Mark Latham Commodity Equity Intelligence Service

Friday 17th June 2016
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    Oil and Gas


    The Met goes all coy.

    UK Outlook for Tuesday 21 Jun 2016 to Thursday 30 Jun 2016:

    Cloud and outbreaks of rain will clear eastwards on Tuesday to give drier and brighter conditions for many, albeit with a scattering of showers in the northwest, and some southeastern parts could hang onto the cloud and rain all day. Thereafter there is a higher than usual level of uncertainty in the forecast, but it seems likely that most parts of the country will see changeable, often unsettled weather prevailing. Spells of rain are likely at times, perhaps accompanied by stronger winds in the north, but there will also be some drier, sunnier periods with the risk of a few showers. Temperatures will generally be near or slightly above average, possibly becoming warm at times, especially in the south.

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    Gold breakout, and fade.

    Gold Surges To 2-Yr. High Above $1,315, But Then Backs Well Off Daily High as U.S. Equities Recover

    Thursday June 16, 2016 13:18

    (Kitco News) - The gold market early Thursday pushed to a two-year high of $1,316.80 an ounce, basis August Comex futures. However, prices had backed well down from the daily highs in early afternoon trading, as U.S. stock indexes rebounded from their session lows and as the key “outside markets” were in a bearish daily posture for the precious metals—lower crude oil prices and a higher U.S. dollar index. August Comex gold was last up $8.20 an ounce at $1,296.90. July Comex silver was last up $0.077 at $17.58 an ounce.

    Gold is being supported by the perceived dovish FOMC statement on Wednesday and on safe-haven demand amid wobbly world stock markets and falling world government bond yields. World stock markets were mostly weaker Thursday, amid some keener risk aversion in the marketplace. U.S. stock indexes were just slightly lower and well up from their daily lows in early afternoon New York trading.

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    French govt steps in as unions, employers spar over jobless benefit

    France's government stepped in to ensure payment of unemployment benefit on Thursday after talks aimed at securing rollover funds before a June 30 deadline collapsed, signalling further deterioration in fraught relations between unions and employers.

    Labour Minister Myriam El Khomri, who is already struggling to arrange a truce over contested labour law reforms, said she would make sure a separate dispute between the two sides did not disrupt payouts from a national unemployment insurance fund.

    "The government will take the necessary steps to ensure that benefit payments continue as of tomorrow," El Khomri said in a statement.

    Normally, the country's jobless benefit fund is co-managed by unions and employer groups, but talks aimed at organising the rollover of those fund from June 30 onwards ran into trouble in recent weeks amid broader tensions in industrial relations.
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    Islamic State Iraq should be split in three: top Kurdish official

    Once Islamic State is defeated, Iraq should be divided into three separate entities to prevent further sectarian bloodshed, with a state each given to Shi'ite Muslims, Sunnis and Kurds, a top Kurdish official said on Thursday.

    Iraqi troops have expelled Islamic State from some key cities the militants seized in 2014, and are advancing on Mosul, the largest city under IS control. Its fall would likely mean the end of the group's self-proclaimed caliphate.

    But even if Islamic State was eliminated, Iraq would still be deeply divided. Sectarian violence has continued for years and a power-sharing agreement in Baghdad has only led to discontent, deadlock and corruption.

    Masrour Barzani, head of the Kurdistan Regional Government's (KRG) Security Council and son of KRG President Massoud Barzani, said the level of mistrust was such that they should not remain "under one roof".

    "Federation hasn't worked, so it has to be either confederation or full separation," Barzani told Reuters in an interview on Wednesday in the Kurdish capital Erbil. "If we have three confederated states, we will have equal three capitals, so one is not above the other."

    The Kurds have already taken steps toward realizing their long-held dream of independence from Iraq, which has been led by the Shi'ite majority since the overthrow of Saddam Hussein, a Sunni, in 2003, following a U.S.-led invasion.

    They run their own affairs in the north and have their own armed forces, the Peshmerga, which have been fighting Islamic State militants with help from a U.S.-led coalition.

    Sunnis should be given the option of doing the same in the provinces where they are in the majority in the north and the west of Iraq, said Barzani.

    "What we are offering is a solution," he said. "This doesn't mean they live under one roof but they can be good neighbors. Once they feel comfortable that they have a bright and secure future, they can start cooperating with each other."

    His father has called for a referendum on Kurdish independence this year as the region is locked in territorial and financial disputes with the central government.

    Baghdad has cut off payments from the federal budget to the KRG to try to force the Kurds to sell crude produced on their territory through the state oil marketing company and not independently. The Kurds also claim the oil region of Kirkuk, in northern Iraq, as part of their territory.

    Barzani said that the Sunnis' feeling of marginalization by the Shi'ite leadership had facilitated the takeover of their regions by Islamic State militants.

    In addition, Iraq endured months of wrangling and chaos over a government reshuffle that was to curb corruption. In May, frustration over the delays culminated in the unprecedented breach by protesters of the Green Zone, which houses parliament, government offices and many foreign embassies.

    Ahead of the battle for Mosul, Barzani said the city's different communities should agree in advance on how to handle the aftermath. Mosul's pre-war population of 2 million was mostly Sunni, but included religious and ethnic minorities including Christians, Shi'ites, Yazidis, Kurds and Turkmen.

    Almost all non-Sunnis fled the Islamic State takeover, along with hundreds of thousands of Sunnis who could not live under the militants' harsh rule or could not endure Baghdad's financial blockade imposed on IS-held regions.

    "I think the most important part is how you manage Mosul after Daesh is defeated," he said, referring to an Arabic name of Islamic State. "We don't want to see the gap of liberation and then a vacuum, which probably will turn into chaos."

    Iraqi Prime Minister Haider al-Abadi at the end of last year expressed hope that 2016 would be the year of "final victory" over Islamic State with the capture of Mosul.

    The army, counter-terrorism forces and Shi'ite Muslim paramilitary fighters backed by air strikes from a U.S.-led coalition are also in a major operation to retake the mainly Sunni city of Falluja, an hour's drive from Baghdad.
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    China allocates 27.6 bln yuan to resettle redundant workers

    China’s National Development and Reform Commission announced on June 14 that the central government has allocated a total 27.643 billion yuan ($4.2 billion) in 2016 industrial restructuring, state media reported.

    The fund was mainly used for resettling redundant workers, which will accelerate the process of excess capacity elimination.

    Starting from May 19, Shaanxi and Shandong, etc. have successively received the fund.

    Shandong, China’s leading steel maker, received 1.923 billion yuan or 7% of the total, which was based on some basic data such as the task load in coal and steel capacity cut and workers need to be rearranged, etc.

    China has established a 100 billion yuan fund to assist those who are made redundant as a result of industrial restructuring, including basis fund and extended fund, an official said late February.

    The government has stepped up efforts to slash excess production capacity in saturated sectors, especially steel and coal. From 2011 to 2015, 91 million tonnes of outdated capacity in the iron industry and 94.8 million tonnes in the steel industry were eliminated.

    China seeks to phase out 1 billion tonnes per annum of coal production capacity in three to five years from 2016, with half of the cut to be realized through mines closure and the other half through company consolidation, the State Council said earlier this year.

    Crude steel production capacity will be cut by 100-150 million tonnes in the coming five years.

    This would translate into hefty job losses. According to preliminary forecasts, the coal and steel sectors will see combined laid-offs totaling 1.8 million.

    The supply-side reform has made significant progress. China’s raw coal output stood at 1.34 billion tonnes over January-May, dropping 8.4% from the year prior, compared with the decline of 6.8% in January-April.
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    Nigeria to abandon naira peg in favour of open market trading

    Nigeria's central bank said on Wednesday it would begin "purely" market-driven foreign currency trading next week, abandoning its 16-month peg and setting the stage for the naira to fall sharply.

    Nigeria's central bank previously pegged the naira at 197 to the U.S. dollar but the currency trades at about half that on the black market as slump in oil revenues has hammered public finances and foreign currency reserves. The new trading rules begin on Monday, Central Bank Governor Godwin Emefiele said.

    The change of tack is a "managed float" and puts Nigeria in line with most central banks, including the Bank of England, a senior central bank official told Reuters. Nigeria's central bank has no target for the naira, he said.

    The latest interbank level will be posted on the central bank's website daily from Monday, the official said, adding: "The old rate of 197 does not exist anymore."

    Following the announcement, three economists estimated the fair value of the naira between 280 and 300 against the dollar, although the black market rate is around 370.

    Nigeria, Africa's largest crude exporter, has resisted devaluing its currency for more than a year despite other major oil producers, including Russia, Kazakhstan and Angola, allowing currences to fall amid lower crude prices.

    The central bank will still be able to inject dollars into the market, giving it some control over the exchange rate within the limit of its foreign reserves which fell to $26.7 billion in June, from $42.8 billion in January 2014.

    Emefiele hopes opening up trading will ease severe U.S. dollar shortages caused by a slump in oil revenue.

    With a likely sharp fall for the naira, Nigerian products will become relatively cheap and imports more expensive, which should stimulate the domestic economy but also lift inflation.

    "To improve the dynamics of the market, we will introduce foreign exchange primary dealers who would be registered by the CBN (central bank) to deal directly with the bank for large trade sizes on a two-way quote basis," Emefiele told reporters.

    Nigeria's stock market gained 3 percent following the announcement.

    "This is a major about-turn. The central bank has traditionally favoured a managed rate and preferred a strong currency to contain inflation," said Gregory Kronsten, head of macroeconomic and fixed income research at FBN Capital in Lagos.

    "It seems the CBN is eager the market captures forex from remittances (international money orders) as well as FDI (Foreign Direct Investment)," he said.

    The central bank said eight to 10 primary dealers would supply the interbank market with dollars, handling minimum volumes of $10 million.

    The primary dealers will be allowed to sell back 70 percent of any dollars bought from the central bank on the day of purchase. Sales must be backed by a specific customer order to avoid currency speculation, the central bank said.

    Nigeria's currency dealers will meet on Thursday to discuss new forex guidelines, two bankers.

    Retail currency operators will not be able to buy from the interbank market, meaning dollars will remain in scarce supply for private individuals and small businesses.
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    Brazil's Temer denies alleged link to Petrobras scandal

    Brazil's interim President Michel Temer denied on Wednesday allegations that he sought campaign funds for his party stemming from a graft scheme at state oil company Petrobras (PETR4.SA), implicating him in the country's biggest ever corruption scandal.

    A plea deal by former Petrobras executive Sergio Machado, made public by the Supreme Court on Wednesday, said a campaign contribution requested by Temer was made legally by engineering group Queiroz Galvao but resulted from a kickback on contracts with Petrobras.

    The testimony is the first to link Temer to the Petrobras investigation, known as "Operation Car Wash." Dozens of executives and politicians have been jailed due to the probe into the scandal, which has added to Brazil's worst recession in decades.

    Temer's office denied that he had solicited illegal contributions from Machado, adding that he had always followed campaign finance laws.

    The allegations threatened to further unsettle Temer's month-old, center-right coalition. Two ministers already resigned after leaked recordings in Machado's plea bargain deal suggested they favored interfering in the investigation.

    News of the allegations overshadowed the announcement of a constitutional amendment to cap the growth of public spending for up to 20 years, a flagship economic initiative by the one-month-old Temer government and the most important fiscal policy shift in decades.

    Brazil's currency BRBY swung sharply, losing value against the dollar before recovering after the U.S. Federal Reserve's decision to leave interest rates unchanged.

    Temer was vice president until May, when President Dilma Rousseff was suspended from office to face trial in the Senate on charges of breaking budget laws.

    Leaked testimony in recent weeks disclosed that Machado, a retired senator and former head of Petrobras' Transpetro shipping and natural gas transportation unit, told prosecutors Senate President Renan Calheiros and former Planning Minister Romero Juca planned to obstruct the investigation once Temer took office.

    The plea bargain documents made public on Wednesday revealed the first formal accusations against Temer himself.

    In particular, Machado's testimony describes a meeting with Temer at an air base in the capital Brasilia in late 2012, a tough period for the Sao Paulo mayoral campaign run by Gabriel Chalita of Temer's Brazilian Democratic Movement Party (PMDB).

    "The context of the conversation made clear that what Michel Temer was arranging with (Machado) was for him to solicit illegal funds from companies that had contracts with Transpetro in the form of official donations," he said in signed testimony.

    The mounting accusations against Temer and his government have rattled his congressional coalition, threatening to shake loose key swing votes in the trial against Rousseff, which is expected to confirm her removal in mid-August.

    As many as a dozen of the 55 senators who voted last month to put Rousseff on trial are now undecided, according to surveys by Brazilian media. If just a couple of them change sides, the Temer camp would lose the 54 votes it needs - two-thirds of the 81-seat Senate - to convict Rousseff.

    The fact that Machado said Temer had asked for a legal donation reduces the damage of the allegations and should not impact voting in the impeachment trial, according to the ARKO Advice consultancy, which puts the odds of the Senate confirming Temer as president at 90 percent.

    "It is extremely uncomfortable for Temer, but far from fatal, since the senators will be voting between Dilma and Temer, and in this comparison, Temer still beats Dilma," said Arko partner Lucas de Aragão.

    Brazil's political establishment is holding its breath as suspended House Speaker Eduardo Cunha, also of the PMDB, comes closer to losing his seat after a congressional ethics committee voted on Tuesday to oust him.

    If Cunha leaves office, he will lose the partial immunity enjoyed by elected politicians, allowing him to be prosecuted by lower courts in several corruption cases brought against him and opening the possibility of another blockbuster plea bargain.

    Machado said in the plea deal that during his tenure at Transpetro, the PMDB received some 100 million reais ($29 million) in political kickbacks from Petrobras contractors.

    Operation Car Wash, named for its beginnings tracking small-time money laundering operators, has identified some 6.4 billion reais of bribes linked to contracts at state-run enterprises and federal ministries.
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    The Brexit weather forecast.

    UK Outlook for Monday 20 Jun 2016 to Wednesday 29 Jun 2016:

    Cloud and outbreaks of rain will spread across most parts early next week, followed by a mixture of sunshine and showers. The remainder of the week will remain unsettled and often windy with bands of rain pushing east, these interspersed with brighter, though showery conditions. The heaviest rain and most frequent showers will be in the north and west and the best of any drier spells in the east and southeast. Into the weekend and following week it will remain generally unsettled with the most frequent spells of rain across northwestern parts and generally drier and brighter weather in the southeast. Temperatures will be generally around normal, with the warmest temperatures likely in the south.Image title

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    Digital Disruption: cloud computing.

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    China's yuan hits five-year low

    The yuan hit a more than five-year low against the dollar on Wednesday as the greenback firmed amid growing fears that Britain may leave the European Union and caution ahead of a U.S. Federal Reserve policy decision later in the day.

    The Chinese currency hit an intraday low of 6.6047 per dollar in early trade, the lowest since January 2011, after the People's Bank of China set the midpoint rate at 6.6001 per dollar prior to the market open. The fixing was also the softest since January 2011.

    Spot yuan opened at 6.6020 per dollar, breaching critical support at 6.60. By midday, it had pared some losses and was changing hands at 6.5951, 0.02 percent firmer than the previous close.

    Concerns that Britain may vote to leave the European Union in a referendum next week continued to rattle global financial markets and policymakers.

    Chinese traders agreed that such a scenario could trigger another round of massive yuan depreciation if it causes chaos on world markets.

    "The impact of Brexit on the global markets is irreversible," said a trader at a Chinese commercial bank in Shanghai. "My estimate is that the yuan will, at the very least, further weaken 200 or 300 pips."

    Chances that the Fed will raise interest rates this week are considered to be virtually nil, but markets will be watching for comments on its rate outlook for the rest of the year.

    U.S. index provider MSCI Inc on Tuesday declined to add domestic Chinese stocks to one of its key benchmarks, concluding that Beijing had more work to do in liberalizing capital markets and delivering a blow to Chinese policymakers hoping to broaden the appeal of their currency.

    Traders said the MSCI decision did not have an immediate impact on China's forex market.

    The offshore yuan was trading 0.16 percent softer than the onshore spot at 6.6058 per dollar.

    Markets are also still awaiting the release of China's bank lending and money supply data for May.
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    China May power consumption up 2.1pct on year

    China’s power consumption rose 2.1% on year to 473.0 TWh in May, up from the 1.9% growth registered in April, according to data from the National Development and Reform Commission on June 14.

    Over January-May, the total power consumption reached 2,282.4 TWh, climbing 2.7% year on year.

    Meanwhile, for the non-residential segment, the primary industries – mainly the agricultural sector, and the tertiary industries – mainly the service sector, power consumption both rose 9.6% in the first five months this year, while electricity use by the secondary industries – mainly the industrial sector–increased slightly by 0.4%.

    The data pints to positive changes in China's economic structure, as power use in the service sector grew faster than the industrial sector, Li Pumin, secretary general of the commission, said at a press conference.
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    Bugging in Brazil Exposes Fear of Biggest Betrayal Yet

    The tale of Brazil’s political crisis is one of betrayals -- and the most explosive one may be yet to come.

    Marcelo Odebrecht, the former head of Brazil’s largest construction conglomerate who was arrested in a massive corruption scandal, is trying to reduce a 19-year sentence through a plea bargain. Its potentially devastating impact on the political class was made clear in a chat between convalescent former president Jose Sarney, 86, and a long-time pal. “Odebrecht will show up with a 100-caliber machine gun,” Sarney said.

    Little did he know that his friend, former Petrobras executive Sergio Machado, was secretly taping their conversations as part of his own collaboration deal, going so far as to record him at a hospital. The leaked recordings were obtained during a probe, dubbed Carwash, into corruption at the state-run oil company.

    The ailing politician was just the latest target in the country’s political crisis where rampant backstabbing has become the path to survival. Machado recorded Sarney and several other members of Brazil’s political elite to gain a bargaining chip with investigators. The recordings toppled two ministers just after Acting President Michel Temer appointed them, and prompted requests for the arrest of Sarney and Senate President Renan Calheiros.

    Even greater fallout is expected if Odebrecht and executives from his family’s construction conglomerate open up to authorities. Based on the names cited in spread sheets seized by the police during raids, the deal could ultimately implicate dozens of politicians from across Brazil’s political spectrum.

    “The political players are trying to survive, and in order to survive, they have to betray someone,” said Carlos Pereira, a professor of political economy at Fundacao Getulio Vargas in Rio de Janeiro. “With the Odebrecht agreement, we are at a critical junction, a real opportunity for big changes. There is growing intolerance for corruption among Brazilians.”

    Marcelo Odebrecht is expected to show links between undeclared funds and donations related to the re-election campaign of suspended President Dilma Rousseff, Veja magazine reported this month, without saying how it obtained the information. IstoE magazine said Rousseff directly asked Odebrecht for 12 million reais ($3.4 million) in illegal donations for her 2014 campaign. Rousseff said the reports of both Veja and IstoE are “lies.”

    The start of talks between Odebrecht and prosecutors doesn’t guarantee that an agreement will be made. According to Brazilian law, investigators can only use the information obtained through a plea bargain if a deal is signed at the end of the process with reduced sentences for the witnesses.

    The plea bargains have been key to expanding the investigation beyond Petroleo Brasileiro SA. They helped prosecutors turn an inquiry into a 26-million-real bribery scheme at the oil company into a probe that has stretched across the entire economy to uncover 6 billion reais in bribes siphoned from public contracts, prosecutors say.

    Odebrecht would be the latest of many witnesses who betrayed confidants in deals with prosecutors in the case. Former Petrobras head Paulo Roberto Costa was the first to hand over information about politicians and money launderers who had been his partners in crime for almost a decade. He collaborated in August of 2014 after his daughters, who owned illegal Swiss accounts, were caught trying to cover up evidence.
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    LME starts the revolution!

    The London Metal Exchange is reviewing using so-called blockchain technology, its chief executive said on Tuesday.

    A blockchain is a huge, decentralized ledger of transactions that can be used to secure and validate any exchange of data, including real assets, such as commodities or currencies

    "We've had a lot of discussions around distributed ledger technology. For warehouses, for anything where there are actual objects, and structures, and collateral and a central counterparty there's a natural extension of possibilities for distributed ledger," chief executive Garry Jones told an industry event in Hong Kong.

    "We don't think the blockchain technology is quick enough it's not broad enough (yet)," he said.

    "We're working on it ... As soon as we feel there is an application, we'll announce it. It's likely to be in the warehouse or collateral space with a central counterparty."

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    China tells Germany: 'We don't want to fight a trade war'

    China's leader told Chancellor Angela Merkel on Monday he did not want trade tensions with the European Union, a vital market for a huge economy facing falling exports, to descend into a trade war.

    Merkel has already said she favours, in principle, granting China market economy status at the World Trade Organization, and Beijing hopes she can encourage more sceptical EU voices to accept the move.

    "China has already fulfilled its obligations on joining the WTO. What's needed now is for the other parties to fulfil the matching obligations they had promised," Premier Li Keqiang told reporters in Beijing on Monday alongside the German leader.

    "We don't want to fight a trade war because this will benefit nobody," he said, echoing a similar comment Merkel made on Sunday.

    The European Commission is set to accept the WTO switch that will mean China is no longer treated as a state-controlled market, making it easier for Chinese exporters.

    But the EU executive also wants to strengthen Europe's ability to defend itself against heavily subsidised Chinese goods.

    That reluctance to give up a method to defend against cheap imports has set up a looming dispute at the WTO and the prospect of broader trade friction.

    Merkel, on her ninth trip to China as chancellor, said: "It does not help us to emotionalise the whole subject. I am convinced that we can find a solution on the lines of what was promised 15 years ago."

    She also pressed China on liberalising its banking industry in return for giving more access to the sector in Europe.
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    China May thermal power output down 6.4pct on year

    Electricity output from China’s thermal power plants – mainly coal-fired – rose slightly to 330 TWh in May from 328.9 TWh a month ago, presenting a year-on-year drop of 6.4%, showed data from the National Bureau of Statistics (NBS) on June 13.

    By contrast, China’s hydropower output climbed 20.7% on year to 93.2 TWh in the month, growing 19.6% month on month, thanks to rich rainfalls in southern China.

    Total electricity output in China reached 463.6 TWh last month, basically flat with a year ago but up 4.32% from a month ago, the NBS data showed.

    That equated to a daily output of 14.95 TWh on average in the month, same as the year prior and up 0.9% from April.

    During the first five months this year, China’s total power output increased 0.9% on year to 2,267.6 TWh. Of this, thermal power stood at 1,712.2 TWh, dropping 3.6% year on year; while hydropower reached 374.3 TWh, up 16.7% from the year prior.

    Over the period, thermal power generation accounted for 75.51% of the total power generation, while hydropower output accounted for 16.51%, mainly attributed to increased rainfalls and the government’s clean energy drive to improve air quality.

    Given the El Niño phenomenon, China may see more rainfalls this summer, which will not only cut industrial power use, but also impact demand for coal-fired power, resulting in lower coal consumption compared with the same period last year.

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    Bank of China Intl commodity unit plans to boost Chinese, European business

    Bank of China International (BOCI) plans to boost its commodity business by tapping a latent investor base in China and broadening its drive into Europe.

    The investment banking arm of state-backed Bank of China , the country's No.4 lender by assets, became the first Chinese member of the London Metal Exchange in 2012, pushing into commodities near the height of a demand boom.

    "Hopefully for the next five years, we'll get into the next stage (in our commodity business) which is to expand our products and our service capability so we can become a key player in the landscape," said Arthur Fan, managing director of BOCI's global commodities arm.

    "Supporting Chinese clients, that is where we have an edge. We regard ourselves as an international player, not from China or Hong Kong. Commodities is a global business, and with a global platform we will tap into those local players."

    BOCI set up the unit in 2010 to serve its Chinese customers with an energy hedging business in Hong Kong, before opening in London, New York, Singapore and Shanghai's free trade zone, focusing on energy, as well as base and precious metals. At the time, however, market participants said it was slow to build on momentum.

    Having launched an oil index product last year, BOCI plans to expand its index and structured products business for institutional and private wealth clients in China, from its own private banking base in Hong Kong, and through its parent's customers on the mainland.

    Further afield, BOCI is looking to expand its financing business for commodity clients, in repurchase agreements and for offtake and prepayments. In Europe, it will also rely on Bank of China's branches for introductions to new clients.

    "These next two years, we will start aggressively expanding our European clients," Fan said on Monday, adding that a mix of Chinese and Europeans on his London team should increase business with firms in the continent, such as in hedging for automakers.

    Fan moved back to Hong Kong this year after five years in London.

    Within Asia, BOCI is readying its business for the internationalisation of the yuan, which Fan sees in the next 2-3 years.

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    China investment slows to 15-year low, more stimulus seen despite debt fears

    Growth in China's fixed-asset investment slipped below 10 percent for the first time since 2000 in January-May as a boost from record credit growth seemed to be quickly fading, putting expectations of further stimulus back on the table.

    Analysts say a sharp deceleration in private investment could jeopardize China's growth target of 6.5-7 percent this year unless the government pumps even more money into the economy, despite growing global fears that the country is already amassing too much debt.

    The International Monetary Fund was the latest to voice such concerns at the weekend, saying Beijing must act quickly to tackle mounting corporate debt which it estimates has swelled to about 145 percent of gross domestic product.

    A further increase in debt levels could handicap China's long-term economic growth, David Lipton, first deputy managing director of the IMF, said on Saturday.Data on Monday showed fixed-asset investment growth - a key driver of China's economy - cooled to 9.6 percent in January-May from a year earlier, missing expectations of 10.5 percent.

    Even more worrying, investment by private firms slowed to a record low, with growth cooling to 3.9 percent from 5.2 percent in Jan-April and double-digits last year. Private investment accounts for about 60 percent of overall investment in China.

    Flagging private investment suggests that more and more of China's growth is dependant on government spending channeled through bloated and inefficient state enterprises, which Beijing has publicly pledged to streamline and reform. Investment by state firms rose 23.3 percent in Jan-May.

    It also means authorities may have to take stronger measures to support the economy if they continue to stick to their 2016 growth target, which officials reaffirmed on Monday despite generally weak April and May data.

    Indeed, other data on Monday showed that Beijing may already be doubling down on its stimulus bet, as government spending soared 17.6 percent in May on-year, versus 4.5 percent in April. Announcements of big new infrastructure projects seem to come almost daily.

    "The government is trying to decelerate a bit on credit growth, but there is no point at this moment because it will have an impact on the growth outlook. Growth is still more important than anything else in China," said Zhou Hao, senior Asia emerging market economist at Commerzbank.

    The soft May data also prompted some analysts to underline the possibility of more imminent policy easing by China's central bank, after some had scaled back such expectations following upbeat indicators in March.

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    China's industrial output growth unchanged in May

    China's industrial output rose 6 percent year on year in May,unchanged from April, official data showed Monday.

    The pace of increase slowed from 6.8 percent registered in March and 6.1 percent postedin the same month of last year, according to data from the National Bureau of Statistics(NBS).

    Value-added industrial output, one of the leading indicators for economic growth, rose 0.45percent in May from April.

    In the first five months, industrial output grew 5.9 percent from one year earlier, up from5.8 percent registered during the January-April period.

    Value-added industrial output measures the output of Chinese companies with annualrevenues above 20 million yuan (about 3 million U.S. dollars).

    The output of the hi-tech and equipment manufacturing industries maintained stronggrowth, rising 11.5 percent and 8.5 percent, according to NBS.

    Manufacturing output expanded 7.2 percent in May. Mining output fell 2.3 percent and the output of the electricity, heating, gas and water sectors grew 2.4 percent, the NBS said.
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    Miners cut distressed debt pool by $60bn as rebound firms

    Mining companies are getting back into financial shape and have cut the sector’s pool of distressed bonds by at least $60-billion, providing another boost to the industry’s outlook as commodities enter a bull market. 

    Anglo American and Glencore are among companies whose notes no longer feature in the ranks of distressed US-dollar denominated debt after selling assets and cutting dividends to bolster their balance sheets, according to Bloomberg Intelligence. 

    The amount of metals and mining bonds trading at distressed levels fell this month to $26-billion from a peak of $86-billion in February, the data show. “There has been a large degree of self help, whether that’s through asset sales or cost cutting or capex rationalisation, to improve cash flow,” said Anthony Ip, a credit sector specialist at Citigroup in Sydney. “At the macro level, you’ve got the rally in commodities prices and the market appears more comfortable with China risks, so that’s helping sentiment.” 

    Commodities have entered a bull market, ending a five-year rout, as supply constraints drive up prices in everything from soybeans to zinc, while Citigroup said last month that raw materials had turned a corner following the biggest price collapse in a generation. 

    Notes issued by the likes of copper producer Freeport-McMoRan and iron-ore miner Fortescue Metals Group also are no longer trading at distressed levels, according to Bloomberg Intelligence’s Richard Bourke. The analysis examined bonds with more than $100-million outstanding that were trading with option-adjusted spreads greater than 1000 basis points. Spreads that wide are often considered a definition of distress, according to Bourke. 

    Moody’s Investors Service, which began a sector-wide assessment of mining in January that prompted 36 rating downgrades, last month upgraded the outlook on Anglo’s Ba3 senior unsecured ratings from negative to positive as a result of better-than-expected asset sale receipts. Anglo in April agreed to sell its niobium and phosphate businesses for $1.5-billion. 

    Miners have announced $27-billion of pending and completed asset sales this year, including China Molybdenum’s $2.65-billion agreement to buy Freeport’s stake in the Tenke Fungurume copper-cobalt mine. That’s easing concern over producers’ debt even with raw materials prices trading about 50% lower than a 2011 peak. 

    Matthew Moore, a senior analyst at Moody’s said by phone. “One of the things that we’ll continue to look at is the ability of companies to execute on things like asset sales for debt reduction,” Moore said. “We’ve also seen companies like Fortescue go out and buy back some of their debt as well, which is improving the position of that company in its rating level.”

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    India's Industrial Output Contracts Unexpectedly in April

    India's industrial output unexpectedly contracted in April amid weak performance in manufacturing, indicating that the country's economic recovery may still not have gained a firm footing.

    Industrial production, a measure of output in the manufacturing, mining and utilities sectors, fell 0.8% from a year earlier, compared with a revised 0.3% rise in March and worse than the 0.8% increase predicted by economists polled by The Wall Street Journal.

    Optimism is rising, though. Above-average levels of rainfall predicted this year and a large pay increase for nearly 10 million government employees and pensioners are expected to boost consumer demand.

    The latest data are at odds with the 7.6% rise in India's gross domestic product last fiscal year.

    While GDP growth has been robust, other indicators such as industrial output have been showing weaker activity, causing confusion about the health of the economy.

    Read more:

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    Ten EU nations still breaching pollution limits: EEA

    Air pollution from sources such as transport and agriculture is still above legal limits in 10 European Union member states, data from the European Environment Agency (EEA) showed on Friday.

    Since 2010, Austria, Belgium, France, Germany, Ireland and Luxembourg have persistently breached their emissions ceilings for nitrogen oxides; Denmark, Germany, Ireland and Luxembourg have exceeded their limits for non-methane volatile organic compounds; and Austria, Denmark, Finland, the Netherlands and Spain have exceeded limits for ammonia, the EEA said.

    In 2014, 10 member states reported emissions data for these pollutants which were the above the ceiling for at least one.

    Nitrogen oxides are produced by exhaust fumes from road transport while ammonia derives from the use of fertilisers and the handling of animal manure. Nitrogen dioxide is a harmful component of nitrogen oxides, causing respiratory problems and cardiovascular disease.

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    China's Bank's, Gold and Bitcoin surge.

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    Oil and Gas

    Group challenges approval of Santos’ Queensland CSG well expansion

    A community group is taking on Federal Environment Minister Greg Hunt’s approval of 6 100 coal seam gas (CSG) wells in Queensland, a move which the industry has slammed as “delaying tactics”. The Western Downs Alliance on Thursday started legal proceedings to challenge oil and gas major Santos’ Gladstone liquefied natural gas (GLNG) gas field development, which is related to the GLNG project and involved the progressive development of CSG resources in Surat and Bowen basins. 

    The community group lodged a case in the Federal Court of Australia against the approval under the national environmental law, arguing that the Minister’s approval was unlawful because he ignored plans by Santos to discharge large volumes of CSG waste water into the Dawson river. 

    “The Santos plan for 6 100 new CSG wells in Queensland is a recipe for disaster for the Great Artesian basin and for landholders who depend on it,” said Western Downs Alliance spokesperson Sarah Moles. She stated that the environmental-impact statement for the project predicted that it would impact on 73 water bores used by landholders in the area, and would extract 219-billion litres of water over the life of the project, producing 22-billion litres of salty brine as waste.

     “Minister Hunt assessed and approved this development under the Water Trigger that was put into the national environmental law in June 2013 specifically to protect our water resources from large coal and CSG development. “However, in this case it appears from the documents that Minister Hunt didn’t assess the impact that the inevitable release of large volumes of waste water from the CSG project into the Dawson river would have,” Moles stated.
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    EU ethylene imports surge 235%, PE imports up 52% over first four months of 2016: Eurostat

    EU imports of ethylene in the first four months of the year surged 235% compared with the first four months of 2015, according to the latest Eurostat data.

    Imports rose from 42,557 mt in January-April 2015 to 142,590 mt in the same four months of 2016.

    This import figure is expected to rise further.

    At the end of May a broker reported that a 6,700 mt ethylene cargo had been fixed for delivery from Houston into Europe, arriving in early June, with an open arbitrage window between the regions.

    EU polyethylene imports in the first four months of the year rose 52% compared with Jan-April 2015, according to the latest Eurostat data released.

    Imports rose to 1,181,435 mt in the first four months of this year from 777,961 mt over the same 2015 period.

    High density PE imports rose to 528,475 mt from 365,554 mt. Low density imports rose to 248,620 mt from 180,202 mt. Linear low density polyethylene imports rose to 404,340 mt from 232,204 mt.
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    Halliburton, Schlumberger bid for fracking jobs in Ukraine: UkrGazVydobuvannia

    Halliburton, Schlumberger and Weatherford are among nine companies that submitted bids to carry out hydraulic fracturing operations for Ukraine's largest natural gas producer UkrGazVydobuvannia (UGV), the company said Thursday.

    UGV, a 100% owned subsidiary of state-owned Naftogaz Ukrayiny, plans to start using fracking techniques in 2016-2017 in order to boost domestic gas output as Ukraine seeks to eliminate gas imports by 2020.

    "Service companies with well-known names, teams of experienced professionals and decades of accumulated experience in the most extreme conditions are willing to come to Ukraine," Oleksandr Romaniuk, the head of UGV, said in a statement. "They believe our company can make a breakthrough in the Ukrainian gas production."

    UGV plans to buy 100 fracking jobs, but will increase the practice if the technique achieves good results.

    Ukraine aims to increase gas output by 7.5 Bcm to 27.4 Bcm/year in 2020 that together with energy conservation measures would eliminate the need to import gas, energy and coal industry minister Ihor Nasalyk said last month.

    UGV plans to invest Hryvnia 80 billion ($3.2 billion) in exploration and drilling during the next four years in order to increase output to 20 Bcm/year in 2020, up from 14.5 Bcm/year in 2015, the company said.
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    Gazprom, Fluxys advance talks on small-scale LNG cooperation

    Russia’s Gazprom said it is looking the possibility of cooperating in the small-scale LNG market with Fluxys of Belgium.

    Representatives of the two companies, Gazprom’s head, Alexey Miller, and Pascal De Buck CEO of Fluxys, discussed the cooperation at a meeting in St. Petersburg, Gazprom said in a statement.

    Among other issues, Miller and De Buck discussed the possibility of jointly participating in the construction and operation of LNG receiving terminals, LNG filling stations and bunkering infrastructure in Europe.

    Additionally, the two companies discussed the option of using LNG as an energy resource for autonomous gasification purposes.

    The talks are a continuation of a framework agreement signed at the end of March, showing the two companies’ intentions to cooperate in the European small-scale LNG market.
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    China and US in close race for title of Worlds biggest oil importer

    The world’s biggest oil importer. The title nobody wants.

    For decades the U.S. held undisputed rights to the crown. Last year, China squeaked ahead for the first time amid growing demand and as rising U.S. shale production displaced overseas deliveries. The Middle Kingdom looked poised to become the center of the crude importing world.

    Then $30 oil happened. U.S. drillers shut the most rigs in modern history, production began to fall and imports have rebounded. Chinese oil firms also shuttered output and kept demand growing. Now the two are neck and neck.

    “I don’t think any country would want to boast about being the world’s largest importer of crude,” said John Driscoll, chief strategist at JTD Energy Services Pte in Singapore. “Who gets more nervous during OPEC meetings? Who’s more vulnerable to supply disruptions, geopolitics or resource nationalism?”

    The one group with no reason for dismay is the Organization of Petroleum Exporting Countries, which needs buyers to soak up a supply glut that has cut prices in half from two years ago.

    The U.S. imported 8.04 million barrels of oil a day in March, according to the Energy Information Administration, the most since August 2013 and about 330,000 more than China did in the same period. U.S. output has fallen 5.9 percent since peaking in April 2015, and drillers have idled 80 percent of the country’s oil rigs since October 2014.

    The increase in U.S. imports comes after years of declines due to increased shale production. Meanwhile Chinese economic growth has boosted imports four-fold since the beginning of 2005, making the country the second-largest consumer in the world. China imported more oil than the U.S. in a month for the first time in April 2015 and again in February.

    China’s crude production dropped by the most in 15 years in May as producers from PetroChina Co. to Cnooc Ltd. reduce drilling in unprofitable fields. Lower domestic output will increase the country’s dependence on imports from the Middle East and Russia, Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong said in an e-mail. China also recently allowed smaller independent refineries, known as teapots, to begin importing oil directly, creating new buyers.

    “I don’t see the U.S. overtaking China on a consistent basis,” said Amrita Sen, chief oil economist for Energy Aspects Ltd. in London. “Especially since China now has sustainably higher crude demand from teapot refineries.”
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    Canada's energy regulator starts review of oil pipeline to east

    Canada's energy regulator on Thursday officially launched its 21-month review of TransCanada Corp's Energy East pipeline, which would carry crude from Alberta's oil sands to refineries and export terminals in Eastern Canada.

    The National Energy Board, which has faced public criticism over its reviews of major energy infrastructure projects, said its review of the C$15.7 billion ($12.1 billion) pipeline will be unique in that the general public will be given the opportunity to provide input.

    The review will also consider upstream gas emissions, following new rules introduced by the ruling Liberals in January on the grounds that public trust needed to be restored in the process for assessing big energy projects.

    Prime Minister Justin Trudeau, speaking to reporters on Thursday, said his government had revamped the review process to ensure that all voices were heard and that any decision would be in the best interest of the entire country.

    A final recommendation to the federal government, including any proposed conditions on construction, is expected by March 2018, though the regulator said the legislated timeline could be extended if needed.

    Canada's resource minister has asked for six-months to review the recommendation before a final federal decision. The pipeline is expected to be in service by 2021.

    "This marks an important milestone for the project and is a culmination of TransCanada's efforts to actively communicate and seek input since announcing Energy East three years ago," TransCanada said in a statement.

    The 4,500-km Energy East pipeline is supported by Canada's energy industry, which is eager to find new and more lucrative markets for its crude, but opposed by many aboriginal and environmental groups, who worry its construction will hasten the development of Alberta's oil sands.

    The province of Quebec has also expressed concerns over the 1.1 million barrel-per-day pipeline, leading TransCanada to scrap plans for an export terminal on the St. Lawrence River and to agree to a provincial environmental review.

    The NEB said it will also concurrently review TransCanada's 279 km (173 mile) Eastern Mainline natural gas pipeline, noting that the projects are connected and best served under a single review.
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    Pioneer to expand Midland basin drilling

    Pioneer Natural Resources Co. will increase its rig count for horizontal drilling in the northern part of its Midland basin Spraberry-Wolfcamp play to 17 from 12 after an acquisition from Devon Energy Corp. and in response to its “improving outlook for oil prices.”

    Pioneer agreed to acquire 28,000 net acres, mostly undeveloped, from Devon for $435 million, subject to normal closing adjustments. The acreage is in Martin, Midland, Upton, Reagan, Glasscock, Andrews, Dawson, Gaines, and Howard counties. Net production is 1,000 boe/d, of which 70% is oil.

    About 15,000 net acres is in the Sale Ranch area of Martin and northern Midland counties, where Pioneer is active. Combined with its existing acreage, the acquisition will add 70 locations targeting the Permian Wolfcamp B shale to Pioneer’s Sale Ranch drilling inventory in an area where lateral lengths average about 9,000 ft.

    A separate 8,000 net acres in the Sale Ranch area and northern Midland County will add about 80 Wolfcamp B locations where lateral lengths are less than 7,500 ft.

    Pioneer said it will use the remaining 13,000 net acres acquired from Devon and existing acreage in trades to consolidate its land positions in core areas.

    It expects to add its first rig in the area in September, followed by two rigs each in October and November.
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    Mexico gas demand will increase 30% by 2021

    Mexico gas demand will increase 30% by 2021, underpinned by growing gas-fired generation in the power sector.

    Wood Mackenzie
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    Suncor Offers to Buy C$1.5 Billion of Notes in Bid to Cut Debt

    Suncor Energy Inc. is offering to repurchase about C$1.5 billion ($1.2 billion) of its own notes from bondholders as the company takes advantage of cash on hand to lower its debt load.

    Suncor Energy Ventures Holding Corp. has offered cash for notes with maturities between 2019 and 2042 with coupons as high as 8.2 percent, the company said Thursday in a statement. The offer will expire on June 22. HSBC Securities and J.P. Morgan Securities LLC are the dealer managers.

    Chief Executive Officer Steve Williams has focused on maintaining enough cash -- about C$3 billion at the end of the first quarter -- to get the company through the two-year long commodity downturn while allowing it to continue expanding projects, like the Fort Hills bitumen mine, and making purchases including the takeover earlier this year of Canadian Oil Sands Ltd. Suncor has about C$15 billion in total debt, according to data compiled by Bloomberg.

    Companies offer to buy back bonds before they mature as a method of reducing overall debt. Borrowing costs for energy companies have fallen relative to similar maturity government debt, as the price of oil has surged since February while global economic concerns push sovereign yields to record lows.

    Suncor’s debt-to-capitalization ratio was 29 percent, while net debt to cash flow was 2.5 in the first quarter, Chief Financial Officer Alister Cowan said during an April 28 conference call with analysts. The company has also identified as much as C$1.5 billion worth of assets it can sell.

    “We are rigorously managing both our operating and capital expenses while maintaining the strength of our balance sheet,” Cowan said at the time.

    The Calgary-based company’s widely traded 7.75 percent coupon notes due in 2019 were trading at 111 cents on the dollar with a 3.74 percent yield, according to data compiled by Bloomberg.
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    EPA Bans Disposal of Frack Wastewater at Public Sewer Plants

    Not long after Michael Krancer was appointed Secretary of the Pennsylvania Dept. of Environmental Protection in 2011, he “requested” (which was more order than request) that municipal sewage treatment plants still accepting and processing Marcellus drilling wastewater stop the practice.

    At the time there were 15 plants accepting Marcellus wastewater. Under pressure from Krancer, they ended the practice in May 2011 . His prescience was rewarded. A year later there were far lower bromide levels in PA rivers .

    That’s how things should work: the state looks after its own environment. But that means less power for the power-mad bureaucrats in Washington, DC. Right on cue, before Obama is ejected from office next January (thank God!), his out-of-control EPA has issued rules that do what Krancer did without a new law back in 2011.

    The EPA has issued a new regulation (i.e. unlegislated law) that declares no municipal sewage treatment plant in any state (not just PA) can accept and process shale wastewater…
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    ExxonMobil refinery evacuated in California as wildfire surges

    A wildfire spurred by strong canyon winds north of Santa Barbara has forced the evacuation of an ExxonMobil refinery.

    The blaze broke out about 3:30 p.m. Wednesday in Los Padres National Forest and by nightfall surged to 250 acres.

    Mandatory evacuations were ordered for Refugio Canyon, Venadito Canyon and Las Flores Canyon, which includes the refinery, the Santa Barbara County sheriff’s office said.

    ExxonMobil spokesman Todd Spitler said the company has evacuated nonessential employees, and those that remain are there to help with fireprotection.

    “Our primary concern is for the safety of our employees, contractors and the environment,” Spitler said.
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    Oil Bosses See Volatility Easing With Crude Around $50 a Barrel

    Crude is stabilizing around $50 a barrel and may only average $55 next year as the global oversupply continues to cap prices, according to two of the world’s top oil executives.

    The past few weeks have seen prices “more or less” steady at around $50, Rainer Seele, chief executive officer of Austria’s OMV AG, said Thursday in an interview in St. Petersburg. Central Europe’s largest oil company forecasts crude will average $40 a barrel this year and $55 in 2017, he said.

    Benchmark Brent futures have rallied more than 70 percent from a 12-year low in January as the global glut is trimmed by unexpected outages and a slide in U.S. output. Yet the recovery remains “fragile” as disrupted supplies return to the market and OPEC members pump more than expected, Goldman Sachs Group Inc. said this week.

    The kind of volatility that saw prices top $100 in 2014 and sink below $28 in January won’t be repeated in the “medium term,” Vagit Alekperov, CEO of Russia’s Lukoil PJSC, said at the St. Petersburg International Economic Forum. Oil will average $50 this year and $55 to $60 in 2017, he said in an interview.

    That’s more optimistic than Russian Energy Minister Alexander Novak, who forecast next year’s price at an average $50 a barrel.

    “It is very unlikely that the prices are going to be high in the forthcoming few years,” he said in an interview with Bloomberg Television. “There is a lot of oil in the world.”

    For a QuickTake explainer on how oil prices are determined, click here.

    Oil companies have sold assets, canceled projects and cut thousands of jobs to weather crude’s collapse over the past two years. BP Plc, which has long warned prices will stay “lower for longer,” now sees oil above $50 a barrel by the end of 2016.

    The current level is “very sustainable,” CEO Bob Dudley told reporters in St. Petersburg. The market will be balanced by the end of the year, he said.
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    Russia’s Novak Sees No Need Now to Cooperate With Saudis on Oil

    It makes no sense now for Russia and Saudi Arabia, the world’s biggest oil suppliers, to work together to influence the market, even as U.S. shale production is poised to rebound next year, Russia’s Energy Minister said.

    Without a “force majeure with prices,” there’s no point in talking about joint action, Alexander Novak said in an interview on Bloomberg TV on the sidelines of the St. Petersburg International Economic Forum. “The door is always open,” but there should be “a desire and a need” for cooperation, which is not the case now, he said.

    The collapse in Brent crude prices to a 12-year low in January squeezed out high-cost producers, helping to reduce oversupply and ultimately boost prices. A tentative deal between Russia, Saudi Arabia and other major producers to freeze output in order to stem the glut was abandoned in April, in part because a Saudi-led OPEC policy of pumping without limits seemed to be paying off.

    “We are in a global period of low oil prices now and such periods may last 10 to 15 years,” Novak said. Still, today’s price of about $50 a barrel is enough to proceed with investments, which suits both producers and customers, he said.

    At current prices, U.S. shale production will probably start recovering early next year, Novak said. “Shale production can pick up quickly,” he said. “A recovery cycle may take six to nine months on a price increase.” There are also risks that prices will fall if crude production in Canada, Libya or Nigeria rebounds after supply disruptions in those countries. “We just should watch the market closely now,” he said.

    Novak met Venezuela’s Oil Minister Eulogio Del Pino to discuss cooperation between members of the Organization of Petroleum Exporting Countries and non-members, including a Venezuelan proposal for an output “band” system, according to an e-mailed statement from the South American country’s oil ministry.

    Novak was expected to meet new Saudi Minister of Energy and Industry Khalid al-Falih in Beijing this month at the G20 energy summit. While the meeting is possible, it’s not confirmed yet, Novak said.

    While the government in Moscow prepares to draft the nation’s 2017 budget using an average oil price of $40 a barrel, Novak said it may reach $50. Brent crude this year has averaged about $40 a barrel.

    In a later interview, Novak reiterated a plan to increase crude output to about 540 million metric tons this year and set next year’s target “somewhere in the range” of 525 million to 545 million tons. Crude exports may rise about 3 percent this year to roughly 252 million tons, and the trend is likely to continue next year, he said.

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    Norwegian oil unions threaten drilling rig strike

    Nearly 300 employees on oil and gas drilling rigs off Norway could go on strike unless a wage deal is agreed by June 22, the country's state-appointed mediator said on Thursday.

    Rowan Companies' Viking and Gorilla rigs will be affected, one of the unions involved in the wage talks said. It was not clear if other rigs would be affected.

    The mediator said that around 3,000 workers could join a long-term strike.

    Labour disputes on drilling rigs typically halt oil and gas exploration and drilling of new production wells at existing fields, but do not affect current production at wells.

    One of the unions, Safe, said 79 of its members working on Rowan Companies' Viking and Gorilla rigs would go on strike if no agreement is reached.

    Unions and the rig owners are due to meet to negotiate an annual wage deal on June 20 and have set a deadline to reach an agreement by midnight on June 21. They have not publicly disclosed the terms demanded.

    The Viking rig currently does work for Swedish oil firm Lundin, while the Gorilla works for oil major ConocoPhillips, Rowan said recently.

    In addition to the 79 Safe members, another 190 workers represented by the Industri Energi union and 14 members of DSO would be part of the first wave of a strike, the state mediator said.

    A spokesman for ConocoPhillips said on Thursday that the Gorilla rig is currently engaged in the plugging of abandoned wells on its Ekofisk field in the North Sea, and that oil output would be unaffected by a strike.
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    Gasoline appeal fades as refiners chase the next profit boost

    Just as drivers hit the road for summer holidays, refiners are turning the taps down on gasoline as a global excess cuts into their profits.

    Refiners in Europe, Asia and the United States, from the mighty ExxonMobil down to smaller players such as Italy's Saras, amped up the proportion of gasoline they churned out to cash in on record driver demand.

    But now they are moving back to the diesel, jet fuel and heating oil that for more than a year had become a "by-product" they did not want.

    "The pendulum of profitability between gasoline and diesel is set to swing back toward the latter during the next 12 months," ESAI analyst John Galante said in an annual forecast. "Tightness in the global gasoline market has run its course."

    Already, Europe's refineries are moving towards diesel, traders said, while Asian units are maximising jet fuel. In the United States, Husky Energy in Lima, Ohio, is making more diesel, while Delta Air Lines is considering switching its Trainer, Pennsylvania refinery to maximise diesel.

    The shift is due in part to the success of their own efforts to do everything they could - from choosing different crude oil to tweaking the way they ran their units - to capitalise on booming gasoline and naphtha demand.

    Most can only shift a small amount of production from one product to another - less than 5 percent, even in a best-case scenario - but the worldwide effort had a big impact.

    Physical supply of so-called light-end products built quietly on ships, at refineries and in storage tanks, with even China exporting gasoline to the United States. The figures are now showing up in official data.

    According to Euroilstock, gasoline inventories in Europe clocked a counter-seasonal build of 3 million barrels from April to May, while even the U.S. Energy Information Administration has shown some builds in gasoline stocks despite record demand from drivers.

    "It has become clear that this is really not 2015 anymore and that the effects of yield-shifting exercises across the globe have more or less taken care of what we assume to still be strong demand growth for gasoline," analysts at JBC wrote.

    At the same time, an unexpected shortfall in diesel and jet fuel crept in, buoyed by strikes that closed four French refineries and extreme heat from El Nino that boosted distillates burned in power generators in India, Pakistan and Vietnam.

    Last week, premiums for gasoline over ultra-low-sulphur diesel fell to flat on a per-barrel basis for the first time since March, in Europe, and November, in Asia, according to JBC. U.S. gasoline traded at a discount to diesel on Wednesday for the first time seasonally in three years 1RBc1-HOc1.

    Still, the shift could prove to be only a short-term profit aid. One trader said the change "makes little sense historically", while analysts warned it could simply crush diesel margins.

    "If they are forced to make more diesel it will undermine those economics, particularly as August is typically a slow period for demand," said Robert Campbell, head of oil products with Energy Aspects.

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    Pioneer Natural Resources Company Announces Pricing of Common Stock Offering

    Pioneer Natural Resources Company today announced that it has priced an underwritten public offering of 5.25 million shares of its common stock for gross proceeds of approximately $827 million. The Company has granted the underwriters an option for 30 days to purchase up to an additional 787,500 shares of the Company’s common stock. Credit Suisse, J.P. Morgan, Deutsche Bank Securities and Morgan Stanley are acting as joint book-running managers for the offering. The underwriters may offer the shares from time to time in one or more transactions on the New York Stock Exchange, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices. The offering is expected to close on or about June 21, 2016, subject to customary closing conditions.

    The Company expects to use a portion of the proceeds from the offering to fully fund its recently announced pending acquisition of oil and gas properties in the Midland Basin (the “Pending Acquisition”) and the remaining portion of the proceeds for general corporate purposes, including funding the drilling program on the acreage to be acquired in the Pending Acquisition and continuing to develop its acreage position in the Spraberry/Wolfcamp play in West Texas. The offering is not conditioned on the consummation of the Pending Acquisition, and if the Pending Acquisition is not consummated, the Company intends to use the proceeds from the offering for general corporate purposes, including continuing to develop its acreage position in the Spraberry/Wolfcamp play in West Texas.

    The offering is being made pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission (the "SEC"). The offering may be made only by means of a prospectus supplement.
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    NDA Avengers blow up another pipeline

    At 4:00am @NDAvengers blow up NNPC Pipeline in Oruk Anam Local Government Area in Akwa Ibom.

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    Bear Head LNG’s licence approved by Governor in Council

    Liquefied Natural Gas Limited’s unit, Bear Head LNG, received Governor in Council approval for its licence to import natural gas from the United States and export LNG from the plant to be located on the Strait of Canso in Richmond County, Nova Scotia.

    Bear head LNG was granted a licence to import and export natural gas in August last year, however that licence was subject to the approval of the Governor in Council, LNg Limited’s statement reads.

    Commenting on the approval on Thursday, Greg Vesey, managing director and CEO of LNG Limited and president of Bear Head LNG said the approval positions the Bear Head LNG to become a major LNG supplier.

    According to the licence, Bear Head LNG can import up to 14.2 billion cubic metres of natural gas per annum, which would be sufficient to export up to 12 mtpa of LNG from Canada, both licences are for a period of 25 years.

    The project has already secured approval from the United States Department of Energy to export US-sourced natural gas to countries that have and those that do not have a free-trade agreement with the US.
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    Iran's Oil Comeback May Already Be Over

    Iran's Oil Comeback May Already Be Over

    Iran easily beat expectations with its speed in boosting oil exports after the lifting of sanctions. Without an injection of cash and the easing of remaining trade barriers, the recovery may have run its course.

    When restrictions on Iran’s oil exports were relieved in January following a nuclear pact with world powers, analysts from Goldman Sachs Group Inc. to Barclays Plc doubted it could return to previous levels this year. The Persian Gulf state defied the skeptics with a 25 percent surge in production and aims to reach an eight-year high of 4 million barrels a day by year-end.

    “They have surprised most market participants with the speed they’ve been able to resume production,” said Antoine Halff, a senior fellow at the Center on Global Energy Policy at Columbia University in New York. “But to exceed pre-sanctions levels would require investment and technology and that’s a much longer-term proposition.”

    Returning to world markets after more than three years of isolation, Iran is seeking more than $100 billion of investment from international partners to rehabilitate its oil industry and ultimately reclaim its position as OPEC’s second-biggest producer. Still, companies are still waiting for Iran to approve the contract model to be used in deals and for clarity on remaining U.S. sanctions before re-entering the country.

    Iranian Wins

    Since limits on crude sales were lifted, exports have doubled to about 2 million barrels a day, flowing again to previously prohibited markets in Europe, where Royal Dutch Shell Plc and Total SA resumed purchases. Production reached pre-sanctions levels of 3.6 million barrels a day in April and maintained that level in May, the Paris-based International Energy Agency estimates.

    Iran’s own figures have output climbing to 3.8 million barrels a day in May, with plans to hit 4 million by the end of the year and ultimately reaching 4.8 million within five years, Oil Minister Bijan Namdar Zanganeh said June 3 in Vienna. With Total, Eni SpA and BP Plc having expressed interest in developing Iran’s resources, Zanganeh predicts the first deals with foreign companies will be signed within three months.

    While oil analysts concede that Iran surpassed their initial forecasts, they aren’t convinced its greater ambitions will be realized soon. Qamaar Energy Chief Executive Officer Robin Mills and independent consultant Peter Wells, who both have experience working in Iran, say that sustaining a level of 3.6 million to 3.8 million a day is more realistic.

    New Investment

    Iran will need billions of dollars of investment and foreign technology to boost reservoir pressure to expand capacity at its aging, cash-starved wells, which were already suffering output declines before sanctions hit, the Paris-based agency estimates. Even with an influx of investment, returning to 4 million barrels a day won’t happen before 2021, the IEA predicts.

    “They are doing everything they possibly can on their own while waiting to bring in foreign partners,” said Bjornar Tonhaugen, an analyst with Rystad Energy AS in Oslo, an oil consultant that advises more than 600 clients. “The risk now is that it’s not sustainable.”

    Iran can boost capacity by 300,000 barrels a day in the next several years from deposits in the West Karoun area near the Iraqi border, said Tushar Tarun Bansal, an energy analyst at consultants FGE in Singapore. Zanganeh, in an interview with Iranian magazine Seda Weekly published June 11, said the country can add 700,000 barrels a day from these fields over five years.

    Model Contract

    However, attracting foreign capital will be a struggle when a model contract for oilfield investment isn’t ready and as a range of U.S. sanctions remain in place, said FGE’s Bansal.

    Even after dropping sanctions on Iran’s oil sales, the U.S. still prohibits transactions related to the Islamic Republic from being conducted in dollars, restrictions imposed because it accuses Iran of human rights abuses and sponsoring terrorism. Zanganeh acknowledged last week that the oil contract models need further revisions.

    “The big question for the Iranians is: ‘Are they going to get all the investment they want?’” Daniel Yergin, vice chairman of consulting firm IHS Inc., said in a Bloomberg television interview. “Companies are going to be very cautious about making new commitments to Iran. No one wants to run afoul of U.S. sanction law. ”
    A series of output disruptions from Nigeria to Canada and Venezuela has meant that the extra Iranian oil has been easily absorbed by the market rather than depressing prices, said Mike Wittner, head of oil market research at Societe Generale SA in New York. Crude futures recovered to more than $50 a barrel last week, nearly double the 12-year low reached in January. With Iran’s comeback almost complete and global demand rising, traders are starting to wonder how much world markets will tighten in 2017, he said.

    “By the end of this year Iran will be maxed out,” said Wittner. “Is it bullish? Yeah. When I look around the world and I need a bit more OPEC crude, I ask myself where it’s going to come from.”
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    Devon sells Texas land to Pioneer, undisclosed buyer for $858 million

    U.S. shale oil producer Devon Energy Corp said on Wednesday it would sell Texas acreage to Pioneer Natural Resources Co and an undisclosed buyer for $858 million, as the pace of asset sales picks up on recovering oil prices.

    The sale is part of a push by Devon to shed up to $3 billion in noncore assets as it tries to strengthen its balance sheet after the worst price crash in a generation.

    "We anticipate our total noncore asset sales to be at or above the top end of our $2 billion to $3 billion guidance," CEO Dave Hager said in a statement.

    Devon also increased its 2016 capital budget by $200 million, saying it now plans to spend $1.1 billion to $1.3 billion this year, and slightly raised its 2016 production guidance for core operations to between 540,000 and 560,000 barrels of oil equivalent per day (boepd).

    Devon said the acreage it sold to Pioneer for $435 million is mostly undeveloped and currently produces around 1,000 boepd.

    Current production from acreage sold to an undisclosed buyer for $423 million is about 22,000 boepd.

    Pioneer said it was issuing 5.25 million common shares to help pay for the purchase of 28,000 acres from Devon's Midland Basin acreage for $435 million.

    Pioneer, known for its aggressive hedging program, also said it would add five drilling rigs in Texas starting in September, bringing its total rig count to 17 as oil prices recover to $50 a barrel.

    These rig additions will add about $100 million to the company's capital budget for 2016, lifting it to $2.1 billion.
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    Petrobras Said Close to $6 Billion Sale of Brazil Gas Pipelines

    Brazil’s troubled state-run oil company Petrobras is close to selling a 81 percent stake in a natural gas pipeline network in Brazil for nearly $6 billion to a consortium led by Brookfield Asset Management Inc, said three people with direct knowledge of the matter.

    The Singapore sovereign-wealth fund GIC Pte, the Chinese sovereign-wealth fund China Investment Corp. and the Greenwich, Connecticut-based private equity firm First Reserve Corp are also part of the group of buyers, said two of the people, asking not to be identified because the discussions are private. The deal is expected to be signed as soon as next month, one of the people said.

    Petrobras is trying to sell the network of gas pipelines, called Nova Transportadora do Sudeste SA, as it struggles to reduce the largest debt load in the oil industry amid crude prices that stand at half the levels seen just three years ago. The transaction, if closed, could be the only divestment in Brazil for the Rio de Janeiro-based firm this year, one of the people said, given the current pace of other deals.

    BR Distribuidora and Transpetro, two subsidiaries the company is considering selling, are complex deals and are currently not moving fast enough to be concluded this year, one of the sources said.

    Brookfield and First Reserve declined to comment on the deal. Petrobras, CIC and GIC didn’t immediately reply to requests for comment.

    Petroleo Brasileiro SA, as the oil giant is formally known, said May 12 it had entered a 60 day period of exclusive talks with Brookfield, the largest alternative asset manager in Canada, for the sale of the gas pipelines, a period which could be extended by 30 more days.

    Pedro Parente, who took over as the company’s chief executive officer this month, has vowed to reduce leverage at the world’s biggest deep-water oil producer and said he would focus on divesting assets outside of its core activities to focus investments on mega-projects in deep waters of the South Atlantic. The company has already sold about $2.1 billion in assets since last year, mainly from unloading its operations in Chile and Argentina -- part of a two-year, $15.1 billion asset sale program.

    Petrobras wouldn’t cash in immediately the money as it would still need approval from regulatory bodies such as the oil regulator known as ANP, and the antitrust body Cade.
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    Canadian Natural sharply raises cash flow forecast for 2016

    Oil producer Canadian Natural Resources Ltd sharply raised its cash-flow forecast for the year as it gains from a rally in crude oil prices.

    The company said on Wednesday that it now expected free cash flow of C$670 million ($519 million) in the fourth quarter, nearly double the C$338 million it forecast previously.

    The oil producer also said it expected the final part of the second phase of its Horizon oil sands project, located north of Fort McMurray in Alberta, to start in four months, with estimated initial production of 45,000 barrels per day.

    Canadian Natural plans to start the third phase of the project in the fourth quarter of 2017.
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    Rex Energy Selling Illinois Basin Assets, Focus 100% on Marcellus

    Rex Energy has always been one of our favourite smaller drillers in the Marcellus/Utica region. Yes, we know you’re not supposed to love some of your drilling children more than others–but we do!

    We’ve often called Rex “the little energy company that could, and does.” Like most E&Ps (exploration and production companies), Rex has had a tough time coming through the recent crash in the price of gas and oil;

    Rex Energy 1Q16: Lost $62M, but Still Drilling in the Marc/Utica; and Rex Energy Swapping $631M in Private IOUs for Public IOUs.

    Rex has always concentrated on two regions: the Marcellus/Utica, and the Illinois Basin. No more. Rex is now a “pure play” driller after announcing it will sell all of its Illinois Basin assets–for $40 million to Campbell Development Group…
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    A rare tour of the Strategic Petroleum Reserve

    A rare tour of the Strategic Petroleum Reserve

    The world’s largest emergency stockpile of crude oil is quickly falling apart.

    The stockpile’s infrastructure, which currently stores 695.1 million barrels at four sites along the US Gulf Coast, is nearing the end of its design life and in need of a roughly $2 billion makeover, US Department of Energy officials claim.

    “We’ve had several significant equipment failures over the last couple years that have affected our operational capability,” said Bob Corbin, the DOE deputy assistant secretary who oversees the stockpile, formally known as the US Strategic Petroleum Reserve.

    In April, a water pipe at the DOE’s Big Hill site in Winnie, Texas failed, less than a year after a crude oil storage tank failed at the Bryan Mound SPR site near Freeport, Texas.

    Throughout the system, pipes are corroding, tank floors need to be replaced, wells are failing mechanical integrity tests and pump motors, after decades of dealing with harsh weather and salty air off the Gulf of Mexico, are breaking down beyond repair, DOE officials claim.

    Corbin said these issues complicate the ability of DOE to both drawdown and distribute crude oil at times of severe supply distributions, which is the primary reason the SPR was created more than four decades ago. They also complicate US’ ability to meet obligations under international agreements and could endanger energy security.
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    Petronas, Saudi Aramco Said Seeking Pitches for $7 Billion Loan

    Malaysia’s state-owned oil corporation and Saudi Arabian Oil Co. are asking banks for proposals to finance about $7 billion for a planned refinery and a petrochemical complex in the Southeast Asian nation, according to people familiar with the matter.

    The lenders would provide financing for the two projects worth a total of $12 billion to be constructed by Petroliam Nasional Bhd. and Saudi Aramco under a memorandum of understanding that the two firms have signed, according to the people, who asked not to be identified as the process is private. The banks are expected to submit proposals by later this month, the people said.

    A Petronas’s spokesman couldn’t immediately be reached for comments by phone. Saudi Aramco’s media officials at its headquarter in Dhahran, Saudi Arabia, declined to comment.

    Long-Term Projects

    While Petronas announced in January that it would cut its capital and operating expenditures by 50 billion ringgit ($12.2 billion) over four years, it also gave commitment to invest in long-term projects. The planned projects with Saudi Aramco are part of the $27 billion Refinery And Petrochemicals Integrated Development that it is building for future growth and will come onstream in 2019.

    Petronas reported a 71 percent decline in net income of 2.7 billion ringgit in the first quarter from 9.3 billion ringgit a year earlier due to lower product prices and reduced sales volume, according to May 18 statement. Its total assets decreased to 567.6 billion ringgit as at end March compared to RM591.9 billion as at Dec. 31. The company raised $5 billion by selling dollar bonds and Islamic debt in March last year.

    Saudi Aramco, the world’s biggest oil exporter, already has refining and petrochemical partnerships in the U.S., China, South Korea and Japan, as well as in Saudi Arabia, giving it a share in plants capable of processing 5.4 million barrels a day. It is also looking to develop more joint ventures in countries including the U.S., China, Indonesia, India, Vietnam and South Africa, Chief Executive Officer Amin Nasser told reporters on May 10.

    Saudi Arabia is seeking to reduce its reliance on oil sales amid lower prices for its most lucrative export. As part of that effort, the Middle Eastern nation wants to sell stock in Saudi Aramco for the first time, creating what could be the world’s largest listed company.

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    Summary of Weekly Petroleum Data for the Week Ending June 10, 2016

    U.S. crude oil refinery inputs averaged over 16.3 million barrels per day during the week ending June 10, 2016, 100,000 barrels per day less than the previous week’s average. Refineries operated at 90.2% of their operable capacity last week. Gasoline production decreased last week, averaging 9.7 million barrels per day. Distillate fuel production increased last week, averaging 5.0 million barrels per day.

    U.S. crude oil imports averaged over 7.6 million barrels per day last week, down by 83,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.6 million barrels per day, 9.8% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 747,000 barrels per day. Distillate fuel imports averaged 123,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.9 million barrels from the previous week. At 531.5 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.6 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.8 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.1 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories decreased by 0.7 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.4 million barrels per day, up by 3.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.6 million barrels per day, up by 2.9% from the same period last year. Distillate fuel product supplied averaged over 3.8 million barrels per day over the last four weeks, down by 2.6% from the same period last year. Jet fuel product supplied is up 5.3% compared to the same four-week period last year.

    Cushing oil storage up 900,000 bbl
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    US oil production down again

                                                           Last Week       Week Before    Last Year

    Domestic Production '000....... 8,716               8,745              9,589
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    Snam working on 4 billion euro refinancing as part of Italgas spinoff: sources

    Italy's Snam, one of Europe's biggest gas pipeline operators, is looking to lift about 4 billion euros ($4.5 billion) off its balance sheet as part of plans to spin off its domestic gas business, sources familiar with the matter said.

    In a refinancing to be carried out by a dozen or so banks, the debt would end up with Snam's Italgas unit, which will be spun off by distributing Italgas shares to Snam investors and listing them, six sources familiar with the refinancing said.

    That would leave Snam more focused on its goal of becoming a prime mover in integrating Europe's patchwork of grids and making Italy a European gas hub, in line with the European Union's desire to wean itself off Russian gas imports.

    Snam, which has 13.5 billion euros of debt, is investing more than half its 3.6 billion euro revenues in transmission and would benefit from cutting domestic distribution commitments.

    While Snam will raise no money from the listing, the deal will cut leverage, making it easier to tap funds on the market.

    "Snam could go for acquisitions in Europe in order to get more control over the South European gas corridor," Macquarie analysts said.

    Three of the sources said around 12 banks, including Mediobanca (MDBI.MI), UniCredit (CRDI.MI) and Banca Imi (ISP.MI), were being lined up for a 3.5-4.0 billion euro refinancing package that would see as much as 2 billion euros of group debt being transferred to Italgas on top of its own 1.9 billion euro debt pile. The refinancing is expected to be wrapped up by the summer with a listing of Italgas likely towards the end of the year, the sources said.

    Snam is controlled by state lender Cassa Depositi e Prestiti (CDP) through a vehicle that also includes State Grid Corporation of China STGRD.UL.

    Four sources said Snam would keep a minority stake in Italgas of up to 15 percent with one source saying it could be as low as 10 percent.

    A banker with knowledge of the matter said the idea of a shareholder pact between Snam and CDP to allow the state lender to keep a firm grip on Italgas when it is on the market was being discussed.

    Goldman Sachs (GS.N) is advising Snam on its options, the sources said, adding the structure of the demerger was still under discussion and some of the details could change.

    The company, which has a strategic alliance with Belgium's Fluxys, already controls French grid TIGF and Austrian pipeline TAG and recently bought a 20 percent stake in the Trans Adriatic Pipeline that will bring Azeri gas into Europe.

    It is interested in German gas grid Thyssengas and Austria's Gas Connect Austria as well as a stake in Greece's DESFA.

    In March Snam launched a feasibility study on demerging all or part of Italgas but gave no further details.

    Earlier this year the group, under new CEO Marco Alvera, delayed its strategy plan which will now be unveiled on June 29.

    New rules in Italy's fragmented gas distribution sector cutting concession areas to just 177 from almost 7,000 are expected to trigger consolidation, favoring companies with strong balance sheets. In January sources told Reuters CDP was mulling the idea of merging Italgas with No 2 distributor 2i Rete gas in which CDP is also a shareholder.

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    Global upstream investment slashed by $1trillion since oil price fall says Wood Mac

    The oil and gas industry will cut $1 trillion from planned spending on exploration and development because of the slump in prices, leading to slower growth in production, according to consultant Wood Mackenzie.

    Malcolm Dickson, Principal Analyst at Wood Mackenzie said: “The impact of falling oil prices on global upstream development spend has been enormous.

    “Companies have responded to the fall by deferring or cancelling projects and costs have also fallen.

    “Our 2015-2020 forecast for capital investment has been reduced by 22% or US$740 billion since Q4 2014. In the nearer term the impact is even more severe: compared to pre-oil price fall expectations, capex will be down by around US$370 billion or 30% in 2016 and 2017.”

    Wood Mackenzie expects to see further cuts throughout the year and investment levels continue to shrink as more projects are dropped and companies struggle to breakeven.

    “Virtually every oil producing country has seen some form of capex cuts. The deepest are in the US Lower 48, where forecast capital investment has halved in 2016-17, falling by US$125 billion. This is mainly down to a big drop-off in drilling, with the onshore rig count dropping by 53% from 2015 to 2016,” says Dickson.

    A global supply glut caused by the increase in shale oil production in the US, coupled with OPEC’s decision to keep pumping to preserve market share, triggered the collapse in oil prices in 2014.

    While Brent crude, the international benchmark, has rebounded more than 75 percent from a 12-year low in January, the current price of about $49 a barrel is still less than half the level two years ago and has led to loss of hundreds of thousands of jobs around the world, with an estimated 120,000 lost in the UK North Sea alone.

    The U.S. has experienced the steepest cuts in spending. Forecast capital investment there is down by half for this year and next, a drop of around $125 billion, mainly due to a decline in drilling, Dickson said in the report.

    The Middle East is the region least affected, with no drop in investment expected in Saudi Arabia — the world’s largest crude exporter — for this year and next. That’s because several countries in the region are spending to maintain their market share, the report said.

    The investment cuts are taking a toll on production. Compared with expectations before the slide in oil prices, output this year will be 5 million barrels of oil equivalent a day lower, with the deficit widening to 6 million next year, Wood Mackenzie estimates.

    Part of the reduction in spending stems from a drop in the cost of doing business. Costs in the U.S. unconventional oil and gas industry were a quarter lower on average compared with their peak in 2014, Wood Mackenzie said. In Russia, the 40 percent reduction in investment in dollar terms anticipated over the next two years is due in large part to the depreciation of the ruble, it said.

    Dr Andrew Latham, Vice President of exploration research at Wood Mackenzie said: “Although exploration investment has more than halved since 2014, and the figure is expected to be around US$42 billion per annum for 2016 and the same in 2017, costs have not been cut as much and as quickly as we expected. Some deepwater exploration spend has been protected by long rig contracts, but as these unwind we expect sharper cuts than in non-deepwater.”

    On a more positive note for operators, cost deflation has played a major role in driving down spend. For example, costs in the US unconventional sector in 2015 fell by 25% on average from peak in 2014. Wood Mackenzie’s models show 2016 is likely to yield another 10%.

    “For now, the select few projects that are progressed will do so because costs have been cut substantially to hit economic hurdle rates. But kick-starting the next investment cycle will require more cost deflation and project scope optimisation along with confidence in higher prices and arguably fiscal incentives.” says Dickson.
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    Why Billions in Proven Shale Oil Reserves Suddenly Became Unproven

    Ultra Petroleum Corp. was a shale success story. A former penny stock that made the big leagues, it was worth almost $15 billion at its 2012 peak.

    Then came the bust. Almost half of Ultra’s reserves were erased from its books this year. The company filed for bankruptcy on April 29 owing $3.9 billion.

    Ultra’s rise and fall isn’t unique. Proven reserves -- gas and oil resources that are among the best measures of a company’s ability to reward its shareholders and repay its debts -- are disappearing across the shale patch. This year, 59 U.S. oil and gas companies deleted the equivalent of 9.2 billion barrels, more than 20 percent of their inventories, according to data compiled by Bloomberg. It’s by far the largest amount since 2009, when the Securities and Exchange Commission tweaked a rule to make it easier for producers to claim wells that wouldn’t be drilled for years.

    Wider Effort

    The SEC routinely questions companies about their reserves. Now, agency investigators are also on the hunt for inflated reserves estimates, according to a person familiar with the matter.

    “Reserves make up a large share of the value of these companies, so it really matters,” said David Woodcock, a partner at Jones Day in Dallas who served as the SEC regional director in Fort Worth, Texas, from 2011 to 2015. “They’re looking even more closely at how companies are booking reserves, how they’re evaluating the quality of those reserves and what their intentions really are. They’re not accepting pat answers.”

    Drillers face pressure to keep reserves growing. For many, the size of their credit line is tied to the measure. Investors want to see that a company can replace the oil and gas that’s been pumped from the ground and sold.

    There are two ways to increase reserves: buy more or find more. Fracking made it easier to do the latter, and the industry lobbied the SEC to count more undeveloped acreage as proved reserves, arguing that shale prospects are predictable across wide expanses.

    The SEC agreed, with two key limits. First, the wells must be profitable to drill at a price set by an SEC formula. The companies got a temporary reprieve for 2014 because the SEC number was about $95 a barrel even though crude had plummeted to less than $50 by the time results were reported in early 2015.

    That advantage has disappeared. When companies reported their 2015 reserves this year, the SEC price was about $50. Wells that vanished this year may return if prices rise.

    The SEC also requires that undeveloped wells be drilled within five years of being added to a company’s books. The five-year plan can’t just be wishful thinking. “The mere intent to develop, without more, does not constitute ‘adoption’ of a development plan,” the SEC explained in 2009.

    Despite those limitations, reserves surged 67 percent in the five years after the 2009 rule change, according to 53 companies that have records going back that far. Almost half the gains came from wells that existed only on paper.

    Fix Estimates

    By the end of 2014, undeveloped properties accounted for 39 percent of proved oil and gas reserves, up from 33 percent at the end of 2009, an increase of nearly 8 billion barrels.

    In its first letter to Ultra, in July 2014, the SEC said it would take about 13 years for the company to drill its backlog. About two months later, Ultra raised $850 million in debt. The SEC letters weren’t yet public. Over the next 19 months, the regulator twice told the company to revise its estimates.

    Falling Prices

    Ultra responded that its drilling plans changed due to falling prices and the shrinking availability of financing. The company sometimes delayed or canceled certain wells in favor of more profitable locations, the company wrote.

    Ultra ultimately agreed to a small revision to its 2011 reserves booking. It was disclosed in a footnote to its 2015 annual report, after the SEC completed its review in February. In the same report, Ultra deleted all of its undeveloped reserves because of uncertainty about financing.

    The letters were made public in mid-March. By then, Ultra’s shares had plummeted to 58 cents, and the bonds issued less than two years before were selling for about 8 cents on the dollar. Prices have since rebounded.

    Sandi Kraemer, Ultra’s director of investor relations, declined to comment. So did Judith Burns, an SEC spokeswoman.

    Other companies have also drawn SEC scrutiny. The agency said in correspondence with Goodrich Petroleum Corp. that the company drilled only 4 percent of its undeveloped reserves each year, a slower pace than necessary to comply with the five-year rule. Linn Energy LLC kept undeveloped reserves on its books at the end of 2014 even after cutting its drilling budget by 61 percent. Both companies have gone bankrupt in recent months owing a combined $8.1 billion. Neither would comment for this story.

    For many drillers, “development plans weren’t realistic,” said Julie Hilt Hannink, head of energy research at CFRA, an accounting advisory firm in New York.

    Rising Bankruptcies

    Penn Virginia Corp., a company in which billionaire George Soros had a stake, booked paper wells in natural gas prospects where it hadn’t drilled in years, according to letters from the SEC.

    “Your actual drilling has consistently failed to follow schedules,” the SEC wrote in an April 2015 letter.
    Penn Virginia responded that it had intended to get to the wells within five years but its plans changed when prices fell.

    That’s not what company executives told investors, according to conference call transcripts. H. Baird Whitehead, Penn Virginia’s chief executive officer, said in a November 2012 call that “under almost no scenario” would the company resume gas drilling. Yet, when Penn Virginia filed its report with the SEC three months later, the prospects accounted for more than 40 percent of its reserves.

    During an April 2013 call, Whitehead said, “We don’t plan on drilling natural gas wells.” Still, the undeveloped natural gas wells comprised 19 percent of the company’s reserves at the end of that year. Patrick Scanlan, a spokesman for Penn Virginia, declined to comment.

    The company intended to follow the SEC’s five-year rule, according to a person familiar with Whitehead’s thinking.

    Penn Virginia erased most of its undeveloped reserves this year. The company filed for bankruptcy May 12 with $1.2 billion in debt. Records show Soros sold his six million shares in the first quarter.

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    Exxon, BHP considering sale of Australia oil and gas assets

    Exxon Mobil Corp and BHP Billiton Ltd said on Wednesday that they are considering selling depleting energy assets in Australia, including Kingfish, the country's largest ever discovered oil field.

    The resource giants are looking to market 13 fields, licenses and associated infrastructure held in the Gippsland Basin Joint Venture. The venture in Australia's Victoria state began operations in 1969, according to BHP's website.

    "We are seeking to identify interested parties with proven experience and strength to operate and capture the remaining potential in these licenses," a spokesman for Esso Australia, which operates the venture, told Reuters.

    BHP and Esso Australia each hold a 50 percent share of the joint venture.
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    Oil disruption >4% of global production.

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    Rosneft Mimics Saudi Strategy to Get Foothold in Indian Market

    Rosneft OJSC is mimicking the strategy of its biggest global competitor to expand in India as the world’s top oil exporters vie for business in the fastest-growing crude-consuming nation.

    The Russian energy giant’s plan to buy a stake in Essar Oil Ltd.’s Vadinar refinery echoes proposals by Saudi Arabian Oil Co. to invest in India’s refining industry and secure new outlets for its crude.

    “We do believe in the upside potential of the Indian market,” Rosneft First Vice President Pavel Fedorov said last week. "There’s some chance you’ll see our progress with respect to tapping opportunities in the Indian market mid- and short-term.”

    The company has said it hopes to acquire as much as 49 percent of the 405,000-barrel-a-day Vadinar refinery in the western state of Gujarat by the end of June. That deal would come with a 10-year contract to supply 100 million metric tons of crude to the Indian market, marking a significant expansion in a country where Russia is currently barely present.

    Officials from the two countries are due to attend the St. Petersburg International Economic Forum later this week.

    Competition for market share around the world has increased as supply continues to swamp demand. While Russia in recent months has overtaken Saudi Arabia in oil exports to China, Riyadh last year took the rare step of selling crude into Moscow’s backyard of eastern Europe, prompting Rosneft Chief Executive Officer Igor Sechin to accuse the Saudis of “actively dumping” their oil.

    The fight for customers only intensified with Iran’s return to the market following the end of sanctions, while West African exporters have sent more barrels to Europe and Asia after the U.S. shale boom trimmed their sales across the Atlantic.

    Saudi Aramco has squared up to rivals, outlining plans for an expansion of refining capacity in countries including Indonesia, Malaysia, Vietnam and India. The Dhahran-based company, which already ships about 70 percent of its crude to Asia, has forged refinery partnerships in Japan, South Korea and China.

    Saudi Aramco’s joint ventures “allow it to secure demand for oil in the region that has a huge potential," said Sushant Gupta, director for Asia Pacific refining at industry consultants Wood Mackenzie Ltd. "Russia’s interest in such projects is also based on these fundamental drivers."
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    Russia's Sechin predicts dogfight for oil markets

    Igor Sechin, head of Russia's largest oil producer Rosneft and the country's most influential energy executive, said in an interview that he expects the fight for global energy market share to intensify.

    In the interview with Il Sole 24 published on Wednesday, Sechin questioned the rationale of Russia's plans to sell almost 20 percent of Rosneft as part of a wider privatization scheme, saying the company's share price did not match its fundamentals.

    "The main challenge for Russia's energy sector is a sharp increase in competition on global energy markets. In future, a tenacious competition is expected for keeping a share of traditional markets and to increase the share of new energy markets," Sechin was quoted as saying.

    Russia has been muscling in on Asian markets, where Saudi Arabia was once the unchallenged dominant supplier. For its part, Riyadh has retaliated with aggressive discounting in Moscow's backyard of Europe.

    Last year, Sechin said Saudi Arabia had started supplying ex-communist Poland at "dumping" prices, while Russian Energy Minister Alexander Novak said Saudi's entry into eastern European markets was the "toughest competition".

    Sechin, a staunch critic of the Organization of the Petroleum Exporting Countries, said the global market may face an oil shortage in three to five years and producers might need a deal to share output increases and release strategic reserves.

    "The market is reaching its balance quicker than analysts had predicted," he said.

    In comments about the state's plans to sell almost 20 percent of Rosneft, Sechin said that as weaker oil prices and international sanctions over Ukrainian crisis had hit the company's share price, wider options should be considered.

    "We believe that it would be prudent to consider different options, including inviting a strategic investor, in the current difficult conditions," he said.

    Sechin also did not rule out the possibility that Italy's Eni might participate in upstream projects in Russia.

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    Suncor sees wildfire costing nearly C$1 billion: sources

    Suncor Energy Inc has told employees the massive wildfire that struck northern Alberta in May will cost the company nearly C$1 billion ($777.91 million), two sources at Canada's largest crude producer said on Tuesday.

    The wildfire, which forced the evacuation of the oil sands hub of Fort McMurray, also shuttered operations at facilities owned by Suncor and other producers in the region for weeks, at one point cutting Canada's crude output by more than a million barrels a day.

    The Suncor number is the first concrete figure to emerge from oil sands companies on the scale of their wildfire costs. With some companies still ramping up production, the overall cost of the natural disaster has not been determined.

    Analysts pegged oil companies' pre-tax profit loss at $45-$50 million a day during the wildfire shutdowns.

    Husky Energy and Cenovus Energy Inc said on Tuesday wildfire costs would not be substantial, though the companies declined to provide an estimate.

    Barclays analyst Paul Cheng said Suncor's pre-tax losses were probably close to C$1 billion, although the long-term impact would be limited.

    "It's going to be a really messy and very difficult second quarter in the case of Suncor," Cheng said. "But everyone is quite confident by the end of the month they should be up to normal operations, and if that's the case this is a one-quarter event and investors will not put too much weight on that."

    At Suncor, one worker, who declined to be named because he was not authorized to speak to reporters, said an executive told employees on Monday that the company expects fire-related losses "just shy" of C$1 billion.

    A second employee, also speaking on condition of anonymity, said workers were told that direct costs related to the fire and the loss of production would cost nearly C$1 billion.

    A Suncor spokeswoman declined to comment on wildfire-related losses.

    Suncor has several oil sands facilities, including the main mining site which has the capacity to produce up to 350,000 barrels per day.

    Last week Suncor said it expected to have its base plant operations back to pre-fire production rates within a week and all operations in the region producing at normal, pre-turnaround rates by the end of June.

    The sources said they were told that the company's thermal operations were not coming back online as quickly as hoped because of blockages, likely stemming from the shutdown of steam injections that melt the tarry bitumen in reservoirs.

    But they were also told Suncor had as much as six months' worth of available inventory at its main mining site, more than the typical amount of roughly two months.

    A third Suncor employee, who also declined to be named, said by email that he was told the company saw "significant losses" that could stretch beyond the nearly C$1 billion disclosed at Monday's meeting, a large portion of which was due to flying workers to and from facilities, and employee lodging.

    "We have lost major production but we do have four to five months of ore and we are slowly ramping back up operations," the employee said.

    Suncor spokeswoman Sneh Seetal declined to comment on specifics of operations but said the broader effort to bring production online was on track.

    "Our return to operations is going as planned," she said. "We are bringing these operations back."
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    API data shows inventory build

    Data from the American Petroleum Institute showed U.S. crude inventories rose by 1.2 million barrels in the week to June 10 to 536.7 million, compared with analyst expectations for a decrease of 2.3 million barrels.
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    Kurds ready for new oil deal with Baghdad if they get $1 billion a month

    Iraq's Kurds are ready to strike an agreement with the central government in Baghdad on a deal to increase oil exports, if it guarantees them a monthly revenue of $1 billion, a spokesman for the Kurdistan Regional Government (KRG) said.

    Iraq's central government in March stopped oil exports through a Kurdish pipeline to pressure the local authorities to resume talks about an oil revenue sharing agreement.

    Iraq's state-run North Oil Company normally exported 150,000 barrels a day through the pipeline that comes out at the Mediterranean port of Ceyhan, in Turkey. The pipeline also carries oil produced in the Kurdish region in northern Iraq and sold independently from the central government.

    KRG spokesman Safeen Dizayee said in an interview in the Iraqi Kurdish capital Erbil on Tuesday that the Kurdish authorities would be willing to sell the oil through Baghdad if they get a share from the federal budget amounting to a $1 billion a month.

    "If Baghdad comes and says ok, give me all the oil that you have and I'll give you the 17 percent as per the budget, which equals to one billion, I think, logically it should be the thing to accept," he told Reuters, specifying later that the amount referred to a monthly payment in dollars.

    "Whether this oil goes to the international market or first to Baghdad and then to the market, it doesn't make any difference," he said. "We are ready to enter dialogue with Baghdad."

    The KRG stopped delivering crude oil to the central government a year ago, a decision taken when Baghdad's payment fell under $400 million a month, according to Dizayee.

    The Kurdish region exported an average of 513,041 barrels in May through the pipeline to Turkey, generating about $391 million, of which about $75 million was paid to oil companies that produce the crude, according to KRG official estimates.

    "The companies have been assured that certain amounts will be made on a monthly basis," said Dizayee, referring to the three foreign oil producers in the KRG region - DNO, Gulf Keystone and Genel.

    "We have started to pay some of it, at least it has rebuilt that confidence between the government and the IPCs (oil companies," he said, referring to arrears owed to the companies.

    The KRG in February said it will be paying international oil companies in 2016 according to the terms of their contracts, after making ad-hoc payments last year.

    The foreign operators have been reluctant to invest and further develop assets in the region without the promise of regular payment, while the cash-strapped KRG needs production to increase as it struggles to avert an economic collapse.
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    EIA June DPR: The Worm Turns for Utica NatGas Production

    Yesterday MDN’s favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite monthly report–the Drilling Productivity Report (DPR).

    The DPR is the EIA’s best guess, based on expert data crunchers, as to how much each of the U.S.’s seven major shale plays will produce for both oil and natural gas in the coming month.

    One observation from the June report: The worm has turned for natural gas production in the Utica Shale. Until this report, the Utica has stood alone among nation’s seven major plays in a trend of producing more natgas month over month. The EIA now predicts next month that trend will reverse and the Utica will begin to produce less natgas month over month. Not a lot less! Just 4 million cubic feet per day (Mmcf/d). But still, it’s worth noting.

    Another observation:When you combine all of the plays for both oil and natgas production, the rate of decrease for both is picking up. That is, month over month we’re now producing less and less of both oil and natgas from our shale plays. Which will likely be good for prices.
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    Shell ‘eyes Gazprom Baltic LNG deal’: report

    Anglo-Dutch supermajor Shell is expected to sign a deal with Gazprom this week concerning the Russian gas giant’s planned Baltic liquefied natural gas project at the Baltic Sea port of Ust-Luga, according to a report.
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    NDA Threatens to Sink Oil Tankers, Review Its Stance of Not Taking Lives

    The Niger Delta Avengers militant group has threatened to sink oil tankers and "review" its stance of not taking lives in its latest warning to oil and gas companies operating in the Niger Delta.

    The Niger Delta Avengers (NDA) militant group has threatened to sink oil tankers and “review” its stance of not taking lives in its latest warning to oil and gas companies operating in the Niger Delta.

    Niger Delta Avengers @NDAvengers


    In a press statement released on the group’s official website, the NDA also restated its intention to attack the interests of oil corporations if they repaired any facilities damaged by the group.

    “They should not undertake any repair of pipeline, oil and gas facilities that is damaged or attacked by our forces,” said General Mudoch Agbinibo in an NDA statement.

    The NDA has carried out several attacks on oil and gas firms in the region since the start of the year, blowing up Chevron’s Escravos terminal and the company’s RMP 24 and RMP 23 wells in the process.

    The Escravos attack followed NDA’s warning to Chevron that no repair works should be carried out to facilities previously targeted by the group, until NDA’s demands are fully met. NDA claimed on its official website May 11 that it suspected Chevron was preparing to carry out repair works at the Okan Valve platform, which was blown up by the group at the start of the month.
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    Venezuela's oil production drops as economic crisis bites

    Output in the country, which has the world's largest oil reserves, dropped to 2.37 million barrels per day in May, according to OPEC data published on Monday.

    That's down some 5 percent from April and off nearly 11 percent from 2015, adding to the woes of oil-dependent Venezuela as it wrestles with a brutal economic crisis. The drop could also help erode a supply glut that has weighed on prices.

    Amid a cash crunch, Venezuela's oil fields are suffering from shortages of spare parts, the retreat of oil services companies due to unpaid bills, maintenance issues, and crime, according to workers, union leaders, foreign executives, and industry experts.

    Oil workers earn only a few dozen dollars a month at the black market rate due to the bolivar currency's rapid tumble on the parallel market, sparking malaise and a brain drain.

    "Workers' moods are in the dumps," said Francisco Luna, a union leader and technician who works in the oil-producing area of Lake Maracaibo. "Every day it's worse. Maintenance is lacking, equipment is lacking."

    Officials at state-run oil company PDVSA, the sole operator of the country's oil fields, did not respond to a request for comment.

    The Caracas-based company has blamed problems on saboteurs and international smear campaigns.

    As Venezuela's recession appears set to worsen, many wonder how much further output could tumble and whether social issues could eventually encroach on output.

    Energy consulting firm IPD Latin America caused waves earlier this year when it predicted production could slip to 2.35 million bpd this year, a figure on par with last month's output.

    Beyond production, Venezuela's refineries and ports have also suffered problems due to equipment failures and power cuts.

    Supermarket lines and worsening scarcities mean many Venezuelans' lives now revolve around the quest for food, and there has been an increase in worker absenteeism, according to union leaders and foreign executives.

    Still, Venezuela's economic crisis may provide a silver lining for global oil consumption.

    "My sense is domestic demand is also lower, so the impact on net exports may be less than the production decline," said Ben Ramsey, an analyst at J.P. Morgan.
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    Total acquires Lampris

    Total and Lampiris, the third-largest supplier of natural gas and renewable power to the Belgium residential sector, have signed an agreement under which Total will acquire all of the shares in Lampiris. The agreement is subject to customary regulatory approvals.

    The transaction will have no impact on the companies' relationships with their customers or their suppliers, whose contracts will not be affected, and no jobs will be lost.
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    Iran oil exports on track for 4-1/2-yr high as European buying recovers -source

    Iran's oil exports are on track to hit the highest in almost 4 1/2 years in June, as shipments to Europe recover to near pre-sanctions level, according to a source with knowledge of the country's crude lifting plans.

    Tehran's oil sales have nearly doubled since December, the last month before sanctions targeting its disputed nuclear programme were lifted, and the increase in sales should help offset some of the current global supply outages.

    Iran is regaining market share at a faster pace than analysts had projected since sanctions were lifted in January, helped by securing more tankers through a temporary shipping insurance fix.

    June loadings of crude and condensate are up by about 100,000 barrels per day (bpd) from last month to 2.31 million bpd in June, the source said.

    The overall figure is more than a double the same month a year ago, and the highest since January 2012, before Western sanctions were introduced, based on U.S. Energy Information Administration data.

    Exports to Europe in June recovered to about 580,000 bpd, up from 530,000 bpd in May and nearly six times greater than prior to sanctions being lifted, the source said.

    Before sanctions were enforced in mid-2012, Iran was exporting about 2.2 million bpd of crude, with Europe taking about 600,000 bpd, according to the International Energy Agency.

    Tehran's re-entry into the oil market has heightened tensions with arch-rival Saudi Arabia and helped thwart efforts by OPEC to limit output to boost oil prices.

    Iran has resisted Saudi Arabia's calls to cap output, while Riyadh aggressively expands sales ahead of an IPO for its state firm.

    Iran's loadings to Asia were 1.62 million bpd in June, up slightly from May but down from this year's high of 1.71 million bpd in April, according to the source.

    Loadings for China, Iran's biggest customer, were nearly 610,000 bpd in June, a three-month low. India's loadings were about 406,000 bpd, while South Korea is at a multiple-year high of 323,000 bpd. Japan is loading about 290,000 bpd, the highest since April.

    Greece, Italy, Spain and Turkey are all loading Iranian oil, according to the source. Poland is also lifting about 67,000 bpd this month, the first purchase since last August.

    Greece and Spain will take 67,000 bpd each this month, while Italy is lifting half that.

    Royal Dutch Shell resumed loading Iranian oil at the end of May, lifting about 1.1 million barrels and becoming the second major oil firm after Total to buy from Tehran.
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    Gazprom expects China's gas consumption to double

    Russia's top gas producer Gazprom expects China's gas consumption to more than double, deputy CEO Alexander Medvedev said on Tuesday, suggesting the company is still counting on robust growth in demand in China even as the economy slows.

    As part of Russia's strategic shift eastwards prompted by rows with the West, Gazprom will supply China with gas via the Power of Siberia pipeline to be built in eastern Russia, raising volumes gradually to make China one of the biggest customers for Russian gas.

    Gazprom's officials said on Tuesday they still aimed to start those supplies in 2019.

    China has pledged to reduce its coal dependence, a major source of air pollution and greenhouse gas emissions, and aims to raise gas consumption to 360 billion cubic metres by 2020 from 193.2 bcm in 2015.

    Sources close to Gazprom told Reuters in January that Russia is likely to scale back the volume of gas it plans to ship to China later this decade, due to the dive in globalenergy prices and uncertainty hanging over the Chinese economy.

    Medvedev, however, sounded more optimistic.

    "Gas consumption (in China) will double and rise further," Medvedev told reporters, without giving a timeframe.

    China expects its domestic output of gas to reach only 190 bcm by 2020, meaning it will need to boost imports or find alternative sources.

    "Russian gas sees no rivals," Medvedev said, when asked about competition in all its markets from an expected influx of seaborne liquefied natural gas from the United States and other countries.

    Gazprom has signed a deal to supply 38 billion cubic metres a year of gas to China over 30 years via the Power of Siberia pipeline, although initially the volumes would be less than that. So far, Gazprom has supplied gas via pipelines only to Europe.

    The company believes that its gas will be highly competitive on global markets due to the weakening of the rouble which makes gas production cheaper.

    Companies worldwide have invested billions of dollars in plants to produce LNG in countries such as Australia and the United States. However, growth in demand for gas is slowing, prices are falling and the LNG volumes that those companies are set to produce will exceed what major buyers such as China and Japan can absorb.

    Gazprom also plans to sell 3 million tonnes of LNG from its portfolio in 2016 on the global market, unchanged from 2015.

    Attached Files
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    Unaoil says to sue Fairfax Media over corruption allegations

    Monaco-based oil services company Unaoil said on Tuesday it was launching legal action against Australia's Fairfax Media group, publisher of the Sydney Morning Herald, over reports linking it to corrupt practices involving big oil companies.

    Fairfax Media and the Huffington Post said in a joint report in April that the U.S. Department of Justice and anti-corruption police in Britain and Australia had launched a joint investigation into the activities of Unaoil.

    Unaoil denied the allegations and said that it had been the victim of an extortion attempt by unidentified criminals.

    It did not say what information the extortionists had threatened to pass to the media but said it had been their victim for four months.

    "Unaoil has instructed its lawyers to commence legal action against Fairfax Media and its partners in relation to the malicious and damaging allegations negligently published by these media organisations and repeated by other media organisations globally," Unaoil said in a statement.

    "Unaoil estimates its damages to be over $100 million and intends to hold Fairfax Media and its partners to account for their irresponsible and injurious reporting."

    Unaoil did not say when it would sue and it has not said what its legal claim is, other than to refer to theft of company data and harm to reputation.

    A spokesman for Fairfax Media could not immediately be reached for comment by Reuters by telephone or email.

    Unaoil provides services to oil companies in the Middle East, Central Asia and Africa.

    Fairfax and the Huffington Post, citing leaked documents, reported that unidentified government contracts worth billions of dollars were awarded on the basis of bribes, many of which were organised by Unaoil.

    Authorities in Monaco subsequently raided Unaoil's offices and the homes of its directors.

    A spokeswoman for The Huffington Post could not immediately be reached for comment by telephone or email. The outlet has previously said it stood by its reporting.

    The reports led Iraqi Prime Minister Haider al-Abadi to direct the country's highest corruption watchdog to investigate suspicion of graft in the awarding of oil contracts and urged the courts to prosecute.

    It also prompted a number of companies, including Italy's Eni, to disavow publicly any contact with Unaoil.
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    LNG prices in Singapore reached the highest level in almost four months.

    Liquefied natural gas for spot delivery near Singapore rose 4 percent in the week to June 13 to $4.808 per mmBtu, the highest level since Feb. 15, according to an assessment by Singapore Exchange Ltd.
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    Petrobras’ Japan Unit Sale Said to Draw Interest From JX, Tonen

    Petroleo Brasileiro S.A.’s sale of its Japanese unit on the tropical island of Okinawa is drawing interest from several companies, including JX Holdings Inc. and TonenGeneral Sekiyu K.K., according to people with knowledge of the matter.

    At least seven companies, including Japanese refiner Cosmo Energy Holdings, have indicated an interest in participating in the first round of the auction for Nansei Sekiyu K.K., said the people, who asked not to be identified because the information is private. Petroleo Brasileiro is the Brazilian state-run oil company better known as Petrobras.

    Petrobras, which is at the center of a corruption scandal, is joining Exxon Mobil Corp. and Royal Dutch Shell Plc in exiting Japan, where demand for oil products is forecast to fall 8.4 percent in the next five years.

    The Brazilian oil giant bought an 87.5 percent stake in the Japanese company from TonenGeneral for 5.5 billion yen ($52 million) in April 2008, followed by a purchase of the remaining 12.5 percent stake from Sumitomo Corp. in 2010. Petrobras has been considering the sale of a stake in its Japanese business since at least 2011.

    The Brazilian company shut a 100,000 barrel-a-day refinery on Okinawa operated by Nansei Sekiyu last year as part of its plan to withdraw from Japan.
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    Japan shuts 596,000 b/d or 16% of refining capacity as of Saturday, hits peak turnaround

    Japanese refiners shut a combined 596,000 b/d, or 16%, of refining capacity as of Saturday, hitting the highest point of the peak turnaround season this spring, S&P Global Platts' analysis of industry information showed Monday.

    Idemitsu Kosan, which shut the sole 160,000 b/d crude distillation unit at its Hokkaido refinery Saturday, was the latest to join the peak refinery turnaround season. Maintenance at the CDU will be carried out for around a month.

    Japan's refining capacity closures this peak turnaround season represents around 16% of the country's total installed capacity of 3.82 million b/d. But the refinery outage will ease to 12% of total capacity, when Japan's largest refiner JX Nippon Oil & Energy restarts the sole 136,000 b/d CDU at its Oita refinery in the southwest on June 18, after completing scheduled maintenance.

    Cosmo Oil also plans to restart the 120,000 b/d No. 2 CDU at its Chiba refinery on June 24 after completing maintenance, while TonenGeneral aims to restart the 180,000 b/d CDU at its 258,000 b/d Kawasaki refinery in Tokyo Bay late June after completing the turnaround.

    Taiyo Oil will shut the 88,000 b/d CDU at its sole 118,000 b/d Kikuma refinery in western Japan on June 30 for scheduled maintenance. The restart is scheduled for July 30.
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    KDB bankrolls U.S. FLNG project

    Korea Development Bank said it has agreed to provide US$1.5 billion for the proposed Delfin FLNG project, 50 miles off the coastline of Cameron Parish, Louisiana.

    Delfin LNG, a wholly-owned subsidiary of Fairwood Peninsula Energy, is looking to develop a deepwater port and floating liquefaction facility, as well as the associated pipeline, including about 1.1 mile of onshore pipeline and aboveground facilities.

    According to Delfin LNG, this would be the first floating liquefaction vessel to operate off the coast of North America.

    LNG engineer Bechtel has been selected to perform the front-end engineering and design for the floating LNG vessel which will be able to disconnect from the port facility and move to protected waters during a hurricane.
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    China's potential oil, natural gas reserves rise: official data

    China's estimated oil and natural gas reserves have risen markedly in the past few years as prospecting has increased, the latest official assessment showed.

    Potential oil resources now reach 126 billion tonnes, with an extractable amount of 30 billion tonnes, the Ministry of Land and Resources announced Monday, citing results of a national assessment completed in 2015.

    The numbers are up 64 percent and 42 percent, respectively, from the the last such assessment in 2007, the ministry said.

    The country is estimated to have 90 trillion cubic meters of natural gas resources, 50 trillion of which can be exploited, up 158 percent and 127 percent from the last assessment.

    The ministry attributed the growth to increased exploration and better technology.

    China is thought to be rich in unconventional oil and gas resources, with 122 trillion cubic meters of shale gas no more than 4,500 meters underground, 22 trillion of which is exploitable, according to the ministry.
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    Penn West Seen Out of Woods for 2016 After Teine Deal Cuts Debt

    Penn West Petroleum Ltd. is getting a new lease on life, and investors welcomed the news with the biggest stock rally since 1992.

    Shares of the Calgary-based energy producer jumped as much as 64 percent on Monday after Teine Energy Ltd.’s agreement to buy oil-producing properties in Saskatchewan for C$975 million ($762 million) in cash eased debt concerns. The stock, up 41 percent at C$1.63 as of 2:22 p.m. in Toronto, is still worth a fraction of its peak price of more than C$47 in 2006 as its elevated debt was made worse by an industry downturn.

    “They’ve made it off the Titanic onto a boat,” Rafi Tahmazian, a fund manager at Canoe Financial LP in Calgary, said in a phone interview. Long-term survival depends on oil prices staying high enough for the company to be profitable and how next year’s spring bank line review goes, he said. “What you have driving against them is that they have had to -- going from darling to very troubled -- dispose of extremely good assets.”

    Penn West, a consolidator of oil properties in Western Canada a decade ago, has spent the last two-and-a-half years selling assets to bring down debt and make it through a market rout. The company had long avoided parting with the Saskatchewan properties seen as crown jewel assets important to its strategy. However, analysts in recent weeks had forecast that Penn West would have to resort to disposing of them and earlier this month the company was said to have hired Royal Bank of Canada to advise it on a sales process.

    Saskatchewan Properties

    In the deal announced Friday, Teine, the energy company backed by Canada Pension Plan Investment Board, will buy all of Penn West’s properties in Saskatchewan, including its Dodsland Viking light-oil assets in the east and the medium and heavy crude assets in the west. Penn West now expects to stay within credit covenants through 2016 with the deal, which reduces its debt by more than half, executives said on Monday. The company had previouslyforecast potentially breaching the covenants in the second quarter.

    “The sale is a definitive step which will help to change the narrative from constant discussions around its debt toward constructive conversations around Penn West’s recent performance in its remaining Cardium area,” Jeremy McCrea, an analyst at Raymond James Ltd. in Calgary, wrote in a note. He upgraded his stock recommendation to the equivalent of a buy from a sell. “The Penn West that ends 2016 will be very different than the Penn West that entered 2016.”

    Attractive Price

    Penn West got an attractive price for the properties, reflecting closely held Teine’s ability to pay up, Kristopher Zack, an analyst at Desjardins Capital Markets in Calgary, wrote in a note. Teine is paying about 15 times the debt-adjusted cash flow of the assets, compared with recent transactions of about 7 times, Zack said.

    “In our view, this reflects the deep pockets and long-duration strategy of the CPPIB, Teine’s largest shareholder -- a luxury that, quite frankly, would not be available to most publicly listed producers,” Zack said.

    Penn West will now target growing its Cardium and Viking positions in Alberta and plans to sell another C$100 million to C$200 million of mostly gas-producing assets outside its primary areas of focus by the end of the year to reduce expenses further, executives said. The company expects to start growing production again in 2017 by about 10 percent a year well into next decade, said Dave Roberts, chief executive officer of Penn West.

    Penn West is among producers that have been challenged by credit concerns that aren’t going away for the industry with U.S. crude below $50 a barrel, Tahmazian said, pointing to bank line reductions announced in recent days by Paramount Resources Ltd. and Journey Energy Inc. Penn West’s challenge will be to increase production without the highly prized assets it’s chosen to sell in the market rout, he said.

    RBC advised Penn West on the deal, while JPMorgan Chase & Co. advised Teine and Canadian Imperial Bank of Commerce advised Canada Pension Plan Investment Board.
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    U.S. shale oil output to dip for seventh consecutive month: EIA

    U.S. shale oil output is expected to fall in July for the seventh consecutive month, according to a U.S. government forecast on Monday, despite a recent rally in crude prices to an 11-month high over $51 a barrel.

    Total output is expected to fall 118,000 barrels per day (bpd) to 4.723 million bpd in July, according to the U.S. Energy Information Administration's (EIA) drilling productivity report.

    Bakken production from North Dakota is forecast to fall 32,000 bpd, while production from the Eagle Ford formation is expected to drop 63,000 bpd.

    Production from the Permian Basin in West Texas is expected to drop 7,000 bpd, according to the data, representing its third consecutive monthly decline.

    The U.S. shale oil and gas industry, led by upstart drillers who upended the global energy order after starting the shale revolution in 2005, has been under siege, pushed to the brink - or beyond it - by enormous debt loads and the largest, longest price rout in a generation.

    U.S. crude futures fell from over $107 a barrel mid-2014 to a near 13-year low around $26 in February. Since then, prices have almost doubled, breaking through $51 last week as U.S. inventories declined and on supply worries in Nigeria.
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    TransCanada JV wins $2.1 bln gas pipeline contract in Mexico

    TransCanada Corp said on Monday that it won a contract with a joint venture partner to build and operate a $2.1 billion natural gas pipeline in Mexico.

    The company's joint venture with IEnova, a unit of Sempra Energy, won the bid for the Sur de Texas-Tuxpan project, in which TransCanada will own 60 per cent, with IEnova owning the rest.

    TransCanada expects to invest about $1.3 billion in the partnership to build the 800 km (497 mile) pipeline, which is expected to come into service by late 2018.
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    Halcon Resources Strikes Deal to File Chapter 11 Bankruptcy

    As MDN told you in May, Halcon Resources, a Utica Shale driller that “guessed wrong” by leasing 140,000 Utica Shale acres in the northern part of the play (in Ohio) and currently doesn’t drill on any of that acreage, is preparing to file for bankruptcy.

    The company is still preparing. On Friday Halcon outlined how they will go about filing–converting some $1.8 billion of debt into shares of stock/ownership in the company.

    Halcón Resources Corporation announced the Company has executed a restructuring support agreement (the “RSA”) with select holders of its 13.0% 3rd Lien Notes due 2022 (“3L Notes”), its three tranches of senior unsecured notes comprised of its 9.75% Senior Notes due 2020, its 8.875% Senior Notes due 2021, and its 9.25% Senior Notes due 2022 (together, the “Unsecured Notes”), its 8.0% Convertible Note due 2020 (the “Convertible Note”) and its 5.75% Perpetual Convertible Preferred Stock (the “Preferred Equity”, and together with the 3L Notes, Unsecured Notes and Convertible Note, the “Affected Stakeholders”).

    As previously announced, the restructuring plan, if implemented, will result in the elimination of approximately $1.8 billion of net debt and approximately $222 million of Preferred Equity, and will reduce the Company’s ongoing annual interest burden by more than $200 million. Under the terms of the RSA, all current stakeholders, including common equity holders, will receive cash and/or common equity in the restructured Company. As of June 9, 2016, holders representing 80% of the aggregate principal amount of 3L Notes outstanding, 57% of the aggregate principal amount of Unsecured Notes outstanding, 100% of the aggregate principal amount of Convertible Note outstanding and holders of 63% of the outstanding shares of Preferred Equity have executed the RSA.,+Preferred+Stockholders/11729261.html
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    Statoil May Consider Pemex Partnerships in Deep Waters, VP Says

    Statoil ASA may seek to partner with Petroleos Mexicanos in Mexico’s deepwater fields as the producer looks to gain a foothold in the country’s recently opened energy market.

    “We see opportunities to bid on deepwater farm-out agreements with Pemex if the terms and conditions are right," said Tore Loseth, vice president of Statoil Exploration in the U.S. and Mexico, on the sidelines of an oil conference in Monterrey on June 10. "But we need to know more about how the process will run before we can properly evaluate these.”

    Pemex and Mexico’s energy ministry announced plans last week to farm out the Trion field in the Gulf of Mexico -– an area believed to contain about 485 million barrels of reserves and estimated to cost $11 billion to develop. While the agreement will be in the form of a license, the details of the contract have yet to be spelled out.

    Loseth declined to say whether Statoil plans to bid on the Trion field. The companies involved in the farm out should be announced in December, Pemex said.

    Trion is the first in a series of long-delayed farm-out agreements for areas that Pemex was assigned in Mexico’s so-called “Round Zero” auction, the results of which were announced in 2014. That non-competitive bidding round was the result of landmark energy reforms that opened the doors to private investment.

    In December, Mexico also plans to hold its first auctions for deepwater blocks -- another way for Statoil to potentially enter Mexico’s oil market.

    Olso-based Statoil, which failed to win areas in Mexico’s shallow-water auctions last year, is among 23 companies that have registered to pre-qualify to participate in the deepwater oil auction on Dec. 5. The list includes deepwater operators such as Chevron Corp., Exxon Mobil Corp. and Total SA, all of whom are now in talks to secure partnership deals with Pemex. The Mexican company said in May that it might also start discussions with Statoil.

    Blocks up for grabs in Mexico’s deepwater auction are “potentially attractive” in spite of low oil prices, said Statoil’s Loseth. “The Mexican side of the Gulf of Mexico is very attractive because it is relatively under-explored."
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    OPEC Has Its Way as China Oil Output Cut by Most in 15 Years

    China’s crude production dropped by the most in 15 years in another sign that OPEC’s strategy of flooding markets to drive out higher-cost suppliers is working in the world’s biggest energy consumer.

    The Asian nation reduced oil output in May by 7.3 percent from a year ago to 16.87 million metric tons, according to data from National Bureau of Statistics released on Monday. That’s the biggest decline since Feb. 2001.

    Shrinking Chinese output may help balance oil markets and sustain a more than 75 percent rebound in crude from a 12-year low earlier in 2016. The rally has also made the Organization of Petroleum Exporting Countries more confident its two-year Saudi Arabia-led strategy of trying to win market share from higher-cost producers is succeeding. The glut shows signs of ending as companies shut unprofitable fields and cut investments, according to forecasters from the IEA to Goldman Sachs Group Inc.

    “It’s certainly an important indicator that global oil markets are rebalancing,” Michal Meidan, an analyst at industry consultant Energy Aspects Ltd., said by e-mail. “The Saudi strategy is starting to yield results.”

    Lower domestic output reflects spending cuts by the country’s oil drillers amid low prices, Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong said in an e-mail. PetroChina Co., the nation’s biggest producer, said in March it expects oil and gas output to fall the first time in 17 years as it shuts fields that have “no hope” of turning a profit, while Cnooc Ltd. sees output slipping as much as 5.2 percent this year.

    “Lower domestic oil production means that China will rely more and more on imports from Middle East and Russia,” Kwan said in the e-mail. The slump in output “is worse than our forecast,” he said.

    Attached Files
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    OPEC Sees Global Oil Market Balancing Toward the End of 2016

    OPEC predicted that the global oil market will be more balanced in the second half of this year as demand rises and rival supplies falter, echoing views expressed by ministers at the group’s meeting this month.

    The Organization of Petroleum Exporting Countries kept estimates for world supply and demand in 2016 unchanged in its monthly market report. Disruptions in Nigeria reduced the group’s output to 32.36 million barrels a day last month, a little below the 32.6 million average required to satisfy estimated demand in the second half.

    “The expected improvement in global economic conditions should result in a more balanced oil market toward the end of the year,” the organization’s Vienna-based research department said in a report. “The excess supply in the market is likely to ease over the coming quarters.”

    Oil has surged about 80 percent from a 12-year low in February as the global glut is trimmed by unexpected disruptions and a slide in U.S. output. OPEC didn’t set any output targets when its 13 members met on June 2 as the organization sticks with Saudi Arabia’s strategy of pumping without limits to squeeze rival producers.

    Output from the 13 nations slipped by 99,800 barrels a day last month as militant attacks curbed supplies from Nigeria. Membership will swell to 14 countries in July with the re-admission of Gabon, which pumps about 200,000 barrels a day.
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    First Dunkirk LNG cargo to arrive on July 8, commercial ops to start in Sep

    Commercial operations at France’s fourth LNG import terminal in the port of Dunkirk will begin in September, with the first cargo for commissioning purposes expected on July 8.

    The first commissioning cargo of about 135,000 cbm of LNG will be brought by France’s energy giant EDF, who owns a 65 percent stake in Dunkirk LNG (Dunkerque LNG). A second ship will follow in August to complete testing of the import facility, according to Dunkirk LNG.

    To remind, LNG World News reported last week that the first commissioning cargo was expected between 04th and 08th July.

    The first ship will “call at the LNG terminal wharf for seven days (rather than the normal 24 hours). As the equipment will still be at ambient temperature, the LNG (at -160°) will need to be unloaded much more slowly than normal so the process gradually enters its ‘cool state’,” Christophe Liaud,Commercial Director of Dunkerque LNG said in a statement.

    “Additionally, the LNG load must come from a liquefaction plant and have a sufficiently low pressure. The methane tanker must also be less than 15 years old to ensure it has the specific equipment required for the start-up of the terminal. Last but not least, the client must accept the risk of cancelling the call if the terminal is not in fact ready on the planned date.”

    “It’s a lot of limitations,” said Liaud, adding that EDF has managed to find an LNG supplier who can “meet these limitations while guaranteeing a competitive price“.

    The Dunkirk LNG terminal will have an annual regasification capacity of 13 billion cbm of gas, enough to cover about 20% of France and Belgium’s annual gas consumption.

    EDF booked 8 bcm of the LNG terminal’s capacity, while Total reserved 2 bcm of gas. The remaining gas quantities will be sold on the market after the LNG terminal has been commissioned.

    Besides EDF, Fluxys of Belgium has a 25% share in the LNG terminal. French gas and oil giant Total owns the remaining 10 percent.
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    CNPC to prioritize gas in pipeline for future

    Analysts expect prices to rebound slightly in coming years as a result of the government's policy to encourage cleaner energy

    Asia's largest oil and gas producer, China National Petroleum Corp, is betting big on natural gas, aiming to boost both its supplies and transportation capacity in the next five years.

    The state-owned company, which provides more than two-thirds of the country's natural gas, plans to sell in excess of 750 billion cubic meters of the fuel between now and 2020, a 40 percent increase on the past five years, says Zhao Zhongxun, deputy director of CNPC's planning department.

    CNPC technicians check natural gas facilities in Yinchuan, capital of the Ningxia Hui autonomous region. Xinhua

    "Our top priority is to boost domestic supplies of natural gas, then adjust imports based on demand, and at the same time expand our pipeline network and capacity of LNG terminals," he says, detailing the energy giant's new five-year plan for natural gas, during a "green development" forum held in Beijing.

    That blueprint suggests that by 2020, the company's pipeline network is expected to exceed 60,000 kilometers with an annual transport capacity of 180 billion cubic meters.

    Also planned are 12 more gas storage sites, with the receiving capacity of its three liquefied natural gas terminals expanding from 13 million to 19 million tons.

    Oil majors have all cut their spending on future projects as plummeting crude oil prices have slashed their profits, but CNPC will secure the production of natural gas and maintain its exploration, a source told China Daily, without giving further details on the budget for natural gas.

    CNPC spokesman Qu Guangxue says there will be greater promotion of gas-fired power plants and the use of natural-gas-powered vehicles.

    CNPC imports a third of its natural gas from major countries in Central Asia such as Kazakhstan and Turkmenistan, and Zhao says it will begin imports from Russia in 2019 on completion of the Chinese section of Sino-Russia pipeline.

    PetroChina, CNPC's listed unit, posted its first quarterly loss in April amid falling global crude prices and shrinking domestic demand.

    Its profit on natural gas and pipelines slumped nearly 36 percent to 4.7 billion yuan ($714 million; 640 million euros) in the first four months of 2016.

    Zhao says during the first three years of its 12th Five-Year Plan (2010-15), the company grew its natural gas supplies 13 percent.

    But demand for the fuel shrunk last year from many industrial sectors including smelting, construction and glass production.

    Analysts expect gas prices to rebound slightly over the coming years as a result of the government's policy to encourage cleaner energy to combat air pollution.

    "Natural gas is a practical choice for China," says Gao Jian, a senior analyst at commodities consultancy Sublime China Information Co Ltd, "as the country increases its share of nonfossil fuel in its energy mix, and relies more on alternatives."

    The share of natural gas in the country's total primary energy mix will be raised to above 10 percent by 2020, double the current level, he says.

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    Teine Energy Agrees to Buy Penn West Oil Assets for $763 Million

    Teine Energy Ltd., the energy company backed by Canada Pension Plan Investment Board, has agreed to buy oil-producing properties from Penn West Petroleum Ltd. for C$975 million ($763 million) in cash.

    The deal involves all of Penn West’s properties in the Canadian province of Saskatchewan, including its Dodsland Viking light-oil assets in the east and the medium and heavy crude assets in the west, Calgary-based Penn West said in a statement late on Friday. The agreement helps highly-leveraged Penn West stay in compliance with debt covenants it had forecast potentially breaching in the second quarter, which ends June 30. Penn West now expects to remain within those covenants through 2016, it said in Friday’s statement.

    Penn West is fighting to stay afloat as the crude market rout approaches two years. The company, while selling other assets to reduce its debt, had long sought to avoid parting with the Viking properties that were important to its strategy. Analysts in recent weeks had forecast that Penn West would have to resort to selling the Viking properties, and Bloomberg reportedlast week that the company had hired hired Royal Bank of Canada to advise it on the sale of the assets.

    “Saskatchewan is a coveted asset amongst many of our competitors and with this transaction we have capitalized on the demand for high-quality oil assets of scale,” David Dyck, chief financial officer of Penn West, said in the statement. “This is a pivotal transaction for the company.”

    The sale of the Saskatchewan assets is expected to close in the second quarter, according to the statement. Penn West has also agreed to sell Alberta properties for proceeds of about C$140 million, the company said, without identifying any buyers. Penn West has agreed to sell assets fetching a total of C$1.3 billion in cash in 2016, the company said.

    Penn West’s share price has fallen 90 percent since U.S. crude’s price peak in mid-2014, to close at C$1.16 in Toronto on Friday. The company had total debt of C$1.86 billion at the end of the first quarter, according to data compiled by Bloomberg.
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    Oil Extends Losses as U.S. Rigs Drilling for Crude Rise 2nd Week

    Crude fell a third day after the number of rigs drilling for oil in the U.S. rose for a second week.

    Futures fell as much as 1.8 percent in New York after dropping 4.2 percent in the previous two sessions. Rigs targeting crude in the U.S. rose by 3 to 328 last week, capping the longest run of weekly gains since August, Baker Hughes Inc. said Friday. Iran is seekingto boost output by 600,000 to 700,000 barrels a day over five years from fields in an area west of the Karoun River along the Iraqi border, Oil Minister Bijan Namdar Zanganeh said.

    “The increase in rigs means U.S. production may increase in the latter half of 2016, and that creates a bearish mentality in the market,” said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp., a state-run company that helps secure energy supplies. “With oil over $50 a barrel, there is a deep-rooted view that American shale producers may return.”

    While the number of active oil rigs in the U.S. rose for a second week the nation’s output is still well below last year’s peak, and explorers have idled more than 1,000 drilling machines since the start of last year. The $50-to-$60 a barrel area is the “sweet spot” as more U.S. producers are expected to return at $60, according to Mark Watkins, Utah-based regional investment manager for The Private Client Group of U.S. Bank.
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    Libyan forces claim port in Islamic State stronghold of Sirte

    Forces aligned with Libya's unity government said on Friday they had taken control of the port of Sirte, making further gains in Islamic State's North African stronghold.

    Brigades largely composed of fighters from Misrata advanced this week to the perimeter of Sirte's city center, after launching a counter attack against Islamic State last month and driving the militant group back along the coastal road between the two cities.

    The brigades are part of an operation backed by Libya's U.N.-backed Government of National Accord (GNA), which arrived in Tripoli in March and has been gradually working to establish its authority.

    Western powers see it as the best bet for trying to unite Libya's political and armed factions against Islamic State and for restoring some stability to the oil-rich North African country.

    A source from the operations room in Misrata said fighters from the front line in the south of Sirte had looped round to the seafront to capture the port, which lies about 5 km (3 miles) east of the city center.

    The brigades have advanced more swiftly than many expected, though their progress has been hampered by suicide bombers, mines and snipers.

    Clashes in Sirte on Friday left 11 brigade members dead and 35 wounded, the operations room source said. More than 100 fighters from the GNA-backed brigades have been killed and more than 500 wounded since the campaign to recapture Sirte began in early May.

    Islamic State started expanding into Libya in 2014 as the political turmoil and conflict in the country worsened. It took full control of Sirte last year, but has struggled to retain territory or win support elsewhere in Libya.

    As the brigades based in Misrata have advanced on Sirte from the west, a separate force that controls some of Libya's key oil terminals and is also aligned with the GNA has pushed Islamic State back from the east. They reached Harawa, a town about 70 km from Sirte, on Thursday.
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    China May crude oil runs down 0.1 pct on year - stats bureau

    China's crude oil runs fell 0.1 percent in May from a year earlier to 44.23 million tonnes, the statistics agency said on Monday.
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    Southwestern Energy sells portion of South west Appalachia acreage

    Southwestern Energy Company announced today that it has entered into a definitive agreement with Antero Resources Corporation to sell approximately 55,000 net acres in West Virginia for $450 million. The cash proceeds from the transaction are expected to be used to reduce the principal balance of the company's $750 million term loan due in November 2018.

    The properties are located in Doddridge, Harrison, Marion, Monongalia, Pleasants, Ritchie, Tyler and Wetzel Counties and are currently producing from the Marcellus Shale. Net production from this acreage is approximately 14 MMcfe per day, primarily from non-operated wells, and proved reserves on this acreage were 11 Bcfe as of December 31, 2015. The Company has no current plans to drill on these properties before 2023.

    'This transaction is one step on delivering on the commitment we made to strengthen our balance sheet in 2016,' remarked Bill Way, President and Chief Executive Officer of Southwestern Energy. 'We are bringing forward the value of acreage that is much longer dated in our development plans, enabling us to take action and proactively reduce outstanding debt. Together with the progress we are making on margin enhancement, this sale further strengthens both the Company's financial flexibility and our bridge to value-added growth for shareholders.'

    The transaction is expected to close in the third quarter of 2016, subject to customary closing conditions and purchase price adjustments.
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    Qatari LNG Deliveries to Europe Down, Volumes to Mideast, S Asia Rise

    For the first five months of 2016, Europe has seen a slow down in deliveries of Qatari LNG.

    Surprisingly, this decline in imports was not lead by Europe's largest importer of Qatari gas, namely the UK.

    Desmond Wong explains how arrivals of Qatari volumes into the UK have remained largely stable compared to the same period last year, with declines from Belgium, Turkey, Portugal, France and Italy, cumulatively forming the bulk of the decline, with increased volumes heading into the Middle East and South Asia.
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    Russian LNG gets financial support

    The leader of a Russian liquefied natural gas project targeting the Asia-Pacific market said it received its first tranche of a loan from national lenders.

    Two Russian lenders delivered $1.13 billion for the Yamal LNG project. Novatek, the largest private natural gas company in Russia, leads the project aimed at sourcing the markets in the Asian-Pacific. The funding is part of a broader finance effort steered from the Russian National Wealth Fund with help from Chinese banks.

    Yamal LNG CEO Evgeny Kot was quoted by Russian news agency Itar-TASS as saying some tankers were already tested for LNG deliveries and the funding should help spur further developments.

    "Readiness of the first stage of the LNG plant is over 70 percent," he said.

    Russia's economy is hobbled by dual strains of economic sanctions related to crises in Ukraine and the low price of crude oil. Liquefied natural gas, meanwhile, offers for maneuverability outside the geopolitical constraints associated with conventional pipeline arteries, like those running to Europe through Ukraine.

    In a market characterized by tight spending trends, Novatek said the costs of development are low enough to compensate for higher maritime shipping costs to the Asian-Pacific markets.

    Novatek controls 60 percent of the Yamal LNG project in the arctic north of Russia, alongside French energy company Total and the China National Petroleum Corp.

    The Yamal LNG project has the capacity to produce about 16.5 million tons of natural gas and exports could target consumers in the Far East. As many as 16 ice-class carriers will be designated to ship LNG year-round to global consumers.

    Yamal could start full operations as early as next year.
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    Dudley: ‘Quitting Norway was not an option’

    The $1.3 billion deal to merge the Norwegian business of BP with Det Norske Oljeselskap was borne out of the hugely competitive nature of today’s industry and the UK supermajor’s unwillingness to letting its assets in Norway go, according to BP’s chief executive Bob Dudley.
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    Wanted: Oil traders who know China, with good heads for liquor

    Chinese independent oil companies are luring traders, marketers and risk managers away from dominant state behemoths, offering better pay and perks in a hiring spree triggered by the freeing up of China's crude import trade.

    Global oil firms and commodity houses have also been raiding state giants such as Sinochem and CNPC for staff to help handle up to $50 million a day in new crude flowing into China this year, and the cherry-picking of talent is likely just getting started.

    China's independent "teapot" refiners, so called due to their small size, could be processing by the end of this year as much as a fifth of the crude imports of the world's No.2 oil consumer. Already, in the first five months of 2016 - the first full year of a dozen of them being granted crude import licences - they have captured about 10 percent of the inbound shipments.

    Shandong Dongming Petrochemical Group, China's largest independent refiner, has built a Singapore-based trading team of 11 to handle this new business, including trading and shipping managers hired from CNPC Fuel Oil Company and the CNOOC group.

    "A team of this size is far from enough for our scale of 10 million tonnes a year (200,000 bpd) crude demand," said Zhang Liu Cheng, vice president of Shandong Dongming.

    "We'll need more to cover products, chemicals and market analysis," Zhang said.

    Awarding crude import quotas of up to 1.2 million barrels per day (bpd) to China's teapots has started a tussle for talent as the refiners - and the oil majors and trading houses that aim to supply them - dive into an activity previously restricted to state-owned enterprises (SOEs).

    This year, use of the quotas has made up most of a 16 percent or around 1 million bpd rise in China's crude imports, even with several underused and more awaiting approval.

    Those angling for a slice of this market have already hired more than 40 traders and others, mostly from state companies, say colleagues and acquaintances of people who have moved jobs.

    "We have a big but not totally motivated team," said a senior trader with a state oil company, noting that offers often beat SOE employment, particularly at smaller firms.

    "Certainly we're going to see more talent outflows as the teapots have just begun hiring," the senior trader said.

    Most of the hires are in their mid-thirties, having honed their craft at Chinese state companies such as Sinochem Corp, China National Offshore Oil Corp and China National Petroleum Corp, sources said.

    "Our traders are very popular," said a source from one of the state oil trading companies. "Most of those who moved from our company are going to trading houses and majors because the perks are definitely better."

    "We are looking for people who have systematic training, good relationship skills, and people who understand how China markets work," said a Beijing-based executive with a global trading house.

    Also, with teapots concentrated mostly in the eastern province of Shandong, an ability on plant visits to withstand drinking bouts could also be critical as official at some refineries there are renowned for their large capacities for alcohol.

    "Sometimes I'm scared to visit our refinery in Shandong as they drink too much," said a Chinese trader who buys crude on behalf of one of the teapots.
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    Alternative Energy

    VW plans 30 electric vehicle models after sales battered by diesel scandal

    VW plans 30 electric vehicle models after sales battered by diesel scandal

    German car-maker Volkswagen has responded to a slump in sales following the emissions-cheating scandal over its diesel engines by announcing plans to spend more than $11 billion and launch 30 all-electric models, including autonomous and ride-sharing vehicles.

    Matthias Mueller, the CEO of Europe’s biggest carmaker said huge investments would be needed as the firm moves beyond the “dieselgate” scandal – an event that is widely considered to represent the beginning of the end of diesel engines, and quite possibly the internal combustion engine.

    VW was forced to write off $US18  billion as a result of the scandal and its obligation to replace millions of cars, and its new vehicle sales are down 13 per cent in the first five months of 2016.

    “The future program we’re unveiling today ushers in the biggest change process in the history of Volkswagen,” Mueller said at a news conference in Germany. “We are building a new, a better and an even stronger Volkswagen.

    VW said there will be a “special emphasis” on “e-mobility” – an area that encompasses electric vehicles, autonomous cars and ride sharing.

    “The new unit will develop and acquire offerings tailored to customer requirements – centering on and starting with ride hailing, i.e. on-demand mobility services,” it says. “Other services such as robotaxis, carsharing and transport on-demand will then be grouped around this nucleus.”

    It expects its first “fully autonomous car” will be built in house by 2021.

    Mueller said VW expected that all-electric cars would account for up to one quarter of its annual sales by 2025, or several million vehicles.

    It is also looking at creating a new battery storage division to meet its expected demand of 150GWh a year. “The strategic options for participating in the potential revenue stream associated with this and developing battery technology into a new Group competency will be carefully examined,” it said in a media release.
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    GE in talks to buy offshore wind joint-venture Adwen -Figaro

    General Electric is in talks with the French state and several companies about acquiring Areva-Gamesa's offshore wind joint venture Adwen, GE chief Jeff Immelt told French daily Le Figaro.

    GE has contracts to build 1,500 megawatts of offshore wind on the French coast for utility EDF following the U.S. company's purchase of energy assets from Alstom last year. These are due to be built by 2019.

    Asked whether GE was interested in acquiring Adwen, Immelt said France deserved a strong offshore wind industry.

    "Being bigger would be useful for us. Talks are underway with different parties: Siemens, Areva, Gamesa, us and the French state," he said.

    Adwen also has contracts to build 1,500 MW of offshore wind on the French coast for utilities Engie and Iberdrola .

    Siemens is negotiating a tie-up with Spanish renewable energy group Gamesa and has not made clear whether it wants to buy out Areva's stake in Adwen.

    The German company is already the dominant player in EU offshore wind and buying Adwen would push its market share close to 70 percent.

    GE is a small player in offshore wind in Europe and buying Adwen would make it a third biggest group in that market. But in France, GE would become the only major player in offshore wind.

    At the end of 2015, Siemens had 63.5 percent of Europe's installed offshore wind capacity, followed by MHI Vestas with 18.5 pct. Adwen accounted for just 5.7 pct of installed capacity.

    Last month, French-based GE renewables head Jerome Pecresse said GE wanted to become a major player in the offshore wind industry and was interested in buying Adwen.
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    Trump vs Clinton, (and Brexit)

    Trump: This was going to be a speech on Hillary Clinton and all of the bad things and we all know what’s going on, and especially how poor she’d do as president in these very, very troubled times of radical Islamic terrorism.

    Clinton: ‘Not one of Donald Trump’s reckless ideas would have saved a single life in Orlando,’ says Democratic candidate while calling for stricter gun control

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    Zimbabwe expects power supplies from Kariba expansion to start in Dec 2017

    Zimbabwe, which endured power cuts almost daily last year, is on track to start generating additional power supplies at its Kariba hydro plant in December 2017, a senior government official said on Wednesday.

    Construction of two new generating units at the country's biggest power plant to add 300 megawatts of capacity is halfway complete and the first 150 MW unit is expected to produce electricity in December 2017, Partson Mbiriri, permanent secretary at the Ministry of Power and Energy, said.

    China's Sinohydro is expanding Kariba power station at a cost of $533 million.

    "Work on Kariba south expansion is 48 percent complete. We are on course to meet the 24 December 2017 deadline for the first unit," Mbiriri told reporters in Kariba town.

    Power cuts in Zimbabwe last year often lasted 18 hours a day after output at Kariba slumped due to low dam water levels.

    Kariba is only producing 285 MW out of its capacity of 750 MW but the country has increased power supplies this year by importing from South Africa and Mozambique.

    Peak power demand in Zimbabwe has fallen over the last decade to 1,600 MW from 2,200 MW, Mbiriri said. Zimbabwe's economy contracted by nearly half during a 1999-2008 recession, causing a decline in manufacturing and commercial agriculture production, sectors that are among the largest consumers of electricity.

    Mbiriri said Chinese-backed China Africa Sunlight Energy was expected to begin work later this year on its 600 MW coal-fired electricity plant in Gwayi, western Zimbabwe, after holding talks on financing the project in China last week.

    Zimbabwe has in the last four years signed agreements with mostly Chinese contractors to build solar and coal power stations that would produce at least 2000 MW but the deals have been hampered by a lack of financing.

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    Solar, wind costs could fall up to 59 percent by 2025, study says

    The average cost of electricity generated by solar and wind energy could fall by up to 59 percent by 2025 if the right policies are in place, a report by the International Renewable Energy Agency (IRENA) said on Wednesday.

    Since 2009, solar photovoltaic (PV) module prices have fallen by 80 percent and wind turbine prices have fallen by around 30-40 percent as renewable energy capacity has grown to record levels and technologies have improved.

    Solar and wind technologies can continue to fall in price to 2025 and beyond if governments set policies to minimize transaction costs and to streamline administrative procedures and approval processes, the report said.

    IRENA estimates the global weighted average levelized cost of electricity (LCOE) of solar PV could fall by 59 percent by 2025 from 2015; the LCOE of offshore wind could fall by 35 percent and the LCOE of onshore wind by 26 percent.

    The LCOE of concentrating solar power could also be as much as 43 percent lower by 2025.

    The LCOE comprises the cost of generating a megawatt-hour (MWh) of electricity; the upfront capital and development cost; the cost of equity and debt finance and operating and maintenance fees.

    "To continue driving the energy transition we must now shift policy focus to support areas that will result in even greater cost declines and thus maximize the tremendous economic opportunity at hand," said IRENA's director-general Adnan Z. Amin.
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    Nissan to develop ethanol-based fuel cell technology by 2020

    Nissan Motor Co said on Tuesday it was developing fuel cell vehicle (FCV) technology using ethanol as a hydrogen source in what would be an industry first, and planned to commercialize its system in 2020 as part of efforts to develop cleaner cars.

    The Japanese company said using ethanol, produced from crops including sugar cane and corn, to generate hydrogen-based electricity inside vehicles would be cheaper than fuel celltechnology developed separately by rivals Toyota Motor Corp Honda Motor Co, and Hyundai Motor Co.

    "The cost and energy required to produce hydrogen can be very high, and it also requires significant investment in (fuelling and storing) infrastructure," Nissan Executive Vice President Hideyuki Sakamoto told a media briefing.

    "Compared with that, ethanol is very easy to procure, it is safer to store and lower cost. These are its merits."

    Nissan said its technology would be ready for use in vehicles in 2020, adding it could be used to extend the range of larger, electric vehicles such as delivery vans.

    It would target a cruising range of around 800 kilometers per fuelling, more than the range for gasoline-powered vehicles of just over 600 kilometers.

    The automaker said running costs for the FCVs would be roughly similar to those of electric vehicles, while declining to give details on vehicle pricing.

    Ethanol is used as a fuel source for vehicles in countries including Brazil, but Nissan is planning to use it to generate electricity in fuel cell stacks to charge batteries which would power vehicle motors.

    In developing its FCV technology, Nissan joins Toyota and Honda in a national, government-backed drive to develop a "hydrogen society", in which the zero-emission fuel would be used to power homes and vehicles, and reducing Japan's reliance on imported fuel sources and nuclear power.

    Toyota began marketing the Mirai, its hydrogen FCV, in late 2014, while Honda earlier this year began sales of its Clarity Fuel Cell vehicle. Initial production for both models has been limited due to their relatively high cost and limited fuelling infrastructure.

    Unlike its rivals' offerings, Nissan's technology does not require hydrogen to be stored in vehicles, reducing the need for expensive bulky hydrogen tanks, and would not require fuelling stations, which have been slow to spread globally.

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    Saudi Arabia to install first wind turbine in 2016

    Saudi Arabia’s first wind turbine will be installed and operational later this year.

    The turbine will be installed by GE and Saudi Aramco at Turaif bulk plant and will replace diesel as the primary source of power generation for the site.

    It has been designed to cope with the harsh climate and analyses its own data several times a second to maximise output and efficiency through its 120-metre blades.

    The initiative is in line with Saudi Vision 2030 that has set an initial target of generating 9.5GW of renewable energy. Up to 750,000 homes can be powered by 1GW – this is equivalent to the output of two traditional coal power plants.

    The initiative aims to promote renewable energy, economic diversity, local manufacturing as well as increasing productivity and efficiency across the energy and digital sectors.
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    Johnson Matthey obtains high energy battery materials licence from CAMX Power LLC

    Johnson Matthey and CAMX Power LLC  announce that Johnson Matthey has been granted a licence under the intellectual property of CAMX relating to the CAM-7 platform of nickel based cathode materials for use in lithium-ion batteries.  

    The CAM-7 platform covers a range of patented, nickel rich cathode materials which offer excellent performance across a range of features including energy density, cycle life, gassing and power handling. This makes products based on this technology particularly suited to demanding applications, such as battery electric vehicles and plug-in hybrid electric vehicles, delivering high energy density with high power capability. With its experience in the scale-up and manufacture of battery materials, in-depth knowledge of nickel chemistry allied to its customer focused technical organization, Johnson Matthey is well placed to bring CAMX Power's innovative technology to market to meet the rising demand for high energy cathode materials.

    "This licence is another important step in our Battery Technologies strategy where we are building a broad portfolio of battery materials aimed at satisfying the most demanding performance requirements," said Martin Green, Director of Johnson Matthey's Battery Technologies business.  "With CAM-7, CAMX Power has built a strong global IP position. Access to this will enable Johnson Matthey to accelerate its entry into the nickel rich cathode material sector of the automotive market. The CAM-7 platform is highly complementary to our existing R&D programmes and we are excited by the prospects that it offers."
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    World Bank's Zambia solar auction sets African low price benchmark

    A World Bank-led solar power auction in Zambia has set a new low-cost benchmark for Africa, with two development groups winning backing to build generating plants in the next year, the international lender said on Monday.

    Neoen SAS, First Solar Inc and Enel Green Power were the winners of the initial auction for the "Scaling Solar" program, the World Bank Group's International Finance Corp said in a statement.

    France's Neoen and U.S.-based First Solar jointly bid 6.02 cents per kilowatt hour and will build a 45-megawatt solar plant in the African nation. Enel Green Power, a subsidiary of Italy's largest power utility, Enel, bid 7.84 cents per kilowatt hour and will build a 28-megawatt plant.

    Those bids compare with recent solar contract prices of over 7 cents per kilowatt hour in South Africa and up to nearly 12 cents in India.

    The two new solar plants are expected to expand Zambia's generating capacity by 5 percent, easing the strain of drought that has reduced the country's hydroelectric output, the IFC said.

    "These are the lowest solar power tariffs seen to date in Africa, and among the lowest prices for solar power anywhere in the world - a game changer for Zambia and other countries in the region facing electricity shortages," IFC Chief Executive Officer Philippe Le Houérou said in a statement.

    The World Bank program aims to help governments deliver cheap and clean energy by helping them run competitive auctions and reducing investment risks. It includes a full suite of World Bank products and services, including IFC financing and advice as well as guarantees from the group's Multilateral Investment Guarantee Agency arm.

    The IFC said Senegal and Madagascar also have signed up to run Scaling Solar tenders, which are expected to move to the prequalification phase in the coming months.

    The program, which hopes to develop one gigawatt of solar power in the next three years, also is supported by the U.S. Agency for International Development and the Dutch and Danish governments.

    The Zambian auction initially attracted interest from 48 development groups, seven of which submitted final proposals.

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    All cars in Germany to be emission free by 2030

    All new cars registered in Germany need to be emissions free by 2030 at the latest to help meet pollution reduction goals, a senior government official said.

    Germany’s pledge to cut carbon dioxide output by 80 percent to 95 percent by 2050 will be in jeopardy unless the country radically reduces transportation pollution, said Deputy Economy Minister Rainer Baake. Since cars typically have a 20-year lifespan, registrations of new diesel and gasoline cars needs to be cut over the next 15 years, he said.

    “Fact is there’s been no reduction at all in CO2 emissions by transport since 1990,” said Baake at a Tagesspiegel newspaper climate forum in Berlin. “We don’t have any answers to cut truck emissions right now but we do have answers for cars.”

    Germany is lagging behind cuts to greenhouse gas that transportation emits, which according to the Environment Ministry account for a fifth of the country’s carbon dioxide pollution. The sector needs to cut some 10 million metric tons of carbon dioxide over the next 5 years from a tally of about 165 million tons last year. While the country has committed to reducing emissions 40 percent by 2020 compared with 1990 levels, its adoption of electric cars has been sluggish.

    Chancellor Angela Merkel’s government pledged subsidies this year to speed e-car sales, a move that was accelerated by Volkswagen AG’s emission-manipulation scandal. Buyers of all-electric and hybrid vehicles can claim cash incentives, moves already in operation in countries including China, Norway and France. The program may spark sales of about 500,000 electric cars by 2020, according to the Environment Ministry.

    Purely electric vehicles as a portion of all cars on German roads may reach about 8 percent in 2025 from 0.6 percent this year, according to a forecast of the Center of Automotive Management institute. The government has so far stuck with a plan to put a million hybrid and battery plug-ins on the road by 2020 and 6 million by 2030

    Electric car sales still remain a fraction of all German vehicle sales. About 130,000 hybrids and 25,000 all-electric cars were registered on German roads as of January compared with 30 million gasoline cars and 14.5 million diesels, according to the KBA vehicle registration authority.

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    China Three Gorges to buy German wind park Meerwind from Blackstone

    China Three Gorges, which operates the world's largest hydropower plant on China's Yangtze river, will buy German offshore wind park Meerwind from U.S. buyout firm Blackstone, the companies said on Monday.

    The terms of the sale were not disclosed but people familiar with the process have told Reuters that they expected it to be valued at around 1.6 billion euros ($1.8 bln).

    The deal, signed during a visit by German Chancellor Angela Merkel to China, has German government approval despite growing controversy over Chinese takeovers of German businesses.

    China Three Gorges, which seeks to expand beyond hydropower as it faces a saturated domestic hydro market, will buy Blackstone's majority interest in WindMW GmbH, an offshore wind power joint venture. WindMW owns Meerwind, a 288 megawatt project in the North Sea and one of Germany's largest offshore windfarms.

    Reuters reported on Friday that China Three Gorges was closing in on a deal.

    The agreement was signed on Monday in the presence of Merkel and Chinese Premier Li Keqiang, the statement said.

    It was one of a number of deals expected to be signed during Merkel's visit. Airbus agreed to sell 100 helicopters to a Chinese consortium on Monday, while Daimler AG (DAIGn.DE) and its Chinese partner, BAIC Motor (1958.HK), pledged to jointly invest 4 billion yuan ($607.53 million)to expand engine production.

    The German government has expressed concerns over foreign takeovers of strategic assets deemed key to the German economy. Germany has been trying to co-ordinate a counter-offer for Chinese home appliance maker Midea's  controversial 4.5 billion euro buyout offer for robotics group Kuka.

    Bremerhaven-based WindMW is 80 percent owned by Blackstone and 20 percent by Windland Energieerzeugungs GmbH, and provides electricity for up to 360,000 households. The present management team will continue to operate the business.

    Jefferies, PJT Partners and Bank of America Merrill Lynch acted as financial advisors to Blackstone.
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    US activates first nuclear reactor in two decades

    The first nuclear reactor in the US in nearly two decades has been connected to the grid.

    An initial test is currently being undertaken at Tennessee Valley Authority’s (TVA) Watts Bar Unit 2, with a team collecting data to ensure the generating equipment is prepared for full operation later this summer.

    That will be followed by full-plant testing of systems and controls to increase reactor power levels up to 100% generation.

    Once all tests have been completed, the facility will provide up to 1,150MW of electricity.

    Combined with Watts Bar Unit 1, roughly 1.3 million properties will be powered.

    Joe Grimes, TVA Chief Nuclear Officer said: “This is another major step in fully integrating Watts Bar Unit 2 as the seventh operating unit in TVA’s nuclear fleet. It is rewarding to see TVA taking the lead on delivering the first new nuclear unit of the 21st century and providing safe, affordable and reliable electricity to those we serve.”

    In the UK, EDF plans to build two reactors at Hinkley Point in Somerset but it hasn’t made a final investment decision yet.
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    Monsanto to form sorghum joint venture with private company

    U.S. seed and agrochemicals company Monsanto Co said on Thursday it is selling its U.S. sorghum production assets to Remington Holding Co LLC and will roll its sorghum breeding business into a joint venture with the privately held company, in transactions valued at about $169.5 million.

    Monsanto's global sorghum breeding business will be a part of the joint venture calledInnovative Seed Solutions LLC, which will initially be focused on sorghum, a drought-tolerant grain crop that is used as animal feed and to produce ethanol biofuel. Remington will contribute cash to the venture.

    The move comes in a period of heightened dealmaking in the agricultural seeds and chemicals industry. Monsanto last month rejected an unsolicited $62 billion takeover bid by Germany's Bayer AG, but the companies have since met to try to negotiate a deal.

    The sorghum transaction is Monsanto's first spin-off of an entire crop space since the sale of its sunflower seeds unit to Syngenta in 2009, a Monsanto spokesman said.

    It is unclear how the deal could impact any negotiations with Bayer. Monsanto declined to comment on how long it had been negotiating the sorghum deal with Remington.

    A Remington subsidiary will take full ownership of Monsanto's U.S. sorghum production facility in Dumas, Texas. Monsanto will assume a 40 percent stake in the joint venture, with Remington owning the remaining share.

    "We recognize that our sorghum business has great potential to expand and grow both domestically and internationally," Mike Frank, Monsanto's chief commercial officer, said in a statement. "We believe by partnering with Remington in the joint venture, we can bring an increased level of focus, investment and resources into this crop space."

    Remington could not be immediately reached for comment.

    Innovative Seed Solutions LLC will be governed by an operational board including senior executives from both companies, with Monsanto veteran Dan Zinck as its chief executive.

    Monsanto will continue to sell sorghum seeds via its Asgrow, Dekalb and Channel seed brands and through regional seed dealer networks.
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    Bayer waiting for Monsanto to engage after spurned bid: sources

    Monsanto Co, the world's largest seed company, has still not opened its books more than two weeks after it rejected Bayer AG's $62 billion acquisition offer but left the door open to a possible deal, according to people familiar with the matter.

    The impasse shows that little progress in negotiations has been made since Monsanto on May 24 turned down its German peer's $122-per-share cash offer but said it was open to "continued and constructive conversations."

    Monsanto has said that Bayer's offer "significantly undervalues the company and also does not adequately address or provide reassurance for some of the potential financing and regulatory execution risks related to the acquisition."

    Bayer, however, has no plans to increase its offer without first reviewing Monsanto's confidential information, the sources said on condition of anonymity because of the confidentiality of the talks.

    The Leverkusen-based company needs access to Monsanto's books before it can decide whether it can pay a higher price, as well as offer a more detailed plan on how to address potential antitrust risks, the sources added.

    Bayer also has no intention currently to go hostile with its bid, the sources said.

    Monsanto, based in St. Louis, has not directly told Bayer that it is looking for better terms in order for it to offer the German company access to confidential information, according to one of the sources.

    However, Monsanto's lack of engagement demonstrates that it not only views Bayer's offer as too low, but that it does not even consider it as a basis for negotiations, the sources said.

    The situation did not change even after Monsanto held a regular board meeting this week to approve a quarterly dividend of 54 cents per share.

    Bayer declined to comment, while a Monsanto spokeswoman did not respond to a request for comment.

    The Wall Street Journal had reported earlier on Friday that Bayer had made a new takeover approach to Monsanto that was rebuffed, in part because it didn't include a higher price.

    Bayer's unsolicited bid for Monsanto is the largest all-cash takeover on record, according to Thomson Reuters data, just ahead of InBev SA's $60.4 billion offer for Anheuser-Busch in June 2008.
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    Precious Metals

    Standard Chartered finds diamonds no longer a bank's best friend

    Standard Chartered said it will stop providing financing to parts of the diamond and jewellery industries as part of a review of its exposure to risky sectors.

    The business, which comprises around $2 billion in loans to so called midstream diamond and jewellery companies which trade and polish the precious commodities, would be shut down, the bank confirmed on Tuesday.

    "Continuing to provide financing to the midstream diamond and jewellery segment falls outside of the bank's tightened risk tolerances. We are working with clients to ensure a smooth exit," said a spokesman for the bank.

    Banks in some of the biggest diamond and jewellery markets such as India have reined in lending in the last two years, fearing defaults amid greater regulatory scrutiny of the sector, which has led to a broad credit crunch.

    Industry sources told Reuters in January that banks including Standard Chartered, State Bank of India, IDBI Bank Ltd and ABN Amro had become cautious over their exposure to the jewellery sector.
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    Britcoin breaches $700 on the upside

    Bitcoin soared above $700, hitting $710 earlier today for the first time since early 2014, when it was sliding from its all time high above $1000.

    As we wrote over the weekend, the catalyst has been another unprecedented bout of Chinese buying, which started on Saturday evening ET (Sunday morning Chinese time). This is again confirmed by looking at the action in the primary Chinese bitcoin exchange, OKCoin, where the buying, and volume, has been relentless, both on Saturday and Sunday, when the BIS appears to be away from the "emergency intervention" desk.

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    Bitcoin Surges to Two-Year High as Supply Seen Shrinking in July

    Bitcoin surged to a two-year high amid expectations supply of the digital currency will shrink next month.

    The cryptocurrency rallied to $696.5 on Monday in Hong Kong, the highest since February 2014, according to data compiled by Bloomberg. It was trading at $689.23 as of 3:50 p.m. in Hong Kong, up 19 percent from Friday.

    Profits from mining bitcoins will be reduced in July, a process that’s written into the code to limit supply, according to Chinese exchanges OKCoin and Huobi. Increased attention from venture capitalists and banks on blockchain, the technology of digital ledgers, has boosted bitcoin’s legitimacy, Jack C. Liu, chief strategy officer at OKCoin, said in Hong Kong.

    "The halving of the supply of Bitcoin is attracting many retail investors," Liu said. "More broadly, we continue to see follow-through from the blockchain hype cycle translating to interest in bitcoin the asset."

    The price of bitcoin has mostly recovered following a steep decline to less than $200 in January of last year from more than $1,000 in December 2013.

    Bitcoin’s rebound is coinciding with weakness in the yuan, which fell the most in two months on Monday in Shanghai. Losses have accelerated in recent weeks as the dollar strengthened and China’s economic outlook deteriorated. Data Monday showed industrial output rose 6 percent in May from a year earlier, while fixed-asset investment increased 9.6 percent in the first five months of 2016, missing all 38 economist forecasts.
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    Base Metals

    Ambatovy JV defers principal payment, Sherritt continues not to fund cash calls

    Canadian diversified miner Sherritt International has announced that the group of lenders to its 40%-owned Ambatovy nickel and cobalt mine, in Madagascar, have entered into temporary agreement to defer a principal repayment due on Wednesday, to August 5. 

    The Toronto-headquartered company said an agreement in principle had also been reached on future principal payment deferrals.

    While Sherritt continued not to fund cash calls, joint-venture partners Sumitomo Corp and Korea Resources provided necessary funding to make an interest payment of $28-million (on a 100% basis) to the lenders on Wednesday. Ambatovy was expected to produce between 48 000 t to 50 000 t finished nickel this year.
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    Chuquicamata underground copper mine to begin production in 2019: Codelco exec

    Work to develop a large underground operation at the Chuquicamata copper mine in northern Chile is on track for production to begin in 2019, a manager at state-owned copper company Codelco said Tuesday.

    Speaking at the MinSub underground mining conference in Santiago, Francisco Carrasco, strategic planning manager for the Chuquicamata underground project, said that despite some initially difficulties in building the necessary tunnels and shafts, progress was on track.

    Tunnel builders are now just 15 meters from completing the 900 meter deep extraction shaft. Transport, air injection and access tunnels are now either complete or near completion, meaning that mass construction of the network of tunnels can continue without interrupting operations at the Chuquicamata open pit, one of the world's largest copper mines.

    The mine will eventually consists of 143 km of tunnels and 19 km of conveyor belts with the capacity to haul 150,000 mt/day of crushed rock 900 meters up to the surface.

    "By the time it is finished it will be the world's largest electromechanical system," Carrasco said.

    Codelco is converting Chuquicamata into an underground mine at a cost of $4 billion as the century-old pit is too deep and ore grades too low to continue operating.

    However, once the underground mine is in production it will take several years to ramp up to its capacity production of 367,000 mt/year of copper.
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    China firms to fund Congo hydro power plant to lift mining output

    GOMA, Democratic Republic of Congo, June 14 (Reuters) - C hina's Sinohydro and China Railway Group will finance a $660 million hydroelectric plant in southeastern Democratic Republic of Congo which is being built to reduce the copper-mining region's power deficit.

    Congo is Africa's largest miner of copper and the 240 megawatt dam in the town of Busanga will power Sicomines, a nearby copper and cobalt mining joint venture between the Chinese companies and Congolese state miner Gecamines.

    Sicomines is the mining side of a $6 billion minerals-for-infrastructure deal signed in 2007, under which Sinohydro and China Railway Group pledged to build $3 billion worth of infrastructure in return for a 68 percent stake in the mine.

    Moïse Ekanga, executive secretary of the Congolese government office charged with overseeing the deal, said on Tuesday that Sicomines would require 170 MW from the Busanga dam to run at full capacity, while the remaining 70 MW would feed the national grid.

    Congo's southeastern mining region has an electricity deficit of about 900 MW, the statement said.

    "This agreement will help jumpstart energy development in the DRC after the recent slowdown due to falling commodity prices," Ekanga said, adding Mauritian firm Mag Energy International will also be a partner in the project.

    The statement did not say how long construction would last. Sicomines officials have previously estimated that it would take four to five years.

    It also did not say whether the Chinese firms' funding would be counted toward their infrastructure or mining obligations under the original contract.

    Campaign groups have expressed concerns that the money will be considered as infrastructure investments, reducing the amount available for roads, schools and hospitals.

    Sicomines, which began operations last November, is already Congo's third largest producer of copper, according to the country's chamber of mines.
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    Turquoise Hill soars on Rio Tinto increasing stake rumours

    Shares in Rio Tinto-controlled Turquoise Hill Resources soared Monday on reports that the mining giant had hired Goldman Sachs as an adviser to look at a two-step wrap-up of the Vancouver-based firm.

    Rio wants to increase its stake in Turquoise Hill to 51% and have the rest of the Canadian firm acquired by single strategic buyer or consortium.

    The stock was up 12.5% to Cdn$4.14 in Toronto and 14% to $3.29 in New York at 11:26 am ET following a London’s Sunday Times article that said Rio Tinto had discussions with potential co-investors for a $6 billion-plus deal aimed at privatizing its giant copper-gold silver Oyu Tolgoi mine in southern Mongolia.

    Currently, Turquoise Hill owns 66% of Oyu Tolgoi — equivalent to a 33.66% stake in the project for Rio — with the Mongolian government owning the remaining 34%.

    According to the article, Rio wants to increase its stake in Turquoise Hill to 51% and have the rest of the Canadian firm acquired by single strategic buyer or consortium.

    The Anglo-Australian giant has repeatedly said that wants copper to be one of its main pillars of growth, and so it named the boss of its copper and coal division Jean-Sébastien Jacques as the group’s new chief executive last March, replacing mining veteran Sam Walsh on the job.

    Turquoise Hill is slated to begin work on an underground mine at Oyu Tolgoi later this year. The expansion project would increase the mine’s annual capacity to more than 500,000 metric tonnes of copper by 2027.
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    Lawsuit alleges Glencore warehouse firm falsified zinc documents

    Executives at a metals warehouse firm owned by commodities group Glencore allegedly ordered workers to falsify documents in New Orleans to manipulate the zinc market, according to a complaint filed by zinc purchasers in a U.S. Federal Court.

    On Monday, a U.S. judge in Manhattan allowed a private antitrust lawsuit to go forward against two units of Anglo-Swiss Glencore Plc. The suit accuses Glencore Ltd. and Pacorini Metals USA of trying to monopolize the market for special high grade (SHG) zinc, driving up its price.

    Her 62-page decision cited allegations made in the complaint filed by zinc purchasers alleging that Pacorini Metals USA, owned by Glencore, created false bills of lading, which are receipts given by transporters confirming shipment of goods.

    U.S. District Judge Katherine Forrest in Manhattan said that the zinc purchasers had alleged sufficient facts for the case to go forward.

    She said they had raised "a plausible story of market control" by the Glencore units in violation of U.S. antitrust law. Forrest did not rule on the merits of the antitrust claim.

    The case will now proceed to the discovery phase, during which both sides will gather evidence to bolster their claims.

    A Glencore spokesman said: "The company does not generally comment on ongoing class action cases and the allegations made therein."

    The group had moved to dismiss the complaint on various legal grounds.

    According to the 87-page complaint by the zinc purchasers, a confidential witness who worked in management for Pacorini said he was instructed by Pacorini executives in late summer or early autumn of 2012 to create falsified documents to mask high-volume movements of zinc.

    "The falsified bills of lading contained false signatures, stated that the metals were picked up by truckers that 'never existed', and sometimes contained incorrect tonnage amounts," the complaint said.

    A second confidential witness who worked as a shipping and receiving clerk for Pacorini confirmed the account, the complaint added.

    The first witness also said representatives of Glencore met with several other large trading companies in late summer or early autumn of 2012 and agreed to a “synchronized” and “highly coordinated” schedule of zinc warrant cancellations at warehouses in New Orleans, according to the complaint.

    If true, the allegations would involve serious violations of regulations of the London Metal Exchange (LME), the world's oldest and biggest market for industrial metals, which registers a global network of metal warehouses. Forging documents would violate the LME warehouse agreement that all approved firms must sign.

    The LME said it never confirms or comments on any of its investigations.

    The judge had dismissed an earlier version of the proposed class-action lawsuit which also named Goldman Sachs Group Inc and JPMorgan Chase & Co as defendants.

    The zinc purchasers allege in the complaint that Glencore sought to manipulate daily reports sent to the LME about warehouse movements of zinc.

    Warehouse movements of metals can influence LME prices as investors see less or more availability of metal, according to traders.

    The complaint also alleges that the false documents played a part in manipulating backlogs of zinc waiting to be delivered, which pushed up the zinc premium, a surcharge buyers pay for immediate delivery of physical metal.

    "Plaintiffs allege that defendants’ efforts to manipulate these warehouse queues were successful and caused an increase in the MW (Midwest) SHG premium and ultimately caused them to pay higher prices for SHG zinc," the judge's ruling said.

    The 139-year old LME is in the midst of wide-ranging reforms of its global network of over 600 approved warehouses in 37 locations after complaints by consumers paying rent to store metal while trapped in backlogs to get delivery of the material.

    Under LME disciplinary procedures, a warehouse firm has 20 days to submit a defense to any charges and a hearing must take place no later than 20 working days after that.

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    Commodities broker Marex targets growth away from LME after fee hikes

    Commodities broker Marex Spectron is expanding its metals business into new regions and products beyond the London Metal Exchange after fee hikes led its customers to look for cheaper avenues for trading.

    London-based Marex has hired new staff to reach into Japan and to add an industrial metals base in Singapore, its global head of metals told Reuters in an interview late last week.

    Simon Van Den Born said the additions would boost its regional base metals businessnow centred in Hong Kong and help build up alternative business lines such as in gold.

    "I would say that the predominant response we get from clients is: how can I avoid the LME with its fee structure? People are migrating away from the LME because of that," Van Den Born said.

    Hong Kong Exchanges and Clearing Ltd bought the LME for $2.2 billion four years ago, before raising trading fees by an average 31 percent at the start of last year as it aimed to wring profit from its investment.

    LME volumes fell in 2015 and have dropped by 9 percent in the first quarter, a trend the Hong Kong bourse has blamed on slow market conditions. Volumes at rivals the U.S Comex bourse and Shanghai Futures Exchange have grown.

    The LME was not immediately available for comment.

    "Our business a couple of years ago was centred around the LME floor and 20 people in London. Today the business is just far more diverse. Precious metals is something we've seen decent growth in the last 24 months," Van Den Born said.

    "We're looking to institutional investors, Chinese players like hedge funds, that's the marketplace we're expanding in ... Our China corporate business may have subsided a little bit, (but) our investor business has increased - our presence in Singapore will maintain that."

    While its overall metals business was steady, Marex's direct Chinese volumes have shrunk 30 percent since the start of 2015, he said.

    Marex Spectron was formed through a merger of metals and oil brokerage firms in 2011 and is majority owned by British private equity investor JRJ Group. Its head count has doubled to more than 500 since 2012, of which metals accounts for some 60 global roles. Beyond London, the broker has bases in Houston, Oslo and New York.

    Van Den Born also said that HKEX's push to develop a monthly contract at the expense of the LME's current structure which encourages daily trade for three months out, was changing the nature of the bourse.

    "After a while you defund the contract, you just drive towards a cash settled contract rather than a fundamentally physically settled contract which has been the bedrock of the LME."

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    Steel, Iron Ore and Coal

    Best metal bond gets even better as Cliffs cashes in on rally

    Cliffs Natural Resources’s borrowing costs fell to the lowest in almost two years as it capitalises on the best stock rally among iron miners to raise money and declared itself out of the woods after a price rout. 

    The Cleveland-based company’s notes due 2018 rallied Thursday, pushing down its yield to 8.7% at 12:31 pm in New York. That represents the smallest gap with average material company yields tracked by Bloomberg since November 2014. 

    Cliffs registered to sell $300-million in new shares, partly for debt repayment, it said in a  statement Thursday. A day earlier, Lourenco Goncalves said the most critical threats he assumed when he took over as chief executive officer via an activist campaign in 2014 had been neutralised. “We have removed all of the death threats,” Goncalves, 58, said in an interview in New York, referring to the sale of the Bloom Lake mine in Canada, renewal of a supply contract with ArcelorMittal and the failure of Essar Steel Algoma to undertake its own competing North American iron expansion. 

    “I positioned Cliffs to be successful in an environment that’s not so strong.” Steel prices have rallied this year, lifting the fortunes of Cliffs, which provides the principal raw material in the metal’s production. 

    Hot-rolled steel coil, the benchmark product, has climbed 64% this year as demand improves while trade cases and the threat of tariffs have limited imports. The domestic steel price probably will stay around current levels for the remainder of the year, Goncalves said. 

    Goncalves began his term as CEO by replacing most board members and promising to divest assets not directly related to Cliffs’ US iron-ore operations. He has sold US coal mines, put Canadian mines into court-supervised reorganisation and attempted to sell Australian assets. 

    Cliffs’ bonds have returned 86% this year, the best performance among more than 300 notes issued by mining and metal companies globally, according to data compiled by Bloomberg. Last year, the company’s notes lost 36%, about three times the average loss by metal producer debt, the data show. 

    The stock market tells a similar story, with Cliffs surging 201 percent this year to lead the BI Global Iron Ore Mining Valuation Peers index after slumping 78% last year. The shares fell as much as 7.1% on Thursday.
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    Samarco iron ore won't restart this year

    Samarco iron ore won't restart this year

    The Samarco iron ore mine  in Brazil – a joint venture Vale and BHP Billiton – is unlikely to resume operations before the end of the year.

    Samarco Mineracao ceased operations in November following a deadly tailings dam burst. Benedito Waldson, the company's head of human resources told Reuters the uncertain timing of  a new licence from the South American nation's environment authorities to restart operations "had forced the company to move to lay off over 1,000 workers."

    At 30 million tonnes per year before the disaster Samarco's pelletizing operations supplied roughly one-fifth of the seaborne trade in the steelmaking raw material that  attracts a premium price over iron ore fines and lump ore. Earlier Samarco said that should the mine reopen output would likely be capped at 19 million tonnes per year.

    The uncertain timing of  a new environmental licence to restart operations had forced the company to move to lay off over 1,000 workers  

    A Brazilian judge on Tuesday dismissed a civil lawsuit brought by the National Humanitarian Society in December seeking environmental and property damages amounting to billion reais (roughly $5.8 billion) against Samarco, in which Vale and BHP each own 50%.

    Another civil lawsuit brought by Brazilian prosecutors for 155 billion reais (around $45 billion today) against the two companies and Samarco, Brazil’s federal government along with the Minas Gerais and Espirito Santo state governments is still being considered. Demands include an upfront payment of $2.2 billion.

    In March Vale and BHP reached a deal with Brazilian authorities and the mine owners agreeing to pay an estimated 24 billion reais or $6.2 billion spread out over several years. Samarco committed to providing $1.1 billion through 2018 into a fund for clean up costs and amounts between $200 million and $400 million to 2021.

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    Dalian iron ore rebounds after two-day drop, but outlook shaky

    Chinese iron ore futures climbed nearly 3 percent on Thursday to recover from a two-day drop, but prices appear vulnerable to more weakness ahead as supply increases both inside and outside China.

    Goldman Sachs expects major global iron ore miners to add another 10 million tonnes to the seaborne market in the third quarter and smaller producers would also contribute slightly.

    But China¡¯s domestic iron ore mines, many of which were shut by the years-long decline in prices, appear to be more resilient than before, with output rising in May for the first time in two years, the U.S. bank said in a note.

    "We do not think this growth is sustainable as most producers are once again operating at a loss, but this modest increase in domestic output will compete with imported ore and is likely to add pressure on seaborne prices in the second half of 2016," Goldman said.

    The most-traded iron ore on the Dalian Commodity Exchange was up 2.9 percent at 369 yuan ($56) a tonne by midday, after earlier rising as far as 372 yuan.

    China is at a seasonally slow period for steel demand as construction activity weakens during summer, limiting appetite for ingredient iron ore as supply increases.

    Output curbs in the top steel-making city of Tangshan to improve air quality during an international conference there this week lifted Shanghai rebar futures to a five-week high on Monday. But prices have fallen since.

    Still, Goldman estimated the production loss from the Tangshan cuts may be material, equivalent to 1.3 million tonnes of crude steel.

    "However, looking beyond the conference, we see limited downstream activity to support steel prices," the bank said.

    Construction-used rebar on the Shanghai Futures Exchange rose 1 percent to 2,095 yuan a tonne, but below Monday¡¯s five-week top of 2,189 yuan.

    Appetite for spot iron ore cargoes has been lean this week, traders said, citing wide gaps between bids and offers.

    Iron ore for immediate delivery to China¡¯s Tianjin port  fell 1.2 percent to $50.20 a tonne on Wednesday, the lowest since June 3, according to The Steel Index.

    While the spot benchmark has found strong short-term support around $50, ANZ commodity strategist Daniel Hynes said it may be "susceptible to being broken through if the Chinese housing market weakens".
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    Shanxi works hard on coal supply-side structural reform

    North China's Shanxi province, one of the major coal producers in China for the past decade, has issued implementation guidance and some detailed regulations to advance its coal supply-side structural reform.

    A package of reform measures will be carried out to ensure a fundamental change in the province's coal industry that helped the local economy boom over the years but is now in tremendous difficulties.

    Data from the Shanxi Statistics Bureau show that the province produced 944 million tons of raw coal in 2015 but lost up to 9.42 billion yuan ($1.43 billion) in the coal industry. This means the province, with the coal industry the pillar of its economy, lost 10 yuan for each ton of coal it sold.

    By the end of 2015, the debt ration of Shanxi's five major coal producers had risen by up to 81.79 percent.

    The severe situation has exerted great pressure on Shanxi's economy and desperately calls for a structural reform of the coal supply.

    "Overcapacity is the key and the biggest problem that must be dealt with," said Li Xiaopeng, governor of the province.

    There are 50.76 million tons of coals in stock, three times more than that held by the end of 2011, Li said at the 2016 national two sessions. So a combined measure of limiting coal production increases and reducing inventory is the only option for Shanxi's coal industry to stop loss and ensure transformation.

    Shanxi will work hard to reduce coal overcapacity by 100 million tons by 2020, said Niu Jianming, vice-director of the province's coal industry department. This amount is expected to be larger than the total sum of overcapacity reduction of the Inner Mongolia autonomous region and Shaanxi province.

    In addition to great efforts in reducing capacity, the reform also emphasizes the cleaning, low-carbon, and efficient use of coal. Shanxi plans to build coal power bases and develop the coal chemical industry to realize industrial transformation.

    The reform also includes technological innovation and increases in production efficiency to ensure the sustainable transform of the coal industry.

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    South Korea May thermal coal imports down 15pct on year

    South Korea imported 6.49 million tonnes of thermal coal in May, falling 14.7% from 7.61 million tonnes in the same month of 2015 and down 10.76% month on month, the latest customs data showed.

    Of this, 6.05 million tonnes was bituminous coal, while the remaining 447,200 tonnes was sub-bituminous coal shipping from Indonesia.

    South Korea’s highest volume of imported bituminous coal in May stood at 2.58 million tonnes from Indonesia, rising 10.94% on year and up 21.52% from April.

    Imports from Australia in May rose slightly by 0.06% on year to 1.85 million tonnes, but down 39.53% from the previous month.

    Imports from Russia in May slipped 28.65% from the year-ago level to 1.26 million tonnes.

    The other main suppliers in the month included Columbia with 160,900 tonnes; Canada with 158,200 tonnes, plunging 75.82% on year and down 3.96% from April; and China with 39,900 tonnes, sliding 5.69% on month and down 52.43% on year.
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    Russia says problems with EU steel anti-dumping probe - Ifax

    Russia says problems with EU steel anti-dumping probe - Ifax

    Russian Economy Minister Alexei Ulyukayev said on Thursday a European Union steel anti-dumping investigation had been carried out incorrectly and Russia would seek an adequate response, Interfax news agency reported.
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    Xi’an Railway Administration cuts freight rate 20pct

    Xi’an Railway Administration has cut the freight rate of station-to-station rail coal transport by 20% in Shaanxi province, starting from June 15, local media reported.

    The cut may help the province reduce rail coal transport cost, improve transport volume and support loss-making coal enterprises.

    In January-May, the administration transported 35.58 million tonnes of coal, with coal transport from Shaanxi Coal and Chemical Industry Group contributing 48.2% or 25.38 million tonnes.

    Based on above 4 million tonnes of coal transport from northern Shaanxi mining areas in the first five months, the freight cut will save around 70 million yuan ($10.8 million) for the mining area.
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    China's Bohai Steel says has paid interest on bonds due 2017

    China's Bohai Steel Group said it had paid the coupon on its yuan-denominated bonds, which was due on Wednesday, and gave assurance that it had sufficient funds to pay the coupon on dollar bonds due for payment on June 17.

    The 6.4 percent coupon is on its 1.5 billion yuan bond .

    China's steelmakers are in the eye of a storm as Beijing moves to slim down bloated industries, including steel and coal, to make the economy more efficient and address a supply glut that has hammered coal and steel prices.

    Earlier this year, the city government of Tianjin, which owns Bohai Steel, set up a creditor committee after signs it might struggle to fully repay 192 billion yuan ($29.64 billion) of debt, according to a report in financial magazine Caixin.

    Bohai Steel Group Co Ltd, a steelmaker based in northeast China has a $100 million bond due 2018 whose coupon is due this Friday.
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    Rizhao Steel and Shenhua Wuhai adjust down coke prices

    Rizhao Steel and Shenhua Wuhai adjust down coke prices

    Two major Chinese steelmakers Rizhao Steel Holding Group and Shenhua Wuhai Energy Co., Ltd, one subsidiary of China’s top miner Shenhua Group in Inner Mongolia, have adjusted down their purchase prices for coke used for steel making, as the profit of steel mills continuously shrank.

    Rizhao Steel Holding Group, a major Shandong-based steel maker, cut down the purchase price of coke by 30 yuan/t, effective 00:00 of June 14, offering 910 yuan/t with VAT for suppliers inside the province and 920 yuan/t for those from other provinces.

    Shenhua Wuhai adjusted down the price of Grade II met coke by 50 yuan/t to 940 yuan/t with VAT, DDP Tangshan excluding empty-return fee, effective 18:00 of June 14, sources confirmed.

    This is the third time Rizhao Steel cut down prices of coke this month, after a decline of 30 yuan/t on June 1 and June 7, respectively; and the second time Shenhua Wuhai cut down coke prices, after adjusting down 30 yuan/t on June 7.

    China’s coke market has been hit since June, with pressure from both upstream and downstream, due to increasing coking coal prices and falling steel prices.
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    China steel, iron ore slide 3 per cent as demand worries drag

    Steel and iron ore futures in China dropped around 3 percent on Tuesday, pressured by slow seasonal demand in the world¡¯s top consumer of the two commodities.

    Profit margins among Chinese steelmakers have fallen in recent weeks following a sharp rise through March and April when a seasonal pickup in consumption combined with low steel inventories.

    The margin of finished steel prices over raw materials has plunged more than 30 percent since the beginning of May, as steel production ramped up in response to the higher profit margins, said a Singapore-based trader.

    "In absence of improved demand sentiment or a reversion to pro-growth policy measures in China, steel margins on average may continue to be pressured over the coming weeks," he said.

    Construction activity typically weakens from June and through the hot summer weather in China, curbing steel demand.

    The most-traded rebar on the Shanghai Futures Exchange was down 2.8 percent at 2,093 yuan ($318) a tonne by the midday break.

    The drop came after a 4-percent surge on Monday that traders attributed to expectations of tighter supply in China¡¯s top steelmaking city of Tangshan. Chinese markets were shut on June 9-10 for public holidays.

    The Tangshan local government has ordered mills in and near the area to cut production from June 14-21 to ease air pollution, similar to an order it made in May.

    The stricter regulations could lower steel production by 500,000 to 1 million tonnes, according to Commonwealth Bank of Australia.
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    Coal demand to grow by 7pct by 2030, Glencore

    Coal demand to grow by 7pct by 2030, Glencore

    Demand for coal was expected to grow by roughly 7% through 2030 to just over 6 billion tonnes of coal equivalent (btce) from 5.6 btce in 2013, Swiss mining and commodities trading giant Glencore said in its first Sustainability Development report dealing with climate change released on June 13

    The company argues that coal will continue to be a mainstay of the global energy mix, despite the rapid growth in renewable sources.

    The growth is primarily driven by emerging markets that continue to build low cost, coal-fired electricity generation plants. Cumulative demand over the period of the study amounts to between 19-21 billion tonnes. In order to meet future demand, 500 million to 1 billion tonnes of export capacity would have to be developed.

    While non-fossil fuel sources are expected to grow by 53% through 2030, total energy produced from renewables (5.47btce) would still be less than from coal.

    The seaborne market for coal is also predicted to grow on the back of demand from the steel, cement and chemical industries reaching 1.48 billion tonnes per year from 1.23 billion tonnes currently. While the Pacific region would underpin this growth due to a lack of domestic supply in some countries, the scrapping of European Union coal subsidies is likely to support imports by the region.

    This means that if there is no new investment in coal mines and companies and governments increasingly adopt a “harvest strategy”, seaborne supply would halve in 15 years' time.

    Glencore, which produces 131 million tonnes of coal per year from mines in Australia, Colombia and South Africa, said its own coal operations would be depleted by 2035 without new investment.

    Glencore's earnings from coal represent 23% of its headline earnings, second to copper at 25%. Glencore’s marketing and trading operations in metals and energy accounts for 23% of income.
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    Brazil judge dismisses $5.7 billion civil suit against Samarco: Vale

    Brazilian iron ore miner Vale SA said on Monday that a 20 billion reais ($5.7 billion) civil lawsuit seeking environmental and property damages for last year's deadly Samarco mine disaster has been dismissed.

    The mine is operated by Samarco Mineração SA, a joint venture between Vale and the world's largest mining company, BHP Billiton Ltd. Vale said the judge did not rule on the merits of the case.

    A tailings dam burst at the mine in November and unleashed 60 million cubic meters of mud and mine waste that devastated a village, killed at least 13 people and polluted a major river valley.

    The National Humanitarian Society (Sohumana) filed the lawsuit before a federal judge in Rio de Janeiro in December.

    Brazil's federal and state governments also threatened to sue Samarco and its owners for 20 billion reais in compensation for the disaster and a settlement was reached in March to cover the damages.

    Under the agreement, Samarco, BHP and Vale will pay the 20 billion reais over 15 years to cover and repair damages. Vale, however, has outlined it expects to pay less than that due to the way the deal is structured, calculating future payments depending on how much work remains to be done.

    The settlement was approved by a Brazilian judge in May, which potentially reduced the threat of a separate $44 billion lawsuit filed by federal prosecutors in the states of Minas Gerais, where the mine is located, and neighboring Espírito Santo, who based their claim on the clean-up costs of the BP oil spill in the Gulf of Mexico in 2010.
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    U.S. top court rejects challenge to Obama mercury air pollution rule

    The U.S. Supreme Court on Monday let stand a lower-court ruling that left in place Obama administration environmental regulations limiting power plant emissions of mercury and other toxic pollutants while the Environmental Protection Agency revised them.

    The justices opted not to hear an appeal by 20 states led by Michigan of a December U.S. appeals court decision that said the rules could remain intact while the government responded to last year's Supreme Court ruling that the EPA should have considered the compliance costs when crafting the regulations. The rules affect mainly coal-fired power plants.

    It marked the second time this year that the Supreme Court has spurned the states on the issue. Chief Justice John Roberts on March 3 declined their request for a stay to put the regulations on hold following the December ruling by the U.S. Court of Appeals for the District of Columbia Circuit.

    The EPA has since updated the regulations, finding in April that they were necessary even when costs that would be incurred by industry are taken into account.

    "That finding reflects EPA's determination that consideration of cost does not justify any alteration of its prior conclusion that regulation of hazardous emissions from power plants is 'appropriate and necessary,'" the Obama administration said in court papers.

    The EPA's April decision is itself challengeable in court. Coal company Murray Energy Corp has already filed a lawsuit.

    The Supreme Court in June 2015 ruled that the Obama administration wrongly failed to consider compliance costs when it devised the regulations, which were intended to reduce deaths caused by air pollution and reduce cases of mercury poisoning that can cause developmental delays and abnormalities in children.

    The justices left it up to the appeals court to decide whether the rule had to be thrown out altogether while the agency revised it.

    According to the EPA, the rule, which went into effect in April 2015, applies to about 1,400 electricity-generating units at 600 power plants. Many are already in compliance, the U.S. Energy Information Administration said.

    The regulation, which covered oil-fired plants as well as coal-burning ones, was challenged by Michigan and other states in addition to various industry groups, including the National Mining Association.
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    China May coal output down 15.5pct on yr

    China produced 263.75 million tonnes of coal in May, sliding 15.5% year on year, data from the National Bureau of Statistic (NBS) showed on June 13.

    That dipped 1.6% on month, compared with the decline of 8.77% in April, data showed.

    China’s raw coal output stood at 1.34 billion tonnes over January-May, dropping 8.4% from the year prior, compared with the decline of 6.8% in January-April.

    With the advance of supply-side structural reform, the state and local governments unveiled more measures in May to guide de-capacity efforts in the bloated coal sector. The Ministry of Finance also arranged 100 billion yuan of special fund to help resettle employees in the coal and steel sectors.

    So far, 11 main coal producing provinces in China have publicized their re-verified production capacity in line with the 276-workday reform, with capacity combined at 1.93 Btpa, down 16% from previous capacity of 2.29 Btpa in total.

    The state government has vowed to shut over 1,000 coal mines in 2016, with combined capacity 60 Mtpa. And the approval of new coal mines will be suspended in three years since 2016.

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    Coal to Replace Gas as Japan’s Leading Power Source From 2019

    Coal is set to overtake gas within the next three years as the largest generator of power in Japan as power utilities replace aging nuclear capacity with the fossil fuel, Bloomberg New Energy Finance said.

    Nuclear power, which accounted for about 29 percent of Japan’s total power output before the 2011 Fukushima disaster, will peak at 13.6 percent by 2023, BNEF said in a report released on Monday. By 2040, nuclear’s share will fall to just 1.2 percent.

    Even with the greater reliance on coal, the country will likely meet its 2030 emission reduction target for the power sector due to a drop in power demand, according to the London-based researcher. The elimination of oil-fired generation, greater reliance on more efficient coal-power plants and an increase in clean energy will also contribute.

    Japan will come very close to meeting its emission reduction target for the power sector, which is aiming for a 34 percent reduction by 2030 compared with 2013 levels, according to the BNEF forecast.

    However, the government’s aim for zero-emission sources to account for 44 percent of electricity generation in 2030 is unlikely to be met without new policy initiatives, according to the report.

    Attached Files
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    China's crude steel output rises 1.8 pct in May on year -stats bureau

    China's crude steel output rose 1.8 percent to 70.5 million tonnes in May from a year ago, the second time to stand above 70 million tonnes this year, datafrom the National Bureau of Statistics showed on Monday.

    The average daily crude steel output in the world's top producer eased 1.7 percent to 2.27 million tonnes in May from a month ago, according to Reuters' calculation based on the data.

    Steel prices surged 79 percent in April from a decades-low hit late last year, encouraging mills to resume production and even bringing some zombie mills alive.

    But prices declined one quarter since May as demand wanes, promoting mills to cool heir pace to pick up production as falling prices eroded their margins and some have started to make a loss.

    Total output for the first five months fell 1.4 percent to 329.95 million tonnes from the same period last year, data showed. Steel production is expected to fall further in June amid slowing demand and China's efforts to cut overcapacity.

    China has committed to curbing its steel capacity and winding down weak state enterprises by taking new measures and strengthening global coordination.
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    India cancels four major new coal plants in move to end imports

    The Indian Energy Ministry has this week announced plans to cancel four proposed coal-fired power plants with a combined capacity of 16 gigawatts (GW).

    The plans previously called for four ultra mega power plants (UMPP) across Chhattisgarh, Karnataka, Maharashtra and Odisha, but these are now to be cancelled due to lack of interest from the host states.

    This is yet another major policy shift underscoring how seriously India is working to transform, modernize and diversify its electricity sector away from coal.

    For eight years, these four proposed plants remained in the planning, preparation and land acquisition stage. However, community resistance to compulsory land acquisition and forced resettlement combined with electricity power surpluses to push the government to issue a cancellation order.

    Moreover, two of the UMPPs (8GW) were planned for coastal locations, aimed to run on imported coal. As such, the announcement is in line with Indian Energy Minister Piyush Goyal target of eliminating thermal coal imports into India.

    His motivation in eliminating thermal imports is to drive delivered cost of electricity down, reduce the current account burden, improve energy security and the straight out lack of need in light of increased domestic production.

    April 2016 coal imports fell 15% year on year.

    To operate, these four UMPPs would have required upwards of a total of 46 million tonnes per annum of coal (approx. 12Mtpa per plant), half of which was to have been imported.

    Attached Files
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    Vale's Mozambique unit says trains attacked by gunmen

    Vale's Mozambique unit says trains attacked by gunmen

    The Mozambique unit of Brazilian mining company Vale said on Friday that its trains had targeted by gunfire twice in recent days on the Sena rail line which carries coal from the interior to the Indian Ocean port of Beira.

    "Vale has been working with the relevant authorities to ensure that logistic activities on the Sena railway line can safely continue," the company said in a statement.

    Vale did not say what the trains were carrying or whether it had suspended activities on the line.
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