Mark Latham Commodity Equity Intelligence Service

Friday 24th June 2016
Background Stories on

News and Views:

Attached Files

    Oil and Gas


    Five questions for Britain and Europe after Brexit vote

    Britons voted in a referendum on Thursday to leave the European Union. Following are answers to key questions on what will happen next in Britain’s relations with the bloc:


    The EU is in shock and entering uncharted territory. No member state has ever left and Article 50 of the EU treaty, which sets out how a state can exit the bloc, offers little detail. Although it provides a sketchy legal framework for a two-year period of withdrawal (see below), many fear the process can quickly become acrimonious, disrupting the economy and European affairs across the board.

    Cameron has said he will notify the Union “immediately” that Britain is leaving by invoking Article 50. But it is not clear how quickly Britain will set that two-year clock ticking and the EU itself cannot, officials believe, trigger the process itself.

    Having lost, Cameron faces huge pressure from his divided Conservative party to resign, although he should remain premier until the party elects a successor. Pro-Brexit potential successors may try to prevent him launching the departure process right away. EU leaders have hoped Cameron might deliver formal notice when they meet him at a summit on Tuesday but many seem willing to give Britain several weeks to get organised.

    Some Brexit campaigners have suggested Britain should wait before triggering Article 50 to give more time for negotiation, possibly even to win better EU membership terms or to secure a deal to retain British access to EU markets once it has left.

    EU leaders have ruled out further talks on membership — “Leave means leave,” they say — and many want a quick, two-year divorce while negotiating terms for a future, arms-length relationship may take much longer. However, major EU powers appear keen to see as orderly a transition as possible to a new relationship. That could involve Article 50 negotiations being extended beyond two years to allow time for a broader deal. But such an extension requires the consent of all 28 member states, and reaching that unanimity could be problematic.

    A deal Cameron struck with EU leaders in February to curb immigration, protect London finance interests from the euro zone and opt out of “ever closer union” is killed by the referendum.

    If no treaty is agreed, EU law simply ceases to apply to Britain two years after it gives formal notice it is leaving.

    Until a departure treaty is signed — which requires assent from Britain and a majority of the remaining 27 states weighted by population — Britain remains, in principle, a full member of the EU but will be excluded from discussions affecting its exit terms. In practice, many expect British ministers and lawmakers to be rapidly frozen out of much of the Union’s affairs.

    Some Brexit campaigners have also said Britain should act more quickly, for example to stop funding the EU budget or curb immigration from EU states. That could provoke EU reprisals.

    “The Article 50 process is a divorce: who gets the house, who gets the kids, who gets the bank accounts,” a senior EU official said, referring to priorities such as settling the EU budget and the status of Britons living in other EU states and of EU citizens in Britain — several million people in total.

    Failing to stick to Article 50 would be “messy divorce territory”, the official told Reuters: “It is spouses, instead of working through lawyers, throwing dishes at each other.”

    An array of laws and EU entitlements will cease to apply to British business and citizens, creating what Brexit campaigners say will be opportunities for more growth and more selective immigration but which Cameron has said will do long-term damage to the economy and Britain’s global influence.

    New trade barriers would hurt both sides’ economies. But the EU fears a political “domino effect” would cost more long-term.


    European Parliament leaders meet at 8 a.m. (0600 GMT).

    European Council President Donald Tusk, who will chair the summit next week and has spoken to all the leaders in the days before the vote, will deliver a statement in the name of the Council, the EU’s governing body, once the result is official.

    European Commission President Jean-Claude Juncker, the EU chief executive, hosts Tusk and European Parliament President Martin Schulz at his Berlaymont headquarters in Brussels at 10:30 a.m. (0830 GMT). Also present will be Dutch Prime Minister Mark Rutte, whose government holds the rotating EU presidency.

    Look for a mantra of Three Rs: Regret – at losing nearly a fifth of the EU economy and more of its military and global clout; Respect – for the will of the British people; and Resolve – to keep the rest of the Union together. Leaders will also remind Britain that it remains a full member for the time being.

    Foreign ministers are gathering for a regular meeting in Luxembourg. The German and French foreign ministers will meet counterparts from the other four EU founders — Italy, the Netherlands, Belgium and Luxembourg. All the bloc’s ministers will discuss the vote over lunch from 1 p.m.

    Tusk has plans, as yet unconfirmed, to fly to key capitals, Rome, Berlin and Paris over the weekend to discuss the next steps. Foreign ministers of the founding six may meet in Berlin on Saturday. EU envoys meet in Brussels on Sunday and Juncker may bring forward to Sunday from Monday a meeting of the 28 members of the Commission. French President Francois Hollande and German Chancellor Angela Merkel meet in Berlin on Monday.

    Britain’s commissioner, close Cameron ally Jonathan Hill, faces being stripped of his sensitive portfolio overseeing banks and financial services. He may choose to resign. That would allow a new British premier to appoint someone else to the Commission, albeit for a limited period until Britain leaves.

    Some euro zone finance ministers have said they may meet at the weekend, though Eurogroup officials say there are no plans.

    EU leaders meet in Brussels for a 24-hour summit starting at 5 p.m. on Tuesday. EU officials expect Cameron to report on the vote and what Britain will do next, then go home that evening.

    Leaders may agree to meet again in July.

    3. WHAT IS ARTICLE 50?

    This 261-word section of the Lisbon Treaty has the following key phrases:

    – A Member State which decides to withdraw shall notify the European Council of its intention … The Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.

    – It shall be concluded … by the Council, acting by a qualified majority.

    – The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification … unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

    – The member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions … or in decisions concerning it.


    The Union needs quickly to fill a 7-billion-euro hole in its 145-billion-euro annual budget, which is currently fixed out to 2020, as it loses Britain’s contributions while saving on what Britons receive from EU accounts.

    The EU will also want to clarify as quickly as possible the status of firms and individuals currently using their EU rights to trade, work and live on either side of a new UK-EU frontier.

    Britain is likely give up its six-month presidency of EU ministerial councils, due to start in July next year. Its place may be filled by Estonia or, possibly Malta or Croatia.

    EU leaders may push for a quick show of unity on holding the bloc together in the face of eurosceptics inspired by the result in Britain — including National Front leader Marine Le Pen, who leads polls for next April’s French presidential election.

    Divisions between Berlin and Paris on managing the euro zone probably rule out a big move on that front before both hold elections in 2017. Closer EU defence cooperation, without sceptical Britain, may be revived. A major EU security policy review is already on the summit agenda as is a new push to tighten control on irregular immigration from Africa.

    Many leaders caution against alienating voters by moving too fast on integration, which they say has alienated voters. Summit chair Tusk wants to launch a formal process of reflection on where the Union has failed to connect with people.


    In principle, nothing changes immediately. Britons remain EU citizens and business continues as before. In practice, many believe trade, investment and political decisions will quickly anticipate British departure from the bloc. The EU could also face a Britain breaking apart if europhile Scots make another push for independence and seek to join the EU on their own.

    There is a “Brussels consensus” that Britain must be made an example of for leaving and will face a chilly future, cast out to perhaps talk its way back later into some kind of trade access in return for concessions such as free migration from inside the bloc and contributions to the EU budget – things which Brexit voters want to end but which the likes of Norway and Switzerland have accepted in varying forms.

    However, cautious diplomats do not rule out surprise turns.

    Attached Files
    Back to Top

    Commodities Reel in World Market Tumult as U.K. Votes for Brexit

    Commodities were swept up in global market turmoil as investors sold off growth-related assets including oil and copper and sought haven in precious metals as U.K. voters opted to leave the European Union after more than four decades.

    The Bloomberg Commodities Index fell as much as 2 percent, the most in more than a month, as Brent crude futures slumped 6.6 percent and copper in London tumbled 4 percent. Gold rose the most in almost 8 years and silver rallied in its biggest intraday gain in 18 months. BBC projections showed voters backing “Leave” by 52 percent to 48 percent as of 5:11 a.m. London time, in a surprising rejection of Europe’s postwar political and economic order.

    As results rolled in to show voters in the world’s fifth-largest economy opted to leave the EU, markets across the globe plunged into turmoil. The British pound slid to the lowest since 1985 and Asian stocks tumbled while safe-haven assets including U.S. Treasuries rose. Energy and raw material companies led losses in equities across Asia.

    “It’s a big shock, the fear is spreading,” Kang Yoo Jin, a Seoul-based commodities analyst at NH Investment & Securities Co., said by phone. “Everything else in commodities except precious metals is getting slammed right now as the general expectation throughout this week was that Brexit won’t happen. Once markets open in the U.S., it could be a ‘Black Friday’ as there is a chance that prices will be hit harder.”

    Volatile Markets

    Energy and industrial metals, where demand is tied to expectations for global economic growth, were hardest hit. Brent crude traded 5.9 percent lower at $47.90 a barrel, after tumbling the most since April 18. Copper slid the most since Jan. 7 to $4,588 a metric ton and nickel fell as much as 4.7 percent. Agricultural commodities had smaller losses, with wheat down as much as 2.4 percent in Chicago and corn losing as much as 2.6 percent.

    Precious metals were the lone bright spot, as investors expect them to hold their value in times of economic turmoil. Gold rose as much as 8.1 percent, the most since Sept. 17, 2008, days after Lehman Brothers filed for bankruptcy at the height of the global financial crisis. Silver gained as much as 6 percent, the most since Dec. 1, 2014. In a sign of risk aversion, yields on U.S. 10-year Treasury notes slid.

    “I have never seen volatility like this in my whole life,” Bob Takai, Tokyo-based president of Sumitomo Corp. Global Research Co., said by phone. “It’s definitely a flight to quality assets. In these kinds of circumstances, gold, and also silver a little bit, are the typical places to hide investors’ money.”

    Attached Files
    Back to Top

    Chilean politician put under house arrest in wide corruption scandal

    A Chilean court ordered that a prominent former senator be placed under nighttime house arrest, while authorities investigate him for possible tax fraud and bribery.

    Pablo Longueira, who was a presidential candidate in Chile's 2013 election, is accused by prosecutors of receiving close to $1 million from specialty mining company SQM from 2009 to 2013, then hiding the donations through falsified receipts in contravention of Chilean law. He also is accused of accepting bribes while working on a 2010 law that regulates mining concessions.

    The order for Longueira's arrest came late on Wednesday night, six days after a court jailed conservative senator Jaime Orpis after he was convicted of falsifying donation receipts.

    It also comes the day after Chile's public prosecutor said it was investigating a former high-level cabinet official in leftist President Michelle Bachelet's government for bribery and tax offenses.

    Longueira has maintained his innocence.

    "I understand the charges and I don't agree with them," he said during a brief appearance before a judge.

    The current scandal caused Longueira to resign in March from the UDI party, which was founded by right-wing allies of former dictator Augusto Pinochet.

    The UDI, like several other major political parties in Chile, has been wracked by a series of money-in-politics scandals in the past year and a half. That in turn has tarnished Chile's reputation for transparency and left Chileans disenchanted with politicians across the spectrum.

    Attached Files
    Back to Top

    Brazil police arrest former minister Paulo Bernardo: media

    Brazil police arrested former minister Paulo Bernardo and raided Workers Party headquarters in Sao Paulo on Thursday in the latest stage of its massive probe into corruption at state-run companies, Globo TV and O Estado de S.Paulo newspaper said.

    Bernardo was planning minister and communications minister during Workers Party administrations for about 10 years. Police also carried out searches at the house of his wife, Senator Gleisi Hoffmann, Globo TV said.

    Bernardo and Hoffmann were indicted in March on charges of corruption for their suspected involvement in an illegal campaign finance scheme uncovered in 2014. They have denied any wrongdoing.

    Brazilian police were not immediately available to comment on the reports.

    Some of Brazil's most powerful executives and politicians face charges or are in jail for taking kickbacks in public works and funneling part of the money to fund political campaigns.
    Back to Top

    UK votes to leave - Germany: 'No special treatment for Britain'

    Manfred Weber, a senior German conservative MEP and a close ally of Angela Merkel, has warned Britain will receive "no special treatment" and must leave the EU within two years.

    He writes in four tweets: "We respect and regret the decision of the British voters. It causes major damage to both sides.

    Manfred Weber, a senior German conservative MEP and a close ally of Angela Merkel CREDIT: EPA

    "This was a British vote, not a European vote. Co-operation within Europe is a question of self-assertion of the continent.

    "We want a better and smarter Europe. We have to convince the people and bring Europe back to them.

    "Exit negotiations should be concluded within two years at max. There cannot be any special treatment. Leave means leave."
    Back to Top

    Bitcoin crash continues

    The average price of Bitcoin across all exchanges is 590.33 USD

    Back to Top

    Australia's Telstra buys into mining technology sector

    Australia's No. 1 telecommunications firm Telstra Corp Ltd has bought a mining technology company for an undisclosed sum, looking to tap the resource sector's appetite for cost-cutting in the face of slumping commodity prices.

    Markets for everything from oil to iron ore have collapsed from record highs a few years ago due to swelling supply and a slowing economy in major consumer China, prompting mining companies to adopt new technologies which automate processes and boost production.

    The decision by Australia's seventh-largest company to invest in resources automation will likely spur new interest in the sector, while offering miners new ways to save money.

    Telstra in a statement on Thursday said it had bought resources-focused wireless technology company CBO Telecommunications Pty Ltd and hired the former chief automation researcher at mining giant Rio Tinto Ltd, Eric Nettleton, as the basis of a new mining technology unit.

    A Telstra spokesman declined to give the value of the purchase.

    "This downturn has created a once in a lifetime shift, where miners are looking to technology innovation," Telstra's head of global industries David Keenan said in the statement.

    The company also hired a former head of technology and innovation at South Africa-listed Anglo American Platinum Ltd , Jeannette McGill.
    Back to Top

    French gas-fired plant sets efficiency record

    A newly commissioned gas-fired power plant in Bouchain, France has been rated the world’s most efficient by Guinness World Records.

    The 605 MW combined-cycle plant, which was commissioned on Friday by operator EDF, features the first use of GE’s 9HA.01 gas turbine (pictured) which has achieved an efficiency rate of up to 66.22 per cent.

    The turbine underwent validation testing in January at GE’s test centre in Greenville, US and in May the first 9HA.01 production unit was completed at GE’s gas turbine manufacturing facility in Belfort in France.

    GE said the turbine is capable of reaching full power from a cold start in around 30 minutes.

    On a press call, GE Power president and CEO Steve Bolze said the company has received confirmed orders for an additional 39 turbines, while 90 are on the “technically selected” list for projects around the world.

    Bolze emphasized Bouchain’s status as part of the company’s Digital Power Plant scheme, with a digital control system featuring an increased number of sensors. He said the plant ushers in “a new era of combined-cycle power generation and digital integration”.

    The company hopes to achieve up to 65 per cent efficiency by the early 2020s, as well as increased output and flexibility, according to Bolze.

    The Bouchain plant, formerly a 500 MW coal-fired plant, was retired in 2015. GE said the new plant’s footprint is 25 per cent of the original plant’s, but its output is higher.  

    “Today we are making history with this power plant for the future,” said Bolze. “We are thrilled to be acknowledged by Guinness World Records for powering the world’s most efficient combined-cycle power plant, and we are also very proud of the industry-leading flexibility and reliability this turbine provides to our customers. We look forward to continuing to work with EDF and providing services to ensure the ongoing high performance of the Bouchain plant in the years to come.”

    Attached Files
    Back to Top

    Rio Tinto may be planning a $9bn spinoff a la BHP

    Together with announcing a major management reshuffle and division reorganization, Rio Tinto revived Tuesday rumours of an incoming $9 billion BHP-style spinoff.

    Soon-to-be Rio’s chief executive, Jean-Sébastien Jacques, overhauled the group business divisions, leaving its least loved units — coal, uranium salt, borates and its Iron Ore Co. of Canada — under a new umbrella branded as the “energy and minerals” business.

    The news division seems like a portfolio of unwanted assets that could be ready for a spinoff, said Paul Gait, a London-based analyst at Bernstein.

    The new division, global asset management firm Sanford C. Bernstein believes, could soon be spun off, just as BHP did to its manganese, coal, alumina and nickel assets last year, when creating South32.

    “This seems like a portfolio of unwanted assets that could be ready for a spinoff,” Paul Gait, a London-based analyst at Bernstein, said in a note quoted byBloomberg. “This division looks a lot like the South32 assets previously in BHP’s portfolio.”

    The energy and minerals unit will be head by London-based Alan Davies, once tipped as one Jacques’s rivals to become chief executive.

    It includes Rio’s iron ore operations in Canada, which are much smaller and less profitable than its western Australian mines.

    The company resolved not to sell those mines three years ago, just before iron ore prices plummeted.

    The rumours come as the world’s second largest miner also said Tuesday it would further cut its gross debt by $3 billion, after accepting the purchase of $1.25bn under its maximum tender offer, which began June 7, and $1.75 billion under its any-and-all offer.

    Like most miners, Rio has been implementing a series of cost-cutting measures, which included selling off assets to help cut its debt load.

    As of December last year, the group’s net debt sat at $13.7 billion.
    Back to Top

    Bitcoin buying dries up

    Overnight the bitcoin buying appears to have finally stumbled, and after hitting $785 just a few days ago, the digital currency tumbled over 10% earlier, and as of this moment was trading at around $640, which incidentally is where it was trading just ten days ago.

    There was no immediate catalyst for the resent drop, although if Chinese trading has been the reason for the recent surge, it is just as likely that Chinese traders, who are known to turn on a dime, simply became sellers as they chased the new momentum this time lower. Also worth noting: while rapidly closing, the Chinese bitcoin premium is still present and was about 4% higher than the coinbase price.

    Ironically, the move lower takes place at the same time as the Winklevoss twins, sensing renewed excitement about the digital currency,told CNBC that they are expanding Gemini, the cryptocurrency exchange founded by the duo, into the U.K.
    Back to Top

    Brazil's Rousseff warned about illegal campaign donations: paper

    Marcelo Odebrecht, the former chief executive of Latin America's largest construction company, will admit in plea bargain testimony that he personally oversaw illegal campaign donations for suspended President Dilma Rousseff in 2010 and 2014, newspaper Folha de S. Paulo said on Tuesday.

    The newspaper said Odebrecht will acknowledge having warned Rousseff on May 26, 2015 in Mexico that prosecutors were about to discover illegal transfers to Rousseff's re-election strategist, Joao Santana.

    Odebrecht was arrested 24 days later as police deepened an investigation on a massive kickback scheme at state-run oil company Petrobras.

    Folha said that under the terms of the plea agreement Odebrecht will testify that Rousseff did not pay attention to his warning.

    Folha did not say how it obtained that information. A spokeswoman at Odebrecht's corporate offices declined to comment on the newspaper report. Representatives for Rousseff did not immediately respond to a request for comment.

    In Brazil, plea bargain testimony to prosecutors is confidential until approved by a judge. The strongest signal Odebrecht was seeking to collaborate came on June 2, when judge Sergio Moro suspended one of several lawsuits against Odebrecht executives for 30 days.

    Marcelo Odebrecht, the scion of the family that controls the company, was sentenced to 19 years in prison after being convicted of corruption and money laundering in the Petrobras case. Under Brazilian law, plea bargain deals to reduce jail time can take place after sentencing in certain cases.

    As a consequence of the Petrobras-focused corruption probe, known in Brazil as "Operation Car Wash," many of Odebrecht's 15 subsidiaries are refinancing up to 35 billion reais ($10.4 billion) in loans and stepping up asset sales.

    Rousseff was suspended last month to face a Senate trial over allegedly breaking budget laws. She has repeatedly denied any wrongdoing.

    Attached Files
    Back to Top

    Philippines' Duterte says to review mining projects

    Incoming Philippine President Rodrigo Duterte said on Tuesday he would order a comprehensive review of mining projects in the country, warning he would cancel operations that are causing environmental harm.

    "There will be a comprehensive review of the mining claims of concessions given. And you must endeavor, if you are into it, be sure that you have enough resources" Duterte told a business conference.

    "For I will require you to go to Canada or Australia, learn how to mine the precious metals inside the bowels of the earth and do it. Because ... (if) you are spoiling the land, I will cancel it without hesitation."

    The Southeast Asian nation has among the largest untapped mineral resources in the region but years of opposition from the Catholic Church and a strong anti-mining lobby, as well as insurgency and widespread corruption, have stalled many projects including the $5.9 billion gold-copper Tampakan project in the southern Mindanao island discovered in 1991.

    Attached Files
    Back to Top

    Heat wave tests Southern California's power grid amid gas shortage

    California's power grid operators warned homes and businesses on Monday to conserve electricity as rising demand for air conditioning stoked by a record-setting heat wave across the U.S. Southwest tested the region's generating capacity.

    The so-called Flex Alert was posted until 9 p.m. Pacific time during a second day of triple-digit temperatures that strained Southern California's energy production, creating a potential for rolling blackouts on the first official day of summer.

    But the peak hour for energy demand came and went Monday evening without disruption of the region's power delivery network, the California Independent System Operator (ISO) reported.

    "Since we're past that and have not experienced any trouble, I think we're headed into the safe zone," agency spokeswoman Anne Gonzales told Reuters.

    Temperatures were expected to begin abating on Tuesday, according to weather forecasts. As of Monday night, there were no plans to extend the Flex Alert, ISO officials said.

    Monday's alert was the first big test of power generators' ability to meet heightened energy demands in the greater Los Angeles area without natural gas supplies normally furnished by the now-crippled Aliso Canyon gas storage field, effectively idled since a major well rupture there last fall.

    The oven-like heat prompted the city of Los Angeles to keep its network of public "cooling centers" - libraries, recreation centers and senior centers - open for extended hours as a haven for people whose homes lack air conditioning.

    Area home improvement and hardware merchants were doing a brisk business in fans and AC window units.

    Brett Lopes, 31, a freelance lighting technician, stopped in a Home Depot outlet near downtown to buy supplies for a homemade air conditioner he called a "swamp cooler" to use while he waited for his landlord to repair his broken AC unit.

    "It's brutal," he said of the heat, explaining that he looked up directions on YouTube for assembling the makeshift cooling device. "It doesn't work as well as AC, but it's better than sitting in 100 degrees."

    Others flocked to public swimming pools.

    "It was really refreshing today, but more crowded than usual," said Paul Stephens, 31, a pastor who was swimming laps at the Rose Bowl Aquatic Center in Pasadena, where the mercury climbed to 108 Fahrenheit (42 Celsius) .

    The ISO, which runs the state's power grid, urged consumers on Monday to cut back on electricity usage, especially during late-afternoon hours.

    Utility customers were advised to turn off unnecessary lights, set air conditioners to 78 degrees Fahrenheit or higher, and wait until after 9 p.m. to run major appliances, such as clothes washers and dryers.

    Gonzales credited public cooperation with the flex alert for likely helping avert widespread outages on Monday.

    Large stretches of three states sweltered in a second straight day of record, triple-digit temperatures, as the National Weather Service posted excessive-heat warnings through Wednesday for southern portions of California, Arizona and Nevada, though the hot spell appeared to have peaked on Monday.

    Power customers ranging from homes and hospitals to oil refineries and airports are at risk of losing energy at some point this summer because a majority of electric-generating stations in California use gas as their primary fuel.

    Since the energy crisis of 2000-2001, the ISO has imposed brief, rotating outages in 2004, 2005, 2010 and 2015, mostly related to unexpected transmission line or power plant failures during periods of unusually high demand.

    With California's largest natural gas storage field shut down indefinitely at Aliso Canyon, state regulators have warned that Los Angeles faces up to 14 days of gas shortages severe enough to trigger blackouts this summer.

    Aliso Canyon, owned by Southern California Gas Co, a division of San Diego-based utility giant Sempra Energy, normally supplies the region's 17 gas-fired power plants, hospitals, refineries and other key parts of California's economy, including 21 million residents.

    The gas leak there, ranking as the worst-ever accidental methane release in the United States, forced thousands of nearby residents from their homes for several months after it was detected last October. The leak was finally plugged in February.
    Back to Top

    Brexit Watch

    Image title

    Voter Turnout

    “The side that is most effective in motivating their voters to turn out on the 23rd will be the side that emerges victorious,” Crosby wrote. “It is clear that polls are now an actor in elections and referendums, not just a metric of public opinion.”

    A survey of 1,632 voters by The National Center for Social Research between May 16 and June 12 found a lead for Remain by 53 percent to 47 percent, the organization said in a statement. T

    Back to Top

    China outbound M&A beats 2015 record with 6 months to spare

    In less than six months of 2016, China's appetite for overseas acquisitions has already outgrown last year's record, as deal-hungry mainland buyers chase global assets such as real estate, chemicals and high-end technology.

    China National Chemical Corp's $43 billion bid for Swiss agrichemicals maker Syngenta (SYNN.S) makes up almost 40 percent of this year's $111.6 billion total, but even without that deal the pace has quickened.

    Bankers and lawyers say there could, however, be some slowdown in the second half, as mainland buyers face heightened scrutiny at home and abroad.

    China International Capital Corp (3908.HK), the country's biggest investment bank, expects outbound deals to hit $150 billion this year.

    Chinese acquirers announced $111.5 billion worth of deals in 2015 from 632 transactions, according to Thomson Reuters data. Completed deals, on which banks are paid fees, last year stood at $73 billion, compared with $45.6 billion so far this year.

    Some recent Chinese technology deals have met with opposition, however, which could turn some buyers cautious. Midea Group Co's (000333.SZ) efforts to buy out German industrial robot maker Kuka (KU2G.DE), for example, provoked a political furor in Germany, and the company has had to offer numerous guarantees on preserving local sites and jobs.

    "We expect outbound M&A activities will continue to rise, but not at the nose-bleeding rate of the first quarter of 2016," said David Wu, head of corporate finance, China, for ING Bank.

    China's desire to temper the outflow of its foreign reserves, which dropped more than half a trillion dollars last year, could also curb deals.

    Lawyers say the State Administration of Foreign Exchange (SAFE), the custodian of the country's $3.19 trillion reserves, is anxious that the deal outflows could weigh on the yuan currency.

    "SAFE canceled the formal approval process for outbound transactions some time ago, but they are monitoring flows going out quite carefully, given the recent surge in money leaving the country," said Andrew McGinty, a partner at Shanghai-based partner at law firm Hogan Lovells International.

    Uncertainty surrounding the outcome of this week's referendum in Britain over its membership of the European Union and the upcoming U.S. presidential elections in November are also factors likely to slow Chinese overseas purchases, bankers say.

    After many years of focusing on the booming domestic economy, Chinese companies are increasingly looking to diversify their revenues as growth at home slipped to a 25-year low.

    Chinese state-owned and private companies are also looking to upgrade their manufacturing prowess with overseas technology.

    Other big purchases announced by China Inc this year include HNA Group's $6.3 billion acquisition of Ingram Micro Inc (IM.N) and Haier Group's $5.4 billion bid for General Electric Co's (GE.N) appliances unit.

    "Whether it be from the private sector, government or even middle market firms, this expansion is strategic and long-term focused," said John Kim, head of M&A, Asia ex-Japan at Goldman Sachs.

    "The appetite is particularly voracious for technology, media, healthcare and financial services, and for the foreseeable future it won't be going away," he added.
    Back to Top

    China’s energy guzzlers Jan-May power use down 3.6pct on year

    Power consumption of China’s four energy-intensive industries dropped 3.6% on year to 677.4 TWh over January-May, accounting for 29.7% of the nation’s total power consumption, the China Electricity Council (CEC) said on June 16.

    Of this, the ferrous metallurgy industry consumed 185.8 TWh of electricity over January-May, falling 10.2% year on year, compared to the drop of 6.5% from the previous year; while the non-ferrous metallurgy industry used 199 TWh of electricity, down 5% year on year, compared a 5% growth from the year prior.

    The chemical industries consumed 177.3 TWh of electricity during the same period, up 4.4% year on year, lower than a 1.6% growth a year ago; while power consumption of building materials industry dropped 1.5% year on year to 115.3 TWh, compared to a 6.6% decline a year ago.

    In May, the four industries consumed a total 150.7 TWh of electricity, decreasing 1% year on year, accounting for 31.9% of China’s total power consumption.

    Of this, the ferrous metallurgy industry consumed 41.5 TWh of electricity in May, dropping 4.9% on year; while the non-ferrous metallurgy industry used 42.9 TWh of electricity, decreasing 3.5% from a year ago.

    Attached Files
    Back to Top

    Hot Hot Hot!

    Image title
    Back to Top

    ANC may lose control of capital in vote, poll shows

    The ruling African National Congress may lose control of three of South Africa’s main cities including the capital, Pretoria, and the key economic hub, Johannesburg, in the August 3 municipal elections, according to a poll released on Thursday.

    In Johannesburg, 31% of respondents said they would vote for the ANC, 29% supported the Democratic Alliance and 10% backed the Economic Freedom Fighters, the survey conducted June 6 and 7 by research company Ipsos for Johannesburg-based broadcaster eNCA found.

    The DA topped the rankings in the Tshwane municipality, which includes Pretoria, with 33% support, while the ANC polled 28% and the EFF 10%. In the southern Nelson Mandela Bay municipality, which incorporates the city of Port Elizabeth, the DA had 34% backing, the ANC 30% and the EFF 7%.

    The Ipsos poll results suggest support for the ANC has slipped following a series of scandals implicating its leader, President Jacob Zuma, and amid rising discontent grows over a lack of jobs, decent housing and education. Both the DA and EFF have said they are prepared to enter into coalitions with other opposition parties but not the ANC.

    The ANC, which has ruled Africa’s most industrialised economy since the first multiracial elections in 1994, secured an outright majority in all three cities in the last municipal vote five years ago and won 62% support in the last national election in 2014.
    Back to Top

    China orders 255 Shanghai industrial facilities to shut for G20

    China ordered at least 255 Shanghai-based industrial facilities, including part of a major oil refinery operated by Sinopec Corp, to shut for 14 days to reduce pollution ahead of the G20 summit, according to an official document reviewed by Reuters.

    The document, issued by the Shanghai Environment Protection Bureau, has ordered a wide range of companies from power and petrochemical plants to logistics firms to shut down between Aug. 24 and Sept. 6 for the upcoming G20 meet in Hangzhou.

    Authorities in neighboring Zhejiang and Jiangsu province are set to issue similar orders to limit air pollution and safety hazards within a 300 km radius from Hangzhou, according to industry and government officials.

    China has previously shut down factories and limited the operation of heavy equipment ahead of high-profile diplomatic and sporting events - such as meetings of the Asia-Pacific Economic Cooperation and the Beijing Summer Olympics of 2008 - to cut the choking smog that afflicts many of its cities.

    "Longer-term China needs to work out a market-based approach to tackle pollution rather than an ad-hoc order. Apart from social responsibilities, business has its profit and loss to take care," said Jing Chunmei, a researcher with China Center for International Economic Exchanges.

    The G20 summit, hosted in the first week of September, has become China's biggest diplomatic event of the year and is expected to gather together world leaders like Chinese President Xi Jinping and U.S. President Barack Obama.

    Shanghai Petrochemical Corp, a subsidiary refinery of state refiner Sinopec Corp, will reduce its capacity by 50 percent, or about 120,000 barrels per day (bpd), for the G20 event during those two weeks, the document from the environment bureau said.

    Coal-fired power plants in the area that do not meet emissions standards will be fully closed over the two weeks, it also said, and the usage of heavy machinery will be reduced by 30 percent across Shanghai.

    An official with Sinopec's Jinling Petrochemical Corp, another major refinery based in the city of Nanjing in neighboring Jiangsu province, said his firm was also asked by local authorities to "appropriately reduce throughput", but was not given any specific reduction size.

    The ruling came from local governments, rather than from Sinopec Corp, the official said.

    Shanghai Petrochemical, according to the environment bureau's document, will be closing a 120,000 bpd crude unit, a 3.9 million tonne-per-year (tpy) residue hydrocracking unit, a 3.5 million tpy catalytic cracking unit, and another dozen or so secondary refining facilities.


    Sinopec also operates in the vicinity the 440,000 bpd Zhenhai refinery, 270,000 bpd Shanghai Gaoqiao refinery and 250,000 bpd Yangzi Petrochemical Corp. A spokesman for Sinopec said the company was not immediately able to comment.

    The 255 factories based in Shanghai, about 200 km from Hangzhou, cover sectors like chemicals, building materials, pharmaceuticals and printing, according to the document.

    Operation of heavy machinery in the Jinshan district will be cut in half during the summit period, and sailings of dry bulk ships below 200 tonnes, oil tankers above 600 tonnes and all chemical tankers will be suspended.

    The government is offering no subsidies for the shutdowns, according to four plants contacted by Reuters.

    "We will try to reschedule plant maintenance to that two weeks to minimize the production loss," said Shi Yan, a manager at Budenheim Fine Chemicals (Shanghai) Co. Ltd.

    Other areas, including the port city Ningbo, have also issued lists of factory shutdowns ahead of the G20 summit in addition to the closures set for Shanghai, according to an official at the Ningbo Environmental Bureau.
    Back to Top

    Lawmakers demand new operator for UK power network

    British lawmakers called on Friday for an independent operator to take over National Grid's role running the country's energy transmission network, as more renewable power is being generated at a local level.

    National Grid owns and operates Britain's main gas network and the high-voltage electricity transmission network in England and Wales, managing flows of power onto and around the grids.

    It also owns interconnectors, which import power from continental Europe, and the UK's electricity infrastructure.

    Different companies own regional distribution networks which carry electricity at lower voltages from the main grid via powerlines, cables and substations to homes and businesses.

    There are similar regional distribution networks for gas, carrying it at ever lower pressure until it reaches customers.

    British lawmakers on parliament's Energy and Climate Change committee said in a report the system needed to be changed so regional distributors could control power flows on their networks better, as more renewable power is generated locally.

    Most of Britain's solar power is connected to local distribution networks and cannot be seen at the overall level, the report said. Instead, it is measured only as a reduction in the demand for power rather than as an input.

    The report said smart grid technology would enable distribution network operators to move from a passive role to being responsible for balancing energy flows, effectively becoming system operators at a local level.

    The committee said National Grid has conflicts of interest because it owns assets which bring in power, but also operates the system which buys the power from those assets.

    "National Grid's technical expertise in operating the national energy system must be weighed against its potential conflicts of interest," said Agnus Brendan McNeil, chairman of the committee, which called for the creation of an Independent System Operator (ISO).

    In the United States, an ISO coordinates, controls and monitors the operation of an electrical power system in one state or sometimes several states. Regional transmission organisations do the same, but cover a larger geography.

    National Grid shares were 0.9 percent lower at 953.1 pence at 0814 GMT.

    A National Grid spokeswoman said there was little evidence that the ISO model would provide any benefits which would justify the cost to households, potential disruption and the risks to security of supply.

    "We are currently working with the Government and with regulators to ensure we continue to manage potential conflicts as our role develops," she added.

    Attached Files
    Back to Top

    Oil and Gas

    Oil Cargoes Lack Buyers in Europe as Refinery Demand Falters

    Cargoes of crude oil are struggling to find buyers in Europe as demand from refineries falters due to unplanned halts.

    Recent strikes at French refineries and the continued abundance of inventories mean demand for cargoes of newly pumped crude is weakening, according to DNB Markets and JBC Energy GmbH. That’s apparent in the price structure of derivatives linked to North Sea oil, where contracts for immediate delivery have been getting cheaper relative to later cargoes, broker data compiled by Bloomberg show.

    “From a physical perspective, the market is very bearish,” Eugene Lindell, an analyst at Vienna-based consultant JBC said by phone. “From a seasonal perspective, you’d have peak European crude intake in July and August” and refiners should be preparing for that, but “that’s not what we’re seeing.”

    Oil futures in New York have advanced about 90 percent from a 12-year low in February as disruptions from Nigeria to Canada and falling output in the U.S. ease a global surplus. While the biggest names in global oil markets, from Saudi Arabia’s Energy Minister to the International Energy Agency, share the view the global oil supply is now back in balance with demand, some data on physical oil flows point to a continued oversupply.

    In the North Sea, the price structure of derivatives called contracts for difference -- used in the North Sea for speculation or hedging -- has inverted. On June 1, they were in backwardation, an indication of strong market where cargoes for the earliest weeks fetch higher prices. Now they are in contango, a sign of a weak market where earlier cargoes are cheapest.

    The CFD for one week ahead traded at a discount of $2.10 a barrel Wednesday, according to data from PVM Oil Associates Ltd. compiled by Bloomberg. That compares to a gap of $1.23 on June 1 and is close to the widest discount since November, the data show. The discount narrowed to $1.96 Thursday.

    A handful of cargoes have taken longer than normal to sell in the North Sea. Total SA, one of the companies affected by the French industrial action, took delivery of a cargo of Forties crude onto a supertanker called Maran Thetis in April and was still trying to sell it earlier this week, according to traders and brokers monitoring price reporting agency Platts’s trading window. Samail, a tanker capable of shipping 2 million barrels of crude, discharged in Rotterdam on Thursday, three months after loading at Scotland’s Hound Point terminal.

    Negative Skew

    Options markets are also showing indications of weak demand for crude, Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA, said by phone.

    Prices for the contracts are trading in a pattern that indicates traders are hedging more against declines than increases. That bearish bias, or skew, is the widest it’s been in at least four and a half years, according to exchange data compiled by Bloomberg.

    This reinforces “what we’re observing in the physical market,” Tchilinguirian said. “Despite outages of production in Nigeria, we’re not seeing in the curve structure on the physical side any indication of supply shortages, rather to the contrary.”

    Attached Files
    Back to Top

    Colombia's Ecopetrol offers 20 blocks in auction launch

    Colombia's state oil company Ecopetrol offered 20 oil and gas blocks for auction on Thursday, part of a company plan to cut back amid low global crude prices.

    One-hundred and thirty-eight companies from 21 countries, some of which already operate in the Andean country, attended the auction launch, Ecopetrol said in a statement.

    "The fields are close to logistical facilities, which adds extra attraction for small and medium sized gas and oil companies," the company said.

    The blocks will be sold in an electronic auction on Sept. 30.

    Ecopetrol has been selling assets in a bid to fund its investment plan, which is down by $1.8 billion this year.

    Attached Files
    Back to Top

    QEP Resources to pay $600 million for Permian shale acreage

    U.S. oil producer QEP Resources Inc said on Tuesday it would spend $600 million to buy acreage in the Permian Basin of Texas, the latest in a recent string of sector acquisitions as crude prices stabilize near $50 per barrel.

    The deal comes a day after Marathon Oil Corp said it would pay $888 million for Oklahoma acreage. Devon Energy Corp, Pioneer Natural Resources Co and others have announced similar deals so far this month, eager to ink agreements as oil prices rise from lows plumbed in 2015.

    QEP plans to buy 9,400 acres in Texas from unnamed sellers, funding the deal by offering 20 million shares of its stock.

    The offering was not immediately popular on Wall Street, and shares of QEP fell 3.2 percent to $18.70 in post-market trading after the deal's announcement.

    The deal is worth about $64,000 an acre, which is high compared with recent shale acreages in the United States, in part because of the Permian's famously thick oil-bearing rock formations.

    On a pure price per acre basis, acreage transactions inked since May have ranged between $11,190 an acre for Newfield Exploration Co's purchase of assets from Chesapeake Energy Corp in Oklahoma, to around $14,557 in Marathon Oil Corp's acquisition of PayRock Energy Holdings LLC.

    Denver-based QEP said the new land offers 430 potential drilling locations, a 50 percent boost to the company's possible drill sites in the Permian. The new land - in Martin County - is roughly 10 miles away from QEP's existing acreage in the Permian.

    The acreage currently produces 1,400 barrels of oil equivalent per day (boe/d) from vertical wells.

    "We believe this acquisition, combined with our existing crude oil assets, will enhance our crude oil production growth and improve our operating efficiency," Chuck Stanley, QEP's chief executive, said in a statement.

    The deal is expected to close by September.
    Back to Top

    US Shale Oil: Frack count grows, production levelling out

    Rystad Energy expects horizontal oil completion activity in the US Shale to outpace drilling operations by 30% in 2H16, resulting in the contraction of DUC inventory by 800 wells. These additional completions will support total US oil output by providing an additional 300-350 kbbl/d to the exit-2016 rate. The additional output will be more than sufficient to balance the base production decline. The inventory of 4,000 drilled but uncompleted oil wells (DUCs) is estimated to hold close to 2 billion barrels of oil reserves.

    'Research shows that operators are now starting to complete wells that have previously been put on hold deliberately. This comes as more than 90% of the accumulated oil DUC inventory can be commercially completed at a WTI of 50 USD/bbl,' says Artem Abramov, Senior Analyst and product manager at Rystad Energy.

    The recent extreme production decline - among the key crude producing states, North Dakota suffered from an all-time high historical decline rate of 70 kbbl/d in April 2016 - fell far outside a natural 10-20 kbbl/d range, which one would expect as a result of current completion activity and mature base production. The significant decline acceleration appears to have come from older 'low decline' wells brought on-line before 2016.

    'It is not the first time such temporary shifts in base decline are observed, and they were caused by road restrictions imposed by the state over the month. This trend is unlikely to persist and should not be extrapolated to the US Shale industry in general,' says Abramov.

    The number of wells in Bakken is not sufficient to keep production flat and this trend is even more apparent in 2Q than in 1Q.

    Attached Files
    Back to Top

    Origin Energy to Frack Amungee NW-1H in Australia's Beetaloo Shale Basin

    Falcon Oil & Gas on Wednesday said operations to re-enter the Amungee NW-1H well has begun.

    The company’s operating partner, Origin Energy, expects the running of production casing and cementing on this well to be completed by the end of June. A multi-stage fracture stimulation programme to test the Middle Velkerri “B” shale reservoir will be performed on Amungee NW-1H by the end of July, followed by a 90 day production testing program.

    Amungee NW-1H in Australia’s Beetaloo shale basin was drilled last year.

    Also, Falcon said civil works at the Beetaloo W-1 vertical well commenced mid-May 2016. Spudding of this well will take place in July after the rig is released from the Amungee NW-1H well.
    Back to Top

    Canada's oil output to grow 28 pct to 4.9 mln bpd by 2030 - report

    Canadian oil production will grow by 28 percent to hit 4.9 million barrels per day (bpd) by 2030, the Canadian Association of Petroleum Producers said in its annual report.

    The estimate is lower than CAPP's previous forecast of 5.3 million bpd by 2030, and comes amid a two-year rout in global oil prices that continue to hammer Canadian oil companies, which have slashed billions in capital expenditures.

    Production from Alberta's oil sands, the world's third-largest crude reserves and No. 1 source of U.S. oil imports, will hit 3.7 million bpd by 2030, the industry group said on Thursday.

    CAPP expects conventional oil production in Western Canada, including condensates, to fall to 1.1 million bpd by 2018 from 1.3 million bpd in 2015 and is expected to remain relatively stable to 2030.

    Attached Files
    Back to Top

    Weir sells renewables units as it battles oil price slump

    Weir has sold two businesses as the industrial pump-maker feels the effects of the oil price crash - with no improvement in sight.

    Demand for the company’s products has slumped as the price of crude oil has collapsed, resulting in Weir being demoted from the FTSE 100 last year.

    In an attempt to deal with the impact of energy businesses slashing spending, the Glasgow-based firm launched a £100m disposal plan.

    This strategy has resulted in the sale of two businesses based around renewable energy: American Hydro Corporation, which supplies the hydroelectric and water distribution industries; and Spain’s Ynfiniti Engineering Services, which maintains wind turbines.

    Ynfiniti maintains wind turbines CREDIT: BLOOMBERG

    The combined value of the disposals is £34.4m, but could rise to £36.7m if certain conditions are satisfied, though Weir said it would take a loss of £5m on the deal. Together the two divisions had revenues of £38m last year, and made £1.4m operating profit.

    Finnish engineering group Wartsila is buying American Hydro. The buyer of Ynfiniti - which Weir bought into in 2010 - was not revealed.

    Proceeds from the sales will be used to reduce Weir’s debt and to pay its scrip dividend.

    Weir’s share price has collapsed since the oil price crash hit in late 2014, falling as low as 764p from pre-slump levels of £27.00.

    Posting annual results in February, chief executive Keith Cochrane described “unprecedented challenges” as full-year revenues fell by more than fifth to £1.9bn and pre-tax profits almost halved to £220m, forcing him to freeze the dividend, ending decades of steady rises.

    Weir chief executive Keith Cochrane

    Mr Cochrane also said he was seeking a further £40m of savings, on top the £110m made already.

    Revealing the sale, Weir also updated on market conditions. “Trading in April and May was consistent with the trends seen in the first quarter and in line with expectations,” the company said.

    "Orders for the five months to the end of May were 15pc below the prior year period, though this was better than the 21pc decline recorded in the first quarter.”

    Attached Files
    Back to Top

    Cheap LNG May Lure 50 More Nations to Gas From Oil, WoodMac Says

    The number of liquefied natural gas importers may more than double as a glut damps prices and encourages nations to ditch crude, according to Wood Mackenzie Ltd.

    More than 50 countries may switch to LNG, with demand from new importers accounting for about 150 million metric tons per year (7.2 trillion cubic feet of gas) by 2025, amid an oversupply of the fuel and tankers to carry it, according to Noel Tomnay, vice president research global gas and LNG at the consultant. That’s about 61 percent of the current global market.

    “You’ve got easy access to shipping and you’ve got easy access to supply, and you’re going to get, we believe, further rises in the oil price whereas LNG prices, at spot level, are probably going to be quite flat,” Tomnay said in an interview in London. “The opportunity is going to become increasingly compelling for markets to switch in to gas.”

    Egypt, Jordan and Pakistan increased the number of LNG importers to 34 last year, helping offset the first decline in Asian purchases since 2009, according to the International Group of LNG Importers. Markets are forming as countries consider switching to gas from crude after prices for the fuels diverged, with spot LNG in Japan sliding 45 percent this year as Brent oil gained 35 percent.

    Demand and supply on the LNG market won’t align until 2021, according to the International Energy Agency, which estimates that the crude market will balance next year.

    Infrastructure Investment

    This year, WoodMac expects five new importers of the gas chilled to minus 162 degrees Celsius (minus 260 Fahrenheit) to turn it into a liquid for transport by ship. They are Colombia, Jamaica, Malta, the Philippines and Abu Dhabi.

    While markets such as Bangladesh can easily turn to LNG, most the new entrants, including El Salvador, Ghana and Kenya, would be switching from naphtha, diesel and fuel oil and require investment in infrastructure such as new pipelines and power plants, Tomnay said.

    That would be a boon for suppliers and companies that provide floating storage and regasification units, which are a quicker and cheaper way to receive the fuel and pump it into local networks than traditional land-based terminals. Hoegh LNG Holdings Ltd. will provide an FSRU to Colombia, while Excelerate Energy will supply a floating terminal to Abu Dhabi.

    Emerging Markets

    LNG suppliers from French energy company Total SA to trading house Noble Group Ltd. have said they are looking at emerging markets for future demand growth. While it will be harder for trading companies to enter new markets due to financing constraints, they may benefit from relationships formed supplying oil to those markets, Tomnay said.

    To help the countries start imports, some suppliers may offer one-stop solutions and develop partnerships for building infrastructure, Tomnay said. Floating power plants may be used to allow a regas facility to operate alongside generators, he said.

    Long-term contracts will be needed to support the construction of infrastructure, and governments in most of these markets would prefer a link to oil as a “default position,” to avoid risks associated with other indexes, he said.

    “If you can do a pricing deal linked to oil but discounted to oil, it’s going
    to be attractive,” Tomnay said.

    Attached Files
    Back to Top

    Iran floating oil storage

    Iran floating oil storage

    Floating Storage Update

    The amount of Iranian oil on floating storage has decreased by

    1.9 M Barrels 

    As the Dan leaves the fleet

    The Current Amount Of Oil Stored

    46.7 M Barrels 

    Back to Top

    Rosneft's crude oil market share in Europe steady, to grow strongly in Asia: CEO

    Russia's biggest oil producer Rosneft sees its position in the European market stable despite concerns on growing competition from Middle East crude producers for market share, while it pushes more actively for a greater role in new Asian markets where the competition is much higher.

    The company continues to show solid operational and financial results despite the tough economic situation and is aiming at strengthening its positions on the markets, Rosneft CEO Igor Sechin said in an interview with the state-run Russia 24 TV network broadcast Wednesday.

    He estimated the crude price was likely to remain volatile in the near future, although growing to around $50-$55/b by the end of this year and possibly to $65/b by end-2017.

    "We are glad that we've managed to maintain our positions on traditional markets, primarily in Europe," Sechin said pointing out to recent agreements with PKN Orlen to increase deliveries to Poland and the Czech Republic.

    "Despite some concerns, we consider our positions [in Europe] quite stable because we've linked with the consumers by the infrastructure, including southern and northern branches of the Druzhba pipeline, which provide a competitive advantage for us," he added.

    Some Russian officials raised concerns late last year over maintaining market share as low oil prices and rising production by some key competitors was threatening Russian supplies to Europe. Sechin said then Saudi Arabia was actively dumping to win new markets in Europe.

    PKN's refineries primarily refine sour Russian Urals crude, which is delivered through the Druzhba pipeline, but the Polish company recently started looking more actively for alternative grades, including from Saudi Arabia and Iraq.

    In May, PKN Orlen signed a deal with Saudi Aramco to receive 200,000 mt/month of crude oil through December 31 this year, saying this was "the first direct long-term contract with a supplier from the Gulf region in the history of our company" which demonstrated the company's efforts to diversify its energy sources.

    But Rosneft also signed a number of new deals in late 2015 and early this year with European refineries to send additional volumes to Germany, Poland and the Czech Republic in 2016 and 2017.

    Due to those deals, Rosneft estimated in March its oil deliveries to European consumers via the Druzhba pipeline would rise by 3-5% from 2015 up to about 28.7 million-29.0 million mt -- 574,784 b/d-580,790 b/d on average.

    Rosneft and PKN Orlen agreed last week to extend a contract on crude supplies for a period of three years to June 30, 2019.

    Attached Files
    Back to Top

    Leviathan partners approve $120M for production platform FEED

    Noble Energy, the operator of the giant Leviathan Gas field in Israel, has been given a nod by its partners to enter into a front-end engineering design contract for work for the offshore production platform for the field.

    Delek Drilling and Avner Oil Exploration on Wednesday said they have authorized Noble Energy to enter into a $120 million deal for the production platform FEED, as approved in the previously announced development plan.

    While the partners did not say who the FEED contractor was, it has been reported that Wood Group Mustang has been selected for the job.

    The approved Plan of Development (POD), submitted earlier this year, envisions a subsea system that connects production wells to a fixed platform located offshore with tie-in onshore in the northern part of Israel. The fixed platform’s initial capacity is anticipated to start at 1.2 billion cubic feet of natural gas per day (Bcf/d) and is expandable to 2.1 Bcf/d.

    Noble’s partners also said on Wednesday that the partnership is working to close other agreements for the purchase of equipment and/or services related to the Development Plan, as approved, and they expect to sign off on them in the near future.

    “In this way, the Leviathan Partners are continuing to work to complete the required actions in order to obtain a Final Investment Decision (FID), based on the Development Plan, in Q4 2016 and for that purpose are advancing negotiations at various stages with potential customers, both in the local market and for export, to sign contracts for the supply of natural gas from the Leviathan field,” the Israeli partners said.

    First gas from the Leviathan field is expected to start in the fourth quarter of 2019.

    Noble Energy operates Leviathan with a 39.66 percent working interest. Other interest owners are Delek Drilling with 22.67 percent, Avner Oil Exploration with 22.67 percent, and Ratio Oil Exploration (1992) Limited Partnership with the remaining 15 percent.
    Back to Top

    Calfrac: Sex.

    Image title
    Back to Top

    Pemex, First Reserve Said to Near $500 Million Asset Deal

    Petroleos Mexicanos and private-equity firm First Reserve Corp. are finalizing terms on a sale and leaseback agreement intended to provide the beleaguered state-owned oil producer with much needed capital, according to two people with knowledge of the discussions.

    Pemex and First Reserve are set to sign an agreement valued at more than $500 million as soon as this week, according to one person familiar. As part of the agreement, First Reserve will buy midstream assets from Pemex and then lease them back to the Mexican producer, which will continue to operate the sites, according to the people, who asked not to be identified because they were not authorized to speak publicly.

    The person also said Pemex has closed its similar $1.2 billion sale-leaseback deal with KKR & Co. and that the funds entered Pemex’s accounts as of last week. Reuters had reported Thursday that the KKR deal was close but not yet finalized. The KKR deal was also mainly for midstream assets, as well as a non-drilling oil platform in Tabasco, the source said, declining to name other specific facilities included in either agreement.

    The two deals come as Pemex looks to raise immediate capital to pare debt during a difficult period. Pemex has recorded 14 straight quarterly losses, seen oil production decline for 11 straight years and had $93 billion in debt excluding pension liabilities as of the first quarter.

    The company has said for several months it plans to sell assets and form joint ventures with private partners to generate cash and boost declining crude production. Pemex Chief Executive Officer Jose Antonio Gonzalez Anaya said in an April 19 interview at Bloomberg’s New York office that the company was looking at possible deals with KKR and First Reserve, saying at the time the potential sale and leaseback agreement with First Reserve would be worth "a bit more" than $500 million.

    A spokesman for Pemex declined to comment on the status of the reported agreements. Greenwich, Connecticut-based First Reserve, which announced a $1 billion agreement with Pemex in April to mutually invest in Mexico energy infrastructure, did not return phone calls or messages seeking comment. New York-based KKR also did not immediately respond to a request for comment.
    Back to Top

    Iran condensate exports set to fall to five-month low in July: sources

    Iran's condensate exports in July are expected to fall to the lowest in five months as major buyer South Korea scales back purchases of the ultra-light oil, trade sources said on Thursday.

    Robust demand for condensate, from South Korea in particular, helped drive a recovery of Iranian oil exports to a 4-1/2-year high in June, although the volume is expected to dip in July.

    Loadings of Iranian condensate in June rose to about 408,000 barrels per day, the highest volume since sanctions on Iranian oil exports were lifted in January.

    For July, Iranian condensate exports are expected to fall by 38 percent to about 252,000 barrels per day (bpd), the sources said citing loading data, as Asian refiners replace the ultra-light oil with cheaper naphtha.

    The volume destined for South Korea in July is expected to fall by nearly two-thirds to 84,000 bpd from a record high in the previous month, as key buyer SK Energy switched to process cheaper naphtha, they said.

    Condensate is processed at splitters to produce mainly naphtha, a petrochemical feedstock.

    Benchmark Singapore naphtha refinery margins from refining a barrel of Brent crude have already tumbled more than 60 percent since the beginning of the year to around $53 per tonne on June 22.

    Still, the start-up of new and existing splitters in Asia and the Middle East is expected to drive demand for Iranian condensate later in third quarter.

    "There could be a rebound (in condensate prices) in September because naphtha cracks are showing some signs of a rebound," a trader with a North Asian firm said.

    South Korea's Hyundai Chemical will also need to buy more condensate from September onwards for its new splitter, which could come into operation in October, he said.

    The petrochemical joint venture between Hyundai Oilbank Co [INPTVH.UL] and Lotte Chemical has already purchased Qatari condensate and is in talks with the National Iranian Oil Company for long-term supplies.

    A planned restart of Singapore's Jurong Aromatics complex and the commissioning of Qatar's new splitter could tighten Qatari condensate supplies and drive demand for Iranian oil, traders said.
    Back to Top

    Panda Power’s 2 PA Marcellus-Fired Electric Plants Complete!

    In August 2013, Moxie Energy of Vienna, VA sold the permits/rights to build a new Marcellus gas-powered electric generating plant in Bradford County, PA to Panda Power Funds of Dallas, TX.

    The project was renamed from Moxie Liberty to Panda Liberty.

    A few months later, in December 2013, Moxie sold a second Marcellus-gas fired electric plant project to Panda, this one slated to be built in Lycoming County, PA.

    That project was renamed from Moxie Patriot to Panda Patriot.

    Panda contracted with Gemma Power Systems (Connecticut) to build both 829-megawatt plants. We have some terrific news to share: Gemma reports completing both facilities and has turned them over to Panda to begin operation!…
    Back to Top

    Summary of Weekly Petroleum Data for the Week Ending June 17, 2016

    U.S. crude oil refinery inputs averaged 16.5 million barrels per day during the week ending June 17, 2016, 188,000 barrels per day more than the previous week’s average. Refineries operated at 91.3% of their operable capacity last week. Gasoline production increased last week, averaging 10.3 million barrels per day. Distillate fuel production decreased last week, averaging about 5.0 million barrels per day.

    U.S. crude oil imports averaged over 8.4 million barrels per day last week, up by 817,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.9 million barrels per day, 13.6% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 876,000 barrels per day. Distillate fuel imports averaged 146,000 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 530.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 0.6 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 0.2 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.2 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 5.2 million barrels last week.

    Total products supplied over the last four-week period averaged over 20.2 million barrels per day, up by 2.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.7 million barrels per day, up by 3.9% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the last four weeks, down by 1.6% from the same period last year. Jet fuel product supplied is up 2.6% compared to the same four-week period last year.

    Cushing inventory drops 1.3 mln bbl's
    Back to Top

    US Oil production continues its drop

                                                 Last Week       Week Before     Last Year

    Domestic Production '000........ 8,677               8,716               9,604
    Back to Top

    Federal Judge Strikes Down Obama’s Effort to Regulate Fracking

    A federal judge struck down the Obama administration’s signature effort to regulate hydraulic fracturing on public lands, putting another of the president’s environmental initiatives in legal limbo months before he leaves office.

    The ruling, issued by Wyoming-based District Court Judge Scott W. Skavdahl late Tuesday, blocks the Interior Department’s Bureau of Land Management from enforcing a 2015 rule that set detailed standards for the construction of oil and gas wells drilled into some 700 million acres of federal land. While the new ruling is almost certain to be appealed, it follows similar setbacks for other pieces of President Barack Obama’s environmental legacy, including a Supreme Court stay of the Clean Power Plan that forces states to slash carbon dioxide emissions from power plants.

    The decision also presages a tough path ahead for another regulation still on the horizon: a Bureau of Land Management proposal to block energy companies from venting or burning natural gas from wells burrowed into public land.

    The Interior Department in a e-mailed statement called the ruling "unfortunate," because "it prevents regulators from using 21st century standards to ensure that oil and gas operations are conducted safely and responsibly on public and tribal lands."

    The regulation has never gone into force, amid a legal challenge from oil industry groups and four states -- Colorado, North Dakota, Utah and Wyoming -- that argued the measure duplicated local drilling requirements and boosted the cost of extracting oil and gas from federal lands.

    On Tuesday, Skavdahl said the fracking rule exceeded the Bureau of Land Management’s powers.

    The legal question is “not whether hydraulic fracturing is good or bad for the environment," Skavdahl said, but whether Congress gave the Interior Department the power to regulate it.

    “Congress has not delegated to the Department of Interior the authority to regulate hydraulic fracturing," Skavdahl wrote. "The BLM’s effort to do so through the fracking rule is in excess of its statutory authority and contrary to law."

    Independent Petroleum Association of America spokesman Neal Kirby said the decision reaffirms the group’s view that "states are -- and have for over 60 years been -- in the best position to safely regulate hydraulic fracturing."

    The Bureau of Land Management faces similar questions about its authority as it moves to block companies from burning natural gas or sending it unchecked into the atmosphere as a less-valuable byproduct of crude at oil wells on federal land. The agencyproposed new limits on that practice of venting and flaring in January, and has been aiming to make them final later this year, even as the EPA separately moves to throttle the release of methane from oil and gas sites nationwide.

    "BLM is extremely vulnerable as it overreaches well beyond its public lands mandate and into EPA’s jurisdiction," Sgamma said by e-mail. "With the venting and flaring rule, BLM is attempting to assert Clean Air Act authority without following any of the constraints of the Clean Air Act. "
    Back to Top

    Gazprom prepares cold reception for U.S. LNG

    Liquefied natural gas (LNG) from the United States is set to do battle in Europe but Russia's Gazprom is setting the stage, preparing a cold reception for the super-cooled gas set to cross the Atlantic.

    A weakened rouble has lowered Gazprom's production costs by a fifth while its profits on dollar-denominated gas sales to Europe last year doubled in rouble terms.

    Gazprom has managed to increase sales despite a push by the European Union to curb Russian energy imports, using discounts, renegotiation of unpopular oil-linked contracts and gas sales via auctions.

    Spurring Gazprom's charm offensive is a looming showdown as a wave of U.S. gas is set to reach Europe's shores beginning next year.

    U.S. exporters led by Cheniere Energy are expected to have 83 billion cubic metres (bcm) of gas ready for sale by 2019. That's about 20 percent of Europe's current annual gas needs.

    That threatens to exacerbate already significant global gas oversupply, with new producers squaring up against established players for market share and driving prices lower.

    "We are at the start of a new chapter in European gas markets," Fatih Birol, executive director at the International Energy Agency said recently, as U.S. and other supplies fight to gain access.

    But Gazprom, for now, appears confident it can see off the challenge and even raise its European market share, which stood at 31 percent in 2015, helped by declining output in Europe, primarily in the Netherlands and Britain.

    As U.S. producers crank up exports, more than a dozen LNG cargoes have been exported, yet so far just one has reached Europe as other markets offer better returns.

    "Longer term, Asia will remain more attractive for U.S. gas. No U.S. businessman in the right state of mind - being already heavily indebted and having put all his assets as collateral with banks - will deliver gas to Europe at a loss," Gazprom's Deputy Chief Executive Alexander Medvedev told Reuters last week.

    Gazprom has looked to bolster demand in Europe through discounting and renegotiating its 25-year, oil-linked supply deals.

    After years of tough negotiations, it has reached deals with long-term buyers including France's Engie and Germany's Uniper, a unit of E.ON.

    Cheaper oil prices have helped lower Russian gas prices, and that has spurred demand, with Gazprom deliveries to Europe and Turkey up 20 percent in the first quarter.

    "Russian gas is low cost and will remain below U.S. gas prices," said Claudio Descalzi, chief executive of Italy's Eni , the biggest buyer of Russian gas in Europe.

    And Gazprom seems willing to fight for greater share of the EU market given dwindling sales in former Soviet states and still distant prospects of piping gas to China, according to Poland's Centre for Eastern Studies.

    European gas hub prices stand at around 35 pence/therm currently. A fall to 21 pence would hurt Gazprom's margins but more critically would make it unprofitable for U.S. supplies to cross the Atlantic.

    As much as half the production capacity of U.S. LNG players could be shut-in during the summer and at other times if Gazprom simply keeps flowing gas to Europe at current rates, said analyst Stephen O'Rourke at consultancy Wood Mackenzie.

    Gazprom has 100 bcm per year of spare production capacity at its disposal, or roughly a quarter of Europe's annual needs, according to the Oxford Institute of Energy Studies.

    And like Saudi Arabia has done in oil, Gazprom has shown it can use its market dominance to squeeze its competitors.

    After Lithuania opened its Independence LNG import terminal at the end of 2014, for example, Gazprom cut prices to Lithuania and has held an auction for the Baltic states in a bid to boost consumption.

    "We have such low production costs that we will always be able to cut the selling price by a dollar or two when it comes to fighting off a rival," said a senior source at Gazprom.

    Attached Files
    Back to Top

    Australia in sweet spot to meet Asia demand for ultra-light oil

    Australia is in pole position to capture a bigger piece of the growing Asian condensate market, with producers pumping new supplies of the ultra-light oil as natural gas output soars to feed the nation's mega LNG projects.

    An Australian wave of liquefied natural gas supply has helped pull Asian LNG prices down by 75 percent since 2014, so selling more lucrative condensate to Asian buyers could give a lifeline to less profitable projects.

    Australia's Ichthys LNG export project, for instance, operated by Japan's Inpex Corp, could produce more than 100,000 barrels per day (bpd) of condensate when it starts up next year.

    "The fact that the project is liquid-rich is one of the reasons that this project is economically in good standing," an Inpex spokesman said, adding that the company has started marketing its condensate, primarily to customers in Asia.

    Condensate is a light oil produced in association with natural gas, and its consumption is rising across Asia as new refineries or splitters come online to meet strong demand for it to be used to make the chemical feedstock naphtha.

    The circle of condensate suppliers is small, though, and Australia has the inside track on selling to Asia, especially with some Middle East producers building their own splitters.

    "The outlook is quite pessimistic (for buyers) as sweet condensate supplies are very limited," said an Asian oil buyer who declined to be named due to company policy.

    Qatar, a traditional exporter to Asia, plans to divert a third of its output to its own splitter by January.

    Rival producer Iran could fill some of that shortfall, and it has stepped up exports to South Korea following the lifting of sanctions against Tehran, hitting a record in June.

    Quality issues with Iran's condensate, however, limit its attraction to buyers. The outlook on its supplies is also murky on delays in the start-up of its splitter projects and a ramp-up of production from its South Pars field.

    Premiums for Qatari condensate loading in February hit a record, but have since fallen back on weak naphtha margins. The rise in condensate use as splitters start up from September could drive premiums higher again, traders said.

    Combined condensate supplies from Ichthys and Gorgon of almost 140,000 bpd will initially meet a rise in Asian splitter capacity of 160,000 bpd in Taiwan and South Korea between late 2016 and early 2017.
    Back to Top

    Dutch agency calls for further cut in Groningen gas production

    A Dutch advisory body has advised the government to make additional cuts to production at the Groningen gas field to reduce the risk of earthquakes in the northern province, local media reported on Wednesday.

    The Netherlands' National Mines Inspectorate has advised the government to cap production at 24 billion cubic meters (bcm) of gas annually, De Telegraaf newspaper said in its overnight edition, citing a recommendation to Economy Minister Henk Kamp.

    The Cabinet is expected to announce its production plans for the field for the period after Oct. 1, 2016 on Friday, after several cuts in the past year have left it at the rate of 27 bcm on an annualized basis.

    The final decision will be based on the recommendations from the agency, Groningen's operator NAM, a joint venture of Royal Dutch Shell and Exxon, and six other parties.

    A majority of lawmakers Dutch parliament have called for production to be cut as far as possible to reduce earthquakes in the northern province caused by the gas extraction.

    Groningen gas has supplied almost 10 percent of demand in the European Union and announcements to cut production have led to short term spikes in gas prices.

    Attached Files
    Back to Top

    Sechin says Rosneft worth up to $130bn as Putin mulls sale

    Russia’s Rosneft PJSC could be worth as much as $130 billion, Chief Executive Officer Igor Sechin said as President Vladimir Putin is reported to consider selling a stake in the state oil giant to China and India.

    The producer is “not afraid” of Chinese partners, including China Petroleum & Chemical Corp. and China National Petroleum Corp., Sechin told state television station Rossiya-24, citing existing partnerships with both companies. Rosneft is not currently talking to Chinese or Indian companies about a stake sale though, he said. The company’s current market value is about $55 billion.

    Selling a stake in Rosneft, which pumps more crude than Exxon Mobil Corp., would help Putin raise cash to plug a deficit in the nation’s budget as a collapse in oil prices has the country facing a second year of recession. Sechin has voiced a preference for selling a stake to a strategic partner as opposed to a public share offering that would be more susceptible to political instability. Rosneft is among companies sanctioned by the U.S. over Russian support for an insurgency in Eastern Ukraine.

    Russia has been seeking buyers for 19.5 percent of Rosneft and has indicate it would prefer a joint deal with China and India, the two nations driving growth in global energy demand, two people familiar with the matter said. There’s “no single preferred option” for the deal, Kremlin spokesman Dmitry Peskov told reporters on Monday.

    Rosneft would like to avoid any attempt by the state to raise funds via taxation, Sechin said. The industry requires the opposite, easing taxation, especially with regards to refining inside Russia, he said.
    Back to Top

    Canada’s pipeline operators on the hook as 'absolute liability' provisions kick in

    The new Pipeline Safety Act has come into force in Canada, heralding a new era of absolute liability for pipeline owners and operators and setting out financial resource requirements to pay for all costs related to a spill or rupture. 

    The National Energy Board (NEB) on Monday welcomed the Pipeline Safety Act, which first received Royal Assent on June 18, 2015. This also resulted in changes to the NEB Act and to some extent the Canada Oil and Gas Operations Act. 

    “These legislative changes enhance and strengthen our mandate to provide lifecycle oversight of federally-regulated pipelines, from construction through abandonment,” NEB chairperson Peter Watson stated. 

    According to the NEB, the most significant changes to the the Pipeline Safety Act (Bill C-46) related to absolute liability and financial resource requirements, abandonment, pipeline releases, damage prevention, as well as audit and enforcement powers. 

    The absolute liability provisions in the Pipeline Safety Act applied to the company that owned the pipeline, not landowners or other companies such as incorporated farms. The NEB stated that it would hold the company that owns the pipeline, and not farmers or other parties, responsible for any clean-up costs in the event of a spill or rupture. 

    The Pipeline Safety Act put in place new measures to help ensure that pipeline companies held enough financial resources to pay these types of costs in the event of a spill or rupture. NEB-regulated companies operating pipelines that had the capacity to transport at least 250 000 bbl/d of oil would from now on be liable for all costs and damages for an unintended release, of up to C$1-billion, regardless of fault. 

    Currently, five companies would be subject to the C$1-billion absolute liability, including Enbridge Pipelines, Enbridge Pipelines (Westspur), Express Pipeline, TransCanada Keystone Pipeline and Trans Mountain Pipeline. Other projects that would fall under the new liability regulations, should they be approved, included TransCanada's Energy East pipeline project and Kinder Morgan's Trans Mountain pipeline expansion project. 

    According to the NEB, each of these companies had submitted a plan explaining how it proposed to meet the C$1-billion of financial resources. The remaining pipeline companies under NEB jurisdiction would have absolute liability limits set through regulations currently being developed by Natural Resources Canada. 

    The new regulations also provided improved provisions for damage prevention, which laid out obligations of those planning construction of facilities, ground disturbance activities or vehicle or mobile equipment crossings in the area of an NEB-regulated pipeline, as well as the obligations of pipeline companies. 

    Further, the NEB’s jurisdiction had also been expanded to provide oversight of pipelines post-abandonment. Companies will remain liable for post-abandonment costs and damages.

    It also provided the NEB with new powers for inspection officers, and new authority to assume control of an abandoned pipeline if a company is not complying with a NEB order. 

    Under the new regulations, the Governor in Council had also been provided the authority, in the event of a pipeline release, to ‘designate’ a company if it either did not have the ability to pay for the release, or did not comply with a board order, and for the NEB to take over spill response.
    Back to Top

    Essar Oil Emerges as India's Largest Unconventional Gas Producer

    India's Essar Oil Ltd. emerged as the country's largest unconventional gas player as itsRaniganj (East) Block in West Bengal crossed an important milestone when it became the first local coal bed methane (CBM) asset to produce 35.3 million standard cubic per day (MMscf/d) or 1 million standard cubic meters per day (MMscf/m).

    The company expected peak production from the Raniganj (East) Block to reach 105.9 MMscf/d (3 MMscf/d). According to the 2016 NSAI (Netherland Sewell & Associates, Inc.) report, the proven, probable and possible gross CBM reserves in the block is around 1.09 trillion cubic feet (Tcf), while contingent resources was estimated at around 270 billion cubic feet (Bcf).

    “We married talent with technology to transform reserves to production. In the last 12 months, the average well productivity has more than doubled, the gas break-out time in new wells has reduced to days instead of months, and the workover cycle has reduced to a fifth. Our collaborative relationship with international service providers has resulted in win-win solutions,” Essar Oil CEO for Exploration and Production Manish Maheshwari said in the press release.

    Essar Oil is supplying 5.29 MMscf/d (150,000 scm/d) of CBM gas to Matix Fertilisers for its pre-commissioning activities, while industrial consumers in the catchment area of Durgapur also received the fuel from the company.

    “There are tremendous opportunities in the domestic unconventional hydrocarbon sector. The Hydrocarbon Exploration Licensing Policy (HELP), which was announced by the Government in March 2016, recognizes this potential in contributing towards national energy security,” Maheshwari added.

    Essar Oil revealed that a U.S. Trade & Development Agency-supported study by an independent U.S. firm with expertise in shale has assessed that the original in-place shale gas resources in the Raniganj (East) Block is estimated at around 8 Tcf.

    In February, Essar Oil awarded Greka Drilling Ltd. a $8 million one year contract for the provision of drilling services for its Raniganj (East) Block. Greka deploys two semi-automated GD75 rigs for the drilling operations, which commenced May 8 and June 5, respectively.

    Excluding its Raniganj (East) Block, Essar Oil's CBM portfolio in India includes more than 1,042 square miles of acreage.
    Back to Top

    Birchcliff Buys Encana’s Gordondale Montney for $488 Million

    Birchcliff Buys Encana’s Gordondale Montney for $488 Million

    Birchcliff Energy Ltd., the company backed by Canadian businessman Seymour Schulich, has agreed to buy natural gas producing properties from Encana Corp. for C$625 million ($488 million) in cash.

    The assets include 54,200 net acres (21,900 hectares) of land and infrastructure in the Gordondale Montney region near Grande Prairie, Alberta, according to statements from the Calgary-based companies on Tuesday. Birchcliff will partially fund the purchase through a C$530 million stock offering and a C$18.75 million investment by Schulich, the company said. Schulich is the largest shareholder of Birchcliff, with a 28 percent stake as of a March filing, according to data compiled by Bloomberg.

    The deal is sizable for Birchcliff, a company that dropped efforts to sell itself just over four years ago. The purchase price is equivalent to more than half of Birchcliff’s current market value of about C$1 billion and will allow the company to boost production to an estimated 65,000 equivalent barrels of oil a day, from about 42,000 in the first quarter. Birchcliff is buying the assets even as it contends with the lowest Canadian gas prices for the start of the year since 1996 and hasn’t hedged for the slump.

    With the transfer of contracts to Birchcliff, Encana estimates it will reduce commitments to other companies tied to the processing and use of its gas by C$100 million. Encana has been selling assets to pay down debt and is seeking to continue reining in costs with U.S. crude still down almost 55 percent from its mid-2014 high. The company was in the midst of reorienting toward production of oil and liquids through a host of deals when the market collapsed, and it has continued to struggle with some pricier gas output than its peers.

    National Bank of Canada and Cormark Securities Inc. advised Birchcliff on the deal, and are also co-leading the equity financing along with GMP Capital Inc. and Bank of Nova Scotia. Royal Bank of Canada advised Encana on the agreement.
    Back to Top

    API data show 5.2 million-barrel drop in crude supplies

    Oil futures climbed past $50 a barrel in electronic trading Tuesday after the American Petroleum Institute reported that U.S. crude supplies dropped by 5.2 million barrels for the week ended June 17, according to sources. Analysts polled by S&P Global

    Platts forecast a fall of 1.4 million barrels for crude inventories. "The slow movement on the pipeline from Canada means we are just starting to see the impact from the [recent] wildfires" which disrupted production, said Phil Flynn, senior market analyst at Price Futures Group. The closely watched Energy Information Administration report will be released Wednesday.

    Attached Files
    Back to Top

    Norway oil drilling rig workers agree wage deal, avoid strike

    Workers on Norwegian offshore oil drilling rigs signed a new wage deal on Wednesday, avoiding a strike, labour unions and employers said in separate statements.

    Some 280 rig workers had threatened to strike if the talks failed, including staff on Rowan Companies' Viking and Gorilla rigs, and on the Statoil-operated Heidrun, Statfjord, Aasgard, Volve and Oseberg fields.

    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.

    Workers will get a 0.5 percent pay rise, said Norway's state-appointed mediator, who brokered the deal.

    The price of North Sea crude oil, Norway's top export, has fallen by some 60 percent since 2014, resulting in about 40,000 layoffs in the industry, according to the Norwegian Shipowners' Association, which negotiated on behalf of rig firms.

    "It's estimated that another 15,000 will lose their jobs before activity levels recover, which at the earliest will happen two years from now," it added.

    As part of the wage deal, it was agreed that those being laid off will have the right for a two-year period to be rehired if an employer increases staffing.

    In return, both unions and employers will contribute to identifying potential cost cuts, the state mediator said.

    "We had wished for a better outcome on wages than this mediation gave us," said Hilde-Marit Rysst, who heads the Safe trade union, one of three organisations negotiating on behalf of workers.

    "But given the situation this industry is in, we've shown moderation in order to win acceptance for our key priority, the right to reinstatement. We expect markets to improve, and if they do this victory will allow many of our members to win back their jobs," she added.

    Separately, oil and gas companies are due to negotiate with production workers from June 30 to July 1. If no agreement is found, a strike hitting the output of crude and natural gas could begin on July 2.
    Back to Top

    Energen numbers imply Permian is bigger than even we think!

    Energen Corporation today announced that it has closed or signed purchase and sale agreements (PSAs) for its non-core Delaware Basin and San Juan Basin assets. Including all sales transactions with multiple, undisclosed buyers, the total gross proceeds of $551.7 million are subject to standard closing costs and transaction fees. Asset sales not yet closed are expected to close by mid-August. The company expects to incur minimal taxes in association with these transactions.

    Net production associated with all the non-core properties being sold averaged 9.0 thousand oil-equivalent barrels per day (mboepd) in April 2016, of which only 34 percent was oil; the majority of the production is in the San Juan Basin. In the Delaware Basin, the non-core assets for which sales are closed or pending largely reflect unproved leasehold of approximately 55,000 net acres previously designated as Tier 1 or Tier 2. At December 31, 2015, proved reserves associated with all non-core asset sales totaled approximately 55 million oil-equivalent barrels (BOE).

    'We are very pleased with the success of our non-core asset sales,' said James McManus, Energen's chairman and chief executive officer. 'The proceeds have exceeded our expectations and, as a result, our balance sheet is even stronger. This position of financial strength allows us a great deal of flexibility to pursue additional capital investment opportunities in the Permian Basin in 2016 and 2017, including increased drilling and development and acquisitions.

    'To that end, we are increasing our capital investment in 2016 to approximately $450 million to further build up our inventory of drilled but uncompleted wells (DUCs) at year end,' McManus added. 'Up to $130 million will now target the Delaware Basin, where we plan to drill 17-19 net DUCs in the second half of 2016. In total, we now expect to end the year with approximately 54-58 net DUCs in the Permian Basin. [Prior capital guidance was $350-$400 million and 37-50 net DUCs.]

    'Not only does our balance sheet support the completion of these wells in 2017 but it also places us in an excellent financial position to undertake additional drilling and development activities in 2017.'

    With the sale of the remainder of its San Juan Basin assets, Energen has completed its transition to a pure Permian Basin operator. Its focus is on drilling and developing its high-quality acreage positions in the Midland and Delaware basins, where it estimates a remaining net resource potential of 2.0 billion BOE.

    In the core Midland Basin, the company has approximately 68,500 net acres with 2,546 net identified locations in seven horizontal formations. After all the transactions have closed, Energen will have approximately 42,200 net acres in the Delaware Basin in Texas and New Mexico with 954 net identified locations in four Wolfcamp shale formations.

    The company's primary focus in the Delaware Basin will be on bringing forward the value on approximately 31,200 net acres in Loving and parts of Reeves and Ward counties. On this core acreage position, the company has identified 675 net locations, including 148 net locations with at least 10,000 foot laterals and another 217 net locations with average lateral lengths of 7,500 feet.

    Attached Files
    Back to Top

    Rival Libyan forces clash in strategic eastern town

    Forces loyal to Libya's eastern leadership launched attacks near the town of Ajdabiya on Tuesday against a newly formed rival brigade, in fighting that threatens to prolong the country's conflict and expose divisions in a U.N.-backed unity government.

    Libya has been blighted by a power vacuum over the past two years, in which loose alliances of armed groups aligned with rival parliaments and governments in Tripoli and the east have fought for supremacy.

    On one side of the most recent air and ground battle are Libyan National Army (LNA) units loyal to eastern commander Khalifa Haftar, who has been waging a campaign against Islamists and other opponents in Benghazi since 2014.

    On the other are several hundred men from the recently named Benghazi Defense Forces (BDF), which says it wants to take back control of Libya's second city. They include members of the al Qaeda-linked militant group Ansar al Sharia.

    Ajdabiya is situated about 150 km (93 miles) south of Benghazi, close to major oil terminals and fields and the site of power and water facilities.

    The BDF attacked Haftar's forces on the southern outskirts of Ajdabiya on Saturday, claiming to have taken control of several LNA positions. On Monday and Tuesday, LNA war planes retaliated with strikes near a flour mill south of the town, military officials said.

    A medical source said a number of civilians in Ajdabiya had been wounded by mortar fire, some seriously.

    A separate force that controls the oil terminals, the Petroleum Facilities Guard (PFG), said on Monday that an LNA strike had hit a PFG training camp, causing damage. A spokesman for the Guard, Ali al-Hassi, promised a "harsh response".

    The PFG used to be allied to the eastern military but has now switched its allegiance to the U.N.-backed Government of National Accord (GNA).

    The GNA was designed to replace Libya's two other competing administrations, and has been trying to assert its authority from the capital Tripoli, which lies hundreds of kilometres west of Benghazi, since March.

    It has yet to win crucial backing from allies of Haftar in the eastern parliament.

    The GNA's Presidency Council issued a statement on Sunday condemning the attack by the BDF, but at least one member of the Council later distanced himself from the statement. Two members of the Council associated with eastern factions have already suspended their membership.

    The fighting in Ajdabiya comes as brigades aligned with the GNA are engaged in a campaign to recapture Islamic State's Libyan stronghold of Sirte, some 370 km to the west.

    Brigades based in the city of Misrata have advanced to the edge of Sirte from the west, and the PFG has retaken coastal territory from the jihadist group to the east.
    Back to Top

    Falling Venezuela oil production

    Internal PDVSA report seen by Platts shows fall in Venezuela oil prod. is accelerating. 2,468,200 b/d in May, down 194,500 b/d frm Jan.

    Back to Top

    Nigeria maintains oil exports despite wave of militant attacks

    Nigeria kept exporting crude oil at a largely steady pace in May, though below historical levels, despite repeated militant attacks on its infrastructure that drove output down to 30-year lows this spring and helped global prices rise, data showed.

    Data from maritime intelligence firm Windward and Thomson Reuters showed a far smaller drop in exports from April to May than most in the market had expected. It suggested that Nigerian oil production is more resilient than many thought.

    Its oil industry has been grappling with a spate of militant attacks that took out the Forcados crude oil stream in February and affected Bonny Light, Brass River and Escravos in May mainly by targeting pipelines taking crude to export terminals.

    An accident on the terminal exporting Qua Iboe, its largest oil stream, further knocked production and led the International Energy Agency (IEA) to declare May production at 30-year lows of 1.37 million bpd.

    But Windward showed May exports dropping by just 62,000 barrels per day (bpd) from April, with exports still reaching 1.89 million bpd.

    Windward tracks all exports coming from Nigeria including crude oil, condensates and ship-to-ship transfers, so its figures are nearly always higher than estimates of crude oil production alone.

    But its figures indicate that Nigeria exported between 300,000-500,0000 bpd more than what OPEC and other agencies thought it had produced in May.

    "It was the gains from small fields that offset declines from others," said James Davis, head of crude supply at FGE Energy. "The disruptions in the fields that were out was pretty much what we expected. What we didn't expect was the marginal increases in other fields."

    Reuters data showed total exports in May at roughly 1.67 million bpd, down from 1.77 million bpd in April, and also a rise in exports of grades including Bonga, Agbami, Antan, Amenam, Okwori that helped to offset the losses.

    The figures remain substantially below the close to 2 million bpd Nigeria has exported in the best of times.

    Still, they suggest that many industry observers, for example the "secondary sources" polled by OPEC that pegged Nigeria's May production at around 1.4 million bpd, were overly pessimistic about its ability to keep pumping.

    Trade sources noted that some of the oil could have come from crude stored at export terminals and on ships offshore.

    But these volumes are not typically substantial in Nigeria, and most traders noted that oil kept flowing from streams that had been repeatedly attacked, including Bonny Light and Brass River, while the Qua Iboe outage was shorter-lived than expected.

    According to Windward data, 22 million barrels exported in the last 10 days of May pushed exports closer to par with April.

    Attached Files
    Back to Top

    DOE releases US LNG export data

    The US Department of Energy’s (DOE) Office of Fossil Energy has released LNG import and export data for the US for the first four months of 2016.

    According to the data, Sabine Pass Liquefaction LLC exported a total of 21 508 223 million ft3 of LNG since the first shipment to Brazil onboard the Asia Vision tanker in February 2016. Following that shipment, a further six cargoes of LNG departed the terminal up until 25 April 2016, delivering to India, the United Arab Emirates (UAE), Argentina and Portugal. The price at export point ranged from US$3.35/million Btu to US$4.10/million Btu.

    The data also shows that American LNG Marketing LLC exported a total of 7432 million ft3 of LNG in ISO containers from Miami, Florida, US to Barbados in the first four months of 2016.

    The US also imported 34.8 billion ft3 of LNG from Trinidad in the first four months of 2016, according to the data. This figure stedily declined from 12 billion ft3 of LNG in January 2016 to just 4.7 billion ft3 of LNG in April 2016.

    Attached Files
    Back to Top

    Warburg Among Private Equity Sideswiped by Canada Gas Plunge

    The first natural gas producers to go broke are being put up for sale in Canada during the worst start for prices in two decades.

    Mosaic Energy Ltd., which is backed by Irving, Texas-based NGP Energy Capital Management LLC, is set to be shopped around by Royal Bank of Canada through a receivership that began in late April, while Endurance Energy Ltd., majority owned by New York-based Warburg Pincus LLC, is being marketed by Bank of Montreal through a restructuring that started at the end of May, court documents show.

    The two gas-focused producers join oil companies also grappling with insolvency two years into a crude market rout, including Connacher Oil and Gas Ltd. and Anterra Energy Inc. They may be the first of a series of Canadian gas companies being forced to sell as they navigate what will probably be a summer of tough prices, according to FirstEnergy Capital Corp.

    “It’s another lesson that even when you’re an all-private firm with private-backed money, that’s no guarantee of success,” said Martin King, an analyst at FirstEnergy in Calgary. “There are still probably too many small, independent natural gas producers out there who are just simply not going to make it through this cycle, or are going to come through it deeply wounded.”

    Canada Discount

    Spot gas prices in Canada are being hit with a confluence of short- and long-term challenges. A warmer winter reduced demand, pushing record volumes into storage for the season, just as the industry is up against stiffer competition from U.S. producers. Demand lost from oil-sands projects shut down by a wildfire in May has been another blow. The storage supplies are widening the discount for Canadian gas relative to the U.S. benchmark, which typically reflects transportation costs.

    Gas at Canada’s AECO hub has averaged $1.1529 per million British thermal units in 2016, the worst start since 1996, according to data compiled by Bloomberg. Gas at 53 cents on May 9 was the lowest daily price since October 1997. While the fuel has almost tripled since then, it’s trading at about little more than half the price at the Henry Hub in Louisiana.

    Service Providers

    Mosaic, a Calgary-based company focused on producing gas and gas liquids in Alberta, had daily production of about 8,190 equivalent barrels of oil a day in February, 74 percent of which was gas, according to court documents. The company, negatively affected by the drop in gas prices and its fuel transportation and processing commitments, defaulted on terms of its agreement with lenders in March and didn’t repay debts, triggering the receivership filing, the documents show.

    A representative for Ernst & Young, the receiver for Mosaic, didn’t return phone and e-mail requests for comment. NGP declined to comment.

    In a unique twist for an insolvent producer, Mosaic could be acquired by one of its service providers. Pembina Pipeline Corp. has a contract to process Mosaic’s gas at its Resthaven plant for minimum charges of C$2 million ($1.6 million) a month for a 15-year term that began in October 2015, the documents show. If the contract isn’t assumed by a purchaser of Mosaic’s assets, Pembina would become a large unsecured creditor. To satisfy a contract currently worth an estimated C$200 million, Pembina may end up bidding for Mosaic, according to people familiar with the sales process who asked not to be identified discussing non-public information.

    First Refusal

    Pembina said the impact of Mosaic’s receivership is “financially immaterial” to the company, declining to comment on details regarding its contract and whether it could acquire Mosaic.

    Endurance, also based in Calgary, produces about 85 million cubic feet of gas a day from its main Sierra Field asset in northeast British Columbia. The decline in gas prices and a reduction of credit available from lenders resulted in a “liquidity crisis” for Endurance, whereby it could no longer pay its debts, according to court filings.

    Warburg Pincus, which bought its initial holdings in Endurance 2012 and now owns 84 percent of the shares, could end up taking the company out of the restructuring. By providing interim financing, the investor has the right of first refusal on any bids for Endurance in the sales process, the documents show.

    Summer Struggle

    Protection from creditors was sought so the company could undergo an orderly restructuring, Endurance Chief Executive Officer Steve VanSickle said in an e-mail. Warburg Pincus declined to comment.

    “There’s got to be a few more guys on the ropes,” said FirstEnergy’s King. Canadian gas producers will probably have to wait for the winter heating season to draw down supplies enough to significantly boost prices, he said. “For the balance of the summer, it’s going to be something of a struggle for Canadian gas.

    Attached Files
    Back to Top

    Russia beats Saudis for third straight month as China's top crude supplier

    Russia beat out Saudi Arabia as China's largest oil supplier in May, customs data showed on Tuesday, marking the third month in a row the world's biggest oil producer has topped the world's biggest oil exporter in feeding China's market.

    Russia's exports to the world's No. 2 oil consumer hit a fresh record and reflect continuing strong demand from China's independent refiners.

    China imported 5.245 million tonnes, or around 1.24 million barrels per day (bpd) of crude oil from Russia last month, up 33.7 percent year on year, and beating the previous record in April of 1.17 million bpd.

    Russian imports surpassed Saudi Arabian imports for the first time on a cumulative basis. For the first five months of 2016, Russian imports are 41.8 percent higher than a year ago at 1.06 million bpd, while Saudi Arabian imports averaged 1.05 million bpd.

    "Russian oil remains the teapots' top pick, suiting them in the way that teapots' throughput planning was often shorter-term that requires prompt deliveries," said a senior China-based trader with a global supplier who frequently deals with independent plants.

    Crude imports from Saudi Arabia jumped 33.6 percent in May from a year ago to 961,000 bpd, data showed, but easing off the 1.0 million bpd level in the previous month.

    Nicknamed "teapots" due to their relative smaller scale versus state refiners, these refineries helped boost China's crude demand by more than 1 million bpd in the first five months of the year.

    Russia's low-sulphur ESPO grade has been a favourite for these plants due to the smaller cargo size and geographical proximity, while higher sulphur grades from Saudi Arabia and Iraq has not been as appealing because of larger shipment sizes and because they typically are sold under long-term contracts.

    China is also speeding up approvals for crude import licenses and quotas for independent refiners. Shandong-based Haiyou Petrochemical Group was granted a crude import licence on June 14, while two other refineries were given import quotas in May.

    Imports from Iran rose 19.5 percent in May from a year earlier to 619,300 bpd, compared with April's 671,176 bpd. Imports for the first five months held largely flat.

    Iraqi exports to China rose 56.6 percent in May from a year ago to 801,120 bpd. Imports for the first five months rose 18.4 percent.

    China's total crude oil imports expanded 39 percent last month from a year earlier to 7.59 million bpd, the biggest jump in more than six years.

    China's refiners also continued to fuel an ongoing glut in Asia's fuel products markets, especially in gasoline and diesel, contributing to a sharp decline in regional profit margins this year.

    China's diesel exports rose more than four-fold in May from a year earlier to a record 1.48 million tonnes, customs data showed, reflecting a slowdown in China's heavy industry which typically uses diesel and continuing growth in throughput at independent refineries.

    Exports of gasoline, used mostly by passenger vehicles, more than doubled in May from a year earlier to 780,000 tonnes as China's newly licensed independent refiners churned out more petrol than the domestic market can handle.

    As a result of China's surging refined product exports, overall benchmark Singapore refinery margins, or cracks, have fallen by more than half this year to under $4.90 per barrel.
    Back to Top

    Nigeria agrees one-month ceasefire with Delta militants, official says

    Nigeria has agreed a one-month ceasefire with militants including the Niger Delta Avengers in the oil-producing southern region, a petroleum ministry official said on Tuesday.

    Militant groups including the Avengers, who have claimed responsibility for a string of attacks on oil and gas facilities in recent weeks, could not immediately be reached for comment.

    They say they want a greater share of Nigeria's oil wealth to go to the impoverished Delta region. Crude sales make up about 70 percent of national income and the vast majority of that oil comes from the southern swampland.

    The latest attacks have pushed production to a 30-year low.

    Last week the Avengers said they would negotiate with the government if independent foreign mediators were involved.

    "It was very difficult getting the Niger Delta Avengers to the negotiating table but we eventually did through a proxy channel and achieved the truce," said the official, who asked not to be identified.

    A second government official, who also wished to remain anonymous, said a "a truce was agreed" with militants.
    Back to Top

    Tokyo Gas buys Eagle Ford shale stake, despite loss from prior U.S. purchase

    Tokyo Gas Co  said on Tuesday it has bought a 25 percent stake in an Eagle Ford shale gas formation, in what could be among the first shale investments in the United States by a Japanese firm since the tumble in energy prices.

    Japan's biggest city gas supplier said it purchased the stake from VirTex Producing Co. The company did not give a break-down of the value of the stake but said it expects to spend up to 8 billion yen ($76.64 million) for the stake plus investments in subsequent drilling combined.

    The Nikkei newspaper said earlier on Tuesday the company plans to buy a 25 percent interest in an Eagle Ford shale development for more than 5 billion yen.

    The project, which already is under commercial production, is expected to supply gas equivalent to 200,000 tonnes per year (tpy) of liquefied natural gas (LNG) output for 20 years, Tokyo Gas said.

    Tokyo Gas in 2013 bought a shale gas stake in Texas' Barnett Basin from Quicksilver Resources that gave it gas output equivalent to 0.35 million to 0.5 million tpy of LNG output for $485 million. But hurt by falling energy prices, the company has posted impairment losses for the project twice.

    The company's senior general manager of global business department, Hisashi Nakamura, told Reuters after a briefing the firm is considering buying more U.S. stakes in future.

    "We would look for more deals if there are good ones, but only the cost-competitive projects that are profitable even at low prices would survive, so they are not found everywhere," he said.
    Back to Top

    Microsoft opens Oil & Gas centre of excellence

    Microsoft's Oil & Gas centre of excellence will include technology and expertise from Microsoft and strategic partners.
    By  Mark SuttonPublished  June 16, 2016

    Microsoft has opened a new centre of excellence for the oil & gas industry in Dubai. The Middle East and Africa centre has been launched to assist organisations in the sector to drive digital transformation, cut costs and optimise processes in their organisations.

    The centre, which is the largest such facility for Microsoft globally, will focus on emerging technologies including Internet of Things (IoT), advanced analytics, modern productivity and cloud computing and Microsoft solutions. The centre also brings together leading industry players like Accenture, Aveva, Baker Hughes, Honeywell, OSIsoft, Schneider Electric and Schlumberger.

    According to the 2016 Upstream Oil and Gas Digital Trends Survey by Accenture and Microsoft, 80% of upstream oil and gas companies plan to increase spending on digital technologies in order to help them drive leaner, smarter organisations. The International Data Corporation (IDC), predicts that IT spending in oil and gas will increase to nearly $50 billion in 2016, while spending on connectivity related technologies should increase by 30%.

    "Digital transformation is top of mind for executives in the oil and gas industry, which is why we built the centre of excellence in the Middle East," said Omar Saleh, director for Oil and Gas at Microsoft, Middle East and Africa. "For the industry to transform, companies need to develop sound digital strategies, built on secure and agile platforms, either on a company's premises or in the cloud. Continuous dialogue with our customers and partners is essential for enabling innovation and moving the industry forward. This is what the centre of excellence is built for."

    The survey also showed that 44% of respondents said that investment in IoT is their next main priority, to extract efficiency from their organisations and speed up decision making. Mobility solutions for field works and connection of assets through IoT and smart devices is also a priority for 60% of organisations.
    Back to Top

    China May diesel exports up over 300 pct on year -customs

    China's diesel exports rose 305.7 percent in May from a year earlier to 1.48 million tonnes, customs data showed on Tuesday.

    Gasoline exports climbed 105.6 percent in May from a year earlier to 780,000 tonnes, while kerosene exports fell 0.3 percent on-year to 950,000 tonnes, the data showed.

    Imports of diesel soared 1,544.7 percent to 40,000 tonnes, while kerosene imports were up 16.9 percent at 340,000 tonnes. Liquefied natural gas imports rose 27.3 percent to 1.43 million tonnes.
    Back to Top

    Private equity warms up to oil deals with $1 trillion warchest: EY

    The world's private equity funds, with a cash pile of around $1 trillion, are stepping up their interest in the oil and gas industry, with almost a half expecting to buy assets in the sector over the next year, a survey showed on Tuesday.

    Funds' appetite for investments in the sector fell sharply after the start of the oil price route two years ago. But recent signs of a rebound, coupled with abundant assets around the world, are turning the tide, advisory firm EY said in a survey of 100 private equity (PE) firms.

    Around 43 percent of the firms said they were planning acquisitions by the first half of 2017 and 25 percent before the end of the year.

    "Activity will pick up at the back end of the year but people are still cautious," Andy Brogan, EY Global Oil & Gas Transactions Leader told Reuters.

    "The fact that the oil price seems to be sticking is gradually making people more confident that they can make some bets."

    PE firms, which typically seek high returns on investment, have a warchest of around $971 billion, EY said.

    The expected pickup in activity, however, is likely to vary by region.

    North America remains a focal point after a large number of assets was placed on the block as the shale oil and gas boom stuttered, including a rising number of distressed companies, Brogan said. Relatively accessible financing is also supportive, he added.

    Asia Pacific is also attracting buyers' interest, although the size of the market is smaller, while mature basins such as the North Sea remain less attractive due to high operating costs and liabilities linked to the clean up of old wells.

    PE funds such as Carlyle Group, Blackstone Group and CVC Partners have all set up management teams in recent years to acquire and manage oil and gas assets.

    Buying activity so far has nevertheless been limited and focused mostly in North America.

    After peaking in 2014 at 104 deals worth $39 billion, PE activity fell sharply last year to 64 transactions, according to EY. The first quarter of 2016 saw 12 deals worth $7.6 billion, including a group of U.S.-based funds acquiring a 12.3 stake in Plains All American Pipeline for $1.5 billion.
    Back to Top

    Saudi Crude Exports Fall to 6-Month Low as Refineries Cut Back

    Saudi Arabia, the world’s biggest crude exporter, cut shipments in April to the lowest level in six months as overseas refineries bought less due to seasonal maintenance and the kingdom burned more oil at home to power air conditioners.

    Shipments dropped to 7.44 million barrels a day from 7.54 million barrels a day in March, and to the lowest since 7.36 million in October, according to data released Monday by the Joint Organisations Data Initiative in Riyadh. Exports also declined for Qatar, whose shipments slid to the lowest since at least 2002, as well as for fellow OPEC members Iraq and Kuwait, the data show.

    Oil companies typically shut refineries for maintenance in April and May in preparation for higher summer demand. Saudi Arabia is planning to boost crude production to 10.5 million barrels a day in the next few months as higher summer temperatures boost demand for electricity needed to cool homes and offices, a person with knowledge of Saudi output policy said in April. The country’s output was 10.26 million barrels a day in April after reaching a record 10.56 million in June 2015, according to Jodi.

    “We have a refinery turnaround season going on,” Mohamed Ramady, a London-based independent analyst, said by phone. Also, “we had an uptick in local consumption of crude for power,” he said.

    Qatar’s oil exports, which fell to 427,000 barrels a day in April from 506,000 barrels in March, were the lowest since JODI started compiling data in January 2002. Iraq’s shipments dropped to 3.36 million barrels a day from 3.81 million in March, while Kuwait’s exports declined to 2.03 million in April from 2.2 million, the data show. Export data on the JODI website wasn’t updated for five of the 13 members of the Organization of Petroleum Exporting Countries: Iran, the United Arab Emirates, Indonesia, Libya and Venezuela.
    Back to Top

    BP sanctions 'fast-track' development of Atoll discovery in Egypt

    BP announced today that together with the Egyptian Natural Gas Holding Company (EGAS), it has sanctioned development of the Atoll Phase One project which is an early production scheme that will bring up to 300 million cubic feet a day (mmscfd) gross of gas to the Egyptian domestic gas market starting in the first half of 2018. BP has a 100% interest in the concession.

    Hesham Mekawi, Regional President, BP North Africa commented: 'BP is proud to progress the acceleration of the Atoll project which will bring critical gas to the Egyptian market and establish a new material hub offshore East Nile Delta. Our confidence in the prospectivity of the area along with our ongoing commitment to Egypt and our successful history of partnership with the Ministry of Petroleum, EGPC and EGAS is allowing us to fast track Atoll from discovery to production in less than three years which is a significant achievement.'

    BP recently completed multiple transportation and processing agreements accelerating the development of the Atoll field which contains an estimated 1.5 trillion cubic feet (tcf) of gas and 31 million barrels (mmbbl) of condensates. Onshore processing will be handled by the existing West Harbour gas processing facilities.

    BP announced the Atoll discovery in March 2015. The Atoll-1 deepwater exploration discovery well in the North Damietta Offshore concession in East Nile Delta was drilled using the 6th generation semi-submersible rig Maersk Discoverer. The exploration well reached a depth of 6400 metres and penetrated approximately 50 metres of gas pay in high quality sandstones. The Atoll Heads of Agreement was signed by His Excellency Tarek El Molla, Egyptian Minister of Petroleum and Mineral Resources and Bob Dudley, BP Group Chief Executive in November 2015, just eight months after the discovery.

    Atoll Phase One is an early production scheme (EPS) involving the recompletion of the existing exploration well as a producing well, the drilling of two additional wells and the installation of the necessary tie-ins and facilities required to produce from the field.

    The Atoll wells will be drilled by the DS-6 rig which arrived in Egypt last month and is expected to start drilling in August for roughly the next 24 months. Success of the Atoll Phase One EPS could lead to further investment in the Atoll Phase Two full field development.
    Back to Top

    Russia's Gazprom eyes asset swap deals with Shell by year-end

    Russia's state-controlled gas giant Gazprom (GAZP.MM) could gain control over some of the assets that Shell (RDSa.L) acquired earlier this year from BG group, a senior Gazprom executive said in an interview.

    Gazprom's Deputy Chief Executive Alexander Medvedev said the BG holdings could be included in an asset swap deal between Gazprom and Shell that was announced last year. He did not say what the BG holdings were or where they were located.

    "The work is under way, progress has been made and the final result is just around the corner - it's certain that the (deals will be completed) by the year-end, maybe earlier," Medvedev said in an interview cleared for publication on Monday.

    "Obviously, the BG assets are also in that basket," Medvedev told Reuters in the interview.

    Gazprom is subject to U.S. financial sanctions imposed on Russia over the conflict in Ukraine.

    Shell signed a deal with Gazprom last week to study jointly building a $10 billion gas plant on the Baltic Sea, as part of their strategic partnership which also foresees asset swaps.

    Shell, which wants to sell as much as $30 billion worth of assets and exit 10 countries after merging with BG, has never commented on the assets it plans to offer to Gazprom.

    The asset swap deal is not covered by the scope of the sanctions. Nevertheless, it could still arouse political sensitivities, especially if as part of the deal the Russian company, run by a close ally of Russian President Vladimir Putin, ends up controlling assets in western Europe.

    Under the previously-announced terms of their asset swap deal, Gazprom and Shell will jointly invest $13 billion in three projects in Russia, including construction of a liquefied natural gas plant on the Baltic Sea and the Sakhalin-2 LNG plant expansion, in the Pacific Ocean.

    Shell is also eyeing the Yuzhno-Kirinskoye gas field off Sakhalin island as part of the asset swap deal. That asset is specifically subject to the U.S. sanctions, complicating any involvement by Shell.
    Back to Top

    MEI: LNG oversupply to stretch to 2024

    The latest research by McKinsey Energy Insights (MEI) predicts the LNG oversupply could last until 2024, meaning few projects could reach financial investment decision in the next 12 to 18 months.

    The research shows the LNG supply glut is“exacerbated by the 100 million tons per annum of new export terminal capacity currently under construction in the United States and Australia.”

    By 2019, MEI expects the oversupply to peak at 60 mtpa.

    According to James Walker said, “Our research shows that the current market oversupply is creating challenging conditions for operators hoping to take FID on projects in the near term.”

    He adds that, in order to be viable, such projects would require an assumption of either a sustained high LNG price post-2024 or a cost optimization strategy to reduce projected capital expenditures.

    In an oversupplied market, many projects will struggle to secure buyers, Walker said, adding that, even if the projects move to the construction phase, LNG supply would hit the market at a bad time.

    The research predicts that the market will remain oversupplied unless the current low prices can stimulate a demand recovery, however, that response has been limited over the past two years.
    Back to Top

    Traffic at France's Fos oil port back to normal -terminal operator

    Ship traffic at France's biggest oil port terminal, Fos-Lavera, was back to normal on Monday after a four-week strike over a labour reform bill ended late last week, an official at terminal operator Fluxel said.

    "During the weekend, our staff did everything possible to clear the harbour," the official told Reuters. "About 30 vessels are now waiting, which is a normal level."

    Strikes at Fos-Lavera on the south coast, Le Havre port in the north and at refineries across France had disrupted fuel supply. CGT union workers at Fos-Lavera are planning two one-day strikes on June 23 and 28 as part of further nationwide protests against the government's labour reform.
    Back to Top

    Marathon Oil to buy PayRock Energy Holdings for $888 mln

    Oil and natgas producer Marathon Oil Corp said it agreed to buy PayRock Energy Holdings LLC for $888 million from venture capital firm EnCap Investments, boosting its presence in the Oklahoma basin.

    Marathon Oil, which held about 265,000 net acres in Oklahoma, said in February it has allocated about 14 percent or $204 million of its 2016 capital spending to the basin.

    PayRock, an Oklahoma and Kansas-focused portfolio company of EnCap Investments, has current production of about 9,000 net barrels of oil equivalent per day in Oklahoma.

    A near 57 percent plunge in oil prices has pushed down the valuation of oil acreages, making acquisitions more attractive.

    Marathon had agreed to sell non-core assets for $950 million in April, bringing its total sales through divestitures to about $1.3 billion since last August.
    Back to Top

    Shell puts revamped shale arm at heart of growth drive

    Having turned round its North American shale business, Royal Dutch Shell is putting so-called unconventional energy at the heart of its growth plans, and believes lessons from the revamp can be applied across the company.

    Greg Guidry, head of the Anglo-Dutch group's unconventionals business, told Reuters a drive to slash costs and streamline decision-making had put his division largely on a par with leading rivals in terms of productivity and efficiency.

    And now the rest of Shell could reap the benefits too.

    "The executive committee charged us to be a catalyst for change within the broader Shell," Guidry said in an interview.

    He also said Shell planned to make small acquisitions near its existing North American shale areas, notably from producers struggling in the current industry downturn, and hoped to launch an early production well this year in Argentina's Vaca Muerta, considered the world's No.2 shale resource after North America.

    That's quite a change in fortunes.

    As recently as late last year, Shell Chief Executive Ben van Beurden was considering jettisoning the unconventionals business over concerns it would drag down group profitability after the group's $54 billion acquisition of BG Group in February.

    Shell and rivals including Chevron and Exxon Mobil were late to the shale revolution at the end of the last decade and struggled to match the success of smaller independent producers that increased U.S. output by around 4 million barrels per day between 2008 and 2015.

    Oil majors' often cautious pace in complex, high-risk projects was ill-suited to the nimble needs of shale, which requires drilling hundreds of wells and injecting water at high pressure to break the rock that holds oil and gas.

    So Shell moved to adapt.

    In recent years, it has shed half of its North American unconventional assets for around $4 billion to focus on four areas in the United States and Canada.

    It has cut its technical check-list for drilling shale wells from 20,000 requirements to less than 200 and given managers "end-to-end" control of the production process from well exploration through to well abandonment, Guidry said.

    The division's efficiency has risen by 50 percent over the past three years, production has grown by 35 percent and capital spending is down by 60 percent to around $2.0-$2.5 billion.


    Today, Shell makes a profit from shale oil production in "sweet spots" in the Permian or Duvernay in Canada with crude prices of $40 a barrel, Guidry said. After dipping below $30 in January, Brent crude is currently trading around $48.

    "In terms of execution, we are completely competitive and have aspirations to be leading," Guidry said, adding the business could now compete with leading shale producers such as Pioneer Natural Resources and EOG Resources, though costs still could be reduced.

    Advances in technology meant there was scope to increase oil recovery from shale rock from today's 7-9 percent by another 1-3 percent over the coming years, Guidry added.

    "That is billions of barrels. We absolutely can reach that," the 55-year-old American said.

    And unlike multi-billion deepwater projects, shale can be turned on "with the drop of a hat," Guidry said.

    At around 300,000 barrels per day, shale today represents around 8 percent of Shell's overall production. However, Shell holds shale reserves of around 12 billion barrels, roughly as much as its deepwater resources, Guidry said.


    The shale business got its reward earlier this month when Van Beurden identified it as a key growth priority for Shell in the next decade along with renewable energy.

    What's more, Shell engineers are now using the experience in the shale business to improve deepwater projects, which helped knock out $1.5 billion in costs for the development of the Stones field in the Gulf of Mexico.

    As oil producers scrap costly and complex projects such as deepwater fields and sharply reduce budgets in the face of the oil price downturn, they are turning again to onshore shale which offers quicker returns and lower investments.

    Some analysts, including at Bernstein, still argue Shell should divest the shale business to focus on core strengths such as deepwater and liquefied natural gas (LNG), which are generating larger profits.

    "Surely private equity would have offered some healthy cash proceeds for this business today," said Bernstein analyst Oswald Clint, who rates Shell shares "outperform".

    But analysts at U.S. investment bank Tudor Pickering, Halt and Co. see growing value in Shell's unconventional portfolio, particularly in the Permian basin, which they value at $13 billion if oil hits $75 a barrel.

    "We believe Shell's North American unconventional portfolio is less core relative to global deepwater and LNG but we do see additional value that should command a premium multiple when compared to its European supermajor peers," they said.
    Back to Top

    Egypt targets 120 cargoes in 2017, grabs 11 for June

    The Egyptian Natural Gas Holding company (EGAS) could import up to 120 cargoes of liquefied natural gas in 2017.

    The state that turned from a net exporter to a net importer over the course of last year, due to increased domestic consumption and falling production, has secured 11 cargoes earlier in June, Reuters reports, citing trade sources.

    Out of the 11 cargoes, 10 will be delivered by the commodity trading house Trafigura with the remaining cargo to be delivered by PetroChina.

    Egypt has deployed two FSRUs in Ain Sokhna that serve as the country’s import terminals, and is looking to charter a third FSRU by the second quarter of next year to up its import capacity up to 2 billion cubic feet per day, the country’s oil minister Tarek El Molla recently said.

    The Höegh Gallant FSRU, provided by Höegh LNG, began operations in April last year, while the FSRU BW Singapore, provided by BW, has been in full operation since October 2015.

    In addition to around 1.1 billion cubic feet per day LNG imports currently, Egypt is looking to increase its domestic gas production by 2019 up to between 5.5 and 6 billion cubic feet per day. The Zohr gas field discovered by Eni could bring 4.6 billion cubic feet of gas online on its own by 2019.
    Back to Top

    Kogas posts lower sales in May

    South Korea’s Kogas, the world’s largest corporate buyer of LNG, reported a decline of 8.6 percent in its sales volume in May.

    Kogas sold 1.91 million tonnes of LNG in May, compared with 2.09 million tonnes a year ago, the company said in a filing to the stock exchange.

    Gas sales into the power sector reached 925,000mt, a decrease of 15.8 percent from the same month in 2015.

    City gas sales fell 0.6 percent on year, reaching 980,000mt of LNG, Kogas said.
    Back to Top

    Norway: Deal reached on offshore supply bases wages. Strike averted

    Norwegian oil and gas employers have reached a collective wages settlement with workers employed in offshore supply bases, thus avoiding a strike.

    To remind, the talks had broken down between the parties, and then went to national mediation. The mediation between the Norwegian Oil and Gas and the Norwegian Union of Industry and Energy Workers (Industry Energy) was conducted on Thursday 16 and Friday 17 June.

    According to Norwegian Oil and Gas the mediation on the land base settlement was successfully concluded two and a half hours past the deadline.

    “Although we would have preferred to secure acceptance for more of our demands for changes to the agreement, we’re pleased that a consensus could be achieved,” says Jan Hodneland, chief negotiator for the Norwegian Oil and Gas Association.

    Hodneland said that the framework for this settlement will protect the profitability and flexibility of the companies at a demanding time.

    No general pay rise will be given. Furthermore, minor adjustments will be made to the rates for minimum pay and subsistence allowances as well as to decentralised funds.

    Some of the demanding issues, such as shift allowances and travel provisions, will be discussed by the employers and the unions in a separate committee.

    Attached Files
    Back to Top

    Russian Crude Losing Out as Iranian Oil Returns to Europe

    Russian Crude Losing Out as Iranian Oil Returns to Europe

    The return of Iranian oil to the international market is hurting Russia’s main crude grade, forcing it to trade at the biggest discount in two years.

    The discount of Russia’s Urals grade in the Mediterranean to global benchmark Dated Brent widened to $2.40 a barrel, according to traders monitoring the Platts window. That’s the lowest since June 2014. Vitol offered the grade again on Friday at smaller discounts. It didn’t find a buyer.

    Urals crude, which is similar to Iran’s flagship blend, became the main beneficiary when the Persian nation was barred from selling oil in Europe in 2012 because of its nuclear program. Since those sanctions were lifted in January, the Russian grade has suffered, according to four traders familiar with the market.

    “Iranian exports have been impressive,” giving refiners in Europe a wider choice of supply, Abhishek Deshpande, an analyst at Natixis SA said by e-mail.

    Challenges unloading cargoes at the Italian port of Trieste -- a major hub for refineries in Eastern and central Europe -- are also contributing to pricing pressure, traders said. Unloading at a jetty there slowed, with just four vessels each with a capacity of 1 million barrels loading since the start of April, compared with an average of four vessels a month in the first quarter.

    Meanwhile, a series of strikes at French refineries last month reduced crude intake, according to DNB Markets.

    “This development for Urals is natural when Iran ramps up at the same time as there are strikes in several European refineries, hampering physical crude demand,” Torbjoern Kjus, chief oil analyst at DNB Markets, said by e-mail.

    Three oil refineries in France have yet to restart completely, according to Total SA, which operates five plants in the country.

    Iran has wasted no time in trying to regain market share, according to the International Energy Agency. Exports of crude last month reached 2.1 million barrels a day, almost pre-sanction levels, the agency said on June 14. Before sanctions were tightened four years ago, Iran shipped 2.2 million barrels abroad, it said.

    Flow of Iranian crude grades to countries in the European Union was 355,000 barrels a day in May, compared with 330,000 in April, according to tanker-tracking data compiled by Bloomberg.

    “Iran has moved swiftly to reclaim its European customers,” the IEA said.
    Back to Top

    Speculators boost U.S. natural gas net longs for 3rd week -CFTC

    U.S. natural gas speculators boosted their net longs for a third consecutive week, betting prices will rise as production eases and power demand picks up to
    absorb some of the record high amount of fuel left in inventories after a warm winter.

    Speculators in four major NYMEX and ICE markets added to their bullish bets by 27,431 contracts to 81,821 in the week to June 14, the U.S. Commodity Futures Trading Commission said on Friday.

    Gas futures on the NYMEX averaged $2.57 per mmBtu during the five trading days ended June 14 versus $2.42 during the five trading days ended June 7.

    To avoid filling storage caverns to their maximum capacity after a warm winter left stockpiles at record highs, analysts said prices will likely remain low this year to pressure producers to cut output and encourage power generators to burn
    more gas instead of coal.

    Spot gas prices at the Henry Hub benchmark GT-HH-IDX have averaged $1.99 so far this year, while futures for the balance of 2016 were fetching $2.77. That compares with an average of $2.61 in 2015, the lowest since 1999.

    Analysts said, however, they expect gas prices in 2017 to rise enough to encourage drillers to boost output again to meet forecast growth in U.S. pipeline and liquefied natural gas exports and industrial demand.

    Gas futures for calendar 2017 were trading around $3.05.
    Back to Top

    U.S. oil drillers add rigs for third week in a row: Baker Hughes

    U.S. drillers this week added oil rigs for a third week in a row for the first time since August, according to a closely followed report on Friday, as producers seek more drilling permits after crude prices hit an 11-week high over $51 a barrel last week.

    Despite a decline in U.S. crude futures to one-month lows to under $47 this week, analysts and producers have said oil over $50 was a key level that would trigger a return to the well pad and drilling permits are a leading indicator of future drilling.

    Drillers added nine oil rigs in the week to June 17, bringing the total rig count up to 337, compared with 631 a year ago, energy services firm Baker Hughes Inc said.

    Before this week, drillers added rigs in only three out of 23 weeks this year, cutting on average nine oil rigs per week for a total of 208.

    That compares with cuts of 18 rigs per week on average in 2015 for a total decline of 963, the biggest annual decline since at least 1988 amid the biggest rout in crude prices in a generation.

    The rig count has declined since hitting a peak of 1,609 in October 2014. The slide came three months after U.S. crude futures began crumbling from a high of around $107 in July 2014 to reach a near 13-year low of about $26 in February this year.

    Since the February price low, U.S. crude futures have almost recouped half their losses. On Friday, they were trading at around $47, or 3 percent lower on the week, amid anxiety over Britain's possible exit from the European Union. [O/R]

    To figure out how many rigs U.S. producers will likely add, analysts said they look to drilling permits, which they forecast rising.

    In most states, producers drill a land well about two months after the state issues a permit because the firm has already incurred significant expenses to secure the acreage and conduct geologic surveys, among other things, analysts at U.S. investment banking advisory Evercore ISI said this week.

    "Land operators are restless after a year and a half of declining activity, and we expect the recent crude rally to bolster permit application totals heading into the warmer (and dryer) months," Evercore said, noting the Permian and Eagle Ford will likely be the first-move shale plays for producers looking to put rigs back to work in 2017.

    After falling to 1,807 permits in February, the lowest monthly level since at least 2006, Evercore forecast the number of land permits would rise to a year-to-date high around 2,119 in June from 2,033 in May.

    That put total annual land permits on track this year to fall below 2015's lows. Land permits peaked at 86,955 in 2008 and bottomed at 43,940 in 2015, according to Evercore data going back to 2006.

    Pioneer Natural Resources Co said this week it expects to boost its 2016 capital budget by about $100 million to $2.1 billion as a result of rig additions.
    Back to Top

    Libyan unity government condemns attack near eastern oil terminals

    Fighting erupted south of the coastal town of Ajdabiya on Saturday between military units loyal to Libya's eastern government and a group calling itself the Benghazi Defence Forces. At least three people were killed and 10 wounded, military spokesman Akram Bu Haliqa said.

    The Benghazi Defence Forces is largely composed of fighters pushed back earlier this year by brigades loyal to the eastern government commander Khalifa Haftar. Haftar has been waging a campaign for two years in Benghazi against Islamists, including some loyal to Islamic State, and other opponents.

    The condemnation by the U.N.-backed Government of National Accord (GNA) is significant because some in the east suspect the GNA - whose leadership has itself been divided - of siding with Islamist-leaning militias.

    The fighting near Ajdabiya, close to three oil terminals and north of major oil fields, risks opening a new front in the conflict between forces that backed competing governments set up in Tripoli and the east in 2014.

    Since March, the GNA has been seeking to replace the rival parliaments and governments and integrate armed groups, including forces loyal to Haftar, into national security forces.

    But the eastern parliament has held back from endorsing the new government, accusing it of legitimizing militias in western Libya whilst undermining the eastern military.

    "The Presidential Council (of the GNA) strongly condemns this criminal act and holds the leaders and members of these militias fully responsible," said a statement published on the Presidential Council's Facebook page on Sunday.

    "These militias are attacking to assist the remnants of the Islamic State terrorist organization in Benghazi and Ajdabiya which have faded and had their strength sapped by the strikes by our brave military."

    Clashes erupted again early on Sunday, a resident said.

    Armed groups in Libya have remained highly fragmented in the political turmoil that followed the toppling of Muammar Gaddafi in 2011.

    Islamic State established a presence in several parts of the country from 2014, and has been active between Benghazi and the militants group's coastal stronghold of Sirte, about 380 km (240 miles) to the west.

    In recent weeks, however, the ultra-hardline group has retreated into the center of Sirte after GNA-aligned forces advanced from the western city of Misrata.

    The Petroleum Facilities Guard (PFG), a separate force that controls the oil terminals near Ajdabiya and is also aligned with the GNA, has pushed Islamic State back to the east of Sirte.

    A PFG spokesman said the fresh outbreak of fighting did not immediately threaten oil facilities, but the PFG was ready to protect them if necessary.
    Back to Top

    A Laggard in Brazil Oil Frenzy Is Now a Favorite in the Bust

    In the saga of Brazil’s oil industry, QGEP Participacoes SA has always flown mostly under investors’ radar. It’s no heavyweight like state-run Petrobras, nor has it ever been as flashy as OGX, ex-billionaire Eike Batista’s startup.

    But among producers that sold more than $77 billion in stock after Brazil discovered massive offshore crude deposits in 2007, QGEP now stands out: It has the best track record of meeting its output targets almost a decade later.

    That hasn’t stopped investors from dumping the stock along with its peers. QGEP is down more than 80 percent since its 2011 peak as oil prices collapsed, OGX filed for bankruptcy protection and Petrobras was ensnared in a crushing corruption probe. QGEP Chief Executive Officer Lincoln Guardado says it’s time for investors to take a second look. And analysts agree.

    “Brazil will return as a global hot spot,” said Guardado, a geologist and former Petrobras executive. And when it does, analysts from Grupo BTG Pactual to Itau BBA say QGEP will be investors’ best bet.

    The company is a favorite among local stock pickers, with nine out of 11 analysts recommending that clients add it to their portfolios. BTG analyst Antonio Junqueira said QGEP is the “only buy” in his coverage universe of Brazil oil and gas producers.

    ‘Balanced Risk Taking’

    “After so much frustration in recent years, Brazil’s energy sector seemed all but over,” said Marcos Peixoto, the head of XP Investimentos’s asset management unit who’s analyzing whether to buy the stock. “QGEP stands out because it’s more conservative than the other producers.”

    Guardado said the company’s strategy is best described not so much as conservative as “balanced risk taking.”

    “We distribute risk” by partnering with bigger players, Guardado said in an interview at the company’s offices, which occupy a few floors in a downtown Rio de Janeiro building that looks modest in comparison to OGX’s old art-deco headquarters several blocks away. “It’s not our practice to maintain 100 percent stakes anywhere.”

    Back in 2011, when QGEP sold shares in an initial public offering, that strategy hardly made it a darling among investors. The company eventually raised about $890 million after cutting its offering price by 34 percent below the top end of its target range.
    Back to Top

    Wood Group buys assets of collapsed Aberdeen engineer

    Oil and gas services giant Wood Group has snapped up the trade and assets of a fellow Aberdeen firm that fell into administration last month.

    Wood said the deal for the fabrication business of Enterprise Engineering Services (EESL) would expand its range of capabilities as it seeks to drive down costs in the North Sea.

    Dave Stewart, chief executive of the group’s PSN arm, said: “Wood Group’s relentless focus is on enhancing value and driving cost efficiencies in the technical solutions we provide to our clients. The acquisition of EESL’s fabrication and manufacturing business broadens our repair order capabilities, enabling us to offer a fully integrated, end-to-end service that supports our clients in assuring the integrity of their assets.”

    He added: “We will leverage EESL’s more than 40 years of expertise providing manufacturing and fabrication solutions to the oil and gas sector, securing jobs for the company’s current Aberdeen fabrication workforce with a view to creating new employment opportunities as we deepen and broaden our fabrication capability in the future.”

    EESL called in administrators from KPMG last month, triggering about 100 job losses. The firm had been trading for 50 years and worked with a large number of oil and gas and utility clients, but suffered a fall in orders amid the sustained drop in crude oil prices.

    The remaining ten employees will be kept on at EESL’s 4,000 square foot Craigshaw Road fabrication facility in Aberdeen when they transfer over to Wood Group.

    Read more:
    Follow us: @TheScotsman on Twitter | TheScotsmanNewspaper on Facebook
    Back to Top

    BP and Rosneft create joint venture to develop prospective resources in East and West Siberia

    Rosneft and BP have today signed final binding agreements to create a new joint venture, Yermak Neftegaz LLC, to conduct exploration in the West Siberian and Yenisey-Khatanga basins in the Russian Federation. The document was signed at the XX St. Petersburg International Economic Forum (SPIEF) by Rosneft CEO Igor Sechin and President of BP Russia David Campbell.

    The joint venture will focus on onshore exploration of two Areas of Mutual Interest (AMIs) in the West Siberian and Yenisey-Khatanga basins covering a combined area of about 260,000 square kilometers. Yermak Neftegaz will be owned 51 per cent by Rosneft and 49 per cent by BP. In the initial stage, the joint venture will carry out further appraisal work on the 2009 Rosneft-discovered Baikalovskiy field inside the Yenisey-Khatanga AMI and on exploration of Zapadno-Yarudeiskoye, Kheiginskoye and Anomalnoye licenses in the West Siberian AMI.

    Exploration activities in the two AMIs will include regional research, acquisition of seismic data and drilling of exploration wells, with the beginning of field works anticipated in the winter season of 2016 / 2017. The preliminary agreement relating to this project was signed at SPIEF in 2015.

    Igor Sechin, Rosneft CEO, said after signing: 'These agreements serve as an example of full scale cooperation with BP, Rosneft's strategic partner and largest minority shareholder. After creation of the Taas-Yuryakh Neftegazodobycha LLC joint venture we are now broadening the geography of our cooperation and creating a precedent which allows us to pursue cooperation in partnership with leading international companies to implement upstream projects at the largest Rosneft greenfield sites in West and East Siberia.'

    David Campbell, President BP Russia, said: 'This agreement and creation of a new joint venture reinforces BP's commitment to our strategic investment in Russia and our long term partnership with Rosneft. In the current low oil price environment we continue to look for opportunities for future growth.'

    BP has committed to provide up to $300 million in two phases as its contribution to the cost of the JV's activities at the exploration stage. Rosneft will contribute licenses and operational experience in West Siberia and Yenisey-Khatanga with initial drilling to be performed by Rosneft subsidiaries.
    Back to Top

    BP Can Keep Reduced Spending Level for Another 3 Years, CEO Says

    BP Plc can keep spending at a reduced rate of about $17 billion for another three years without affecting growth, Chief Executive Officer Bob Dudley said.

    The explorer has enough projects at hand to be able to continue producing fuel, he said in a Bloomberg TV interview in St. Petersburg, Russia. “Being a low-cost producer is the name of the game,” Dudley said. “We’re getting very disciplined about capital.”

    While oil’s slump has forced companies to slash spending and defer new projects to protect their balance sheets, they still must ensure enough investment for future growth. The industry will cut more than $1 trillion of expenditure by the end of this decade, in part because of the declining cost of doing business, consultant Wood Mackenzie said this week.

    “Costs are coming down very fast,” Dudley said. “The industry has to get its cost structure right.”

    BP plans $17 billion of capital expenditure this year, down from about $27 billion a few years ago, Dudley said. The company is ready to cut spending to as little as $15 billion if the slump persists, it said in April. Dudley has signaled BP is driving down costs to ensure it can maintain payouts to shareholders.

    The key for the oil majors is to be able to pay dividends without having to borrow. BP said in April it will be able to balance cash flow with shareholder payouts and capital spending at an oil price of $50 to $55 a barrel next year, down from a previous estimate of $60.

    Investors are looking for spending discipline in this downturn. Royal Dutch Shell Plc, Europe’s biggest oil company, this month announced deeper cuts and set an upper spending limit of $30 billion a year until 2020, even if oil prices rise. If crude remains at the current level of about $50 a barrel, Shell can go lower, cutting expenditure to below the bottom end of its range of $25 billion, it said.
    Back to Top

    China grants independent refiner 4.04 mln T/yr preliminary oil import quota

    China has granted independent refiner Qingyuan Group Co Ltd a preliminary oil import quota of 4.04 million tonnes per year, the country's oil industry association said on Friday.

    The government has promised to open up the crude import business, which has long been dominated by state oil giants Sinopec and PetroChina.
    Back to Top

    Energy Transfer and Williams Head to Court Ahead of Merger Vote

    One week before Williams Cos. shareholders are set to vote on whether to accept Energy Transfer Equity LP’s takeover bid, the two companies will meet in Delaware to tell a judge how each has violated the terms of the agreement.

    The two-day trial, which consolidates several lawsuits the companies filed against each other related to the deal, opens Monday, with Delaware Chancery Court Judge Sam Glasscock set to rule before the June 27 vote. Essentially, each says the other has done things that breached the terms they had agreed to. Williams wants Energy Transfer held to its original offer -- valued then at $32.9 billion -- and Energy Transfer would like Glasscock to rule the violations were grave enough to kill the deal.

    It’s “high-stakes M&A poker,” according to a Wednesday clients note by Timm Schneider, an analyst for Evercore ISI. If Energy Transfer is held to the agreement’s now-unfavorable terms, Williams would have a stronger bargaining position to force a settlement, he wrote.

    What looked like a good deal in September to create a massive empire of oil and gas networks spanning the U.S. has turned into a nightmare for both as plummeting oil prices upended the logic of their marriage. Three former Williams chief executive officers have urged shareholders to reject the merger, saying the structure of the deal benefits Energy Transfer. Kelcy Warren, CEO of Energy Transfer, has been blunt as well, saying on an earnings call last month that “we can’t close.”

    For more on Energy Transfer’s queasiness over the deal, click here.

    If Energy Transfer is forced to stick to its original offer, Schneider said it could cost the Dallas-based firm as much as $2 billion to get out of the deal. That would cover Williams’ “entire 2016 capital budget and help pre-fund 2017,” he wrote.

    Lance Latham, a spokesman for Williams, declined to comment ahead of the hearing and Vicki Granado, an Energy Transfer spokeswoman, didn’t respond to requests for comment.

    Since Energy Transfer offered to buy Tulsa, Oklahoma-based Williams for $43.50 a share in either cash or stock in September, the global glut of crude has wiped out nearly half the value of both companies and forced the energy firms to twice slash the expected earnings boost from the merger.

    “There’s no way the original deal is going to fly and the Williams folks are going to want to get something out of this mess,” said Chad Ruback, a Dallas-based lawyer who has been following the flurry of lawsuits over the merger. He isn’t representing either of the companies. “There will be either a re-negotiation of the deal or a large-dollar settlement.”

    Under the merger agreement, Energy Transfer gets to walk away with little cost. But Williams would have to pay a $1.5 billion breakup fee if it’s the one to terminate the deal. While that’s rare, it’s not unheard of, said Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance.
    Back to Top

    Sinopec serves $5.5 bln arbitration notice to Repsol

    Chinese energy conglomerate Sinopec has served an arbitration notice to Spain's Repsol demanding around $5.5 billion in compensation over a 2012 joint venture, Repsol said on Friday.

    Sinopec and subsidiary Addax Petroleum UK are seeking compensation for their initial investment and lost investment opportunities stemming from a North Sea oil and gas fields venture deal with a firm called Talisman which Repsol bought in 2014.

    The claim has no foundation and is deemed a remote risk by legal advisers, Repsol said.

    "The arbitration notice is unfounded and does not reflect the loyal attitude one would expect from a partner," it said in a statement.

    Repsol reported a loss last year and has slashed its dividend. It has announced a 40 percent cut in exploration and production investment and asset sales in a bid to protect its investment grade credit rating.

    Talisman has cut hundreds of jobs at loss-making joint venture Talisman Sinopec Energy UK due to falling production and rising operating costs.
    Back to Top

    Alternative Energy

    ARENA says latest bids shows large scale solar costs falling quickly

    in possibly its last grant funding round before its remaining $1.3 billion of legislated funds are stripped by the Coalition government – says twenty different solar projects totalling 757MW lodged a final bid for a share of the $100 million in grants to be allocated.

    The asking price for grants, ARENA says, has fallen to 28c/watt in this round from 43c/watt when expressions of interest were lodged late last year. This compares to $1.60/watt when AGL Energy built the Nyngan and Broken Hill solar plants with the help of ARENA funding last year.

    The funding to the Nyngan and Broken Hill plants was always considered to be on the generous side, even though ARENA has argued that it was necessary to kick-start the large scale solar industry.

    It says the latest round of funding shows that the size of grant funding required to get projects across the line is falling quickly. And that should mean more projects can be funded in this round.

    “ARENA is playing a vital role providing bridge funding for projects that will make large-scale solar PV more competitive by increasing confidence and building supply chains,” CEO Ivor Frischknecht said in a statement.

    “Our funding round has already reduced costs through competitive tension and encouraged a portfolio of new Australian solar plants to proceed to more advanced stages of planning and development.”

    A spokesman said the new round of bidding had shown a “significant” fall in engineering, procurement and construction (EPC) costs between the two rounds. Total project MW ratios had come down from an average of $2.19/watt in the shortlisting stage to an average of $2.11/w in the final applications; or 5 per cent.

    The lower bids were also likely supported by announcements from the Queensland and NSW governments that they would write power purchase agreements for 120MW of solar in the case of Queensland, and more than 40MW of solar (92GWh) in the case of NSW.

    The long term contracts from NSW and Queensland will have allowed the developers to reduce the amount of grant funding needed. The lower bids should also mean that ARENA will be able to lift the amount of solar plants it can support – from 200MW to 280MW if the full funding is to be allocated.

    All but four of the 22 projects shortlisted for the funding in January are located in Queensland and NSW. A total of 20 lodged bids in the final round, seeking $211 million of grants for $1.6 billion in projects, although ARENA is not saying which two projects dropped out.

    Frischknecht says the funding results clearly demonstrates “how quickly large-scale solar PV costs are falling supported by ARENA funding, which has resulted in rising confidence, lower finance costs and a more supportive market for power purchase agreements.”

    But he sys that hurdles remain. “Doing something the first few times is always harder and more expensive, and building large-scale solar PV plants is no exception,” Frischknecht said.

    ARENA says it expects the cost of large scale solar to fall well below $100/MWh before 2020, and private developers say it could fall further and sooner. Some suggest a price of around $80/MWh may already be appropriate, which probably helps explain the lower grant funding bids.
    Back to Top

    SunPower to Boost Sales as Parent Total Expands in Renewables

    SunPower Corp. will be able to offer new products to homeowners, businesses and utilities as its majority owner, Total SA, continues to consolidate its clean-energy units, said SunPower Chief Executive Officer Tom Werner.

    Paris-based Total agreed last month to buy French battery maker Saft Groupe SA as it ratchets up investments in renewable energy, battery storage, power and gas trading and energy efficiency. The oil major plans to invest $500 million a year in renewables.

    “Total understands that solar and storage provide a lot of benefits,” Werner said Tuesday in an interview at Bloomberg’s New York headquarters. “The ecosystem is coming together nicely.”

    By adding battery systems to solar and energy efficiency packages, San Jose, California-based SunPower, the second-largest U.S. panelmaker, can promise to deliver excess supplies to utilities, creating a new source of revenue.

    “Offering firm power is very logical,” Werner said.
    Back to Top

    Tesla offers $2.8 billion for SolarCity in 'no brainer' deal for Musk

    Tesla offers $2.8 billion for SolarCity in 'no brainer' deal for Musk

    Elon Musk on Tuesday sought to build a clean energy powerhouse as his electric car maker, Tesla Motors Inc, made an offer to buy his solar installation firm SolarCity Corp in a stock deal worth as much as $2.8 billion.

    Tesla shares plunged more than 13 percent to $189.99 in extended trading - amounting to a loss in value of about $4.3 billion, or more than the value of the offer for the other company. Shares of SolarCity rose about 18 percent to $25.02.

    Musk, who is the chairman of SolarCity, CEO of Tesla and the largest shareholder of both companies, described the deal as a "no brainer" in a call with reporters. The company could sell customers an electric car, a home battery and a solar system all at once, he said.

    "Instead of making three trips to a house to put in a car charger and solar panels and battery pack, you can integrate that into a single visit," Musk told reporters. "It's an obvious thing to do."

    "Ideally you want to see Tesla focus on Tesla - building Teslas and expanding the cars," said Ivan Feinseth, an analyst at Tigress Financial Partners. "Maybe the feeling is that this takes away focus, and it could financially strain Tesla, which is going to continually need a lot of cash."

    SolarCity has about $6.24 billion in liabilities, including debt.

    Tesla executives said its predictable cash flow in the form of payments for its solar systems pays for the debt.

    Although it is the U.S. market leader in residential rooftop solar systems, it regularly posts quarterly losses and the stock has fallen nearly 60 percent so far this year, pummeled by investors who see its business model as too complex in a market that has become increasingly competitive.

    Musk said Tesla did not know how many of its customers have solar panels, but guessed that most of them were likely interested in solar. In a blog, Tesla described the deal as a way to expand both companies' markets.

    The solar systems will be sold under the premium Tesla brand, which is seeking to expand its target market with a $35,000 electric vehicle called the Model 3 that it will begin delivering late next year.

    Musk, who owns 19 percent of Tesla and 22 percent of SolarCity, said he would recuse himself from voting on the deal. He could not say how soon shareholders could vote on the deal, as due diligence needs to take place first.

    SolarCity CEO Lyndon Rive, Musk's first cousin, said he supported the deal but would also recuse himself from voting. Rive's brother, Peter, is also a founder of the company and its chief technology officer.

    Musk and Lyndon Rive hatched the idea for SolarCity during a trip to the Burning Man desert festival in 2004. Over a decade later, SolarCity has become the top U.S. residential solar installer thanks to a no-money-down financing scheme that allows homeowners to pay for their solar panels through a monthly fee that is less than what they would pay their local utility.

    Tesla said it offered $26.50 to $28.50 per share for SolarCity, which represents a premium of about 25 percent to 35 percent to the company's Tuesday close of $21.19. That values the deal at about $2.6 billion to $2.8 billion overall.

    In a statement issued late Tuesday, Tesla said its management will host a conference call to discuss the 'rationale' surrounding the offer to buy SolarCity. The conference call is scheduled to take place Wednesday morning before U.S. markets open.

    Attached Files
    Back to Top

    World’s longest’ turbine blade unveiled

    The first of the turbine blades claimed to be the longest in the world has been unveiled.

    The 88.4-metre blade was manufactured at LM Wind Power’s factory in Lunderskov, Denmark.

    It will be transported to a facility in Aalborg in the next few days where it will be tested to feature on Adwen’s 8MW offshore wind turbine.

    The offshore wind company is a joint venture between France’s Areva and Spain’s Gamesa.

    Luis Álvarez, Adwen General Manager said: “When you are building the largest wind turbine in the world, almost everything you do is an unprecedented challenge. We are going where no one else has ever gone before, pushing all the known frontiers in the industry.”

    Yesterday Siemens announced it is merging its wind businesswith turbine manufacturer Gamesa.
    Back to Top

    Why reciprocating gas engines make sense for Europe's power industry

    Europe is moving towards basing its energy needs on renewable energy sources.

    Already today, 27 per cent of the European Union's electricity requirements are covered by water, wind, sun and bioenergy. In the next 15 years, the EU wants this percentage to increase beyond 50 per cent.

    Most of the renewable sources of energy are non-continuous and unpredictable - such as solar and wind - and have a rather low capacity factor: roughly between 15 and 25 per cent.

    When you do the simple math, you see that in some areas, namely Germany, the total demand for electrical energy could already be covered by renewables... when the sun shines and the wind blows.

    As we all know, this has brought disruptive change to our energy generation and distribution landscape. To complement shortages from unstable renewable energy sources, three principal solutions exist:

    - Energy storage: storing energy in times of high availability of wind and solar power;

    - Extending the grid to make reliable energy from distant areas available (e.g., hydropower from Norway or excess capacity from distant production locations);

    - Reliable and highly flexible backup power generation with thermal power plants.

    As it stands today, we will see a mix of all three options develop over the coming years. What remains is that large thermal power plants which provide baseload power but cannot complement non-continuous power sources due to their inflexibility will lose production share with the rise of non-continuous sources.

    As energy storage systems in the size required will not be available at competitive cost for some time and large-scale extensions of the grid will be realized only in the longer term due to investment requirements and political and regulatory difficulties, there is need for highly reliable and flexible back-up power generation with thermal power plants.

    This is where we see the benefits and the place of thermal power plants utilizing reciprocating gas engines as prime movers. This list of benefits is long and impressive:

    - Gas engines offer single electrical efficiency in excess of 50 per cent in single cycle and up to about 70 per cent in combined cycle;

    - Multiple engine applications allow operators to run gas engine plants at maximum efficiency at virtually any load requirement;

    - Reciprocating gas engines can respond faster to load changes than any other prime mover;

    - Gas engine plants can operate in tri-generation mode, providing electricity and heat/cold, leading to a total energy efficiency of more than 90 per cent;

    - LNG has a CO2 footprint that is 80 per cent lower than that of coal (117 vs 200 pounds CO2/MBTU) and does not emit any sulphur;

    - The turnkey erection of a 200 MW gas plant with reciprocating engines can be accomplished in less than 12 months;

    - Highly competitive initial investment cost and attractive return on investment;

    l Proven technology with hundreds of (bio-)gas installations in Europe already existing;

    - If fueled by biogas it is a renewable source of energy;

    - Dismantling and relocation of gas engine-based thermal power plants in case of changed requirements is technically and financially feasible;

    - As it is also possible to achieve high plant efficiency with a small installation, it is possible to generate a distributed power supply system which is safer in case of failure of single units or even of a total single plant;

    - Thanks to their low environmental impact, these distributed power plants can be located close to inhabited areas, with the additional benefit of enabling centralized district heating;

    - Transmission losses in a gas grid are lower by a factor of 10 compared to those of electricity power lines.

    Of course, the present tariff system for electricity in Europe is not conducive to investment in power plants for balancing power.

    However, the example of an LNG-fired gas engine plant with a capacity of nearly 200 MW contracted for the utility in Kiel, Germany shows that gas engines have a strong business case, providing electricity to the grid when needed (and therefore attractive in price) and utilizing the heat for centralized heating systems - and even using the electrical energy for heating purposes at times of low electrical demand.

    This is a striking real-life answer to why reciprocating gas engines make sense for Europe's power industry.
    Back to Top

    Apple’s energy bombshell: Why it may sell you electricity

    Apple will soon be selling more than MacBooks, iPhones, iPads and watches to consumers. It may also be selling electricity.

    In what is being regarded as something of a bombshell in the energy markets – albeit a long predicted one – Apple has quietly has created a new subsidiary called Apple Energy, and asked to obtain a licence to sell electricity directly to consumers, rather than back to the grid via the wholesale market.

    The software giant’s intent is clear. Apple has vowed to source all of its electricity from renewable energy sources. It has already reached 93 per cent, buying the output of a host of large-scale solar projects in the US, wind projects, its own rooftop arrays, as well as a 1.1MW rooftop array in Singapore and aggregating the output from 800 different solar arrays.

    The next step is to sell the output of its contracted and owned solar, hydro and biogas plants to its suppliers, to ensure that its supply chain is also sourcing all of its energy needs from renewables.

    A further step, say analysts, will be to sell that output to consumers, possibly in conjunction with purchases of products such as iPhone and iPads, or even with electric vehicles. As we reported last month, Apple is spending more on research into EVs and autonomous vehicles than it did on iPhones, iPads and Apple watches combined.

    There’s two good reasons for this. One is corporate reputation; Apple, like so many other major US and European companies, has signed up to become 100 per cent renewable. That is what the millennial generation expects of them.

    The second is economic. Apple currently sells its excess electricity back into the grid at wholesale rates. If it can sell that electricity to its suppliers, and then to its customers, it is likely to get a significantly higher rate.

    Apple already has contracts with 521MW of solar projects worldwide announced to date, making it one of the largest solar power end-users in the world.

    Apple has sought permission to operate as an energy company from the FERC, the main US federal regulator. It filed its request on June 6 and wants an answer by August 6.

    Tim Healy, the co-founder, CEO and chairman of EnerNoc, describes the move as a fundamental shift in the energy world and says its implications are vast.

    “Essentially, Apple is seeking the ability to sell the renewable energy it generates to other businesses and consumers at retail prices,” he writes.

    “Without FERC’s approval, Apple will only be able to sell its energy to energy providers and utilities at wholesale prices. Apple Energy would more or less act as an energy provider itself, enabling the company to leverage its investments in renewable energy like wind and solar to generate new revenue from an entirely new market.

    Attached Files
    Back to Top


    Belarus may revive potash cooperation with Uralkali

    Belarus is considering cooperating with Russian potash producer Uralkali, it said on Thursday, the first sign the two sides might work together again since Uralkali broke off a potash alliance in 2013, triggering a fall in global prices.

    Uralkali is the world's biggest producer of potash, a widely used nutrient for crops, while state-controlled Belaruskali is the second largest.

    "New Uralkali shareholders are coming to me every month saying: 'accept us'. We are not against it - let's unite, on our conditions," Belarus President Alexander Lukashenko said at an event in Minsk.

    "Let's resume work and agree how much we will produce."

    Lukashenko did not disclose his conditions. The previous joint venture was based in Minsk, that time a crucial condition for Belarus and the main concern for Uralkali.

    Uralkali declined to comment. Its major shareholder, Uralchem, was not available for comment.

    The collapse of Uralkali's joint venture with Belaruskali triggered a fall in global prices as competition between producers intensified. Prices have not yet fully recovered.

    Lukashenko also said Minsk signed a new potash supply contract with India on Wednesday, although Belarussian Potash Company (BPC), a trading arm of Belaruskali, later said it was still finalising the deal.

    "I think it's a wonderful contract, taking into account the current prices," Lukashenko said, without disclosing the price or volume to be supplied.

    BPC said in its statement it expected to sign the contract in June.

    A major Indian customer, who asked not to be named, told Reuters both sides were close to signing the deal.

    In 2015, Uralkali was the first major producer to sign a one-year contract with India to supply 800,000 tonnes of potash at $332 per tonne.

    Apart from Belaruskali and Uralkali, Canada's Potash Corp of Saskatchewan and Agrium Inc, U.S.-based Mosaic Co and Germany's K+S AG supply the crop nutrient to India.

    India and China, the world's biggest fertiliser consumers, usually sign contracts for potash earlier in the year. This year, deals were delayed by high stocks built up by farmers.

    India's deal, if signed, will be a rare instance of that country signing a potash supply contract with a major producer before China. Contracts with China usually set a price floor and benchmark for other markets.
    Back to Top

    Bayer, Dupont join ag-tech investment boom to ease grain pain

    Dupont and Bayer AG have teamed up to invest in a new fund that will back agricultural technology startups, becoming the latest companies to pile into the multibillion-dollar industry as farm profits shrink.

    The two chemical and seed companies along with venture capital firm Finistere Ventures and two others have launched a $15 million accelerator fund, called Radicle, that will back early-stage agricultural-tech companies, the fund said in a statement on Wednesday.

    Of the $15 million, $6 million has been initially committed but the fund did not identify which companies would receive the monies.

    While small in size, it marks the first time DuPont's investment arm has taken a stake in the ag-tech arena since launching in 2003, according to fund officials.

    The companies are joining a burgeoning industry of ag-tech investors hoping to profit from ever more sophisticated tools in the food supply chain, from plant genomics and seed traits, to drones and weather sensors for crops.

    For seed and chemical companies, such ventures can bring access to new research that may complement - or fill gaps - in their product pipelines.

    For venture capital firms - some of which have bought up land in recent years - it is also a way to try to ease the economic sting of falling farmland values.

    Returns on commodity farmland have declined as grain prices have dropped for the past three years due to global oversupplies. Corn futures are down about 40 percent from three years ago due to large global harvests.

    For startups, reaching out to funds can help them gain access to cash for research and new product testing without having to sell the whole company.

    "There's nothing like commodity prices halving to focus your mind on how else you can make money," said Finistere partner Arama Kukutai said in a recent interview.

    Wednesday's launch comes after Bayer, Syngenta AG and other investors last month rolled out an $11.5 million fund called AgTech Accelerator to start new agricultural technology businesses and help keep them running.

    On Monday, Kellogg Co launched a corporate venture group called Eighteen94 Capital (1894), and announced plans to invest $100 million in food and food-related tech startups. Kellogg follows similar moves by rival consumer packaged goods companies General Mills Inc and the Campbell Soup Co
    Back to Top

    K+S on track to start August commissioning of $4.1bn Legacy project

    Germany's K+S Potash Canada on Tuesday said its $4.1-billion Legacy potash project, in Saskatchewan, was on track to start commissioning activities by the end of August, with the aim of producing the first tonne of potash before year-end. 

    KSPC broke ground on the project – the first new potash mine in the province – in June 2012. About 90% of the capital budget had already been spent. 

    More than 100 employees had moved into permanent jobs in the new operations and administration buildings on site, and the company said external utilities were all up and running, ready to fully service production. 

    According to KSPC, the Legacy Project was presently the largest job creator in Saskatchewan, currently providing 4 500 construction jobs. Once in production, the mine was expected to produce two-million tonnes of potash a year, ramping up to 2.86-million tonnes in subsequent years. 

    The potash market had, in recent quarters, been under significant pressure as lower demand and weaker prices had placed major operations at risk. 

    Emerging market currency weakness relative to the US dollar had also weighed on the fertiliser market. Meanwhile, significant potash projects were in the pipeline in Saskatchewan, including BHP Billiton’s $2.6-billion Jansen project.
    Back to Top

    Canpotex axes Canadian potash export terminal

    As weak demand persists for fertiliser minerals and a number of companies plan to divest agri-assets or reduce capacity, Canpotex has decided to scrap plans for the development of a potash export terminal in Canada, saying it has sufficient terminal capacity through existing logistics networks.

    Canadian potash exporter and logistics company Canpotex International PTE Ltd has scrapped plans for a new fertiliser export terminal at the Port of Prince Rupert in British Columbia, Canada.
    Back to Top

    France to vote against continued EU use of weedkiller glyphosate

    France will vote on Friday against the continued use of weedkiller glyphosate, its environment minister said, adding to uncertainty over the future of widely-used products such as Monsanto's Roundup in the European Union.

    The EU license for glyphosate expires at the end of June and, if it is not extended, manufacturers will have six months to phase-out products containing the common herbicide.

    Contradictory findings on the carcinogenic risks of the chemical have pitted farming and chemical lobbies against citizen and environmental groups, making some EU politicians reluctant to approve its continued use.

    "France will vote against the glyphosate vote," Segolene Royal told journalists, ahead of a meeting of EU environment ministers on Monday.

    The European Commission - after failing to win support for a proposal to renew the license for glyphosate for up to 15 years - had offered a 12 to 18 month extension pending further scientific study.

    As big EU nations France and Germany abstained from a vote earlier this month, even the compromise proposal lacked enough support to be adopted.

    The matter has now been referred to an appeal committee of political representative of the 28 EU nations, expected on June 24. If no decision is reached by qualified majority there, then the European Commission could choose to act on its own.

    The Commission wanted the temporary extension to allow time for a study by the European Chemicals Agency (ECHA), which it hopes will allay health concerns.

    The topic is also on the agenda of a meeting of member state experts on June 28.

    Monsanto has defended the safety of glyphosate and has not ruled out a legal appeal if its license is not extended.

    Bernstein senior analyst Jonas Oxgaard has estimated Monsanto could see earnings reduced by up to $100 million if the EU were to halt glyphosate sales.
    Back to Top

    Chinese bank allocates $1.4 bln loan for potash project in Belarus

    Belarusbank and China Development Bank (CDB) have signed a credit agreement of 1.4 billion U.S. dollars for a potash project in Belarus, the state-owned Belarusian bank said in a statement.

    The agreement, signed on Friday, stipulates the procedure for financing the project of building the mining and processing factory Slavkaliy, using raw materials of the Nezhinskoye section of the Starobinskoye potash salt deposit in Minsk region of Belarus.

    The factory will be able to produce 2 million tonnes of chloride a year.

    "The beginning of such a large-scale project demonstrates the big potential of our cooperation (with Chinese banks)," said Sergei Pisarik, Chairman of the Board of Belarusbank.
    Back to Top

    Mosaic in talks to acquire Vale fertilizer unit in $3bn deal — report

    US-based Mosaic Co., the world’s largest producer of phosphate fertilizer, is said to be in talks with Vale to acquire the Brazilian mining giant’s fertilizer unit, in a deal worth about $3 billion.

    According to sources quoted by Reuters, a cash-and-stock deal remains the favourite option at this point, though the parties are also discussing other alternatives.

    Vale is the biggest producer of phosphate in Brazil, which in turn is the planet's fifth-biggest user of fertilizer.

    The largest producer of iron ore and nickel, Vale had long vowed to hold on to world-class operations in these and other key areas.

    But in February, the Rio de Janeiro-based firm announced it was putting its core assets on the block in a bid to reduce its net debt to $15 billion within 18 months, from $25.23 billion at the end of 2015.

    Talks with Mosaic come on the heels of Vale’s failed attempt to partner with US private equity firm to bid for Anglo American's (LON:AAL) niobium and phosphates business in Brazil, which were acquired by China Molybdenum in April.

    Vale is the biggest producer of phosphate in Brazil, which in turn is the planet's fifth-biggest user of fertilizer. It currently operates two potash mines, one in Brazil and one in Peru, and has developing projects in Canada and Mozambique.

    According to a recent report by BMI Research, Brazil is set to recover its long-lost appeal to mining investors and see a fresh wave of mergers and acquisitions this year.

    The experts predict the windfall will benefit several sectors, beyond iron ore and potash, giving a renewed boost to the country’s gold industry. Higher gold prices will push miners to restart or speed up development of projects in Brazil, they say.
    Back to Top

    Precious Metals

    Gold investors wrestle with Brexit vote in wild options dealings

    Gold investors piled on near-term bullish and bearish options bets on Wednesday, racing to protect against whipsawing prices as Britons head to the polls to decide on the future of their European Union membership on Thursday, data showed.

    Implied volatility, a measure of options activity, in Comex July gold calls and puts with strike prices that are as much as $50 higher or lower than current prices soared to record highs on Wednesday.

    A vote for Brexit is expected to spur a rush to safe haven assets like bullion.

    The frenzied dealmaking and diverging strike prices suggested dueling forces as investors grew nervous about the potential impact of the vote on the market - prices could fall or rise by as much as 5 percent.

    It was most evident in bullish bets. COMEX July gold calls that give the holder the option to buy at $1,300 per ounce and $1,325 were some of the most actively traded on the day.

    Activity in July puts with strike prices of $1,200 and $1,220 was also almost as busy. They all expire on Monday.

    Combined turnover in the four contracts equated to close to 638,000 ounces of bullion worth more than $800 million.

    Spot gold prices fell for the third straight session on Wednesday, dropping to a two-week low of $1,261.01 per ounce.

    Implied volatility typically rises ahead of expiry, but traders said dealmaking has been more pronounced than usual, amid heightened risk appetite and nervousness about the result, traders said.

    "We're at a line in the sand on which way we're going to go and that's why we're seeing implied volatility in puts and calls spike right now," said Adam Packard, vice president operations at brokerage Zaner Group in Chicago.

    Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York, said flight to safe haven amid uncertainty over Brexit could push prices to as high as $1,375, the loftiest since March 2014.

    An "In" vote is seen as quickly unwinding gold's 5-percent gain in June, as appetite for risk rises and focus returns to the U.S. economy.

    Prices hit their highest since August 2014 last week as the $5-trillion-a-year gold market rose with other "safe" assets, such as German bunds, the Swiss franc and Japan's yen.

    Premiums of some out-of-the-money calls were more than two times the cost of out-of-the-money puts, suggesting a more bullish sentiment, said Packard.
    Back to Top

    Record revenues for Gemfields at its Singapore rubies auction

    Coloured gems specialist Gemfields PLC notched up record revenues in its recent auction of rough rubies held in Singapore.

    The auction generated record total revenues of US$44.3 million at an average realised price of US$29.21 per carat.

    Given the quality mix offered at this auction comprised a blend of varying qualities and sizes of material, a direct comparison with previous auction results is not possible, Gemfields said.

    On a quality-for-quality basis, however, the per carat prices achieved were indicative of improved overall global demand when compared to previous auctions, it added.

    In all, 71 of the 75 lots up for auction were sold, with 44 companies placing bids.

    The proceeds of this auction will be repatriated to Montepuez Ruby Mining Limitada, which is 75%-owned by Gemfields, in Mozambique, with the royalties due to the Government of Mozambique being paid on the full sales price achieved at the auction.

    In total, the six auctions of gems from Montepuez held since June 2014 have generated US$195.1mln in aggregate revenues.

    "We are pleased with the results of Gemfields' sixth Montepuez ruby auction. The prices achieved and the high percentage of goods sold fully support our analysis of the market conditions, the quality of Mozambique's rubies and the increasing levels of demand across various markets and categories,” said Ian Harebottle, chief executive officer (CEO) of Gemfields.

    The CEO revealed that the company is to launch a new global marketing campaign in London on 22 June focusing on Mozambican rubies.

    Attendees of the Singapore auction were given a sneak preview of the campaign.

    “The overwhelmingly positive response underpinned the clients' confidence in Gemfields marketing efforts and is further supported in the Company's ongoing success in growing demand for Zambian emeralds,” Harebottle said.

    “The five ruby and emerald auctions Gemfields has hosted so far this financial year have yielded aggregate revenues of US$174.4 million,” Harebottle noted, adding this represented a superb performance by the company.
    Back to Top

    Base Metals

    Zambia expects copper output to double next year

    Zambia's copper output will rise by 5.5% to 750 000 t this year and output is expected to double to 1.5-million tonnes in 2017, Mines Minister Christopher Yaluma said on Thursday. Copper production in Africa's second-biggest producer of the metal was at 711 515 t in 2015.

    "It has to do with mining companies trying to optimise their production. We will also maintain consistent mining policies," Yaluma told journalists on the sidelines of a mining conference.

     Zambia's frenzied royalty tax changes last year caused concern in the mining sector and prompted firms to suspended major capital investment. The cabinet in February approved a new royalty system that varies depending on the copper price as the country seeks to keep struggling mines open and limit job losses. 

    Mining companies operating in Zambia including Vedanta Resources and Glencore cut thousands of jobs and closed copper shafts as prices fell after slower growth by top consumer China.
    Back to Top

    China copper export surge

    China exported 85,000 tonnes of refined copper in May. It was the second highest monthly outflow on record, eclipsed only by the 102,000 tonnes that left the country in May 2012.

    The copper market, which is more accustomed to tracking what goes into China, the world's largest single consumer of the stuff, is now fretting that more, maybe much more, may be on its way.

    Particularly given the flood of metal into London Metal Exchange (LME) warehouses at key Asian locations such as Singapore and South Korea at the start of June.

    Such concerns are understandable.

    The strength of imports over the first part of the year was surprising, given accumulating evidence of stuttering manufacturing demand in China.

    With domestic production also rising strongly, up seven percent year-on-year in May, and the seasonal summer lull in fabricating activity fast approaching, it is tempting to view last month's export surge as a warning sign that the Chinese market is saturated.

    However, May's highly unusual copper flows may say as much about the London copper market as about that in China.

    It's easy to forget that China has for several years been a consistent exporter of refined copper, even if what leaves is dwarfed by what enters the country.

    Although there is a 15-percent export duty on refined copper, some of the country's largest producers qualify for a VAT rebate on some of their output.

    Exports last year totalled 211,600 tonnes. The top three destinations were Taiwan (72,100 tonnes), Malaysia (38,400 tonnes) and Vietnam (24,500 tonnes).

    The pace of exports in the first four months of this year was actually down on the year-earlier period to the tune of seven percent, or just under 6,000 tonnes.

    Some sort of acceleration always looked likely.

    Both visible stocks on the Shanghai Futures Exchange (ShFE) and darker inventory held in Chinese bonded warehouses grew significantly over the first quarter.

    Physical premiums for bonded metal slumped below $50 per tonne over LME cash at one stage in early April. Critically, that was less than the level of incentives being offered by some LME warehouse operators.

    For those smelters entitled to a tax rebate, exporting metal was something of a no-brainer.

    Attached Files
    Back to Top

    Kenmare surges as investors rally support for $368m deleverage

    Shares in UK-listed mineral sands producer, Kenmare Resources, surged a fifth as it edged closer to an overhaul of its balance sheet which will include a share issue of between $275m and $368m.

    Importantly, three of the firm’s strategic shareholders have agreed to support the capital raise for an aggregate amount of $115m, a development described by Investec Securities today as “no small sum”.

    If completed, the capital raise would help cut Kenmare’s debt by nearly three quarters to no more than $100m. Shares would be issued at just over £1.09 per unit. Kenmare is currently trading at 85 pence per share, a 20% increase in the first few hours of trade on the London Stock Exchange.

    As part of the share issue, which Kenmare hopes to complete by August, it signed a $100m cornerstone investment with State General Reserve Fund of the Sultanate of Oman (SGRF). However, discussions with a second cornerstone investor, King Ally, had been terminated by mutual consent after the parties encountered uncertainty of deal terms and completion.

    All in all, Kenmare would raise between $275m to $368m which would enable it to cancel up to $293m in debt and leave it with some $75m for working capital purposes.

    “We are pleased that we have signed an agreement for the investment of $100m by SGRF and are encouraged by the level of interest shown by a broad range of investors in the capital raise,” said Michael Carvill, CEO of Kenmare in a statement.

    Three major shareholders in Kenmare indicated they would support the capital raise for some $115m, including M&G which will protect its 19.97% stake in the firm as a result.

    “Early indications of investment from three of the main shareholders of Kenmare, in combination with lender underwriting position the company well to achieve the minimum target of $275m,” said Carvill.

    Investec Securities said winning the support of M&G was no mean feat. “While Kenmare has lost one of its cornerstones, it appears that existing shareholders are stepping up in a meaningful way,” it said.

    It added: “$115m from three shareholders is no small sum. The banks are also getting involved in order to see their debt being repaid, accepting $3 for every $4 owed and underwriting part of the raise”.

    Carvill said that with the finalisation of key transaction agreements completion of the capital raising ought to be achieved in “the next few weeks”.

    Conditions in the titanium market, especially ilmenite, have been depressed owing to excess iron ore production from which ilmenite is produced as a by-product.

    However, Kenmare estimated that inventories would be exhausted this year and that a supply deficit would materialise by about 2020. Market conditions for zircon were not expected to revive in the foreseeable future.
    Back to Top

    Steel, Iron Ore and Coal

    Molybdenum price is on tear

    Molybdenum price is on tear

    While base metals have enjoyed a good 2016 so far with only lead (-5%) in negative territory for the year and the likes of zinc (+27%) and tin (+18%) entering bull markets, molybdenum is making a star turn.

    A metric tonne of molybdenum on the London Metal Exchange fetched $16,500 on Thursday after customs data from China showed imports of concentrate and oxides surged 131% in May. Over the first five months of the year, China imported 8,851 tonnes of molybdenum concentrates and oxide, up 89% year on year.

    The price of molybdenum has shot up 43.5% year to date as it recovers from a record low of $10,200 hit in October last year.

    Thinly traded and primarily produced as byproduct of copper mining with annual supply of less than 270,000 tonnes a year, the molybdenum price is bound to be volatile, but the last year has been particularly topsy-turvey – the metal is still only worth half of what in July 2015.

    The difficult environment has led several molybdenum mine closures in north America which together with China supply more than two-thirds of the world's molybdenum used primarily in steel alloys.
    Back to Top

    Russia may increase production and export of coal in 2016 by 10 mln T

    Russia plans to increase coal production in 2016 by 10 million tonnes, while the increase of coal exports will also be around 10 million tonnes, Deputy Energy Minister Anatoly Yanovsky told the international conference "Prospects of energy cooperation between Russia - EU. Gas Aspect", sponsored by the Russian gas society.

    "We now have an increase in comparison with last year - more than 5.5 million tonnes of production and a similar increase in exports, including exports to the Asia-Pacific region. Relying on this data, than before the end of the year we will have plus 10 million tonnes in production and a 10 million tonnes increase in export," he said.

    Yanovsky added that the ministry expects coal exports to China to increase as well.

    Earlier, the deputy minister said that coal production in Russia in 2016 is planned at the level of 2015.

    In 2015, coal production in Russia reached 373 million tonnes against 358.2 million tonnes a year earlier.
    Back to Top

    China’s major steel makers cut July prices

    China’s major steelmakers adjusted down prices for their main steel products for July delivery as a correction to their relatively high prices in response to weakening demand from end users.
    Back to Top

    Lenders turn away BHP port debt plan, wary of coal

    Australian mining giant BHP Billiton pulled a $500-million debt refinancing plan at one of Australia's biggest coal export terminals after banks were reluctant to lend to the sector, said three sources with knowledge of the process. 

    The decision earlier this month sets back efforts to simplify complex debt arrangements at the Newcastle Coal Infrastructure Group (NCIG) project and stalls BHP's plan to release cash tied up in the terminal as it looks to strengthen its balance sheet amid a global commodities slump. 

    It also underscores the plight of the industry in trying to attract financing from lenders wary of coal's commercial outlook and contribution to climate change. 

    BHP had approached existing and new financiers for around $500-million of new debt to replace $685 million taken out in 2007. Under the now-defunct plan, BHP was to supply $185-million of the debt and would get the rest from lenders at generous terms, according to the three sources who spoke on the condition of anonymity because of the sensitivity of the subject. 

    "It wasn't a problem with BHP, it was more a coal market-specific problem," said Alen Golubovic, director of infrastructure and fixed income research for FIIG Securities, adding that banks were more open to rolling over existing debt than taking on new commitments.
    Back to Top

    China May steel sector PMI further slides to 50.9

    The Purchasing Managers Index (PMI) for China’s steel industry fell to 50.9 in May from 57.3 in April, the first drop after climbing for five consecutive months, showed data from the China Federation of Logistics and Purchasing (CFLP),
    Back to Top

    Fortescue reduces debt by further $500m

    Iron-ore mining company Fortescue Metals said on Thursday it had issued a further $500-million repayment notice for the 2019 senior secured term, bringing its total debt repayments for the 2016 financial year to $2.9-billion. 

    The latest repayment would generate an interest saving of $21-million a year, while total debt repayments for 2016 had lowered Fortescue’s yearly interest expense by $186-million, said Fortescue CFO Stephen Pearce. 

    “Cashflow generation from our operational performance and cost reductions have allowed Fortescue to continue to repay debt,” he added in a statement.
    Back to Top

    Steel futures extend gains on firm orders, steady inventories

    Steel futures in China rose for a third consecutive session and hit a 1-week high on Wednesday, supported by a pickup in orders by steel mills and the absence of a spike in inventories.

    The most active rebar futures for October delivery on the Shanghai Futures Exchange rose 2.8 percent to 2,143 yuan ($325.27) a ton, the highest close since June 14.

    "Investors have raised hopes that downside risk for prices is small after a big slump in May while steel mills' orders unexpectedly picked up and market inventories did not pile up," said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen, South China's Guangdong Province.

    Total inventories of five steel products, including hot-rolled coil for machinery use and rebar for construction use, remained unchanged at 8.126 million tons in June versus a month earlier, the China Iron and Steel Association said on Monday.

    Typically, steel stocks pile up as construction work slows in China between June and August due to hot weather. But this year steel demand in the top consumer has picked up on a year-on-year basis due to China's stimulus measures, Zhao noted.

    "A couple of mills that I've spoken to have seen their orders picking up in early June from the average level in May when sales were hit by a big slump in prices," Zhao said.

    Steel futures tumbled 22 percent in May after a 21 percent jump in April. Demand is expected to pick up again in September and October.

    Attached Files
    Back to Top

    Global steel output dips marginally to 139 mln T in May

    Global steel production fell marginally by 0.1% to 139.15 million tonnes in May, compared with 139.29 million tonnes a year ago, showed the latest data from industry body World Steel Association (WSA).

    Crude steel capacity utilization ratio of 66 countries in May was 71.3%, compared with 71.4% the same month last year. Compared to April this year, it is 0.1 percentage point lower, WSA said in a statement.

    China’s crude steel production for May was 70.5 million tonnes, an increase of 1.8% compared to the same month last year. Elsewhere in Asia, Japan produced 8.8 million tonnes of steel in May, a decrease of 0.9%, it added.

    India’s steel production was 8 million tonnes in May, up 4.9% on year, while South Korea’s steel production was 5.8 million tonnes in the same month, down 3.5% from the year-ago level.

    In the EU, Germany produced 3.9 million tonnes of steel, an increase of 4% for the month under review, whereas Italy produced 2.2 million tonnes of crude steel in May, climbing 9.3% on year.

    Spain produced 1.3 million tonnes, down 10.6% from the year prior, and France’s production fell 18.8% on year to 1.2 million tonnes.

    Turkey’s crude steel production in May was 3 million tonnes, up 5.4% on year, WSA said.

    In May, Russia produced 6 million tonnes of crude steel, up 0.4% from a year ago. Ukraine produced 2.3 million tonnes of crude steel, up 5.7% compared to the same month in 2015.

    Steel production in the US fell marginally by 0.4% to 6.8 million tonnes in May 2016.

    While, Brazil’s production in May was 2.6 million tonnes, a year-on-year decline of 13.2%.
    Back to Top

    EU hints at new sanctions on China over steel

    China's failure to curb its steel output could prompt the European Union to consider new trade sanctions against Beijing, the European Commission said on Wednesday, joining U.S. calls for over-capacity to be dealt with swiftly.

    By far the world's top steel producer, China's annual steel output is almost double the EU's total production. Western governments say Chinese steel exports have caused a global steel crisis, costing jobs and forcing plant closures.

    In an EU document aimed at framing the bloc's China policy over the next five years, the Commission said Beijing's pledge to cut up to 150 million tonnes of crude steel production by 2020 was insufficient and the country had to do more.

    "The EU is seriously concerned about industrial over-capacity in a number of industrial sectors in China, notably steel production," said the document, which was agreed by top EU officials including EU Trade Commissioner Cecilia Malmstrom and EU foreign policy chief Federica Mogherini on Wednesday.

    "If the problem is not properly remedied, trade defence measures may proliferate, spreading beyond steel to other sectors such as aluminium, ceramics and wood-based products," it said, referring to punitive tariffs to limit Chinese imports.

    The policy document follows a pledge by the Group of Seven leading industrialised nations in May to take steps after global steel production hit a record high earlier this year.

    The European Commission now has seven ongoing investigations into Chinese steel imports after opening a new case into alleged subsidies for hot-rolled flat steel in May.

    China's steel exports rose 6.4 percent to 46.28 million tonnes in the first five months of the year, according to Chinese data. The United States last month imposed import duties on Chinese steel products.

    China denies causing a global glut, but the United States and the EU accuse Beijing of keeping unprofitable plants running through subsidies in order to avoid massive job losses as the Chinese economy slows.

    "Subsidies and other government support measures that contribute to expanding or exporting steel capacity, or to maintaining structurally loss-making operations, should be eliminated as soon as possible," the EU document said.

    "China needs to reform its state-led economy and let market forces naturally address the problem," it said.

    Attached Files
    Back to Top

    Indian iron ore miner NMDC fears cash shortage on share buyback plan -sources

    Indian state-owned iron ore miner NMDC Ltd may borrow funds for the first time in more than two decades next fiscal year to cover a potential cash shortage caused by a government-mandated share buyback, two company sources said last week.

    India's government wants to raise as much as 360 billion rupees ($5.4 billion) from share buybacks by state-controlled companies including NMDC, Coal India Ltd and aluminium company NALCO in the current fiscal year that ends next March, to fund infrastructure and welfare programmes.

    NMDC's buy-back of up to 25 percent of its own shares will raise as much as 75.3 billion rupees for the government which owns four-fifths of the company, but drain its ability to finance expansion plans next fiscal year, said a source with direct knowledge of concerns raised by some company directors in a recent board meeting.

    A quarter of NMDC's 12-member board did not want the buy-back to go through, the source said.

    "NMDC's cash-onbook will be halved if the buy-back goes through," said analyst Goutam Chakraborty of Emkay Global Financial Services in Mumbai on Monday. "Going forward, if iron ore prices remain the same or fall further it is likely to put pressure on their balance sheet."

    An NMDC spokesman said last week the company had sufficient free cash-flows to meet expansion plans.

    But the source said the buy-back, a planned dividend payout of nearly 42 billion rupees, and proposed capital expenditures for the current fiscal year will leave the company with very little cash for the next fiscal year even if it made a profit of about 15 billion rupees as internally estimated.

    The second source confirmed that the buyback would deplete the company's cash reserves and require issuing debt in the fiscal year ending in March 2018 for the first time in about 20 years. Both sources, senior company officials, declined to be named as they are not authorised to talk to media.

    A spokesman for India's Finance Ministry, which is driving the buybacks, declined to comment.

    NMDC wants to spend about 40 billion rupees in the 2017/18 fiscal year to build a steel plant in the eastern state of Chhattisgarh and is likely to construct the second phase of an iron ore slurry pipeline with a partner.

    Attached Files
    Back to Top

    China coal-to-oil production capacity may reach 21.31 Mtpa by 2020

    China may see its coal-to-oil production capacity climb from 4.3 Mtpa in 2015 to 21.31 Mtpa by 2020, Shanghai ASIACHEM Consulting Co. Ltd. said in a recent analysis.

    Falling international oil prices and the deepening of environmental protection campaign have brought much pressure to coal-to-oil industry.

    China’s coal giant Shenhua Group saw its coal-to-oil industry make a loss in 2015, with annual avenue at 3.06 billion yuan ($463.9 million), compared with average annual avenue of 5.71 billion yuan in 2011-2014.

    Inner Mongolia Yitai Coal Co., Ltd, the biggest private coal producer in northern China, saw net profit of its Ordos 0.16 Mtpa coal-to-oil project fall from 174 million yuan in 2014 to only 10.87 million yuan last year.

    The analysis said the development of fine chemicals during the process of turning coal to oil is the best choice to reduce the loss caused by falling international oil price.

    Shenhua has kicked off a 0.18 Mtpa indirect coal-to-oil project in Ordos this year, making byproducts of diesel, heavy wax and alcohol.

    Coal-to-oil product is irreplaceable in ensuring self-sufficiency of China’s energy and chemical materials, analysts said, adding that international oil price trend, supply-demand situation of China’s oil products and the development of high added-value products in the industry will determine the trend of the industry.

    Attached Files
    Back to Top

    Merafe hikes ferochrome price

    Merafe announces huge increase in the pricing of European benchmark ferrochrome, moving from 82US cents per lb Q2 to 98US cents in Q3. +19%

    Back to Top

    China May coking coal imports up 136pct on yr

    China’s coking coal imports surged 135.7% on year but down 17.7% on month to 4.42 million tonnes in May, showed the latest data from the General Administration of Customs (GAC).

    The yearly increase was mainly due to the tight supply amid coal producers’ strict implementation of production cut as well as a 1.8% year-on-year rise of crude steel output.

    Yet, a 600-800 yuan drop of steel prices since May reduced steel mills to the break-even point and greatly weakened their ambition of expanding production, which led to the monthly drop of coking coal imports.

    The value of the import stood at $255.94 million in May, rising 67% on year but down 25.8% on month, the GAC said.

    The average price of imported coking coal was $57.9/t in May, down 9.8% from April.

    Over January-May, China’s coking coal imports climbed 28.4% on year to 21.21 million tonnes; the value of the imports was $1.35 billion, falling 7.1% year on year.

    Meanwhile, China’s exports of coking coal dropped 10.8% on year and down 57.9% from April to 80,000 tonnes in May. The value of the exports was $6.9 million, losing 31.3% on year and down 58.4 % on month.

    Over January-May, China’s coking coal exports stood at 640,000 tonnes, rising 52.8% from the previous year; while the total value of the exports increased 15.3% on year to $56.5 million.
    Back to Top

    China’s key steel mills daily output stands at 1.74 mln T in early Jun

    The daily crude steel output of China’s key steel mills dropped 2.03% from ten days ago to 1.74 million tonnes in early June, according to data released by the China Iron and Steel Association (CISA).

    China’s daily crude steel output is expected to be 2.35 million tonnes in early June, down 1.59% from ten days ago, CISA forecasted.

    By June 20, the capacity utilization of the 163 surveyed steel mills dropped 4.54% on month, mainly impacted by the production cut at Tangshan. The crude steel production is expected to slow down in June amid plunging steel prices in May as well as production cuts, yet it will continue to stay at a high level.

    By June 10, stocks of steel products in key steel mills rose 1.7% from ten days ago to 14.2 million tonnes; social stocks of steel products remained stable on month by June 20.

    Analysts said the domestic steel prices may not experience steeper decline after plummeting for consecutive six weeks, due to not any notable shrink of steel demand is observed.

    Back to Top

    China May thermal coal imports surge 62.3pct on year

    China’s import of thermal coal, including bituminous and sub-bituminous coal, stood at 7.61 million tonnes in May, surging 62.3% on the year and up 7% from April, showed data released by the General Administration of Customs on June 21.

    The value of the imports totaled $359.35 million, translating to an average import price of $47.22/t, down 14.43% year on year but up $0.16/t from the month prior.

    During the January-May period, China imported 33.06 million tonnes of thermal coal, down 8.6% from the same period in 2015, which valued $1.55 billion, down 31.8% year on year.

    Meanwhile, China imported 5.13 million tonnes of lignite in May, up 0.45% year on year and up 0.12% on month. That valued $170.21 million, up 0.13% year on year.

    Total lignite imports over January-May reached 22.18 million tonnes, up 0.06% year on year, with value at $731.27 million, down 0.22% year on year.

    Separately, China exported 0.3 million tonnes of thermal coal in May and 1.75 million tonnes in the first five months, which valued $20.69 million and $126.8 million, respectively.
    Back to Top

    Rio Tinto drops iron ore chief in corporate reshuffle

    Rio Tinto on Tuesday replaced the head of its iron ore division, its biggest profit maker, as part of a sweeping management reshuffle by new Chief Executive Jean-Sebastien Jacques, who will take over the reins next week.

    Iron ore division head Andrew Harding - once tipped as a contender to lead the company - will leave Rio as of July 1, the company said in a statement.

    He will be replaced by Chris Salisbury, currently acting copper and coal chief executive, will run the iron ore division from Perth.

    A source familiar with the changover procedure said Harding had expressed a willingness to stay on in the role he has held since 2013, but it was agreed that the division would benefit from "fresh eyes".
    Back to Top

    US coal consumption increases to near year-high volume

    Hotter weather and higher natural gas prices have helped increase coal consumption for power generation to near a year-high mark.

    Coal consumption last week topped 16.5 million st, a weekly volume eclipsed only once this year when 17.1 million st was burned the week ending January 21, according to Bentek Energy, a unit of S&P Global Platts.

    The climb in coal consumption began in late May as the Henry Hub prompt-month gas futures contract began to gain strength. Since the rollover into July delivery, the Henry Hub prompt-month contract is up 78.4 cents, a 39.9% gain.

    Monday's settlement at $2.747/MMBtu marked a year-high price for the Henry Hub prompt-month contract and its highest since $2.758/MMBtu on September 14.

    As gas prices went up in the past month, coal consumption also climbed, increasing 29.4% nationwide from 12.8 million st in the week ending May 19, with coal-fired boilers in the Midcontinent Independent System Operator and the Electric Reliability Council of Texas leading the surge.

    MISO has seen coal consumption jump 43% since mid-May, with weekly volumes climbing to 4.1 million st last week from 2.9 million st. MISO weekly coal consumption last topped 4 million st in January.

    Coal consumption in ERCOT has increased since early April and picked up in May. ERCOT coal consumption had not surpassed 2 million st/week this year until volumes topped that mark in five of the last six weeks. Consumption reached a year-high mark of 2.5 million st in the first week of June.
    Back to Top

    China orders energy-use checks to speed closure of coal, steel capacities

    China has ordered local authorities nationwide to check on energy use by coal and steel companies to speed up closure of plants and mines that fail to reach certain efficiency standards, the country's economic watchdog said on Monday.

    Local governments need to conduct energy consumption checks on coal and steel producers, and any that do not meet efficiency standards will be given a maximum of nine months in which to improve or be closed, according to two statements on the website of the National Development & Reform Commission (NDRC).
    Back to Top

    BHP Flags ‘Another 10 Years’ as Iron Ore Adjusts After Boom

    The iron ore market will take longer to balance out than other commodities as excess supply may take years to be absorbed after a boom, according to BHP Billiton Ltd. Chief Executive Officer Andrew Mackenzie, who flagged his company’s low production costs as a lure for hedge-fund investors.

    “There are some commodities, like oil and copper, where there is a natural decline because pressure drops off, grade drops off,” Mackenzie said in New York after making an address. “One of the markets that will take longest to come back into balance is the iron ore market.”

    Iron ore dropped for three years to 2015 as low-cost miners including BHP and rivals Rio Tinto Group and Fortescue Metals Group Ltd. ramped up output just as growth cooled in China, spurring a glut. Prices staged an unexpected rally in the opening months of this year amid a speculative frenzy in China, before dropping again. Mackenzie said in March he was more bearish on iron ore than other raw materials that BHP produces.

    “The reality is we’ve settled down now to a price that we would say is more realistic on the basis of fundamentals of supply and demand,” Mackenzie said on Monday, speaking in response to an audience question. “We’ve had such a long boom. To walk that through, in my view, may take another 10 years.”

    Ore with 62 percent content was at $51.06 a dry ton on Monday after losing 28 percent since topping $70 in April, according to Metal Bulletin Ltd. The raw material peaked in 2011 at more than $191, and the slump has prompted closures and mergers among higher-cost miners.

    “Consolidation, particularly of the high-cost producers, it will carry on much longer than you think they humanly should,” Mackenzie said. “In the meantime, you’ve got to be at the bottom of the cost curve, you’ve got to be doing everything I’ve said, running things in the most productive way possible, or your hedge funds won’t want to invest in us.”

    Mackenzie said last month BHP is increasing exploration and investment in copper and oil, signaling a shift from cutting costs with or without a recovery in prices. The company has previously flagged copper and petroleum as its key focus for growth amid expected supply constraints for both commodities.

    Attached Files
    Back to Top

    BHP Billiton steps up coal output, slices costs, eyes acquisitions

    Top global miner BHP Billiton outlined plans to boost coal output by 8 percent over the next three years while slashing costs, and said it would only consider premium, lowest-cost assets for any acquisitions.

    BHP Billiton, the world's top exporter of coking coal used in steelmaking and also a producer of energy coal, is in the enviable position of running profitable coal mines at a time when more than half the world's coal mines are losing money.

    It remains optimistic about the long-term prospects for its coal business based on the quality of its coal, its low costs and growth prospects in China, India and Southeast Asia, but said markets would be challenging in the short to medium-term.

    "We have the portfolio of assets best placed to meet this future demand," BHP Billiton Minerals Australia president Mike Henry told reporters on Tuesday after an investor presentation.

    Making life harder for its rivals, BHP increased its forecast for coking coal output for the current year, ending June 30, by 6 percent to 42.5 million tonnes, and said it plans to hike production to 46 million tonnes in 2018.

    It also aims to slice costs by $600 million over the next year by getting more out of its trucks, wash plants, and workers, and negotiating better deals on parts and equipment.

    That would help cut its coking coal costs to 9 percent over the next year to $52 a tonne. That compares with coking coal prices which averaged more than $90 a tonne in the June quarter.

    While it has sold, spun off or shut most of its energy coal mines amid a global push to curb carbon emissions, BHP did not rule out bidding for rival Anglo American's one-third stake in the Cerrejon energy coal mine in Colombia or its coking coal mines in Australia.

    Henry declined to comment on specific assets, but said any acquisition would have to fit with the company's tighter geographic focus, be high quality, low cost, and come at a good price.

    "It would need to enable higher returns and would need to be resilient to all markets," he said.

    Analysts have said it would make sense for BHP to own Anglo American's Moranbah and Grosvenor coking coal mines, which are near its own mines in Queensland's Bowen Basin. The company has said it is mainly seeking acquisitions in copper and petroleum.

    BHP Billiton owns nine coking coal mines in Australia's Queensland state with Japanese partners Mitsubishi Corp and Mitsui & Co. It also owns the biggest energy coal mine in the Hunter Valley in Australia and a one-third stake in Cerrejon, alongside Anglo American and Glencore Plc.
    Back to Top

    Vale said in talks with Asia buyers for stake in iron ore

    Vale is holding discussions with Asian mining companies about a potential sale of a minority stake in its Brazilian iron-ore assets that could fetch as much as $7 billion, according to people familiar with the matter.

    The world’s top iron-ore producer may also consider streaming deals, the people said, asking not to be identified as the information is private. No agreements have been reached, and the talks may not result in a deal, the people said.

    The Rio de Janeiro-based company joins other global miners such as Freeport-McMoRan, Glencore and Anglo American who are trying to pay down debt through asset sales. Chief executive officer Murilo Ferreira raised the prospect of selling some of the company’s most prized assets in February after Vale reported its first year of losses since 1997. The company has said it wants to raise about $10 billion through next year.
    Back to Top

    China cuts 14.57 Bt standard coal consumption in 2005-15

    China has cut consumption of 14.57 billion tonnes of standard coal in 2005-2015, equaling reducing carbon dioxide emission by 3.6 billion tonnes, Xinhua News Agency reported, citing an industry meeting held in Hebei on June 18.

    Coal share in China’s energy mix dropped from 72% in 2005 to 64% in 2015, according to the report. While non-fossil energy share in the country’s primary energy increased from 7.4% to 15%.

    The energy consumption per GDP reduced 19.1%, 18.2% and 15% during 2005-10, 2011-15 and 2016, data showed.

    China made great progress in energy saving in construction and transportation industries, especially the production of energy-saving buildings and green cars.

    Attached Files
    Back to Top

    Brazil fines Samarco 142 million reais for damages to protected areas

    Brazil's Environment Ministry fined mining company Samarco 142 million reais ($41.6 million) for damages to three protected areas resulting from a tailings dam burst in November, the ministry said on Friday.

    The ministry said in a statement the three areas on the coast of Espirito Santo state were contaminated by metals such as lead, coper and cadmium. The metals spilled from the dam and were carried all the way from Minas Gerais through the Doce River to the ocean.

    Experts from the Environmental Ministry found several species had been wiped out in the contaminated areas, the statement said.

    Samarco, a joint venture between Brazil's Vale SA and BHP Billiton, has shut its iron ore operation in Mariana, Minas Gerais state, since the accident late last year.

    The company sealed a deal with the Brazilian government in March to pay as much as $5.1 billion over 15 years for damages resulting from the dam burst.

    In a statement late on Friday, Samarco confirmed the new fines and said it was evaluating a possible appeal.

    It said all necessary works and associated costs to mitigate damages resulting from the spill were already included in the March deal, which was also signed by the ministry.
    Back to Top

    China to re-investigate anti-dumping case into stainless steel tubes from EU, Japan

    China's Commerce Ministry said on Monday it would re-investigate its anti-dumping case into imports of high performance, seamless stainless steel tubes from Japan and the European Union.

    China lost an appeal ruling in October at the World Trade Organization in a dispute in which Japan and the European Union had complained about Chinese use of anti-dumping duties on the steel products.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP