Mark Latham Commodity Equity Intelligence Service

Tuesday 20th June 2017
Background Stories on www.commodityintelligence.com

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    Flawed process and flawed charter will curtail mining development



    The government seems to have been wanting to create the biggest shock possible in the mining industry with the newly released Mining Charter, which raises questions around the true agenda, says Soria Hay, BEE expert and Head of Corporate Finance at Bravura, an independent investment banking firm specialising in corporate finance and structured solutions.

    “The instrument for radical economic transformation, as expressed by Mineral Resources Minister Mosebenzi Zwane, could in fact radically curtail mining development in South Africa. With limited consultation with the Chamber of Mines or other industry investors prior to the release of the Charter, the interests of key industry stakeholders are clearly not the main driver here.”

    While the requirement of 30% BEE for all mining rights listed in the Charter released on Thursday is a considerable overall increase from the previous 26%, this in itself is not the end of the world, according to Hay. The ICT Charter, for example, also requires 30% and certain approved beneficiation programmes can be offset against 11% of the BEE shareholding.

    “However, the devil is in the detail, as within this 30%, the new Mining Charter requires 8% to be owned by employees, 8% by mine communities and 14% by black entrepeneurs. Further employment equity level requirements are simply unrealistic, for example there are simply not enough female technical professionals in the country to meet targets of up to 44% of women.”

    Hay outlines several glaring issues with the new Charter. “The major problem here is that all mines have already implemented BEE deals under the previous legislation, at the required 26%. While an exemption has been created eliminating the specific apportionment requirements if the rights holder already on 30% already, these mining companies will not qualify for this exemption. Does this make them non-compliant, and are they now required to completely restructure? It’s certainly not as simple as topping up their BEE within 12 months. And furthermore, it is clear that the “Once empowered, always empowered” approach within this sector is no longer on the table.”

    Another factor that will seriously curtail the overall development of South Africa’s mining industry is the 50% plus 1 BEE requirement for all new prospecting rights. “The exploration side of mining, which is the most difficult to find financing and funding for in South Africa, will be seriously impacted. Not even the Public Investment Corporation (PIC) or the Industrial Development Corporation (IDC) are willing to fund early exploration,” says Hay.

    The new Charter requires foreign mining equipment suppliers to pay 1% of their annual turnover, presumably only in South Africa, to the Mining Transformation and Development Agency. “This cost will most likely just be passed through to the mines,” says Hay. “Also, there is a lack of clarity on who runs this Agency, and how transparency and good corporate governance will be ensured.” The same Agency will also receive a further 2% of the Leviable Amount on skills development.

    Finally, Hay highlights that the 30% BEE shareholding requirement is in fact a complete misnomer when it comes to the true distribution of funds;

    “The Mining Charter requires 1% of annual turnover to be paid to the BEE shareholders, prior to any distributions to any of its other shareholders, which again includes the BEE shareholders. For example, a mine may have turnover of R800 million, and profits of R40 million. R8m must be paid to the BEE shareholders before dividends are declared. Should 100% of the profits then be declared in dividends, a further R12m would go to the BEE shareholders, and R28m to “other” shareholders. The BEE shareholders have therefore received R20m, and the other shareholders R28m. This equates to a full 42% of profits going to BEE shareholders. However, it is important to understand that the investment to build the mine would have been funded proportionately to shareholding,” says Hay. “The other problem with this point is that low commodity prices, such as we have experienced over the last 4 to 5 years, have largely left mines either marginally profitable, or making a loss. However, the 1% of annual turnover that needs to be paid to the BEE shareholders does not depend on profitability.”

    The Mining Charter, already causing damage in the markets, is certainly revolutionary as promised, but not in a positive way, says Hay.

    “The Charter will certainly stifle further private sector investment, the last thing that the already challenged industry needs.”

    http://www.miningne.ws/2017/06/18/flawed-process-and-flawed-charter-will-curtail-mining-development/#
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    A Tour of the Ethereum Token Bubble

    https://medium.com/@LyleCantor/a-tour-of-the-ethereum-token-bubble-493c489bd0ea


    I was not old enough during the dot-com bubble to experience it in any extent. It must have been something. The scope of it. The market correctly foresaw a leviathan. But it didn’t understand exactly its form. And in its uncertainty and excitement, it went mad.

    I’ve read a little about the time, read the archives of GettingIt.com, a grotesquely unprofitable valley-focused webzine published at the height of the bubble, whose offices, on bankruptcy, were inhabited by their former (and then-newly-homeless) editor-in-chief for over six months until finally he was kicked out. Legend has it, he spent most of those months inhaling vast quantities of nitrous oxide, leaving a comically large pile of empty whipit canisters for the landlord to clean up.

    The CAPE was at an all-time high of 44, never matched before or since. There were parties every weekend, the launch of each new startup or IPO trigging inconceivable celebrations with open bars, all at the investors’ expense. It was the age of pingpong tables, of ice-cream delivery startups, of eyeballs over dollars and IPO, IPO, IPO! It was a golden time for nerds, and a platinum time for fakers, scammers and wanna-bes.

    A hell of party and a hell of a hangover — the granddaddy of all bubbles. Quite an experience to live through I imagine, but one I could never quite understand.

    Most of those startups seemed so obviously to be terrible ideas. Why were people buying them? I wasn’t old enough to comprehend this question during the dot-com bubble, but I’m living through the ICO bubble now. And for the first time since I read the archives of Gettingit.com in bemused horror, I finally feel like I’ve had a taste of what its like.

    Sure, the ICO bubble is much smaller, but for all that its madness is keener, more concentrated. And the terrible ideas would make petfood.com blush.

    What is an ICO? It is not a security, at least not one that resembles any security that existed more than 5 years ago. I suppose you could call them commodities that are purchased overwhelmingly for speculative reasons. But I am getting ahead of myself. First, what is Ethereum?

    Ethereum is a blockchain protocol very similar to Bitcoin, but unlike Bitcoin it supports sophisticated forms of transactions known as smart contracts. These are simple programs that define when, how, and in what manner ETH (the name of the native token on the Ethereum network) is distributed. Most importantly for this article, this flexibility allows one to create new tokens on top of the Ethereum platform very easily. And it is these tokens or “coins” that are being speculated on in this bubble, “ICO” being an acronym for initial coin offering.

    These coins are sold as vital parts of as-yet-undeployed decentralized mechanisms (in the economics sense, as in “mechanism design”) which are purported to be useful at some point in the future, and their tokens are claimed to extract rent or value from the people who will use these services. As we will see, most of these projects are unlikely to be useful. And of those that have a chance of being useful, most don’t seem to clearly need the tokens that were sold and don’t have a clear path to provide value to the token holders, or are likely to be quickly forked into less rent-seeking forms.

    That is, unlike in the IPO bubble, for the most part token holders do not own any direct claim or share in the profits of these mechanisms. It is as if during the dot-com bubble people were not speculating on shares of useless companies but instead speculating on limited-supply coupons that could be redeemed to purchase the services of these companies on some indefinite future date.

    I cannot help but think this will end in tears.



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    UAE's Gargash says Qatar isolation could last for years



    A senior United Arab Emirates (UAE) official said on Monday Qatar's powerful Arab neighbours could continue to isolate it "for years" if it did not alter its foreign policy and said a list of their grievances would be completed in the next days.

    Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic ties and transport links with Qatar on June 5 in the worst diplomatic crisis in the region in years.

    The four countries accuse Qatar of fomenting instability in the Middle East, funding terrorism and cosying up to Shi'te power Iran, accusations that Qatar denies.

    Kuwait is attempting to mediate, although scant progress has been made so far.

    "The Kuwaiti mediation will be very useful and there will be demands coming," Anwar Gargash UAE Minister of State for Foreign Affairs told a small group of reporters in Paris. "Qatar will realise that this is a new state of affairs and isolation can last years.

    "If they want to be isolated because of their perverted view of what their political role is, then let them be isolated. They are still in a phase of denial and anger."

    Gargash said the priority concern was in dealing with Doha's links to al Qaeda-linked and other Islamist groups across the region as well as its ties to the Muslim Brotherhood and the Palestinian Hamas group.

    EARLY DAYS

    He said a list of grievances Arab nations had with Qatar would be completed in the next few days.

    Qatar earlier on Monday dismissed the accusations against it as a "publicity stunt" aimed solely at sulllying its image and reputation.

    "We don't really see an escalation, but isolation. You are part of our team, but you keep scoring an own goal," Gargash said, citing Qatar's support of militant groups in Libya, Yemen and Syria.

    Gargash said there was a risk Iran and Turkey would try to fill the vacuum caused by the rift, but urged Ankara, which has supported Doha, to be neutral.

    "It's early days. Turkey is trying to balance between its ideological zeal and its national interests. We are still in the phase and let's hope they are wise and understand that it's in its best interest...what we are doing," he said.

    Gargash, who was in Paris as part of efforts to lobby European allies to put pressure on Doha, said he believed that when Qatar did back down, there would be a need to monitor its activities in the region, something Western powers could undertake.

    "There is no trust. So far it's an idea to create a monitoring system...France, Britain, U.S. or Germany could monitor because they have the diplomatic clout and technical know-how," Gargash said.

    http://www.reuters.com/article/gulf-qatar-emirates-idUSL8N1JG2IV
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    Australia to regulate exports of natural gas



    Australia's conservative government will go ahead with legislation to put export controls on gas, Prime Minister Malcolm Turnbull said Tuesday.

    "We are taking immediate action to put downward pressure on power prices and ensure reliable and secure energy for all Australians," Mr. Turnbull told reporters. "We will be implementing our gas regulation that affects exports… as one of the factors that affects the high price of energy at the moment is a shortage of gas."

    Under the proposed legislation, which is still to pass through Parliament, liquefied natural gas projects taking gas from the domestic market in order to meet long term contract commitments abroad will be stopped from exporting the amount of gas which equates to any gas shortfall locally.

    http://www.marketwatch.com/story/australia-to-regulate-exports-of-natural-gas-2017-06-19
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    Oil and Gas

    Oil Tanker Storage Hits a 2017 Record Despite OPEC's Cuts



    Oil traders are resorting to storing more and more oil at sea amid swelling output in the Atlantic region, a sign the market is far from the kind of re-balancing that OPEC would have hoped for when the group set out last year to bring down global stockpiles.

    The amount of oil stored in tankers reached a 2017 high of 111.9 million barrels earlier this month, according to Paris-based tracking company Kpler SAS. Higher volumes of storage in the North Sea, Singapore and Iran account for most of the increase.

    The build-up occurs even as the Organization of Petroleum Exporting Countries and 11 other nations led by Russia cut supplies. Since the beginning of the year, those nations have attempted to trim nearly 1.8 million barrels a day from the market, though higher output in the U.S. and Africa and sluggish demand in Asia have all helped to undermine their efforts.

    “If anything, it shows that OPEC cuts still aren’t having enough of an impact,” Olivier Jakob, managing director of consultant Petromatrix GmbH, said of the buildup at sea. “The pressure is coming from the Atlantic Basin,” where there are additional supplies, he said.

    Companies including Trafigura Group and Vitol Group have recently chartered older supertankers for as long as eight months, and some of the vessels are likely to be used for floating storage, according to a research note Monday from Pareto Securities AS.

    As a result of the persisting surplus, spot prices for oil are being pushed lower than those for supplies months and years into the future. Such a structure, known as contango, can make it profitable for traders to store oil in tanker ships for delivery later, although data compiled by Bloomberg and E.A. Gibson Shipbrokers Ltd. indicate that’s not the case yet.

    As recently as May 1, the average volume was about 74 million barrels, according to Kpler. Floating storage in Singapore has risen by 23 percent this year and 32 percent in the North Sea, it estimates.

    Africa, North Sea

    The return of West African and Libyan crude “could be a reason for the build in the North Sea,” said Jorge Antequera, a crude oil market analyst at Kpler. Because the Brent benchmark is priced in that region “even if it’s a small build, it will have a significant impact on oil prices.”

    Earlier this month, Royal Dutch Shell Plc lifted export restrictions on Nigeria’s Forcados crude, which had been shut in for more than a year after a militant attack on a sub-sea pipeline. Forcados exports are now expected to average about 285,000 barrels a day in August, almost a quarter of the volume that OPEC has pledged to cut from the market.

    In addition, Libya’s biggest oil field, Sharara, has restarted after intermittent halts and is now pumping about 270,000 barrels a day, the level before a recent shutdown, according to the state-run National Oil Corp. Libyan output is the highest since 2013 after a deal with Wintershall AG enabled at least two fields to resume production.

    Tanker tracking by Bloomberg show almost 9 million barrels of key crude grades Brent, Forties, Oseberg and Ekofisk crudes are now floating on Aframax vessels and crude supertankers off the U.K.’s coasts. The tankers have been floating from less than a week to over two months. The region’s inventories on ships last increased in March, before receding again.

    In the U.S., crude oil production has been on an upward trend since October, and last month it reached 9.34 million barrels a day, the highest level since August 2015. Rig counts have increased for a record 22 weeks straight as shale producers have boosted output, according to data from Baker Hughes Inc. In addition, U.S. crude exports reached a record 1.1 million barrels a day in February.

    Re-Balance ‘Elusive’

    Global crude inventories are likely to decline to some extent later this year, but “a return to five-year average stock levels remains elusive for some time to come,” Morgan Stanley analysts including Martijn Rats wrote in a research note Monday. Oil in floating storage has been building at a rate of about 800,000 barrels a day since early May and continues to increase, they said. More than 52 million barrels a day have been loaded onto tankers this month, a record since at least 2012, they estimate.

    While oil appears to be flowing into floating storage, estimates from E.A. Gibson and exchange data compiled by Bloomberg show that keeping barrels at sea wouldn’t normally be profitable at the moment. For three, six and twelve months, traders would lose money by storing at sea either in the North Sea, the Mediterranean, or Asia. Floating storage isn’t viable, David Martin, an analyst at JPMorgan Chase & Co., wrote in a research note.

    The back up of crude in the North Sea likely won’t clear without it being discounted for buyers in Asia. “Anecdotal trade reports indicate that although Asian refinery buying has been muted in recent weeks, it is picking up momentum,” he wrote.  

    https://www.bloomberg.com/news/articles/2017-06-19/oil-tankers-store-most-oil-this-year-as-glut-proves-hard-to-kill
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    Oil at $30/b oil next year if OPEC fails to deepen cuts, IAEE conference hears



    The price of oil could fall to $30/b next year and stay at that level for about two years, according to Fereidun Fesharaki, chairman of consultants FGE.

    Speaking Monday at the opening of the International Association for Energy Economics international conference in Singapore, Fesharaki said that the current level of cuts implemented by OPEC and associated non-OPEC producers should be sufficient to keep the oil price around $50/b for the remainder of 2017.

    However, new supply would outstrip demand growth in 2018, leading to lower prices, if OPEC fails to deepen its cuts, he said.

    The message of burgeoning excess supply next year was also emphasized by Keisuke Sadamori, the International Energy Agency's Director of Energy markets and Security, who spoke at the IAEE conference earlier.

    Fesharaki said the key question was whether there was a limit to US Light Tight Oil production, noting that past expectations of how much LTO the US could produce had already been surpassed.

    If there was a limit, he argued, then OPEC's production cuts would eventually have their desired effect. If there was no real limit in the short term, or there was a boom in shale oil production in Argentina, then OPEC's strategy would fail, he warned.

    Fesharaki said there was still excess oil on the market, despite OPEC's recent decision to rollover its production cuts, extending them by nine months from end June this year to end March 2018.

    Next year the surplus will grow owing to increases in US LTO output and rising Nigerian, Libyan and Kazakh production, while Russia, he said, remained a wildcard, as a result of an expected rise in upstream investment in the country.

    Both Russia and Kazakhstan are participants in the OPEC/non-OPEC pact to cut almost 1.8 million b/d from the market over the first six months of this year, and extend that level through to end March 2018.

    FOCUS ON SAUDI ARABIA

    Fesharaki said that within OPEC, only Saudi Arabia had the capacity to implement deeper cuts. "It's for Saudi Arabia to decide. Are they going to cut more because they think the number [of barrels the US can produce] is limited, or do they think the number is unlimited?" he asked.

    "If Saudi Arabia believes there is a limit to US production, they will cut... critical decisions will have to be taken [by Riyadh] in the middle of next year or towards the end of next year," he said.

    Widhyawan Prawiraatmadja, from the Governing Board of the Indonesian Institute of Energy Economics, provided an insight into recent OPEC meetings, saying there was no single cohesive viewpoint within the organization.

    He noted that the group of OPEC producers within the Gulf Cooperation Council has not dismissed a return to the organization's "market share" strategy, which was initiated by Saudi Arabia in October 2014 but abandoned in October last year.

    He said Iran could cope with such a strategy, but it would leave many other members of OPEC "very disappointed".

    https://www.platts.com/latest-news/oil/singapore/oil-at-30b-oil-next-year-if-opec-fails-to-deepen-26755447
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    Libya Oil Output Hits 885,000 Bpd



    Libya is producing 885,000 barrels of crude oil daily after last week it reached an agreement with German Wintershall that will see the latter restart production at fields with a combined output of 160,000 bpd, a source from the country’s oil industry told Reuters. Since the announcement of the agreement, total Libyan output has jumped by 50,000 bpd.

    The North African country, which has been exempted from the OPEC production cut deal, now aims to raise production to 1 million bpd by the end of next month. This plan, and the fact that it is not as far-fetched as it may have seemed a few months ago amid clashes between armed groups at some of the main oil export points in the Oil Crescent, is bound to weigh on oil prices. Last month, it was Libya whose increase in oil production drove an overall rise in OPEC output, which deepened the gloom among oil bulls and pressured prices further down below US$50 a barrel.

    The conflict with Wintershall that took off 160,000 bpd from Libya’s total production stemmed from a dispute over crude oil owed by the German operator of two oil production concessions in Libya, with the dues dating back to 2010, the chairman of the NOC told the FT last month. The NOC, according to the FT, wanted to change the terms of its contract with Wintershall from a concession to a production-sharing agreement, but the German company, which is a unit of BASF, apparently resisted. Now the dispute has been settled and Libya is well on its way to reaching its production target for mid-2017.

    At the same time, tensions between the rival government in the East and the West, and additional tension between the NOC and the West-based government, which is backed by the UN, are still intense. The NOC was particularly vocal about the Beghazi government’s recent decree that aimed to transfer some of the oil trading powers of NOC to the cabinet.

    http://oilprice.com/Latest-Energy-News/World-News/Libya-Oil-Output-Hits-885000-Bpd.html
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    Singapore HSFO/Dubai crack swap hits 5-year high amid lower crude, tight supply



    The Singapore high sulfur fuel oil front-month paper crack spread versus the front-month Dubai swap hit a five-year high Monday due to recent weakness in international crude prices and the lower-than-expected supply of fuel oil, S&P Global Platts data showed.

    The front-month July FOB Singapore 180 CST HSFO/Dubai crack swap -- which measures the relative value of the product to crude oil -- rose 39 cents/b from last Friday to minus 0.212 cents/b Monday. The crack was last assessed higher on May 25, 2012, at minus 0.178 cents/b, Platts data showed.

    The front-month July FOB Singapore 380 CST HSFO/Dubai crack swap stood at minus 1.236 cents/b Monday, up 35 cents/b from last Friday. It was last assessed higher on June 28, 2012, at minus 1.164 cents/b, Platts data showed.

    Declining supply and strong demand for bunker fuel were the main contributing factors for the increase in fuel oil cracks, market sources said.

    Singapore is expected to receive about 3 million-4 million mt of imported fuel oil in July, down from 4.5 million-5 million mt in June. Sources attributed the decline to summer demand in the Middle East luring away cargoes and to OPEC cutting output of heavier crude oil.

    Singapore has been seeing an increase in bunker demand in recent weeks, especially since the diplomatic spat between Qatar and other Arab countries arose earlier this month.

    Falling crude prices have also been a strong factor in helping cracks to strengthen, sources said.

    CRUDE ON DOWNTREND

    Crude prices have recently been on a downtrend due to skepticism over the impact of the OPEC-led production cuts amid rising US stock and production levels.

    The ICE August Brent Futures contract Monday touched an intraday low of $46.77/b, just 13 cents off the front-month contract's year-to-date low, before settling at $46.91/b.

    The European benchmark contract has been hovering close to near seven-month lows since early last week, weighed down by rising production in Libya and Nigeria and a lower-than-expected draw in US crude stock levels.

    The front month July Dubai Swap hit a seven-month low last Thursday, when it was assessed at $45.93/b. On Monday, it was little changed at $45.96/b.

    The more liquid second month August Dubai Swap has also been weakening, reaching a nine-month low Monday at $46.21/b, down 23 cents/b from last Friday. The swap was assessed last lower on September 9 last year at $46.18/b.

    The second month August Brent/Dubai Exchange of Futures for Swaps has averaged 74 cents/b to date in June, compared with an average of 78 cents/b for May -- the narrowest since Platts started publishing the assessment in August 2011. However, the EFS has started to inch upwards, with the second-month EFS assessed at 96 cents/b Monday.

    The weaker Dubai crude structure has been attributed to poor market sentiment for Middle East sour crudes due to uncertainties arising from the Saudi-led move on June 5 to cut diplomatic ties, consular relations as well as land, air and sea contact with Qatar over terrorism funding claims. HSFO/BRENT SWAP AT 5-YEAR HIGH

    The HSFO/Brent crack swap remains around the five-year high it reached on June 9, edging up to hit a fresh high Monday.

    The front-month July FOB Singapore 180 CST HSFO/Brent crack swap rose 42 cents/b from last Friday to minus 1.652 cents/b Monday. The crack was last assessed higher on June 27, 2012, at minus 1.576 cents/b, Platts data showed.

    The front-month July FOB Singapore 380 CST HSFO/Brent crack swap was at minus 2.676 cents/b Monday. It was last assessed higher on June 15, 2012, at minus 2.671 cents/b.

    https://www.platts.com/latest-news/oil/singapore/singapore-hsfodubai-crack-swap-hits-5-year-high-27847446
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    Japan boosts May LNG imports



    Japan’s liquefied natural gas (LNG) imports increased by 13 percent in May year-on-year, according to the provisional data released by Japan’s Ministry of Finance.

    The world’s largest buyer of the chilled fuel imported 6.24 million mt of LNG in May as compared to 5.52 million mt in the same month the year before.

    This is the fourth straight month that Japan boosted its LNG imports on a yearly basis.

    Japan paid about $2.79 billion for LNG imports last month, a rise of almost 69 percent when compared to the same month in 2016, the ministry’s data shows.

    To remind, Japan’s average price of spot LNG arriving during May reached $5.7 per mmBtu, down from $5.9 per mmBtu in April, METI said earlier this month.

    http://www.lngworldnews.com/japan-boosts-may-lng-imports/
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    South Korea’s LNG imports up in May



    Liquefied natural gas (LNG) imports into South Korea, the world’s second-largest buyer of the fuel, rose in by 12.4 percent in May year-on-year.

    The country imported 2.49 million mt of LNG in May as compared to 2.21 million mt in the corresponding month the year before, according to the customs data.

    The data shows that South Korea paid about $1.08 billion for the LNG imports last month.

    Qatar, the world’s top LNG exporter, remained the dominant source of South Korean imports with 648,321 mt of the chilled fuel imported from Qatar in May.

    Australia was the second-largest LNG supplier to Korea last month with 509,230 mt.

    The remaining volumes imported into South Korea were sourced from Malaysia, Oman, Indonesia, Russia, Algeria, USA, Agnola and Brunei.

    To remind, South Korea’s Kogas said Thursday it started commercial operations of three LNG storage tanks at its Samcheok receiving terminal located some 290 kilometers east of Seoul.

    The Samcheok import terminal now has a total storage capacity of 2.6 million cubic meters of LNG in twelve storage tanks.

    Including the latest additions, Kogas operates in total 74 LNG storage tanks in South Korea and overseas.

    The company imports approximately 96 percent of Korea’s LNG demand via its four LNG terminals, namely Incheon, Pyeongtaek, Tongyeong and Samcheok.

    http://www.lngworldnews.com/south-koreas-lng-imports-up-in-may/
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    Bangladesh seeks expressions of interest to supply spot LNG



    Bangladesh has issued an international tender seeking expressions of interest by July 30 to supply LNG on a spot basis, state-run Petrobangla's LNG chief Md Quamruzzman said Monday.

    "We plan to pick a pool of 10-12 LNG suppliers who would be interested in supplying LNG to us on a spot basis in response to our requests," he said.

    The tender is in line with the Bangladesh government's policy of importing LNG via both long-term contracts and spot deals to achieve competitive prices, the country's State Minister for the Ministry of Power, Energy and Mineral Resources, Nasrul Hamid, told S&P Global Platts last Thursday.

    The volumes to be supplied under spot deals and long-term contracts has yet to be decided.

    The short listed spot suppliers will be asked to submit quotes for supplying LNG from time to time, when Petrobangla deemed it necessary, Quamruzzman said.

    They will be asked supply lean LNG as per specifications on a delivery ex-ship basis to either floating and land-based storage and re-gasification units currently being set up, he added.

    To facilitate long-term imports, state-run Petrobangla signed a memorandum of understanding with Switzerland-based AOT Energy last Tuesday to supply LNG, with a sales and purchase agreement due to be signed by year end.

    This is on top of an MOU signed with Qatar's RasGas in January 2011 for the supply of 4 million mt/year of LNG. Negotiations with RasGas and AOT Energy were also underway, Quamruzzman said last week.

    Bangladesh eyes starting LNG imports in early 2018 as the country's first LNG import terminal, a 3.75 million mt/year floating storage and regasification unit being developed by US-based Excelerate Energy, is expected to be commissioned next April.

    The country's second FSRU, also with a capacity of 3.75 million mt/year, is being developed by Summit Group, with commissioning expected by October 2018.

    Petrobangla is also planning to set up two onshore LNG terminals, each with a capacity of 7.5 million mt/year, by 2025. The company signed an MOU with India's Petronet in December to build one on Kutubdia Island and issued an international tender in April seeking bids for the construction of the second.

    Petrobangla has already moved to seek around $1.4 billion in subsidies from the government to foot its LNG import bill in 2018, as it will not be able to cover the cost through domestic sales, Quamruzzman said earlier.

    Bangladesh has moved to import LNG as it is reeling under an acute natural gas shortage, with daily average output of around 2.70 Bcf against demand of over 3.30 Bcf/d, according to Petrobangla.

    https://www.platts.com/latest-news/natural-gas/dhaka/bangladesh-seeks-expressions-of-interest-to-supply-27846978
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    ExxonMobil sanctions $4.4bn Liza development, offshore Guyana



    American multinational oil and gascorporation has made a construction decision for the first phase of development for the Liza field, one of the largest oil discoveries of the past decade, located offshore Guyana.

    The Irving, Texas-based company said on Friday that the Liza Phase 1 development includes a subsea production system and a floating production, storage and offloading (FPSO) vessel designed to produce up to 120 000 bbl/d of oil.

    Production is expected to start by 2020, less than five years after discovery of the field. Phase 1 is expected to cost just more than $4.4-billion, which includes a lease capitalisation cost of about $1.2-billion for the FPSO facility, and will develop about 450-million barrels of oil.

    “We’re excited about the tremendous potential of the Liza field and accelerating first production through a phased development in this lower-cost environment. We will work closely with the government, our co-venturers and the Guyanese people in developing this world-class resource that will have long-term and meaningful benefits for the country and its citizens,” ExxonMobil Development Companypresident Liam Mallon said in a statement.

    The short time it took ExxonMobil to go from Liza's discovery to declaring final investment decision (FID) signals the competitiveness of the project, both within the company's portfolio and globally, industry analyst Wood Mackenzie's senior analyst for upstream Latin America, Pablo Medinasaid in a note sent to Creamer Media’s Mining Weekly Online.

    Medina said that the Liza-Payara wells has a breakeven of $46/bbl (Brent; using a 15% discount rate), which puts it in a very attractive position compared to other leading investment opportunities such as tight oil or deepwater Brazil.

    Very few deepwater projects have been pushed through FID during the oil price downturn. “Only the very best projectshave been sanctioned and this speaks volumes of Liza's potential,” the analyst said.

    “We currently forecast the full development of Liza-Payara will produce over 330 000 bbl/d of oil at peak, with reserves of over 1.5-billion barrels of oil equivalent. The successful exploration campaign has also led to the discovery of almost three-trillion cubic feet of associated gas. The full development solution will need to address the challenge of gas monetisation, given the field's remoteness from the coast and the lack of a gas market in Guyana,” he explained.

    Going forward, Guyana will have the task of managing the complexities of developing its first oil and gas field. “Within ten years, we expect the Liza-Payara development to produce 330 000 bbl/d – allowing Guyana to join the ranks of other Latin American producers, where legacy production has been in steady decline,” Medina pointed out.

    The Liza Phase 1 development can provide significant benefits to Guyana, including jobs during installation and operations, workforce training, local supplier development and government revenues to fund infrastructure, social programs and services.

    The development has received regulatory approval from the government of Guyana.

    The Liza field is about 190 km offshore in water depths of 1 500 m to 1 900 m. Four drill centres are envisioned with a total of 17 wells, including eight production wells, six waterinjection wells and three gas injection wells.

    The Liza field is part of the Stabroek Block, which measures 26 800 km2. Esso Exploration and Production Guyana is operator and holds a 45% interest in the block.

    Hess Guyana Exploration holds a 30% interest and CNOOC Nexen Petroleum Guyana holds 25%.

    Esso Exploration and Production Guyana is continuing exploration activities and operates three blocks offshore Guyana – Stabroek, Canje and Kaieteur. Drilling of the Payara-2 well on the Stabroek block is expected to start in late June and will also test a deeper prospect underlying the Payara oil discovery.

    http://www.miningweekly.com/article/exxonmobil-sanctions-44bn-liza-development-offshore-guyana-2017-06-16
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    China 2017 oil import quotas surpass last year's allowances - document



    China last week issued a second batch of crude oil import quotas under the so-called "non-state trade" that is higher than for all of the allowances in 2016, but allotments to independent refineries were lower than a year earlier.

    The Ministry of Commerce approved 22.92 million tonnes under the second batch of quotas this year to 32 companies, versus 29 recipients in the first issue for 2017, according to a document dated June 14 viewed by Reuters on Monday.

    That takes the total of quotas issued this year to 91.73 million tonnes versus 87.6 million tonnes in 2016.

    The 32 companies included mostly independent oil refineries, also known as teapots, and some state-run companies that received portions of the quotas.

    Crude imports quotas for the 19 independent refiners dropped by 16.8 percent from last year to 61.41 million tonnes with the sharpest cuts seen for Baota Petrochemical, Haiyou Petrochemical, Chambroad Petrochemical and Wonfull Petrochemical, according to the documents and Reuters data.

    The Ministry of Commerce did not immediately respond to request for comment.

    Beijing gave out a total of 68.81 million tonnes in the first batch of quotas for 2017 in January.

    Company officials at five independent refiners told Reuters that they have received a second batch of crude import quotas.

    Beijing approved the oil quotas under the "non-state trade" designation, which basically means companies that do not included the country's state-owned oil companies Sinopec Ltd, China National Petroleum Corp, Sinochem Group, China National Offshore Oil Corp and Zhuhai Zhenrong Corp.

    http://www.reuters.com/article/china-oil-imports-idUSL3N1JG3EX
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    Qatar Petroleum counters crisis by starting up bunkering facility



    Qatar Petroleum has made fuel oil bunkering solutions available for all vessels calling on Qatari ports to mediate the effects of the ongoing crisis in the region on its clients.

    The company will be catering for the majority of Qatar’s LNG vessel fleet and provide the service to other clients including Muntajat, Hamad Port, and potential free-on-board (FOB) clients of Qatar who load products such as crude oil, LPG, condensate and naphtha.

    The vessel-borne fueling will be available for all vessels lifting any Qatari seaborne imports or exports. Bunkering operations will be managed in collaboration with WOQOD Marine, which is responsible for the sale and delivery of fuel oil utilizing ship to ship transfer operations.

    Commenting on the fueling facility, Saad Sherida Al-Kaabi, the president and CEO of Qatar Petroleum, said that the “unfortunate ongoing crisis” impacted the company’s clients and that Qatar Petroleum decided to assist its clients by “introducing measures to ensure the continuous and reliable energy supplies.”

    Al-Kaabi added that the temporary ship-to-ship bunkering facility will be deployed until a permanent solution is implemented with the company fast-tracking required studies and investments.

    http://www.lngworldnews.com/qatar-petroleum-counters-crisis-by-starting-up-bunkering-facility/
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    Genscape Cushing: Draw -917k bbls in last week



    Genscape Cushing: Draw -917k bbls in last week

    @zerohedge
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    Is the Permian Getting Too Hot to Touch?



    High acreage costs beginning to affect economics in the Delaware

    The Permian has enjoyed a rush of capital since oil prices began to recover from a low of $26.21 in February of last year.

    The play is home to some of the best economics in the country, making it a prime target for E&P companies looking to maximize profit in a lower price environment. But the surge in land costs is leaving little room for new investors to profit.

    The Delaware basin, the Permian’s hottest zone, is beginning to become a victim of its own success. EnerCom Analytics’ well economic models indicate that the internal rates of return (IRRs) in the Delaware are now lower than those seen in the Midland due to the high cost of land.

    At $45 WTI, EnerCom’s well economics models show IRRs in the Midland of 22.8% compared to 21.5% in the Delaware when acreage costs are included in the equation. The cost per-acre in the Delaware is 65% higher than in the Midland at an average of $33,000 per acre.

    Economics in every basin are expected to see pressure as oil prices remain in the low- to mid-$40 range and oilfield service providers, who are in high demand for well completions and drilling, look to increase their prices. Combined with the high premiums in the Permian, this barrage of pressuring factors are making it more difficult for new investors to enter the play, and those with exposure are beginning to pull back.

    Service costs are expected to increase between 10% and 15%, according to EnerCom Analytics, with some E&P companies saying they could increase as much as 20%. In EnerCom’s March Energy Industry Data & Trends, the firm found that most basins could absorb even the high-end of those estimates at $50 per barrel WTI, but with prices floating around $45 per barrel, it will be much more difficult for E&Ps to continue generating 20% IRRs or better.

    Based on EnerCom’s models, only the Midland could handle more than a 10% increase in service costs at $45 per barrel with the high per-acreage cost of the Delaware pushing the play’s IRRs beneath the 20% IRR threshold.

    Eight hedge funds have reduced the size of their positions in ten shale firms with exposure to the Permian by over $400 million, according to information from Reuters. The value of these funds’ positions in the 10 Permian companies declined by 14 percent, to $2.66 billion in the first quarter 2017 from $3.08 billion in the fourth quarter of 2016.

    Less room to run

    Investors continue to give Permian players a premium multiple compared to companies in other parts of the country, but some firms are beginning to worry operations in the region do not merit the higher valuations.

    Concern about inflated land costs and weakness in oil prices has some firms worried Permian players may not fly much higher. The 10 companies examined by Reuters were down 18% already this year compared to a 13% decrease in the S&P 500 energy sector.

    EnerCom’s analysis of a peer group of Permian pure-play companies found the companies were struggling more than the Reuters information indicated. Looking at the performance of seven Permian players compared to the XOI index, companies with operations in the region were underperforming the wider energy index in all cases.

    The XOI is down 12% YTD while the seven Permian companies averaged a loss of 34% so far in 2017. WTI is down 15% over the same time period.

    Well economics and returns from the Permian continue to be some of the strongest in the country, but companies in the play may see a near-term correction as investors weigh higher land costs and lower oil prices. Already this year, Permian companies are underperforming the wider energy markets and with an expected increase in service costs, it will become more difficult for companies in more expensive parts of the play to compete with other companies around the country for capital.

    https://www.oilandgas360.com/permian-getting-hot-touch/
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    Oil and gas producer EQT to buy Rice Energy in $6.7 billion deal



    U.S. oil and gas company EQT Corp (EQT.N) said on Monday it would buy Rice Energy (RICE.N) for $6.7 billion (5.24 billion pounds) in its biggest deal ever, as it looks to expand its natural gas business.

    Rice Energy's shares surged more than 24 percent to $24.47 in early trading, but below the $27.05 per share offered by EQT. EQT's shares were down 9.4 percent.

    The deal comes at a time when U.S. energy firms are pumping in money to develop facilities in gas-rich states like Pennsylvania, West Virginia and Ohio as the country prepares to become the world's top natural gas exporter.

    EQT said it would be able to drill longer horizontal wells in Pennsylvania after the deal as most of the acquired acreage is next to where EQT already drills or owns land.

    "EQT is a decade behind in fracking technology used by industry leaders in Marcellus/Utica," said Dallas Salazar, CEO of energy consulting firm Atlas Consulting. "EQT needs a lot - and Rice offers a lot of what it needs."

    EQT has been buying acreage in the Marcellus shale field - where gas is among the cheapest in the country. Most recently it picked up 53,400 acres in the field from Stone Energy Corp.

    EQT said the acquisition would increase its 2017 average sales volume by 1.3 billion cubic feet equivalent per day (bcfe/d) and its core acres in the Marcellus field by 187,000 to 670,000.

    The deal would also give the company access to Rice Energy's midstream assets, including a 92 percent interest in Rice Midstream GP Holdings. EQT will take on about $1.5 billion in debt.

    Rice Energy shareholders will receive $5.30 per share in cash and 0.37 EQT shares for each share they hold, EQT said.

    The offer translates to a price of $27.05 per Rice Energy share, representing a premium of 37.4 percent to the stock's Friday closing price, according to Reuters calculations.

    Citigroup was EQT's financial adviser, while Wachtel

    http://www.reuters.com/article/uk-rice-enrgy-m-a-eqt-corp-idUSKBN19A221
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    Occidental Petroleum Monetizes Non-Strategic Permian Resources Acreage and Enhances Permian EOR Business Resulting in Higher Net Production



    Occidental Petroleum Corporation announced today that it has agreed to a number of purchase and sale transactions in the Permian Basin. On a combined basis, these transactions require no net cash outlay and add approximately 3,500 barrels of oil equivalent per day to the Company’s production. Occidental will reduce its Permian Resources position by 13,000 net acres, divesting non-strategic acreage in Andrews, Martin and Pecos Counties and adding incremental acreage to enhance a future core development area in Glasscock County. Occidental also agreed to increase its ownership interests and assume operatorship of a CO2 enhanced oil recovery (EOR) property.

    “These transactions support our pathway to breakeven at $50 after dividend and production growth and our long-term, returns-focused value proposition. The combined results accelerate cash flow and enhance our future returns by exchanging low-priority development acreage for low decline, low capital intensity EOR production that has significant opportunity for value improvement,” said Vicki Hollub, President and Chief Executive Officer. “By monetizing assets in the tail of the portfolio that were not strategic to us, but are synergistic to other companies, we are creating value for our shareholders.”

    The net Permian Resources transactions will generate proceeds of approximately $0.6 billion. The divested acres had no significant near-term development plans while the acquired acreage provides additional value within the future development area. The Permian EOR transaction included the acquisition of working interests in the Seminole-San Andres Unit, a premier CO2 flood, interests in the Seminole Gas Processing Plant, source fields at Bravo Dome Unit and West Bravo Dome Unit and the Sheep Mountain and Rosebud CO2 pipelines for $0.6 billion. Occidental has had an ownership interest in these EOR assets since 2000. Seminole-San Andres Unit will become Occidental’s largest domestic oil producing EOR unit.

    All the transactions are expected to close by the third quarter. An updated investor presentation, which includes additional details is available at: http://www.oxy.com/investors/Earnings/Pages/Investor-Presentations.aspx.

    http://www.businesswire.com/news/home/20170619005723/en/Occidental-Petroleum-Monetizes-Non-Strategic-Permian-Resources-Acreage/?feedref=JjAwJuNHiystnCoBq_hl-YKT6SDyMw5Lye4ovXwHmkqD8R-QU5o2AvY8bhI9uvWSD8DYIYv4TIC1g1u0AKcacnnViVjtb72bOP4-4nHK5idAXrgr_e1ZUbxvK6BY66Xm&utm_source=dlvr.it&utm_medium=twitter

    Hess Announces Sale of Its Enhanced Oil Recovery Assets in the Permian Basin

    Hess Corporation today announced it has entered into an agreement to sell its interests in enhanced oil recovery (EOR) assets in the Permian Basin to Occidental Petroleum Corporation for a total consideration of $600 million, effective June 1, 2017. Proceeds from the sale will be used to fund the company’s strong growth opportunities.

    The transaction consists of the following Hess-operated assets: the Seminole-San Andres Unit (Hess 34.2% interest) and the Seminole Gas Processing Plant (Hess 46.6% interest) in Texas; the West Bravo Dome C02 field in New Mexico (Hess 100% interest); and a 9.9% non-operated interest in the Bravo Dome unit in New Mexico. These assets produced an average of 8,200 barrels of oil equivalent per day in 2016 net to Hess.

    The agreement is subject to regulatory approvals and other customary closing conditions and is expected to close August 1, 2017.

    Hess Corporation is a leading global independent energy company engaged in the exploration and production of crude oil and natural gas. More information on Hess Corporation is available at http://www.hess.com.

    http://www.businesswire.com/news/home/20170619005689/en/Hess-Announces-Sale-Enhanced-Oil-Recovery-Assets/?feedref=JjAwJuNHiystnCoBq_hl-YKT6SDyMw5Lye4ovXwHmkqD8R-QU5o2AvY8bhI9uvWSD8DYIYv4TIC1g1u0AKcacnnViVjtb72bOP4-4nHK5idAXrgr_e1ZUbxvK6BY66Xm&utm_source=dlvr.it&utm_medium=twitter
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    Haynesville slowdown highlights bearish natural gas outlook



    Often considered a bellwether for natural gas producer confidence, drilling activity in the Haynesville Shale last week witnessed the biggest slowdown in nearly 11 months as weakening prices over the last four weeks have continued to weigh on internal rates of return.

    On Friday, the rig count in the Louisiana-Texas-Arkansas play fell by two, the largest decline since late-July 2016, data compiled by Baker Hughes show. At 39 though, the rig count in the Haynesville still remains at its highest since February 2015.

    The recent slowdown in drilling comes as the futures market at the Henry Hub, often used by producers to hedge future production, continues to weaken.

    The 12-month forward curve, assessed Thursday at $3.11/MMBtu, has fallen by 25 cents, or more than 7%, in the last month.

    With an estimated breakeven Henry Hub gas price of $3.14/MMBtu according to Platts' Well Economics Analyzer, current market conditions are leaving producers in the Haynesville unenthusiastic about new drilling initiatives.

    Recent drilling trends in other dry gas plays have been characterized by a similar kind of inertia. Over the last two weeks, rig counts in the Marcellus, Utica, Barnett and the Fayetteville have been unchanged.

    With benchmark forward prices beyond first-quarter 2018 already below the $3/MMBtu level, dry plays outside of the Northeast may soon become unprofitable.

    WEAK FUNDAMENTALS DRIVE RECENT PRICE DECLINES

    A bullish storage injection, announced by the US Energy Information Administration Thursday led the prompt NYMEX futures contract to jump 12 cents/MMBtu, pushing the settlement price above $3/MMBtu after it had tested a three-month low Wednesday at $2.93/MMBtu.

    Thursday's rally though stands in stark contrast to the recent and sustained downward price trend that appears to be tracking weak supply-demand fundamentals emerging since the start of injection season.

    From April 1 to date, total US gas demand has averaged 64.5 Bcf/d and is down roughly 1.8 Bcf/d compared with the same 11-week period last year.

    Production too has suffered a decline over that timeframe, though the magnitude of that contraction is much smaller.

    Since the start of April, gas supply has averaged 71.3 Bcf/d and is down less than 1 Bcf/d compared with the same period in 2016, Platts Analytics data show.

    One of the largest annual declines in gas demand has come from the power sector, which has pulled back on gas-fired generation in response to higher gas prices this year compared to 2016.

    Since the start of injection season cash prices at the Henry Hub are up $1.08/MMBtu compared with 2016. Over that same 11-week period, gas demand from generators is down an average 2.4 Bcf/d.

    That decline comes in spite of warmer temperatures this year, which are up about 1-degree Fahrenheit compared with last year.

    Adding to the recent bearish sentiment, Platts Analytics expects that US power burn this summer will average just 30.4 Bcf/d from July through September.

    That forecast is down sharply from last year when burn averaged 34.9 Bcf/d over the same three months.

    https://www.platts.com/latest-news/natural-gas/houston/analysis-haynesville-slowdown-highlights-bearish-26755808
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    Eclipse passes new 'super lateral' record



    US gas producer drills 19,500-foot horizontal well in Utica condensate window

    Pennsylvania-based Eclipse Resources continues to set apparent records for horizontal well lengths onshore US, drilling two recent "super laterals" stretching more the three-and-a-half miles in the Utica shale play.

    Eclipse has claimed what it believes to be the longest-ever lateral drilled in a US shale at 19,514 feet with the Outlaw C 11H. Total measured depth was around 27,750 feet.

    The Outlaw well followed the previous drilling of the 19,315-foot Great Scott 3H well from the same pad.

    http://www.upstreamonline.com/live/1284886/eclipse-passes-new-super-lateral-record
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    Alternative Energy

    Tesla Battery Production CO2 release


    Study: Tesla car battery production releases as much CO2 as 8 years of driving on petrol

    Posted: June 19, 2017 by tallbloke in Accountability, Analysis, Big Green, Carbon cycle, Emissions, flames, greenblob
     4 Tesla-Model-S-fire

    Tesla Model S – this is the only way you’ll keep warm in one during winter.

     

    From NyTeknik:

    Huge hopes tied to electric cars as the solution to automotive climate problem. But the electric car batteries are eco-villains in the production. Several tons of carbon dioxide has been placed, even before the batteries leave the factory.

    IVL Swedish Environmental Research Institute was commissioned by the Swedish Transport Administration and the Swedish Energy Agency investigated litiumjonbatteriers climate impact from a life cycle perspective. There are batteries designed for electric vehicles included in the study. The two authors Lisbeth Dahllöf and Mia Romare has done a meta-study that is reviewed and compiled existing studies.

    The report shows that the battery manufacturing leads to high emissions. For every kilowatt hour of storage capacity in the battery generated emissions of 150 to 200 kilos of carbon dioxide already in the factory. The researchers did not study individual bilmärkens batteries, how these produced or the electricity mix they use. But if we understand the great importance of play battery take an example: Two common electric cars on the market, the Nissan Leaf and the Tesla Model S, the batteries about 30 kWh and 100 kWh.

    Even when buying the car has thus emissions occurred, corresponding to approximately 5.3 tons and 17.5 tons, the batteries of these sizes. The numbers can be difficult to relate to. As a comparison, a trip for one person round trip from Stockholm to New York by air causes the release of more than 600 kilograms of carbon dioxide, according to the UN organization ICAO calculation.

    Another conclusion of the study is that about half the emissions arising from the production of raw materials and half the production of the battery factory. The mining accounts for only a small proportion of between 10-20 percent.

    Read more: “The potential electric car the main advantage”

    The calculation is based on the assumption that the electricity mix used in the battery factory consists of more than half of the fossil fuels. In Sweden, the power production is mainly of fossil-nuclear and hydropower why lower emissions had been achieved.

    The study also concluded that emissions grow almost linearly with the size of the battery, even if it is pinched by the data in that field. It means that a battery of the Tesla-size contributes more than three times as much emissions as the Nissan Leaf size. It is a result that surprised Mia Romare.


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    Exxon Makes a Biofuel Breakthrough



    It’s the holy grail for biofuel developers hoping to coax energy out of algae: Keep the organism fat enough to produce oil but spry enough to grow quickly.

    J. Craig Venter, the scientist who mapped the human genome, just helped Exxon Mobil Corp. strike that balance, with a breakthrough that could enable widespread commercialization of algae-based biofuels. Exxon and Venter’s Synthetic Genomics Inc. are announcing the development at a conference in San Diego on Monday.

    They used advanced cell engineering to more than double the fatty lipids inside a strain of algae. The technique may be replicated to boost numbers on other species too.  

    "Tackling the inner workings of algae cells has not been trivial," Venter said. "Nobody’s really ever been there before; there’s no guideline to go by."

    Venter, who co-founded Synthetic Genomics and sequenced the human genome in the 1990s, says the development is a significant advancement in the quest to make algae a renewable energy source. The discovery is being published in the July issue of the journal Nature Biotechnology.

    It’s taken eight years of what Venter called tedious research to reach this point.

    When Exxon Mobil announced its $600 million collaboration with Synthetic Genomics in 2009, the oil company predicted it might yield algae-based biofuels within a decade. Four years later, Exxon executives concededa better estimate might be within a generation.

    Developing strains that reproduce and generate enough of the raw material to supply a refinery meant the venture might not succeed for at least another 25 years, former chief executive and current U.S. Secretary of State, Rex Tillerson said at the time.

    Even with this newest discovery, commercialization of this kind of modified algae is decades away.

    Venter says the effort has "been a real slog."

    "It’s to the team’s credit -- it’s to Exxon’s credit -- that they believed the steps in the learning were actually leading some place," he said. "And they have."

    The companies forged on -- renewing their joint research agreement in January amid promising laboratory results.

    Exxon declined to disclose how much the Irving, Texas-based company has invested in the endeavor so far. Vijay Swarup, a vice president at ExxonMobil Research and Engineering Co., says the collaboration is part of the company’s broad pursuit of "more efficient ways to produce the energy and chemicals" the world needs and "mitigate the impacts of climate change."

    Carbon Consumer

    Where Exxon’s chief products -- oil and natural gas -- generate carbon dioxide emissions that drive the phenomenon, algae is a CO2 consumer, Swarup said.

    Most renewable fuels today are made from plant material, including corn, corn waste and soybean oil. Algae has long been considered a potentially more sustainable option; unlike those traditional biofuels, it can grow in salt water and thrive under harsh environmental conditions. And the oil contained in algae potentially could be processed in conventional refineries.

    The Exxon and Synthetic Genomics team found a way to regulate the expression of genes controlling the accumulation of lipids, or fats, in the algae -- and then use it to double the strain’s lipid productivity while retaining its ability to grow.

    "To my knowledge, no other group has achieved this level of lipid production by modifying algae, and there’s no algae in production that has anything like this level," Venter said in a telephone interview. It’s "our first super-strong indication that there is a path to getting to where we need to go."

    Nitrogen Starved

    They searched for the needed genetic regulators after observing what happened when cells were starved of nitrogen -- a tactic that generally drives more oil accumulation. Using the CRISPR-Cas9 gene-editing technique, the researchers were able to winnow a list of about 20 candidates to a single regulator -- they call it ZnCys -- and then to modulate its expression.

    Test strains were grown under conditions mimicking an average spring day in southern California.

    Rob Brown, Ph.D., senior director of genome engineering at Synthetic Genomics, likened the tactic to forcing an agile algae athlete to sit on the bench.

    "We basically take an athlete and make them sit on a couch and get fat," Brown said. "That’s the switch — you grab this guy off the track and you put him on a couch and he turns into a couch potato. So everything he had in his body that was muscle, sinew, carbohydrates -- we basically turn that into a butterball. That’s what we’re basically doing with this system.”

    Without the change, most algae growing in this environment would produce about 10 to 15 percent oil. The Exxon and Synthetic Genomics collaboration yielded a strain with more than 40 percent.

    Venter, who is also working on human longevity research, views the development as a significant step toward the sustainable energy he believes humans need as they live longer, healthier lives. The study also is proof, he says, that "persistence pays."

    "You have to believe in what you’re doing and that where you’re headed really is the right direction," he said, "and sometimes, like this, it takes a long time to really prove it.”

    https://www.bloomberg.com/news/articles/2017-06-19/genome-decoder-s-fatty-algae-is-biofuel-breakthrough-for-exxon
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    Agriculture

    Funds nearly wipe away bearish CBOT corn bets


    Within the past two weeks, speculative investors have bought back close to 1 billion bushels worth of corn in the form of Chicago Board of Trade futures and options contracts – which was very probable given the record bearish bets extending into the U.S. growing season.

    The potential of the 2017 U.S. corn crop has come into question with less-than-ideal condition ratings and marginal weather forecasts, and no one wants to be last out the door in case corn yields go bust.

    Money managers slashed their net corn short in the week ended June 13 to just 17,929 futures and options contracts, representing a dump of 120,829 on the week (reut.rs/2saSk3g).

    Last week also marked the second-ever biggest round of short-covering in the corn market. Funds bought back 109,295 short positions, slightly missing the June 30, 2015 record of 119,265 contracts.

    Funds had also considerably cut their net short position in the week ended June 6 - though not to the extent of last week - but that move was just as much the result of new longs in the market as it was short-covering. Through June 13, funds only extended their outright longs by 5 percent while slashing their shorts by 29 percent.

    Although the data from the Commodity Futures Trading Commission shows that money managers are still net short the yellow grain through June 13, they are presumably long heading into the week of June 19. Corn futures rallied again late last week, which had funds buying up even more contracts.

    WHEAT ON THE RISE

    It is likely that speculators are also much less bearish on Chicago wheat in real-time than what is reflected in the latest Commitment of Traders report based on last week’s futures rally. Still, pessimism proved lighter in the week ended June 13.

    Hedge funds cut their Chicago wheat net short to 82,859 futures and options contracts, which represents the least bearish view on soft red winter wheat since early March. This compares with 106,136 contracts in the week before, and the new stance is only half has large as the recent max short of 162,327 contracts in the week ended April 25 (reut.rs/2sClTwa).

    The K.C. wheat bulls were out in force last week as funds extended their net long to 23,888 futures and options contracts. The move from last week’s 2,394-contract long marks the largest-ever weekly extension in either direction on the hard red winter wheat spec stance (reut.rs/2rFrywg).

    U.S. hard red spring wheat conditions were slashed to just 45 percent of the crop in good to excellent condition as of June 11 and the wheat market is now garnering evidence that the crop is not going to be great. But funds modestly extended their net long to 11,780 futures and options contracts from 9,486 the week before (reut.rs/2rFwYaG).

    This is not even the most bullish that speculators have been this year on Minneapolis wheat, as the net long position exceeded 12,000 contracts for six straight weeks from Jan. 11 through Feb. 21, which topped out at 16,717 contracts in the week ended Jan. 24.

    BEARS STILL RULE THE SOY COMPLEX

    Funds bought back positions across the CBOT soy complex in the week ended June 13, lifting the combined bets off of the previous week’s all-time bearish stance (reut.rs/2saVdkD).

    Short-covering was the theme in oilseeds as soybean futures rose from June 6 through the end of the week over U.S. crop weather concerns, though to a lesser degree percentage-wise than the grains. Funds cut their net soybean short to 79,673 futures and options contracts from 94,737 in the prior week, which had been their second all-time bearish view on the oilseed.

    Money managers were also covering shorts in soybean oil, chopping their short position to just 16,840 futures and options contracts from 34,301 in the week prior. Soybean meal bets moved the least last week as funds reduced their net short to 44,746 contracts from the previous week’s 50,941 contracts, which was an all-time spec short.

    Since June 13, trade sources indicate that commodity funds had been net buyers of both soybeans and soybean oil, but net sellers of soybean meal.

    http://www.reuters.com/article/us-cbot-grains-braun-idUSKBN19A0ZO
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    China's pork demand hits a peak, shocking producers, as diets get healthier



    China's frozen dumpling makers are finding there's a quick route to winning new sales - increase the vegetable content, and cut down on the meat.

    This departure from traditional pork-rich dumplings is a hit with busy, young urbanites, trying to reduce the fat in diets often heavy on fast food.

    "They like to try to eat more healthy products once a week or fortnight. It's a big trend for mainland China consumers, especially those aged 20 to 35," said Ellis Wang, Shanghai-based marketing manager at U.S. food giant General Mills (GIS.N), which owns top dumpling brand Wanchai Ferry.

    For pig farmers in China and abroad, it is a difficult trend to stomach. The producers and other market experts had expected the growth to continue until at least 2026.

    Chinese hog farmers are on a building spree, constructing huge modern farms to capture a bigger share of the world's biggest pork market, while leading producers overseas have been changing the way they raise their pigs to meet Chinese standards for imports. Some have, for example, stopped using growth hormones banned in China.

    China still consumes a lot more meat than any other country. People here will eat about 74 million tonnes of pork, beef and poultry this year, around twice as much as the United States, according to U.S. agriculture department estimates. More than half of that is pork and for foreign producers it has been a big growth market, especially for Western-style packaged meats.

    But pork demand has hit a ceiling, well ahead of most official forecasts. Sales of pork have now fallen for the past three years, according to data from research firm Euromonitor. Last year they hit three-year lows of 40.85 million tonnes from 42.49 million tonnes in 2014, and Euromonitor predicts they will also fall slightly in 2017.

    Chinese hog prices are down around 25 percent since January, even though official numbers suggest supply is lower compared with last year.

    China's meat and seafood sales IMG: tmsnrt.rs/2s83aam

    RARE LUXURY

    Since China began opening up to the world in the late 1970s, pork demand expanded by an average 5.7 percent every year, until 2014 as the booming economy allowed hundreds of millions of people to afford to eat meat more often. During Mao Zedong's reign as Chinese leader from 1949-76 meat had, for many, been a rare luxury.

    Now, growing concerns about obesity and heart health shape shopping habits too, fuelling sales of everything from avocados to fruit juices and sportswear. [reut.rs/2rpFDhp] [reut.rs/2tis0Tg]

    "Market demand remains very weak. I think one factor behind this is people believe less meat is healthier. This is a new trend," said Pan Chenjun, executive director of food and agriculture research at Rabobank in Hong Kong.

    Sales of vegetable-only dumplings grew 30 percent last year, compared with around 7 percent for all frozen dumplings, Nielsen research also shows.

    "Demand for vegetable products keeps rising, giving us large room for growth," said Zhou Wei, product manager at number two dumpling producer Synear Food.

    Guangzhou-based Harmony Catering says health is the key to reduced servings of meat to the roughly 1 million workers eating at its 300 canteens each day.

    Staff at the technology companies, banks and oil majors that are Harmony's clients will consume about 10 percent less meat today than they did five years ago, but around 10 percent more green vegetables, according to Harmony vice president Li Huang. "It's mainly because of media, the concept of health has entered popular consciousness," he said.

    For now, it's mostly urban and white-collar workers paying closer attention to their diets. There's been, for example, a sharp rise in vegetarian food stations at university campuses. But the government wants a nationwide shift in eating habits.

    Childhood obesity in China is rocketing, and the country also faces an epidemic of heart disease, Harvard researchers warned last year. Among the problems, they blamed growing consumption of red meat and high salt intake.

    In April, the health ministry kicked off its second 10-year healthy lifestyle campaign, urging citizens to consume less fat, salt and sugar, and aim for a 'healthy diet, healthy weight and healthy bones'.

    By 2030, Beijing wants to see a marked increase in nutritional awareness, a 20 percent cut in the per capita consumption of salt, and slower growth in the rate of obesity, it said in its recently published 'Healthy China 2030' pamphlet.

    Some companies have been urgently changing the mix of products they sell, going for higher-margin pork meats rather than volume. Sales of traditionally less popular lamb and beef have also been increasing.

    Li of Harmony Catering says although servings of pork are down, the firm is including more beef and lamb in meals.

    "People usually eat lean beef or lamb, like beef brisket, while with pork it's both fatty and lean parts, like in 'hong shao rou'," said Beijing-based nutritionist Chen Zhikun, referring to the widely consumed braised pork dish.

    China's top pork producer WH Group has been going up market, selling Western-style products in China, such as sausages and ham. A lot of this is imported from Smithfield, the largest U.S. pork producer, which was acquired by WH in 2013.

    Some producers say that the recent drop in pork consumption can be partly explained by sharply lower output. A prolonged period of losses during 2013 to 2015 forced farmers to cull millions of hogs, hitting supply and sending pork prices to record levels in 2016.

    But for a growing portion of Chinese consumers, price tags on food items are less and less important. A spate of safety scandals in recent years, many related to meat, have made urban Chinese highly sensitive to food quality.

    More than 80 percent of people in China surveyed by Nielsen last year said they were willing to pay more for foods without undesirable ingredients, much higher than the global average of 68 percent.

    "China is in a new stage where consumption of pork and other foods is no longer a simple matter of 'more is better'," said Fred Gale, senior economist at the United States agriculture department.

    http://www.reuters.com/article/us-china-meat-demand-insight-idUSKBN19A31C
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    Base Metals

    Some Indonesian nickel smelters cease operations due to falling prices



    About a dozen newly constructed nickel smelters in Indonesia have stopped operations due to a plunge in nickel prices while others are operating at a loss, an industry association executive said on Monday.

    Thirteen smelters with a combined capacity of 750,000 tonnes of nickel pig iron a year "were forced to cease operation" because nickel prices reached as low as around $8,000 a tonne, Jonatan Handojo, deputy chairman of the Indonesian Smelter Association told Reuters, declining to name the owners of the smelters.

    Three-month nickel touched a one-year low of $8,680 per tonne on the London Metal Exchange last week and is down more than 10 percent so far this year. The metal was trading at $8,975 per tonne on Monday at 0800 GMT.

    There are 12 other nickel smelters in Indonesia which have been able to carry on producing, but they have suffered from losses, Handojo added.

    Indonesia enacted a policy in 2014 restricting nickel ore exports that fostered the construction of new smelters. That year, nickel prices hit a record $21,625 a tonne. The country reversed those rules earlier this year, allowing the export of nickel ore and bauxite under certain conditions.

    Indonesian state-controlled miner Aneka Tambang resumed nickel ore exports last month.

    Refined nickel prices have been pressured by expectations of more nickel ore supply from the Philippines and Indonesia.

    Nickel ore output in the Philippines, the world's top supplier, fell 51 percent in the first quarter due to rains and the suspension of mine operations by former environment minister Regina Lopez.

    But Lopez was ousted in May by a panel of lawmakers and President Rodrige Duterte's choice for her replacement was one welcomed by miners. The country's finance minister Carlos Dominguez has promised investors there would be no more arbitrary suspensions of mining operations.

    http://www.reuters.com/article/indonesia-mining-idUSL3N1JG2UA
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    Steel, Iron Ore and Coal

    Coal dedicated Wari railway nearing full completion in China



    Coal dedicated Wari railway nearing full completion in China

    http://en.sxcoal.com/
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    Iranian Firm Mulls Buying Iron Ore Mine in Australia



    Golgohar Mining and Industrial Company (GEG) is considering purchasing an iron ore mine in Australia, manager Nasser Taqizadeh said.

    The company will either make the purchase on its own or through a consortium made up of Iranian steelmakers, Minews reported.

    “Australia is our main choice, as we seek to buy a mine in a country with high investment security,” Taqizadeh was quoted as saying.

    He added that establishing a consortium and using the Australian ore will definitely be an efficient and economic choice, as the commodity will be transported to Iran using large carriers capable of carrying 100,000-150,000 tons of ore. That is the maximum carrier size Iranian ports can accommodate, according to the official.

    The company is currently conducting the project’s feasibility studies and holding talks with steelmakers.

    Golgohar Mining and Industrial Company, located 50 km from Sirjan in the southwest Kerman Province, operates mines containing six ore bodies spread over an area of 40 square kilometers. The total deposits of iron ore in the region are estimated to be over 1.135 billion tons.

    The major ore body has a deposit of more than 650 million tons, according to the company’s website.

    The mines are connected to the Trans-Iranian Railroad through the Tehran-Bandar Abbas line.

    ➢ Austria Denies Golgohar Involvement

    Following reports in the local media that Austria was extending a credit line to help build a steel plant in Golgohar, the Austrian government has denied any such move.

    “Reports in the Iranian press have no basis; the topic was not addressed by our side at all. There was, therefore, no pledge or signing,” a spokeswoman from the Austrian Finance Ministry told Metal Bulletin.

    She declined a request to confirm reports that the credit line had been extended to Iran at all.

    Hans Jorg Schelling, Austria’s finance minister, led a delegation in a visit to Iran earlier this month aimed at strengthening ties between the two countries’ banks, but there were conflicting reports on what exactly was agreed between the parties.

    According to a report by IRNA on Sunday, Austria’s Oberbank extended a €1 billion ($1.12 billion) credit line to Iran to “provide finance and cooperation development between the two countries”.

    And on the same day, a report published by an Iranian state-run television outlet noted that it would be used to help make a 2.4-million-ton per year steel plant in Golgohar.

    It said Austrian steelmaker Voestalpine would be joining “Iranian partners” to build the steel plant.

    However, a spokeswoman for Voestalpine flatly denied any involvement in the project.

    “It is false information and we do not know where it came from,” she said, adding that the reports were “surprising”.

    “We have no projects in Iran [and] we are not involved,” she said.

    http://www.hellenicshippingnews.com/iranian-firm-mulls-buying-iron-ore-mine-in-australia/
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    China iron ore stabilises; Citi cuts forecasts as supply expands



    Chinese iron ore futures ticked higher on Monday along with steel prices but the steelmaking raw material is still under pressure amid a persistent glut.

    Investment bank Citi said it has cut its iron ore price forecasts for this year and next, due to expanding supply and said it should fall below $45 a tonne for the market to rebalance.

    Spot iron ore, which traded at just below $56 on Friday, has dropped 41 percent from this year’s peak.

    The most-traded iron ore on the Dalian Commodity Exchange was up 0.6 percent at 432.5 yuan ($63) a tonne, as of 0227 GMT. The contract, for September delivery, touched a seven-month low of 412.50 yuan last week.

    Firmer steel supported iron ore, with the most-active rebar on the Shanghai Futures Exchange climbing 0.3 percent to 3,123 yuan per tonne.

    But analysts at Citi see further downside risks, saying they expect more than 100 million tonnes in iron ore surplus this year, on top of over 60 million tonnes in surplus in 2016, citing expansion projects by top miner Vale in Brazil and the Roy Hill mine in Australia.

    “As prices approach $50 per tonne, we may start to see lower output from Russia, Canada and Ukraine. When prices approach $45 per tonne, high-cost Australian and Brazilian miners could be under pressure to cut,” they said in a report.

    Citi slashed its 2017 average price forecast to $61 a tonne from $70, and to $50 from $53 for next year.

    The bank expects iron ore stocks at Chinese ports, currently near their highest level in 13 years, to peak in the second-half of the year.

    “We anticipate steel mills’ restocking activities to gradually weaken, not only because expectations on a bearish iron ore outlook have grown, but also because Chinese banks have tightened credit lines to large steel mills and therefore mills are forced to purchase ores in cash,” the analysts said.

    Inventory of imported iron ore at major Chinese ports stood at 138.95 million tonnes on Friday, according to data tracked by SteelHome. The week before, the stockpiles reached 140.05 million tonnes, the highest ever on SteelHome’s records that date back to 2004. SH-TOT-IRONINV

    Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose 0.9 percent to $55.75 a tonne on Friday, according to Metal Bulletin.

    http://www.hellenicshippingnews.com/china-iron-ore-stabilises-citi-cuts-forecasts-as-supply-expands/
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    Nippon Steel keeps benchmark system for PCI, semi-soft



    Japan's largest steelmaker Nippon Steel and Sumitomo Metal will set long-delayed second-quarter prices for pulverized coal injection (PCI) and semi-soft coking coal through bilateral negotiations, despite shifting to indexation for its hard coking coal contracts, Argus reported on June 16.

    It has not decided whether to continue benchmark negotiations for PCI and semi-soft contracts for future quarterly prices, Nippon Steel said, or eventually switch to the use of indexes for these feedstocks as well.

    US-based miner Peabody and UK-South African mining company Anglo American are the leading producers in the PCI contract discussions, while Switzerland-based Glencore likely to lead semi-soft contract talks.

    Steel producers were compelled to consider indexation for quarterly hard coking coal contracts after volatility in spot coking coal markets strained negotiations at the end of last year, and stalled second-quarter talks completely when prices doubled in just over a week in early April because of the impact of Cyclone Debbie on Australian supply.

    Nippon Steel expressed it would use three indexes recently, including Argus assessments, to settle quarterly prices for hard coking coal, ending benchmark system of bilateral negotiations that has been in place since 2010.

    A Japanese steel mill official said that Index prices are more likely to be used for the hard coking coal benchmark than for PCI because of a lack of liquidity in PCI indexes.

    The lack of established indexes for semi-soft material is also weighing against any change. "We will see a fixed-price benchmark for PCI and semi-soft in part because the Japanese mills do not think there is any semi-soft index that reflects real market prices," said a Japanese trader.

    There is also less urgency for PCI and semi-soft quarterly contracts to move towards indexation. "Steelmakers in Japan can maintain bilateral negotiations for PCI and semi-soft because those are smaller parts of their overall procurement," another Japanese trader said.

    http://www.sxcoal.com/news/4557475/info/en
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    U.S. sees possible legal challenges to crackdown on steel imports



    The Trump administration expects U.S. and World Trade Organization-related legal challenges in response to a possible crackdown on foreign imports of steel or aluminum, U.S. Secretary of Commerce Wilbur Ross said on Monday.

    President Donald Trump ordered the investigation in April under the rarely used section 232 of the Trade Expansion Act of 1962. It allows the president to impose restrictions on imports for reasons of national security.

    Ross is expected to announce within days the outcome of the steel inquiry.

    "We assume that if there is any affirmative action that comes out of either one, there probably will be either a domestic legal challenge and, or, a WTO challenge, so we have that very much in mind," Ross told a news conference on the sidelines of the SelectUSA investment summit.

    The administration says the lack of domestic producers could impede U.S. defense procurement for its armed forces as well as for strategically important infrastructure. Foreign steel companies have been concerned the probe may be aimed at shoring up American producers and cutting out foreign competition

    While the investigation has mainly been aimed at cheap imports from China, European steel exporters worry they will be targeted by the U.S. measures.

    European steel association (Eurofer) chief Axel Eggert told Reuters last week his group was exploring options, including submitting a complaint to the World Trade Organization, in response to U.S. tougher measures.

    Speaking during the investment conference, Ross said he expects the outcome of the investigations to be concluded this month. Trump would move swiftly to act on the recommendations of the report, he added.

    "The president being the president I don't think he will dilly dally very long on making his decision whatever it turns out to be," Ross said. "I would expect this to come to a head during the month of June."

    Steel stocks gained broadly on Monday after four steel companies were upgraded following a Reuters report on Friday that the investigation was nearly done.

    Nucor, Steel Dynamics, U.S. Steel, and AK Steel were all upgraded to buy by Longbow Research.

    The S&P 1500 steel sector .SPCOMSTEEL was up 2.5 per cent. U.S. Steel was up 3.9 per cent, AK Steel was up 4.0 per cent, Nucor was up 3.1 pct and Steel Dynamics was up 1.6 pct.

    Asked during a panel discussion on Monday with UK trade minister Liam Fox whether European concerns over a potential U.S. crackdown steel were overblown, Ross said: "There have been a number of European companies against whom we have had trade cases and so the problem of overcapacity is not unique to one segments over the world, it happens to be very concentrated in China."

    "Since we are the world's largest importer of steel, we're the main victim of the overcapacity, so that is the issue we have to grapple with," he added.

    Fox acknowledged that Britain had concerns over possible U.S. actions on steel imports because the two countries traded steel for military projects. The two countries had a "shared view" on national security as NATO allies, he added.

    "We will wait to see what the report says. It's in our interest that global overcapacity is dealt with ... but we have unique US-UK security concerns which we have raised," he added.

    http://www.reuters.com/article/trade-usa-steel-idUSL1N1JG1IR
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    Tata Sons to buy Tata Steel stake in Tata Motors on or after June 23


    Tata Sons Ltd, the holding company of India's salt-to-software Tata conglomerate, plans to buy out Tata Steel Ltd's stake in Tata Motors Ltd on or after June 23, it said in a regulatory filing on Saturday.

    Tata Sons will buy about 83.6 million shares in Tata Motors at or around the prevailing price of the stock on the date of the planned acquisition, it said in the filing.

    It cited "restructuring of investment portfolio" as the reason for the planned deal.

    Tata Motors shares closed at 455.75 rupees in Mumbai trading on Friday.

    Tata Sons owned 28.71 percent of Tata Motors at the end of March, while Tata Steel owned 2.9 percent in the vehicle maker.

    Tata Sons owned 29.75 percent of Tata Steel at the end of March, while Tata Motors owned a 0.46 percent stake in the steelmaker, according to stock exchange data.

    Indian media have reported that Tata Sons planned to reduce crossholdings among group companies.

    http://www.reuters.com/article/tata-sons-tata-motors-stake-idUSL3N1JE05I
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