Mark Latham Commodity Equity Intelligence Service

Tuesday 21st March 2017
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    China's MIIT forecasts 4.8% rise in nonferrous metals output for 2017

    China's production of major nonferrous metals such as copper, aluminum, lead and zinc is expected to grow by 4.8% year on year in 2017, which is equivalent to 55.37 million mt, according to a post made by the Ministry of Industry and Information Technology late Friday.

    MIIT disclosed that for the nonferrous metals sector, excess capacity cuts, and restructuring, optimization and concentration of metals producers in China would remain among the core tasks for this year. The ministry did not mention any more details.

    Nevertheless, aluminum could be one of the primary targets among the metals, as China's central government has always been listing aluminum together with steel, coal, glass and cement when addressing industries that have serious levels of overcapacity.

    The production projection more or less matched MIIT's prediction of a 4.1% average annual increase in apparent consumption of the metals nationwide over the 13th Five Year Plan period of 2016-2020, or six percentage points lower than the 12th Five Year Plan period of 2011-2015.

    Last year, China's production of the ten major metals grew by 2.5% year on year to 52.83 million mt, among which, primary aluminum was up 1.3% year on year to 31.87 million mt, zinc was up 2% to 6.27 million mt, lead was up 5.7% year on year to 4.67 million mt, and refined copper accounted for 8.44 million mt, up 6% year on year.

    And by 2020, China's consumption of the ten metals is expected to reach 68 million mt, the ministry had said late last year.

    Over 2016-2020, China's demand for refined copper is expected to grow by 3.3%, or 5.6 percentage points lower than the previous five years, aluminum up 5.2%, down 9.2 percentage points, while lead consumption increase is expected to stabilize at around 0.6%, and zinc at about 1.7%.

    Consumption of lithium and cobalt are expected to grow at 13.5% and 12.5%, respectively, over 2016-2020, as these are the new materials for manufacturing batteries.
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    Oil and Gas

    Nigeria's amnesty plan for militants facing funding challenges

    The Nigerian government's amnesty program designed to keep militants from attacking oil facilities in the Niger Delta is facing funding problems, posing a potential challenge to efforts to curb violence in the region and raise oil production, a government official said Sunday.

    Nigeria had been paying hundreds of millions of dollars annually to former Niger Delta militants under an amnesty program introduced in October 2009 to help end years of attacks on oil installations.

    "The program has faced inadequate funding," presidential adviser to the Amnesty program Paul Boroh was quoted as saying Sunday in a government statement.

    This meant the government was unable to cover the monthly stipends paid to ex-militants as well as fund their training programs at foreign institutions, Boroh was quoted as saying at the inauguration of an inter-ministerial committee set up to oversee development plans for the restive Niger Delta region.

    "Inadequate funding has also limited the capacity to empower [ex-militants] and exit them from the program," he said in the statement.

    Nigerian government revenue has been hit by low oil prices in the international market, as well as a decline in output and exports.

    Output slumped to a near 30-year low of 1.2 million b/d in mid-2016 from 2.2 million b/d earlier due to a sudden resurgence in attacks on oil facilities in the Niger Delta.

    However it has since been on a gradual increase, hitting 1.7 million b/d in February according to the Platts survey, on the back of the recent peace talks between the government and Niger Delta leaders and youths.

    Nigeria's Vice President Yemi Osinbajo, who has been leading the peace talks, inaugurated an inter-ministerial team to fast track the government's development plans for the Niger Delta as part of the deal struck with the communities to end the violence in the region.

    Setting up the team confirmed the government was "faithful to the promises and the spirit of the presidential engagements with the people of the Niger Delta," Osinbajo was quoted as saying in a statement.
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    Libya Ports Prepare to Resume Crude Shipments After Clashes

    Libya’s major oil ports of Es Sider and Ras Lanuf are resuming operations and preparing to export crude after a two-week halt in shipments due to military clashes in the holder of Africa’s largest crude reserves.

    Libya’s total production rose to 646,000 barrels a day from 621,000 barrels on Sunday mostly due to an increase from Waha Oil Co., Jadalla Alaokali, a National Oil Corp. board member, said Monday by phone. Waha Oil feeds into Es Sider, the country’s biggest oil port. Staff are returning to Es Sider and Ras Lanuf, its third-largest, and exports are set to restart in a week to 10 days, Alaokali said Sunday.

    “Both ports are ready to restart exports,” Alaokali said.

    Waha Oil, a joint venture between the NOC, Hess Corp., Marathon Oil Corp. and ConocoPhillips, suspended production earlier this month after clashes between armed factions in the politically divided nation forced Es Sider and Ras Lanuf to suspend shipments. Waha Oil is "soon" expected to reach 75,000 to 80,000 barrels a day, the level it was at about two weeks ago before fighting broke out near the ports on March 3, according to Alaokali. It began pumping on Saturday.

    Forces loyal to Libya’s eastern-based military commander Khalifa Haftar regained control over the two ports on March 14. The fighting, including airstrikes, dealt a blow to international efforts to restore stability in the country. A rival group had seized Es Sider and Ras Lanuf earlier this month.

    Pumping Oil

    Brent crude added 23 cents, or 0.5 percent, to $51.85 a barrel at 1:24 p.m. Singapore time. The global benchmark has lost almost 9 percent this year.

    Libya’s eastern oil region is safe now, and companies in the area can resume normal operations related to production and exports, Mustafa El-Zegheid, coordinator of the NOC’s Oil Crescent emergency committee, said.

    At least 45 workers and engineers have returned to their jobs at Ras Lanuf and 35 others at Es Sider, El-Zegheid said. Employees at Es Sider have inspected storage tanks and valves, and the facilities are ready to receive crude from the Waha field, which will slowly increase Waha Oil’s production, he said.

    Libya has sought to boost crude exports after fighting among rival militias hobbled oil production following the overthrow in 2011 of dictator Moammar Al Qaddafi. The conflict showed signs of calming in recent months, with oil output reaching about 700,000 barrels a day in February from 260,000 a day in August, according to data compiled by Bloomberg. Libya pumped 1.6 million barrels a day before Qaddafi’s ouster.

    Waha Oil has an output capacity of more than 300,000 barrels a day, according to the NOC’s website. Its production dropped by half to 40,000 barrels a day after the closing of Es Sider, before it came to a complete halt. Libya has been rescheduling crude loadings at Es Sider and Ras Lanuf and transferring them to other ports such as Zueitina and Brega.

    Libya split into separately governed regions in 2014, leading to the establishment of competing NOC administrations. A deal meant to unite them under a single management was signed in July 2016. The future of that accord now appears uncertain as the head of the NOC in the east said earlier this month he was pulling out of the deal because the terms of the agreement, including the transfer of the company’s headquarters to Benghazi, have yet to be met.
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    Armed With $11 Billion, Thai Oil Giants Hunt for Investments

    The Asian energy companies sitting on the largest hoard of cash outside China are ready to put it to use.

    Thailand’s PTT Exploration & Production Pcl and its parent company have nearly $11 billion combined in cash and marketable securities, such as bonds and other short-term investments. The explorer is ready to spend from its portion on projects and exploration acreage to rescue declining oil and gas reserves, according to Chief Executive Officer Somporn Vongvuthipornchai.

    PTT E&P is eyeing early-life producing assets or projects that are already sanctioned and ready for development, Somporn said in an interview in Bangkok. It’s also looking to work with its parent, PTT Pcl, to invest in liquefied natural gas plants, which would help feed the country’s growing demand.

    “We’ll have to rely on mergers and acquisitions to maintain our growth,” said Somporn. “We’re looking at opportunities in the few hundred million to $1 billion range.”

    There was no such hunger when Somporn took the reins of the upstream company in October 2015. Oil prices had already fallen from the $100 a barrel range into the $60s, and he watched as over his first six months they cratered below $30 to hit the lowest in more than a decade.

    He kept the company focused on weathering the downturn by cutting costs and investments. Meanwhile, proved reserves have fallen from the equivalent of 1.1 billion barrels of oil in 2009 to 695 million last year. That will last just five years at its current production rate.

    Short Life

    “They have a relatively short reserves life and it’s pretty clear they’re going to have to acquire to grow as a company,” said Neil Beveridge, an analyst with Sanford C. Bernstein in Hong Kong, who has a neutral rating on the company.“Domestic oil and gas production is going to decline over the coming years, so that puts more emphasis on companies like PTT E&P to go overseas and build supply.”

    Oil’s crash made deals difficult to close last year because it was hard to agree on long-term values. While the market will remain volatile, Somporn said there is enough of a consensus now for buyers and sellers to find common ground. PTT E&P is using a $50 oil price forecast this year for its investment decisions.

    “It’s a good time to grow while we have this cash with us,” he said. The E&P company has $4 billion in cash and marketable securities, which parent PTT accounts in its $10.9 billion. Only China’s big three oil firms, led by PetroChina Co.’s $18 billion pile, have more than that among listed energy companies in Asia, according to data compiled by Bloomberg.

    LNG Growth

    Most of the company’s wells are in Thailand and Myanmar, where Somporn is looking first for new supply. Divestitures by oil majors seeking to maintain dividends in a lower revenue environment provide opportunities to find assets, he said.

    LNG is another avenue for growth. Parent-company PTT is looking to expand gas imports to meet growing domestic demand fueled by economic expansion, while domestic production is declining and pipeline imports from Myanmar may be redirected to China.

    “There is an opportunity for us to participate more on the LNG value chain,” Wuttikorn Stithit, PTT’s executive vice president for natural gas supply and trading, said in a separate interview. “It’s kind of a natural hedge, because when the price of LNG is high, from the projects we would have some value.”

    PTT last week announced a higher-than-expected 2016 dividend of 16 baht (46 U.S. cents) per share, signaling an increased focus on capital allocation, according to Mayank Maheshwari, an analyst at Morgan Stanley in Singapore. The company’s balance sheet can sustain 20 percent higher dividends in the medium term, Maheshwari said in a note.

    Somporn said geography doesn’t play as much of a limiting role for LNG projects. He would prefer a project where the export facilities and production fields are combined, as opposed to projects such as those on the U.S. Gulf Coast, where firms buy already produced gas and then pay to have it liquefied for export.


    PTT E&P owns an 8.5 percent stake in Anadarko Petroleum Corp.’s proposed Mozambique LNG project. Somporn said the companies are finalizing legal requirements with the government, firming up gas contracts with buyers and beginning to discuss financing for the project. He said he hopes to make a final investment decision on the project by the end of this year.

    The company also has exploration acreage 700 kilometers (435 miles) offshore Australia that could contain 4 trillion cubic feet of natural gas. The company has shifted its focus from developing a floating production platform for the project to working with existing onshore liquefaction plants, Somporn said.

    “Thailand would be hungry for LNG,” he said. “Our Gulf of Thailand gas fields are getting mature, while demand is rising and rising.”

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    North Sea oil outlook less promising as Scotland eyes new referendum: consultancy

    The North Sea oil industry faces a halving of investment in the next three years and tens of billions of pounds worth of decommissioning obligations, creating an unpromising environment for a potential Scottish independence referendum, consultancy Wood Mackenzie said Friday.

    The UK oil industry has made progress on costs and efficiency since Scotland's last independence referendum in 2014, the consultancy said in a research note after the devolved government in Edinburgh proposed a new referendum this week.

    However new challenges have emerged, including weaker oil prices and a lack of new discoveries and development projects, Wood Mackenzie, which is based in the Scottish capital, said.

    "It is clear that oil and gas tax revenue will play a smaller part in the economic case for independence should a second referendum be held," it said.

    In any case, "political uncertainty could deter investors from committing to new projects," particularly in the context of the UK's exit from the European Union, it added.

    Wood Mackenzie estimated the value of Scottish oil and gas fields, including a 10% discount, at GBP44 billion ($64 billion).

    However the volume of the UK's commercial oil and gas reserves has dropped 30% since the vote in 2014, mainly because reserves totaling 1.6 billion barrels of oil equivalent have been tapped in the intervening period, compared with total discoveries of just 100 million boe.

    In addition, 1.3 billion boe of UK resources have been removed from consideration as commercial reserves due to lower oil prices.

    This means that as of the start of this year the UK was home to 6 billion boe in reserves, of which 5.3 billion boe, or 88%, lay in Scottish waters, although Scotland may be able to count on another 4.3 billion boe of "contingent" resources.

    The note highlighted a Wood Mackenzie estimate that the UK faces a total bill of GBP52 billion ($64 billion) for the eventual decommissioning of North Sea facilities, 80% of this being attributable to Scotland.

    The industry is counting on rebates of past taxes paid to the UK Treasury to help it meet these expenses, a potential difficulty for a fully autonomous Scottish government.

    "With new investment and jobs at stake, and the complicating factors of boundaries and decommissioning tax relief, much is at stake," the consultancy concluded.

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    Strike action looms as UK offshore workers reject pay deal again

    Members of Scotland’s biggest offshore trade union Unite have once again voted to reject a pay offer by their employers thus moving a step closer to a potential strike action.  

    The union said in a statement on Monday that, in a consultative ballot, 81 per cent of its members voted to reject the latest deal put forward by their employers, represented by the Offshore Contractors Association (OCA).

    Unite, along with the GMB union, is seeking a wage increase for offshore members, along with improved sick pay and paid travel time to an employer’s onshore base.

    This is the second pay offer rejected by members. In December, 85 percent of Unite members voted to reject a previous OCA proposal that would have seen no increase in their pay and no improvement to their terms and conditions, the union claimed.

    Unite regional officer Tommy Campbell said: “We have repeatedly warned the OCA employers and other offshore employers that we cannot simply have a race to the bottom, with companies competing with each other to suppress the pay and conditions of offshore workers.

    “It’s bad for our members and it’s bad for the local economies that rely on their incomes.

    “Those companies who invest in their workers and see them as genuine partners will reap the benefits in the future. Those who don’t will end up lagging behind, and will always face the possibility of industrial action from their workforce.”

    Referring to what will come next, Campbell further said: “We will now consult with our union members and Unite workplace representatives about the way forward, given they now have a mandate for an industrial action ballot following the rejection of the pay offer.”

    Several days before the results of the ballot were revealed, OCA said that member companies believed this offer would help protect and sustain the North Sea industry and employment opportunities within the sector, now and in the long-term.

    Responding to the results of the vote, Paul Atkinson, OCA CEO, said: “We are extremely disappointed that members of the trade unions who took part in the consultative ballot have rejected our pay offer.

    “Our priority is to find ways of avoiding industrial action. We will continue to maintain an on-going dialogue with union officials in an attempt to bring this to a resolution.”
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    Chevron calls end of LNG mega project after $88Bn spree

    Chevron Corp. has signaled the end of major new liquefied natural gas(LNG) projects in Western Australia and is unlikely to sanction an expansion of its Gorgon and Wheatstone export developments as it focuses on boosting returns from $88-billion of investment.

    The climate for developing large greenfield LNG projects has shifted to smaller developments given a slump in the price of oil to under $50 a barrel, according to Nigel Hearne, a managing director with the company’s Australia unit.

    “The mega projects of the past decade are giving way to smaller, more targeted investments with quicker economic returns,” Hearne said in a speech in Perth on Tuesday. “As it stands there is unlikely to be another large greenfield LNGdevelopment” in Western Australia.

    Chevron’s two major Australian LNG facilities have suffered from cost blowouts, delays and poor timing. Oil’s worst slump in a generation and an LNG supply glut reduced revenue from projects across the industry.

    While the third LNG train from the $54-billion Gorgon project is in the process of starting up, further expansions are unlikely in the current climate with Chevron focusing future investments on “shorter-term” returns.

    “I can’t see in the near-term us investing in a fourth train at Gorgon or a third train at Wheatstone,” Hearne said in Perth. Chevron is focused on generating returns on its existing investments and paying a “dividend back for the money” already spent.

    The first train from the $34-billion Wheatstone projectremains on schedule for mid-2017, he said.

    About A$118-billion ($91-billion) of LNG developments in the nation are scheduled to be completed in 2017 including Gorgon, Inpex Corp.’s Ichthys and Royal Dutch Shell Plc’s floating Prelude vessel, according to a December report from Deloitte Access Economics.

    A growing supply glut will likely deter significant investment in new Australian LNG projects beyond 2017 with doubts growing over the feasibility of planned floating facilities, according to the report. Planned FLNG projects in Australiaincluding Woodside Ltd.’s Browse and Sunrise facilities and Exxon Mobil Corp.’s Scarborough may not proceed due to a more competitive operating environment, Deloitte said.
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    Japan's Top Oil Experts Seek Solutions to Chinese Fuel Flood Problem

    Huddled deep within Tokyo’s government district, nearly two dozen of Japan’s top oil experts pore over a problem plaguing its energy industry: how can they stop China from pushing its crude refiners into a corner?

    The task force, summoned by the trade ministry, needs a strategy to save oil refiners battered by years of declining demand at home. The processors, including JX Holdings Inc. and Idemitsu Kosan Co., now face rising competition for sales in Asia, the world’s biggest oil market. The ministry fears that China’s move to adopt stricter fuel standards will spur regional rivals into producing higher quality products, forcing Japan out of the market.

    “We’ve been saying for more than 20 years that Japanese refiners should become stronger,” said Hidemasa Nishiyama, director of the trade ministry’s petroleum refining and reserve division. “The external environment has changed: the capacity of China and other countries is becoming excessive, and their exports could surge.”

    China is the biggest among a slew of other threats for Japan. The gradual slowdown of economies such as South Korea’s have led to rising exports to an increasingly saturated market. Meanwhile, other developed countries including the U.S. are also fighting for its share in Asia after China’s diesel and gasoline shipments overseas capped a record year in 2016.

    Sense of Urgency

    Members of the task force include Seisuke Iwai, a senior official at industry group Petroleum Association of Japan, Norimasa Shinya, an energy analyst at Mizuho Securities Co., Fuminori Hasegawa, senior vice president at Mitsubishi Corp. and Katsuhiro Sato, a partner at McKinsey & Co. in Japan.

    Their mission has taken on a sense of urgency following China’s move at the start of this year to curb the amount of sulfur used in vehicle fuels in an effort to reduce air pollution. The new rule has encouraged suppliers like China Petroleum and Chemical Corp., the world’s biggest oil refiner known as Sinopec, to pledge about $29 billion in facility upgrades to enable it to pump cleaner fuel.

    At the same time in Japan, the popularity of electric hybrid vehicles has reduced the country’s gasoline demand, contributing to an oversupply in refined products. Domestic oil-product sales at JX Holdings and other refiners have shrunk for the past five years, forcing them to cut capacity while seeking to sell excess fuel abroad.

    JX Holdings shares slipped 0.7 percent at the close in Tokyo on Tuesday. TonenGeneral Sekiyu KK lost 1.9 percent, Showa Shell Sekiyu KK dropped 1.7 percent while Idemitsu Kosan added 0.4 percent. The benchmark Topix index declined 0.2 percent.

    This isn’t the first time the ministry has intervened. The trade ministry, known as METI, enforced a rule eight years ago that pushes refiners to increase their ratios of heavy oil cracking capacity to crude oil distillation units by March 2014. Later that year, the ministry asked refiners to further improve its efficiency while setting a new deadline for March 2017. For the refiners to upgrade their oil cracking units, they would likely need to invest tens of billions of yen, according to Nishyama.

    But the rules have been met with little success. Rather than upgrading to enable plants to produce more high-quality and expensive crude products such as diesel while reducing low-value residual ones such as fuel oil, the refiners instead opted to slash processing capacity. While that drop helps alleviate oversupply issues in Japan, it hasn’t helped the companies become more competitive overseas.

    The expert group is scheduled to make new recommendations to the country’s industry at its next meeting this month. METI hasn’t decided whether to implement a third round of similar efficiency rules, Nishiyama said.

    “Cutting nameplate capacity like we are doing now means our costs won’t change but profits will rapidly fall,” said Tsutomu Sugimori, the president of JX Nippon Oil & Energy Corp., Japan’s biggest refiner by capacity. “It will only weaken the health of refining companies.”
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    Italy gives final approval to Intesa funding of Russian oil deal

    Italy has given its final blessing to a 5.2 billion euro loan made in January by bank Intesa SanPaolo to finance the privatisation of a stake in Russia's biggest oil company, after checking to ensure the deal did not breach sanctions.

    Russia sold a 19.5 percent stake in Rosneft in December for 10.5 billion euros, in one of the biggest transfers of Russian state assets into private hands since the 1990s.

    The stake was bought by a consortium made up of Qatar and the oil trading company Glencore, which together provided 2.8 billion euros. The consortium borrowed funds from Intesa, Italy's biggest retail bank, to make up most of the rest of the purchase price.

    The deal was subject to regulatory scrutiny in Italy because of the size of Intesa's loan and the potential for entanglement in EU sanctions on Russia. Rosneft itself, its boss Igor Sechin and Russia's main state banks are all subject to sanctions imposed after Russia's annexation of Crimea from Ukraine in 2014.

    However, Italy's Financial Security Committee (FSC), a government body which includes officials from the finance, foreign and justice ministries, the central bank, finance police and anti-mafia prosecutors, found no sanctions violations.

    The FSC, which gave preliminary blessing to the deal in January, concluded its inquiry in early March, officials said.

    "At the end of all checks, we didn't find any kind of obstacle... The operation was carried out in compliance with all rules," said a spokesman for the FSC.

    Glencore, Rosneft and the Qatari investment fund QIA declined to comment. Intesa's spokesman said: "No issues were raised by competent authorities."

    According to four Italian government and bankingsources,  Intesa first agreed to lend the money to Glencore and Qatar on Dec. 6 and approached the FSC for approval, but this was held up until the new year because the new government of Prime Minister Paolo Gentiloni was sworn in only on Dec. 12.

    Since the Russian government wanted to close the deal before the end of 2016, Russian state lender VTB provided a bridge loan while the buyers waited for the money from Intesa.

    VTB is subject to sanctions, and the sources said the FSC investigated the Russian bank's role, but concluded that the bridge loan arrangement did not make the transaction illegal. VTB declined to comment.

    Reuters reported in January that certain details of the deal could not be determined from public records, including the source of 2.2 billion euros in funding and the beneficial owners of a Cayman Islands company that is part of the consortium's ownership structure. Rosneft says the deal was transparent and Glencore and Qatar are the only owners of the stake.
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    Borr Drilling to buy 15 Transocean rigs in $1.35 billion deal

    Oslo-listed rig operator Borr Drilling has agreed to buy 15 drilling rigs from Swiss-based Transocean in a $1.35 billion deal, Borr said in a statement on Monday.

    The letter of intent comprises 10 rigs from Transocean's current fleet and five that are currently under construction, it added.

    Borr also said a group of investors had agreed to an $800 million share issue, and that the proceeds will be used to fund the Transocean deal.

    The new shares will be sold at $3.5 each, a discount to the 32.5 Norwegian crowns ($3.85) that Borr currently trades at.
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    Shell to drill new wells by end-2018 to shore up Australia gas supply

    Royal Dutch Shell said on Tuesday it will drill 161 new gas wells at its Queensland operations by the end of 2018, helping to underpin its promise to continue supplying 10 percent of the domestic gas market to help prevent a shortage.

    The project at its QGC operations in the Surat Basin in southeast Queensland has been planned for some time as existing wells decline, with the new wells due to be drilled this year and next. The wells will help sustain Shell's 75 petajoules of gas supplies a year to eastern Australia's gas market.

    The new drilling will not affect exports from Shell's Queensland Curtis liquefied natural gas (LNG) plant.

    The announcement came a week after Prime Minister Malcolm Turnbull hauled in Australia's gas producers, led by Shell Australia and ExxonMobil Corp, to discuss how to boost supplies in face of warnings from the nation's energy market operator of a looming shortage within the next two years.

    Gas supply has become a hot issue, following blackouts and brownouts in Australia's eastern states over the past year, and as growth in LNG exports has led to soaring gas prices for manufacturers.

    Thanks to onshore production in Queensland, businesses there will pay less than rivals further south, where onshore drilling has been banned or restricted due to opposition from landowners and green groups, said Shell Australia Chairman Andrew Smith.

    "This is a competitive advantage for Queensland business in attracting manufacturing jobs from Victoria, where gas customers will be forced to pay more for political reasons," Smith said.
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    India boosts February LNG imports

    India’s imports of liquefied natural gas (LNG) rose 19.2 percent in February as compared to the same month a year ago.

    India imported 2.13 billion cubic meters or about 1.57 million mt of LNG in February, as compared to 1.78 Bcm in the same month in 2016, according to the data from oil ministry’s Petroleum Planning and Analysis Cell (PPAC).

    This is India’s first monthly increase in LNG imports after posting a decline in January and December, respectively.

    Domestic natural gas production declined 1.7 percent in February to 2.52 Bcm, the PPAC data shows.

    In the April-February period, India’s LNG imports rose 16.4 percent year-on-year to 22.53 Bcm or about 16.67 million mt of LNG.

    The country’s LNG imports have been rising since the beginning of last year on the back of lower prices.

    Costs of importing LNG into India have dropped sharply in 2016 after the country’s largest importer, Petronet LNG signed a revised long-term contract with Qatari LNG producer RasGas.

    India paid $0.6 billion for December LNG imports. In the April-February period, LNG import costs reached $5.4 billion, PPAC said.

    This year, India made additional steps to further boosting its imports of the chilled fuel as part of plans to shift to a natural gas-based economy.

    The country announced last month it would halve its basic customs duty on imports of LNG from current 5 percent to 2.5 percent.

    India’s ministry of the road, transport and highways has also recently given the green light for the use of LNG as fuel for road vehicles.

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    Methanol's use as marine fuel to hinge on commercial aspects

    The popularity of methanol as a bunker fuel will hinge on commercial considerations rather than environmental concerns, as the marine industry confronts an array of viable alternatives that comply with the International Maritime Organization's 2020 sulfur cap, sources said at an industry event.

    Methanol is a biodegradable, clean-burning marine fuel that reduces smog-causing emissions, and is also similar to bunker fuel specifications because it is a liquid, making it easier to transport and store than alternatives such as liquid natural gas which requires its own infrastructure.

    But the move to look at methanol as a marine fuel is relatively recent, and has been driven by the recent surge in production capacity, particularly in the US, where supply has burgeoned thanks to cheap gas from shale plays.

    Tepid demand from traditional downstream applications of methanol such as acetic acid and formaldehyde, has also prompted some suppliers of methanol to scout for other applications including its use as a marine fuel.

    The production cost of methanol is about 50% higher than that of LNG. However, the distribution chain of methanol is much simpler as it requires no additional investment -- special vessels or storage terminals. LNG, on the other hand, requires expensive sophisticated deep sea vessels, import and re-export terminals, LNG coastal feeder vessels, local LNG terminals and storage, and LNG bunker vessels. Due to the costly distribution chain for LNG, the cost difference at the production facilities is eliminated when the fuel is distributed to the vessel," said Bengt Ramne, managing director at ship design company ScandiNAOS AB.

    "Conversion costs of using methanol are also much lower -- around 300-350 kw of installed power -- a third of the conversion costs of LNG," Ramne said, speaking at an event Friday jointly organized by the Methanol Institute, International Bunker Industry Association and Lloyd's Register Marine.

    Conversion costs are likely to fall further as more methanol plants come online and additional storage infrastructure is developed, sources said.

    Another factor that could spur the use of methanol would be the prospect of rising crude oil prices, they said.

    Stena Line, for example, successfully retrofitted the vessel Stena Germanica to use methanol as a solution to low sulfur fuel requirements, Ramne said. But the decision was taken at a time when methanol prices were low, he said, adding that the incentive for shipowners and operators to switch to methanol had dwindled in the current low crude oil price environment.

    S&P Global Platts assessed Asian methanol at $343/mt CFR China Thursday, lower than MGO Singapore at $468.50/mt but higher than Singapore delivered 380 CST bunker fuel at $297.50/mt.


    In the absence of a real pull factor from the shipping industry, concerns still remain over the widespread adoption of methanol over other alternatives, an industry source said. These alternatives could be scrubbers with heavy fuel oil, marine gasoil, 0.5% sulfur fuel oil or LNG.

    Although LNG infrastructure is costly, LNG uptake is expected to rise, he said, adding that the push for LNG is coming not only from suppliers but also governments and ports. Many ports in Singapore, Japan and South Korea are already gearing up for LNG bunkering.

    Methanol has other challenges too.

    "The flash point [for methanol] is around 11-12 degrees Celsius whereas the SOLAS regulation requires minimum 60 C, and of course the biggest challenge is to beat the low fuel price," said Md Harun Ar Rashid, technical manager at fuel tester Veritas Petroleum Services.

    "Gasoil will still be the dominant fuel, whether we like it or not. Low sulfur fuel oils and hybrids will also have a bigger role, particularly post 2020," Rahul Choudhuri, Managing Director VPS Singapore, said, adding this trend was reflected in recent data and tests conducted by his company. In 2016, for example, VPS observed a 9% year-on-year increase in hybrid fuels as they gained traction due to tougher environmental regulations, he said.

    "Increased use of methanol will also take time as the use of scrubbers is expected to accelerate," another industry source said. "People will have too many choices and may end up choosing just plain vanilla."

    "Installing scrubbers may be an economically attractive option [for the shipping industry]. Although there is an initial investment, shippers can expect a high return of 20% and 50% depending on investment cost, MGO fuel oil spread and ships' fuel consumption," Sushant Gupta research director for Asia refining at Wood Mackenzie said at a different event last month.

    He added that the company's baseline case estimated scrubbers in ships rising from around 300 currently to as high as 8,000-10,000 by 2025.
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    Genscape Cushing inventory higher

    Gesncape Cushing inventory +1.5mmbbl

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    TransCanada seeks Canada pipe approval for Petronas LNG terminal

    Transcanada Corp has secured shipper commitment for a pipeline for Malaysian state-owned oil company Petronas's Pacific NorthWest liquefied natural gas (LNG) terminal in western Canada and will seek approval for early construction, the company said on Monday.

    TransCanada was previously granted approval for the North Montney Mainline pipe on condition of a positive final investment decision from Pacific NorthWest. The approval TransCanada is seeking will allow the company to start building most of the pipe before such a decision, TransCanada said.
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    Phillips 66 announces Rodeo pipeline in the Permian

    Houston’s Phillips 66 hopes to take advantage of West Texas’ booming Permian Basin by building the 130-mile Rodeo pipeline to the Midland area.

    The project would focus on transporting oil from the surging Delaware Basin portion of the Permian that’s west of Midland. The pipeline would run from the northern portion of Reeves County and run through Loving and Winkler counties en route to terminals in the Odessa-Midland area.

    The Reeves-Odessa Origination Project, nicknamed Rodeo, is slated for completion in the second half of 2018. Phillips 66 is not revealing project costs.

    The pipeline initially would transport 130,000 barrels of crude daily and eventually ramp up to 450,000 barrels a day. The pipeline would be 130 miles long, but that’s not counting various laterals built off of the mainline.

    Phillips 66 will build a new storage terminal near Odessa and Midland to service the pipeline. Phillips 66 currently is seeking oil producing customers in need of West Texas pipeline services.
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    Strong export demand drives large propane stocks draw in winter 2016-17: EIA

    US propane inventories fell 59 million barrels since October despite a mild winter, largely on record exports, the Energy Information Administration said.

    "As domestic propane consumption has remained relatively flat or declined on an annual basis, US exports of propane have continued to increase," EIA said in its Today In Energy feature. "Rising production and lower seasonal heating demand over the past two winters, in particular, have meant that more propane has been available for export."

    Stocks began to fall during the week of October 7, 2016, EIA data showed, when inventories were at 103.93 million barrels. As of March 10, the latest data available, stocks had dipped to 44.47 million barrels, or 18.03 million barrels below levels at this time a year ago.

    The 59.46 million-barrel draw this season tops last year's winter draw by almost 20 million barrels -- in the same 23-week period -- and is 32 million barrels larger than winter 2014-15.

    Because propane's primary source of demand domestically is as a heating fuel for homes and businesses, inventories tend to peak in late September or mid-October and bottom out in March.

    An expanded Enterprise LPG export terminal on the Houston Ship Channel, which came online in December 2015 and the startup of Phillips 66's 150,000 b/d Freeport, Texas, export terminal in late 2016, along with a growing shipping fleet, have increased US propane export capacity.

    In fact, US propane exports in December 2016 -- the latest monthly export data available -- topped 1 million b/d for the first time since the EIA began reporting propane exports in 1973 at 1.05 million b/d. December 2015 exports were at 751,000 b/d.

    As such, Gulf Coast propane prices spiked as high as 74% of crude futures in early February, a first since October 2011. Outright prices for non-LST, or Enterprise, barrels reached a 28-month high of 93.75 cents/gal February 2.

    WINTER 2017-18

    Next winter's stocks are not likely to rise to the 100 million-barrel levels of the last two years because of the expected startup of Sunoco's 275,000 b/d Mariner East 2 pipeline in the third quarter and continued export demand, according to Platts Analytics Bentek's Weekly NGL Market Monitor.

    Mariner East 2 will allow producers in the Utica shale play to move LPG to Marcus Hook for export.

    Platts Analytics models show stocks could reach 81 million barrels by the first week of October if inventories build at a similar rate to the average builds in 2015 and 2016 and Mariner East 2 does not come online until next year. If Mariner East 2 starts up quickly before the end of the year and Northeast propane does not reach the Conway, Kansas, or Mont Belvieu, Texas, NGL hubs, stocks might only reach 60 million barrels by October.

    "This likely represents a "worst-case" scenario of sustained high exports through the summer and fall," analysts said in the Weekly Monitor. "A minimum-price response would be the 5-15 cents/gallon needed to re-route propane from Marcus Hook to the US Gulf Coast."

    Attached Files
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    Alternative Energy

    Coal mine in Germany turns into hydroelectric battery

    RAG AG-owned Prosper-Haniel hard coal mine, located in the German state of North-Rhine Westphalia, will be turned into a giant battery that stores excess solar and wind energy.

    Set to be totally transformed by 2018, the mine will become a 200-megawatt pumped-storage hydroelectric reservoir, which means it will behave as a battery and have the energy to power more than 400,000 homes.

    When needed to compensate intermittent wind and solar power, as much as 1 million cubic meters of water could be allowed to plunge as deep as 1,200 metres, turning turbines at the foot of the collieries mine shafts. The mining complex comprises 26 kilometres of horizontal shafts.

    Miners in the town of Bottrop, who have worked for decades at the site, will remain employed while seeing a shift in their usual tasks. According to governor Hannelore Kraft, they will continue playing a key role in providing uninterrupted power for the country.

    During a press briefing earlier this week, Kraft also said that other mines may follow suit because the state needs more industrial-scale storage as it seeks to double the share of renewables in its power portfolio to 30% by 2025.
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    “Sun King” returns with ultralight, flexible PV to reshape solar market

    Dr Zhengrong Shi, the founder of Suntech and the former UNSW PhD graduate known as the “Sun King”, is returning to the solar market with a newly developed lightweight, ultra-thin and flexible panel that he is hailing as the biggest change to the solar industry in decades.

    The new PV panel uses a composite material – similar to that used in aircraft windows – that makes it nearly 80 per cent lighter than conventional panels, and thin, and flexible.

    This makes the panel ideal to incorporate into building structures such as rooftops and facades, and to put on large rooftop structures such as factories and carports that often cannot take the weight of conventional solar PV products.

    Dr Shi also says the new product – known as eArche, due to its architectural qualities – can be cut and shaped to order and is perfect to be incorporated into pre-fabricated buildings and building materials such as roofs and wall panels.

    “We think governments should require all new buildings to have solar panels integrated into their structure,” Dr Shi told RenewEconomy from Shanghai ahead of an official launch in Sydney this Thursday. “With this panel, it is easy to do.”

    Dr Shi estimates that even if one-tenth of the 20,000 new homes built in Australia each year used this product, that would add 20MW of solar each year. Around 10kW in each house could be easily incorporated into roofs, facades and pergolas.

    Indeed, Dr Shi’s big pitch is to new housing and extensions, and not the “retrofit” market. His team has invited more than 50 architectural firms to the launch in Sydney this week, and is working with lightweight building materials specialist Stratco, and numerous other building supply companies.

    He says the new panels will offer huge possibilities for architects, given their weight, their appearance, and the fact that they can be cut into different shapes, and can be curved.

    Tesla, along with others, have unveiled ideas for “solar tiles” in recent years, but Dr Shi says Tesla, in particular, is going about it the wrong way, by making tiles heavy and rigid. “The Tesla solar tile is the wrong way of doing it. That type engineering is very expensive.”

    Dr Shi has launched a new company, called SunMan, and an Australian company called Energus, to distribute the new products. It includes several ex-Suntech employees such as managing director Jenny Lu and marketing director Thomas Bell.

    Australia and Japan are the initial major launch countries for what he describes as the biggest innovation in the solar industry in more than a decade.

    “Most of the cost reductions we have seen come from manufacturing, growing efficiency and supply chain,” Dr Shi said from Shanghai. “There has been very little innovation on products and applications, so we have decided to focus on the panel itself, which has been very rigid and heavy.”

    Dr Shi says his lightweight, ultra-thin solar panels will cost about the same as conventional panels, but will cost much less to install. The material itself is only 2-3mm thick, with the entire panel width measuring between 5.5mm and 6mm.

    They weigh around 6kg each, compared to more than 20kw for a conventional panel and can be transported at bulk – 1MW can fit in a 40′ container rather than just 200kW, saving on transport costs.
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    Brazilian meatpackers slump as China, South Korea suspend imports

    Brazilian meatpackers slump as China, South Korea suspend imports

    Fallout over a Brazilian meat corruption scandal spread on Monday, with China and South Korea suspending some imports, the European Union mulling action and shares of meatpacking companies BRF SA  and JBS SA dropping.

    China, Brazil's top trade partner, decided to suspend the import of meat products from Brazil as a "precautionary measure," said a source who requested anonymity because of the sensitivity of the information.

    South Korea's agriculture ministry said in a statement that it would tighten inspections of imported Brazilian chicken meat and temporarily bar sales of BRF chicken products.

    The South Korean ministry said suppliers of Brazilian chicken would have to submit a health certificate issued by the Brazilian government.

    The actions came after Brazilian police investigation on Friday named BRF, JBS and dozens of smaller rivals in a major investigation of alleged bribery of health inspectors to hide unsanitary conditions in plants.

    Police conducted raids on Friday in six states to seek more evidence, tarnishing one of few vibrant sectors in Latin America's biggest nation, which is suffering its worst recession on record.

    The two-year probe, known as "Operation Weak Flesh," found evidence that meatpackers paid off inspectors and politicians to overlook practices including processing rotten meat and shipping exports with traces of salmonella, police said.

    Shares of BRF SA fell 8 percent and JBS SA dropped 5 percent on Monday. The companies have strongly denied any wrongdoing.

    Shares of Minerva SA (BEEF3.SA) and Marfrig Global Foods SA which are not involved in the investigations, also fell sharply as traders fretted over the possibility of further import bans.

    Credit Suisse Securities analyst Victor Saragiotto wrote in a Monday note to clients that the scandal "could be enough to compromise temporarily Brazilian protein's acceptance worldwide."

    Brazil exported $6.9 billion of poultry and $5.5 billion of beef worldwide last year, according to industry groups.

    More than 80 percent of the 107,400 tonnes of chicken imported by South Korea last year came from Brazil, and almost half of that was supplied by BRF.

    The European Commission said it would monitor meat imports from Brazil, and any companies found to be involved in a meat scandal there will be denied access to the European Union market, a spokesman said.

    "The Commission will ensure that any of the establishments implicated in the fraud are suspended from exporting to the EU," a spokesman for the European Commission told a media briefing.

    The Commission said the scandal would have no impact on negotiations between the European Union and South American bloc Mercosur about agreements on free trade.
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    Base Metals

    Striking union at BHP's Escondida says it is open to further conversations

    The union for striking workers at BHP Billiton's Escondida in Chile, the world's largest copper mine, said after meeting with the company on Monday that it was open to further conversations that could lead to reopening negotiations.

    "At this time, both parties are doing their own evaluation. Depending on the status of that evaluation, this could go forward," union spokesman Carlos Allendes told reporters in the city of Antofagasta.

    "We're going to see if that could put in place a dialogue going forward. We're hopeful. We have the willingness, and we're going to wait."

    The union was unclear when further conversations might occur, but Allendes said union leaders might sit down with BHP representatives as early as Monday night.

    Company representatives could not be reached for comment.

    The 2,500-member union at Escondida has been on strike since Feb. 9. Since then, production has been stopped, sending global copper prices higher amid supply concerns.

    Workers have maintained three core demands - that benefits in the existing contract not be reduced, work shifts not be made more taxing and new workers receive the same benefits as those already at the mine.

    On Thursday, the union invited the company to return to the negotiating table on the condition that BHP give a written guarantee that talks would focus on that trio of demands.

    The company agreed but was ambiguous about its commitment to discuss only the union's key issues. Earlier on Monday, union leaders said that they would meet with BHP, despite slamming the company's response as "manipulative."

    Union leaders said earlier on Monday that they had received approval from the rank and file to invoke Article 369 of Chile's labor code, if the leaders deem it appropriate.

    That would legally halt the current negotiation process and maintain the benefits of the current contract for 18 months, postponing collective wage talks.

    Such an agreement is not often invoked by workers, as it delays the one-time bonus typically given to miners when contracts are signed, and appears less likely after the union's most recent remarks.

    The union said delaying the wage talks would allow the next round of negotiations to occur under Chile's new labor code, which is set to take effect in April, giving the union more power.

    Escondida produced slightly over 1 million tonnes of copper in 2016. Rio Tinto and Japanese companies including Mitsubishi have minority interests in the mine.
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    Peru mine output stranded after rains disrupt rail shipments

    Heavy rains in Peru have disrupted train transport of minerals from the country's central region to the Pacific Coast, and the train line could take at least 15 days to fix, VP and Transport Minister Martin Vizcarra said on Monday.

    The government is coordinating with mining companies to find alternative routes, Vizcarra said. The intense floods have killed more than 70 people and destroyed tens of thousands of homes since the start of the rainy season.

    Central Peru accounts for at least one-fifth of Peru's metals production, according to the National Society of Mining, Petroleum and Energy (SNMPE), an industry group. Peru is the world's second-largest copper producer, the third-largest zinc and silver producer and the sixth-largest gold producer.

    The region is home to Chinalco Mining Corp's 300 000 t/y Toromocho copper mine, a zinc and silver mine owned by Volcan Compania Minera and some precious metals mines owned by Compania de Minas Buenaventura .

    An SNMPE spokesperson said warehouses at Peru's El Callao port had enough supplies to fulfill companies' commitments for up to 30 days.

    Alvaro Barrenechea, director of corporate affairs at Chinalco's Peruvian affiliate, said the company would be affected if the railway does not re-open within a month.

    "I expect the situation will improve in ten days," he said.

    Speaking to local radio station RPP, Vizcarra said at least one kilometre of the rail line that links the center of the country with the coast was destroyed by flooding from the Rimac river in the outskirts of Lima.

    The intense rains began a week ago, due to an unexpected climate phenomenon known as "Coastal El Nino" that could last through April.

    "This railway was attached to the river bank," said Vizcarra. "We need the river flow, which is rising, to recede, and that will not happen in less than 15 days. Then, we will be able to instal the line."
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    Union at Peru mine Cerro Verde says it to restart strike Friday

    A strike at Peru's top copper mine, Cerro Verde, is set to end by government order on Thursday, but workers said the stoppage would start right back up on Friday if no deal over their demands is reached with management.

    Union Secretary General Zenon Mujica said that 11 days of striking had not resolved the dispute. The workers want better family health benefits and a bigger share of the mine's profits.

    The mine is operating at 50 percent because the company has found replacement workers, Mujica said. Cerro Verde is controlled by Freeport-McMoRan.

    "This first strike is ending on Thursday and we will start a new one on Friday," Mujica said.

    The union, which represents 1,300 workers, will meet on Tuesday with the company and government officials to try to negotiate a deal. "It's going to be hard because the company has been quite intransigent," Mujica said.

    Representatives of the company could not be immediately reached for a comment.

    Production at the mine, which generated nearly 500,000 tonnes of copper last year, has fallen by 50 percent since some 1,300 of about 1,650 workers joined the strike, Mujica said earlier this month.
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    Steel, Iron Ore and Coal

    Coking coal at $160/t expected for Q2 and Q3 benchmarks

    With a growing sense of market stability after a peak in prices seen at the end of 2016, coking coal industry reference prices in the second and third quarters of 2017 may end up close to current spot prices, Platts reported on March 17, citing US investment bank FBR.

    FBR has cut its estimate for Q2 and Q3 coking coal benchmark pricing under the accords to $160/t, from $180/t previously, said Lucas Pipes, an analyst from FBR.

    According to industry reports, Q2 met coal benchmark negotiations are ongoing. With premium coking coal spot prices hovering around $160/t FOB Australia, currently we believe a settlement at or close to this price is most likely, said FBR in a note.

    "Considering the decline in spot prices during February to the low $150/t, we believe the recent stabilization and potential Q2 settlement off the lows are promising signals of the market regaining stability following a particularly volatile six months."

    Coking coal spot prices peaked at over $300/t FOB Australia in Q4 2016, before plunging to half of that level by February this year.
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    Trump says preparing new executive actions to save coal mining

    President Donald Trump said on Monday he was preparing new executive actions to save coal mining and put miners back to work.

    "As we speak we are preparing new executive actions to save our coal industry and to save our wonderful coal miners from continuing to be put out of work. The miners are coming back," Trump told a rally in Louisville, Kentucky, without providing any details.
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    Indian Railways April-February coal transport falls 4% YoY

    The Indian Railways carried 482.57 million tonnes of coal from April 2016 to February 2017, down 4% from a year earlier, showed data released by the Directorate of Statistics and Economics on March 16.

    Among the total volume transported by the Indian Railways, 413.56 million tonnes comprised domestic coal while 69.01 million tonnes was imported.
    Domestic coal to thermal power plants fell 4.88% to 302.80 million tonnes in the period while imported coal delivered to thermal power plants declined 6.21 million tonnes year on year to 14.4 million tonnes, the data showed.
    Coal accounts for around 50% of the overall freight traffic by rail. The fall in coal volumes is mainly due to low power demand and sufficient stocks at power plants. Also, owing to rationalization of coal supplies, power plants are now getting coal from mines that are nearer.
    Coal imports are also on a downtrend as domestic output rises. Volumes of domestic coal delivered to steel manufacturers were up 2.8% in the 11-month period to 16.9 million tonnes.
    However, imported coal delivered to steel plants declined 14.62% year on year to 26.80 million tonnes in the period.
    Domestic coal volumes delivered to other consumers rose 12.33% to 92.74 million tonnes during the period, while imported coal delivered to other consumers climbed 11.87% to 36 million tonnes.
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    Guizhou bans coal outbound sales to ensure supply

    Southwestern China's coal-rich Guizhou banned coal sales to other provinces from March 17, in order to ensure thermal coal supply inside the province, market sources said.

    It was not clear how long the ban will last, and sources said it could be lifted once supply meets demand.

    Coal mines which finished coal supply tasks assigned by the provincial government are allowed to sell coal to other provinces, they noted.

    Supply of coal, especially thermal coal for power generation, has been rather tight in the province, as demand for coal-fired electricity increased significantly while coal output stayed low because of the capacity-cut campaign.

    In November last year, Guizhou banned sales of middlings but allowed sales of washed coal and peats to other provinces.

    With utilities facing losses, the government ordered miners to sell coal to local power plants at prices lower than market prices.

    In December, the province gave a 10-20 yuan/t reward to coal firms finishing coal supply tasks assigned by the provincial government, and offered preferential loans to coal miners to resume and maintain production.

    Attached Files
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    China Shenhua 2016 net profit soars 40.7pct on year

    China Shenhua 2016 net profit soars 40.7pct on year

    China Shenhua Energy Co, the listed arm of coal giant Shenhua Group, saw net profit surge 40.7% year on year to 22.71 billion yuan ($3.29 billion) in 2016, the company said in its latest statement.

    It realized 183.1 billion yuan of operating revenue last year, a year-on-year rise of 3.4%, according to the statement. The company cited effective cost controls and enhanced competitiveness for the notable improvement of performance.

    The company reported production cost of self-produced coal at 108.9 yuan/t last year, down 8.9% from a year earlier.

    Last year, China Shenhua produced 289.8 million tonnes of commercial coal, increasing 3.2% from the year before.

    The company stepped up efforts to boost sales of coal traded at northern ports, which had the highest gross profit margin, and strengthen sales of outsourced coal, in order to obtain maximum sales profit.

    In 2016, its coal sales reached 394.9 million tonnes or 12.1% of China's total coal sales, up 6.6% from the preceding year. Of this, sales of coal via northern ports increased 11.1% year on year to 226.4 million tonnes, while sales of outsourced coal gained 34.7% from the year prior to 109.4 million tonnes.

    To maximize profit of integrated operations, China Shenhua increased sales of coal traded at northern ports, especially shipment at self-owned ports. The company's coal sales at self-operated Huanghua port and Shenhua Tianjin wharf accounted for 87.5% of its total coal sales at ports in 2016, compared with 74.5% a year earlier.

    The company established regional electricity sales firms to maintain market shares under the country's electricity marketization reform. Utilization of coal-fired power units averaged 4,428 hours, 263 hours more than the country's average level.

    In 2016, China Shenhua generated 236 TWh of electricity, up 4.5% year on year; while electricity sales climbed 4.8% from the year prior to 220.6 TWh.

    It said that China will continue to put efforts in cutting surplus coal capacity in 2017 to keep supply and demand in balance, and coal prices are likely to fluctuate around contract prices. Power producers may face a tougher competition, given the continued surplus in coal-fired power capacity and increased generation cost.

    The company predicted a year-on-year rise of 2.8% in commercial coal output to 298 million tonnes in 2017. It also expected coal sales to increase 3.1% from a year ago to 407 million tonnes, while electricity sales may drop 2.7% year on year to 214.7 TWh this year.

    It voiced uncertainties in realizing these goals, citing impacts from supply-demand situations in the coal and power sectors, de-capacity policy enforcement among others.
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    New Hope profit soars, confident coal prices won't drop

    New Hope Corp, Australia's top independent coal producer, reported a near quadrupling in first-half underlying profit after four years of pain, and said it was confident coal prices would hold near current levels thanks to producers' discipline.

    The company's managing director, Shane Stephan, told Reuters on Tuesday he believed thermal coal prices would stay within China's price target of $75-$85 a tonne, as no major supplies were expected to enter the market and weaken prices.

    "We're seeing this domestic Chinese industry policy as being a significant influence on Asian thermal coal pricing for the foreseeable future," Stephan said in an interview.

    Strong prices and New Hope's acquisition of the Bengalla coal mine in Australia helped the company report its best first-half profit in four years, with underlying profits at A$54.9 million ($42.4 million) for the six months to Jan. 31.

    The result was slightly higher than the top end of New Hope's upgraded guidance last month.

    Sale volumes rose 47 percent to 3.96 million tonnes, thanks to Bengalla.

    Stephan said he believed seaborne coal prices were sustainable because producers in Australia, Indonesia and Colombia had not increased output even after last year's strong price surge.

    Australia's Newcastle coal prices at $81.50 are about 50 percent higher now than they were a year ago, having peaked at around $116 in November.

    "The supply is steady despite the increase in price, which gives me confidence that we're looking at a little bit more reasonable future," Stephan said.

    "There is quite a gap, in our opinion, between the price needed for sustainable profitability of existing coal assets and the price required to encourage new production capacity," he said, adding that environmental challenges made it tough to bring on new production.

    He said he did not fear plans by India's Adani to build a 25 million tonnes a year mine in Queensland targeting first production in 2020, as that output was going to Adani's own power stations in India.
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