Mark Latham Commodity Equity Intelligence Service

Tuesday 1st November 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    China's power use to rise 2.5% in 2016, CEC


    China's power consumption is forecast to rise some 2.5% year on year in 2016, said an official from the China Electricity Council (CEC), on an industry summit held on October 28.

    Electricity supply will remain sufficient in China on the whole during the same period, with surplus in some areas, said Cai Yiqing, deputy chief engineer of CEC, at 2016 the 4th Global Thermal Coal Resource & Market Summit organized by China Coal Resource.

    The country's installed capacity of power generation will gain 7.8% to 1.64 TW by the end of 2016 from 1.51 TW last year, with newly-added capacity exceeding 100 GW, he said.

    The utilization hour of electricity generation units is expected to fall to 3,700 hours in the second half of this year, with that of thermal power units down to 4,050 hours or so.

    China is picking up pace in lowering carbon emissions while seeking to power grid connection with other countries. Cai predicted the country's non-fossil energies will climb to 15% of the total energy consumption over 2016-2020, while coal burns will drop drastically.  

    Member countries of the Organization for Economic Cooperation and Development (OECD) have seen natural gas contributing over 30% of their primary energy consumption, and their renewable energies and nuclear power are also booming, according to Cai.

    The power sector has been allowed to be preliminarily open to the market, to enhance utilization efficiency and optimize allocation of energy sources. However, specific market rules and supervision should be worked out to ensure healthy development of the industry, Cai stated.

    Meanwhile, difficulties ahead are far more than expected – surplus capacity of fossil fuels, bottleneck of renewables, tough task of clean energy substitution and inefficient power generation system. The central government will take measures to tackle them, Cai pointed out.

    China will also put hydropower generation in the first priority, and vigorously develop nuclear and natural gas based power generation.

    The green and clean development of coal-based power generation will still be important in the future, as coal is expected to continue to dominate China's energy mix in the long term.

    http://www.sxcoal.com/news/info?lang=en&id=4548642

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    Bitcoin price breaches $700 on the upside


    The average price of Bitcoin across all exchanges is 711.17 USD

    ‏@bitcoinprice
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    South African Rand Jumps After Fraud Charges Against Finance Minister


    South Africa’s currency jumped on Monday after the country’s national prosecutor dropped fraud charges against Finance Minister Pravin Gordhan, the latest chapter in a drawn-out battle for control of the ruling African National Congress that has rattled markets in Africa’s most developed economy.

    National Prosecuting Authority chief Sean Abrahams announced in a news conference in Pretoria that charges against Mr. Gordhan would be dropped because there was no intention to act unlawfully.

    Mr. Gordhan, a respected treasury chief and veteran of the antiapartheid struggle, was due to be prosecuted on Wednesday for approving a generous early-retirement deal for a former senior official in the South African Revenue Service.

    “I am satisfied that Mr. Gordhan didn’t have the requisite intention to act unlawfully,” Mr. Abrahams said at the end of a long press conference laced with obscure case law. “As such, I have directed the summons to be withdrawn with immediate effect,”

    The rand jumped about 1.4% to 13.625 to the dollar, its highest level in almost a month. Yields on South Africa’s 10-year bond fell to 8.710%, down from Friday’s close of 8.875%. Yields had hit 8.925% on Thursday, the highest since Oct. 12 and close to September-highs, according to Thomson Reuters data.

    The dropping of the charges represents the latest chapter of a turf war between Mr. Gordhan and President Jacob Zuma over government spending and the direction of the ANC, which has governed South Africa since the end of white-minority rule in 1994. Allies of Mr. Zuma, whose second term in office ends in 2019, have openly fought with Mr. Gordhan over control of state finances, including the running of state-owned enterprises, anticorruption agencies and the central bank. Ratings firms have warned that political infighting could lead to South African bonds being downgraded to junk status.

    http://www.wsj.com/articles/rand-jumps-after-south-africa-drops-fraud-charges-against-finance-minister-pravin-gordhan-1477908530

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    UK's First automated grid capacity warning triggered


    The new automated Capacity Market notices are a signal four hours in advance that there may be less generation available than the grid operator expects to meet national power demand – when extra headroom is forecast to fall below 500MW.

    They are intended to be a signal that the risk of a ‘System Stress Event’ in the electricity network is higher than under normal circumstances.

    Today, the grid warned there could be insufficient electricity production supply to meet the UK’s demand at 4.30pm.

    It said demand was likely to be 44.26MW while supply would be 44.49MW.

    In response, around 800MW of demand reduction and onsite generation capacity was prepared to fill the gap.


    The news comes as the nation moves back to GMT, when people are expected to use more power.

    National Grid said the notice does not indicate there is a supply problem.

    A spokesperson added: “Capacity Market Notices are automated and based on the data industry has submitted.

    “They are not an indication of supply problems but to flag that the trigger level set by government under the Capacity Market rules (500MW above expected demand and NG’s operating margin) has been breached. The notice serves as a reminder to Capacity Market participants to pay attention to any system notices or instructions that may appear from the system operator.”

    Earlier this month, National Grid increased the gap between total power generating capacity and peak demand to 6.6% for this winter.

    https://www.energylivenews.com/2016/10/31/first-automated-grid-capacity-warning-triggered/?utm_source=dlvr.it&utm_medium=twitter

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    Oil and Gas

    Iran floating storage rises


    5 TANKERS HAVE BEEN ADDED TO THE #IRANAN FLOATING STORAGE AS THEY HAVE BEEN THERE LONGER THAN A MONTH. ADDED 2MB; NOW 38.5MB TOTAL.

    @Samir_Madani
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    Indonesia offers three unconventional oil and gas blocks - official


    Indonesia is offering three new unconventional oil and gas blocks on the islands of Sumatra and Kalimantan to potential bidders, an energy ministry official said on Monday.

    The assets on offer are one shale gas block in East Kalimantan, with potential resources of 7 trillion cubic feet of gas and 21 million barrels of oil, as well as two coalbed methane blocks in South Sumatra.

    Bidders can propose a production split or make an upfront payment for the right to develop the block, Tunggal, an upstream director at the directorate-general of oil and gas who goes by one name, told reporters.

    http://www.reuters.com/article/indonesia-energy-tender-idUSL4N1D13K8

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    Iran eyes new crude oil buyers, Asia remains linchpin


    Iran continues its quest for new crude buyers, especially in Europe, but its loyal customer base will continue to hinge on countries like India and China, whose demand for Iranian crude has observed a steady rise this year.

    Iran has found interest for its crude in some unusual places in the past few months as it continues it diversify its list of buyers. Earlier this month it agreed to sell 1 million barrels of crude oil to Hungary via Croatia as it seeks to widen its post-sanctions customer base, which now includes cargoes sold to oil major BP, France's Total, Greece's Hellenic Petroleum, Spain's Repsol and Cepsa, Russia's Lukoil, Poland's Grupa Lotos, Portugal's Petrogal and Italy's Saras and Iplom.

    Iran said it has held talks with Bosnia and Herzegovina this week as it hopes to expand its list of crude oil export destinations. However, its shipments to Asia remain the pillar of its export market.

    In September, total estimated export volumes of crude and condensate on VLCCs, Suezmaxes and Aframaxes from Iran's crude and condensate ports jumped to 2.49 million b/d from 2.42 million b/d in August.

    This sharp rise was driven by a heavier Iranian Heavy export program, sources said.

    Exports to Asia accounted for 79%, or some 1.72 million b/d, of total outflows, marking a fall of around 300,000 b/d from August.

    Despite the slight fall, Asia remains its premier market with China and India buying almost 50% of Iranian crude last month.

    India was the largest buyer of Iranian crude last month, totaling 602,456 b/d, up from 458,880 b/d in August

    India's thirst for Iranian crude has intensified this year, with its estimated share of market volume for September rising to 25% from 19% in August.

    India's Oil Ministry recently said it received its first consignment of 260,000 mt of Iranian crude for its strategic reserves on the west coast in mid-October.

    State-run Mangalore Refinery and Petrochemicals Ltd. received almost 2 million barrels of a variety of Iranian crude grades at the strategic crude oil storage facility at Mangalore, which has a capacity of 11 million barrels.

    Around 5.5 million-6 million barrels of storage at the Mangalore facility is to be filled with Iranian crude.

    The other two strategic reserve sites are at Visakhapatnam on the east coast, with capacity of 9.75 million barrels, and Padur in southern India's Kerala, which will have the highest capacity of around 18.33 million barrels when it becomes operational by the end of this year.

    http://www.platts.com/latest-news/oil/london/analysis-iran-eyes-new-crude-oil-buyers-asia-26582551
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    G.E. to Combine Oil and Gas Business With Baker Hughes


    General Electric said on Monday that it would combine its oil and gas business with Baker Hughes, looking to increase its scale to battle the effects of a prolonged slump in oil prices that has eaten into results and prompted job cuts across the petroleum sector.

    The new company, which G.E. referred to as the “new” Baker Hughes, would be one of the world’s largest providers of equipment, technology and services to the oil and gas industry. In 2015, the businesses had $32 billion in revenue, and operations in more than 120 countries. It also would be better able to compete with Schlumberger and other oil services companies.

    Oversupply in the oil industry has sapped prices in the past two years, and there is little expectation that prices will rise much more before the end of the year. But expectations that the Organization of the Petroleum Exporting Countries cartel could freeze or cut production has helped send prices higher recently.

    The deal came after Baker Hughes and Halliburton called off a $35 billion merger in May, following a lengthy regulatory review and a lawsuit by the Justice Department to block the transaction on antitrust grounds.

    After the deal, G.E. would own 62.5 percent of Baker Hughes. Shareholders of Baker Hughes would own the rest.

    “This transaction creates an industry leader, one that is ideally positioned to grow in any market,” Jeffrey R. Immelt, the G.E. chairman and chief executive, said in a news release. “Oil and gas customers demand more productive solutions.’’

    Under the terms of the deal, Baker Hughes shareholders would receive a one-time cash dividend of $17.50 a share. The dividend would be funded by $7.4 billion contributed by G.E.

    The transaction is subject to approval by regulators and Baker Hughes shareholders. It is expected to close in mid-2017.

    It would be structured as a partnership with G.E. and Baker Hughes each contributing assets to the new company and G.E. holding a controlling stake.

    The combined company would have headquarters in Houston and London, with Mr. Immelt serving as chairman and Lorenzo Simonelli, the president and chief executive of the unit G.E. Oil & Gas, serving as president and chief executive.

    Martin Craighead, the Baker Hughes chairman and chief executive, would serve as vice chairman. The new Baker Hughes board would have nine directors, with five from G.E., including Mr. Immelt.

    http://www.nytimes.com/2016/11/01/business/dealbook/general-electric-baker-hughes-oil-energy.html?_r=0
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    Shell pares back capex, posts profit


    Shell is aiming for the lower end of a previously given guidance on capital expenditure for next year, which will be some $4 billion off this year's expected total.

    The Anglo-Dutch supermajor also ran up a profit in the third quarter as against a hefty loss a year earlier, although revenues sank.

    Shell is looking at full-year organic capex this year of $29 billion - inclusive of $3 billion in non-cash items - which is around $18 billion below the 2014 combined spend of Shell and BG Group, which it acquired.

    For next year capex is seen at around $25 billion - which is right at the bottom of previous guidance of between $25 billion and $30 billion.

    Capex for the third quarter was $7.7 billion and $73 billion for the first nine months of the year - however, $52.9 billion of that related to the BG purchase.

    Net profit for the three months to the end of September was $1.43 billion, a vast improvement on the $7.39 billion loss taken a year earlier.

    Revenues slipped, however, from $68.71 billion to $61.86 billion. This was due to a huge drop in the average realised price of both liquids (11% down) and natural gas (31% down).

    Oil and gas production was, however, up significantly, rising 25% to 3.6 million barrels of oil equivalent per day. A major factor was the integration of BG, which contributed an increase of 806,000 boepd.

    "Excluding the impact of divestments, curtailment and underground storage utilisation at NAM in the Netherlands, a Malaysia PSC expiry, PSC price effects, the Woodside accounting change, and security impacts in Nigeria, third quarter 2016 production increased by 28% compared with the same period last year, or in line with last year excluding BG," Shell said.

    Liquefied natural gas volumes of 7.7 million tonnes were 45% higher, with BG contributing 2.19 million tonnes.

    http://www.upstreamonline.com/live/1186344/shell-pares-back-capex-posts-profit?utm_source=twitterfeed&utm_medium=twitter
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    BP third quarter profits cut in half but beat forecasts


    Underlying third-quarter profits halved at BPcompared to last year but the fall was not as bad as feared as the oil colossus continues to chip away at costs.

    Although down 49% on last year due to lower oil prices, currency effects and one-off events hitting production levels, underlying replacement cost profits of $933m in the three months to the end of September were well ahead of the consensus forecast of $720m.

    Cost-cutting helped, with cash costs over the past four quarters down $6.1bn compared to two years ago.

    "We continue to make good progress in adapting to the challenging price and margin environment," said chief financial officer Brian Gilvary. "We remain on track to rebalance organic cash flows next year at $50 to $55 a barrel, underpinned by continued strong operating reliability and momentum in resetting costs and capital spending.

    The Brent oil price averaged $46 a barrel in the quarter, compared with $50 a barrel in 3Q 2015, and gas prices outside the US were also weaker. Refining margins were steeply down from a year earlier, depressed by high product stock levels.

    Reported profits were up $1.66bn from $1.23bn a year ago and the FTSE 100 company announced an unchaged quarterly dividend of 10 cents per share, which will be paid on 16 December with the sterling translation to be calculated by 6 December.

    Total production for the quarter was 5.9% lower and underlying production fell 2% to 2,110m barrels of oil equivalent per day, with the main factors being maintenance activities, the impact of weather and the outage from the Pascagoula gas plant fire in the Gulf of Mexico.

    For the first nine months of the year, total and underlying production of 2,209mboe/d was broadly flat versus the same period in 2015.

    Looking to the final quarter of the year, BP said it expected production to be slightly higher than the third quarter, mainly reflecting recovery from planned seasonal turnaround and maintenance activity.

    Expectations for full year organic capital expenditure were reduced to $16bn, compared to original guidance of $17-19bn given at the start of the year. For 2017 guidance is for $15-17bn.

    With $2.7bn of cash divestments over the year to date, gearing at the quarter end was 25.9%.

    http://www.digitallook.com/news/news-and-announcements/bps-quarterly-profits-cut-in-half-but-beat-forecasts--1942758.html
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    Saudi Aramco, Nabors ink onshore rig agreement


    Nabors Industries has announced the signing of an agreement to form a new joint venture (JV) in the Kingdom of Saudi Arabia to own, manage and operate onshore drilling rigs. The JV, which will be equally owned by Saudi Aramco and Nabors, is anticipated to be formed and commence operations in the second quarter of 2017.

    As part of its commitment to developing a competitive Saudi energy sector, Saudi Aramco has sought to localize industry hubs in order to foster economic diversification and job creation. This JV is one of the anchor projects that has grown out of this strategy, which supports the wider development and localization of industries such as rig and rig equipment manufacturing and casting and forging.

    The JV will leverage Nabors' established business in Saudi Arabia to begin operations, with a focus on Saudi Arabia's existing and future onshore oil and gas fields. Saudi Aramco and Nabors will each contribute land rigs to the JV in the first years of operation along with capital commitments toward future onshore drilling rigs, which will be manufactured in Saudi Arabia.

    Nabors Chairman, President and CEO, Anthony G. Petrello, said, "Nabors has had a decades-long and a mutually beneficial relationship with Saudi Aramco. We welcome this opportunity to expand that relationship, extend our commitment to the Kingdom, and create a long-term, profitable growth partnership with high skills career opportunities for Saudi employees. This venture represents a new chapter in the operator-contractor relationship. We fully expect the venture's shared interest and collaborative efforts to result in even higher levels of safety and efficiency, while enhancing Saudi Aramco's well productivity and cost savings."

    http://www.worldoil.com/news/2016/10/31/saudi-aramco-nabors-ink-onshore-rig-agreement
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    Interest in latest UK oil exploration tender lowest in 14 years


    Britain's latest tender for offshore exploration permits attracted the lowest interest in 14 years, underlining how the mature North Sea is struggling to entice explorers to extract the 20 billion barrels of oil equivalent left untapped.

    The 29th round for offshore licences, which included unexplored areas around the Shetlands, received only 29 applications for 113 blocks, compared with 1,261 blocks on offer, Britain's Oil and Gas Authority (OGA) said on Monday.

    "Long standing investors continue to seek new acreage and we also welcome the arrival of new entrants," OGA Chief Executive Andy Samuel said in a statement.

    A total of 24 companies submitted applications, including multinationals and first-time applicants, the OGA said.

    The total of applications received was the lowest since 2002, however, when just 289 blocks were on offer.

    Oil companies across the globe have severely cut back spending on exploration as weak prices have squeezed cashflow.

    Aware of tighter budgets, the OGA reduced licence-related rental fees by up to 90 percent in the latest round, which closed on Oct. 26, and offered more flexibility in terms of when explorers can carry out certain work programmes.

    The hunt for new oil and gas fields in the British part of the North Sea is expected to fall this year to the lowest since the early 1970s when North Sea oil and gas extraction first took off.

    http://www.reuters.com/article/britain-oil-exploration-idUSL8N1D12MZ

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    Angola LNG production halted


    Angola LNG has suspended production at its 5.2 million tons per year liquefaction plant in Soyo as it is conducting a planned shutdown for a “minor intervention”, an Angola LNG spokeswoman confirmed to LNG World News on Monday.

    Production of the chilled fuel is expected to resume during the month of November, the spokeswoman said in an emailed statement.

    To remind, the $10 billion Angola LNG project, led by U.S. energy giant Chevron, restarted operations in May this year after it was closed for more than two years due to a major rupture on a flare line that occurred in April 2014.

    The facility was shut down again in July this year as part of the restart and commissioning programme and came back online in September.

    Since the May restart, the Angola LNG project shipped 8 cargoes of LNG and 16 LPG cargoes, Chevron chief financial officer Pat Yarrington told analysts on Friday after the company announced its third-quarter results.

    According to Yarrington, the plant reached a rate of approximately 5 mtpa of LNG prior to the latest shutdown.

    “Short duration shutdowns are often experienced as facilities are ramped up to their full capacity. ALNG expects to restart the plant within the next couple of weeks and will continue to ramp up and fine-tune the system,” she added.

    Angola LNG is a joint venture between Sonangol (22.8%), Chevron (36.4%), BP (13.6%), Eni (13.6%), and Total (13.6%).

    http://www.lngworldnews.com/angola-lng-production-halted/
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    Nigerian Oil Pipeline Hit By Fresh Violence In Niger Delta


    An oil workers’ representative said on Monday that there was another attack on an oil pipeline in the Niger Delta, which a fairly new militant group had claimed on Saturday.

    The Niger Delta Greenland Justice Mandate group claimed that it had attacked the Efurun-Otor pipeline in the in the Urhobo region, operated by the Nigerian Petroleum Development Company (NPDC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC).

    “Although the pipeline was not in use at the time of attack, NPDC periodically makes use of it and it is a major carrier of their product from (oil mining lease) OML 34 to OML 65,” Lucky Sorue, head of oil and gas workers in the Urhobo region, said on Monday, as quoted by Reuters.

    The Niger Delta Greenland Justice Mandate became notorious in August when it started blowing up pipelines earlier that same month. The Greenland group has been targeting NPDC installations because these are the only installations in the area where the Greenland group operates. That group, which is not affiliated in any way to the most notorious militants, the Niger Delta Avengers (NDA), had not taken part in the ceasefire that the NDA had vowed to keep.

    Last week, however, just as Nigeria said that its oil production had increased to 1.9 million barrels per day, from the 1.3 million bpd it produced in the spring of 2016, the NDA targeted Chevron’s offshore export pipeline at Escravos. The sharp drop in Nigeria’s daily crude oil output had been courtesy of (mostly) the NDA militants targeting oil infrastructure in the Niger Delta. Before the militant attacks started a couple of years ago, OPEC member Nigeria was pumping 2.2 million bpd.

    Due to the violence that has crippled Nigeria’s oil production, OPEC has generally agreed that the country, alongside Libya and Iran, would be given a pass when the cartel discusses production cuts to fit its total production within the tentative 32.5 million bpd-33 million bpd limit it is currently trying to negotiate.

    http://oilprice.com/Latest-Energy-News/World-News/Nigerian-Oil-Pipeline-Hit-By-Fresh-Violence-In-Niger-Delta.html?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+oilpricecom+%28Oil+Price.com+Daily+News+Update%29
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    ConocoPhillips advances deepwater exploration exit with Senegal assets sale completion


    ConocoPhillips has completed a transaction for the sale of its shares in ConocoPhillips Senegal BV, which holds a 35 percent interest in three exploration blocks offshore Senegal, to Australia’s Woodside Petroleum.

    ConocoPhillips said on Friday that the total sales price of the transaction between its subsidiary and Woodside was around $440 million, including net customary adjustments of approximately $90 million.

    To remind, the two companies agreed in July that Woodside would buy all of ConocoPhillips’ interests in Senegal, based on an effective date of January 1, 2016.

    Matt Fox, executive vice president for Strategy, Exploration, and Technology at ConocoPhillips, said: “We are pleased to complete this transaction with Woodside. We experienced a transparent and cooperative relationship with the Senegalese government and appreciated their support throughout a very successful exploration and appraisal campaign.

    “By completing this sale we are progressing our broader exit from deepwater exploration, which will further increase our capital flexibility and reduce the cost of supply of our portfolio.”

    The three offshore exploration blocks, Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore, had a net carrying value of approximately $285 million as of Sept. 30, 2016.

    With the acquisition of ConocoPhillips’ Senegal assets, Woodside will get access to the SNE and FAN deep-water oil discoveries. SNE is one of the largest global deepwater oil discoveries since 2014. Woodside estimates that the SNE discovery contains 560 MMbbl of recoverable oil (at the 2C confidence level, 100%).

    Partners in the exploration blocks are Cairn Energy, FAR Limited, and Petrosen, the Senegal National Oil Company.

    http://www.offshoreenergytoday.com/conocophillips-completes-senegal-assets-sale/?utm_content=bufferd8b36&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
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    Genscape: Cushing inventory


    Genscape Cushing inv +585K for week ended 10/28

    ‏@zerohedge
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    Anadarko Petroleum posts bigger-than-expected loss


    Anadarko Petroleum Corp reported a bigger-than-expected quarterly loss, hurt by lower crude prices, and said it expects to raise more than originally planned through asset sales this year.

    Anadarko increased its full-year asset monetization target for the second time this year, this time to $4 billion from its July forecast of $3.5 billion.

    The company has slashed its 2016 capital spending, cut its dividend, laid off about 1,000 workers and sold assets to cope with a more than 55 percent drop in oil prices since mid-2014.

    The net loss attributable to Anadarko narrowed to $830 million, or $1.61 per share, in the third quarter, from $2.24 billion, or $4.41 per share, a year earlier.

    Excluding items, the company lost 89 cents per share, much more than analysts average estimate of 57 cents, according to Thomson Reuters I/B/E/S.

    Anadarko's revenue rose 12.1 percent to about $1.89 billion in the three months ended Sept. 30, also missing analysts' estimates of $2.19 billion.

    http://www.reuters.com/article/us-anadarko-petrol-results-idUSKBN12V2BW
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    CONSOL, Noble Energy to separate Marcellus shale joint venture


    The two companies have negotiated a separation of the JV that was formed in 2011 for the exploration, development and operation of primarily Marcellus shale properties in Pennsylvania and West Virginia. Highlights of the agreement include:

    Each party will own and operate a 100% interest in its properties and wells in two separate operating areas. Each party will have independent control and flexibility with respect to the scope and timing of future development over its operating area.
    All acreage operated by CONSOL Energy and Noble Energy in their respective operating areas will remain fully dedicated to CONE Midstream Partners.

    "This agreement with Noble Energy to separate our JV is bitter sweet for CONSOL Energy," commented Nicholas J. DeIuliis, president and CEO. "Noble has been a top-notch partner, and we have enjoyed the collaborative relationship that we have shared over the past five years. Even though we have seen much success together, we have agreed that we must both have the ability to adapt to a changing energy landscape. The separation of the JV is consistent with CONSOL's transitional journey to a pure-play exploration and development company, and the company's commitment to future growth, in what is now a more robust and actionable stacked pay opportunity set."

    David L. Stover, chairman, president and CEO of Noble Energy, added, "The accomplishments of our JV over the last five years are outstanding, including significant increases in combined production and recoverable resources. These outcomes are a direct result of the high-quality nature of the acreage, but even more so a result of the combined technical leadership and coordination between our two companies. Today's agreement between CONSOL Energy and Noble sets a clear path for both companies into the future. It provides us with greater control and flexibility over the future pace of development in the Marcellus."

    Prior to the agreement, the JV collectively operated approximately 669,000 Marcellus acres. CONSOL Energy and Noble Energy each held a 50% working interest. As of the effective date of the agreement on Oct. 1, 2016, total flowing production to the JV was 1.07 Bcfd of natural gas equivalents.

    Subsequent to closing of the agreement, the acreage and production of the prior JV will be as follows:

    CONSOL Energy will operate a 100% working interest in approximately 306,000 Marcellus acres with associated production of approximately 620 MMcfd of natural gas equivalents. The majority of the acreage operated by CONSOL Energy resides in Pennsylvania.
    Noble Energy will operate a 100% working interest in approximately 363,000 Marcellus acres with associated production of approximately 450 MMcfd of natural gas equivalents. The majority of the acreage operated by Noble Energy resides in West Virginia.

    In addition to the acreage and production realignment between the two companies, Noble Energy will also remit a cash payment of approximately $205 million to CONSOL Energy at closing. The exchange of properties and cash result in the elimination of the remaining outstanding carry cost obligation due from Noble Energy to CONSOL Energy.

    While the exchange agreement creates independent ownership interests in the acreage and production currently gathered by CONE, it does not change the total acreage dedicated to CONE, the gathering rates, or other fundamental terms for the services provided by CONE. CONSOL Energy and Noble Energy remain as co-sponsors of CONE and shippers on CONE's gathering systems, while retaining their respective general partnership and limited partner ownership interests in CONE.

    The agreement is expected to close in the fourth quarter.

    http://www.worldoil.com/news/2016/10/31/consol-noble-energy-to-separate-marcellus-shale-joint-venture
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    Suncor Energy Inc sells lubricants unit to HollyFrontier Corp for $1.13 billion


    U.S. oil refiner HollyFrontier Corp said on Monday it would buy Suncor Energy Inc’s Petro-Canada lubricants unit for $1.13 billion, expanding its North American lubricants business.

    HollyFrontier will become the fourth-largest lubricants producer in North America with a capacity of 28,000 barrels per day, or about 10 per cent of North American production, the oil refiner said.

    Petro-Canada is the world’s largest manufacturer of white mineral oil, which is used in health and beauty products, pharmaceuticals, adhesives, plastics and elastomers. It purchased its lubricants business from Gulf Canada in 1985.

    Suncor, Canada’s biggest energy company, merged with Petro-Canada in 2009.

    Reuters reported last week, citing sources, that HollyFrontier was in advanced talks to acquire Suncor’s Petro-Canada lubricants division for a little over $1 billion, after submitting the highest bid in an auction.

    The deal, which includes working capital of about $342 million, will immediately add to HollyFrontier’s earnings per share and cash flow, the company said.

    HollyFrontier said it would fund the deal, expected to close in the first quarter of 2017, with a combination of debt and cash on hand.

    http://business.financialpost.com/news/energy/suncor-energy-inc-sells-lubricants-unit-to-hollyfrontier-corp-for-1-13-billion?__lsa=e419-c465
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    Agriculture

    China to launch first e-commerce satellite in 2017


    China plans to launch its first e-commerce satellite in 2017, with the primary purpose of using satellite data in agriculture.

    The plan was announced on Monday during an international aviation and aerospace forum in Zhuhai, Guangdong Province, by the China Academy of Launch Vehicle Technology, China Aerospace Museum and Juhuasuan, an arm of e-commerce giant Alibaba.

    "In an era of space economy, the potential of a commercial space industry is immeasurable," Han Qingping, president of the Chinarocket Co., Ltd, said at the forum.

    In 2015, the value of the global space industry amounted to 330 billion U.S. dollars, 76 percent of which resulted from commercial activities.

    Chinese authorities are making efforts, including legislation, to support and regulate the development of a commercial space industry.

    "China is speeding up the making of space law, with the aim of having completed drafting the law by the end of this year," Hu Chaobin, an official from the State Administration of Science, Technology and Industry for National Defense, said during the forum.

    http://en.people.cn/n3/2016/1031/c90000-9135111.html
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    Precious Metals

    Canadian miners complain of hefty taxes, weak rule of law in Mexico


    Canadian miners are seeking a meeting with Mexico's president to air grievances about issues ranging from the rule of law to aggressive tax collection, according to an unusually strident letter by an industry group published on Monday.

    President Enrique Pena Nieto should intervene for Mexico to "recover its position in relation to other investment destinations in the hemisphere," the Canadian Chamber of Commerce in Mexico (CanCham) wrote on behalf of the miners, in a letter printed in Mexico's Reforma newspaper.

    The letter cited unrest earlier this month at Goldcorp's Penasquito gold mine in the state of Zacatecas, where a week-long blockade by a trucking contractor forced operations to shut down temporarily.

    "Goldcorp did not get support from Mexican institutions to end the illegal blockade and was forced to negotiate individually with the truckers in the absence of the application of the law," the letter read.

    CanCham also flagged "a policy of aggressive tax collection" at SAT, Mexico's tax authority, complaining of a spike in the number of audits and delays in receiving value-added-tax (VAT) refunds. They also expressed concern about new mining royalties.

    Reuters reported last year that Mexico's government withheld hundreds of millions of dollars in tax refunds owed to Procter & Gamble, Unilever, and Colgate combined as it sought to coax them and other multinationals to pay more income tax locally.

    Neither the president's office nor SAT responded to requests for comment.

    http://www.reuters.com/article/mexico-mining-idUSL1N1D1222
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    Base Metals

    Copper at risk of being squeezed as prices lag incentive levels


    A lack of investment in new project capacity risks squeezing copper prices higher in the next decade, with current prices falling well short of what is needed to tempt fresh money into the sector.

    After years of strong output and lacklustre demand, copper prices are languishing at around $4,750 a tonne, close to January's seven-year low at $4,318.

    Analysts surveyed by Reuters in recent weeks pegged incentive prices for the metal - at which investment in new projects becomes viable - at $6,200-7,000 a tonne. The premium of that price over the benchmark suggests consumers are having no difficulty sourcing copper.

    "Current spot prices are way below incentive prices, indicating that metal is more than well supplied," said Societe Generale analyst Robin Bhar, speaking as the metals industry prepares to gather in London next week for LME Week, a series of seminars and functions surrounding the London Metal Exchange.

    Copper prices have dropped precipitously from over $10,000 a tonne in 2011 to less than half that this year, as a once-undersupplied market swung back into surplus.

    That has led producers to mothball capacity, while holding off investing in new projects. Projects given the green light during the boom years have still been coming online, however, keeping supply buoyant.

    In terms of maintaining current output, analysts flag up concentration risks in the market.

    "You have five mines accounting for 80 percent of net supply growth," Bank of America-Merrill Lynch analyst Michael Widmer said.

    "There is a real risk that you won't get each of those mines hitting guidance, and then you will potentially run short of mine supply as soon as next year."

    Future projects in copper are likely to be lower grade and in more remote areas with less developed infrastructure, pushing up costs, Citi said.

    Deutsche Bank earlier in 2016 predicted small surpluses this year and next, but a deficit of 280,000 tonnes in 2018, 350,000 in 2019 and 280,000 in 2020.

    That is likely to trigger a price response, in turn incentivising more supply. But the length of time needed for new copper projects to move from inception to production looks like creating the perfect conditions for a price squeeze.

    "Copper is a very slow business in terms of new project development - I always equate it to an oil tanker trying to turn," Macquarie analyst Vivienne Lloyd said.

    "It takes eight to 11 years to bring on a greenfield copper mine. Miners haven't been committing the development this year, last year and the year before that would have been required to bring things on by 2020. So, as usual, the cycle will turn too late. We'll have a deficit, and prices will really go up."

    http://www.reuters.com/article/metals-lmeweek-incentiveprices-idUSL8N1CV5TQ

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    Glencore closes another zinc mine


    Apart from steelmaking raw materials iron ore and coking coal, zinc is the best performing mined commodity in 2016. Trading at $2,374 a tonne, the metal is up 47% year to date.

    Zinc's prospects brightened considerably after the shutdown of two major mines last year – Australia's Century and the Lisheen mine in Ireland. The two mines had a combined output of more than 630,000. The shuttering of top zinc producer Glencore’s depleted Brunswick and Perseverance mines in Canada in 2012 brings total tonnes going offline since 2013 to more than one million tonnes.

    Glencore has been out in front when it comes to curtailing production to shore up prices and the Swiss giants' announcement of cutbacks inspired another leg up in the price. Glencore's first half production numbers showed a 31% output decline to 506,000 tonnes after the company idled mines in Peru and downscaled its Australia operations.

    On Monday announced another zinc and lead mine closure due to depletion of reserves. According to the company the mine began production in 2004 with an initial expectation of an eight year life but it lasted 13 years producing 40m tonnes of ore, 1.75m tonnes of contained zinc metal and nearly one million tonnes of contained lead metal.

    Glencore said it has implemented a staged workforce transition program over the past three years with many employees redeployed to other operations.

    In a statement Glencore’s Chief Operating Officer for Zinc Assets Australia Greg Ashe as saying Black Star’s workforce "overcame a number of unique geotechnical and mining challenges presented by an old expansive network of abandoned underground workings":

    “The team adopted an innovative approach to void analysis, which enabled the safe and sustainable recovery of a valuable mineral resource that would otherwise have been inaccessible.”

    http://www.mining.com/glencore-closes-another-zinc-mine/?utm_source=twitterfeed&utm_medium=twitter
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    Aluminum: China road regulations limit supply


    Since mid-September, China has enforced a lower maximum load weight on trucks, from 55 mt to 49 mt, with Commerzbank commenting that "the costs of transporting aluminum by lorry have risen sharply," as a result as there are "not sufficient rail transport capacities available" in the aluminum-producing provinces in the north of the country.

    Market analysts have said that this could increase producer costs by as much as 30%, the Wall Street Journal reported.

    "This change has come at a time when orders in China are very decent, so there is also a demand story in play," a trader said Friday.

    Since September 21, the day the regulation was introduced, several Asian LME warehouses have also seen a drawdown in stocks. Live Singaporean warrants have subsequently fallen by 11,425 mt as of Friday since September 21, with some market participants saying some of this may be sent to China on the higher price environment.

    On the same day in September, 28,800 mt of LME warrants were canceled in Singapore with further cancellations arising over the month of October. Busan cancellations rose to 17,325 mt in early October, with the majority of this already loaded out.

    http://www.platts.com/latest-news/metals/london/aluminum-futures-prices-strengthen-as-chinese-26581278

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    Steel, Iron Ore and Coal

    Coal producer Shenhua's profit rises 46% in Q3

    Coal producer Shenhua's profit rises 46% in Q3
     
    China's largest coal producer saw profit jump 46 percent in the third quarter amid a price surge following the government's efforts to curb the oversupply.

    Net income at China Shenhua Energy Co, the biggest coal miner in the world's largest energy consumer, rose to 7.48 billion yuan ($1.1 billion) from about 5.1 billion yuan in the same period last year, the Beijing-based company said in a statement to the Shanghai Stock Exchange.

    Coal prices have made a comeback after five years of declines because of a reduction in domestic supply.

    The central government earlier this year ordered miners to operate for the equivalent of 276 days of production, down from the standard 330 days, as part of its efforts to revitalize the industry and curb industrial overcapacity. This helped spur the nation's benchmark power-station coal prices more than 70 percent so far this year.

    "Shenhua and China Coal Energy Co have obviously benefited from the coal price surge in the previous quarter," Leo Wu, an analyst with Guotai Junan Securities Co, said before the earnings were released. "China Coal's output decline should have been offset by the price gain."

    China Coal, the second-biggest miner, said on Friday that net income swung to a 401.3 million yuan profit in the first nine months of the year from a loss of 1.59 billion yuan in the same period last year.

    http://www.chinamining.org/Companies/2016-11-01/1477963964d77808.html
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    China's coal price fever chills power plants


    North China has been caught by sudden cold snap with temperatures already sub-zero, but local power plants have been feeling the chill for a long time as soaring coal prices stripped their profits away, state-run media Xinhua News Agency reported.

    China's five largest power companies saw their combined coal-fired business lose 300 million yuan ($45 million) in September, the first group loss since August 2012.

    GD Power Development saw revenue shrink in the first nine months, with net profits down about 4% in the third quarter year on year. Shanghai Electric Power saw its profit fall by 10.3% in the third quarter.

    "The high coal price is eating away our profit and there are worries that a short-term shortage might push the price higher," said Liu Shenghan, sales manager of a power company in Shanxi Province, where 30 of 52 coal-fired power plants made losses in the first nine months.

    On October 31, the Fenwei CCI Thermal index assessed 5,500 Kcal/kg NAR coal at 678 yuan/t FOB including 17% VAT, a rise of 312.5 yuan/t from the start of the year, showed data from China Coal Resource (sxcoal.com), a China-focused coal information portal.

    Coal supply fell short of demand from utilities following rapid price increases in the past few weeks, as hydroelectric generation is falling with the end of rainy season.

    While rising prices, and profits along with them, might tempt some faltering enterprises to expand production, the policy of cutting overcapacity is not negotiable and a long-term structural overhaul remains the primary objective, according to Sheng Laiyuan of the National Development and Reform Commission (NDRC).

    Since the end of September, the NDRC has called a number of industry-wide meetings, striving to cool price fever while ensuring stable supplies in the last quarter of the year. At one of those meetings last week, medium-to-long-term supply and price contracts were on the agenda, as a win-win solution -- rationalizing the supply chain and securing demand.

    http://www.sxcoal.com/news/4548704/info/en

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    Shenhua 4 Mtpa CTL project goes into operation


    Shenhua Ningxia Coal Industry Group Co., Ltd., one branch of China's coal giant Shenhua Group, put its coal-to-liquids (CTL) project into official operation, following the successful production of refined methanol on October 29, local media reported on October 31.

    The indirect coal liquefaction project is China's second coal deep processing demonstration project following Shenhua's direct coal liquefaction project in Ordos, and the world's largest single CTL facility.

    The project is designed to produce 4.05 million tonnes of oil products and 1 million tonnes of methanol per year, according to the report.

    Major products include diesel, naphtha and liquefied petroleum gas, with designed annual output at 2.73 million, 0.98 million and 0.33 million tonnes, respectively.

    http://www.sxcoal.com/news/4548701/info/en
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    Indian steel industry opposes anti-dumping duty on met coke import


    The Indian steel industry has petitioned the Prime Minister's Office (PMO) against the move to impose anti-dumping duty on imports of low-ash met coke from Australia and China, saying that such an impost would result in price increases of R750-1,500/t ($11.25-22.5/t) for finished steel products, The Financial Express reported.

    Stating that the percentage of met coke in the total cost of crude steel is 40-50%, the Indian Steel Association (ISA), in a letter to Nipendra Mishra, principal secretary to the Prime Minister, has said domestic coke suppliers are unable to supply met coke with required specification for larger-size blast furnaces.

    "The larger blast furnaces with capacity of more than 1,200 cubic metres necessarily require met coke with low ash content and moisture content of less than 5%, to ensure that the blast furnaces run efficiently as any variation in coke quality results in instability in thermal profile which takes a long time to stabilise," ISA said, adding that the use of domestic met coke has an adverse impact on the steel production and blast furnace productivity.

    Fearing that their business would be in jeopardy due to cheaper imports, domestic met coke producers including Gujarat NRE Coke had earlier filed an application with the directorate general of anti-dumping (DGAD). Met coke prices rose sharply in recent times from $121/t in January to $285/t now.

    "The imposition of anti-dumping duty will accentuate the already worsened situation by increasing the prices of inputs. We urge the government no anti-dumping duty on met coke should be levied for use in steel sector in India," said the ISA.

    http://www.sxcoal.com/news/4548671/info/en
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