Mark Latham Commodity Equity Intelligence Service

Friday 20th May 2016
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    Iraq Reaches $5.4 Billion IMF Funding Accord, Minister Says

    Iraq has reached a $5.4 billion, three-year loan agreement with the International Monetary Fund to help OPEC’s second-biggest producer repair public finances damaged by the plunge in oil prices and the war with Islamic State militants.

    The agreement will help Iraq “get more from other financing entities,” Finance Minister Hoshyar Zebari told a news conference in Amman on Thursday. He said Iraq is facing “a very tough economic and financial crisis and this program will reduce the burden on us.”

    The accord, subject to the approval of the IMF Executive Board, will make Iraq the first major oil exporter to sign a financing program with the Washington-based lender. Central bank chief Ali al-Allaq said the interest rate on the loan won’t exceed 1.5 percent.

    Oil producers from Venezuela to Riyadh have slashed spending to counter the plunge in crude prices. For Iraq, the challenge was compounded by a costly war against IS militants, who captured swathes of the country’s territories to set up a so-called Islamic caliphate.
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    Proposed Gazprom dividend would cut Russian state's income

    Russia's state gas giant Gazprom proposed a dividend on Thursday less than half as big as the amount implied in a government order for state companies, adding to strains on state finances caused by low oil prices.

    The company said its board had recommended a dividend on its 2015 results of 7.89 roubles per share, after gaining a waiver from a government rule setting a minimum amount.

    The recommended dividend amounts to more than 50 percent of Gazprom's adjusted net profit under Russian accounting standards, the company said in a statement, and compares with a 7.2 rouble per share dividend paid on 2014 profits.

    The recommended 2015 dividend would represent around 23.5 percent of Gazprom's net profit under International Financial Reporting Standards.

    The government had ordered a 50-percent threshold for state companies according to whichever of the two accounting standards gave a higher amount of profit, although the order allowed for exceptions.

    Gazprom got a waiver from the 50-percent rule, arguing it needed to keep a larger share of profits to finance its investment programme and to finance the repurchase of a 2.7 percent stake held in Gazprom by Vnesheconombank, the financially-troubled state development bank.

    The smaller dividend than previously planned means the government will need to withdraw more funds from its fiscal Reserve Fund.

    Shares in Gazprom were down 0.8 percent on Thursday, slightly outperforming the MICEX stock index which was down 1.1. percent.

    Gazprom shares have fallen some 5.5 percent this week, and by 10 percent since the start of the month, as investors' expectations of significantly higher dividends from the company faded because of the government's waiver.
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    China’s energy guzzlers Jan-Apr power use down 4.4pct on year

    Power consumption of China’s four energy-intensive industries dropped 4.4% on year to 526.7 TWh over January-April, accounting for 29.1% of the nation’s total power consumption, the China Electricity Council (CEC) said on May 18.

    Of this, the ferrous metallurgy industry consumed 144.3 TWh of electricity over January-April, falling 11.6% year on year, compared to the drop of 6.9% from the previous year; while the non-ferrous metallurgy industry used 156.2 TWh of electricity, down 5.4% year on year, compared a 3.7% growth from the year prior.

    The chemical industries consumed 140.5 TWh of electricity during the same period, up 4% year on year, lower than a 2.9% growth a year ago; while power consumption of building materials industry dropped 2.2% year on year to 85.8 TWh, compared to a 6.5% decline a year ago.

    In April, the four industries consumed a total 145.4 TWh of electricity, decreasing 0.5% year on year, accounting for 31.8% of China’s total power consumption.

    Of this, the ferrous metallurgy industry consumed 40.2 TWh of electricity in April, dropping 4.3% on year; while the non-ferrous metallurgy industry used 40.7 TWh of electricity, decreasing 4.9% from a year ago.
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    Saudi Arabia Admits To A Full-Blown Liquidity Crisis

    Just three weeks ago we reported that the biggest construction conglomerate in the middle east, the Saudi Binladin Group had announced it would layoff 50,000 workers or a quarter of its workforce, slammed by the weak economy.

    Now, Saudi Arabia has admitted that in addition to acute economic problems, which will manifest themselves most directly in a soaring Saudi debt load...and rising default risk...

    Saudi Arabia can also add liquidity worries which just spilled out into the open, because Bloomberg reported moments ago, Saudi Arabia has told banks it is considering paying some outstanding bills to contractors with government-issued bonds, citing people with knowledge of matter say.

    Contractors would be able to hold bond-like instruments until maturity.

    Bloomberg adds that issuing bonds is one of several options being considered.

    Contractors so far received some payments of outstanding bills from government in cash.

    Saudi Arabia’s finance ministry declines to comment, while central bank didn’t immediately return calls seeking comment

    What this means is simple: as a result of the budget imbalance driven by low oil prices, largely a Saudi doing, the kingdom is forced to give workers an implicit pay cut. It also means that since the government has to "pay" through the issuance of debt, that the liquidity crisis in the kingdom is far worse than many had anticipated.

    Which brings up the question of devaluation: how long until the SAR has to follow the Yuan and see a substantial haircut. According to the market, 12 month SAR forward are now trading at a price which implies a 12% devaluation in the coming months.

    When that happens is, of course, up to the King Salman.

    What it also means is that as Saudi Arabia is now scrambling to generate any incremental cash, it too will be caught in the deflationary spiral of excess production as it will have no choice but to outsell its competitors, especially those rushing to grab Chinese market share such as Russia, as it seeks to make up with volume what it has lost due to lower prices.
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    Russia's VTB to grow trading to help Russian commodity exports

    Russia's second largest bank, state-controlled VTB, is growing its commodities trading business to help the country's oil, coal and metals producers expand in new markets from China to Africa.

    VTB aims to become a top global commodities trading bank as Western peers cut their Russian exposure due to sanctions and as Russian firms feel the pressure of falling prices, the division's head, Atanas Djumaliev, told Reuters.

    "We aim to enter the top ten of leading banks working with commodities markets," said Djumaliev, who already has 30 people in offices in Moscow, London and Switzerland and plans to grow.

    The market's top trading banks, such as Goldman Sachs or Citi, employ 200 to 300 people in commodities, generating revenues which can top $1 billion in good years.

    But their proprietary trading -- taking bets with their own money -- has been drastically reduced by U.S. regulations, a factor VTB does not need to worry about.

    "We don't limit ourselves at just providing liquidity. We participate in export flows," said Djumaliev.

    Inside Russia, VTB would, for example, often buy oil from mid-sized independent producers and supply it to small refiners, from which it would purchase refined products for exports.

    "However, we are rather niche players in commodities and do not aim to rival global tradinghouses such as Vitol or Glencore. Our priority is to support Russian clients locally and improve Russian export competitiveness on global markets," he said.

    VTB plans to grow operations - from hedging to structural finance - in Africa, Asia and Latin America to help Russian companies spur exports to those destinations.

    Russia has become one of the top oil suppliers to China and Asia in the last decade, competing with OPEC leader Saudi Arabia in markets Riyadh and its Gulf allies long dominated.

    VTB hopes to help Russian firms expand even further.

    "We are talking to many refiners in China, which are interested in Russian supplies. Chinese refiners, for example, like purchasing oil with deferred payment. Sometimes it doesn't suit Russian producers. So our role is to optimise the process for both sides," said Djumaliev.

    "We can make a pre-payment, provide funding to a Chinese consumer and coordinate oil supply to a local port".
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    NUM rejects Eskom’s 5% wage offer

    The National Union of Mineworkers (NUM) on Wednesday said it had rejected “with disgust a lousy offer” by power utility Eskom of 5% In an statement NUM said: “This horrible increase will drive thousands of Eskom employees into poverty taking into account the continued rise of Consumer Price Index”. 

    NUM Energy Sector Coordinator, Paris Mashego: “We are very shocked by the declaration by Eskom management that 42% of the estimated profit of R28.2-billion will be set aside as bonuses”. 

    Mashego added: “With this declaration, Eskom executives will receive 25%, managers will take home 16.7% while NUM members receive a mere 12%”. The NUM said it was demanding an increase of 18% for the lowest paid workers and 15% for the highest paid workers.

     “We call upon this hostile employer to compensate workers accordingly in terms of their contribution to the profitability of the company. While we accept bonuses, which is a once-off payment, we demand a salary increase which is a long-term earning and pensionable,” said Mashego.

    The NUM demanded salary increases for workers that “address income differentials that will address the apartheid wage gap” that still exists 22 years after democracy. “Eskom must improve the salaries of black females who are the lowest paid employees in the company,” said Mashego. “We further demand that Eskom must negotiate in good faith by disclosing relevant information to foster sound industrial relations.”
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    China's home prices continue to rise

    China's property sector continued to recover in April, with more citiesreporting month-on-month rises in new home prices, an official survey showedWednesday.

    Of 70 large and medium-sized cities surveyed in April, 65 saw new home prices climbingmonth on month, up from 62 in the previous month, the National Bureau of Statistics(NBS) said.

    Meanwhile, five cities reported month-on-month price declines, down from eight in March,according to NBS data.

    On a yearly basis, 46 cities posted new-home price increases and 23 reported falls in April,compared with 40 and 29 in March.

    New-home prices soared 63.4 percent year on year in the southern city of Shenzhen, thesharpest increase last month among all the major cities.

    Prices in Shanghai, Nanjing, Xiamen and Beijing also rose fast, up 34.2 percent, 22.6percent, 21.7 percent and 20.2 percent year on year, respectively.

    The northeastern city of Jinzhou registered the steepest price decline of 3.2 percent over ayear earlier.

    For existing homes, 51 cities reported month-on-month price increases in April and 10reported lower prices, compared with 54 and 13 in March.

    China's housing market started to recover in the second half of 2015 after cooling for morethan a year, boosted by government support measures, including interest rate cuts andlower deposit requirements.

    In February, taxes on some property transactions were slashed and further reductions tothe minimum downpayments for eligible first- and second-time home buyers wereannounced.
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    Shanxi Jan-Apr power use edges down 0.2pct on year

    Shanxi province consumed a total 56.7 TWh of electricity over January-April, edging down 0.2% on year and unchanged from the first quarter this year, showed the latest data from the provincial Commission of Economy and Information Technology.

    The power consumption of industrial sector stood at 42.6 TWh during the same period, falling 2.4% from a year ago, data showed.

    In April, power use of the province dropped 0.1% on year to 13.79 TWh, with that of industrial sector down 1.9% on year to 10.59 TWh.

    It was mainly attributed to the plunging electricity consumption of coal and steel industries. In April, the coal, steel, chemical and ferrous industries consumed 1.89 TWh, 1.83 TWh, 1.18 TWh and 1.05 TWh of electricity, falling 6.1%, 16.8%, 8.2% and up 4.3% from a year ago.

    The province produced a total 78.09 TWh of electricity over January-April, down 2.6% on year, with power output in April falling 2.4% on year to 19.38 TWh.
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    China April power consumption up 1.9 pct on year -energy regulator

    China consumed 456.9 kilowatt hours of power in April, up 1.9 percent compared to the same month of last year, the country's energy regulator said on Wednesday.

    The National Energy Administration also said that total generation capacity rose to 1,499.6 gigawatts by the end of April, up 11.9 percent on the year.

    According to official data released on Saturday, power output declined 1.7 percent in April on the year, driven by a 5.9 percent drop in thermal power generation.
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    Asked about aid, China says Venezuela crisis is domestic matter

    An economic crisis in Venezuela is a domestic matter, a spokesman for China's Foreign Ministry said on Monday, when asked if the country planned to give aid to the Latin American nation.

    The OPEC country, which has received about $50 billion in Chinese financing since 2007, is also struggling with a contracting economy and runaway inflation, following a collapse in oil prices.

    Venezuelan President Nicolas Maduro has imposed a 60-day state of emergency due to what he called plots by the United States and within his own country to subvert him.

    "We hope that Venezuela can properly handle their current domestic situation and safeguard the stability and development of the country," said Hong Lei, a spokesman for China's Ministry of Foreign Affairs.

    He declined to comment specifically on the situation in Venezeula, however.

    Investors have long hoped China would provide financial relief, or at least ease the terms of a major loan pact by which Venezuela borrows money and repays in shipments of oil and fuel.

    The Venezuelan opposition won control of the National Assembly in an election in December, propelled by voter anger over product shortages, raging inflation that has annihilated salaries, and rampant violent crime, but the legislature has been routinely undercut by the Supreme Court.

    Protests are on the rise and a key poll shows nearly 70 percent of Venezuelans now say Maduro must go this year.
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    Oil and Gas

    Report: South Korea mulling KNOC, KOGAS merger

    The government of South Korea is reportedly considering merging Korea National Oil Corporation 9KNOC0 and Korea Gas Corporation (KOGAS) in an attempt to boost the profitability of the two companies.

    Four reform measures have been suggested in a report that will be presented by the energy ministry, according to news site Pulse.

    The plan most likely to succeed is the merger of the two companies that would allow for the combination of overlapping sectors such as exploration and production. It is regarded as the most viable option to improve overseas resource development and overall profit structure, according to the report.

    However, concerns remain over a possible transfer of KNOC’s losses to KOGAS, the report said.

    The other options are selling KNOC’s resources development unit to a private company, but the government fears the asset could be sold undervalued.

    Two more options include transferring KNOC’s resource development unit to KOGAS or spinning off the state-owned oil company’s overseas resources development business by creating a new company, the report said.

    According to the report, the fourth option would not resolve the inefficiencies in promoting resource development projects.

    Deloitte Anjin has been selected by the South Korean ministry of trade, industry and energy to look into the options of improving the profitability of the two state-owned energy businesses.
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    Downeast LNG puts itself up for sale

    Downeast LNG, that is proposing to build an LNG export terminal in Robbinston, Maine, said that its board and shareholders have decided to put the company up for sale as of July 1.

    Downeast LNG’s majority shareholder is private equity manager Yorktown Partners, which manages approximately $7 billion in energy investments.

    The company is proposing to build a 3 million ton per annum (450 MMCF/Day) liquefied natural gas export facility on Passamaquoddy Bay near the Canadian border. The project would also have the capacity to regasify up to 100 mmcfd.

    “We have reviewed our strategy and decided that an industrial player or a specialized investor such as an infrastructure fund is better suited to continue the permitting process and eventual build-out of the project,” said George Petrides, Chairman of the Board of Downeast LNG.

    Petrides also said that although global LNG pricing has been low recently, there are two developments in the last few weeks that could help attract potential buyers.

    “With the cancellation of the controversial Kinder project that would have gone east from Schoharie County, New York to Boston, we believe it is very likely that the Algonquin expansion will happen and will facilitate natural gas going from the Marcellus in Bradford County, Pennsylvania to our project in northern Maine,” he said.

    “Secondly, we noted the successful capital raise by Venture Global last month and see that as continued interest by investors in US-based projects,” Petrides added.

    The Downeast LNG terminal would consist of one storage tank, a liquefaction train, a small regasification plant, marine facilities, and a natural gas pipeline that will connect the facility to the existing Maritimes and Northeast Pipeline. The project would access both unconventional US gas reserves and conventional western Canada gas reserves.
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    Canadian firefighters make progress against fire in oil sands region

    Firefighters made progress against a wildfire in the Fort McMurray region of northern Alberta on Thursday as a shift in winds pushed it away from communities and oil sands facilities.

    The massive blaze has charred 505,000 hectares (1.2 million acres), up from 483,000 on Wednesday. On Thursday, it moved to the neighboring province of Saskatchewan, but Alberta wildfire officer Chad Morrison said cooler weather and rain would aid efforts to get it under control.

    "We saw a trace of rain this morning, so that's actually helped our firefighting efforts," he added.

    The blaze, which hit Fort McMurray in early May, surged north on Monday. It forced the evacuation of 8,000 oil sands workers, destroyed a work camp and prolonged a shutdown that has cut Canadian oil output by a million barrels a day.

    Morrison said the fire burned near Suncor Energy's base plant and the Syncrude facility on Wednesday, but fire breaks held and the threat has diminished.

    The joint-venture Syncrude project told customers to expect no further crude shipments for May, trading sources said on Thursday, extending a force majeure on crude production from earlier in the month.

    Syncrude spokesman Will Gibson declined to comment on deliveries.

    "We are not making any oil and will not have forecasts for some time," he said.

    Still, in an encouraging sign, Imperial Oil said on Thursday it had restarted limited operations at its Kearl site, which was unaffected by the fires. The return to full operations depends on a number of factors, including safety and air quality, it said.

    The latest round of evacuations suggest production may be suspended for longer than companies and analysts had previously anticipated.

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    U.S. blames Plains pipeline company for Santa Barbara oil spill

    Numerous lapses in safety measures, judgment and planning by Plains All American Pipeline LP led to and worsened a major oil spill last year that fouled miles of shoreline and ocean near Santa Barbara, California, the U.S. Transportation Department said on Thursday.

    The agency said it would focus next on "enforcement options" against the Houston-based company for the rupture of an underground petroleum pipeline that federal inspectors have found was severely worn by corrosion.

    In their final report on the spill, federal investigators concluded that Plains "failed on multiple levels to prevent, detect and respond to this incident," said Marie Therese Dominguez, head of the Transportation Department's Pipeline and Hazardous Materials Safety Administration.

    While the immediate cause of the rupture was external decay, the company was at fault for failing to protect the pipeline from corrosion beforehand and to promptly detect and respond to the spill once it occurred, the agency said in a statement.

    The report came two days after Plains was indicted in California on 46 state criminal charges stemming from the spill, which environmental groups seized on to warn of hazards posed by an aging U.S. oil and gas industry infrastructure.

    By the company's own estimate, as much as 3,400 barrels of crude gushed onto the shore and into the Pacific Ocean when the company's 24-inch Line 901 burst along a coastal highway about 20 miles (32 km) west of Santa Barbara on May 19, 2015.

    The spill, linked to the deaths of hundreds of sea birds and marine mammals, forced closure of two state beaches and left slicks that stretched over 9 miles of the ocean.

    It ranks as the largest spill to hit the ecologically sensitive but energy-rich coastline northwest of Los Angeles since 1969's 100,000-barrel blowout in the Santa Barbara Channel.
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    Oil Search boosts LNG push in PNG with $2.2 billion InterOil bid

    Australia's Oil Search Ltd  agreed a $2.2 billion deal to acquire InterOil Corp on Friday, aiming to pave the way for two rival liquefied natural gas projects led by global majors to work together in Papua New Guinea.

    In the face of weak oil prices, PNG is considered one of the best locations for LNG projects, thanks to its high quality gas and low costs. The country has the existing PNG LNG project, run by ExxonMobil Corp, and the proposed Papua LNG project, run by Total SA.

    For Total, which will boost its stake in Papua LNG as part of the deal, Oil Search's move will open opportunities for collaboration and possible integration with ExxonMobil's project, said CEO Patrick Pouyanné.

    "It was a deal waiting to happen, a consolidation of the joint venture," said RBC analyst Ben Wilson. "Conceptually, it makes a lot of sense and should allow them to go forward to the development phase a lot faster than otherwise would be the case."

    Oil Search co-owns Papua LNG and PNG LNG and has been pushing them to cooperate in order to avoid wasting money on duplicating infrastructure as happened on Australia's east coast, where three LNG plants were built next to each other at a cost of $64 billion. The takeover of InterOil will give it a bigger stake in Total's project.

    "The days of industry profligacy are past with these sorts of oil and gas prices that we're experiencing and are likely to experience for some years to come," Oil Search Chief Executive Peter Botten told Reuters.

    ExxonMobil said it was "open to discussing infrastructure sharing opportunities with other operators where it is technically feasible and commercially attractive for both parties," in an email to Reuters.

    InterOil is coveted for its stake in the Elk-Antelope fields, which could hold at least 6.2 trillion cubic feet of gas, more than enough to fill one LNG processing train. Drilling of one more well this year could prove it holds much more.

    InterOil CEO Michael Hesson said the company had received a number of other proposals, but declined to give details.

    "I can also tell you this was the best proposal," he told a conference call.

    Oil Search is offering 8.05 of its shares for each InterOil share plus a contingent value right tied to the size of the eventual reserves in Elk-Antelope. Oil Search said the offer valued InterOil at $40.25 a share up front, a 27 percent premium to its close on Thursday.

    Oil Search said the deal could see it double its output by 2023.

    "We think it's a very smart deal. It should be well supported," said Ric Ronge, a portfolio manager at Pengana Capital, which owns shares in Oil Search and Total.

    As part of the plan, Oil Search has agreed to sell more than half of Interoil's stake in Papua LNG to Total. As a result, Oil Search will end up with a 29 percent stake in the Papua LNG project, complementing its 29 percent stake in PNG LNG.

    Total's stake in Papua LNG will increase to 48 percent.

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    Rebel Bombing Shuts Down Key Colombian Oil Pipeline

    Colombia’s second-largest oil pipeline has been taken offline by a rebel attack which spilled crude oil into the Bojaba river, this is the fourteenth such attack this year.

    While no group has claimed responsibility for the attack, the authorities suspect the ELN (National Liberation Army) rebel group.

    The Cano-Limon Covenas pipeline, run by state-owned Ecopetrol, was bombed at a 485-kilometer section that runs near the border with Venezuela in Arauca province, Reuters reported. Pumping of crude into the pipeline has been halted, according to Ecopetrol.

    The pipeline has a 210,000 barrel per day capacity, and transits crude produced by U.S.-based Occidental Petroleum to the port of Covenas in the Caribbean, which is the country’s main export facility. The Cano Limon oilfields, operated by Occidental, account for 30 percent of Colombia’s total oil output.
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    Kuwait Changes Tune at $50 Oil

    In a matter of a week, Kuwait has simultaneously said it was seeking to boost production, called for an output freeze to rebalance the market glut, and—most recently—praised OPEC’s strategy for pushing out US shale as successful.

    Now that oil is near US$50 per barrel, the Saudi-led OPEC strategy to hang onto market share doesn’t seem so bad.

    As told by Kuwait’s acting oil minister, Anas Al-Saleh, in a Wednesday interview with media in Kuwait, the Gulf country will stick by the Saudis as OPEC defends its market share by pumping more to win customers, rather than targeting price.

    It’s a strategy, he said in comments carried by Bloomberg, that is working. Crude prices are rising along with demand, and output from non-OPEC countries is declining. Some 3 million barrels per day of supply has left the market due to either the disruption of conflicts (Nigeria, Libya) or natural disasters (Canadian wildfires) or price (US shale).

    “Now we see better prices in the market, demand has been increasing […],” al-Saleh was quoted as saying.

    So the “theory has been working well,” and Kuwait will be “sticking to the market share strategy.”

    It’s not the same line Kuwait was taking last week, before all the supply disruptions started to reverberate through the market.

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    Iraq’s Oil Output Seen by Lukoil at Peak as Government Cuts Back

    Crude output in Iraq, OPEC’s second-largest producer, has probably peaked and is likely to fall short of the country’s target over the next two years, according to an official with Lukoil PJSC, operator of one of the country’s biggest fields.

    Iraq needs more investment to maintain production at current levels, according to the official, who asked not to be identified when discussing company matters. Yet output can’t keep up because the government is requiring companies to reduce spending, the person said. The oil ministry has reached agreements in principle with most international oil companies to reduce their 2016 budgets by about 50 percent, and final accords may be reached in about two months, the person said.

    The Persian Gulf nation has boosted oil output as companies such as BP Plc, Royal Dutch Shell Plc and Lukoil are developing some of the largest deposits in its oil-rich southern region. They’ve been physically insulated from fighting against Islamic State militants in the country’s north, though the war effort and lower oil prices have strained the government’s finances and diverted its attention from developing new projects the companies are seeking to implement.

    Lukoil may spend about $1.3 billion on the West Qurna 2 field, the company official said, down from about $3 billion the year earlier. Lukoil is pumping about 400,000 barrels a day at West Qurna 2 and plans to raise capacity to 1.2 million barrels daily in the next decade.

    Iraq pumped a record 4.51 million barrels a day in January and 4.31 million in April, according to data compiled by Bloomberg. Its total production capacity is 4.8 million barrels a day, and increasing that to a target of 5 million will depend on oil prices, Deputy Oil Minister Fayyad Al-Nima said in a May 12 interview.

    The government is negotiating with oil companies on production targets after asking them to reduce 2016 spending because of lower oil prices and cuts in government revenue, Falah Al-Amri, chairman of Iraq’s state Oil Marketing Organization, said in February. The talks may affect Iraq’s target to have crudeproduction capacity of 6 million barrels a day by 2020, Al-Amri said.

    Iraq needs Brent crude at about $55 a barrel to break even on government spending, the Lukoil official estimated. Brent is trading this week near $50 a barrel, about half the 2014 average. Lukoil has suggested linking compensation for work done at the fields to the market price of oil rather than basing payments on a flat fee as is the case now, the official said.

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    Qatargas and JERA agree first spot LNG cargo deal

    Qatargas Operating Company Ltd (Qatargas) has announced that it has reached an agreement with JERA Co. Inc. on the first spot LNG cargo purchase under the newly executed Master Sales and Purchase agreement between the two companies.

    The spot cargo was delivered onboard the Q-Flex LNG carrier, Al Ruwais, to the Futtsu LNG terminal in Tokyo Bay, Japan, on 13 May 2016.

    JERA is a recently formed joint venture between Chubu Electric Power Co. Inc. and TEPCO Fuel & Power Inc, both of who are Qatargas foundation buyers. With JERA’s inception, Qatargas will deliver a total of nearly 7 million tpy of LNG under a long-term supply contract to this new entity.

    Last year, Qatargas delivered a total of 14.6 million t of LNG to Japan.

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    90% of US DUCs are located within Permian, Eagle Ford, Bakken and Niobrara

    Operators have accumulated ~3,900 drilled, but uncompleted horizontal oil wells ('DUCs') across the US shale, with more than 90% of these located within the major liquids plays, shows Rystad Energy's latest analysis.

    The largest DUC inventory is spread over the Permian Basin with 1,200, Eagle Ford with ~1,000, and Bakken with ~850 wells awaiting completion services. The remainder of oil DUCs are located in Niobrara (~620 wells) and other plays (~270 wells).
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    B.C. signs Coastal First Nations LNG Benefits Agreement

    The government of British Columbia (B.C.), Canada, has announced that it has signed the Coastal First Nations LNG Benefits Agreement. The agreement commits the Canadian province to helping address economic benefits and environmental impacts of the LNG industry.

    B.C. has committed to work with the groups on environmental safety and stewardship, air-shed impacts, greenhouse gas (GHG) emissions, renewable energy, skills training and employment projects. The agreement will deliver a base of CAN$1.5 million/yr for three years, with further funding available based on how many LNG projects in the region are established.

    Coastal First Nations have previously offered their input on benchmarks for emissions from LNG plants and two air-shed studies related to proposed LNG facilities in the Kitimat and Prince Rupert areas. They also continue to be involved in the discussions on marine shipping in B.C.
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    East Libya Oil Exports to Resume Thursday After Diplomatic Deal

    Oil exports are set to resume Thursday from the port of Hariga in eastern Libya, easing a bottleneck and allowing for crude production to increase after competing administrations of the state-run National Oil Corp. reached an agreement in the divided country.

    The tanker Seachance is loading 650,000 barrels of crude at Hariga for the U.K., Omran al-Zwai, a spokesman for NOC unit Arabian Gulf Oil Co. known as Agoco, said by phone on Thursday. The cargo would be the first international shipment from Hariga since the United Nations blacklisted a tanker last month following complaints from authorities in the west of the country. NOC’s competing leaderships reached an agreement to resume exports from Hariga earlier this week.

    Agoco will be able to boost crude output to 120,000 barrels a day from 90,000 before the shipment, Al-Zwai said, as the company’s production has been limited by a lack of storage at the port. Libya produced a total of 310,000 barrels a day in April, data compiled by Bloomberg show.

    Libya, with Africa’s largest proven crude reserves, split into two separately governed regions in late 2014, one based in the western city of Tripoli and the other run by an internationally recognized government in the east. The political divisions were mirrored by rival NOC administrations in the east and west of the country. Libyans are currently working to set up a Government of National Accord, with the support of the U.S. and European nations.

    The competing NOC administrations agreed to restart shipments from Hariga after holding talks in Vienna earlier this week, Elmagrabi said Monday. Officials at the western NOC administration in Tripoli couldn’t immediately be reached for comment. The shipment from Hariga comes after Agoco reached an agreement on Wednesday with the NOC’s eastern administration to restart international exports from the port, said Nagi Elmagrabi, chairman of the eastern NOC.
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    Russia's Gazprom expects 2016 rebound in output

    Russian gas producer Gazprom will raise production this year but has slowed construction of its Power of Siberia pipeline set to serve China from 2018, Deputy Chairman Vitaly Markelov said on Thursday.

    Gazprom plans to produce 452.5 billion cubic metres (bcm) of natural gas in 2016, up from 418.5 bcm last year, Markelov said.

    It plans to increase gas condensate output to 15.8 million from 15.3 million tonnes in 2015.

    Demand fell last year as a conflict with Ukraine over Moscow's annexation of Crimea and other differences saw Kiev turn to Europe for gas. Kiev has said it may not buy any Russian gas this year.

    Gazprom has also faced increased competition in Russia from Novatek and Rosneft, with its pricing policy constrained by government-imposed tariffs.

    With the European Union looking to curb its reliance on Russian energy imports, Gazprom has begun work on a pipeline to China with a view to shipping 38 bcm of gas per year, which would make China its second-largest customer after Germany.

    Gazprom currently only pipes gas to Europe.

    Markelov said of Power of Siberia's approximately 3,000 km of pipeline to be built, 115 km was complete and another 400 km was planned for this year.

    Gazprom had earlier said it aimed to complete around 800 km of the link this year.

    "We have cut back expectations of construction due to costs optimisation," Markelov said, but added that the pipeline's 2018 launch had not been altered.
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    Technip, FMC Technologies to merge in all-stock deal

    France's Technip announced an all-stock merger with U.S. rival FMC Technologies to create an oil services group with combined revenue of $20 billion.

    The transaction is expected to deliver annual pretax savings of at least $400 million as of 2019 and boost earnings per share significantly, the companies said in a statement on Thursday.

    "We have complementary skills, technologies and capabilities," Technip Chairman and Chief Executive Thierry Pilenko said. "Together, TechnipFMC can add more value across Subsea, Surface and Onshore/Offshore, enabling us to accelerate our growth."

    Lower energy prices are driving consolidation in the oil services sector as companies seek savings to boost profits amid an oil supply glut that has been weighing on exploration and production.

    Reuters reported in December that Technip had held talks with FMC.

    Under the terms of the deal, each Technip share will be converted into two shares of TechnipFMC, and each FMC Technologies share will be exchanged for one share of TechnipFMC, with each company's shareholders owning close to 50 percent of the combined company.

    Pilenko will serve as executive chairman of TechnipFMC, while FMC Technologies’ President and Chief Operating Officer Doug Pferdehirt will be CEO, the companies said. The transaction is expected to close early in 2017.

    Last year, the two companies formed a joint venture, Forsys Subsea, aimed at reducing the cost of subsea oilfield exploration, a sector that has been badly hurt by the drop in the price of oil.

    Technip has a market value of about $6.2 billion, compared with $6.5 billion for FMC Technologies. Technip has annual revenue of $13.5 billion, more than double that of FMC Technologies.

    Goldman Sachs and Rothschild are acting as financial advisers to Technip. Evercore and Societe Generale are acting as financial advisers to FMC Technologies.
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    Iran fields to be developed by Sinopec, CNPC

    Chinese companies will develop the second phases of two giant Iranian oil fields, Russian news portal reported, citing Iranian Minister of Petroleum Bijan Zangeneh.

    Sinopec will develop the Yadavaran oil field, and China National Petroleum Corp (CNPC) will develop the North Azadegan one, Zangeneh said on Monday, following a meeting with Zhang Yuqing, deputy head of China's National Energy Administration.

    Sinopec and CNPC are two of three State-owned oil giants in China. Once the second phase of the Yadavaran oil field is developed, its output will be 180,000 barrels per day, up 95,000 barrels from the current production level, the Cihan News Agency in Turkey reported on Tuesday, citing Abdolreza Hoseininejad, CEO of Petroleum Engineering and Development Co (PEDEC).

    CNPC and Iran's PEDEC have already signed a deal to produce 25,000 barrels per day in the second phase of the North Azadegan oil field, according to the Cihan News Agency.

    Early in 2009, CNPC signed contracts with Iran to develop the North Azadegan oil field, but work was interrupted by Iran's nuclear crisis.
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    Halcón reaches pact with creditors on prepackaged bankruptcy plan

    Halcón Resources Corp, which produces oil in Texas and North Dakota, said on Wednesday it plans to file for a prepackaged bankruptcy that would wipe out $1.8 billion in debt and help it survive the drop in crude prices.

    Shares of the Houston-based company fell 55 percent to 44 cents in after-hours trading.

    The bankruptcy marks a setback to Halcón Chief Executive Floyd Wilson's long-running goal to build and then sell the company to the highest bidder, a plan that mimicked Wilson's 2011 sale of Petrohawk to BHP Billiton for more than $12 billion at a 65 percent premium to its shares.

    Yet almost from the beginning, Halcón was saddled by high costs and high debt, despite having some quality acreage. Indeed, the value of Halcón's holdings in North Dakota's Bakken shale formation have long eclipsed the market value of the company.

    Halcón's restructuring plan will eliminate about $222 million of preferred equity, and reduce the company's annual interest payments by more than $200 million.

    Debtholders will hold most of Halcón's shares after it emerges from bankruptcy protection, the company said in a statement, with existing common shareholders getting 4 percent of the new equity and existing preferred shareholders receiving $11.1 million.

    In a prepackaged bankruptcy, companies and their creditors agree on a reorganization plan prior to the bankruptcy filing.

    Wilson did not immediately respond to a request for comment.

    Together with several former colleagues from Petrohawk, Wilson pooled $55 million to form Halcón in 2011. EnCap Investments LP, a private equity firm, together with a subsidiary of Liberty Mutual Holding Co, invested $550 million.

    In a 2013 interview with Reuters he boasted: "We will be successful. I've been doing this a long time. Nothing keeps me up at night."

    A near-60 percent fall in crude prices has eroded cash flows at oil producers, forcing them to restructure to cut debt and reduce interest payments. More than 60 U.S. oil producers have so far sought bankruptcy protection, though most are not prepackaged.
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    Continental Resources announces record STACK oil well

    Continental Resources, Inc. today announced the completion of an industry record well in the over-pressured oil window of Oklahoma's STACK play. The Verona 1-23-14XH flowed at an initial 24-hour test rate of 3,339 barrels of oil equivalent per day, comprised of 2,345 barrels of oil, or 70% of production, and 6.0 million cubic feet of 1,370-Btu natural gas (British thermal units). The Verona is producing from the Meramec reservoir through a 9,700-foot lateral at a flowing casing pressure of approximately 2,400 psi, on a 34/64-inch choke.

    'The Verona is another example of the exceptional results we are getting from wells drilled in the over-pressured oil window of STACK,' said Harold Hamm, Chairman and Chief Executive Officer. 'We couldn't be more pleased with the performance of our wells in STACK and the addition of this outstanding asset to our portfolio. Our STACK team also completed the Verona at a cost of approximately $9.0 million, which is $500,000 less than our year-end 2016 target cost for two-mile lateral wells in the over-pressured oil window. This is the Company's lowest cost completion in STACK to date.'

    The Verona is the Company's ninth well completed in the over-pressured oil window of STACK, and all have been strong producers. The Company is in the process of completing four additional Meramec wells. Continental currently has 11 operated rigs drilling in STACK, with six targeting the Meramec zone and five targeting the Woodford zone.

    Located in Blaine County, Oklahoma, the Verona is immediately east of the Company's Ludwig unit, where Continental is currently drilling an eight-well density pilot, its first in the STACK play. The density pilot consists of seven new wells in the Upper and Middle Meramec reservoirs, as well as an additional well in the Woodford reservoir underlying the Meramec. Results from the Ludwig density pilot are expected to be announced by the Company's third quarter 2016 earnings release.

    As announced earlier in the month, at March 31, 2016 Continental had approximately 171,000 net acres of leasehold in the STACK play, 95% of which is in the over-pressured window.
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    Eni pipeline 'blown up' in Nigeria

    A pipeline owned by Italian player Eni has been attacked by a militant group in the Niger Delta.

    The pipeline bombing is the latest in a string of attacks on major oil and gas companies operating projects in the area.  

    The Eni gas pipeline was blown up on Tuesday in Ogbembiri in Bayelsa state, according to local media reports. As a result, Eni's production is said to have been affected.  

    It is not clear yet who was responsible for the attack, but reports indicate it was a group calling itself the Niger Delta Avengers, which previously claimed responsibility for similar attacks on Chevron and Shell project.  

    Eni was unavailable for immediate confirmation when contacted by Upstream.
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    Shell ships Cheniere's ninth Sabine Pass export cargo

    Cheniere’s Sabine Pass LNG export terminal in Louisiana, the first of its kind to ship US shale gas overseas, has exported its ninth cargo of the chilled fuel since start-up in February.

    The 155,000 cbm GasLog Shanghai LNG tanker left the Sabine Pass facility on Monday and is currently located in the Gulf of Mexico, according to AIS data provided by the vessel tracking website, MarineTraffic.

    The liquefied natural gas tanker is chartered by BG’s Methane Services, now part of Hague-based LNG giant Shell.  Shell has a 20-year offtake agreement with Cheniere for 3.5 mtpa of LNG from Train 1.
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    Susquehanna County Uses NatGas to Attract New Business, May 19 Expo

    Cabot Oil & Gas is a great company that focuses most of its shale efforts in the Marcellus. And every single Marcellus well they drill is located in a single northeastern Pennsylvania county–Susquehanna County. Susquehanna County has been good for Cabot, and conversely, Cabot has been good for Susquehanna County–providing jobs and pumping millions into the local economy.

    So it was no surprise to learn that Cabot is the main sponsor of a county event being held tomorrow: the Susquehanna County Business Expo. The purpose of the expo? To lure companies to locate or relocate in a relatively rural but rapidly growing county–where the air is good, the people are nice, the taxes are LOW and the gas is plentiful.

    The not-so-subtle message to businesses located nearby in Broome County, NY (where MDN is written) is that they ought to consider relocating over the border.

    Specifically in their sights are manufacturers who can leverage the cheapest natural gas in the world! The sad truth is that businesses have been, and continue to, leave the Empire State in droves. Cuomo is driving them out with his obtuse policies.

    The Expo will be held tomorrow in Montrose, PA. MDN encourages Broome businesses (and business from other areas) to consider attending.
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    Summary of Weekly Petroleum Data for the Week Ending May 13, 2016

    U.S. crude oil refinery inputs averaged about 16.4 million barrels per day during the week ending May 13, 2016, 192,000 barrels per day more than the previous week’s average. Refineries operated at 90.5% of their operable capacity last week. Gasoline production decreased last week, averaging 10.0 million barrels per day. Distillate fuel production increased last week, averaging about 4.8 million barrels per day.

    U.S. crude oil imports averaged about 7.7 million barrels per day last week, up by 22,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.6 million barrels per day, 8.8% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 691,000 barrels per day. Distillate fuel imports averaged 52,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.3 million barrels from the previous week. At 541.3 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.5 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 3.2 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.0 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories decreased by 0.7 million barrels last week.

    Total products supplied over the last four-week period averaged 20.2 million barrels per day, up by 2.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.6 million barrels per day, up by 5.7% from the same period last year. Distillate fuel product supplied averaged 4.1 million barrels per day over the last four weeks, down by 0.9% from the same period last year. Jet fuel product supplied is up 3.8% compared to the same four-week period last year.

    Cushing inventories rise 500,000 bbl
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    Small drop in US oil Production

                                                    Last Week    Week Before    Last Year 

    Domestic Production '000........... 8,791            8,802              9,262
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    Report: Apache set to be bought by Occidental Petroleum

    Apache +9.8% premarket following a report from that the company may be acquired by Occidental Petroleum in a deal thought to be worth at least $25B.

    APA has called a town hall meeting today where it may announce the takeover to staff, according to the report.

    APA is a "perfect fit" for OXY, the report says, as the companies have a similar production profile in terms of liquids production.


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    India Sustains Crude Buying at Record, Boosts Diesel Imports

    India sustained crude oil imports at a record and purchased more diesel than it has in the previous three years combined.

    The South Asian nation imported 17.96 million metric tons of crude last month, according to data released Wednesday by the oil ministry’s Petroleum Planning and Analysis Cell. That’s roughly equivalent to 4.39 million barrels a day, little changed from a record in March. A surge in diesel buying to a five-year high pushed net exports of the fuel to the lowest since May 2015. Total product imports at 3 million tons were the highest ever.

    India is becoming the center of global oil demand growth as an expanding economy translates into more goods being transported and increasing consumer spending. Water shortages and disputes between government-owned refiners and their private rivals has further boosted the need for overseas supplies.

    “The water shortages have led to run cuts at some refineries, while growing demand continues to result in Indian state-owned refiners importing products in the spot market,” said Virendra Chauhan, an oil market analyst at Energy Aspects Ltd.

    Bharat Petroleum Corp., Indian Oil Corp. and Hindustan Petroleum Corp. are turning to fuel imports because of an ongoing dispute over freight costs and taxes with private refiners Reliance Industries Ltd. and Essar Oil Ltd. Mangalore Refinery and Petrochemicals Ltd. last month shut a crude distillation unit with an annual capacity of 3 million metric tons at its facility in southern India because of water shortages.

    A strong monsoon season -- which runs from June to September -- should ease diesel imports as water levels improve, Chauhan said.

    The country imported 508,000 tons of diesel in April while exporting 2.1 million tons. That left the country’s net exports -- a measurement which strips out inbound shipments -- at the lowest in 11 months. Gasoline exports slipped to 1.37 million tons, the lowest since September.

    Attached Files
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    Saudi Oil Stockpiles Hit 18-Month Low in March as Output Capped

    Saudi Arabia’s crude oil stockpiles fell in March for the fifth month in a row reaching the lowest level in 18 months as the kingdom kept shipping crude to meet customer demand while keeping a lid on production.

    Stockpiles dropped to 296.7 million barrels in March from 305.6 million barrels in February, according to data published on the website of the Riyadh-based Joint Organisations Data Initiative. Stockpiles peaked at 329.4 million barrels in October and have been in decline since then, the data showed.

    Saudi Arabia, Russia, Venezuela, and Qatar had an initial agreement in February to freeze production at January levels to curb a global glut and shore up prices. Negotiations between OPEC members and other producers on April 17 in Doha ended without a deal to limit output after Saudi Arabia and allies in the Gulf Arab region wouldn’t agree to any accord unless all members of the Organization of Petroleum Exporting Countries joined, including Iran.

    "The Saudis were pushing for a freeze deal since February so they needed to rely on stocks to meet any rise in customers demands at home and abroad while keeping their output flat,” Mohamed Ramady, an independent analyst and former economics professor at King Fahd University of Petroleum and Minerals, said by phone from London. “The Saudis also wanted to give some rest to fields after 12 months of production above 10 million barrels a day.”

    The world’s biggest crude exporter kept its oil production almost flat since January at about 10.2 million barrels a day. It exported more in the first quarter this year compared to the same quarter last year, the data showed. Daily exports in March were at 7.54 million barrels, little changed from February. They reached 7.84 million barrels a day in January, the highest since March 2015 when it shipped 7.89 million barrels a day.

    Saudi Arabia’s own refineries produced 2.85 million barrels daily of different products in March, an all-time high and up from 2.84 million barrels a day in February, according to the initiative known as JODI. Gasoline production rose to 569,000 barrels a day in March, the highest since December 2013 when Saudi refineries produced at a record of 613,000 barrels a day, according to JODI.
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    Exxon Mobil expected to ramp up Nigeria's Qua Iboe crude output this week

    Exxon Mobil is expected to ramp up its production of Nigeria's Qua Iboe crude oil this week.

    The company declared force majeure on exports of the grade late last week after a drilling rig damaged a pipeline. Sources said the issue cut the company's production by as much as 250,000 barrels per day (bpd).

    Traders said that Exxon is expected to increase production as early as Tuesday and issue a new loading programme later in the week. Traders expect exports to be delayed by about 10 days.

    Exports of Qua Iboe were scheduled at roughly 306,000 bpd for May. Nigeria's oil production has fallen by almost 40 percent to 1.4 million bpd because of militant attacks on pipelines and other facilities, its oil minister said on Monday.
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    Petronas warns of further oil price impact as profit hit

    Malaysia's Petroliam Nasional Bhd warned that lower oil prices will continue to hurt its earnings on Wednesday after its first quarter profit fell by 60 percent.

    The state-owned company has been hit hard by a tumble in oil prices that has forced it to slash costs and reduce dividends to the government. It detailed plans this year to cut spending by up to 50 billion ringgit ($12 billion) over the next four years.

    "Concerns on moderate demand outlook and persistent oversupply will continue to pressure crude oil prices," Petronas said. "Petronas expects performance to be affected by the volatility of oil prices and foreign exchange rate."

    It added that it will continue with its cost cutting.

    In February, Petronas said it may have to borrow or tap into reserves to meet its dividend commitment to the government.

    Crude oil prices have risen by about 30 percent this year and are near their 2016 highs, but prices are nevertheless down 60 percent since mid-2014, plagued by a global supply glut.

    Petronas said lower prices across all products and higher net impairment on assets had also reduced profitability.

    First-quarter net profit fell to 4.6 billion ringgit ($1.14 billion) from 11.4 billion ringgit in the year-ago quarter, while revenue slid 26 percent to 49.1 billion ringgit, it added.
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    Oil demand strong, year end too early for re-balancing: Total CEO

    Oil demand in 2016 will stay strong, supporting prices, but the market is unlikely to rebalance by the year end, the Chief Executive of French oil and gas major Total, said on Wednesday.

    Patrick Pouyanne told a French Senate committee that oil demand rose sharply in 2015 to 1.8 million barrels per day (bpd), increasing at about 2 percent in a single year.

    "This year, experts see demand at about 1.2 million barrels per day," Pouyanne said.

    "Me and my team see it at about 1.4 million barrels per day, which is still strong and means the market is rebalancing, but will not rebalance completely by the end of the year, however, it will somehow support prices," he added.

    Oil futures have rebounded in the past days, hitting 2016 highs of nearly $50 per barrel due to supply disruptions in Nigeria and Canada, from as low as $26 per barrel in January on a global supply glut.

    The Paris-based International Energy Agency, said in its May forecast that global oil demand growth was broadly unchanged at 1.2 million bpd for this year, but said the risks to future forecasts lay to the upside.

    Pouyanne said the market was still being supplied and major projects that were decided by oil companies some three to four years ago when prices were high at about $100 per barrel, are expected to enter into production around the year 2020.

    "However, investments have fallen sharply and we are not preparing production for the years 2019-2020," he said, adding that investments have fallen from about $700 billion in 2014 to $400 billion this year.

    "At this rhythm, there could be a shortfall of supply and a counter shock. There could be a shortfall of about 5 million barrels in that horizon, which is a lot. All of this because volatility has been extreme," Pouyanne said.

    Attached Files
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    Iran's May oil exports set to surge nearly 60 pct from a year ago -source

    Iran's oil exports are set to surge in May, climbing nearly 60 percent from a year ago, with European shipments recovering to about half of pre-sanction levels, according to a source with knowledge of the country's crude lifting plans.

    This shows Tehran is regaining market share at a faster pace than analysts had projected as it battles with Saudi Arabia for customers by cutting its prices. April loadings at 2.3 million barrels per day (bpd) were around 15 percent higher than the International Energy Agency estimated earlier this month.

    May shipments are set to jump to 2.1 million bpd from 1.3 million bpd during the same month in 2015, when Iranian exports were constrained by Western sanctions imposed because of the country's nuclear programme. The April loadings were the highest since January 2012.

    The increase in loadings suggests that Iran has overcome a tanker shortage that threatened to derail attempts to regain market share after the sanctions were lifted in January.

    Saudi Arabia will feel the surge in Iranian exports most keenly as it struggles for regional supremacy with Iran, with the oil market becoming a key battleground.

    Saudi Arabia plans to boost production in the coming months to squeeze the Iranians, said Ian Bremmer, the president of political risk consultancy Eurasia Group, who spoke recently with executives and a member of the ruling family.

    The production increase could also boost returns for the planned Saudi Aramco share sale and help ensure a smooth succession for deputy crown prince Mohammed bin Salman, Bremmer told Reuters on Wednesday.

    Increases of as much as 1 million bpd were mentioned, Bremmer said, though he was sceptical about the higher targets.

    "The challenge against Iran will mean an expanded effort to work with Asian economies," he said.

    That will mean investing in refineries in the Asian market, "something the Iranians can't do, given both their resource limitations and the remaining sanctions environment," he said.

    In the meantime, Iranian exports are rapidly returning to near pre-sanctions levels. Loadings to Asia were 1.7 million bpd in April, about a third higher than a year ago and the most since 2011, according to the source.

    Loadings will stay near that level for May, with 1.6 million bpd scheduled.

    Loadings for China, Iran's biggest customer, were nearly 840,000 bpd in April and more than 620,000 bpd are planned for May.
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    Drought triggers unusual thirst for gasoil in Asia

    Hit hard by an El Nino-induced drought, some Asian countries are witnessing an unusual spike in gasoil demand for power generation with water shortage severely curtailing hydro power generation, especially when the crop season is drawing near.

    Analysts said that while India, Pakistan and Vietnam are witnessing a spike in demand, Malaysia is also facing dry weather in many areas but has not yet boosted gasoil imports. The market, though, is keeping a close eye on any additional demand from Malaysia.

    "Across Asia, we have seen a significant switch to diesel in the power sector due to the drought. We have also seen air conditioning demand soar, supporting gasoil demand further," said Amrita Sen, Chief Oil Analyst at Energy Aspects.

    In India, state-run oil firms have been issuing rare gasoil import tenders to tide over the crisis. Some Vietnamese importers have also sharply raised their gasoil imports. And Pakistan State Oil, or PSO, recently stepped into the international market, in an unusual move, to import gasoil.

    "The El Nino conditions have meant that India has had two successive years of below-normal rainfall. If weak rainfall persists for a third year, agri-based diesel demand may continue to accelerate," Macquarie said in a recent research report on India's oil sector.

    The agriculture sector contributes to about 13% of India's overall diesel demand. It is heavily dependent on rainfall, and diesel pumps supplant irrigation supply. A fall in hydro-electricity generation has also meant more diesel is needed to run gen-sets in times of electricity shortage at homes and commercial establishments.

    All this implies that weak rainfall almost always results in boosting diesel demand growth, Macquarie added.

    Under the El Nino weather phenomenon, warm water spreads from the west Pacific and the Indian Ocean to the east Pacific, causing extensive drought in the western Pacific and rainfall in the normally dry eastern Pacific.

    In India, gasoil imports have gone up significantly over the past few months, partly triggered by water scarcity in the country that led state-owned refiner Mangalore Refining and Petrochemicals Ltd. to idle some units, and partly due to state-owned refiners switching to imports instead of buying from private refiners Essar Oil and Reliance Industries, market sources said.
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    Chevron close to restarting Gorgon LNG’s Train 1

    Chevron has reportedly started work in order to begin the pipe cooling and pre-start activities in order to resume production at its $54 billion Gorgon LNG plant on Barrow Island in Australia.

    The facility halted production soon after the first cargo was shipped in March due to a mechanical issue in the propane refrigerant circuit on Train 1.

    Chevron’s spokeswoman told The West Australian, the start-up activities on Train 1 are under way with the production set to resume in the coming weeks.

    Additionally, the spokeswoman noted construction activities on the second and third production train continued without effects on the timing.

    Chevron did say, following the refrigerant circuit failure, the repairs would last 30 to 60 days, and Joe Geagea, the company’s executive vice president for technology, projects and services, at the end of April said the restart could be expected in May.

    Prior to the mechanical failure, Train 1 production peaked at nearly 90,000 barrels of oil equivalent and Chevron still expects the ramp-up to full capacity over the next six to eight months, despite the issue.

    Chevron did not comment on the costs of the repair works tipped to be up to $200 million.

    According to the report by The West Australian, the project’s second LNG cargo, destined for LNG giant Shell, is expected to leave Barrow Island by the end of this month.

    At full capacity, the plant on Barrow Island will have the capacity to produce 15.6 mtpa of LNG using feed gas from the Gorgon and Jansz-Io gas fields, located within the Greater Gorgon area, between 80 miles (130 km) and 136 miles (220 km) off the northwest coast of Western Australia.
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    Brazil Regulator Renews Two Petrobras Offshore Leases For 27 years

    Brazilian petroleum regulator ANP said on Tuesday that it extended state-run oil company Petroleo Brasileiro SA's concessions to explore and produce oil from the Marlim and Voador offshore fields for 27 years, to 2052.

    The extensions were made to help facilitate new investment in the fields, which require new wells, production equipment and other capital spending to help maintain their declining output, the ANP said in a statement.

    Petrobras is struggling with low oil prices, nearly $130 billion of debt and stagnant output.

    The ANP, though, has pressured the company to use more of its shrinking investment budget to improve output in Marlim and other Campos Basin offshore fields near Rio de Janeiro.

    These fields have been declining nearly as fast as Petrobras can add new output. Their decline has also deprived the state of royalties and other taxes in the midst of a recession.

    To cut debt and increase its investment budget, Petrobras is seeking to sell $14 billion of asset this year, including stakes in existing fields or prospects. Extending the rights to the fields and their oil and gas could make selling them, or raising debt to finance improvements, easier for Petrobras.

    Marlim, Brazil's fifth-most-productive field in March, has output of about 150,000 barrels of oil a day and about 2 million cubic meters (70.8 million cubic feet) a day of natural gas, the ANP said.

    Voador, which will soon reconnect its wells to a new floating production platform in Marlim, produces about 1,520 barrels a day of oil and 38,000 cubic meters of gas.

    - See more at:
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    China's surging crude oil imports for storage may ease

    China appears to be stockpiling crude oil at a faster pace than the market had expected, taking advantage of low prices but perhaps also pulling forward its demand for imported crude.

    While China doesn't disclose the amount of crude flowing into strategic storage, an estimate can be made simply by subtracting refinery runs from the total amount of oil available from both imports and domestic output.

    Domestic crude production dropped 5.6 percent in April from a year earlier to 16.59 million tonnes, equivalent to about 4.04 million barrels per day (bpd), the National Bureau of Statistics said on May 14.

    This was the lowest rate on a daily basis since July 2013, and it brought the decline in the first four months of the year to 2.7 percent from the same period in 2015, with about 4.11 million bpd being produced.

    While lower domestic output in the world's fourth-largest producer shows China's oil firms aren't immune to the pressures of low prices, the shortfall has been more than made up by sharply higher imports.

    Crude imports for the first four months of the year were 123.7 million tonnes, equivalent to about 7.46 million bpd, and 11.8 percent higher than for the same period last year.

    Taking imports and domestic output together, total crude availability in China for the January to April period was 11.56 million bpd.

    Total refinery throughput was 2.9 percent higher in the first four months at about 10.69 million bpd.

    This means that there was about 870,000 bpd of crude available that wasn't processed through refineries, meaning it most likely made its way into commercial and strategic storages.

    This means that China is filling storages at a considerably faster pace than had been expected in a Reuters poll of analysts conducted in December.

    According to the poll, China was seen adding 70 to 90 million barrels to its Strategic Petroleum Reserve (SPR) in 2016, or about 245,000 bpd at the upper end of that range.

    If all the surplus crude has indeed flowed into storage, it implies that about 105 million barrels were added in the first four months alone, more than what analysts had expected for the entire year.

    It is worth noting that some analysts had expected greater flows into the SPR, with Energy Aspects predicting 150 million barrels for the year.

    It would now seem that even optimistic forecasts may be exceeded, if China maintains the rate of crude imports directed for storage.

    China is currently filling its second phase of SPR, which has a capacity of 244.8 million barrels, and Thomson Reuters Oil Research and Forecasts expects this process will be completed by the end of the year.

    A planned third phase of undisclosed capacity is due for completion by 2020 as China works toward the goal of reserves equal to 90 days of imports.

    It would appear that China still has the capacity to add more oil to its SPR in the coming months, but questions must be asked whether it can do so at the same pace seen in the first four months.

    It's possible that storage flows may ease back in coming months, resulting in slower growth in crude imports.

    This may already be happening, with Thomson Reuters Oil Research and Forecasts provisionally assessing May imports at 29.47 million tonnes, down from the 32.58 million reported by customs for April.

    Higher oil prices may also help dissuade the Chinese from importing for storage, with Brent crude closing on Tuesday at $49.28 a barrel, some 77 percent higher than the lowest close of 2016 of $27.88 on Jan. 20.

    Certainly, history suggests the Chinese tend to buy more when they deem prices to be cheap, and ease back when they believe prices have risen too far, too quickly.

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    Petrobras raises $6.75 billion in return to global bond markets

    State-controlled Petróleo Brasileiro SA raised $6.75 billion on Tuesday from a sale of five- and 10-year dollar-denominated bonds, in a closely watched return to global debt markets after the suspension of Brazilian President Dilma Rousseff.

    The sale is the first by any Brazilian company since June and the first to test investor sentiment toward Brazil since Rousseff was ousted last week to face an impeachment trial. Petrobras, as the firm is known, will also buy back up to $3 billion of debt maturing in 2018.

    Investors have said Petrobras, which for years was Rousseff's main tool to enact policies that helped drive Brazil into a recession not seen in eight decades, could gain most from the change in Brazil's leadership. Rousseff forced Petrobras to borrow beyond capacity to bolster her Workers Party's political agenda. The company is the world's most indebted oil firm.

    In a strong sign of backing for a company that has been the largest emerging market corporate borrower in recent decades, investors placed more than $20 billion worth of bids for the new securities, according to three sources directly involved with the transaction. They asked to remain anonymous because terms of the deal are private.

    The deal could help pave the way for other Brazilian companies to raise money in a "very gradual" reopening of debt markets, as optimism mounts that Rousseff's exit may usher in the implementation of more business-friendly policies, said Eduardo Vieira, an analyst with Deutsche Bank Securities in New York.

    "Petrobras needed to tap the market, since one of the company's pressing issues was liquidity," he said.

    The sale is Petrobras' first attempt to place global bonds since a $2.5 billion offer of bonds maturing in 2115 last June. The company borrowed from Chinese lenders in recent months to counter the impact of plunging oil prices, restricted access to capital markets and fallout from the sweeping corruption scandal that accelerated Rousseff's fall.

    The company sold $5 billion in five-year notes at 8.625 percent and $1.75 billion in 10-year notes at 9 percent. Petrobras had last sold similar debt in March 2014, bearing interest of 4.875 percent and 6.256 percent, respectively.

    "It may turn out to be a costly deal, even if the market response turns out to be very positive," Vieira said.

    Yields on Petrobras' shorter-termed bonds had surged in recent months on concern the company could have trouble refinancing $18 billion in notes maturing between next year and 2019, one of the sources said.

    Last week, Chief Financial Officer Ivan Monteiro said on a conference call to discuss Petrobras' first-quarter results that an eventual market reopening could help the company pay down debts coming within the next five years.

    Petrobras has $33 billion of bonds coming due within the next five years, or about 60 percent of outstanding bond debt.

    "We need to adjust to the fact that we are no longer an investment-grade company," Monteiro said last week. "The cost has risen."
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    Shell Looks to Offload $40B In Non-Core Assets

    Royal Dutch Shell plc is divesting US$40 billion in non-core assets in its attempt to cut capital expenditures and raise cash in a desperate attempt to right its balance sheet wrongs after its takeover of BG Group plc earlier this year left it strapped for cash and laden with nearly US$81 billion worth of debt.

    The costly merger at a time of depressed oil prices has rendered Shell the largest published owned company in the UK and the largest producer of liquefied natural gas (LNG) in the world.

    Shell’s massive debt rose from US$43.84 billion to US$80.87 billion from Q1FY15 to Q1FY16, while free cash flow fell from US$.53 billion to -$5.06 billion over the same period.

    Unfortunately for Shell, as far as oil assets go, it’s a buyer’s market, with drilling rigs and the like selling for 10 percent of their value during “normal” times. But divest it must, so it’s quite possible that Shell will be forced to take drastic measures and issue an initial public offering (IPO) to lighten its load.

    Simon Henry, Shell’s CFO, confirmed that an IPO was a possible solution, and that he expected this move would help to lower Shell’s net debt by over $50 billion over the next four years. “There are no prima facie reasons why we would not look at such a monetization route, if that was the best way to create value.”

    An IPO of Shell’s mature assets would allow Shell to still benefit from any future oil recovery, if there is indeed an oil recovery on the horizon.

    A decision on how to implement the divestment is not expected anytime soon, although analyst Aneek Haq of Exane BNP Paribas believes that an IPO announcement could be made within a year.
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    Williams Announces Open Season for Northeast Supply Enhancement

    Williams has pre-filed an application with the Federal Energy Regulatory Commission for the the Northeast Supply Enhancement project–a project to expand the Transco pipeline to increase pipeline capacity and flows heading into northeastern markets.

    Yesterday Williams announced an official, “binding” open season for the project–to sign customers to long-term contracts to use the expanded capacity…
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    Greece, partners sign off Trans-Adriatic Pipeline to widen gas supply

    Five countries in south-east Europe formally signed off on the construction of a pipeline which will transport Caspian gas to European markets in an attempt to ease their reliance on Russia.

    The 870-km (540-mile) Trans-Adriatic Pipeline (TAP) is part of the so-called "Southern Corridor" that will link Azerbaijan's giant Shah Deniz II field with Italy, crossing through Georgia, Turkey, Greece, Albania and the Adriatic Sea. It is the largest endeavour to bring new supply sources to European consumers.

    "The energy map of south-east Europe is being redefined and this turns Greece into an energy hub of the region," Greek Prime Minister Alexis Tsipras said at an inauguration ceremony in the northern Greek city of Thessaloniki on Tuesday.

    The 5-billion-euro project will cross through Georgia, Turkey, Greece, Albania and the Adriatic Sea. European regulators cleared the project in March as part of Europe's drive to secure energy supplies.

    Around 10 billion cubic metres (bcm) per year of Azeri gas should reach Europe by 2020 through TAP as well as the South Caucasus Pipeline through Georgia and the Trans-Anatolian Pipeline (TANAP) through Turkey.

    "We are inaugurating an important part of one of the largest and most complex projects in the history of energy industry," said Georgian Prime Minister Georgy Kvirikashvili.

    "Georgia, as a transit country, reiterates its commitment to the diversification of energy supplies to Europe."

    TAP is owned by BP, Azeri state energy firm SOCAR, Italy's Snam, Belgian company Fluxys, Spain's Enagas and Axpo. Construction is expected to begin this summer.

    The European Bank for Reconstruction and Development is considering financing of up to 1.5 billion euros ($1.7 billion) for TAP, which would be the largest loan it has granted.

    Total project costs - which include drilling, offshore platforms and terminals as well as pipelines - are $45 billion and the entire pipeline route will span 3,500 km, with TAP the final link into Europe.

    Cash-strapped Greece has been seeking to boost its role as a regional energy hub and has said that TAP fitted well with another gas pipeline scheme, Interconnnector Greece-Bulgaria (IGB), and a planned liquefied natural gas (LNG) project off the northern Greek city of Alexandroupolis.

    Government officials say the project is expected to create some 8,000 direct jobs in country with a record unemployment of 24 percent and will mean hundreds of millions of euros in contracts for Greek firms which will take part in construction works.
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    Rockhopper vs the Shales.

    An independent audit showed that the best estimate of contingent resources -- also known as 2C resources -- at the Sea Lion complex came in at 517 million barrels, of which London-based Rockhopper’s share is 258 million barrels, it said Tuesday in a statement.

    Today’s announcement is higher than the 482 million barrels Bank of Montreal was expecting.

    “It adds to confidence on the prospectivity of the region,” David Round, an analyst at BMO, said by e-mail. “But there remain a number of hurdles, namely the oil price, before the resources can be commercialized.”

    Shares in Rockhopper gained as much as 6.2 percent to trade at 38.75 pence a share in London, the highest in two weeks. They were 3.4 percent higher as of 9:17 a.m. Premier Oil Plc, a London-based explorer with a 60 percent stake in Sea Lion, gained 2.9 percent to 79.75 pence a share.

    “The current size of Sea Lion at over 500 million barrels is good to see, helping confirm a significant second phase beyond the current development,” Daniel Slater, research director at Arden Partners Plc, said in a note.

    The 2010 Sea Lion oil discovery was the first off the Falklands, the south Atlantic archipelago which Margaret Thatcher fought to keep British in 1982. No discovery there has yet been commercially productive.

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    Libyan factions agree in principle on unified oil structure: foreign minister

    Rival factions have agreed in principle to have one oil organization for strife-torn Libya, the foreign minister in the new U.N.-backed, national unity government said on Tuesday.

    The West is counting on the unity government to gradually end armed anarchy in the OPEC member state, tackle Islamic State militants and stop new flows of migrants across the Mediterranean to Europe, though the new leaders still lack effective control over the capital city Tripoli.

    "These institutions can only be managed centrally. That's why it was agreed that both institutions from east and west be united, so that there is only one oil company, one investment company and one central bank," Foreign Minister Mohammed Siyala told reporters in Vienna.

    "The first steps to achieve this are being taken now, there is an agreement on the basic points and principles and now we're waiting for the implementation."

    Libya, an OPEC member, will resume oil shipments from the port of Marsa El Hariga after a deal reached at talks in Vienna between rival oil officials representing the east and west of the country, Libyan oil sources said on Monday.

    Exports from Marsa El Hariga have been blocked for two weeks due to a standoff between the rival national oil corporations in the east and west of the vast OPEC member state.

    Asked on Tuesday about the time frame for the first oil exports, Siyala said:

    "You know that sanctions against Libya existed... Now it's up to us. There is already a shipment from the official ports and with international agreement and under international rules and I believe that oil exports, be they from the eastern or western ports, will return to what they used to be."
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    Producer/merchants' total holdings in NYMEX crude futures largest since 2013

    Producer/merchants massively boosted their total holdings in crude futures for the reporting week ended May 10, data from the Commodity Futures Trading Commission showed Friday.

    This brings their total holdings in NYMEX crude -- the sum of longs and shorts -- to 702,586 contracts, the most since October 2013, the CFTC data showed.

    The group added 25,041 longs and 20,180 shorts, which effectively left them net short by an unremarkable 283,534 contracts. However, the action comes amid a rather large increase in total open interest for December crude futures, which rose 8,511 contracts to 212,925 contracts.

    With December crude touching $49.26/b last week, crude producers -- a substantial portion of the producer/merchant category -- were likely attempting to help lock in a floor through the traditionally very liquid December contract.

    This week, a number of crude producers said they were more actively hedging. Devon Energy said it would look at more "opportunistic" hedges while keeping crude production around 50% hedged. And Marathon Oil said it was looking at a $40/b floor for its 2016 oil hedges. Pioneer Natural Resources said it was 50% hedged for 2017 and 85% hedged this year.

    ConocoPhillips, too, may start to hedge, CEO Ryan Lance said Tuesday. The company currently does not hedge any of its roughly 800,000 b/d of global crude and bitumen production, Lance said.

    Money managers, meanwhile, piled headlong back into short positions. The group added 20,367 shorts and cut 659 longs, pulling their net long position lower by 21,026 contracts to just 191,731 contracts.

    This marks the second straight week the group has trimmed its net long position, and comes as prompt crude futures rose just over $1 to $44.46/b over the reporting week.

    Money managers had built up a substantial net long position between the beginning of the calendar year through mid-March, a period that saw crude prices hit bottom in mid-February before rising steadily ever since. That net long has proven difficult to maintain, however, having drifted below 200,000 contracts both last week as well as in early April.

    Swap dealers were also very active last week, adding 12,868 longs and cutting 5,857 shorts, leaving their net short position 18,725 contracts leaner at 8,087 contracts. Other reportables were less busy, but still cut their net long by 5,558 contracts to 100,229 contracts.
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    WTI curven now building a big 'kink'

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    Iraq Oil Surge Seen Losing Steam Just as Markets Need More Crude

    Iraq’s oil industry is on a roll. Production has jumped more than 40 percent since mid-2014 and exports are at near-record levels.
    It probably won’t last. Plunging government revenue is hampering the state’s ability to invest, while OPEC’s second-biggest crude producer is reaching the limits of its capacity to store and export oil, according to analysts at Energy Aspects Ltd. and FGE. Spending on the country’s biggest fields may shrink to as little as $7 billion this year from about $13 billion in 2015 and $20 billion in 2014, Richard Mallinson of Energy Aspects said Monday.

    Iraq has boosted output after decades of sanctions, war and under-investment, with international companies such as BP Plc and Lukoil PJSC developing some of the largest deposits in its oil-rich southern region. The country is exporting 3.3 million barrels a day of crude this month from the southern port of Basrah, and it targets keeping shipments at that level for the rest of the year, Deputy Oil Minister Fayyad Al-Nima said in a May 13 interview. Without more investment, these exports are sure to slide, the analysts said.

    “We’re going to see production growth flatten and then start to decline by late this year and into 2017,” Mallinson said by phone from London. “What does that mean if Iraq doesn’t deliver growth this year? If you were expecting a big increase from Iraq and we don’t see that, it will add to bullish sentiment in the market.”

    While crude continues to flow from Rumaila, West Qurna and other fields in the south, parts of northern Iraq are a battleground for forces trying to dislodge the Islamic State militants who have occupied swathes of territory since 2014. The conflict has prevented the government from exporting oil through its northern pipeline to Turkey, and the collapse of a plan to share oil revenue with the self-ruling Kurds in northeastern Iraq has limited sales from fields in the region.

    Iraq pumped a record 4.51 million barrels a day in January and 4.31 million in April, according to data compiled by Bloomberg. Its total production capacity, including in Kurdish areas, is 4.8 million barrels a day, and increasing that to a target of 5 million will depend on oil prices, Al-Nima, the deputy minister, said. Domestic demand for oil as fuel for power plants is also a constraint on exports, Al-Nima said.

    Investment in Iraq’s southern fields may fall by 30 percent to 40 percent this year as the government, which gets most of its income from oil sales, delays payments to foreign companies and limits future spending, said Tushar Tarun Bansal of FGE in Singapore.

    “Investment in new wells isn’t getting done, and that will show up in reduced production later in the year,” Bansal said. “The market is yet to account for the impact that will have, and it could lead to higher prices.”
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    Oil sand work camps evacuated as Alberta wildfire moves north

    A massive wildfire burning around the oil sands hub of Fort McMurray was growing and moving rapidly north late on Monday, forcing firefighters to shift their focus to protecting major oil sand facilities north of the city, officials said.

    The sudden movement of the fire prompted the evacuation of some 4,000 people from work camps outside Fort McMurray, with all northbound traffic once again cut off at the city, the Regional Municipality of Wood Buffalo said.

    Suncor Energy Inc and Syncrude Canada confirmed they had evacuated workers from the affected area. Their major facilities were under a precautionary notice with the fire still some 15 to 20 kms (10-12 miles) away, officials said.

    A dozen work camps south of the major projects faced mandatory evacuation notices.

    "The urgency we're looking at is with regards to the oil gas infrastructure," Scott Long, executive director of the Alberta Emergency Management Agency, told reporters in Edmonton, adding Fort McMurray itself appeared to be safe for now.

    The entire population of Fort McMurray, about 90,000 people, was forced to flee nearly two weeks ago as the uncontrolled wildfire raged through some neighborhoods and destroyed about 15 percent of structures.

    On Monday, the blaze continued to burn uncontrolled, now covering 285,000 hectares (704,000 acres), officials said. By Monday evening it was moving 30 to 40 meters (98 to 131 feet) every minute and had jumped a critical firebreak north of the city to push into the oil sand camp areas.

    "When you have this type of extreme fire behavior, it doesn't matter what tankers you put in front of it, or how many helicopters, mother nature is going to continue to move that fire forward," wildfire manager Chad Morrison said.

    Morrison said the blaze was expected to slow into the evening and that it was unclear if it would reach the major oil sand facilities, though responders were preparing for that eventuality.

    A Suncor spokeswoman said 120 people were evacuated from its MacKay River plant and camps as a precautionary measure Monday afternoon, adding the facilities were not at risk from the fire.

    Syncrude, a joint venture among numerous energy companies operating in the region, said on Twitter that it was relocating its workers to safety.

    The fire also threatened Enbridge Inc's Cheecham crude oil tank farm south of Fort McMurray. The blaze, about 1 km (1,094 yards) away from the tank farm, was under control with the wind cooperating as the company's industrial firefighters tackled the fire, officials said earlier in the day.

    Enbridge said a firebreak around the terminal was being widened and that crews were assessing other fire suppression tactics like spraying down facilities. It said some pipelines in and out of the terminal were operating, and the situation was being monitored.

    Roughly a million barrels per day of oil sands crude production was shut in as a precaution and because of disruptions to regional pipelines, and much of that production remains offline.

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    Japan's upstream oil and gas investment to tumble in 2016/17

    Japan's upstream oil and gas investment to tumble in 2016/17

    Investment by big Japanese firms in upstream oil and gas developments is set to fall by around 40 percent to about 1.2 trillion yen ($11 billion) in 2016/17 due to current low prices, a government Energy White Paper showed on Tuesday.

    The upstream investments by 10 firms including Inpex Corp, JX Holdings, Mitsubishi Corp and Mitsui & Co had already slipped from 2.1 trillion yen in 2014/15 to 1.9 trillion yen in the year ended in March, the trade ministry said.

    The other firms surveyed are Japan Petroleum Exploration (Japex), Cosmo Energy Holdings, Idemitsu Kosan, Itochu Corp, Marubeni Corp and Sumitomo Corp.

    Globally, top oil companies have struggled to cope with a roughly 55 percent decline in oil prices since their 2014 peak, triggering a wave of spending cuts on new wells and projects to conserve cash.

    International Energy Agency (IEA) Executive Director Fatih Birol said last month that global upstream investment fell by 24 percent in 2015 and is set to fall by 18 percent in 2016.

    This would be the first time that the upstream investment has fallen for a second straight year since the 1980s, he said.

    Birol said annual global upstream investment needs to be at about $630 billion a year to compensate for declining output at existing fields and maintain current production levels.

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    Libya to resume oil shipments from Hariga after talks -sources

    May 16 Libya will resume oil shipments from the port of Hariga after an agreement was reached at talks in Vienna between rival oil officials representing the east and west of the country, Libyan oil sources told Reuters.

    Exports from the port have been blocked since early this month due to a standoff between the rival eastern and western National Oil Corporations (NOC).

    The NOC in Benghazi, which is loyal to Libya's eastern government, has prevented the loading of a tanker sent by the NOC in Tripoli, since the former tried unsuccessfully last month to export a cargo of crude for the first time.
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    Saudi Aramco awards Hasbah gas expansion contract

    State oil giant Saudi Aramco IPO-ARMO.SE has awarded a $1 billion-plus contract to India's Larsen & Toubro (L&T) and Singapore-based Emas AMC for the expansion of the offshore Hasbah sour gas field, industry sources said.

    Increasing its supply of gas is a top priority for Saudi Arabia. Many industrial firms have complained about a shortage crimping expansion plans, while the kingdom is trying to use more of the fuel for power generation and water desalination instead of burning crude oil, which it wants to export.

    Work on the expansion scheme includes building platforms and pipelines, with the field's supply feeding the Fadhili gas plant, a $6 billion complex that will include a gas processing unit and sulphur recovery.

    Saudi Aramco declined to comment. L&T did not respond to emailed requests for comment, while Emas was not available for immediate comment.

    It is the second major contract win for the duo in recent months: Emas AMC, a unit of Ezra Holdings, also teamed up last year with the Indian firm to secure a long-term contract with Aramco to work on offshore facilities.

    The expansion of Hasbah will supply 2 billion standard cubic feet per day (scfd) of gas to the Fadhili plant, for which Aramco awarded a construction contract last year. The remaining 500 million scfd of supply for the plant will come from the onshore Khursaniyah field.

    Hasbah already feeds Wasit, another major gas plant. Aramco said in March it had started producing natural gas from the offshore field ahead of peak summer demand in the world's largest oil exporting country.

    An industry source told Reuters the Wasit plant would reach full capacity in July of processing 2.5 billion scfd of gas.

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    Penn West Petroleum flags going concern risk

    Canadian oil and gas producer Penn West Petroleum Ltd said on Monday it may default on its financial covenants at the end of the second quarter and raised doubts about its ability to continue as a going concern.

    Penn West had long-term debt of C$1.86 billion as of March 31, or $1.44 billion at current exchange rates.

    The company said it was in talks with lenders on amending its financial covenants, which if successful would reduce the risk of default.

    Penn West said it would try to raise money by selling more assets and would seek funding from investors.

    The Calgary-based company, like other oil and gas companies, is suffering from a near-60 percent slump in global crude prices since mid-2014.

    The plunge has pushed at least 28 publicly traded North American oil and gas producers to seek bankruptcy protection since early 2015, according to a Reuters review of regulatory filings.

    Penn West, which reported a smaller first-quarter loss on Monday due to lower expenses, said total production fell 18.9 percent to 77,010 barrels of oil equivalent per day in the three months ended March 31.

    The company slashed its budget by as much as 90 percent in January. It also cut about 35 percent of its workforce in September and stopped paying dividend from the next month in an effort to reign in spending.
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    SandRidge Energy files for bankruptcy protection

    SandRidge Energy Inc and master limited partnership Breitburn Energy Partners LPfiled for bankruptcy protection on Monday, the latest U.S. oil and gas companies to fall victim to weak oil prices.

    A plunge in global crude prices LCOc1 has now pushed at least 28 publicly traded North American oil and gas producers to seek bankruptcy protection since early 2015, according to a Reuters review of regulatory filings.

    SandRidge said in a court filing that it had total assets of $7.01 billion and total debt of $4 billion as of March 31. 

    Breitburn listed assets and liabilities of $1 billion to $10 billion.

    SandRidge, which has been in talks with creditors on a restructuring deal, said on Wednesday it would not be able to file financial results for the quarter ended March 31 on time.

    Small oil and gas producers have largely exhausted funding alternatives after issuing more equity and debt, tapping second-lien loans and shedding assets over the last two years to stay afloat as banks trim credit lines.
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    Rosneft announces first quarter 2016 operating results

    - Average daily hydrocarbon production of 5.21 mmboe, an increase both compared to Q1 2015, and for two consecutive quarters (+2.5% compared to Q3 2015)
    - Production drilling grew by 52% with maintaining in-house OFS share above 50%
    - Gas production grew by 6% to 16.72 bcm against Q1 2015
    - Refining throughput optimization with refining depth up to 68.9%
    Euro-5 motor fuel production increased by 1.7 times against Q1 2015


    Hydrocarbon production continued to grow in Q1 2016. The level of production reached 5.21 mmboed (64.0 mmtoe), up by 0.2% against Q1 2015 and by 2.5% over the last two quarters.

    In Q1 2016 the Company increased its production drilling by 52% against Q1 2015 to 2.08 million meters as established by the targets for the year. The share of in-house services in the total drilling footage consistently exceeds 50%. New wells put into operation grew by 59% compared with Q1 2015 (with horizontal wells share of 30%).

    Liquid hydrocarbon production in Q1 2016 returned to the level of Q1 2015 and amounted to 50.2 mmt. The largest contribution to these positive production dynamics was provided by: RN-Uvatneftegaz (+13.2%), RN-Severnaya Neft (+17.6%), Sakhalin-1 project (+23.1%), Samaraneftegaz (+6.0%), as well as the Northern tip of the Chayvo field (+39.4%).

    RN-Uvatneftegaz started commercial oil production at a new field of the Uvat project - the West Epasskoe (crude oil ABC1+C2 recoverable reserves exceed 17 mmt). The technological targets of the West Epasskoe field are included in the Eastern Hub in the south of the Tyumen region enabling to gain synergies through the use of existing fields' infrastructure.

    In March 2016, the Company produced 120 mmt of oil at the Vankor field since its commissioning in 2009. The project of drainhole well completion is being successfully implemented at the field. Experience in operating such wells has shown a significant increase in their productivity.In Q1 2016, Rosneft in cooperation with Statoil successfully completed a pilot project on the selection of efficient technologies PC1 reservoir development in the North-Komsomolsk field (Yamalo-Nenets Autonomous District, operator - RN-Purneftegas LLC). Total ABC1+C2 recoverable reserves of the North-Komsomolsk field amount to 203 mmt of oil and condensate and 197 bcm of gas. We were able to conduct pilot operation of 2 horizontal wells in different operating modes, and perform a number of well tests to update the geological and hydrodynamic field models. The average flow rate during the operation exceeded initial expectations and reached more than 75 tpd. Production potential is estimated at more than 100 tpd per well. Over 7,000 tons of oil was produced during the period of pilot operation.

    In Q1 2016, the Company started production drilling at the Tagul field (ABC1+C2 recoverable reserves stand at 286 mmt of oil and condensate and 228 bcm of gas), which is part of the Vankor cluster. The drilling is directional with primarily horizontal completions. During 2016, it is planned to complete drilling about 9 wells and continue with field infrastructure development.

    In Q1 2016, gas production amounted to 16.72 bcm, which is 1% above the level of Q4 2015 and 6% above Q1 2015. One of the key factors in gas production growth for the periods indicated is the startup of the 2nd stage of Rospan's Novo-Urengoi comprehensive gas and condensate processing plant in a comprehensive testing mode in Q4 2015. This facility will enable to increase the actual performance of the GPP to 11 million cubic meters of gas per day and 1,700 tons of condensate per day. Another significant factors of the gas production growth are the start of the third and fourth wells at the Northern tip of the Chayvo field and commissioning of the gas processing plant at RN-Purneftegaz's Barsukovsky field in December 2015.

    The utilization of associated gas in Q1 2016 grew to 91% compared with 87% in Q1 2015. The improvement of APG utilization is an important element of environmental policy.

    Much more information:

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    China April preliminary oil demand rises 1.7 pct to record high

    China's April preliminary oil demand rose 1.7 percent from a year ago as refining throughput rose as independent refiners increased their processing runs and as fuel exports dropped.

    China consumed about 10.62 million barrels per day (bpd) of oil in April, a record daily consumption volume, according to Reuters calculations based on preliminary government data published on Friday.

    The gain in demand, which excludes adjustments of oil stocks, was mainly due to an increase in refinery throughput in part at independent plants.

    In April, Chinese refiners processed 10.89 million bpd of crude oil, up 2.4 percent year on year, data from the statistics bureau showed. The figure compared to March's runs at 10.58 million bpd.

    Throughput for the January to April period rose 2.9 percent on year to about 10.69 million bpd.

    China's refined fuel exports fell to 3.68 million tonnes in April from 3.75 million tonnes in the previous month. A year ago, China was a net importer of refined oil products.

    The implied oil demand is the sum of domestic refinery throughput and net imports of refined products. Reuters will publish a more detailed demand calculation later in April, broken down by products and amended for changes in fuel stocks based on data yet to be released.
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    Range Resources to Buy Memorial Resource Development for $3.3 Billion

    Range Resources Corp., a Fort Worth, Texas, natural-gas producer, on Monday said it agreed to buy rival energy company Memorial Resource Development Corp. in an all-stock deal valued at $3.3 billion.

    The agreement also calls for Range to take on $1.1 billion in debt owed by Memorial. Range will absorb the smaller driller, adding its Louisiana operations to existing acreage and wells across Pennsylvania, Texas and Oklahoma.

    Once it closes, the transaction will rank as one of just a handful of deals executed between sizable independent U.S. energy producers during the oil-and-gas downturn.

    When Whiting Petroleum Corp. announced its acquisition of Kodiak Oil & Gas Corp. in mid-2014, the deal was valued at $3.8 billion, plus $2.2 billion in debt. Noble Energy Inc.’s acquisition of Rosetta Resources Inc., announced a year ago, was valued at $2.1 billion, plus $1.8 billion in debt.

    Jeff Ventura, chief executive of Range, said integrating Houston-based Memorial’s assets will give Range a strategic position on the East and Gulf coasts, and more exposure to natural gas demand. Gas accounted for 71% of the Range’s production last year, while oil and other liquids accounted for 29%, company filings show.

    Both Range and Memorial have seen the value of their shares cut in half during the energy bust, as the price of oil has dropped from more than $100 to under $50 today. In that time, the benchmark U.S. natural gas price has fallen from more than $4.50 per million British thermal units to just over $2. Range shares closed at $42.01 Friday, down from more than $90 just before oil prices peaked in late June 2014. Shares of Memorial have fallen from nearly $30 in September 2014 to $13.45 a share as of Friday.

    Range will issue 0.375 shares, worth $15.75 based on Friday’s closing price, for each share of Memorial, a 17% premium to the Memorial’s closing price on Friday. Memorial shareholders will own 31% of the combined company, and Memorial will have the right to nominate one of its independent directors to Range’s board.

    The companies expect the deal to close in the second half of the year.
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    N Dakota Bakken producers need $40 for 90 days to raise activity

    Oil prices have rallied lately, but not enough to convince U.S. oil producers that hard times may be over soon.

    That’s evident in shale regions like North Dakota that have driven a resurgence in U.S. oil and natural gas production over the last few years.

    Lynn Helms, the director of the North Dakota Department of Mineral Resources, told reporters the other day that producers won’t begin to ramp up activity until they see oil prices holding steady at more than $40 a barrel for 90 days or so.
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    Astomos' VLGC to be first commercial tanker to transit expanded Panama canal

    An executive at Japan's top LPG supplier Astomos Energy said Friday the company's VLGC will be the first commercial tanker to transit the expanded Panama Canal June 27, for a delivery to Japan, marking the start of regular commercial operations through the new locks.

    Speaking to reporters, Kaname Ichima, managing director and COO of Astomos' international business division said the company had not yet picked a VLGC from its fleet for the maiden expanded Panama Canal transit but had two possible candidates.

    To date, Astomos Energy, 51%-owned by Japanese refiner Idemitsu Kosan and 49% by Mitsubishi, currently has 21 VLGCs in its fleet -- six that it owns and 15 on time charter.

    Of these nine VLGCs -- three new tankers and six converted vessels -- are equipped to transit the expanded Panama Canal, according to a company official.

    For Astomos, using the expanded Panama Canal would be its "strategic" option not only to diversify its supply sources but also to reduce its dependency on supplies from the Middle East, using US cargoes from its supply portfolio, Ichima said.

    Over 2014-21, Astomos has term contracts to procure a total of 5.8 million mt of US LPG, all of which are propane. The company is now looking at a possibility of buying US butane in the future, he said.

    But Ichima said the company would need to clear "such issues as specifications" before sealing any deals to buy US butane, of which the company is looking at supplying to Southeast Asia.

    With steady demand for US propane in Japan, Astomos intends to supply its US propane cargoes to the country via transiting the expanded Panama Canal, Ichima said.

    Astosmos reiterated Friday that it still aims to expand its total purchase and trade LPG volumes to 12 million by 2017. This will be up from its planned volumes of around 10.5 million mt in 2016, steady from 2015.

    To expand its total LPG handling volumes, Astomos intends to expand its sales to Vietnam, Thailand and Indonesia, as well as looking at how it can cultivate its demand in China and India indirectly through its partners, Ichima said.

    Of its planned 10.5 million mt purchase and supply plan in 2016, Astomos intends to supply about 3.2 million mt of LPG to Asia, the company said.

    In Japan, Astomos sold a total of 3.653 million mt of LPG in its fiscal year ended December 31, up 3.7% from a year ago, led by increased sales to households, industries, city gas and cars, the company said Friday.

    Astomos' domestic LPG sales for petrochemicals use and for power generation, however, dropped 18% and 34% respectively to 134,000 mt and 147,000 mt in 2015, the company said.

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    Genscape: Iran’s daily oil exports surge by 1.2M barrels since January

    Iran has managed to pump more of its oil back into Asia and Europe than it originally promised, surprising skeptics and laying the groundwork for a Mideast market-share clash — or a truce.

    Iran’s crude exports climbed to 2.35 million barrels a day in April, according to consulting firm Genscape, more oil than U.S. drillers pump in South Texas’ Eagle Ford Shale and North Dakota’s Bakken Shale put together.

    The sharp increase of 660,000 barrels a day compared to March — and 1.2 million barrels a day since January — puts Iran above its planned export target just three months after western powers lifted strict economic sanctions against Iran.

    “Iran has been waiting for this moment for years and they made the best of it,” said Amir Bornaee, an analyst at Genscape who tracks oil vessels.

    Many analysts had said Iran would fall short of its goal because its oil fields fell into disrepair in the three years that the West had sanctioned Iran’s oil exports.

    Some attribute the recent rise in Iran’s exports to a collection of vessels kept near the country’s coastline, but Bornaee says many of those tankers are still there, storing oil.

    Still, it is not clear how much of Iran’s oil came from the more than 30 million barrels it had stored onshore, and how much came from its oil fields.

    Iranian officials have been courting western oil companies and amending drilling contracts in a push to attract investments in its fields, so it’s possible Iran is selling its stored oil in an effort to reach its export goal quickly.

    That way, Iranian officials could be ready to call a truce in the ongoing market-share war by the time the Organization of Petroleum Exporting Countries meets in early June.

    “There’s a lot of posturing going on ahead of the OPEC meeting,” said Andy Lipow, president of Lipow Oil Associates in Houston.

    OPEC, Russia and others failed to reach an agreement last month to cap their production levels when Saudi Arabia balked at Iran’s refusal to join the freeze.

    One reason Iran’s surge in crude exports hasn’t sent oil prices down is because other countries like Canada, Nigeria and Libya have recently suffered production outages.

    The International Energy Agency on Thursday said Nigeria’s output has fallen to a two-decade low amid attacks on its energy infrastructure, and Canada has shut in 1.2 million barrels a day of production amid devastating wildfires, though the outage is expected to be temporary.

    Global oil demand is growing faster than anticipated at 1.4 million barrels a day, and production outside of OPEC is expected to fall 800,000 barrels a day, the IEA said, in a sign there are many market forces offsetting Iran’s return to the oil market.

    According to Genscape, Saudi Arabia lowered its oil exports by 700,000 barrels a day last month to 6.9 million, its first decline in exports this year. But Saudi officials have recently signaled the world’s largest oil-producing nation is gearing up to ramp up its output.

    “Until everyone freezes (oil production), these two countries (Iran and Saudi Arabia) aren’t likely going to slow down,” Bornaee said.

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    Kill the Shale!

    Fifteen New York towns that are upset at Democratic Gov. Andrew Cuomo’s decision to ban fracking have threatened to secede from the state and join neighboring Pennsylvania, where fracking is allowed.

    The towns, all members of the Upstate New York Towns Association, have expressed interest in secession, Conklin Town Supervisor Jim Finch told The Huffington Post. The association is compiling a report to assess the feasibility of joining Pennsylvania.

    “We’re in the Southern Tier of New York,” Finch said, referring to localities in Broome, Tioga, Sullivan and Delaware counties. “There are no jobs. The economy is terrible. There’s nothing going on.”

    He decried Cuomo’s recent decision not to bring a casino to the region, and noted that Conklin and the 14 other towns in the Southern Tier sit on the Marcellus Shale, which is rich in natural gas. Permitting drilling in the region would provide an avenue for new jobs and a way to raise money for local schools and governments, as it has across the border in Pennsylvania, Finch said.

    Leaving New York and joining the Keystone State, he added, would also mean lower taxes for businesses and lower insurance payments.

    Finch conceded that secession is “far-fetched” — it would require the approval of the New York legislature, the Pennsylvania legislature and the federal government — but said raising the idea helps highlight the region’s discontent with New York’s government, and Cuomo in particular.

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    Oil Drillers Betting Three-Month Crude Rally Is Nearing the End

    Oil producers are taking advantage of the rebound in crude markets to lock in protection against another slump.

    They increased their bets on falling prices to the highest level in 4 1/2 years as U.S. inventories of stored oil remained near an 87-year high, while a natural disaster in Canada and militant attacks in Africa curtailed output. Negative sentiment among the group expanded for a third consecutive week, the longest streak since February.

    Energy companies from EOG Resources Corp. to Chesapeake Energy Corp. used financial instruments such as futures, swaps and collars to guard against another fall in prices. West Texas Intermediate oil, the benchmark U.S. crude, has gained more than 75 percent since hitting a 12-year low in mid-February.

    “They’ve been getting more and more active in hedging ever since the first initial jump,” said John Kilduff, a partner at Again Capital LLC in New York. Oil producers “appear to be drawn to this market as everyone tries to stay alive through the downturn,” he said.

    Producers and merchants increased their short position in WTI by 3.8 percent for the week ended May 10 to the highest since September 2011, according to data from the Commodity Futures Trading Commission.

    In western Canada, raging forest fires closed in on Alberta’s vast oil sands, prompting tens of thousands of residents to flee and interrupted shipments of the thinning agent used to help move the extra-heavy crude produced there through pipelines.
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    China Processes Record Crude on Boost From Independent Refiners

    China processed record crude on a daily basis in April as the nation’s independent plants boosted operations amid a surge in oil imports.

    Crude refining in the world’s second-largest oil consumer increased 2.4 percent from a year earlier to 44.75 million metric tons last month, or about 10.93 million barrels a day, according to data released by the National Bureau of Statistics on Saturday. That’s up 1.2 percent from the previous record of 10.8 million barrels a day in December.

    Independent refineries, known as teapots, have been increasing runs after they were allowed to import crude oil. The utilization rate at the plants in eastern Shandong province increased to 53 percent of capacity as of April 29, according to industry website That’s the highest since at least August 2011, when Bloomberg started compiling the data.

    “Teapot refineries have raised operation rates significantly this year,” Amy Sun, an analyst with ICIS China, a Shanghai-based commodity researcher, said by phone. “This has resulted in much higher oil processing than we expected in recent months.”

    China’s inbound oil shipments in April rose 3.2 percent from the previous month to 7.96 million barrels a day and near the February high. Crude imports through Shandong’s Qingdao port surged to a record in March and accounted for about 30 percent of the country’s total.

    China’s crude output fell 5.6 percent from a year earlier to 16.59 million tons (4.05 million barrels a day), Saturday’s data showed. Natural gas production climbed 5.6 percent to 10.6 billion cubic meters and coal output declined 11 percent to 268 million tons.
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    Refiners struggle to stay afloat as Asia drowns in gasoline

    Asia's refined product markets are being swamped by a wave of gasoline as a long-lasting crude oil glut spills into the one fuel market refiners had hoped would save them, ruining margins and dragging down share prices across the region.

    Singapore's benchmark gasoline margins - long the bright spot for Asia's oil processors amid rock-bottom profits earned on diesel, jet and shipping fuel - have more than halved since the beginning of 2016, when they were near at least a seven-year high for first-quarter values. 

    With gasoline's slump, overall refining margins in Singapore have dropped nearly 60 percent since the beginning of the year, buckling under the weight of the fuel products pumped out of oil plants as refiners feasted on crude prices that were as low as three-quarters of their mid-2014 levels.

    Besides dragging down crude refiners' share prices, this drop in margins could also undercut global oil prices that have struggled up from 12-year lows hit early this year, and refiners say the situation will not improve anytime soon.

    "We don't expect 2016 refining margins to improve. In fact, the situation could worsen from second-half of 2016 as the peak maintenance season in Asia will be over," said KY Lin, spokesman for Formosa Petrochemical Corp, meaning that more fuel would hit the market once shutdown refineries restart.

    In a sign of just how bloated the market has become, Singapore's light distillate stocks, which includes gasoline, hit nearly 16 million barrels late last month, the highest on record, according to government figures. The stocks have dropped back since, but there's still enough gasoline in the tanks to fill up almost 50 million average-sized vehicles.

    Lin said some of the main contributors to the gasoline glut have been private Chinese refiners, known as "teapots", that have started exporting their surplus petrol, overwhelming demand.

    The collapsing margins are a sharp reversal from expectations of a few months ago. Just in February South Korea's SK Innovation, a major Asian refiner, said its margins would remain strong as demand for gasoline and naphtha offset weaker markets for other fuels.

    Formosa Petrochemical operates a 540,000 barrels per day (bpd) refinery in Mailiao, Taiwan, the island's largest and one of the 10 biggest in Asia. Formosa produces about 3 million barrels of gasoline a month, over half of which it usually exports.

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    OPEC’s Stable Market Outlook Gives Few Drivers for Policy Change

    The 13 nations of the Organization of Petroleum Exporting Countries pumped 32.44 million barrels a day in April, slightly less than will be required in the the third quarter. Production rose as gains in Iran and Iraq compensated for losses in Nigeria and Kuwait. Investment by the global oil industry through 2018 will slump to less than half the amount spent from 2012 to 2014 following the collapse in prices, OPEC said.

    Oil prices have rebounded more than 75 percent from the lows reached in February as U.S. shale production falters, signaling that Saudi Arabia’s strategy to re-balance oversupplied world markets is taking effect. OPEC, which failed to complete an accord with non-members last month on capping output, has no current plans to revive supply limits when ministers meet on June 2, six delegates said on May 4.

    “It is widely recognized that an adequate return on investment is needed to maintain production levels, as well as to allow for the growth,” the group’s Vienna-based research department said in the monthly report. “A return to balance is a shared interest among consumers and producers alike.”

    While the group’s supply has typically exceeded the required amount in recent months, April output is about 380,000 barrels a day below the 32.8 million that OPEC estimates will be needed in the third quarter. That potential shortfall is a further indication the organization’s policy is working.

    Global oil demand will increase by 1.2 million barrels a day, or 1.3 percent, this year to 94.18 million a day, according to the report. Supplies from outside the group will shrink by 740,000 barrels a day to 56.4 million.

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    Big Oil Gobbles Up Record Debt as Borrowing Costs Decline

    The world’s biggest oil companies are borrowing record amounts of money to cope with a slump in crude prices. Luckily, there’s rarely been a better time to go on a debt binge.

    Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., Total SA, BP Plc and Eni SpA have together sold the equivalent of $37 billion of bonds this year, about double the amount issued in the period before oil prices plunged, according to data compiled by Bloomberg. While this is stretching their balance sheets and even resulting in credit-rating downgrades, the lowest debt costs in a year are softening the blow.

    They’re making hay while the sun shines,” benefiting from improved investor sentiment as oil prices have recovered, said Alex Griffiths, a London-based managing director at Fitch Ratings Inc. “Treasurers are making use of good market conditions to maintain liquidity buffers.”

    Even though oil has increased from the lows of January as a global surplus diminished, prices are still less than half their level two years ago. The world’s biggest companies have sought to keep investors happy through the downturn by maintaining dividend payouts and investing for the future at the same time. With profit and revenue sharply down, the only way to do that is borrow more money.

    Debt markets are opening up for companies worldwide as central banks in the U.S. and Europe keep benchmark borrowing rates low. Investors currently demand a return of 3.09 percent to hold dollar-denominated debt of companies with an investment-grade rating, the lowest level in a year, according to data from Bank of America Merrill Lynch. For euro securities, they seek 1.01 percent, close to the record low of 0.93 percent in March 2015, the data show.

    At the same time, the premiums for credit default swaps for the biggest U.S. and European oil companies, which investors use to protect against defaults, have dropped from the highest level in at least five years.

    “The majors still have strong balance sheets to raise debt at competitive rates so they can manage their capital agenda, for example, to maintain dividends and strategic capital investments,” said Jon Clark, leader for oil and gas transaction-advisory services in Europe, the Middle East and Africa at Ernst & Young LLP. “It’s also a good opportunity to refinance more expensive debt.”

    Oil’s slide has forced companies to cut billions of dollars of spending, delay or cancel projects and renegotiate contracts, yet they continue to make dividends their top priority. Shell hasn’t cut its payments to investors since at least the Second World War. Exxon even increased its payout a day after losing its coveted AAA credit rating last month.

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    Russian ESPO crude falls out of favour with China teapot refiners

    China's independent refiners have switched to buying more oil from Africa and Latin America instead of large volumes of Russia's ESPO crude as they have struggled to cope with the excess light fuels that come with processing the grade.

    The change in preference shows the transient nature of crude purchases from the new Chinese buyers, also known as teapots, who are still trying out different crude grades to identify suitable types for their refineries.

    The teapots' tapering demand for the Russian grade pushed spot premiums for June-loading cargoes to as low as $2 a barrel from as high as $5.60 a barrel for April loaders, catching some traders who sell to teapots off guard.

    Lured by the short shipping distance and six-year low crude prices, teapots paid strong premiums to secure Russian ESPO oil in the first quarter.

    Spurred by the strong teapot demand, Russia overtook Saudi Arabia as the biggest crude exporter to China for four months in late 2015 and again in March.

    Nearly half of the Russian ESPO exports landed at the port of Shandong, where most of the teapots are located, each month between February and April, data from Reuters Trade Flows showed.

    But Shandong's imports may fall in the coming months as some refiners found the crude too light, several trade sources said. High crude inventories and large supplies waiting to offload at congested ports also reduced teapots' appetite for ESPO, they said.

    "ESPO produces too much naphtha. The oil wasn't economical to us as the ship size was too small and premium was high," a trader from one of the teapot refiners said.

    The independent refiners, which had relied on residual fuel as a feedstock before Beijing opened up crude imports last year, were mostly designed to maximise production of middle distillates such as diesel and jet fuel instead of light products like naphtha and gasoline.

    ESPO has an API gravity of 35.57 degrees, much lighter than Oman oil, a favourite among teapots. Refiners would typically draw about 20 percent of naphtha from a barrel of ESPO after processing versus about 15 percent from an Oman barrel.

    The naphtha cannot be processed further at teapots' facilities, four sources said. A consumption tax of 40 yuan ($6.16) per tonne for selling the naphtha as a petrochemical feedstock has deterred the teapots from selling the fuel, sources said.

    Still, the teapots' ESPO demand may improve as several of them are building new units to further process the naphtha, including the largest, Shandong Dongming Petrochemical, the sources said.

    Dongming will complete a 24,000 barrels-per-day reformer at its Lianyungang refinery in eastern Jiangsu province by the end of 2016 that will process the naphtha to produce aromatics for gasoline blending or domestic sales, sources close to the matter said. Qirun Chemical Industries Co will also bring online a new reformer next year, a company official said.

    In the meantime, teapots are seeking alternatives, with West African crude arrivals to Shandong rising 35 percent in April from December and deliveries from South America increasing 50 percent over the same time frame, Reuters Trade Flows data showed.
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    Exco Resources forms committee to evaluate strategic alternatives

    Oil and gas producer Exco Resources Inc said on Friday it formed a special committee to evaluate strategic alternatives, including in-court or out-of-court restructuring.

    Exco joins dozens of U.S. shale companies forced to restructure debt after a near-60 percent slump in oil prices since mid-2014 eroded cash flows.

    The Dallas-based company had long-term debt of $1.32 billion as of March 31, according to a regulatory filing.

    The Special Committee will also evaluate options such as divestitures and restructuring of its gathering, transportation and certain other contracts, the company said.

    Exco has retained Akin Gump Strauss Hauer & Feld LLP as its legal adviser.
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    InterOil shareholders nominate 5 independent directors to board

    Oil and gas producer InterOil Corp's former chief executive, Phil Mulacek, and other shareholders nominated five independent directors to the company's board.

    The shareholders, who collectively own about 7.6 percent of InterOil, said in a statement "the incumbent board has presided over a massive destruction of shareholder value."

    Up to Thursday's close, the company's shares had fallen more than 38 percent in the last 12 months.

    InterOil on Friday reported a smaller net loss for the first quarter ended March 31, helped by lower exploration and finance costs.
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    Delaware active, but where's the Midland? Permian players numbers.

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    Alternative Energy

    Tesla plans to sell $1.7 billion in new stock to fund Model 3

    Tesla Motors Inc will offer up to $1.7 billion of new common stock to finance the accelerated launch of its new Model 3 electric sedan, the electric luxury car maker said on Wednesday.

    Tesla shares fell 2.2 percent following the announcement, which came after the market closed. They were $206.59 in after market trading, well below the $242 a share price at which the company last issued new shares, in August 2015.

    Tesla, which has posted operating losses since its initial public offering in June, 2010, said in a prospectus it expected to sell as many as 8.2 million shares at a price of $204.66 a share.

    Last month, Tesla Chief Executive Officer Elon Musk said he might need to raise additional cash after receiving 373,000 reservations for the Model 3. Musk said he would respond to demand for the Model 3 by tooling up Tesla's factories to build 500,000 vehicles a year in 2018, two years earlier than planned. The Model 3 will start at $35,000 before tax breaks.

    In tandem with the sale of shares by Tesla, Musk will sell nearly 2.8 million of his own shares, which at current prices is worth almost $600 million.

    Tesla must fund as much as $2.25 billion in capital spending Musk has forecast for this year, mainly to equip its factories and suppliers to build the Model 3. Tesla had about $1.44 billion in cash and cash equivalents as of March 31, including borrowing from an asset backed credit line.

    Tesla reported a net loss of $282.3 million for the first quarter, and noted in its prospectus "we have a history of losses and have to deliver significant cost reductions to achieve sustained, long-term profitability and long-term commercial success."

    Suppliers and analysts say Musk's timetable for reaching production of 500,000 vehicles a year is ambitious, at roughly 10 times the company's production in 2015.

    The Tesla prospectus highlighted strong demand for the Model 3.

    "We have obtained this level of reservations without any advertising or paid endorsements, with only a few social media posts leading up to the March 31st unveiling, without anybody but those who were in attendance on March 31st having had an opportunity to test drive the car, without yet publicly disclosing numerous features about the car," Tesla stated.

    "If we wanted to, we believe that we could further increase the number of Model 3 reservations with minimal effort," the company added.

    Tesla has disclosed that the final design of the Model 3 will not be completed until next month.

    Tesla previously has raised more than $4.5 billion in debt and equity offerings over the past six years. Since it raised $226 million in an initial public offering in June 2010, Tesla has gone back to the capital markets several times.

    Musk will sell 2.8 million of his own shares primarily to pay taxes related to the exercise of vested stock options to purchase 5,503,972 Tesla shares. Musk already controls a 26.7 percent stake in Tesla, according to the company's latest proxy statement. The exercise will increase Musk's stake in the company, Tesla said.

    Tesla raises $1.46B in stock sale, at a lower price than its August 2015 sale: IFR

    Tesla Motors has raised $1.46 billion in fresh capital from the sale of its 6.8 million new common stock offering, according to IFR.

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    U.S. EPA expected to increase 2017 biofuels targets -sources

    U.S. environmental regulators were expected to raise targets for the amount of corn-based ethanol and biofuels that must be mixed into the nation's motor fuel supply next year, five sources said.

    Sources expected the Environmental Protection Agency (EPA) to raise requirements from the 18.11 billion gallons set this year reflecting strong demand for diesel and gasoline as Americans drive at a record pace, sources said. The 2016 target included 14.5 billion gallons for ethanol.

    A spokeswoman for the EPA declined to comment on the timing of the proposal or its contents.

    The size of the rise was not known, but it would fall short of the 24 billion gallons outlined in a 2007 law aimed at weaning the United States off oil imports and boosting the use of fuel based on renewable sources such as corn.

    The EPA said last year that those requirements were unachievable, acknowledginginfrastructure constraints known as the "blend wall," the 10 percent saturation point for ethanol blended in gasoline.

    An ethanol target of 15 billion gallons would be a victory for the farm lobby and biofuels companies like Poet LLC, which has spent millions to produce advanced biofuels, and a blow to the oil industry.

    Releasing the targets ahead of 2017 would be part of the EPA's efforts to get the controversial policy back on track after years of delays in the program, which has seen entrenched oil and farm interests fight an increasingly fraught lobbying battle.

    In November, the agency unveiled a retroactive target for 2014 and the first for 2015 and 2016, triggering lawsuits from both Big Corn and Big Oil.
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    UNSW solar team achieves huge leap in solar cell efficiency

    Australia’s leading solar research scientists have achieved another significant milestone, reporting a huge leap in solar cell efficiency that could in time lead to a quantum reduction in solar power costs.

    A University of NSW team led by the renowned Professor Martin Green and Dr Mark Keevers (pictured above) has reported a new world efficiency record for solar cells using unfocussed sunlight, the sort of light that falls on the rooftop solar modules on homes and businesses.

    The striking part of the new record is that it is so far ahead of previous achievements – 34.5 per cent instead of 24 per cent – and is edging closer to the theoretical limits of sunlight to electricity conversion – and more than three decades before recent predictions.

    It also sets the scene for another step change in the cost of solar – which is already falling below 3c/kWh in recent contracts, and is set to become unbeatable in terms of levellised cost of energy across all energy sources. Future modules will be smaller, more powerful, and will provide cheaper power.

    More from UNSW on the technology details of their breakthrough:

    “The record-setting UNSW mini-module combines a silicon cell on one face of a glass prism, with a triple-junction solar cell on the other.

    “The triple-junction cell targets discrete bands of the incoming sunlight, using a combination of three layers: indium-gallium-phosphide; indium-gallium-arsenide; and germanium.

    “As sunlight passes through each layer, energy is extracted by each junction at its most efficient wavelength, while the unused part of the light passes through to the next layer, and so on.

    “Some of the infrared band of incoming sunlight, unused by the triple-junction cell, is filtered out and bounced onto the silicon cell, thereby extracting just about all of the energy from each beam of sunlight hitting the mini-module.

    “The 34.5% result with the 28 cm2 mini-module is already a world record, but scaling it up to a larger 800-cm2 – thereby leaping beyond Alta Devices’ 24% – is well within reach.

    “There’ll be some marginal loss from interconnection in the scale-up, but we are so far ahead that it’s entirely feasible,” Keevers said. The theoretical limit for such a four-junction device is thought to be 53%, which puts the UNSW result two-thirds of the way there.

    “Multi-junction solar cells of this type are unlikely to find their way onto the rooftops of homes and offices soon, as they require more effort to manufacture and therefore cost more than standard crystalline silicon cells with a single junction. But the UNSW team is working on new techniques to reduce the manufacturing complexity, and create cheaper multi-junction cells.
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    Shell to create new green energy division

    Oil giant Shell is to create a separate division focused on renewable energy and low carbon projects.

    Dubbed ‘New Energies’, it will bring together hydrogen, biofuels and green projects such as wind and solar.

    According to Shell’s CEO Ben van Beurden, the firm has invested $1.7 billion (£1.1bn) in the new division and are currently spending around $200m (£138m) a year to explore and develop new energy opportunities.

    He added: “Shell has invested in renewables, such as wind, solar and biofuels for many years but New Energies is more than traditional renewables. The theme spans the digital revolution, more electrification, especially in transport, more customers with more choice on energy mix.

    “It’s an exciting and fast moving landscape. We’ve made the decision that Shell will build on its existing foundations in renewables and put a lot more emphasis on New Energies going forward.”

    The announcement follows a report by the Carbon Tracker Initiative which stated big oil and gas companies could be collectively worth $100 billion (£69bn) more if they align their investment plans with the 2˚C target.

    Last month, Shell unveiled a new car which it claims could help deliver material reductions in energy use in the road transport sector.
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    TerraForm Global delays first-quarter report

    TerraForm Global Inc, a unit of bankrupt U.S. solar energy company SunEdison Inc, said it could not file its report for the quarter ended March 31.

    TerraForm Global, one of SunEdison's "yieldcos", said it has not yet filed its financial report for 2015. The company said in April its lenders had agreed to give it another month to file its annual report after it missed the March 30 deadline.

    The company said on Tuesday it was continuing to see if SunEdison's delay in filing its annual report could affect TerraForm Global's reports.
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    Statoil gains offshore lease for floating windfarm

    Statoil ASA, the Norwegian energy company, was granted a lease to use the seabed off the east coast of Scotland and can now begin building the world’s first floating offshore wind farm.

    The Hywind project will consist of five 6-megawatt turbines. They will float on steel tubes fastened to the seabed about 25 kilometers from the town of Peterhead, according to a statement issued by the company based in Stavanger, Norway. The U.K.’s Crown Estate granted the lease, a step that allows Statoil to begin construction. Works onshore and near-shore are planned to begin later this year. Turbines will be installed in 2017.

    Floating turbines allow offshore wind farms to be deployed in deeper waters, opening up the industry to areas such as Japan and Mediterranean countries. Statoil installed a floating turbine off the coast of Norway in 2009 for tests. The Hywind project will be the first multi-turbine array.
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    Ontario to spend $5.4 bln to cut carbon footprint

    The government of the Canadian province of Ontario plans to spend more than C$7 billion ($5.41 billion) over four years from 2017 in a bid to cut the province's carbon footprint, the Globe and Mail reported on Monday.

    The province will begin to phase out natural gas for heating, provide incentives to retrofit buildings and give rebates to buyers of electric vehicles, according to a Climate ChangeAction Plan reviewed by the newspaper.

    The government plans to spend C$3.8 billion on grants, rebates and other subsidies to retrofit buildings, and move them off natural gas and on to geothermal, solar or other forms of electric heat, the Globe reported. (

    Another C$1.2 billion will go to help factories and other industrial businesses cut emissions, such as by buying more energy-efficient machines, the Globe said.

    The plan requires gasoline sold in the province to contain less carbon, lays out building code rules requiring all new homes by 2030 to be heated with electricity or geothermal systems and sets a target for 12 percent of all new vehicle sales to be electric by 2025.

    The office of Ontario's Ministry of Finance did not immediately respond to a Reuters request for comment.
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    Danish government says wind power became too expensive

    Danish government says wind power became too expensive

    The Danish government said on Friday it wanted to scrap plans to build five offshore wind farms as their output would become too expensive for consumers.

    The government estimates it would cost consumers 70 billion Danish crowns ($10.63 billion) to buy electricity from the plants with a total combined capacity of 350-megawatts.

    "Since 2012 when we reached the political agreement, the cost of our renewable policy has increased dramatically," said Lars Christian Lilleholt, energy minister in Denmark's Liberal party government.

    "We can't accept this, as the private sector and households are paying far too much. Denmark's renewable policy has turned out to be too expensive," he said.

    Denmark produced more than 40 percent of its electricity from wind power last year, a world record, and it has a goal of increasing this share to 50 percent by 2020.

    Subsidies for wind power producers had to increase as power prices fell sharply since 2012, and producers had to get more money to make production profitable.

    Nordic average power prices fell to 21 euros per megawatt-hour (MWh) in 2015, down from 31 euros/MWh on 2012.

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    Dutch offshore wind tender attracts bids from Shell, RWE and Vattenfall

    Some of Europe's biggest energy companies, including Shell, RWE and Vattenfall, are competing in a Dutch offshore wind tender seen as one of the biggest green energy projects on offer in Europe this year.

    The Dutch government has an ambitious target to more than quadruple its offshore wind energy capacity by 2023 to lower climate-harming carbon emissions from energy production.

    Many other European governments lack a clear framework to deliver renewable energy projects after 2020, making the Dutch tender an attractive one for investors.

    In a first round, the government has offered two offshore wind sites at Borssele that can each house wind farms with a capacity of 350 megawatts (MW).

    A second tender for two further sites at Borssele will close in September, making the entire project of 1,370 MW one of the biggest European offshore wind tenders in recent years. A fifth site of 20 MW is set reserved for innovation projects.

    Anglo-Dutch oil major Shell in partnership with Dutch energy supplier Enerco and contractor Van Oord NV. German utility has found a co-investor in Macquarie Capital, while Swedish utility Vattenfall has announced a bid on its own.

    Dutch media have named Denmark's Dong Energy as another potential bidder.

    Dong Energy declined to comment but said the Dutch market was interesting because it is a consistent programme with five tenders.

    The Netherlands has a yearly offshore wind tender programme in place out to 2019 that aims to push installed capacity to 4,500 MW by 2023.

    Offshore wind energy is one of the most potent forms of renewable energy as technological advances have allowed developers to build offshore wind farms bigger in capacity than a small gas-fired power plant.

    However, constructing these huge projects in treacherous conditions and the relative infancy of the industry means it is one of the most expensive forms of energy to build.

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    Russia to lend Egypt $25 billion to build nuclear power plant

    Russia will loan Egypt $25 billion to finance building and operating a nuclear power plant in Egypt, the official gazette said on Thursday.

    Egypt and Russia signed an agreement on Nov. 19 for Russia to build Egypt's first nuclearpower plant in Egypt and to extend Egypt a loan to cover the cost of construction.

    It was not clear at the time what the deal was worth, but Egypt's president Abdel Fattah al-Sisi said the loan would be paid off over 35 years.

    Egypt will pay an interest rate of 3 percent annually, according to the country's official gazette. Installment payments will begin on Oct. 15, 2029.

    "The loan will be used by the Egyptian side for a period of 13 years between 2016-2028 ... the Egyptian side will repay loan amounts used over 22 years in 43 installments," the gazette said.

    The loan will finance 85 percent of the value of each contract for the work, services and equipment shipping, the gazette said. Egypt will finance the remaining 15 percent.

    The plant will be built in Dabaa, a site in the north of the country that Egypt has been considering for a nuclear power plant on and off since the 1980s. It is due to be completed in 2022, and the first of its four reactors is expected to begin producing power in 2024.

    Egypt, with a population of 90 million and vast energy requirements, is seeking to diversify its energy sources. As well as a nuclear plant, Sisi has talked of building solar andwind energy facilities in the coming three years to generate around 4,300 megawatts of power.

    The country also recently discovered a large reserve of natural gas off the Mediterranean coast.

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    Mongolia set to pay $70m to end Khan mine dispute-source

    Mongolia is ready to deliver a $70-million payment to Toronto-listed uranium miner Khan Resources, a government source said, wrapping up a seven-year dispute that tarnished the country's reputation as a hot mining destination. 

    The resource-rich country that relies on China to buy nearly all of its resources is settling disputes with miners one by one to help revive foreign investment after four years of economic decline. 

    Mongolian Prime Minister Chimed Saikhanbileg has repeated the slogan "Mongolia is open for business" on visits around the world in the hopes rebooting the economy, which the Asian Development Bank projects will grow just 0.1% this year. "We want to show that we're trying to improve our relationships and reputation," said a Mongolian government source. He said $70 million had been deposited into an escrow account for payment to Khan Resources on Monday. 

    The source asked not to be named as the transaction had not yet been completed. Mongolia's Ministry of Finance was not immediately available for comment. 

    Last year, a Paris tribunal ordered Mongolia to pay about $100-million to Khan Resources as compensation for canceling its uranium-mining licences for the the Dornod uranium project in 2009 and handing it over to Russia's ARMZ. 

    At a meeting during a major mining conference in Toronto in March, Mongolia and Khan came together and settled on a payment of $70-million. 

    The dispute with Khan Resources wraps up just as Rio Tinto and its partners are set to resume work on a $5.3-billion expansion of the Oyu Tolgoi copper mine following a three-year delay due to disputes with the Mongolian overnment. Investors are also keeping close watch on the Gatsuurt gold mine in Mongolia, where Centerra Gold Inc has waited seven years for mining rights.
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    Potash Corp. sees Chinese supply contract settling within weeks

    Potash Corp. sees Chinese supply contract settling within weeks

    Potash supply contracts with Chinese buyers should be settled in 2-4 weeks, setting a much-needed global price floor, Potash Corp. CEO Jochen Tilk tells Reuters.

    The CEO expects Chinese buyers to settle first with Belaruskali and Russia's Uralkali, as is typical, followed by a contract with the Canpotex group owned by POT, Mosaic and Agrium.

    Tilk also says POT's $1 annual dividend is sustainable, noting that the company's capital spending is set to decline next year.
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    EU delays vote on weed-killer glyphosate licence amid cancer row

    The European Union on Thursday delayed a vote on renewing sales approval for the pesticide glyphosate, used in Monsanto's weed-killer Roundup, amid a transatlantic row over whether it may cause cancer.

    Experts from the EU's 28 nations had been due to vote on a proposal, seen by Reuters, to extend by nine years licensing of the herbicide, widely used by farmers and gardeners.

    EU sources said the vote was postponed due to opposition in France and Germany, which have big farming and chemicals industries.

    Without those two countries' support, the European Commission lacks the majority it needs for a binding vote: "Since it was obvious that no qualified majority would have been reached, a vote was not held," a Commission spokeswoman said.

    The EU executive had hoped for a decision to set the clock ticking on a six-month phase-out period for glyphosate products when the existing authorisation lapses at the end of June.

    Germany had planned to abstain from voting because ministries run by different parties in the ruling coalition remain at odds, a government spokesman told Reuters.

    In response to opposition, the EU executive had already postponed a vote on reapproval in March and shortened the proposed licence to nine years from 15.

    The new proposal would also ban some particular products because of the substances they combine with glyphosate, which could add to risks. The banned "list of co-formulants", includes POE-tallowamine from glyphosate-containing pesticides.

    Contradictory findings on its carcinogenic risks by various scientific bodies have thrust glyphosate into the centre of a row involving EU and U.S. politicians, regulators and environmental and agricultural researchers.

    Experts from the U.N.'s Food and Agriculture Organization (FAO) and World Health Organization (WHO) this week said glyphosate is unlikely to pose a risk to humans exposed to it through food. It is mostly used on crops.

    The finding matches that of the European Food Safety Authority (EFSA), an independent agency funded by the European Union, but runs counter to a March 2015 study by the WHO's Lyon-based International Agency for Research on Cancer (IARC).

    That agency said glyphosate is "probably" able to cause cancer in humans and classified it as a 'Group 2A' carcinogen. It says it assesses whether the substance can cause cancer in any way - regardless of real-life conditions on typical levels of human exposure or consumption.
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    Rush for ag-chem megadeals clogs regulatory path, worries farmers

    As Bayer AG joins the agricultural sector's scramble to consolidate, its bid for Monsanto Co may be a tipping point for U.S. farmers, federal lawmakers and regulators concerned the tie-ups may harm the farm economy.

    If Monsanto accepts Bayer's unsolicited offer, experts say, the deal would inevitably trigger a review by federal antitrust regulators. But that review would be slowed down by the fact that two other major mergers of the companies' rivals are also underway.

    Farmers and lawmakers say a Bayer-Monsanto deal could be one too many for an agrochemical and seed market where prices have risen and, say critics, innovation has suffered after it shrank to just six large players.

    Jeffrey Golman, vice president at Mesirow Financial, said the sheer size, scope and number of these deals would inevitably slow regulatory reviews and potentially complicate the process of finding buyers for divested assets.

    "I can't imagine that this could get done before the third or fourth quarter of next year," he said.

    Analysts at Bernstein say that in order to clear antitrust hurdles to acquire Monsanto, Bayer would likely need to sell part of its cotton and vegetable seeds segments and a category of weed killers called non-selective herbicides.

    Farmers, too, are unhappy as they have been squeezed by lower commodity prices and high land rents.

    "If one or two people control all the traits, there really isn't a lot of competition there," said Dean Coleman, an Iowa farmer. "If you have half a dozen strong players it keeps them trying to provide the best for you and trying to get your business."

    The National Farmers Union, an industry group that has already come out against a merger of Dow and Dupont, will likely oppose Bayer's bid for Monsanto, said President Roger Johnson.

    Such opposition matters to regulators, as antitrust enforcers by law must focus on the effect of a merger on customers - and farmers are these companies' customers.
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    Bayer makes move for Monsanto in global agrichemicals shakeout

    German drug and chemicals giant Bayer AG has made an unsolicited takeover offer for Monsanto Co, the world's biggest seed company, as high inventories and low commodity prices spur consolidation in the global agrichemicals industry.

    Monsanto disclosed the approach on Wednesday before Bayer confirmed its move, though neither released proposed deal terms.

    With Monsanto worth $42 billion by market capitalization, an acquisition would likely be bigger than ChemChina's February deal to buy Swiss agrichemicals firm Syngenta AG for $43 billion - a target Monsanto itself pursued last year - and could face U.S. antitrust hurdles.

    Monsanto said in a statement its board is reviewing the proposal, which is subject to due diligence, regulatory approvals and other conditions. There is no assurance that any transaction will take place, it said.

    Bayer, which has a market value of $90 billion, said in a brief statement that its executives recently met executives of Monsanto to privately discuss a negotiated acquisition. A further statement will be made as appropriate, it said.

    The proposal comes as Chinese state-backed ChemChina's deal for Syngenta faces intensive regulatory review in the United States over concerns about the security of U.S. food supply. The deal is the largest foreign acquisition ever by a Chinese company, as Beijing seeks to secure the country's own food supply.

    Any deal between Bayer and Monsanto, meanwhile, could raise U.S. antitrust concerns because of the overlap in the seeds business, particularly in soybeans, cotton and canola, antitrust experts have said.

    However, spurning a deal with Bayer over concerns a tie-up might not receive antitrust clearance could also pose challenges for Monsanto - its own bid for Syngenta last year would have meant significant expansion in seeds.

    Bayer, the inventor of aspirin and maker of Yasmin birth control pills, is a much more diversified company than Syngenta or Monsanto, with a major life sciences business. Bayer's crop science division has businesses in seeds, crop protection and non-agricultural pest control, potentially complementing Monsanto's seeds assets.

    Monsanto approached Bayer earlier this year to express interest in the latter's crop science unit, in the form of an acquisition or joint venture, sources told Reuters in March.

    Bayer is ranked No. 2 in crop chemicals, with an 18 percent market share, according to industry data. The largest, Syngenta, has a 19 percent share.

    Monsanto is the leader in seeds, with a 26 percent market share, followed by DuPont, with 21 percent. DuPont agreed last year to merge with Dow Chemical.
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    Greenhouse gas emissions from this surprising source could doom the Paris climate accord goal

    By now, almost anyone can pick the world’s biggest polluters out of a lineup: power plants, automobile tailpipes and factories. Together they push nearly 70 percent of heat trapping greenhouse gases into the atmosphere. Not surprisingly, the trio drew considerable attention during the late 2015 Paris climate talks to limit global warming to 2 degrees Celsius, or 3.5 degrees Fahrenheit, by the end of the century.

    But a new study released Tuesday says the agreement reached by governments after the United Nations talks will fail if they fail to confront another major source of greenhouse gas emissions: agriculture. Based on some estimates, meat, dairy and crop production emit as much greenhouse gas pollution in the form of methane and nitrous oxide as automobiles emit carbon. The study said farm emissions must fall by a billion tons per year by 2030.

    According to the study, current regulations for agriculture will fall up to 5 percent short of what’s needed. “This research is a reality check,” said Eva Wollenberg, leader of the CCAFS Low Emissions Development research program at the University of Vermont’s Gund Institute for Ecological Economics. “Countries want to take action on agriculture, but the options currently on offer won’t make the dent in emissions needed to meet the global targets agreed to in Paris.”

    The U.N.’s current solutions call for more water efficiency in rice production, better forestry practices and lowering food waste. But the study’s authors said governments will have to do better than that. The study advocates identifying specific breeds of cattle that produce less methane, along with a dietary inhibitor that reduce the gas by more than 25 percent.

    The study, two years in the making, was published in the journal Global Change Biology. Its more than 20 authors represent research institutions from around the world, including the International Livestock Research Institute in Nairobi, the French National Institute for Agricultural Research in Paris, the International Rice Research Institute in Los Baños, Philippines, and the International Institute for Tropical Agriculture in Cali, Colombia.
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    ICL profits drop on weak fertiliser sales, to cut dividend

    Israel Chemicals (ICL) on Wednesday reported a 50 percent drop in first-quarter earnings due to a fall in fertiliser sales and said it would cut its dividend payout ratio because of weakness in agricultural markets.

    "Our board has adjusted the company's dividend policy to strengthen ICL's financial position amid the volatile situation we are facing in the agricultural commodities market," Chief Executive Stefan Borgas said.

    The company said prices of agricultural commodities fell during the first months of 2016, weighing heavily on farmers' decisions on how much fertiliser to buy.

    Last month, the world's biggest fertiliser company producer by capacity Potash Corp cut its full-year 2016 profit forecast due to lower demand and weak prices.

    ICL, which has exclusive permits in Israel to extract minerals from the Dead Sea, earned 7 cents per diluted share, excluding one-time items, in the first quarter, down from 15 cents a year earlier. Sales fell to $1.27 billion from $1.4 billion, mainly due to a drop in potash prices and sales volumes.

    ICL, one of the three largest suppliers of crop nutrient potash to China, India and Europe, was forecast to make adjusted earnings of 9 cents on sales of $1.3 billion, according to Thomson Reuters I/B/E/S.

    The sale of non-core businesses and the weaker euro and pound against the dollar also hit revenue.

    The potash market, in particular, has been hurt by the delay of 2016 contracts with China, usually a trigger for other markets and which sets a price benchmark for the year, ICL said. Weak sales to China and India also hit potash profit margins.

    Potash sales in the quarter fell to 917,000 tonnes, including Israel, from 1.14 million a year earlier.

    Borgas said the company was taking steps to strengthen its phosphates joint venture in China, which was affected by weaker domestic demand and lower prices. ICL will step up efficiency measures to cut the joint venture's staff numbers and set up a marketing division in China to improve sales.

    For 2016 and 2017, ICL's dividend payout ratio will comprise up to 50 percent of its adjusted annual net income, compared with a prior policy of up to 70 percent.

    ICL will pay a dividend of 3 cents a share, or a total of $35 million, for the quarter.

    Shares in ICL, a subsidiary of Israel Corp, fell 2.8 percent to 15.78 shekels.

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    Monsanto suspends new soybean technologies in Argentina

    The dispute blew up after Monsanto asked Argentine exporters to inspect soybean shipments to ensure growers had paid royalties for using the company's products. The Argentine government told the world's largest seed company that such inspections must first be approved by the government.

    The U.S. company issued a statement saying it was "disappointed" that talks with the Argentine government had not yielded an agreement on the inspection issue.

    "The company plans to take measures to protect its current assets and will suspend launching any future soybean technologies in the country," Monsanto said in the statement.

    Argentina, the world's No. 1 exporter of soymeal livestock feed, relies heavily on Monsanto's genetic technology to produce soybeans.

    A spokeswoman for Argentina's agriculture ministry said the country's rules regarding soybean inspections were designed "to guarantee free trade and property rights."

    "If they (Monsanto) feel threatened, that's their prerogative," said the ministry spokeswoman.

    Soy farming has spread rapidly across Argentina's Pampas agricultural belt over the last 20 years, thanks in large part to the country's embrace of genetically modified seeds. The technology makes soy plants resistant to glyphosate herbicide, which kills most of the weeds that grow in Argentina.

    The pullout by Monsanto leaves Argentine growers without the company's new "Xtend" technology, aimed at increasing soy yields and controlling glyphosate-resistant broad leaf weeds. Pedro Vigneau, who farms 1,500 hectares in the bread basket province of Buenos Aires, said no other company offered the same technology that Xtend would provide.

    "This is not good news for us," said Vigneau. "We need the company and the government to reach an agreement in order to obtain the best technology we can get."

    Argentina last month issued a decree saying the government must authorize any grain inspection, dealing a blow to Monsanto's push for exporters to check cargoes.

    Monsanto has pressured shipping companies to notify it when crops grown with its technology are slated for export without documentation showing royalties had been paid.

    Argentina, the world's third biggest exporter of raw soybeans, is expected by the Buenos Aires Grains Exchange to harvest a 56-million-tonne crop this year. The estimate was cut from a previous forecast of 60 million tonnes due to floods that hit key farm areas in April.
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    Syngenta offer deadline extended as regulators probe deal

    The deadline for shareholders in Swiss pesticides maker Syngenta to accept a $43 billion takeover bid from state-owned ChemChina has been extended to allow for some outstanding regulatory approvals, the company said on Tuesday.

    Syngenta said the offer will now run from May 24 to July 18.

    "We don't have all the regulatory approvals yet," a Syngenta spokesman said, adding the company still expected the deal to close by year end.

    ChemChina has previously said that the offer period, which initially would have expired on May 23, could be renewed several times for subsequent periods of up to 40 trading days.

    People familiar with the matter told Reuters on Monday that the U.S. Department of Agriculture has agreed to join the U.S. government panel that is reviewing the deal.

    The move will subject the transaction to additional U.S. government scrutiny and comes after lawmakers called for the USDA be involved in the review so that the impact of the transaction on domestic food security could be better assessed.

    Shares in Syngenta, which have traded at a discount to ChemChina's offer of $465 (455 Swiss francs) per share plus a special dividend of 5 francs, were 0.7 percent lower at 390.7 francs at 1355 GMT while the broader Swiss market slipped 0.4 percent.

    Switzerland-based traders said the discount would likely persist for now, given the delay.
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    U.N. committee finds weed killer glyphosate unlikely to cause cancer

    The weed-killing pesticide glyphosate, made by Monsanto and widely used in agriculture and by gardeners, probably does not cause cancer, according to a new safety review by United Nations health, agriculture and food experts.

    In a statement likely to intensify a row over its potential health impact, experts from the U.N.'s Food and Agriculture Organization (FAO) and World Health Organization (WHO) said glyphosate is "unlikely to pose a carcinogenic risk to humans" exposed to it through food. It is mostly used on crops.

    Having reviewed the scientific evidence, the joint WHO/FAO committee also said glyphosate is unlikely to be genotoxic in humans. In other words, it is not likely to have a destructive effect on cells' genetic material.

    The conclusion contradicts a finding by the WHO's Lyon-based International Agency for Research on Cancer (IARC), which in March 2015 said glyphosate is "probably" able to cause cancer in humans and classified it as a so-called Group 2A carcinogen.

    Seven months after the IARC review, the European Food Safety Authority (EFSA), an independent agency funded by the European Union, published a different assessment, saying glyphosate is "unlikely to pose a carcinogenic hazard to humans".

    The differing findings thrust glyphosate into the center of a row involving EU and U.S. politicians and regulators, the IARC experts, environmental and agricultural specialists and the WHO.

    Diazinon and malathion, two other pesticides reviewed by the WHO/FAO committee, which met last week and issued its conclusions in a statement on Monday, were also found to be unlikely to be carcinogenic.
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    French Senate suspends palm oil tax, pesticide ban deadline

    The French Senate on Thursday adopted a revised version of its biodiversity bill in which Senators scrapped a proposal to impose an additional tax on palm oil and a deadline to ban on pesticides blamed for harming bees.

    The decisions are not final as the two houses of the French parliament now have to reach an agreement, or the bill will end up at the National Assembly, which has the final word.

    The Senate had introduced the additional tax on palm oil used in food to encourage the sector to reduce the environmental damage palm oil plantations can cause. The action was vehemently opposed by leading producers Indonesia and Malaysia.

    The National Assembly in March sharply reduced the extra tax and excluded oils produced in a sustainable way.

    The softening, supported by the government, was welcomed but not enough to please the producers who still view the tax as discriminatory.

    The latest version of the biodiversity bill adopted by the Senate on Thursday scrapped the additional tax on palm oil altogether, with senators saying it could be against international trade rules and that it would be more appropriate in a finance legislation.

    But the tax on palm oil can be reintroduced in the law at a later stage, notably by the National Assembly.

    The fate of another key proposal of the biodiversity law, a ban on neonicotinoid pesticides, is also uncertain.

    The government had expressed mixed feelings about the proposal with Environment Minister Segolene Royal saying it would protect bees while Agriculture Minister Stephane Le Foll warned a unilateral French move on neonicotinoids could hurt farmers in the EU's biggest crop producing country.

    It since clarified its position and introduced on Thursday an amendment requesting a study on substitution products to neonicotinoids and delaying the ban to July 2020, against September 2018 in the text adopted at the National Assembly.

    But the Senate rejected the 2020 deadline saying a ban would be "in total contradition with European law".

    The EU limited the use of neonicotinoid chemicals, produced by companies including Bayer CropScience and Syngenta , two years ago after research pointed to risks for bees, which play a crucial role pollinating crops. (Reporting by Sybille de La Hamaide, Editing by Gus Trompiz, Toni Reinhold)
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    Precious Metals

    SA plans levy on mines to tackle acid mine water pollution

    South African mining firms say plans by government to charge them two-thirds of the cost for treating water pollution resulting from their operations are unfair and would put the ailing industry under further financial strain.

    South Africa, one of the world’s biggest metals producers, has been hit by a slide in commodities prices that has come on top of widespread labour unrest among miners. Mining output in May plunged by 18%, the most on record.

    “Any further financial pressures would certainly threaten the sustainability of the industry,” said the South African Chamber of Mines’s executive for environment, Nikisi Lesufi.

    Lesufi said the chamber also opposed the levy because mining companies had adhered to the laws and regulations that were in place at the time.

    “It is the industry’s view that AMD legacy issues are the responsibility of the state,” Lesufi said, adding that it could not comment on the design and implementation of the levy because had not been privy to the department’s plans.

    Acid mine drainage (AMD) results from the outflow of acidic water from mines, and often affected water supplies develop pH levels similar to those of battery acid, rendering the water harmful to humans as well animal and plant life.

    South Africa’s water ministry on Wednesday said it would charge mining firms 67% of the cost for treating polluted water emanating from their century-long operations in Johannesburg’s mining belt.
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    Chinese investors interested in privatisation of Russia's Alrosa -TASS

    Chinese investors are interested in taking part in the government sell-off of a 10.9 percent stake in Russian diamond miner Alrosa, the TASS news agency quoted Alrosa chief executive Andrey Zharkov as saying on Thursday.

    Alrosa, the world's largest producer of rough diamonds in carats, competes with De Beers, a unit of Anglo American and the world's leading diamond miner in terms of value. Together they produce more than a half of the world's rough diamonds.

    "We see potential interest from Chinese investors in the company, in the possibility of acquiring shares in the company," Zharkov told reporters in Hong Kong.

    Russia plan to sell part of the government's stakes in Alrosa, as well as in the country's second-largest lender VTB Bank and mid-sized oil producer Bashneft later this year to keep the budget deficit within a 3 percent of GDP target amid weak oil prices.

    According to Zharkov, Alrosa held a presentation for Chinese investors during a recent visit by Russian Deputy Prime Minister Yuri Trutnev to Asia.

    Trutnev is in charge of Russia's far eastern regions, which share a border with China and in which Alrosa's main production assets are based.

    Shares in Alrosa were up 0.3 percent in Moscow on Thursday, outperforming Moscow's broader MICEX index, which was down 0.8 percent.

    Its market capitalisation has risen 41 percent to 585 billion roubles ($8.8 billion) so far this year on the back of an improvement in the diamond market.

    China is the world's largest manufacturer of diamond jewellery and Asia is the second largest global market for diamond jewellery retail sales after the United States.
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    De Beers and Namibia sign 10-year sales agreement

    De Beers and the Namibian government have signed a 10 year sales agreement, the resources group said.

    The agreement gives Namdeb — in which De Beers and the Namibian government are equal partners — the right to sort, value and sell diamonds for the next 10 years. Namdeb is one of Namibia’s largest taxpayers and the country’s biggest foreign exchange generator, contributing more than a fifth of Namibia’s foreign earnings.

    "This sales agreement — the longest ever between Namibia and De Beers — not only secures long-term supply for De Beers, but also ensures that Namibia’s diamonds will continue to play a key role in national socioeconomic development long into the future," De Beers CEO Philippe Mellier said.

    Anglo said there would be a significant increase in rough diamonds made available for beneficiation as a result of the agreement, with $430m of rough diamonds being offered annually to Namibia Diamond Trading Company customers. As part of the agreement, all Namdeb’s special stones will be made available for sale in Namibia.

    In addition, the agreement provides for 15% of Namdeb’s run-of-mine production a year to be made available to a government-owned independent sales company called Namib Desert Diamonds.

    "Diamonds can have a powerful and transformative effect on a country’s prospects when effectively managed and I commend our partners in government for their vision regarding the role of diamonds in national development," Mellier said.

    "This new agreement cements Namibia’s position as an important international diamond player and will provide further stimulus to advance our downstream industry. De Beers and Namibia have a longstanding and successful partnership and I am pleased we will continue working together for the benefit of Namibia and the diamond industry," Namibian Minister of Mines and Energy Obeth Kandjoze said.
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    China’s ICBC buys giant London gold vault from Barclays

    China’s ICBC Standard Bank aid on Monday it is buying a precious-metals vault from Barclays PLC’s, one of Europe’s largest vaults, in the latest move by the Chinese bank to increase its role in the precious metal’s market.

    The agreement, which is due to close in July according to Bloomberg, will make ICBC Standard the only Chinese bank to operate a vault in London, a strategic market when it comes to trading and storing precious metals.

    The vault, which holds up to 2,000 tonnes in gold, silver, platinum and palladium, will make it easier for ICBC to sells its services to western-based clients.

    China accounts for more than a quarter of global bullion demand, but gold trading was until recently largely run out of western banks and in markets such as London and New York.

    The vault, which holds up to 2,000 tonnes in gold, silver, platinum and palladium, will make it easier for ICBC to sells its services to western-based clients given that it now has a location to store metals that is closer to them.

    The facility, located at a secret location in London, was opened by Barclays in 2012and took more than a year to build.

    No financial terms were announced.

    Last week, ICBC joined the London clearing system for gold, silver, platinum and palladium, which is managed by London Precious Metals Clearing Limited (LPMCL).

    As many investment bank, Barclays has been moving out of the precious metals market in recent years. In January, the lender confirmed rumours that it was exiting metal trading, following similar decisions by several high-profile banks and trading houses, including Deutsche Bank AG and Switzerland-based Gunvor Group.

    ICBC, which boasts more than four million business clients and services 410 million retail customers, paid $765 million for control of the London global markets unit of Johannesburg-based Standard Bank in 2014 to expand into the bullion and forex trade. In 2008 ICBC bought 20% of the 150-year old Standard Bank group, Africa's largest bank, for $5.4 billion.
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    Lonmin reports core profit after cost savings

    South Africa-focused platinum producer Lonmin reported a core profit on Monday after cost savings, and said it expected firm chemical and car industry demand for the rest of the year despite the Volkswagen diesel emissions scandal.

    In its first-half results statement, Lonmin said it had cut losses per share to 1.8 cents from a loss of 164.6 cents the same time a year ago, and reported a core profit of $36 million versus a loss of $6 million in the first half of 2015.

    Cost-cutting is ahead of schedule, with close to 70 percent of the full-year target of savings of 700 million rand ($45 million) already achieved.

    Net cash improved to $114 million at the end of March, compared with $185 million net debt at the end of September.

    CEO Ben Magara said in a conference call he did not anticipate further job cuts at current market conditions, but added conditions may change.

    Volkswagen's admission last year that it cheated U.S. diesel emissions tests could, analysts have warned, hit sales of diesel cars, which need platinum for catalytic converters.

    But Lonmin predicted emerging markets would spur demand as they seek to catch up with the "ever tightening emission standards of developed markets".

    It also said it saw firm chemical industry demand, while the jewellery market could remain static during the year.
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    Base Metals

    Peru's Fujimori takes tough stance on Southern Copper Tia Maria project

    Peruvian presidential contender Keiko Fujimori said it would take "many years" for Southern Copper Corp to regain the trust of farmers, which she said is part of the community support she considers critical to developing the company's $1.4 billion Tia Maria copper project.

    The center-right candidate also said she would ban mining companies that pollute the environment from operating or slap fines on them, in some of her toughest comments yet for the key sector in the Andean country.

    Fujimori, the 40-year-old daughter of imprisoned ex-president Alberto Fujimori, has been neck-and-neck with economist Pedro Pablo Kuczynski in most polls ahead of the June 5 run-off election.

    Tia Maria has been on hold for the past year after protests by locals who fear the 120,000-tonne-per-year proposed mine would pollute the environment or disturb farming.

    Fujimori said Southern Copper had misled communities by initially saying Tia Maria would not impact groundwater supplies, and later, following protests in 2011, promising to build a desalinization plant.

    "That means they were going to use groundwater and they were going to affect farmers," Fujimori said in broadcast comments to reporters in Arequipa, the region where Tia Maria would be built.

    "Farmers in the Tambo Valley of Cocachacra obviously feel deep distrust, and it will take many years for the company to regain that trust. For me it's fundamental that an investment project be in harmony with communities," Fujimori said.

    Kuczynski has also said community support is needed before a new mine can be built.

    Southern Copper, controlled by Grupo Mexico SAB de CV , did not immediately respond to requests for comment.

    The president of Southern Copper, Oscar Gonzalez, told reporters in videotaped comments last month that he would press for a construction permit for Tia Maria from the government of President Ollanta Humala in the last two months of his term.

    Humala's energy and mines ministry said in December that the government would probably not issue the permit because of stiff local opposition to the project.

    Peru, a leading exporter of copper, gold, silver and zinc, is expected to supply a growing share of the world's copper supplies in coming years, but frequent disputes over mining and water threaten to hold up billions in investments.

    Fujimori said that if elected, she will ensure water goes to Peruvians before mining companies.

    "Water is prioritized for drinking first, then agriculture and livestock, and then all other activities related to man, and I'd say that in last place for mining," Fujimori said.
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    New Caledonia reports minor acid leak at Vale nickel operations

    Brazilian miner Vale has had a minor acid leak at its Goro nickel operations in New Caledonia, the government of the French Pacific territory said, two years after a large chemical discharge at the same site sparked violent protests.

    "A small leak was found on a tank container filled with hydrochloric acid at 30 percent (strength)," New Caledonian authorities said in a statement on Wednesday, adding there had been no environmental or human impact.

    Vale spokesperson Cory McPhee confirmed the leak at the company's port facility but said that production had not been interrupted and that there had been no impact on employees or the environment.

    In 2014, the Southern Province of New Caledonia suspended Vale's operations for nearly a month after acid-tainted effluent spilled into a river.

    The leak sparked violent riots by locals that caused more than $20 million in damage.

    Brazilian miner Vale said last week it would stick to a plan to sell $10 billion of core assets by next year to reduce debt, despite a recent rise in commodity prices.
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    Chinese company doubles Papua New Guinea copper mine cost to $3.6 bln

    A Chinese conglomerate planning to develop the Frieda River copper project in Papua New Guinea has more than doubled the estimated construction cost for the mine to $3.6 billion after boosting its potential production capacity.

    State-owned Guangdong Rising Assets Management Co Ltd bought into Frieda River in 2015, in line with moves by Chinese companies to pursue offshore copper mines to feed demand in the world's biggest user of the metal.

    The project has still to gain formal financing and no date has been set for construction, said Joe Walsh, corporate development officer at GRAM subsidiary PanAust.

    The capital cost for Frieda River is more than double the $1.7 billion estimate made in September 2014 by PanAust, before it was acquired by GRAM for around $950 million.

    The increase reflects a larger annual production capacity, as well as extra spending on waste management and rising construction costs, according to a document released by Highlands Pacific Ltd, which has a 20 percent stake in the project.

    An additional $2.3 billion would also be spent over the life of the mine, the document said.

    Copper has been earmarked as one of the few growth markets for mining companies stung by a slowdown in metals directly related to steelmaking, such as iron ore and nickel.

    China Molybdenum paid $2.65 billion for Freeport McMoran's majority stake on the Tenke copper project in Democratic Republic of Congo this month and $820 million for the Northparkes copper mine in Australia in 2013.

    In 2014, Hong Kong-listed MMG Ltd bought the Las Bambas copper project in Peru off Glencore for $5.85 billion.

    Copper is languishing near its lowest price in seven years due to a supply glut. With fewer discoveries, however, miners exploiting new lodes hope by the time they are up and running, the market will have turned.
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    Copper purification system to cut shipping costs

    New technology to improve the purification process of minerals will allow a major Australian miner to significantly reduce shipping costs.

    South Australian company OZ Minerals has designed a refining process that allows it to increase the quality of its copper concentrate and exponentially reduce export costs.

    OZ Minerals’ hydromet technology improves the leaching process and purifies copper concentrate by reducing the amount of iron.

    Project Director at the company’s Carrapateena mine Brett Triffett said hydromet’s unique ability allowed it to significantly reduce the shipping weight, which would save the company tens of millions of dollars in export fees.

    “We were planning on producing a product that was about 40 per cent copper and that product would be shipped to our customers in Asia and Europe and they would make that into something that was 100 per cent copper,” he said.

    “It’s a leeching process. We take that 40 per cent product and use a combination of reagents to dissolve the iron out of the concentrate. It then upgrades it to the targeted 60 per cent.”

    The majority of mines around the world produce copper concentrations between 24 to 40 per cent.

    Trifett said having a higher concentrate percentage not only increases its monetary value but also simplifies the smelting process.

    “We have the potential to take this technology and apply it to our other operations in Australia and also other mines overseas as well,” he said.

    “We hope it will give us a competitive advantage to develop projects that would not otherwise have been able to be developed at the moment because of the quality of their copper concentrate.

    “This process is unique to us. We’ve done it to suit our concentrate and there is no one else in the world that’s doing anything like this.”

    The company is currently engineering a plant and finalising costs to demonstrate the feasibility of the process.
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    Antofagasta suffers setback on Chile investment plan approval

    Chilean copper miner Antofagasta has suffered a setback as it seeks environmental permit approval for new investment at its Los Pelambres mine, in central Chile, but hopes to resolve the issue in coming days. 

    Earlier this month, the London-listed company's operating unit, Antofagasta Minerals, submitted a $1.1-billion plan to build new infrastructure, including an improved mill and new desalinisation plant, so it can maintain output at the mine at 400 000 t/y of copper. 

    But a local regulatory body ruled last week that it could not consider the submission because the paperwork neglected to define the potential impact the plans might have on nearby communities.

     "The study has not been rejected," Antofagasta told Reuters on Monday. "It's a paperwork formality that we hope to resolve in the coming days." 

    Spurred by popular resentment toward mining and energy projects that could be detrimental to the environment, regulators in Chile, the top copper exporter, have become more demanding in recent years, leading some projects to be delayed, and others to be abandoned altogether.
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    KGHM delays expansion of flagship mine in Chile

    Shares in Polish mining giant KGHM , Europe's second-largest copper producer, soared Monday after earnings at overseas units helped it beat analysts estimates for the first-quarter profit.

    As copper prices trade near the lowest level in more than two months KGHM has decided to delay the next phase of expansion at its flagship overseas mine in Chile, Sierra Gorda.

    The state-controlled copper miner, which posted a slower-than-expected drop in profit on Friday, also said it was delaying the next phase of expansion at its flagship overseas mine in Chile, Sierra Gorda, after a continued rout in metals prices more than halved its net profit in the first quarter.

    Earnings before interest, taxes, depreciation and amortization, or Ebitda at Sierra Gorda stood at $39 million with the production cost falling 32% from the previous quarter. The mine has generated a total Ebitda loss of $976 million since it began commercial production in July last year, including $928 million write-offs.

    KGHM gained control of Sierra Gorda in 2011 when it bought Canadian rival Quadra FNX for $2.07 billion (Cdn$2.87 billion), the largest-ever foreign acquisition by a Polish company.

    In January Sierra Gorda's co-owner, Japan's Sumitomo, said it cut its profit forecast due to the investment loss at the mine.

    KGHM, also the world's largest silver miner, said that despite delays and increased costs, it aims to bring the mine to full production by the end of June.

    Sierra Gorda produced 84,000 tonnes of copper concentrate in 2015 and 15 million pounds of molybdenum last year, far from over 220,000 tonnes and 25 million pounds, respectively, targeted after the second phase.
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    Finnish government plans $113m funding for nickel mine

    The Finnish government is planning to inject around €100-million ($113-million) into Terrafame Mining, the state-owned company that runs Talvivaara's former nickel mine, but may eventually still have to close the operation, sources said. 

    The government is planning to propose this month that parliament approve the funding, which would keep the mine running until the end of the year, two sources who declined to be named told Reuters. "A closure of the mine is an option that will be considered," a government source said. 

    The government took control of the mine last year, aiming to avert a closure at the site in northern Finland where around 950 people including contractors worked as of the end of March. 

    Talvivaara was originally aiming to become Europe's biggest nickel mine by pioneering an extraction process called bioheap leaching -- using bacteria to extract nickel. Repeated production problems were compounded when the mine leaked waste water in 2012, raising uranium and metals levels in nearby lakes and rivers. 

    In 2014, Talvivaara Mining Company filed for debt restructuring while its key subsidiary that owned the mining assets filed for bankruptcy protection. The government has so far injected close to €250-million into Terrafame, and said last year it might still close the mine if it cannot find investors by 2017. 

    The search for investors has become even more difficult after a Finnish administrative court last month decided to make the mine's environmental permit temporary. "It is practically impossible to find private funding after that decision," another source said. Terrafame Chairman Lauri Ratia told Reuters he believed that from the taxpayers' point of view, it would be better to try to expand the mine.
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    In wake of defending against dissident shareholder, Taseko reports wider Q1 loss

     After enduring a rollercoaster first quarter as a dissenting shareholder launched a scathing proxy contest against which base metals miner Taseko Mines had successfully defended itself, the company this week reported a wider adjusted loss than expected. 

    Excluding special items, Taseko reported a C$15.7-million wider net loss of C$18-million, or C$0.08 a share, missing analyst expectations by a penny. The net loss for the period ended March 31 improved by C$23.7-million, to a loss of C$1.5-million, or C$0.01 a share, compared with a net loss of C$25.2-million, or C$0.11 a share. “First quarter results were impacted by lower copper grades, which were forecasted in Gibraltar’s 2016 operating budget. 

    In the current low copper price environment, our focus will remain on operating costs, which in the first quarter were maintained at a very low cost per ton milled of $9.59. “The average realised copper price for the quarter was $2.10/lb, which is the lowest pricing quarter since the first quarter of 2009. 

    Considering the copper price and grade Gibraltar processed in the first quarter, it is impressive we were able to generate break-even earnings from mining operations,” president and CEO Russell Hallbauer stated. Output from the company’s flagship 75%-owned Gibraltar mine, in British Columbia, rose by 400 000 lbs to 28.8-million pounds during the quarter. 

    Sales improved by 5.1-million pounds of copper to 30.5-million pounds, which contributed to lift revenues by C$3.1-million to C$58.2-million during the period. Site operating costs, net of by-product credits were $1.78/lb produced and total C1 operating costs were $2.11/lb produced. Gibraltar’s copper output for 2016 expected to be in the range of 130-million to 140-million pounds.
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    Steel, Iron Ore and Coal

    Investors in world’s top coal shipper pass climate-change motion

    Glencore Plc investors agreed that the largest exporter of coal burned for power should provide more information on risks to its business from growing levels of government legislation to tackle climate change.

    Shareholders at an annual meeting in Zug, Switzerland, on Thursday voted 98% in favour of requiring more information on public-policy positions and actions Glencore takes on greenhouse gas pollution.

    Such proposals are championed by the Aiming for A coalition of fund managers, which already secured resolutions at BP Plc and Royal Dutch Shell Plc. The California Public Employees’ Retirement System has also expressed support.

    “The board fully supports this resolution,” Chairman Tony Hayward said. “We want to engage and work with the coalition on what we all recognize will be a multi-year journey.”

    A growing number of investors and regulators are considering whether untapped deposits of oil, gas and coal around the world, valued at trillions of dollars and controlled by some of the biggest resource companies, will be stranded as nations seek to curb climate change. Glencore is the largest exporter of thermal coal with interests in about 30 operating coal mines in Australia, South Africa and Colombia.

    With almost 20% of Glencore’s energy needs coming from renewable sources, the company will look for ways to deploy renewable energy at its operations, where it makes commercial sense, Hayward said. Glencore is working to develop clean-coal technologies as it wants to cater for growing coal demand in regions such as Southeast Asia, Hayward said.

    While the U.S. and Europe are burning less coal, there’s a “strong probability” of rising demand in Southeast Asia, he said. The fuel is a growing part of energy use across most of the region where low-cost gas isn’t available, he said.

    “Our assets, particularly those in Australia, are well placed to satisfy that demand,” Hayward said. “Coal remains the energy of choice for the emerging world and there is a reason for that. It’s cheap and readily available. It’s lifted billions of people out of poverty and will continue to do so.”

    The fuel accounts for almost 20% of its industrials revenue and 3% of the company’s earnings before interest and taxes, Jefferies LLC estimates.
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    China’s four ministries issue notice jointly to guide coal capacity cut

    China’s four ministries including the National Development & Reform Commission and the National Energy Administration jointly released a notice on May 18, aiming to further regulate the coal industry and effectively eliminate surplus capacity.

    China’s coal industry is in deep water. The situation has been compounded by some coal producers that produce coal beyond their approved capacity and sell coal at extremely low prices since last year.

    Coal miners are asked to strength self-discipline, and strictly implement the state’s production cut and 276-workday policy and maintain fair competition of the industry, the notice said.

    State-owned enterprises should take the lead in this respect, it added.

    China has asked local governments to reset mine capacity under the 276 working days starting from 2016.

    Coal miners should arrange production based on the reconfirmed capacity, and any coal production above the capacity is strictly banned, the notice said.

    The China National Coal Association (CNCA) should guide coal producers to cut production spontaneously to help bring coal prices back to reasonable levels, it said.

    Over the past years, the CNCA has summoned China’s leading coal producers frequently to discuss measures and take concerted action in stabilizing domestic coal prices.

    Meanwhile, the government will accelerate the establishment of credibility system in the domestic coal industry, with the implementation of production cut and the 276-workday compliance being part of the assessment items.

    On the same day, the State Council required at an executive meeting to further promot structural reform, and eliminate outdated steel and coal capacity at enterprises owned by the central government.

    China's central government-controlled firms will cut steel production capacity by 10% over the 2016-2017 period, with their non-core business assets that retreat from the market will be orderly transferred.
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    China allocates 27.6 bln yuan to resettle redundant steel, coal workers

    China has allocated 27.6 billion yuan ($4.2 billion) from the central budget to cut steel and coal capacity, the country's Ministry of Finance announced on May 19.

    The funds will be mainly used to resettle redundant workers, according to the ministry website.

    Overcapacity in some industries, especially steel and coal, has become a major drag on China's growth in recent years, and the government is at pains to slim down the sectors.

    China seeks to phase out 1 billion tonnes per annum of coal production capacity in three to five years from 2016, with half of the cut to be realized through mines closure and the other half through company consolidation, the State Council said earlier this year.

    Crude steel production capacity will be cut by 100-150 million tonnes in the coming five years.

    This would translate into hefty job losses. According to preliminary forecasts, the coal and steel sectors will see combined laid-offs totaling 1.8 million.
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    Russia's TMK sees flat core earnings in 2016

    TMK, Russia's largest maker of steel pipes for the oil and gas industry, expects its 2016 core earnings to be flat compared with last year, amid a stable Russian market and a recovery at its U.S business from a weak first quarter

    The company reported on Thursday a 35-percent fall year-on-year in first-quarter adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) to $120 million, due to the weaker results at its U.S. division.

    "TMK believes its full-year 2016 EBITDA will be above the first quarter 2016 annualised level and remain roughly flat compared to FY 2015," it said in a statement. Its adjusted EBITDA was at $636 million in 2015.

    The company, controlled by businessman Dmitry Pumpyansky, said first-quarter net profit fell 53 percent from the same period a year ago to $14 million. Revenue was down 33 percent to $761 million.

    Revenue in the U.S. division tumbled 80 percent to $65 million due to falling drilling activity and exchange rate losses.

    TMK said the U.S. results should now gradually improve, while it forecast industrial pipe demand in the European market would be stable in the second quarter.

    The company's total debt was flat at $2.8 billion at the end of March compared with the end of 2015.

    Results from ongoing improvement initiatives at the U.S. division should start to benefit TMK's financials from the second quarter, Sberbank CIB analysts said in a note this week.

    As both changes in selling prices and raw materials costs translate into TMK's financial results with some lag, an improvement in the company's performance is expected in the second half of 2016, Sberbank CIB added.
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    BHP says over 50 Mt of steel capacity restarted in China

    More than 50-million tonnes of steel capacity has been restarted in China since the start of the year as rising prices boosted margins, a senior official told an industry conference on Thursday. 

    The world's No. 3 iron-ore miner also sees around 30-million tonnes of new seaborne supply this year, down from around 90-million tonnes last year, said Vicky Binns, vice president for marketing minerals at BHP.
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    Large Indonesian coal miners to maintain output despite sagging demand

    Several large Indonesian thermal coal miners continue to forecast stable to higher production targets for 2016 despite weakening demand in both India and China, putting downward pressure on prices.

    Indonesian coal suppliers have been hit by a significant drop in Chinese imports of thermal coal and increasing domestic output in India.

    "China import demand for the thermal coal is expected to continue to decline over the medium term," said Tim Buckley, director of Energy Finance Studies at the US-based Institute for Energy Economics and Financial Analysis. Coal production in China fell about 6.8% in the first four months of 2016 from the same period last year, while thermal power generation was down 3.2% over the same period.

    "All are very negative trends in terms of falling demand from China, and a likely increase in China looking at export opportunities," Buckley said.

    China, which produces about 4 billion mt/year of coal, lowered its export tax to 3% from 10% early last year, fueling speculation the country might look to become a net exporter in the near to medium term.

    Global seaborne thermal coal demand is seen declining 25% by 2020 from 2014 peak volumes, Buckley noted.

    Goldman Sachs analysts expect seaborne trade to contract by 10% over 2015-2020.

    Indian imports fell about 19% year on year in the first four months of 2016. For fiscal year 2015-2016, Indian imports, including metallurgical and thermal coal, were down 15% to 182 million mt.

    "IEEFA expects Indian import demand for thermal coal to continue to decline at 10-20% year on year rates over the coming year, considering the comments from NTPC Ltd, the biggest user of coal in India, saying they will not import any thermal coal in next 12 months," Buckley noted.

    Growing domestic production in India has led NTPC to significantly cut imports. India has set a target of doubling coal production to nearly 1 billion mt by 2019.

    "India sits on substantial coal reserves equivalent to 150 years of current consumption, so a scarcity of resources has never been a constraint on future production," Goldman Sachs analysts said.

    With dwindling demand in both China and India, several Indonesian suppliers have begun to shift their focus to emerging economies like Vietnam, Thailand, the Philippines, Malaysia and other Southeast Asian countries.

    Attached Files
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    China's government-controlled firms to cut steel and coal capacity: cabinet

    China's central government-controlled firms will cut steel production capacity by 10 percent over the 2016-2017 period, the cabinet said on its microblog on Wednesday.

    Coal production capacity would also be cut by 10 percent at these firms over the same period, the statement said, without specifying what the 2016-2017 period meant.

    The statement added the government-controlled firms, which are infamously bureaucratic, would shed layers of management from their existing 5-9 levels down to 3-4 levels in the next three years.

    The firms would also cut costs by at least 100 billion yuan over the next two years.
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    China says to support steel exports as U.S. imposes hefty tariffs

    China said it would persist with controversial tax rebates to steel exporters to support the sector's painful restructuring programme, defying a United States move to impose punitive import duties on Chinese steel products.

    A worldwide steel glut has become a major trade irritant, with China under fire from global rivals who say it is dumping cheap exports after a slowdown in demand at home.

    In a marked escalation of the spat, the United States on Tuesday said it would impose duties of more than 500 percent on Chinese cold-rolled flat steel, which is widely used for cars body panels, appliances and construction.

    However, China's Ministry of Finance, said it would "continue to implement a tax rebate policy on steel exports" as it tries to finance a costly capacity closure plan.

    China, by far the world's largest steel producer, plans to eliminate 100-150 million tonnes of annual production - more than U.S. produces per year - over the next five years.

    The ministry said China was making special funds available to curb overcapacity in both the steel and the coal sectors, and would reward local authorities for exceeding their targets and meeting them early.

    The policy document, though dated May 10, was published just hours after the U.S. tariffs were announced. It is the latest policy announced by different departments including the Ministry of Human Resources and Social Security to push forward the overcapacity cut.

    The U.S. Commerce Department said on Tuesday the new duties effectively will increase by more than five-fold the import prices on Chinese-made cold-rolled flat steel products, which totaled $272.3 million in 2015. It found that products were being sold in the U.S. market below cost and with unfair subsidies.

    China's commerce ministry expressed its "strong dissatisfaction" with ruling and said the United States should rectify its mistakes as soon as possible.

    "The United States adopted many unfair methods during the anti-dumping and anti-subsidy investigation into Chinese products, including the refusal to grant Chinese state-owned firms a differentiated tax rate," the ministry said in a statement posted on its website.

    The Group of Seven rich nations plans to address the steel glut when it meets in Japan later this month, in a move seen likely to add to pressure on China.

    Attached Files
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    Global coal consumption to increase 15pct by 2040, EIA

    The global coal consumption is expected to increase only 15% on year by 2040, instead of 18%, if the Clean Power Plan (CPP), unveiled by US President Barack Obama in August 2015, really takes effect, sources learned from a report released by the US Energy Information Administration (EIA).

    According to the report, the current coal use has reduced dramatically form the level ten years ago. In the future, coal-fired power generation will increase at an annual rate of only 0.6%, and it may account for only 28-29% of the total electricity output by 2040, compared with 40% in 2012.

    Meanwhile, power generation from natural gas and renewable energies—including hydropower—is expected to rise to 28-29% by 2040. Other power supply will mainly come from nuclear power generation.

    The declining coal burns and increasing renewable energies utilization in power generation are the trend for most countries across the globe, and carbon dioxide emissions will be greatly reduced, said Sieminski, head of EIA.

    If CPP really takes effect, renewable energies will have more room to thrive while coal consumption is dipping. It may exert much influence on US coal industry, though little impact on global coal consumption situations, he added.

    A report released by EIA at the end of 2014 has already forecasted a 15% growth of global coal consumption by 2040, yet nearly 67% of the increase will occur in next ten years. And China’s coal demand accounts for 50% of the world, which will decline by 2030.
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    U.S. sets steep duties on imports of Chinese cold-rolled steel

    The United States slapped Chinese steelmakers with final import duties of 522 percent on cold-rolled flat steel on Tuesday after finding that their products were being sold in the U.S. market below cost and with unfair subsidies.

    The U.S. Commerce Department said the duties effectively will increase by more than five-fold the import prices on Chinese-made cold-rolled flat steel products, which totaled $272.3 million in 2015.

    Cold-rolled steel is primarily used in automotive body panels, appliances, shipping containers and construction.

    The rulings by the Commerce Department come amid escalating U.S.-China trade tensions, especially in the steel sector, where both U.S. and European producers claim China has distorted world pricing by dumping its excess output abroad as demand at home slows.

    The original complaint was filed in July 2015 by major U.S. producers United States Steel, AK Steel Corp, ArcelorMittal USA [ARCMTR.UL], Nucor Corp and Steel Dynamics Inc. U.S. steel producers say they have laid off some 12,000 U.S. workers in the past year.

    Commerce also levied final anti-dumping duties against Japanese-made cold-rolled steel of 71.35 percent, upholding preliminary findings. About $138.6 million of these products were imported from Japan last year.

    Chinese companies affected by the duties include Baosteel Group, Angang Group Hong Kong Holdings Ltd, and Benxi Iron and Steel (Group) Special Steel Co Ltd. Among Japanese producers affected are Nippon Steel & Sumitomo Metal Corp and JFE Steel Corp.

    For Chinese cold-rolled steel imports, Commerce upheld its preliminary anti-dumping duties of 265.79 percent, but increased its preliminary anti-subsidy duties to 256.44 percent from 227.29 percent.

    In a separate case, U.S. Steel is seeking to halt all imports from China's top steelmakers.

    In a complaint to the U.S. International Trade Commission (ITC), the U.S. steelmaker called on regulators to investigate dozens of Chinese producers and their distributors for allegedly conspiring to fix prices, stealing trade secrets and circumventing trade duties by false labeling.

    Beijing has defended itself against the allegations, saying it has done enough to reduce steel capacity and blaming global excess and weak demand for the industry's woes.

    Attached Files
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    Rio Tinto submits feasibility study for Simandou project in Guinea

    Anglo-Australian mining giant Rio Tinto said on Monday it had submitted feasibility studies to the Guinea government for its massive Simandou iron ore project, considered the world's biggest untapped iron ore deposit. 

    Simfer, Rio Tinto's subsidiary, "submitted today the bankable feasibility study (EFB) of the mine and the infrastructures of the Simandou South Project in Guinea", the world's No 2 miner said in a statement. 

    "They are based on extensive analyses conducted during the last two years by Simfer, China Harbour Engineering Company (CHEC), China Railway Construction Corporation (CRCC) and other international mining and construction services providers." 

    The real cost of the project, which could have a major impact on Guinea's flagging economy, has yet to be revealed but it is tipped to reach $20-billion.
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    US, Chinese companies respond to US Steel Section 337 filing

    Multiple US and Chinese companies spoke out for and against US Steel's use of a Section 337 investigation to try to bar all Chinese carbon and alloy steel products from the US market, ahead of the US International Trade Commission's decision on whether to begin the investigation.

    On April 26, USS filed a complaint with the ITC, alleging that Chinese steelmakers and distributors conspired to fix prices, stole trade secrets and circumvented duties by false labeling. The ITC has up to 30 days from the filing to decide whether to pursue the case.

    Some US manufacturers that purchase tin mill products and some pipe and tube companies believe excluding Chinese steel from the US market would harm their businesses. Ball Metal Food Container -- which purchases tinplate from Chinese companies named in the USS petition -- told the ITC in a filing that excluding all Chinese steel products from the US market would harm US companies by reducing competition, potentially resulting in higher prices and short supplies.

    Packaging company BWAY said it has been purchasing tin mill products from Baosteel for more than 10 years, and said Baosteel's product has kept the market competitive.

    There are certain parts of the market where USS and other companies do not have the capacity to replace the material lost from an exclusion order, Baosteel said. The company added that it would "argue vigorously" against any potential violations.

    China's Hunan Valin argued that USS' complaint "brings up serious public interest and public policy concerns" and interferes with US-China economic and political relationships.

    "Because other measures have largely stopped steel imports from China already, the public interest is not served by expending scarce governmental resources to open up another front via the Section 337 arena to combat very similar behavior," the mill said in a filing.

    Coiled tubing manufacturer Global Tubing sided with Chinese steelmakers, and Coastal Pipe USA CEO Michael Sanders said "strict monitoring of responsible mills to effect a reasonable competitive and efficient industry is what's needed."

    In support of the investigation, Barry Zekelman, CEO of JMC Steel Group, told the ITC that USS is one of JMC's key suppliers and that the company's viability was essential to JMC, which is North America's largest independent pipe and tube manufacturer.

    "We urge the [Obama] administration to ensure that US Steel Corporation is able to present its case, advance its theories and evidence, and probe the activities of these respondents, by initiating a full Section 337 investigation into these deeply troubling allegations," Zekelman said. "The American people deserve relief from the unfair practices that are alleged in the Section 337 petition."

    The American Iron and Steel Institute and Steel Manufacturers Association said USS' requested remedies are in the public interest and said there was unused steelmaking capacity that is ready to replace the volume of Chinese steel that may be subject to an exclusion order or a cease and desist order.
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    China's thermal power overcapacity likely to worsen, Fitch

    Excess capacity in China's thermal power generation is likely to worsen from now to 2017 due to falling coal costs and favorable on-grid tariff rates, Fitch Ratings said in a report on May 17.

    Despite government support of facilities that run on cleaner fuels, China's electricity producers have incentives to keep adding thermal power capacity before the end of 2017 as falling coal costs and favorable on-grid rates keep profitability high, Fitch said.

    Annual fixed-asset investment in thermal power sources increased by 1%, 13% and 22% in 2013, 2014 and 2015, respectively. Projects that have started construction are likely to be completed in the next two years, the report said.

    Fitch expects investment returns in the thermal power sector to remain generally robust in the short term, largely because the sector can still enjoy a healthy "dark spread," or the difference between on-grid power tariffs and unit generation fuel costs.

    However, severe overcapacity could cause competition that hurts returns in the longer run. Performance of individual independent power producers will start to diverge based on asset quality and location, according to the report.

    Fitch believes that China will take further measures to rein in investment in the sector.
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    China Apr thermal power output down 5.9pct on year

    Electricity output from China’s thermal power plants – mainly coal-fired – stood at 328.9 TWh in April, dropping 5.9% year on year, showed data from the National Bureau of Statistics (NBS) on May 14.

    By contrast, China’s hydropower output increased 10% on year to 77.9 TWh in April, mainly due to robust output of hydropower in southern China.

    Total electricity output in China reached 444.4 TWh in last month, down 1.7% from a year ago, the NBS data showed.

    That equated to a daily output of 14.81 TWh on average in the month, falling 1.7% on year.

    During the first four months this year, China’s total power output increased 0.9% on year to 1798.6 TWh. Of this, thermal power stood at 1377.2 TWh, dropping 3.2% year on year; while hydropower reached 281.6 TWh, climbing 15.5% from the year prior.

    Over the period, the share of thermal power generation in the total power generation was at 76.57%, while hydropower output accounted for 15.66%.

    The decrease in China’s thermal power generation was mainly attributed to surplus power supply amid slowing domestic economy.

    Much attention has been drawn on the excess installed capacity of thermal power generation lately, which was forecasted to be more than 200 GW during the "13th Five-Year Plan" period (2016-2020).

    Local governments and enterprises have been further urged by the National Development and Reform Commission and National Energy Administration to slow down the construction of coal-fired power plants.
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    Top Chinese steelmaker urges more government support for exports!

    Jiangsu Shagang, the listed unit of China's biggest privately-owned steel producer, said on Monday the government should provide steelmakers with more support in their efforts to export products and shift capacity overseas.

    China's massive steel sector has come under growing international scrutiny, with foreign steelmakers accusing the country's firms of flooding the global market with cheap, subsidized steel and driving them out of business.

    But Chen Ying, Shagang's general manager, said supporting exports would help speed up China's efforts to tackle a massive capacity surplus now amounting to around 300 million tonnes a year, nearly double the total annual production of the European Union.

    "China should support exports - steel product exports and moving projects and plants abroad," said Chen at an industry conference.

    "Chinese steel products have an international market and there is demand," she said. "If there is demand, why shouldn't steel products be exported?"

    Ma Guoqiang, chairman of the China Iron and Steel Association, told the conference earlier that the government had never encouraged China's steel firms to boost exports, saying the sector was primarily oriented toward the domestic market.

    The country's central bank, in a document published last month, said China would boost state support for the export of steel by encouraging firms to shift production abroad as part of its efforts to ease domestic overcapacity.

    Chinese steel exports reached a record high of 112.4 million tonnes last year, up 19.9 percent on the year.
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    India’s NTPC takes coal import holiday

    Breaking with import dependency over the last decade, India’s largest thermal power producer, NTPC Limited, has decided to take a coal import holiday during the current financial year in response to higher domestic availability and expected production from captive mines. 

    Having received guarantees of assured coal supplies from producer Coal India Limited (CIL), NTPC would not enter into any import contracts during 2016/17, and would receive only a small volume of shipments during the year, which had already been contracted, a company official said. 

    The power utility had initially planned to import 21-million tonnes in 2015/16, which during course of the year was reduced to 16-million tonnes. However, actual shipments were lower at 10-million tonnes, in response to higher dispatches from CIL, the official said. The official added that there was a possibility that the import holiday would be extended for the next few years as captive coal blocks allocated to NTPC were progressively brought into production.

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    Tokyo Steel hikes prices of deformed steel reinforcing bars

    May 16 Tokyo Steel Manufacturing , Japan's top electric arc furnace steelmaker, said on Monday it would raise the prices of its deformed steel reinforcing bar products for June delivery by around 6 percent, reflecting a recovery in domestic markets.

    Tokyo Steel's pricing strategy is closely watched by Asian rivals such as Posco, Hyundai Steel Co and Baosteel, which all export to Japan.

    The company kept the prices of other steel products unchanged after its first across-the-board hike in more than two years for May.

    Nippon Steel & Sumitomo Metal Corp is also raising the price of its sheet steel products, hot-rolled, cold-rolled and galvanised sheets and coils by about 20 percent from June, reflecting higher overseas markets, it said on Friday.

    The sales of deformed steel bars, used in reinforced concrete for buildings, accounted for about 7 percent of total revenues, a Tokyo Steel official said.

    "Other domestic steel makers have also raised the prices of steel sheets and hot-rolled.
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    China Jan-Apr coal industry FAI down 26.8pct on year

    China’s fixed-asset investment (FAI) in coal mining and washing industry amounted to 50.9 billion yuan ($7.8 billion) over January-April, dropping 26.8% from the year prior, compared with the decline of 24.5% in the first quarter, showed data from the National Bureau of Statistics (NBS) on May 14.

    Private investment in the sector stood at 30.8 billion yuan, falling 23.9% year on year.

    In the same period, fixed-asset investment in all mining industry in the country posted a yearly decline of 15.3% to 202.5 billion yuan; of this, private investment in mining industry stood at 122.2 billion yuan, dropping 7.1% from the previous year.

    Meanwhile, the total fixed-asset investment in ferrous mining industry over January-April witnessed a yearly drop of 20.2% to 21.3 billion yuan; while that in oil and natural gas industry dropped 27.5% on year to 46.9 billion yuan, according to the NBS data.

    The fixed-asset investment in non-ferrous mining industry stood at 45.2 billion yuan during the same period, up 4.9% from the year-ago level, data showed.
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    China steel industry sees profit turnaround?

    China's bloated steel industry saw a profit turnaround in March, Xinhua-run newspaper Economic Information Daily reported on May 13, but the momentum is unlikely to sustain due to a persistent mismatch between supply and demand.

    China's large and medium-sized steel producers reported 2.7 billion yuan ($415.4 million) in profits in March, ending a 15-month losing streak, the paper quoted unnamed authorities as saying.

    The unexpected improvement was largely due to recovering steel prices on the back of a pick-up in infrastructure and property projects, as well as elevated speculation in the steel futures market, which analysts said would be unsustainable.

    Steel makers have been in deep water over the past few years as a result of shrinking demand and excessive capacity built up during decades of rapid expansion.

    China's over-supplied steel sector experienced years of plunging prices and factory shutdowns due to the sluggish economy. However, with encouragement from an upward trend in prices in March, many steel mills are resuming production, challenging government efforts to cut overcapacity in the industry.

    At a press conference on May 12, Zhao Chenxin, spokesperson with the National Development and Reform Commission (NDRC), pointed out that the price surge will only mildly disturb the de-stocking efforts, and the price increase will be short-lived.
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    India Apr coal imports down 15pct on year

    India imported 15.9 million tonnes of coal in April, down 15% year on year, according to a coal ministry official.

    The value of imports in April stood at 60.23 billion Rupee ($902 million), down 32% year on year.

    "Reduced import in 2015-16 resulted in saving of estimated 240 billion Rupee in foreign exchange," coal secretary Anil Swarup said on May 13.

    The government wants to meet demand by increasing domestic coal production at state-run Coal India's mines.

    With Coal India ramping up production, dependence on imported coal has been falling, especially at those plants which were using imported coal to blend with domestic coal.
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    China April crude steel output up 0.5 percent on year: stats bureau

    China produced 69.42 million tonnes of crude steel in April, up 0.5 percent on the year, the statistics bureau said on Saturday, with mills defying a sector slowdown in order to take advantage of higher profit margins.

    China has faced growing international pressure to tackle a colossal capacity glut in the steel sector, and aims to shut 100-150 million tonnes of surplus production in the coming five years.

    But rising prices have encouraged struggling steelmakers to maximize output, with many able to squeeze out profits for the first time in months. Traders expect output to continue rising in May after a number of previously shuttered mills went back into operation.

    The April volume is slightly lower than the record 70.65 million tonnes of crude steel produced in March.

    Output over the first four months of the year has now hit 261.42 million tonnes, down 2.3 percent on the same period of last year, according to the National Bureau of Statistics.

    Though production has risen for two months in a row, analysts have warned that the improvement over March and April is likely to be temporary, with underlying demand in the world's biggest steelmaking nation still relatively weak.

    The China Iron and Steel Association's composite index, which tracks the price movements of six major Chinese steel products, rose from 69.81 to 84.66 over April, and has risen more than 50 percent since the beginning of the year.

    CISA's index is measured against a 1994 reference price, meaning that prices are still more than 15 percent lower than they were 22 years ago.

    The association warned that mills were still caught in a "vicious circle" in which they ramp up production at the first sign of improving prices, thereby driving prices back down again, and the association's index has retreated to 82.57 during the first week of May.
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    China April coal output down 11 percent on year: stats bureau

    China produced 268 million tonnes of coal in April, down 11 percent on the year, the National Bureau of Statistics said on Saturday, with producers cutting back in a concerted effort to shore up prices.

    China's coal sector has been struggling with a massive capacity glut and miners have been encouraged to cut production to shore up domestic prices, which plummeted around 30 percent last year. The country has promised to shed 500 million tonnes of surplus capacity in the next five years.

    Coal output over the first four months reached 1.081 billion tonnes, down 6.8 percent from the same period last year, with full-year production on course to see its third consecutive annual decline.

    Though coal consumption normally rises in the second quarter, with supplies traditionally under intense pressure as power plants boost their reserves ahead of the summer peak, analysts do not foresee any jump in prices, particularly as high hydropower volumes reduce the need for coal-fired generation.

    "Entering May, the weather has been fine, residential power use has stayed weak and power plants are undergoing routine maintenance, and also we have the heavy rainfall in the south that has boosted hydropower," said Chen Jie, an analyst with the China Coal Trade and Distribution Centre, in a research note.

    Thermal power generation hit 328 billion kilowatt-hours (kWh) in April, down 5.9 percent on the year, though a 10 percent jump in hydropower generation during the month meant overall volumes fell by just 1.7 percent to 444.4 billion kWh.

    Crude steel production hit 69.42 million tonnes, down from a record-high in March but 0.5 percent higher than the same period of last year, with mills still keeping output high in order to profit from higher prices.

    The production of coking coal used in steelmaking fell 3.4 percent in April to 36.25 million tonnes, with year-to-date output reaching 138.87 million tonnes, down 7.6 percent.

    Cement production reached 216.26 million tonnes in April, up 2.8 percent on the year, extending a period of restocking that began in March as new construction activities get underway.

    According to data from China's customs authority, imports of coal reached 18.8 million tonnes in April, down 4.5 percent compared to March, but up 10.4 percent on the year. Imports over the first four months fell 2.5 percent.

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    China admits overcapacity not yet falling in bloated steel sector

    Massive overcapacity in China's bloated steel industry is not yet falling, but protectionism is not the solution for problems facing the global steel industry, the country's vice minister for industry said on Monday.

    China is facing anger and calls for trade penalties to block its exports from steel producers around the world, who say it is dumping cheap exports after a slowdown in demand at home.

    The world's biggest steel producer has vowed to cut capacity, but its efforts have been complicated by a recovery in domestic steel prices.

    "Prices have been improving since the end of last year but there hasn't been any fundamental change in the underlying conditions of the market and no improvement in overcapacity," Xin Guobin told a conference in Beijing.

    China's April steel production fell from March, although average daily production rates increased from 2.279 million tonnes to 2.314 million tonnes, according to Reuters calculations based on data released from the National Bureau of Statistics on May 14.

    France and Germany last week urged fellow EU members to tighten trade defenses to protect the bloc's companies against floods of cheap imports, such as the recent surge of steel products from China.

    Chinese government officials have rejected suggestions that the surge in steel production in March and April was mostly due to so-called "zombie" enterprises returning to the market in order to profit from the higher market prices.

    "In my understanding, the capacity that has recovered production is regular capacity, and not that marked for closure," Zhao Chenxin, a spokesman for the National Development and Reform Commission, told a news briefing last week.

    "Enterprises stopping and resuming production is mainly a reaction to market changes - adjusting production is normal behavior," Zhao said.

    Hebei province, China's biggest steel producing region, has also explicitly banned the reopening of capacity that has already been scheduled for elimination.

    But industry experts are concerned that Chinese provinces will reopen mills that have not produced a ton of steel in years, but have clung to life in order to qualify for compensation from the central government.

    In the steel-producing city of Tangshan in Hebei, several mills have been out of operation since the market began to falter in late 2013, but they still do not count as bankrupt. Demolishing these plants in order to meet overcapacity targets will have no impact on market supply or on prices.

    China Iron and Steel Association secretary general Liu Zhenjiang said last month that "cutting steel capacity is important but controlling steel output is more important".

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    Coal, steel de-capacity plans submitted; strictly implement once approved

    China’s regional de-capacity plans for coal and steel sectors have been submitted to central government, and will be strictly implemented once approved, media reported.

    Those initial plans showed that provinces and cities of China focused on industrial upgrade through merger and regrouping of firms from different regions, industries, and systems of ownership, and sound support of fund, taxation and credit policies will be provided.

    It is expected to embrace a promising and sustainable coal and steel industry amid the several favorable policies, yet some firms were also observed in a slow or stagnant process of regrouping, mainly troubled by legality issues, shifted ownership system and local benefit burdens.

    China’s State Council rolled out the guideline for steel de-capacity missions in early February, which required a capacity cut of 500 million tonnes and the capacity regrouping of 500 million tonnes within next 3-5 years in coal sector, while capacity of crude steel was required to reduce 100-150 million tonnes in next five years.

    Thus, a total of eight supporting policies in initiatives, subsidies, finance, taxation, staff resettlement and other aspects were formulated, in order to realize the target. And seven of them have officially been released by May 10.

    Meanwhile, a united work team composed of several ministries and industrial associations put up with detailed requirements for local capacity cut plans.

    Inner Mongolia is required to cut surplus coal capacity of 179 million tonens in next 3-5 years. It will also propel the regrouping of coal, power, chemical, metallurgy and building material sectors in 2016. Those new projects dealing with only coal mine business will not be approved, and new power and chemical projects should be regrouped with existing coal mines.

    Shanxi province will focus on large coal producers in the province in process of capacity reduction. Datong Coal Group is the major object of the province’s supply-side structural reform, with sound support from provincial government, analyst said.

    Hebei province, whose steel capacity accounts for 33% of the country’s total, pledged to cut steel capacity of 100 million tonnes in next five years; Jiangsu, the second largest steel production base in China, set its steel de-capacity target at 12.55 million tonnes, and mainly fulfilled through steel makers’ capacity cut on their own initiative, market deselection and regrouping.

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    Mechel says earnings up on investment returns

    Indebted Russian coal and steel producer Mechel's core earnings jumped 54 percent year-on-year in 2015 due to increased returns on investments that previously threatened to sink the company.

    The mining company, controlled by businessman Igor Zyuzin, borrowed heavily before Russia's economic crisis and has struggled to keep up repayments as demand for its products weakened alongside tumbling coal and steel prices.

    Mechel reached agreements in principle to restructure $5.1 billion of debt with creditors including Russian lenders Sberbank, Gazprombank and VTB in February, but has since struggled to get approval from shareholders.

    "Mechel's operational and financial results improved to a large extent due to the fact that our key projects whose implementation had caused our company's debt growth, are reaching target capacity utilization levels and increased returns on invested capital," said Chief Executive Oleg Korzhov.

    Mechel's earnings before interest, taxation, depreciation and amortisation (EBITDA) totalled 45.73 billion roubles ($3.87 billion) in 2015, the company said in a statement.

    Its net loss for the year totalled 115.16 billion roubles, compared with a loss of 132.7 billion roubles in 2014, largely due to foreign exchanges losses, Mechel said. Revenue increased 4 percent year-on-year to 253.14 billion roubles.

    Along with other Russian steelmakers, Mechel has also been hit by a collapse in global steel prices, which plumbed 10-year lows in late 2015 and early 2016, as well as weaker demand for at home, undermined by Russia's deepening economic downturn.

    Competitors Severstal and MMK reported core earnings down 53 percent and 39 percent year-on-year respectively for the first three months of the year.

    But Korzhov said the market was improving.

    "The strengthening of steelmaking commodity and steel markets which we currently observe enable us to confidently conduct our operations and sales with a view to the company's further development," he said.

    Mechel's crude steel output increased 1 percent year-on-year to 4.3 million tonnes in 2015, while coal production rose 2 percent to 23.2 million tonnes.
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