Mark Latham Commodity Equity Intelligence Service

Friday 20th May 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Saudi geriatric plans coup.

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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.

    http://www.bloomberg.com/news/articles/2016-05-19/iraq-reaches-5-4-billion-imf-funding-accord-minister-says
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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.

    http://www.reuters.com/article/russia-gazprom-dividends-idUSL5N18G2FW
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    Oil and Gas

    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.

    http://www.lngindustry.com/regasification/19052016/Qatargas-and-JERA-agree-first-spot-LNG-cargo-deal-2472/

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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.

    http://www.bloomberg.com/news/articles/2016-05-19/iraq-s-oil-output-seen-by-lukoil-at-peak-as-government-cuts-back

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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.

    http://www.bloomberg.com/news/articles/2016-05-19/east-libya-oil-exports-to-resume-thursday-after-diplomatic-deal
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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.

    http://oilprice.com/Latest-Energy-News/World-News/Rebel-Bombing-Shuts-Down-Key-Colombian-Oil-Pipeline.html?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+oilpricecom+%28Oil+Price.com+Daily+News+Update%29
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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.

    http://oilprice.com/Latest-Energy-News/World-News/Kuwait-Changes-Tune-at-50-Oil.html?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+oilpricecom+%28Oil+Price.com+Daily+News+Update%29

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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.

    http://www.reuters.com/article/russia-gazprom-output-idUSL5N18G1MX
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    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.

    http://www.lngworldnews.com/report-south-korea-mulling-knoc-kogas-merger/
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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.

    http://www.reuters.com/article/interoil-ma-oil-search-idUSL3N18G5J5

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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).

    http://www.oilvoice.com/n/90-of-US-DUCs-are-located-within-Permian-Eagle-Ford-Bakken-and-Niobrara/36b5460b1d5f.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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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.

    http://www.reuters.com/article/us-canada-wildfire-idUSKCN0YA0Z1

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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.

    http://www.lngworldnews.com/usa-downeast-lng-puts-itself-up-for-sale/
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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.

    http://www.reuters.com/article/us-california-oilspill-plains-all-amer-idUSKCN0YA2V5
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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.

    http://www.lngindustry.com/liquefaction/19052016/BC-signs-Coastal-First-Nations-LNG-Benefits-Agreement-2474/
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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.

    http://www.reuters.com/article/us-tesla-offering-idUSKCN0Y92TH

    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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    Uranium

    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.

    http://www.reuters.com/article/us-egypt-russia-nuclear-idUSKCN0YA1G5

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    Agriculture

    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.

    http://www.reuters.com/article/us-monsanto-m-a-farmers-idUSKCN0YB01X
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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.

    http://www.reuters.com/article/health-eu-glyphosate-idUSL5N18F20L
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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.

    http://seekingalpha.com/news/3184583-potash-corp-sees-chinese-supply-contract-settling-within-weeks
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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.

    http://www.mineweb.com/news/political-economy-analysis/sa-plans-levy-mines-tackle-acid-mine-water-pollution/?utm_content=buffer30fbf&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
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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.

    http://www.reuters.com/article/russia-alrosa-idUSL5N18G1L4
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    Steel, Iron Ore and Coal

    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.

    http://en.sxcoal.com/0/146355/DataShow.html
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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.

    http://en.sxcoal.com/0/146357/DataShow.html
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    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.

    http://www.mineweb.com/news-fast-news/investors-worlds-top-coal-shipper-pass-climate-change-motion/
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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.

    http://www.reuters.com/article/russia-trubnaya-metal-results-idUSL5N18G2AT
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