financial and production estimates; the 11-cent per-share loss wasn’t as bad as the 20-cent deficit analysts’ foresaw, and the company’s 402,000 barrels of daily output beat every single estimate in the survey.

    Chesapeake surged more than 9 percent after saying it pumped the equivalent of 638,100 barrels of crude a day in the third quarter, exceeding most of the 23 analysts’ estimates in a Bloomberg survey. The Oklahoma City-based shale driller closed 1.7 percent up.

    EOG Resources Inc., the shale driller expanding its footprint in the sought-after Permian Basin, rosefollowing an earnings report that showed it met output targets for the quarter and is increasing its expectations for growth in coming years.
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    Apache CEO says Alpine High will transform company

    John Christmann, chief executive of Houston’s Apache Corp., said this week that the company’s top priority next year is the newly discovered Alpine High oilfield in West Texas.

    Alpine High, Christmann said, is transformational to Apache and will provide incremental earnings by the end of 2018 that the company has never before seen.

    “Things will change significantly for us in the back half of ’18,” he said. “It’s going to be a different profile than we’ve probably had in our history.”

    Christmann, speaking to investors during Apache’s third-quarter earnings call, said he was aiming to run four to six rigs in the oilfield next year and build out a pipeline system. The region, surrounding the small town of Balmorhea, has no such infrastructure now.

    But Christmann also said that he didn’t want the company to get ahead of itself. Investment, he said, should not outpace a “comprehensive understanding” of the geology nor the company’s ability to get oil and gas to market.

    Analysts on the call were skeptical of the company’s ability to pump as much oil and gas as it expected.

    Christmann insisted test wells have confirmed that oil and natural gas liquids are present in as much as 5,000 vertical feet of rock, he said, in five underground ribbons — the Bone Springs, Wolfcamp, Pennsylvania, Barnett and Woodford formations. “It’s such a thick column, all we have to do is move up hole and we’ll have more oil,” he said.

    The chief executive hinted that Apache may drill more than the 2,000 to 3,000 wells it first anticipated. The company’s initial estimates of well counts only considered two of the five formations, he said. The company also has about 20,000 more contiguous acreage now.

    Apache, one of the largest oil and gas companies in the U.S., narrowed losses in the third quarter thanks largely to the increase in oil prices.

    It reported on Thursday losses of $607 million, 85 percent or $3.5 billion better than losses in the third quarter last year. The company posted $1.60 in losses per share, in comparison to $10.95 in losses per share over the same period last year.

    Revenues dipped 6 percent or $88 million to $1.4 billion. Expenses fell dramatically: Apache cut 60 percent or $3.6 billion to end the quarter spending $2.3 billion, largely because it did not have to write down oil reserves.

    Oil production fell 7 percent or 20,000 barrels per day to 271,000 barrels per day. Gas production fell 8 percent or 90 million cubic feet per day to 1.1 trillion cubic feet per day. Total production, including natural gas liquids, fell 6 percent or 30,000 barrels of oil equivalent per day to 520,000 barrels of oil equivalent per day.
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    Blast-damaged Colonial gasoline line back in service

    A gas pipeline that exploded in Alabama last week is back in service, the pipeline company said Sunday.

    Service was restarted at 5:45 a.m. Sunday on the pipeline that transports gasoline from the Gulf Coast to New York City, according to Colonial Pipeline Co.

    The pipeline exploded Monday while a crew was making repairs related to a September gas spill, killing one person and injuring four others. It may take several days for the fuel delivery supply chain to return to normal after the service restoration, the company said.

    Government officials and Colonial Pipeline have said a piece of excavation equipment hit the pipeline, causing the explosion, but further details haven't been released. Anthony Lee Willingham, 48, of Heflin, Alabama, died in the blast. Four other people were injured and remained hospitalized.

    Colonial said it began excavating Wednesday night at the site, located about 25 miles southwest of Birmingham, Alabama.

    The National Transportation Safety Board is investigating the pipeline rupture, conducting interviews, documenting the site and surrounding area and collecting physical evidence, the agency said in a news release. The investigators also plan to travel to Colonial's office in Alpharetta, Georgia, to speak to operations and engineering staff, review control room operations and collect data and documents.

    Since Monday's explosion, gas prices had rose 7 cents in Georgia and 2 cents in Tennessee, Garrett Townsend with AAA in Georgia said in an emailed statement, but that restarting the line would help ease concerns about supply.
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    U.S. fracking sand firms boost prices in sign of shale recovery

    U.S. producers of sand used to extract oil from shale are raising prices due to stronger demand, a sign higher oil prices are improving the outlook for the domestic fracking industry.

    U.S. shale oil companies, which pump sand into oil wells to make them more efficient, were ravaged by a 2014 global crude glut that hammered prices from more than $100 a barrel to near $26 in February 2016. Dozens fell into bankruptcy.

    However, publicly traded sand companies have pulled thousands of rail cars out of storage after oil hit a one-year high in October, thanks to rising demand, according to recent earnings calls and interviews. Sand companies idled half of the roughly 125,000 frac sand cars they had in service in 2014 after oil plunged, experts said, but nearly all are expected to return to service by 2018.

    Companies including Chesterland, Ohio-based Fairmount Santrol Holdings Inc; U.S. Silica Holdings Inc of Frederick, Maryland; Southlake, Texas-based Emerge Energy Services LP; and Hi Crush Partners LP in Houston all saw increased business in the year's third quarter.

    Smart Sand held its initial public offering on Friday in another sign of industry confidence.

    Rangeland Energy LLC, a privately held logistics company in Sugar Land, Texas, that unloads sand from rail cars to put onto trucks, is eyeing expansion to handle more volumes, said Patrick McGannon, vice-president for business development.

    "We'll have three more sets of three silos," he said of the company's sand storage facilities, which take months to set up. He said that will more than double current capacity, which is 26,000 tons of storage, according to the company's web site.

    Hi Crush had just over 600 rail cars in storage at the end of the year's third quarter, down from about 1,900 six months ago, chief financial officer Laura Fulton said on an earnings call on Nov. 1.

    "What a different picture we see from just six months ago," she said, adding that Hi Crush expects double-digit volume increases in the fourth quarter.

    While the increase in sand volume represents a ramp-up of U.S. activity, it does not necessarily correlate with improved global oil demand, said Credit Suisse analyst Charles Foote. Fracking is unique because the sand is instrumental to the process, unlike other types of drilling.

    "It's a good little pocket of positive activity, but I don't think you can extrapolate it much," he said.

    Still, in increasing prices, sand companies are betting on an improving outlook for the oil industry, said Scott Cockerham, managing director at the consulting firm Huron. "It's a very symbiotic system," he said. However, of late, crude prices have dipped from their recent highs near $52 a barrel; U.S. crude futures on Friday were trading at $43.87 a barrel, a six-week low.

    The United States has 450 active drilling rigs, according to oil services company Baker Hughes Inc. It has been steadily rising from a six-year low of 316 reached in May.

    "Our customers are talking about actually adding some crews even in Q4 and certainly adding crews into Q1 2017," said Rick Shearer, chief executive of Emerge. "We're very bullish, going forward, that our volumes and our pricing will continue to build.”

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    Woodfibre set to build Canada's first LNG export project

    Woodfibre LNG will start building British Columbia's first liquefied natural gas processing and export terminal in 2017, it said on Friday, a project that would grant Canada a long-awaited opportunity to enter the global market.

    The facility near Squamish, north of Vancouver, will export 2.1 million tonnes a year once it is operational in 2020, according to a company statement.

    However, Woodfibre is relatively small compared to other proposed LNG projects in the province and will have little impact on weak Canadian natural gas prices, said Samir Kayande, a director at research group RS Energy.

    More than a dozen LNG projects have been proposed for British Columbia, but the global slump in energy prices has undermined their feasibility and delayed investment.

    In September, Canada approved a proposed C$36 billion, 12-million-tonne-a-year LNG project by Petroliam Nasional Berhad. But Petronas, as the Malaysian state-owned oil company is known, has yet to give the final go-ahead, and Canadian aboriginal and environmental groups have filed lawsuits to stop it.

    Privately held Woodfibre said its Singaporean parent authorized funds for the facility after British Columbia offered a competitive electricity rate for LNG projects.

    Woodfibre, based in Vancouver, is a subsidiary of Pacific Oil & Gas Ltd, which is part of the Singapore-based RGE Group of companies.

    Byng Giraud, country manager for Woodfibre, said in a statement the cheaper rates were what allowed the "go forward" decision to happen. The plant will be powered using electricity rather than natural gas.

    The British Columbia government, which is keen to develop an LNG industry, welcomed the green light for the C$1.6 billion project and said it would be one of the largest private sector investments in the southern part of the province.

    Gas for the facility will come from northeastern British Columbia via Spectra Energy and Fortis Inc-owned pipelines.

    Environmental group the Pembina Institute warned the project would make it harder for British Columbia to meet its 2050 carbon emissions targets.

    Squamish Mayor Patricia Heintzman said the announcement was somewhat "jumping the gun" as there are 25 environmental conditions put forward by the Squamish First Nations still being worked out.

    Squamish Chief Ian Campbell could not be immediately reached for comment.

    Woodfibre has legally committed to and will continue to work to meet those obligations, said company spokeswoman Jennifer Siddon.

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    Four years after rescue, U.S. refinery reels as investors profit

    A deal struck in 2012 to save the U.S. East Coast's oldest and largest refinery seemed to have all of the right elements for success: private investors, big oil and taxpayer funding, and the promise of a private-public partnership that would help job growth and consumers.

    Four years after private equity firm Carlyle Group and a partner purchased Philadelphia Energy Solutions, the refinery faces another existential crisis.

    A sharp decline in the price of oil sourced in North Dakota has hammered profits across the sector with layoffs mounting. Capital projects are now on ice after an industry-wide earnings slump.

    Over this period, Carlyle Group and its partner - Sunoco parent Energy Transfer Partners - have banked hundreds of millions from the refinery in the form of dividend-style payouts, funded in part from a loan that put the refinery's future on less-solid footing, an analysis of corporate filings shows.

    These moves, along with the saturated state of the energy sector, have burdened Philadelphia Energy Solutions' (PES) refinery with a huge debt load and a dwindling cash buffer. (For a graphic, click Plans to sell stock in an initial public offering were scrapped in September.

    The stakes are high. The refinery is one of the region's largest employers, and U.S. energy officials have warned that its closure would lead to price spikes at the pump and even threaten the nation's national security interests.

    Carlyle officials say the refiner's misfortunes are not related to its stewardship. They point to macroeconomic factors, including the narrowing discount for domestic crude oil and the rising costs of U.S. renewable fuel regulations.

    "With Carlyle's support, PES has invested nearly $750 million to upgrade the refinery, preserve 900 jobs and create hundreds more, and ensure the integrity of the fuel supply on the east coast," Carlyle spokesman Christopher Ullman said in a statement.

    Energy Transfer Partners, which merged with Sunoco in 2012 around the time of the deal, declined to comment.

    Carlyle put up $175 million in 2012 in exchange for two-thirds of the new company and full responsibility for day-to-day operations. Sunoco agreed to contribute the refinery’s assets and be a non-controlling partner.

    For a region contending with global competition, the deal offered potential relief, but the measures have failed to act as a long-term solution that could withstand pressure from fluctuating oil prices and policies.

    To be sure, more favorable oil prices and improved demand could boost profits for U.S. independent refiners.

    "We are committed to the long term success of PES even in challenging markets," Ullman said.


    In early 2013, Carlyle took out a $550 million loan for capital projects, as well as payouts to itself and Sunoco parent Energy Transfer Partners, according to filings. In total, between 2013 and 2015 payouts and tax advances reached $480.9 million, all but guaranteeing Carlyle's venture would be profitable.

    About $121 million of the loan proceeds were paid as distributions to Carlyle and to ETP. The loan also funded a $25 million payment to preferred unit holders at Carlyle, filings show.

    Carlyle said it took out the loan because the firm had confidence that the business plan would be successful, adding they were proved correct in the subsequent two years. The loan payouts were to help reduce Carlyle’s risk, the private equity fund said.

    The refinery owners enjoyed a taxpayer-funded rescue package, which included the creation of a tax-friendly zone, $25 million in grants and environmental liability waivers.

    A spokesman for Philadelphia Mayor Jim Kenney, who was a councilman when the initial deal was struck, said public support was justified in light of the payouts "because it meant that the refinery remained opened and nearly 1,000 jobs stayed in Philadelphia."

    U.S. Congressman Bob Brady, a Democrat credited for putting deal together, did not respond to requests for comment.

    Proceeds from the loan also helped fund construction of a 280,000 barrel-per-day oil rail terminal in 2013 at the north end of the refinery, which connected the refinery to cheap crude oil flowing out of North Dakota. The terminal helped PES generate $210.8 million in net income in 2014, filings show.


    The boom turned to bust by the end of 2015, as the supply of cheap crude disappeared and margins shrunk. The timing was poor for Carlyle, as it was preparing to take PES public in August of 2015 just as the downturn worsened. The IPO valued the refinery enterprise at $1.3 billion.

    Expecting a boost in cash from an IPO, Carlyle, ETP and other smaller investors took out an additional $260 million in payouts in 2015, regulatory filings show.

    But public investors offered to pay “less than half” of the $15 to $18 per share PES was seeking, according to a person familiar with the offering. Investors were wary of PES’s debt load and long-term contracts, two sources familiar with the offering said, and the IPO was eventually scrapped.

    PES recorded a $65.7 million loss in its cash balance in 2015, due in large part to the payouts, filings show.

    The company’s ratio of net debt to earnings before deducting items such as depreciation and taxes was 1.0 in September 2015, in line with the industry, regulatory filings show. By year’s end, the most recent figures available, it nearly doubled, climbing to 1.9, a Reuters analysis shows.

    Moody's Investors Service warned in an April note - its most recent on the company - that "additional aggressive distributions" to Carlyle and ETP posed a risk to the company's B1 credit rating.

    Carlyle said the payouts did not hurt PES’s financial footing.

    "We believe that leverage levels throughout our ownership have been prudent," Ullman, the Carlyle spokesman, said.

    In recent weeks, the refiner has cut about 25 percent of non-union staff, reduced benefits and postponed capital projects, according to sources at the plant. A letter to employees from the company's CEO, Phil Rinaldi, a refinery turnaround specialist, describes the situation in stark terms.

    "The company's finances are significantly stressed," Rinaldi said in the letter, sent to employees in September.
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    Earthquake Rocks Central Oklahoma Oil Town of Cushing

    A sharp earthquake centered near one of the world's key oil hubs Sunday night triggered fears that the magnitude 5.0 temblor might have damaged key infrastructure in addition to causing what police described as "quite a bit of damage" in the Oklahoma prairie town of Cushing.

    City Manager Steve Spears said a few minor injuries were reported and questioned whether some of the community's century-old buildings might be unsafe. Police cordoned off older parts of the town to keep away gawkers.

    "Stay out of the area," Spears told residents during a late-night news conference.

    Emergency officials evacuated an assisted living center catering to the elderly in Cushing.

    Assistant City Manager Jeremy Frazier said that while damage was reported at the Cimarron Tower after the quake, no injuries were reported among the home's residents.

    It wasn't immediately known how many people lived at the building in downtown Cushing. Tulsa television station KOTV said some of those taken from the home were moved to the Cushing Youth Center.

    Frazier said the temblor caused the most damage in and around Cushing's century-old downtown. A number of brick facades had collapsed, and window panes in several buildings shattered. Frazier said city leaders could do a better assessment after sun-up.

    Cindy Roe, 50, has lived in Cushing all her life and said she's never felt anything like Sunday's quake.

    "I thought my whole trailer was going to tip over, it was shaking it so bad," she said. "It was loud and all the lights went out and you could hear things falling on the ground.

    "It was awful and I don't want to have another one."

    Megan Gustafson and Jonathan Gillespie were working a shift at a McDonald's in Cushing when the quake hit.

    "It felt like a train was going right through the building, actually," Gustafson, 17, said Sunday night as she and her co-workers stood behind a police barricade downtown, looking for damage. "I kind of freaked out and was hyperventilating a bit."

    Gillespie, also 17, described the building as shaking for about 10 seconds or so.

    But he said he wasn't as alarmed as Gustafson because he lives in an area that has experienced multiple earthquakes, especially in recent years.

    "I didn't think it was anything new," he said.

    The Oklahoma Corporation Commission said it and the Oklahoma Geological Survey were investigating after the quake, which struck at 7:44 p.m. and was felt as far away as Iowa, Illinois and Texas.

    "The OCC's Pipeline Safety Department has been in contact with pipeline operators in the Cushing oil storage terminal under state jurisdiction and there have been no immediate reports of any problems," the commission's spokesman, Matt Skinner, said in a statement. "The assessment of the infrastructure continues."

    Assistant City Manager Jeremy Frazier said two pipeline companies had reported no trouble but that the community hadn't heard from all companies.

    The oil storage terminal is one of the world's largest. As of Oct. 28, tank farms in the countryside around Cushing held

    58.5 million barrels of crude oil, according to data from the U.S. Energy Information Administration. The community bills itself as the "Pipeline Crossroads of the World."

    The Cushing Police Department reported "quite a bit of damage" in the town of 7,900. Spears said some damage was superficial — bricks falling off facades — but that some older buildings might have damaged foundations that would be difficult to assess until daylight.

    Fearing aftershocks, Police Chief Tully Folden said people needed to stay out of downtown, where photos posted to social media showed piles of debris at the base of commercial buildings.

    The Cushing Public School District has canceled classes Monday in order to assess the earthquake damage.

    Oklahoma has had thousands of earthquakes in recent years, with nearly all traced to the underground injection of wastewater left over from oil and gas production. Sunday's quake was centered one mile west of Cushing — and about 25 miles south of where a magnitude 4.3 quake forced a shutdown of several wells last week.

    Spears said at the news conference that earthquakes are no longer out of the ordinary.

    "I was at home doing some work in my office and, basically, you could feel the whole house sway some. It's beginning to become normal," Spears said. "Nothing surprises you anyway."

    The U.S. Geological Survey said initially that Sunday's quake was of magnitude 5.3 but later lowered the reading to 5.0.

    According to USGS data, there have been 19 earthquakes in Oklahoma in the past week. When particularly strong quakes hit, the Oklahoma Corporation Commission directs well operators to seize wastewater injections or reduce volume.

    A 5.8 earthquake — a record for Oklahoma — hit Pawnee on Sept. 3. Shortly afterward, geologists speculated on whether the temblor occurred on a previously unknown fault.
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    Alternative Energy

    Brazil wind power industry fears closures as demand plunges

    Brazil's wind power industry, once one of the fastest growing in the world, faces a challenging outlook as projects are delayed due to sluggish electricity demand while new licensing rounds by the government are in doubt, two industry participants said on Thursday.

    Vestas Wind Systems A/S Brazil head Rogerio Zampronha estimated that Brazil's production capacity for wind turbines is around 3.5 to 4 gigawatts per year, but last year only around 1 gigawatt of new projects was added in the Latin American country.

    So far in 2016, no new licenses have been awarded for wind parks, he said.

    "The current pipeline of orders is too small for the size of the industry," Zampronha told Reuters.

    Brazil was a late entrant to the wind power sector. It had relied on massive hydroelectric dams, which left the country in trouble three years ago after a harsh drought depleted reservoirs.

    The government gave incentives to speed up development of alternative energy sources such as wind, which allowed for a manufacturing base to be quickly formed.

    But the deepest recession in generations sharply reduced power consumption and made credit for new projects scarce and expensive.

    João Paulo Gualberto, wind power director at local wind turbine producer WEG, said the policies of the former government had attracted investment in factories to produce wind power turbines.

    "We invested, our competitors invested," Gualberto told Reuters. "Now the plants are empty."

    Brazil's power demand, which grew on average 4.5 percent per year in the decade until 2014, fell 2 percent in 2015. It is expected to fall another 0.5 percent this year while the country struggles to resume economic growth.

    WEG believes orders will still be low in 2017 and 2018.

    Brazil's Energy Ministry scheduled a new licensing round for wind farm projects for next month, which analysts see as crucial to breathe life into the sector.

    Odilon Camargo, a power sector expert for consultants Camargo Schulbert, expects the round to award licenses for at least 1 gigawatt of new projects.

    While that is not a very large volume, he said, it could guarantee the continuation of several firms in the supply chain.

    "Many in the sector have basically no orders currently," he says.

    Vestas' Zampronha, however, believes foreign companies would lead the bids in the auction, since local builders are struggling to guarantee adequate financing.

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    Total's Pouyanne says solar industry facing 'a new winter'

    The global renewable solar industry is facing a new crisis due to over-capacity and low demand, Patrick Pouyanne, Chief Executive of French oil and gas giant Total said on Thursday.

    Low prices seen in recent projects and a decline in government support in some countries could make investments in the solar power sector unprofitable, Pouyanne told an energy conference.

    "The solar industry is facing a new winter," he said, adding that the industry had gone through a similar phase in 2011 and 2012. "Today, the segment is facing a double crisis, a crisis of over capacity and a crisis of low demand."

    Pouyanne said he believed long-term prospects looked good but stressed that the industry had to find new ways to make solar energy profitable.

    "There were some very aggressive tenders with very low prices. Frankly, when you see prices under 30 cents per kilowatt hour, I don't understand. It does not cover the amortization of any investment," he said.

    He said it was too early for governments to cut subsidies to the sector, adding that China had decided to change its policy on feed-in tariffs by lowering it, while in the United States the impact of a renewal of tax incentives was not being felt yet.

    Total has gradually increased the share of renewables in its portfolio since its 2011 acquisition of U.S. solar power company SunPower Corp for $1.3 billion.

    It launched a new gas, renewables and power division in September to help drive its ambition to become a top renewables and electricity company within 20 years.

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    Tesla’s price shock: Solar + battery as cheap as grid power

    Last week, Tesla launched their Powerwall 2.0 residential battery storage system, a little less than a year after Powerwall 1.0.

    Compared to Powerwall 1.0, peak power has increased by 40 per cent, continuous power by 50 per cent, storage capacity by 100 per cent (to 14 kWh) and an inverter is included. And all this for US$5,500 ($A8,800) – about the same price as Powerwall 1.0.

    In other words, the price per kWh stored and re-used has halved in less than a year. Indicative installed prices in Australia are a little over $10,000. The commonly accepted wisdom was that battery costs would decline more gradually than the precipitate decline seen in solar PV costs. This has been proved wrong.

    Let’s do a solar PV+battery+grid versus grid-only price comparison.

    First, let’s assume a 4,800kWh per year household in Adelaide and that its electricity bill is either the average of all 77 market offers after all conditional discounts, or the average of all 77 Market Offers before all conditional discounts, from the 16 retailers operating in Adelaide (data from MarkIntell).

    For solar PV, let’s take the median installed price of a 5kW system (data from Solar Choice) and let’s assume a 20 year life with zero residual and 20% purchase premium for on-going maintenance. For battery, let’s take the indicative installed price ($A10,300) and assume a 10 year life with zero residual.

    Let’s also assume an operating regime that sets the daily household consumption against solar PV production and battery storage as far as possible. This results in 8,373 kWh per year solar production, 200kWh of grid purchases and 3,773kWh per year of solar PV export to the grid.

    Putting this together and annuitising the capital items at 2 per cent real (the typical mortgage rate), we get the result shown in the chart below: PV+battery+grid is level-pegging with the average grid-only Market Offer (after conditional discounts) and cheaper than the average grid-only Market Offer (before conditional discounts).

    This is astounding.

    A typical household in the suburbs of Adelaide can now meet its electrical needs with solar and battery storage for about the same amount they would pay on a competitive offer from the grid.

    And no need to worry about black outs or bill shock: for an outlay of around $16k and assuming a suitable roof, consumers will be able to reduce their grid bill to almost nothing (revenue from surplus PV exports paying for the grid fixed charge plus the little energy bought from the grid to cover rainy days). And the set-up more than pays its way.

    Of course one can argue with any of the assumptions I have made, but they seem plausible to me and the calculation itself is not tricky.

    Electricity in Australia is deeply interesting at the moment. Of all the fascinating issues competing for attention, this tops my list.

    It has obviously profound implications for consumers, PV and battery producers and installers, electricity retailers, centrally dispatched generators, network service providers, market operators, regulators and governments.

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    Emissions goal implied by Paris Agreement likely to be missed

    Wood Mackenzie's latest analysis and preliminary outlook on energy demand shows the emissions goal implied by the current version of the Paris Agreement is likely to be missed.

    The Paris Agreement comes into force today, imposing greenhouse gas emission limits on countries across the globe.

    According to Wood Mackenzie's study, developed countries have committed to emissions cuts they will be unable to make without additional efforts to decarbonise their economies. Such efforts include increased energy efficiency, greater focus on renewable energy and the trend towards electric vehicles.

    Although developed economies have progressed in addressing greenhouse gases, a lot more needs to be done to boost renewable energy and increase efforts to lower emissions.

    Paul McConnell, research director for global trends at Wood Mackenzie, says: "Emerging markets should meet their Paris Agreement targets with relative ease, given these are in general not much of a constraint on development. Some emerging economies may choose to go further on emission constraints, particularly if there is any political ground to be gained by 'climate leadership'."

    But NGOs and other external actors are certain to demand all parties do more to ensure the Paris Agreement meets its self-proclaimed goal of limiting global warming to 2 °C above pre-industrial levels.

    "Whether more stringent targets emerge now or some years in the future, recent trends suggest continued pressure on emissions growth is a reliable bet," says McConnell.

    "Hydrocarbon fuel consumption is in the firing line, and energy sector impacts are being felt already, despite Paris Agreement targets not kicking in until the end of the decade," he adds.

    Wood Mackenzie's study shows a formalised global policy framework favouring low-carbon energy challenges the traditional business models in oil and gas production, coal extraction and power utilities in the longer run.

    "Judging the pace of transition from old to new is among the big difficulties facing companies as they survey this emerging energy landscape," says McConnell. "Companies will need to change, beginning with understanding their own carbon footprint, then developing strategies to adapt."

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    Vast Moroccan solar power plant is hard act for Africa to follow

    On the edge of the Sahara desert, Morocco is building one of the world's biggest solar power plants in a project largely funded by the European Union.

    It is a hard success for other African nations to match as they seek to implement a new global deal to combat climate change.

    The huge 160-megawatt first phase of the Noor plant near the town of Ouarzazate contrasts with efforts by some other nations focused on tiny roof-top solar panels to bring power to remote rural homes.

    At Noor, curved mirrors totaling 1.5 million square meters (16 million square feet) - the size of about 200 soccer pitches - capture the sun's heat in the reddish desert.

    Morocco is showcasing Noor before talks among almost 200 nations in Marrakesh about implementing a global deal to combat climate change that entered into force on Nov. 4 - a day when the Saharan sky was unusually overcast with spots of rain.

    "We hope we can be an inspiration," Mustapha Bakkoury, head of the Moroccan Agency for Solar Energy (Masen), told Reuters. Many African nations are pushing to boost economic growth to end poverty, while seeking greener energies.

    The gleaming concentrated solar power plant is not economically competitive with cheaper fossil fuels, but is a step to develop new technologies as prices for solar power fall sharply.

    "Unfortunately for many, it's thought that renewables are to have a light bulb or light a school ... This is to get away from the caricature of renewables," Bakkoury said.

    Morocco aims to get 52 percent of its electricity from clean energy such as wind and solar by 2030, up from 28 percent now.

    Once completed, Noor will cost 2.2 billion euros ($2.45 billion) and generate 580 MW, enough power for a city of almost 2 million people. Morocco aims to expand at other desert regions to 2 gigawatts of solar capacity by 2020 at a cost of $9 billion.

    On the sprawling site, south of the snow-capped Atlas Mountains, workers clear ground with diggers, build concrete pillars or clean off Saharan dust that dims sunshine. In Arabic, Noor means light.

    By contrast in East Africa, M-KOPA Solar has installed 400,000 tiny rooftop solar panel systems costing $200 each on homes in the past five years to provide power for light bulbs and a radio. That completely by-passes the grid.

    M-KOPA Chief Executive Jesse Moore, whose company focuses most on Kenya, Tanzania and Uganda, said rooftop solar systems were a breakthrough for Africa, where half the 1.2 billion people lack electricity.

    He noted that Tesla founder Elon Musk was trying to sell solar systems to U.S. homes.

    "Elon Musk is trying to get people to leap off the grid in California. Over here on the other side of the planet this is happening already," he told Reuters.

    Unlike Morocco, some nations in Africa find it hard to attract investors to green projects, part of global efforts to limit climate change and more floods, heat waves and droughts that are a big threat to Africa.

    "Morocco is particularly suited for a large-scale project. It may not be suitable for all other countries," Roman Escolano, vice president of the European Investment Bank (EIB), told Reuters.

    The European Union including the EIB has funded about 60 percent of Noor. Masen issued Morocco's first green bond, of 106 million euros, on Friday to help finance Noor.

    Apart from sunshine, Morocco has had relative political stability in recent years and a predictable legal and banking system, helping it attract investors.

    Even so, Morocco has had a week of street protests after the death of a fishmonger, crushed to death in a garbage truck in a confrontation with police, in one of the biggest and longest challenges to authority since the 2011 Arab Spring.

    Unusually for a desert, Morocco has water from the Atlas mountains to help clean off dust. And in some countries, power lines from remote parts of the Sahara could be vulnerable to attacks - Noor's pylons have red spikes to discourage intruders.

    At Noor, the sun's rays bounce off the mirrors, heat a fluid that in turn heats a vast tank of molten salt that can drive a turbine to generate electricity even after dark.
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    China uranium demand to double by 2020 but prices seen depressed -CNNC

    Chinese demand for uranium is expected to nearly double to 9,800 tonnes per year by 2020 from the end of 2015, although a near-term supply glut will keep prices depressed, said the head of a unit of state-owned China National Nuclear Corporation (CNNC).

    China is in the middle of a nuclear reactor building programme and aims to have 58 gigawatts (GW) of capacity in full commercial operation by the end of 2020, up from 30.7 GW at the end of July.

    But Wang Ying, chief executive of CNNC International, told the IMARC mining conference in Melbourne, that only around 53 GW of capacity would likely be online by the turn of the decade as not enough construction of nuclear plants had already begun.

    Uranium last traded at $18.75 per pound, down from $67 before Japan's Fukushima disaster in 2011.

    "I think perhaps we have a bottom of around $20 per pound at present. But unfortunately today because of excess supply and storage, I don't think it will be more than $40 by the end of this decade," she said on Monday.

    Prices could recover as more nuclear capacity comes online by 2025, she added.

    Global stockpiles of uranium stand at around 1,427.5 million pounds or some 550,000 tonnes she said, around 6-7 years of supply. That includes stockpiles of nearly 300 million pounds at China's utilities. It also includes China's government stockpiles, which stand at more than 10,000 tonnes, she said, citing data by U.S. based consultancy Trade Tech.

    Meanwhile, she said uranium needed to supply growing global nuclear generating capacity is seen at 80,383 tonnes in 2020, rising to 90,780 tonnes in 2025 and 106,301 tonnes in 2030.

    Estimated total production of uranium is seen at 75,000 tonnes by 2020 and around 85,000 in 2025.
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    Steel, Iron Ore and Coal

    Indonesia's November HBA thermal coal price hits multi-year high

    Indonesia's Ministry of Energy and Mineral Resources has set its November thermal coal reference price, also known as Harga Batubara Acuan or HBA, at $84.89/mt, a jump of 23% from October and the highest level seen in more than 3 1/2 years.

    November HBA also represents a 56% surge from a year ago. The HBA was last set higher at $85.33/mt in May 2013.

    The rally in HBA prices since May this year has been largely driven by a mix of supply cuts and strong demand from China.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg GAR assessment; 25% on the Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    In October, the daily Platts FOB Kalimantan 5,900 kcal/kg GAR coal assessment averaged $72.27/mt, up from $62.14/mt in September, while the daily 90-day Platts Newcastle FOB price for coal with a calorific value of 6,300 kcal/kg GAR averaged $93.17/mt, up from $72.90/mt in September.

    The HBA price for thermal coal is the basis for determining the prices of 75 Indonesian coal products and calculating the royalty producers have to pay for each metric ton of coal they sell.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash as received and 0.8% sulfur as received.
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    India sets coal-import deadline for govt-owned power producers

    Having already announced a stated policy to reduce coal imports to nil, India has directed government-owned thermal power plants to stop coal imports from April 1.

    In advisory to thermal power plants owned and operated by the federal or provincial government companies, the Coal Ministry has said that coalcontracts and shipment from overseas have to be concluded by start of the next financial year, adding that Coal India Limited (CIL) will supply thermal power producers’ coal demand.

    No advisory was officially issued to private power producers, although CIL and the Coal Ministry have been in touch with these utilities to convince them of increasing off-take from the domestic miner, particularly at a time when international coal prices are rising, a senior government official said.

    “We have discussed separately with every public sector powercompany and have made sure that their imports turn to zero by April 1, 2017,” Coal Secretary, Anil Swarup said on Thursday.

    He stated that State-owned companies’ coal imports would decline from 40-million tons in 2015/16 to 15-million tons in 2016/17.

    Taking a lead, the country’s largest power producer, NTPC, has already stopped contracting for imported thermal coaland all shipments scheduled to come in over the next few months of currently financial year were on account of contracts signed last year.

    NTPC’s peak level imported coal was estimated at 16-million tons a year.

    However, the coal supply glut in the domestic market stems more from demand crunch, than supply side easing and, as such, shortages in future may be a distinct possibility.

    In a veiled acknowledgement, Swarup said, “at present, the coal stock situation looks like there is a surplus. However it is not enough to give coal to everyone and we are not fully comfortable about making coal available to everyone at this level of stock position.”

    CIL is carrying estimated pit-head stocks of 50-million tons, while each thermal power plant has an average stock of about 15-tons of coal.

    According to the Coal Secretary, the apparent surplus coalavailability could quickly reverse into a shortage situation with just a bare 6% to 7 % rise in average plant load factor (PLF) of thermal power plants.

    According to one analyst’s report, thermal power generation was up a mere 0.3% year-on-year during the July-to-September 2016 period.

    As a result of slowdown of the industrial sector, average PLF of thermal power plants during two quarters of the current financial reduced to 54.6%, from 60% during corresponding period of previous year and the lowest in the last 15 years.

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    Shandong sees Oct coal output down 35pct on yr on capacity cut

    Eastern China's Shandong province produced 10.01 million tonnes of raw coal in October, plunging 34.57% year on year, showed preliminary data released by the Shandong Administration of Coal Mine Safety on November 4.

    The output in October however, rose 21.22% from September, as the government eased production control at mines to boost coal output and cool down prices.

    Over January to October, raw coal output of the province totaled 106.67 million tonnes, falling 14.39% from the corresponding period last year.

    Of this, 81.98 million tonnes were produced by provincial-owned mines, down 11.47% on year, with that from mines owned by municipal and lower-level government stood at 24.69 million tonnes, down 22.84% from a year ago.

    The province aimed to slash 16.25 million tonnes per annum (Mtpa) of coal capacity during 2016. And it planned to slash 64.6 Mtpa of surplus coal capacity by closing 114 mines over 2016-2020.

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    China's 90 large coal producers Jan-Sep raw coal output down 11.9pct

    China's 90 large coal producers produced a total 1.64 billion tonnes of coal in the first nine months this year, falling 11.9% from the year prior, showed data from the China National Coal Association (CNCA).

    The top ten coal enterprises produced a total 1 billion tonnes of raw coal over the period, accounting for 61.1% of the total output produced by 90 coal producers, data showed.

    Output of the top ten was also some 40.72% of China's total raw coal output of 2.46 billion tonnes in the first nine months, down from a share of 43% over January-February this year, according to data from the National Bureau of Statistics.

    Of this, raw coal output of Shenhua Group, China National Coal Group and Shandong Energy Group stood at 306.54 million, 97.45 million and 97.21 million tonnes during the period.

    Shaanxi Coal & Chemical Industry Group, Datong Coal Mine Group and Yankuang Group followed with raw coal output at 87.66 million, 84.71 million and 83.96 million tonnes.

    Shanxi Coking Coal Group, Jizhong Energy Group, Kailuan Group and Yangquan Coal Industry Group produced 67.33 million, 63.86 million, 56.3 million and 55.82 million tonnes, respectively.

    China plans to further enhance concentration in the coal industry over the next five years, with the 14 large coal production bases expected to take 95% of the national total coal capacity by 2020 and the top eight producers accounting for some 40% of the country's total coal capacity, according to a notice released previously by CNCA.

    By 2020, China will cut the number of coal mines to 6,000 or so, and advanced coal capacity will account for some 40% of the total.

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    Japan Sept thermal coal imports up 23.4pct on year

    Japan's thermal coal imports (including bituminous and sub-bituminous coals) stood at 10.12 million tonnes in September, up 23.4% year on year and up 3.5% month on month, the latest customs data showed.

    In September, Japan imported 9.36 million tonnes of bituminous coal, up 4.2% on year and up 31.6% on month.

    Australia remained the largest supplier to Japan with 7.81 million tonnes of the material, up 37.9% on year and up 7.6% on month.

    This was followed by Russia at 877,600 tonnes, dropping 14.3% on year but edging up 1.47% on month.

    Imports from Canada stood at 228,100 tonnes, climbing 2.6% year on year and against none in August.

    Imports from Indonesia dropped 53.6% on month and down 44.2% on year to 227,300 tonnes in the month.

    Imports from China surged nearly 200% on month to 148,500 tonnes in the month, against none in September last year.

    Meanwhile, Japan imported 761,100 million tonnes of sub-bituminous coal in September, down 4.7% on year and down 30% on month.

    Indonesia, the top supplier of this material, shipped 392,100 tonnes to Japan in September, falling 36.2% on year and down 41.7% on month.

    Russia followed with 218,700 tonnes, surging 106.3% on year and roaring over 400% on month.

    Japan imported 86,800 tonnes of sub-bituminous coal from China in September, up 12.9% on year and up 28.2% on month.

    Imports from Australia dropped 55.1% on month to 63,400 tonnes, compared with only 100 tonnes from the same month last year.

    Additionally, Japan imported 484,800 tonnes of anthracite coal in September, dropping 12.3% from a year ago but up 24.3% from August.
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    US Sept coal exports fall 20.7pct on year

    US exported 3.88 million tonnes of coal in September, down 14.6% from the prior month and 20.7% from the year-ago level, showed the latest data from US Census Bureau on November 4.

    The decline was mainly attributed to this year's rally in seaborne prices for both thermal and metallurgical coal.

    The country's bituminous coal exports in September totaled 1.1 million tonnes, up 30% on month but down 21.9% from a year prior. But its metallurgical coal exports in the month dropped 26% from the previous month to 2.57 million tonnes, down 17.7% from the year-ago month.

    Sub-bituminous coal exports from the US totaled 117,125 tonnes in September, of which nearly all went to Mexico.

    During the first nine months of this year, US exported 8.42 million tonnes of bituminous coal, down 46% compared with the year-ago period. And its metallurgical coal exports totaled 26.58 million tonnes, falling 19.9% on year.

    Meanwhile, the country imported 1.17 million tonnes of sub-bituminous coal from January to September, compared with no imports during the same period last year.
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    Roy Hill mine to reach full operations in Jan-March - Marubeni CFO

    Japanese trading house Marubeni Corp expects its Roy Hill iron-ore mine in Australia to reach full operations in the January-March quarter, CFO Nobuhiro Yabetold a news conference on Friday.

    The mine, jointly owned by Marubeni, Hancock Prospecting, South Korean steelmaker Posco and Taiwan's China Steel, shipped its first iron ore cargo in December last year, marking the start up of the last of the mining-boom era mega projects in the country.

    Roy Hill has capacity to produce and ship 55-million tonnes of high grade iron-ore a year.
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    Brazil environmental agency to fine Samarco daily over dam spill response

    Brazil's federal environmental agency IBAMA said on Friday it is fining Samarco Mineracao 500 000 reais ($154 693) per day for not complying with directives related to a 2015 tailings dam spill.

    Samarco, an iron-ore joint venture between Vale and BHP Billiton, must increase the height of a dike that was built to contain the continuing runoff from the dam spill and effectively treat the mining waste, known as tailings, IBAMAsaid.

    Samarco said it was working to increase the capacity of the dike to 2.9-million cubic meters at the mine in Minas Gerais, a state in south eastern Brazil. It did not say when this work would be completed.

    Environmental bodies, including IBAMA, have expressed concern that the oncoming rainy season could cause further mining waste to run into rivers and surrounding ecosystems.

    Samarco says it is working to ensure environmental impacts from the rains are kept to a minimum.
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    China's Baosteel increases steel capacity cuts

    China's Baosteel Group said it would cut steel production capacity by 11 million tonnes from 2016 to 2017, according to an announcement posted on its website on Friday, ahead of an earlier target.

    The company had previously set a goal of cutting 9.2 million tonnes of excess capacity between 2016 and 2018.

    Baosteel Group has taken over Wuhan Iron & Steel Group to form the country's top steelmaker Baowu Steel Group and also the world's second-largest maker after ArcelorMittal.

    The China Iron & Steel Association (CISA) said last week that China is on track to hit its 2016 target for crude steel capacity cuts of 45 million tonnes by late October, with extra reductions expected in the last two months of the year.

    Overcapacity in China's steel sector has created trade tensions, with India, Australia and the United States imposing duties on Chinese steel exports amid allegations of dumping.

    Dai Zhihao, president of Baoshan Iron & Steel said in August that its parent Baosteel Group would cut 12.20 million tonnes of capacity through 2018, in line with Beijing's efforts to curb oversupply.
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