Mark Latham Commodity Equity Intelligence Service

Friday 19th May 2017
Background Stories on

News and Views:

Attached Files

    Oil and Gas

    Steel, Iron Ore and Coal


    Here’s why Colombia’s mining sector is losing its shine

    Foreign investors are likely to flee Colombia’s mining sector in the coming months as the country is failing to protect the interest of global companies operating and exploring in the country, the local mining association warns.

    According to Roberto Junguito, president of the board of governors at the Colombian Mining Association (ACM), the country needs to set clear rules for the industry and prioritize national over local interests.

    His comments to Financial Times (subs. required) come as recent rulings have forced some major miners, including world number three gold producer AngloGold Ashanti (NYSE:AU), to halt operations.

    Recent rulings have forced some major miners, including world number three gold producer AngloGold Ashanti, to halt projects and operations.

    “Recent years have not been easy for mining,” Junguito told FT, citing protests, road blockades, falling commodity prices and a government tax reform introduced late last year.

    “The biggest challenge of them all is judicial uncertainty. A lot of recent court cases have gone against the industry.”

    In April, AngloGold had to halt all exploration work at its La Colosa project in central Tolima after voters overwhelmingly backed a proposal to ban mining in the municipality.

    The company, which had been advancing the project for 14 years, has invested roughly $900 million in Colombia over the past decade and La Colosa was the largest of its three projects in the country, as it has the potential to become on of the world’s largest gold mines.

    A few days earlier, Canada’s Gran Colombia Gold (TSX:GCM) decided to take the Colombian government to court for forcing the company to halt operations at its Marmato project until further consultation with locals has been conducted.

    The Toronto-based company, which acquired the project when it merged with Medoro in 2011, is seeking $700 million in compensations and it’s basing the suit in the Colombian-Canadian free trade agreement.

    Those two cases are not the only ones. Another Canadian firm, junior explorer Zonte Metals (TSX-V: ZON), is locked in a legal battle with local authorities over a permit rejection. In February, a special court granted Zonte rights to proceed with the lawsuit that claims both, Colombia’s Department of Antioquia and the National Mining Agency did not process its exploration application in accordance with the country’s mining code.

    Fear of copycat effect

    At the Colombian Mining Association’s (ACM) annual conference last week, companies voiced their concern the recent incidents could encourage other communities to push for similar votes or try to block multinationals via lawsuits.

    There are 39 local referendums currently in the works, which results could spell troubles for several mining, oil and infrastructure projects.

    The group warned there are 39 local referendums currently in the works, which results could spell troubles for several mining, oil and infrastructure projects, local La FM reported (in Spanish).

    Former Minister of Mines and Energy Amylkar Acosta, said that Colombia’s mining sector will fall victim of social unrest and legal insecurity.

    "The regions and territories where extractive activities take place are plagued with land use conflicts, which have not been solved due to lack of clear rules," he said according to RCN Radio (in Spanish).

    He noted that one of the main bones of contention is the recent change in royalties perceived by municipalities, which went from 70% royalty income to a mere 9%.

    "This triggers discontent because the communities do not see a benefit from mining and that dissatisfaction triggers protests, blockades and other problems," Acosta said.

    Colombia’s top mining sectors are gold and coal, but there has been a spike in interest for potential copper projects in the last years.
    Back to Top

    Trump to extend Iran sanctions relief, still developing US policy

    The Trump administration said Wednesday it will extend sanctions relief for Iran given under the 2015 nuclear deal with the Islamic republic.

    In a statement, Stuart Jones, an acting assistant secretary at State, said the administration would continue to waive sanctions as required under the deal, known as the Joint Comprehensive Plan of Action. The waivers were set to expire Wednesday.

    The US continues to "closely scrutinise" Iran's commitment to the Obama-era nuclear deal and the Trump administration is still developing a "comprehensive" Iran policy, Jones said.

    "This ongoing review does not diminish the United States' resolve to continue countering Iran's destabilising activity in the region, whether it be supporting the Assad regime, backing terrorist organisations like Hezbollah, or supporting violent militias that undermine governments in Iraq and Yemen," Jones said. "And above all, the United States will never allow the regime in Iran to acquire a nuclear weapon."

    As a candidate for president, Donald Trump criticised the nuclear deal the Obama administration brokered with Iran as the "worst deal ever" claiming he would negotiate a "better" deal, without offering specifics. On April 18, Secretary of State Rex Tillerson said Iran has complied to date with its requirements under the deal, while calling the deal a failure a day later.

    The US Treasury Department Wednesday announced unrelated, new sanctions in connection to Iran's ballistic missile program.

    Since the nuclear deal was reached in July 2015, Iranian oil production has climbed from 2.8 million b/d to 3.81 million b/d in April, according to the US Energy Information Administration.

    The extension of the sanctions comes ahead of Iran's presidential election on Friday.
    Back to Top

    China Unicom Units Inflated Sales for Years, Document Shows

    China United Network Communications Group Co., the state-run phone giant known as Unicom Group, found what it described as an unprecedented degree of falsified revenue, profit and asset figures at units in the northwestern province of Shaanxi, according to an internal document seen by Bloomberg News. Its shares fell in Hong Kong.

    Nine out of 10 branches in Shaanxi engaged in organized, cross-departmental faking of financial figures from 2012 to 2016, and more than 70 managers have been disciplined, according to the document, which was dated April 6. Though the document didn’t give a tally of the fraud, Caixin reported it involved 1.8 billion yuan ($261 million) of revenue in the past five years, citing a document and an internal speech by Unicom’s chairman.

    Spokespeople at Unicom Group, China’s second-largest mobile-phone carrier, weren’t immediately reachable. A representative of the company’s Hong Kong-listed arm, China Unicom (Hong Kong) Ltd., couldn’t immediately comment.

    The findings emerged at a time Unicom Group is preparing to sell billions of dollars in shares as part of a government push to attract private capital into state-owned enterprises. The company was among six SOEs picked by the nation’s economic planner last year for a pilot program in mixed-ownership -- China’s preferred term for its privatization campaign.

    "This case exposes some of China Unicom’s weaknesses in its corporate governance, but for a company with around 300 billion yuan in annual revenue, irregularities of a couple of billions won’t change its fundamentals," said Steven Liu, an analyst at China Securities International in Hong Kong who has a buy rating on the stock.

    Unicom fell as much as 3.6 percent, the most in a month, on Thursday in Hong Kong trading. Its Shanghai-listed arm, China United Network Communications Ltd., has been suspended from trading since late March pending further disclosure of its mixed-ownership plan.

    Unicom’s Hong Kong-listed arm has posted three years of falling revenue -- 274.2 billion yuan in 2016 -- and two years of declining profits amid intensifying competition and the increased cost of keeping up with market leader China Mobile Ltd. Earnings are expected to recover this year, according to average analyst estimates compiled by Bloomberg.

    The document also said:

    About 17% of the total falsified revenue came from Shaanxi’s Tongchuan and Yulin cities, while the Hanzhong branch falsified more than a third of its revenue
    Penalties ranged from dismissals to administrative warnings, suspended party membership and salary deductions
    Managers were punished according to the Communist Party disciplinary guidelines
    The nature and repercussions of the fraud are unprecedented in Unicom’s history, according to the document

    Attached Files
    Back to Top

    Petrobras, Vale ADRs plunge after new Brazil corruption allegations

    Shares in Brazilian state-controlled oil company Petroleo Brasileiro SA and iron ore miner Vale SA both plunged in U.S. after-hours electronic trading following a report that the country's president was taped backing the payment of a bribe to thwart a corruption probe.

    Petrobras American Depositary receipts were down 11 percent to $9.15, while Vale ADRs slumped 7 percent to $7.93.
    Back to Top

    Swiss to vote on law to help renewables, ban new nuclear power plants

    Swiss voters will on Sunday determine the fate of a law proposing billions of dollars in subsidies for renewable energy, a ban on new nuclear plants and a partial utilities bailout.

    Polling so far suggests the law will be approved in the binding referendum, but support has slipped. A survey this month by research institute gfs.bern for state broadcaster SRG showed 56 percent of voters backed the law, down from 61 percent.

    The Swiss initiative mirrors efforts elsewhere in Europe to reduce dependence on nuclear power, partly sparked by Japan's Fukushima disaster in 2011. Neighboring Germany aims to phase out nuclear power by 2022. Nearby Austria banned it decades ago.

    Debate on Switzerland's "Energy Strategy 2050" has focused on what customers and taxpayers will pay for the measures and whether a four-fold rise in solar and wind power by 2035, as envisaged in the law, can deliver reliable supplies.

    Critics say a family of four would pay 3,200 Swiss francs ($3,257) in extra annual costs and say more intermittent wind and solar energy would mean a greater reliance on imported electricity. Switzerland was a net power importer in 2016.

    "This law will lead to massive increases to the price of energy while leaving Switzerland without adequate, reliable power," said Toni Brunner, leader of the opposition Swiss People's Party (SVP) which helped force the referendum.

    Opposition posters show a woman shivering under a cold shower, suggesting this is what voters face if they say "yes".

    Energy Minister Doris Leuthard, whose government proposed the law, dismisses opposition estimates as highly inflated. She said the package would cost the average family 40 francs more a year, based on a higher grid surcharge to fund renewable subsidies.

    "The SVP is including costs related to a second phase of the Energy Strategy that is not up for a vote," she said in a television interview.


    The price tag row largely hinges on whether costs are based on the surcharge alone or also include future expenses related to managing the reduction of fossil fuel use and emissions. The SVP puts the broader costs at about 200 billion francs.

    The law would raise 480 million francs a year from electricity users to fund investment in wind, solar and hydro power, while 450 million francs would be earmarked from an existing fossil fuels tax to help cut energy use in buildings by 43 percent by 2035 compared to 2000 levels.

    Solar and wind now account for under 5 percent of output, compared with 60 percent for hydro and 35 percent for nuclear. Under the law, power from solar, wind, biomass and geothermal sources would rise to at least 11,400 gigawatt hours (GWh) by 2035 from 2,831 GWh now.

    Swissmem, the electrical and mechanical engineering industry lobby, has urged a "no" vote, citing the variability of renewable supply. "Even limited interruptions in our electricity supply can cause massive costs," said spokesman Ivo Zimmermann.

    The law will ban building new nuclear plants. Switzerland has five plants, with the first slated to close in 2019. Voters have not set a firm deadline for the rest, allowing them run as long as they meet safety standards.

    Supporters say the law would help utilities which rely on hydropower, whose costs exceed Europe's wholesale prices.

    Alpiq, BKW, AXPO and other utilities would share a 120 million franc annual subsidy to help close the gap between production costs and market prices. Other funds would help build new dams or refurbish old ones.

    About 38,000 renewable projects, mostly small roof-top solar installations, await approval as a national fund to support them has insufficient funds. Supporters say the new law would help end the logjam.
    Back to Top

    China's One Belt, One Road policy seen changing polymer landscape

    Traders expect China's "One Belt, One Road" or OBOR policy to move polymer resin production from eastern China to inland provinces and Asian countries, industry sources said late Tuesday on the sidelines of Chinaplas, which runs in Guangzhou over May 16-19.

    OBOR, also known as the "Belt and Road Initiative" is China's plan to revive ancient trade routes linking Asia, Africa and Europe to boost global commerce. It was unveiled by Chinese president Xi Jinping in 2013 and spans some 65 countries.

    Commenting on the Belt and Road Forum for International Cooperation which ended Sunday in Beijing, polymer traders said the countries which would experience more trade are mainly the land routes that are covered in the policy, which includes China to Central Asia, China to Russia, China to South Asia such as Nepal, and China to Eastern Europe.

    China signed cooperation deals with 68 countries and international organisations during the two-day forum.

    Low value manufacturing could be moved to the other less developed countries along the OBOR route, and the finished goods then imported back to China or sold in the domestic markets, traders said.

    Domestically within China, labor-intensive plastic processor industries might migrate to China's western provinces, away from eastern China where rising wage costs pose a challenge. This will also help create jobs, they said.

    The largest Chinese plastics compounder, Kingfa, has announced plans to build a new plant in Chengdu, Sichuan, with a registered capital of Yuan 500 million ($72.6 million). Also, Saudi Arabia's Sabic and Japan's Toray have begun building plants in Chengdu over the last few years.


    OBOR will affect the Middle East as polymers are mainly supplied by sea from the Middle East to China.

    OBOR comprises a land-based "Silk Road Economic Belt" and a "21st Century Maritime Silk Road."

    It is logical to expect that countries along the maritime route will attract the lion's share of Chinese future investments.

    Already, Saudi Arabia is working to integrate its Vision 2030 reforms with the Chinese initiative and to attract more Chinese companies to invest in Saudi Arabia.

    Vision 2030 is a plan to reduce Saudi Arabia's dependence on oil and diversify its economy.

    China imports about 9 million mt/year of polyethylene and about 3 million mt/year of polypropylene according to source estimates and import statistics.

    Within China, polymers move by rail as well as road via lorries to the consumption areas in eastern China. The low-end finished end products mainly serve the domestic Chinese market.


    Polymer demand, which is consumption driven, would also grow given that the more than 60 countries in the OBOR route have a combined gross domestic product of an estimated $21 trillion, according to source estimates.

    Most of the inland Asian countries do not feature prominently as demand is still quite small, but with a growing population, consumption is expected to grow, sources said.


    OBOR may also lead to securing more low-cost feedstock advantages for polymer manufacturing to China, traders said.

    Currently polymers are made mainly from oil but also partially from gas and coal.

    Already Uz-Kor Gas Chemical, an Uzbekistan company along the OBOR route, started up a new plant in late 2015 and has sold around 163,701 mt of polyethylene to China to date, customs statistics showed. Uzbekistan has signed onto the OBOR initiative.

    Uz-Kor processes about 4.5 Bcm of gas to produce about 400,000 mt/year of PE and 100,000 mt/year of PP.

    Gas-based polymers would also free Chinese polymer processing companies to manufacture higher level goods, from "made in China" to "smartly made in China", the theme of this year's Chinaplas, sources said.
    Back to Top

    China's April power capacity near record even as Beijing curbs excess

    China's installed power capacity rose 7.6 percent to the second-highest on record in April, with coal accounting for nearly two-thirds of the total, data showed on Wednesday, even as the country has pledged to curb excess and shift to cleaner power.

    Capacity rose to 1,613.25 gigawatts (GW) by the end of April, just shy of December's record 1,645 GW, National Energy Administration (NEA) data showed, in line with China's expansion to keep pace with its industrial demand.

    That was up 7.6 percent from a year earlier and 0.3 percent from March.

    The total takes the world's second-largest economy closer to its target of 2,000 GW by 2020, as outlined in the current five-year plan.

    Beijing's push to curb excesses in its power capacity showed some signs of taking effect, with the year-on-year growth rate at its lowest since at least 2010, according to historic data.

    The 7.6 percent rise compares with double-digit percentage increases for most of 2016. Growth has slowed every month since July last year and has not fallen below 8 percent since at least the end of 2010, data shows.

    A slowdown was expected as Beijing aims to rein in excess capacity and shift the nation to renewable generation that produces less emissions.

    But coal's 65 percent portion of the total capacity, well below the 2020 target, highlights the obstacles of the shift to cleaner fuels like hydro, wind and solar.

    Attached Files
    Back to Top

    R3, Apple, Google, Amazon, Paypal, Intuit: Blockchain, again.


    The consortium started on September 15, 2015 with nine financial companies:[5][6][7][8] BarclaysBBVACommonwealth Bank of AustraliaCredit SuisseGoldman SachsJ.P. Morgan,[9] Royal Bank of ScotlandState Street, and UBS.

    On September 29, 2015 an additional 13 financial companies joined:[10] Bank of AmericaBNY MellonCitiCommerzbankDeutsche BankHSBCMitsubishi UFJ Financial GroupMorgan StanleyNational Australia BankRoyal Bank of CanadaSkandinaviska Enskilda Banken,[11] Société Générale, and Toronto-Dominion BankFinancial Times reporter Kadhim Shubber wrote that the new additions are "a sign the industry is gathering behind R3 in one potential implementation of the distributed ledger technology behind the currency bitcoin."[12]

    On October 28, 2015 an additional three financial companies joined:[13] Mizuho BankNordea, and UniCredit.

    On November 19, 2015 an additional five financial companies joined :[14] BNP ParibasWells FargoINGMacquarie Group and the Canadian Imperial Bank of Commerce.

    On December 17, 2015, an additional 12 financial companies joined :[15] BMO Financial GroupDanske BankIntesa SanpaoloNatixisNomuraNorthern TrustOP Financial GroupBanco SantanderScotiabankSumitomo Mitsui Banking CorporationU.S. Bancorp and Westpac Banking Corporation.

    As of April 25, 2016, three additional financial companies had joined:[16] SBI Holdings of Japan, Hana Financial of South Korea, and Bank Itau of Brazil.

    Toyota Financial Services joined in June[17] and MetLife joined in August 2016.[citation needed]

    On March 3, 2016, R3 announced that it had completed a trial involving 40 banks held in the last two weeks of February, testing the use of blockchain solutions offered by Eris IndustriesIBMIntel and Chain to facilitate the trading of debt instruments. This was a follow-on to an 11-bank trial conducted earlier in January which used Ethereum hosted on Microsoft Azure.[18]

    In November 2016, Goldman Sachs, Santander and Morgan Stanley each withdrew from the consortium.[19][20][21]

    On December 14, 2016, Credicorp becomes the first Spanish-speaking Latin American member of R3.[22][23]

    JPMorgan has become the latest sell-side institution to withdraw from the R3 blockchain consortium, following the exits of Goldman Sachs, Morgan Stanley and Santander in November last year.

    Reuters reports that JPMorgan has withdrawn from the consortium led by New-York based R3 CEV, which is currently in the process of a fundraising drive to raise $150 million from its members and strategic investors in return for a 60 percent stake in the business.

    In November last year, Goldman SachsMorgan Stanley and Santander all left the consortium, as banks seek to streamline the number of blockchain-based ventures they are involved in as interest in the technology cools.

    While the cryptocurrency industry may see Apple and PayPal as competitors, those two tech companies are among a group pushing for regulatory reforms in the US that could provide a boost to the nascent industry.

    For those that missed the news, Apple and PayPal have joined forces with Google, Amazon and Intuit in Washington, DC, to push for reforms to spur innovation in the financial system. Notably, a core item on their agenda is a federal money transmission license that would supersede the existing state-by-state regime.

    Further, Financial Innovation Now (FIN), the lobby group representing the five companies, sent a letter to the Senate Banking Committee last month proposing a series of recommendations that, among other items, called for the establishment of a national money transmission requirement to be managed by the Treasury Department.

    "Consumer protection is a critical part of payments regulation, but it makes no sense for different states to regulate digital money differently from one state to another," the letter explained.

    Brian Peters, executive director of FIN, stressed to CoinDesk the group is taking the money transmission issue seriously and is seeking a legislative solution.

    A New York-based broker-dealer has asked the Securities and Exchange Commission (SEC) to propose rules to cover blockchain-based assets.

    According to the petition, Ouisa Capital wants the SEC to weigh in on the use of crypto tokens and resolve “the lack of regulatory clarity with respect to the regulation of digital assets and blockchain technology”.

    The firm went on to write:

    "Ouisa encourages the SEC to engage in a meaningful discussion of how to regulate FinTech companies that are issuing digital assets that may be deemed securities and the platforms and broker-dealers that facilitate the issuance and trading of those digital assets. We believe digital assets in several contexts are securities and that existing laws provide a mechanism for regulation of the issuance and trading of digital assets."

    Additionally, Ouisa asked the SEC to create a so-called 'regulatory sandbox', through which startups and financial firms can test new products in limited settings.

    Attached Files
    Back to Top

    Belt and Road Forum transition from blueprint to roadmap -- U.S. expert

    The two-day Belt and Road Forum for International Cooperation has just concluded, with some 1,500 guests from over 130 countries attending, among them Dr. Robert Lawrence Kuhn, a prolific U.S. expert on China issues.

    Kuhn, who has written and edited more than 25 books and is a much sought-after commentator on China, had some compelling things to say about the Belt and Road Initiative, which aims to build a trade and infrastructure network connecting Asia with Europe and Africa along the ancient trade routes.

    The forum was the fourth event on the Belt and Road Initiative Kuhn attended, and he has been following the initiative's progress closely since it was first proposed in 2013 by Chinese President Xi Jinping. He sat down with Xinhua on the sidelines of the forum to speak about this historic event.

    Kuhn called Xi's keynote speech at the opening of the forum on Sunday "a grand vision for the Belt and Road."

    "This is a change of the Belt and Road from theory and preliminary ideas, from a blueprint to a roadmap, from ideas on paper to projects on the ground," he said, adding that Xi put the initiative in its historical context of East meets West on the Silk Road and showed how much the world needed the Belt and Road Initiative to combat poverty and extreme inequalities that breed instability.

    However, Kuhn stressed that the Belt and Road Initiative was not charity by any means. "It is not foreign aid, which is good at times, but it is often not sustainable," he said.

    "The Belt and Road starts at the foundation, and builds infrastructure, so it enables the host countries, the developing countries, some very poor countries, to be able to develop their own economies ... You can't develop an economy without a foundation of infrastructure," he said.

    He found the cooperation potential under the Belt and Road Initiative especially appealing. "He (Xi) showed that people who have differences in geography, race, religion, ethnicity, different views can work together for common development. But it needs to start with infrastructure."

    The expert was especially impressed that China "is making a creative, proactive effort" with this initiative.

    As Kuhn was listening to Xi's speech, he was pondering the potential challenges the Belt and Road Initiative faces in its implementation, a topic he is particularly interested in exploring.

    "You have to start with a vision, but unless you appreciate all the challenges, the difficulties, it's going to have problems in the future," the expert said.

    When asked how other countries can better benefit from China's wisdom and solutions, Kuhn said the countries would derive a dual benefit.

    The first benefit would be the projects themselves, which would provide the "desperately needed" infrastructure for an economy to grow and become integrated into the global economy.

    The second one would be the "more subtle benefit" of China's reform and opening-up experience that other countries could learn from, for example how to avoid pollution.

    The expert also had a lot to say on how the initiative would help the world recover from the economic sluggishness.

    "I think you have to look at the Belt and Road Initiative in the long term. I think it's a mistake to try to say the Belt and Road is going to have an immediate benefit," as haste makes waste where infrastructure projects are concerned.

    "Infrastructure projects are not measured in years, they are measured in decades," Kuhn said.

    "You need to understand the Belt and Road in terms of the real economic matching between risk, reward, investment and return. And it's not short term," he said.

    Kuhn remarked on the large turnout at the forum, which underscores the initiative's importance. "The world is collectively agreeing to build infrastructure, recognizing all the challenges involved, and I think that is the most important element that we have here, the results of which we will see over time," Kuhn said.

    He suggested that think tanks would play a role in guiding the initiative in the right direction.

    The expert also addressed a common misconception about the Belt and Road Initiative, which has been occasionally compared to the Marshall Plan that provided aid to Europe after World War II, or chequebook diplomacy. By contrast, the Belt and Road Initiative is truly win-win, he argued.

    "Belt and Road is not foreign aid, which is giving charity ... it is truly win-win. The benefit of win-win is that it's sustainable," Kuhn said, adding that China has been open about the fact that the initiative would benefit its own country as well.

    What's more, in Xi's speech at the forum, the Chinese president said that China has neither the intention of interfering in other countries' internal affairs nor would it export its own social system or model of development. Kuhn agreed with that approach.

    While implementing the Belt and Road Initiative, participating countries need to respect each others' local cultures and governmental structures while at the same time applying the highest international standards, he suggested.

    In sum, "the forum is a milestone in a big transition" from theory to "a major world commitment led by China" to promote global connectivity.

    "This makes the commitment absolutely definitive," Kuhn said.
    Back to Top

    Smog in key northern China region rises in first four months of year

    Air pollution in a key Chinese region surrounding Beijing worsened in the first four months of this year, despite tough new campaigns to enforce green regulations and punish offenders, official data published on Tuesday showed.

    In the Beijing-Tianjin-Hebei region, average concentrations of small breathable particles known as PM2.5 rose nearly 20 percent year-on-year to 85 micrograms per cubic meter from January to April, said the Ministry of Environmental Protection.

    China has launched campaigns aimed at ensuring the region meets a series of politically significant 2017 air pollution targets set by the central government in 2013.

    The region is under pressure to cut 2012 levels of small particulate matter by around 25 percent by the end of this year, with the capital Beijing aiming to keep average PM2.5 rates at below 60 micrograms per cubic meter, down from 73 micrograms in 2016.

    Beijing has already promised "extraordinary measures" to ensure the target is met, but its average PM2.5 reading stood at 76 micrograms in the first four months of 2017, up 11.8 percent from the same period of 2016.

    There were improvements in April alone, with average PM2.5 readings in the region falling 5.2 percent to 55 micrograms, while the number for Beijing was 53 micrograms, down 22.1 percent.

    But those were not enough to offset the outbreaks of near-record smog that hit the region in January, prompting dozens of cities to issue "red alerts" to curb industrial activity and thin traffic.

    Chinese cities need to cut average PM2.5 readings to 35 micrograms in order to meet state standards, while the World Health Organization recommends concentrations of no more than 10 micrograms.

    Hebei province accounted for six of China's 10 smoggiest cities over the first four months of the year, with the steel city of Handan in the province's south ranking the worst over the period.

    The environment ministry said last month it would dispatch 5,600 inspectors to look into the sources of air pollution in 28 cities in and around the Beijing-Tianjin-Hebei region. Violations have been uncovered at more than two thirds of the firms that have been inspected.

    Hebei, which produces more steel in a year than the whole of the European Union, admitted last week that it was still failing to implement policies aimed at curbing pollution and industrial overcapacity.

    Attached Files
    Back to Top

    Hebei admits more lapses in pollution, overcapacity fight

    China's Hebei province is not properly enforcing policies to cut pollution or reduce chronic overcapacity in major industrial sectors like steel and coal, Reuters reported, citing the environmental bureau.

    Hebei produces more steel a year than the whole of the European Union, and it aims to cut total annual production capacity to less than 200 million tonnes by the end of the decade, down from 286 million tonnes in 2013.

    However, despite plans to shed 60 million tonnes of capacity over the 2013-2017 period, Hebei actually saw production increase in 2016.

    The northern province, one of China's most polluted regions, has launched a campaign to hold officials accountable for enforcing environmental policies and to tackle "grass roots micro-corruption".

    The provincial environmental protection bureau said in a recent statement it has launched its own campaign to root out "ineffective mobilization" by officials in the battle against pollution.

    One of the key problems was the failure to implement industry overcapacity rules, it said.

    During campaigns to cut excessive steel, iron, cement, glass and coal capacity, some illegal plants were suspended but not shut down, allowing dead facilities to spring back to life or relocate, it said.

    Also, shuttered "zombie" firms did not have their power or water supplies cut off or their facilities demolished, allowing them to re-open, it said.

    Policies aimed at converting villages from coal to gas or electricity were not being implemented properly or according to schedule.

    Hebei surrounds Beijing and is estimated to be the source of about a third of the particulate matter drifting over Beijing.

    As the province strives to meet 2017 air quality targets, it has launched a series of campaigns aimed at punishing polluters and "normalising compliance".
    Back to Top

    Elliott steps up pressure on BHP to ditch petroleum

    Activist investor Elliott Management upped the pressure for strategic changes at BHP on Tuesday, calling for an independent review of the mining giant's petroleum business.

    Elliott, which has built up a 4.1 percent stake in BHP's UK-listed arm and is urging changes to boost shareholder value, said there were clear signs that the market was receptive to a new strategy for BHP.

    "There is extremely broad and deep-rooted support for pro-active steps to be taken by management to achieve an optimal value outcome for BHP's petroleum business following a formal open review," it said in letter to management.

    Elliott, founded by billionaire Paul Singer, has been pushing for BHP to collapse its dual-listed structure, spin off its U.S. oil and gas assets, and boost returns to shareholders since tabling its proposals on April 10 - all of which BHP has rejected.

    Its latest letter, which did not name any other shareholders, was released just hours before BHP Chief Executive Andrew Mackenzie is due to speak at a Bank of America Merrill Lynch mining conference in Barcelona.

    "This latest salvo by Elliott is well-timed to coincide with Mackenzie's speech," said an analyst, on condition of anonymity as his company owns BHP shares. "It almost forces BHP to directly address them on this."

    Responding to concerns raised by the Australian government, Elliott said on Tuesday that BHP could remain incorporated in Australia and stay an Australian tax resident, retaining full listings on the Australian and London bourses.

    In a slide presentation on its website,, Elliott criticized BHP's track record on share buybacks and suggested the company should make a $6 billion buyback in 2018.

    Such a buyback, if the current valuation remained unchanged, would lead to $2.4 billion in value accretion, equivalent to more than 12 times Elliott's expected costs of unifying BHP's dual listings, it said.

    Elliott has put the cost of unification at $200 million and said BHP's $1.3 billion estimated cost was "flawed and misleading".

    BHP had no immediate comment on the latest proposal.

    Mackenzie has previously stressed that it is the wrong time for BHP to sell its U.S. petroleum assets, given oil prices are still low at about $52 per barrel.

    BHP has also sought to highlight the action it is taking to divest non-core parts of its U.S. shale assets.
    Back to Top

    India's Vedanta swings to profit after metal rally, zinc payout

    Vedanta reported a fourth-quarter profit as India’s biggest base metals producer benefited from a rally in prices and a special dividend announced by its zinc arm.

    Net income attributable to owners was 14.1-billion rupees in the three months through March and revenues were 246.1-billion rupees, the unit of London-listed Vedanta Resourcessaid in a statement Monday. That compares with a loss of 138.4-billion rupees a year ago because of a writedown at its oil unit.

    A surge in zinc prices globally saw profit at unit Hindustan Zinc surge 43% in the quarter from a year earlier and the company announced a record payout to investors in March. Vedanta’s billionaire chairman Anil Agarwal got another lift in April after shareholders approved merging the company with his Indian energy business, Cairn India, as he bids to create a resources heavyweight in the mold of Australia’s BHP Billiton.

    A near- $1.2-billion windfall from Vedanta’s 65% stake in Hindustan Zinc and access to about $4 billion in cash at Cairn India will help soften concerns over its debt pile, according to ratings agencies. Vedanta’s gross debt stood at 636.6-billion rupees at the end of March, while cash and liquid investments were 634.7-billion rupees, according to the company.

    “Our strategic focus to ramp up production across the portfolio namely in zinc, aluminium, power and iron-orebusinesses throughout the year has supplemented revenue growth,” outgoing CEO Tom Albanese said in the statement. Record production of zinc and aluminium and cost management initiatives also helped the company boost profits, he said.

    Vedanta’s stock rose 1.8% to close at 241 rupees on Monday, putting it up 11% for the year. Zinc prices in London advanced 36% in the past year due to a shortfall in production of the metal used to galvanize steel.
    Back to Top

    China's Factory Output, Investment Moderate as Growth Dials Back

    The world’s second-largest economy dialed back a gear in April as authorities crack down on the nation’s swelling financial leverage.

    Key Points

    Industrial output rose 6.5 percent last month from a year earlier, compared to 7 percent seen by economists and 7.6 percent in March
    Retail sales increased 10.7 percent versus 10.8 percent seen by analysts  
    Fixed-asset investment excluding rural areas expanded 8.9 percent for the first four months, compared to a median estimate of 9.1 percent

    Big Picture

    Growth momentum has softened after a strong first quarter as policy makers seize the window to curb shadow lending and leverage. While equity and credit markets have been shaken by the campaign, economic fundamentals remain robust as reflation boosts company profits and external demand gets a boost from a pick up in global growth. The Bloomberg monthly GDP tracker pulled back to 7.15 percent in April, from 7.64 percent in March.

    Economist Takeaways

    "All the data sends the same message: The economy slowed down meaningfully in April," said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. "But given that growth is still fine, in the second quarter policy makers will still focus on reducing financial risk."

    Slowing growth combined with bond-market tumult "will likely throw the People’s Bank of China off its tightening trajectory," Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. "Despite the slight slowdown in retail sales, the pace of consumption growth continues to far outstrip that of household income -- an unsustainable state of affairs reflecting breakneck growth in bank loans to households."

    "Slowing domestic consumption growth and softer external demand appear to have driven the slowdown," said Julian Evans-Pritchard, China economist at Capital Economics Ltd. in Singapore. "Infrastructure and property investment are holding up, helping to stave off a sharper deceleration. But we doubt the current strength in these areas can be sustained given that policy is being tightened and the property market is starting to cool."

    "The April activity data barrage add to evidence China’s cyclical upswing has peaked and conditions will cool into the second half of the year," said Katrina Ell, an economist at Moody’s Analytics in Sydney. "Autos remained a major drag due to high base effects from earlier subsidies."

    "Chinese growth appears to be moderating, in line with the central bank’s tweaking of market interest rates slightly higher," said Callum Henderson, Managing Director, Global Markets, Asia Pacific at Eurasia Group in Singapore. "This is good news for China as growth should be relatively strong and solid heading into the 19th Party Congress – and most likely will be. However, it suggests a modest correction going forward in the assets of those countries that export to China heading into the second half.”

    The Details

    Private fixed-asset investment rose 6.9 percent in first four months while property development investment climbed 9.3 percent
    Ferrous and non-ferrous metal smelting and pressing dragged on industrial production
    China’s surveyed jobless rate fell in April from March
    China added 4.65 million new jobs from January to April
    The weaker April economic data was partly due to there being fewer work days during the period, a statistics bureau spokesman said at a briefing

    Attached Files
    Back to Top

    China PE prices hit 11-month lows on weak demand

    Polyethylene import prices in China have hit 11-month lows because of weak demand resulting from a multitude of factors, market sources said on Monday, prior to the opening of ChinaPlast, which runs from Tuesday to Friday in Guangzhou, China.

    The bearish reasons listed by market participants include higher interest rates, slow economic growth, higher domestic production in China, less debt lending, a weak Chinese currency, low futures trading volumes, high import volumes, and new global capacities.

    Linear low-density polyethylene import prices, at $1,115/mt CFR Far East Asia as assessed on May 12, were at its lowest seen since June 2016, according to S&P Global Platts data.

    The domestic Chinese market saw abundant supply from both local and overseas suppliers. PE imports in first-quarter 2017 rose 25.66% from Q1 2016 to 3,051,275 mt, according to China import statistics. This was a result of new global suppliers in 2017, with a total capacity of 5-6 million mt/year, all targeting China as a key import market, traders said,

    Domestic PE production in China in Q1 2017 also rose to around 4 million mt, an increase of "probably around 10%" from that in Q1 2016, traders said. This led to the current high PE inventories at ports, estimated at around 500,000 mt, according to traders.

    "Although [inventories] had fallen from the all-time high of 1 million mt seen in February, it is still at a multi-year high," a Chinese trader said.

    Moreover, continued weakness in the Chinese curreny, at Yuan 6.9 against the US dollar -- a nine-year low -- made imported resin unattractive, sources said.

    The bearishness in China's Dalian futures, which showed a year-on-year fall of 59.23% in January-April volumes traded, also led to the bearish buying sentiment, traders added.

    Decreased money supply had led to soft Chinese demand to boot, sources added. China's efforts to tackle excessive lending have led to incraese in interest rates.

    As of May 15, the Shanghai Interbank Offered Rate, or Shibor, lending rates for three and six months increased 96 and 44 basis points to 4.4184% and 4.3996%, respectively, while one-month interest rates fell 6 basis points at 4.0462%. The weekly interest rates are updated every Monday at 11.00 am on the People's Bank of China website.

    On top of this, a weaker 2017 gross domestic product has also lessened demand for PE, since PE is heavily linked to consumption, industry sources said.

    China's GDP is expected to be 6.5% in 2017, 0.2% lower than 2016's, as Chinese premier Li Keqiang had earlier announced.
    Back to Top

    Aust'n scientists discover "lost forests"

    A team of international scientists led by those at Australia's University of Adelaide have discovered 467 million hectares of "previously unreported forest," in a development which could help improve the accuracy of global carbon modelling and lead to new conservation efforts.

    The scientists discovered the previously unreported forests, which increases the current global "forest cover" by 10 percent, on all continents, with a major focus on uninhabitable areas such as the south of the Sahara desert, central India, rural Australia and parts of South America.

    The scientists said the differences in the coverage estimates was stark in Africa, where reported forest regions doubled, something the team has said could revolutionize carbon modeling for climate change and force a re-think in conservation.

    In a statement released on Friday, the University of Adelaide's Prof. Andrew Lowe said scientists from more than a dozen organizations analyzed the global distribution of forests and woodlands across drylands.

    He said dryland forests were previously difficult to measure using satellite imagery or other remote sensing because of the "relative low density of trees."

    "Just when we thought we knew the world, this project shows we are still improving our knowledge and description of natural systems," Lowe said.

    "To 'find' an area of forest that represents 10 percent of the global forest cover is very, very significant, with broad consequences for global carbon budgeting and dryland restoration and management.

    "It shows that dryland regions have a greater capacity to support trees than previously perceived and understood. With its low opportunity costs, dryland could therefore provide a unique chance to mitigate climate change through large-scale conservation and afforestation actions. It also shows the potential for improved livelihoods of the people in these areas."

    According to Lowe's colleague, Associate Professor Ben Sparrow, the teams used more than 210,000 satellite images to calculate global forest cover.

    "The main reason for the underestimate of forest cover is that previous land type classifications have been based on older and lower resolution satellite imagery without any kind of ground validation," Sparrow said on Friday.

    "This new reassessment has been possible due to access to higher resolution satellite imagery, through Google Earth Engine, as well as the incorporation of ground validated information from TERN's ecological plots."
    Back to Top

    Nepal in talks with China to build $8 billion cross-border rail link: finance ministry official

    Nepal is in talks with China to build a cross-border rail link that may cost up to $8 billion, and funding could be expected after Nepal formally signed up to Beijing's Belt and Road initiative, a Nepali finance ministry official said on Sunday.

    Yug Raj Pandey, an under secretary at Nepal's Ministry of Finance, told Reuters the proposed 550 kilometer-long railway would connect China's western Tibet region to Nepal's capital of Kathmandu and will carry goods and passengers.

    The Himalayan nation officially signed an agreement two days ago to be part of President Xi Jinping's ambitious plan to build a new Silk Road, he said on the sidelines of the Belt and Road Forum in Beijing.

    "Now we are a member of (the initiative) we can get some specific project assistance from China's government. We expect it for the railway," he said. "Once we connect by railway then we can increase our trade and invite more tourists to Nepal."

    Pandey said the two countries had been in discussions for the past five months about the project, which could cost $7-8 billion and take up to eight years to complete.

    He said Nepal planned to start preparing a detailed project report for the railway, and that they had yet to decide how much funding they will seek from China.

    The railway will travel over 400 kilometers in China to the Nepal border, and then about another 150 kilometers from the Nepali border to Kathmandu, he said.

    "Our first priority is railway, and second will be hydropower projects and cross-border transmission lines between Nepal and China," he said.

    China last year agreed to consider building a railway into Nepal and to start a feasibility study for a free trade agreement with impoverished, landlocked Nepal, which has been trying to lessen its dependence on its other big neighbor India.

    Pandey declined to comment about India's opposition to parts of the Belt and Road initiative, in particular an economic corridor China is building in Pakistan.

    China has touted what it formally calls the Belt and Road initiative as a new way to boost global development since Xi unveiled the plan in 2013, aiming to expand links between Asia, Africa, Europe and beyond underpinned by billions of dollars in infrastructure investment.
    Back to Top

    Australia's BHP heads back to roots, drops Billiton from its name

    Australia's BHP heads back to roots, drops Billiton from its name

    One of the last reminders of a merger 16 years ago that created the world's biggest mining house will be erased on Monday when BHP Billiton changes its name back to just BHP.

    Dropping the Billiton reflects a move to simplify its corporate structure, the company said, and return to its founding roots in Australia more than a century ago, when it was known as Broken Hill Proprietary Co Ltd.

    BHP, which has operations in 25 countries, will retain its dual listings in Australia and London.

    BHP head of external affairs Geoff Healy dismissed suggestions that the name-cropping is in response to a call by activist shareholder Elliott Management for the miner to scrap its dual-listing mechanism in Sydney and London and spin off assets, specifically its U.S. shale oil unit. "There is zero connection with Elliott's proposals," Healy said. "We've been doing this for 18 months."

    The company is spending an initial A$10 million ($7.4 million) on an advertising campaign in Australia to promote the shortened name.

    The merger of BHP and South African mining house Billiton in June 2001 created a company with an initial enterprise value of $38 billion. The joining, however, came to be widely regarded by analysts as value-destructive, even during the China-fueled boom years at the end of the last decade.

    Most of the original Billiton assets were included in a 2015 spin-off, South32, and no longer contribute to the company's bottom line. South32 was initially derided as a compilation of BHP Billiton's most unwanted assets, but it has frequently outperformed the parent company.
    Back to Top

    Wooing investors after Elliott, BHP boss to play up shale

    BHP Billiton CEO Andrew Mackenzie, batting off an attack by activist funds, will tell investors in Barcelona next week that the top global miner can pump more for less out of its unloved shale assets.

    But don't expect a fresh public response to the attack by hedge fund Elliott Management, which last month called for an overhaul of BHP's structure.

    "You are not going to see a rebuttal to Elliott," said a source close to BHP, who was not authorised to speak publicly about the matter.

    Mackenzie, among the executives due to address a Bank of America Merrill Lynch mining conference next week, will outline how BHP is increasing output and cutting shale drilling costs, gaining better acreage by trading assets, and extending its reach by partnering with other players, the source said.

    Elliott is pushing a three-point plan to collapse BHP's dual-listed structure, spin off its US oil and gas assets, and boost returns to shareholders - all of which BHP has rejected.

    Sydney-based Tribeca Global Natural Resources Fund last week called for a board shake-up and a sale of the shale assets.

    The idea that has gained the most traction among investors contacted by Reuters is that BHP should rethink its involvement in US oil and gas.

    The source close to BHP said the company is also conscious that the oil and gas argument has generated the most discussion.

    However, investors differ over the timing of any sale and whether BHP should pursue a trade sale of the shale assets, a public listing of all of its US assets, as Elliott has suggested, or even a total exit from petroleum.

    BHP says oil and gas is core to its strategy, with good growth, strong margins and fewer market-share obstacles to acquisitions compared to its iron-ore, copper and coal arms.

    Outgoing BHP chairperson Jac Nasser said earlier this month that the petroleum business, including deepwater oil assets in the Gulf of Mexico, is the company's highest-margin business.

    A BHP spokeswoman and a spokesman for Elliott declined to comment on the address or sideline meetings. It was unclear if Elliott would be travelling to Barcelona.


    "Oil as an asset has actually been good as part of the overall BHP portfolio," said Argo Investments portfolio manager Andy Forster, a top 20 investor in BHP's Australian arm.

    "It's just unfortunate they went and bought the US shale assets. Potentially over time they maybe should get out of the US shale business, but I just don't think now's the time to do it."

    BHP paid $20-billion for the US shale assets, bought in 2011 and 2012, but the subsequent collapse in oil and gas prices forced it to write down the value by $12.8-billion.

    The company last month said it had put its Fayetteville assets in Arkansas, bought for $4.75-billion but now valued at $919-million in its books, back on the block.

    Elliott is "not convinced that the piecemeal sale of little bits of assets is the best way forward," a source close to the activist fund said.

    London-based Bernstein analyst Paul Gait said Mackenzie needed to prove that oil majors like ExxonMobil Corp were not "missing a trick" in lacking mining divisions.

    "If they are not, then BHP is mistaken in its ownership of oilassets and Elliott is right. Basically, either BHP is right on this or every major oil company apart from them is wrong."
    Back to Top

    China, India plans for electric cars threaten to cut gasoline demand

    Demand for gasoline in Asia may peak much earlier than expected as millions of people in China and India buy electric vehicles over the next decade, threatening wrenching change for the oil industry, oil and auto company executives warned.

    They said refiners should prepare for a future in which gasoline, their biggest source of revenue, will be much less of a cash cow.

    Change is being prompted by policy moves in India and China, where governments are trying to rein in rampant pollution, cut oil imports, and compete for a slice of the fast-growing green car market.

    In its "road map", released in April, China said it wants alternative fuel vehicles to account for at least one-fifth of the 35 million annual vehicle sales projected by 2025.

    India is considering even more radical action, with an influential government think-tank drafting plans in support of electrifying all vehicles in the country by 2032, according to government and industry sources interviewed by Reuters late last week.

    "We will see a clear shift to electric cars. It's driven by legislation so electric cars are coming, it's not a niche anymore," Wilco Stark, vice president for strategy and product planning at German car maker Daimler (DAIGn.DE), told Reuters.

    Stark and other executives were interviewed during the Asia Oil & Gas Conference in Kuala Lumpur this week.

    Daimler sees electric vehicles contributing 15-20 percent of its overall sales by 2025 and at least an additional 10 percent of sales coming from hybrids, he said.

    Electric cars currently make up less than 2 percent of the global car fleet, and any faster-than-expected growth in that percentage will materially impact oil demand and the refining business.

    "Technology is moving fast. In 10-15 years... our gasoline market might not be the same as it is today," said Dawood Nassif, board director at the state-owned oil company Bahrain Petroleum Company (BAPCO).

    With gasoline responsible for up to 45 percent of refinery output, and one of the highest profit-margin fuels, a slowdown or fall in demand will have far reaching implications.

    Credit agency Moody's says that the fast pace of technological development makes accurate predictions difficult, but warned that direct financial effects from falling oil demand, including gasoline, "could be material by the 2020s."

    The changes are so big that the influential International Energy Agency (IEA) plans to revisit its analysis of electric vehicle trends and oil demand.

    "The choices made by China and India are obviously most relevant for the possible future peak in passenger car oil demand," an IEA spokesman told Reuters.

    In its current policies scenario, last updated in November 2016, the IEA still expects oil demand from vehicle use to rise until 2040.

    It's not just China and India that are changing fast.

    Asia's major car makers, Japan and South Korea, already sell significant volumes of hybrid vehicles - which operate off gasoline and electricity - while fuel efficiency gains will continue to cut gasoline consumption for standard vehicles.

    There will, though, be some major hurdles before a country like India goes mostly electric. High battery costs would push up car prices and a lack of charging stations and other infrastructure in India means car makers may hesitate to make the necessary investment in the technology.


    Asia has long been the main driver of future oil demand thanks to supercharged growth in sales of autos.

    China sells more than 2 million new cars a month aCNDSLSAUT and is challenging the United States as the world's biggest oil consumer. India now is the world's third-biggest oil importer, ahead of Japan.

    More than a third of the world's refineries are in Asia, up from just 18 percent in 1990.

    For refiners, the growth of vehicles that run on electricity and other alternative fuels is a wake-up call. They can tweak the products they make from crude oil to an extent, but still mostly rely on gasoline consumption for revenue.

    "Rising pressure on margins and cash flows will potentially lead to stranded assets," Moody's warned, using a term for assets that no longer provide an economic return because of changes in the market or regulatory environment.

    The oil industry is taking note.

    Royal Dutch Shell (RDSa.L) said this week that it "is looking into ... the potential to introduce electric vehicle charging points at our retail sites in several countries."

    Oil executives say it is still premature to expect overall oil demand to fall soon.

    "Our industry will not disappear," said Abdulaziz al Judaimi, senior vice president for downstream at Saudi Aramco, the world's biggest oil export company.

    They are envisaging a shift towards producing more petrochemicals like plastics or household chemicals, areas where consumption is soaring.

    Saudi Aramco is jointly developing the huge Malaysian RAPID refinery and petrochemical complex with state-owned Petronas, and the two said this week they are exploring an expansion of its petrochemical capacity.

    Exxon Mobil this week said it would buy a petrochemical plant in Singapore.

    Refiners also still see strong oil demand from heavy industry.

    "Refiners may shift their focus from gasoline to middle distillates," said KY Lin of Taiwan's Formosa Petrochemical (6505.TW), a major Asian refiner. "Gasoil is used widely, including in farming/industrial equipment... and also as a marine fuel."

    Attached Files
    Back to Top

    China's power use increases in April

    China's electricity consumption, an important indicator of economic activity, increased significantly in April, suggesting economic improvement, official data showed Friday.

    Power use rose 6 percent year on year to 484.7 billion kilowatt-hours in April, according to data from the National Energy Administration.

    In April, electricity use by primary industries dropped 1.1 percent year on year. Power consumption by secondary industries went up 5 percent, while tertiary industries saw a 12.7-percent rise amid economic restructuring.

    In the first four months, power consumption rose 6.7 percent from the same period in 2016 to 1.93 trillion kWh, data showed.

    Electricity use in the service sector rose 8.9 percent in the first four months, while the industrial and agricultural sectors saw increases of 6.9 percent and 6.7 percent, respectively, according to NEA.

    The rates reflect positive changes in China's economic structure, as power use in the service sector grew faster than the industrial sector.

    Attached Files
    Back to Top

    Fortis to buy Teck Resources' stake in British Columbia dam for $875 mln

    Canadian utility Fortis Inc said on Friday it would will buy Teck Resources Ltd's two-thirds stake in the Waneta dam in British Columbia as well as any related transmission assets for C$1.2 billion ($875 million) in cash.

    A Teck unit will then get a 20-year lease to use the assets to produce power for its Trail Operations, the company's zinc and lead smelting and refining complex in southeastern British Columbia, the companies said in a joint statement.

    Vancouver-based Teck, which primarily mines coal, zinc and copper, said last September it was considering selling some infrastructure assets, including the Waneta Dam and the Ridley coal terminal in British Columbia.

    Teck, which has been using cash flow and profit to cut debt, had debt of $5.1 billion at the end of the first quarter.
    Back to Top

    Is A Chinese Recession Imminent? Yield Curve Inverts For First Time Ever

    Is A Chinese Recession Imminent? Yield Curve Inverts For First Time Ever

    While China growth has been slowing, and monetary conditions tightening, few (if any) have predicted any prolonged deflation (let alone a recession), yet overnight - for the first time ever - the $1.7 trillion Chinese bond market inverted, flashing a warning signal to the world that something is wrong.

    Early on Thursday, the five-year yield rose to 3.71%, breaking above the 10-year yield for the first time since records began - even though the latter, at 3.68%, was near a 25-month high.

    Some of the overnight weakness in the 10Y yield was eased by reports that PBOC would offer some Medium-Term Loans.

    Of course it's not just bonds that are getting dumped...

    But, as The Wall Street Journal writes, such a “yield-curve inversion” defies normal market logic that bonds requiring a longer commitment should compensate investors with a higher return. It usually reflects investor pessimism about a country’s long-term growth and inflation prospects.

    Perplexed traders and analysts offered up many excuses...

    “Many of us are scratching our heads for an explanation because this kind of curve inversion is absolutely not normal,” said Wang Ming, a partner at Shanghai Yaozhi Asset Management Co., a bond fund that manages 2 billion yuan ($289.66 million) in assets.

    “The inversion is a form of mispricing in the bond market,” said Liu Dongliang, senior analyst at China Merchants Bank . “The fact that no one is taking the bargain despite the higher yield on the five-year bond just shows how depressed investors’ mood is.”

    “It’s really difficult to predict when the selloff or such anomalies will end because China’s bond market is reacting to the regulatory crackdown only and is no longer reflecting economic fundamentals,” said China Merchants Bank’s Mr. Liu.

    But of course, the reality is - without massive and contonued credit creation, there are very large questions about just how 'dynamic' Chinese growth could be and while technical flows are certainly part of the reasoning for 5Y yields rising, the question is, why wouldn't the rest of the world pile in to 'reach for yield'... unless the fundamentals really did have them worried?
    Back to Top

    Oil and Gas

    WAF VLCC freight rates soft due to weak China buying, slow Persian Gulf market

    The cost of taking crude oil from West Africa to China on VLCCs has hit a near two-month low, due to slack demand from China and a weak Persian Gulf market, sources said.

    The VLCC route from West Africa to China, basis 260,000 mt, was assessed at $11.95/mt on Tuesday, the lowest level since March 31, when it was valued at $11.85/mt, according to S&P Global Platts data.

    NPI was heard to have taken the VLCC vessel Kondor on subjects at w55.5 for a voyage from West Africa to China with June 14-16 loading dates, which equates to $11.95/mt.

    The leading VLCC market in the Persian Gulf is weak and this is depressing the Atlantic market as well, sources said.

    Shipbroking sources estimate the tonnage over-hang at approximately 38 VLCC ships in the Persian Gulf, which is close to the highest level in three years.

    "We are looking to the Atlantic for some hope, but the Caribs can't take everything, and there is not much to take Arabian Gulf ships away and reposition them in the Atlantic," said one shipbroker.

    Chinese demand for Angolan crude has been slightly lower for May and June cargoes, with the country's teapot refineries reducing their purchases from earlier in the year.

    "We have had high global refinery maintenance and don't have peak runs. The teapots haven't come back into the market and a lot of them have already used up their import quotas," said one trader.

    The lower Chinese demand has placed downward pressure on Angolan differentials and made these barrels more attractive to European refiners. As the voyage time from Angola to Europe is considerably shorter than from Angola to China, VLCC ton mile demand has been reduced by the lower Chinese demand for Angolan crude.

    Attached Files
    Back to Top

    Tidewater files for Chapter 11 bankruptcy as it seeks to cut debt

    U.S. offshore support vessel owner Tidewater has filed voluntary petition under Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware.

    The move is intended to help Tidewater pursue a prepackaged plan of reorganization in accordance with its previously announced restructuring support agreement (the “RSA”) with certain lenders to “effectuate a comprehensive balance sheet restructuring.”

    The company last week said it had entered into a debt restructuring support agreement with certain consenting creditors.

    The U.S.-based vessel company has entered into the deal with lenders under its Fourth Amended and Restated Revolving Credit Agreement, dated as of June 21, 2013, and holders of Tidewater Senior Notes to put into force a proposed prepackaged plan of reorganization of the company.

    As part of its debt restructuring plan, Tidewater plans to reject certain sale-leaseback agreements for leased vessels currently in the company’s fleet, and to limit the resulting rejection damages claims to approximately $131 million.

    However, the Sale Leaseback Parties dispute the amount of the rejection damages claims and a final resolution of the amount of such claims will be subject to litigation, Tidewater said.

    “As a result, there is no certainty as to the final amount of sale-leaseback rejection damages claims that will be treated pursuant to the Prepackaged Plan,” the company added.

    The prepackaged plan is supported by lenders holding approximately 60% of the outstanding principal amount of loans under the Credit Agreement and Noteholders holding 99% of the aggregate outstanding principal amount of the Senior Notes. Collectively, these supporting Lenders and Noteholders also constitute a majority in number of the holders of General Unsecured Claims.

    Debt reduction

    Announcing its agreement with creditors last week, Tidewater said the plan would substantially deleverage its balance sheet and better position Tidewater “to weather the extended downturn in the offshore energy industry while maintaining the company’s position as a worldwide market leader in offshore vessel services.”

    Tidewater expects that it will eliminate approximately $1.6 billion in principal of outstanding debt.

    Under the plan, the consenting creditors will receive their pro rata share of $225 million of cash; common stock and, if applicable, warrants to purchase common stock, representing 95% of the pro forma common equity in reorganized Tidewater, and new 8% fixed rate secured notes due in 2022 in the aggregate principal amount of $350 million.

    Furthermore, Tidewater’s existing shares of common stock will be cancelled, and the existing common stockholders of Tidewater will receive their pro rata share of common stock representing 5% of the pro forma common equity in reorganized Tidewater.

    The existing shareholders will also be granted six year warrants to buy purchase additional shares of common stock of reorganized Tidewater.

    These warrants will be issued in two tranches, with the first tranche (the“Series A Warrants”) being exercisable immediately, at an aggregate exercise price based upon an equity value of the Company of approximately $1.71 billion, and the second tranche (the “Series B Warrants”) being exercisable immediately, at an aggregate exercise price based upon an equity value of the Company of $2.02 billion, Tidewater said. The tranches will enable the existing shareholders to buy a number of shares equal to 15 percent (7.5% per tranche).

    Business as usual

    Tidewater expects to continue to operate the business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and fully expects to continue existing operations and maintain staffing and equipment as normal throughout the court-supervised financial restructuring process.

    “Tidewater has filed a series of motions with the Bankruptcy Court to ensure a seamless transition into chapter 11 and has sought the approval of the Bankruptcy Court to continue paying prepetition employee wages and salaries and to provide employee benefits without interruption. The Company continues to work closely with its suppliers and partners to ensure it meets ongoing obligations and business continues uninterrupted,” the company added.

    Jeffrey M. Platt, Tidewater’s President and Chief Executive Officer states, “After much thought and successful negotiations with certain of our economic stakeholders, we decided that commencing the chapter 11 cases was necessary to create financial stability which would allow Tidewater to remain a formidable competitor given this unprecedented industry downturn. Throughout the chapter 11 process, we anticipate meeting ongoing obligations to our employees, customers, vendors, suppliers, and others. We will continue to provide our customers with dependable, high-quality services.”

    To support and effect the restructuring, Tidewater has filed applications to retain, among others, Weil, Gotshal & Manges LLP as restructuring counsel, Jones Walker LLP as corporate counsel, Lazard Frères & Co. as investment banker, and AlixPartners, LLP as restructuring advisor.

    Subject to the approval of the Bankruptcy Court, the Prepackaged Plan is expected to be consummated in approximately 45 days.

    “Tidewater believes it has adequate liquidity to maintain its operations in the ordinary course and does not intend to seek any debtor-in-possession financing during the pendency of the bankruptcy cases,” the company said.
    Back to Top

    Aiming To Lift Production, Kazakhs May Not Play Along With OPEC Cuts

    While many oil producers part of the OPEC/non-OPEC agreement to curb production have already stated their support to the deal extension for another nine months, Kazakhstan is going into next week’s meeting with little enthusiasm for rolling over its production cuts, as it plans to raise output from its major oil fields.

    Kazakhstan’s Energy Minister Kanat Bozumbaev said earlier this week that his country would attend the meeting at which OPEC and partners are expected to hammer out the details of the cuts extension.

    In the deal from November 30, OPEC pledged to cut 1.2 million bpd of its production, while Azerbaijan, Bahrain, Brunei Darussalam, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Republic of Sudan, and Republic of South Sudan committed to a collective cut of 558,000 bpd.

    At that time, Kazakhstan promised to cut output by 20,000 bpd from an average 1.5 million bpd, Radio Free Europe says.

    According to Bloomberg, Minister Bozumbaev has said that his country won’t automatically roll over the cuts it is implementing now.

    Kazakhstan is seeking to increase production at its giant fields, especially Kashagan, which after years of delays and setbacks, resumed commercial-scale production in October 2016 at a rate of 90,000 bpd. In January, the company operating the field said that it was ramping up production to 180,000 bpd.

    Just days before Saudi Arabia and Russia said that they agreed that the production cuts should be extended by nine months to March 2018, Bozumbaev said that Kashagan currently produces 140,000-150,000 bpd, and output would rise to 200,000 bpd in the second half of the year, and possibly to 300,000 bpd at the end of the year.

    But the minister noted that it’s important for Kazakhstan that the price of Brent not drop below US$50 per barrel. The country’s budget is based on a US$50 Brent price, and therefore Kazakhstan will discuss the possibilities of an output cut extension.

    A recently approved expansion at another field, Tengiz, plans for production to increase by some 260,000 bpd, to around 850,000 bpd.

    Given its ambitious plans to grow production, Kazakhstan may be reluctant to sign up to cutting its output for another nine months.
    Back to Top

    WTI Stays near $49 if OPEC Cuts Continue: EnerCom

    WTI Stays near $49 if OPEC Cuts Continue: EnerCom

    OPEC’s meeting to decide the future of production cuts is quickly approaching, and many expect that the group will extend their deal through at least the end of this year.

    The production cuts, when they were first initiated, helped to bring both WTI and Brent crude oils back above $50 per barrel, but prices have struggled to maintain that position or go higher as unconventional drilling and U.S. production continue to ramp up.

    In EnerCom Analytics’ Monthly Energy Industry Data & Trends for April, the firm examined the possible effects of OPEC’s decision making on WTI prices and forecasted that oil prices would hit $49.29 per barrel if the group maintained cuts and the members exempt from the deal reached their production targets.

    When the deal was originally announced,  Libya and Nigeria were given exemptions from production cuts.

    Iran has stated that it hopes to achieve 4 MMBOPD of output, the same amount it was producing prior to the implementation of international sanctions. Production in the Islamic Republic ramped up quickly following the end of sanctions, but many believe that it will need to attract foreign investment and partners in order to hit its 4 MMBOPD mark as it stretches its existing projects to the limits of their current capacity.

    Libya has repeatedly claimed force majeure on its production as the country continues to struggle with a civil war, and Nigeria’s oil infrastructure continues to be a target for factions that are unsatisfied with the current government, making it difficult for either to increase and maintain, production.

    If all three were able to reach their targets, however, with Iran hitting 4 MMBOPD, Libya maintaining its production at its peak of 1.1 MMBOPD, and Nigeria pushing output back to levels seen in 2015 as OPEC ramped up production, WTI prices would reach $49.29 per barrel, assuming compliance with the production deal remained high, according to EnerCom Analytics. WTI closed at $49.35 today, six cents higher than EnerCom’s April prediction.

    At this point, it seems that the market has largely priced in the extended production cuts. If the group does confirm that cuts will continue, oil prices will likely remain largely unchanged.

    Failure to extend cuts:  $47.50 oil

    If the group is unable to reach an agreement on further production cuts and increases output to levels seen in December 2016, WTI could go as low as $47.50 as markets begin to absorb the increased production, according to EnerCom’s models. Even at those prices, however, most U.S. basins would remain economic, the report said.

    At $45 WTI, the Eagle Ford, Delaware, Midland and Bakken are all able to generate 20% IRRs or better, meaning that even if oil fell to $47.50, many operators would be able to continue drilling. This, in turn, caps how far oil price would be able to rise beyond that point, however.

    Adjusting for inflation, these prices are somewhat below the historical average going back to 1974. Over the last 43 years, WTI has averaged $36.26 nominally, but $54.67 per barrel once adjusted for inflation.

    If you like to receive EnerCom’s predictions as soon as they are released, as well as the firm’s insight on a number of other topics, subscribe to Energy Industry Data & Trends. To learn more about the scenarios run by EnerCom, and how U.S. policies and increases in the strength of the dollar might affect WTI oil prices
    Back to Top

    Halliburton's incoming CEO sees significant price hike

    Halliburton Co, the No. 2 oilfield service provider, expects to raise prices at least 10 percent and in some cases 20 percent or more this year, higher increases than many customers expect but ones that company executives said were crucial to fuel the oil industry's nascent growth.

    The rising business activity comes as Jeff Miller prepares to become the 98-year-old company's chief executive officer next month, taking over from Dave Lesar, CEO since 2000.

    "We will continue to implement our strategy," Miller said in an interview at the company's Houston headquarters just outside George Bush Intercontinental Airport. "North America is absolutely our growth story today."

    Miller, Lesar and other executives have been in talks with customers for months about raising rates for Halliburton's myriad services, highlighting not only the company's scale but its experience.

    Halliburton was the first company to hydraulically fracture, or frack, a well, pioneering the process in 1949.

    Many customers had locked in service rates during the two-year price downturn when Halliburton laid off more than 35,000 employees. Today, with the American shale oil industry whirring again, Halliburton is at max capacity for many services and itching to charge more.

    Like peers, Halliburton has said it will not refurbish old equipment for field use until prices rise and has no North American fracking crews available until at least the fall. That limits the ability of customers to bring new wells online.

    "Customer urgency is the most-important part of that discussion today," said Miller, an accountant by training.

    Lesar, who will retire as CEO but remain executive chairman until Dec. 2018, echoed those comments in an interview, adding that Halliburton is keen to work with producers to prevent rampant cost inflation.

    "We and our customers have to co-exist in this environment," said Lesar, who became CEO after predecessor Dick Cheney was nominated to be U.S. vice president. "Everybody has got to make money."

    Shares of Halliburton, which have lost about 14 percent this year, rose 24 cents, or 0.5 percent, on Thursday to close at $46.58.


    Both executives expect oil prices CLc1 to remain near $50 per barrel for the foreseeable future, a level they believe will allow North American shale customers and Halliburton to grow in tandem.

    "Clearly, the rising star at this point in time is the Permian" shale basin of Texas and New Mexico, Lesar said, adding that the DJ Basin in Colorado and the Utica in Ohio are other shale areas where Halliburton is growing.

    Costs for sand used in fracking pressured Halliburton over the winter, since many mines are located in the northern United States. Still, both executives said they believe their supply costs should stabilize this year.


    Halliburton has hired more than 2,000 workers since the oil industry started to recover, more than half of them former employees. That points to the company's lucrative salary and perks, as well as its culture, both executives said.

    "We've got a very loyal workforce," Miller said.

    "Our position in North America is second-to-none," Lesar said. "We intend to hold that, no matter what the competition does."
    Back to Top

    Rosneft working to be ready for competition post-oil output cuts: Sechin

    Russia's Rosneft, the world's top listed oil company by output, is working to be ready to compete on global oil markets after the deal with OPEC on oil curbs expires, Chief Executive Igor Sechin said on Thursday.

    Rosneft is key for Russia's efforts to meet obligations under the deal with the Organization of the Petroleum Exporting Countries, under which Moscow has promised to cut production by 300,000 barrels per day.

    This week, Russia, which delivered the cut in full last month, and Saudi Arabia agreed on the need to extend the global deal until March 2018.

    Sechin, on a visit to Berlin to open the Rosneft Deutschland office, said Rosneft will plan its work this year so as to be competitive on the global oil market when the agreement expires.

    "We will plan our work till the year-end in the way that while complying with the agreements, paying a special attention to mature fields not to lose oil resources and do preparations needed for new field launches, so in case the deal is stopped be ready for competitive work on the markets and not to lose our market share," Sechin said.

    He added Rosneft was cutting production at its newest fields under the OPEC deal, not touching mature fields as there was a risk that they may not come back on-line in full after the cuts.

    Sechin repeated that both Russia and Saudi Arabia should work out mechanisms for a "smooth" exit from the agreement when it is over to avoid market shocks.

    "I would not think beyond March of the next year," Sechin said when asked if the market would be balanced by then and if a further extension of the global deal may be needed. "We should see how shale oil production (in the United States) will perform."

    Attached Files
    Back to Top

    Full tanks and tankers: a stubborn oil glut despite OPEC cuts

    Full tanks and tankers: a stubborn oil glut despite OPEC cuts

    After the first OPEC oil production cut in eight years took effect in January, oil traders from Houston to Singapore started emptying millions of barrels of crude from storage tanks.

    Investors hailed the drawdowns as the beginning of the end of a two-year supply glut - raising hopes for steadily rising per-barrel prices.

    It hasn't worked out that way.

    Now, many of those same storage tanks are filling back up or draining more slowly than investors and oil firms had expected, according to global inventory estimates and more than a dozen oil traders and shipping sources who told Reuters about storage in facilities that do not make their oil volumes public.

    The stalled drawdowns shed light on the broader challenge facing OPEC - the Organization of the Petroleum Exporting Countries - as it struggles to steer the industry out of the downturn caused by oversupply. With U.S. shale oil production surging, inventories remain stubbornly high and prices appear stuck in the low-$50s per-barrel range.

    The market has not strengthened enough to drain many major storage facilities around the globe - which OPEC oil ministers had hoped would be a first step toward rebalancing what has been a buyer's market since late 2014.

    Estimated inventories in industrialized nations totaled 3.025 billion barrels at the end of March - about 300 million barrels above the five-year average, according to the International Energy Agency’s latest monthly report.

    Preliminary April data indicated stocks would rise further, the IEA said. Crude stocks stood at a record 1.235 billion barrels.

    OPEC and other non-OPEC nations - most notably Russia - are now widely expected to extend production cuts for another nine months, through March 2018.

    The ongoing struggle to thin supplies has forced economists to cut their oil price forecasts. Bank of America, for instance, last week lowered its 2017 target for Brent crude LCOc1 by $7 a barrel to $54.

    During the two-year price war started by OPEC, about half a billion barrels of crude and refined products flowed into storage facilities as oil prices hit lows of less than $30 a barrel in early 2016.

    Much of the inventory build-up came as traders started using storage to make easy money on the widening spread between rock-bottom spot oil prices and substantially higher prices for contracts to deliver the oil in future months.

    That price spread - a market structure known as contango - allowed traders to profit even after they paid for expensive storage in facilities such as the Louisiana Offshore Oil Port (LOOP) - the only deep-water U.S. oil port and a major conduit for crude imports - or supertankers parked offshore in Singapore.

    Although the storage trade has been less profitable since the OPEC production cuts, much of that oil remains in tanks, said Chris Bake, an executive committee member at Vitol, the world's largest independent trader, during an industry conference last week in London.

    "This 550 million barrel-plus inventory build of crude and products that started in 2014 is still very much there," he said. "How much is going to come out? That is an ongoing debate among all of us."


    From the Malacca Straits in Asia to the ports of Northern Europe and the Gulf of Mexico, drawdowns of global inventories have slowed or even reversed.

    In the Amsterdam-Rotterdam-Antwerp (ARA) region – one of the most expensive areas in Europe to store oil and the benchmark pricing point for fuel - crude is starting to flow back into storage because refiners are "clogged" with oil, an industry source handling deals in that region told Reuters.

    Refined fuel inventories have also jumped suddenly, with gasoil in tanks in the ARA hub rising to an eight-month high earlier this month, according to Dutch consultancy PJK International. Gasoil includes jet fuel, diesel and heating oil.

    At one of the world's largest oil storage facilities - on the shores of Saldanha Bay in South Africa - millions of barrels were sold in recent months, traders told Reuters.

    But more cargoes are flowing right back into its tanks, which can hold 45 million barrels,
    as sellers struggle to find refiners to buy freshly loaded oil, the traders said.

    In the Houston region, stored oil stocks touched record levels at the end of March, according to energy information provider Genscape.

    The state of inventories appears more mixed in Asia.

    In China, the world's second-largest oil consumer behind the United States, commercial crude stocks hit their lowest level in four years in March, according to the government-controlled Xinhua News Agency. But in nearby South Korea, inventories were near a record, according to the Korea National Oil Corp.


    While global inventories remain bloated, there are some signs that the OPEC cuts have dented supplies.

    Recent data from the U.S. Energy Information Administration showed that nationwide stocks started draining in April this year - the first decrease for that month since 1999.

    Declining costs for storage is another indication that traders and oil companies are putting less oil in storage than at the height of the price war.

    At the largest U.S. storage facility at Cushing, Oklahoma, storage tanks costs about 35 cents a barrel per month, traders say, compared nearly 50 cents a year ago.

    Parking oil in a supertanker off the shore of Singapore, Asia's refining hub, costs anywhere from 30 to 40 cents a barrel per month, down from 50 to 80 cents just a few months ago.

    The futures contract LOSc1 for oil storage at the LOOP, off Louisiana's coast, dropped to about 24 cents per barrel recently, one of the lowest prices this year.

    Still, the patchy evidence of draining storage has fallen far short of what investors expected after OPEC and non-OPEC nations agreed on production cuts last November.

    "People were impatient and thought we'd start drawing 10 million barrels a day since the first week of January," said Amrita Sen, chief oil analyst at Energy Aspects. "We're still in excess, and there's lots of inventory around."

    Attached Files
    Back to Top

    Digital H2O Comes to the Marcellus/Utica

    Digital H2O is a “digital oilfield water management solutions company.” What the heck does that mean?

    Water is not only the key ingredient in life, it’s also the key ingredient in the shale industry. It takes a lot of water to drill and frack a shale well. Locating sources for that water, getting it shipped to and then from a well pad, and disposing of it, is a logistical challenge.

    Digital H2O helps helps drillers source water, transport it, and dispose of it–at a cheaper cost than they otherwise could have. Digital H2O accomplishes this magic with a sophisticated computer software program–populated with all sorts of information (i.e. data).

    Until now, Digital H2O has concentrated its service on the Permian and Bakken shale regions in Texas, North Dakota, and New Mexico. The company has now turned its attention to the Pennsylvania Marcellus and now offers it service in our neck of the woods…
    Back to Top

    Noble Energy Sells Marcellus Midstream to Quantum Energy Partners for $765 Million

    Noble Energy, Inc. today announced that it has signed a definitive agreement to divest the holding company which owns a 50 percent interest in CONE Gathering, LLC and 21.7 million common and subordinated limited partnership units to a portfolio company of Quantum Energy Partners (“Quantum”) for total cash consideration of $765 million. The limited partnership units represent a 33.5 percent ownership interest in CONE Midstream Partners LP . CONE Gathering owns the general partner of CONE Midstream.

    David L. Stover, Noble Energy’s Chairman, President and CEO, commented “CNNX has performed exceptionally well since its IPO in late 2014, exceeding forecasts despite a challenging macro-economic backdrop. Including this transaction, Noble Energy will realise more than $1 billion in total value from our Marcellus midstream business, which represents approximately three times our net invested capital. Going forward, our midstream efforts are focused on Noble Midstream Partners, supporting our DJ Basin and Delaware Basin growth areas.”
    Back to Top

    China succeeds in mining combustible ice in South China Sea

    China has succeeded in collecting samples of combustible ice in the South China Sea, a major breakthrough that may lead to a global energy revolution, Minister of Land and Resources Jiang Daming said Thursday.

    This is China's first success in mining flammable ice at sea, after nearly two decades of research and exploration, the minister said at a trial mining site in the Shenhu area of the South China Sea Thursday.

    China found flammable ice, a kind of natural gas hydrate, in the South China Sea in 2007.

    International scientific circles have predicted that natural gas hydrate is the best replacement for oil and natural gas
    Back to Top

    Most OPEC/non-OPEC deal countries support 9-month extension: Algerian minister

    Most OPEC/non-OPEC deal countries support 9-month extension: Algerian minister

    "I think we have a consensus and the majority of countries support the
    proposal of Russia and Saudi Arabia," Boutarfa told reporters after talks with his Russian counterpart Alexander Novak in Moscow.

    On Monday, Novak and his counterpart from OPEC kingpin Saudi Arabia,
    Khalid al-Falih, said they agreed on the need for a nine-month extension of
    the agreement, which expires at the end of June.

    Boutarfa, who visited Russia after traveling to Iraq last week to discuss
    the issue with Iraqi oil minister Jabber al-Luaibi, also reiterated that he
    supports the proposal.

    The countries participating in the agreement, including OPEC member
    Algeria and non-OPEC Russia, are to meet in Vienna on May 24 and 25
    to discuss the possible extension of the agreement between OPEC and non-OPEC oil producers to reduce oil production by some 1.8 million b/d from October 2016 levels.

    Several African countries have expressed their interest in joining the
    agreement of OPEC and non-OPEC countries, Boutarfa reportedly said, while speaking in Moscow.

    "There are several African countries that have expressed their support to
    the agreements. We'll consider this issue at a meeting in Vienna," he said, as reported by Prime news agency.

    On Tuesday, Novak said some three to five new countries could join
    the agreement next week, declining to name them.

    Boutarfa also expressed satisfaction with the level of compliance with
    production cut obligations among participants.


    When asked if he is concerned about Russia fulfilling its obligations,
    Boutarfa said: "As for the last month, the conformity is very high. For OPEC it's more than 100% and also you have good conformity from the non-OPEC countries. It's more than 95%," he said.

    Russia said it has fully meet its obligation to reduce production by
    300,000 b/d by May, with this cut level being achieved in the last days of

    The average daily output cut in April was at around 252,000 b/d. Unlike
    some OPEC countries, Russia cannot regulate quickly its production and needs some time to achieve the output cut through reduced drilling.

    Earlier this week, Kuwaiti oil minister Essam al-Marzouq lent his weight
    to a growing consensus over the need to extend the OPEC/non-OPEC output cut deal into next year, offering the state's full support to the extension in a statement released by Kuwait Petroleum Corp Tuesday.

    This followed Monday comment by Mohammed al-Rumhy, the oil minister of Oman, a key non-OPEC Arab producer, who also supported the extension.

    Before Novak and Falih announced their proposal on Monday, a number of
    other countries had expressed their support for the production cut extension, but at the time there was a perception that the possible extension would be for six months only. Among those who expressed their support then were OPEC members Iran, Iraq and Angola.

    At the same time, Brazil's Petrobras on Tuesday ruled out joining the
    non-OPEC group of countries participating in the deal, with its CEO Pedro
    Parente saying in an interview with S&P Global the company is very heavily in debt and its financial situation would not allow it to do that.

    Brazil was among a number of oil producers that were invited, but did not
    join, the current OPEC-led output cut deal designed to reduce global oil stock levels and support oil prices.

    Other countries that turned down an invitation to join the cuts included
    Bolivia, Colombia, Turkmenistan, Trinidad and Tobago, Egypt, the Republic of Congo, and Uzbekistan.
    Back to Top

    Crude stocks at China's Shandong ports rise on maintenance at independent refineries

    Crude stocks at China's Shandong ports rise on maintenance at independent refineries

    Crude oil stocks at major ports in eastern China's Shandong province had risen to a 13-month high because of heavy maintenance at independent refineries and high crude imports in the previous months, port sources told S&P Global Platts Thursday.

    Discharge operations at the ports however, were not affected, they added.

    Total crude inventory at the major ports of Qingdao, Longkou, Laizhou and Rizhao in Shandong rose 10% from mid-April to around 2 million mt as of May 11, the highest since April 2016, according to JLC data. JLC is a Beijing-based energy information provider formerly known as JYD.

    And at Qingdao port, stocks have been hovering at relatively high levels of around 750,000-800,000 mt in recent weeks -- slightly above the average level of 700,000 mt over January-April.

    A source at Qingdao port attributed the build in stocks to several independent refineries deferring moving crude from the port to their facilities in recent weeks, as they are facing ullage issues at their own crude storage tanks during turnarounds.

    A total 12.8 million mt/year (256,000 b/d) of independent refining capacity had been shut for maintenance in May, up 41% from 9.1 million mt/year last month, according to Platts calculations.

    Wantong Petrochemical's 4.3 million mt/year refinery was shut on April 28 for a month-long maintenance until end-May, while the 3.5 million mt/year Lijin refinery was shut on May 3 for a turnaround lasting one month. The 5 million mt/year Lianhe Petrochemical will restart in end-May from an ongoing maintenance that started in end-April.

    With those plants undergoing full turnarounds, crude consumption is estimated to have been cut by about 1 million mt this month, according to sources.

    Adding to a heavy turnaround program, high crude imports over the past months have also contributed to the build in crude stocks at the ports, according to sources.

    Crude imports by Shandong independent refineries came at 8.3 million mt in April, down 17% from a record high of 10 million mt in March, a separate Platts monthly survey showed.

    Despite the month-on-month drop, April crude imports were still the second highest level seen since Platts started tracking independent refinery imports in January 2016.

    And imports are likely to fall further in May, as fewer crude cargoes have called at the berths this month, given that a few independent refineries are running low on import quotas.


    Meanwhile, crude discharge operations at the ports have not been affected by the high port stocks, according to sources at Qingdao and Laizhou ports.

    Currently, Qingdao port is not facing any congestion and it takes about a week for a cargo to be discharged, which is the normal timing, said the Qingdao source.

    Sources at Laizhou port also confirmed that there is no congestion, simply because fewer cargoes have arrived in the first half of the month.

    A total 300,000 mt of crude have been discharged in the first half of May, falling nearly 29% from around 420,000 mt in the first half of April, according to the source.

    No vessels were waiting outside Laizhou port as of Thursday. In contrast, three to four 100,000-mt vessels have waited outside port limits each day at its peak.

    At Qingdao port, around six vessels were waiting to discharge on Thursday. This compares to a peak of around 15 vessels last year due to logistic issues.

    Attached Files
    Back to Top

    China resumes light cycle oil imports amid tax uncertainty - sources

    China has resumed imports of light cycle oil (LCO) after buyers cancelled shipments in April, as a planned Chinese consumption tax has not been announced, four industry sources said this week.

    Less than 1 million tonnes of LCO are being shipped from South Korea to China in May and June, compared with a peak of 2 million to 3 million tonnes, said two of the sources, both from South Korean refiners. The lower volumes reflects cautious buyers, they said.

    China had planned to impose consumption taxes on oil by-products such as mixed aromatics, light cycle oil and bitumen blend. The tax would close a loophole that allowed Chinese buyers to import light cycle oil, then sell it locally as low-grade diesel, avoiding taxes that would normally be levied on diesel.

    The proposed tax was initially expected to be levied in May but no official announcement has been made, increasing uncertainty among buyers, the sources said.

    At least two LCO cargoes for late-April loading from South Korea were cancelled last month ahead of the planned tax.

    But shipments have resumed for May-loading cargoes, the sources said. They are likely being used for blending into fuel oil instead of being re-sold as diesel, one of the sources said.

    Light cycle oil is the residue produced after running fuel oil through a catalytic cracking unit to produce gasoline and diesel.

    LCO cargo premiums have dropped by about one-sixth from their peak, which is reducing the incentive for refiners to produce the oil and instead maximize their output of jet fuel and diesel, one of the sources said.

    Premiums have also dropped to below $1 a barrel on a free-on-board (FOB) Korea basis for the cargoes, compared with a peak of about $6 a barrel earlier this year and $2 to 3 a barrel in April, the sources added.

    "Buyers are still wary as no one knows the status of when the tax will be implemented," the source said
    Back to Top

    Russia has not complied with oil cuts?

    Russia has not complied with oil cuts?

    Not only has Russia not complied, it has barely managed to cut 150,000 b/d over the six months. 


    OPEC officials say Russia hasn't cut the amount of 300,000 barrels a day as promised over six months 

    Back to Top

    Fracking Crew Shortage May Push Oil's Biggest Bubble to 2018

    Shale explorers pushing to expand oil production are struggling to find enough fracking crews after thousands of workers were dismissed during the crude rout.

    Independent U.S. drillers underspent their first-quarter budgets by as much as $2.5 billion collectively, largely because they couldn’t find enough fracking crews to handle all the planned work, according to Infill Thinking LLC, a research and consulting firm focused on oilfield services and exploration. If the scarcity holds, output increases planned for this summer may get pushed into 2018, creating an unanticipated production bulge with “scary” implications for oil prices, said Joseph Triepke, Infill’s founder.

    In some cases, active crews are walking away from jobs they signed up for months ago -- and paying early-termination penalties -- to take higher-paying assignments with other explorers. Workers earn anywhere from $29,000 to $72,000 a year before overtime, depending on the company and the region.

    The tight fracking market “means U.S. oil production growth this year will be back-half weighted, and we may not understand the full extent of U.S. production growth until early 2018,” said Triepke, who previously was an analyst at Citadel LLC’s Surveyor Capital unit. “This point is particularly scary if you are a rooting for higher oil prices.”

    Oilfield-service companies contributed the largest chunk of more than 441,000 jobs slashed globally as prices plunged from more than $100 a barrel over the last three years, according to Houston-based industry consultant Graves & Co.

    Now, with the price of oil settling at around $50 a barrel, shale drillers are once again gearing up in areas such as the Permian Basin, where break-even costs are as low as $30 a barrel. The result: rising competition for workers and equipment, which means higher costs. Fracking companies are now charging 60 percent to 70 percent more than a year ago as explorers engaged in bidding wars to lock up crews, according to Infill data.

    In response, servicers are scrambling to re-hire hands and retrieve gear from storage, said Andrew Cosgrove, an analyst at Bloomberg Intelligence.

    Typical Crew

    A crew typically consists of 25 to 30 workers who operate a huge array of powerful truck-mounted pumps, storage tanks for fluids and sand, hoses, gauges and safety gear. Fracking, which involves pumping tons of water, sand and chemicals into a well to smash open the surrounding oil- and gas-soaked rock, is the most expensive part of drilling a well, usually accounting for about 70 percent of the total cost.

    So far, independent shale drillers are confident they’ll find ample fracking capacity and are leaving their ambitious double-digit output growth targets intact. West Texas Intermediate crude, the U.S. benchmark, is heading for a second weekly advance as U.S. stockpiles decline while Saudi Arabiaand Russia indicated a willingness to extend price-boosting production cuts. WTI on Thursday was trading 0.3 percent lower at $48.91 a barrel as of 1:07 p.m. in Singapore.

    Those efforts could be dashed in coming months, however, if shale explorers deliver a larger-than-expected bubble of supply.

    “Every single pressure pumper is saying their order books are full through the third quarter and some as far ahead as the first quarter of ’18,” Cosgrove said.


    EQT Corp. was left short of fracking crews during the first quarter when some pumping companies walked away for higher-paying contracts. Still, the Pittsburgh-based shale driller expects to attract enough fracking capacity by the beginning of June to stay on track and hit its full-year growth forecast.

    “A couple of our frack contractors decided to pay us the penalties to take their frack crews to jobs that were more profitable,” EQT Chief Executive Officer Steven Schlotterbeck said during an April 27 conference call with analysts. “So we will get some penalty fees but that obviously is far less than the value of having the wells fracked on the schedule that we would have liked.”

    The last time the shale patch boomed, Parsley Energy Inc. CEO Bryan Sheffield remembers personally delivering breakfast and giving away World Series tickets to get into good graces with fracking companies.

    Better-Paying Gigs

    That was late 2011, when booming demand for fracking capacity meant service companies could fire clients to take better-paying gigs, Sheffield said in an interview. The 39-year-old Parsley founder was relatively unknown at the time, trying to get to the top of frack companies’ cancellation lists, so he could get a chance to hire them and get his oil flowing.

    Those days are back, he said.

    After the last boom that saw oilfield truck drivers commanding more than $200,000 a year in the Bakken of North Dakota, companies are again hunting for more truckers -- this time in the Permian Basin of Texas and New Mexico for hauling water, sand and oil. Fracking equipment prices began rising late last year, Sheffield said.

    “This is exactly what we saw in 2011 and 2012,” Sheffield said. “The bottleneck moves down the chain.”

    Attached Files
    Back to Top

    Drilling applications backing up at Bureau of Land Management

    President Donald Trump’s pledge to open oil and gas drilling on federal lands has hit a bureaucratic log jam.

    More than 3,000 applications for drilling permits are  awaiting review at the Bureau of Land Management, according to a report by E&E News, a trade publication.

    Acting Director Mike Nedd told E&E the bureau is working on several strategies to speed the processing of applications. “It may be a strike team. It may be shifting the workload to a different office,” he said.

    Revenue from oil and gas production on federal lands and waters declined sharply in recent years, after the collapse in commodity prices in 2014. Interior Secretary Ryan Zinke has ordered staff to review regulations and management to see how production can be increased.

    “Every day that goes by while independent producers — companies with an average of 12 employees — wait for their permits to be approved means more money out of their own pockets,” Neal Kirby, spokesman for the Independent Petroleum Association of America, told E&E.
    Back to Top

    Petrobras turnaround could yield first dividend in years in 2017

    Brazil's state-controlled oil company Petrobras will pay its first shareholder dividend in three years if the company turns a profit in 2017, Chief Executive Officer Pedro Parente said on Wednesday.

    Parente took the helm of the world's most indebted energy company a year ago and said he is ahead of schedule with an aggressive restructuring plan to cut its $95 billion debt, reduce costs and sell assets.

    Petroleo Brasileiro SA, or Petrobras, made a record operating profit in the first quarter and if that continues throughout the year, chances are good that the firm will pay a dividend, Parente told Reuters in an interview in New York.

    "We really are keen to start paying dividends as fast as we can," he said. "If at the end of the year I have a profit, we would be more than happy to start paying dividends."

    Petrobras' bylaws say that shareholders are entitled to dividends if the company turns a profit, pending approval from the board and considering factors such as cash requirements and investment opportunities. Company executives have in the past said Petrobras is not obliged to pay dividends on its profits.

    Rising output in Brazil's prodigious offshore fields is helping Parente turn Petrobras around from its nadir in 2014, when the firm last paid dividends.

    Then, investors lost confidence as Petrobras sank into a political and financial maelstrom with the oil price fall reducing its revenues, a corruption scandal swamping the company and losses mounting due to government fuel subsidies.

    Ratings firms downgraded Petrobras' creditworthiness, landing the firm with a huge interest bill to service its debt, which then stood at around $130 billion, accumulated to finance development of massive reserves in Brazil's deep Atlantic waters.

    Parente says he was hopeful about hitting his key metric to reduce leverage by the end of this year - a full year ahead of schedule.

    "It is likely we will reach that target ... before 2018. I hope, but I don't know." he said.

    He is targeting reducing Petrobras' debt to 2.5 times its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from 5.1 times EBITDA at the end of 2015. At the end of the first quarter the ratio stood at 3.24.

    Even if he hits that target, Parente has no plans to stop reducing debt or to let up on asset sales.

    "We're not going to stop our plan... This is not yet a healthy leverage level for Petrobras," he said.

    A more appropriate level that would put Petrobras in line with global oil majors would be around 1.5 EBITDA, he said. He has no plans, for now, to make that a new target.

    Investors have rewarded Parente for the turnaround. The firm achieved an interest rate of below 5 percent this week on a five-year bond for the first time since the crisis, Parente said. At the worst point, the rate was around 13 percent.

    Parente said he would consider serving as chief executive beyond the end of next year if the government that is elected in 2018 wants him to continue in the post. A full cycle of management at the company would be four years, he said.

    Petrobras has yet to decide whether it will participate in three government auctions this year for oilfields, he said. If it does, it will be go for deepwater fields, as operating there is Petrobras' strength, he added.

    The company will not adjust its five-year capital expenditure plan of $75 billion through 2021 to finance the development of new fields, Parente said, adding that the firm would fund any expansion through cost reductions.

    Petrobras will not bid for onshore or shallow water oilfields, he said, and is committed to selling its participation in onshore and shallow water fields as part of a $21 billion divestment plan, he said.

    He declined to say how much cash he hoped to raise with field sales.

    Rising Brazilian output, both from Petrobras and from international oil firms operating there, has contributed to a strong rise in output from non-OPEC producers this year that is making it hard for the Organization of the Petroleum Exporting Countries to curb global supply and end a two-year glut.

    Petrobras' crude exports rose to 725,000 barrels per day in the first quarter, up 72 percent on the year. The rise came in part because of higher output, but also because a recession in Brazil has hit domestic oil demand.
    Back to Top

    Flotilla of U.S. crude heads to Asia as OPEC weighs extending cuts

    Oil tankers carrying roughly 2.5 million barrels of U.S. crude are currently en route to Asia, trade sources said on Wednesday, as U.S. producers take advantage of favorable prices to ship to Asia while OPEC ponders further supply cuts next week.

    At least three vessels capable of moving 1 million barrels of crude each are sending domestic oil to Asian refiners, as well as some Mexican crude, several sources said.

    OPEC members meet next week to discuss extending a global supply cut, but the possibility of U.S. supply eating into their market share will be a challenge. While member countries have largely restrained their supply, they have remained intensely focused on keeping market share with Asian refiners. But relatively cheap U.S. crude has buoyed exports to Asia.

    Traders expect that May U.S. crude exports could reach around 1 million barrels per day, with a sizable portion of that going to Asia. Last week, U.S. crude exports touched 1.09 million bpd, the third highest on record, according to U.S. government data. If numbers remain elevated, they could surpass the record 1.2 million bpd seen in February.

    "We expect that momentum to continue when (Dakota Access Pipeline) opens and as more Permian production hits Corpus Christi docks," said Sandy Fielden, director of oil and products research at Morningstar, of the exports.

    Increasing traffic to Asia is possible because of a widening premium for Brent over U.S. crude, which touched a six-week high on Wednesday.

    "Early May spot prices showed both Brent and Dubai trading at around a $3 per barrel premium to Brent and WTI Cushing, which is an open window," said Fielden.

    Meanwhile, prompt Brent crude's premium to Dubai, also called the exchange of futures for swap narrowed to below $1 a barrel last month, hitting 46 cents a barrel on April 27, its tightest since 2010.

    That spread has been tightening since OPEC agreed to production cuts in November, making U.S. cargoes more competitive. An extension to OPEC cuts may further benefit U.S. producers and exporters.

    The Sydney Spirit, a Bahamas-flagged vessel, is delivering Alaskan North Slope (ANS) crude to Asia, according to two sources and Reuters vessel tracking data. Half of the crude onboard the vessel is unsold, one of the sources said.

    Vessel tracking data available via Eikon system lists the ship as "for orders," which indicates there may not be a buyer for at least some of the crude. The ship is currently on its way to Asia.

    Meanwhile, Japanese refiner Cosmo Energy loaded the Almi Star, a Aframax vessel carrying around 600,000 barrels of crude, with offshore Southern Green Canyon crude and Domestic Sweet Blend (DSW) outside of Houston, before picking up an additional 300,000 barrels of Maya crude at Dos Bocas, Mexico, two sources familiar with the matter said.

    That ship will move through the Panama Canal, and then transfer crude to a larger Suezmax vessel loaded with 400,000 barrels of Mexican Maya crude for a voyage to Asia, the sources said.

    The Montesperanza, another Suezmax, is headed to Singapore after loading at the Galveston Offshore Lightering Area. The ship is controlled by French energy firm Total SA, and the crude on it is expected to go to Japan, two sources said.
    Back to Top

    Summary of Weekly Petroleum Data for the Week Ending May 12, 2017

    U.S. crude oil refinery inputs averaged over 17.1 million barrels per day during the week ending May 12, 2017, 363,000 barrels per day more than the previous week’s average. Refineries operated at 93.4% of their operable capacity last week. Gasoline production decreased last week, averaging over 10.0 million barrels per day. Distillate fuel production increased last week, averaging over 5.0 million barrels per day.

    U.S. crude oil imports averaged 8.6 million barrels per day last week, up by 970,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 8.3 million barrels per day, 9.3% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 696,000 barrels per day. Distillate fuel imports averaged 161,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.8 million barrels from the previous week. At 520.8 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 0.4 million barrels last week, but are above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 1.9 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories increased by 0.6 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories increased by 4.3 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.8 million barrels per day, down by 2.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.3 million barrels per day, down by 2.6% from the same period last year. Distillate fuel product supplied averaged about 4.1 million barrels per day over the last four weeks, down by 0.8% from the same period last year. Jet fuel product supplied is up 6.1% compared to the same four-week period last year.

    Cushing unchanged
    Back to Top

    US Lower 48 production up 12,000 bbls

                                                       Last Week  Week Before   Last year

    Domestic Production '000.......... 9,305           9,314            8,791
    Alaska ............................................... 510  .            531               506
    Lower 48 ...................................... 8,795           8,783            8,285
    Back to Top

    Canadian Natural Resources Limited Announces Normal Course Issuer Bid

    Canadian Natural Resources Limited announced today that Toronto Stock Exchange has accepted notice filed by Canadian Natural of its intention to make a Normal Course Issuer Bid through the facilities of Toronto Stock Exchange or other alternative Canadian trading systems. Purchases may also be made through the facilities of the New York Stock Exchange.

    The notice provides that Canadian Natural may, during the 12 month period commencing May 23, 2017 and ending May 22, 2018, purchase for cancellation up to 27,931,135 shares, being 2.5% of the 1,117,245,428 outstanding common shares as at May 12, 2017. Canadian Natural will not acquire more than 25% of the average daily trading volume of its common shares during a trading day, being 591,186 common shares subject to certain prescribed exceptions. The price which Canadian Natural will pay for any such shares will be the market price at the time of acquisition. The actual number of common shares that may be purchased and the timing of any such purchases will be determined by Canadian Natural.

    In addition to further strengthening its balance sheet, investing in exploration and development of its diverse asset base, and participating in acquisition opportunities, returns to shareholders remain a priority to create value for Canadian Natural’s shareholders. Funds flow in 2017 is targeted to be allocated to these four pillars and may also be used by Canadian Natural, depending upon future trading prices and other factors, to purchase its common shares, as it is believed to be a worthwhile investment, and in the best interests of Canadian Natural and its shareholders
    Back to Top

    Indian jet fuel, LPG demand shrugs off demonetisation impact

    Jet fuel and LPG have turned out to be the shining stars in India's oil demand basket so far in 2017 as rapidly growing air travel and New Delhi's clean fuel energy push are helping the two fuels to post the sharpest growth rates among all oil products.

    As air travel continues to grow amid intensifying competition among airlines offering competitive fares, jet fuel demand rose by 9.5% year on year in April, to 610,000 mt from 557,000 mt from a year earlier, according to data from the Petroleum Planning and Analysis Cell.

    In the cumulative January-April period, jet fuel demand surged 12% year on year to 2.46 million mt from 2.19 million mt a year earlier.

    "While demonetization has affected consumption of some oil products, it has not affected air travel because most air tickets are booked using credit cards. Not much cash is involved. Therefore, jet fuel demand remains robust, said Tushar Bansal, director at Ivy Global Energy, a Singapore-based oil and gas consultancy.

    India announced the scrapping of 1,000 and 500 rupee notes with immediate effect on November 8, 2016, in a move aimed at curtailing the shadow economy but which also led to a slowdown in demand for various commodities over the following months.

    According to CAPA - Centre for Aviation, an independent provider of market intelligence for the aviation sector, India is likely to overtake Japan in 2017 to become the world's third-largest domestic aviation market, behind the United States and China.

    In reaching this milestone, India will have achieved average domestic annual traffic growth of over 15% since the liberalization of the sector commenced in 2003-04 (April-March).

    While domestic traffic could grow by nearly 25% in 2017-18 (April-March) and approach 130 million passengers, international travel could growth by about 10%-12%, CAPA added. Strong economic fundamentals have contributed to the growth, although traffic has been over-stimulated by low fares.

    "India's status as the fastest growing aviation market in the world creates tremendous opportunities. But risks are also heightened as the inadequacy of India's infrastructure planning, a fast emerging shortage of skills, flawed policy initiatives, and weak regulatory oversight threaten to become major stumbling blocks," according to a CAPA report on India's aviation outlook.

    Prime Minister Narendra Modi has said that in the global civil aviation market, India, which is currently the eighth-largest market in the world, would become the third-largest by 2034, adding that growth in the aviation sector would multiply demand for aviation fuel in India four times by 2040.

    Rising domestic demand is taking a toll on India's jet fuel exports as more cargoes find their way into local markets. Jet fuel exports in the first quarter of 2017 fell almost 12% year on year to 1.75 million mt, from 1.99 million mt in Q1 2016.

    Market participants expect India's jet fuel exports to maintain a downward trend as domestic demand is expected to remain robust in the foreseeable future.


    While LPG demand grew by only 2.6% year on year in April to 1.63 million mt, from 1.59 million mt a year earlier, it has been the second-fastest growing fuel this year, with demand rising by 6.1% year on year to 7.31 million mt in the January-April period, from 6.9 million mt in the same year-ago period, PPAC data showed.

    "The government is expected to speed the pace of distribution of subsidized LPG connections to the poor. That will keep the demand growth at double digits," Bansal added.

    India is expected to invest $3.9 million-$4.7 billion in developing infrastructure facilities for LPG to raise household connections to 95.5% by 2020, oil ministry officials said Friday.

    State-own Indian Oil Corp plans to spend 10% of its overall capex of $3.1 billion for 2017-18 on strengthening the infrastructure for LPG including setting up of terminals and bottling plants.

    But despite the capacity build-out, IOC's chairman B. Ashok said he expects India to continue importing LPG at least for the next 12 to 13 years after which he anticipates a slowdown in India's LPG demand growth.

    India consumed 21.5 million mt of LPG in 2016-17, a 9.8% growth from the previous year (2015-16), according to the oil ministry updates. Half of the last year's demand was met via imports, mainly from the Middle East. India's LPG imports rose 23% year on year to 11 million mt of LPG in 2016-17.

    "Our main import destinations will continue to be the Middle East as shale gas production has made LPG price relatively a competitive option," Petroleum Minister Dharmendra Pradhan said.

    India aims to increase the number of households with LPG access to 268.7 million in 2018-19, up by around a third from 199 million in 2016-17, and to add 10,000 new LPG distributors by 2019, the minister said. The renewed push on LPG saw 4,600 new distributors open in 2016-17.

    India's overall demand for oil products in April rose 2.3% year on year to 16.79 million mt, or 4.4 million b/d, PPAC data showed. January-April oil products demand fell 1% year on year to 65.7 million mt, or 4.3 million b/d.

    "In line with our expectations, India's oil demand is on a recovery path as the impact of demonetization fades," said Sri Paravaikkarasu, Head of Oil, East of Suez, at consultancy FACTS Global Energy.

    "Transport fuels should continue to propel oil demand growth in the coming months although LPG and other products will also contribute to a 5% to 6% average growth for the year," she added. "The double-digit growth in fuel oil in 2016 should reverse this year, while kerosene will track the negative trend."

    Attached Files
    Back to Top

    BP inks Indonesia LNG supply deal

    UK-based energy giant BP has signed a deal to supply LNG to the Indonesian power utility Perusahaan Listrik Negara (PLN).

    BP is to supply 16 LNG cargoes per year from its Tangguh LNG project in Bintuni Bay to PLN over 2020-2035.

    The Tangguh LNG facility consists of offshore gas production facilities supplying two 3.8 mtpa liquefaction trains that have been in operation since 2009.

    In July last year, the project partners have made a final investment decision to build a third train at the facility. The third liquefaction train will add 3.8 mtpa of production capacity to the existing facility, bringing total plant capacity to 11.4 mtpa. First production from the third train is expected in 2020.

    Besides BP, the other partners in the Tangguh production sharing contract are MI Berau (16.30%), CNOOC Muturi (13.90%), Nippon Oil Exploration (Berau) (12.23%), KG Berau Petroleum and KG Wiriagar Petroleum Ltd (10.00%), Indonesia Natural Gas Resources Muturi (7.35%), and Talisman Wiriagar Overseas (3.06%).
    Back to Top

    Oil inventories become more visible

    Reported oil stocks have fallen much more slowly than OPEC anticipated at the beginning of the year, leading to scepticism about the effectiveness of the organisation's production cuts.

    But the sluggish response may reflect the repositioning of formerly uncounted stocks to more visible locations rather than a failure to adjust the supply-demand balance.

    In general, crude oil and refined products move down the supply chain from areas of net production to areas of net consumption.

    Despite significant trading activity around particular cargoes, the movement of crude and products essentially occurs in only one direction.

    For commercial reasons, it makes no sense to move crude and products back up the supply chain, away from consumers and back towards refiners and producers.

    Crude and products stocks are positioned as close to refiners and final consumers as possible, subject to the availability and cost of storage.

    OPEC ministers and officials have stated that the objective of production cuts is to eliminate the overhang of excess oil stocks and reduce inventories to the five-year average level.

    Ministers and officials most often reference commercial crude and product stocks held in OECD member countries when talking about the overhang and market rebalancing.

    OECD stocks are the most accurately and frequently reported so in some ways it makes sense to use them as the benchmark for assessing whether the production cuts are working.

    The problem is that they are not necessarily representative of stockpiles held in producing and consuming countries outside the OECD.

    According to the International Energy Agency, total OECD commercial stocks rose during the first quarter of 2017, but this was largely offset by a reduction in floating storage and stocks held outside the OECD ("Oil Market Report", IEA, May 2017).

    The diverging behaviour of OECD and non-OECD oil stocks reflects their differing locations along the oil industry's supply chain.

    While OECD countries are substantial net importers of crude and consumers of refined products most of the major oil-exporting countries are located outside the OECD.

    OECD refining centres also contain lots of inexpensive storage options which make them the preferred choice for holding non-operational or speculative inventories.

    The result is that storage tanks in the OECD tend to be the first to fill during a period of oversupply and the last to empty when global stocks are falling.

    By targeting OECD stocks, OPEC has made achieving its objective harder in the short term, because these stocks will be the last to respond to its production policy.

    There is some evidence excess global inventories have already fallen, with reductions in oil-exporting countries, floating storage and remote locations part way between producing and consuming centres.

    Excess stocks are gradually being pulled along the supply chain from producers, floating storage and remote locations towards the major refining centres in the OECD.

    But the behaviour of the supply chain introduces an important non-linearity into the response of OECD stocks to OPEC's production policy.

    OECD stocks are likely to fall slowly at first, then accelerate once producer stocks and floating storage have been emptied.

    As a result, OPEC's production policy often tends to appear relatively ineffective at first before gaining traction later.

    In this instance, the stubbornly high level of OECD oil inventories during the first quarter of 2017 may have masked a broader tightening in the supply-demand-inventory balance.

    Inventory movements coupled with stronger seasonal consumption during the northern hemisphere summer could result in a more pronounced decline in OECD stocks during the second and third quarters.

    Attached Files
    Back to Top

    Oregon county rejects measure blocking natural gas terminal

    A coastal Oregon county overwhelmingly rejected a ballot measure aimed at blocking a proposed natural gas terminal dealing a blow to what was the latest in a series of efforts to thwart energy projects across the Pacific Northwest.

    The measure, had it passed, would have banned transport of fossil fuels not intended for local use through Coos County, located about 200 miles (322 kms) south of Portland.

    Around 76 percent of votes were cast against the measure, with 24 percent in favor, according to unofficial results posted on the Coos County government website late Tuesday.

    "This ballot measure was not a good measure by any means, and I think (the voters) were able to see that," Coos Bay's mayor Joe Benetti, who opposed the measure, told local newspaper The World.

    Backers called the initiative a response to a $7.6 billion proposal by Calgary-based Veresen Inc, to build a facility in the county where natural gas would be liquefied and transferred to tanker ships for sale abroad. They cast the measure as a local refusal to contribute to global warming.

    Gary Cohn, head of the National Energy Council, in April singled out the Veresen project as a priority for the administration of Republican President Donald Trump.

    The Coos County initiative was part of regional resistance in the Northwest to fossil fuel projects that has seen the blockage of several major export facilities.

    Last year, the Lummi Nation Native American tribe and environmental groups blocked an export terminal in Northwest Washington state that would have moved Montana and Wyoming coal to markets in Asia.

    In January, Washington State denied a permit for a coal export terminal in the city of Longview, citing concerns about the financial viability of the project.

    In February, bowing to pressure from activists, Seattle's city council voted to divest approximately $3 billion from Wells Fargo, citing concerns over the bank's support of the North Dakota Access Pipeline, among other factors.

    Passage of the Coos Bay measure would have been another blow for liquid natural gas projects on the West Coast, even as depots in other areas of the country have moved forward.

    Cheniere Energy Inc opened a port in Louisiana last year and several other companies are set to open projects on the Gulf Coast in 2018 and 2019. Dominion Energy Inc plans to open the Cove Point LNG port in Maryland later this year.

    Attached Files
    Back to Top

    Iran to Offer Azadegan Oil Fields as Single Project

    Iran is preparing to combine its massive North and South Azadegan oil fields for development as a single project and plans to invite IOCs to bid for the contract in coming weeks.
    Back to Top

    OPEC Risks Deal Fatigue as Maintaining Oil Curbs Get Tougher

    The Organization of Petroleum Exporting Countries and its partners are expected to extend output curbs into early 2018 when they meet next week, in an ongoing bid to clear a global surplus. Yet the tailwinds that made cutting supply easier in the first half of the year -- from a seasonal lull in demand to temporary oil-field maintenance -- will be gone just as new obstacles are emerging.

    To keep a lid on output this summer, Saudi Arabia will need to sacrifice an even bigger share of exports as consumption at home rises. Iraq yearns to expand capacity, and has already used the option of maintenance to keep oil fields idle. Meanwhile Nigeria and Libya, two OPEC nations exempt from the deal, are restoring lost output.

    “They’re going to struggle,” said Michael Barry, director of research at consultants FGE in London. “This deal has been remarkable in its implementation. As time goes on, discipline is likely to erode. Almost every country wants their production to go up.”

    As the world’s fuel-storage tanks remain brimming
    and prices languish, OPEC and its allies have conceded that the initial plan for six months of production cuts wasn’t long enough. Yet Saudi Arabia and Russia’s proposal that their 24-nation coalition, due to meet in Vienna on May 25, should extend the measures for another nine months may prove an unbearable strain.

    “Production curbs for the first quarter of 2017 were comparatively easy to agree to,” said David Fyfe, chief economist at Geneva-based oil trader Gunvor Group. “They’ll likely agree to extend” but “the risk is higher they’ll leak extra barrels onto the market.”

    OPEC showed an unprecedented level of commitment to this deal, implementing 96 percent of the cuts it promised during the first four months of the year, according to the International Energy Agency.

    Holding Line

    Some are optimistic that OPEC and its partners will maintain their resolve. The stakes are high enough that the organization will stick to its commitments, and as inventories decline producers will feel encouraged to stay the course, said Mike Wittner, head of oil market research at Societe Generale SA in New York.

    “They’re going to hold the line,” said Wittner. “If we see stock draws happening soon, which we believe will be the case, those signs of success will bolster their determination. When you see light at the end of the tunnel, it’s easier to keep it together.”

    Still, strong compliance was often attributable to Saudi Arabia cutting more than it was required, compensating for laggards like Iraq and the United Arab Emirates.

    If the kingdom continues to restrain output, it needs to make another sacrifice. The Saudis typically boost production during the summer to maintain exports while meeting increased local demand from air conditioning. Keeping a cap on output would mean foregoing some exports and the revenues they bring.

    Iraqi Question

    Iraq, which still hasn’t made its full cut, plans to boost production capacity to 5 million barrels a day, an increase of about 6 percent, Oil Minister Jabbar al-Luaibi said on May 11. This won’t conflict with its commitment to freeze output, he said.

    “We have question marks around Iraq,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “They have been reluctant since the very beginning, and were slow to implement their cuts. Most of the supply restraint in Iraq has come with the help of field maintenance.”

    Maintenance in Iraq, Kuwait and the U.A.E. may have accounted for about 500,000 barrels a day of the output halted -- almost half the group’s total cut, according to FGE. For Iraq, this enabled them to avoid compensating foreign companies for unscheduled production shutdowns.

    “Several countries basically used maintenance as a way of keeping production down but what they did was pull it forward from later in the year,” said FGE’s Barry. “Now maintenance is over the question is what do they do? More maintenance or cut at other fields? The pressure is on.”

    OPEC also faces the challenge that the two members exempted from the deal because of production losses are recovering. Both Libya and Nigeria are showing progress in tackling the political crises that slashed their output.

    Disciplinary Issues

    Libya is producing at the highest level in more than two years after restarting its largest oil field, according to state-run National Oil Corp., while Nigeria has fixed a pipeline after a one-year halt that could boost its output by about 13 percent.

    The 11 non-members joining OPEC’s effort have still only implemented about two-thirds of their promised reduction, according to the IEA, and also face problems in sustaining their curbs. Cutbacks in Russia came alongside the traditional seasonal stagnation in activity, and prolonging them would thwart plans by companies to expand output.

    “It was easy to mask maintenance in the first half as voluntary cuts, but quite impossible to do it any further,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “There will be lower discipline within OPEC, and lower discipline from non-OPEC.”

    Attached Files
    Back to Top

    SM Keeping Bakken Assets

    Bids for Divide County acreage didn’t add up

    SM Energy announced that it has postponed indefinitely the sale of its Divide County North Dakota assets.

    SM expressed its desire to sell its Divide County assets in January, and expected to close the transaction around mid-year.

    Goal was to reduce leverage

    According to analysts at Wells Fargo, expected valuations were around $400 million. However, the bids the company received were too low and would not allow SM to meaningfully reduce its leverage. With this in mind, SM has decided to retain its 123,570 net acres in North Dakota.

    SM’s Divide County assets are producing about 10.7 MBOEPD. SM did not drill or complete any wells in the area in Q1, but reports 17 net DUCs (drilled uncompleted wells) in inventory.

    SM wants to focus on Midland, Eagle Ford

    SM Energy has already completed a series of divestitures, as it focuses on its Midland basin and Eagle Ford properties. In December the company sold its Williston basin assets outside of Divide County to Oasis Petroleum (ticker: OAS) for $765.8 million. In January the company sold its non-operated Eagle Ford assets for $800 million to an affiliate of KKR (ticker: KKR).

    SM used the Williston basin sale to fund its acquisition of acreage in the Midland basin, and has now accumulated 88,000 net acres in the area. The company plans to use the proceeds from its Eagle Ford sale to fund its projected 2017-2018 spending, which will exceed cash flows. The Divide County sale would have been used to reduce debt, as the company’s 3-year objective is net debt to EBITDAX of 2.0x. SM’s net debt to total 2016 EBITDA was 5.6x, for reference.

    No sale increases immediate net debt to EBITDAX, but reduces outspending

    The failure of the sale means that net debt to EBITDAX will not decrease as quickly, but the funds from this asset will decrease projected outspending over time.

    Wells Fargo reports that without a Divide County sale net debt to EBITDAX will climb to 4.4x in Q1 2018 before beginning to decrease. The lack of a sale increased KLR’s net debt to EBITDA projection from 3.4x to 3.8x. Stifel now projects year-end 2017/2018/2019 net debt to EBITDA of 3.4x/2.6x/1.9x vs 3.1x/2.7x/2.0x.

    SM President and CEO Jay Ottoson commented on the sale, saying, “We have successfully pre-funded the expected outspend for our capital program for 2017 and 2018 with the completed sale of our third party operated Eagle Ford assets, and we do not need to sell our Divide County assets.

    “We have concluded that current market uncertainty around forward oil prices is not conducive to realizing a sales price that meets our deleveraging objective. We remain committed to our long-term financial strategy, which is best served by retaining the cash flow generated by the Divide County assets.”

    Attached Files
    Back to Top

    Egypt paid $750 mln in oil company arrears, to pay same in June

    Egypt has paid off $750 million of its debt to international oil companies and will make a second payment of the same amount at the start of next month, Central Bank Governor Tarek Amer said on Tuesday.

    Egypt has struggled to pay arrears to foreign oil and gas companies operating in the country, with outstanding debt at $3.5 billion before the latest payment.

    "Today $750 million was paid to international oil companies and another $750 million will be paid on June 1, meaning that there is $1.5 billion the government has committed to pay to the international companies," Amer told a news conference.

    The payments are the first since Egypt paid about $100 million in the last quarter of 2016.

    Cairo has pledged to eliminate the arrears by the end of June 2019 and not accumulate more, part of its drive to draw new foreign investment to an energy sector that is attracting interest following several major gas discoveries.

    Amer said separately that Egypt has received $8 billion in investment from 150 global investment funds over the past six months.
    Back to Top

    In America's largest oilfield, whirr of activity confounds OPEC

    As oilfield workers for Lilis Energy Inc threaded together drill pipes one recent morning in the Permian Basin, a bulldozer cleared sagebrush to make way for the company's fifth well since January.

    Lilis aims to expand production sevenfold this year in America's most active oilfield.

    The whir of activity is all the more impressive after the small firm nearly collapsed in late 2015 - amid unrestrained production from the Organization of the Petroleum Exporting Countries (OPEC). As per-barrel prices plummeted, Lilis piled on debt and struggled to pay workers.

    Now - with prices higher after a November OPEC decision to cut output - Lilis can't grow fast enough.

    Such resurrections are common these days in the Permian, which stretches across West Texas and eastern New Mexico. They tell the story of the U.S. shale resurgence and the quandary it poses for OPEC as it struggles to tame a global glut.

    Surging U.S. production has stalled OPEC's effort to cut supply. Inventories in industrialized nations totaled 3.05 billion barrels in February - about 330 million barrels above the five-year average, according to the International Energy Agency.

    The Permian boom will be high on the agenda as OPEC oil ministers begin gathering in Vienna ahead of a May 25 policy meeting to decide whether to extend output cuts.

    In the long term, too much U.S. output could spur OPEC to open the spigots again - setting off another price war - but for now its member nations' need for revenue makes that unlikely.

    On Monday, the world's top two oil producers - OPEC heavyweight Saudi Arabia and Russia, a non-OPEC nation - said they had agreed in principle on the need to continue output cuts for an additional nine months, through March 2018.

    That would extend the initial agreement, which took effect in January and reduced production by 1.2 barrels per day (bpd) from OPEC nations and another 600,000 bpd from non-OPEC producers, including Russia.

    The pledge to extend cuts marked an evolution in the thinking of Saudi Arabia Oil Minister Khalid al-Falih - in response to surging U.S. output.

    After OPEC's decision in November, Al-Falih expressed confidence that no further supply curbs would be needed because of rising demand.

    Then in March, Al-Falih told a Houston energy conference that the "green shoots" in U.S. shale might be "growing too fast" - and warned there would be no "free rides" for U.S. producers benefiting from OPEC production cuts.

    But by last week, Al-Falih vowed OPEC would do "whatever it takes" to control oversupply.

    Unlike OPEC nations, U.S. firms are barred by anti-trust laws from colluding to control output or prices, leaving market demand as the only check on production.

    "I'm really proud American production is offsetting those OPEC cuts," said Lilis Chief Executive Avi Mirman.


    Now it appears the free ride for U.S. shale producers will continue at least into next year.

    U.S. oil output has jumped to 9.31 million bpd this year, up 440,000 bpd from 2016, according to U.S. Energy Information Agency estimates.

    About a quarter of that production comes from the Permian, where broad-based growth comes from small firms like Lilis, global majors including Exxon Mobil Corp and large independents such as  Parsley Energy Inc .

    OPEC's two-year price war sank hundreds of companies and forced majors including Exxon and Chevron Corp to retrench - but it also and stirred their interest in shale.

    Exxon paid nearly $7 billion in February to double its acreage in the Permian.

    Earlier this month, about 20 miles (32 km) south of Midland, Texas - the center of the basin's industry - a crew from ProPetro Holding Corp (PUMP.N) was hydraulically fracturing, or fracking, an Exxon well.

    Silver silos held 18 million pounds of sand, which would be mixed with 22 million gallons of water and forced into the well, unlocking oil trapped in rock.

    "We're really approaching the Permian as a major project," Sara Ortwein, president of Exxon's shale-focused subsidiary, XTO Energy, said in an interview.

    Across the Permian, the number of rigs this year has risen 30 percent and the number of fracking crews has jumped 40 percent, according to Primary Vision, which tracks oilfield service equipment usage.

    That won't change soon, said Mark Papa, CEO of Centennial Resource Development Inc (CDEV.O), which added to its Permian land holdings this month with a $350 million deal.

    "A disproportionate amount of U.S. production growth between now and the end of the decade will come from the Permian," Papa said in an interview.


    In a reversal from the thousands of layoffs here in 2015, oil companies are hiring briskly.

    Fracking service provider Keane Group Inc, for instance, has plans to hire at least 240 workers this year.

    For the growth to continue, however, prices will have to rise for rigs and other services, executives and analysts have said.

    Paul Mosvold, president of drilling contractor Scandrill Inc, has more business than he can handle.

    "We're out of rigs," he said. "We have been since January."

    But he won't add more rigs unless producers pay more - maybe $25,000 per day, instead of the current $15,000 to $19,000.
    That may depend on per-barrel prices going up, an unlikely prospect amid expanding supply.

    Oil drillers, meanwhile, continue to hunt for new cost-cutting technologies - after already halving the cost of extracting a barrel since 2014.

    Parsley is cutting labor costs with sensors on wells that transmit production and maintenance data to its headquarters in Austin, Texas.

    "We're constantly getting more efficient," Mark Timmons, Parsley's vice president of field operations.

    The Lilis revival started last year with debt-for-equity swaps and a merger with another troubled oil producer, giving Lilis access to Permian acreage.

    The company's market value has risen to $210 million from about $3 million two years ago.

    At the company's newest well site, Lilis CEO Mirman checked drilling progress on his iPhone and shrugged off any worries about OPEC’s next move.

    "We're using every tool at our disposal to grow," he said.

    Attached Files
    Back to Top

    Russia's Rosneft says could send 10 billion cubic meters of gas to China each year

    Russian energy firm Rosneft said on Tuesday it could supply about 10 billion cubic meters of natural gas to China per year.

    Rosneft added in a report on its website that it saw opportunities for gas supplies to China following the sale of a stake in its subsidiary Verkhnechonskneftegaz to Chinese firm Beijing Gas.
    Back to Top

    Oil Prices Slip After U.S. API Reports Build In Crude Stocks

    The American Petroleum Institute (API) reported a build of 882,000 barrels in United States crude oil inventories, compared to analyst expectations that markets would see a draw of 2.3 million barrels for the week ending May 12. This week’s build ends a run of five draws over the last six weeks, using API data.

    Gasoline inventories fell by 1.88 million barrels, according to the API. Gasoline inventories continue to worry markets, as refiners continue to turn crude oil into gasoline above demand for the fuel.

    While there was tough talk from Saudi Arabia and Russia this week, which dangled the idea of extending the oil production cuts into 2018—followed by dutiful member support for the extended extension, including Oman, Venezuela, Kuwait, Iran (with conditions), and even non-compliant Iraq—prices were unable to hold any significant gains.

    Further dampening spirits, the IEA’s Oil Market Report on Tuesday foretold of a 2017 that would not see oil inventories return to its five-year average—an important milestone that many equate with the rebalancing.

    While prices this week have gained over last week, oil prices fell again on Tuesday despite OPEC’s efforts. WTI was trading down 0.18% at 2:14pm EST at $48.76 (+$2.89 over last week) and Brent Crude was trading down 0.08% at $51.78 (+$3.09 over last week).

    Distillate inventories rose this week by 1.8 million barrels, and inventories at the Cushing, Oklahoma, site fell by 500,000 barrels.
    Back to Top

    Shale Play `Left for Dead’ Gets Some Love as U.S. Gas Rises

    Haynesville Shale Natural Gas Drilling Rig in LouisianaA natural gas basin that helped kickstart the shale boom a decade ago is getting a new lease on life as the market recovers.

    Production in the Haynesville reservoir will climb for the seventh straight month in June, reaching the highest since October 2014, government data show. Output in the play, located in Louisiana and east Texas, fell to a six-year low last March, pressured by tumbling gas prices and competition from gushier, more profitable wells in Pennsylvania and West Virginia.

    As pipeline bottlenecks strand gas supplies in the eastern U.S., the vast network linking the Haynesville to the rest of the country — along with a new export terminal shipping American gas overseas — has made production in the play more valuable. Drillers from Exco Resources Inc. to Chesapeake Energy Corp. have refocused resources there to slash production costs, while private-equity backed companies bought assets to do the same.

    “Once left for dead, the Haynesville Shale in Louisiana and East Texas is in the midst of a resurgence as new well designs bring natural gas gushers to life,” William Foiles, a New York-based analyst for Bloomberg Intelligence said in a May 12 report. “Redesigned wells have since expanded the Haynesville’s untapped potential, with output expected to rise as capital and rigs return.”

    Chesapeake has boosted well productivity by using “massive amounts” of sand to extract gas from deeply-buried shale, according to Foiles. Exco has drilled longer horizontal well sections and is fracturing the rock in more places.

    The gas market’s rebound has created strong economics to drill in the Haynesville, Hal Hickey, Exco’s chief executive officer, said on a call May 10. Gas futures on the New York Mercantile Exchange have jumped 61 percent over the past year.

    While Pennsylvania and West Virginia have “some really good reserves,” the need for more pipelines and processing plants is “really restricting us at this point relative to our opportunities down in the South,” Hickey said.
    Back to Top

    Exxon Mobil announces positive Muruk-1 sidetrack well results

    Exxon Mobil Corporation has announced positive results on the Muruk-1 sidetrack well in the Papua New Guinea North Highlands, 13 mi (21 km) northwest of the Hides gas field.

    The Muruk-1 sidetrack well encountered high-quality sandstone reservoirs southwest of the Muruk-1 natural gas discovery announced in late 2016. The sidetrack well was safely drilled to 13,550 ft (4,130 m).

    “This important discovery confirms the extent of the Muruk area and further establishes Muruk as a potentially significant new discovery with the same high-quality sandstone reservoirs as the Hides field that underpins the PNG LNG project,” said Steve Greenlee, president of Exxon Mobil Exploration Company.

    Exxon Mobil has a long and successful history of exploring, developing and commercializing assets in PNG.

    “The diversity of our onshore and offshore portfolio demonstrates the strength of Exxon Mobil’s long-term investment approach and the opportunities that exist to grow our business in Papua New Guinea,” Greenlee said.

    Oil Search began drilling the Muruk-1 well on Nov. 2, 2016.

    Petroleum prospecting license 402 covers 126,000 acres in the Papua New Guinea Highlands.
    Back to Top

    Trapped Canadian natural gas producers find a way to reach LNG markets – via the U.S.

    American liquefied natural gas exporters have been courting Canadian producers of the commodity, and analysts expect more domestic gas will move south in the absence of Canadian LNG projects.

    Advantage Oil and Gas president and CEO Andy Mah says there have been conversations between Canadian gas producers and U.S. LNG proponents about shipping more Canadian gas to American export facilities.

    “The North American gas market is going to be one market,” Mah said, adding that pipeline connections between various gas basins and demand centres are improving.

    At a recent industry conference, Painted Pony Petroleum Ltd. president and CEO Patrick Ward said demand for Canadian gas is growing, in part because of sizeable exports from LNG terminals in the U.S.

    “The U.S. guys started on LNG when we started on LNG (on the British Columbia coast) and the U.S. is already exporting over 10 billion cubic feet a day,” Ward said. “They are buying our Canadian gas for $2.50 Canadian and selling it to the Mexicans for US$3.50.”


    Southern Discomfort: How the U.S. helped quash Canada’s ambitions to become an LNG superpower
    Why Canada may have missed the boat on building a viable LNG industry

    Calgary-based Seven Generations Energy Ltd., a gas producer, has an agreement to send its gas through a Cheniere terminal and had previously announced it was delivering gas from Canada to the Henry Hub pricing point in Erath, La.

    Seven Generations president and CEO Marty Proctor said on a recent earnings call the company was sending 100 million cubic feet per day to the hub but added, “Ultimately, we are still keen to find a way to backstop, use our resources to underpin investment in West Coast LNG.”

    Cheniere Energy Inc. spokesperson Eben Burnham-Snyder wouldn’t name specific Canadian natural gas companies but confirmed that his company has been in talks with multiple producers about sourcing their product for its two LNG terminals on the U.S. Gulf Coast. “We’ve had talks with every supplier you can think of,” Burnham-Snyder said. “We’re willing to talk to any supplier we can access – in Canada and the U.S.”

    GMP FirstEnergy director of institutional research Martin King says he expects similar discussions in the coming months as American companies start to shop around for more gas for those plants. “The LNG plants in the U.S. are going to need U.S. domestic supplies, they might need Canadian supplies as well,” King said.

    King also said that no new LNG export terminals on the West Coast have been sanctioned in the last 18 months, and he is bearish on the prospects of Canadian LNG proposals. “I would love to be proven wrong.”

    Stream Asset Financial Management’s Dan Tsubouchi says he is aware of Canadian companies considering using American LNG facilities. “I know that a number of Montney producers are trying to figure out what the opportunity is,” he said.

    Domestic producers are trying to move more of their gas out of Alberta, as they’re concerned the local AECO gas price hub could be oversupplied with gas if no LNG projects are built.

    “The last thing you want to do is have your gas trapped in Alberta,” Tsubouchi said.

    Even without American LNG terminals processing Canadian gas, King said producers would benefit from the growth of the U.S. LNG industry even as the domestic industry has stalled.

    “Whatever is being shifted out of the southern U.S. for exports needs to be backfilled, either by U.S. supplies or Canadian supplies so there’s lots of opportunities to get that gas to market,” King said.

    King told oil and gas executives in Calgary that the discount domestic producers are forced to accept for their gas should tighten relative to the NYMEX price as demand for Canadian gas grows south of the border.

    “Once that call goes out for more Canadian gas, you’re going to see these AECO prices get more of a lift, and we’ll see that differential tighten up,” he said. “The U.S. is coming up short of gas supply. They will buy it and they will pay more for it as a necessary consequence. That’s going to help tighten up that differential.”
    Back to Top

    Asian refiners get minimal nomination cuts for Saudi crude in Jun: sources

    Saudi Aramco's major buyers in Asia are receiving minimal allocation cuts for crude oil loading in June, according to traders this week.

    The cuts, however, differ from buyer to buyer, while some were heard to have received additional or replacement barrels from the Middle Eastern producer, they said.

    At least two Northeast Asian traders noted that lesser allocations for Arab Medium and Arab Heavy crudes were heard for June, while more Arab Extra Light crude was allocated instead.

    "[There is] more or less no cut [overall]," said a Singapore-based crude trader with a Northeast Asian refiner.

    "The cuts were less than 2% [for Arab Medium and Arab Heavy] and we requested for more Arab Medium and got it. So in the end it was all OK," said a fourth trader with an Northeast Asian refiner.

    Another two traders with Northeast Asian refiners noted that there were some cuts to allocations of the lighter Saudi crude grades, including Arab Extra Light, but they added that the cuts were "very minimal."

    Meanwhile, two Northeast Asian refiners were heard to have received allocation cuts of less than 5% while details were unclear for South and Southeast Asian refiners.

    Earlier this month, Aramco cut the June official selling price differentials of its Asian-bound crude grades by 20-70 cents/b. The cuts were mostly bigger than expected, traders have said.

    Saudi Arabia and Russia jointly said Monday that they agreed that the oil output cut agreement needed to be extended by nine months until the end of March 2018 to achieve the desired balancing effect on oil markets.

    Saudi Arabia, OPEC's largest producer, produced 9.954 million b/d in April, a rise of 49,200 b/d from March, according to secondary sources. The kingdom self-reported output of 9.946 million b/d in April, up 46,400 b/d from March.

    Saudi Arabia has now cut more than its quota for four months in a row, the only country to do so. The kingdom was allocated a quota of 10.058 million b/d under the OPEC agreement which ends in June.
    Back to Top

    IEA expects speedier oil market rebalancing in H2 but 'much work remains'

    The International Energy Agency expects the global oil market's rebalancing to accelerate in the short term, having "almost balanced" in the first quarter as OECD commercial stocks fell for a second consecutive month in March, it said Tuesday in its monthly Oil Market Report.

    But the agency also cautioned that "much work remains to be done" in the second half of 2017 to drain inventories further as the diversity and dynamism of the US shale sector continues to surprise.

    OPEC compliance with its output restraint agreement "loosened a touch" in April however, with production rising by 65,000 b/d in April to 31.78 million b/d as increased flows from Nigeria and Saudi Arabia offset lower production from Libya and Iran.

    The IEA said OPEC's year-to-date compliance with the production cuts remained robust at 96% but stressed the "need to keep a close eye on Libya and Nigeria where there are signs that production might be rising sustainably."

    OPEC and non-OPEC participants will meet on May 25 to review its production agreements, and signs suggest the deal is likely to be extended.

    This report was published a day after Saudi Arabia and Russia agreed on the need for a rollover of their output cuts by nine months to March 2018, as the world's top two crude producers step up their commitments to pare back the global oil stock glut.

    Overall though, the IEA said that if OPEC's April crude oil production levels of 31.78 million b/d are maintained, and nothing changes elsewhere in the balance that would imply a stock draw of 700,000 b/d.

    "Adopting the same scenario approach for the second half of 2017. The stock draws are likely to be even greater. Even if this turns out to be the case, stocks at the end of 2017 might not have fallen to the five-year average, suggesting that much work remains to be done in the second half of 2017 to drain them further," it said.

    OECD inventories of crude and oil products fell for a second straight month in March by 32.9 million barrels to 3,025 million barrels, as product stocks fell sharply on lower refinery output and increased exports.

    But preliminary data from the IEA suggests oil stocks in the OECD will have risen by 16.2 million barrels in April, "which helps to explain the fall in oil prices seen in the second half of April."

    The report also said the call on OPEC crude is expected to rise steadily and reach 33.4 million b/d during the final quarter of the year, implying sharp stock draws if output cuts are extended.

    Data also showed OPEC is estimated to have earned more in Q1, 2017 while pumping fewer barrels.

    "Supply fell by around 4% versus a record-setting Q4, 2016 while estimated daily revenue was up nearly 5%," it said. "As OPEC turned down the taps from record Q4, 2016 production, the average OPEC basket price of crudes rose from $47.59/b in Q4, 2016 to $52.03/b in Q1, 2017."

    Iran saw the most substantial rise, earning an extra $15.2 million a day during Q1 while Saudi Arabia, which is shouldering the bulk of the reduction, made an estimated $12.5 million a day more. Iraq earned an extra $10.5 million a day, according to the report.


    Overall global oil supply fell by 140,000 b/d in April to 96.17 million b/d, "as non-OPEC, and especially Canada, pumped less, with production down 90,000 b/d from the same period last year," it said.

    Non-OPEC oil production dropped by 255,000 b/d in April, as producers subject to the output cut agreement stepped up compliance and Canadian oil sands output slipped on unscheduled shutdowns.

    But non-OPEC output was still 310,000 b/d above year-earlier levels, with renewed growth in the US adding to gains from Brazil, Canada, Kazakhstan and Russia.

    However, the agency noted an improving outlook for US crude oil production, which is seen rising by 345,000 b/d from the previous year, and up 790,000 b/d from the end of 2016.

    The IEA said US operators have sharply stepped up spending and drilling activity since last year against a backdrop of the coordinated supply cut agreement and higher prices.

    It also noted that, alongside production cuts and steady demand growth, a rise in global refinery runs should start to contribute to the rebalancing.

    "A major contribution to falling crude stocks in the next few months will be a ramp-up in global crude oil runs. Starting in March, refinery activity is building up and by July global crude throughputs will have increased by 2.7 million b/d," it said.

    The IEA maintained its 2017 global oil demand growth forecast at 1.3 million b/d, with demand reaching 97.9 million b/d.

    This is despite relative weakness in a number of previously solid countries -- India, the US, Germany and Turkey -- which curtailed the H1, 2017 global demand growth estimate by 115,000 b/d.

    The report noted Chinese demand remains relatively strong even as India's demonetisation policy continues to cast a long shadow over oil demand, with US demand expected to be flat in 2017.

    Attached Files
    Back to Top

    TAQA studies solutions for outages at Bergermeer gas storage site

    Abu Dhabi National Energy Company (TAQA) said on Tuesday it was studying solutions for ongoing outages at its Bergermeer gas storage site in the Netherlands, which have halted gas withdrawals and reduced injection capacity.

    Bergermeer is in its second year of full operation. However, the site has suffered significant outages this year.

    On March 2, gas withdrawals were halted at Bergermeer after a problem with a heating element forced the shutdown of a drying train, which is used to withdraw gas from the site.

    Injection capacity has also been reduced by 30 percent until mid-July due to issues with compressors, which allow gas injection into the site's reservoir.

    Gas storage provides security and flexibility of supply. In the summer, when demand and so prices are low, gas can be put into storage for withdrawal when demand rises in the winter.

    In a market update on Tuesday, TAQA said there were occasional element and electrical connector failures and it was working with the equipment manufacturer to understand the cause, carry out repairs and/or improve the reliability of the heater elements.

    "TAQA is looking at structural solutions which will address the current challenges," it said.

    "This could be in the form of modifications to the existing equipment and installations, or a full replacement of any equipment that cannot be assured to be reliable for the next 25 years."

    Regarding the compressor issue affecting injection capacity, TAQA said three of six compressors were currently in operation and the other three were undergoing maintenance or repair.

    One compressor will be back in operation during the week of May 22. Another will be back online mid-July and the sixth will be available in early September, TAQA said.

    Bergermeer is currently around 33 percent full. Customer requirements of 5 gigawatts (GW) can be met with one compressor, 9 GW with two compressors and 12.5 GW with three, TAQA said.

    "Based on past actual usage of these contractual rights, forecast of future rights and available alternative measures to satisfy customer requests, (Bergermeer) can opt to either keep customers whole or (partly) curtail contractually," TAQA said.

    "Without giving any guarantees, and based on current variables, three compressors currently do not curtail customers contractual rights," it added.

    In Britain, which imports some of its gas from the Netherlands, the country's largest gas storage site, Rough, is not available for injection until the end of April next year due to an ongoing outage.
    Back to Top

    Japan to buy up to 100,000 T LPG for national stockpiles

    Japan will likely conduct a tender in the autumn to buy up to 100,000 tonnes of liquefied petroleum gas (LPG) for national stockpiles, a trade ministry official with direct knowledge of the matter said on Tuesday.

    The fuel, often referred to as butane or propane, will be stored at a stockpiling base in Kurashiki in the country's west by the end of November.

    The step comes as Japan looks to boost its LPG state stockpile to at least 50 days' worth of national imports, or about 1.38 million tonnes.

    It wants to reduce the impact from any supply disruptions in the Middle East, which it relies on for supplies of the fuel, commonly used in heaters or stoves.

    Japan currently has a total of 1.35 million tonnes in five LPG stockpiling bases with a total capacity of 1.5 million tonnes.

    The trade ministry's Agency for Natural Resources and Energy has budgeted 4.84 billion yen ($42.7 million) for this fiscal year to buy 100,000 tonnes of LPG, the official said, declining to be identified. He did not say how much LPG would be purchased in the November tender.

    Meanwhile, the trade ministry has approved lowering the commercial sector's LPG reserve requirements to 40 days' worth of the nation's imports from 50 as state stocks are being increased.
    Back to Top

    China's Norinco and Saudi Aramco line up $10 billion refinery plan

    Chinese defense conglomerate China North Industries Group Corp (Norinco) has signed a framework agreement with state-run oil company Saudi Aramco to build a refinery and chemicals complex in northeast China, industry and government officials said on Tuesday.

    The planned projects -- including a 300,000 barrels per day refinery and an ethylene complex with annual capacity of 1 million tonnes -- are to be built at an estimated cost of 69.5 billion yuan ($10.09 billion), according to one industry official with knowledge of the agreement.

    The framework pact, which follows a memorandum of understanding in March, marks one of the high-profile agreements signed during China's Belt and Road Forum, the first summit under President Xi Jinping's ambitious plan to promote global trade and investment.

    The investment would boost Aramco's presence in China's massive refining industry, adding to its 25 percent stake in the Fujian refinery in southeast China operated by state refiner Sinopec Corp.

    Aramco could not immediately comment on the report and a Norinco representative was not immediately available for comment.

    Norinco, the state defense giant that also runs oil and gas businesses, won regulatory approval in 2015 to build the refinery and petrochemicals complex in Panjin, Liaoning province, Reuters has reported.

    Industry analysts have cast doubt over the feasibility of adding a large plant in the region, which traditionally has surplus refining capacity and is far from the main consuming regions
    Back to Top

    LNG players may need to curtail supply

    Following the LNG price collapse, Wood Mackenzie sees high-cost players in Qld needing to curb output.

    Following the LNG price collapse over the past couple of years, energy analysis firm Wood Mackenzie sees high-cost players in Queensland needing to curb output.

    Speaking with Sky News Business at the APPEA Oil and Gas Conference in Perth, Wood Mackenzie analyst Saul Kavonic said project survival is now the key question for the industry.

    'With structural oversupply of LNG forecast over the next five to seven years, we're going to have to see supply curtailed and that's going to happen where it's got the highest short-run cost, and that's in the US and Queensland,' said Mr Kavonic.

    Mr Kavonic said international gas buyers in the domestic market, who have been used to relatively low prices for decades, now have to readjust.

    'Gas prices are becoming increasingly linked to international prices, so even though international prices are at record lows, that's still a big step up for a lot of gas buyers.'

    Wood Mackenzie sees any gas shortages in the domestic market being made up by diversions from Queensland, but Mr Kavonic told Sky News Business that's only half of the equation.

    'The second issue is how you actually get the gas from Queensland down into the Southern states where it's needed.'

    Mr Kavonic said the gas will most likely come from the players in Queensland who have the most flexibility, particularly Shell.

    'We're actually going to see Shell probably do most of the heavy lifting there, diverting gas to the domestic market in response to price signals.'

    - See more at:

    Attached Files
    Back to Top

    Aramco Offshore to Add 1 Million b/d by 2023

    Aramco Offshore to Add 1 Million b/d by 2023

    Saudi Aramco plans to add a little over 1 million b/d of oil production from its offshore fields by 2022-23 and has begun moving ahead with its expansion plans.

    Saudi Aramco has awarded the National Petroleum Construction Company (NPCC) a new contract for four offshore platforms and associated submarine pipelines, cables and tie ins for Al Safaniya, Zuluf and Berri oilfields.

    “These EPC contracts for Al Safaniya, Zuluf and Berri Oilfields include engineering, procurement, fabrication, load-out, transportation, installation, hook-up and pre-commissioning work of four offshore platforms (SSS Wellhead Decks) with the associated four subsea pipelines, three submarine cables and downstream tie-ins,” said Aqeel A Madhi, CEO of NPCC.

    Madhi added that this third contract comes under the scope of the long-term agreement (LTA) between Saudi Aramco and NPCC, signed in October 2016, to help with offshore oil and gas producing platforms and related facilities in the Arabian Gulf.
    Back to Top

    Nigerian oil union orders sympathy strikes at upstream companies

    Senior Nigerian oil workers' union Pengassan has told its members to withdraw their services from offices and oil production facilities operated by upstream companies in Nigeria, in sympathy with striking employees of the local subsidiary of ExxonMobil, union and industry source said Monday.

    The union directive, which threatens Nigeria's bid to restore production back to over 2 million b/d, followed a failed attempt by the Nigerian government to mediate in the two week-old dispute between the Pengassan union branch of ExxonMobil and the management of the US major, over the sacking of more than 80 workers, a union official said.

    Union officials have locked workers out in offices at Shell, Eni and Chevron in the commercial capital Lagos, as well as the companies operational bases in southern Niger Delta region, officials of the foreign companies told Platts by telephone.

    The union has also shut down some of ExxonMobil's production facilities in southern Akwa Ibom, a company source confirmed.

    ExxonMobil produces more than 300,000 b/d.

    "The national executive of Pengassan at the weekend directed members to begin at the international oil companies in solidarity with our members in Mobil Producing Nigeria," Abel Agarin, chairman of the Lagos branch of Pengassan said.

    Industry analysts said the union action could deal a major blow to Nigeria's bid to restore output following months of militant attacks on oil infrastructure that caused the West African nation's production to plummet to near 30-year low last year.

    Nigeria's Labor minister Chris Ngige has in the meantime referred the dispute between Pengassan and ExxonMobil to an Industry Arbitration Panel for resolution, after the failed attempts by the government to settle the matter, a government official said on Monday.

    "After the union failed to attend the meeting called on two occasions last week by the Minister of Labour and that of the Petroleum Resources, the Labor Minister on Friday, referred the matter to the Arbitration Panel," the official said.

    "This means all the parties in the dispute should maintain the status quo," the official added.

    Nigeria's two powerful oil unions Pengassan and its junior counterpart Nupeng, have been at loggerheads with multinational companies over what they called unfair labor practices by the companies.

    The Nigerian government, which in recent weeks stepped up peace talks with Niger Delta leaders and youths to end unrest in the region, has set the target of producing 2.2 million b/d of oil this year to help drag the country's economy out of the recession it slipped into last year.
    Back to Top

    Analysts question latest North Dakota crude breakeven prices

    North Dakota's breakeven price for crude production averaged $24/b in the first quarter of 2017, with the breakeven in the state's most active county averaging $21/b, according to estimates from the state's Department of Mineral Resources.

    The breakeven price puts the Bakken Shale play in economic competition with nearly any play in the world, including Saudi Arabia, but analysts caution that the latest data out of North Dakota may not be telling the whole story of what drillers are seeing there.

    "These numbers don't make that much sense to me," said Graham Walker, an oil market analyst with Petrologica. "It's very much an art, these breakeven prices. There are so many factors you can include or not include."

    Walker said that, when calculating their breakeven prices, North Dakota officials may be including only sanctioned wells, or only wells that are successfully completed and put on production while ignoring unsuccessful attempts. Rather than a point where wells make money, the state's breakeven price may be a threshold that needs to be maintained before a well is shut in.

    Walker pointed to McLean County in the central portion of the state, where there were no rigs and only 64 wells capable of producing in Q1. The state estimated that the breakeven price in McLean was $17/b.

    "If it's $17/b in McLean, where is everybody?" Walker asked.

    During a press briefing Friday, Lynn Helms, the state's top oil and gas regulator, said that the $17/b figure represents the relatively small sample size of the producing wells in the region, particularly three highly successful wells that are "pushing the limits" of drilling technology.

    "We're a bit at the mercy of statistics," Helms said.

    Alison Ritter, a spokeswoman for the state agency, declined to comment further Monday on how the state determines breakeven prices.

    In Q1, statewide breakeven prices averaged $24/b, with 51 rigs and 15,639 wells at the start of the quarter. McKenzie County, in the northwest of the state, averaged $21/b and had 24 rigs and 4,260 wells. Neighboring Dunn County, which had 11 rigs and 2,030 wells, averaged $23/b.

    However, the statewide breakeven figures, which analysts argue seem too low, are above previous breakeven estimates by the state.

    In February, the agency estimated that statewide breakeven prices averaged $18/b in the fourth quarter of 2016 and in November estimated the statewide breakeven averaged $21/b in the third quarter of 2016. The agency estimated the statewide breakeven averaged $26/b in the second quarter of 2016.

    According to an analysis of well economics by Platts Analytics, Bakken breakeven prices averaged $33.38/b in May, down $1.73/b from January. Bakken breakeven prices have fallen by $11.25/b compared with May 2014, when they were estimated to average $44.63/b, according to Platts Analytics.

    Platts Analytics analyst Matt Andre said that while his analysis looks at a typical well in the basin using weighted average initial production rates and drilling and completion costs, the state may only be looking at top performing wells in the play.

    Enerplus, a Bakken producer, estimates the breakeven in the play at $33.50/b while Diamondback Energy puts the Bakken breakeven at $33.36/b.

    On Friday, North Dakota's DMR said that about 1.025 million b/d of crude oil was produced in the state in March, down 8,610 b/d from February.

    In its Drilling Productivity Report Monday, the US Energy Information Administration estimated that Bakken production will average 1.026 million b/d in May and rise to 1.032 million b/d in June.

    Overall production in all US shale plays is forecast to rise from 5.279 million b/d in May to 5.401 million b/d in June, an increase of 122,000 b/d. The largest increase will be in the Permian Basin, where output will climb 71,000 b/d compared with May to 2.492 million b/d in June, according to the EIA.
    Back to Top

    Permian Effective Rig Count 1,109

    On an individual basis, the Utica has seen the most advancement in productivity. Current rigs in the Utica are yielding 4.5 times more barrels of oil equivalent than January 2014 Utica rigs. There are currently 22 rigs active in the Utica area, but the production from these rigs equates to 99 January 2014 rigs.

    Ground Zero

    In the Permian basin, the heart of current unconventional activity, rigs are currently yielding 3.3x more production than Permian rigs did in January 2014. This means that the Permian Effective Rig Count is 1,109, which is higher than the nationwide Effective Rig Count from September 2015 to November 2016.

    Permian, Eagle Ford, Haynesville growth expected

    In the EIA’s monthly Drilling Productivity Report the agency outlined recent drilling and production activity. In today’s report, the EIA provided estimates for production growth from May to June. As might be expected, the Permian is projected to see the largest oil and gas production growth.

    The region’s oil production is projected to rise 70 MBOPD to 2,492 MBOPD, while gas production rises 169 MMcf/d to 8,391 MMcf/d. The Eagle Ford is projected to see the second-largest growth in oil production, while the EIA estimates the Haynesville will experience the second-largest growth in oil production.

    In a turnabout from prevailing strategy last year, drilling activity continues to outpace completions, according to the EIA. The agency estimates that there were 5,721 drilled uncompleted wells in the U.S. in April, up 187 from March. This growth is led by the Permian, where the recent surge in activity has drawn about half of all U.S. drilling rigs. Of the major basins, only the Utica saw completion activity outpace drilling, as the region’s DUC inventory decreased by six from March to April.

    Source: EIA

    The EIA also released estimates of new well oil and gas production per rig, an estimate for the productivity of rigs in individual basins. The EIA estimates that rigs in the most productive oil rigs are found in the Eagle Ford, where rigs are yielding 1,448 BOPD. When considering gas, Marcellus rigs are the most productive, with each active Marcellus rig yielding 13,427 Mcf/d.

    Attached Files
    Back to Top

    U.S. shale oil output expected to rise by 122,000 barrels a day in June: EIA

    Oil production from seven major U.S. shale plays is forecast to climb by 122,000 barrels a day to 5.401 million barrels a day in June from May, according to a monthly report from the Energy Information Administration released Monday.

    Oil output from the Permian Basin, which covers parts of western Texas and southeastern New Mexico, is expected to see the largest climb among the big shale plays, with an increase of 71,000 barrels a day.
    Back to Top

    Genscape Cushing inventory

    Genscape Cushing inventory -505K bbls W/W

    Back to Top

    Chevron stops production at Gorgon Train 1

    US-based energy giant Chevron has shut down the first liquefaction train at its multi-billion Gorgon LNG plant on Barrow Island in Western Australia.

    “Production on Gorgon Train 1 was stopped on May 12th due to a failure of a flow measurement device,” Chevron’s spokesman told LNG World News in an emailed statement on Monday.

    “Train 1 is expected to be down approximately one month for this replacement and we will take this opportunity to perform other routine maintenance,” he said.

    He added that Trains 2 and 3 were running normally and the terminal is continuing to ship LNG cargoes.

    Chevron has in March started-up the third and the last Train at the Gorgon facility that has a total capacity of 15.6 million mt/year.

    The troubled $54 billion LNG project has experienced several production interruptions since it shipped its first cargo in March last year.

    “The Gorgon project is currently loading a ship about every 2 days and has shipped 67 cargoes to date with 38 cargoes shipped since the beginning of the year,” Chevron Asia Pacific Exploration and Production president Stephen Green said during the company’s first-quarter conference call on April 28.

    According to Green, all three Trains were running over 85% of nameplate capacity at that time, processing gas from both the Jansz and Gorgon fields.

    “Looking ahead, we’ll complete commissioning and start-up of additional equipment, which boosts efficiency of the trains such as the turbo expanders and the end flash gas compressors, systems that can be started now that all 3 trains are operational,” Green said during the call.

    Once all systems are in operation, Chevron plans to begin the optimization and tuning of each train, the first step in further increasing the plant’s capacity.

    “After this, we’ll analyze plant performance and look for debottlenecking opportunities that will increase capacity and capture incremental value going forward,” Green said.
    Back to Top

    Oil To Hit $60 Max in 2017

    There is clear consensus that oil prices will be in the $50-60 per barrel range this year, and within the $60-80 per barrel range in 2020, according to a new survey from Wood Mackenzie.

    The survey, which analyzed the responses of 170 industry professionals, revealed that priorities for 2017 are focused on protecting dividends and strengthening balance sheets.

    Higher risk investments, such as deepwater projects, are being screened at higher hurdle rates by the industry, according to the report, which suggested that lower risk investments, like asset M&A, are most likely to be pursued by the sector.

    “The industry is very cautious right now and risk appetite is low,” Martin Kelly, Wood Mackenzie’s head of corporate analysis, said in a statement sent to Rigzone.

    Wood Mackenzie’s oil price prediction is in line with a recent poll conducted by Rigzone, which placed the price of Brent Crude Oil at around $60 per barrel by the end of the year.

    Attached Files
    Back to Top

    North Dakota Crude-by-Rail Loadings Plummet with DAPL Startup Imminent

    Crude-by-rail loadings in North Dakota kicked off May with volumes at their lowest point since 2012, as the market prepares for the upcoming startup of Energy Transfer Partners’ 470,000 bpd Dakota Access (DAPL) crude pipeline.

    For the week ending May 5, loaded crude volumes at the 13 Genscape-monitored rail terminals in North Dakota plummeted 111,000 bpd to 130,000 bpd, the lowest amount since week ending June 1, 2012. Genscape only monitored five rail terminals at the time, but crude production was 664,000 bpd in June 2012, versus 1.026mn bpd in March 2017, according to the latest data from North Dakota's Department of Mineral Resources.

    The startup of ETP’s Bakken Pipeline system (which is the Bakken-to-Patoka, IL, DAPL and 470,000 bpd Patoka-to-Nederland, TX, Energy Transfer Crude Oil pipeline) will result in a fundamental shift in how crude is shipped out of the Bakken shale play.

    The Dakota Access pipeline is “mechanically complete and line fill operations are set to conclude mid-May,” a company spokeswoman said May 9. The Bakken Pipeline system is set to begin service on June 1, the spokeswoman added.

    A company tariff filing on April 13 with the U.S. Federal Energy Regulatory Commission showed that interstate operations will begin on May 14.

    Once the Bakken Pipeline system is operational in June, the local refinery and pipeline takeaway capacity will surpass Bakken production in North Dakota and Montana, thereby eliminating the need for crude shipments by rail from the region, Genscape data shows. Bakken production in May is forecast by Genscape to average 1.039mn bpd, while pipeline and local refinery capacity is 878,000 bpd. In June, once DAPL comes online, pipeline and refinery capacity will jump to 1.348mn bpd, with production expected to average 1.027mn bpd.

    Crude-by-rail loadings in North Dakota have been on the decline since they peaked at 585,000 bpd in March 2014, according to Genscape, as new pipeline capacity and lower crude production then began to chip away at the volumes. After loadings declined to an average of 296,000 bpd in 2016, 2017 volumes were relatively stable through end-May 2017 at an average of 255,000 bpd.

    Refineries on the U.S. East Coast were the first ones to shy away from rail volumes and instead opt for waterborne crude deliveries, Genscape data shows.

    Crude-by-rail shipments to the five monitored terminals on the East Coast tumbled 58,000 bpd to 20,000 bpd for the week ending May 5, with only PBF’s 182,200 bpd refinery in Delaware City, DE, posting receipts. The three-week decline for the region was 121,000 bpd. The region averaged 117,000 bpd in 2017 through the end of April.

    Some refiners began the move away from railed-in barrels early in the year. After receiving 59,000 bpd by rail in January, Phillip 66’s 238,000 bpd Bayway refinery in Linden, NJ, averaged 15,000 bpd in February and 14,000 bpd in March. There have been no unloaded volumes at the refinery in the past three weeks.

    There were no unloadings at the 335,000 bpd Philadelphia Energy Solutions refinery in Pennsylvania last week for the first time since early March 2016. Unloadings at the refinery had a week-on-week drop of 43,000 bpd, and brought the three-week decline to 75,000 bpd.

    However, waterborne crude imports to the East Coast have increased in recent weeks, replacing the displaced rail barrels. For the week ending May 4, waterborne imports into PADD 1 averaged 877,000 bpd, putting the three-week average at 873,000 bpd, Genscape data shows. March and February waterborne imports averaged 436,000 bpd and 428,000 bpd, respectively.

    Domestic waterborne crude deliveries to the Bayway refinery have stepped up in recent weeks as the rail volumes have dropped off, Genscape data shows. Domestic deliveries to the refinery are averaging 148,000 bpd over the last four weeks, compared to 85,000 bpd over the preceding four weeks. Waterborne imports have increased, as well, to the refinery. Imports received at Bayway have averaged 290,000 bpd the last two weeks, up from the April average of 231,000 bpd.

    Genscape added flow data for DAPL to the Mid-Continent Pipeline and PetroRail Bakken services on May 12, 2017. The Dakota Access pipeline flows from Johnsons Corner, ND, to Patoka, IL. The pipeline has further upstream connectivity to the Stanley, Ramberg, Epping, Trenton, and Watford City terminals. According to Dakota Access’ tariff, the pipeline is entering interstate service on May 14, 2017. As such, any flow activity observed prior to that date may be considered as related to linefill activity. DAPL historical data is available beginning March 17, 2017.

    Access Genscape's PetroRail report to gain insight into the market with the industry's most comprehensive crude-by-rail data. Receive analysis and market implications of crude-by-rail movements in North America from Genscape's proprietary monitors. To learn more about Genscape's PetroRail report, or to request a free trail, please click here.

    Genscape's Mid-Continent Pipeline Service provides insight into major pipeline shutdowns, start-ups, flow changes, and construction. Using its proprietary energy monitoring technology, aerial photography, and industry expertise, Genscape offers an unprecedented view into critical pipelines supplying storage hubs and refineries in the United States and Canada.

    - See more at:
    Back to Top

    Eni fires up Jangkrik gas project in Indonesia

    Italian energy giant and LNG player Eni has started gas production from the Jangkrik development project, in deep water offshore Indonesia.

    The project comprises the gas fields Jangkrik and Jangkrik North East, located in the Muara Bakau block, Kutei basin, in the deep water of Makassar Strait.

    Production from ten deep-water subsea wells, connected to the newly built floating production unit (FPU) “Jangkrik”, will gradually reach 450 million standard cubic feet per day (mmscf/d), equivalent to 83,000 barrels of oil equivalent per day (boed), according to Eni.

    The gas, once processed onboard the FPU, will flow via a dedicated 79km pipeline to the onshore receiving facility, both built by Eni, and then through the East Kalimantan Transportation System, finally reaching the Bontang gas liquefaction plant.

    Gas volumes from Jangkrik will supply the local domestic market as well as the LNG export market, providing a significant contribution to Indonesia’s current energy requirements and future economic development, Eni said.

    The production start-up comes within three and a half years from the sanctioning of the project.

    “The completion of the project and the start-up of production ahead of schedule further confirm Eni’s strategy and global capabilities. Furthermore, it provides the opportunity for the Jangkrik floating production unit to become a hub for the development of our nearby gas discovery Merakes (Eni 85%, Pertamina 15%), which could start production within the next two years. We will consolidate our near field exploration strategy and operating model and maximize the integrated development of our projects also in Indonesia,” said Eni Chief Executive Claudio Descalzi.

    Eni is the operator with a 55% stake of the Muara Bakau PSC through its subsidiary Eni Muara Bakau B.V. The other partners are Engie E&P (through its subsidiary GDF Suez Exploration Indonesia BV) with 33.334% and PT. Saka Energi Muara Bakau with 11.666%.

    Attached Files
    Back to Top

    China refinery runs at 7-mth low on maintenance, gas growth quickens

    China's April refinery throughput fell to its lowest level on a daily basis since last September as some large state-owned refineries conducted planned oil plant maintenance and crude oil output continued to drop.

    April crude throughput was down 0.6 percent year on year to 44.45 million tonnes, or about 10.82 million barrels per day (bpd), the lowest in seven months as several major plants carried out planned shutdowns, according to data from the National Bureau of Statistics (NBS).

    The April throughput was 3.3 percent lower compared to the 11.19 million bpd level in March. Refineries had processed a record amount of 11.26 million bpd in December as processors ramped up output at the end of year due to attractive margins.

    For the first four months of the year, crude throughput was up 3.1 percent from a year ago at 182.25 million tonnes.

    The NBS data on Monday also showed domestic crude output fell 3.7 percent last month versus a year earlier to 15.99 million tonnes, or 3.89 million bpd.

    Output for the first four months was down 6.1 percent on year at 64.01 million tonnes.

    Although still in negative growth, China's crude oil production has been declining less rapidly in recent months and is expected to post flat growth for the whole of 2017, said Seng Yick Tee, analyst with consultancy SIA Energy.

    "We expect crude oil output to recover more in the second half to show positive growth, as a result of higher oil prices and state oil companies boosting spending," said Tee.

    Natural gas output rose 15 percent in April from a year earlier at 12.2 billion cubic metres (bcm), extending for the second month in a row double-digit growth that has not been seen for more than three years.

    Natural gas productions gained six percent on year at 50.9 bcm for the January-April period, the data showed.

    China's gas consumption growth has been quickening since the start of this year after a nearly three-year lull, according to analysts, thanks to stronger demand from industrial and power sectors under a government push to wean off coal addictions.
    Back to Top




    Back to Top

    Cheniere in talks to boost LNG shipments to China

    Cheniere Energy Inc said on Friday it has had extensive negotiations with China about increasing U.S. liquefied natural gas exports, as a new trade deal paves the way for a second wave of LNG investment in the world’s fastest growing gas supplier.

    The Trump Administration on Thursday said it reached an agreement with China to increase trade access for some U.S. companies to China, which is expected to include LNG exports.

    That should benefit several companies building LNG export terminals in the United States, as the U.S. is forecast to become the third largest LNG exporter by the end of next year.

    Cheniere is currently the only company able to export large cargoes of LNG from the continental United States, giving it a leg up now to ink long-term contracts with China, the world’s largest growth market for gas.

    “We’re heartened by this trade deal for its potential to increase Chinese access to American LNG,” Cheniere spokesman Eben Burnham-Snyder told Reuters.

    “We have had extensive negotiations with the Chinese over the last month,” he said. Cheniere has also shipped LNG to 20 other countries around the globe, and is in talks to ship to more.

    Shares of Cheniere jumped as much as 5 percent to $49.50 on Friday to their highest since February, and the stock has more than doubled since Cheniere’s Sabine Pass terminal first opened in February 2016. Shares closed up 3.3 percent to $48.68.

    Since the shale boom in the U.S. a decade ago, energy companies have been building export facilities, with as much as 6 billion cubic feet per day of capacity due by the end of 2018.

    “In the longer term, the deal paves the way for a second wave of investment in U.S. LNG,” said Massimo Di-Odoardo, Head of global gas and LNG research at natural resources consultancy Wood Mackenzie.

    “Developers will now be able to target Chinese buyers directly, potentially supporting project financing. It could also support direct Chinese investment into liquefaction and upstream developments on U.S. soil,” he said.

    Those companies include Dominion Resources Inc, Kinder Morgan Inc, Sempra Energy and Freeport LNG, which are building LNG export terminals, and Exxon Mobil Corp, Veresen Inc, Venture Global LNG and Tellurian Inc, which hope to build new export terminals.

    Under the plan, which falls under the framework of the U.S.-China Comprehensive Economic Dialogue, Chinese companies can now negotiate long-term contracts to source LNG from U.S. suppliers, the U.S. Commerce Department said.

    “We are happy for all support in moving forward with U.S. LNG exports…We view this announcement as a step forward in improving the balance of trade,” said Joi Lecznar, a spokeswoman for Tellurian, which is developing the $13-$16 billion Driftwood LNG export facility in Louisiana, expected to enter service in 2022.

    Until now, Chinese buyers have not bought long-term LNG supplies from the U.S. directly.

    China, however, has bought U.S. LNG through short-term, or spot, deals. The only long-term contracts it has for U.S. LNG are with companies, like Royal Dutch Shell PLC, which themselves have agreements to buy gas from Cheniere’s Sabine Pass or other U.S. export terminals.

    Sabine Pass in Louisiana entered service in February 2016, making it the first and only big LNG export facility in the lower 48 U.S. states. The United States has been a net importer of natural gas for 60 years; that is expected to change in 2017 as a result of LNG exports.

    China was the third biggest importer of U.S. LNG in 2016, having imported 17.2 billion cubic feet (bcf) on six vessels, according to federal energy data. For the first two months of 2017, China imported 30.9 bcf of gas on 10 tankers.

    One billion cubic feet is enough gas for about five million U.S. homes.

    By 2030, Wood Mackenzie projects Chinese LNG demand will reach 75 million tonnes per annum or 10 bcfd. That would be worth $26 billion a year at current prices ($7 per million British thermal units).

    “The U.S. is keen for a slice of the pie,” Di-Odoardo said, noting that U.S. LNG accounted for about 7 percent of total LNG imports into China in March.

    The Trump Administration earlier announced plans to expedite the environmental permitting process for other new facilities, such as Veresen’s Jordan Cove project on the Pacific Coast in Oregon.
    Back to Top

    Oil companies drill down on industrial cyber security

    In recent months, more U.S. oil company boards have demanded IT managers prove refineries and drilling rigs are protected against cyberattacks, the chief of a security firm says.

    Rising oil prices and increased awareness of industrial cyber threats seem to have spurred new corporate-level maneuvers this year to secure computer controls that run energy facilities, said Barak Perelman, chief executive of Israeli cyber security firm Indegy. At some oil companies, he said, chief information security officers now spend a quarter of their monthly security committee meetings discussing so-called industrial control systems, the devices that control oil and gas equipment.

    “They’re being given budgets for industrial cyber security,” Perelman said on Friday. “In all my conversations, nobody has said ‘yes, but oil prices.’ I heard that a lot last year.”

    Related: Energy industry’s controls provide alluring target for cyberattacks

    Perelman, who moved from Israel to New York this year because of increasing demand for industrial cyber security in the United States, said he spends most of his time teaching IT professionals how to tackle the security of devices manufactured by Siemens, Honeywell and Emerson – so different from the Microsoft and Apple computers they know well.

    Before 2017, “when we talked to oil companies in Texas, we were mainly talking with control systems engineers who understood the ins and outs of everything, but they didn’t care much about security,” Perelman said. “They didn’t have the budgets for it. It wasn’t their role. In the last few months, we’ve seen more IT corporate security get demands for proof the facilities are protected.”
    Back to Top

    Permian Dominates Again: Rig Count Rises 17th Week

    Baker Hughes released its weekly rig count today, announcing the seventeenth straight week of increasing drilling activity.

    In total, eight rigs came online in the U.S. this week, meaning there are 885 active rigs in the country. Seven land rigs were added, while inland waters lost one rig and two offshore rigs came online.

    Oil continues to dominate U.S. activity, as nine oil-targeting rigs came online this week. One gas-targeting rig came offline, meaning there are 540 more oil-targeting rigs than gas-targeting rigs in the U.S.

    Eight horizontal rigs were added this week, ending the week with 742 rigs active. Other trajectory rigs were mixed, as one directional rig came offline and one vertical became active.

    Horizontal activity is even more dominant than oil, as horizontal rigs outnumber vertical and directional rigs combined by 599.

    Rigs continue to move to Texas, as the state added eight active rigs this week and now has 451 operational rigs. Texas now has 51% of all rigs active in the United States. Several other states experienced small changes, with one rig coming online in Colorado, North Dakota, Ohio and Wyoming while Alaska and New Mexico lost two and Oklahoma lost two.

    Permian remains ground zero

    The Permian is still the heart of oil and gas activity, as the basin added eight rigs this week.

    The Permian now has 357 active rigs, more than all the other major basins Baker Hughes tracks combined. Like the states, basins otherwise saw only minor changes. Two rigs came online in the Cana Woodford, and one was added in the Granite Wash, Utica and Williston. One rig shut down in both the Arkoma Woodford and Mississippian.

    Canadian rigs have not quite hit the bottom of the spring shutdown yet, as two more rigs came offline this week. Four gas-targeting rigs came offline, while oil-targeting rigs added two. Unlike in the U.S., where 80% of rigs target oil, 64% of all Canadian rigs target gas.
    Back to Top

    Gazprom hopes to agree in 2017 main terms of gas exports to China from Russian Far East

    Gazprom hopes to agree in 2017 the main terms of natural gas exports to China from the Russian Far East, the CEO of Russia's state gas giant Alexei Miller said on Sunday.

    The gas supplies from the Russian Far East are considered to be an extension of an already signed 30-year contract on exporting of 38 billion cubic meters of natural gas to China from Siberian deposits, Miller told reporters in Beijing.
    Back to Top

    Floating oil storage has dropped by one-third in 2017: OPEC source

    Global oil inventories in floating storage have declined by one-third since the start of the year, a source from the Organization of the Petroleum Exporting Countries told Reuters on Monday.

    The drop in stockpiles is the latest sign that output cuts by major producers have helped deplete a global glut.
    Back to Top

    U.S. Shale's Favorite Financial Trick Is Getting Less Attractive

    Oil bulls, take heart! U.S. drillers have dramatically reduced their hedging activity, a move that could portend a break in the production gains that have upended global crude prices.

    The relative cost of options protecting against a drop in West Texas Intermediate crude has fallen to its lowest since August, thanks to a big drop in producer hedging, Societe Generale SA said on Friday. The so-called put skew for contracts delivered a year from now -- weighing the difference in value between bullish and bearish options -- fell to just below 6 percentage points, after rising above 8 points in February.

    Hedging contracts lock in payments for future production. U.S. drillers signed onto such agreements in droves late last year, after an OPEC-led deal to cut output raised prices. The Catch-22 is that the guarantees gave drillers the security to boost output, undercutting the rally. Now, futures have languished to the point that the industry’s favorite financial safeguard no longer makes economic sense.

    The fall in WTI 2018 swap prices has made it “unattractive for most U.S. shale oil producers to hedge," Jesper Dannesboe, a London-based commodity strategist for SocGen, wrote in Friday’s report. Unless oil prices rally meaningfully, that will continue, he said.

    Changes in drilling-rig counts on the ground tend to follow a few months after shifts in hedging activity, since many shale companies prefer to hedge new production before committing to more spending, Dannesboe said.

    “In other words, the recent decline in WTI prices may, if maintained, over time cause U.S. oil production growth to slow meaningfully," he wrote.

    WTI crude for June delivery rose 7 cents to $47.90 a barrel at 9:26 a.m. Friday on the New York Mercantile Exchange, after the U.S. reported a steeper-than-expected drop in crude inventories.

    Standing Pat

    In quarterly earnings reports over the past month, oil companies indicated they’d chosen to stand pat with their hedges this year, after the surge at the end of 2016. Apache Corp. and Anadarko Petroleum Corp., two of the most active hedgers last year, hadn’t added significant new contracts as of the end of the quarter, for example.

    “Given that oil prices have declined so far in 2017, I would imagine that there was a deceleration in hedging activity," Peter Pulikkan, a Bloomberg Intelligence analyst in New York, said in an interview.

    Still, drillers are also forging ahead with plans to increase production, in part thanks to the financial cushion provided by existing hedges. Pioneer Natural Resources Co., one of the most prolific actors in Texas’ Permian shale basin, has contracts in place for 85 percent of its expected oil and natural gas output this year, the company said on a May 4 conference call.

    Pioneer has already hedged more than 20 percent of next year’s oil production and 15 percent of its gas volumes for 2018 as well, Chief Executive Officer Tim Dove told analysts on the call. Parsley Energy Inc., Devon Energy Corp. and RSP Permian Inc. also said they either had 2018 hedges in place or were planning to add them.

    That’s likely to continue complicating the oil market. OPEC members plan to meet in Vienna on May 25 to discuss additional production cuts that could resuscitate oil prices. Dove, on his call, said he sees it as his next opportunity to lock in hedges.

    Attached Files
    Back to Top

    Nigeria's Forcados oil pipeline said fully fixed, ready to ship

    Nigeria's Forcados oil pipeline said fully fixed, ready to ship. 2 Forcados cargoes to load in May + another cargo CIF Europe offered for June/July. sources.

    Back to Top

    Russia sees oil market balance in winter if cuts deal extended: agencies

    Global oil markets will reach a supply-demand balance in late 2017 or early 2018 if a pact to cut output is extended, Russia's energy minister was quoted by local news agencies as saying.

    "Judging from the current dynamics in the decline of the oil and oil products inventories, the markets will see such decline in inventories by the end of 2017 - early 2018, which will lead to cuts in inventories to a five-year average," Alexander Novak was quoted as saying.

    The Organization of the Petroleum Exporting Countries and other producers including Russia pledged to cut output by 1.8 million barrels per day (bpd) in the first half of the year to lift oil prices.

    But global inventories remain high, pulling crude back below $50 per barrel earlier this month and putting pressure on OPEC to extend the cuts to the rest of the year.

    Novak told the agencies that OPEC countries and other leading oil producers would discuss extending the deal in the second half of the year or "maybe further than that".

    He also said that he expected the parameters of the deal to be unchanged, meaning deeper cuts were unlikely.

    OPEC and industry sources said there had been discussions about extending curbs until the end of the first quarter 2018, when crude demand is seasonally at its weakest.

    Novak added that Russia would keep output cuts of 300,000 barrels per day from the level of October 2016 as stipulated by the December 2016 deal, he added.

    He said that Russia's oil output forecast of 549-551 million tonnes for this year remained the same but could change depending on the outcome of oil producer nation talks in Vienna later this month.
    Back to Top

    Saudi Arabia, Russia agree oil output cuts until March 2018

    Saudi Arabia and Russia, the world's two top oil producers, agreed on Monday to extend oil output cuts for a further nine months until March 2018 in a bid to erode a global crude glut, pushing up prices.

    The timing of the announcement ahead of OPEC's next official meeting on May 25 and the statement's strong wording surprised markets, and the move will go a long way to ensure that other OPEC members and other producers who participated in the initial round of cuts fall into line.

    In a joint statement that followed an earlier meeting, Saudi energy minister Khalid al-Falih and his Russian counterpart Alexander Novak said they had agreed to prolong an existing deal by another nine months until March 2018.

    The ministers pledged "to do whatever it takes" to reduce global inventories to their five-year average and expressed optimism they will secure support from producers beyond those in the current deal, the statement said.

    "There has been a marked reduction to the inventories, but we're not where we want to be in reaching the five-year average," said Falih at a briefing in Beijing alongside Novak.

    "We've come to conclusion that the agreement needs to be extended."

    Under the current agreement that started on Jan. 1, the Organization of the Petroleum Exporting Countries (OPEC), and other producers including Russia pledged to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year.

    Saudi, the defacto leader of OPEC, and Russia, the world's biggest producer, together control a fifth of global supplies.

    While it was broadly expected that OPEC and Russia would agree to extend the cut, the timing and wording of the statement sent crude prices up more than 1.5 percent in Asian trading.[O/R]

    "I think OPEC and Russia recognize that in order to get the market back on their side they will need 'shock and awe' tactics where they need to go above and beyond a simple extension of the deal," said Virendra Chauhan, Singapore-based analyst at Energy Aspects.

    "The market will also be looking at export cuts and not just production cuts, which is what is required to rebalance the market."

    Major producers had been forced to consider lengthening the cuts as crude futures LCOc1CLc1 have languished around $50 per barrel as markets remain well supplied even after the current deal.

    An OPEC source familiar with the market situation told Reuters earlier on Monday that oil inventories in floating storage have declined by one-third since the start of the year.

        Russia and Saudi Arabia together control around 20 million bpd in daily output.
    Back to Top

    Egypt to cut down on LNG imports

    Rising domestic natural gas production prompted Egypt to start talks with its LNG suppliers to cut down on contracted cargo deliveries.

    The Egyptian Natural Gas Holding Company (EGAS) is looking to defer a number of cargoes scheduled for delivery through 2017, Reuters reports citing analysts.

    In addition to deferring 2017 cargoes, the company is looking to cancel up to 40 LNG cargoes for delivery in 2018.

    Talks on deferring the cargoes are currently ongoing while traders and producers are looking where to divert the cargoes to, analysts say.

    The company has already deferred some ten shipments in 2017 already with up to 17 deliveries due by the end of the year.

    Egypt that has turned a net importer over the course of 2016, due to falling production, increased domestic consumption and gas shortages, has deployed two FSRUs in Ain Sokhna that serve as the country’s import terminals.

    The Höegh Gallant FSRU, provided by Höegh LNG, began operations in April last year, while the FSRU BW Singapore, provided by BW, has been in full operation since October 2015.

    The country became a major importer and cutting down on imports could impact global gas prices if the deferred cargoes are not delivered to other markets.

    A report by Wood Mackenzie notes that the Egyptian market is set to undergo change over the next five years, as new gas discoveries and production start-ups push the country’s gas market back into surplus.

    With BP’s West Nile Delta and Atoll fields and Eni’s massive Zohr find, the North African country will add a cumulative 41 billion cubic meters a year of gas production by 2022, according to WoodMackenzie.

    However, the surplus is expected to be seasonal and Reuters cites Anne-Sophie Corbeau, a research fellow at the King Abdullah Petroleum Studies and Research Center as saying that, although the LNG demand could be challenged it will not disappear completely.
    Back to Top

    Japan’s spot LNG prices continue to drop

    The average price of spot LNG for delivery into Japan that was contracted in April 2017 was at US$5.7 per mmBtu.

    According to the monthly report from the Japanese Ministry of Economy, Trade and Industry (METI), the contract-based spot price dropped 9.5 percent from $6.3 per mmBtu recorded in March.

    Compared to April 2016, when the ministry reported a contract-based price of $4.2 per mmBtu, spot LNG price rose over 35 percent.

    The price of spot LNG arriving into Japan during the month of April 2017 also dropped in comparison to the previous month.

    According to the data, the arrival-based price reached $5.9 per mmBtu in April 2017, down 21.3 percent from $7.5 per mmBtu reported in March 2017.

    However, in comparison to April 2016 when the ministry reported the arrival-based price of $5.8 per mmBtu, the price of spot LNG has risen 1.7 percent.

    Only spot LNG cargoes are taken into account in this assessments, excluding short, medium and long-term contract cargoes, as well as those linked to a particular price index.
    Back to Top

    Qatar cargoes could weigh on Australian NWS condensate premiums

    Premiums for Australia's North West Shelf condensate could slip in May amid faltering refining margins and the recent spike in Middle Eastern spot supplies, market participants said Friday.

    Four regional condensate traders surveyed by S&P Global Platts said they expected July-loading NWS condensate cargoes to trade at between $1/b and $1.50/b premium to Platts Dated Brent crude assessments on an FOB basis.

    Two traders said that the spot differential could possibly fall below Platts Dated Brent plus $1/b, though a third one said the premium might rise to around $2/b this month.

    Chevron was said to have sold a cargo of NWS condensate for loading over June 6-10 at a premium of around $1.50-$1.60/b to Dated Brent crude assessments in the previous trading cycle.

    Regional traders said that refining margins had been trending lower with both light and middle distillate crack values tumbling to multi-month lows in recent weeks.

    "Many companies buy condensate for refining and blending purposes, not just [to manufacture] petrochemicals ... when [distillate] margins are poor, condensate market takes hit as well," said a trader with a South Korean refiner.

    The second-month gasoil/Dubai swap crack fell to $9.25/b last Thursday, the lowest since August 10, 2016, when it was $9.24/b. The second-month jet fuel/kerosene to Dubai swap crack also fell to a multi-month low of $9.79/b last week.

    "The outlook [for ultra-light grades] isn't that great," a North Asian trader said, adding that gasoline and naphtha cracks had fallen even lower.

    The second-month spread between Singapore naphtha and Dubai swaps averaged minus $2.54/b to date in May, compared with the April average of minus $1.78/b.

    For gasoline, the spread between second-month average of Singapore 92 RON gasoline and Dubai swaps averaged minus $8.82/b in May to date. Last month, the spread averaged $11.24/b.


    Asian condensate traders said the recent spike in Qatari ultra-light crude supply in the spot market could draw buyers to the Middle Eastern material.

    The regional market saw a flurry of deodorized field condensate cargoes being offered over the past several weeks due to an operational glitch at Qatar's Laffan Refinery complex in early April.

    A handful of prompt-month DFC cargoes had flooded the Asian spot market in April, while Qatar Petroleum for the Sale of Petroleum Products awarded at least five 500,000-barrel cargoes of DFC for loading in June in its previous spot tender, traders said.

    Earlier, QPSPP sold just one or two DFC cargoes via monthly spot tenders during Q4 2016 and Q1 this year.

    "I expect to see just as many cargoes offered and sold [for loading in July]," the North Asian trader said, adding that the operating rate of the Laffan Refinery complex might have dropped below 40% in recent months.

    DFC is a primary feedstock for Laffan Refinery's condensate splitters.


    Meanwhile, market sources said the preliminary July program for NWS condensate reflected a major reshuffle in the grade's loading schedule following the suspension of production at the Karratha gas plant in mid-April. The program seen by Platts showed that four 650,000-barrel cargoes of NWS condensate are scheduled for export in July.

    The Japanese consortium of Mitsui and Co. and Mitsubishi Corp., or MIMI, holds the first cargo for loading over July 1-5 while BHP Billiton has the second cargo for loading over July 9-13.

    Prior to the loading delays caused by the production hiccup, MIMI and BHP had been scheduled to lift the cargoes on June 19-23 and June 26-30 respectively.

    As for the rest of the July program, BP holds the third cargo for loading over July 17-21 and Chevron has the fourth and final cargo for loading over July 23-27.

    "Buyers are still wary about further delays, and this could also hurt NWS premiums," said a Southeast Asian condensate trader.

    Attached Files
    Back to Top

    Tidewater in bankruptcy deal to eliminate $1.6B in debt

    Tidewater, one of the world’s largest offshore vessel owners, has entered into a debt restructuring support agreement with certain consenting creditors.

    The U.S.-based vessel company has entered into the deal with lenders under its Fourth Amended and Restated Revolving Credit Agreement, dated as of June 21, 2013, and holders of Tidewater Senior Notes to put into force a proposed prepackaged plan of reorganisation of the company.

    The plan, that includes Tidewater and some of its subsidiaries filing for Chapter 11 bankruptcy by May 17, will, the company says, substantially deleverage its balance sheet and better position Tidewater “to weather the extended downturn in the offshore energy industry while maintaining the company’s position as a worldwide market leader in offshore vessel services.”

    The prepackaged plan has the support of the company’s lenders holding 60% of the outstanding principal amount of loans under the credit agreement and holders of 99% of the aggregate outstanding principal amount of Tidewater’s Senior Notes. Tidewater expects that it will eliminate approximately $1.6 billion in principal of outstanding debt.
    Back to Top

    Caspian oil pipeline eyes massive expansion thanks to new oilfields

    The Caspian oil pipeline is seen boosting its capacity this year by around 47 percent thanks to new oilfields in the region including the giant Kashagan deposit in Kazakhstan, the consortium's director general, Nikolai Gorban, said on Friday.

    Oil exports via the Caspian Pipeline Consortium (CPC) rose by 3.6 percent to 44.3 million tonnes in 2016 and are expected to grow to almost 65 million tonnes (1.3 million barrels per day) this year.
    Back to Top

    EOG in a nutshell.

    Image title
    Back to Top

    Alternative Energy

    France needs 'massive' renewables growth, nuclear not only energy solution, says PM

    France needs "massive and rapid" growth in renewable energy capacity and nuclear power is not the country's only energy solution, new Prime Minister Edouard Philippe said on Thursday.

    Philippe, who was appointed by newly inaugurated President Emmanuel Macron, used to work as head of public affairs for state nuclear energy group Areva, parts of which are set to be absorbed by EDF, the state power utility which operates the nation's ageing nuclear power station fleet.

    On Wednesday, Macron appointed environmentalist Nicolas Hulot as his environment minister with responsibility for energy matters - a move that hit EDF's share price.

    Nuclear power accounts for about three-quarters of French power generation at present.

    France needs "to reach the objectives set out by the President," Philippe said on France Inter radio. "That means an approach founded on the secure base of nuclear and a rapid, massive and visible development of renewables," he added.

    Philippe also said the government would take a "pragmatic" approach regarding France's future energy and power supplies.
    Back to Top

    Daimler, Vivint Solar in exclusive deal on U.S. home batteries

    German automaker Daimler AG will enter the nascent U.S. market for home batteries through a collaboration with residential rooftop solar installer Vivint Solar Inc, the two companies said on Thursday.

    The exclusive partnership, Vivint's first foray into energy storage, will allow the companies to compete against similar offerings from automaker Tesla Inc, solar installer Sunrun Inc, battery maker LG Chem Ltd and others.

    The market for energy storage is small, but growing rapidly as the costs of lithium-ion batteries fall. Last year the industry generated $320 million in revenue in the United States, though residential systems made up just 4 percent of the total.

    Home battery systems allow customers to store solar power generated during the day for use after sunset, a time when they might charge an electric vehicle. Eventually, as utilities move to charging higher rates for power used in the evening, when demand is greatest, the batteries could bring customers significant savings. They can also provide backup power.

    Daimler will sell the batteries through its Mercedes-Benz Energy subsidiary established last year, bringing its aspirational car brand to the home energy market in much the same way Tesla has with its Powerwall batteries.

    The head of Mercedes-Benz Energy Americas, Boris von Bormann, said entering the home storage market was a natural evolution for the luxury car brand.

    "In the future when someone steps into a dealership and they are looking to purchase an EV, they are asking for several solutions and storage will be one of them," he said in an interview.

    Vivint Chief Executive Officer David Bywater said solar customers are increasingly demanding an energy "ecosystem" that includes home energy management, storage and electric vehicle charging.

    Mercedes-Benz "will help us both on the home storage as well as the EV charging stations over time," Bywater said.

    The energy storage systems will be made up of 2.5 kWh modular batteries that can be combined to create a system as large as 20 kWh. The largest size would cost about $13,000 fully installed, Bywater said.

    By comparison, a 14 kWh Tesla Powerwall costs $6,200, not including up to $2,000 in installation costs, according to pricing information on Tesla's website.

    The systems are available immediately, and Vivint plans to sell them both online and through its primary door-to-door sales operation.
    Back to Top

    12 from 12: ARENA’s big solar plans take off across the country

    The Australian Renewable Energy Agency has announced that all 12 of the projects that won funding under its large-scale solar program have now reached financial close and will begin construction shortly, if they haven’t already.

    The last of the 12 projects to get to financial close – the 20MW White Rock solar farm in northern NSW – did so late last week. Funding was never really in doubt considering that the project is owned by Chinese giant Goldwind, which is building a 175MW wind farm by the same name at the same place.

    ARENA, however, used the milestone to hail its $90 million initiative as a huge success, helping to bring down the cost of large-scale solar to the level of wind energy – and five years ahead of what had been expected.

    The 12 projects have also benefited from $320 million in low-cost finance from the Clean Energy Finance Corporation, as the country’s major banks tried to wrap their mind around this new technology.

    But there is every sign that they have, and have lowered the risk quotient on their financing, at least for those with long-term power purchase agreements. While the ARENA program will deliver 490MW of large-scale solar, another 1,500MW is thought to be also under construction, or about to begin, around the country.

    “This competitive round is the perfect demonstration of how ARENA is accelerating Australia’s shift to a low emission, renewable energy future,” Frischknecht said in a statement.

    “From zero to more than 20 plants in five years, Australia’s large-scale solar industry has grown at a tremendous pace thanks to concerted efforts by ARENA and the CEFC.

    “We know of at least six new plants that are being developed without any ARENA grant funding support.”

    He said the ARENA program had unlocked $1 billion in investment from other sources and regional economies would benefit, with an estimated 2,300 direct jobs and thousands more indirect jobs expected to be created by these plants.

    Frischknecht said planning, developing and financing large-scale solar projects remained a complex task involving multiple different parties. That’s why the knowledge gained from the project is so valuable.

    “ARENA believes in the power of shared knowledge. That’s why we require project developers to share the learning from each stage of development, construction and connection with the renewable energy sector,” Mr Frischknecht said.

    “Our support for Whitsunday Solar Farm assisted project developer Edify Energy to secure debt finance for two additional plants, Hamilton Solar Farm in Queensland and Gannawarra Solar Farm in Victoria. ARENA is benefitting from knowledge sharing activities across the three projects.”

    The projects are expected to be completed between late-2017 and mid-2018, and will help reduce wholesale prices in all three states where these projects will be built when they come on stream.
    Back to Top

    How cheap is solar? Cheap enough to cool the air outside

    How cheap is solar? Cheap enough, says the head of the Australian Renewable Energy Agency, to drive the transformation of our grid to zero emissions. Cheap enough, he says, to inspire some people to install air conditioners on their verandah to cool the air outside the house, as well as inside.

    Source: Wendy Miller, Senior Research Fellow, Queensland University of Technology (via The Conversation)

    The latter, quite bizarre example was given by ARENA CEO Ivor Frischknecht at the recent Emissions Reduction conference in Melbourne to illustrate just how cheap solar has become.

    He came across a home owner in Townsville, north-eastern Queensland, who had installed a very large rooftop solar system, and planned to use it to power an air conditioning unit on the verandah.

    “He likes to have cool air on his face while he is sitting outside outside,” Frischknecht said. “And this is fine, because if you are only running it in middle of day, and using the solar, the energy is free.”

    Indeed, noted Frischknecht, solar was becoming so cheap, and will become so abundant, that we will reach the situation where the kilowatt hours of use (i.e. the production) are effectively free. The cost will come in managing the variability, and integrating it into the grid.

    But even here, contrary to much that is written, Frischknecht says the technologies to do that are available now, in the form of battery storage, demand response, pumped hydro and a “whole bunch of solutions that can ensure that the lights stay on.”

    The challenge comes down to rewriting the market rules and regulations, and reframing business models, so that these technologies are rewarded for their services, and not punished.

    He cited the use of battery storage.

     “If you have a battery today and charge it up –you have to pay transmission costs and distribution costs and a share of RET, and when you discharge it again and sell the output, you pay all those costs again,” Frischknecht said.

    “You are adding 50 per cent to the cost of energy getting stored. That’s a pretty big barrier to put in place of a mechanism we need.”

    Frischknecht says it is not hard to look forward and imagine a world where many things would be quite different, and when a lot of centralised fossil fuel generation is made redundant by the falling costs of renewables.

    “The cost of solar PV will be so cheap it will literally cover every surface – packaging, buildings, cars, roads. Energy will be cheap, but we will still got this variable output issue. We are going to have to figure out different ways of pricing and dealing with variable output.”

    Attached Files
    Back to Top

    China, India surpass U.S. as most attractive renewables markets: report

    China and India have surpassed the United States to become the two most attractive countries for renewable energy investment, a report by UK accountancy firm Ernst & Young showed on Tuesday.

    In an annual ranking of the top 40 renewable energy markets worldwide in terms of allure, China was the top country, followed by India.

    The United States, which ranked the highest last year, slumped to third place, due to a shift in U.S. energy policy under President Donald Trump.

    Trump has issued orders to roll back many of the previous administration's climate change policies, revive the U.S. coal industry and review the Clean Power Plan, which requires states to cut carbon emissions from power plants.

    Meanwhile, China announced this year that it would spend $363 billion on developing renewable power capacity by 2020. India's government has unveiled plans to build 175 gigawatts of renewable energy generation by 2022.

    Among European countries, Germany ranked fourth, France eighth and Britain moved to 10th place, from 14th last year.

    While Britain's renewable investment environment is more settled than in recent years, which were beset by subsidy cuts, future energy policy after it leaves the European Union is uncertain, the report said.

    "The UK's reappearance in the top 10 is the result of other countries falling away – notably Brazil, which cancelled a wind and solar auction in December - rather than any particularly encouraging resurgence," said Ben Warren, EY's head of energy corporate finance.
    Back to Top

    Argentina expects to triple its production of lithium in five years with investments for USS 1500 million

    Google Chrome translation:

    The country currently has the capacity to produce 35,500 tonnes per year but five projects are under development to multiply that figure by three in 2021.

    Argentina has an installed capacity of lithium production of 35,500 tons per year, which means 16 percent of the global supply, but has at the advanced stage of development five other projects that will allow it to triple its production in 2021 with investments for US $ 1.5 billion and exports for about 880 million US dollars.

    This is the result of a report prepared by the Under-Secretariat for Mining Development, in which it is highlighted that there are currently two projects in production in the country: the Salar del Hombre Muerto / Mina Fénix, which has been producing in Catamarca since 1997; And the Salar de Olaroz in Jujuy, about to reach full capacity this year.

    In 2016, Olaroz accounted for 6% of global production and marked a milestone as the first greenfield project ("from scratch") in brines after 19 years, while the Orocobre operator of the field plans to at least double Its capacity from 17,500 to 35,000-42,500 tons, taking advantage of the current infrastructure ..

    At the same time, there are several projects with different degrees of advancement that could be operating in the next 5 years, among which the company Lithium Americas, together with SQM and JEMSE, in the Salar de Cañarí, Jujuy stands out.
    There the partners announced the construction of a lithium-potassium plant with a capacity of 25,000 tpa that would be produced in 2019, and a second stage projected that would add an additional 25,000 tpa.

    The Galaxy Resources group plans to build a plant in the Salar del Hombre Muerto, also in Jujuy, that would be producing 25,000 tpa in a first phase by 2020; While the company Eramet finalized the studies in the salares of Centenario and Mice for the construction of a plant of 20,000 tpa.

    Another of the most advanced projects is Enirgi Group, the operating company of Salar del Rincón, in the province of Salta, which has a pilot plant of 1,200 tpa, and is seeking financing to build a plant with a capacity of 20,000 tpa.

    Considering these four major projects that are more advanced, plus the expansion programmed by Olaroz, would incorporate some 110,000 nominal tons to the current production, which implies investments of US $ 1.5 billion and annual exports for about US $ 880 Million, at an average of $ 8,000 a ton although some projections put the price at $ 12,000 for the coming years.

    The report of the undersecretary under Mario Capello, who reports to the mining secretary, Daniel Meilán, highlights that in addition to these projects, in Argentina there are five others in the advanced exploration stage, 12 in initial exploration and 17 in the exploration stage .

    Each project of lithium with a horizon of 40 years and an estimated capacity of 20,000 tpa requires on average about 350 million dollars of investment and employs in its construction between 400 and 600 people, whereas for the operation generates around 200 sources of work Between direct and indirect labor.

    With the consolidated figures for 2016, Argentina was the most dynamic producer in recent years, passing from 11% to 16% of the world market for lithium derivatives.

    The mining authorities emphasized "the Argentine opportunity to grow demand and a project race in the world is to develop new projects so that they stabilize, before the windows of opportunity for the Entry of new competitors ".

    The international market for this mineral is in an upward cycle, but it is still small if compared to other minerals, as for data for 2016 the value of world gold production (124 billion USD), for example, is 87 times that of lithium (1.4 thousand USD) and copper (94,437 million USD) about 66 times.

    The ton of lithium carbonate accounted for an increase of 48.02% from an average of US $ 5,050 a ton in 2014 to US $ 7,475 in 2016, with peaks in the second half of the year that exceeded 9,000 u $ S

    Regarding global demand last year closed at 37,800 tonnes, up 13.5% on that of 2015, while in the same period the use of lithium batteries, with 39% of the market, shifted from the historic first place To ceramics and glass, and is expected to account for more than two-thirds of demand by 2025.

    Argentina is in fourth place in terms of proven lithium reserves, although depending on the sources, it may appear third, and it possesses between 25% and 30% of the potential resources of the so-called "lithium triangle" formed together with Bolivia and Chile.
    Back to Top

    Gansu's active wind power capacity hits new high

    Active power generation capacity at wind farms in northwestern China's Gansu province hit a new high of 6.09 GW at 6:17 a.m. (GMT+8) May 5, sources reported.

    That accounted for 38.8% of the province's total on-grid power generation capacity and 59.95% of the grid's power load, according to China Electric Power News.

    By the end of last year, installed wind and photoelectric power capacity amounted to 19.6 GW, accounting for 41% of the province's total capacity, which surpassed the share of thermal power capacity.

    Owing to a lack of indigenous demand and difficulties in outbound transmission, Gansu has been idling lots of its wind and photoelectric power capacity.

    The Jiuquan wind base has more than 10 GW of power capacity.

    Gansu saw its power transmission capacity improving, thanks to the commissioning of a ±800 KV ultra-high voltage project in Jiuquan, which has transmitted over 31 GWh clean power to Hunan province in central China.
    Back to Top


    Indian cabinet approves plans to build 10 nuclear reactors

    India's cabinet approved plans on Wednesday to build 10 nuclear reactors with a combined capacity of 7,000 megawatts (MW), more than the country's entire current capacity, to try fast-track its domestic nuclear power program.

    The decision by Prime Minister Narendra Modi's government marks the first strategic response to the near collapse of Westinghouse, the U.S. reactor maker that had been in talks to build six of its AP1000 reactors in India.

    Westinghouse, owned by Japan's Toshiba, filed for Chapter 11 bankruptcy in March after revealing billions of dollars in cost overruns at its U.S. projects, raising doubts about whether it can complete the India deal.

    India has installed nuclear capacity of 6,780 MW from 22 plants and plans to add another 6,700 MW by 2021-22 through projects currently under construction. The 10 additional reactors would be the latest design of India's Pressurised Heavy Water Reactor.

    "This project will bring about substantial economies of scale and maximize cost and time efficiencies by adopting fleet mode for execution," the government said in a statement.

    "It is expected to generate more than 33,400 jobs in direct and indirect employment. With manufacturing orders to domestic industry, it will be a major step towards strengthening India’s credentials as a major nuclear manufacturing powerhouse."

    Westinghouse has said it plans to continue construction of its AP1000 plants in China and expects to bid for new plants in India and elsewhere, without elaborating on how it plans to do so.

    Indian companies such as Larsen and Toubro, Kirloskar Brothers Limited and Godrej & Boyce welcomed the government's move.

    Sanjay Kirloskar, chairman of Kirloskar Brothers Limited, said: "nuclear power plants will go a long way in reducing the perennial energy deficit," while Larsen and Toubro's director S.N. Roy called the move "bold and historic."
    Back to Top


    EU to propose 10-year license renewal for weed killer glyphosate

    The European Commission will propose extending by 10 years its approval for weed-killer glyphosate, used in Monsanto's Roundup, a spokeswoman said on Wednesday.

    A transatlantic row over possible risks to human health has prompted investigations by congressional committees in the United States, and in Europe has forced a delay to a re-licensing decision for Monsanto's big-selling Roundup herbicide.

    A new study issued in March by the European Chemical Agency (ECHA) paved the way for the Commission's decision to restart negotiations with EU nations over renewing the license for glyphosate, despite opposition from environmental groups.

    The EU body, which regulates chemicals and biocides, said glyphosate, the key ingredient in Roundup, should not be classified as a substance causing cancer.

    A spokeswoman for the Commission said it had "taken into account the latest state of scientific research and would "work with the Member States to find a solution that enjoys the largest possible support."

    No date has yet been set for when discussions with representatives of EU member states will start.

    Pending the results of the ECHA study, the EU granted an 18-month extension last July of its approval for the weed killer after a proposal for full license renewal met opposition from member states and campaign groups.

    While the World Health Organization’s cancer agency, the International Agency for Research on Cancer (IARC), classifies glyphosate as "probably carcinogenic", many other government regulators, including in the United States, see the weed killer as unlikely to pose a cancer risk to humans.

    The European Food Safety Authority (EFSA), which has found that glyphosate is "unlikely to pose a carcinogenic hazard to humans", welcomed ECHA's opinion on Wednesday, as did lobby groups for farmers, who make wide use of products containing glyphosate.

    But environmental groups said doubts remain over its safety.

    "It makes no sense to accept the wide range of risks associated with glyphosate," said Bart Staes, a Green group member of the European Parliament.

    The decision to seek a 10-year rather than a longer approval was also criticized by supporters of the herbicide. The European Crop Protection group called it "short-sighted", saying it pandered to activists.

    According to data published by IARC, glyphosate was registered in over 130 countries as of 2010 and is one of the world's most heavily used weed killers.

    Analysts have estimated that Monsanto could lose out on up to $100 million of sales if glyphosate was banned in Europe.
    Back to Top

    Rising Chinese hog output set to erode profits by 2018: analysts

    China's pig farmers will start to lose money next year as the country's herds are close to full capacity, analysts said on Thursday, which may undermine planned expansions of pork production.

    China's farmers had earlier culled herds after a spell of losses, which pushed prices to a record 22 yuan ($3.19) per kg last year. As a result, companies including Cofco Meat, New Hope Liuhe and Guangdong Wen's Foodstuffs embarked on a building spree to expand production to chase profits of more than $100 per pig.

    But prices have been falling for several months, driven by the replenishing of sows, said Feng Yonghui, chief analyst at consultancy

    "Sows are not yet in overcapacity, but it will be very soon, within two or three months. Which means by next year this profit-making cycle will end and turn to losses," he told an industry seminar.

    Prices have already tumbled from last year's peak to about 14.5 yuan per kg and are set to keep falling sharply, said Feng.

    "Next year they'll fall to more than 5 yuan per half kg," he told Reuters on the sidelines of the seminar.

    Sows removed from farms that have been shut in southern China to tackle water pollution are simply being transferred elsewhere, which is not leading to an expected further reduction of the hog herd, said Feng

    Meanwhile, large farming groups have built new capacity further north, and many are still planning new projects. Top producer Wen's is targeting production of 27.5 million hogs by 2019, up from 17 million last year.

    Productivity in China is also increasing, said Pan Chenjun, executive director of food and agriculture research at Rabobank Hong Kong, with the average piglets per sow now around 17.

    "I agree with Feng that by middle of next year some farmers will be losing money," she told Reuters.

    "Although a lot of farms have closed since 2016, it hasn't led to a real drop in production capacity."

    She estimated pork production will increase by 2 percent this year, pressuring prices.'s Feng added that the loss-making cycle could last as long as six years, around double the typical period for a down cycle, with major pork firms unwilling to relinquish market share.

    "Smallholders also made a lot of money last year so they won't want to slaughter sows either," he added.

    China's sow inventory fell from about 50 million head in 2014 to 37.5 million currently, according to official data.
    Back to Top

    Pests and pathogens could cost agriculture billions

    The spread of pests and pathogens that damage plant life could cost global agriculture $540 billion a year, according to a report published on Thursday.

    The report, released by the Royal Botanic Gardens (RBG) at Kew in London, said that an increase in international trade and travel had left flora facing rising threats from invasive pests and pathogens, and called for greater biosecurity measures.

    "Plants underpin all aspects of life on Earth from the air we breathe right through to our food, our crops, our medicines," said Professor Kathy Willis, RBG Kew's director of science.

    "If you take one away, what happens to the rest of that ecosystem - how does it impact?"

    Researchers also examined the traits that would determine which plant species would cope in a world feeling the effects of climate change.

    Plants with deeper roots and higher wood density are better able to withstand drought, while thicker leaves and taller grasses can cope with higher temperatures, the report found.

    Surprisingly, researchers also found that the traits that are likely to help species thrive appear to be transferable across different environments.

    "The interesting fact to emerge is that the suite of 'beneficial' traits are, on the whole, the same the world over and are as true in a temperate forest as in a desert," Professor Willis said in a statement.

    The report, which involved 128 scientists in 12 countries, found that 1,730 new plant species had been discovered in the past year.

    Nine new species of the climbing vine Mucuna, used in the treatment of Parkinson's disease, were found and named across South East Asia and South and Central America.
    Back to Top

    New EuroChem potash mines to produce 1.1 mln T 2018 -CFO

    Privately held fertilizer producer EuroChem Group plans to produce 1.1 million tonnes of potash in 2018 from its two new Russian mines, with output capacity ramping up to 8.3 million tonnes annually by 2024 or 2025, the company's chief financial officer said on Wednesday.

    EuroChem also intends to convert up to 200,000 tonnes of that potash to sulphate of potash (SOP), a premium product, in 2019, and to 500,000 tonnes of SOP in 2020 or 2021, CFO Andrey Ilyin told Reuters.

    New EuroChem potash mines to produce 1.1 mln T 2018 -CFO

    May 17 Privately held fertilizer producer EuroChem Group plans to produce 1.1 million tonnes of potash in 2018 from its two new Russian mines, with output capacity ramping up to 8.3 million tonnes annually by 2024 or 2025, the company's chief financial officer said on Wednesday.

    EuroChem also intends to convert up to 200,000 tonnes of that potash to sulphate of potash (SOP), a premium product, in 2019, and to 500,000 tonnes of SOP in 2020 or 2021, CFO Andrey Ilyin told Reuters.
    Back to Top

    Chinese company confirms huge UK fertilizer deal

    A small Chinese company that is key to plans by Sirius Minerals to build a huge fertilizer mine under a national park in the north of England has confirmed it has a binding agreement with the UK firm.

    DianHuang CEO Wang Xiaotian reiterated the agreement in a letter to Reuters on May 15, saying it had been signed on May 27 last year. DianHuang would buy 150,000 tonnes of the mineral polyhalite a year from first extraction in 2021, scaling up to a million tonnes a year over five years as part of plans to grow peony flowers and extract edible oil from their seeds, he said.

    The reassurance from Wang followed a May 8 telephone interview with Reuters in which he said the two firms were still negotiating.

    The DianHuang deal is the biggest take-or-pay agreement Sirius has inked so far with a named customer. By demonstrating confirmed demand for its product, it helped Sirius raise $1.2 billion in financing for the mine and win planning permission from the North York Moors national park.

    Sirius needs its existing take-or-pay agreements and more to raise a further $2.6 billion, in debt financing, to complete the mining project. The company has said it must double the amount of polyhalite covered by take-or-pay deals to satisfy the banks arranging the financing that it has enough potential cash flow.

    Asked if DianHuang had signed a legally binding agreement with Sirius, Wang had said by telephone: "We have not officially signed this, it is just a strategic cooperation agreement ... Because with Sirius we have a framework cooperation, of course we hope this cooperation can be pushed forward."

    These were the first comments to media by the Chinese company on the deal, which Sirius announced in June 2016. At that time, Sirius said DianHuang would buy up to a million tonnes of fertilizer a year from first extraction, under a take-or-pay arrangement.

    In the telephone interview, Wang had said DianHuang was also negotiating with a rival firm, ICL, also known as Israel Chemicals.

    "It depends whose fertilizer is more beneficial for us," he said. "ICL is the biggest global producer of organic potassium fertilizer. They are also competing, they are also in touch with us. They have brought over some fertilizer for test use."

    ICL, whose mine is on the same Yorkshire seam that Sirius plans to exploit, declined to comment on DianHuang's statement.

    After Reuters posed questions to Sirius Minerals about Wang's phone comments, Sirius said the assertion that it only had a framework agreement with DianHuang was incorrect: "The Company has a binding offtake agreement in place."

    Sirius added that any possible talks between DianHuang and its rival were up to the Chinese firm.

    In Wang's letter, which he wrote after Reuters contacted Sirius, he said: "To clarify, the contract is not a framework agreement but rather a firm take or pay agreement." Wang was not immediately available to comment further when contacted by Reuters after the letter.

    ICL is so far the only company that has actually begun mining polyhalite, a relatively new entrant to the fertilizer market which both it and Sirius say is a multi-nutrient product superior to traditional potash. Wang's follow-up letter to Reuters made no reference to ICL.

    Sirius has announced take-or-pay agreements for up to 3.6 million tonnes a year of its polyhalite product so far. It has not named some customers for commercial reasons. That is about half what it says it needs to complete the project.

    It says the mine will create thousands of jobs and add as much as 2.4 billion pounds ($3.11 billion) per year to the United Kingdom's gross domestic product.

    Attached Files
    Back to Top

    BHP likely to open Jansen potash mine in Canada by 2023

    BHP, the largest mining company by market capitalization, sees potash as a key commodity in which to base its future growth despite prices are still hovering around $230 a tonne, less than half what they were only five years ago.

    Speaking at the Bank of Merrill Lynch mining conference in Barcelona, Spain, chief executive Andrew Mackenzie confirmed the company's commitment to the crop nutrient by announcing that the first phase for the company’s massive Jansen potash mine will be completed within six years.

    BHP could seek approval from the board for Jansen's expansion as early as June 2018, said chief executive Andrew Mackenzie.

    “As we currently see it, we’re looking at a phased expansion into Jansen with an initial stage of four million tonnes per annum, and that will generate competitive returns,” Mackenzie said.

    He added the company could seek approval from the board for such expansion as early as June 2018, with production beginning in 2023.

    “As we progress this project we continue to optimize the development path as to how we might add a mine to those shafts so we can reduce risk and unlock value,” Mackenzie noted.

    The world's number one mining company has committed to date a total investment of $3.8 billion to move Jansen into production. From that total, $2.6 billion have been set aside for surface construction and the sinking of shafts, though analysts predict the total cost will be close to $14 billion.

    According to BHP’s leader, a phased expansion of Jansen — which is projected to produce generate 8 million tonnes of potash a year or nearly 15% of the world's total — is expected to generate competitive returns in stage 1, with significant potential upside in subsequent stages.

    However, he didn’t seem in any rush to finish the project. Instead, he said that, as with every venture BHP embarks on, the company will only develop it “when the time is right.”
    Back to Top

    China soy growers to receive bigger subsidies than corn producers

    China's top grain-producing provinces will pay greater subsidies to soybean farmers than corn growers as the country pushes to whittle a huge corn glut.

    The nation has been overhauling its grains policy in the wake of abandoning a state stockpiling system that amassed over 250 million tonnes of corn, more than one year's consumption.

    The governments of Heilongjiang and Liaoning provinces in the northeastern corn belt announced the move on subsidies in policy documents published late last week, although details on subsidy levels will be released later.

    China included cutting corn acreage and lifting soybean acreage in its five-year plan issued last year. It is the world's top consumer of both commodities.

    The amount of land used to grow soybeans in China will rise to 140 million mu (9.3 million hectares) by 2020, up from 98 million mu in 2015, according to the plan.
    Back to Top

    Trump reassures farmers immigration crackdown not aimed at their workers

    President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry and its largely immigrant workforce, according to farmers and officials who met with him.

    At a roundtable on farm labor at the White House last month, Trump said he did not want to create labor problems for farmers and would look into improving a program that brings in temporary agricultural workers on legal visas.

    "He assured us we would have plenty of access to workers," said Zippy Duvall, president of the American Farm Bureau Federation, one of 14 participants at the April 25 meeting with Trump and Agriculture Secretary Sonny Perdue.

    During the roundtable conversation about agriculture, farmers and representatives of the sector brought up labor and immigration, the details of which have not been previously reported. Some farmers told Trump they often cannot find Americans willing to do the difficult farm jobs, according to interviews with nine of the 14 participants.

    They said they were worried about stricter immigration enforcement and described frustrations with the H-2A visa program, the one legal way to bring in temporary seasonal agricultural workers.

    The White House declined to comment on the specifics of the discussion, but described the meeting as "very productive." The U.S. Department of Agriculture did not respond to a request for comment on the April meeting.

    About half of U.S. crop workers are in the country illegally and more than two-thirds are foreign born, according to the most recent figures from the U.S. Department of Labor's National Agriculture Workers' Survey.

    During the roundtable, Luke Brubaker, a dairy farmer from Pennsylvania, described how immigration agents had recently picked up half a dozen chicken catchers working for a poultry transportation company in his county.

    The employer tried to replace them with local hires, but within three hours all but one had quit, Brubaker told the gathering at the White House.

    Trump said he wanted to help and asked Secretary Perdue to look into the issues and come back with recommendations, according to the accounts.

    While other issues such as trade, infrastructure and technology were also discussed, participants were more positive after the meeting about the conversation on foreign labor "than about anything else we talked about,"  said Bill Northey, a farmer and Iowa's secretary of agriculture.


    Tom Demaline, president of Willoway Nurseries in Ohio, said he told the president about his struggles with the H-2A guestworker program, which he has used for 18 years.

    He told Trump the program works in concept, but not in practice. "I brought up the bureaucracy and red tape," he said. "If the guys show up a week or two late, it puts crops in jeopardy. You are on pins and needles all year to make sure you get the workers and do everything right."

    While use of the program has steadily increased over the past decade, it still accounts for only about 10 percent of the estimated 1.3 million farmworkers in the country, according to government data. In 2016, the government granted 134,000 H-2A visas

    Employers who import workers with H-2A visas must provide free transportation to and from the United States as well as housing and food for workers once they arrive. Wage minimums are set by the government and are often higher than farmers are used to paying.

    Steve Scaroni, whose company Fresh Harvest brings in thousands of foreign H-2A workers for growers in California's Central valley, says, however, that he could find work for even more people if he had more places to house them.

    For a related photo essay click on:

    Trump recently signed another executive order titled "Buy American, Hire American," calling for changes to a program granting temporary visas for the tech industry, but not to visas used by farmers and other seasonal businesses, including Trump's own resorts.


    Trump also signed two executive orders, just days after taking office, focused on border security that called for arresting more people in the United States illegally and speeding up deportations.

    Roundtable participants said that many farmers have worried about the effect of the stepped up enforcement on their workforce, but Trump told them his administration was focused on deporting criminals, not farmworkers.

    "He has a much better understanding about this than some of the rhetoric we have seen," said meeting attendee Steve Troxler, North Carolina's agriculture commissioner and a farmer himself.

    The farmers at the meeting said they stressed to the president the need for both short-term and permanent workers. They said there should be a program to help long-time farmworkers without criminal records, but who are in the country illegally, to become legal residents.

    Last Tuesday, Democrats in the House and Senate said they would introduce a bill to give farmworkers who have worked illegally in the country for two consecutive years a "blue card" to protect them from deportation.

    Brubaker, the Pennsylvania farmer, said he liked what he had heard about the bill and hoped it would get the president's support to make it a bipartisan effort.

    "The administration has got something started here," he said of the meeting with farm leaders. "It's about time something happens."
    Back to Top

    Precious Metals

    De Beers diamond sales down by 11%

    The company said it continues to see steady demand despite the industry entering a typically quieter season. 

    De Beers, the world’s largest rough diamond producer by value, saw its sales declining by 11% during the fourth cycle of the year compared with the previous cycle.

    The Anglo American’s unit said provisional diamond sales of $520 million for the fourth sales cycle ended May 15, compared with $586 million generated in the previous sales cycle. Sales for the fourth cycle of 2016 were $636 million.

    The company, however, said it continues to see steady demand despite the industry entering a typically quieter season.

    "Sentiment remains positive as we head towards the important Las Vegas trade show in early June,” chief executive Bruce Cleaver said in the statement.
    Back to Top

    Bearish aura pervades London Platinum Week

    The mood was distinctly bearish among attendees at London Platinum Week 2017, with representatives from across the value chain painting a negative outlook for the autocatalyst metal.

    "[For the time being] people do not hate [platinum], but at $1,000 they will hate it again," said a fund manager Monday evening.

    A senior banking source said: "The mood is overall bearish."

    Diverging outlooks on supply and demand dynamics were circulating among participants at the event.

    Johnson Matthey, the world's largest refiner of platinum and palladium, expects to see a supply surplus in 2017, the first in six years.

    The company also sees falling jewellery demand for the metals as Chinese manufacturers look set to turn increasingly to gold.

    "The envisaged surplus is quite sizable at 302,000 oz. Last year saw a deficit of 202,000 oz...The main reason for the anticipated surplus is weaker demand (minus 9.5%) -- because of new standards, less platinum is being used in diesel auto-catalysts," Germany's Commerzbank said in reaction to Johnson Matthey's forecasts.

    This contrasted with predictions from the World Platinum Investment Council and Thomson Reuters GFMS.

    Ross Strachan, precious metals demand manager at Thomson Reuters, said: "Platinum has been the worst performing precious metal in the year to date, continuing a pretty underwhelming performance in 2016. We do not expect it to continue to lag its peers substantially as the market has priced in much of the bad news...We are looking for a fundamental deficit this year as mine production continues to be hindered by the lack of investment in earlier years."

    Industry lobby group WPIC said Monday that overall platinum supply was forecast to fall 2% year on year to 7.73 million oz in 2017, with both primary and secondary supply expected to decline.

    Total demand in 2017 is projected at 7.795 million oz, WPIC said.

    Recycling is projected to fall by 6% to 1.76 million oz.

    "This quarter's report reinforces our long-held view that supply will become increasingly constrained in 2017, while revisions to the data show that 2016 was more heavily in deficit than previously detailed," WPIC CEO Paul Wilson said.

    One senior industry source struck a negative tone: "Diesel passenger vehicles are unsaleable...and with the stock of metal driving around Europe -- and soon to be recycled -- diesel could conceivably become a net source of supply of platinum, not demand."

    "Also cheap platinum has damaged -- perhaps fatally -- the platinum jewellery brand in China," he added. "The two big drivers for platinum have stalled so I can't be anything other than negative."

    JP Morgan's technical analysts, however, were less downbeat, issuing a "buy platinum" recommendation in anticipation of a minimum rally to $1,050/oz.

    Attached Files
    Back to Top

    Platinum to see first market surplus in six years in 2017: JM

    The platinum market is set to record its first surplus in six years in 2017, Johnson Matthey said on Monday, as a drop in demand from the vehicle industry, jewelers and investors outstrips a smaller fall in supply.

    But the deficit in palladium is expected to widen to 792,000 ounces in 2017 from 163,000 ounces this year, the company said.

    The rising deficit in palladium helped cut its discount to platinum to less than $100 an ounce this month, it lowest in 15 years. The average for the past 20 years has been $555.

    Both metals are heavily used in catalytic converters but platinum, which is used more heavily in diesel catalysts, is seen as vulnerable to a drop in diesel market share.

    Commenting on platinum, JM said: "Chinese jewelry fabrication is expected to contract again, while automotive demand will be hit by changes in catalyst technology in Europe, in response to the introduction of Real Driving Emissions testing."

    JM, a leading manufacturer of vehicle catalysts, added in its release: "Investment demand is forecast to remain positive, but at lower levels than in the last two years, as purchasing by Japanese investors slows."

    Platinum prices have underperformed other precious metals this year, rising about 2 percent against a near 20 percent jump in palladium. The market is expected to be in a 300,000 ounce surplus this year.

    Strong automotive and industrial demand for platinum and firm investment had kept it in a deficit of 202,000 ounces last year, JM's data showed.

    Automotive demand for palladium hit record levels last year, with buying by Chinese automakers up 23 percent. Russian destocking pushed supply up 5 percent.
    Back to Top

    Base Metals

    China likely to boost refined zinc imports as concentrate shortfall bites

    China is likely to step up imports of refined zinc from this month, industry sources said on Friday, as dwindling global supplies of concentrate hit local output of the metal, used to galvanise steel.

    China's refined zinc output marked its lowest in more than two years in April as the impact from the closure of major mines in places such as Australia and Ireland stifled the concentrate supplies China relies on to churn out finished metal.

    The nation's 'war on pollution' has also curbed output as Beijing clamps down on mining and heavy industry in a drive to clear its skies.

    That will likely push buyers of refined zinc to look overseas for supplies, boosting international prices that this week marked their weakest since November at a touch below $2,500 per tonne, after chalking up substantial gains last year.

    "It is starting to bite," said analyst Daniel Hynes of ANZ in Sydney. "The tightness is pretty much upon us."

    "We are looking for zinc to push back to $2,800 in the second half ... The zinc market is set to stay tight over the short to medium term. This certainly should provide a bit of a reality check for the bears."

    Imports of refined zinc from China's bonded zones could be resold on the local market for a profit of as much as $45 this week, Reuters calculations show, near the strongest since January 2016, when the country shipped in around 60,000 tonnes of refined metal.

    China brought in just 25,600 tonnes in March and total imports are down by two thirds this year.

    Traders have already been turning to local exchange stocks. Shanghai Futures Exchange zinc stocks have halved since February to near 100,00 tonnes, the lowest since February 2015. ZN-STX-SGH

    Meanwhile, China's 'war on pollution' is entering its fourth year as it looks to dilute the environmental damage caused by years of breakneck economic growth, likely hitting production of base metals.

    "The Chinese government is going to put a lot of pressure (on metals producers) to reform from an environmental perspective," said the head of metals at a China commodity trade house.

    "Definitely we are going to see companies with limited domestic availability of concentrate. We should see some opportunities for imports of refined metal," he said, declining to be identified as he was not authorised to speak with media.
    Back to Top

    $5.48bn Panama project on track for 2018 commissioning

    The $5.48-billion Cobre Panama copper project, being developed by First Quantum Minerals, is on track for commissioning in 2018.

    Speaking at the Paydirt Latin America Down under conference, in Perth, First Quantum global exploration director Mike Christie said on Thursday that the company was targeting a throughput rate of 60-million tonnes by the end of December, with full capacity of 75-million tonnes a year targeted in 2019, to deliver around 320 000 t/y of copper.

    First Quantum would spend about $1-billion on project construction in 2017, Christie said, noting that the project was some 50% complete by the end of April this year.

    A further $830-million on project capital will be spent in 2018, with a final $110-million to be spent in 2019.

    Once in full production the Cobre Panama project, which is the largest capital project in Panama, rivalling the PanamaCanal in terms of capital spend, will push First Quantum’s total copper production to over 900 000 t/y, making the company one of the largest copper producers in the world.

    Christie pointed out that the development of First Quantum’s Haquira copper project, in Peru, and its Taca Taca copperproject, in Argentina, would place the company in the ranks of top global producers, including BHP and Glencore.

    First Quantum is currently working on an environmental impact assessment at both the Haquira and Taca Taca projects.
    Back to Top

    ERG’s DRC mine delivers 35% increase in copper output

    Frontier mine, owned by Eurasian Resources Group (ERG), has delivered more than 107 000 t contained copper in concentrate in 2016, an 35% year-on-year increase in output.

    ERG on Wednesday said the growth at its flagship mine, in the Democratic Republic of the Congo(DRC), came on the back of its revised production plan, launched in late 2015, which sought to increase long-term copper production by improving the efficiency and effectiveness of its operating model.

    Frontier GM John Robertson said the production figures were encouraging. “This is a major step forward for the group and supports ERG Africa’s strategy to become a regional copper and cobalt champion.”
    Back to Top

    Turquoise Hill revenue surprise lifts shares 6%

    Shares in Turquoise Hill rose sharply on Tuesday after the company announced better than expected revenues amid declining production at its massive Oyu Tolgoi copper and gold mine in Mongolia.

    By the close in New York Turquoise Hill stock was changing hands at $2.81, up 6.2% on the day, bringing its year-to-date gains to more than 21%.

    The Vancouver-based company said in a statement copper production at Oyu Tolgoi  fell 16.3% during the first quarter compared to the final quarter 2016 while gold production declined 49%. Turquoise Hill said the drop was expected due to lower grade and recoveries at the lower end of the grade recovery curve.

    Sales went in the other direction and the company recorded revenue of $237.5 million in Q1 which was 5.7% higher than Q4 last year reflecting a higher average selling price for copper and higher volumes of copper in concentrates sold. The Oyu Tolgoi concentrator amassed record average daily throughput for the quarter of 112,100 tonnes, up 5.1% compared to the December quarter.

    Turquoise Hill is forecasting lower output at the open pit compared to last year of 130,000 – 160,000 tonnes of copper in concentrates during 2017. Gold in concentrate output of 100,000 ounces – 140,000 ounces is forecast for the full year.

    $136.4 million was spent on the Oyu Tolgoi underground expansion during the quarter and the company awarded several large contracts during the quarter, with the largest for the decline material handling system.

    More than $363 million has been spent on construction of the new mine so far and capital commitments for the year is an additional $872 million. Total capital outlay is around $5.3 billion with first production from the underground operation expected mid-2020.

    Oyu Tolgoi is expected to be world's third-largest copper mine at peak production in 2025 with output of over 550,000 tonnes per year.

    Turquoise Hill owns a 66% interest in Oyu Tolgoi in the Gobi Desert close to Mongolia's border with China with the government of the Asian nation holding the rest. Turquoise Hill is controlled by Anglo-Australian giant Rio Tinto
    Back to Top

    Vale to shutter nickel mine in Canada; up to 200 jobs at stake

    Vale Canada said on Tuesday it would suspend operations at its Birchtree nickel mine in the province of Manitoba on Oct. 1 because of weak nickel prices and declining ore grades as the small, 51-year-old mine nears the end of its life.

    The suspension will result in up to 200 job losses and a 6,000 tonne-a-year reduction in nickel from Vale's Manitoba operations, Vale Canada said in a statement.

    Brazil's Vale, the world's biggest nickel producer, also operates the Thompson mine, mill, smelter and refinery in Manitoba. It also operates nickel mines elsewhere in Canada, notably in Sudbury in Northern Ontario.

    Vale is looking at offsetting the lost production with increased output at the Thompson mine.

    "We remain committed to a long-term mining and milling future in Thompson," Mark Scott, vice president of Vale's Manitoba operations said, detailing around $100 million of planned investments in upgrades at the complex.

    Nickel prices have fallen nearly 70 percent in the past six years on a supply glut.
    Back to Top

    Deripaska's group bets on improving aluminium, Russian outlook

    A deepening global shortage of aluminium and an improving outlook for Russian equities should make tycoon Oleg Deripaska's En+ company attractive to investors seeking exposure to emerging markets free of foreign exchange risks, its chief told Reuters.

    Chief Executive Maxim Sokov said En+ is billing itself as a Russian aluminium and hydropower conglomerate similar to Norway's Norsk Hydro but with the benefit of lower-cost Siberian power, a boon for highly energy-intensive aluminium smelting.

    "We convert power into aluminium and sell it to the world. We believe the aluminium market has a significant upside," said Sokov, whose company owns Siberian power assets and a 48 percent stake in Rusal, the world's second-largest aluminium producer.

    In a Reuters poll published this month, analysts slashed their estimates of a global aluminium surplus this year by 74 percent to 82,000 tonnes from 317,000 tonnes in the previous poll in January. They have pegged in a deficit of 200,000 tonnes for 2018, mostly due to a crackdown in top producer China to reduce smog.

    The metal, mainly used in transport and packaging, has been the best performer on the London Metal Exchange, rising 13 percent this year and touching 28-month highs.

    En+ predicts demand for aluminium will exceed production by 0.7 million tonnes this year even before China caps winter power generation to reduce pollution.

    That should lead to a further decline in aluminium production globally by about 1.2 million tonnes, beginning from the winter months of 2017, Sokov said. En+ is considering an initial public offering (IPO) in 2017, possibly as early as June, market sources have said.

    Sokov declined to comment on any IPO, saying the group "is considering various instruments, including public capital markets" to raise funds as it is seeking to cut its debt.


    En+ has amassed debts of around $5 billion during the last decade when it was consolidating power assets in Siberia and wants to reduce the leverage to around three times its core earnings from the current ratio of around six.

    Deripaska, who started as a metals trader in the 1990s, was Russia's richest and the world's ninth richest person, according to Forbes, before the markets crashed in 2008.

    The tycoon spent the next decade successfully renegotiating his debts although he never fully recovered and with an estimated wealth of $5.1 billion he ranks today as Russia's 23rd richest man.

    The debt is mainly with top Russian state banks Sberbank and VTB, of which two thirds is rouble denominated and one third is dollar denominated. Sokov said rouble revenues from power sales support repayment of rouble debts, while Rusal's dollar-denominated dividend supports dollar debt payments, thus limiting foreign exchange risks which often put off investors in Russian companies.

    "We effectively have a natural hedge thanks to aluminium and power generation. If the dollar weakens, we get stronger rouble revenues from power sales. If the rouble weakens, then we gain from higher dollar aluminium revenues," Sokov said.

    Besides an improving outlook for the sector, the outlook for Russia is also getting better as geopolitical and sanctions concerns subside.

    "The outlook for Russia will depend on the meeting between (Russian President Vladimir) Putin and (U.S. President Donald) Trump. But even among this uncertainty, Russian assets have considerably gone up in price," said Sokov.

    He gave as an example yields on Russian corporate bonds, which used to trade above 10 percent but have lately declined to 4-6 percent on renewed appetite from investors, including for Rusal's debt.

    "I think a similar story will happen with Russian equities" he said, predicting the narrowing of valuations gaps with Western rivals.
    Back to Top

    Zinc miners leverage scarcity to flex muscles over smelters

    If there were any doubt that the zinc supply chain is tightening, it should be dispelled by this year's benchmark smelter treatment charge.

    The treatment charge is the fee paid by a miner to a smelter for converting mined concentrates into refined metal and it is probably the best indicator of raw material availability; high during times of surplus and low during times of scarcity.

    This year's headline fee of $172 per tonne is the lowest in a decade, a firm swing of the negotiating pendulum in favour of miners and a tangible sign that the much-anticipated concentrates crunch has arrived.

    Indeed, miners have used the squeeze on availability to make what might turn out to be a historic change in how these annual benchmark contracts are structured.

    Zinc bulls have been waiting a long time for this supply squeeze and they may have to wait a bit longer before it moves from raw materials to refined metal parts of the chain.

    But at a mined concentrates level it has very surely arrived.


    This year's headline treatment charge of $172 per tonne was confirmed by Belgium's Nyrstar, a zinc miner itself but a much bigger converter of concentrates into refined metal.

    It represented a 15 percent decline from last year's benchmark of $203 per tonne and was the lowest outcome since 2006.

    The comparison is worth noting because that was the year London Metal Exchange (LME) zinc hit its highest ever level at $4,580 per tonne.

    As well as seeing their revenues reduced this year, smelters have also lost any price participation.

    Price participation disappeared from copper concentrate contracts several years ago but it has persisted in the zinc market in the weird and wonderful form of "escalators" and "de-escalators".

    These determine how much the treatment charge can change depending on how far the zinc price deviates from a preset "basis" price in the contract.

    In 2016, for example, the "basis" price was set at $2,000 with escalators allowing for price participation up to $3,750 and de-escalators down to $1,500.

    This year, however, both escalator and de-escalator have been set at zero, a partial victory for those miners seeking the complete elimination of price participation by smelters.

    Escalators and de-escalators remain in the benchmark contract, in theory allowing for a resurrection at a future date.

    Whether price participation actually returns remains to be seen.

    When BHP Billiton dropped price participation from its copper contracts in 2007, it was at the time presented as a temporary market-driven phenomenon.

    But within a couple of years everyone else had done the same and price participation was quietly consigned to the copper history books.


    Smelters can probably afford to be sanguine about the zero price participation this year.

    As Hilmar Rode, chief executive of Nyrstar, told analysts on the company's first-quarter conference call: "If you go back and you monitor say the last 10 years, you'll see sometimes that works in favour of the mine sometimes in favour of the smelters but over a longer period of time ... it's pretty much a net zero."

    More important to a company like Nyrstar is the retention of another strange-sounding component of the annual zinc treatment charge benchmark, namely "free metal".

    What this means is that zinc smelters pay for only 85 percent of the metal contained in the concentrate.

    This curiosity dates back to a long-lost time when most of the world's zinc smelters were pyrometallurgical and typically could only extract that amount of metal from the concentrate.

    Times and technology have changed a lot since then and a company such as Nyrstar can now typically recover around 96-97 percent of the metal, meaning it gets 11-12 percent "free".

    Miners would no doubt love to eat into, if not eliminate altogether, this "free metal" allowance but the consensus seems to be that this would be a step too far right now.


    The sharp drop in the benchmark treatment charge was widely expected.

    This zinc supply crunch has been a long time coming and there have been plenty of false starts for over-eager bulls in recent years.

    But, to quote Jonathan Leng, principle zinc analyst at Wood Mackenzie, "the record 6.3 percent fall in global mine supply in 2016 transformed the concentrate market."

    Concentrate stocks fell to "minimum working levels" in September of last year and smelters, particularly those in China, are having to cut production.

    Nor does Woodmac see much change in the zinc concentrates market any time soon. Its view is that it will remain tight for the next couple of years with treatment charges likely to remain at correspondingly low levels over that period.

    What does this mean for the refined zinc price?

    So far bulls have been frustrated that mine supply crunch hasn't translated into refined metal crunch.

    China's imports of refined zinc remain subdued, while metal is still occasionally appearing on LME warrant at New Orleans, albeit not in the sort of volumes as seen in the past.

    Woodmac's Leng, however, believes it's only a matter of time. He expects to see acute tightness later this year with stocks "projected to fall to historically low levels and remain so until 2020."

    That will translate into a price high next year "comparable to the 2006 price peak".

    Not everyone, it's fair to say, is quite so bullish . There are still a good number of known unknowns at work, not least the state of mine supply in China itself.

    But this year's benchmark concentrates terms make it hard to argue against the starting proposition of bulls such as Wood Mackenzie.

    The concentrates market is as tight as it's been since 2006.

    Whether that means a return to the historical peak in zinc prices in that year remains to be seen.

    Attached Files
    Back to Top

    Swedish engineering group Sandvik says hit in cyber attack

    Swedish engineering firm Sandvik said on Saturday it had been hit in the cyber attack that has affected public authorities and companies around the world.

    Sandvik said computers handling both administration and production were hit in a number of countries where the company operates, with some production forced to stop.

    "In some cases the effects were small, in others they were a little larger," Head of External Communications Par Altan said.

    "In some cases, certain production has been affected. Certain, but far from all of it."

    Altan would not say which countries had been affected or give further details on the impact on production.

    He said Sandvik was now assessing the situation.
    Back to Top

    U.S. EPA paves way for stalled copper and gold mine in Alaska

    U.S. environmental regulators have cleared the path for a stalled copper and gold mine in Alaska by agreeing to settle current lawsuits and other issues over the project, which had drawn environmental concerns over its potential impact on the world's largest sockeye salmon fishery.

    U.S. Environmental Protection Agency, in a statement on Friday, said the settlement does not guarantee the proposed mining project in southwest Alaska's Bristol Bay region would ultimately win approval but that its review would now be carried out "in a fair, transparent, deliberate, and regular way."

    The Pebble Limited Partnership mining company had filed a lawsuit against the EPA under the previous administration of Democratic president Barack Obama, which had sought to block it.

    Backers of the project had been hopeful that Obama's Republican successor, Donald Trump would allow it to proceed. Shares of Northern Dynasty Minerals, which owns the massive Pebble deposit, have surged since Trump won the U.S. election back in November. Trump took office Jan. 20.

    In February 2014, the EPA took the unusual action of blocking a mine before the project owner applied for a development permit.

    Opponents of the mine include environmental groups as well as many native residents who rely on the fish from the Bristol Bay watershed, which EPA has said supports the world's largest fishery of sockeye salmon. Many commercial fishermen and sport fishermen are oppose it.

    In the settlement reached on Thursday, Pebble Limited Partnership can now apply for a Clean Water Act permit from the U.S. Army Corps of Engineers, the EPA said in its statement released on Friday.

    The EPA and Pebble Limited Partnership also agreed to ask the U.S. District Court for the District of Alaska to dismiss related cases and lift a court-ordered preliminary injunction, according to the statement.
    Back to Top

    Rusal boosts first-quarter profit, to restart aluminium smelter project

    Russian aluminium giant Rusal  posted higher first-quarter recurring net profit on Friday amid stronger aluminium prices and said it was preparing to resume construction of its aluminium smelter in Siberia.

    Russian tycoon Oleg Deripaska controls 48 percent of Rusal through his En+ Group, which also manages his hydro power businesses. En+ may raise $2 billion in IPO in London and Moscow in June, sources familiar with the deal have said.

    Hong Kong-listed Rusal, the world's second largest aluminium producer, reported first quarter recurring net profit of $434 million, up from $149 million a year earlier, thanks to higher prices and volumes of sales.

    Global demand for aluminium continued to grow in the first quarter of 2017, led by the transportation sector, while supply is expected to tighten in the second half, it added.

    In a separate statement on Friday, Rusal announced that it had proposed the resumption of construction of its long-standing Taishet aluminium smelter.

    Its board of directors has already approved the $38.5-million financing of works at the smelter in 2017, it added.

    "While the funding is relatively small, the capacity is unlikely to come on stream in the near term," analysts at Citi said in a note.

    Rusal, which started building this smelter in 2007 but then delayed it when aluminium prices fell, told Reuters that it was still in talks with banks and its partner Russian power generator Rushydro to organize the financing for Taishet.

    In 2016, Rusal said it was negotiating the $800-million of the project financing and to build 430,000 tonnes of annual capacity there by the end of 2018.

    A source who attended meetings between En+ management and analysts previously told Reuters that En+ hopes that Rusal's two brownfield projects - Taishet and another Boguchansk smelter in Siberia - would raise their capacity by one million tonnes of aluminium in 3-5 years, boosting En+'s EBITDA.

    En+'s 2016 EBITDA (adjusted earnings before interest, taxation, depreciation and amortization) reached $2.3 billion. Rusal accounted for $1.5 billion of that sum, and EN+'s other businesses - power operations, coal mining and logistics - accounted for $822 million.

    Rusal's shares rose 1.6 percent in Hong Kong on Friday, against a 0.1-percent growth in benchmark index.

    Rusal estimated demand grew 5.5 percent year on year to 15 million tonnes in the first quarter. Over the same period, global supply was up 7.8 percent to 14.9 mln tonnes, signaling a market roughly in balance, according to the company.

    Attached Files
    Back to Top

    Steel, Iron Ore and Coal

    China's key steel mills output up 7.53pct in April

    Back to Top

    China's ferrous scrap exports may be a longer-lived anomaly in 2017

    China depends on imported iron for around 80% of its needs, yet the country's burgeoning ferrous scrap exports highlights a reliance on iron ore and coking coal at ever bigger blast furnaces in China's steel industry.

    China is expected to utilize a growing pile of ferrous scrap originating from its economy's stellar growth, providing likely unmatched scale and speed in scrap generation from automobiles to buildings.

    However, adapting the local blast furnace-focused steel industry to use more scrap may take time, as government-ordered closures of electric furnaces unleashes new scrap supplies.

    China has become the world's biggest user of scrap, but as a proportion of crude steel production at 808 million mt in 2016, the ratio is small, at just over 10%.

    In the US, the ratio is over 70%. And to put it in context, an increase in crude steel production in the US of 5% based on current feedstock trends may require a similar amount of scrap the US exported last year to Turkey, the biggest scrap importer.


    The Chinese government's directive to eliminate scrap-fed induction melting furnaces in the country by June 30, led to a huge turnaround. According to industry estimates, China's induction furnaces produced around 30-50 million mt last year of steel, and capacity totaling 80-120 million mt/year of finished steel output will go.

    Based on the output range last year, 33-55 million mt of scrap would need to find a home.

    Chinese export scrap availability, despite a 40% export duty being imposed, is expected to depress scrap prices in Asia.

    Regional scrap importers Tokyo Steel and Taiwan's Feng Hsin have ordered trial lots of Chinese scrap. South Korea's Hyundai Steel is inspecting scrap in China this month.

    Chinese scrap has been offered into Southeast Asia, and as far afield as India.

    Scrap used at integrated mills in China may be currently limited to well under a 10% rate per ton of crude steel, and the addition of domestic feed earlier sourced for induction furnaces may be harder to absorb.

    In the US, scrap charging rates may be up to three times as much. Some Europe mills are flexible in charging more scrap, while 10% is a typical ratio. This is depending on raw materials availability and relative pricing, qualities of scrap and final steel, and impact around wider operations and costs.

    In China, more scrap was fed when coke prices rose sharply, with Shagang booking bulk scrap from the US in response.

    However, scrap demand in China's steel sector is determined on short-term price comparisons with other raw materials, and access to qualities.

    Chinese blast furnace operators may be reluctant to adapt rates and utilize more scrap if the availability proves short-lived.

    Global scrap prices are relatively high, around 30% above a trough seen in September 2016 for Turkey's benchmark import prices.

    A catalyst for embracing more scrap in China may be emissions restrictions, which could hit iron ore sintering and pelletizing plants and cokemaking.

    However, with ready supplies of imported lump ore at ports, at current low price premiums, paying up for scrap may not be so attractive.

    "China reduced its steel scrap imports by 7.1% [in 2016] and, therefore, clearly used more steel scrap from the domestic market," said Rolf Willeke, statistics adviser at the BIR Ferrous Division, in a report this month.

    "The proportion of steel scrap used in the country's steel production increased from 10.4% in 2015 to 11.1% in 2016," Brussels-based Bureau of International Recycling said in the report.

    In April, iron ore and premium HCC imports into China, based on Platts benchmark spot price assessments, averaged at around $182/mt CFR China based on industry ratio needed per ton of hot metal, while scrap benchmark HMS 80:20 East Asia CFR prices were 1.5 times higher.

    The same comparative ratio averaged at over 2:1 scrap import prices to the mix of iron ore and coking coal prices adjusted per ton of hot metal in 2016.

    Even accounting for 40% China export tax, and adjusting for quality, scrap prices remain higher than the mix of iron ore and Premium HCC, while the final evaluation may be complicated by individual fixed and cash costs in utilizing the inputs.

    China's steel scrap reserve may easily outpace any future growth in demand. Latent supplies may reach 7.8 billion mt by 2017, 10 billion mt by 2025, and 12 billion mt by 2030, estimates Li Xinchuang, president of China Metallurgical Industry Planning and Research Institute.

    China's scrap consumption estimated currently at 100 million mt may exceed 200 million mt by 2025 or take another five years to 2030 before reaching the level, based on the group's forecasts.
    Back to Top

    Molybdenum slips as market slows

    A lack of activity in the molybdenum market took its toll on prices as sellers said they were receiving little interest.

    Sellers said they had not received any inquiries during the day and felt the market had turned very quiet since last week.

    "It's not difficult to find material if you need it," a European trader said. "There are more sellers compared to buyers."

    Offers were heard in Europe at $8.30/lb but market participants said sellers were biddable. "It's a whole lot of nothing today," a second European trader said.

    In Asia, a trader said there were no inquiries and would consider selling at $8.30/lb if he could find a buyer.

    S&P Global Platts daily dealer oxide assessment stood at $8.30-$8.35/lb Tuesday from $8.30-$8.45/lb Monday.

    Platts daily European ferromolybdenum assessment was also lower Tuesday at $20.50-$20.80/kg from $20.50-$20.90/kg Monday.

    Ferromolybdenum offers were heard at $20.80/kg and higher but there were doubts that sales could be concluded at this level.

    Others said they were having offers rejected at $20.60/kg as there was no demand from mills or traders.

    Attached Files
    Back to Top

    Inner Mongolia to cap energy use at 225 Mt standard coal by 2020

    Inner Mongolia in northern China planned to cap total energy consumption at 225 million tonnes of standard coal by 2020, in a move to save energy and lower carbon emission, said the local government in a recent notice.

    The autonomous region also would control the average annual growth of energy consumption within 3.5% by the last year of the 13th Five-Year Plan period, according to the notice.

    By 2020, the energy consumption per 10,000 yuan GDP in Inner Mongolia will decrease 14% from 2015.
    Back to Top

    China's April raw coal production jumps 10% on year to 290 mil mt: NBS

    China's raw coal production rose 9.9% year on year to 290 million mt in April, National Bureau of Statistics data released Wednesday showed.

    Over January-April, raw coal production rose 2.5% year on year to 1.11 billion mt.

    Coal production rose 5% year on year in April in Shanxi, Inner Mongolia and Shaanxi, which account for 67% of China's total coal production.

    Output in Jiangxi, Hubei, Hunan and Chongqin, where medium to small miners are clustered, fell more than 30% over the same period.

    China's power generation in April rose 5.4% on year to 476.72 TWh, and over January-April rose 6.6% to 1,938.24 TWh.

    NBS said thermal power generation rose 5.7% year on year to 352.18 TWh in April, but was down 2% from March, while hydro power generation was down 5.4% year on year at 74.34 TWh in April due to lower rainfall, but was still up from 72.5 TWh in March.

    Attached Files
    Back to Top

    China, India dominate coal ownership as some shun climate risks

    Investors in China and India increasingly dominate ownership of coal reserves amid campaigns for divestment in many rich nations to limit the risks from climate change, Reuters reported, citing a study.

    The report, by British-based research group Influence Map, identified thousands of shareholders in 117 listed companies producing 3 billion tonnes a year of thermal coal with 150 billion tonnes of reserves.

    It said that ownership of thermal coal, used in power plants, was dominated by "strategic investors in China and India (governments, individuals, power companies, special purpose companies)."

    Ownership had shifted towards Asia from Europe and North America in recent years, Dylan Tanner, executive director of InfluenceMap, said.

    "Coal has been pushed into a corner, stigmatized by the divestment community," said Tanner.

    Almost 200 governments pledged at a summit in Paris in 2015 to shift this century from fossil fuels towards renewable energies to curb climate change, and more than 500 major investors have pledged to limit coal investments.

    China and India say they will need coal for decades to bolster economic growth even as they try to curb emissions blamed for warming the planet.

    As part of the divestment in coal, Norway's sovereign wealth fund and California's CalPERS and CalSTRS pension funds, representing about $1.4 trillion in assets, had sharply cut their ownership of coal since 2010, the study said.

    Some investors, however, now see opportunities in coal because U.S. President Donald Trump doubts climate change is man-made and wants to promote fossil fuels from the United States as a cheap source of energy.

    Even before Trump's election, some mid-size U.S. and other asset managers "have been bulking up on coal in the last five years in anticipation of a resurgence of some of the remnants of the U.S. coal bankruptcies and growth in Asia," the study said.

    The report said that if all the coal reserves identified in the report are consumed, it would release greenhouse gases equivalent to 45% of the gases needed to raise average surface temperatures above an agreed ceiling of 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial times.

    Attached Files
    Back to Top

    Beijing-Tianjin-Hebei area to totally ban coal burning

    Beijing-Tianjin-Hebei area, China's major high-tech and heavy industrial base, will speed up achieving "zero" coal-burning in this place, announced the Ministry of Environmental Protection (MEP) in a briefing on May 16.

    According to a former plan released from the MEP, Beijing, Tianjin, Hebei's Langfang and Baoding should entirely ban burning coal by October 2017.

    As of end-October, Beijing pledged to complete the project of changing coal to clean energy in the rest of 820 villages.

    By September 2016, the city has started the project in 463 villages, and fulfilled changing coal to electricity in 385 villiages.

    Wuqing District in Tianjin, was divided into Beijing-Tianjin-Hebei coal-ban area and made sure no coal firing by October this year, said a senior official of the MEP.

    "It is estimated 0.45 million tonnes of coal can be reduced up completion," he added.

    Before the deadline of October 2017, Hebei's Baoding planned to finish reforms of coal-to-clean energy in 590,000 families of 1,467 villages.

    Attached Files
    Back to Top

    India's coal output expects to boom temporarily

    A report by the Indian government indicates the country will double its coal output to 1.5 billion tonnes by 2020, Power Engineering reported on May 16.

    As the world's third largest coal producer, India currently generates 58% of its energy from coal. However, coal's share of the country's energy mix is expected to shrink to between 42-48% by 2047, according to the report.

    The report was written by Indian think tank NITI Aayog, which advises the government on policy issues and is chaired by Prime Minister Narendra Modi and the Institute for Energy Economics Japan.

    India is also the world's second-largest coal importer, though the country hopes to cut its imports to zero by the end of this year.

    "India would like to use its abundant coal reserves as it provides a cheap source of energy and ensures energy security as well," the report said.

    However, the report suggests India will need to resume importing coal again after its coal output peaks in 2037, according to the report, while imports could rise to as much as 62% of its total by 2047 if the country doesn't make its coal mining more efficient.

    Renewable generation is also expected to grow to 175 GW by 2022. The country currently generates 4% of its energy from renewable sources. Natural gas could rise from 6.5% of India's energy now to between 10-17% by 2047.

    Attached Files
    Back to Top

    Banpu reports revenue boost in Q1, driven by rising coal price

    Thailand-based Banpu Public Co., Ltd. reported total sales revenue of US$633 million in the first quarter, increase 15% or $81 million over the same period last year, showed the latest quarterly results.

    Banpu is also seeing a significant increase in earnings before interest, tax, depreciation and amortization (EBITDA) of 93% year on year though flat quarter on quarter at $216 million.

    For the first quarter, Banpu's net profit amounted to $40.86 million, a turnaround from a net loss of $5.15 million in the same period last year.

    Banpu has expanded its investments in shale gas in the US. Also, the company aims to strengthen its midstream business strategy in coal trading and is also looking for opportunities to become a leading energy provider in the Asia-Pacific region.

    "An increase in the average selling price of coal results in higher sales revenue, which was previously affected by a seasonal decrease in demand for coal in Indonesia and the move of longwall machinery at the mine sites in Australia." Somruedee Chaimongkol, Banpu's chief executive officer said.

    He said the 15% year on year increase in Banpu's total sales revenue was largely due to a continued rising of the global coal price. Of the $633 million revenue, coal sales accounted for $566 million, or 89% of total sales revenue. Sales of power, steam and others generated $60 million, representing 9% of total revenue. In addition, the gas business from two shale sources in Pennsylvania generated $7 million, accounting for 1% of the sales revenue.

    Attached Files
    Back to Top

    China seeks more than coal capacity cut, NEA

    Though achievements have been obtained in coal capacity cut since last year, China seeks more than that, and what it really focuses on is the clean and efficient utilisation of fossil fuels, said Li Zhi, head of the National Energy Administration.

    Coal and oil contribute 62% and 19% to China's total energy consumption, respectively, which was mainly resulted from its resource structure. Coal will remain a significant fuel in China's primary energy mix in a long period ahead, said Li.

    Huang Qili, academician of the Chinese Academy of Engineering, suggested that power firms that mainly rely on coal burns should strive to enhance efficiency to reduce coal use and promote clean utilization of coal.

    He pointed out that the average efficiency of China's coal-fired power generation was 33%, compared with 43% of foreign countries.

    "Coal is both resource and energy, so we should promote its comprehensive use," he added.

    Attached Files
    Back to Top

    Tata Steel agrees British pensions deal

    India's Tata Steel has agreed the main terms of a deal to cut benefits for its British pension scheme in a move that will see the firm back a new plan that will pose less risk to the company.

    The pension scheme is a major stumbling block in talks to merge Tata's British and European steel assets with those of Thyssenkrupp (TKAG.DE), because the German company is opposed to taking on 15 billion pounds ($19.37 billion) in UK pension liabilities.

    The fate of Tata's British businesses, including the country's largest steelworks at Port Talbot, has been in the air since Tata Steel said a year ago it planned to sell its British assets following heavy losses.

    Pensions consultants questioned, however, whether the pensions deal announced on Tuesday would be enough to satisfy Thyssenkrupp.

    Tata said the deal will see it plough 550 million pounds into the British Steel Pension Scheme (BSPS), one of Britain's largest final salary schemes with 130,000 members.

    The deal is subject to formal approval by The Pensions Regulator, but Tata said it expected to get approval shortly.

    "We are in a very positive consultation with all stakeholders," said Tata Steel's executive director for finance and corporate Koushik Chatterjee.

    Tata Steel UK has agreed, as part of the deal, to sponsor a new pension scheme that will have lower benefits than those of the original BSPS and will therefore pose less of a risk to the company.

    As a further safety measure, Tata will give the BSPS a 33 percent equity stake in its UK business.

    BSPS members who do not agree to move to the new scheme will automatically transfer to the Pension Protection Fund (PPF), which said all members, including those in the new scheme, are guaranteed at least PPF compensation levels.

    The PPF is a lifeboat for pension schemes in Britain that run into trouble.

    "Good progress is being made," The Pensions Regulator said.

    But it added: "We will only approve (pensions restructurings)...where stringent tests are met, so that they are not abused by employers seeking to inappropriately offload their pension liabilities."

    Martin Hunter, principal at pensions consultant Punter Southall, said the deal did not involve a total separation of the pension scheme from Tata.

    Thyssenkrupp has consistently opposed taking on Tata's UK pension liabilities, though it continues to pursue merger talks with Tata in a bid to achieve sector consolidation and tackle Europe's excess steel capacity.

    "The $64,000 question is ‘is this good enough for Thyssenkrupp, given that Tata Steel UK is still on the hook for the pension scheme?’,” said independent pensions consultant John Ralfe.

    Thyssenkrupp declined to comment.

    The merger is vigorously opposed by German trade unions, who fear large-scale job cuts as a result - probably at Germany's expense after workers at Tata Steel's Port Talbot plant in Wales were recently given job guarantees.

    Tata Steel reported an unexpected fourth-quarter loss on Tuesday due to one-off exceptional items, including charges related to the pensions deal.

    It posted a fourth-quarter net loss of 11.68 billion rupees ($182.4 million), compared with a net loss of 30.42 billion rupees a year ago.

    The company’s current debt is 730 billion rupees as of the end of March 2017.

    Attached Files
    Back to Top

    U.S. finds Japanese, Turkish rebar exports dumped

    U.S. Commerce Department Secretary Wilbur Ross said on Tuesday the department had made a final finding of dumping of steel concrete reinforcing bar (rebar) exports from Japan and Turkey, as well as subsidization by Turkey.

    The decision, announced in a statement, could lead to anti-dumping duties being slapped on Japanese exporters ranging from 206.43 percent to 209.46 percent, and on Turkish exporters of 5.39 percent to 8.17 percent. In addition, Turkish exporters face anti-subsidy duties of 16.21 percent.

    "The United States can no longer sit back and watch as its essential industries like steel are destroyed by foreign companies unfairly selling their products in the U.S. markets,” Ross said in the statement.

    Its investigation followed a petition from the Rebar Trade Action Coalition and members Bayou Steel Group, Byer Steel Group Inc, Commercial Metals Co, Gerdau Ameristeel U.S. Inc, Nucor Corp and Steel Dynamics Inc.

    In a March preliminary anti-dumping decision, the department assigned preliminary dumping margins of 209.46 percent for Japanese exporters, including Jonan Steel Corp and Kyoei Steel Ltd, and 5.29 percent to 7.07 percent for Turkish producers.

    It also assigned margins ranging from 3.48 percent to 29.47 percent for Taiwanese exporters. Final determinations for Taiwan are expected in July.

    For the margins to take final effect, the U.S. International Trade Commission must find the exports cause harm to U.S. producers. It is expected to make its final injury determinations for Japan and Turkey in June, and for Taiwan in August.

    In 2016, imports of steel concrete reinforcing bar from Japan were estimated at $96.1 million, and from Turkey at $511.9 million, department figures show
    Back to Top

    Hong Kong-listed IRC says could reopen Russia iron ore mine

    Commodity company IRC Ltd on Wednesday said it was considering restarting its 1.1-million tonnes per year iron ore mine in the far east of Russia, the latest sign of revival in a sector shaking a years-long downturn.

    "Following the positive price movements in 2017 and the recent stabilisation in the bulk commodity market, the board is considering restarting Kuranakh, including options of potential cooperation with other parties," the Hong Kong-listed company said in a statement.

    The Kuranakh mine, in Russia's Amur region, was producing about 1.1 million tonnes of iron ore concentrate each year before it was put under 'care and maintenance' in early 2016. It was also churning out about 200,000 tonnes a year of ilmenite, a titanium ore.

    Iron ore prices have surged 30 percent and ilmenite by 150 percent since the mine was suspended, the company said.

    However, the statement comes at a time when futures prices in China have toppled off record highs hit in recent months, dampened by concerns about a slowdown in demand in the world's top importing nation and a growing glut as stockpiles have ballooned.

    The most-active Chinese iron ore futures have fallen by about 30 percent since hitting record highs of 650.5 yuan ($94.49) per tonne in February.

    Rocketing prices prompted some Chinese producers to reopen mines after suffering years of tepid demand.

    Attached Files
    Back to Top

    China's Shagang cuts ferrous scrap buying price for fourth time in May

    China's largest ferrous scrap user Jiangsu Shagang Group, has lowered its buying prices for heavy melting scrap by Yuan 40-60/mt ($6-$10/mt) Tuesday -- its fourth reduction this month.

    Shagang will now pay Yuan 1,470/mt ($213/mt), including 17% value added tax, delivered to Zhangjiagang, for heavy melting scrap with a minimum width of 6 mm.

    The company last lowered its buying prices for scrap by Yuan 50-70/mt on May 12. The latest cut brings the cumulative fall in Shagang's buying price for that specification by Yuan 140/mt (8.7%) this month.

    Also on Tuesday, two major mills in eastern China -- Zenith and Magang -- cut their scrap buying prices by Yuan 40/mt.
    Back to Top

    Indonesia tenders to build remaining 12 GW of 35 GW power project by end-2017

    Indonesia is tendering to build 12 gigawatts of electricity generating capacity as the final plank in Jakarta's plan to increase the country's power sector capacity by 35 GW by 2019, sources said at the 23rd Coaltrans Asia Conference in Bali this week.

    "Out of 35 GW, we are likely to close tenders for 11.7-11.8 GW by the end of the year," said Harlen En, head of the coal division at PLN (Persero) at the conference on Monday.

    Tendering process takes a lot of time, as does financial closure, Harlen said, adding it takes at least three-four years to commission a power plant. Harlen said PLN has long-term contracts with the some of the major miners, like Adaro, Kideco, Berau Coal, and Kaltim Prima Coal, until 2025.

    Moreover, to support both the success of the 35 GW project and to secure coal supply, PLN intends to partner in mine-mouth coal projects, Harlen said.

    According to market sources, around 60% of the 35 GW project's generating capacity will be fueled by coal. The move is likely to see a spark increase in domestic demand for Indonesian thermal coal, sources said.

    M. Arsajad Rasjid P.M., CEO of Indika Energy, said, the 35 GW power project would result in extra coal demand of around 110 million-120 million mt and progressively 140 million-150 million mt.

    Indonesia intends to raise its share of domestic thermal coal production to around 60% by 2019 from 22% in 2017, said Satry Nuguraha from the Ministry of Energy and Mineral Resources on Monday.


    Land issues have been deterring the progress of the project, said Dharma Djojonegoro, deputy CEO at Adaro power, on Tuesday.

    "Various regulation licenses and permits have to be synced in, so it takes a lot of patience to do that. It took us about three-four years to sort land issues and the change in the transaction currency to Indonesian Rupiah was also a setback. Then we had to deal with the land zoning issue too, which took us around six months," Djojonegoro added.

    "The cost factor is also very important," Harlen said, adding the pricing for the project should be "comfortable" for both suppliers and PLN.

    Given the current volatility in energy prices, he added they intend to discuss with the government to peg a floor and a celling price.
    Back to Top

    Adani to begin producing coal from Australian project in FY21

    Indian conglomerate Adani Group plans to begin extracting coal from the $16.5 billion Carmichael project in Australia in 2020-21, PTI reported on May 14, citing Chairman Gautam Adani.

    The group, which has interests from ports to power, would finalise by June an investment decision for the project, which has been delayed due to protests from environmental groups.

    Adani expressed his group is not just investing in coal but also in renewable energy in Australia, seeking to develop 1,500 MW of solar projects by 2022.

    It has signed pacts to build two solar farms, each with capacity of 100-200MW in Queensland and South Australia.

    Adani said the company has scaled down the coal mine capacity in the first phase. Originally seen producing 60 million tons a year from six open-cut pits and five underground mines, a scaled-down first stage is now planned to produce 25 million tons a year of coal and will cost over USD 4 billion.

    "We will begin work within months after getting final approval from the Australian government," he said.

    Projections of a global glut of coal and prolonged low prices notwithstanding, Adani is pushing ahead with plans to build the mine that would produce thermal coal to generate electricity and operate for six decades.

    "About 15 million tons of coal produced from the project (in the northern Australian state of Queensland) will be shipped to India for generating electricity," he said.

    The group has for more than five years battled opposition from green groups, who insist any expansion of the port will cut into the Great Barrier Reef World Heritage Area. The port is to be used for exporting coal to India.

    "A port already exists with capacity to handle coal from phase-one," he said adding a rail line will have to be built for transporting coal from the mines to the port.

    The group has so far invested A$3.4 billion on the Abbot Point port and preparatory work for the Carmichael coal mine. It has applied for an Australian government agency loan to finance the railway line.

    Adani said he is expecting Australian federal and state government nods for the coal project soon.

    Attached Files
    Back to Top

    Chinalco wants to be sole owner of world’s largest iron ore deposit

    Chinalco has sent the Guinean government a draft agreement that included a proposal to take over blocks 1 and 2 before it starts developing 3 and 4. (Image courtesy of Rio Tinto Simandou)

    Aluminum Corp. of China, better known as Chinalco, is said to have approached the Guinean government with a proposal to take over the entire Simandou iron ore project, the world’s largest untapped resource of the steelmaking ingredient.

    The moves comes about seven months after Rio Tinto (ASX, LON:RIO) agreed to sell to the Chinese company its 46.6% stake in the giant project for up to $1.3bn. The deal gave Chinalco almost 80% of the project, with the Guinean government holding the rest.

    While the requested parts of the project belong to Guinea, they are at the centre of litigation between it and Israeli billionaire Benny Steinmetz's BSGR.

    The state-owned miner's written proposal for Simandou, Reuters reports, was sent to the government in March and included a motion to take over blocks 1 and 2 before it starts developing 3 and 4.

    While the requested parts of the project belong to Guinea, they are at the centre of litigation between it and Israeli billionaire Benny Steinmetz's BSGR.

    Simandou with over 2 billion tonnes of reserves and some of the highest grades for direct-shipping-ore in the industry (66% – 68% Fe which attracts premium pricing) has a chequered history.

    It was originally discovered by Rio Tinto, which held the licence for the entire deposit since the early 1990s. In 2008 the firm was stripped of the northern blocks by a former dictator of the country.

    BSG Resources acquired the concession later that year after spending $160 million exploring the property. In 2010, it sold 51% to Vale for $2.5 billion.

    The Rio de Janeiro-based company stopped paying after the first $500 million after missing a number of development milestones. Then the new Guinean government launched a review of all mining contracts awarded under previous regimes, including an investigation into the Vale-BSGR joint venture which concluded the later had won its mining rights through corruption.

    The Guinean inquiry cleared Vale of any involvement in the alleged corruption.

    To date BSGR denies the allegations and even launched arbitration proceedings against Guinea last year.

    Shortly after, Rio —the world's number two producer of iron ore — officially pulled the plug on the project. Following an internal probe, the company alerted US and UK authorities in November of a $10.5 million payment made in 2011 to a French investment banker involved in helping Rio obtain its mining rights over Simandou.

    With complete control over Simandou, Beijing would be a step closer to securing iron ore supply for its vast economy for decades to come.

    China consumes more than 70% of the world's seaborne iron ore and imports have been gradually displacing domestic production, which has pushed dozens of local iron ore mines into bankruptcy in the past two years.
    Back to Top

    Coal market oversupply risks grow as producers boost output

    Indonesia's coal industry has benefited from higher prices this year after a downturn in 2015 and 2016 put many small producers out of business, though recent price declines could signal more difficulties ahead.

    Australian coal prices, the benchmark for Asia, soared 130 percent to over $110 per ton last year, but have slumped by 20 percent since early April to just over $70.

    Ken Crichton, president-director of mining contractor Theiss Indonesia, said his company needed to be careful responding to clients' demand for more production.

    "We've put most of our idle plant back to work - now we've got the decision whether we re-invest or not. And after the last five years it's going to be quite a challenge to convince our organization where prices are going to be to justify further investment and expanding our operations in Indonesia."

    However, the chief executive of Indonesian producer PT Adaro Energy, Garibaldi "Boy" Thohir, told Reuters that he was less concerned over oversupply.

    "Domestic demand from Indonesia will increase rapidly and ... it's also not very easy to ramp up production because there are a lot of challenges," he said, citing problems that some miners, particularly for smaller ones, have in procuring heavy equipment and gaining financing.

    "Yes, short term there will be a little more supply but in the medium term I'm still very optimistic," he said.

    Thohir said Adaro was not increasing output this year or for the foreseeable future as it dedicated reserves to feed its own domestic power plants.

    Indonesia's 2017 coal output may rise 11.5 percent from a year ago to 101 million tonnes, said Agung Priabadi, the energy ministry's director of coal. Power stations would use 86 million tonnes.

    Indonesia, the world's top thermal coal exporter, could increase production by 5 percent in 2017 and 2018, Indonesian Coal Mining Association Chairman Pandu Sjahrir said on Sunday.

    In October, Sjahrir said Indonesia's coal production could reach 460 million tonnes in 2017, up from an estimated 440 million tonnes last year, because of improving prices.

    However, Indonesia output may be limited as the country's producers divert capital to power plant projects rather than expansions, Sjahrir added.

    Attached Files
    Back to Top

    Global coal market seen in 16 mln t oversupply in 2017 -Noble analyst

    The global coal market is forecast to hit an oversupply of 16 million tonnes this year as production increase, Noble Resources chief coal analyst said on Monday.

    "Those (producers) who are going to expand into the second half of this year are going to have to face price pressure," Rodrigo Echeverri, the head of coal analysis at Noble Resources, told the Coaltrans Asia conference in Bali.

    "The producers are now making money, so it's in the hands of the producers what they do with that money. To go and invest in their own production and expand it - that's actually not a very good idea for the market. That almost guarantees that we'd see the market go back to 2015 where we were all struggling."
    Back to Top

    S.Korea to temporarily close 10 old coal-fired power plants in June

    South Korea will temporarily shut down 10 coal-fired power plants that are over 30 years old in June to mitigate air pollution, the office of President Moon Jae-in said in a statement on Monday.

    The measure comes as coal-fired power plants are being criticised for contributing to deteriorating air quality in South Korea, Asia's fourth-largest economy.

    Amid these concerns, new President Moon vowed during his election campaign to close the old coal power plants and review a plan to add coal power generation. Instead he advocated increasing the share of renewables to produce more clean energy.

    Following through on the promise to reduce coal-fired generation, the presidential office, formally called the Blue House, said that it will temporarily suspend operations of the older coal power plants next month for one month.

    The Blue House also said it will shut the older coal plants again in 2018 from March to June and, furthermore, wants to close all of the old coal plants within Moon's presidency which ends in May 2022.

    In July last year, South Korea's energy ministry announced a plan to close the 10 old coal-fired power plants by 2025 in order to lower its coal power reliance and reduce greenhouse gas emissions.

    Coal supplies about 40 percent of South Korea's total power generation because it is cheaper compared to other energy sources such as liquefied natural gas.

    At present, South Korea runs a total of 59 coal-fired power plants. Out of the total, the 10 old power plants make up 10.6 percent of South Korea's total installed coal power capacity, or 3.3 gigawatts, the statement said.

    Attached Files
    Back to Top

    ArcelorMittal profit more than doubles as steel volumes rise

    ArcelorMittal reported first-quarter profit that more than doubled amid a rally in steel demand that’s seen prices recover across the globe. The shares slumped.

    Earnings before interest, taxes, depreciation and amortisation rose to $2.23 billion from $927 million a year earlier, the Luxembourg-based company said in a statement Friday. The figure beat the $2.01 billion average of seven analysts’ estimates compiled by Bloomberg.

    The stock retreated 5.2% to 6.85 euros as of 9:52am in Amsterdam. Earlier, the shares fell as much as 7.6%, the biggest intraday drop since June.

    Steelmakers have seen their earnings buoyed as prices for the metal trade at the highest in more than two years in key markets such as the US and Europe. The rally has been spurred by rising demand and a curb in record Chinese exports that had dented prices across the globe.

    “All parts of the business reported improved Ebitda as steel prices responded to higher raw-material costs and strong volume growth saw steel shipments increase by 5.1% compared with the fourth quarter,” chief executive officer Lakshmi Mittal said in the statement. “We expect market conditions to be broadly stable in the second quarter.”

    The outlook for steel has improved in recent months. Excluding China, the world’s top producer and user, global demand probably will rise 2.4% this year, compared with a 0.7% increase in 2016, according to the World Steel Association. There will be gains in big markets such the US and Europe, with bigger rebounds expected in key growth markets such as Brazil and Russia, after multiyear contractions, the industry group predicted.

    The US price of hot-rolled coil, a benchmark product, is near the highest in more than two years after rallying 62% in 2016. In Europe, prices jumped 82% last year.
    Back to Top

    China April coal output up 9.9 percent year-on-year at 294.5 million tons: stats bureau

    China's coal output rose 9.9 percent in April from a year earlier to 294.5 million tonnes, the National Bureau of Statistics said on Monday.

    It is the second straight month that output has registered a year-on-year increase as mines have scrambled to reverse the government-enforced cuts last year to take advantage of soaring prices.

    The most-active futures hit record highs of 566 yuan per ton in early April, but have fallen 10 percent as supplies have increased and demand has waned.

    For the first four months of the year, coal production rose 2.5 percent to 1.11 billion tonnes, data showed.
    Back to Top

    China April steel output hits record, second month to push peak higher: stats bureau

    China produced a record volume of steel in April, breaking the previous highest peak set in March, data showed, stoking worries about a growing glut of metal even as the government said most of this year's targeted capacity cuts have already been met.

    Chinese steelmakers churned out a highest-ever 72.78 million tonnes in April, up 4.9 percent, the National Statistics Bureau (NBS) data showed on Monday, surpassing March's monthly record of 72 million tonnes as mills in the world's top producer rushed to profit from rising prices even as demand remains flat.

    In a briefing after the data release, an NBS spokesman said the nation had already met 63.4 percent of this year's targeted cuts for steel and 46 percent of coal cuts.

    The ramp-up in steel output underscores the challenge for the government as it aims to slash 50 million tonnes of low-grade outdated capacity this year, on top of the 65 million removed last year. The government is targeting rebar, used in construction, in particular.

    But many of the plants that have been closed in recent years were already idled and output from still-open plants has continued to rise.

    "Driven by high profits, steel companies are raising their capacity, by using high-quality iron ore and increasing their use of steel scrap," said Bai Jing, analyst at Galaxy Futures.

    "Production might be at record high, but the steel production capacity is being reduced."

    In the first four months, production totalled 273.9 million tonnes, up 4.6 percent from the same period a year earlier, the data showed.
    Back to Top

    Foresight Energy Q1 coal sales up 41% on stronger export volumes: company

    US coal producer Foresight Energy's sales volumes and cash costs both improved in the first quarter as it took advantage of stronger export markets and increased production, company executives said Thursday.

    The St. Louis-based company, which operates solely in the Illinois Basin, reported sales volumes of 5.3 million st, up 40.7% from the year-ago quarter, as Foresight shipped 24% of its coal into the export market. By comparison, the producer had shipped 14% of its coal into exports in the year-ago quarter, said Rob Moore, the company's president and CEO.

    "Most significant was our ability to access export markets due to substantial improvements in API2 prices compared with the prior-year quarter," Moore said.

    Related Commodities Spotlight podcast: Newly optimistic US coal industry focuses on flexibility, federal regulations

    Foresight, which did not take questions after its prepared remarks, noted production efficiencies at both Sugar Camp and Williamson mines, which ranked as the two most productive mines in the country in terms of clean tons per hours worked, Moore said.

    Foresight's cash costs averaged $22.80/st for the quarter, down from $23.86/st in the year-ago quarter, and down from $22.84/st in the prior quarter. Its coal sales averaged $43.12/st, down from $43.45/st in the year-ago quarter and down from $48.46/st in the prior quarter.

    The company generated coal sales revenues of $227.8 million during the quarter on sales of 5.3 million st, up from $163.1 million in the year-ago quarter on sales of 3.8 million st.

    "Our current cost structure is sustainable, and we anticipate improving costs over the remainder of the year," Moore said.

    For the remainder of 2017, Foresight has 18.6 million st contracted for delivery and anticipates an "active spot market," Moore said. Its contracted tonnage is 84%-91% of the company's projected production of 20.5 million-22 million st for the remainder of the year, he said.

    Moore also touched on the next steps for reopening its long-idled Deer Run longwall mine near Hillsboro in Montgomery County, Illinois.

    The company had submitted a formal application last month to the US Mine Safety and Health Administration to re-enter the mine. Moore said that MSHA had accepted its plan to evaluate the status of the underground mine, which has been idled for over two years due to elevated carbon monoxide levels.

    MSHA's acceptance of the plan did not include longwall systems or returning air shafts, but Moore called it "a step in the right direction in evaluating conditions of the mine."

    "In coming weeks, we plan to breach the seals that are restricting airflow into the mine and allow personnel into the mine," he said.

    Attached Files
    Back to Top

    Coal workers at India's CIL, SCCL to go on three-day strike from June 19

    Workers at state-owned Coal India Limited and Singareni Collieries Company Ltd. will go on strike from June 19 to protest the delay in wage revision and other issues, sources said Thursday.

    Five trade unions representing around 500,000 workers of CIL and SCCL had decided to go on strike from June 19-23, SK Pandey, representative of one of the trade unions, the Bharatiya Mazdoor Sangh, said.

    The trade unions have already served notice to CIL, SCCL and coal ministry, Pandey added.

    The other trade unions involved in the protest are the All India Trade Union Congress (AITUC), the Centre for Indian Trade Unions, the Hind Mazdoor Sabha, and the Indian National Trade Union Congress.

    Talks between the unions and the government on wage revision and pension schemes fell through this week resulting in the decision to go on strike, Pandey said.

    Industry sources put the output loss from a three-day strike at 4.5 million mt for CIL and around 537,000 mt for SCCL.

    CIL has targeted a production of 660 million mt coal in fiscal 2017-2018 running from April to March.
    Back to Top

    Chongqing Steel warns of uncertainty in steel asset sales, shares still suspended

    Chinese steelmaker Chongqing Iron & Steel Co warned late on May 11 that its plans to sell off debt-ridden iron and steel assets faced "uncertainties" and might not go ahead, saying trading in its shares would remain suspended.

    It didn't say when it expected a restart in trading of shares that have been suspended since June last year, after it suffered net losses of almost 6 billion yuan ($872 million) in 2015. The firm has blamed its predicament on the downturn in the economy, severe industrial overcapacity, soaring labor costs and persistently low steel prices.

    The company warned in a notice posted to the Hong Kong Stock Exchange on May 11 that a proposed restructuring plan that would enable it to exit the steel industry entirely and shift to more lucrative sectors like finance might not satisfy regulatory requirements. Chongqing Iron & Steel had a market value of about $1.6 billion when shares last traded.

    The firm announced last August that it intended to sell all its steel assets to the Yufu Group, an entity run by the local Chongqing city government. It then hoped to acquire high-quality assets in the financial and industrial investment sectors from Yufu.

    But it said on May 9 that the steel assets "involve large scale of debt with numerous creditors and complex liabilities associated with litigations", adding that it was still unclear whether the proposed transactions would proceed.

    "There is also fairly great uncertainty in whether agreement can be reached with the main creditors on the intended disposal plan," it warned.
    Back to Top

    Beijing's battle against pollution takes toll on truck drivers at coal port

    On a recent visit to the area around Tianjin Port Co Ltd, there were more than one hundred empty trucks parked at the coal storage center run by Ningdong Logistic Co, Reuters reported.

    Once one of the busiest places close to Tianjin's sprawling port, the storage facility was now silent as activity had ground to a halt after the port operator last month announced a ban on trucking in coal or storing it there. The announcement was sooner than expected.

    It is a sign that Beijing's years-long war on pollution is disrupting the logistics of the market for coal - one of China's crucial commodities - as well as the lives of what trucking industry insiders estimate are 60,000 drivers who carry coal to and from the port.

    The central government has said it may extend the measure to ports in heavily industrialized Hebei province by September as it tries to combat choking pollution that often blankets the north of the country, including nearby Beijing.

    "I was sending coal from Inner Mongolia to the port and carrying imported iron ore from the port to other places. The government has completely cut my livelihood," said Wang Fangyuan, who was based in Tianjin but has left with a fleet of 40 trucks and their drivers to ply the trade in Erdos, 800 miles to the northwest in Inner Mongolia.

    Cleaner air

    Until now, Beijing's efforts to cut overcapacity and pollution had little impact on the output of the country's favorite fuel. Outdated, inefficient mines were shut, only to be replaced with production from leaner, cleaner ones. The ban has helped knock about 20% off Tianjin Port's shares but had its desired effect on air quality, at least locally.

    Tianjin Port, which last year handled about 110 million tonnes of coal arriving by truck and rail, has said it is taking measures to increase rail freight to help offset the loss of trucked coal.

    The ban, aimed at reducing pollution from trucking coal, has put Tianjin port at a disadvantage to other ports such as Tangshan and Caofeidian.

    It has also created traffic jams at nearby Huanghua port in Hebei province, and threatens to increase the cost of moving coal as traders shift to rail, which is more expensive.

    Inside the port's own coal storage area, around 600,000 tonnes of coking coal is covered in green plastic webbing since the start of May to reduce dust. Sprinklers are used to keep the dust down.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP