Mark Latham Commodity Equity Intelligence Service

Friday 26th February 2016
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    Iranians start voting for new parliament, Assembly of Experts

    Iranians went to the polls on Friday in parliamentary and Assembly of Experts elections, seen as a contest between hardliners entrenched in power and allies of pragmatist President Hassan Rouhani seeking to expand their influence.

    "Voting has started in Iran. Millions of Iranians will vote all around the country," state TV said.

    The 290-seat parliament vote will have scant impact on Iran's foreign policy, in which Supreme Leader Ayatollah Ali Khamenei has the final say, but could strengthen Rouhani's hand before next year's presidential vote. The 88-member Assembly will select Khamenei's successor.

    Both bodies are currently in the hands of hardliners.

    The contest pits supporters of Rouhani, who championed last year's nuclear deal with world powers and is likely to seek a second presidential term next year, against conservatives deeply opposed to detente with Western powers.

    Both sides have called for a strong turnout. Most reformist candidates have been barred by a hardline clerical vetting body, along with many moderates, but their supporters have called on voters to back Rouhani's allies and keep the conservatives out.

    Results are hard to predict, with conservatives traditionally doing well in rural areas and young urbanites favouring more reformist candidates.
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    14 shopping apps! China digital boom.

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    Carbon Concrete: Hard shell – lightweight core

    With over 100 million cubic meters used each year, steel-reinforced concrete is the most important construction material in Germany – for now. There’s a modern alternative on the horizon: Instead of steel, reinforcement is provided by carbon fibers, which are four times lighter than steel, offer six times the load capacity and don’t rust.

    C3 (Carbon Concrete Composite) is the name of the carbon fiber-reinforced concrete project which is now slowly moving out of its infancy. It is the biggest construction research project in Germany and has received government funding of around 45 million euros. The project team includes specialists from our TechCenter Carbon Composites. Christoph Klotzbach, head of the TechCenter, says: “Initial applications show we’re on the right track.”

    But why does concrete need to be reinforced in the first place? Isn’t it rock hard as it is? That’s true – but only for so-called compressive loads. Under tensile loading the material breaks relatively quickly. That’s why concrete needs to be reinforced, achieved to date by casting it around a steel mesh.

    The principle has been known since the 19th century, and since then steel-reinforced concrete has been used to construct roads, bridges, tunnels, buildings, masts, retaining walls, drains and much more besides. The problem is that steel rusts and needs to be encased in several centimeters of concrete just to prevent corrosion.

    Non-rusting materials such as carbon don’t need this protection, so components can be made much thinner and require far less concrete. Carbon fiber-reinforced concrete thus offers advantages in terms of resource and energy consumption and carbon footprint that are virtually unrivaled by any other material in any other sector.

    Building with carbon fiber-reinforced concrete not only extends the lifetime of the structures, it also allows more intricate architectural designs. This could significantly extend the range of applications for concrete. Lightweight building with concrete is no longer a contradiction in terms, it is the concept of the future.
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    Oil and Gas

    OPEC and non OPEC producers set to meet in March

    Oil futures closed higher Thursday following an afternoon surge on reports of a March meeting between OPEC members and Russia to discuss production.

    Venezuela's Oil Minister Eulogio Del Pino said a meeting was scheduled for March that includes Russia, Saudi Arabia, Venezuela and Qatar, several media outlets reported.

    Russia's Energy Minister Alexander Novak also referred Thursday to a producers' meeting in March.

    "As far as we understand, OPEC countries are planning a meeting of OPEC and non-OPEC ministers in mid-March," Novak was quoted by the Prime news agency as saying.

    Saudi Arabia, Venezuela, Qatar and Russia -- agreed to freeze production at January levels, if other key producers did the same.

    Oman, which is not an OPEC member, is willing to cut output by 10% if a deal is reached between major OPEC and non-OPEC producers, Oil and Gas Minister Mohammed al-Rumhy said, according to the Oman Observer.

    Oman's crude and condensate output averaged more than 1 million b/d in January, so a 10% cut would remove 100,000 b/d from the global market.
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    Iran Seeks Oil Barter Deals as European Buyers Face Bank Hurdles

    Iran is offering to swap exports of crude oil for imports of refined fuel as some European customers are unable to find banks to process payments, a sign the Middle Eastern nation is still struggling to regain markets since the removal of sanctions.

    The National Iranian Oil Co. is resorting to barter because financial restrictions still impede trade, said three officials who asked not to be named citing company policy. Hellenic Petroleum SA, the Greek refiner that got as much as quarter of its crude from Iran before the European Union embargo, can’t secure deliveries because banks won’t process payments, said two people familiar with the matter.

    Iran is seeking to regain lost European markets and boost exports to Asia after sanctions were removed last month upon completion of an agreement limiting its nuclear program. It loaded its first cargo of oil to Europe since 2012 this month onto a tanker chartered to French oil company Total SA. The Persian state plans to increase exports by 1 million barrels a day this year, according to Oil Minister Bijan Namdar Zanganeh.

    Cautious Banks

    Banks are being “super cautious because they do want to have access to the U.S. markets and the U.S. rules as to what they can do aren’t particularly clear,” said Ross Denton, a partner at Baker & McKenzie LLP specializing in sanctions. “Iran is open for trade” only for entities with no direct connection to the U.S., he said.

    Several European banks approached by Hellenic have refused to handle transactions linked to Iran, the two people said, asking not to be identified because the matter was private. This has stymied the company’s Jan. 22 agreement to resume purchases of Iranian crude.

    Barter deals avoid the need to access bank finance for as long as many lenders remain unwilling to issue letters of credit for Iran-linked trades, the three NIOC officials said. The company is asking for at least partial cash payment for most refined-product trades and accepting transactions in Euros and other currencies, they said. It is offering products such as fuel oil in exchange for imports of gasoline and is also willing to swap crude for fuel, they said.

    Even after the successful nuclear deal, some U.S. sanctions on Iran remain in place. In 2014, the nation’s regulators imposed fines on some European banks including BNP Paribas SA for processing transactions to nations under U.S. sanctions like Iran, Cuba and Sudan.
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    Brazil senate passes pre-salt rule change bill

    Petrobras’ dominant position in the highly-productive pre-salt province off Brazil could be challenged after the country’s Senate passed a bill that could pave the way for other players to become operators of acreage there.
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    Petrobras may get $6 billion in sale of natgas pipeline unit: paper

    Brazil's state-led oil company Petrobras is expected to fetch as much as $6 billion from the sale of a natural gas pipeline unit in Brazil's industrialized southeast, the Valor Economico daily newspaper reported on Thursday.

    Bids of between $5 billion and $6 billion for Nova Transportadora do Sudeste are expected by a Tuesday deadline from Canadian, French and Chinese companies, the paper said, without citing the source for its information.

    Potential bidders include Canada's Brookfield Asset Management Inc (BAMa.TO), China National Petroleum Corp [CNPET.UL], and a joint venture between the CanadianPension Plan Investment Board [CPPIBC.UL] and France's Engie SA (ENGIE.PA), Valor reported.

    Petroleo Brasileiro SA, as the oil company is formally known, has plans to sell about $14 billion of assets this year in an attempt to cut its debt and maintain cash amid a plunge in world oil prices and a corruption scandal at the company.

    Petrobras' estimated $130 billion of debt is the largest in the oil industry and one of the largest of any industrial company in the world.

    A Brookfield press spokesman in Toronto declined to comment when contacted by Reuters. Engie's press office in Rio de Janeiro declined to comment. A Canadian Pension Plan Investment Board press official in Toronto declined to comment. CNPC officials did not immediately respond to an emailed request for comment.
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    Kurdish oil exports suspended after pipeline sabotaged in Turkey

    Oil exports from the autonomous Kurdish region in northern Iraq have been suspended for a second week after pipelines were sabotaged in conflict-hit southeastern Turkey, Reuters reported.

    Halting the oil exports - Iraqi Kurdistan's main source of income - will deprive the region of much-needed revenue, already reeling from record-low oil prices and an oversaturated market.

    The pipeline, which carries about 600,000 barrels of crude per day from the fields in Iraq to Turkey's Ceyhan port, is set to remain closed until Feb. 29, meaning an outage of nearly two weeks since pumping stopped on Feb. 17.

    Industry sources have indicated the pipeline was sabotaged. Violence has flared in Turkey's mostly Kurdish southeast, as skirmishes between the Turkish military and Kurdistan Workers' Party (PKK) militants have led to a deteriorating security situation.

    The pipeline has been sabotaged several times inside Turkey, with the Kurdish government in Iraq accusing the PKK of targeting it. Although both the KRG and PKK are Kurdish, the PKK opposes the KRG's economic relations with Turkey.

    As a result of the outage, Iraq's state-run North Oil Company (NOC) which operates the fields in Kirkuk, has reduced its production from 200,000 barrels per day to about 120,000.
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    Exxon's Downgrade Threats Mount as Oil Rebound Prospects Dim

    Exxon Mobil Corp. may lose its top-notch credit rating from Moody’s Investors Service as the oil-market collapse imperils cash flow needed to cover debt payments and investment in new discoveries.

    Seven of the other largest U.S. energy explorers also were put on notice or downgraded by Moody’s Thursday after the rating company concluded crude prices will remain weak for years. The Moody’s review featured a Who’s Who of American oil and gas heavyweights, from Chevron Corp. to Marathon Oil Corp. to ConocoPhillips.

    The outlook for Exxon, which has held Moody’s top Aaa rating for more than 90 years, dropped to negative from stable, the rating company said in a statement on Thursday. The move followed a warning earlier this month from Standard & Poor’s that its own rating on Exxon’s debt may be in jeopardy.

    "The negative outlook reflects our expectations of negative free cash flow and weak cash flow based leverage metrics,” Moody’s said. "While the company is cutting its capital spending and operating costs in response to lower commodity prices, this diminished level of capital reinvestment could adversely affect Exxon Mobil’s reserve replacement and production profile in the latter part of this decade."

    Triple-A Edge

    Exxon, which traces its roots to the 1800s when kerosene began competing with whale oil as household lamp fuel, has annual revenues that dwarf the economies of most of the nations in which it operates. The Irving, Texas-based company’s platinum credit rating gives it an edge in competing with rival drillers when negotiating exploration concessions with oil-rich nations, Chairman and Chief Executive Officer Rex Tillerson has said.

    “Exxon Mobil places a high value on its strong credit position and continues to be focused on creating long-term shareholder value despite near-term market volatility,” Scott Silvestri, an Exxon spokesman, said in an e-mailed statement on Thursday.

    Credit rating firms have been downgrading drillers, explorers and even entire nations as the oil-price crash erases revenue relied upon to pay debts and fund day-to-day operations. The downgrades have spanned from U.S. shale fields to offshore Brazil. Deep cuts to headcounts and exploration spending haven’t been enough to shield balance sheets from the impact of slumping prices.
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    NRDC: China's Natural Gas Consumption Up Nearly 18% In Jan

    China's natural gas consumption rose 17.6 percent in January from the same month last year, reaching 22.3 billion cubic metres, China's central state planning commission said on Friday.

    Production was up 4.1 percent on the year to 13.1 bcm, the National Development and Reform Commission (NDRC) said in a statement on its website.

    Refinery runs of crude oil fell 1.8 percent on the year in January to 38.66 million tonnes, or 9.1 million barrels per day. Crude output dropped 2.1 percent to 17.69 million tonnes, or 4.17 million bpd.

    The country's National Bureau of Statistics does not release standalone production figures for January.

    Its production figures generally differ from those released by the NDRC.
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    Leviathan partners raise annual natgas production forecast

    Leviathan partners raise annual natgas production forecast

    The partners developing Israel's massive Leviathan offshore natural gas field increased their annual production forecast on Thursday and said they expect to bring the project online by the end of 2019.

    The group led by Texas-based Noble Energy and Israeli conglomerate Delek Group presented a new development plan that calls for 21 billion cubic meters (bcm) of gas production each year, up from 16 bcm in their initial plan.

    They also lowered the estimated cost of the project to $5-$6 billion from a previous $6-$7 billion.

    Leviathan was discovered in 2010 in the eastern Mediterranean and has estimated reserves of 622 bcm, making it one of the world's largest finds of the past decade. But development has been held up due to regulatory uncertainty in Israel.

    The government recently agreed to a framework deal with Noble and Delek to speed up development of Leviathan, though the Supreme Court needs to give a final approval because some opponents have claimed it is unlawful.

    The development plan presented on Thursday includes drilling eight wells to be connected by a subsea pipeline to an offshore platform, producing a total of 21 bcm a year.

    One exit point capable of handling up to 12 bcm a year will be for Israel, as well as bringing supplies to neighbouring markets in the Palestinian Authority, Jordan and Egypt. A second exit point to handle up to 12 bcm is solely for export.

    "We are moving forward as fast as possible to bring gas to market by the end of 2019," Yossi Abu, chief executive of Delek subsidiaries Delek Drilling and Avner Oil Exploration , told Reuters.
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    Repsol Cuts Dividend as Crude Slump Casts Doubt on Talisman Deal

    Repsol SA, the worst-performing major European oil stock over the past year, cut its dividend for the first time since 2009 as its acquisition of Talisman Energy Inc. turned sour amid the crude-market rout.

    Repsol’s board proposed cutting the final 2015 payout to 0.3 euros per share from 0.5 euros as the Madrid-based producer followed Eni SpA and ConocoPhillips in paring its dividend. The company booked an impairment charge of 2.96 billion euros ($3.26 billion) for the collapse in prices.

    Repsol has lost half its market value over the past year, the most among Europe’s six largest oil companies, as it struggles to convince investors of its ability to weather the slump in crude while integrating Talisman. The assets of the Canadian company it acquired for $13 billion last May suffered operating losses in Norway, Colombia and North America.

    The company reported a net loss of 2.06 billion euros in the fourth quarter. Talisman assets posted a 208 million-euro operating loss, even as Repsol’s production unit showed an operating profit of 11 million euros. Adjusted net income rose 25 percent to 461 million euros from a year earlier, beating the average 451.1 million-euro estimate of seven analysts surveyed by Bloomberg.

    Repsol’s shares rose 1.9 percent in Madrid trading as the 22 member STOXX Europe 600 Oil & Gas Index gained 1.8 percent.

    The company plans to sell 6.2 billion euros of assets by 2020 to cut its debt load from the highest in at least 27 years. Net debt rose sixfold to 11.9 billion euros as of Dec. 31 from a year earlier following the Talisman acquisition.

    Repsol cut its dividend for the first time since reducing the payout on its 2009 earnings as it struggles to avert credit rating downgrades and seeks to avoid selling down its 30 percent stake in Gas Natural SDG SA. Repsol last month doubled its annual target for synergies from the Talisman acquisition to $400 million.

    The company reported that refining margins, a gauge of profitability, rose to $7.3 per barrel in the fourth quarter from $5.5 per barrel a year ago. Repsol pumped about 697,500 barrels of oil equivalent per day in the three months through Dec. 31, compared with 371,000 a year earlier, before the takeover of Talisman.

    Repsol announced the sale of its U.K. offshore wind production unit to SDIC Power Holdings Co. for 238 million euros, giving an after tax capital gain of 109 million euros.
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    Technip shares leap as market applauds resilience amid oil rout

    Technip's shares jumped by more than 15 percent on Thursday as markets applauded its fourth-quarter results and it said that its 2016 dividend was well covered thanks to a strong backlog of projects while cash flow helped it to resist the worst of the oil price rout.

    Although the French oil services company expects business to dip in 2016 as oil and gas companies hold off on new investments, it said it expects to some rebound in momentum from late in the year going into 2017.

    Kepler Cheuvreux analysts, who have a "hold" rating on Technip, wrote that the results were in line with forecasts and that they expect the company to announce a multibillion-euro contract in Mozambique in the coming weeks.

    Italy's Eni said on Wednesday that it had won approval from the Mozambique government to build its planned Coral floating liquefied natural gas (LNG) plant. Technip is expected to take part, but a company spokesman was not immediately available to comment.

    One London-based analyst described Technip's outlook as reassuring, while Jefferies, which has a "buy" rating on the stock, said the results were above consensus and 2016 guidance was positive.


    Sector suppliers have been squeezed along with oil and gas companies that have cut spending and jobs, while placing projects on hold, in response to a 70 percent drop in oil prices since mid-2014 because of a global crude glut.

    Technip's Italian rival Saipem said on Wednesday that it may have to cut costs further to meet a commitment to stick to profit forecasts for 2016 after it posted a 2015 net loss of 806 million euros and wrote off assets.

    The Technip CEO, Thierry Pilenko, told reporters that a strong backlog of work, solid cash flow and cost cuts had enabled the firm to remain resilient.

    "We have a very robust balance sheet, which is supported by a strong cash generation and a solid backlog that allows us to set very clear objectives for 2016," Pilenko said.

    Technip said its business backlog was 17 billion euros ($18.7 billion) at the end of 2015, compared with more than 20 billion euros the previous year, and that it ended the year with 1.9 billion euros of net cash.

    The company's cost savings target has been increased to 1 billion euros by 2017, from the 830 million euros announced last July, but it said no further job cuts are planned.

    Pilenko said the company might consider small acquisitions and alliances to strengthen its position in technological developments.

    The company's chief finance officer told analysts that the dividend for 2016 is well covered.
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    Kremlin aide suggests selling 19 pct in Rosneft to strategic investor: agencies

    The best option for privatizing top Russian oil producer Rosneft is to sell the state's 19 percent stake to a strategic investor "to receive a maximum premium", Russian news agencies quoted Kremlin aide Andrei Belousov as saying on Thursday.
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    China asks for urban ban on high-sulphur diesel in clean fuel push

    China has asked local governments in 11 provinces to ban in urban areas the selling of high-sulphur diesel that is used for industrial and farming purposes rather than in automobiles, Beijing said in a policy document released on Thursday.

    The request comes after China rolled out "national five" standards for gasoline and diesel on Jan. 1 in the 11 provinces in the more economically developed eastern part of the country. The standards are equivalent to Euro V specifications that allow a maximum sulphur content of 10 parts per million (ppm).

    Due to lax supervision, however, "general diesel" or diesel with a high-sulphur content is still being sold at urban petrol stations in the provinces that come under the new policy, said the National Development & Reform Commission (NDRC) on Thursday in thedocument posted on its website

    Only kiosks in rural areas or along the rivers should be allowed to sell high-sulphur diesel, the NDRC said.

    The tighter fuel standards are an attempt to tackle air pollution. Emissions from automobiles, especially from diesel-burning trucks, are one of the main contributors to the choking smog that plagues many Chinese cities.

    "Along with China's accelerating fuel upgrades, the problem of having the lower-grade fuel quit the market has become increasingly prominent," the agency said.

    "Especially as general diesel is being sold to automobiles illegally, marketing of (higher quality) automotive diesel has been adversely affected."

    The agency requires all service stations to mark clearly the names and quality of their fuels to help motorists select the grades they want and to allow authorities to supervise fuel quality, the NDRC said.

    By January 2017, "national five" will cover the whole country, it said, in line with an announcement last April that moved the roll-out up by one year.

    Refiners have started boosting output of cleaner fuels, and also raised imports of diesel to 145,000 tonnes in January as recorded by customs data, despite an overall domestic surplus that has turned China into a leading exporter of the fuel.

    Traders said the rare imports, which were about 20 percent of the diesel China exported last month, were driven in part by the need to meet the cleaner fuel standards.

    China, the world's largest fuel user after the United States, has more than 90,000 petrol stations. Nearly 60 percent of them are owned or run by dominant state refiners Sinopec Corp and PetroChina, the rest by smaller state oil companies like Sinochem Corp [SASADA.UL] and independents.

    The big state refiners say they have spent billions of dollars upgrading facilities to make the cleaner fuels.
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    Sunoco May Ship First U.S. Waterborne Ethane Export Within Days

    Sunoco Logistics Partners LP, which operates pipelines and terminals, is poised to export the first U.S. waterborne ethane cargo “within a week,” according to Genscape Inc.

    The company’s Mariner East 1 pipeline, which stretches from the Marcellus shale deposit in western Pennsylvania to the Marcus Hook terminal on the Delaware River near Philadelphia, boosted ethane deliveries on Feb. 22, said Amanda Townsley, senior adviser of petrochemicals and LNG for Genscape, which is monitoring the line.  The jump in flows coincides with the arrival of the terminal’s first tanker, the JS Ineos Intrepid, at the ethane dock, she said.

    This ethane is contracted to go to Norway as feedstock at processing plants owned by Ineos Europe AG, and will ultimately be used to make products such as plastic. U.S. producers have seen prices for natural gas and liquids tumble as output from shale deposits outpaces demand.

    “The first ship at the ethane dock is exciting; this would be the first waterborne export from the U.S. period,” Townsley, based in Houston, said in a telephone interview. “It’s not a massive volume so it’s not a game changer for the supply and demand balance, but it’s a big deal for the producers in the area.”

    Range Resources Corp. is contracted to ship 20,000 barrels of ethane on the pipeline to the Philadelphia area terminal, according to its website. Ineos previously announced it also has a long-term contract to purchase ethane from Consol Energy Inc.

    Sunoco Logistics spokesman Jeffrey Shields declined to provide updates and said to listen to the company’s earnings call early Thursday for any developments, according to an e-mail Tuesday. He didn’t respond to requests for comment on Wednesday.
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    Gazprom cuts gas supplies to Turkey by 10 pct - sources

    Russian energy giant Gazprom has reduced natural gas supplies to private sector companies in Turkey by 10 percent due to a price dispute, officials at Turkey's energy ministry told Reuters on Thursday.

    The cut came after Turkish companies refused to pay a fresh bill sent by Gazprom with higher prices after an initial deal between Ankara and Moscow envisaging a 10.25 percent reduction in prices was cancelled.

    Russia's Interfax news agency said the cut came into effect on Feb. 10. Six private Turkish companies buy a total of 10 billion cubic meters of natural gas from Russia annually.

    Turkey is dependent on Russia for more than half of its natural gas imports but the two countries have been at loggerheads since November when Ankara downed a Russian warplane along the Turkey-Syria border saying it violated its air space.

    Turkey has not asked for additional supplies from elsewhere, an industry source said, as demand at the moment remained low due to warm weather. "At the moment there are no problems in terms of meeting the gas demand," he said.

    Turkey said last year it had struck a deal giving it a 10.25 percent price discount on gas from Gazprom, but a final signing was delayed, prompting state pipeline operator Botas to appeal to the International Chamber of Commerce (ICC).

    Russia is Turkey's largest gas supplier with sales of 28-30 billion cubic metres annually worth around $6.5 billion. Turkey imports 60 percent of its gas and 35 percent of its oil from Russia.
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    Canada: Douglas Channel LNG project shelved

    The Douglas Channel LNG Consortium, led by Canadian AltaGas, said on Thursday it will halt further development of its floating LNG export project in British Columbia due to unfavourable market conditions.

    The consortium, which includes Japan’s Idemitsu, EDF Trading of France and Exmar of Belgium, had planned to achieve a final investment decision on the small-scale LNG project by the end of 2015.

    However, the “worsening global energy price levels and a challenging market environment have caused the consortium to withdraw from the project,” Douglas Channel LNG said in a statement.

    Canadian National Energy Board issued a licence in January to Douglas Channel LNG project to export up to 10.3 billion cubic metres of natural gas per annum for a period of 25 years.

    The plans for the LNG project included a barge-based 0.55 mtpa LNG facility with natural gas sourced from Western Canada and transported to the project site at District Lot 99, near Kitimat, British Columbia for liquefaction.
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    How Many Gas Tankers Would It Take to Wipe out a U.S. Glut?

    At least 163 tankers.

    That’s how many cargoes of natural gas it’d take to wipe out the ever-expanding glut of the heating and power-plant fuel in the U.S. A mild winter and production still flowing out of America’s shale formations have inventories swelling compared with previous years, dragging down U.S. gas prices even as the first export of shale gas prepares to leave from Cheniere Energy Inc.’s Sabine Pass terminal in Louisiana today.

    “Production keeps going and right now we are pricing in a natural gas-ageddon,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “How many tankers do we need to to get rid of the glut?”

    In a testament to how massive America’s natural gas supplies have become (they’re near a seasonal record), it’d take at least 163 tankers the size of the Asia Vision, the vessel at Cheniere’s docks, to bring U.S. gas inventories back to the five-year average. If you lined them up end to end, they would stretch about 30 miles (48 kilometers), just long enough to ring the perimeter of Manhattan.

    And the chances of this fleet suddenly showing up to whisk U.S. gas away are slim. Initial exports will be too small to make a dent in the U.S. supply surplus anytime soon, said Jason Schenker, president of Prestige Economics LLC in Austin, Texas.

    “It’s hard to find much of a bullish story,” Schenker said. “We see low natural gas prices for the balance of this year.”
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    Sanchez Energy announces fourth quarter and full year 2015 results

    Sanchez Energy Corporation, today announced the Company's operating and financial results for the fourth quarter and full-year 2015, which included the following highlights:


    - Record production of 5.3 million barrels of oil equivalent ('MMBoe')
    - Record quarterly average daily production of 58,115 barrels of oil equivalent per day ('Boe/d')
    - Better than expected production results were driven by Catarina production of 46,030 Boe/d, the highest quarterly production level recorded to date from the asset, as well as strong performance from new wells in the Cotulla area
    - Average quarterly well costs at Catarina of $3.5 million per well and wells are 40 percent more productive since first acquired
    $435 million cash balance at year-end 2015 and $735 million in total liquidity
    - Closed the Western Catarina Midstream Divestiture for approximately $345 million in cash
    - Entered a joint venture with Targa Resources Partners LP ('Targa') to construct a cryogenic processing plant and high pressure gathering pipeline near Catarina, which is expected to provide a path to improved yields, lower processing fees, and significant marketing benefits


    - Record annual production of 19.2 MMBoe for an average annual production rate of 52,560 Boe/d, an increase of 72% over 2014 production
    - Record oil production averaging 19,629 barrels per day ('Bbl/d')
    - Upstream capital expenditures including accruals of $545 million in 2015 compared to $867 million in 2014, a reduction of approximately 37% over 2014
    - $155 million mark-to-market value of hedging position at year-end 2015 corresponding to hedge contracts covering approximately 82% of expected 2016 revenues, and $189 million current mark-to-market value of hedge position as of February 24, 2016
    - Completed the 50-well annual drilling commitment at Catarina for the period July 1, 2015 through June 30, 2016, which provides the Company with significant operational and financial flexibility in 2016 and 2017, as up to 30 wells drilled in excess of the minimum commitment can be carried forward to the next annual period
    - 2015 year-end proved reserves are approximately 128 MMBoe, with a PV-10, a non-GAAP measure defined below, of $594 million


    2015 was a strong year for Sanchez Energy despite the most challenging commodity environment we have faced as a Company,' said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy. 'Our achievements in 2015 include ending the year with a strong cash position of $435 million. The Company's cash position was aided by several key divestitures with Sanchez Production Partners which generated approximately $430 million in cash proceeds without needing to issue additional equity or debt. Our balance sheet remains strong and we are well prepared to weather a prolonged down cycle.'
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    Data shows further Cushing builds

    U.S. crude futures were down 2 percent on Thursday, extending losses from earlier in the session, after data showing stockpiles at the Cushing, Oklahoma hub for U.S. crude deliveries having reached new record highs.

    The front-month in U.S. crude futures was down 63 cents at $31.52 a barrel by 10:08 a.m. EST (1508 GMT).

    It hit a session bottom of $31.32 after market intelligence provider Genscape said inventories at Cushing rose by more than 503,000 barrels to reach above 67.5 million barrels between Feb 19 and Feb 24, traders who saw the data said.
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    Alternative Energy

    Unsubsidised solar PV price hits record low in Peru auction

    Peru recently awarded 185 megawatts (MW) of new solar photovoltaic (PV) contracts in a renewable energy solicitation, at record-low prices for a nation not offering any tax breaks for such development.

    Of the 185 MW of new project capacity, 144 MW relates to a bid from Enel Green Power at $47.98/MWh (megawatt-hours); and 40 MW relates to a bid from Enersur at $48.50/MWh.

    Notably, the projects aren’t expected to be built until 2017 — when solar PV prices are expected to be notably lower, hence the lower bids and contracts.

    According to the press release from Peru’s Supervisory Agency for Energy and Mines (Osinergmin), the Enel Green Power contract is for the provision of 415 gigawatt-hours (GWh) of electricity a year from the company’s planned Rubí solar PV project at the aforementioned price of $47.98/MWh. The Enersur contract is for the provision of 108 GWh of electricity a year from the planned Intipampa solar PV project at $48.50/MWh.

    Delivery of electricity from the projects is currently set to begin by the end of 2018 — if the terms of the contracts are to be met.

    Along with the above-mentioned solar energy projects, 3 wind energy projects were awarded contracts following the recent solicitation. Contract prices for these projects ranges from $36.84–37.83/MWh. In addition, a number of hydroelectric and biomass projects were awarded contracts as well.

    Attached Files
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    Rival emerges for Swansea's tidal energy plans

    A competitor has emerged to challenge Tidal Lagoon Power (TLP) as the first to develop tidal energy in the UK.

    TLP's £1bn project aims to pioneer the technology with Swansea becoming the first of six lagoons around Britain.

    But now Ecotricity, one of the first green energy companies in the UK, said it is working on proposals to generate electricity through tidal energy.

    It claims it will be at a lower price and financed over a shorter time than TLP.

    Ecotricity, based in Stroud in Gloucestershire, told BBC Wales it wrote to the UK government before it announced a review two weeks ago into the sector.

    It believes tidal power can work at a lower price than the £168 per megawatt hour (MWh) across 35 years that is being discussed for Swansea Bay.

    Image copyrightAlistair Heap/EcotricityImage captionDale Vince is the founder of Ecotricity

    Founder Dale Vince said: "We were concerned that the UK government was being pushed into paying too high a price for tidal energy through the Swansea Bay scheme.

    "That would be bad for renewable energy generally because it would reinforce the myth that green energy is expensive, and bad for tidal power specifically because it may never get off the ground."

    Tidal Lagoon Power is now talking with the UK government about a lower price for their electricity generation over a longer, 90 year time frame, for Swansea.

    But Ecotricity said it believes that price is too still too high.

    The company will not say which sites it is looking at - including whether they would include Swansea - but acknowledges that the tidal range of the Severn Estuary is very attractive.

    It will make a further announcement in the summer.

    The review by the UK government - which is seeking "clarity" about the potential of tidal - is due to start in the spring and report in the autumn.

    Ectotricity currently operates nearly 70 wind turbines, has 175,000 customers and powers the equivalent of more than 40,000 homes.

    TLB - which last week said it welcomed the idea of competition - envisages Swansea as a first project to trial the technology with work starting next year.

    Cardiff and Newport would be among future locations for larger lagoons which would be able to produce power even more cheaply.

    A spokesman said: "The emergence of a competitive marketplace for the future is another clear sign that Swansea Bay Tidal Lagoon is fulfilling its role as a pathfinder".
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    Areva gets 1.1 bln euro bridge loan, delays earnings release

    French state-controlled nuclear firm Areva postponed the publication of its results on Thursday after securing a 1.1 billion euro ($1.2 billion) bridging loan to help finance a drastic restructuring plan.

    Areva is expected to book an annual net loss for a fifth year in a row, in particular due to provisions for a restructuring plan announced in May and ballooning costs for its long-delayed nuclear reactor project in Finland.

    Areva said in a statement on Thursday its board had decided to delay the closing of its financial accounts for 2015 for 24 hours to finalise the technical documentation of the bridging loan from six banks.

    "There is no negative consequence in our view," a spokeswoman for Economy Minister Emmanuel Macron said.

    "It's one more step on the path to recovery for the company, which is making progress quickly and methodically."

    Once the jewel in France's nuclear crown, Areva said in January it planned a 5 billion euro capital increase to restore its finances and expected the takeover of its reactor division by fellow state utility EDF to be finalised in 2017.

    Shares in Areva were suspended before the stock market opened in Paris following the announcement about the loan and the postponement of the results publication.

    Debt traders said Areva's short-dated debt was helped by the loan news as it had reassured the market about the company's ability to cover repayments this year, but they were keen to know whether the bridge financing was secured or not.

    They said Areva's 975 million euro 3.875 percent 2016 note rose a full point to 99.30 but its 1 billion euro 4.875 percent 2024 note slumped from 79 to 76.60.

    EDF is buying between 51 and 75 percent of Areva's reactor business and will make a binding offer once arrangements have been made to immunise EDF against costs and risks related to Areva's Olkiluoto 3 (OL3) reactor project in Finland.

    The EPR reactor Areva is building there is billions over budget and years behind schedule and the subject of an arbitration suit in which Areva and its Finnish client TVO are claiming billions from one another.

    Areva plans to focus on uranium mining and nuclear fuel following the sale.
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    Precious Metals

    Goldcorp cuts dividend, lowers production guidance for next three years

    Goldcorp Inc. slashed its dividend and lowered its production guidance for the next three years on Thursday as the company tries to maintain a strong balance sheet and faces unexpected problems at an Ontario project.

    The Vancouver-based mining giant moved from a monthly dividend of US2 cents a share to a quarterly dividend at the same level, effectively reducing the annual payout by two thirds. Goldcorp said this lowered dividend still offers a “competitive” yield, while allowing the company to invest in its growth projects. One of those growth projects is already facing major challenges. Goldcorp removed the Cochenour project from its production guidance for the next three years and said the project is re-entering the “advanced exploration” phase.

    With Cochenour out of production guidance, it was not surprising that the overall forecast dropped. Goldcorp said it expects to produce between 2.8 and 3.1 million ounces of gold a year in each of the next three years. Previously, the company forecast up to 3.6 million ounces in 2016, up to 3.7 million in 2017, and up to 3.4 million in 2018.
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    South Africa's Sibanye Gold could raise dividend payout

    South Africa-focused bullion producer Sibanye Gold said on Thursday it plans to raise its dividend payout as its mines generate more cash, sending its shares to all-time highs.

    Already paying one of the highest dividends in the sector at 25 to 35 percent of normalisedearnings, the bullion producer said that "after due consideration of future requirements the dividend may be increased beyond these levels."

    Normalised earnings, a measure which excludes certain non-trading items, surged to 976 million rand in the second half of the year from 243 million rand in the previous half.

    Chief Executive Neal Froneman also told Reuters that Sibanye planned to buy a major platinum or gold asset this year.

    Sibanye last year bought mines owned by Anglo American Platinum and Aquarius Platinum in South Africa's platinum belt. Froneman has previously said any acquisition would not jeopardise payouts to shareholders.

    Gold production for 2015 dipped 3 percent to 1.54 million ounces from the previous year partly due to power cuts. Sibanye plans to mine 1.61 million ounces in 2016, saying the previous year's operational issues were unlikely to be repeated.

    "I'd be surprised if we didn't do at least one material transaction in either gold or platinum this year," Froneman said after the company announced its annual results.

    Sibanye is a young company buying everything from coal mines to platinum mines at the bottom of the commodity cycle, unlike the big miners which are saddled with debt and struggling to cut costs and reduce capital expenditure.

    Shares had jumped 8.5 percent to 56.40 rand by 0858 GMT, the highest level since Sibanye was spun off from Gold Fields three years ago.

    Sibanye said it would pay a final dividend of 90 cents per share, bringing the total payout for 2015 to 100 cents.

    Sibanye's headline earnings per share, the main profit gauge in South Africa that strips out certain one-off items, came in at 74 cents for the year ended December.

    The company posted a 59 percent fall in full-year earnings, hit by power cuts and a dilution in value after the average number of shares rose by 9 percent following an acquisition.

    Sibanye has said it was considering using its dollar holdings to buy bullion mines abroad as a weaker rand raises the cost of domestic acquisitions.

    South African gold mining companies pay their costs in the local currency, but earn their profit in dollars. The rand price for gold is at near record highs cushioning local producers.

    "South African gold stocks have been re-rated because of the rand gold price. I would not say distressed assets but there are some value opportunities in the gold sector outside of South Africa," Froneman said.
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    Base Metals

    Rio Tinto offers Q2 Aluminium at $130/MT plus LME CIF Japan up 18% from Q1

    Rio Tinto Alcan has offered Japanese aluminum buyers a second quarter contract premium of $130/mt plus London Metal Exchange cash CIF Japan, up 18% from the Q1 premium of $110/mt, buyer sources said Friday.

    The producer in an email to Japanese trading houses and consumers Friday said it saw $130/mt plus LME cash CIF Japan as the market level for Q2 shipments of primary aluminum ingot as well as those of billet, foundry alloys and slabs.

    Two other producers, South32 and Alcoa, which are also negotiating Q2 premiums with Japanese buyers, have yet to announce offers, the buyers said.

    Japanese buyers said they would wait for the other offers before submitting their bids.

    At least two Europe-headquartered traders have expressed interest in supplying P1020/P1020A ingot to Japanese buyers in Q2 at a discount to the producer premiums, Japanese traders said.

    Two Japanese buyers said there was a gap to fill between their expectations and Rio Tinto's offer, as they were not prepared to pay $130/mt plus LME cash CIF Japan for Q2 shipments.
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    Tin defies commodity slump on back of Indonesian export cuts

    Tin is defying the downdraft sweeping commodity markets, with prices for the metal used to solder electronics surging this year thanks to reduced production in major exporter Indonesia.

    Prices of many commodities, ranging from base metals to oil, have been hammered by oversupply and concerns about weakening demand in top raw materials consumer China.

    But tin has bucked the trend, buoyed by the Indonesian cuts, which have countered slowing demand in the electronics sector and helped push down exchange stockpiles of the metal to their lowest levels since 2008.

    It has been the best performer on the London Metal Exchange (LME) this year, rising about 10 percent to around $16,000 a tonne, against a largely flat index of six industrial metals and a drop in the Thomson Reuters/Core Commodity CRB Index of 10 percent.

    "The fact that (Indonesia) has reduced their yearly exports, stocks are below 4,000 tonnes ... has attracted funds again," said a tin trader at a global trading house in Europe. "I won't be surprised to see the price rallying to $18,000."

    Many industry experts say the rally could run out of steam in the coming weeks or months, however, partly due to surging tin output from Myanmar - though they expect prices to resume their uptrend towards the end of the year.

    Caroline Bain, senior commodity economic at consultancy Capital Economics, predicted prices would reach $17,000 by the end of 2016, helped by a pick-up in demand from the electronics sector - which accounts for around half of global consumption of tin, used as solder to fuse together circuitry components.

    Global semiconductor sales - a barometer for electronics demand - dropped 5.2 percent year-on-year in December, according to the Semiconductor Industry Association.

    "The demand side is quite subdued, although there are some early indications that the electronic sector could be picking up," said Bain.


    It has been a sharp turnaround for tin. Prices were languishing at 6-1/2 year lows in January before Indonesian exports fell by 63 percent after authorities tightened export rules and launched new audits of smelters, helping to trigger the rally.

    They hit a peak of $16,200 a tonne on Tuesday, their strongest level since October, following news that major Indonesian tin smelter PT Refined Bangka Tin (RBT) would be scrapped. Smelters process ore into refined metal.

    LME tin inventories MSNSTX-TOTAL have fallen to 3,850 tonnes, their lowest since November 2008, indicating shortages on the market.

    Industry group ITRI said flooding in a major tin-producing region on Indonesia was expected to further reduce exports from the country in February.

    "Recently we've been surveying the individual tin producing companies on their output and pretty much everybody is reporting lower production," said Peter Kettle, markets manager at ITRI.

    Global refined tin output is forecast to fall 3 percent this year after a decline of 8 percent in 2015, resulting in a global deficit of 10,000-15,000 tonnes, he added.


    However tin prices are likely to be pressured in the coming weeks and months, partly from the rising production in Myanmar. Chinese imports from the nation jumped 240 percent in January, although analysts said it was uncertain that such high levels could be sustained.

    "We saw the run-up in prices on that tin smelter shutting down, but then we got the data showing huge imports from Myanmar, which seemed to compensate for any loss out of Indonesia," said Robin Bhar, head of metals research at Societe Generale in London.

    The LME stocks picture is also not the whole story on inventories, warned Capital Economics' Bain.

    "If you look at the exchange stocks alone, you would wonder why the price isn't double what it is now, but certainly there are anecdotal reports that producer stocks of tin in Indonesia are high."

    A plea by Chinese tin producers to the government to stockpile tin also implied excess stocks there, she added.

    "We do expect tin prices to pick up by the end of this year, but people are right to be cautious about how tight the tin market really is."
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    Steel, Iron Ore and Coal

    Vale earnings fall less than estimated

    Vale, the world’s biggest iron-ore miner, reported a smaller-than-estimated decline in quarterly earnings as efforts to lower costs and focus on higher-quality deposits blunted the impact of slumping commodity prices.

    Fourth-quarter adjusted earnings before interest, taxes, depreciation and amortisation fell to $1.39 billion from $2.19 billion a year ago, the Rio de Janeiro-based company said on Thursday. That compared with the $1.37 billion average of 12 dollar-based estimates compiled by Bloomberg. On a net basis, Vale had a loss of $8.57 billion.

    While Vale is reducing iron-ore output from lower-quality facilities and replacing it with more productive projects, it continues to produce at near record levels with global supply still outstripping demand. The three dominant iron-ore players — Vale, BHP Billiton and Rio Tinto Group — have opted to plow on with expansions to displace less efficient producers. Morgan Stanley projects the ensuing glut will endure to at least 2020.

    The benchmark iron ore price have been trading below $60 a metric ton since mid last year and are down more than 70 percent from a 2011 peak. It was little changed at $51.64 on Wednesday, up for a low of $38.30 in December.

    The iron-ore outlook in the coming years is grim as Chinese steel demand continues to weaken, according to David Wang, a Chicago-based analyst with Morningstar Investment Services Inc. Vale is poised to weather low prices better than most as it prepares to start producing at its giant S11D project in Carajas, Brazil. It’s also selling non-core assets and has opened the door to halting dividends.

    “What we really see across the mining space is cost cutting by everybody,” Wang said. “Vale’s in somewhat of a special situation because its new project should be lower in average cost than its existing capacity, which would help bring costs down more than average.”

    Vale shares slumped 4.4% percent to 8.60 reais at the close in Sao Paulo on Wednesday, extending a decline this year to 16%. Last year, the stock tumbled 47%.

    Output from the Brazilian company’s mines missed estimates in the fourth quarter on seasonal factors and an outage at its Samarco joint venture with BHP after a November 5 tailings dam rupture. Including third-party purchases and its share of Samarco, fourth quarter iron-ore production reached 88.4 million tons.

    Vale is also the top nickel producer and a sizable copper miner. Total quarterly production of nickel reached a record 82 700 tons. Copper output rose to 112 500 tons, also a record.
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    Brazil's Vale looks to sell $10 billion of assets after massive loss

    Brazilian miner Vale SA put its prime assets on the block on Thursday after taking the biggest loss in decades, but analysts said the target to make $10 billion in 18 months was unrealistic and expressed concern a fire sale could destroy equity value.

    Chief Executive Murilo Ferreira said on a conference call there were "no restrictions" on what the company would consider selling in order to reduce net debt to $15 billion as it looks to protect itself against a possible further deterioration in iron ore and nickel prices.

    The move is a sharp departure for the troubled miner and is a reflection of how vulnerable the world's largest iron ore producer has become to volatile commodity prices.

    Vale reported a fourth-quarter net loss Thursday of $8.57 billion, its worst ever as a private company, amid weak commodity prices and hefty writedowns. Analysts in a Reuters poll had predicted a loss of just $56 million.

    Previously, Vale had looked to make up cash shortfalls by selling its so-called "non-core" assets like fertilizer plants and ships, confident that lucrative profits will return when its new S11D iron ore mine in the Amazon hits full capacity in 2018.

    Now, with analysts forecasting that iron ore may stay around $45 per ton until then, that date looks a long way off.

    "I can understand Vale's strategy because if iron ore slips to $35 per ton, all of a sudden you have an issue," said Andreas Bokkenheuser, analyst at UBS.

    "But the question is what valuations can they get for these assets?" adding that Vale had to be careful not to sacrifice future cash potential.

    The company did not say how much it was looking to get for certain assets, or how close it was to doing a sale.

    Paul Gait, analyst at Bernstein, said the speed and quantity of asset sales did not seem feasible and he thought the strategy was flawed.

    "It really is irrelevant what they sell. This is not the issue. If they want to de-gear, they should reduce sales of iron ore and stop spending CAPEX. As simple as that," he said.

    Gait criticized the strategy of the so-called "big three" iron ore miners of Rio Tinto (RIO.L), BHP Billiton (BLT.L) and Vale to keep increasing production despite an oversupplied market and falling prices.

    Of the three, Vale has been worst hit because it was at a later stage of its investment cycle, building major mines in Brazil and Mozambique, when prices began to slide, forcing it to spend more cash while earning less.
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    China key steel mills daily output up 3.7pct in early-Feb

    Key steel mills in China saw their average daily Crude Steel output post a 3.68% ten-day rise to 1.56 million tonnes in early-February, according to the latest data released by the China Iron and Steel Association (CISA).

    It was a favorable rebound after hitting a record low since early-October 2012 in late-January.

    China’s daily crude steel output in early-February was estimated at 2.06 million tonnes, edging up 0.98% from the average level in January.

    By February 10, stocks in key steel mills stood at 13.85 million tonnes, jumping 15.23% from end-January.

    As of February 20, social stocks of steel products across the country reached 12.05 million tonnes, climbing 39.80% from end-2015 and surging 32.27% from end-January, which indicated a stronger expectation in steel market.

    Meanwhile, steel prices witnessed a robust rebound after the Chinese Lunar New Year due to the government’s easy credit policy, and the lower-than-expected stock level as many steel mills haven’t yet resumed production completely.

    Domestic prices of the five major steel products except seamless steel tube increased in mid-February, with rebar price averaging 1,934.1 yuan/t, up 1.9% from early-February, showed data from the National Bureau of Statistics (NBS).

    However, the rise in steel prices, which mainly caused by China’s loose credit policy combined with seasonal restocking in real estate industry, was expected to be limited and could only support the sector temporarily, analysts said.

    Steel prices will fluctuate at a low level due to the severe situation of steel overcapacity, which may need a long time to be consistent with the demand, according to the CISA.
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    Police raid Brazil steelmaker Gerdau, issue CEO arrest warrant

    Federal police said they raided the offices of Brazilian steelmaker Gerdau SA on Thursday and issued an arrest warrant for its chief executive on suspicion the company evaded hundreds of millions of dollars in taxes.

    Federal police said Gerdau, Brazil's largest steelmaker, is suspected of evading 1.5 billion reais ($380 million) in back taxes.

    A police spokesman said they had a warrant for the arrest of André Gerdau Johannpeter, the company's chief executive, for questioning. The executive had agreed to appear voluntarily later on Thursday, the spokesman added.

    Search and seizure warrants were being carried out at Gerdau offices in the cities of Sao Paulo, Brasilia, Rio de Janeiro, Recife and the company's headquarters in the southern city of Porto Alegre, police said.

    The raids are part of an inquiry, known as "Operation Zealots," into kickbacks by companies through lobbyists to tax officials in return for waiving tax debts and fines.

    Gerdau said the company was cooperating with police and had no further information to provide.

    The raids on Gerdau, a family company that has made steel for generations, comes as Brazilian prosecutors grow increasingly aggressive in efforts to crack down on corruption by some of the country's most powerful firms.

    Andre Gerdau's father, Jorge Gerdau Johannpeter, was CEO of the steelmaker from 1983 to 2006 and has been a close advisor to President Dilma Rousseff on industrial policy.

    In addition to Operation Zealots, which is probing suspected kickbacks at dozens of companies, Brazil for the past two years has been gripped by the far-reaching corruption probe around state-run oil company Petroleo Brasileiro SA.

    Dozens of executives at Brazil's biggest construction firms have been arrested or charged with corruption in that investigation.

    On Monday, police again searched offices of Odebrecht, Brazil's largest engineering and construction conglomerate. Marcelo Odebrecht, the company's chief executive, was jailed in July in connection with the Petrobras scandal.

    On Tuesday, police arrested Rousseff's main political campaign strategist Joao Santana, on the suspicion that he had been paid off-shore by Odebrecht with funds siphoned from the Petrobras graft scheme.
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