Mark Latham Commodity Equity Intelligence Service

Friday 11th September 2015
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    U.S. Senate Democrats block move to derail Iran nuclear deal

    A Republican-backed measure to derail the Iran nuclear agreement was blocked in the U.S. Senate on Thursday, in a major foreign policy victory for Democratic President Barack Obama.

    The vote was 58-42 against clearing the way for debate of the bill, meaning opponents of the nuclear pact failed to get the 60 votes necessary to advance a resolution of disapproval.

    All 42 of the votes not to advance the measure were from Democrats or independents who normally vote with them. Four Democratic senators voted with Republicans to move ahead.

    But Senator Mitch McConnell, the Senate Republican leader, immediately took steps that would allow the Senate to have another vote on the nuclear agreement.
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    China to prosecute former China Resources chairman for graft

    China will prosecute the former chairman of state-owned conglomerate China Resources Holding Co Ltd on suspicion of corruption after accusing him on crimes including embezzlement, the anti-graft watchdog said on Friday.

    Song Lin was sacked last year after coming under investigation for suspected "serious violation of discipline", the usual terminology for corruption.

    Song took bribes, used public funds for personal expenses like playing golf and is an adulterer, the ruling Communist Party's Central Commission for Discipline Inspection said on its website in a brief statement.

    Party members can be punished for adultery as they are supposed to be upstanding members of society. The charge is frequently levelled at high-ranking graft suspects as a way of showing they are morally degenerate and deserve punishment.

    His case has been transferred to the legal authorities, the watchdog said, meaning he will face prosecution.

    A former company vice chairman, Wang Shuaiting of the company will also face charges after being accused of similar crimes, the watchdog added.

    Both men have been expelled from the party, it said.

    The state prosecutor said separately that it had approved the detention of both men and had begun to build cases against them.
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    El Nino to strengthen in winter but gradually weaken in spring -CPC

    A U.S. government weather forecaster on Thursday said El Nino conditions would gradually weaken through the northern hemisphere spring after peaking in late fall or early winter.

    The National Weather Service's Climate Prediction Center said the likelihood that El Nino conditions would persist through the northern hemisphere winter was about 95 percent, up from a more than 90 percent chance in last month's forecast.

    There has been a growing consensus among forecasters for a strong El Nino, the warming of Pacific sea-surface temperatures. The World Meteorological Organization said last week that this year's phenomenon could be the strongest on record and was likely to peak between October and January.

    The weather pattern can roil crops and commodities prices. Japan's weather bureau said earlier on Thursday that there was a strong possibility that El Nino would stretch into the winter.

    El Nino conditions would probably contribute to a below-normal Atlantic hurricane season and to above-normal seasons in both the central and Eastern Pacific hurricane basins, the CPC said.

    It added that across the contiguous United States, the effects of El Nino were likely to remain minimal during the early northern hemisphere autumn and increase into the late fall and winter.

    The CPC said this month that "all models surveyed" predicted that El Nino would last into the northern hemisphere spring, up from an 80 percent chance it estimated last month.

    The El Nino phenomenon would mean increased likelihood of rain for parched areas of drought-stricken California later in the fall, although the Pacific Northwest States of Oregon and Washington would probably not get much relief.
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    China uncovers more accounting problems with Three Gorges Dam

    Chinese government auditors have found more accounting problems with projects linked to the $59-billion Three Gorges dam, the world's biggest hydropower scheme, following a critical report last year that revealed nepotism and other corrupt practices.

    The state audit office has conducted 21 inspections since construction began in 1992, uncovering issues such as embezzlement, but continues to find problems, it said in a statement on its website on Thursday.

    The National Audit Office found accounting problems amounting to almost 2 billion yuan in the final accounts for a 7.1-billion-yuan ($1.11 billion) underground hydroelectric plant, it said.

    These included 1.54 billion yuan from improper bidding and 337 million yuan in duplicate calculations, it said, adding that too much money had been spent on some equipment, while management oversight was lax.

    The Three Gorges Corporation, which runs the dam, is now "proactively organising rectifications" having received the report, the auditor said, adding that it would watch developments.

    "At present all the problems pointed out by the audit have already been finished or rectified."

    Last year the ruling Communist Party's anti-graft watchdog slammed the Three Gorges Corporation for shady property deals and dodgy bidding procedures.

    In 2011, then-premier Wen Jiabao presided over a government meeting that said that despite the benefits from the dam, it had spawned a myriad of urgent problems, from the relocation of more than a million residents to risks of geological disasters.

    In 2000, six years before the project was completed, authorities busted a ring of officials who had siphoned off hundreds of millions of yuan in resettlement funds.
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    E.ON drops nuclear spin-off

    Germany's biggest utility E.ON has abandoned plans to spin off its German nuclear power plants, bowing to political pressure to retain liability for billions of euros of decommissioning costs when they are shut down.

    The move, deals a massive blow to the group's plan to restructure by hiving off its power plants, energy trading and oil and gas activities into a separate unit, named Uniper.

    It leaves E.ON with the burden of 16.6 billion euros ($18.6 billion) in provisions needed to fund the shutdown of its nuclear plants which Germany is phasing out by 2022.

    Those provisions could limit vital investments the group needs to make in its main remaining business areas following the spin-off -- renewables, networks and services, which E.ON has called the pillars of the new energy world.

    E.ON said including its German nuclear plants in Uniper, due to be set up next year, no longer made sense after recent regulatory changes, conceding that the spin off as a whole could even be delayed.

    "The risks are high," Chief Executive Johannes Teyssen told journalists on Thursday, adding that the timetable had always been ambitious.

    Teyssen confirmed that the carve out of Uniper would be completed on Jan. 1 as planned, with the spin-off scheduled for the second half of 2016.

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    Bluedog Democrats back Oil exports.

    The Blue Dog Coalition announced their support today for H.R. 702, a bill to repeal the ban on crude oil exports in the United States. The Coalition backs the bill as changing market conditions have proven that the 1970’s-era ban on crude exports is hopelessly outdated. Among countries with the largest energy reserves, the United States is the sole nation that prohibits the export of its own domestically-produced oil.

    The bill repeals a section of the Energy Policy and Conservation Act of 1975, which gives the president the authority to restrict oil exports.

    "It makes no sense that the U.S. can export refined oil products, but not crude oil," said Blue Dog Co-Chair for Administration Kurt Schrader (OR-05). "Currently, crude oil from the U.S., one of the world’s leading producers, is excluded from determining the global market price of oil. In order to expand our markets and decrease gasoline prices globally, this ban must be lifted. Allowing U.S. oil into foreign markets also has the potential to increase stability in volatile regions of the world by creating competition on the global market and limiting the ability of countries like Russia to use crude oil as a political weapon. Lifting this ban would help improve the U.S.’s trade balance problem and improve the future budget picture for America. It’s high time that Congress moves forward on this commonsense, bipartisan and straightforward solution to a ban which has outlived its usefulness.”

    “For the first time in two decades, we are producing more oil than we are buying from foreign countries,” said Blue Dog Co-Chair for Policy Jim Cooper (TN-05). “And our gas production is at an all-time high and growing so fast that we will soon be producing more than we will be able to use at home. The boost to job creation that comes from low energy prices and weaning ourselves from foreign oil is huge, and gives us an international competitive advantage. All of this, including exporting crude, gives us a chance to become an energy leader and we shouldn’t squander this opportunity.”

    “The ban on crude oil exports is an outdated policy that frankly, no longer makes sense,” said Blue Dog Co-Chair for Communications Jim Costa (CA-16). “New technologies have provided the United States with an abundance of domestic crude oil production and expanding our export opportunities to include crude oil, in addition to gasoline and natural gas products, will further stimulate our economy and create jobs.  Additionally, and importantly, providing our domestic producers the ability to sell crude oil to the global market will reduce the geopolitical influence of bad actors like Iran and Russia. This is commonsense, bipartisan legislation that will have a positive impact here in the United States and abroad.”

    “As the representative for one of the largest oil-producing regions in the country, I have seen the negative effects of the crude oil export ban on industry in my district,” said Congressman Henry Cuellar (TX-28), lead Democratic whip for the bill. “With jobs being lost and equipment being taken offline, we need to take proactive steps to ensure that the new product being drawn out of the ground with new extraction technologies can be sold. Lifting the ban will benefit the U.S. economy and will likely lead to lower gas prices. It will also jump-start the economy by creating as many as 800,000 new jobs.”

    H.R. 702 currently has 123 cosponsors from both parties and will receive a vote in the House Subcommittee on Energy and Power tomorrow. The legislation received a hearing in the Subcommittee in July.

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    Brazil downgraded to junk rating by S&P, deepening woes

    Standard & Poor's downgraded Brazil's credit rating to junk grade on Wednesday, further hampering President Dilma Rousseff's efforts to regain investors' trust and pull Latin America's largest economy out of recession.

    The faster-than-anticipated downgrade from investment grade will likely rock Brazilian financial markets on Thursday and will increase borrowing costs for the government and Brazilian companies.

    Brazil first won its investment-grade credit rating in 2008 and the S&P downgrade is a major setback for Rousseff, a leftist struggling to kick-start the economy and shore up weak public finances.

    It further sours market sentiment about the country and Brazilian assets will suffer because many investors will perceive higher risks.

    S&P cut Brazil's rating to BB-plus, the highest junk rating, from BBB-minus.

    It warned less than two months ago that a downgrade was possible but the unusually fast move underscores how quickly Brazil's economy and public finances have deteriorated since then. The outlook on the new rating remains negative, which means additional downgrades are possible in the near term.

    The investment-grade rating was a key imprimatur that solidified Brazil's emergence as an economic power during a decade-long commodities boom that fizzled in recent years as the Chinese economy, Brazil's biggest export market and once ravenous for its raw materials, began slowing.

    Further fallout from the downgrade will depend on how other major ratings agencies respond. While there will be some sharp falls in asset prices now, a flood of "forced selling" is not expected until a second agency also drops Brazil to junk status.
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    China to step up fiscal incentives for growth

    China will adopt "stronger" fiscal policies to support growth, Beijing said as it seeks to soothe increasing fears about the world's second-largest economy following turmoil in domestic and overseas markets.

    The government will accelerate major construction projects, allow more small companies to benefit from tax cuts, and encourage private capital to invest in key areas, among other measures, the finance ministry said in a statement.

    Global markets have been in turmoil for weeks on worries about slowing growth in China, a key driver of global expansion, wiping trillions off share prices. The panic has also hammered mainland Chinese markets, with Shanghai's exchange plummeting after a debt-fuelled bubble burst.

    The finance ministry gave no specific values for future spending. But it said that by the end of August the central government had already spent 96 per cent of its annual infrastructure investment budget.

    To achieve China's 2015 growth target of around seven per cent, the ministry said it would step up and improve a "proactive fiscal policy, fine-tune the measures in a timely manner and accelerate reforms that will help stabilise growth".

    Attached Files
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    China changes GDP data: This could shock markets!

    China's statistics bureau said on Wednesday it has changed the way quarterly gross domestic product data is calculated, a move it calls a step to adopt international standards and improve the accuracy of Chinese numbers.

    There has long been widespread scepticism about the reliability of Chinese data, especially as the government has sought to tamp market expectations of a protracted slowdown in the world's second-largest economy.

    The move by the National Bureau of Statistics (NBS) comes after China said in July its annual growth rate in the second quarter was 7.0 percent, the same as in January-March. Many economists believe the April-June pace was lower.

    The combined economic output of China's provinces has long exceeded that of the national level compiled by the bureau, raising suspicion that some growth-obsessed local officials have cooked the books.

    Now, China is calculating GDP based on economic activity of each quarter to make the data "more accurate in measuring the seasonal economic activity and more sensitive in capturing information on short-term fluctuations", the NBS said.

    Previously, China's quarterly GDP data, in terms of value and growth rates, was derived from cumulated figures rather than economic activity of that particular quarter, the bureau said.

    The new methodology - in line with that of major developed countries - will pave the way for China to adopt the International Monetary Fund's Special Data Dissemination Standard (SDDS) in calculating GDP, it said.

    The bureau, which has revised some historical quarterly GDP figures for 2014 and prior years retrospectively, said it will publish third-quarter GDP data, due out on Oct. 19, based on the new methodology.

    The NBS has revised down year-on-year economic growth rates for every quarter last year by 0.1 percentage points, following its revision on Monday of the 2014 annual economic growth rate to 7.3 percent from 7.4 percent.

    The bureau has also revised down growth rates in the first two quarters of 2012 by 0.1 percentage points respectively and revised up the fourth quarter by 0.1 percentage points.

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    Bulgaria Blocks Russian Access To Its Airspace For Syria Flights

    On Monday we flagged a notable escalation in the build up to the geopolitical “main event” in Syria where, thanks largely to the West’s ambition to break Gazprom’s leverage over Europe, the US and Russia are one “accidental” run-in away from taking the “proxy” out of the term “proxy war.”

    With the Kremlin now ramping up its military presence around the Assad stronghold of Latakia, the US is scrambling to do anything and everything in its power to slow the Russian build up - including putting pressure on Greece to deny Russia the use of its airspace for supply flights to Syria.

    This isn’t the first time Greece has found itself in the middle of Cold War 2.0, as Athens (and notably Panagiotis Lafazanis) used Greece’s geographical position to field competing gas pipeline bids from Washington and Moscow during the height of the country’s fraught bailout negotiations.

    So while we wait for Greece to pick a side between the US and Russia by either allowing Moscow to use its airspace on the way to supplying Assad or else snubbing the Kremlin and jeopardizing a potentially lucrative gas deal,at least one country has been quick to make a decision: Bulgaria...

    Why, you ask? According to a spokeswoman, the Bulgarian foreign ministry has "enough information that makes [it] have serious doubts about the cargo of the planes, which is the reason for the refusal."

    What's particularly amusing here is that all of the above (Greece's reluctance to immediately acquiesce to Washington's demands, Bulgaria's move to deny Russia use of its airspace, and the whole Syrian civil war) is the direct result of energy disputes. As mentioned above, Greece is being pulled between The Southern Gas Corridor and the Turkish Stream, while the South Stream debacle means Bulgaria has no reason not to side with the West. And of course the entire crisis in Syria all comes down the proposed Qatar-Turkey line.

    So once again, it all comes down to natural gas and if the conflict in Syria has taught us anything so far, it's that when it comes to energy, the world's most powerful nations are willing to sacrifice hundreds of thousands of lives to protect their interests.
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    Japan second-quarter GDP shrinks less than expected on inventory gains

    Japan's economy shrank less than expected in the second quarter although capital expenditure fell more than originally forecast, revised data showed, keeping policymakers under pressure to do more to energize the fragile recovery.

    Analysts expect any rebound in July-September growth to be feeble as factory output unexpectedly fell in July and China's slowdown dampened prospects for a solid recovery in exports.

    "Factory output lacks strength in July-September due to sluggish exports of cars and electric machinery," said Junichi Makino, chief economist at SMBC Nikko Securities.

    "If consumer spending fails to pick up, the government may compile a supplementary budget" to prop up growth, he said.

    The world's third-largest economy shrank an annualized 1.2 percent in April-June, less than the initial estimate of a 1.6 percent contraction, Cabinet Office data showed on Tuesday.

    The median market forecast was a revision to a 1.8 percent contraction.

    Capital expenditure fell 0.9 percent from the previous quarter, more than a preliminary 0.1 percent drop, clouding the outlook for the world's third-largest economy.

    But the weakness in capital spending was offset by gains in inventories, which contribute to economic growth.

    Inventory gains added 0.3 percentage point to growth, more than a preliminary 0.1 percent contribution, the data showed.
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    China's August import slump raises concerns over sharper slowdown

    China's August exports fell less than expected but a steeper slide in imports pointed to continuing economic weakness, adding to concerns over the health of the world's second-largest economy that have been rattling global markets.

    Exports dropped 5.5 percent from a year earlier, slightly less than a 6.0 percent decline forecast in a Reuters poll, and improving from an 8.3 percent drop in July.

    Imports shrank for a 10th consecutive month, falling 13.8 percent, far more than the poll's expected 8.2 percent, after an 8.1 percent decline in July, reflecting both lower global commodity prices and persistently sluggish demand at home.

    That left the country with a trade surplus of $60.24 billion for the month, the General Administration of Customs said on Tuesday, far higher than forecasts for $48.20 billion.

    "I'm not optimistic about the prospect of exports and it's unlikely China can achieve the export target this year," said Nie Wen, analyst at Hwabao Trust in Shanghai. "There will be at least three more reserve requirement rate cuts this year to counteract capital outflows."

    Global investors will be combing China's August data over the coming weeks to see if the economy is at risk of a hard landing.

    Though most economists believe a gradual and prolonged slowdown is more likely, a stock market crash and the unexpected devaluation of the yuan currency in August have heightened concerns about stability and policymaking in China.

    On Aug. 11, the People's Bank of China jolted markets by devaluing the yuan by nearly 2 percent. Economists say the devaluation may give a mild boost to Chinese exports eventually, but most did not expect it to have any impact on the August data.

    China's top economic planning agency said on Monday that exports from some sectors had seen improvement in August.

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    Icahn-targeted Freeport said to work with JP Morgan on strategy

    Management turns to advice from investment bank before things turn ugly.
    Dinesh Nair and Matthew Monks (Bloomberg) | 7 September 2015 12:40

    Freeport-McMoRan Inc. is working with JPMorgan Chase & Co. to review its strategy after billionaire activist investor Carl Icahn bought a stake in the company, people familiar with the matter said.

    Freeport, the world’s biggest publicly traded copper producer, may consider options including cost cuts and capital reduction plans, as well as asset sales, the people said, asking not to be identified as the information is private. Freeport’s discussions with its advisers are at an early stage and no decisions have been made, the people said.

    Representatives for Freeport and JPMorgan declined to comment.

    Icahn amassed about an 8.5 percent stake in Freeport, the investor disclosed in a filing with the U.S. Securities and Exchange Commission last month. The activist may seek board representation and intends to hold talks with the Phoenix-based company on “capital expenditures, executive compensation practices and capital structure as well as curtailment of the issuer’s high-cost production operations,” according to the filing.

    Icahn’s investing firm filed a Hart-Scott-Rodino Act notice about a week before it went public with an activist 13D, alerting regulators and Freeport that he intended to buy as much as 25 percent of the company, two people familiar with the notice said at the time.
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    Iran Sanctions Seen Lifted in Early 2016 by Nuclear Envoys

    Oil and financial sanctions on Iran will probably be lifted within the first three months of 2016, according to four western diplomats familiar with the nuclear monitoring process.

    Under the terms of a July 14 accord between world powers and Iran, sanctions imposed internationally on the Persian Gulf nation will be lifted in return for restrictions on nuclear work. The Vienna-based International Atomic Energy Agency will assess when Iran has fulfilled the terms of deal, paving the way for the removal of restrictions.

    The monitoring necessary for that to happen will probably be in place by January or February, according to three of the envoys. A fourth saw restrictions lasting as late as March. All of the officials have knowledge of the IAEA’s verification regime in Iran and asked not to be named discussing confidential estimates.

    Iran, with the world’s No. 4 oil reserves, is preparing to ramp up production once sanctions are eased, and European business executives and politicians are already shuttling to Iran to lay the groundwork for investment and trade.

    All four envoys dismissed assertions made by skeptics of the deal that it doesn’t give IAEA investigators enough access to suspect Iranian facilities. The agency has already begun to receive significantly more information, one person said. The IAEA declined to comment when contacted by phone on Monday.

    The seven nation accord, already approved by the United Nations Security Council, will be officially adopted by next month and IAEA investigators will give their final assessment of Iran’s past nuclear activities by Dec. 15, according to the timeline. The U.S. Senate, which President Barack Obama has urged to back the deal, has until Sept. 17 to pass a resolution to block its implementation.
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    Transparency fears over China explosion - FT

    Details of an explosion that destroyed an adhesives plant in eastern China, including a mounting death toll, are only slowly emerging despite pledges for greater transparency made in the wake of last month’s Tianjin disaster.

    The local government of Dongying in Shandong province has gradually raised the number killed to 13 after an initial assessment of one when a single blast destroyed the Binyuan Chemicals plant on August 31. “The bodies were blown to pieces, making the investigation difficult,” it said in an explanation that was deleted from the Dongying government website after being picked up by Chinese media.

    The explosion comes less than a month after the Tianjin blast killed at least 162 people and destroyed thousands of apartments, unsold cars and other facilities. Insurance claims could reach $3.3bn, making it one of Asia’s most expensive man-made disasters for insurers, according to risk and reinsurance specialists Guy Carpenter.

    Despite the high profile of the Tianjin explosions — mobile phone videos of the blasts went viral worldwide on social media and journalists flocked from Beijing — and the fact dozens of firefighters did not return that night, the city government took days to raise the casualty count.

    Similarities in the two cases — including accusations that explosive chemicals were improperly stored — may explain Dongying authorities’ desire to avoid scrutiny over the accident. It also occurred shortly before a Beijing military parade to mark the end of the second world war. Chinese authorities are usually under orders to play down any incidents that might mar such an event.

    Local authorities initially attributed the blast to the explosion of a benzene tank stored too close to the factory.

    “Because the materials they produce are highly flammable, it’s very likely that fire first broke out in the storage house,” said a Chinese oil industry analyst who declined to be identified due to the potential sensitivity of the case. “But we noticed that the benzene tank was not mentioned in lots of state media reports, and I know why that is. Benzene is highly poisonous, and it will affect water and air nearby. 500 cubic meters is not a small amount.”

    The Lijin government attracted criticism from state media over its weekend statement, which said that some of the dead had been cremated and that “the emotions of their relatives are stable”.

    “How can emotions be stable when bodies are blown to pieces?” Xinhua asked, in an article on its mobile platform that was also subsequently deleted.

    The city of Dongying, at the mouth of the Yellow River, is dominated by Sinopec, the nation’s second-largest state-owned oil company, which operates the Shengli oilfield there. In recent years, as output from the field has declined, the local government has set up petrochemical complexes to attract downstream investors.

    Binyuan Chemicals is owned by a local chemicals entrepreneur, Li Peixiang. He also owns Dongying Luyuan Sci-Tech and Trade Co, which makes and trades chemicals used in fracking and oil drilling, a Financial Times search of online records shows. Dongying Luyuan is a shareholder in at least one company that is a services contractor to Sinopec and is a supplier to both Sinopec and state-owned PetroChina, according to information it posted online.

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    China's economy showing signs of stabilising - state planner

    China's power usage, rail freight and property market have all shown improvement since August, indicating that the economy is stabilising, the country's top economic planning agency said on Monday.

    The effects of supportive policies, including interest rate cuts, property market stimulus and local government debt swaps, will feed into the economy over the next few months and help underpin growth, the National Development and Reform Commission (NDRC) said on its website.

    "The power usage, rail freight, as well as real estate prices and turnover have all improved into August, indicating the economy is stabilising amid fluctuations," the NDRC said.

    "The economy is expected to maintain steady growth and we are able to achieve annual economic growth target," it added.

    A flurry of recent soft indicators - and a collapse in China's stock markets - had heightened fears of a hard landing for the world's second-biggest economy and sent global financial markets into a tailspin.

    China's economy, which grew 7 percent in the first half from a year earlier and in line with the government's target for the year, is headed for its slowest economic expansion in 25 years in 2015.

    The recent downbeat data, however, has raised the risk the government could miss the full-year growth target.

    The National Bureau of Statistics said on Monday that it had revised China's economic growth rate in 2014 to 7.3 percent from the previously released figure of 7.4 percent.

    The NDRC cited data from the State Grid as saying that China's total power consumption in August rose 2.47 percent on the year - the fastest growth so far this year and steady growth was likely to continue in September.

    The average daily rail freight volume rose 1.6 percent in August from July, the NDRC said

    China's exports are likely to swing into positive growth in August from a 8.3 percent drop in July, the agency said without giving specifics.

    The customs office is due to release August trade figures on Tuesday. Analysts polled by Reuters expected exports to drop 6.0 percent in August compared with a year earlier.
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    UK manufacturers halve 2015 growth forecast as export orders slump

    UK manufacturers halve 2015 growth forecast as export orders slump

    Britain's main manufacturing lobby has halved its forecast for growth this year after overseas orders fell to their lowest since the financial crisis, while recruiters said skills shortages were leading to higher wages but slower job growth.

    British manufacturing expanded 3.1 percent last year, its best performance since 2010, but the EEF manufacturers' organisation said on Monday that it expected growth to slow this year to just 0.7 percent, down from an earlier forecast of 1.5 percent.

    "While UK data has continued to point to solid growth, UK manufacturing is having to contend with a roller-coaster of risks from the rest of the world, and the white-knuckle ride is starting to take its toll," EEF chief economist Lee Hopley said.

    Uncertainty about the scale of an economic slowdown in China have caused share prices there to tumble in recent weeks, and both the United States and China have reported the slowest manufacturing activity in more than two years.

    The EEF said the proportion of British manufacturers reporting growth was the lowest since late 2009, and that new export orders had edged down to a six-year low, a weaker picture than a similar survey had shown last week.

    But for central bank policymakers in Britain and the United States, who are considering when to start to raise interest rates, the broader picture is mixed. Domestic conditions are strong, and tight labour market is starting to push up wages.

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    China: Growth falls to 2%


    Then there will come a crash -- in asset values and expectations, if not in production and employment. After the crash, China will revert to the standard pattern of an emerging market economy without successful institutions that duplicate or somehow mimic those of the North Atlantic. Its productivity rate will be little more than the 2 percent per year of emerging markets as a whole; catch-up and convergence to the North Atlantic growth-path norm will be slow if at all; and political risks that cause war, revolution or merely economic stagnation rather than unexpected booms will become the most likely surprises.

    I was wrong for 25 years straight -- and the jury is still out on the period since 2005. Thus, I'm very hesitant to count out China and its supergrowth miracle. But now "a" crash -- even if, perhaps, not "the" crash I was predicting -- is at hand.

    A great deal of China supergrowth always seemed to me to be just catch-up to the norm one would expect, given East Asian societal-organizational capabilities. China had been far depressed below that norm by the misgovernment of the Qing, the civil wars of the first half of the twentieth century, the Japanese conquest and the manifold disasters of rule by the paranoid Mao Zedong. Take convergence to that East Asian societal-capability norm, the wisdom of Deng Xiaoping and then Jiang Zemin in applying the standard Hamiltonian gaining-manufacturing-technological-capability-through-light-manufacturing-exports development strategy (albeit on a world-historical scale) and a modicum of good luck, and China seemed understandable. There thus seemed to me to be no secret Chinese institutional or developmental sauce.

    Given that, I focused on how China lacked the good-and-honest government, the societal trust and the societal openness factors that appear to have made for full convergence to the U.S. frontier in countries such as Japan. One of the few historical patterns to repeat itself with regularity over the past three centuries has been that, wherever governments are unable to make the allocation of property and contract rights stick, industrialization never reaches North Atlantic levels of productivity.

    China will -- unfortunately -- likely become another corrupt middle-income country in the middle-income relative development trap.

    Sometimes the benefits of entrepreneurship are skimmed off by roving thieves. Sometimes economic growth stalls. Sometimes profits are skimmed by local notables, who abuse what ought to be the state's powers for their own ends. China -- in spite of all its societal and cultural advantages -- had failed to make its allocation of property rights stick in any meaningful sense through the rule of law. Businesses could flourish only when they found party protectors, and powerful networks of durable groups of party protectors at that.

    Professor of economics, U.C. Berkeley

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    Tianjin: 1000 Chemical plants to be relocated.


    At a cabinet meeting in Beijing to draft a new water pollution prevention law, China’s minister of industry and information technology, Miao Wei, said that since the Tianjin explosion local governments throughout the country have provided his ministry with plans to relocate about 1,000 chemical plants away from population centers.

    According to the official People’s Daily newspaper, the relocation proposals involve plants that are either hazardous or heavily polluting. The project, if it goes forward, would cost a total of about $63 billion. Miao did not provide details on who would pay for the moves.

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    Oil and Gas

    Oil Supply Outside OPEC to Fall Most Since 1992, IEA Forecasts

    Oil supplies outside OPEC will decline next year by the most in more than two decades as the price rout curbs U.S. shale output, according to the International Energy Agency.

    Production outside the Organization of Petroleum Exporting Countries will fall by 500,000 barrels a day to 57.7 million in 2016, the Paris-based adviser said Friday in its monthly report. While fuel demand this year will be the strongest since 2010, record-high oil inventories in developed nations won’t start to diminish until the second half of next year, and the revival of Iranian exports with the removal of sanctions may swell supplies further, it said.

    Shrinking supplies outside OPEC show that Saudi Arabia’s strategy to defend the group’s market share by pressuring rivals with lower prices “appears to be having the intended effect,” the IEA said. Brent crude futures, a benchmark used around the world, slumped to a six-year low near $42 a barrel on Aug. 24 amid a persisting global glut.

    “The big story this month is one of tightening supply,” said the agency, which advises 29 nations on energy policy. “The lower price environment is forcing the market to behave as it should by shutting in output and coaxing demand.”

    Shale Shrinkage

    U.S. shale output will shrink by almost 400,000 barrels a day next year as futures contracts for 2016 trade below the price needed for most projects to break even, the agency said. As recently as July, the IEA had projected that U.S. shale supply would expand by 60,000 barrels a day in 2016.

    The decline in total non-OPEC supply next year will be the biggest since a drop of 1 million barrels a day in 1992 following the collapse of the Soviet Union, it said.

    As a result of the projected drop in non-OPEC output, the amount of crude needed from OPEC next year will increase by 1.6 million barrels a day to 31.3 million. That’s still less than the 31.57 million daily barrels the organization’s 12 members pumped in August. Their output slipped by 220,000 barrels a day last month because of lower production in Saudi Arabia, Iraq and Angola, according to the report. High-cost projects in the group are “at risk” because of the price slump, the agency estimated.

    Global oil demand will climb by 1.7 million barrels a day this year to 94.4 million as low prices stoke consumption, before growth eases next year to 1.4 million barrels a day. China, the world’s second-biggest oil consumer, will “keep up its purchases” even as signs of slowing growth and the country’s surprise devaluation of its currency fan concerns about its economic stability, the IEA said.
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    BHP Billiton highlights the potential of Australia's Beagle sub-basin

    BHP Billiton believes Australia’s next big oil find - if there is one - could be hiding beneath the waters of the Beagle sub-basin off the coast of northwest Western Australia. Tim Cutt, the president of the group’s petroleum unit, said BHP had identified four leads, or prospects, in the sub-basin that each have the 'potential of over 400 million barrels recoverable'.

    BHP is known to have been evaluating WA waters as a host of world-class finds. But Mr Cutt’s comments to a conference in New York is the first indication of the potential size of the prize. The Beagle sub-basin (a basin within a basin) sits within the comparatively lightly explored northern reaches of the Carnarvon Basin, one of Australia’s most prolific oil and gas provinces.
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    Gazprom closes gas auction, volume low, price high

    The first ever auction of Gazprom and its unit Gazprom Export for sales of natural gas conducted from the 7th till the 10th of September 2015 has been finalized.

    As a result of the auction, over forty deals with 15 clients were concluded, with a total volume of over 1 bcm being sold which corresponds to over one-third of the volumes initially offered, the company informed in a statement.

    The auction contract prices were higher than Gazprom Export contract prices’ average for the coming winter (October 2015 through March 2016) for the whole portfolio, and for Central and Northern Europe including Germany; auction prices were higher than the spot and forward prices on the European gas hubs, too.

    Gazprom offered 3.2 bcm of gas to be supplied during the delivery period winter 2015/2016 with 39 companies taking part in the auction.
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    Marathon Oil trims jobs, $150 million from exploration spending

    Marathon Oil Corp. is shedding 40 jobs, mostly in the United States, and is scaling back plans to explore for oil and gas in conventional plays, the company confirmed Thursday.

    The Houston oil company said it plans to suspend new venture funding for its conventional exploration program and re-direct the funds to its oil fields in the Gulf of Mexico and off the coast of West Africa. It doesn’t plan to drill any conventional exploration wells next year.

    The job cuts are a small addition to Marathon’s layoff of 400 employees earlier this year, and will bring staff reductions to 13 percent of its workforce. Employees were notified of the additional layoffs this week. Some were geologists and engineers. Marathon had 3,300 employees at the end of 2014.

    “A leaner and more focused conventional exploration team will drive execution and value capture in our existing Gulf of Mexico and Gabon opportunities but at substantially reduced spending,” Marathon spokeswoman Lee Warren said in an emailed statement.

    The Gulf of Mexico and Gabon projects will continue to be staffed and it will explore in shale and other unconventional plays.

    Marathon CEO Lee Tillman told investors at a Barclays conference this week the company is in the early stages of planning its 2016 capital budget but it has already found $600 million it can trim.

    He said the company is spending $100 million on its conventional exploration program next year, 60 percent less than the $250 million it spent on exploring those plays this year. It had spent $500 million in 2014.

    “Every dollar is under scrutiny and there are simply no spend too small to challenge,” Tillman said. “And as we move through the second half of 2015 and into 2016, there will be more to come.”

    Marathon’s main unconventional plays are in the Eagle Ford Shale in South Texas, the Bakken Shale in North Dakota and in Oklahoma. It has other conventional exploration prospects in Ethiopia, Kenya and the Kurdistan region in Iraq.

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    Saudi sees no need for oil summit, best leave market alone-sources

    Top oil exporter Saudi Arabia sees no need to hold a summit of producing countries' heads of state if such discussions would fail to produce concrete action towards defending oil prices, sources familiar with the matter said on Thursday.

    The comments followed a meeting of Gulf Arab oil ministers with Qatar's emir in Doha, at which a Venezuelan proposal for an OPEC and non-OPEC summit was discussed.

    Oil prices have more than halved since summer last year on an oversupplied market as well as a decision by OPEC to defend market share and discourage competing supply sources, rather than cut its output in the face of cheaper crude.

    Riyadh believes it is best not to interfere in the market at present, the sources told Reuters on condition of anonymity.

    One OPEC source said that should such a meeting produce no concrete outcome, it would have a negative impact on prices.

    "If we are meeting for the sake of meeting, it would backfire," the source said.

    Earlier on Thursday, Qatar's energy minister said members of the Organization of the Petroleum Exporting Countries and non-OPEC producers were studying the Venezuelan proposal for a heads-of-state summit to address low oil prices.

    "The different countries are studying this proposal and if there was a response from OPEC and outside OPEC then OK," Qatar's Mohammed al-Sada said. "But we are in the study phase."

    Sada was speaking to reporters after a meeting of ministers from the six-nation Gulf Cooperation Council in the Qatari capital, Doha.

    Cash-strapped Venezuela has for months been pushing for an emergency OPEC meeting with Russia to stem the tumble in prices.

    Venezuelan President Nicolas Maduro said on Saturday he had suggested to the emir of Qatar that an OPEC summit be held, and that the leader of the Arab Gulf state "liked" the idea.

    Maduro also suggested non-OPEC countries, including Russia, take part.

    Non-Gulf members want OPEC to take action. Algeria has written to OPEC expressing concern about the market and Iran has supported the idea of an emergency meeting.

    But the Gulf OPEC members have opposed holding an early meeting and show no sign of changing strategy, especially given the refusal of Russia and other big non-OPEC countries to cut output.

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    US Domestic oil production

                                            Last week     Week before       Last year
    Domestic Production '000 .....9,135            9,218                8,590
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    Summary of Weekly Petroleum Data for the Week Ending September 4, 2015

    U.S. crude oil refinery inputs averaged over 16.1 million barrels per day during the week ending September 4, 2015, 279,000 barrels per day less than the previous week’s average. Refineries operated at 90.9% of their operable capacity last week. Gasoline production decreased last week, averaging 9.6 million barrels per day. Distillate fuel production decreased last week, averaging 4.8 million barrels per day.

    U.S. crude oil imports averaged about 7.5 million barrels per day last week, down by 396,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.6 million barrels per day, 0.5% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 589,000 barrels per day. Distillate fuel imports averaged 130,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.6 million barrels from the previous week. At 458.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 0.4 million barrels last week, but are in the middle of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 1.0 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 0.2 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 3.2 million barrels last week.

    Total products supplied over the last four-week period averaged over 20.2 million barrels per day, up by 4.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.3 million barrels per day, up by 3.8% from the same period last year. Distillate fuel product supplied averaged 3.7 million barrels per day over the last four weeks, down by 1.2% from the same period last year. Jet fuel product supplied is up 7.5% compared to the same four-week period last year.

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    BHP weighs more oil and gas capital spending cuts

    BHP Billiton petroleum president Tim Cutt says capital spending could be cut again for its diminished United States onshore shale business amid depressed prices but is confident in a "medium-term" oil and gas price recovery.

    Mr Cutt said volatility in oil and gas prices would continue in the near term, and depending on how the oil price tracks, BHP could again reduce its 2016 capital spend of $US1.5 billion for its onshore US division.

    That spend is already 60 per cent lower than last year's, when oil and gas prices began to fall off a cliff.

    "The capital reduction this year could be even more pronounced," Mr Cutt said at a conference in New York.

    The resources house has a capex spend of $US1.6 billion flagged for conventional oil in the current year.

    BHP has dramatically pulled back from its ambitions in the US onshore shale oil and gas sector, also known as unconventionals, because the division has been rendered largely unprofitable by the oil and gas price collapse.

    It has slashed its drilling rig numbers from 26 to just 9, and took a pre-tax write-down of $US2.8 billion on the business in June.

    But Mr Cutt insists high-cost oil and gas supply will eventually be needed. A recovery in prices, and cheaper development costs will be needed to incentivise investments needed to deliver new supply to meet growing demand, Mr Cutt argued.

    However, "the near term will be volatile until the imbalance of approximately 2 million barrels per day works through".

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    Gazprom's Bovanenkovo field hits by breakdown in Russia-Ukraine ties

    KyivPost reported that Russian gas giant Gazprom, whose big Bovanenkovo field on the Yamal Peninsula is equipped with compressors manufactured in Ukraine, has had to cope with difficulties that have emerged in the technical servicing of that equipment.
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    Iran Said to Cut Pricing for All October Crude to Asia

    Light crude at narrowest premium to Saudi oil since 2012
    Iran seeking to win market share from Saudis after sanctions

    Iran cut pricing for all its oil grades for sale to Asia next month, according to two people with knowledge of the decision, trimming the premium on its main Light crude over the comparable Saudi blend to the narrowest since the end of 2012.

    National Iranian Oil Co. will sell the Light blend at a premium of 25 cents a barrel more than the regional benchmarks, according to the people, who asked not to be identified since the information is not yet public. No one answered a call to NIOC’s public relations department in Tehran on Thursday, the first day of the country’s weekend.

    Saudi Arabia, the world’s largest crude exporter and biggest member of OPEC, cut the premium on its main light oil grade to Asia by 30 cents a barrel to 10 cents a barrel more than the regional benchmark, it said on Sept. 4. Today’s pricing from NIOC puts Iran’s Light crude at a premium of 15 cents to the Arab Light blend from Saudi Arabia. That’s the lowest premium since it stood at 10 cents in December 2012, according to data compiled by Bloomberg.

    NIOC will sell its Heavy grade crude at a discount of $1.37 a barrel in October, compared with 85 cents below the benchmark this month, the people said. The discount on Forozan crude will widen to $1.20 a barrel from 68 cents, while Soroosh and Norooz blends will sell for $6.78 less than the Heavy grade, compared with a $6.30 discount to Heavy for September.

    Iran, formerly the second-largest producer in the Organization of Petroleum Exporting Countries and now fourth, aims to regain market share from other regional sellers like Saudi Arabia once international sanctions over its nuclear program are lifted. The removal of sanctions would allow Iran to boost oil shipments. Middle Eastern producers are competing increasingly with cargoes from Latin America, North Africa and Russia for buyers in Asia.

    Regional sellers market their crude mostly under long-term contracts to refiners. Most of the Persian Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.
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    Tanker-Rate Slump Ending as Asia Refiners Restock African Crude

    For operators of very large crude carriers, the tankers that move as much as 2 million barrels of oil across oceans on a single trip, the fourth quarter can’t come fast enough.

    Since July, shipping rates have dropped by 47 percent after later-than-usual maintenance caused Asian refineries to close and demand to fall. Now rates are poised to reach their highest levels in a final quarter since 2008, according to analysts who point to growth in the amount of crude scheduled to be loaded from West African countries in October. Nigeria is aiming for a 9.5 percent rise in the number of barrels shipped compared with last year, while Angola’s programs show a 6.7 percent increase.

    The total of Nigeria and Angola’s loadings is set to be the highest for an October since records began in 2008.

    The most likely buyer for the added barrels is Asia, with China building up its crude reserves as it takes advantage of higher refining margins, according to Charles Rupinski, an analyst who follows shipping for Global Hunter Securities LLC in New York. Winners may include Euronav NV, DHT Holdings Inc. andFrontline Ltd., all of which saw their shares drop between late July and late August as the hire rate declined.

    As refineries restart, “we think the market will get tight,” said Jonathan Chappell, an analyst with Evercore Partners Inc. in New York.

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    Record eastern diesel to hit Europe as mega refineries hit full stride

    Europe is poised to receive record levels of diesel from the east this month as the region bears the full brunt of supply from new Middle Eastern refineries.

    A mammoth 1.4 million tonnes of diesel has already been booked from new mega refineries in the Middle East, and export-oriented refineries in India, to land in Europe in September, according to traders and Reuters shipping data.

    Traders expect several more shipments to be booked in the coming days, leading total exports this month to surpass August's 1.6 million tonnes.

    "It will be high," one trader said of the imports, adding that it was likely to hit a new record.

    Reuters shipping data shows more than 3 million tonnes in total of oil products en route from the east. The bookings include diesel on two oil product supertankers capable of carrying 1 million barrels each, the Atina and the Novo.

    Three even larger mega tankers with 2 million barrels, the Gener8 Neptune, the Yuan Chun Hu and the Yuan Qiu Hu, are also set to carry distillates from South Korea to West Africa on their maiden voyages.

    While Europe's imports typically peak in the autumn, during refinery maintenance season, Middle Eastern shipments were turbo-charged by the addition of crude producer Saudi Arabia's new 400,000 barrel per day (bpd) Yasref refinery.

    That unit hit full capacity at the end of June, just as the Middle East's own distillate consumption entered its summer peak.

    In the first five months of the year, total Saudi distillate exports were 22 percent higher than the same period last year, according to JODI data, reaching an average of roughly 1.1 million tonnes per month. These shipments were aided by the 400,000 bpd Jubail refinery, which reached maximum output in late 2014.

    "These two Saudi refineries have hit their full stride, and they're going to keep pushing diesel to Europe," said Harry Tchilinguirian, global head of commodity strategy at BNP Paribas. "That's what they were built, configured and optimized for."

    Already, stocks of distillates in the Amsterdam-Rotterdam-Antwerp hub have hit all-time records, according to Dutch consultancy PJK International. Figures from industry monitor Genscape show gasoil stock levels in ARA at nearly 5.7 million tonnes at the end of August - nearly one million above the previous year.

    Genscape pegs ARA gasoil storage at close to 70 percent of total capacity.

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    China curbs conventional gas output, keeps shale target

    China's state energy giants are reducing output from conventional natural gas fields as demand growth for the fuel eases to a multi-year low, local media and sources said, although shale gas targets are being maintained.

    Sinopec Corp and PetroChina have restricted production at two major conventional fields - Puguang and Anyue - in the Sichuan gas basin, as a cooling economy curbs fuel use by industries like chemical plants and glass and ceramics makers.

    By end-August, Sinopec had closed 12 wells at Puguang, one of the country's largest with annual production capacity of 12 billion cubic metres (bcm), and planned to shut in another 15 wells, the Sichuan Daily reported, citing a Sinopec official at Puguang.

    Sinopec said Puguang was pumping at a daily commercial rate of 10 million cubic metres, which was half the amount at the start of the year, as reported by the paper. The production loss was equivalent to roughly 3 percent of national output.

    Puguang is competing with rising production at the Fuling shale gas project, China's first and largest commercial shale discovery, as well as at the nearby conventional Yuanba gas field.

    Petrochina has also capped production at the Moxi block of the Anyue field, which is among the country's largest gas reservoirs tapped onshore in recent years, said a government source who had been briefed by gas companies.

    A PetroChina spokesman declined to comment on output curbs, but said production rates at conventional fields were "adjustable based on market conditions".

    Official data showed China's domestic gas output rose 2.6 percent in the first seven months of 2015, down from 6.9 percent annual growth in 2014, and a far cry from average double-digit growth over the past decade.

    Despite the reductions at conventional fields, the firms said they remain on track to meet a government-set shale gas target this year, as Beijing tries to replicate the shale boom in the United States.

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    U.S. shale giants turn to 2016 with somber outlook

    Some of the largest U.S. shale oil producers have already begun slashing 2016 budgets, with some planning double-digit reductions starting next January, the latest sign low crude prices are forcing a radical adjustment in the industry.

    A rash of bleak commentaries from CEOs this week marks one of the earliest times in a calendar year that oil producers have laid out rough sketches for the following year's spending.

    Gone, for now at least, are the high-rolling ways of an industry that as recently as last year was flush with cash. Here to stay, it seems, is constant belt-tightening, though executives still think they will be able to pump more oil.

    In all, North American oil companies should cut their budgets by as much as 15 percent next year, analysts at Barclays estimate.

    "No cost is too small for us to scrutinize," Marathon Oil Corp Lee Tillman told the Barclays Energy Power Conference on Wednesday. "We continue to be laser-focused on reducing costs across all areas of our business."

    Marathon, which operates in North Dakota and Texas, said it would trim at least 18 percent of its capital budget next year - more than $600 million - by cutting the number of wells it fracks, among other steps.

    Executives at Anadarko Petroleum Corp and Apache Corp hinted strongly they could take cuts of their own.

    "If we do stay in this lower-for-longer scenario, we're going to see (2016) become a very different period than we would have anticipated," Al Walker, Anadarko's CEO, said at the conference.

    Searching for a metaphor for the downturn, Walker quoted a friend saying: "It is going to rain for a long time. We are all going to get wet, and a few people are going to drown."

    Analysts expect the most acute pain at very small firms, not the big independents.

    Still, cuts are happening. Apache has cut 20 percent of its staff this year and has begun looking for a joint venture partner to help develop its Montney shale acreage in Canada, a sign that the company is looking to spread financial risk.

    WPX Energy Inc, which is spending $825 million to $925 million this year, could cut that to $700 million to $800 million next year, Chief Executive Rich Muncrief said Wednesday.

    Chesapeake Energy Corp CEO Doug Lawler told investors at the conference on Tuesday that maximizing liquidity and preserving the company's ability to generate cash were near-term priorities.

    "How we deploy our cash in the next few years will be very important," said Lawler, adding that he was prepared to cut capital spending next year.

    "We believe our customers will take a conservative approach to their 2016 budgets," Paal Kibsgaard, chief executive of Schlumberger NV, the world's largest oilfield service provider, told the conference on Wednesday.

    To be sure, budget cuts don't necessarily mean that oil output will drop, with productivity of drilling rigs and frack crews jumping in the past two years.

    Cimarex Energy Co said new processes to complete wells have helped it extract 64 percent more oil in New Mexico than had previously been available, a staggering jump that points to how nonchalantly the industry had spent money and overlooked efficiencies when oil prices eclipsed $100 per barrel, roughly $55 above current levels.
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    Cheap Russian Gas Tempts EU Buyers as LNG Import Growth Stalls

     Europe lowered purchases of liquefied natural gas for a third month in August as buyers boosted purchases of oil-linked fuel through pipelines from Russia.

    LNG imports by 10 nations in the region that receive the tanker-delivered fuel dropped 3.4 percent from a year earlier in August, after reaching a two-year high in March, according to data from Genscape Inc. Russian pipeline supplies soared about 20 percent from a year earlier in August, remaining at the highest level this year, tracking declining crude prices, according to data from Gazprom PJSC, the world’s biggest gas producer.

    Europe, which imports as much as 70 percent of its gas needs, has increased shipments from Russia as contract prices declined because they follow crude with several months delay. Traders bought more LNG as they waited for pipeline gas prices to drop further in the third quarter, encouraged by a slump in Asian LNG prices that removed the incentive for producers such as Qatar to send cargoes east.

    “We expect the supply picture to remain stable for the rest of the year with shippers continuing to draw heavily on oil-indexed supply and LNG sitting on the margin,” Ashish Sethia, head of Asia-Pacific gas and power analysis at Bloomberg New Energy Finance, said in an e-mailed note Tuesday. “As has largely been the case in 2015, exactly how much LNG will land in Europe depends on how competitively priced seaborne gas is.”

    Chart showing changes in LNG imports in August vs year earlier

    LNG imports into the U.K., Belgium, Spain, France, Greece, Italy, Lithuania, the Netherlands, Portugal, and Turkey declined to 3.02 million metric tons in August, compared with 3.13 million tons in the same month a year earlier, according to Genscape. Only the Netherlands, Italy and Portugal boosted shipments.

    Russian exports to Europe, excluding the Baltic states and including Turkey, were at 14.3 billion cubic meters in August, unchanged from the previous month, and up from 11.5 billion cubic meters in the same month a year earlier, according to data from Gazprom and the Russian Energy Ministry’s CDU-TEK unit.

    Russia’s average price could drop as low as $237 per 1,000 cubic meters ($6.64 per million British thermal units) this year, according to Valery Nemov, a deputy head of department for Gazprom’s export arm, from more than $340 in 2014. That compares with $6.39 per million British thermal units for front-month gas in the U.K., the European benchmark, on the ICE Futures Europe exchange.

    European LNG imports so far this year are 4.3 percent higher than a year earlier at 26.1 million tons, according to Genscape data through August.

    LNG imports into Europe are expected at 30 million tons this year, according to BNEF. The EU will have a “moderate LNG demand growth” to 40 million tons in 2020, and 74 million tons in 2025, according to BNEF’s Global LNG Market Outlook.

    “Existing supplies in the Middle East and Atlantic basin may be increasingly forced to look for markets in northwest Europe to deliver their LNG and put downward pressure on European gas hubs,” Barclays analyst Nicholas Potter said in a note dated Sept. 7.“With limited outlets, Gazprom may continue to raise exports to Europe in order to balance falling oil-linked prices.”
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    Poland to receive first LNG cargo by year-end

    Poland’s LNG import terminal in Świnoujście will receive its first cargo of the chilled gas by the end of 2015.

    Gaz-System’s unit Polskie LNG, which is building the import terminal, said on Wednesday that it has concluded talks regarding the project completion with the construction consortium led by Italy’s Saipem.

    Polskie LNG and the consortium signed an annex to the original contract where the EPC contractor “committed itself to complete construction works and receive the first LNG cargo this year,” the company said in a statement.

    The second delivery of LNG designated for operational tests will be supplied in the first quarter of 2016, while commercial operations of the terminal will commence in the second quarter of the same year, Polskie LNG said.

    The start-up of Poland’s first LNG terminal has been delayed several times with the original date which was set for the end of June last year.

    Saipem said earlier this year it would finish construction of the LNG terminal this summer only if it received further payment.

    “The contractual lump sum remuneration due to the EPC contractor will remain unchanged, thus the investor will not incur any additional expenses in relation to project implementation,” Polskie LNG said.

    The total contractual lump sum remuneration amounts to 2.4 billion zlotys ($635.8 million).

    The LNG project in Świnoujście is more than 98.2 percent complete, according to the statement.

    In the first stage of operation, Polskie LNG’s facility will enable the regasification of 5 Bcm of natural gas annually.

    Polskie LNG has earlier this year signed a contract with Tractebel Engineering to conduct a feasibility study for the expansion of the terminal involving the construction of a third storage tank and accompanying investment.

    The expansion would include adding LNG reloading service for smaller vessels, through which the terminal could become a reloading depot for smaller installations operating in the region, as well as for bunkering vessels with LNG.
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    Egypt Aims to Cut Arrears Owed to Foreign Oil Firms to $2.5B in 2015

    Egypt paid foreign oil companies $600 million in arrears in August and still owes them $2.9 billion, the petroleum minister told Reuters on Wednesday.

    Sherif Ismail also said Egypt aims to lower the amount of arrears it owes foreign oil companies to $2.5 billion by the end of 2015.

    Delays in paying back foreign companies had discouraged investment in Egypt's economy, battered by power cuts, attacks by militants and political turmoil triggered by a 2011 uprising that toppled autocrat Hosni Mubarak.

    Egypt's energy sector received a boost last month when Italian energy group Eni said it had discovered the largest known gas field in the Mediterranean off the Egyptian coast, predicting the find could help meet the country's gas needs for decades to come.

    Egypt, which once exported gas to Israel and elsewhere, has become a net energy importer over the last few years.

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    Clock ticking for North Sea oil as low prices threaten closure of 140 fields

    Falling oil prices could lead to the closure of 140 fields in the North Sea over the next five years as operators accelerate plans for decommissioning amid drastic cost cutting, a leading energy consultancy has warned.

    Wood MacKenzie said that the decommissioning of the fields could go ahead even if oil prices return to $85 per barrel, from their current price of around $49.

    Even a partial recovery to around $70 a barrel would leave 50 oil fields facing early closure, the Edinburgh-based firm said.

    Over the same period just 38 new fields are expected to be brought on stream in the UK Continental Shelf (UKCS), according to Wood Mackenzie.

    "In 2015 operators have reacted to the low oil price environment by deferring spend and delaying sanction of new developments," said Fiona Legate, UK upstream research analyst for Wood Mackenzie. "We have analysed the impact of the low oil price on decommissioning activity looking at the timing of cessation, retained decommissioning liabilities from previous deals, and batch decommissioning."

    The report comes after Oil and Gas UK said that 65,000 jobs had been lost in the North Sea since the slump in oil prices began last November. The trade body has warned that with so few new projects gaining approval, capital investment is expected to drop from £14.8bn last year to between £2bn and £4bn in each of the next three years.

    Decommissioning is already underway in more ageing fields in the North Sea.Royal Dutch Shell is planning the decommissioning of the Brent field. Four Brent platforms – Alpha, Bravo, Charlie and Delta – have generated £20bn of tax revenue since they were brought into production in 1976.

    Investment in North Sea expected to collapse

    "We expect around £54bn (in nominal terms) will be spent on decommissioning on the UKCS and anticipate it to be completed in the early 2060s. Decommissioning spend is expected to increase by over 50pc by 2019 and will overtake development spend in the same year," said Ms Legate.

    Lower oil prices are forcing companies to review their operations around the world. New basins opening up in the Arctic and Brazil mean that the UK Government will have to provide more incentives to drillers to keep working in the North Sea.
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    Encana's four strategic assets deliver 257,000 BOE/d in August 2015

    Encana's capital investment and operational activity in the first half of 2015 is delivering high-margin production growth from its four strategic assets. During July and August the company brought 72 new wells on production in the Permian, Eagle Ford, Duvernay and Montney. In August, these assets delivered total average production of 257,000 barrels of oil equivalent per day (BOE/d), up from an average 223,000 BOE/d in the second quarter 2015.

    'Our strategic assets are delivering impressive high-margin production growth and are on track to meet our fourth quarter expectations,' said Doug Suttles, Encana President and CEO. 'We remain focused on executing our highly disciplined capital program, strengthening our balance sheet and capturing sustainable efficiencies through innovation.'

    Operational update on Encana's four strategic assets

    Permian August production up 26 percent from the second quarter 2015

    production in August averaged 45,000 BOE/d, up from an average of 35,800 BOE/d in the second quarter
    well performance continues to improve, with new wells performing in line with type curve expectations
    during July and August, 44 net wells were brought on production, including 20 horizontal wells

    Eagle Ford August production up 25 percent from the second quarter 2015

    production in August averaged 57,100 BOE/d, up from an average of 45,800 BOE/d in the second quarter
    the Patton Trust South Facility came on stream in July, increasing the processing capacity of the facility to over 25,000 BOE/d
    during July and August, 17 net wells were brought on production

    Duvernay August production up 62 percent from the second quarter 2015

    production in August averaged 9,400 BOE/d, up from an average of 5,800 BOE/d in the second quarter
    better well performance and the successful start-up of Phase 2 of the 15-31 plant reduced the impact of third-party transportation restrictions
    during July and August, four net wells were brought on production

    Montney August production up 7 percent from the second quarter 2015

    production in August averaged 145,000 BOE/d, up from an average of 135,900 BOE/d in the second quarter
    continuous improvement in well performance reduced the impact of third-party transportation restrictions
    during July and August, seven net wells were brought on production

    Encana continues to expect its Permian, Eagle Ford, Duvernay and Montney assets will achieve average production of 270,000 BOE/d during the fourth quarter

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    Maersk Oil cuts $1 billion from investment budget as prices fall

    A.P. Moeller-Maersk A/S’s oil unit cut $1 billion off its annual budget for capital expenditure after petroleum prices plunged.

    Maersk Oil CEO Jakob Thomasen presenting at the company's Capital Markets Day. Image: Louise Münter, Maersk Group.

    Maersk Oil plans long-term capex in the range of $2 billion to $4 billion a year compared with a previous range of $3 billion to $5 billion, according to an investor presentation in Copenhagen on Wednesday. The new forecast doesn’t include funds to be spent on acquisitions, which the company says it’s still pursuing.

    Maersk Oil is following the rest of the industry in cutting jobs and lowering investments after crude prices dropped about 50% over the past 12 months. The company says it has lowered unit costs by about 33% over the past year and completed 600 job cuts by the end of June.

    Maersk Oil will focus on acquisitions in 2015 and 2016, it said. In the “long term”exploration will be “critical” to replace reserves, it said.

    “We believe this is an opportune time for inorganic moves,” Jakob Thomasen, CEO of the oil division, said at the presentation.

    The company is still on track to meet a goal of lowering operating expenses by 20% by the end of 2016 compared with 2014 levels.

    The oil price will stay at about its current level in the “short term,” and then rise, helped by Chinese demand and responses from OPEC, Maersk said.
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    China shale gas output set to hit 4 bcm in 2015

    China’s shale gas output may exceed 4 billion cubic meters (bcm) this year, with production capacity up to 8 bcm per annum by end-2015, sources reported.

    That’s lower than the government’s output target of 6.5 bcm in 2015, the last year of the country’s 12th Five-Year Plan. But the development of China’s shale gas industry is much faster than the coalbed methane (CBM) industry, analysts said.

    The growth in shale gas output was attributed mainly to increased output from Sinopec and PetroChina – China’s two oil giants -- which stood at 0.9 bcm and 0.24 bcm in the first half of the year.

    Shale gas output from Sinopec and PetroChina is expected to reach 2.1 bcm and 0.75 bcm in the second half of the year, respectively.

    Thus, shales output from these two groups may total 3 bcm and 1 bcm in the whole year. Other producers may realize combined output at around 0.1 bcm in 2015.

    Sinopec and PetroChina’s shale gas production capacity is expected to be 5 bcm and 2.5 bcm by the end of 2015, separately.

    China aimed to pump at least 30 bcm of shale gas by 2020, compared with an initial goal of 60-100 bcm, the Ministry of Land and Resources said in September last year.
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    Kazakhstan may cut 2016 oil output if prices fall further

    Kazakhstan might cut crude oil output by almost 10 percent next year if prices drop to $30 per barrel, its energy official said, while top producers such as Russia are resisting calls to cut production to support prices.

    Reduced volumes from Kazakhstan, which exports the bulk of its production to Europe and Asia, may help to balance global markets, where oil prices have hit multi-year lows this year.

    Kazakhstan's Deputy Energy Minister Uzakbai Karabalin told reporters on Wednesday that if the oil price next year was $50 per barrel, Kazakhstan would produce between 79 and 80 million tonnes.

    That would be little changed from this year's forecast of 80.5 million tonnes, or roughly 1.6 million barrels a day.

    But if the price drops to $40, Kazakhstan's output would be 77 million tonnes and if oil fell to $30, it would be cut to 73 million tonnes, Karabalin said.

    Mexico, which like Russia and Kazakhstan is not a member of the Organization of the Petroleum Exporting Countries (OPEC), will also not consider cutting oil output at the moment, Energy Minister Pedro Joaquin Coldwell told Reuters on Tuesday.

    Oil production in Kazakhstan is falling anyway as the bulk its fields are depleting. Output dropped 1.2 percent last year to 80.8 million tonnes and is expected to fall again in 2015.

    The Chevron-led venture, Tengizchevroil, is Kazakhstan's largest oil producer. Last year, its output fell 1.5 percent to 26.7 million tonnes and is expected to remain unchanged in 2015.

    Kazakhstan was hoping to boost oil output, a major source of budget revenues, through the Caspian offshore Kashagan oil field, which was finally launched in September 2013 after huge delays and cost overruns.

    But Kashagan halted production a few weeks later when gas leaks were detected and it is not expected to be up and running before 2017, a date confirmed by Karabalin on Wednesday.

    Kazakhstan officials had expected the country to be producing between 90 million tonnes and 100 million already in 2015, thanks to Kashagan.

    On Wednesday, Karabalin said the lower forecasts were not due to Kashagan's delays: "This is not about Kashagan, but because the oil price is different now and costs are different."

    Attached Files
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    US House panel set to approve crude oil exports bill Thursday

    A US House Energy and Commerce subcommittee is expected Thursday to approve a bill to lift all limits on US crude exports.

    The House energy and power subcommittee is scheduled to vote on a bill from Texas Representative Joe Barton, a Republican, to repeal these limits, which have been in place for roughly four decades.

    In a joint statement, Michigan Representative Fred Upton, a Republican and the full committee's chairman, and Kentucky Representative Ed Whitfield, a Republican and the subcommittee's chairman, said current limits on US crude exports have become "obsolete."

    "We have taken a thoughtful approach to reconsidering oil exports, and the time to lift the ban is now," Upton and Whitfield said.

    The subcommittee vote, which will be the first of its kind in the House, is expected to set up a potential full House vote as early as this month. There are enough votes in the House for the bill to pass easily, according to congressional staffers. Barton's bill currently has 113 co-sponsors, including 13 Democrats.

    The path is much less clear in the Senate, congressional staffers and lobbyists claim.

    The Senate Energy and Commerce Committee in July approved a bill from Alaska Senator Lisa Murkowski, a Republican and the committee's chairman, which includes a provision to repeal existing limits on US crude exports.

    Senate Majority Leader Mitch McConnell, a Kentucky Republican, has indicated that he will not bring any crude export bill to the Senate floor until he has assurances that it has 60 votes to pass, sources have said.
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    Continental Resources Reducing 2015 Capital Spending

    Continental Resources, Inc. (CLR) (Continental or the Company) today announced plans to spend approximately $300 to $350 million less than its previously approved capital budget for 2015 to better align spending with cash flow at current commodity prices. The Company plans to defer well completion activity, except for where it has contractual considerations or it accomplishes specific strategic objectives. Continental is also reducing its operated rig count in the Bakken from 10 to eight rigs by the end of the month.

    "While we do not believe today's low commodity prices are sustainable long term, we are committed to living within cash flow until they recover," said Harold Hamm, Chairman and Chief Executive Officer. "We are reducing capital expenditures to protect our balance sheet and to preserve the value of our world-class assets until commodity prices improve."

    The Company's 2015 guidance remains unchanged.  Continental continues to expect production growth of 19% to 23% for the year, compared with 2014, but now expects to exit the year with production in a range of approximately 200,000 to 215,000 barrels of oil equivalent (Boe) per day. The bottom end of the range is 10,000 Boe per day below its previously stated outlook, reflecting an increase of inventory from the previously expected 100 gross operated wells that are drilled but not yet completed at year-end 2015 to the current estimate of 160 gross wells drilled but not yet completed at year-end 2015.  Maintenance capital to maintain 2016 production at the 2015 exit rate is now projected to be $1.6 to $2.0 billion.

    "We continue to focus on achieving cash flow neutrality in the current environment," said John Hart, Chief Financial Officer. "We believe it is in the interest of shareholders to defer new production growth until we see stronger commodity prices. We can achieve this objective due to our focus on costs, operating efficiencies and having a large portion of our high-potential leasehold already held by production," he said.

    "We are pleased with our results year-to-date, and operating performance versus guidance remains strong, especially in terms of production growth and cost controls. Annual production growth is expected to be toward the top end of our guidance range, even with deferred completions," he said. "Production expense per Boe and general and administrative expense per Boe are also trending positively toward the low end of guidance. Lower capex spending and excellent operating performance should position us to be cash flow neutral for the remainder of 2015 in an environment of approximately $50 per barrel for West Texas Intermediate. In a $40 per barrel WTI environment, our updated spending outlook would result in capital expenditures being approximately $150 million over cash flow.  We continue to have ample liquidity with approximately $1.3 billion available under our credit facility at August 31, 2015, basically in line with our June 30, 2015 balance."

    Attached Files
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    Investors Flee Biggest U.S. Crude Oil Fund as Volatility Surges

    A net 19.3 million shares of the biggest exchange-traded fund that tracks oil were sold back, a weekly record since the ETF’s inception in 2006, according to data compiled by Bloomberg. Total shares outstanding dropped to 176 million on Sept. 4, the lowest since Aug. 11.

    Investors withdrew from the fund as oil’s trading volatility reached the highest since March last week. The weekly redemption represents an outflow of $290.9 million, the most since December 2013.

    “There’s a lot of volatility in the market,” said Carl Larry, head of oil and gas for Frost & Sullivan LP in Houston. “We are seeing money being pushed away from oil.”

    The CBOE Crude Oil Volatility Index, which measures the volatility of the ETF, increased to 57.51 on Sept. 1, the highest since March 17.
    The U.S. Oil Fund, which holds West Texas Intermediate futures, slipped 0.4 percent Tuesday to $15.02. WTI crude lost 0.2 percent to $45.94 a barrel on the New York Mercantile Exchange.
    The ETF is down 26 percent this year, compared with a 14 percent decline for front-month futures. The fund’s performance is trailing oil because the market is in contango, meaning futures for delivery in later months trade higher than nearby contracts. The structure erodes gains as the ETF sells the expiring contract and buys the more expensive next-month futures.
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    Oil Default Wave Seen Spreading to China With 40-Cent Bonds

    The wave of defaults and debt restructuring hurting oil bonds around the world looks set to reach China.

    Notes of oil services firms are the nation’s worst performers this quarter with a 5.9 percent slide amid record industry debt and slumping crude prices, according to a Bank of America Merrill Lynch index of foreign-currency notes. Explorers have lost 1.4 percent. Some private-sector companies have dropped to distressed levels with the 2019 notes of Honghua Group Ltd. at38.5 cents on the dollar and Anton Oilfield Services Group’s 2018 paper at 44 cents.

    China’s quest to secure resources for the world’s second-biggest economy has sparked a fourfold expansion in petroleum industry debt in the past decade to 1.3 trillion yuan ($205 billion). Crude’s14 percent slide this year is adding to stress on energy firms’ finances. Standard & Poor’s says oil and gas companies account for 28 percent of all corporate defaults globally this year, and that they are among the most vulnerable to failures in coming months.

    “We see the possibility of a default scenario for private Chinese oil companies in the next year or so given their stretched liquidity," said Annisa Lee, credit analyst at Nomura Holdings Inc. "Some of them will run into trouble if banks don’t roll over their loans. They could resort to debt exchanges to cut coupon costs as well as to extend maturities.”

    Obligations at Chinese oil and gas companies have shot up to 29 percent of assets from 19 percent, data compiled by Bloomberg show. The situation is especially tough for private firms because they have less access to funding than state-owned peers, saidSandra Chow, a high-yield bond analyst in Singapore at CreditSights Inc.
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    UK oil, gas output to rise for first time in 15 years

    British oil and gas production is set to rise for the first time in 15 years this year as investment in more efficient technology pays off, the industry's association said on Wednesday.

    Britain's oil and gas output has more than halved in the past 10 years due to easy-to-reach resources running low and a lack of investments in new areas.

    This trend will likely reverse this year when production is expected to rise 3-4 percent, the first increase since Britain's oil and gas output peaked in 2000, lobby group Oil & Gas UK said.

    "Despite a very difficult business climate we are beginning to turn a corner," Mike Tholen, economics director for Oil & Gas UK, told Reuters at the launch of the association's yearly economic report.

    "We are turning a corner in terms of the massive spend on North Sea fields pulling production up with it and on top of that we're now begininig to get to terms with the cost base to find ways to make businesses cope in a much weaker environment."

    Preliminary government data showed oil and gas output over the first six months of this year rose 3 percent compared with 2014.

    The increase comes after years of investments in new technologies that have meant new fields are run more efficiently.

    However, the recent slump in oil prices has tightened oil companies' purse strings and Oil & Gas UK expects capital expenditure to fall to 10-11 billion pounds ($16.91 billion)this year, down from 14.7 billion pounds last year.

    Low oil prices in combination with high operating costs in the North Sea have caused many operators to question the economic viability of continuing to run some of their oldest fields.

    Maersk Oil said last month it would file for early decommissioning permission for its Janice field in the North Sea.

    "Inevitably there will be some more fields decommissioned as a result of low prices," Tholen said.

    "It's a significant concern but it's not the edge of the cliff."

    Bringing down operating costs in the North Sea is a key priority for operators and the British government which hopes a rebound in production will also increase tax revenue.

    Since the start of oil production in the 1970s, the industry has paid over 330 billion pounds in taxes to the British government.

    Oil & Gas UK expects operating costs to fall by more than 2 billion pounds, or 22 percent, by the end of 2016 as companies work more efficiently.
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    Japan Aug average LNG spot price rises to $8.10/ down again

    Liquefied natural gas (LNG) spot prices for buyers in Japan, the world's top consumer, averaged $8.10 per million British thermal units (mmBtu) in August, up 20 cents from the previous month, trade ministry data showed on Wednesday.

    The rise was largely in line with Asian spot prices, which were mostly higher last month than they were in July.

    The price of Asian spot cargoes was around $7.50 per mmBtu on Friday, down 50 cents from a month ago, underscoring how markets have shifted into an era of oversupply.

    The trade ministry surveys spot LNG cargoes bought by Japanese utilities and other importers, while excluding cargo-by-cargo deals linked to benchmark prices such as the U.S. natural gas Henry Hub index.

    It only publishes a price if there is a minimum of two eligible cargoes reported by buyers. Prices are converted to a delivery-ex ship basis.

    The following table lists the monthly average prices in mmBtu for contracted and arriving spot LNG cargoes.
      Year   Month   Contract price   Arrival price
      2015     Aug            $8.10           $7.70
      2015    July            $7.90             n/a
      2015    June            $7.60           $7.60
      2015     May              n/a             n/a
      2015   April            $7.60           $7.90
      2015     Mar            $8.00           $7.60
      2015     Feb            $7.60          $10.70
      2015     Jan           $10.20          $13.90
      2014     Dec           $11.60          $15.10
      2014     Nov           $14.40          $14.30
      2014     Oct           $15.30          $12.40
      2014    Sept           $13.20          $11.30
      2014     Aug           $11.40          $12.50
      2014    July           $11.80          $13.80
      2014    June           $13.80          $15.00
      2014     May           $14.80          $16.30
      2014   April           $16.00          $18.30
      2014   March           $18.30             n/a
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    Repsol Postpones Oil Refinery Work in Spain as Margins Climb

    Repsol SA, Spain’s largest oil company, said it will postpone maintenance at its joint-biggest refinery, fueling speculation that collapsing crude prices are boosting margins and encouraging European plants to limit routine works.

    The company will carry out work at the 220,000 barrel-a-day plant on the Mediterranean Sea at some point in 2016 rather than in the fourth quarter, spokesman Kristian Rix said by phone on Tuesday. He didn’t say if the entire plant will halt or give a reason. The works, when they happen, will last about 45 days and take about 110,000 barrels a day offline, according to Wood Mackenzie Ltd., an Edinburgh-based energy consultant.

    The oil-price slump has cut costs for refiners while simultaneously helping boost demand for fuels, buoying profits. From the North Sea to West Africa, crude supply in the Atlantic is poised to jump next month, according to loading programs obtained by Bloomberg. Repsol’s refining margins rose to $9.10 a barrel in the second quarter from $3.10 a barrel a year earlier, the Madrid-based producer said July 30.

    “They must make hay while the sun shines,” said Steve Sawyer, a consultant at FGE Energy in London. “It doesn’t come around very often for a refiner, so it doesn’t surprise me at all.”

    Low oil prices and demand for heating fuel will support margins for the rest of the year, Lydia Rainforth, an analyst at Barclays Plc, said in a research note Tuesday. Its estimate for margins in northwest Europe, the region’s oil hub, was $5.10 a barrel last week, compared with a negative figure for last year. Its estimate for the Mediterranean was $6.80 a barrel last week.
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    Reversed REX Pipeline from Marcellus/Utica to Midwest Will Expand


    On August 1, the Rockies Express Pipeline reversed its direction on a portion of the pipeline called Zone 3 and began flowing 1.8 billion cubic feet per day (Bcf/d) of Marcellus and Utica Shale gas to the Midwest . REX Zone 3 stretches from Clarington, OH to Mexico, MO (see the map). Further good news. The Federal Energy Regulatory Commission (FERC) has granted a favorable Environmental Assessment (EA) for REX to beef up capacity along Zone 3 by expanding two existing compressor stations and building three new compressor stations along the Zone 3 section.
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    Noble Energy raises third-quarter sales volume outlook

    Noble Energy today provided new third quarter 2015 sales volume guidance, with the midpoint of the Company's new expectation representing a 10 thousand barrel of oil equivalent per day (MBoe/d) increase over the midpoint of its prior estimate. Following strong volume performance in July and August, the Company has raised its anticipated third quarter 2015 sales volume range to between 360 and 370 MBoe/d. The increase was driven primarily by enhanced well performance and infrastructure expansion in the DJ Basin. In addition, strong production is resulting from the Company's assets in Texas (Eagle Ford and Delaware), Marcellus Shale, Israel, and Equatorial Guinea. Natural gas sales in Israel set a record in August as the Company's Tamar asset averaged more than one billion cubic feet of natural gas per day, gross, for the month.

    Gary W. Willingham, the Company's Executive Vice President of Operations, commented, "The expansion of natural gas processing systems in Greater Wattenberg has continued to unlock the productive capacity of our DJ Basin operations. Production from our legacy vertical wells and older horizontal wells are benefitting from substantially reduced line pressures and improved third-party plant uptime. We have also continued to materially grow production from the East Pony Integrated Development Plan, which is primarily crude oil and is entirely handled by Noble Energy owned midstream assets. Strong production performance in our business is resulting from execution momentum and the benefits of operating a high-quality and diversified portfolio, despite reducing capital investment materially quarter over quarter throughout the year."

    The third-party Lucerne-2 plant has been tested to a nameplate capacity of 200 million cubic feet of natural gas per day (MMcf/d). Addition of the Lucerne-2 plant has expanded total system natural gas processing capacity to 840 MMcf/d, resulting in line pressures being reduced by between 50 and 100 psi in various parts of Greater Wattenberg while also providing additional capacity for future growth. Noble Energy's net DJ Basin production has averaged approximately 115 MBoe/d through the first two months of the third quarter of 2015.
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    Expectations of Saudi oil shake-up stir uncertainty

    A shake-up of Saudi Arabia's oil leadership by King Salman has introduced a new element of unpredictability to its energy policymaking at a moment when Riyadh is grappling with slumping crude prices and its war in neighbouring Yemen.

    State oil giant Aramco has been without a permanent chief executive since April, when Khalid al-Falih was made health minister, and the old Supreme Petroleum Council, where energy policy was historically made, was abolished in January.

    While the world's top crude exporter has always prized stability and consistency in crafting oil policy, the changes, alongside a shift in market strategy that contributed to the world price slump, have left analysts and traders guessing as to King Salman's long-term vision.

    The main tenets of Saudi oil policy - maintaining the ability to stabilise markets via an expensive spare-capacity cushion and a reluctance to interfere in the market for political reasons - are still set in stone, say market insiders.

    But the uncertainty has led to speculation over the fate of both veteran Oil Minister Ali al-Naimi and the wider composition of the kingdom's energy and minerals sectors, with rumours abounding that a sweeping restructure could be imminent.

    "There will be changes (at the oil ministry), but no one knows when or what will happen next. It could be tomorrow, next week or a month from now," said a Saudi insider.

    "The decisions are being taken by a small circle of people and a few advisers."

    The key person in that small circle is Prince Mohammed bin Salman, the young deputy crown prince who without having any previous oil experience has emerged since his father's accession to power as the most powerful figure in Saudi economic and energy policy.

    The prince heads both an economic development supercommittee and a new council overseeing Aramco, making him the first royal ever to directly supervise the state oil giant, the world's biggest energy company.

    The sense of unpredictability has only been sharpened by the wider geopolitical and market climate.

    "It's anybody's guess what will happen next," said a Western diplomat in Riyadh.
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    In Canada's prairies, crude slump puts first oil patch in reverse

    Amid the corn and canola fields of eastern Saskatchewan, oil foreman Dwayne Roy is doing what Saudi Arabia and fellow OPEC producers are loath to do: shutting the taps on active wells.

    Inside a six-foot-square wooden shed that houses a basic hydraulic pump, the Gear Energy Ltd employee demonstrates how shutting down a conventional heavy oil well in this lesser-known Canadian oil patch is as simple as flipping a switch. His company has already done so hundreds of times this year, making the Lloydminster industry among the first in the world to yield in a global battle for oil market share that has sent crude prices tumbling to six-year lows.

    Gear Energy Ltd, has idled up to 500 of its least efficient wells this year, many of them in the past weeks. Some cost of up to C$28 ($21.22) a barrel to operate. It costs another C$7 in royalty and transportation fees to get the crude, among the densest in the world, to regional rail hubs - where it was fetching barely $20 a barrel during last month's lows.

    "We ask every day: is this well making money today? Will it make us money going forward?" says Roy.

    Such questions have been nagging oil industry veterans since crude prices started sliding last year as a result of a supply glut caused by a battle between exporters' group OPEC and North American shale oil producers.

    Energy firms around the world have responded by laying off thousands of workers and slashing spending by billions of dollars. But producers here are the first to do what the global market needs to rebalance: turn off the taps.

    All told, at least 8,000 barrels per day (bpd) of local heavy conventional oil production has been idled by firms such as Gear, Canadian Natural Resources Ltd and Baytex Energy Corp this year.

    So far their actions are merely symbolic - the output loss represents less than a rounding error in a global market that produces 95 million barrels each day.

    Yet if prices stay low, other firms such as Husky Energy and Devon Energy could also shut in similar wells that produce conventional heavy crude, which accounts for roughly 11 percent of Canada's 3.7 million bpd output.
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    Gazprom, Shell talk Sakhalin third LNG train

    Gazprom’s Alexey Miller, and Ben van Beurden, Chief Executive Officer of Shell met in Vladivostok where they discussed a variety of issues of the strategic cooperation development.

    During the meeting, particular attention was given to the project for constructing the third LNG train within the Sakhalin II project as well as the asset swap deal-related issues, Gazprom said in a statement.

    Within the signed agreement of strategic cooperation a decision was made to form a joint coordination committee for reviewing a whole range of issues on the priority lines of activity, according to the statement.

    As part of Sakhalin II, Russia’s first LNG plant with the annual capacity of 9.6 million tons of LNG was commissioned in 2009.

    Sakhalin Energy is the Sakhalin II project operator with the ownership distributed among Gazprom (50 per cent plus one share), Shell (27.5 per cent minus one share), Mitsui (12.5 per cent) and Mitsubishi (10 per cent).

    On June 18, Gazprom and Shell signed a memorandum on implementing the project for constructing the third train at the LNG plant within Sakhalin II.
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    Woodside bids for Oil Search in Asia’s biggest energy offer

    Woodside Petroleum Ltd. offered A$11.65 billion ($8.1 billion) in stock for Oil Search Ltd. as it aims to take advantage of a collapse in oil prices in what would be the biggest energy deal between non-related companies in the Asia-Pacific region.

    Woodside offered one share for every four Oil Search shares, which amounts to a premium of about 14 percent based on Oil Search’s closing price on Monday. Oil Search rose 16 percent to A$7.835 and Woodside slid 2.9 percent to A$29.68 as of 1:12 p.m. Sydney time. Oil Search was one of the few oil and gas companies to report a jump in profit in the first half, driven by its Papua New Guinea liquefied natural gas project.

    “The market is sending a pretty clear signal that Woodside’s offer is undervaluing the Oil Search stake in the PNG LNG project, which is really one of the most competitive LNG investments in the whole Asia Pacific region,” Angus Nicholson, a market analyst at IG Markets Ltd. in Melbourne, said by phone. “Not to mention Woodside will need PNG government support, so that could be tricky.”

    Papua New Guinea’s government holds a 9.8 percent stake in Oil Search, according to data compiled by Bloomberg. Woodside Chief Executive Officer Peter Coleman identified the nation as a prospective target area in May last year after he pulled out of a planned investment in Israel. Oil Search has a 29 percent interest in the PNG project, which is operated by Exxon Mobil Corp.

    “While Oil Search will consider the proposal, it should be noted that Oil Search has a material equity position in the world class PNG LNG project and attractive, low cost, LNG development opportunities,” the company said in a statement. “Oil Search shareholders are entitled to an offer which adequately reflects this value potential.”

    The implied premium of 13.6 percent compares with the average 13.7 percent premium of three similar-sized global oil exploration and production acquisitions in the past year, according to Bloomberg data.

    Companies have announced $172 billion of oil and gas acquisitions this year, up from $123 billion a year earlier, data compiled by Bloomberg show. Brent crude, the benchmark for half the world’s oil, has tumbled more than 50 percent in the last year.

    The proposal sparked a rally in the shares of other Australian energy companies, with Santos Ltd. rising as much as 13 percent in Sydney trading and Origin Energy Ltd. surging as much as 6.6 percent.

    Oil Search appointed Morgan Stanley and Allens as advisers. Woodside is being advised by Bank of America Corp., Gresham Advisory Partners Ltd. and Herbert Smith Freehills LLP.

    Oil Search “is not in a hurry with a manageable balance sheet and some of the lowest-cost LNG in the region,” Cristobal Garcia, a Hong Kong-based analyst at Sanford C. Bernstein & Co., wrote in a report, adding that he sees potential for a 27 percent premium. “This could turn into a bidding war” with Total SA and Exxon Mobil involved, he wrote.

    The premium offered by Woodside is probably too low, and the bid faces a number of hurdles, Nik Burns, a Melbourne-based analyst at UBS Group AG, wrote in a research note. Oil Search’s LNG expansion projects rank in the top two or three undeveloped conventional developments globally, according to UBS.

    “The transaction makes sense for Woodside,” implying an oil price of about $68.30 a barrel, Burns wrote. “We don’t see Oil Search accepting an offer at this level.”

    Attached Files
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    Oil Extends Decline as Russia Rules Out Deal With OPEC on Output

    Oil declined for a second day after another Russian official ruled out cooperation on production cuts with OPEC, adding to signs that a global oversupply will persist.

    Futures lost as much as 2.4 percent in London. Russia won’t join the Organization of Petroleum Exporting Countries and isn’t able to cut production in the same way, said OAO Rosneft Chief Executive Officer Igor Sechin. Russia’s Deputy Prime Minister Arkady Dvorkovich said last week there is no way the country can artificially reduce supply.

    Oil has fluctuated the past three weeks as concerns over slowing demand in China fueled volatility in global markets. Prices are down more than 25 percent from this year’s closing peak in June on signs the surplus will persist. OPEC members are sustaining output and U.S. crude stockpiles remain almost 100 million barrels above the five-year seasonal average.

    “Russia’s comments on the market are having some impact on prices today,” Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB, said by phone. “There’s some positive data coming from U.S. rig count for example, and that could be positive for oil prices this week.”

    Brent for October settlement lost as much as $1.19 to $48.42 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $3.41 to West Texas Intermediate. Prices have decreased 15 percent this year.
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    Gazprom Boosts Defense of EU Market Share With First Auction

    Gazprom PJSC will this week hold auctions to sell gas in Europe as the world’s biggest exporter of the fuel takes unprecedented steps to defend its market share in the region.

    The Moscow-based company started the sales at 10 a.m. Moscow time Monday and will hold three auctions for delivery into Germany, complementing its decades-long practice of long-term contracts mainly linked to oil. Gazprom is seeking to boost supplies to Europe and Turkey by 7 percent this year to make up for an anticipated 30 percent drop in the price it will receive for its fuel, Valery Nemov, a deputy department head at the company’s export arm, said on a conference call Sept. 1.

    Gazprom faces falling prices in Europe, its biggest market by revenue, and plunging deliveries to the former Soviet Union after Ukraine stopped imports from Russia in July. While Europe’s appetite for the company’s fuel rebounded after the oil drop was priced into contracts, competition from sources including liquefied natural gas has intensified amid stagnating demand.

    “The move represents a fairly historic shift in Gazprom’s marketing of gas to Europe,” Trevor Sikorski, head of gas, coal and carbon at Energy Aspects Ltd., a London-based consultant, said by e-mail Sept. 2. “It is one of the most high profile interactions Gazprom has had with the concept of putting spare gas into the spot market. There are some good reasons why Gazprom is making this change now.”

    The Russian state-owned company, which supplies about 30 percent of Europe’s gas, will through Sept. 10 seek buyers for 3.24 billion cubic meters (114 billion cubic feet) for delivery in the six months from Oct. 1, according to documents published on the website of Gazprom Export. The price will be fixed and determined by the auction.

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    Israel lawmakers approve gas development deal, obstacles remain

    Israel's parliament on Monday approved a deal that would enable the development of three offshore natural gas fields, although significant regulatory hurdles remain.

    In a non-binding vote, lawmakers voted 59-51 in favour of an outline plan that would allow the large Leviathan gas field and two smaller ones to be developed by a consortium led by Noble Energy and Israel's Delek Group.

    But for the government and companies to move forward with the framework agreement, which was opposed by the competition regulator, parliament still needs to approve a measure that transfers power to override the regulator from the Economy Ministry to the cabinet.

    It was unclear when such a vote would take place since Prime Minister Benjamin Netanyahu may not have the support of enough of his coalition partners to drive through such a move. Economy Minister Aryeh Deri has said he wants to wait until a new regulator is in place.

    Netanyahu has pushed hard for the deal despite objections of the regulator, who resigned over the matter, that Noble and Delek would hold most of Israel's natural gas reserves.

    The companies also own large stakes in the Tamar field, which started production in 2013 and has reserves of 10 trillion cubic feet (tcf).

    At 22 tcf, Leviathan was initially slated to begin production in 2018 with most of the gas earmarked for exports, but that will likely not be the case.

    Noble in a statement urged Israel's government to implement the deal as quickly as possible. "After final approval we can complete the required export contracts, rebuild the work teams ... and raise the external financing needed," it said.

    Monday's vote, which could be aimed at preventing Noble from seeking international arbitration, comes just a week after Italian energy group Eni said it had found 30 tcf of gas in the Zohr field off Egypt, muddying the waters for Israel's gas sector.

    As part of the deal initially reached in June, Noble and Delek would be allowed to keep ownership Leviathan, but would be required to sell off other assets, including stakes in Tamar.

    Critics say the deal still leaves too much of the gas reserves in the hands of Noble and Delek, which could keep prices high.

    The agreement has become the focus of national debate with critics saying Netanyahu was putting energy profits above what could be a windfall for the state and citizens hoping to lower energy prices. But Netanyahu believes the more pressing issue is to get the gas out of the ground and fast-track development of Israel's natural resources.

    Netanyahu, who holds a one-seat majority in parliament, told reporters after the vote: "There is one obstacle left and we will overcome it."

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    Fort Nelson First Nation wins legal challenge stopping Nexen water license

    Fort Nelson First Nation has won a major legal challenge against the BC government and Nexen Inc., an upstream oil and gas company. The first long-term water license granted in the Horn River Basin for shale gas fracking has been cancelled, effective immediately, by the Environmental Appeal Board.

    The license, issued to Nexen in 2012, authorized the company to pump millions of cubic meters of water from Tsea Lake, a small lake in FNFN territory, each year until 2017.

    'Granting this license was a major mistake by the Province,' said FNFN Chief Liz Logan. 'Our members have always used the Tsea Lake area in our territory to hunt, trap, and live on the land. The company pumped water out of the lake, even during drought conditions. There were major impacts on the lake, fish, beavers, and surrounding environment. Water is a huge concern for us, and for all British Columbians. By approving this license, the Province demonstrated it is not protecting the public interest in water.'

    After three weeks of hearings involving expert reports, scientific literature, and other evidence, the EAB has rejected the license on two grounds:

    The EAB found that the science behind the license was fundamentally flawed in both concept and operation.
    The EAB found that the Province failed to consult FNFN in good faith and breached its duty to consider the potential impacts on FNFN.

    The EAB said that BC government officials showed a lack of good faith in their dealings with FNFN on the license, and that the consultation process was 'seriously flawed.' The EAB found that the Province breached its constitutional duty to consider the potential adverse effects on FNFN.

    The EAB also rejected the Province's conclusion that the license would have no significant environmental impacts, finding that the license was fundamentally flawed in concept and operation. It found that the company's water withdrawal scheme was not supported by scientific theory or adequate data as it was based on incorrect, inadequate, and mistaken factual information and modelling results.
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    Iran to use Spain’s LNG terminals for EU exports

    Iran says it has received a proposal from Spain to use its liquefaction facilities to export LNG to Europe.

    Iran’s Oil Minister Bijan Zangeneh has told reporters that the proposal was raised during his meeting with the visiting Spanish Minister of Industry, Energy and Tourism José Manuel Soria López.

    Zangeneh emphasized that discussions between Tehran and Madrid over the same issue will continue in the near future.

    Iran was previously pursuing several major LNG projects that included Pars LNG, Persian LNG and Iran LNG. But they were later abandoned as complications grew – mostly as a result of US-sanctions that prohibit investments of liquefaction enterprises in Iran.

    A recent alternative for Iran – albeit less spoken of - is to pipe its natural gas to Oman for liquefaction processing and export the LNG thus obtained to international markets.

    Spain has presently turned into a major hub for reloading LNG for re-exports to Europe and elsewhere.

    In 2013, Spain reloaded 3.8 bcm of LNG cargo (equivalent to 4% of Russian volumes to Europe) back onto ship for export to Latin America, Asia, and Europe.

    Analysts believe that Spain’s proposal – as explained by Zangeneh – may involve the same reloading scheme through which future LNG supplies from Iran will be sent to other markets in Europe and beyond through Spanish regasification terminal.

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    Islamic State takes Syrian state's last oilfield - monitor

    Islamic State takes Syrian state's last oilfield - monitor

    Islamic State fighters have seized the last major oilfield under Syrian government control during battles over a vast central desert zone, a group monitoring the conflict said on Monday.

    The Jazal field was now shut down and clashes were ongoing east of Homs, with casualties reported on both sides, the Britain-based Syrian Observatory for Human Rights said, without giving dates or more details.

    Syria's army said it had repulsed an attack in the same area but did not mention Jazal or comment on how much of the country's battered energy infrastructure remained under its sway. It said it killed 25 fighters, including non-Syrian jihadists.

    "The regime has lost the last oilfield in Syria," said the Observatory, which tracks violence through a network of sources on the ground.

    Commentators on social media said fighting had surged in the last two to three days and the rebels had taken the oilfield on Sunday.

    Jazal is a medium-sized field that lies to the north west of the rebel-held ancient city of Palmyra, close to a region that holds Syria's main natural gas fields and multi-million-dollar extraction facilities.

    The army, which has been fighting to retake the city and surrounding areas since they fell in May, had managed to secure the oil field's perimeter in June.

    The Observatory also said U.S.-led coalition bombing raids in areas in the militant's de facto capital of Raqqa had killed at least 16 militants, including five foreign jihadists.
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    Arab Gulf producers to meet Wednesday to discuss unified priceng

    Arab Gulf countries will meet Wednesday to discuss possibility of unifying oilproducts pricing, says Kuwait's oil ministry...Platts Oil

    Gulf oil ministers to meet on Thursday amid price slide

    Gulf oil ministers are due to meet this week in Qatar for an annual meeting, in the first gathering by the heavyweight crude producers since the latest slide in oil prices.

    But while the price drop is not on the agenda for the scheduled meeting of the six-nation Gulf Cooperation Council (GCC) - Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman, it will be a chance for oil ministers to air views on the market.

    Comments by Saudi Arabia Oil Minister Ali al-Naimi, in particular, will be closely scrutinised. The oil minister of the world's top crude exporter has made no public comment on prices since June 18, when the oil price was above $63 and he said he was optimistic about the market in coming months.

    Oil prices have more than halved since peaks hit in summer last year due to abundant supplies and a policy change by producer group OPEC to defend market share and discourage competing supply from rival producers, rather than cut its own output. Saudi Arabia and its Gulf allies led the policy shift.

    "The Doha meeting is central given what the international petroleum industry is going through from volatility and to push towards stability," Kuwait's oil ministry tweeted in a statement on Monday.

    The ministry's statement did not say crude prices would be discussed during the ministerial meeting on Sept. 10, where topics such as unifying domestic gasoline prices, climate change and cooperation in renewable energy sector are on the official agenda.

    Venezuelan President Nicolas Maduro said on Saturday he had suggested to the Emir of Qatar a summit of heads of state of OPEC countries to defend oil prices.

    Last year, the GCC oil ministers held their meeting in Kuwait. Oil prices were trading then at slightly below $100 a barrel, a level which had long been favoured by OPEC members before last year's policy shift.

    Saudi Arabia, Kuwait, UAE and Qatar are the main Gulf OPEC members. Oman and Bahrain are both non-OPEC members.

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    CNPC adds more than 160 Bcm of shale gas reserves in Sichuan basin

    As examined and approved by the Ministry of Land and Resources, CNPC has added 207.87 sq km of new shale gas bearing areas in well blocks of Wei-202, Ning-201 and YS108 in Sichuan basin.

    The areas have been added with proven original gas in place of 163.53 Bcm and technically recoverable reserves of 40.88 Bcm. All the three well blocks are located in the national shale gas demonstration zone in the Sichuan basin.

    By Aug. 27, 47 wells have been put into production in the newly proved areas, producing 3.62 MMcmd, enough for domestic gas use of 2.8 million families.

    This is the first time for CNPC to submit proven shale gas reserves to the Ministry of Land and Resources. It marks a new breakthrough in China's unconventional gas explorationand development, and is significant to promoting the rapid development of China's gas industry and ensuring national energy security.
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    Statoil declares Smørbukk South extension in operation – producing from 'tight' reservoir

    Statoil declares Smørbukk South extension in operation – producing from 'tight' reservoir

    Two and a half years after project sanction, production commences from Smørbukk South Extension. The offshore project at the Åsgard field is a world class project in production from tight formations.

    Through a combination of wells with long well sections and new completion technology, oil and gas are now produced from a reservoir previously regarded as not feasible. This pioneer project opens up for other similar developments.

    The reserves in the Smørbukk South Extension project are estimated to be 16.5 million bbl oil equivalent and will contribute significantly to the production from the Åsgard A FPSO in the times ahead.

    The field was discovered in 1985, but due to low permeability, the volumes were regarded as not economical to develop. The hydrocarbons in the Smørbukk South Extension project are located in reservoirs with varying porosity ranging from “bricks to tiles”.
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    Middle East oil outflows tumble with VLCCs idle

    A significant fall in demand for the transport of crude has caused Middle East outflows of oil to tumble to their lowest levels since before the summer, according to Platts ship-tracking tool cFlow.

    This has resulted in numerous VLCCs being idled for longer while ample supply and low bunker fuel prices have continued to push down freight rates, the analysts agency said.

    Over the week to Wednesday, sailings from Saudi Arabia, Iraq's Basrah, Iran and the wider Middle East fell to their lowest levels since before the start of June, according to cFlow data, as refinery run cuts across parts of Asia weakened demand.

    Departures from Saudi Arabia fell to 24 this week, from 30 last week, while total sailings for August slipped to a four-month low of 125 VLCCs, down from 137 in July.

    Five tankers left over the week from Iraq's southern terminals, while in August, a total of 36 departed, up from 34 in July.

    The slight increase in VLCC sailings was in contrast to actual crude oil exports from Basrah on all ship-types, which fell in August, to 3.021 million b/d, a drop of 43,000 b/d from July.

    Oil ministry spokesman Asim Jihad attributed the fall to a technical fault in the export system.

    Iranian weekly sailings dipped to three, the lowest since mid-July, while total departures for August fell to nine, an all-time low for the year thus far.

    The volume of outflow from the Middle East is typically lower than the count of ships leaving the region's individual ports because over a quarter of VLCCs tend to co-load.
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    U.S. Oil Rig Count Falls to 662 in Latest Week

    The U.S. oil-rig count fell by 13 to 662 in the latest week, breaking six consecutive weeks of increases, according to Baker Hughes Inc.

    The number of U.S. oil-drilling rigs, which is a proxy for activity in the oil industry, has fallen sharply since oil prices headed south last year. The rig count dropped for 29 straight weeks before climbing modestly in recent weeks.

    Despite recent increases, there are still about 59% fewer rigs working since a peak of 1,609 in October.

    According to Baker Hughes, gas rigs were unchanged at 202.

    The U.S. offshore rig count is 33 in the latest week, up three from last week and down 32 from a year earlier.

    For all rigs, including natural gas, the week’s total was down 13 to 864.
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    Saudis may follow UAE and cut fuel subsidies - paper

    Saudi Arabia was looking more closely at cutting gasoline subsidies, a move it has been studying for years, after the United Arab Emirates did so last month, with both states trying to save money in an era of cheaper oil, a newspaper reported.

    Saudi domestic gasoline prices are some of the lowest in the world. Allowing them to rise would be one of the biggest economic reforms in the country for years and a highly politically sensitive one as many Saudis rely on cheap fuel.

    United Arab Emirates let gasoline prices rise 24 percent last month.

    Al Watan's Saturday edition quoted unnamed sources as saying Saudi Arabia cannot leave gasoline prices at ultra-low levels indefinitely because that would hurt the economy.

    The newspaper did not elaborate on when the government might make a decision and gave no details on the possible reform.

    However, a source in the Gulf oil industry told Reuters that Saudi officials were "seriously" thinking about reducing fuel subsidies gradually.

    Riyadh would probably not act as aggressively as the UAE because of political and economic considerations, the source said. He said UAE officials had advised Riyadh to "start small", possibly raising prices just a few percent.

    Saudi energy officials could not immediately be reached for comment.

    Unleaded gasoline costs only about 15 U.S. cents per litre in Saudi Arabia, the world's lowest price after Venezuela, according to website

    Economists estimate removing gasoline subsidies would save the kingdom nearly 30 billion riyals ($8 billion) annually, Al Watan reported. That would be a significant saving in a budget deficit which analysts estimate could total $120 billion or more this year if crude prices stay low, slashing state revenues.

    The reform could also help hold back burgeoning consumption. Domestic oil product demand rose 5.1 percent year-on-year to a record 2.98 million barrels per day in June, according to the Joint Oil Data Initiative.

    Al Watan quoted Fahad al-Anazi, deputy chairman of the economic and energy committee in the Shura Council, a top state advisory body, as saying any changes to subsidies would have to be accompanied by other measures to preserve public welfare such as providing cheaper public transport.

    This implied major reform might still be years away. The government is building public transport systems but the Riyadh metro is only due to be completed in 2019, for example.

    Because higher gasoline prices could fuel inflation in other goods, Anazi suggested the government might introduce new subsidies for some food and consumer items, or let poorer people keep their fuel subsidy.

    Such subsidies would be provided to Saudi citizens rather than the large number of foreigners in the country, he said.

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    Russia Targets One Third Increase In Oil Output In 20 Years

    Russia could increase its oil output by a third to over 14 million barrels per day (bpd) in the next two decades, it's most powerful oil executive said as Moscow targets growing Asian markets.

    Russia is already the world's top oil producer, steadily pumping near its post-Soviet highs of 10.7 million bpd thanks to the weak rouble which offsets the impact of low oil prices by reducing production costs.

    A proposed increase in Russia's oil production signals Moscow would not act to support falling prices, a stance similar to OPEC, in a move to defend its market share.

    "Our position is that Russian annual oil production in the future may reach 700 million tonnes (14 mln bpd) and higher," Igor Sechin, Chief Executive of the world's top listed oil firm by output, Rosneft, told the Eastern Economic Forum.

    To reach the goal and beat Soviet records of over 11 million bpd reached in late 1980s Russia needs to increase exploration drilling, boost hard-to-extract resources and speed up development of Arctic offshore, Sechin said.

    Russia's rapid turn to Asia comes at a time when ties with the West are at their lowest point since the Cold War because of the conflict in Ukraine. Russia is under sanctions, which also ban western firms from helping to tap Arctic offshore and shale oil resources.

    Russia plans to at least double its oil and gas flows to Asia over the next 20 years, sending at least a third of its oil and a third of its gas eastwards by then.

    That is a swing away from traditional westward routes that date back to Soviet times when Europe was the only market capable of absorbing Russian energy.

    Sechin said Russia can boost gas exports to China to as much as 300 billion cubic metres a year. Now, gas is being exported only by sea from the Sakhalin-2 LNG plant, in the Pacific.

    China got 0.2 billion cubic metres of gas from Russia last year, in a form of LNG, according to BP data. Pipeline gas should reach China by the next decade, according to Gazprom plans.

    "This means that a powerful energy bridge between Russia and Asia-Pacific region is really possible. The question is in investments... and adequate oil prices," Sechin said.

    Wang Yilin, board chairman at CNPC, to which Rosneft ships over 15 million tonnes of oil annually via one of the routes, a spur of East Siberia-Pacific Ocean pipeline, told reporters that work was ongoing to increase imports.

    "We will cooperate with Rosneft on this (crude oil supplies increase). We are good friends with Sechin," he said.

    The only top-profile western guest at the forum was the chief executive of Royal Dutch Shell, Ben van Beurden, who met Gazprom CEO Alexei Miller and discussed expansion of Sakhalin-2, Russia's sole LNG plant.

    Current oil prices of around $50 per barrel are in line with investment forecasts for Russia's largest producers like Surgut , Russia's No.4 biggest by output.

    Sechin said that production costs for Russia's largest operating fields were down to around $3 per barrel now, thanks to the weak rouble, from $7-5 over the past couple of years and are now comparable to those in the Gulf, one of the world's cheapest locations for extracting oil.

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    BP shares at risk from M&A temptation - BAML

    BP will need to buy oil and gas fields to offset falling production, which could lead it to issue equity to raise funds, Bank of America Merrill Lynch (BAML) said on Friday, cutting its rating on the oil major's shares to underperform from neutral.

    As oil prices are expected to recover only slowly over the next two years, the British oil and gas company will have to sell more assets, cut spending by an additional $5 billion and increase borrowing to maintain dividends, the U.S. bank said.

    With lower in-house growth, BP will need to acquire companies or assets. All this could result in BP issuing shares to raise funds, it said.

    "We warn of increasing M&A (merger and acquisition) risk: BP is in our view likely to replace organic with inorganic investment opportunities -- including the risk of value destruction as well as further dilution from at least partially equity-funded M&A," BAML said.

    "Should project sanctioning see further delays as we face persistently low oil prices, we believe the temptation to engage in more M&A and external reserve replacement will only grow," it added in the report published on Friday.

    BP declined to comment.

    Barclays last month rated BP's shares "overweight", noting progress in cost saving. "We continue to see BP as having a differentiated opportunity to reduce costs relative to the wider peer group and anticipate further progress throughout the rest of 2015 and into 2016," Barclays said.

    Like most peers, BP has slashed spending in the face of an extended period of low oil prices.

    It has also sold more than $50 billion of assets over the past year to boost its balance sheet and to finance the costs and fines of the deadly 2010 Gulf of Mexico oil spill.

    BP, for years the subject of speculation that it could be an acquisition target, is expected to maintain its dividend payout through increased borrowing, BAML said.

    Assuming benchmark Brent crude oil prices recover to $70 a barrel by 2017, BP will still need $4 billion in additional cash savings to cover dividends, BAML said.

    "Given the industry's patchy track record on creating value from M&A, we believe investors will be rewarded for patience. In other words, we believe it pays to stand on the sidelines and evaluate any M&A proposition after it is announced," BAML said.
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    Parex increases 2015 production guidance

    Parex forecasts 2015 production to be approximately 27,400 bopd as compared to the original 2015 oil production guidance of 26,500 bopd. The revised production forecast represents an increase of 22% compared to the 2014 annual average oil production of 22,526 bopd. Fourth quarter 2015 oil production is forecast to be 28,500 bopd, an increase of 7% from production of 26,544 bopd for the fourth quarter of 2014.

    Capital expenditures for 2015 are estimated to now range between $140-$145 million dependent upon oil prices as Parex will continue to review its discretionary exploration capital programs in the context of our funds flow from operations given the lower oil price environment.

    Parex plans to drill the Taringa-1 and Tautaco-1 wells back to back to increase drilling rig efficiencies and accordingly does not expect to commence drilling the Taringa-1 well until surface negotiations are complete for the Tautaco prospect on block LLA-10, which is anticipated to be late 2015. Accordingly for the remainder of 2015 capital expenditures will likely be limited to drilling the Jacana-2 appraisal well on LLA-34, commencement of drilling the Taringa-1 exploration well, Tautaco prospect civil construction and finishing facilities work on LLA-34, Rumba and LLA-32.

    Parex is committed and able to maintain its strong balance sheet and cash reserves notwithstanding the lower oil price environment. At June 30, 2015 Parex had drawn no bank debt on its USD $200 million syndicated credit facility and had working capital of approximately USD $90 million including approximately USD $104 million of cash.
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    Chevron Pays To Keep Workers Quiet At Its Gorgon LNG Project

    Shareholders in Chevron Corporation haven’t had much to smile about lately, and they’ll have even less to smile about when they learn that construction workers on the Gorgon liquefied natural gas (LNG) project in Australia have just won a generous increase in pay and conditions.

    A year late on its timetable, and close to double its original budget, the $54 billion Gorgon project has become a case study of “how not to” in the oil world.

    But what will really rile Chevron shareholders is a 5% pay rise granted earlier today to construction workers, plus a reduction in their work rosters from 26 days on site, with nine days off, down to 23 days on and 10 days off, which is as good as second pay day

    More money and less work time for contractors and employees on the Gorgon project are in contrast to a 39% share-price fall by Chevron over the past 12-months with the only compensation for shareholders being a steady dividend of $1.07 for the June quarter.

    What also makes the latest pay and time deal more remarkable is that it comes at a time of low oil prices and the likelihood that the project will struggle to post reasonable profits, at least in its early years, thanks to the cost blow-outs and completion delays.

    Officially, Gorgon is more than 90% complete and scheduled to start delivering LNG to customers in Asia later this year. or early next.

    Why it has proved so difficult to build, and so much more than budgeted, are questions that Chevron shareholders might start probing especially after the latest pay deal for workers.

    One explanation for the extra money is that Chevron, which manages Gorgon and has a 47.3% stake in the project, simply wants to get the job finished and get some cash coming in the door, rather than continuing to bleed capital.

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    YPF, Gazprom Sign Accord to Develop Gas Projects in Argentina

    YPF SA Chief Executive Officer Miguel Galuccio and his counterpart at Gazprom PJSC Alexey Miller signed an agreement to develop projects in Argentina.

    The agreement to develop tight and shale hydrocarbons in Argentina sets out the principles for cooperation for a final accord that could be signed in the Russian spring, Sergei Kupriyanov, Gazprom’s spokesman, said after the signing ceremony Friday in Vladivostok, Russia. That may be March, according to the company.

    YPF, the state-run energy company, is seeking partners to finance development of a shale formation the size of Belgium known as Vaca Muerta that contains at least 23 billion barrels of oil. Chevron Corp. is now producing 43,000 barrels of oil equivalent a day with YPF while Dow Chemical Corp. is developing gas in an area called El Orejano. Similar deals have been signed with Malaysia’s Petroliam Nasional Bhd. and China Petroleum & Chemical Corp.

    The accord will provide “a significant impulse for the development of the republic’s oil and gas industry,” Gazprom Miller said in the statement.

    Argentine President Cristina Fernandez de Kirchner and Russia’s Vladimir Putin attended the signing of a memorandum between the two companies in April.
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    Gazprom cements gas ties with European partners

    Russia's Gazprom increased its industrial muscle in the heart of Europe on Friday, bulking up through deals on asset swaps and more pipeline capacity with energy companies keen to get back to business as usual.

    Gazprom secured access to western European gas storage as well as a deal with industry partners to double the capacity of the Nord Stream pipeline to deliver gas to Europe bypassing Ukraine, with which Russia is in a protracted conflict.

    The surprise revival of an abandoned deal between the Russian behemoth and German chemicals group BASF will give Gazprom access to German gas trading and storage in exchange for more stakes in Siberian gas fields.

    BASF's oil and gas production unit Wintershall said in a statement the partners had deemed the time ready to complete the transaction. "We are convinced that natural gas from Russia is necessary to ensure energy security in Europe," it said.

    The European Union has been trying to loosen Russia's grip on the EU's gas supply - it currently supplies one-third of the gas used by the bloc. Gazprom abandoned its South Stream pipeline project, designed to deliver gas from Russia to Europe via the Black Sea and Bulgaria, last year under EU pressure.

    The EU has instead encouraged the development of alternative supplies from the Caspian Sea and the United States.

    Now an agreement with a group of Western energy companies on the Nord Stream link via the Baltic Sea to Europe will allow it to come online in 2019, giving it a head start on the competition.

    "The fact that the global energy majors participate in the project bespeaks its significance for securing reliable gas supply to European consumers," said Gazprom Chairman Alexei Miller in a statement.

    German officials remain concerned about the situation in Ukraine, but have praised Russia's approach during talks to seal an accord over Iran's nuclear programme.

    They say Moscow has also shown signs that it is prepared to play a more constructive role in discussions over how to resolve the civil war in Syria - the source of many of the hundreds of thousands of migrants heading for Europe.

    Austrian energy group OMV, a long-standing partner of Gazprom, separately reported progress on its own asset-swap talks with Gazprom.

    OMV chief executive Rainer Seele, a German who recently joined the Austrian firm after many years at BASF, spoke of extending a "trustful partnership".

    Shell's Chief Executive Ben van Beurden, partner to the pipeline deal, stressed Europe's dependence on Russia.

    "New projects like Nord Stream 2 are needed to ensure that Europe's demand for energy is met, especially as gas production in Europe itself is falling," he said.

    Nord Stream 2 will come on line just as a rival pipeline is supposed to bring Caspian gas to Europe, boosting competition for market share in the bloc and loosening the ties between politics and energy security.

    New liquefied natural gas (LNG) exports from the United States should also be in full swing by then and likely landing on Europe's shores in significant volumes, an development set to challenge Russia's current energy dominance.

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    US Oil Export embargo days are numbered.

    WASHINGTON — Momentum is growing to lift the 40-year ban on exporting U.S. oil to foreign nations, with a federal report concluding that doing so wouldn’t raise gasoline prices. Congress could vote on proposals when it returns from its summer vacation next week.Rep. Joe Barton, R-Texas, said he has “green lights” from the House Republican leadership, and is confident the House will pass a bill on ending the ban this fall.“It is up to this Congress to examine the issue and move towards a better policy that reflects the reality of America today, not the America of 1975,” Barton said in an email.Republican presidential candidates are also seizing on the issue, with Sen. Marco Rubio, R-Fla, declaring that ending the ban is one of the first things he’d do if elected president. There’s opposition among Senate Democrats, but also a growing willingness among some to consider the idea that seemed a political impossibility just a few years ago.The oil export ban was put in place after the 1970s Arab oil embargo, ostensibly to protect Americans from gasoline shortages and sharply higher prices. But oil companies and many energy economists argue that it’s an outdated policy at a time of enormous American oil and natural gas production, and that lifting the ban would encourage more drilling.The Obama administration has taken small steps, including an announcement last month that it would start letting companies send lighter U.S. oil to Mexico where it’s good for aging refineries there, and get heavy Mexican oil in return.

    WASHINGTON — Another Senate Democrat has signaled his support for exporting U.S. oil — as long as it is part of a broader clean energy plan.

    The declaration from Sen. Michael Bennet came during the Rocky Mountain Energy Summit, when the Coloradan was asked if he backed oil exports.

    “In the context of being able to move us to a more secure energy environment in the United States (and) a cleaner energy environment in the United States, yes,” Bennet said.

    A spokesman for Bennet said the senator believes a move to lift the 40-year-old ban on crude exports “would have to be part of a more comprehensive plan that includes steps to address climate change and give the country and the world a more sustainable energy future.”

    Bennet’s comments make him the latest Senate Democrat to suggest he is open to oil exports — even if the support is predicated on other changes.

    Senate Democratic Leader Harry Reid recently said there was room for a “compromise” on the issue. “We should sit down and try to work something out with the people who are so focused on exporting it and those people who are so focused on not exporting it and come up with a deal,” Reid told Politico.

    And Sen. Robert Menendez, D-N.J., a longtime oil export critic, highlighted the possibility of strategically selling U.S. crude abroad to bolster a new round of nuclear negotiations with Iran.

    To some oil export advocates, the declarations are a sign of building momentum — that a change in policy is viewed as practically inevitable by some lawmakers who want to extract some concessions in exchange for a yes vote.

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    IEA gas expert says Aus LNG will struggle to break-even

    Two-hundred billion dollars of investment that’s poured into six natural gas plants currently under construction in Australia will struggle to generate a return due to falling energy prices, according to the International Energy Agency.

    The Australian Financial Review reports that IEA senior gas expert, Constanza Jacazio, also says the three projects currently in planning stage are unlikely to go ahead.

    "In a $US60 oil environment the Australian projects will continue, but you are probably not breaking even," Ms Jacazio said in an interview from Paris, the AFRreports. "Will anything else in Australia proceed beyond this next portion of projects? I think in this environment it is very unlikely."

    Australia’s six LNG projects across Western Australia, Queensland and the Northern Territory were all planned when energy prices were high courtesy of strong Asian demand.

    Major energy investors from the US, Japan and China pumped tens of billions of dollars into the industry based on projections that energy prices would remain higher for longer.

    But strong supply from the US shale and Saudi Arabia, coupled with a larger than expected slowdown in demand from China has seen oil prices plunge to six-and-a-half year lows.

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    Woodmac bearish LNG


    “With the LNG market facing a wall of new supply just as China’s gas demand growth has faltered, it is surprising how few new projects chasing a final investment decision have been postponed,” said Noel Tomnay, VP Global Gas & LNG Research.

    Global LNG supply is presently around 250 million tonnes per annum (mmtpa) and there is a further 140mmtpa under construction, says Tomnay.

    Noel Tomnay, VP Global Gas & LNG Research, Wood Mackenzie.

    “Recognising that the global market will struggle to absorb such a large supply uptick, for some time now we’ve been forecasting a soft global market,” he said. “However that bearish prognosis is now being exacerbated by a demand downturn.”

    LNG prices are stuck in the US$7-US$8 per million British thermal unit range, compared to the US$11-US$12 needed long-term to make the economics feasible, according to Tomnay.

    Wood Mackenzie points to Asia and China, in particular, as being key to its revised outlook. China’s LNG import commitments are set to rise by 17 per cent year-on-year between 2015 and 2020, from 20 to 41 mmtpa but China will struggle to take all this LNG so quickly.

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    Qatar acknowledges LNG Glut.

     Qatar News Agency) Global supply of liquefied natural gas (LNG) is set to increase significantly from 245m tonnes per annum (mtpa) in 2014 to 297mtpa in 2017, a QNB weekly analysis said.

    Three major projects have recently been completed; over 100mtpa of LNG projects are currently under construction; and 600mtpa of projects are under consideration. 

    However, the viability of many of these projects is being threatened by a number of factors, not least the recent collapse in crude oil (LNG prices for long-term contracts are usually indexed to crude oil benchmarks) and LNG spot. Qatar is well placed to compete with the expected increase in supply. It is the lowest cost LNG producer globally; already accounts for 31% of the global market (74mtpa in 2014); and sells most of its gas through long-term contracts, ensuring stability of supply. 

    The three major global projects that have recently been completed have faced some difficulties. The 8.5mtpa Queensland Curtis LNG project in Australia, was completed in 2015 after considerable delays. A 4.7mtpa Algerian facility completed in 2014 is only producing at 50% of capacity due to a lack of feedstock. 

    The 6.9mtpa facility in Papua New Guinea was completed in 2014 and a new 2mtpa facility started production in Indonesia in 2015. 

    There are currently 16 major LNG projects already under construction, which should add around 12mtpa in 2016 and 33mtpa in 2017. Australia and the US are adding the largest amount of capacity. Australia made large discoveries of natural gas in the 2000s and invested heavily in LNG USD180bn of LNG projects are currently under construction with total capacity of 60mtpa. 

    The US is currently building 50mtpa following its shale gas revolution which has transformed the US from a hefty importer of natural gas to a soon-to-be exporter. As a result, a number of plants that were designed as LNG importing terminals are being converted to export facilities. Some additional LNG capacity is also expected from Malaysia (4.8mtpa in 2015-16) and Russia (16.5mtpa in 2017-19). 

    The plug is unlikely to be pulled on projects that are under construction. They already have long-term commitments from buyers for the sale of LNG and their breakeven oil price is estimated at around USD50/barrel, just about manageable at present. However, we expect there to be some slippage in the completion date of these projects due to their complexity, rising costs as well as permitting and regulatory issues. 

    In addition to under construction projects, there are numerous projects being considered, including around 600mtpa of proposed projects, around 260mtpa of which are in the initial engineering and design phase. 

    However, in the current environment, very few of this massive volume of projects is likely to be considered viable for a number of reasons. First, the breakeven oil prices on these projects is estimated at around USD70-80/barrel, well above current market levels. 

    Second, China is expected to be the main source of future demand growth for LNG and concerns about its economy slowing down may undermine the global LNG demand outlook. 

    Third, construction costs more than doubled in 2007-13 compared with 2000-06, with higher labour costs being a particular issue in the US oil and gas sector. Fourth, the large amount of new capacity that is already under construction seems to point to a likely oversupplied market until at least 2020, discouraging the approval of projects that are currently under consideration. 

    Fifth, buyers are reluctant to enter into long-term contracts in the current market environment as spot LNG prices are low and falling. Without long-term gas sales contracts in place, large-scale LNG projects are highly unlikely to be able to put the financing in place, making it hard to get these projects off the ground. 

    Some companies have already cancelled projects. For example, Royal Dutch Shell cancelled its USD20bn Arrow project in Australia at the beginning of 2015 and Woodside has pushed back a decision on its Browse floating LNG project in Australia from 2014 to 2016 at least. In this environment, we expect few new LNG projects to be initiated in the short-term. LNG projects have a construction period of 4-6 years. Therefore, a delay in initiating new projects over the next year or two, should lead to tighter LNG markets in the early 2020s. 

    To summarise, LNG capacity is expected to increase sharply up to around 2020 leading to a glut in supply, depressing prices. Qatar is in a strong position versus new producers thanks to its competitive pricing power and the long-term contracts it already has in place. In the longer-term, the current pause in the initiation of new LNG projects could to lead to a tightening of the market as demand catches up.
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    Alternative Energy

    India’s unconventional plan to increase solar power

    Think Progress reported that India’s government is ordering its state-owned utility, NTPC, to sell electricity from solar power along with electricity from coal-fired power in order to boost solar’s position in the country.

    The decision, mandates that the utility sell currently-cheaper coal power bundled into one unit with solar power, which is currently more expensive.

    This could have the effect of expanding the production and usage of solar power, making it less expensive for distribution companies to bring it to customers. India’s power distribution companies are also run by the government, and had been losing money when buying more expensive electricity and selling it at a lower price.

    The other effect, of course, will be the continued use of quarter-century-old coal plants that will get their power output bundled with newer solar plants coming online. This helps guarantee the coal plants’ operation, as well as their carbon emissions.

    Mr Rupesh Agarwal, a partner at BDO India LLP, said that “These plants are already 25 years old. Will they function for that many more years? Do we need to extend the lives of these plants to bundle with solar energy when solar on a stand-alone basis is becoming competitive?”

    NTPC will construct 15 GW of solar over the next four years as a part of this deal.
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    IEA study highlights remarkable shift in competitiveness of solar PV

    This new IEA report is based on data for 181 plants in 22 countries, including 3 non-OECD countries.

    It then applies a coherent set of assumptions to calculate the so-called Levelized Cost of Electricity (LCOE) for each of the main power generation technologies. The most remarkable finding in the report is the dramatically improved competitiveness of solar PV, compared to the established baseload technologies coal, nuclear and natural gas.

    Several data in the analysis underpin this finding:

    The median LCOE from all solar PV plants has dropped from 500 to below 200 USD/MWh since 2010, whereas the power from combined-cycle gas, coal and nuclear has become slightly more expensive in the same period.

    By equalizing costs and revenues using a 3 % real interest rate, which the IEA economists believe is a reasonable proxy for the «social cost of capital» today, the median cost of ground-mounted PV drops to below 100 USD/MWh. This is equivalent to the median cost of power from combined-cycle natural gas plants (CCGT), and only 20-30 % higher than cost from existing coal and nuclear plants in the OECD area.

    If we apply the higher 7 % real interest rate, the median cost of the capital-intensive ground-mounted PV increases in the study to around 125-130 USD/MWh, only 20–40 % higher than the baseload alternatives gas, coal and nuclear.

    PV competitiveness is most relevant to study in sunny countries. The data from the only sunbelt-countries in the report, United States and China, confirm the remarkable progress made by solar PV. The reported costs from ground-mounted PV in the US and China are as low as 55 USD/MWh at 3 % interest rate and 74 and 80 at 7 % respectively.

    In China, solar PV is already 40 % (3% interest rate) or 20 % (7% interest rate) cheaper than natural gas-fired power using the most cost-efficient technology CCGT. In the US, which has the lowest natural gas costs of all countries, solar PV is still cheaper than gas assuming a 3 % real interest rate. Even with 7 % interest rate, ground-mounted PV in the US is only 8 dollar/MWh more expensive than natural gas.
    Of course, the data and assumptions used in the report should be treated with caution. Many will argue the data points are too limited, the fuel price assumptions to high or too low, the cost data inaccurate, etc. The model furthermore applies a 30 $/t carbon cost to all technologies. This might look a bit high given today’s carbon prices, but is highly realistic – if not moderate – considering the 30-40 year lifetime of newly built power plants.

    Attached Files
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    San Marcos University commits to Doosan fuel cell

    California State University San Marcos has finalized an agreement that will provide the 304-acre campus with two fuel cells to help the institution adhere to strict sustainability standards and reduce greenhouse gas emissions associated with energy consumption.

    The project, developed by BioFuels Energy LLC, will utilise power plants provided by Doosan Fuel Cell (Doosan), which will shrink reliance on the San Diego power grid and, unlike grid power, will consume no water during energy production – a key performance advantage in droughtstricken California.

    “As an institution for higher learning, we believe it is our responsibility to continually look for the most efficient and innovative ways we can operate our campus,” says Lindsey Rowell, director of energy management and utility services for CSUSM, which serves more than 14,000 students.

    “CSUSM’s new fuel cells not only represent a significant step toward achieving our aggressive sustainability goals, they will also offset electricity costs and ensure we can sustain continued growth while remaining one of the most energy-efficient universities in the state.”

    BioFuels Energy, a project developer that supplies its clients with “renewable energy solutions” through strategic alliances and long-term power purchase agreements (PPAs), has acquired two 440kW fuel cells and a 90 tonne chiller from Connecticut-based Doosan.

    “The Doosan fuel cells have been in existence longer than most any stationary fuel cell for commercial applications. These units have very reliable uptime and (energy) availability,” says Ken Frisbie, managing director for BioFuels. “In this flexible financing model, using a combination of state and federal incentives has helped Cal State San Marcos acquire the benefits from fuel cells with no upfront expense.”

    The Doosan PureCell Model 400 technology requires no water consumption or water discharge while combining hydrogen and oxygen to produce electricity and heat. The fuel cells, which meet the CARB (Calif. Air Resources Board) standard for ultra-low emissions devices, operate quietly, can be installed in nearly any indoor or outdoor environment and have the potential to deliver grid-independent power.

    “As businesses, including college campuses across America, reduce their environmental impact and cut greenhouse gas emissions, fuel cells are moving to the forefront,” says Jeff Chung, President and CEO of Doosan Fuel Cell. “As demonstrated by Cal State San Marcos, this is especially true in California where water resources are evaporating due to drought conditions and building a sustainable future with ultraclean energy from fuel cells is essential.”
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    China's stock market to launch carbon efficiency index next month

    China's equity market in Shanghai will launch a carbon index next month, the first of its kind in China with the aim of identifying the greenest companies on the exchange.

    The Shanghai Stock Exchange (SSE) and China Securities Index (CSI) will launch the index on Oct. 8, according to a statement from the CSI published on its website on Wednesday. It will track the carbon efficiency of blue-chip companies belonging to Shanghai's SSE180 index, which are worth 15 trillion yuan ($2.35 trillion) in total.

    "The less carbon intensive companies will be weighed more in the index. It aims to direct the flow of capital from funds managers towards green businesses," said Zhao Yonggang, an official with CSI responsible for compiling the index.

    The index will rank all the constituent stocks of the SSE180 apart from the most carbon-intensive, defined as those with a carbon footprint that exceeds 1,000 tonnes of CO2 per million U.S. dollars of market value.

    The sampled companies still include giant energy firms like PetroChina, the biggest listed steel firm Baoshan Iron and Steel and the China Railway Group .

    China is planning to launch a national carbon market no later than early 2017 in order to bring down greenhouse gases starting by around 2030, but it is not yet mandatory for listed companies to disclose their annual emissions rate.

    The index will adopt carbon benchmarks provided by Trucost, a British environmental consultancy, to assess the emissions of the firms.

    "Some institutes have shown interest in developing products linked to the index," said Zhao. "The index will move along with the market value of the 180 stocks on a daily basis, and we will adjust carbon-related factors every half-year," said Zhao.

    Turmoil on China's stock markets has wiped out 40 percent of the value since June, but CSI said the carbon index is already 64.77 percent higher than the benchmark level of 1000 which reflects prices on July 2013.
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    Luminant inks deal with SunEdison to bring more solar power to Texas grid

    More solar power will enter Texas’ power market next year to compete “apples to apples” with coal and gas power now that Dallas-based Luminant has signed the largest such deal in the country with SunEdison.

    Power generator Luminant will buy 116 megawatts — enough to power 58,000 homes during normal demand — from SunEdison’s new 800-acre Castle Gap facility in Upton County, just south of Midland. The complex will have 485,000 solar panels when it is completed next year.

    The companies are touting the deal as the largest in the country in which solar power is being bought to compete in a competitive wholesale marketplace with all other power generation.

    “That is a first and that is a big deal,” said Julie Blunden, SunEdison chief strategy officer. “Solar is ready to compete head to head.”

    Unlike typical agreements in which the solar power is sold to a specific customer or in a regulated portion of Texas, Luminant will sell the electricity to the competitive market managed by the Electric Reliability Council of Texas. The companies are not revealing the financial terms of the deal.

    Solar power currently makes up less than 1 percent of the Texas power grid’s generation capacity, while wind power represents 14 percent, but several solar projects in the state are being planned.

    The costs for solar power have come down 15 percent in the last year, said Steve Muscato, Luminant chief commercial officer, in a video presentation.

    “When our customers are running the most amounts of electricity is when solar is producing,” Muscato said about the hot summer days in Texas. “So it doesn’t necessarily replace coal or replace gas because coal and gas are sort of there 24 hours a day, seven days a week.”

    “As we evaluate our future generation needs, we focus on projects that are profitable and able to compete in the wholesale market. This agreement with SunEdison meets those goals since solar generation costs have become increasingly competitive,” Luminant CEO Mac McFarland said in the announcement.
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    EU solar panel producers seek extension to Chinese import limits

    A group of European solar panel manufacturers has asked the European Commission to extend restrictions on imports of Chinese solar power products, a move that could revive a politically charged tussle between Brussels and Beijing.

    The European Commission set in place in 2013 an arrangement allowing Chinese manufacturers to sell into the EU a limited number of solar panels, wafers and cells at a minimum price, following a complaint from the European group, EU ProSun.

    Imports from Chinese producers not part of this undertaking are subject to duties of up to 64.9 percent.

    The duties and duty-free arrangment expire in mid-December.

    EU ProSun, an association of EU producers, said it had filed an application last Thursday to extend them.

    The association did not welcome the EU settlement with Chinese solar module producers but wants it to be renewed. Otherwise, Chinese rivals will be able to sell into the EU free of tariffs.

    Assuming the European Commission agrees to start at so-called expiry review, the undertaking and anti-dumping duties would extend for at least a year while the it is assessed.

    The review is one of a number of actions EU ProSun is taking to contend with what it says is a continued assault from Chinese rivals even after a 2013 settlement.

    That settlement warded off a mounting trade battle between Brussels and Beijing, the latter saying that the European Union was unfairly targeting a sector whose exports to the EU rose to 21 billion euros in 2011.

    The Commission is already investigating a complaint that Chinese solar companies are trying to evade import tariffs by shipping their products via Taiwan and Malaysia.

    The Commission has already proposed denying six Chinese solar panel producers from the duty-free undertaking because of alleged violations of its conditions.

    They include Canadian Solar, ReneSola and Chint Solar.
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    Disagreements over scope and ownership delay Saudi solar projects

    Saudi Arabia's ambitious plans to become a world leader in installed solar power appear to have run into the sand amid disagreements over their scale, ownership and technology.

    The world's largest crude exporter announced three years ago it wanted to install 41 gigawatts of solar electricity by 2032 to help meet surging local demand for energy as the Saudi population increases rapidly and the economy grows strongly.

    The decision was prompted by concerns about cost rather than about cutting Saudi carbon emissions to help combat climate change. The kingdom currently generates much of its electricity by burning crude oil, thereby reducing the amount available for export and threatening its market share.

    But despite a 2013 statement that bids would soon be issued for the first solar power projects, the body set up to spearhead alternative energy development -- King Abdullah City for Atomic and Renewable Energy (K.A.Care) -- has made no progress and in January it pushed back the 2032 target to 2040.

    "It hasn't been approved yet, we are in a waiting mode," said a Saudi government source who declined to be identified.

    "There is a divergence of views. Everybody agrees on the goals, but they have different ideas on how to implement them."

    With its sunny climate and strong demand for electricity during the summer, Saudi Arabia seems perfectly suited for solar power projects, though its high levels of atmospheric dust and soaring temperatures pose difficult technical problems.

    The biggest obstacle, however, is bureaucratic. K.A.Care's relationship with the powerful ministries of electricity and oil was never clearly defined, meaning that no single department was put in charge, industry sources say.

    "The key issue is K.A.Care does not belong to any particular ministry leading the initiative and does not have the balance sheet to conclude power purchase agreements directly," said Imtiaz Mahtab, president of the Middle East Solar Industry Association.
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    World nuclear capacity set to grow by 45 pct by 2035

    Global nuclear power generation capacity could increase by more than 45 percent in the next 20 years but the pace of growth will still fall short of what is needed to curb climate change, an industry organisation report showed on Thursday.

    The World Nuclear Association Nuclear Fuel report forecasts global nuclear capacity will grow to 552 gigawatts equivalent (GWe) by 2035 from 379 GWe currently, as many countries build new plants as a lower-carbon option and for energy security.

    The International Energy Agency has estimated that nuclear capacity needs to reach 660 GWe in 2030 and more than 900 GWe by 2050 to help keep a rise in global temperatures within 2 degrees Celsius this century, a threshold scientists say should avoid the worst effects of climate change.

    However, this would require $81 billion a year investment in new nuclear plants from 2014 to 2040.

    "Nuclear electricity output is set to increase at a faster rate over the next five years than we have seen for more than two decades," said Agneta Rising, director general of the World Nuclear Association.

    "More must be done so that nuclear energy can make the contribution being asked of it, to deliver a clean, affordable and reliable electricity supply in harmony with other low-carbon options," she added.

    To meet the pace of capacity growth, the world will likely need 103,000 tonnes of elemental uranium (tU) by 2035, up from 62,000 tU now, the report said.

    Uranium production has stalled because depressed uranium prices have curtailed exploration activities and the opening of new mines.

    The market should still be adequately supplied to 2025 if all planned mines and those under development start up as forecast but will need additional supplies and projects soon after 2025.

    Attached Files
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    French court confirms Monsanto guilty of chemical poisoning

    A French court upheld on Thursday a 2012 ruling in which Monsanto was found guilty of chemical poisoning of a French farmer, who says he suffered neurological problems after inhaling the U.S. company's Lasso weedkiller.

    The decision by an appeal court in Lyon, southeast France, confirmed the initial judgment, the first such case heard in court in France, that ruled Monsanto was "responsible" for the intoxication and ordered the company to "fully compensate" grain grower Paul Francois.

    Monsanto's lawyer said the U.S. biotech company would now take the case to France's highest appeal court.

    Francois, who says he suffered memory loss, headaches and stammering after inhaling Monsanto's Lasso in 2004, blames the agri-business giant for not providing adequate warnings on the product label.

    Lasso, a pre-emergent soil-applied herbicide that has been used since the 1960s to control grasses and broadleaf weeds in farm fields, was banned in France in 2007 after the product had already been withdrawn in other countries such as Canada, Belgium and Britain.

    Monsanto phased out of Lasso in the United States several years ago for commercialreasons, its spokesman in France said.

    Though it once was a top-selling herbicide, it gradually lost popularity, and critics say several studies have shown links to a range of health problems.

    Monsanto said in a statement after the ruling that experts, including those nominated by the French civil court, had not found any causal link between the alleged accidental exposure and the alleged damages for which Francois claims compensation.

    The company's lawyer, Jean-Daniel Bretzner, said a potential fine to compensate for the farmer's loss would be decided after the decision of the highest court but he said that in any case it would be very low.

    "We are speaking about modest sums of money or even nonexistent. He already received indemnities (by insurers) and there is a fundamental rule that says that one does not compensate twice for a loss, if any," Jean-Daniel Bretzner said.

    Lasso is not Monsanto's sole herbicide accused of being harmful.

    The International Agency for Research on Cancer (IARC), part of the World Health Organization (WHO), said in March that glyphosate, the key ingredient in Monsanto's Roundup, one of the world's most used herbicides, was "probably carcinogenic to humans."
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    U.S. court finds EPA was wrong to approve Dow pesticide harmful to bees

    A U.S. appeals court ruled on Thursday that federal regulators erred in allowing an insecticide developed by Dow AgroSciences onto the market, canceling its approval and giving environmentalists a major victory.

    The ruling by the U.S. Court of Appeals for the Ninth Circuit, in San Francisco, is significant for commercial beekeepers and others who say a dramatic decline in bee colonies needed to pollinate key food crops is tied to widespread use of a class of insecticides known as neonicotinoids. Critics say the Environmental Protection Agency is failing to evaluate the risks thoroughly.

    The lawsuit was filed in 2013 against the EPA by organizations representing the honey and honey beekeeping industry. The groups specifically challenged EPA approval of insecticides containing sulfoxaflor, saying studies have shown they are highly toxic to honey bees.

    The court said in its ruling that sulfoxaflor is a neonicotinoid subclass.

    Dow AgroSciences, a unit of Dow Chemical Co, first sought EPA approval for sulfoxaflor in 2010 for use in three products. Brand names include Transform and Closer.

    "It's a complete victory for the beekeepers we represent," said Greg Loarie, an attorney who represents the American Honey Producers Association, the American Beekeeping Federation and other plaintiffs in the case. "The EPA has not been very vigilant."

    Dow said in a statement that it "respectfully disagrees" with ruling and will "work with EPA to implement the order and to promptly complete additional regulatory work to support the registration of the products."

    The EPA said it was reviewing the court's decision and would have no further comment.

    California's Department of Pesticide Regulation issued a statement Thursday noting that it has long had concerns about sulfoxaflor's impact on bees and has never allowed unconditional registration in that key farming state.

    Honeybees pollinate plants that produce roughly a quarter of the food consumed by Americans. The demise of the bees has become a hotly debated topic between agrichemical companies, which say the insecticides they sell are not to blame, and those who say research shows a direct connection between neonicotinoids and large bee die-offs.

    The White House has formed a task force to study the issue and the EPA has said it is trying to address concerns.

    In its ruling, the court found that the EPA relied on "flawed and limited data" to approve the unconditional registration of sulfoxaflor, and that approval was not supported by "substantial evidence."

    Dow had asked the EPA to approve sulfoxaflor for use on a variety of crops, including citrus, cotton, canola, strawberries, soybeans and wheat.

    The EPA analyzed studies and data provided by Dow about the effects of sulfoxaflor on various species, including bees, and initially proposed several conditions on approval due to insufficient data provided by Dow, the court found.

    However, in May 2013 the EPA decided to go ahead with unconditional registration even though the record revealed Dow never completed additional requested studies, the ruling stated.

    In vacating the EPA approval, the court said that "given the precariousness of bee populations, leaving the EPA's registration of sulfoxaflor in place risks more potential environmental harm than vacating it."

    The EPA must obtain further data regarding the effects of sulfoxaflor on bees as required by EPA regulations before it grants approval, the court said.

    The U.S. Department of Agriculture said earlier this year that losses of managed honeybee colonies hit 42.1 percent from April 2014 through April 2015, up from 34.2 percent for 2013-14, and the second-highest annual loss to date.
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    Potash miner Belaruskali expects fall in 2015 exports

    Belarussian potash producer Belaruskali expects its exports to decline to 9 million tonnes this year due to a lower demand for the fertiliser, the head of the company's trading division said on Thursday.

    Belaruskali, which has major clients in China, India and Brazil, is facing with lower demand for potash, a fertiliser that helps yield and root growth, amid weaker economies.

    "I think, it (exports) will be close to 9 million (tonnes). A difficult fourth quarter is ahead of us," Elena Kudryavets, the head of Belarusian Potash Company (BPC), told reporters.

    BPC exported 9.5 million tonnes of potash last year.

    BPC does not want to "overload" the market with additional exports, Kudryavets added.

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    Bayer issues fungicide warning for wine grape growers, pending crop investigation

    Germany's Bayer has advised wine grape growers not to use its Moon Privilege fungicide until its CropScience arm has investigated whether there is a connection between the product's use and reported crop damage.

    Growers have reported deformed leaves and lower yields from their crops this year.

    Referring to "atypical symptoms" in vines where Moon Privilege -- known as Luna Privilege in some markets -- had been deployed in 2014, a statement on the company's website said: "As long as the cause of this change in the grape vines remains unexplained, we recommend for precautionary reasons not to use Luna Privilege for wine growing.

    The statement also said that Bayer regrets the situation and is doing everything necessary to discover the cause.

    Some Swiss wine grape growers claim that the fungicide is responsible for the damage and are demanding compensation, Schweiz am Sonntag newspaper reported on Sunday.

    Growers have estimated a potential loss of up to 10 percent of the Swiss wine grape harvest, the paper said.

    "The damage will, in any event, be in the three-digit millions (of Swiss francs)," Andreas Meier, a grower in the northern Swiss canton of Aargau, was quoted as saying.

    The paper also said that Bayer has acknowledged in a letter to growers a "high probability" of a connection between the fungicide and damage to the 2015 harvest.

    Bayer CropScience did not respond immediately to Reuters' telephone and emailed requests for comment on Sunday.

    Last year Bayer said it expected more than 250 million euros ($279 million) in annual peak sales from its Luna group of products, which were launched in 2012 and are used for fruit and vegetable crops.
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    China Plows Big Money Into Australian Agriculture

    Australian deal makers are swapping hard hats for cowboy hats as Chinese investors increasingly explore a new natural-resource boom: agriculture. As WSJ’s Daniel Stacey reports:

    China became the largest investor in Australia’s agricultural sector during the financial year ended June 2014, according to a report from the country’s Foreign Investment Review Board, pouring in 632 million Australian dollars ($450 million), almost twice as much as the year before.

    Chinese investment in Australian mining projects fell by a third to A$5.85 billion during the same period, the latest figures available.

    Australia’s Seafarms Group is seeking offshore investors to help develop a A$1.45 billion prawn farm in the country’s remote northwest. Nearby, Chinese company Shanghai Zhongfu last year spent A$700 million to launch a sugar and sorghum farm. Integrated Food and Energy Development, a private Australian company, is pitching a project to offshore investors that would convert five cattle stations in Queensland state into a A$2 billion enterprise producing sugar, guar beans and cattle.

    China’s push into Australian agriculture has been more cautious than its rush into mining, in which companies spent big on projects at high prices only to lose out as metals prices fell and costs soared. The agriculture investors are mostly limiting their ambitions to joint ventures and stakes in exchange for a share of output. They’re tapping local expertise and retaining existing managers, rather than trying to gain full ownership of farms or launch major greenfield projects, local deal makers say.

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    Precious Metals

    Botswana's Debswana cuts diamond production due to market downturn

    Botswana's Debswana, the world's biggest diamond producer by sales value, has cut its 2015 production target to 20 million carats from 23 million carats, its secretary for economic and financial planning Taufila Nyamadzabo said on Friday.

    "We had to revise our 2015 growth forecast from 4.9 percent to 2.6 percent due to (a) downturn in the global diamond market," Nyamadzabo said.

    Sluggish demand in the diamond market saw sales at rivals De Beers and Okavango Diamond Company (ODC) fall by over 20 percent in the first six months of the year.
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    Sibanye buys Amplats’ Rustenburg platinum mines for R4.5billion

    Sibanye Gold has announced the acquisition of the Rustenburg Operations from Anglo American Platinum Limited (Amplats) for an upfront consideration of R1.5 billion in cash or shares and a deferred consideration equal to 35% of the distributable free cash flows generated by the Rustenburg operations over a six year period, subject to a minimum nominal payment of R3 billion. The company said should there still be an outstanding balance at the end of the six year period, Sibanye has the option to elect to extend the period by a further two years. Any remaining balance at the end of this period will be settled by the gold producer either in cash or shares.

    In addition to the deferred payment, which allows for a favourably extended payment period; should the Rustenburg operations generate negative distributable free cash flows in either 2016, 2017 or 2018, Amplats will be required to pay up to R267 million per annum to ensure that the free cash flow for the relevant year is equal to zero. This arrangement will provide important capital investment and downside price protection for Sibanye, facilitating ongoing capital investment in the first 3 years following the conclusion of the transaction. Should higher prices result in early repayment of the deferred payment during the first 6 years, Sibanye will share the upside with Amplats.

    Neal Froneman CEO of Sibanye said: “We have for some time indicated our interest in participating in the PGM sector and believe that these assets provide an attractively priced entry at an advantageous moment in the price cycle. The Rustenburg Operations are similar in nature to Sibanye’s current gold operations and, after extensive engagement with Amplats and completing a thorough due diligence, we are confident that we will be able to realise value for our stakeholders by leveraging our successful operating model. The Rustenburg operations have been significantly restructured and are well positioned to benefit from a recovery in PGM market conditions and provide a platform to grow regionally within the PGM sector. The outcome is a sensible commercial transaction, which is strategically advantageous for both parties.”
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    Diamond cuts: India's global hub fears more job losses as China slows

    A year ago, India's diamond capital hit the headlines when one of the largest polishing companies in the western city of Surat treated hundreds of employees to bonuses in the form of Fiat cars, apartments and jewellery.

    This year, there's no sign of a repeat bonanza in a city that by some estimates polishes about 80 percent of the world's diamonds.

    More than 5,000 Surat polishers have lost their jobs since June and thousands more could be left without work, as Chinese consumers pull back from luxury purchases, leaving jewellers with stocks of unsold jewellery and gems. Polishers say Chinese jewellers have defaulted on deals worth millions of dollars.

    Nearly half a dozen large diamond companies in the city have closed down: a significant hit for an industry that employs nearly a million people in India, two-thirds of them in Surat.

    Jobs are a critical issue for India's government, struggling to revive economic growth to a rate that will create employment for millions joining the workforce every year.

    Sunilkumar Rajput spent 25 years cutting gems in this coastal city, where streets are lined with workshops of all sizes, bustling with craftsmen huddled under desk lamps, preparing to carve rough diamonds into multi-faceted gems. He lost his job in June.

    "I am ready to work even at half the salary I was getting in my previous job, but no one will listen," says Rajput, 45, speaking in a quiet side street of Surat. He has sent his children back to his home state of Uttar Pradesh, in India's north, to save money.

    Distress in Surat's warren of polishing houses comes at a time of unrest across the state of Gujarat - Prime Minister Narendra Modi's home base - where hundreds of thousands of members of the Patidar, or Patel, community have held protests to demand changes to India's affirmative action policies, which they say hurt them.

    Like many of Gujarat's largest industries, diamond polishing is dominated by Patels, who make up 14 percent of the state and a nascent but disgruntled middle class.

    Hiren Patel, 35, says his salary has halved since June: "We have work only for three days a week."

    Last month, he joined a rally of at least half a million people which turned violent, leaving at least seven dead.

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    Russian crisis prompts Polyus Gold co-owner to eye buyout offer - sources

    The economic crisis in Russia has persuaded a co-owner of Polyus Gold to consider a $5.4-billion buyout, which could end the top Russian gold producer's premium listing in London after just three years, say three sources close to the possible deal.

    Said Kerimov, the 20-year-old son of tycoon Suleiman Kerimov, already controls a 40 percent stake in the gold miner along with the 'Suleyman Kerimov Foundation'.

    His father, who Forbes magazine estimates is worth $3.4 billion, is not allowed to hold assets directly because of his membership of the Federation Council, Russia's upper house of parliament.

    In a low key announcement, Said Kerimov and the foundation announced last week, via their companies Sacturino and Wandle, that they were now considering making an offer to buy the remaining 60 percent of the firm by the end of September.

    Sources told Reuters the move reflected a view among the secretive Kerimov family that a London listing was less attractive now because of tighter access to Western capital, sanctions imposed over Moscow's role in the Ukraine crisis, and the Kremlin's attitude to overseas listings.

    "Wandle believes that it is better for Polyus to be developed as a private company," one of the sources told Reuters.

    Sacturino, a subsidiary of Wandle, is in discussions with VTB, the country's second-largest bank, about financing the possible offer, the source added.

    Suleiman Kerimov displeased the Kremlin in 2013, when he decided to end a joint potash trading venture between Russia's Uralkali, a firm he previously co-owned, with a Belarussian partner, a step that ignited a political row between Moscow and Minsk.

    Despite a fall in the gold price and Western sanctions, the market value of Polyus in London has not been as volatile as some of its peers.

    That was due to demand from large shareholders, something which eventually meant its shares were thinly traded, according to two sources.

    Delisting from London would make it easier for Polyus' large shareholders to manage their loans, under which Polyus shares are pledged as collateral, the two sources added.

    "The liquidity of Polyus Gold shares has been low for quite some time for now, and the potential buyout of the company was widely expected," Sberbank CIB said in a recent note.

    Other Polyus shareholders include Gavril Yushvaev, who has a 19.3 percent stake, and Oleg Mkrtchan who has an 18.5 percent stake.

    The official free float is around 22 percent. However, many minority investors have sold out in recent months, according to a former Polyus minority shareholder, who said they were attracted by their better-than-average value.

    The company also has a Russia-registered subsidiary, which bears the same name, and would be able to keep its listing in Moscow if the buyout went ahead, according to two sources.
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    Base Metals

    Freeport Indonesia cuts copper sales forecast due to El Nino

    Freeport-McMoRan has revised down its forecast for copper concentrate sales from its Indonesian unit, an official at the US mining giant said, after milling operations were hurt by the El Nino dry weather pattern. Freeport, which runs one of the world's largest copper mines in Papua in eastern Indonesia, said a lack of water supply would cut its 2015 sales by 25-million pounds, or 3%, from its earlier sales estimate of 860-million pounds for the year. 

    "During the third quarter, milling operations have been impacted by a reduction in process water available under current El Nino conditions," company spokesperson Eric Kinneberg said in an email late on Wednesday. Indonesia is expected to face moderate El Nino conditions from July to November, affecting provinces from Sumatra to eastern Indonesia, although the weather pattern could strengthen from September to December. 

    Exports from Freeport Indonesia's Grasberg mine complex in remote Papua have already been hindered this quarter by new payment rules for buyers and the closure of the company's domestic smelter. 

    Freeport Indonesia usually produces about 220 000 t/d of copper ore, which is then converted to copper concentrate. Kinneberg declined to provide daily output details for the mine. Union officials said last week that Freeport sent a letter to employees on August 20 asking for greater efficiency and emphasising the need for cost-saving.
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    Indonesia to allow mine contract extension talks to begin 5-10 yrs before expiry

    The Indonesian government plans to revise a mining regulation to allow miners to start contract extension talks five to ten years before a concession contract's expiry, at least doubling the time allowed from the current two years. "There are some contracts of work that will expire. This will give the chance to propose extension, such as for Freeport and Vale," energy and mines minister Sudirman Said told reporters on Thursday. Freeport's current mining contract is due to expire in 2021.
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    Canada’s Capstone puts Chile copper project on back burner

    The Santo Domingo copper and iron project is located in Chile's north, 50 kilometres west of Codelco's El Salvador copper mine. (Image courtesy of Capstone Mining Corp.)

    Capstone Mining Corp. (TSX:CS) said Wednesday that low commodity prices have forced the company to halt work at its 70%-owned Santo Domingo copper development project in northern Chile, adding it will lay off most of the employees at its South American offices.

    The Vancouver-based miner noted the move would affect 23 of the 31 people it employs at its two Chilean offices.

    "As copper prices continue to deteriorate, we have looked at a range of actions to preserve our financial flexibility,” Capstone president and CEO Darren Pylot said in a statement. “This includes reducing and deferring capital expenditures at our operating mines, suspending all work on the Santo Domingo project, eliminating non-essential operating and general and administrative expenses and reducing exploration expenditures."

    The company anticipates the cost of community relations going forward will be about $2 million a year.

    He added the company anticipates the cost of community relations going forward will be about $2 million a year.

    “While we continue to believe that Santo Domingo is an excellent project, a number of factors, including uncertainty over the future direction of copper prices and our financing capacity for the project, make capital preservation a priority at this time,” Pylot said.

    The Santo Domingo copper and iron project, located 50 kilometres west of Codelco's El Salvador copper mine, is co-owned by Korea Resources, which holds a 30% stake on it. The project estimated initial cost was $1.7 billion as per June 2014.

    Capstone highlighted that despite the gloomy news its operating mines — in Canada’s Yukon Territory, Arizona and the Mexican state of Zacatecas — are on track to meet the company’s overall 2015 output guidance.
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    Copper Surged Above Key Technical Level

    Copper prices has surged over 4% in morning trading, breaking above the 50-day moving average (trading 2.41, near 2-month highs). Aside from Glencore's demise and modest strength in the Chilean peso today, this seems more like an algo-driven run off China's massive intervention-driven momentum.

    Copper broke above it 50-day moving average...

    as China's intervention floated all boats...


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    Global copper market to see shortage in 2-3 years – Rio Tinto

    Global copper markets could flip into a structural shortage within two to three years as demand from power stations makes it the first commodity to come out of a glut, Rio Tinto said. 

    Copper is expected to be the first commodity to shake the glut off, Rio Tinto's chief executive of copper and coal, Jean-Sebastien Jacques, told Reuters on the sidelines of the Financial Times Commodities Retreat in Singapore on Monday. "Market conditions are challenging but copper is an attractive commodity. In the next two to three years we could move into a shortage," he said. 

    Tighter supply would help underpin global copper prices that have plunged 20% in the past two years and hit a six-year low of $4,855 per tonne last month. Analysts in a Reuters poll conducted in July forecast an oversupply of 194,000 tonnes this year and 262,500 tonnes next year. 

    Despite the current oversupply and low prices, Rio Tinto's Jacques reinforced the policy of mining majors of keeping output high in order to squeeze out smaller higher-cost competitors. "We are in the business of mining for the long run. We need to create revenue. We are getting through the current challenging phase by saving costs through improving efficiency, not by cutting output," he said. 

    Anglo-Australian Rio Tinto plans to produce more than 500 thousand tonnes of copper this year, accounting for about 15% of its total revenues. Growth in demand for the metal will be primarily driven by the power sector, where it is used as a conductor, Jacques said.
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    Vedanta to ramp up aluminium production after OERC order

    Economic Times reported that even as it warns of a possible shutdown of its Kalahandi refinery in Odisha in the face of raw material issues and sliding global aluminium prices, Vedanta hopes to step up metal production at its Jharsuguda smelter.

    This has been made possible by an interim order of the Odisha Electricity Regulatory Commission (OERC), which allowed the company to use for now a fourth of capacity from its 2,400 megawatt independent power plant (IPP) at Jharsuguda without paying cross subsidy - this subsidy is payable when power is bought from an IPP in Odisha.

    Mr Abhijit Pati, chief executive of Vedanta's aluminium business said “A few formalities remain to be completed with the state and regulators before we can ramp up smelter production from 0.5 to 0.8 million tonne.”
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    Centrum Broking sees aluminium climbing back to USD 2000

    Image Source: centrumEconomic Times reported that Centrum Broking said that it expects aluminium prices to recover sharply to USD 2000 per tonne by first half of 2016 from USD 1700 per tonne price currently, citing expected supply cuts due to large unviable capacity at present prices and steady demand.

    The brokerage said 30-40 per cent of aluminium capacity was presently unviable and supply cuts would accelerate globally with China's smelter margins being at multi-year lows right now.

    Centrum Broking analyst Mr Abhisar Jain said “We believe that current depressed levels in aluminium are driven by a mix of speculation and unfavourable currency movements rather than demand-supply and ignore the support of current global cost curve which makes one-third of global capacity unviable and is triggering sharp supply cuts.”

    The brokerage said Hindalco will benefit from its low cost of production and capital expenditure plan coming to an end, while Vedanta's diversified asset base will help the company tide through tough times.

    Hindalco and Vedanta shares have lost half their value in last six months on BSE.
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    Luanshya Copper Mines to cut 1600 jobs at Baluba mine in Zambia

    Zambia's Luanshya Copper Mines, owned by a Chinese firm, said on Monday it would suspend operations and cut jobs at its Baluba mine due to plunging copper prices and power shortages.

    The firm said “This decision was arrived at after considering the escalating cost structure for Baluba Mine owing to the plummeting copper price, coupled with the energy deficit the country is currently experiencing.”

    The Mineworkers Union of Zambia said about 1,600 members were affected by the decision.

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    Financing crunch leaves Codelco's investment plans in pieces

    The ambitious investment plans of Chile's state-run copper producer Codelco are in tatters as it faces delays to mine expansions and keeps at least one unprofitable project running with global copper prices plumbing multi-year lows.

    Expansion of the key Andina mine has been delayed by two years and a plan to take the century-old Chuquicamata mine underground is behind schedule, hampered by operational setbacks and financing and environmental concerns, company insiders say.

    Meanwhile, Codelco, the world's No. 1 copper supplier, is keeping unprofitable mines like Salvador open, apparently to protect jobs and save President Michelle Bachelet's leftist government more confrontations with unions.

    "The juncture at this moment is awful," Carlos Caballero, head of Codelco's new Ministro Hales mine, told Reuters.

    Codelco's troubled outlook raises doubts over whether it will be able to bolster production to a targeted 2 million tonnes per year by 2026, from 1.67 million tonnes in 2014.

    It also puts Bachelet in a difficult position because Codelco, hit by an end to the commodities boom, is generating less of the income she needs to finance ambitious and long-promised social programs.

    Codelco says it needs to invest $25 billion over five years to dig deeper at new and existing sites and keep production flowing. With copper prices at a six-year-low, the cash-strapped government has so far pledged just $4 billion in returned profits between 2015 and 2020.

    Codelco hands its profits to the state, and is funded in part by the return of some profit and in part by issuing debt.

    Last year, the government received some $3 billion profit from Codelco, the lowest level since 2003. In 2012, the company paid $7.5 billion into Chile's coffers.

    Bachelet's government and Codelco now face a financing quandary. The government has pledged billions of dollars for an overhaul of the education system and other social initiatives and is reluctant to promise more funds to Codelco at a time when the economy is struggling and copper prices are low.

    But issuing more debt would hit Codelco's investment grade and returning the company to private hands is politically unpalatable.

    The government says it is taking its cue from the company.

    "We will have to see what decisions Codelco makes to see what path the government will take," Mining Minister Aurora Williams said.

    "The most sensible and profitable thing to do would be to close Salvador now and open it if Rajo Inca is viable," a senior Codelco executive told Reuters.

    Former Codelco executives said Salvador should be a low priority and that optimistic announcements on Salvador's future were "intended to keep people's hopes up".

    Closing the mine would entail job losses and could be politically damaging to Bachelet, who is already struggling with low approval ratings.

    Some question if Codelco's overall investment plans will deliver a return, even if prices recover.

    "When they are completed it will have cost $40 billion and how much will production increase? How much could be produced elsewhere with that money?" said one copper market trader.

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    400 000 t copper cathode removed in Katanga, Mopani review

    Central African mining company Katanga Mining Limited had begun a review of its business, including operations and expenses, in light of the challenging environment for commodities, Glencore said on Monday. 

    A similar review was under way at Mopani Copper Mines in Zambia, the London-, Hong Kong- and Johannesburg-listed global commodities mining and marketing company said. The review would include the suspension of production at Katanga and Mopani for 18 months up until the completion of the expansionary and upgrade of the ore leach at Katanga and the new shafts and concentrator at Mopani, which would provide a material reduction in overall operating costs at both operations. 

    The suspension of operations would remove 400 000 t of copper cathode from the market. Once complete, the programmes were expected to reduce net direct cash (C1) costs at Katanga to $1.65/lb and at Mopani to $1.70/lb from more than $2.50/lb currently. 

    The 181 000-employee Glencore, headed by CEO Ivan Glasenberg, said it would continue to fund the expansionary and upgrade projects at both operations, adding that Mutanda Mining continued to perform well, producing above nameplate capacity at a C1 cost of $1.33/lb.
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    Aluminium companies consider consolidation under SOE reform program

    China is trying to push its two biggest aluminium businesses together as part of a planned shake-up of State-owned enterprises, industry sources said, a move that would create the world's largest aluminium maker.

    Power company State Power Investment Corp is in talks to hive off its aluminium assets to Aluminium Corp of China Ltd, also known as Chinalco, allowing SPI to focus on power construction and generation, three industry sources said.

    The consolidation is shaping up as a test of Beijing's ambitions to restructure its vast but underperforming State-owned sector, particularly at a time of slowing economic growth.

    If successful it would be a fillip for reform, but slow progress in what is seen as a relatively simple tie-up underscores the problems China faces in more challenging SOE consolidation, such as merging rivals in the same industry.

    "Merging State-owned enterprises is going to be very difficult and will involve a lot of problems that could cause damage to the harmony of society," said Guo Chunqiao, a macroeconomic analyst at the State-backed research firm Beijing Antaike Information Development Co Ltd, referring to potential job losses.

    SPI, which inherited the loss-making aluminum assets when it was formed from the merger of two SOEs in June, wants to abandon the sector, which is suffering from a supply glut, the sources said.

    Shifting the assets would boost Chinalco's capacity to more than 7 million metric tons a year of primary metal, making it the world's biggest producer, ahead of Russia's Rusal.

    But while talks have been going on for the past two months, progress has been slow, with one stumbling block being Chinalco's reluctance to take over high-cost smelters, said a source familiar with SPI.

    The State-owned Assets Supervision and Administration Commission, which manages SOEs on behalf of the central government, was considering the issue and would back the move if it did not dent Chinalco's profits, the sources said.
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    Glencore emergency rights, suspends dividend.


    Glencore Plc, the commodity producer and trader, plans to sell assets and shares to cut its $30 billion net debt by about a third following the rout in global markets.

    Baar, Switzerland-based Glencore, which last week posted its biggest weekly decline in London since going public in 2011, plans to sell about $2.5 billion in new shares and assets worth as much as $2 billion. It also will suspend dividend payments until further notice as it aims to reduce its net debt by about $10.2 billion, the company said Monday in a statement.

    Glencore has lost more than half its market value this year, and along with BHP Billiton Ltd. and Rio Tinto Group has seen profits slump as commodity prices plunged to touch a 16-year low last month. Standard & Poor’s cut Glencore’s outlook to negative from stable last week, saying weaker growth in China will weigh on copper and aluminum prices.

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    Steel, Iron Ore and Coal

    Indonesia's September HBA thermal coal price further slide

    Indonesia's September thermal coal reference price, also known as Harga Batubara Acuan (HBA), was set at $58.21/t FOB, the lowest ever recorded since its inception in January 2009, said the Ministry of Energy and Mineral Resources.

    The September HBA price represents a drop of 1.57% from August, when it was set at $59.14/t.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg gross as received assessment; 25% on Argus-Indonesiacoal index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash and 0.8% sulfur.

    The HBA for thermal coal is the basis for determining the prices of 73 Indonesian coal products and for calculating the royalties Indonesian producers have to pay for each metric ton of coal they sell locally or overseas.

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    China key steel mills daily output down 4.4pct in late-August

    Average daily crude steel output of China's key steel mills posted a ten-day drop of 4.43% to 1.64 million tonnes in late-August, in the wake of the third straight ten-day rise, according to the latest data from the China Iron and Steel Association (CISA).

    That was mainly due to extensive production cut at north and northwest China before the Beijing military parade.

    Stocks in key steel mills stood at 15.32 million tonnes by August 31, edging down 0.85% from August 20 but up 1.32 % from July.

    In addition, key steel mills’ daily output of pig iron reached 1.61 million tonnes during the same period, dipping 4.8% from the past ten days.

    Domestic steel products prices saw a week-on-week drop of 0.7% from end-August to September 6, with rebar price averaging 2,155.5 yuan/t, edging down 2.5% from ten days ago and down 1% from last week, showed data from the Ministry of Commerce.

    Steel mills are pressing down the purchase price of coke, due to weak demand from building materials industry. Steel mills in Tangshan, Hebei asked for a 20 yuan/t cut in coke purchase price, which has been accepted by some coke producers.

    Some steel mills at other areas in Hebei and east China also planned to lower coke purchase price by 20 yuan/t.

    Crude steel output may rebound in mid-September, as steel mills may return to normal operation after production suspension and furnace maintenance due to environmental protection campaign amid slack season, analysts said.
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    FMG not in a hurry to sell a stake in its mines – Mr Power reported that Fortescue Metals Group has been approached by two parties interested in buying a stake in its mining operations, but the company is not in a rush to sell. In an interview on Wednesday FMG’s chief executive, Mr Nez Power, said the miner would wait for the iron ore price to recover before entering serious discussions about a sale.

    Mr Power said he believes the commodity is still trading at unduly depressed prices, and that FMG was not in a hurry to sell. He said “We are in very strong shape and therefore we can be patient. That might mean we need to wait until potential investors think the iron ore price is about to go up again, and then they will be more motivated.”

    It was March this year when Power told The Australian the company may look to sell a minority stake in its Pilbara assets. It came after the company posted a first-half profit of $US331 million, down from the $US1.7 billion it posted a year earlier, due to the depressed price of iron ore.
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    Shenhua may resume coal exports to Japan

    China’s coal giant Shenhua Group hoped to expand coal exports and gradually resume exports to Japan, amid fluctuations in international coal market and persisting sluggishness in domestic market

    Invited by Shenhua, delegates from Japan’s major power companies including Tohoku Electric Power visited the group’s mining areas and power plants in late August, seeking ways to enhance further cooperation.

    Han Jianguo, vice president of the Group, said Shenhua has always attached great attention to the exports to Japan, and hopes to resume coal exports to the Japanese market steadily, against the backdrop of new economic and coal trades situations.

    The delegates fully affirmed the stable coal quality, safe supply of Shenhua, and they were willing to further build partnership with the group.

    In late August, two South Korea-based traders said Shenhua had dispatched a delegation to South Korea in mid-August to meet traders and power utilities. Shenhua offered thermal coal with 5,800 Kcal/kg NAR and 0.3% sulfur from Yujialiang mine in Shaanxi province at $80/t (513 yuan/t) FOB, inclusive of export tax.

    However, some South Korean utilities were bidding this variety at $54/t FOB, far lower than the offered price.

    China Shenhua, a listed company of Shenhua Group, exported 600,000 tonnes of coal or 0.3% of the total sales in the first half of the year, down 33.3% on year. The export price averaged 467.9 yuan/t, falling 18.2% from the year prior.

    Trade sources said Shenhua started preliminary talks to export coal to South Korean and Japanese utilities back in April. Meanwhile, Shenhua is lobbying with the Chinese government to further lower the export tax or completely exempt the company from paying the tax to allow them to be more competitive in the market.

    China lowered its export tax from 10% to 3% in January this year.

    Chubu Electric Power and Tokyo Electric Power, which founded a joint venture in April this year, planned to finish the integration of energy transport and trading business into the new company before October 1.

    Presently, the new company is focusing on integrating thermal coal and other energy purchasing across the globe, with annual thermal coal imports at 85 million tonnes.

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    Dalian iron ore jumps 5 pct to 9-week high on steel hopes

    Iron ore futures in China climbed 5 percent on Wednesday, buoyed by hopes that infrastructure spending would gain pace for the remainder of the year and boost steel demand.

    Steel demand in China, the world's top consumer, has continued to shrink this year amid a slowing economy, spurring more producers to sell overseas. China's steel consumption fell last year for the first time since 1981. Infrastructure spending on some sectors such as telecommunications has only been "30-40 percent" completed, and local governments may speed up investment for the rest of the year, said Wang Li, an analyst at CRU Group in Beijing.

    "There are some uncertainties in the overall economy but the Chinese government has bigger power and influence on the economy so I'm not too bearish," said Wang. The most-traded January iron ore contract on the Dalian Commodity Exchange rose as much as 5 percent to 402 yuan ($63) a tonne, the daily ceiling set by the bourse and its highest level since July 3. It closed at 398 yuan, up 3.9 percent. On the Shanghai Futures Exchange, the January rebar contract ended 1 percent higher at 1,948 yuan a tonne after touching a 1-1/2-week high of 1,979 yuan.

    The 14-percent decline in China's iron ore imports in August from July possibly reflects slower supply additions, said Wang. "I think the major miners may adjust their business cycle according to Chinese demand," she said. Iron ore prices have been hurt by worries over a global glut amid signals that China's steel demand may be near its peak. But the steelmaking raw material, after recovering from a decade-low of $44.10 a tonne in July, has managed to stay above $50 since then.

     On Tuesday, iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI rose 0.7 percent to $56.40 a tonne, a level last seen on Aug. 5, according to the Steel Index. But Commonwealth Bank of Australia believes weak Chinese steel demand will continue to cut the country's iron ore imports. "While we still expect low-cost iron ore supply from Brazil and Australia to displace high-cost supply in China, we may still see China's iron ore imports fall this year due to weak steel production and demand," the bank said in a note.
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    Drinking, smoking China Baosteel exec sacked for frugality breach

    A top executive of China's Baosteel Group, the parent of Baoshan Iron & Steel, has been sacked for breaking Communist Party frugality rules, including smoking cigars and drinking expensive liquor during meetings, the party graft watchdog said.

    Since President Xi Jinping's appointment in 2013, the government has cracked down on official corruption and extravagance in China, where the flaunting of personal and often illicit wealth and wasteful public spending has led to widespread criticism of the party.

    Zhao Kun had been vice general manager of Baosteel Group, but was found to have spent company money on expensive accommodation, dinners and personal entertainment, the party's Central Commission for Discipline Inspection said late on Wednesday.

    Zhao booked villas on the company when at company meetings in August and December 2013, and used company money to drink expensive imported alcohol and smoke cigars, as well as allowing his subordinates to go sightseeing, the watchdog said.

    He also visited a private club in Guangzhou in May and September of last year and played golf at company expense, it added.

    "Since 2013, he accepted cigars from his subordinates six times, with each worth between 260 yuan ($40.77) and 900 yuan," the statement said.

    "Zhao ignored the party leadership's repeated warnings ... and did not stop his wrongdoings," it added.

    "Even now, some executives of state-owned firms continue to ignore the central leadership's orders."

    It was not possible to reach Zhao for comment. It is not clear if he will face any criminal charges.

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    Mechel seals debt restructuring deal with VTB

    Russian coal and steel producer Mechel has signed a debt restructuring deal with the country's second-largest state bank, VTB, leaving it one step away from reaching an agreement with all three of its main lenders.

    The indebted miner has spent a year in talks over a $6.8-billion debt restructuring with its three main lenders: VTB, Gazprombank and Sberbank.

    VTB has agreed to restructure Mechel debt worth 70 billion roubles ($1 billion), the bank and the miner said on Wednesday.

    Mechel, which employs 72,000 people, had to ask its lenders to delay debt repayments after Russia's economic downturn and a decline in coal and steel prices put an end to its strategy of borrowing heavily to finance large investments.

    The restructuring will also allow VTB to cut costs on loan-loss provisions for Mechel's debt at a time when the bank's profits have slumped.

    "This restructuring will enable the company to service its debt even in these times, which are difficult for the global commodity market," Igor Zyuzin, Mechel's board chairman and controlling shareholder, said in a statement.

    The restructuring agreement gives Mechel a grace period on debt repayments to VTB until April 2017 and states that subsequent loan repayments will follow in monthly installments until April 2020, VTB and Mechel added.

    In late August, Mechel signed a similar debt-restructuring deal worth $1.4 billion and 33.7 billion roubles ($506 million) with Gazprombank.

    The company is still in talks with Sberbank, Russia's largest lender, to which it owed $1.3 billion as of mid-June.

    Sberbank said on Wednesday it was yet to agree terms with Mechel over its outstanding debt and was continuing legal proceedings to recover money it is owed.
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    DGS recommends 20% safeguard duty on HR import into India

    On anticipated lines but in a swift mode, India's DGS has recommended to impose 20% ad valorem safeguard duty on imports of HRC into India today. It is understood that the recommendations have been sent to a committee comprising of secretaries of steel, finance and commerce who, most likely, recommend immediate imposition to finance minister to approve and implement with immediate effect. The Indian government seems to be in real hurry to protect Indian domestic HRC makers

    India’s Director General Safeguard vide notice no GSRD-22011/26/2015 dated 9th September 2015 announced that after preliminary examination of the matter concerning imports of HR, as notified on September 7th 2015, it is seen that there is all around deterioration in the financial parameters of the domestic industry and the domestic industry has suffered serious injury and immediate protection is required in the form of the safeguard duties with a view to save the domestic industry from further injury.

    [email protected]
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    BHP’s met coal sees record production in fiscal 2015

    Metallurgical coal production from BHP Billiton -- the world’s largest supplier of seaborne metallurgical coal, rose 13% in fiscal 2015 to a record 43 million tonnes.

    Continued productivity improvements and the ramp-up of Caval Ridge helped achieve this record at Queensland Coal.

    Also, an increase in equipment and wash plant utilization helped six other operations achieve record volumes.

    Thermal coal production, on the other hand, fell 5% to 41 million tonnes. This was expected, as drought conditions and managing dust emissions at Cerrejon in Colombia impacted volumes.

    Met coal production is expected to drop to 40 million tonnes in fiscal 2016 as operations at Crinum come to an end in the first quarter of 2016.

    Wash plant shutdowns at Goonyella and Peak Downs mines are also scheduled for the quarter ending September 2015, which will impact production volumes for fiscal 2016.

    However, going forward, some of this drop in production should be offset by the 1 million tonnes per annum Haju mine in Indonesia, which is expected to commence production during fiscal 2016.

    Thermal coal production is forecast to remain largely unchanged in fiscal 2016 to 40 million tonnes. This assumes a full year production from the San Juan mine. BHP sold this mine to Westmoreland Coal Company, and the transaction is expected to close at the end of 2015.

    Going forward, BHP’s thermal coal production should drop since the San Juan mine, which produced 5 million tonnes of thermal coal in fiscal 2015, no longer contributes to BHP’s thermal coal volumes.
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    BHP expects coal rebound and makes move in Borneo

    Image Source: SMHIt is reported that BHP Billiton is set to ramp up its focus on Indonesian coal, revealing it will open a second mine on Borneo within two years as it predicts a rebound in global markets.

    Mr Mark Small, BHP's Indonesian coal boss, said that mining had this year started at Haju in Central Kalimantan which is the first coal deposit mined in the IndoMet coal project, a joint venture which is 75 per cent owned by BHP and 25 per cent by Adaro Energy.

    Mr Small said that the company would look to start its next Indonesian mine within two years. In parallel we have commenced construction within a second CCoW (Coal Contracts of Work) due to come on-stream in 2017.

    He said that IndoMet would seek to create a world-class metallurgical coal basin supporting a suite of mines and employing many thousands of people.

    BHP's strategy is to mine only the world's largest mineral resources which can be expanded for generations or even centuries and therefore it rarely goes into a new mining province without evidence of a substantial resource.

    He added that "To date we have identified a resource of 1.3 billion tonnes with further exploration planned."

    However, coal prices have dived as part of a global commodity slump but Mr Small said that, beyond the challenging short-term outlook, he was optimistic about both thermal coal and metallurgical coal in the medium to long term.

    He further added that "We are potentially more bullish about metallurgical coal. In the long term I think there will be a recovery, to what extent I am not sure."
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    China Aug steel products export up 25.4pct on yr

    China exported 9.73 million tonnes of steel products in August, up 25.39% year on year and unchanged from July, showed the customs data on September 8.

    The value of August steel exports stood at $5.14 billion, dropping 14.72% on year and down 3.3% on month. That translated to an average export price of $528.57/t in August, dipping 3.31% from July and down 31.99% year on year.

    Over January-August, the exports of China’s steel products stood at 71.87 million tonnes, rising 26.5% from a year ago.

    Total exports value during the same period stood at $42.98 billion, down 4.1% from a year ago.

    China’s steel price dropped after a small rebound in early and mid-August. By end-August, the price of rebar fell 110 yuan/t on month to 2155.5 yuan/t.

    In August, China’s export of steel products saw its competitiveness subduing, mainly due to currency devaluation in major steel importers, intensified international anti-dumping acts, and ample stocks in steel importers.

    However, China’s steel products export may remain on an upward trend in September, due to flat domestic demand amid oversupply, said the China Iron and Steel Association.

    The new export order sub-index under the Purchasing Managers Index (PMI) for China’s steel industry dipped 1.6 from July to 54.5 in August – the third consecutive month above the 50 mark, data showed from the China Federation of Logistics and Purchasing (CFLP).

    Meanwhile, China imported 1.02 million tonnes of steel products in August, dropping 12.8% on year and down 2.9% on month. The value of imports stood at $1.11 billion, dropping 11% from July and down 24.16% from a year ago.
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    Platts China Steel Sentiment Index stabilizes in September

    Chinese steel market participants expect new steel orders during September to stay at similar levels to last month, though prices could soften slightly, according to the latest Platts China Steel Sentiment Index (Platts CSSI), which showed a headline reading of 55.64 out of a possible 100 points in September.

    The September index rose just 0.45 points from August’s 55.19, and was the second consecutive month the CSSI has stayed above the 50 threshold. A figure greater than 50 indicates expectations of an increase. The outlook for new domestic steel orders increased by 1.35 points to 58.33, while export order expectations for the month deteriorated by 10.09 points to 24.48.

    Crude steel production was expected to stay relatively flat in September, compared with August, while steel inventories held by traders were expected to rise further in response to weak demand.

    Prices of flat steel products, such as hot rolled coil, were expected to weaken slightly in September, the CSSI showed. Sentiment is currently more positive regarding domestic demand, while expectations for export orders fell 10.09 points in September to 24.48.

    “Generally, market sentiment remains extremely pessimistic with domestic steel prices at record lows, while demand from the manufacturing and property construction sectors has yet to improve,” said Paul Bartholomew, Platts managing editor of steel and steel raw materials. “Exports have provided a vital outlet for Chinese steel but there is now so much competition for overseas markets that it is pulling export prices down and eroding confidence.”

    Platts China Steel Sentiment Index – September 2015 (a figure over 50 indicates expectations of an increase; under 50 indicates a decrease)
    Data PointSep-15Change from August (points)
    CSSI (Total New Orders)55.640.45
    New Domestic Orders58.331.35
    New Export Orders24.48-10.09
    Steel Production37.142.14
    Steel Prices (flat products)41.43-3.57
    Stocks held by traders61.3413.64

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    China’s 1st ultra-supercritical gangue-fired power project starts construction

    China’s first ultra-supercritical low-calorific gangue-fired power project started construction at Changzhi City in northern Shanxi province on August 25, local media reported.

    The pit-mouth power plant is only 1.0km away from modern Zhaozhuang mine, which has an annual capacity of 8 million tonnes.

    The whole project, jointly invested by Jincheng Anthracite Mining Group and Shanxi International Energy Group, has a designed installed capacity of 3.2 GW.

    The 2×600MW first phase of the project would consume 3.54 million tonnes of coal per year, with standard coal consumption at 287g/KWh during the power generation.

    The project is expected to generate 6 TWh of electricity per year, with annual output value totaling 2.13 billion yuan ($348 million).

    It aimed to realize “zero emission” by recycling coal dust, slag and other emissions and is expected to be put into operation in late-August, 2017.
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    CIL ponders lower output as buyers dry up

    Coal major Coal India Limited (CIL) may be forced to halt supplies to its financially distressed bulk customers. Higher production, rising coal stocks at thermal power plants, falling electricity demand and the financial distress of electricity distributors have forced large coal consumers to call off the acquisition of fresh fuel supplies. 

    “It is not that we are stopping supplies on our own. But several of CIL’s operational mining subsidiaries have been approached by consumers, mostly power distribution companies controlled by provincial governments, seeking stoppage of fresh supplies,” a CIL official said on Monday. “These distribution companies feared that, given their current crippling debt burden, they would not be able to make payment for fresh coal purchases nor clear past dues,” the official said. 

    He was, however, quick to add that, considering that both CIL and power distributors were controlled by federal and provincial governments, the halt in fresh coal supplies was "unofficial" as neither could afford to be seen making such a “tough decision”. 

    Power distributors from the provinces of Madhya Pradesh, Rajasthan and Jharkhand, were the first to seek a halt in buying new supplies, with officials expecting the list to grow as more power distributors started to feel the pinch of their growing indebtedness. 

    The inability to commit to buying fresh coal supplies was evident from the staggering losses of power distribution companies of provincial governments. For example, distribution companies in Rajasthan, in central India, have notched an accumulated loss of about $12-billion. Those in Tamil Nadu in southern India notched up $2.12-billion in losses. 

    The losses were so pronounced that the country’s central banker Reserve Bank of India in a recent note on financial stability said the $8-billion worth of combined loans of distribution companies, which had been recast by government-owned commercial banks, were now at risk of becoming nonperforming assets on the books of these banks. 

    Besides the financial health of these coal consumers, thermal power companies' rising coal stocks, a direct fall-out of low electricity demand and falling plant load factor (PLF), were contributing to the market moving from a shortage to a surplus. According to Central Electricity Authority data, thermal power companies had estimated average coal stocks sufficient to supply 23 days of consumption, up from about 6 days of consumption in 2014. 

    Meanwhile, the average PLF of thermal power plants had fallen to around 58%, from 65% in 2013/14 and 73% in 2011/12, indicating a slowdown in energy demand.

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    China coking coal prices further slide in September

    China’s coking coal prices have further slid since September, due to coke producers’ strong bargains as coke prices decreased 20 yuan/t in general at major production bases in late-August.

    Many coking plants and steel mills have reduced coking coal purchase prices recently, industry portal China Coal Resource learned.

    Northern large steel mills cut 10-30 yuan/t on purchase price of locally-produced coking coals, with one cutting purchase price of Liulin low-sulphur material by 30 yuan/t.

    Most coking plants were in talks with miners about adjusting down prices by 10-30 yuan/t, source said.

    Sources learned that Hebei’s coking plants were running at low capacities, impacted by stricter checks before the Beijing military parade, thus they reduced coking coal purchase.

    Few Shanxi-based coal washing plants reported a rapid increase in stocks in early-September.

    Stocks at large miners were at medium or high level, but downstream buyers slowed efforts to press down prices due to previous big price cuts and discounts.

    Some analysts said large miners may keep prices stable due to already very low prices; some predicted further price drop, as some miners could be forced to cut prices due to high stocks and falling coke prices.

    China’s steel market was also on the downward trend this month. The largest private steelmaker Shagang Group reduced the price of its steel products for construction by 100-130 yuan/t, ex-plant basis, starting from September 1.
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    Vale sees iron ore market at best point in two years on China import dependency

    Brazil's Vale, the biggest iron ore miner in the world, sees the market for the steelmaking raw material at its best point in the last two years, according to CEO Murilo Ferreira.

    He sees smaller iron ore suppliers exiting mines and delaying projects in China, Mexico, Canada and Brazil, leaving open a more consolidated marketplace for the biggest and more efficient miners to capitalize on, according to comments he made in a local newspaper interview confirmed by the company Friday.

    The outlook for iron ore is much better than four months ago when prices dipped, with many adjustments made in supply, Ferreira told Valor Economico.

    Platts IODEX 62% fines index was steady in the mid $50s/dmt CFR range for much of August, assessed at $56.75/dmt Friday. The benchmark fell into the $40s/dmt range first in April and later in July before the market rallied.

    China is expected to see domestic iron ore production fall to around 200 million mt/year, he said, suggesting a sharp adjustment and growth in import substitution from the second half of 2015.

    Increasing reliance from China on seaborne imports is expected by the industry, although remaining domestic mines had kept up share as steel output fell earlier this year, based on trade data.

    Vale should ramp up output further next year, guiding somewhere between the forecast for 2015 of 340 million mt and the previous 2016 target of 376 million mt, with more emphasis now on quality and margins than outright volumes.
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    Australian bank against funding Adani's mine

    Image Source: Business StandardBusiness Standard reported that following the lead of all top American and European banks, which have refused to fund Adani Group’s controversial coal mining project in Australia, the National Australia Bank (NAB) has also decided to steer clear of lending to the group.

    Mr Adrian Burragubba, the spokesperson for the W&J Traditional Owners Family Council, welcomed the move and said the Council was deeply heartened that NAB has ruled out any involvement, now or in the future, in financing this disastrous project.

    Mr Burragubba said that “Today, NAB has acted with moral authority and in accordance with the principles of corporate social responsibility to which it is signatory. Its decision brings this disastrous project one step closer to its demise.”

    A spokesperson for group declined comment. The Adani group has invested close to USD 1 billion in developing the mine, but over the last few months has decided to withdraw all contractors who were preparing the site for mining. The company had hoped to invest as much as USD 15 billion in the project.
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    China Aug steel sector PMI rebounds for 2nd straight month

    The Purchasing Managers Index (PMI) for China’s steel industry witnessed a second monthly straight rebound of 3.7 to 44.7 in August, in the wake of a 3.6 rise in July, indicating a small recovery in the sluggish market, showed the latest data from the China Federation of Logistics and Purchasing (CFLP).

    However, the index has stayed below the 50 mark for 17 straight months, signaling a persisting conflict between supply and demand in this sector.

    The output sub-index rose 6.5 from July to 47.5 in August, the 12th consecutive month below the 50 mark though hitting a new high in the past four months.

    Daily crude steel output of China’s key steel producers rose 2.46% from ten days ago to 1.72 million tonnes over August 11-20, a second straight ten-day rise, showed data from the China Iron and Steel Association (CISA).

    The new order sub-index rebounded 3.3 from July to 39.9 in August, but the new export order index fell 1.6 from July to 54.5 in August – the third consecutive month above the 50 mark, reflecting improved buying from home and abroad.

    The sub-index for steel products stocks decreased 1.3 to 49.8 in August, the lowest since January 2014, said the CFLP.

    As of August 20, total stocks in key steel mills stood at 15.45 million tonnes, dipping 1.24% from ten days ago and down 7.15% from July, indicating a slight relief in steel supply.

    Steel mills would resume production after the military parade in Beijing, probably leading to an increase in market supply. Meanwhile, the recovery of northern construction sites may also boost the demand for steel products. Steel price is likely to fluctuate in the short run.
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    Second phase of expansion of Robe River iron ore JV completed

    Second phase of expansion of Robe River iron ore JV completed

    Nippon Steel & Sumitomo Metal Corporation announced completion of second phase of expansion of iron ore export capacity and West Angelas mine expansion in Robe River Joint Venture in Western Australia. As a result, the annual export capacity of Cape Lambert Port will increase to more than 200 million tons and the annual production capacity of West Angelas mine will increase to 35 million tons.
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    ThyssenKrupp cuts costs by 1 bln euros - CFO in paper

    German industrial group ThyssenKrupp has cut costs by more than 1 billion euros ($1.12 billion) this year, beating its target, and plans to press ahead with renewed savings efforts, its chief financial officer told a German newspaper.

    The company's "Impact" efficiency programme had aimed for 850 million euros in savings in the current fiscal year ending Sept. 30.

    "We had also announced 850 million euros last year and reached 1 billion in the end; I don't think we'll do less than that this year," Guido Kerkhoff told Boersen Zeitung newspaper.

    ThyssenKrupp will continue to work on efficiency improvements in the years ahead, he said. "There is still a lot we could improve. We've just gotten started."

    These savings are expected to make a considerable contribution to earnings growth in the future, helping to boost group earnings before interest and taxes (EBIT) to well above 2 billion euros, he said, declining to give a firm timeline for the improvement.

    The company has said it wants to reach an annual EBIT of at least 2 billion euros in the coming years and aims to achieve this goal as quickly as possible.

    In its third quarter results published on Aug. 13, ThyssenKrupp stuck to its target of adjusted EBIT of 1.6-1.7 billion euros for the year to end-September, up from 1.33 billion a year earlier, although it also said it would probably reach the upper end of the range.

    Kerkhoff played down the impact of slackening growth in China, where ThyssenKrupp makes about 6 percent of sales.

    The group's Elevator Technology business was stable with a share of around 10 percent in China, where 60 percent of the world's elevators are installed.

    "If this market has a stable level, you can't really say that's a bad thing," he said.

    The company was also working to expand its business supplying parts to Chinese car makers and the wind energy sector.

    In Brazil, ThyssenKrupp was still dealing with the impact of sharply falling steel prices on its business. The company has been trying to sell its Brazilian steel mill, known as CSA, which has struggled with losses due to cost overruns and operational challenges.

    "We will decide on a sale based on valuation considerations and will wait for the right moment," Kerkhoff said.

    "However, given the current price of steel in the Brazilian market, no one is thinking about any value-creating transactions," he said.
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    Rio Tinto credit outlook downgraded by S&P

    Rio Tinto plc , a metal and mining company, has lost more than 35% of its market capitalization over the past year, as a commodity market downturn has weakened its earnings. Several commodities, which include crude oil and copper, are trading at multi-year lows, as China experiences an economic slowdown.

    Standard & Poor's analysts have expressed their concerns in a note published on Friday. They believe that the “continued weakness and volatility in commodity prices” could weaken the company’s credit metrics. As a result, the rating agency has revised down its outlook for Rio Tinto, from Stable to Negative, and warns of a potential downgrade.

    A major reason to revise the outlook to Negative were the lowered commodity price assumptions. Weak market conditions, combined with the Chinese economic slowdown, have contributed to expectations that commodity prices will be “highly volatile.”

    Over the next year and a half, S&P could downgrade Rio Tinto’s rating by a notch, if its adjusted funds from operations-to-debt ratio stays “meaningfully” below 35% during 2016-17, or if its discretionary cash flow after dividends for 2016 is “more negative” than expected.

    Long-term and short-term credit ratings have been affirmed at A- and A-2, respectively. The current ratings reflect S&P’s view on the company’s “robust” operational performance. This can be partially accredited to cost-cutting initiatives introduced this year.

    S&P pointed out that Rio Tinto’s net debt-to-capital ratio, a gearing measure, is in the 20-30% range, which supports the current ratings. At the end of second quarter of fiscal 2015 (2QFY15), Rio Tinto’s net debt-to-capital ratio was 21%. The agency believes that Rio Tinto’s business risk profile is “strong,” and is supported by a low-cost and long-life asset base.
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    BHP Billiton inches ahead of Rio Tinto in race for title of lowest-cost exporter

    BHP iron ore president Jimmy Wilson. BHP is now the lowest-cost exporter to China. Photo: Sergio Dionisio

    BHP Billiton has overtaken arch rival Rio Tinto to become the world's lowest-cost exporter of iron ore to China, less than a year after iron ore president Jimmy Wilson threw down a challenge to claim Rio's coveted mantle over the "medium term".

    That is the state of play according to UBS mining analyst Glyn Lawcock, who says BHP has inched ahead of Rio by reducing its break-even to as low as $US28 ($40.50) a tonne, putting it about $US1-$US2 ahead of Rio.

    However, Mr Lawcock says it is "a game of inches and cents" between Rio and BHP.

    While BHP has claimed the lowest-cost-exporter mantle in the past three to four months, that is likely to keep changing as both miners drive their costs lower, he said.  


    "The biggest driver of who wins on all-in delivered costs is not cash costs – they are very similar now – it  is sustaining capital, which is $2 higher for Rio,"

    "But they are very close, it's a game of cents that's fluid and can change quickly."

    The new UBS figures show Brazil's Vale and Gina Rinehart's Roy Hill mine as having the next-best break-evens, both at $US39 a tonne. Fortescue is put at $US42 a tonne, higher than the $US39 guided by the miner.

    In May, when UBS last ran the iron ore cost curve numbers, BHP and Rio's break-evens –  the price at which they are not making or losing cash – were about $US30 with BHP starting to push ahead. Both still make fat margins at current iron ore prices of $US55 a tonne.

    Since then, the premium for iron ore sold in lump form, has fallen about $5 a tonne. A slightly greater proportion of Rio's product is sold in lump form than BHP's, so it has taken a bigger hit. However, that can change quickly.

    "The tyranny of distance is also a headwind for Rio. Their mines are further from the coast than BHP and their mines will get further away from port, and that will put pressure on their costs," Mr Lawcock said.

    Rio's sustaining capital costs are $7 a tonne, $2 a tonne greater than BHP because Rio needs to keep opening new mines to hold its volumes, and eventually hit and maintain its 360mtpa target, Mr Lawcock said.

    "Rio's mines tend to be smaller scale and smaller life than BHP's, which has said it doesn't need to open a new mine for eight years, or a new mining hub for 20 years."

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