Mark Latham Commodity Equity Intelligence Service

Tuesday 22nd September 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    China's Banking Regulator: "Worse than 2008"


    AsiaPac stocks are opening mixed after the US session gains. Perhaps the biggest news of the evening is, as China's bankiong regulator has been meeting with foreign banks to express concerns over lack of risk control around non-performing loans. As CBRC said, rather stunningly honest for a government entity, "the current situation is more severe than the time in 2008 during the financial crisis." With stocks up while commodities (Zinc) limit-down, PBOC injects another CNY50 bn and devalued the Yuan fix for the 2nd day in a row.

    CBRC urged foreign banks that aren’t managing risk well enough to increase checks. CBRC officials mentioned in meetings that those banks should control NPL ratio to not more than 2%,

    http://www.zerohedge.com/news/2015-09-21/pboc-devalues-yuan-injects-more-liquidity-chinas-banking-regulator-admits-bad-loan-s

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    Australia 'is toast'

     

    Foreign investors have turned especially bearish on the Australian economy, with one describing it as "toast", a National Australia Bank report says.

    Chief economist Ivan Colhoun said a recent visit to clients in Britain, continental Europe and the Middle East revealed a "uniformly negative view on Australia's prospects".

    "I have never experienced such overwhelming negativity on the outlook for the Australian economy and Australian dollar in all my years marketing the Australian economy offshore," he wrote on Monday.

    "To be fair, one investor did say that they were not that negative on Australia.


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    Russia: Quick glance at Oil.


    Image titleLukoil suggests little makes money below $50.

    Image title
    For the first time Russian Oil drilling has fallen below prior year levels.



    "Due to actual investments in production the volumes are still being added to the market, but the current cuts are starting to have an affect. In the next years the ongoing programs of investment shrinking - primarily from the transnational corporations - will certainly have their effect. As for now, the implementation of their long-term investment programs that started even before the current crisis has expressed in some production growth. But in 2014, the oil majors claimed to reduce the investment in production; in 2015, additional reductions by 10-20% and more were announced by such majors as BP, Shell, Chevron, Total. Overall cutback in global upstream investment was about $140 bln, and it is expected to reach $200-250 bln by 2016 year-end. Within 2-3 years, this will inevitably influence on the production and will have a long-term negative effect.

    It should be noted that the average production costs in 2013 were 5 times higher than they had been 10 years before. As a result high revenues to shareholders were already in question before the recent drop in prices, therefore cutbacks in investments are being made quite actively. We should take into account that the status of the hydrocarbons resource base is permanently getting worse. The growth of world reserves of "conventional" oil and gas in 2014 was the lowest for the past 20 years; the negative trend remains for 4 years. Over 30% of new resources pertain to tight resources (deep water, heavy oil, super-tight reservoir, high content of acid gases).

    A very limited set of countries have the ability to significantly build up oil and gas production now. While in the short to medium term they are mainly the Gulf countries, some African countries and possibly the United States, in the long term the main aspirations to meet the global demand for hydrocarbons are associated with Russia, Venezuela and Iran.

    As a result, we can expect with a high probability that we are likely to witness the comeback of oil prices to a level that ensures a reasonable return on investment during the current investment cycle.

    If compared to 1980s, the current share of the discovered conventional onshore fields reduced from 60% to less than 30% of all new discoveries. At the same time, the rate of more expensive deep-water and shallow-water fields, along with other sources of "high-tech" oil such as tight oil, has substantially grown. Such discoveries will prevail in the future. It is the deep-water oil that will define the full cycle costs and require higher prices for its efficient production.

    Analysts got used to the fact that today Russia is not the absolute leader in the proven reserves of oil and gas being behind such countries as Venezuela, Saudi Arabia and Iran. However, according to a number of current estimates, the potential hydrocarbons resource base of the Russian Federation is the largest in the world.

    Thus, the magnitude of potentially recoverable gas resources in Russia is estimated at 90 - 220 trillion cubic meters which is more than twice than the resource base of the United States (40-62 trillion cubic meters). 

    Though less recognized, the situation is similar with the oil resources. The potentially recoverable oil resources in Russia are estimated at 367-506 billion barrels which is significantly more than the capacity of not only the US but also Iraq, Iran and Saudi Arabia.

    Take note that the major oil production projects in Russia are substantially below their main competitors on the cost curve, and are comparable with the projects the Gulf region. The oil production Opex per barrel in Russia in the recent years was 5-7 dollars, and in the current price environment, taking into account the weakening of the ruble, it went down to 2.8 dollars per barrel. This allows us to supply even at the lowest price scenarios, and the partners that have decided to join the Russian assets may count on a profitable return on investment."

    ~Sechin

    OAO Rosneft, the world’s largest traded oil producer, increased drilling by 27 percent in the first seven months of the year, according to a statement. That helped the company stabilize output in the first half, Chief Executive Officer Igor Sechin said in Moscow on Friday.

    The Kremlin-backed company is able to buck the international trend of cutbacks in oil projects because the plunge in the ruble and the quirks of

    Russian tax law insulated producers from the crude price slump. The nation’s exports remain just as profitable as they were a year ago when the oil price was about $100, according to Citigroup.

    “We don’t see a financial reason for Russian production to start falling,” Ronald Smith, an oil and gas analyst for Citigroup, said by phone. “If anyone was out there expecting Russia to balance the market, the signal is that’s not going to happen.”

    Brent, the international oil benchmark, is trading at about $50 a barrel, less than half the level a year ago. While oil drilling in the U.S. fell by a record after the Organization of Petroleum Exporting Countries decided last year to defend market share rather than cut production, Russia’s industry has shrugged off the price slump. The nation’s oil production rose to a record in June.

    Rosneft drilled more than 800 new wells through the first half of the year, according to the statement. Total depth drilled rose to 4.59 million meters (15 million feet) compared with 3.61 million meters in the first seven months of last year.

    The company is buying Trican Well Service Ltd.’s Russian pressure pumping business for $140 million. Pressure pumping, also known as hydraulic fracturing, blasts water, sand and chemicals underground to release trapped hydrocarbons.

    Rosneft “needs to drill actively in order to withstand falling production,” said Alexander Kornilov, an oil analyst at Alfa Bank. Results of increased drilling will probably be seen in 2016, he said.

    At the company’s largest unit, RN-Yuganskneftegas, drilling increased by 40 percent including a larger number of wells using more advanced technology, the company said. Rosneft has changed its business plan toward increasing output at existing projects including Yuganskneftegas, Sechin told Prime Minister Dmitry Medvedev on Friday.



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    Progress on cutting fossil fuel subsidies "alarmingly slow"-OECD


    Major nations are "alarmingly slow" in keeping pledges to cut fossil fuel subsidies despite signs of a decline in support worth up to $200 billion a year, the Organisation for Economic Cooperation and Development (OECD) said on Monday.

    Reductions in damaging subsidies for oil, coal and natural gas would reduce air pollution,save cash and help a shift to greener energies before a Nov. 30-Dec. 11 U.N. summit in Paris on limiting climate change, it said.

    "We are totally schizophrenic," OECD Secretary-General Angel Gurria told an online news conference. "We are trying to reduce emissions and we subsidise the consumption of fossil fuels" blamed for stoking global warming.

    "Support for fossil fuels seems to have peaked, but global progress remains alarmingly slow," he said of an updated inventory of subsidies.

    The OECD estimated the annual value of subsidies for 2010-14 at between $160 billion and $200 billion, mostly for petroleum products, in the 34 OECD nations and China, India, Brazil, Russia, Indonesia and South Africa.

    The Group of 20 leading economies agreed as long ago as 2009 to phase out inefficient subsidies for fossil fuels.

    "Support now seems to follow a downward trend after having peaked twice in 2008 and 2011-12," the OECD said, without giving exact annual figures. It said that not all subsidies identified were "unambiguously inefficient."

    Among recent reforms, the OECD pointed to cuts in support by India and Mexico for diesel and gasoline. Gurria said a fall in oil prices should make it easier to phase out support.

    The OECD said it had uncovered about 800 types of subsidy, mainly in national budgets, but said they did not cover all factors causing artificially lower prices.

    The OECD said its findings are not directly comparable with those of the International Energy Agency, which reckons fossil-fuel consumption subsidies worldwide amounted to $548 billion in 2013.

    The OECD has been trying for more than a year to reach agreement on phasing out a form of coal subsidy that helps rich nations export technology for coal generation. Talks in Paris last week again failed to get a deal.

    The negotiations will resume on Nov. 16, EU diplomats said.

    Separately, environmental group Greenpeace said the world could shift to 100 percent renewable energy by 2050.

    Investments of $1 trillion a year would be offset by savings of $1.07 trillion, partly because wind and solar power are free of fuel costs once set up, unlike fossil fuels, it said in a report.

    http://www.reuters.com/article/2015/09/21/subsidies-oecd-fuel-idUSL5N11R1L620150921
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    Air Products announced pricing increases for North American customers


    Effective October 1, 2015, or as contracts permit, Air Products will increase product pricing and monthly service charges for merchant customers in North America – involving a range of gases.

    The pricing adjustments include increases of:

    Up to 20% for liquid argon and liquid carbon dioxide

    Up to 15% for liquid oxygen, liquid nitrogen, liquid and bulk hydrogen

    Up to 10% for liquid and bulk helium

    Up to 10% for tank monthly service charges

    Some price adjustments may be outside of these ranges based on specific situations.

    These price adjustments are in response to rising costs and will also support continued investments to improve the reliability, security, safety, and efficiency of operations.

    http://www.gasworld.com/pricing-increases-for-north-america-customers/2008238.article?utm_source=GasesSynopsis&utm_medium=twitter&utm_campaign=Feed%3A+gasworld+%28Gasworld+Industrial+Gas+-+Global+News%2C+Conferences+and+Business+Directory%29
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    BHP plans multi currency hybrid sale after investor meetings


    BHP Billiton Ltd., the world’s biggest mining company, plans to sell new hybrid securities to institutional debt investors to help refinance existing near- term liabilities following a marketing campaign.

    The company will begin a tour of investors in Europe, Asia and the U.S. next week to gauge the appetite for the multi currency capital instruments, BHP said Tuesday in a statement. Standard & Poor’s said that it assigned its A- long-term issue rating to the proposed securities.

    BHP last month reported a 52 percent drop in underlying full-year earnings, highlighting its challenges as Chief Executive Officer Andrew Mackenzie seeks to boost payouts for shareholders while he also trims capital spending and debt to try and reassure bond investors and ratings companies.

    Among advantages of the hybrid instruments is “an expected 50 per cent equity: 50 per cent debt treatment by the rating agencies,” BHP said. Using the instruments would allow the producer to diversify its debt investor base and bolster efforts to maintain a “solid A credit rating,” it said.

    The company is rated A+ by S&P, the fifth-highest grade, and the outlook on the company is negative. It carries the equivalent A1 score from Moody’s Investors Service with a stable outlook. BHP targets ratings of A+ or A from S&P and A1 or A2 from Moody’s, it said last month.

    Any sale of perpetual notes would be a first for BHP, according to data compiled by Bloomberg. The company has sold several notes with maturities north of 15 years, including $2.5 billion of 5 percent securities that mature in 2043. Those debentures, one of the company’s most heavily traded, were little changed at 104.712 cents on the dollar as of 5:10 p.m. in Sydney versus 113.525 cents at the start of the year.

    The cost to insure BHP’s debt against nonpayment using credit-default swaps rose to the highest in three years earlier this month. The swaps touched 115 basis points on Sept. 1, the most since September 2012, and were last at 105.9 basis points having risen 29 basis points this year. Swaps on Rio Tinto Plc are up 26 basis points since Dec. 31 at 132.5 basis points, according to data provider CMA.

    http://www.mineweb.com/news-fast-news/bhp-plans-multi-currency-hybrid-sale-after-investor-meetings/

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    Oil and Gas

    Oil Price Rout Seen as Threat to $1.5 Trillion of New Projects


    New investments uneconomic at $50/bbl, Wood Mackenzie says
    Operators seeking to reduce costs by an average 20-30%

    About $1.5 trillion of potential investment in new oil projects isn’t viable with crude prices at $50 a barrel, highlighting the need to reduce costs, according to consultant Wood Mackenzie Ltd.

    The proposed projects, including spending on North American shale, are “now out of the money, or in starker terms, uneconomic at $50 oil,” James Webb, upstream research manager at Wood Mackenzie, said in a statement Monday. “This spend is very much at risk.”

    While operators want to cut costs by 20 percent to 30 percent on new projects, supply-chain savings will only achieve cuts of 10 percent to 15 percent on average, according to Wood Mackenzie.

    A drop of about 50 percent in crude prices over the past year has forced oil companies to cut spending and defer new projects. Brent, the benchmark for half the world’s oil, was trading at $47.78 a barrel, up 31 cents, at 1:06 p.m. in Sydney. A glut may keep oil prices low for the next 15 years, according to Goldman Sachs Group Inc.

    http://www.bloomberg.com/news/articles/2015-09-21/oil-price-rout-seen-as-threat-to-1-5-trillion-of-new-projects
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    The Battle for China Oil Market Spoils


    The race among the top sellers of crude to the world’s biggest energy-consuming nation got a little tighter last month.

    Iraq overtook Russia to become the third-largest supplier to China, while Oman edged past Iran in sales of oil to Asia’s biggest economy. Saudi Arabia kept the lead in the race even as its shipments slipped, data from General Administration of Customs in Beijing on Monday show. Cargoes from Angola rose, helping the African producer hold onto the No. 2 spot.

    China remains the main safeguard against a further price meltdown as a drive to boost its strategic petroleum reserve helps alleviate a market glut. As a shale boom in the U.S. shrinks America’s need for overseas crude, producers are competing to supply the world’s second-biggest oil consumer, which is forecast by the International Energy Agency to account for about a quarter of growth in global demand next year.

    “Iraq, with its booming domestic output, will make sure it stays ahead in the game to compete with its Middle East counterparts,” Gao Jian, an analyst at SCI International, a Shandong-based energy consultant, said by phone. “With U.S. demand for imports dwindling, all the major suppliers will look to Asia and China is the biggest market here.”

    Russia’s shipments slipped to 3.1 million tons in August from 3.77 million a month earlier, the data show. The nation in May briefly held the status of leading supplier, as a direct pipeline to northern China boosted exports of its East Siberia-Pacific Ocean crude and helped it race past Saudi Arabia.

    Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, has since regained its top spot as it pumps near record amounts of crude in a bid to defend market share from competitors.

    Cargoes from Iran surged 61 percent from a year earlier to 2.14 million metric tons in August. The Persian Gulf state is preparing to increase output and exports once international sanctions over its nuclear program are eased and has vowed to take back market share lost due to the measures.

    China’s imports from Angola climbed 9.4 percent from a year ago to 3.52 million tons, the customs data show. Crude from Africa’s second-largest oil producer has a lower sulfur content than Middle East supplies, and refineries that run one variety will also need to process the other to balance the quality of feedstock, Tushar Tarun Bansal, a senior oil analyst in Singapore at industry consultant FGE, said earlier this month.

    http://www.bloomberg.com/news/articles/2015-09-21/another-contender-emerges-in-battle-for-china-oil-market-spoils

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    Gazprom proposes out-of-court settlement on EU antitrust case -Interfax


    Russia's top natural gas producer Gazprom has sent proposals to the European Commission regarding an out-of-court settlement of an antitrust case against the company, Interfax news agency quoted a Gazprom official as saying on Monday.

    After more than two years of investigation, EU antitrust regulators charged the Russian gas giant in April with abusing its dominant position in Poland, Hungary, and six other countries in Eastern Europe, to overcharge by up to 40 percent.

    State-run Gazprom, which supplies a third of EU gas needs and generates more than half its revenues there, has denied the charges and said it has already made significant concessions.

    However, it also said in May that it would consider offering Europe new concessions, including on pricing, to settle the antitrust case, and thereby avoid a long legal battle which could result in billions of dollars in fines.

    Interfax did not say what was in the proposals but quoted Alexander Medvedev, Gazprom's deputy chief executive officer, as saying on Monday that Gazprom would soon set up a meeting with EU antitrust chief Margrethe Vestager, the news agency reported.

    Gazprom has to submit a written response, or statement of objections, by Sept. 28 to the claims by the European Commission.

    "We sent our proposals about the settlement of the claims, which were formally lodged to Gazprom," Interfax quoted Medvedev as saying.

    "In the nearest future, we will discuss it with Mrs Vestager in order to find an out-of-court solution," he added.

    Medvedev also said that Gazprom would send its statement of objections on Sept. 28 as he did not expect to resolve the issue by that date.

    https://mail.google.com/mail/?shva=1#inbox?compose=14fefd0daaa716ba
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    EQT attracts offers for Dutch oil storage firm Koole


    Swedish buyout group EQT has received offers for its Dutch oil storage group Koole Terminals valuing the business at more than 1 billion euros ($1.1 bln), several people familiar with the deal said.

    The investor last week collected more than 10 tentative bids, mainly from infrastructure investors, and will now pick several groups to submit final bids, the sources, who declined to be identified, said on Monday.

    A consortium of Canadian pension fund OTPP and Wren House Infrastructure has made an offer, as has Borealis, the infrastructure arm of pension fund OMERS, bidding alongside First State Investments, they said.

    The infrastructure arms of Goldman Sachs, JP Morgan and Macquarie are also in the running as are infrastructure-focused private equity groups like ArcLight Capital, they added.

    Morgan Stanley is advising EQT on the sale, the sources said.

    EQT, Morgan Stanley and the bidders declined to comment or were not immediately available for comment.

    Since the collapse in oil prices in mid-2014, there has been strong demand for mid-stream storage and pipeline assets due to their stable valuations compared to oil exploration and production assets.

    Investors speculating to sell oil at higher prices in the future have also increased demand for storage assets and made the business of storing oil highly profitable.

    Koole is expected to post earnings before interest, taxes, depreciation and amortization of roughly 80-90 million euros this year, the sources said.

    EQT is hoping to reap 14-15 times that in a potential deal, in line with the multiples paid in Vopak's sale of U.S. terminals to Kinder Morgan earlier this year and of ANZ Terminals to Macquarie last year.

    EQT bought Koole in 2011 and has expanded the business with several bolt-on acquisitions such as terminals from Westway, NOVA and BP, which in January also announced the sale of another European oil storage asset.

    Koole is held by EQT's fully invested fund Infrastructure I, which has divested three companies this year - Denmark's NORD, U.S.-based RTI and Sweden's Swedegas.

    Bankers are preparing debt packages of around 6.5 times core earnings to back infrastructure bidders, totalling up to 585 million euros of debt financing expected to be in the form of loans.

    The loans could comprise a five-year facility and a three-year bridge facility, which will be taken out via the bond market. Any debt financing backing a private equity firm is likely to involve higher leveraged multiples.

    http://www.reuters.com/article/2015/09/21/koole-sale-idUSL5N11R1OH20150921
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    Jet fuel stays at sea as imports overwhelm Europe


    A jet fuel market in Europe saturated by imports from Asia and the Middle East has forced sellers to keep their oil offshore on tankers or chose longer voyages as they seek out buyers.

    Jet fuel and diesel stocks in Europe have been steadily building as refineries around the world operate at near-maximum capacity to benefit from a rare run of strong profit margins driven mainly by global gasoline demand. [ID: nL5N10W2KN]

    In a sign of the growing pressure, the 90,000 tonne tanker Mindoro anchored for nearly two weeks of the southern coast of England, according to shipping brokers, traders and Reuters ship tracking.

    The Mindoro is en route to the port of Fawley, where it will discharge part of its cargo before returning to anchor at sea as it seeks buyers for the rest of its fuel.

    A second 90,000 tonne tanker, the STI Lombard, arrived from South Korea and has been anchored off the coast of the Netherlands since last week and still has no dicharging options, according to traders.

    Europe, where refineries do not produce enough jet fuel and diesel to meet demand, has become a major destination and storage hub for huge modern refineries such as SK Energy's 840,000 barrels per day Ulsan refinery in South Korea, Reliance's 660,000 bpd refinery in Jamnager, India, and the 400,000 bpd Satorp refinery in Saudi Arabia, a joint venture between Saudi Aramaco and France's Total.

    While these imports have taken storage tank levels in Europe's Amsterdam-Rotterdam-Antwerp hub to record highs, future prices are not high enough for most traders to make money from taking out long-term charters on ships to store the oil.

    The six-month forward curve on ICE gasoil futures, for example, is in a contango of just under $20 per tonne, a third of where it stood in 2009 when floating storage became widespread.

    So traders are adapting, and in some cases have opted to sail tankers from Asia to Europe around Africa instead of the conventional route via the Suez canal, extending the voyage by at least 10 days to around 45 days, a move tantamount to floating storage, but without the long-term commitment or costs.

    Tankers carrying some 600,000 tonnes of jet have in recent weeks opted to sail via Cape Horn, according to traders and ship tracking.

    "It is still good to have jet in the tanks, but there is not much room left currently," one trader said.

    The outlook looks dim, with around 2.4 million tonnes of jet fuel already booked for arrival in Europe in October from Asia and the Middle East, compared with an average of around 1.8 million tonnes in recent months, which had already outweighed demand.

    The build in jet fuel stocks in the region comes despite a significant pick-up in air traffic worldwide in recent months as economic growth accelerates.

    According to the International Air Transport Association (IATA), European carriers saw passenger demand rise by 5.3 percent in July from a year earlier, more than double June's growth. Figures from the International Energy Agency showed jet fuel demand across the developed world growing by 4-5 percent in the first two quarters of this year.

    http://www.reuters.com/article/2015/09/21/jetfuel-floating-idUSL5N11O2JV20150921

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    Key debt ratios for selected US E&P's






    @shaledaily
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    Cheniere, EDF sign another LNG supply deal


    Cheniere Energy’s unit, Cheniere Marketing has entered into another sales arrangement with France’s EDF for the delivery of LNG cargoes on an ex-ship basis (DES) from its Sabine Pass terminal in the U.S.

    The deal covers the delivery of up to 24 cargoes, or up to approximately 89 million MMBtus total, from 2017 through 2018.

    As previously reported, the sales price for the LNG cargoes is linked to the Dutch Title Transfer index (TTF).

    With this latest agreement, Cheniere Marketing has executed agreements for the sale of up to a total of 92 cargoes, or up to approximately 340 million MMBtus, to buyers in Europe and Asia through 2018, Cheniere said on Monday.

    Cheniere Marketing’s LNG portfolio is expected to have approximately 9 mtpa of LNG available from Trains 1 through 6 of the Sabine Pass liquefaction project and Trains 1 through 3 of the Corpus Christi project.

    http://www.lngworldnews.com/cheniere-edf-sign-another-lng-supply-deal/
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    This Breakthrough Could Spark An Oil Sands Revival


    Riding high on its first clean oil sands project at Utah’s Asphalt Ridge, MCW Energy Group (traded in the US under MCWEF and in Canada under MCW.V) has now closed another key acquisition that will give it ownership of oil sands deposits and a place to build a much larger extraction plant as the company moves quickly to consolidate its unique position in this market.

    MCW Energy is changing the way people view oil sands with a breakthrough, commercially viable technology that is cleaning up Utah’s tens of billions of barrels of oil sands without creating the toxic wastelands that have resulted from oil sands projects in Western Canada. And they’re doing it at a cost that can still turn a profit in today’s oil price slump.

    The breakthrough technology uses a solvent that pulls the oil out of oil sands in much the same way that soap washes grease from plates, according to MCW CEO Dr. R. Gerald Bailey, former Exxon (NYSE:XOM) president of Arabian Gulf operations. Once the oil sands are washed with the solvent, they come out 99 percent clean before being returned to the earth. The process is not reliant on water, high temperatures or pressures, nor does it emit any greenhouse gases.

    At Asphalt Ridge, in the heart of the western Green River Formation, MCW has been cleaning Utah’s oil sands and selling it off since the beginning of this year.Asphalt Ridge alone is believed to hold some 1 billion barrels of recoverable oil, and MCW’s plant here is producing 250 barrels a day right now at a reasonable $30 per barrel.

    Now MCW is taking operations further, with the 8 September 2015announcement that it closed the acquisition of TMC Capital, LLC. This deal gives MCW an oil sands deposit lease called the Temple Mountain Project, which will supply more oil sands for Asphalt Ridge and also serve as the location for the company’s next extraction plant—a much larger version that will further drive down production costs.

    http://oilprice.com/Finance/investing-and-trading-reports/This-Breakthrough-Could-Spark-An-Oil-Sands-Revival.html
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    Total sells 10% interest in Fort Hills to Suncor Energy


    Total has signed an agreement to sell a 10% interest in the Fort Hills oil sands mining project to the operating partner Suncor Energy. The total aggregate consideration at the time of the announcement is C$ 310 million (around US$ 230 million). The transaction is subject to regulatory approval.

    'As a result of a full comparative analysis of its global asset portfolio in the context of lower oil prices, Total has decided to reduce its exposure to Canadian oil sands projects. Following the suspension of the Joslyn project at the beginning of 2015, the sale of this minority interest will reduce our Capex outlay in the Fort Hills project by over C$ 700 million (about US$ 530 million) from now until end-2017, and help us deliver on our global Capex reduction target', said Arnaud Breuillac, President Exploration & Production.

    Upon closing, expected in the fourth quarter of 2015, Total will hold a 29.2% interest in the Fort Hills project, alongside Suncor Energy (50.8%, operator) and Teck Resources (20%). The sale also includes the transfer of a 10% interest in associated logistics in Alberta.

    Located in Alberta, Canada, some 90 kilometers north of Fort McMurray, Fort Hills has a planned capacity of 180,000 barrels per day. Construction activities are approximately 40% complete. The operator's target is to start up the project by end-2017.

    http://www.oilvoice.com/n/Total-sells-10-interest-in-Fort-Hills-to-Suncor-Energy/32a4f553937f.aspx
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    Halliburton cuts jobs in Williston, North Dakota


    Halliburton Co, the world's No. 2 oilfield services provider, said on Monday it has laid off staff in Williston, North Dakota, blaming plunging crude oil prices.

    The company provided no details on the number of employees affected.

    "Halliburton will continue to monitor the business environment and will adjust the size of our workforce to align with current business demands as needed," the company said in an emailed statement to Reuters.

    http://www.reuters.com/article/2015/09/22/halliburton-redundancies-idUSL4N11S03U20150922
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    Cheniere requesting to start commissioning of Train 1 at Sabine Pass LNG


    The United States Federal Energy Regulatory Commission revealed that Houston-based Cheniere requested permission to introduce fuel gas within train 1 and the outside battery limits at its Sabine Pass liquefaction facility, in order to begin commissioning.

    More specifically, Cheniere requested authorization to introduce fuel gas within the areas identified as Phases 3 – 5 with phase 5 to include the fuel gas systems for the refrigerant compressor turbine drivers of the first train, stands in the filing.

    When commissioned, the train 1 at the Cheniere’s Sabine Pass liquefaction facility in Cameron Parish, Louisianna will have the capacity to produce 4.5 mtpa of LNG.

    All six of Sabine Pass liquefaction trains are expected to be commissioned by 2018.

    http://www.lngworldnews.com/cheniere-requesting-to-start-commissioning-of-train-1-at-sabine-pass-lng/
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    Agriculture

    Potash Pessimism Clouds Prospects for BHP's Jansen Project


    BHP Billiton Ltd.’s prospects of building potash into the fifth pillar of its portfolio of big-ticket businesses is looking a long way off. That’s the view of Macquarie Group Ltd., which has a “very pessimistic view” of the market.

    The world’s biggest miner’s Jansen project in Canada, which has already consumed about $3.8 billion in capital, is unlikely to be developed unless prices rise, according to Macquarie. The bank has cut its long-term price forecast by 16 percent to $280 a metric ton.

    “Our base-case scenario for BHP assumes the indefinite deferral of Jansen’s development,” Macquarie analysts wrote in a note to clients dated Sept. 21.
    The company will probably favor development of less capital intensive petroleum and copper projects, they said.

    Mosaic Co., the largest U.S. producer of potash fertilizer, said Monday it plans to reduce output as low crop prices continue to erode farmer demand for agricultural products. The company, along with rivals including Potash Corp. of Saskatchewan Inc., have endured a 17 percent drop in spot potash prices and are bracing for further declines amid a wave of new capacity.

    For Jansen to proceed, prices would need to rise to at least $400 a ton to achieve an acceptable rate of return and probably to about $500 a ton to compete for capital with the company’s other projects, Macquarie said. It forecasts the potash price will average $254 a ton this year.

    Potash demand could slide 8 percent next year, leading to a record surplus with new low-cost projects being developed in Russia to England, according to Macquarie. The bank has cut its forecast for 2016 potash spot prices by 7.6 percent to $254 a ton, and to $250 a ton in 2017. BMO Financial Group analysts on Monday forecastthe lowest prices since 2009 for potash and urea fertilizers.

    Melbourne-based BHP has flagged potash as a potential key division for future growth, identifying the fertilizer as a priority alongside existing coal, copper, iron ore and petroleum units to tap rising consumption and an expanding middle class across Asia. Jansen remains the world’s “best undeveloped potash resource,” BHP said Tuesday in an e-mailed statement in response to the note.

    http://www.bloomberg.com/news/articles/2015-09-22/potash-pessimism-clouds-prospects-for-bhp-s-jansen-project?cmpid=yhoo

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    Precious Metals

    Diamond jewelry sales rise to record in 2014 - De Beers


    Diamond miner De Beers said global diamond jewellery sales grew by 3 percent last year to a record of over $80 billion, helped by strong demand in the United States, but warned 2015 will be tough for the industry.

    De Beers said sales of polished diamonds rose 7 percent in the United States, while demand in China and India grew by 6 percent and 3 percent in local currency terms, respectively.

    "Growth would have been almost five percent had it not been for the strengthening of the U.S. dollar against the currencies of several of the major diamond consumer markets in the latter part of 2014," De beers said in a report.

    The company, a subsidiary of global miner Anglo American , warned growth would be muted in 2015 as the strong dollar and an economic slowdown in China weigh.

    De Beers chief executive Philippe Mellier said many industry participants started the year with more inventory than planned due to weak demand for diamond jewellery at the end of 2014.

    "This led to a period of 'indigestion' in the diamond value chain and as a result we expect 2015 as a whole to be a more challenging year," Mellier said.

    De Beers said global rough diamond production fell by 3 percent in volume terms in 2014 to about 142 million carats, remaining well below the 2005 peak of around 175 million carats.

    The company said expected output from expansion projects currently under way in the sector would lift total carat production to levels similar to the mid-2000s.

    http://www.reuters.com/article/2015/09/21/de-beers-diamonds-idUSL5N11R2GW20150921

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    Miners turn to alternative finance to cut debt as downturn grinds on


    A niche form of mining industry finance is emerging as the new go-to funding for miners bowed by debt, another sign of the sector's distress as it plods through the fourth year of a commodities' downturn. 

    Glencore, the world's third-biggest miner, is in talks to raise more than $1-billion in so-called "streaming" deals, coming on the heels of transactions by No 1 gold producer Barrick Gold and diversified miner Teck Resources. More such deals are expected as shareholders, ratings agencies and lenders pressure miners to slash debt amid a gloomy commodity price outlook and as other debt-cutting tools such as asset sales, dividend cuts and share issues are not enough. 

    Until now so-called "streaming" finance - upfront funds for miners in exchange for a portion of a mine's future output - has most commonly been used by mid-sized miners with limited access to capital to fund mine builds. That the world's biggest miners are now prepared to do deals that see them giving up a portion of their future production, earnings and cashnflow to cut debt is a reflection of their limited options. 

    "It is a sign of the times," said Andrew Kaip, an analyst at BMO Capital markets. "Equity markets are to a large degree closed... Miners are looking for alternatives. Unfortunately this is an alternative of last resort," he said. 

    Companies providing stream financing, including US-based Royal Gold Inc, Toronto's Franco-Nevada and Vancouver-based Silver Wheaton, say they have never been busier. "We have never seen a market as attractive as we have seen it for the last six months or so," said Tony Jensen, Royal Gold's CEO. 

    Most of the streaming opportunities right now are for repairing balance sheets, said Silver Wheaton CEO Randy Smallwood. "If I look at all the opportunities out there that I find appealing... it is probably between $4-billion to $5-billion worth," Smallwood said in an interview at the Denver Gold Forum, an annual gold mining industry conference. 

    All three CEOs expect streaming companies may have to start teaming up on deals as transaction sizes get too big for anyone to fund alone. But they say miners do not like syndication as it reduces competition for deals, making them more expensive. 

    At end-June, streaming companies had some $4.5-billion of cash and credit available for new deals, BMO's Kaip said. Besides Glencore's potential $1-billion deal, Teck Resources, whose credit rating was slashed to junk this month due to its heavy debt load, has said it is open to more deals. Debt-laden copper miners First Quantum Minerals and Freeport McMoRan are also possible streaming candidates, sources said. 

    http://www.miningweekly.com/article/miners-turn-to-alternative-finance-to-cut-debt-as-downturn-grinds-on-2015-09-21

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    Base Metals

    CSRC: 40bn RMB losses


    Image titleThe scene outside the main Beijing exchange yesterday am.

    From August:

    Furious investors have kidnapped the head of a Chinese exchange for minor metal trading from his hotel and handed him to police, the Financial Times (FT) has reported.

    The investors were angry that authorities had failed to find out why their funds had been frozen and believed by handing over Fanya Metals Exchange boss Shan Jiuliang to police they could spark an investigation.

    The FT reported investors had been protesting for weeks about their funds being frozen at the exchange which is based in the southwestern city of Kunming and traded minor metals. It also offered high interest investment products from offices in Shanghai and Kunming.

    Shan had been holding regular meetings with exchange backers and was on the way to Guangzhou for a business trip when he was captured.

    Shan had been holding regular meetings with exchange backers and was on the way to Guangzhou for a business trip when he was captured. Photo: Weibo


    The exchange, which had purchased minor metals for above market prices, has faltered as China's economy slowed.



    Read more: http://www.smh.com.au/business/markets/unhappy-chinese-investors-kidnap-fanya-metals-exchange-boss-shan-jiuliang-20150825-gj7q9m.html#ixzz3mSGvtMJ7 
    Follow us: @smh on Twitter | sydneymorningherald on Facebook

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    UK mining cos slammed as EM growth scare grips stocks again


    ** Shares in UK-listed mining cos Anglo-American and Glencore down more than 8 pct, among top losers on the FTSE 100 as well as across top European stocks.

    ** Broker Credit Suisse takes a grim view of sector's prospects, says challenging to find floor on commodity prices till China demand and EM currencies stabilize

    ** Bellwethers Rio and BHP down about 3.5 pct

    ** CS cuts TP of Rio Tinto to 2500p from 2800p; downgrades Anglo to Neutral from Outperform; Antofagasta reduced to Underperform from Neutral with TP moved to 510p from 640p

    ** CS downgrades Vedanta Resources to Underperform from Neutral, TP at 430p from 690p; cuts TP of BHP Billiton to 1250p from 1350p; Randgold Resources TP cut to 4040p from 4270p

    ** Glencore TP reduced to 175p from 235p, citing co suffered a complete loss of confidence from investors following the recent dividend cut and equity placing

    ** The rout in commodity prices is putting pressure on credit ratings and dividends across the mining sector, prompting reductions in capex, operational costs and jobs

    http://www.reuters.com/article/2015/09/22/idUSL4N11S28920150922
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    Steel, Iron Ore and Coal

    China 52 coal firms output exceeding 10 mln T in 2014


    There were 52 coal firms produced over 10 million tonnes of the fossil fuel in 2014, accounting for 83.4% of the country’s total output, the China National Coal Association (CNCA) said on its website on September 18.

    Nine out of the 52 coal firms produced over 100 million tonnes of coal last year, with the top three being of Shenhua Group, China National Coal Group and Datong Coal Mine Group, producing 473.51 million, 183.04 million and 167.54 million tonnes of coal, respectively.

    Seven coal firms, including Shanxi Lu'an Mining Group, Kailuan Group, Yangquan Coal Industry Group realized output between 50 million and 100 million tonnes, showed the list published by CNCA.

    Coal-rich Shanxi province had six coal firms that produced more than 50 million tonnes of coal last year -- Datong Coal Mine Group, Shanxi Coking Coal Group, Lu'an Mining Group, Yangquan Coal Industry Group, Jingneng Group, and Jincheng Anthracite Mining Group.

    Over 50 mln T:



    http://en.sxcoal.com/0/132015/DataShow.html
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    Australia's New Hope sees coal deals accelerating in next 12 months


    Australian coal miner New Hope Corp, which has a war chest for potential acquisitions, said it expects coal mine deals to pick up over the next year as buyers' and sellers' views on the outlook for the battered sector start to converge.

    New Hope, with more than A$1 billion ($713 million) available for acquisitions, is looking to snap up good quality operating energy coal and steel-making coal mines in Australia and western Canada.

    It is in a strong position after reporting a 25 percent rise in profit to A$51.7 million before one-offs for the year to July 2015, as cost cuts outweighed a drop in sales with energy coal prices slumping to more than six-year lows.

    The result matched a forecast from broker Morgans.

    In contrast to its rival Whitehaven Coal, which paid no dividend, New Hope raised its final dividend by 25 percent to 2.5 Australian cents a share and announced a 3.5 cents a share special dividend.

    Managing Director Shane Stephan said different coal producers' outlooks were starting to shift, leading to more overlapping views on coal asset valuations.

    "So I think that the potential for transactions to occur over the next six to 12 months is greater than what it has been over the previous 12 months," he told Reuters in an interview.

    New Hope has been reported to be looking at Rio Tinto's assets in the state of New South Wales, vying with Glencore Plc and former Xstrata boss Mick Davis' X2 Resources, among others. Stephan declined to comment on that auction or any others.

    Anglo American is looking to sell stakes in four Australian mines.

    "There are certainly a significant number of potential opportunities evolving over the next 12 months or so," he said.

    While environmentalists see coal in decline, Stephan contrasted flat demand in Europe and falling demand in North America with growth forecasts for Asia over the next 15 to 20 years, as coal delivered to north Asia costs half the price of gas per unit of energy.

    "Over that period of time there will be a very strong future for good quality thermal coal into Asia," he said.

    But he sees no demand for any new energy coal mines in Australia for at least five years.

    New Hope expects its output in 2016 to be flat at around 5.7 million tonnes.

    http://www.reuters.com/article/2015/09/22/new-hope-results-idUSL4N11R52Y20150922
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    Severstal introduces new product - Steel Cashmere

    Severstal introduces new product - Steel Cashmere

    Russian steel giant Severstal has introduced a new product: Steel Cashmere. Steel Cashmere is polyurethane coated galvanized steel sheet with the highest degree of resistance to UV radiation. Owing to the increased thickness and greater strength of the polyurethane coating, with prime and top coat layers which are 35-50 mkm thick and the zinc layer, which weighs 180 gsm, the new product is highly resistant to environmental and mechanical impacts, including corrosion. The new product has a highly attractive finish with a slightly textured coating which feels like cashmere.

    http://steelguru.com/steel/severstal-introduces-new-product-steel-cashmere/435053#tag

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    US raw steel production in Week 38 down by 9% YoY


    AISI announced that in the week ending September 19, 2015, domestic raw steel production was 1,706,000 net tons while the capability utilization rate was 71.4 percent. Production was 1,878,000 net tons in the week ending September 19, 2014 while the capability utilization then was 78.1 percent. The current week production represents a 9.2 percent decrease from the same period in the previous year.

    http://steelguru.com/steel/us-raw-steel-production-in-week-38-down-by-9-yoy/435058#tag

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    Finland's Outokumpu warns of bigger third-quarter loss


    Outokumpu, Europe's largest stainless steel maker, has warned its quarterly loss will be deeper than expected, citing weak demand from distributors amid high stock levels and low nickel prices.

    Shares in the company fell more than 9 percent after it forecast its third-quarter core operating loss would deepen from the second quarter, compared with its previous estimate of a smaller loss.

    "In both key markets, Europe and USA, destocking continues and distributors continue to hold back orders," the company said in a statement on Tuesday, adding that a one-day general strike in Finland last week also had an impact.

    The Finnish company, 26 percent owned by the state, is struggling to turn around its business following its unsuccessful acquisition of Thyssenkrupp's stainless business Inoxum in 2012.

    Analysts noted EU's anti-dumping duties, launched in March, had so far given little support to the European industry, which is battling poor demand and a China-led growth slowdown.

    "We were expecting that the second quarter would have been the bottom for the firm, but it wasn't, and the fourth quarter doesn't look too good either," said Inderes analyst Antti Viljakainen, who has an "increase" rating for the stock.

    "It is very rare from them to revise a guidance given to one quarter only."

    Viljakainen said competitors had managed to cut costs more successfully, while Outokumpu is still trying to fix problems from the past.

    Outokumpu in 2013 partly reversed the Inoxum deal after the EU demanded an important mill in Italy to be left out as a condition for its approval.

    "They have been restructuring for almost four years now... It was a mistake to put together those two companies with weak profitability," Viljakainen said.

    http://www.reuters.com/article/2015/09/22/outokumpu-results-idUSL5N11S0KC20150922

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