Mark Latham Commodity Equity Intelligence Service

Friday 5th June 2015
Background Stories on

News and Views:

Attached Files

    Oil and Gas


    BHP Billiton warns global commodity supply glut to persist

    BHP Billiton warns global commodity supply glut to persist

    BHP Billiton , the world's biggest mining company, warned on Wednesday that a global oversupply of commodities that is putting pressure on prices is likely to be be prolonged.

    In metals markets, newly installed low-cost supply can now be stretched to meet growing demand, BHP Billiton Chief Executive Andrew Mackenzie told a gathering of sector executives and Australian lawmakers.

    "Incremental supply, induced during periods of higher prices, will take longer to absorb and this means over-supply may persist for some time," he said.

    Prices for most commodities are now lower than the extreme highs of the recent past and closer to more sustainable longer term levels, Mackenzie said.

    BHP is also battling multi-year low prices for coal, copper, nickel and other minerals it mines.

    BHP's iron ore division president Jimmy Wilson said on Wednesday that BHP's share of the seaborne iron market has reamined steady at about 17 percent despite its major investments.

    "Fortescue Metals has grown its share of seaborne exports to 11 percent since entering the market in 2007 - they have been the world's most prolific iron ore growth story between 2007 and the end of 2014," he wrote in a comment piece for The Australian newspaper.
    Back to Top

    Saudi Budget Gap Seen at 20% by IMF as Spending Defies Oil Slump

    Saudi Arabia will post a budget deficit equal to 20 percent of economic output this year, as the government pursues spending plans in the face of an oil slump that has slashed revenue, the International Monetary Fund said.

    The fiscal support will help keep economic growth at about 3.5 percent this year, the fund said in an e-mailed statement. That will slow to 2.7 percent in 2016 “as government spending begins to adjust to the lower oil price environment,” it said. In the next few years, Saudi Arabia will need “a sizable fiscal policy consolidation,” the fund said.

    Saudi Arabia is the world’s biggest oil exporter, and posted large budget surpluses in recent years. The plunge into deficit comes as the kingdom fights wars in Yemen and Syria and pursues a stimulus plan to ward off political unrest. Meanwhile, crude prices have dropped about 40 percent from a year ago.

    The kingdom has been burning through its reserves at a record pace to finance government spending. That is likely to slow “as the government starts to issue debt to finance the deficit instead,” the IMF said.

    Saudi Arabia has the lowest level of gross government debt in the region at 1.6 percent of GDP last year, according to the IMF.
    Back to Top

    Peru elections seen fanning flames of mining disputes

    Mining conflicts in Peru, a top global minerals exporter, will likely heat up ahead of presidential and congressional elections next year as political outsiders whip up anti-mining sentiment, government officials and business leaders said.

    Protests from local community groups have derailed three mining projects worth $7 billion in the past five years, and threaten to hold up more.

    Carlos Galvez, head of Peru's main mining association, said opponents of mining projects can win votes in rural areas where poverty rates are high and many eke out a living as farmers.

    "Here everyone is anti. If you're anti-mining then you're in fashion," said Galvez, who leads the National Society of Mining, Petroleum and Energy.

    David Montoya, a cabinet official tasked with conflict prevention, accused protest leaders of feeding fears about pollution from Tia Maria in order to win the dispute and pave a political future for themselves. "They shut down discussion," he said.

    Several leading opponents of Tia Maria belong to an environmental party, Tierra y Libertad ("Land and Freedom"), that plans to run a candidate in the presidential election in April 2016. The group currently has no seats in Congress and is not seen as a leading contender.

    Polls show most Peruvians favor mining, which accounts for about 60 percent of the country's export earnings.

    However, projects can run up against local opposition and leftist politicians can boost their reputations by leading protests, said Roland Luque with the country's ombudsman office.

    Marco Arana, the head of Tierra y Libertad and its likely presidential candidate, said his party did not orchestrate protests against Tia Maria to promote itself.

    "That's a way to dismiss the legitimate concerns of farmers," Arana said. "What is true is that where there is conflict, candidates must make their positions clear ... that can prolong and deepen the conflict."

    He said opposition to Tia Maria and Conga, a gold mine peoject thwarted by protests in 2011, was strong in part because President Ollanta Humala had suggested when he was a candidate that he would oppose the projects. Humala ended up backing Tia Maria and Conga after his election.
    Back to Top

    E.ON calls for 'timely' intervention to fix power market

    Germany must act swiftly to fix its fundamentally broken energy market and avoid the risk of a power capacity shortage, the chief of top utility E.ON said on Monday.

    Utility companies and politicians have clashed over whether compensation payments are needed by power producers, who have been hit hard by a crisis in the sector as coal and gas-fired power plants continue to be displaced by renewable sources.

    Utilities have called on the government to follow Britain and create a capacity market - which compensates utilities for keeping loss-making power plants online as backup.

    Utility companies say this would enable them to ensure supply and avert blackouts when there is a lull in variable wind or solar energy. The German government is opposed to funding otherwise unprofitable plants.

    "The question is should we heal the problem while it's still cheap, like the British did, or do you run it down the drain and when it's almost broken then you interfere," Johannes Teyssen said at the annual Eurelectric conference.

    He said the problems in the market risked discouraging investment in the sector.

    Britain has become the first country in Europe to set up a backup capacity market and governments pushing for renewable energy production are looking to London to prove it can work for generators as well as consumers.
    Back to Top

    Argentine election candidates plan to unwind president's policies

    All three of the leading candidates in Argentina's election race plan to dismantle outgoing President Cristina Fernandez's web of currency and trade controls and clean up government finances to boost the stagnating economy.

    Fernandez has ramped up state intervention in the economy during her eight years in power, trying to shore up thinning currency reserves while financing generous subsidies and welfare programs.

    The economy grew quickly in the first years of her presidency but it is now teetering on the brink of recession. The currency has slumped on the black market and inflation is running at about 25 percent, according to private estimates.

    Economic advisers to the main candidates in the October election told Reuters they plan to liberalize the dollar exchange rate, cut taxes on lucrative grains exports, and move to plug a fiscal deficit and tame inflation.

    The consensus on the need for policy changes could further encourage investors who have driven a rally in Argentina's bond and equity markets this year and renewed interest from hedge funds in the country.

    The campaign teams differ, however, on the pace and depth of reform.

    Mauricio Macri, the pro-business opposition mayor of Buenos Aires who is running a close second place in polls, promises swift changes to win back investor confidence.

    Daniel Scioli, the frontrunner for the leftist ruling party's ticket, is more cautious as he targets votes from the Fernandez faithful as well as swing voters opposed to her policies.

    And third-placed Sergio Massa, who broke ranks with the president two years ago, pitches himself in the middle.

    On currency controls, Miguel Bein, an economic advisor to Scioli, said the first priority will be to ensure that dollars are available to importers as well as foreign companies who have been unable to repatriate profits.

    "I would not normalize [the currency market] in a year, but perhaps in two or three," Bein said.

    While Scioli talks of "gradualismo", or gradual change, Macri plans faster, more far-reaching reforms and says he would start to lift currency controls on his first day in office.

    "We would normalize flows immediately," said Federico Sturzenegger, a Macri advisor who gained repute turning around the previously loss-making Bank of Buenos Aires.

    Scioli and Massa both warn a hasty removal of controls would lead to a hemorrhaging of dollars and a spike in inflation that would hit the poor hardest.

    Macro's camp disagrees. "You won't need to protect the reserves. Everyone will sell their dollars if they believe the next president's economic program is credible," Sturzenegger said.

    Sturzenegger says inflation can be hauled down to 0-4 percent in three years. Bein says single figures are achievable by the end of a first Scioli term.
    Back to Top

    Europe's top oil firms jointly call for carbon pricing

    Europe's top oil and gas companies urged governments around the world to introduce a pricing system for carbon emissions, as governments meet in Bonn, Germany, on Monday to work on a U.N. deal to fight climate change.

    Criticised for not doing enough to tackle climate change, the chief executives of BG Group, BP, Eni , Royal Dutch Shell, Statoil and France's Total said carbon pricing "would reduce uncertainty and encourage the most cost-effective ways of reducing carbon emissions widely."

    In a joint statement, the companies acknowledged "the current trend" in greenhouse gas emissions is too high to meet the United Nation's target for limiting global warming by no more than 2 degrees.

    "Our industry faces a challenge: we need to meet greater energy demand with less CO2. We are ready to meet that challenge and we are prepared to play our part," the leaders of the six companies said.

    "We firmly believe that carbon pricing will discourage high carbon options and reduce uncertainty that will help stimulate investments in the right low-carbon technologies and the right resources at the right pace."

    U.S. oil majors ExxonMobil and Chevron chose not to take part in the initiative, an industry source said.

    Climate Group, a non-profit advocacy, urged the world's biggest economies to respond positively to the initiative.

    "This is a symbolic moment, and demonstrates an important if not universal shift. It reflects a growing realisation within influential sectors of the fossil fuel industry of a need to adapt to both market and climate realities," Mark Kenber, Climate Group chief executive, said in a statement.
    Back to Top

    Economy fret: plat gold heads for cycle lows.

    Image title
    Back to Top

    Chicago PMI crashes.

    Image title
    Back to Top


    Image titleInvestor appetite for U.S. stocks has slumped to its lowest level in more than seven years. Though the  S&P 500 has hit three new highs in May, the region has suffered its biggest drop in equity allocation since September 2008, with the number of investors overweight U.S. equities declining to a net 19% in May, according to Bank of America Merrill Lynch’s monthly fund manager survey.

    Equity allocations have fallen in all of the P7 markets. Equity allocations by Japanese pension funds have decreased from 48% in 2004 to 33% in 2013 while equity allocations by UK pension funds have fallen from 67%to 44% in the same period. While in the Netherlands equity allocations fell from 39% to 30% and Canada’s allocation to equities fell from 51% to 41%. Australian pension funds have maintained the highest allocation to equities over time, reaching 51% in2014.  

    MGL: Global investors are underweight equity, and underweight the two largest economies: US+ China. If you can find 5% dividend yields covered by cash flow (EBITDA - Capex), then that could be be the simplest strategy for making returns.

    Image titleImage titleHundreds of people crowded 42nd Street in hopes of recording the event.

    MGL: We're increasingly fascinated by the iconic in this the age of aquarius. What possible meaning has Manhattenhenge?  The OECD political climate is increasingly 'isolationist', and its a foreign affairs view that reflects the 'inner' focussed zeitgeist.

    Almost 1,000 illegal immigrants landed in Italy yesterday after threatening to throw babies into the sea if their rusting ship was turned back.

    The 240ft Monica had been spotted in international waters during the night.

    When Italian coastguard boats drew alongside, the crews were shocked to see men and women on board begin dangling the infants over the side.Image title

    Read more: 
    Follow us: @MailOnline on Twitter | DailyMail on Facebook

    Image titleMGL:  The acute failure of the emerging world to grow is causing havoc, not just in the commodity space, but also in the political space. Immigration in both the EU and the USA has exploded out of obscurity these last ten years to being a defining issue.  If the political or economic environment at home won't allow you to succeed, then you leave.  This seems to be matched by capital flows, here's China for example:
    Image title

    Attached Files
    Back to Top

    Oil and Gas

    Magnitude redefines microseismic fracture monitoring and refracturing efficiency

    Magnitude, a Baker Hughes company, announced the commercial release of two new offerings, the IntelliFrac™ VSP-Enhanced monitoring service and the IntelliFrac Recomplete service, as part of the company’s line of IntelliFrac advanced microseismic services.

    The new IntelliFrac VSP-Enhanced microseismic monitoring service integrates vertical seismic profiling (VSP) and time-lapse quantitative VSP analysis with traditional microseismic measurements to facilitate improved fracture designs, help optimize real-time fracture applications, and deliver more accurate and far-reaching fracture mapping than is possible by just using microseismic measurements alone. Combining the accurate event locations and magnitudes gathered through this service with patent-pending SWAT (Shear Wave Attenuation Tomography) analysis also makes it possible to best ascertain the effectiveness of hydraulic fracturing treatments via changes in fracture density.

    The IntelliFrac Recomplete service combines microseismic depletion zone mapping with advanced Baker Hughes completion and pressure pumping technology to design and execute effective, efficient refracturing treatments that target and isolate non-depleted regions along the wellbore. Using this service, operators can avoid restimulating areas of the reservoir that have little hydrocarbons left to offer, reducing restimulation costs while still optimizing the potential recovery from their refracturing operations.
    Back to Top

    CNRL, Cenovus wait to resume oil production lost to wildfires

    Production at two of Canada's major oil sands operations remained suspended on Thursday as wildfires continue to rage in northern Alberta.

    Cenovus Energy Inc's 135,000 barrel per day Foster Creek oil sands project and Canadian Natural Resources Ltd's 80,000 bpd Primrose site have been shut for a week after staff were evacuated when a wildfire threatened the two sites.

    The Burnt Lake Fire in northeastern Alberta has consumed more than 33,000 hectares (127 square miles) of forest and remains out of control even as 300 firefighters struggle to contain the blaze.

    The fire shut in about 10 percent of total production from the oil sands, the largest source of U.S. oil imports, and pushed the differential between Canada's Western Canada Select crude and the U.S. standard, West Texas Intermediate, to the narrowest in more than five years.

    While the fire remains a threat and fire hazard in the region remains listed as very high, officials have allowed both companies to return some staff to their sites to prepare for normal operations.

    Canadian Natural, the country's largest independent oil producer, has already resumed some production. The Kirby South project had suspended about 18,000 bpd of production after a third-party pipeline shutdown. That site began ramping up on Wednesday.

    The company said on Thursday it has begun a staged start-up at the larger Primrose project, but cannot yet say when it will reach full capacity.

    Cenovus has also returned some staff to Foster Creek, co-owned with ConocoPhillips. Cenovus said the restart is going well and it expects production to resume soon, though it has yet to announce a target.

    Though the two companies had combined production losses of more than one million barrels of oil, neither has issued a warning that the project shutdowns will impact their second-quarter earnings or revised the production promises made to investors.
    Back to Top

    Lukoil may cut price to close Kazakh deal with Sinopec

    Russia's second largest oil company Lukoil is in talks with China's Sinopec over a stalled sale of assets in Kazakhstan, and is ready to cut its price by up to 10 percent, industry sources said on Thursday.

    Lukoil signed a sale and purchase agreement last year for the sale to Sinopec of a 50 percent stake in Caspian Investment Resources Ltd, a company with various stakes in four hydrocarbon-production projects in Kazakhstan. However Sinopec has failed to complete it, according to Lukoil.

    In February, Lukoil said it had commenced arbitration proceedings in London against Sinopec over the uncompleted $1.2 billion deal, although Lukoil CEO Vagit Alekperov has expressed hope for an out-of-court settlement.

    "The discount would be less than 10 percent of the initial price," a source close to Lukoil told Reuters.

    The deal was initially announced when the price of oil stood at above $100 per barrel. Since then it has halved.

    "It's hard to agree on such projects when the prices on the market are so low," another source said.

    Caspian Investment Resources' fields are located mainly in the western part of Kazakhstan which supplies oil to Europe via Russia.

    Lukoil's share of production through the venture was around 30,000 barrels per day in 2013. Output from various small fields that the venture controls will soon peak or has done so already.
    Back to Top

    Fracking has not led to widespread risk to drinking water supplies: EPA

    Fracking has not led to widespread, systematic pollution of drinking water, the Environmental Protection Agency (EPA) will say on Thursday in a long-awaited study, sources who have seen the assessment said.

    The study, five years in the making, found some drinking water vulnerabilities to hydraulic fracturing, such as where supplies were scarce, but overall saw little impact from the drilling technique.

    In its review of data sources "available to the agency," the EPA found specific instances where fracking affected water sources but found that they were small relative to the overall number of fracking sites around the United States.

    “EPA’s draft assessment will give state regulators, tribes and local communities and industry around the country a critical resource to identify how best to protect public health and their drinking water resources,” Dr. Thomas Burke, EPA’s science advisor and deputy assistant administrator of EPA’s Office of Research and Development, said in a statement seen by industry sources.
    Back to Top

    Will Saudi boost oil capacity? Naimi's retort: Show me 10 pct return

    When it comes to whether Saudi Arabia will invest billions of dollars to increase its ability to pump more oil, boosting the world's only large stand-by reserve, minister Ali al-Naimi has a quick answer: show me the return.

    Naimi, speaking informally to reporters in Vienna on Thursday, was asked whether the kingdom needs to lift its capacity now that it is pumping crude at its fastest rate in over three decades to meet a resurgence in demand.

    The country last embarked on a $100 billion push to raise its capacity a decade ago amid a price boom fuelled by China's growth. It can now pump as much as 12.5 million barrels per day (bpd), scarcely 2 million bpd above current output.

    With casual banter, Naimi responded: "Is there demand for Saudi crude? Can you guarantee it? If I go and put a dollar, will you guarantee that I would get 10 percent on that dollar?"

    He added: "I don't want 16 percent, just 10 - can you guarantee that?"

    While his comment sheds little light on the kingdom's internal discussions about possible future investments, the question is more relevant than ever as the world's spare reserve shrinks to its smallest in seven years just as unprecedented regional political tensions are raising new risks.

    Some analysts warn that the recent price crash - which has reignited demand and slammed the brakes on much global investment - may be sowing the seeds of another supply squeeze as early as next year.

    It may also reflect the financial considerations being made by the world's biggest oil exporter as it navigates a new market order, one it created last year by saying the kingdom would no longer cut its own production to shore up prices - although it will continue to meet new demand from its customers.

    Saudi officials have consistently brushed aside questions of new upstream investment. After finishing the kingdom's programme to add nearly 4 million bpd of capacity in 2009, Saudi officials and oil company executives have talked on and off about the possibility of targeting another boost to 15 million bpd by 2020, but those plans were shelved several years ago as demand growth cooled and new supplies emerged.

    Not that the kingdom has been idle. It launched a $35 billion five-year exploration and production investment plan in 2012 meant to sustain its current capacity.

    While the number of U.S. oil rigs has fallen by more than half since last year due to low prices, those drilling in the Middle East have risen to near the highest in records going back to 1975, according to Baker Hughes data.

    More than 400 rigs are operating in the region, a more than 10 percent rise from 2013, with just over half of those in Saudi Arabia.

    Much of Saudi Arabia's international influence has derived from a role often described as the oil equivalent of a major central bank, since it holds nearly all of the world's spare capacity - an emergency reserve that this year has dwindled to its lowest since 2008 as the kingdom steps up output to cover shortfalls in places such as Iran and Libya.

    "There's not a lot of spare capacity left in the world," said Dr. Gary Ross, executive chairman of New York-based PIRA Energy Group. "The last time they pursued this kind of philosophy in 1985 they had 10 million bpd of spare capacity. "
    Back to Top

    Global Demand Growth for Natural Gas Shrinks: IEA

    The International Energy Agency (IEA) on Thursday morning released its “Medium-Term Gas Market Report” covering the next five years. The agency forecasts demand growth of 2.0%, down from growth of 2.3% in last year’s forecast. Lower prices will drive demand growth, but demand from Asia is expected to decrease and that more than offsets the impact on growth due to low prices.

    The belief that Asia will take whatever quantity of gas at whatever price is no longer a given. The experience of the past two years has opened the gas industry’s eyes to a harsh reality: in a world of very cheap coal and falling costs for renewables, it was difficult for gas to compete.

    Because Asian natural gas prices are indexed to oil prices, last year’s sharp drop in the price of crude has also substantially dropped the price of natural gas. In the short term, demand for natural gas will increase because of the lower pricing, but some Asian countries (India comes to mind) plan to expand coal-fired power generation because coal is even cheaper than natural gas.

    Due to their capital-intensive nature and long lead times, liquefied natural gas (LNG) projects are soft targets for investment reductions and several of them are likely to be delayed or even cancelled. If current low prices persist, LNG markets could start tightening substantially by 2020, with demand gradually absorbing the large supply upswing expected over the next three years.

    LNG projects in Australia and the United States are forecast to supply 90% of the 40% jump in natural gas supplies on the market in 2020. Chevron Corp. (NYSE: CVX) is expected to begin first deliveries later this year from its massive Gorgon LNG project in Australia. The company is also the operator of another Australian LNG project, Wheatstone, that is still being developed.

    Read more: Global Demand Growth for Natural Gas Shrinks: IEA - Chevron Corp (NYSE:CVX) - 24/7 Wall St.
    Follow us: @247wallst on Twitter | 247wallst on Facebook

    Attached Files
    Back to Top

    Prepare for $40 oil by year-end, ex-OPEC research head says

    Brent crude will be lower by the end of the year as production is set to increase from Iraq and Iran, shale oil output stabilizes while demand slows, according to OPEC’s former head of research.

    Brent will trade between $40 and $50 in the fourth quarter, Hasan Qabazard, who was research head from 2006 to 2013, said in an interview in Vienna. That compares with Wednesday’s close of $63.80 and the lower end of the range is below the price at which the benchmark bottomed in January.

    The end of the U.S. driving season will mean slower demand, Qabazard said. “The fourth quarter is going to be a real test,” Qabazard, who’s now CEO of Kuwait Catalysts Co., said on the sidelines of an OPEC seminar on prospects for the oil industry. The meeting was attended by chief executives from Exxon Mobil Corp. to BP Plc and Royal Dutch Shell Plc and oil ministers from Saudi Arabia to Kuwait and United Arab Emirates.

    “There is a serious oversupply in the market,” Iran’s Oil Minister Bijan Namdar Zanganeh told reporters in Vienna on Thursday.

    Zanganeh said he’s delivering a letter at the meeting alerting OPEC to make room for a rise in the country’s output. Shell CEO Ben Van Beurden and BP CEO Bob Dudley said they are interested in investing in Iran if sanctions related to its nuclear energy program are removed.

    Prices are attractive for non-OPEC producers to keep drilling, Qabazard said. U.S. shale oil output is now steady at about 4 MMbpd, and will grow to 5 MMbpd by 2018, he said.
    Back to Top

    Tight oil is here to stay, Conoco CEO tells OPEC

    The U.S. tight-oil boom is here to stay despite low crude prices as technological breakthroughs will allow steep reductions in costs, the head of U.S. firm ConocoPhillips told a seminar organised by oil-producing group OPEC.

    "Innovations have already led to a U.S. energy renaissance. Tight-oil reservoirs can remain viable today, breakeven costs are already down by 15 to 30 percent," Ryan Lance, chairman and CEO of Conoco, said on Thursday.

    The North American shale oil industry "will survive at $100 and it will survive at $50 or $60 Brent pricing too," Lance told an audience packed with OPEC officials, including Saudi Arabia's influential oil minister Ali al-Naimi.

    Lance said cost reductions had been partly achieved due to cuts in service costs.

    "We're in the second inning of a nine-inning game. We're still trying to figure out how to get the optimum amount of flow through the reservoir. There are more (gains) to come."

    "So the message - unconventional production is here to stay," Lance said.

    U.S. oil production growth has slowed in recent months and the number of rigs drilling for crude shrank dramatically.

    "If prices stabilise and start to improve a little bit, I think you will see rigs start to improve and come back as we go into 2016 and 2017 and create more supply into the system," Lance said.
    Back to Top

    Bloated oil market fed more crude from unwinding sea storage plays

    Physical oil is coming under pressure as trade houses unwind a profitable storage play after several months that saw them holding millions of barrels on tankers at sea.

    A drop in the volume of crude stored for speculative profit is putting more supply into an already saturated market, elbowing out new loadings leading to a build-up of unsold West African, North Sea and Mediterranean oil.

    "When the contango started, it created a demand," said Tamas Varga of PVM oil brokerage. Now "they are creating additional supply".

    "The structure of the market should weaken significantly," Varga added. "There is just lots of oil around in the U.S. and globally."

    At its peak earlier this year as much as 50 million barrels of oil was estimated to have been earmarked for storage on tankers. The oil market has since rallied - flattening that discount, also known as a contango, leading trade houses to cash in on profits.

    Shipping sources and shipping data estimated that volumes earmarked for contango-led floating storage had dropped to as few as 10 tankers, known as very large crude carriers, each capable of carrying a maximum of 2 million barrels, meaning at most 20 million barrels.

    "We're getting to the point where it makes sense to sell," Richard Mallinson, analyst with Energy Aspects.

    In the past week alone as much as 5 million barrels of floating storage has been sold, shipping data showed.

    Trade sources said trading firms such as Trafigura and Vitol as well as Shell had all sold cargoes held in floating storage.

    "If you want to recreate the contango trade, you need a steep drop ... in the oil price to make it viable given where tanker rates are today," said Arctic Securities analyst Erik Nikolai Stavseth.

    Nevertheless, for holders of millions of barrels of West African crude and also North Sea oil in the Atlantic, the sell-off in floating storage could mean a longer wait to offload cargoes as they compete. "Everyone is trying to sell," one oil trader said.
    Back to Top

    Increasing demand boosts sales for Deep Casing Tools

    Deep Casing Tools has seen an increase in demand for its casing and completion technology products. This development has resulted in sales in excess of half a million pounds this year to new clients alone. Deep Casing Tools provides a range of innovative tools designed to land casing and completions at target depth within oil or gas wells.

    Supply agreements signed with major contractors in Malaysia and Vietnam earlier this year has increased sales from local operators. More than 30 tools have already been dispatched this year to the Middle East, Far East, the USA and Canada, increasing the number of tools sold to 270.

    This development comes at a time of growth in the company after reporting that it has doubled its revenue year-on-year to £9m in 2014.

    Lance Davis, Director of Deep Casing Tools, said: “New clients in Europe, the Far East and the United States have increased tool demand to improve the well construction process. A combined office and warehouse facility was established in the Jebel Ali Free Zone (JAFZA) in the United Arab Emirates earlier this year to support the growing customer base in the Middle and Far East. Additional sales and operational personnel were employed to support increased demand which has resulted in new orders. Trials are also underway with new operators in the Far East, which should continue a successful year for the company.”

    Deep Casing Tools’ drill-thru turbine motor provides significant time and cost savings when compared to conventional methods. With the new ability to ream while running in, the casing can be run sooner while the hole is in best condition, eliminating wiper trips and open hole exposure time.

    Attached Files
    Back to Top

    International Energy Agency says Australian LNG faces $26b annual hit to revenue

    Australia's new liquefied natural gas projects face a potential $US20 billion ($25.7 billion) hit to annual revenue after last year's halving in the crude oil price, while future projects face an uphill battle to be built at all, according to the International Energy Agency, which has slashed its forecast for gas demand.

    The IEA warned revenues for Australia's seven new LNG projects are set to come in "well below target", with the drop in oil prices dramatically eating into returns on capital given the direct link between LNG contract sales prices and oil prices.

    In its annual gas market report, released in Paris on Thursday, the IEA noted that a massive 72 billion cubic metres of new LNG export capacity is to start up in Australia by 2018. The new projects have almost all suffered cost blowouts and delays, as the surge in construction drove up labour and construction rates.

    The agency calls Australia's growth in LNG "impressive", but questions the business case for the flood of investment in such a short timeframe: "With the benefit of hindsight, carrying out such a large simultaneous expansion program seems to be questionable from a business perspective," it said.

    Now that the projects are finally crossing the finishing line "after a very painful journey", the collapse in the oil price is threatening returns of the projects set to start production over the next two years, the IEA said.

    The IEA calculates said that assuming a 14.5 per cent slope of LNG sales prices to crude oil in long-term contracts, a drop in the crude oil price from $US100 a barrel to $US50 would reduce the Australian projects' revenues by $US20 billion a year. That represents almost 10 per cent of the combined capital expenditure of Australia's seven new LNG projects, of just over $US200 billion.

    Brent crude oil prices, a benchmark for Asian prices, have slid to about $US65 a barrel from $US115/bbl a year ago, in line with the $US50 reduction in prices in the IEA's theoretical calculation.

    "Low oil prices will sharply lower the return on capital of projects soon to be on line whose volumes are sold on an oil price linked basis," said the agency, the OECD's advisory agency on energy.
    Back to Top

    CNRL says ramping up oil sands output as Alberta wildfires ease

    Canadian Natural Resources Ltd said on Wednesday it is ramping up production at its 30,000 barrel per day Kirby South oil sands project in northern Alberta as the wildfire threat in the region eases.

    The company was forced to cut production to 12,000 bpd last week because of wildfire disruptions.

    Canadian Natural also said safety checks and equipment assessments at its 80,000 bpd Primrose project, which was evacuated because of the fire threat, will be taking place over the "next several days", along with a staged start-up of production.

    Spokeswoman Julie Woo said only minor equipment repairs are required but until the assessment is complete, no timeline will be available for when Primrose will reach full capacity.
    Back to Top

    Freeport may sell less than 20 pct of oil, gas unit in IPO

    Freeport-McMoRan Inc, which is exploring a public offer for a stake in its oil and gas business, will likely sell off less than 20 percent of the unit, Freeport Chief Financial Officer Kathleen Quirk said on Wednesday.

    Freeport said in April it was mulling an initial public offering for a minority stake in the unit to raise funds for project development, but did not say how much it planned to sell.

    Keeping 80 percent of the unit gives Freeport some tax advantages, Quirk told a Deutsche Bank AG conference in Chicago.

    Freeport, the biggest U.S.-based copper miner, expects to make a decision on the IPO in the Fall.
    Back to Top

    Summary of Weekly Petroleum Data for the Week Ending May 29

    U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending May 29, 2015, 43,000 barrels per day less than the previous week’s average. Refineries operated at 93.2% of their operable capacity last week. Gasoline production decreased last week, averaging 9.4 million barrels per day. Distillate fuel production increased last week, averaging over 5.0 million barrels per day.

    U.S. crude oil imports averaged nearly 7.4 million barrels per day last week, up by 677,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.0 million barrels per day, 1.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 692,000 barrels per day. Distillate fuel imports averaged 64,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.9 million barrels from the previous week. At 477.4 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 0.3 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 increased by 3.8 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 3.8 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 7.4 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.9 million barrels per day, up by 4.3% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.3 million barrels per day, up by 1.1% from the same period last year. Distillate fuel product supplied averaged over 4.0 million barrels per day over the last four weeks, down by 1.6% from the same period last year. Jet fuel product supplied is up 7.8% compared to the same four-week period last year.
    Back to Top

    Venezuela finds new front in attack on U.S. fracking: water

    Venezuela sought to open a new front in its months-long verbal assault on the U.S. shale oil industry on Wednesday, suggesting it posed a grave threat to water supplies.

    In the latest criticism of the hydraulic fracturing technology that has yielded a gusher of crude supplies in Venezuela's biggest oil market, oil minister Asdrubal Chavez cited the "huge environmental impact" from shale.

    "This does not seem to raise any concerns among the governments promoting it or the companies involved," he told an OPEC seminar in Vienna attended by chief executives of some of the world's biggest oil companies, including Exxon and BP, both of which operate in U.S. shale.

    "It is a responsibility of the conventional crude oil-producing countries to develop price mechanisms that take into account these economic and geopolitical actors that promote technologies that threaten the availability of the fundamental resource for human existence: water."

    The comments echo those of environmental activists in the United States who have questioned both the extensive amount of water that must be injected into shale wells, and also the risk that the chemical-laced mixes used in fracking could seep into groundwater.

    The issue is a difficult one for scientists because in many places data on water quality has rarely been taken before the energy extraction began.

    After years of study, the U.S. Environmental Protection Agency is expected soon to release a landmark report on the possible impact of fracking on drinking water. Other existing research has failed to identify any systemic problems, although a handful of reported incidents have raised public concerns.

    The comments from Venezuela are its latest broadside against the rise of an industry that is widely cited for tipping the world's oil market into oversupply and precipitating a collapse in oil prices that has slammed the increasingly cash-strapped and unpopular government in the midst of a deep recession.

    Chavez blamed fracking for creating an "involuntary price war among oil-producing brother countries".

    President Nicolas Maduro has for months alleged that the United States is deliberately flooding the market with shale oil to sink prices and destabilise his OPEC nation, whose crude shipments to U.S. refiners have halved over the past decade.
    Back to Top

    Big Oil chiefs tell OPEC they're adapting to price shock

    Six months after OPEC upended oil markets and sent prices crashing, the head of U.S. oil giant ExxonMobil has an unusual message for the cartel: thanks.

    While Exxon and other large oil companies have been forced to slash spending, cut staff and sacrifice tens of billions of dollars in revenue as oil prices halved, they have also watched with quiet satisfaction as upstart rivals from the U.S. shale patch struggle simply to survive through the downturn.

    The price collapse has helped shine a sharper light on the highest-cost producers, Rex Tillerson, head of the world's largest publicly traded oil company, told a rare meeting of oil executives and OPEC ministers.

    "We're trying to discover where the marginal barrels are around the world. It's important for all of us to know," he said. "We are constantly chasing the price against the cost of supply."

    "We live with a lot of uncertainty and we're rewarded for how well we manage it," said Tillerson, one of the best-paid CEOs in the world. If you can't live with uncertainty, "be a librarian", he said.

    OPEC decided against cutting its oil production last year to fight for market share with non-OPEC producers, thus aggravating a global oil glut that arose due to a shale boom in the United States. The group is expected to maintain that policy on Friday at its first meeting since the November decision.

    Tillerson has repeatedly said the downturn was a time of opportunities to acquire rivals, although Exxon has yet to emulate a megadeal done by rival Royal Dutch Shell in April to acquire smaller competitor BG for $70 billion.

    Tillerson also urged against excessive cuts amid a low oil price environment - be it capital spending or staff: "We are chasing a moving target (oil price). We always overshoot in both directions - on the way up and on the way down".

    The head of French oil company Total, Patrick Pouyanne, said he was confident technology would achieve further breakthroughs to allow the U.S. shale oil industry to increase output even in an environment of low oil prices.

    Asked whether he had a target price in mind for U.S. shale or Total's operations in general, Pouyanne said: "We have a margin - not a target price. I'm not crazy to bet on one target price".
    Back to Top

    The Texas Natgas Massacre: By Bill Powers

    Natural gas production in Texas in Q1 2015 declined 1.5 billion cubic feet per day (bcf/d), results from the Texas Railroad Commission (RRC) show. That's a 5.5% decline on the 22 bcf/d Texas produces-a full one third of all natural gas production in the USA.

    Conservatively, I expect a 15% decline in the Lone Star state for all of 2015. That would result in a loss of more than 3 bcf/d.

    In fact, that's very conservative as the collapse in Texas rig count from 891 a year ago to only 373 for the week ending 5/15/2015-a 58% drop-is having a profound impact on gas production in the state.

    The combination of thousands of wells drilled in the past few years that are still in the high-decline portion of their lifecycle and such a large reduction in drilling activity indicates that Texas is on track for an epic decline in gas production in 2015.

    To be sure, the reduced output is partly to blame on slumping activity levels. Investors should remember that the 1.5 bcf/d decline in Q1 2015 occurred with an average of 647 land rigs running in the state. As of May 15, 2015 there were only 372 rigs working in the state. (Source: Baker Hughes)

    Now, considering there is usually a six-month lag between falling rig counts and declining production, the drop in Texas in the first three months of 2015 is remarkable. More importantly, the quick drop in Q1 indicates the second half of year is likely to see a more pronounced fall off in production barring a quick rebound in activity.

    Below is a table tallying up the declines by major Texas plays in Q1 along with conventional production as well as my projected decline for the entire year:

    Play Name Decline in Q1 2015 Projected 2015 Decline
    Barnett .4 bcf/d 1 bcf/d
    Eagle Ford .33 bcf/d .75 bcf/d
    Permian .2 bcf/d .4 bcf/d
    Granite Wash .25 bcf/d .5 bcf/d
    Haynesville 0 0
    Conventional .3 bcf/d .6 bcf/d
    Total 1.5 bcf/d 3.25 bcf/d
    Back to Top

    US 'non-imports' freed up 108 Bcm of LNG: official

    The boom of the US shale gas industry in recent years has freed up more than the LNG equivalent of 100 Bcm of gas for world markets that might otherwise have been consumed by the US this year, a Department of State official told the World Gas Conference Tuesday.

    Robin Dunnigan, deputy assistant secretary at the Bureau of Energy Resources, told the conference that 10 years ago it was expected the US would be importing the LNG equivalent of around 108 Bcm of gas by 2014.

    In fact, it imported only 1 Bcm of gas.

    So while people often asked her about the likely impact of upcoming US LNG exports, she said they should remember the impact already made by US "non-imports."

    "That's changed the energy picture in the world globally," she said.

    US exports of LNG are expected to start late this year or early next year from Cheniere Energy's Sabine Pass facility.
    Back to Top

    BP CEO sees oil price "softness" in second half of 2015

    BP Chief Executive Bob Dudley said on Wednesday he sees "some softness" in oil prices in the second half of the year as global supplies continue to grow.

    "Supply growth continues to go up. We are at a balance with the supply and demand right now," he said on the sidelines of the Organization of the Petroleum Exporting Countries (OPEC) seminar.

    "I think we can see some softness in price continuing and as a result as an industry we must readjust cost structures, tax structures around the world," Dudley said.
    Back to Top

    India refiners in talks with Iraqi oil firm on strategic reserves-sources

    State refiners Indian Oil Corp and Hindustan Petroleum Corp are holding talks with Iraq's national oil company to buy 4 million barrels of Basra light crude oil for India's strategic petroleum reserves (SPRs), three sources said.

    India in March asked the state refiners to each seek two very large crude carriers (VLCCs) of Iraq's Basra crude oil for arrival in May-June totalling 8 million barrels for the reserves in the coastal city of Vizag in southern Andhra Pradesh state.

    But after being faced with having to pay a premium for spot oil purchases the refiners had decided to directly negotiate with Iraq's State Oil Marketing Organisation (SOMO), said the sources with knowledge of the talks.

    So far the indications were that SOMO would supply the refiners with Basra Light crude at the official selling price, said one of the sources, who declined to be identified due to the sensitivity of the issue.

    The sources said the refiners were looking for the oil supplies to arrive in the next two to three months.

    HPCL last month awarded a tender for June loading to European trader BP at $1.40 a barrel above the official selling price (OSP).

    IOC, the country's biggest refiner, agreed to pay a premium of 50-60 cents a barrel to Chinese trader Unipec for a VLCC arriving in mid-June.

    "The spot market is getting pricey now," said an Asian oil trader, highlighting recent spikes in Basra light premiums. "I think SOMO's ambition to push the OSP for Basra Light higher is achievable now."
    Back to Top

    China goes for gasoline

    China's shift to consumer-led growth is accelerating demand for gasoline in the world's biggest energy user, with the fuel on track to challenge the dominance of diesel as an increasing number of middle class consumers buy bigger family cars.

    Diesel production is still forecast to be some 33 percent higher than gasoline this year, but the gap is on course to halve in five years, according to calculations based on data from consultancy Wood Mackenzie.

    This gap could disappear in the next decade, said a trader, citing general industry estimates.

    The importance of diesel and gasoline varies globally, largely due to the usage in cars and industry. Most cars in China use gasoline, a similar picture to North America where almost 90 percent of private vehicles run on gasoline, while in Europe more than half of new cars are diesel powered.

    Back to Top

    How Much does it cost to produce Oil?

    Image title

    As I have noticed in one of my articles, cash flow situation does not look wellfor the majors. In the long term, a profitable company must be able to generate enough cash flow to cover its capex and to pay money back to its shareholders (either via dividends or share buybacks). Therefore I included operating cash flow and total capex in my data. Operating cash flow and capital expenditure both refer to the whole company. Capital expenditure is investment in assets as well as in subsidiaries if they are not consolidated. This number does not include any subtractions because of the selling of assets.

    When the numbers for all 143 companies are summed up, operational cash flow amounts to $710 billion, while capital expenditure amounts to $706 billion and assets worth $105 billion were sold (a certain part of this amount can be found in capital expenditure of other companies). The industry as a whole seems to be able to fund its investment. However, there are at least two things to consider with regard to these numbers. Firstly, the data refer to 2014, a year that saw an average oil price of more than $96 per barrel. Secondly, cash flows refer to the whole company. As for many companies upstream is only one segment, the numbers are somehow biased. Other, less volatile business fields may introduce some error (e.g. ExxonMobil that also has divisions in refining and chemical engineering)

    Back to Top

    The Great Edmonton Propane Giveaway

    Yesterday (June 2, 2015) spot prices for propane at Edmonton, Alberta were assessed by OPIS at an average of -0.625 cnts/gal (-26.25 cnts/Bbl). Yes you read correctly – the price was negative – meaning that producers will PAY YOU to take their propane away in Edmonton. Prices at Edmonton have been below zero before at least twice in the past 2 weeks and they averaged just 2.4 cnts/gal during May. Propane has fallen on hard times in the U.S. as well with Mont Belvieu Gulf Coast trading hub prices reaching13 year lows under 33 cnts/gal last week (back up to 44 cnts/gal yesterday) and the ratio of propane prices to U.S. benchmark West Texas Intermediate (WTI) crude hitting an all time low under 24%. Today we begin a new series on propane with a look at the Edmonton market.

    Propane is one of the five “purity” natural gas liquids (NGLs) produced from natural gas processing plants, typically accounting for about 28% of the NGL mix. It is also produced by refineries. About 60% of demand for propane in Canada is non-seasonal use as fuel in industrial markets and as a feedstock for petrochemical plants. Another 35% of demand is highly seasonal use for residential and commercial heating and agricultural crop drying. Because of the seasonal element, demand peaks occur in the fall and winter and propane storage plays a critical role in buffering supplies over the course of the year. On the supply side, about 85 - 90% of Canadian propane is produced from natural gas processing – mostly in Alberta. According to a 2014 Canadian Energy Research Institute (CERI) report, Canada produced 242 Mb/d of propane in 2013 and consumed 152 Mb/d – with the remaining 90 Mb/d going to the export market. Propane exports from Canada primarily supply the U.S. Midwest and the East Coast – for seasonal heating and crop drying.
    Back to Top

    US told of bribery evidence in Brazil probe

    Prosecutors investigating Brazil's largest corruption scandal have reportedly notified the US Department of Justice (DOJ) of evidence that at least four foreign companies allegedly paid bribes to win Petrobras contracts.

    The allegations are against units or affiliates of Samsung Heavy Industries, Skanska, AP Moeller-Maersk and Toyo Engineering, Bloomberg reports, citing Carlos Lima, the senior prosecutor in a nine-member task force.

    Companies could face charges in Brazil that would restrict local operations as well as possible sanctions under the US Foreign Corrupt Practices Act, he told the news wire.

    "We've had a meeting in the US about it. The Americans like to know who are involved," Lima said. "These companies can be accountable under the FCPA."

    Samsung Heavy Industries told Bloomber it "has not been contacted by any law enforcement authorities regarding this issue".

    Toyo and its Brazilian affiliate "are entirely unrelated to the bribery scandal of Petrobras", the Japanese firm said.

    Maersk said bribes are strictly forbidden for any employee or third party, commissions were paid within industry norms and it found no indication of improper activity. The Copenhagen-based company added that it has not been contacted by authorities.

    Skanska told Bloomberg that it has zero tolerance for unethical business practices and is undertaking an internal investigation.
    Back to Top

    Ivanhoe Energy declared bankrupt after failing to restructure

    Ivanhoe Energy Inc., a company that proposed using a unique heavy oil technology to develop its Tamarack thermal oilsands project in northern Alberta, has been declared bankrupt after it failed to reach a restructuring proposal under the Bankruptcy and Insolvency Act.

    In a news release Tuesday, the Vancouver-based company backed by mining promoter Robert Friedland said it worked “diligently” with major creditors and its court-appointed trustee, Ernst & Young, since filing a notice of its plan on Feb. 20 but no “viable restructuring proposal” resulted.

    Ivanhoe suspended work on the estimated $1.37-billion, 20,000-barrel-per-day Tamarack project last year after it was one of five projects affected by an Alberta Energy Regulator review of shallow thermal projects over worries about cap rock integrity. It bought the property from Talisman Energy Inc. in 2008 for $105 million.

    “Ivanhoe’s decision is based on the uncertainty that there is no timeline defined … for a new regulatory framework for shallow SAGD projects, and that there is no clarity as to a path for approval for its Tamarack application,” the company said in a news release in March 2014.

    Tamarack was to use the company’s proprietary heavy-to-light or HTL technology to partially upgrade the bitumen.
    Back to Top

    Shell CEO warns on Coal/Renewable mix

    Shell CEO Ben van Beurden is set to warn a major conference Tuesday that the energy industry must guard against the development of a coal/renewables-based energy mix at the expense of natural gas.

    Speaking at the opening day of the World Gas Conference in Paris, van Beurden is expected to say that a failure to properly price carbon dioxide emissions is allowing coal to maintain or grow its share in the energy mix alongside renewables, at the expense of cleaner-burning gas.

    A coal/renewables mix can already be seen in European countries such as Germany and could spread to Japan, he argues, according to a section of the speech released earlier Tuesday.

    "Key gas and LNG markets have ... failed to create carbon pricing systems that lead to a switch from coal to gas in power generation," the prepared speech says.

    Back to Top

    Lured by discounts, Canada's Come By Chance refinery taps Nigerian oil

    Canada's Come By Chance refinery, located on the eastern island of Newfoundland, has bought Nigerian oil for the first time in at least a decade, the latest addition to the facility's diverse crude slate, according to Reuters customs data.

    The purchases come as West African crude producers are courting new suitors in the face of weak demand from a U.S. market awash with cheaper, domestic crude.

    The search for new buyers has forced West African producers to compete aggressively on price, so light sweet Nigerian crude grades like Qua Iboe are being heavily discounted relative to global benchmark Brent crude.

    "I suspect the West African crude is priced to sell given the continuing reduction in U.S. imports of light sweet African crude," said Sara Emerson, a managing principal at ESAI Energy.

    The crude's relatively cheap price has drawn interest from the 115,000 barrel-per-day Come By Chance refinery, according to a source familiar with the refinery's operations.

    The latest shipment arrived aboard a Bahamas-flagged ship named M.V. Jiaolong Spirit, which carried 1 million barrels of Qua Iboe crude that arrived at the refinery on May 27, according to vessel tracking data available on ThomsonReuters' Eikon.

    The refinery has made one additional purchase of Nigerian crude, according to the person familiar with the refinery's operations who said future buys could be expected.

    Shale oil is not a perfect fit for the refinery, which prefers a medium-sour grade, but the owners are willing to run at slightly reduced rates to take advantage of the competitive pricing for U.S. crude oil. The same goes for White Rose, which must be blended with other crudes before its processed.

    The team negotiated a new supply and offtake agreement with BP Plc and overhauled operational management at the site.
    Back to Top

    Crude processed by U.S. refiners gets lighter and lighter.

    U.S. refineries are processing the lightest cocktail of crudes for almost a quarter of a century, as they run out of room to switch light imported oils with domestic shale production.

    In March, U.S. refineries processed crude with an average gravity of 31.95 degrees API, the lightest combination since April 1991, according to data from the U.S. Energy Information Administration (EIA).

    Higher numbers on the API scale correspond to lighter crude oils. API gravity is a scale employed for measuring the density of fluids such as crude and refined fuels. API gravity of 31.95 degrees corresponds to roughly 864 kilograms per cubic metre.

    The average density of crude processed at U.S. refineries has fallen by 3 kilograms per cubic metre over the last 12 months and 10 kilograms since 2008, which may not sound much, but density has varied in a narrow band of just 16 kilograms over the last 30 years.

    Most units in a refinery are constrained by volume and designed to operate with maximum efficiency only if the average quality of the feedstock can be kept within a fairly narrow range.

    For example, the trays in an atmospheric distillation tower are arranged to produce cuts in roughly fixed proportions.

    A crude cocktail lighter than intended will produce more gases and very light fractions at the top of the tower, which the refinery may not be able to handle efficiently, and less heavy residual, leaving vacuum distillation and coking units underemployed.

    For this reason, refiners try to keep average feedstock quality stable within a fairly tight range to squeeze the maximum efficiency from their plants.

    The shale revolution has challenged refinery efficiency because it has forced U.S. refineries to process a large volume of very light oils.

    North Dakota's Bakken crude can be a light as 810-820 kilograms per cubic metre, which is 50-60 kilograms per cubic metre lighter than the long run U.S. refinery average. Oils from Eagle Ford are even lighter.

    U.S. refiners have tried to keep average density steady by reducing the amount of light oil they buy and purchase from North and West Africa (Nigeria, Algeria and Angola) as well as the North Sea.

    But imports of light crudes have now been reduced close to zero which means that refiners are reaching the limits of this strategy.

    One alternative is to blend very light domestic crude with very heavy oils, for example from Canada, to achieve the same average mix.

    Even as imports of light oils from West Africa have been almost eliminated, the United States is importing record quantities of mostly heavier oil from Canada.

    Clever blending has not been enough to stop the average feedstock from becoming lighter and lighter over the last year.

    There are questions about how much longer this trend can continue before it starts to have a significant impact on refinery efficiency.

    Attached Files
    Back to Top

    1Q15 Ohio Production Numbers Released: Natgas Production Up 11%

    The Ohio Dept. of Natural Resources (ODNR) released their first quarter 2015 production report yesterday. It shows natural gas production in the Buckeye State was up 11% from the previous quarter. That rate of increase has slowed (but is still good, all things considered).

    In 4Q14 production numbers were up 25% from the previous quarter. The production number increase for 1Q15 slowing to only 11% is a reflection of less new drilling in the state.

    There’s plenty of Utica wells already drilled awaiting completion and connection to pipelines–so production will almost certainly continue to increase in Ohio for the foreseeable future–albeit at a slower pace.

    According to yesterday’s report, Ohio produced 183.6 billion cubic feet (Bcf) of natural gas, and 4.4 million barels of oil in 1Q15. Note that NGLs are part of the natural gas figures–Ohio doesn’t break out NGLs in a separate number, unfortunately.
    Back to Top

    Peruvian regulator in dispute with Shell over LNG royalties

    PeruPetro is in dispute with Anglo-Dutch oil firm Shell over royalties related to the export of seven Peruvian liquefied natural gas (LNG) cargoes last year, the regulator said, adding it hoped to reach a deal soon or would resort to arbitration.

    Supplies from Peru's 4.45 million tonne per annum LNG export plant are handled by Shell, which acquired the asset from Spain's Repsol in 2014.

    Under the terms of its contract, Shell must pay the Peruvian government a royalty based on the final destination price of where it sells the LNG, PeruPetro's promotion and communications manager Oscar Quesada told Reuters in an interview.

    But Shell in 2014 exported seven cargoes to the United States, paying Peru a royalty based on the U.S. gas futures benchmark, one of the lowest prices in the world. It then re-sold the LNG to be exported to Asia, pocketing a much bigger sum and not sharing the proceeds with Peru, Quesada said.

    "In 2010 there were 10 cargoes that Repsol sold and did not share the full royalties. Shell did something similar last year. Right now Shell and PeruPetro are talking to solve this," Quesada said.

    Quesada could not give an indication of how much it wants Shell to pay Peru, but said the talks with Shell were progressing and it was hopeful a deal could be reached soon. If not, PeruPetro will resort to arbitration courts, he said.

    Peru recently settled a similar long-standing dispute over inadequate royalty payments related to 10 LNG cargoes exported in 2010-2011.

    The World Bank's International Center for Settlement of Investment Disputes ruled last week against PlusPetrol, operator of a Peruvian gas field that supplies the LNG plant.

    The ruling was a victory for PeruPetro, which is set to collect compensation for the lost royalties.
    Back to Top

    Russian oil production surges in May ahead of OPEC meeting

    Russian oil output neared a record in May, damping speculation before OPEC meets this week that major producers may cooperate to curb a global supply glut.

    Production of oil and natural-gas condensate climbed 1.6 percent from a year earlier to 10.708 million barrels a day, close to January’s post-Soviet record of 10.713 million barrels a day, according to preliminary data from the Energy Ministry’s CDU-TEK unit.

    “Russian output has proven to be pretty resilient to the fall in prices, and they will not have a problem keeping production up for the next year or two,” said James Henderson, who researches the Russian oil industry at the Oxford Institute for Energy Studies.

    The Organization of Petroleum Exporting Countries, meeting June 5 in Vienna, will probably maintain its output target of 30 million barrels a day, according to a Bloomberg survey. Global supplies have continued to outpace demand six months after the group adopted a policy aimed at keeping its market share. Saudi Arabia and Russia are both pumping oil at near record levels.

    Russia’s May crude exports reached 5.06 million barrels a day, rising 1.95 percent from a year earlier while falling 5.7 percent from April, according to ministry data.

    Production increases were driven by condensate output from SeverEnergia, a Siberian joint venture between OAO Novatek and OAO Gazprom Neft. Novatek and Total SA also started their Termokarstovoye project in May and expect to pump 800,000 metric tons of condensate there this month.

    Russian output has continued to grow even after oil prices sank and the U.S. and Europe imposed sanctions against the industry over the government’s role in the conflict in Ukraine.
    Back to Top

    Chesapeake could return to 68 percent of its wells to refrack

    Out of Chesapeake Energy’s 6,750 wells, 4,600 of them have the potential to be refracked. Investopedia reports that since the 4,600 wells, or 68 percent of all of its wells, were drilled before 2012, they weren’t drilled using the latest fracking technology, so they have the potential to be refracked.

    In the past few years, fracking technology has improved, so well performance and production have improved. Refracking allows oil and gas companies to reap the benefits of returning to previously-fracked wells to have another turn at production.

    Refracking has the potential to improve company revenue, so investors should keep an eye on trends in the months and years to come.
    Back to Top

    North Slope pay day for Repsol

    Repsol has made a series of “significant” oil discoveries on Alaska’s North Slope after carrying out an extensive 16-well exploration drilling campaign.

    The latest pair of wells drilled in the Nanushuk formation, Qugruk 8 and Qugruk 301, tested at respective flow rates of 2160 and 4600 barrels per day of oil, according to a statement from the Spanish explorer on Tuesday.

    It said the “production tests yielded good-quality crude from wells which have encountered multiple pay areas”.

    Repsol stated the flow tests underpin positive results from winter drilling efforts over the past four years since it acquired the acreage in 2011 that “indicate an area of significant potential”.

    Another three wells drilled in the Alpine formation struck oil-productive sands in two penetrations with an estimated oil pool covering about 15,000 acres (61 square kilometres), according to partner Armstrong Oil & Gas.

    Armstrong claimed that all 16 wells drilled in the campaign, including sidetracks, “have found hydrocarbons, most with multiple pay zones”.

    The company stated the Nanushuk reservoir,where seven appraisals have been drilled, has an oil pool spanning 25,000 acres (101 square kilometres) with an oil column of more than 650 feet and up to 150 feet of net pay, with an average porosity of 22%.

    While additional drilling is needed to confirm the size of some of the finds, Armstrong said permits are now being sought for development of two fields – one in Nanushuk and one in Alpine.

    Repsol holds a 70% operating stake in the exploration consortium, with Armstrong on 22.5% and GMT Exploration on 7.5%.
    Back to Top

    Korea Gas Corp to buy few spot cargoes this year, inventory to grow

    Korea Gas Corp, the world's single biggest buyer of liquefied natural gas (LNG), expects to purchase few spot LNG cargoes this year, with low demand expected to push inventories towards capacity by the third quarter, a senior official said.

    The company's LNG inventories held at four receiving terminals are currently 50-60 percent full but they are expected to reach tank-top by the third quarter, Kunho Lee, commercial manager for LNG procurement and trading, said.

    "The supply will be overflowing at that point but it's difficult to pin down the exact order of magnitude, an educated guess is that we are unlikely to be in the market for the rest of the year," Lee said.

    Last year Kogas, as the company is known, embarked on a major selling spree after low demand and healthy supply forced it to get rid of incoming shipments.

    Thai PTT seeks to secure LNG imports with global suppliers

    Thailand's PTT PCL said it plans to negotiate arrangements for import of liquefied natural gas (LNG) with several gas suppliers, including Chevron Corp, to offset a decline in domestic resources and to secure long-term supply.

    State-controlled PTT also plans to expand its partnership with Qatar Liquefied Gas Co Ltd, a major long-term LNG supplier, PTT chief executive Pailin Chuchottaworn said in a statement released while attending the World Gas Conference in Paris this week.

    PTT, Thailand's sole gas supplier, has a 20-year contract to buy 2 million tonnes of LNG a year from Qatar starting this year.

    The company has so far not revealed the names of the firms with which it is talks for LNG supplies, except for Anadarko Petroleum Corp, an operator of a Mozambique gas field in which PTT's unit has a stake

    Back to Top

    Gazprom says China started its part of Power of Siberia construction

    China has started pipeline construction last week to receive Russian gas from the Power of Siberia pipeline, Russian state gas company Gazprom said on Tuesday.

    Russia and China clinched a $400-billion gas deal last year, which requires construction of the pipeline. It requires $55 billion in investment for the Russian part only, including bringing on stream new gas fields.

    Gazprom also said that talks on the so-called Western route which would connect operating fields with China were moving forward at a good pace.
    Back to Top

    Iran seeks to take back its share of OPEC production

    Iran will try to persuade OPEC countries to reverse production increases they implemented to fill a gap left by sanctions on Iran, the country's OPEC delegate Mehdi Asali was quoted as saying, ahead of a potential nuclear deal that could see sanctions lifted.

    Iran, once the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia, has seen its exports halved since 2012 to just over 1 million barrels per day (bpd) due to sanctions imposed by the European Union and the United States.

    "Production decreases for those countries which raised their production during Iran's relative absence will be a topic of discussion at the 167th meeting (of OPEC)," the Shana news agency quoted Iran's OPEC delegate as saying on Monday evening.

    "Some countries, which increased their production in the last two or three years during sanctions on Iran and insecurity in North Africa, are now not willing to reduce their production," he said, ahead of an OPEC meeting in Vienna on Friday.

    Iran's Oil Minister Bijan Namdar Zanganeh made similar comments in April, but Gulf OPEC members, including Saudi Arabia, have refused to cut output.

    The Islamic Republic hopes to quickly boost crude exports by as much as 1 million bpd if Tehran and six major powers finalise a nuclear agreement by a June 30 deadline, but oil industry experts say that figure is likely to be unrealistic.

    "My view is that within maybe 6 to 9 months they could add up to 800,000 bpd -- so not as much or as quickly as they say," Robin Mills, non-resident fellow for energy at the Brookings Doha Center, said.

    "They won't get back to pre-sanctions level immediately, as they must have lost some capacity since then."
    Back to Top

    Continental reports increased Bakken production

    Continental Resources Inc. has announced that its production in the Bakken region has increased by four percent with 66 net completed operated and non-operated wells in the Middle Bakken and Three Forks formations during the first quarter of 2015.

    During this time, the company operated an average of 13 rigs in the region, down from the 19 operating at the end of 2014. The company’s production in the Bakken averaged 135,538 barrels of oil equivalent per day for the first quarter, an increase of 39 percent compared to the first quarter of 2014. Through the remainder of the year, based on current market conditions, Continental plans to average 10 operated rigs.

    To maximize returns for the upcoming year, the company will focus on core leasehold areas in Williams, McKenzie, Mountrail and Dunn counties. While concentrating on the core of the play, Continental will also be entering the first stage of full-field development with roughly 60 percent of the wells in its 2015 program drilled with 660-foot to 880-foot inter-well spacing. Wells completed in this year’s program will utilize 30-stage enhanced completions to further maximize production rates and recoverable reserves per well.

    In Williams and McKenzie counties, where Continental has its largest data set, enhanced completions are delivering an average 90-day production increase of roughly 40 percent for hybrid completions and 50 percent for slickwater completions when compared with its offset legacy wells.

    The company projects estimated ultimate recovery (EUR) uplifts in a range of 25 to 45 percent for enhanced completions, eventually expanding the drilling activity into Mountrail and Dunn counties where similar uplifts and EURs are expected. For the 2015 Bakken drilling program, Continental is aiming for an average EUR of approximately 800,000 Boe per well.

    In a statement, Continental Chairman and CEO Harold Hamm said, “Our teams have done an outstanding job making the necessary adjustments to achieve our 2015 goals by aligning capital expenditures with cash flow by mid-year, reducing expenses across the board, and maximizing returns on every dollar we spend. We’re proud of Continental’s early 2015 performance and discipline.”

    As planned, the company significantly reduced its completion crew count in the Bakken during the first quarter with three active crews compared to last year’s 10. Based on current market conditions, the company plans to maintain this level throughout the year.

    Currently, Continental has 115 gross operated Bakken wells drilled and waiting on first production, down from the 2014 year-end count of 122. By the end of this year, the company expects to have approximately 90 gross operated Bakken wells drilling and awaiting first production.
    Back to Top

    Naimi says Saudi oil strategy working, sees stronger demand

    Saudi Arabia's oil minister Ali al-Naimi said on Monday he expects oil demand to pick up in the second half of 2015 while supply decreases, in a sign that the kingdom's strategy of defending market share was working.

    The comment indicates Saudi Arabia will likely propose not to change output policy at producer group OPEC's meeting on Friday, although Naimi declined to speak directly on the issue.

    "The answer is yes," Naimi said in his first public comment upon arrival in Vienna, where the meeting will take place, when asked whether the strategy of defending market share through higher supplies and lower oil prices was working.

    "Demand is picking up. Good! Supply is slowing, right? That is a fact," he told reporters. "You can see that I'm not stressed, I'm happy," he said.

    Naimi was the key architect of OPEC's decision at its last meeting in November 2014 not to cut crude production despite a growing global glut, exacerbated by a boom in U.S. shale oil.

    Instead, OPEC kingpin Saudi Arabia raised production to win back market share and depress the output of higher-cost producers through lower oil prices, which fell from as much as $115 in June 2014 to as low as $46 in January 2015.

    However, prices have recovered in recent weeks to $60-$65 per barrel on the possibility of a major slowdown in U.S. oil output and signs of stronger global demand.

    Naimi said it would take time for the oil markets - still heavily oversupplied - to rebalance. "I don't have a crystal ball but it is (going) in the right direction," he said.

    He added he was not concerned by prospects of an increase in Iraqi or Iranian supplies later in the year.

    He said he doubted that millions of barrels of oil stored in recent months by traders and oil companies would be offered anew in the market, thus leading to a fresh drop in prices.

    He said one reason why that would not happen was the narrowing contango - a market structure in which future prices are higher than current prices, encouraging the storage of oil for resale at a profit in the future. The opposite structure, backwardation, has current prices higher than future prices.

    "This is not a good time to sell the surplus. So they (traders) have to keep it and as the contango goes down and they see the backwardation coming forward they will hang on to it. They are not going to dump it on the market," Naimi said.
    Back to Top

    Tourmaline Oil Corp. provides operations and financial update

    Tourmaline currently has six rigs active post-break-up and plans to activate the remaining 10 rigs in early July. Continued optimization of recently expanded facilities has allowed the Company to increase production through-put and allowed the Company to defer planned 2H 2015 facility expansions at Wild River and Spirit River, Alberta to 2016. The available capital created by this deferral will allow for the drilling of an incremental 18-20 horizontal wells to be drilled in the NEBC Montney and Alberta Deep Basin play areas during the second half of 2015. The significant reduction in drilling and completion costs realized over the past six months will also allow for the drilling of additional incremental wells within the existing 2015 capital program.

    The aforementioned incremental 2H 2015 drilling and the 2015 acquisitions completed to date are expected to yield a 2015 production exit of 200,000 boepd. Tourmaline is also raising 2016 production guidance to 215,000 boepd from the 205,000 boepd originally forecast. April 2015 production of approximately 153,500 boepd was ahead of the Company's Q2 2015 target of 151,500 boepd.

    Recent notification of unplanned maintenance by TCPL on the Edson, Alberta lateral, affecting production in late May and the first week of June and by Spectra on the T North B.C system, affecting production in the first three weeks of June, is expected to reduce Q2 average production to approximately 147,500 boepd. These interruptions are incremental to the 5,000 boepd provision for unscheduled down time that Tourmaline has built into the 2015 forecast.

    Full-year 2015 average production guidance remains unchanged at 164,500 boepd. Tourmaline currently has approximately 22,000 boepd of production shut-in either awaiting tie-in or facility access. The Company will provide revised 2H 2015 and 2016 capital and cash flow guidance in July with the release of the second quarter 2015 results.

    Tourmaline is pleased to announce the expansion of its credit facility to $1.80 billion, an increase of $200 million, which has been established with a syndicate of eight banks. Tourmaline also has an additional operating line of $50 million and a term loan of $250 million. The prevailing effective interest rate on the facility is 2.7%. The term of the credit facility has been increased from three years to four years and the existing covenants remain the same.

    A new provision has been included whereby, at the Company's request, up to an additional $500 million may be accessed under identical terms to the credit facility. The revision to the syndicated bank facility is expected to close in early June 2015. The total credit facility of $1.85 billion along with the term debt of $250 million brings the total credit capacity to $2.1 billion.
    Back to Top

    Enterprise Products to buy midstream assets for $2.15 bln

    Pipeline company Enterprise Products Partners LP said it would buy member interests in EFS Midstream LLC from affiliates of Pioneer Natural Resources Co and Reliance Industries Ltd for $2.15 billion.

    The purchase price of this deal, which is expected to close in the third quarter, will be paid in two installments, Enterprise Products said on Monday.

    EFS Midstream was formed by affiliates of Pioneer Natural and Reliance Industries in June 2010 to construct, own and operate facilities providing gas gathering, treating, and transportation services in the Eagle Ford Shale in South Texas.
    Back to Top

    Shale Oil Production in Bakken, Eagle Ford Flat in April: Platts' Bentek

    Production From These Two Prolific Shale Plays Still Up 20% Versus April 2014

    Oil production from key shale formations in North Dakota and Texas were mostly flat in April versus March, according to Bentek Energy, an analytics and forecasting unit of Platts, a leading global provider of energy, petrochemicals, metals and agriculture information.

    Oil production from the Eagle Ford shale basin in Texas continued its flat trajectory in April, growing only 1000 barrels per day (b/d) month on month. The marginal growth (less than 1% from the March levels), signifies the on-going impact resulting from the suppressed oil pricing environment. Bakken shale in North Dakota remained relatively flat in April, increasing about 2000 b/d, or less than 1%.

    In South Texas, Eagle Ford production averaged 1.6 million barrels per day in April, up 284,000 incremental barrels per day or nearly 22% higher than April 2014, said Sami Yahya, Bentek energy analyst. Additionally, crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin averaged 1.2 million b/d last month, Bentek data showed. This was 173,000 b/d higher than year ago levels.

    'The number of active rigs in the Eagle Ford basin currently stands at 116 rigs, down 27 rigs from the previous month. The efficiency gains noted in the region—such as the trimming of average drill time per well from 13 to 11 days between 4Q2014 and 1Q2015—have helped in preventing oil production decline so far. Nonetheless, we do expect to see declines, however marginal, in Eagle Ford oil production as soon as next month,' Yahya said.

    Yahya noted that oil production in the Bakken Basin, however, is expected to continue to grow but at a slower pace. 'Producers will likely continue to focus on efficiency gains and shift their rigs to the core areas, where initial production rates are more favorable.'

    Bentek analysis shows that from April 2014 to April 2015, total U.S. crude oil production has increased by nearly 1 million b/d.

    'Prices of both Eagle Ford and Bakken shale oil have been on an upward trajectory since mid-March and reached a new year high by the end of April,' said Jacqueline Puig, Platts associate editor of Americas crude.

    The Platts Eagle Ford Marker, a daily price assessment launched in October 2012 and reflecting the value of oil out of the Eagle Ford Shale formation in South Texas, was up 21% between January and April, with an average price of $54.37/b for the year. The marker has ranged between $46.22/b and $65.17/b since the beginning of this year.

    The price of oil out of the Bakken formation at Williston, North Dakota, was up 22% between January and April, with an average price of $47.55/b for the year, according to the Platts Bakken assessment. It has ranged between $38.43/b and $57.45/b since the beginning of January.
    Back to Top

    Israel's Delek Looks to Increase Stake in Cyprus Gas Field

    Israeli conglomerate Delek Group said on Monday it is in talks to buy an additional 19.9 percent stake of the offshore Cyprus gas field Aphrodite from its partner, Texas-based Noble Energy, for about $155 million.

    Noble has a 70 percent stake in the field, which is located in Block 12 off the Cypriot coast and estimated to contain 4.54 trillion cubic feet of natural gas. Delek, through two subsidiaries, holds the remaining 30 percent.

    The negotiations are at an early stage and any deal would need various regulatory approvals, Delek said.

    - See more at:
    Back to Top

    US rig count declines 10 units, falls below nadir of 2008-09 downturn

    The US drilling rig count dropped 10 units during the week ended May 29 to settle at 875 rigs working, falling below the nadir of the 2008-09 downturn by a single unit, according to data from Baker Hughes Inc.

    Although an uptick from the mere 3 units lost last week, the loss of 10 units represents the second-smallest decline of the 25-week period.

    Raymond James & Associates Inc.’s energy research team noted this week that most oil field services companies with which it speaks are saying “the bottom is in” for US drilling following last week’s rise in the US onshore count for the first time since last November. The analyst noted, however, that “it’s difficult to envision a ‘V-shaped’ recovery motivated by sub-[$60/bbl] crude—even if it is $15 higher than the bottom.”

    Oil-directed rigs lost 13 units to 646, down 969 from a recent peak on Oct. 10, 2014, and 890 year-over-year. Gas rigs gained 3 units to 54.

    Land-based rigs dropped 9 units to 844, down 948 year-over-year. They were up 3 last week after 25 straight weeks of losses. Following a mere 2-unit loss last week, rigs engaged in horizontal drilling fell 9 units to 674, down 698 from a recent peak on Nov. 21, 2014, and 577 year-over-year. Rigs drilling directionally gained 5 units to 90.

    Rigs drilling in inland waters edged down a unit to 2. Offshore rigs were unchanged at 29.

    Canada’s rig count, meanwhile, recorded its largest gain since January, jumping 26 units to 98, still down 342 from a recent peak on Jan. 16 and 100 year-over-year. The sudden jolt came from a 20-unit rise in oil-directed rigs to 44. Gas-directed rigs rose 6 units to 54.

    After no movement in Texas last week, the first week in which the state hadn’t lost a unit in 25 weeks, the count declined 4 units to 369, down 537 from a recent peak on Nov. 21 and 525 year-over-year. The Eagle Ford, however, led all major basins with a 3-unit rise to 110. That marks its second rise in three weeks.

    In the wake of the Santa Barbara oil spill, California fell 3 units to 10. Louisiana, Pennsylvania, and Arkansas each fell 2 units to 67, 47, and 6, respectively. The Marcellus fell 3 units to 63. North Dakota edged down a unit to 77.
    Back to Top

    Homeless Atlantic oil cargoes deepen global glut

    A shadowy build up of oil has intensified in the Atlantic Basin with homeless cargoes of crude turning into unintentional floating storage - another sign the global surplus has some way to go before clearing.

    Off the coast of West Africa and in the waters of the North Sea, vessels holding millions of barrels of oil have become, in effect, accidental storage, as their owners fight for buyers.

    These are competing with new loadings, as well as time-chartered cargoes that major trading houses such as Unipec and Trafigura booked to store crude months ago and are now selling.

    "It's pretty bad," one West African crude oil trader said. "There is a lot floating there that wasn't meant to be."

    The development highlights the diverging fates of crude grades as U.S. shale oil shuts light, sweet West African crudes out of North America, while state-of-the-art refinery additions worldwide are geared towards heavy crudes.

    Nigerian surplus in particular amplifies the yawning disconnect between futures and physical markets. "The country is a good barometer for global oversupply, with its exports to Asia, Europe and the Americas fluctuating with regional demand," analysts JBC said in a note on Friday.

    Traders said there are around six million barrels of crude from Nigeria's May programme available - some already loaded onto vessels. Cargoes such as the Front Ariake, which loaded in late April, are only now sailing out of the region.

    That joins more than 65 million barrels left in June and July for Nigeria alone, leaving producers looking to extra-high run rates at European refineries for salvation.

    In the North Sea, four expected June VLCC (very large crude carrier) bookings to Asia dwindled to one confirmed fixture, leaving Europe to absorb almost the entire Forties programme.

    Meanwhile, trader Unipec has reoffered Forties crude from Aframaxes the Thornbury and the British Falcon. Such ship-to-ship transfers are another symptom of the glut, as this is crude that failed to find a home weeks after it would normally have. Traders said that unless demand intensifies, these types of distressed sales would continue.

    "This is the worst North Sea market for a long time," one trader said.

    This has weighed heavily on prices; Forties traded at the lowest differential to dated Brent since December 2008 this week, whilst Ekofisk traded at a nine-year low. Differentials for Nigerian grades were trading near five-year lows.

    Asian tenders that were the salvation of West African crude this spring have in the past week been awarded from floating storage, to Unipec and Trafigura, or pulled due to prices made expensive, partly by freight.

    "We see the overhang of Atlantic crude as supportive for both VLCCs and suezmaxes and as such remain positive near term despite the lack of a real contango curve which would renew interest in floating storage," Stavseth said.

    Attached Files
    Back to Top

    Eni talks on Mozambique sale sticking in oil slide

    Talks between Eni and suitors including Chinese state utility Huadian for a stake of around 15 percent in the Italian oil major's prized Mozambique gas field are dragging on due to differences over price, industry and banking sources said.

    State-controlled Eni is looking to sell around 8 billion euros ($8.8 billion) of assets in the next five years to fund growth in new markets and help ringfence dividends.

    The biggest foreign oil producer in Africa plans to raise around a quarter of these proceeds from the sale of minority stakes in top acreage such as Mozambique, Congo and Ghana, without giving up operatorship.

    In Mozambique, Eni is looking to sell down its 50 percent stake in its Area 4 field. But its insistence on remaining operator is likely to exclude majors such as Exxon and Shell who tend to favour controlling investments in big oil and gas projects, the sources said.

    "Eni's been talking to Huadian for a while, though there are other interested parties too. The aim is to close this year," one source with knowledge of the matter said.

    Eni declined to comment. Huadian did not immediately reply to an email for comment.

    Area 4 is located in Mozambique's Rovuma Basin, where gas in place amounts to some 85 trillion cubic feet -- one of the richest gas discoveries in recent times.

    Plans are to convert it into liquefied natural gas, or LNG, using onshore refrigeration plants so that it can be loaded onto tankers and shipped to consuming markets in Asia.

    "There is interest ... it remains to be seen if Eni has readjusted its pricing expectations," another banker familiar with the matter said.

    The field's huge productive capacity attracted peak valuations two years ago, when Eni sold 20 percent to China's CNPC for $4.2 billion, amid strong competition for reserves that could underpin one of the world's biggest gas export plants.

    But a halving of oil and gas prices since then, combined with an upcoming surge in global LNG export capacity and slowing demand, has dampened buyers' enthusiasm while Eni has been reluctant to budge on price, sources said.

    An oil analyst familiar with the Italian major said he calculated a 15 percent stake in the Mozambique field would be worth just $1.5 billion at today's oil prices.

    "Given the price uncertainty, Eni could end up selling down its Congo acreage first since that is all oil, easy to extract and very fast to get to market," the analyst said.
    Back to Top

    Xcite Confirms $35-per-Barrel Costs for Bentley Field

    UK North Sea-focused junior oil Xcite Energy reported its first quarter results Friday, confirming that full-field costs for its Bentley field development work out at $35 per barrel.

    Xcite made a net loss of $0.5 million during the three months to March 31, 2015, compared to a loss of $0.1 million in 1Q 2014.

    The company previously announced on April 30 the results of a reserves and resources assessment report (RAR) that showed 2P reserves for the Bentley field of 265 million barrels of oil – which was an increase of some eight million barrels on the RAR reported on February 25. A further 21 million barrels of P50 contingent resources were also assigned to the Bentley field.

    In a statement Friday, Xcite CEO Rupert Cole commented:

    "The reserves report is significant for us, as it incorporates much of the work we have completed over the past year with the development group, providing external validation to the recovery of the field, the development plan and execution strategy. Full field unescalated costs are expected to be approximately $35 per barrel have been underpinned by third-party quotes and estimates in order to increase the visibility of the robust economics of this development plan for the Bentley project.

    "We remain focused on developing the funding required to crystallize value from this asset."

    - See more at:
    Back to Top

    SandRidge Energy, Inc. Updates Shareholders on Liquidity and Flexibility

    SandRidge Energy, Inc. (the "Company") (SD) announced that it is entering into transactions which will increase current liquidity to approximately $1.4 billion, including a revised revolving bank credit facility containing leverage covenants that are less restrictive than under its current credit facility and a private offering of $1.25 billion of senior secured second lien notes ("Second Lien Notes"). Pricing detail of the $1.25 billion private offering of Second-Lien Notes has been previously disclosed by the Company.

    The Company will, concurrently with the issuance of its Second Lien Notes, revise its first lien credit facility, lowering its initial borrowing base availability from its current $900 million to $500 million, subject to maintenance of a first lien leverage ratio of not more than 2.0 times (senior first lien secured debt/ LTM pro forma EBITDA) and a minimum current ratio (including available borrowing capacity) of at least 1.0 times.
    Back to Top

    DNO produces daily 170,000 barrels of oil from the Tawke field

    DNO ASA announced a new daily record of 170,000 barrels of oil produced from the Tawke field in the Kurdistan region of Iraq, of which 30,000 barrels were sold into the local market and the balance allocated for export.

    Tawke production in the first quarter of 2015 was 104,925 barrels of oil per day (bopd), of which 8,679 bopd was sold into the local market. In the current quarter to date, production has averaged 146,309 bopd, including 26,027 bopd sold into the local market.

    The company's realized prices for local sales currently average around USD 40 per barrel, with payments received upfront and revenues split 50/50 with the Kurdistan Regional Government.

    'We are ramping up production, export and local sales following the recently completed Tawke capacity expansion,' said Bijan Mossavar-Rahmani, DNO's Executive Chairman. 'We will dust off investment plans as our revenue stream continues to grow,' he added.
    Back to Top

    Total's CEO expects funds for Yamal LNG to be unblocked by end-2015

    Total's chief executive said on Friday he expected funding for the $27 billion Yamal LNG project it is developing in Russia with Novatek to be made available by lenders before the end of the year.

    "It's progressing well. We think we'll get the funds before the end of the year," Patrick Pouyanne told reporters on the sidelines of the French oil major's annual general meeting.

    The liquefied natural gas (LNG) project in the Yamal peninsula in Siberia was barred from raising funds in U.S. dollars after the United States imposed sanctions on Russia. Total, Novatek and China's CNPC are now seeking funds in euro, yuan and rouble.
    Back to Top

    China LPG: Falls further on lower Asian spot prices, bearish outlook

    * Around 154,000 mt of imported LPG arrives in South China
    * Demand from petrochemical plants continues to shrink
    * Buying interest wanes ahead of Saudi Aramco's June CPs

    Imported and domestically produced LPG fell for the fourth consecutive week across southern and eastern China this week on the back of lower Asian prices and bearish outlook, traders said Friday.

    In the Asian spot market, prices fell to four-month lows on regional supply glut and weaker crude futures Thursday.

    CFR South China refrigerated LPG was assessed at $468/mt for propane and $503/mt for butane, down 6%-7% from last Thursday's $497/mt and $540/mt, respectively, Platts data showed.

    Traders also expect Saudi Aramco to set its June term Contract Prices for propane and butane in the range of $410-$425/mt and $440-$460/mt, respectively, both down from $465/mt and $475/mt for May.

    This also exerted downward pressure on spot prices this week, traders added.

    In China's southern Guangdong province, domestically produced LPG was heard to have traded lower at around Yuan 3,800-Yuan 3,900/mt ($620.96-$637.30/mt) Friday, down Yuan 50/mt from last week.

    Imported LPG cargoes of mixed propane and butane were expected to trade at around Yuan 3,850-Yuan 3,950/mt Friday, also down Yuan 50/mt from last week, local traders noted.

    "Several refineries and small terminals lowered their prices by Yuan 50-Yuan 100/mt for domestically produced LPG Friday morning, which is believed to have put pressure on the price of imported grade," a trader in the Pearl River Delta said, adding that the price of imported LPG was around Yuan 3,850-Yuan 4,000/mt earlier this week.

    "In addition to lower Asian values, ample supply of imported grade and weak seasonal demand also exerted downward pressure on LPG prices," he noted.
    Back to Top

    Fracklog status?

    • Image titlePeak record Saudi crude production has maintained oil prices below profitable levels for major U.S shale oil producers.
    • The result is fracklog, a backlog of 4,731 wells put on hold.
    • Shale producers CLR, WLL, PXD and EOG have reported crude price levels that would enable them to be profitable with continued improvement in efficiencies that reduce operational costs per barrel.
    • With current crude prices within a consolidation level, investors can balance supply against an expected greater summer demand for oil and watch for higher price movements if they occur.
    • Data are provided for the companies mentioned in this article to indicate oil price levels where they can be profitable.


    Fracklog is a term that is used to describe the number of wells waiting to be hydraulically fractured. If you think the U.S. is awash in oil now, think again, and thank the fracklog that it isn't worse. An analysis by Bloomberg Intelligence puts the backlog of wells at 4,731, with 322,000 barrels a day kept underground. To provide perspective, that is as much oil as Libya has been pumping this year and represents a tripling of wells that could be pumping oil. This crude is kept off the market with U.S. storage facilities now the fullest they have been since 1930.

    Attached Files
    Back to Top

    Texas Railroad data..late payments??

    Image title

    Thursday offered a case in point. The first March data to be released showed average monthly U.S. crude production at 9.5 million barrels a day, the highest level since 1972 and higher than indicated by the weekly data released in March. The weekly data showed that output peaked in mid-March around 9.4 million barrels a day, then declined, which boosted prices at the time.

    The production data for February and January were also revised higher. The EIA now reports production of roughly 9.4 million barrels a day for both months, up from last month’s figures of 9.2 million barrels a day for January and 9.3 million barrels a day for February.

    The updated figures suggest that the glut of oil in the U.S. may not shrink as quickly as bullish traders have expected. U.S. producers have gotten more efficient, and their service costs have dropped. Some producers now say that if prices stabilize around $60 or $65 a barrel, they can increase output.

    “Threshold oil prices required to drive production growth are considerably lower than what people thought,” said Bill Herbert, managing director at Simmons & Co. International. Shale-oil production is only about five years old, he noted, and its resiliency in a low-price environment has never been tested before. “We are going to be learning an awful lot in the next three to six quarters.”

    Attached Files
    Back to Top

    Alternative Energy

    Germany's record wind turbine growth boosts output

    Germany's wind power output in January-May rose 34% year on year and the country is on track for a third successive record year for new turbine installations, with the first wave of offshore wind farms finally coming online, a Platts analysis of the latest available data show.

    Wind turbines in Germany generated 32.5 TWh of electricity in January-May, up more than 8 TWh from a year earlier, grid operator data compiled by Platts Powervision show.

    On average, wind generated 7.5 GW each hour in the first five months of 2015, the data shows.

    The main reason for the rise is record growth in Germany's wind-power industry with Germany on track to install over 14 GW of new wind turbines between 2013 and 2015, averaging over 12 MW a day.

    That compares with 13 GW added in the seven previous years between 2006 and 2012, or averaging just 5 MW/day, data from Platts Powervision show.

    The offshore grid link bottlenecks now easing, the first wave of some 3 GW of German offshore wind farms is on track to be online by the end of 2015.

    Offshore wind power capacity registered for direct marketing was 2.225 GW in May, a fourfold increase from a year earlier, according to the latest data from the TSOs.

    Total onshore capacity was 38.116 GW as of end 2014 after a record 4.75 GW of new onshore wind capacity was installed last year.

    For 2015, wind lobby group BWE still expects another significant increase of 3.5-4.0 GW, it said earlier this year.

    The boom in additional wind capacity from 2013 to 2015 is in stark contrast to a sharp slowdown in new solar capacity, which boomed between 2010 and 2012 adding some 22 GW in those three years alone, Platts Powervision data show.

    German day-ahead prices in April averaged Eur25.30/MWh, the lowest monthly average in more than 12 years as the seasonal drop in demand combined with strong supply from renewables as well as conventional sources.
    Back to Top

    Qingdao to build provincial largest wind field

    Forty-six wind power project in Shangdong were approved recently by China's National Energy Board as part of the 12th Five-Year Plan (2011-2015) for renewable energy. Datang Group, with an installed capacity of 250,000 kilowatts, is the largest project, the Qingdao Daily reported.

    Qingdao, at the southern tip of the Shandong Peninsula, has a temperate monsoon climate. Its wind force of 3 or above in spring, autumn and winter is suitable for wind energy generation, explained a meteorologist from Qingdao¡¯s observatory.

    The coastal West Coast New Area, in particular, is one of the windiest areas in Shandong, due to its low mountains and hills. Its annual average wind speed in flat areas hit 2 meters/second.

    West Coast New Area has introduced State-owned enterprises since 2011. At present, there are five wind power projects and three development enterprises. The total installed capacity has reached 218,000 kilowatt.

    In 2014, the total electricity generation in West Coast New Area hit 330 million kilowatt-hours, and 110,000 tons of standard coal and 1.03 million tons of water were saved. The discharge of carbon dioxide was reduced by 210,000 tons.

    Datang's 250,000-kilowatt project, with 2 billion yuan ($322.6 million) of investment, will settle in the New Area's hilly land in the west.

    Upon completion, it is expected to generate 500 million kilowatt-hours of electricity per year, equal to 160,000 tons of standard coal. It will save 1.54 million tons of water, reduce carbon dioxide emissions by 320,000 tons and sulfur dioxide by 1,521 tons.

    "We will introduce related enterprises and professionals to the New Area, relying on the project," said Yang Yong, a manager of Datang, adding that it will also boost other advanced manufacturing industries.
    Back to Top

    The small windpower market expected to grow at 19.5% pa

    The small wind power market, in terms of types, has been segmented into horizontal axis wind turbine and vertical axis wind turbine.

    Small wind turbines have a power rating of 100 KW or less. These small wind turbines find applications in the micro-generation of energy, mainly to cater to the demands of small-scale commercial customers, residential customers, telecommunication providers, farms, and small industrial facilities.

    The global small wind power market was valued at $776.8 million in 2014 and is projected to grow at a CAGR of 19.5% from 2014 to 2019, to reach a market size of $1,895.0 million. The growth of this market is mainly attributed to the rise in demand for renewable sources for energy generation. Among the applications, the off-grid application segment accounted for the largest market share of about 66% of the global small wind power market in 2014.

    The major companies operating in the global small wind power market are Northern Power Systems Inc. (U.S.), Bergey Wind Power Co. (U.S.), Kingspan Group Plc. (Netherlands), and Xzeres Wind Corp. (U.K.).
    Back to Top

    At OPEC the Saudi Oil Minister Mainly Wants to Discuss Solar Power

    Everybody wants to know what the oil minister for Saudi Arabia thinks. These days, it's all about solar power.

    He's talking about it. A lot. Perhaps more than ever before. And some people in Saudi Arabia say it's for real this time. This matters, because it shows just how much renewable power is disrupting the traditional energy industry that's dominated for more than a century.

    In Vienna today, where OPEC ministers are meeting with the leaders of the world's biggest oil companies, Saudi oil minister Ali al-Naimi was asked an open-ended question that generated this revealing answer.

    Reporter: What would you like to hear from the oil executives over the next two days?

    Al-Naimi: What do they think the future holds? ... On the whole energy spectrum.

    Reporter: What do you think is interesting that is going on right now in the energy spectrum?

    Al-Naimi: Solar energy. It's an opportunity for everybody.

    It's interesting because just two weeks ago, while on a panel in Paris, the minister spoke at length about the nation's ambitious plans to push into solar power, recognizing that one day its fossil fuel exports will end. Al-Naimi said Saudi Arabia will be exporting lots of  electricity, rather than oil.

    We've heard this before, but so far almost nothing has happened. Saudi Arabia, the land of constant sunshine, today has less than 50 megawatts of solar power capacity, 0.1 percent of what exists in Germany, according to Bloomberg New Energy Finance. Much of its power comes from burning oil.

    This time it's different, according to Mohamed Ramady, petroleum professor at King Fahd University in Dhahran, who said a recent reorganization of the Saudi energy industry and related government ministries will spur solar-power development.

    "It is going to happen this time,'' he said.
    Back to Top

    Power line standoff holds back Germany's green energy drive

    Nestled in the hills of northern Bavaria, residents of Pegnitz once enthusiastically embraced Germany's green energy programme. Now they are pushing back, upset that high voltage cables and pylons are planned across their tiny town.

    It is a crucial phase in Chancellor Angela Merkel's "Energiewende", or shift from nuclear power and fossil fuels towards renewable energy sources -- a policy that has put Germany on the map as a leader on green issues before a G7 meeting on June 7-8 and a climate summit at the end of the year.

    But the resistance is developing into a major headache for Merkel. It is dividing her coalition, undermining her most ambitious domestic policy, creating uncertainty for some of Germany's biggest companies, and threatening the goal of producing nearly half of all power from renewable sources by 2025 while remaining Europe's economic powerhouse.

    One of three main power lines carrying wind power from the breezy north to the industrial south would cut through Pegnitz. Many of its 14,000 residents worry that it will destroy the landscape, devalue property and bring unknown health risks.

    "We are absolutely in favour of the Energiewende, but the power lines are the wrong way to implement it," Uwe Raab, the mayor of Pegnitz told Reuters. "The people in Pegnitz are frightened and upset."

    The issue is likely to come to a head in the next few weeks as the government has set a deadline of the end of June or start of July to reach agreement on the routes.

    "Studies suggest there could be a link between power lines and cancer," says Markus Bieswanger, leader of a protest group in the town. While there is no clear evidence of this, the uncertainty is enough to unsettle the public.

    Other towns are also in revolt. Since the federal network agency presented its master plan to build the three high-voltage direct-current transmission lines from north to south, protest groups have formed across the country.

    The conflict has escalated since the combative premier of Bavaria, Horst Seehofer, head of Merkel's sister party, the Christian Social Union (CSU), bowed to public concern and publicly revoked his support for the grid expansion.

    So the governing coalition has delayed a decision on whether to go ahead with the three power lines several times, creating uncertainty for the economy and Merkel's grand project -- just as it has also delayed a plan to reduce emissions from coal plants under pressure from miners and industry.

    Underground cabling and modernising existing pylons could be a solution at least in some areas, the net operators say.

    But Raab, the mayor, remains sceptical. He fears that protests could turn violent as was the case in the Bavarian town of Wackersdorf in the 1980s. Back then, citizens prevented the construction of a nuclear reprocessing plant. During clashes with police, hundreds of people were hurt and some even killed.
    Back to Top

    Federal officials approves for three solar power farms

    The Hill reported that federal officials have approved the first 3 proposed solar power farms under a streamlined permitting program for solar projects on federal land.

    The 3 projects are all on Bureau of Land Management property in Clark County, Nevada and will together have a capacity of 440 MW, enough to power about 132,000 homes.

    BLM said that the projects benefitted from the Western Solar Plan, which identified 19 specific areas that could benefit from solar power, and set up streamlined permitting processes for them. The permits took less than 10 months to process.

    The Interior Department, of which BLM is a part, said that the process shows that officials can effectively encourage solar power by reducing barriers.

    Ms Sally Jewell, Interior Secretary, said in a statement that “Through thoughtful planning and upfront public participation, these solar projects demonstrate we can reduce permitting times, create certainty for energy developers, and achieve better outcomes for communities and the environment.”

    She said that “Through a landscape-level approach, we are cutting carbon pollution and creating jobs through responsible solar development on our public lands.”

    Mr Neil Kornze, Director of BLM, said that “Projects like these demonstrate that regional planning and mitigation can achieve much faster permitting times and better outcomes. The Western Solar Plan provides a win-win approach for communities and for our public lands.”

    The projects are being built by Invenergy, First Solar Inc and NV Energy. Each company won the project rights in a June 2014 auction that brought in USD 5.8 million for the federal government.
    Back to Top

    Expansion in U.S. ethanol on hold after blending targets slashed

    Expansion in the U.S. ethanol industry, stuck in neutral for more than a year as the government debated biofuel blending requirements, is now likely to come to a screeching halt.

    With the U.S. Environmental Protection Agency last week essentially maintaining the so-called blend wall that mandates nearly every gallon of gasoline sold in the United States contain 10 percent ethanol, there is little need for new plants in a saturated market, industry sources said.

    Ethanol makers are putting expansion plans on hold as profit margins sag, threatening corn producers already suffering from low grain prices and massive supplies.

    Existing ethanol facilities can supply as much as 15.75 billion gallons, according to Scott Irwin, an agriculture economist at the University of Illinois specializing in biofuels.

    That is more than enough to meet demand for domestic blending for this year of about 13.4 billion gallons of corn-based ethanol as well as export demand, on pace to reach roughly 1 billion gallons.

    "We have the supply handled - we're a little long on supply," said Mark Warren, chief financial officer at consultancy Ascendant Partners.

    An ethanol plant in North Dakota that began operating last month was the first such startup in five years and, possibly, the last for the foreseeable future.

    Ethanol stockpiles of 20 million gallons ET-STK-T-EIA are the largest in about three years, prices of $1.50 per gallon hovering near the lowest levels in a decade.

    Dakota Spirit AgEnergy, a $155 million project, is fine-tuning the ethanol plant that will be able to produce 65 million gallons annually, said Jeff Zueger, chief executive officer of Midwest AgEnergy Group.

    Top producer Archer Daniels Midland Co, which closed an ethanol plant in North Dakota in 2012, has no plans to expand ethanol operations, company sources said.

    Producers still are earning money, benefiting from record supplies and the lowest corn prices in five years. But current profit margins of about 30 cents per gallon pale in comparison with the record profits of $2 per gallon last year and are a dime below average returns from the last eight years, according to Iowa State University.
    Back to Top

    Iran plans to purchase 80 wind turbines - Mr Harsini

    Mr Iraj Harsini, director for engineering affairs of Renewable Energies Organization, said that Iran's Renewable Energies Organization plans to purchase 80 wind turbines to be installed mainly in the southeastern Sistan Balouchestan province.

    Mr Harsini said that Iran, enjoying a unique strategic position, could use win as a secure source of energy for generating electricity.

    He said that Sistan Balouchestan, East Azerbaijan, West Azerbaijan, Qazvin, Semnan and Khorasan are good places for the installation of wind turbines.

    Mr Harsini said that the wind turbines could not be installed in northern and southern coasts due to irregular winds.

    He said that "Using wind energy brings about energy security and will contribute to curbing fossil fuel consumption because that would reduce the country's dependence on the electricity generated by power plants which are mainly fed by gas and petroleum products."

    According to Mr Harsini, more than 200 wind turbines are operating in Iran.
    Back to Top

    Miner Molycorp misses $32.5 mln interest payment

    Miner Molycorp Inc said it missed a $32.5 million interest payment on its senior secured notes.

    Molycorp has a 30-day grace period to make the payment, after which it would be considered in default, the company said on Monday.

    Molycorp, which posted its thirteenth consecutive quarterly loss last month, had warned its annual report in March that it might not have enough money to stay afloat if its debt restructuring efforts failed.

    Missing the loan repayment deadline could lead to Molycorp filing for bankruptcy by the end of the month.

    Attached Files
    Back to Top

    India could incentivize rooftop solar projects - Mr Goyal

    Mr Piyush Goyal, Power and New and Renewable Energy, realized that rooftop solar projects in India stand to be incentivized if a proposal made by the Minister for Coal.

    Also, the government is reportedly in talks with banks to provide loans for clean energy initiatives such as solar rooftop installations as part of home loans in future.

    Mr Goyal said that he would discuss introduction of tax incentives for purchase of rooftop solar panels with Finance Minister Arun Jaitely. He made the statement in response to a question raised during Talkathon, a program on state television.

    The minister also added that reduction of interest rates on loans for solar panels would be considered.

    Earlier, the government had introduced FAME, a scheme aimed at promoting the manufacture and use of electric vehicles.

    The initiative is being organized by CII under Green Jobs Sector Skill Council and Surya Mitra Initiative. The government plans to train 50,000 youths to be called Surya Mitras across the country for the purpose.

    Mr Goyal also indicated that construction rules would be amended to facilitate adoption of clean power and energy conservation in large commercial, industrial and residential projects.

    The incumbent government has set a renewable energy expansion target of 175 gigawatts by 2022. The capacity will be comprised of 100 GW solar, 60 GW wind, 10 GW biomass and 5 GW of small hydro projects.
    Back to Top

    Worlds largest solar park

    Karnataka, which entered the global power map by setting up Asia’s first hydroelectric station, is now embarking on another milestone mission of setting up a mega solar power park, said to be the world’s biggest. The park, with a capacity of 2,000 MW, will come up on 10,000 acres of land in the parched Pavagada taluk of Tumakuru district.

    Secretary, Union Ministry of New and Renewal Energy, Upendra Tripathy and Additional Chief Secretary, Karnataka Energy Department, Ravi Kumar, who announced this at a press conference here on Friday, said the work on the proposed park would start soon.

    The 1,000 MW solar park being implemented in Andhra Pradesh is the biggest such project so far in the country. The Centre would support the park by offering a subsidy of Rs. 20 lakh per mega Watt, Mr. Tripathy said.

    According to sources, Pavagada was chosen for the solar park because of a combination of various factors, including high sunlight exposure, backwardness of the area, and lesser demand for land.

    In addition to the park, Karnataka has bigger plans for the renewable energy sector as the State on Friday committed itself to setting up projects to tap green energy to the tune of 16,000 MW in the next five to seven years. The commitment was made at a meeting with Ministry of New and Renewal Energy authorities here where the Centre wanted the States to take up the responsibility of executing green energy project proposals to the tune of 1,75,000 MW received by it during the renewable energy global investors’ meet.

    To facilitate evacuation of such a massive quantum of renewable energy from the generation sites, the Centre has also decided to set up an exclusive pan-India green corridor at a cost of Rs. 36,000 crore, Mr. Tripathy said. To raise resources for renewable energy sector infrastructure, the Centre would float tax-free green bonds to the tune of Rs. 5,000 crore in about three months from now, he said.

    Set up roof-top solar plants with home loans

    Special Correspondent

    Now, you can set up a roof-top solar power plant on your house to take care of your power requirements through bank loans which would be part of home loan or home improvement loan.

    Secretary, Union Ministry for New and Renewable Energy, Upendra Tripathi, who announced this at a press conference here on Friday, said this was possible as the Reserve Bank of India had included renewable energy under the priority lending category. Individuals could borrow a maximum of Rs. 10 lakh under this scheme.

    Also to take care of the service and repair requirements of such roof-top solar power plants, the Centre was set to launch Surya Mithra scheme under which 50,000 rural unemployed youth with a qualification of Class 7 would be given free training in handling solar power plants, he said.

    Back to Top


    Looming 15% uranium market supply gap could spur price revival – Cameco

    An emerging 15% supply gap could signal a prolonged upturn in the uranium price through to 2024, Canadian uranium major Cameco said on Thursday. A decline in secondary sources of yellowcake was forcing the market to increasingly rely on primary suppliers, which, when coupled with unprecedented growth in the nuclear reactor industry, foretold improved market conditions over the medium and long term, investor relations director Rachelle Girard told the Cantor Fitzgerald Annual Global Uranium Conference, in New York. 

    Cameco expected the market to expand at 4% a year to about 230-million pounds of uranium oxide a year by 2024, a far cry from today’s output of about 140-million pounds, excluding projects under development.

    Worldwide, about 63 new nuclear reactors were under construction, but the world’s insatiable need for electricity could see a further 81 more nuclear reactors come on line in the future. 

    The global uranium market had been stumped by Japan's March 2011 Fukushima Daiichi nuclear disaster, which prompted all nuclear reactors to be shut down in Japan. The natural-disaster induced crisis had created significant global uranium market backlash and public opinions about the safety of using nuclear-derived power took a beating. This had eroded demand and caused a global supply glut, as the Japanese nuclear fleet remained largely offline. 

    Girard said Japanese reactor restarts could kickstart uranium demand growth and start clearing the excess market supply. However, the low-price environment was keeping investment low in new uranium development projects, which could see the primary uranium producers finding it difficult to keep up with demand, once the market started to rebound. 

    “The world needs four more Cigar Lakes to keep up with future demand,” Girard stressed. China would account for 57 new nuclear reactors by 2024, while Indian nuclear-sector growth was poised to take off with 16 new reactors expected to be built by then. 

    Cameco’s recent C$350-million deal to supply more than seven-million pounds of uranium concentrate to India had opened the door to a significant previously inaccessible market, Girard noted. Other developing regions such as the Middle East, Southern Africa and South America were also expected to increasingly draw on the demand side. 

    And when the inevitable global market improvement had started gaining sustained traction, Cameco would be waiting in the wings, able to quickly ramp-up output to about 30% of the global output by 2024. “Cameco has the pounds in the ground when the market calls for it,” Girard said. 

    Cameco expected Cigar Lake to ramp up to its full production rate of 18-million pounds by 2018.
    Back to Top

    Anatolia and Uranium Resources on fast track to production with merger

    Uranium hopeful Anatolia Energy on Thursday announced that it had reached a merger agreement with US-based Uranium Resources to create a larger diversified uranium development and exploration business. 

    Under the terms of the transaction, Uranium Resources would acquire full control of the ASX-listed Anatolia by offering shareholders 0.06579 of its own shares for every one Anatolia share held. 

    The offer valued Anatolia shares at A$0.115 a share, and represented a premium of 29.1% on the company’s closing price prior to the announcement of the merger, and a premium of 47.3% on the 30-day volume-weighted average price.

    On the completion of the merger, Anatolia shareholders would hold a 40.6% interest in the combined entity, with Uranium Resources shareholders owning 59.4%. Anatolia MD and CEO Paul Cronin said on Wednesday that the merger with Uranium Resources would provide a solution to Anatolia’s current objective of advancing its Temrezli project, in Turkey, into production as quickly as possible. 

    Cronin said that the merger brought with it the possibility of reducing up-front capital costs for the Temrezli project if the merged entity could successfully relocate and use Uranium Resources’ Rosita processing plant, in South Texas. “The Rosita processing plant had major upgrades and additions in 2007/8, before construction was halted. It is fit for our Temrezli project and has the added benefit of already being designed and constructed with the ability to scale-up the production profile from 800 000 lb/y uranium oxide (U3O8), to 1.6-million pounds U3O8 a year, with some additional upgrades, which will accommodate potential future production from satellite operations that may feed into the Temrezli central processing plant.” 

    A February prefeasibility study into the Temrezli project, based on a central processing plant delivering 1.2-million tonnes a year of U3O8, estimated that a capital investment of $41-million would be required.
    Back to Top

    State Power Investment comes into being, holding 700 bln yuan asset

    State Power Investment Corporation (SPIC) formally came into being by incorporating China Power Investment Corporation (CPIC) and Statenuclear Power Technology Corporation (SNPTC) on May 29, after approved by the State Council.

    With an asset of over 700 billion yuan and annual revenue of more than 200 billion yuan, the SPIC will become another power giant in China, together with long-existed China National Nuclear Corporation (CNNC) China General Nuclear Power Group (CGNPG).

    "The founding of SPIC is one of the moves of the central government to deepen the reform of central enterprises, and it marks a new breakthrough in the reform of nuclear power system since the turn of the century”, said Tang Zide, former Deputy Director with the Nuclear Power Development Office under the State Council.
    The incorporation is deemed as a win-win option, because the CPIC is one of China’s top five power groups and capable of earning profit continuously, while the SNPTC is known for advanced technological innovation ability in nuclear power.

    The SPIC will integrate both the upstream and downstream sectors, and it will break the duopoly of the SNPTC and CGNPG in nuclear power sector. The IPO will also be put on agenda.
    Back to Top

    Paladin corners Carnarvon basin with Carley Bore uranium acquisition

    Perth-based Paladin Energy on Monday announced that it would buy the Carley Bore uranium project in Western Australia’s Carnarvon basin from Energia Minerals in a A$15.8-million transaction. 

    The acquisition would consolidate Paladin Energy’s control of an emerging uranium province around its Mayingee project, where the company is considering an in-situ recovery (ISR) operation producing two-million pounds a year of uranium oxide (U3O8). 

    “The current low uranium price and sustained sector weakness have created an opportunity to consolidate our portfolio in strategically important regions for the company. This acquisition is certainly a game changer for us in terms of our Australian projects. With this land package, we have cornered a significant portion of the emerging Carnarvon basin uranium province,” commented Paladin MD and CEO John Borshoff. 

    Paladin, which also owns mines in Namibia and Malawi, said the potential to develop a significant mining operation with a mine life extending beyond 20 years in a new mining district was compelling.  However, it would only develop new projects when the uranium price reached at least $70/lb.   

    Paladin said it envisaged Carley Bore as a satellite operation with Manyingee as the main processing hub. 

    “The ability of ISR projects to operate with a central plant supported by numerous satellite deposits typically results in a lower capital cost and highly cost effective development approach. For decades, a similar satellite and central processing hub and spoke strategy has been successful at a number operations in the US and is currently used at Heathgate Resources’ Beverly ISR uranium project, in South Australia, with the Four Mile, Panniken and Pepegoona deposits,” the company said in a statement. 

    The acquisition would increase Paladin’s Joint Ore Reserve Committee-compliant indicated mineral resources in the area by more than 30% to 20.7-million pounds of U3O8 at a grade of 680 parts per million (ppm), and doubled the inferred mineral resources by to 20.9-million pounds at a grade of 415 ppm. Paladin stated that it could potentially increase the resource base by a further 15-million pounds to 25-million pounds. Exploration work in the 2016 financial year would focus on resource extensions to Carley Bore and regional exploration to test potential for additional uranium deposits.
    Back to Top


    Agribusiness nervous as WHO cancer unit analyzes popular pesticide

    The World Health Organization is set to examine a widely used pesticide and agribusiness is bracing for bad news, less than three months after the group classified another popular herbicide as "probably" cancer-causing.

    Twenty-four scientists representing WHO's International Agency for Research on Cancer (IARC) will analyze scientific findings regarding links between cancer in humans and the herbicide known as 2,4-D at a June 2-9 meeting in Lyon, France.

    A separate group of IARC scientists in March unanimously decided to classify glyphosate, the key ingredient in Monsanto Co's Roundup weedkiller, as "probably carcinogenic to humans." The designation prompted outrage and calls for a retraction from Monsanto, and demands by some public officials and consumers for bans on the pesticide.

    Many believe the same could happen for 2,4-D.

    "I do think they are going to upgrade 2,4-D," said Michael Hansen, a senior scientist at Consumers Union who has served on an advisory committee of the U.S. Department of Agriculture as well as an expert on WHO consultation projects.

    "There is just as strong, or even a stronger case (for links to cancer), on 2,4-D than there was for glyphosate," he said.

    IARC's work is of particular concern to Dow AgroSciences, a unit of Dow Chemical Co. The company manufactures 2,4-D and this year is rolling out a product that combines 2,4-D with glyphosate after approval from the Environmental Protection Agency last year.
    Back to Top

    Precious Metals

    End of an era as largest gold ETF drops out of top 10

    Once the largest fund of its kind in the world, top physical gold-backed exchange traded fund – SPDR Gold Shares (NYSEARCA: GLD) – has dropped out of the top ten.

    According to GLD suffered outflows of $902 million or 3% of its total assets under management during May.

    That compares to total inflows in US-listed ETFs – dominated by US and international equity funds – in May of more than $12 billion and the year to date total if $84 billion.

    GLD still dwarfs other physically-backed exchange traded gold products holding 44.5% of the global total at 709.9 tonnes or 22.8m ounces worth $26.8 billion.
    Back to Top

    For risk-wary gold miners, small is beautiful

    Bigger isn't better for the world's gold miners, who are increasingly making "bite-sized" developments that carry less risk of budget disasters and fewer of the political and environmental disputes that have derailed mega-mines in recent years.

    Newmont Mining is a prime example of how companies are responding to bleak industry conditions by building mines on a smaller scale than in the past, with the price of gold down almost 40 percent from its peak in 2011 and banks avoiding the sector.

    The cautious approach will likely persist even if conditions improve, with miners increasingly teaming up on big, complex projects to share costs, expertise and risk, senior mining executives and industry watchers said.

    "If there's going to be something go wrong, you'd rather it go wrong after you've spent $1 billion than $3 billion or $4 billion," said Goldcorp Inc Chief Executive Chuck Jeannes. Goldcorp, the world's most valuable gold miner by market capitalization, owns stakes in a number of joint-ventured assets such as the Alumbrera gold mine in Argentina and the Pueblo Viejo gold mine in the Dominican Republic.

    Barrick Gold, the world's largest bullion producer, could be the poster child for problem-plagued mega-mines.

    Newmont Mining, the world's No. 2 gold producer, decided to start small with its recently-announced Long Canyon project in Nevada.

    The first phase is a $250 million to $350 million development funded with cash flows and available cash, using existing staff. Payback is projected in just over four years.

    Rather than building all the infrastructure for future phases up front, this approach makes each successive phase carry and provide its own return-on-investment, said Newmont CEO Gary Goldberg.

    Yamana Gold is building Cerro Moro in Argentina for $265 million over two and a half years. It will be Yamana's smallest operation on a throughput basis, or the volume of ore processed each day. "It's a sweet spot in terms of manageable capital expenditures over an extended period of time," said CEO Peter Marrone.

    But miners have learned from the past five years, said Joseph Foster, portfolio manager at Van Eck, Barrick's biggest shareholder. "I don't think we'll see the capital cost blowouts and the margin squeezes going forward that we have in the past," Foster said. "They've learned a very hard lesson and I don't think they'll forget it."
    Back to Top

    Weaker rouble pushes Russia's Alrosa Q1 profit to 22.2 bln rbls

    Russian diamond mining company Alrosa said on Thursday its net profit rose to 22.2 billion roubles ($409 million) in the first quarter of 2015, up almost fourfold year-on-year due to a weaker rouble.

    Alrosa, the world's top producer by output in carats, and other Russian exporters have benefited from the depreciation of the rouble, weakened by Western sanctions and lower oil prices, as their costs fell in dollar-terms, supporting margins.

    "First quarter results were mainly driven by a favourable foreign exchange market environment," chief executive Andrey Zharkov said in a statement.

    The company also said it achieved higher prices for its gem-quality rough diamonds due to a better product mix, which helped to compensate for weaker market demand.

    "The diamond market in the first quarter was less active compared with (the same period last year) due to a lower demand for rough diamonds from Indian cutters and polishers," Zharkov said.

    Earnings before interest, taxation, depreciation and amortisation (EBITDA) rose to 42.9 billon roubles, up 65 percent compared to the previous year, the company said. Revenue increased 31 percent to 74.6 billion roubles.

    Alrosa recorded a 16.8 billion rouble loss last year, as the tumbling value of the rouble prompted a revaluation of the dollar-denominated part of its debt.

    But the miner has said it expects net income of 100 billion roubles in 2015 and to increase sales by one percent, taking advantage of rising production and using offtake from its stock. ($1 = 54.3005 roubles)
    Back to Top

    Lonmin’s value near an all-time low

    Three years of falling platinum prices have left Lonmin Plc near an all-time low and valued at just $1.3 billion. That’s down from a peak of more than $12 billion in 2007 for the miner of the metal used in cars and jewelry. And now the company’s largest shareholder, mining and commodities giant Glencore Plc, is getting set to divest its 23.9 percent holding in Lonmin by distributing the stake to its shareholders.

    Glencore, which acquired its stake in Lonmin in the 2013 takeover of Xstrata Plc, is divesting the holding because “we do not trade platinum and have no special insight into the market,” Chief Executive Officer Ivan Glasenberg said when the plan was announced in February.

    After Glencore distributes its Lonmin shares on June 9, that may create a group of sellers that want to dispose of their holding, according to Investec. It also could create an opportunity for a buyer.

    “Certainly they are a target — their market valuation is more or less the same as sinking a shaft,” Adrian Williams, a mining analyst at Avior Capital Markets Ltd. in Johannesburg, said by phone. “It’s not a particularly well-run company, but they’ve got good assets.”

    While excessive stockpiles of platinum may continue to keep prices depressed for now, at some point the supply-demand balance will shift. The average price of the metal is expected to increase more than 25 percent to $1,618 an ounce by 2018, according to the median forecast of 23 analysts surveyed by Bloomberg.

    For buyers willing to make an early bet on the rebound, Lonmin represents a bargain.

    Lonmin may appeal to a larger competitor such as Impala Platinum Holdings Ltd., according to Stanlib Asset Management Ltd. Impala is building new shafts and has capacity to treat additional ore at its own processing facilities, allowing it to produce platinum cheaper. A Chinese buyer may be interested in acquiring Lonmin as a way to lock in a supply of the metal, according to Imara SP Reid Pty Ltd.
    Back to Top

    AngloGold in exclusive talks with Newmont on Colorado mine – sources

    Newmont Mining is in exclusive talks with AngloGold Ashanti as it moves closer toward clinching a deal to buy the African miner's Cripple Creek & Victor gold mine in Colorado, according to two sources familiar with the matter. A sale could be finalised soon, and the price for the gold asset is likely to be well below the $1-billion that was initially speculated on by analysts, said the sources, who asked not to be named as they are not authorised to discuss the matter publicly. 

    The sources said that if South African-based AngloGold agrees to a sale, the asset is likely to fetch a price somewhere in the $700-million to $800-million range. One source said that the divestiture process, which is being led by BMO Capital Markets, may still result in the partial sale and not an outright sale of the entire asset. 

    Other players that had been vying for the Cripple Creek asset and that may still re-enter the fray if Newmont fails to strike a deal, are Canadian gold miners Iamgold, Kinross Gold, Goldcorp and Yamana Gold. 

    US-based gold and silver miner Hecla Mining had looked at the asset but decided against making a bid for it, Luke Russell, the company's VP for external affairs said. Cripple Creek & Victor is an openpit mine that produced some 211 000 oz of gold in 2014 and about 110 000 oz of silver. 

    AngloGold, the world's No 3 gold miner by production, said in April it was looking for a partner or buyer for the mine as it attempts to reduce its $3.1-billion debt pile by at least $1-billion over the next one to three years.
    Back to Top

    Seven diamond miners form group to fight synthetics

    Russia’s Alrosa, Anglo American’s De Beers, Rio Tinto, Lucara, Dominion, Petra and Gem Diamonds are joining forces to market their gems and counter threats such as the expansion of synthetic stones.

    The group, called the Diamond Producers Association (DPA), will promote diamonds as a luxury item for high-end consumers and highlight the attraction of natural diamonds amid concerns that some consumers may soon begin favouring cheaper synthetic rocks.

    The association, which counts with a $6 million yearly budget, claims to be “the first-ever international representative organization to be formed by some of the leading diamond producers,” DPA said in an e-mailed statement.

    The freshly formed entity will step into a role once filled by De Beers, which at one point controlled over 80% of the world’s mined diamonds and pioneered the use of diamonds in engagement rings.

    Industry sources believe DPA's key challenges will be to curb entry of undisclosed man-made diamonds into the market. But for diamond analyst, Paul Zimnisky, such task won’t be a challenging one. At least for now:

    “The pricing of synthetics is not yet attractive enough to convert the indifferent customer, nor is the product accessible enough for the unwilling e-shopper,” he wrote earlier this month. “Until there is at least one display case devoted to synthetics in the national jewellery chains and department stores, synthetics' reach may be limited to being just that of a specialty item."

    In the past year, prices for rough diamonds have fallen 13%, affecting miners everywhere.

    Attached Files
    Back to Top

    Base Metals

    First Quantum closes C$1.44bn equity financing

    First Quantum Minerals has completed the previously-announced overnight-marketed public offering of common shares at C$16.25 per common share.

    Including the common shares issued on the exercise of the over-allotment option, First Quantum issued 88,461,450 common shares for aggregate gross proceeds of C$1,437,498,563. The underwriting syndicate was led by RBC Capital Markets and Goldman Sachs Canada Inc, and included Barclays, BNP PARIBAS, Deutsche Bank Securities, Jefferies International Limited and Nomura.

    First Quantum intends to initially use the largest portion of the net proceeds of the offering to reduce net debt and thereby reduce its interest expense, for further capital investment in respect of the company's existing production facilities and development projects, and in respect of strategic initiatives to further enhance its growth pipeline.
    Back to Top

    Zinc likely to struggle in the short term

    Zinc prices are likely to struggle in the short term, weighed down by a more plentiful supply situation than forecast.

    Analysts and industry sources said that more inventories are due to move into LME warehouses while two mine operations will produce more than expected despite well flagged closures.

    Zinc is one of the best performing metals on the London Metal Exchange and has been a favourite of investors in recent years due to the prospect of shortages developing because of the shutdowns of major mines.

    Benchmark LME zinc surged by a fifth during the six weeks to May 5, when it hit an eight month peak of USD 2,404.50 per tonne but has since given up about half of those gains.

    Some analysts are concerned about more flows of inventories into LME warehouses after 36,400 tonnes arrived in Malaysian depots on May 19, the biggest one day inflow in over a year.

    Ms Vivienne Lloyd analyst at Macquarie in London said that “We expect to see some more material being warranted and we can only assume that will restrain any further bullish sentiment for zinc for now. Warrants are ownership documents for metal placed in LME certified warehouses.

    She said that “Sizable amounts of metal are in non-LME warehouses in Asia and the United States, which may be shifted into LME facilities. Lloyd expects inflows in both June and July mainly due to LME market dynamics, which included a strong backwardation in May, where nearby prices are higher than forward ones.
    Back to Top

    Alcoa supplying aerospace aluminum for Samsung Galaxy 6 phones

    Metals company Alcoa Inc said on Thursday it is supplying aerospace-grade aluminum to Samsung Electronics Co Ltd for its Galaxy S6 and S6 edge models, enabling the smartphone maker to produce more durable and sleeker phones.

    Phones made with 6013 Alcoa Power Plate, which is 70 percent stronger than standard aluminum are available now globally, Alcoa said.

    This latest announcement fits New York-based Alcoa's strategy of moving away from costly traditional smelting and refining toward more value-added businesses such as automotive and aerospace.

    "Alcoa's Power Plate is the perfect fit to create the phones that our customers want: thinner, lighter, and stronger," DJ Koh, executive vice president of Samsung's mobile communication business said in a statement put out by Alcoa.

    Part of aluminum's strength comes from heat treatment. The plates are a few millimeters thick and are produced in South Korea.

    Sales of Samsung's flagship Galaxy S6 smartphones reached 6 million units at the end of April, less than a month after their launch, researcher Counterpoint said on Tuesday.

    Counterpoint said it expected sales for the new Samsung flagship phones to reach 50 million by the end of the year, which could make it the world's top-selling smartphone ahead of the iPhone 6 series from rival Apple Inc O>.

    While the flat-screen S6 sold more in April, the researcher said sales of the curved-screen S6 edge would have been higher had it not been for supply constraints.

    Samsung has said supply problems for the edge model will be resolved within the current quarter.
    Back to Top

    Zambia mulls cutting mining royalties even further

    According to state broadcaster ZNBC, mines minister Christopher Yaluma said that lower taxes would make underground mining more cost effective.

    Zambia set mining royalties for both open-pit and underground mines at 9% in April, abandoning a short-lived tax hike that would have seen the government charging as much as 20%.

    The royalty increase prompted warnings of closures and thousands of job losses, underscoring a growing trend across the continent, where governments from Tanzania to Guinea are changing tax regimes and adjusting ownership structures to get a larger share of natural resources.

    From 1997 to 2013, mining attracted $12.6bn in foreign investment to Zambia, according to industry figures. The capital injection helped the southern African nation become one of the continent’s star economic performers, with average annual GDP growth of 6.4% over the last decade.

    Today, mining employs 90,000 people and contributes about three-quarters of the country’s foreign exchange earnings and 25-30% of government revenue.
    Back to Top

    Vedanta to extend life of Skorpion zinc mine

    Vedanta Resources is extending the life of its Skorpion mine in Namibia by two years to financial year 2019, which could mean higher-than-expected supplies of zinc.

    Skorpion produced about 102,000 tonnes of refined zinc metal in the last financial year, Vedanta said last month.

    "At Skorpion, plans are in place to extend mine...FY2017 to FY2019," the miner said in its annual results report.

    "This is being achieved by deepening of current open pit to access additional resources. Mine production will end in FY2019 and oxide ore processing will continue until FY2020 from stockpile."

    Higher zinc supplies are likely to dampen the enthusiasm of zinc bulls expecting higher prices on the basis of mine closures this year.

    A recent Reuters survey showed analysts expect the zinc market to see a 145,300 tonne deficit this year and a 200,000 tonne deficit in 2016.
    Back to Top

    Seafloor copper extraction better than traditional mining — report

    Extracting copper from the seabed can be cause less disruptions to the environment and local communities than traditional mining. (Image courtesy of Nautilus Minerals)

    A fresh study commissioned by Canadian seafloor miner Nautilus Minerals (TSX:NUS) shows than extracting copper from the seabed causes less disruptions to the environment and local communities than traditional mining, the company said.

    The report, released by Earth Economics, compared Nautilus' copper, gold Solwara 1 project — located in the Bismark Sea, north of Papua New Guinea — to three traditional copper mines: Bingham Canyon (Utah, U.S.), Prominent Hill (South Australia, Australia) and Intag (a proposed project in Ecuador).

    Based on the analysis of each mine’s social and environmental impacts, the research concluded that seafloor mining has the potential to not only provide economic benefits within the communities nearest to the operations, but also to minimize the impact of copper mining.

    According to Nautilus Minerals, the study proves that the proposed Solwara 1 project would be "far superior" than existing and proposed terrestrial copper mines. “[Seabead mining] has also the potential to change the physical nature of the mining industry for the better," Nautilus' chief executive officer said in a statement.

    The Toronto-based company, the first yet not the only one with projects to mine the ocean floor, summarized the key finding of the reports as follows:

    Attached Files
    Back to Top

    Guinea bauxite miner CBG plans $1bn expansion to meet demand

    Guinea bauxite miner Compagnie des Bauxites de Guinée (CBG) plans a $1-billion expansion to increase its production capacity to 23.5-million tonnes per year by 2018 to respond to increased demand, the firm's director general said. 

    CBG is 51% owned by Halco Mining consortium, controlled by aluminium producer Alcoa, global miner Rio Tinto and Dadco Investments. 

    The company signed a contract with Abu Dhabi state-owned investment fund Mubadala and Dubai Aluminium (Dubal) in 2013 to supply ten-million tonnes of bauxite, starting with five-million tonnes from 2017. 

    Namory Conde said CBG had signed other supply deals which required it to invest heavily to expand its production capacity to meet the demand. "We have finalised a roundtable with financial partners. 

    The expansion project will cost around $1-billion," Conde said, but did not give details on how the funds will be secured. He added that financial advisers selected by the partners will visit the firm in June to conclude the project. 

    Conde said 2014 output was not adversely affected by the worst outbreak on record of an Ebola epidemic which began in Guinea and spread to several countries in the region, killing over 11 000 people. Although the outbreak curtailed mining activities in the region, Conde said CBG's operations in Kamsar, north of the capital Conakry, was spared the worst of the epidemic as production hit a record 15.2-million tonnes in 2014 compared with 15-million in 2013.
    Back to Top

    Asian Warehouses 1/10 LME costs

    Traders who normally make money as middlemen shipping commodities around the world are increasingly shifting their metals holdings from London Metal Exchange-approved warehouses to cheaper, less well-documented locations, analysts say.

    The traders’ main aim is to reduce storage costs, a big chunk of their expenses. Warehouses in places such as Malaysia, South Korea and Singapore typically charge storage rates that are as low as one-tenth of those levied by official LME warehouses.

    But while the LME publishes daily data about stock levels in its warehouses, little is certain about the size of metal stockpiles held outside its network.

    Back to Top

    Steel, Iron Ore and Coal

    Molybdenum oxide at 11-year low, threatens to break $7.50/lb

    Molybdenum oxide prices hit the lowest point seen in 11 years on Thursday, June 4, as buyers continued to stay away from the market despite lower offers.

    Platts' daily molybdenum oxide was at $7.50-$7.55/lb from $7.50-$7.60/lb giving a mean of $7.525/lb, the lowest level seen since 26 February 2004, when Platts' weekly dealer oxide mean was at $7.35/lb.

    "I can't sell at $7.50/lb, but I don't think any sales have been done lower," one European trader source said. Others agreed that despite market talk of $7.40/lb and $7.45/lb being concluded, there was evidence of sales.
    Back to Top

    POSCO to sell stake in construction unit to Saudi fund - Officials

    Company officials said that POSCO will sign a deal to sell a 38 percent stake in POSCO Engineering and Construction (E&C) to a Saudi sovereign fund this month.

    POSCO E&C held a board of directors meeting Monday and decided to issue new shares worth 400 billion won and sell them to the Public Investment Fund (PIF) of Saudi Arabia.

    Previously, POSCO Group, the company's largest shareholder, said during a recent board of directors meeting that it would sell a 25% stake in POSCO E&C, which is worth about KRW 800 billion.

    When the deal is finalized, the Saudi sovereign fund will be the second largest shareholder of POSCO E&C, after POSCO Group which currently holds an 89.5 percent stake in the construction company.

    POSCO plans to sign an agreement with PIF by mid-June.
    Back to Top

    Joy Global's profit plunges as miners cut spending

    Mining equipment maker Joy Global Inc reported a quarterly profit that nearly halved as customers cut spending due to weak prices.

    The company, which gets about 60 percent of its revenue from coal miners, also said it now expects earnings and sales for 2015 to be at the low end of its previous forecast.

    "The further step down in our key commodity end markets, in particular with U.S. coal and global copper, has resulted in reduced production forecasts and further deferred maintenance on our installed base of equipment with our customers," CEO Ted Doheny said in a statement.

    Joy Global had forecast earnings of $2.50-$3.00 per share on revenue of $3.3 billion-$3.6 billion for the year.

    Analysts on average were expecting earnings of $2.57 per share and revenue of $3.38 billion.

    Coal miners have been hurt by weak demand for thermal coal as U.S. utilities have switched to cheap and abundantly available natural gas.

    Sluggish demand from Europe and Asia, especially China, has also weighed on metallurgical or steel-making coal.

    Revenue fell 13 percent to $810 million in the second quarter ended May 1.

    But U.S sales rose 7.3 percent after falling for the last nine quarters. U.S. is the company's largest market and accounted for 31 percent of overall sales in 2014.

    Overall bookings fell 29 percent in the quarter.

    Net income fell to $38.7 million, or 40 cents per share, from $74 million, or 73 cents per share, a year earlier.

    Excluding pension settlement and restructuring charges, Joy Global earned 59 cents per share.

    The year-earlier quarter included restructuring charges of $3.1 million.

    Analysts had expected quarterly earnings of 56 cents on revenue of $810 million, according to Thomson Reuters I/B/E/S.

    Up to Wednesday's close of $38.93, the company's stock had fallen about 16 percent this year.

    Attached Files
    Back to Top

    China to curb illegal coal production, power quota related

    China pledged to further curb illegal coal production in a document on the website of the National Development and Reform Commission on June 3, which released it jointly with the National Energy Administration and the State Administration of coal mine Safety.

    One strict policy is that utilities’ power generation quota would be related to how they implement thermal coal contracts signed with producers.
    If one utility buys thermal coal from mines under illegal production, its annual power generation quota will be reduced. For 2015, the reduced power generation quota would equal 1.2 times of the volume of thermal coal the utility buys from mines under illegal production; for 2016, the ratio would be 1.5 times.
    An overall inspection of coal mine construction and production is required to be carried out by various levels of governments in coal-producing areas.
    A list of mines illegally built, in production beyond capacity or in unsafe conditions would be publicized on the website of the provincial government, and be submitted to the above-mentioned three parties and then to transportation authorities, which may restrict coal transportation for mines on the list.
    All illegal mines would asked to shut operation to rectify within a time limit, and those fails to do so would be forced to close by the provincial government.
    Back to Top

    SDI, AK Steel, ArcelorMittal USA, CSI, Nucor and US Steel file case against 5 countries

    Steel Dynamics Inc, AK Steel Corporation, ArcelorMittal USA, California Steel Industries, Nucor Corporation and United States Steel Corporation have petitioned to the US Department of Commerce and the US International Trade Commission to apply antidumping and countervailing duties against imports of corrosion resistant steel from China, India, Italy, South Korea, and Taiwan.
    Back to Top

    Australia's Port Hedland iron ore exports to China rise 5.2 pct in May

    Australia's iron ore exports to China from Port Hedland rose 5.2 percent in May from a month earlier, while total shipments from the port hit a record high, figures released on Thursday showed.

    Exports of the steelmaking commodity to Australia's biggest trading partner climbed to 31.69 million tonnes last month from 30.1 million tonnes in April, according to the Pilbara Ports Authority, which operates the world's biggest export terminal for iron ore.

    Total shipments of iron ore from Port Hedland hit an all time peak of 38 million tonnes in May, up 7.3 percent on the previous month. Shipments to Japan jumped 67 percent in the month to 2.15 million tonnes.

    Iron ore in recent years has replaced coal as the country's greatest source of foreign income.

    Port Hedland, which handles about a fifth of the world's seaborne iron ore trade, is used by BHP Billiton and Fortescue Metals Group to ship around 35 million tonnes a month, the lion's share to Chinese steel mills.

    The inventory of imported iron ore at 44 Chinese ports dropped 1.95 million tonnes to 86.7 million tonnes by May 22 , latest data from industry consultancy SteelHome showed.
    Back to Top

    Richard’s Bay coal market faces changes after complaints to globalCOAL

    Coal trading platform globalCOAL will weigh changes to South Africa’s Richard’s Bay market this week after complaints about high bids for unusual tonnages.

    Since January there has been a jump in the number of buyers looking for non-standard tonnages for RB1 coal, said globalCOAL, the world’s top physical coal broker.

    Traders said those bids are often above the market, which some think is skewing prices higher, with a knock-on effect on the API 4 index, the benchmark for pricing South African coal.

    The vast majority of bids and offers are made in multiples of 25,000 tonnes but traders said that in recent months there had been a rise in bids for non-standard amounts, such as 60,000 tonnes, which fewer sellers could meet, particularly at short notice.

    Such volumes made up less than 1 percent of trade on the market over the last five years, globalCOAL data shows. This year, that has jumped to 14 percent.

    Eoghan Cunningham, chief executive of globalCOAL, said its compliance committee would meet on Wednesday. It will review responses from members regarding the functioning of the market and whether it should limit volumes to multiples of 25,000 tonnes on the physical market.

    “GlobalCOAL has received a substantial number of submissions from market members and will deliberate on that feedback,” Cunningham said.

    One trader told Reuters that by entering bids on screen that no seller is in a position meet, a bidder could artificially push up prices.

    “The way you do that is by the timing and size of those parcels,” the trader said.

    As the market is not particularly liquid, bids and offers help inform pricing on the API 4 index, which is calculated using data gathered by Argus and IHS McCloskey.
    Back to Top

    China Coal fails to gain approval for low-CV coal fired power project

    China coal energy Group, the country’s No. 2 coal producer, failed to obtain approval from the environmental watchdog for a low-CV coal firedpower generation project in northern Shanxi province.

    The Ministry of Environmental Protection refused to give go-ahead to the environmental impact assessment of a new power project proposed byChina coal Pingshuo Group, the major branch of China Coal Energy, the ministry said on May 29.

    This means that China Coal Pingshuo Group would not be able to start construction on the project, according to China’s environmental impact assessment law.

    One of the main reasons is that the proposed project is located in Shuozhou City, where coal-fired power plants are intensively distributed and air quality is far below the required level, the ministry said.

    Meanwhile, the project failed to meet the requirement that new coal-fired power projects except cogeneration are prohibited in prefecture-level cities in China, as stipulated in the 12th Five-Year plan for prevention and control of atmospheric pollution, it said.

    On January 1, China implemented the "harshest-ever" new environmental protection law, with heavy fines on those violating the relevant requirements. This would stimulate the clean use of coal and demand for premium coal in the long run, insiders said.
    Back to Top

    Anglo American to start hedging iron-ore in second half

    Global mining company Anglo American said it will start using iron-ore derivatives to hedge its exposure from the second half of this year in a move that should help further boost volumes in the fast growing financial market. 

    "In the second half of this year we will definitely implement that (iron-ore hedging)," David Trotter, global head of iron-ore sales for Anglo American told Reuters at the Metal Bulletin iron-ore symposium in Vienna.

    Iron-ore derivatives traded on the Singapore Exchange have roughly doubled in volume each year since their launch in 2009, but are still roughly half the 1.3-billion tonnes of physical seaborne iron-ore traded globally each year. "There's three or four people who will be directly involved in trading (iron-ore derivatives). They're based in Singapore," said Trotter. 

    He added, however, that the miner will start off hedging just a small part of its total iron-ore production. The iron-ore derivatives market has gained popularity among financial players and trading houses in the last few years. However, the market still lacks the participation of most iron-ore producers, and is not that popular amongst Western steel mills, the natural buyers of ore whose input is needed for the market to mature.

    It is our preference that if you wish to share this article with others you should please use the following link:
    Back to Top

    China's top coal firms raise prices again as supply tightens

    Chinese state coal firms have raised prices for the second time in a month after a long sequence of cuts, but analysts said a seasonal spike in demand was unlikely to improve the sector's long-term prospects.

    China is the world's biggest coal producer, but slower economic growth and a state-led effort to switch to cleaner energy have hurt the sector, with 80 percent of firms suffering losses, according to industry data.

    The China Coal Transport and Distribution Association (CCTD) said on its website (www. that Shenhua, together with China Coal Energy and Inner Mongolia Yitai Coal, had raised the June price for most grades of coal by another 5-15 yuan ($0.8-$2.42) per tonne.

    The firms raised prices of lower-grade coal by 10 yuan per tonne in mid-May, anticipating a surge in demand for power over the summer.

    "More air-conditioner usage in summer raises demand for power coal, but substitutes like hydropower or wind power are likely to dissipate demand, so I think it is only a test price adjustment to see how the market reacts," said Zhang Xiaojin, an analyst with China's Everbright Futures.

    The price of Shenhua's 5,200-kilocalorie/kilogram grade of coal now stands at 395 yuan per tonne. The price of its highest 5,500 kcal/kg grade of coal remains unchanged at 462 yuan.

    Benchmark 5,500 kcal/kg spot prices at the port of Qinhuangdao, which have lost 22 percent since the start of the year, were unchanged on the week at 410 yuan per tonne.

    CCTD said end-user stocks were at a three-year low and the prices of low-grade coal were recovering, but the turnaround was likely to be limited.

    "As well as the serious supply and demand imbalance, other non-conventional factors - including a worse-than-forecast economic slowdown, a huge increase in hydropower, a mild winter and rapid downstream destocking - have also piled on the downward pressure," CCTD said.

    The National Development and Reform Commission, China's state planner, said on Wednesday it would strengthen efforts to curb illegal production and take action against users that buy coal produced in violation of regulations.

    Output in the first four months of the year reached 1.15 billion tonnes, 6.1 percent lower over the same period of 2014, official data showed last month.

    But government actions were unlikely to have a quick impact, said Zhang of Everbright, noting that the market was expected to remain oversupplied for three to five years.
    Back to Top

    Anglo American sees surge in iron ore sales to India

    Global miner Anglo American said its iron ore sales to India have more than tripled over the past year as Asia's third-largest economy embarks on a once-in-a-generation urbanisation drive.

    "India is around 15 percent of our (iron ore) sales portfolio, or about 6 million tonnes (a year)," David Trotter, Anglo American's global head of iron ore sales, told Reuters at the Metal Bulletin iron ore symposium in Vienna.

    India's iron ore imports jumped to a record high above 15 million tonnes in the fiscal year to end-March as tumbling global prices and limited domestic supply pushed steelmakers to buy more of the raw material overseas.

    Trotter expects India to account for 20 percent of Anglo American's iron ore sales over the next two to three years, a significant but not equally stellar rate of sales growth.

    Formerly the world's No. 3 supplier of iron ore, India has been importing it over the past three years due to court-imposed restrictions aimed at curbing illegal mining in the major producing states of Karnataka and Goa.

    But according to some industry experts, the reopening of iron ore mines in key producing states such as Odisha, Jharkhand and Goa may reduce India's imports in the current fiscal year.
    Back to Top

    Datong Coal kicks off Yanggao low-CV coal fired power project

    Datong coal mine Group, one major thermal coal producer based in Shanxi province, kicked off construction of a low-CV coal based thermal power project in Yanggao county, northeast of the province, on May 30, the miner said on its website.

    The first phase project, with an investment of 3.3 billion yuan, involves two 350 MW generating unit of supercritical circulating fluidized bed, with efficient dedusting, desulfurization, denitration and sewage treatment devices.

    And, a coal-dedicated railway and closed storage yard will be put in place to realize ultra-low emissions, zero waste water discharge and pollution-free coal shipment and storing.

    According to the miner’s plan, the two generators will be put into full-load trial operation (168 hours) by the end of November 2016. It is expected to contribute annual electricity output at 3.5 TWh and annual heat supply at 3.26 million GJ.

    The project was approved by the Shanxi Development and Reform Commission on April 29, 2015, after gaining initial approval in August 2014 and passing feasibility study in September 2013.

    Datong Coal’s combined installed capacity under operation and construction had reached 14.01 GW by the end of 2014, which is able to burn 17 million tonnes of coal annually, said Chairman Zhang Youxi. Total installed capacity is expected to reach 15 GW by the end of 2015, he added.
    Back to Top

    Vale to ship coal along Mozambique Nacala Corridor in Q3 -exec

    Brazilian miner Vale SA plans to start exporting coal along the Nacala rail and port corridor in Mozambique and Malawi in the third quarter after heavy rains damaged the rail line, the firm’s head of coal told Reuters on Friday.

    The Moatize mine remains on track to reach a run rate of 11 million tonnes of coal per year by mid-2016, Vale Executive Director of Coal and Fertilizers Roger Downey said on the sidelines of the Japan-Africa Mining & Resources Business Seminar in Tokyo. Current production is 7 million tonnes per year.

    Vale’s Moatize project has been beset by logistics issues, with the difficulty of constructing and expanding the Nacala railway and port holding back production increases at the mine. The rail line runs for 900 kilometers (560 miles)from the Moatize mine, through land-locked Malawi, to the port of Nacala on the Indian Ocean. Vale had previously said it expected to ship coal from the new port in the first quarter of 2015.

    Downey said the plan remained to increase production to 22 million tonnes of coal per year by 2017.

    In December, Vale sold a stake in the project to Japanese trader Mitsui & Co Ltd. Mitsui bought a just under 15 percent stake in the mine and 35 percent in the rail and port.
    Back to Top

    China May steel sector PMI hit 16-mth low

    The Purchasing Managers Index (PMI) for the Chinese steel sector hit a 16-month low of 42.4 in May, down from 48.2 in April, showed data from the China Federation of Logistics and Purchasing (CFLP) on June 1.

    It was the 14th consecutive month below the 50-point threshold separating growth from contraction, indicating persisting sluggishness in the sector.

    The output sub-index dropped 8.7 from April to 40.7 in May, as steel mills reduced output amid low profit, shortage of fund and huge environmental protection pressure.

    Daily crude steel output of key Chinese steel producers fell 1.65% from ten days ago to 1.778 million tonnes over May 1-10; China’s total daily output during the same period was estimated at 2.269 million tonnes, down 3.5% from ten days ago, showed data from the China Iron and Steel Association (CISA).

    The new order sub-index dropped to 37.6 in May from April’s 45.5, the 11th consecutive month below the 50-point threshold, indicating persisting bleak domestic demand.

    However, the new export order index rebounded 3.7 from April to 43.7 in May, reflecting improved demand from the international market.

    China’s net exports of steel products were 7.34 million tonnes in April, up 17.6% on year and up 13.1% from March; total net exports over January-April surged 42.5% from the year before to 29.88 million tonnes, customs data showed.
    Back to Top

    Australian Iron Ore mining costs crackdown reaps AUD 20 billion

    Image Source: The AustralianThe Australian reported that there is nothing like a massive price crunch to stir management in to action to bring down costs and protect margins. That is what has been happening in the iron ore industry in the past eight months.

    The industry’s attack on costs and productivity has clawed back an estimated AUD 20 billion in margins that evaporated when iron ore began a steep retreat from USD 90 a tonne in September last year to a low of USD 46.70 a tonne on April 2.

    Analysis by UBS shows that the break even all in cash cost of the entire local industry is currently at least sitting comfortably below the spot price of USD 61.40 per tonne.

    UBS said that iron ore producers had worked hard to reduce costs in response to iron ore’s price crash from an average of USD 135 per tonne in 2013 to USD 97 per tonne in 2014 and this year’s running average of USD 59.60 per tonne. Aussie juniors had also done an impressive job lowering their cash costs by 20% plus. It has been a case of do or die for Australia’s higher cost producers.

    Already this year we saw Atlas suspend operations when the price fell to USD 47 a tonne as it was losing about USD 15 per tonne. But now, with the help of its suppliers and contractors, Atlas has lowered its break even price to about USD 50 per tonne. Compared to eight months ago, our universe of iron ore producers have managed to lower their break-even costs by USD 20 to USD 30 a tonne.
    Back to Top

    Alpha no longer qualifies for mine cleanup insurance subsidy

    Alpha Natural Resources Inc no longer qualifies for a government program that subsidizes a share of mine cleanup insurance, requiring the coal company to find another way to cover roughly $400 million in liabilities, Wyoming officials said on Friday.

    State officials told Alpha that it has failed financial tests that have allowed the company to defer a share of mine cleanup costs in the case of bankruptcy under a program called "self bonding."

    "At the end of the day, the rules for self bonding are very clear," said Keith Guille, a spokesman for the Wyoming Department of Environmental Quality.

    Wyoming formally warned Alpha in April that it did not meet self-bond requirements and the company did nothing to change that view in the weeks that followed, Guille said.

    Alpha said it disputes the ruling, but is "investigating a range of options" to satisfy the regulator that it can cover cleanup costs.

    The company had earlier warned that losing its right to self bond and the increased costs of surety bonds could weigh on its balance sheet.

    In April, Reuters reported that the national mine industry regulator was examining the federal self-bond program for abuses.

    Investors have lately shunned U.S. coal stocks as weak global demand, an abundance of natural gas and costly regulations have hammered the sector.

    It would be difficult for cash-strapped mining companies to acquire surety bonds or offer collateral to backstop current reclamation obligations, said Robert Duke, chief counsel for the Surety & Fidelity Association of America.
    Back to Top

    India douses century-old coal fires as Modi seeks output boost

    Prime Minister Narendra Modi is determined to move more than 100,000 people living near coalfields in eastern India to new homes, making it easier to douse underground fires that have burned for a century and mine huge reserves of premium coal.

    Reviving output from India's nationalised coal sector has been one of Modi's most tangible achievements during his first year in office, one that he hopes will secure continuous power to all and eat into an annual coal import bill of $15 billion.

    The burning deposits of Jharia, in Jharkhand state, are particularly prized because they are the only source of top quality steelmaking coal in the country. India spends $4 billion a year on importing that grade alone.

    Modi travelled to Jharkhand in February and urged the chief minister to speed up work on putting out the fires and shifting the people living there.

    "The fact that the prime minister is directly involved shows that the government is very serious about it," Coal Secretary Anil Swarup said in New Delhi. "It's a huge task but the good news is that we have started moving in the right direction."

    For some of the thousands living in run-down settlements around the coal deposits, the urgency is clear.

    Shakili Devi, 60, has lost count of the number of huts she inhabited over the years that caved in because of intense heat and shifting ground around her.

    "We're scared, but what can we do?," she asked, her shack standing next to a crack in the ground leaking hot gas. "We can only wait for the government to find us a new home."

    Until then, Devi and others like her are stuck. Many families are squatters who rely on casual work from contractors working the mines and on free water pumped to the settlements.

    The glowing coals and rising smoke date back to 1916, a quarter of a century after private firms began to mine the field. India nationalised most coal assets in the 1970s.

    According to experts, those firms failed to backfill mines after digging, exposing them to the open air and allowing fires to start by spontaneous combustion.

    Bootleggers who used abandoned mine areas made things worse, because some failed to put out fires they lit to run the stills.

    BCCL accounts for about 7 percent of Coal India's output and has projected growth of 54 percent to 53 million tonnes in five years, according to a company document seen by Reuters.

    Its success will help decide how close Coal India gets to its ambitious target of output of 1 billion tonnes by 2019/20.

    Previous attempts to control the fires by sealing the surface, trenching and pumping in inert gases had limited success and were blamed for driving BCCL close to bankruptcy.
    Back to Top

    British workers at Tata Steel's biggest union vote to strike

    Tata Steel UK's biggest trade union voted on Friday to go on strike, setting the scene for the biggest labour action in the British steel sector in three decades.

    Members of the trade union Community voted 88 percent in favour of going on strike, a statement said.

    The union members are locked in a dispute with the company about its proposal to change their pension scheme.

    "Steelworkers are determined to stand up to Tata," said Roy Rickhuss, general secretary of Community.

    "We stand on the brink of the first national strike in the steel industry for over 30 years," said Rickhuss, also chair of the National Trade Union Steel Co-ordinating Committee.

    The union, which did not give a date for a strike, said it was calling for Tata to return to negotiations.

    Unions have been balloting some 17,000 members for industrial action. Results from the GMB and UCATT unions were expected later on Friday while a ballot by Unite is due to close next Friday.

    Tata Steel did not have any immediate comment about the vote, but previously has said that its actions were aimed at developing an affordable and sustainable pension scheme through changes that were balanced and fair.

    An open letter to employees released earlier on Friday said Tata's UK operations as a whole were still losing money and that the pension scheme had a shortfall of up to 2 billion pounds.

    Profitability in Britain's steel sector has become difficult due to cheap imports and sluggish demand, which has yet to recover to pre-2008 levels.

    The UK steel sector's labour, logistics and energy costs are higher even than mainland Europe, which itself struggles to compete globally.

    The company's parent, India's Tata Steel Ltd, posted a $889 million quarterly loss on May 20, inflated by a hefty impairment on its UK business.
    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