Mark Latham Commodity Equity Intelligence Service

Monday 2nd November 2015
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    China official PMI below expectations Caixin PMI above

    China’s official purchasing managers index remained at 49.8 in October, the National Bureau of Statistics said Sunday, compared with an estimate of 50, the line between expansion and contraction.

    The unchanged manufacturing PMI suggests continued monetary easing by China’s central bank hasn’t yet boosted smaller businesses as much as their larger, state-owned counterparts, which are able to borrow at reduced rates. A private manufacturing PMI reading by Caixin Media and Markit Economics released Monday was at 48.3, compared with the median projection of 47.6 in a Bloomberg survey and up from 47.2 in September.
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    China Aims For Slower Growth

    China’s leaders have confirmed that they are aiming for an annual GDP growth of “at least 6.5 percent” over the next five years. The announcement confirms economists’ predictions that China would lower its official growth target from this year’s goal of “around 7 percent,” in an acknowledgment of economic challenges that have seen exports fall and output slow in recent months.

    China did not release a formal GDP growth target last week, when its leaders met to set the country’s economic direction for the next five years. But speaking to South Korean business leaders at a conference in Seoul on Sunday, Chinese Premier Li Keqiang said, “We need to maintain year-on-year growth of at least 6.5 percent,” adding that this would enable China to “meet the goal,” set at that meeting, of creating a moderately prosperous society by 2020.
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    Peru's Garcia makes mining key pillar of his presidential campaign

    Peru's former president Alan García has kicked off his campaign for a third term with a promise to deliver economic growth of at least 6% a year mainly by attracting more mining investment.

    The 66-year-old long-time leader of the centre-left American Popular Revolutionary Party, said he planned to achieve such goals by reducing red tape to a minimum, while working with local governments to re-start a long list of stalled mining projects.

    He also vowed to significantly reduce poverty to less than 10% by 2021, from last year's 23%, if he won a new term in the elections scheduled for April. “We will then be at the same level than developed countries,” he said according to local newspaperEl Comercio (in Spanish).

    García last governed Peru from 2006 to 2011, when prices for the key minerals mined in the country, such as copper, gold and silver, were skyrocketing and the nation’s was able to reach annual economic growth rate of 9%. But his administration also saw Peru become the world’s No. 1 cocaine exporter.

    The sociologist and politician said Peru is, undoubtedly, “a mining country” and, as such, it should work on easing opposition to projects, especially those in poor Andean regions.

    In an earlier interview with El Comercio, the sociologist and politician said Peru is, undoubtedly, “a mining country” and, as such, it should work on easing opposition to projects, especially those in poor Andean regions.

    García is proposing to do so by transferring royalties from mining projects directly to nearby communities.

    Mining opposition has stalled $21.5 billion worth of mining projects in recent years, disrupting major projects such as Southern Copper’s (NYSE, LON: SCCO) $1.4 billion Tia Maria copper mine and Newmont Mining Corp's (NYSE:NEM), (TSX:NMC) proposed $5 billion Conga copper and gold mine.

    García promised to build trains to transport minerals from operations, mostly located in the Andes Mountains, to ports on the Pacific coast, and said he would quickly formalize small-scale gold miners.

    Illegal miners clash with police during a 2014 protest against a law criminalizing their activities (Photo from archives).

    Peru’s current administration began such process in 2012, before making informal mining a criminalized activity. But despite the efforts, illegal gold production in the South American nation has increased fivefold in the last six years

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    Oil and Gas

    Oil Bears vs History.

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    China more than doubles 2016 non-state crude import quota to 1.75 mln bpd

    China has more than doubled its non-state crude oil import quota for 2016 to 87.6 million tonnes, or 1.75 million barrels per day (bpd), as Beijing seeks to boost competition and attract private investment in its oil industry.

    The 2016 quota issued by the Ministry of Commerce on Friday compared to this year's figure of 37.6 million tonnes.

    The commerce ministry said in July that China will allow more refiners to apply for import licences. The total quota, equivalent to about 28 percent of China's crude imports last year, will be allotted to traders outside the dominant four state traders - Unipec, Chinaoil, Sinochem and Zhuhai Zhenrong.

    So far six new refiners have won the right to directly import crude oil on their own.

    In the past, such traders would normally have to sell the crude they import to the state oil giants Sinopec and PetroChina, but under new rules issued by the National Development and Reform Commission in February, smaller refiners can get permission to use imported crude oil if they meet certain environmental conditions, including the closure of old and polluting refining capacity.

    Eleven refiners - nine in the coastal province of Shandong - have received either a preliminary or final greenlight to use about 1 million bpd of imported oil.

    The commerce ministry also set the 2016 quota for fertiliser at 13.65 million tonnes, the same number as the past year.
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    Global LNG surplus pushing producers, importers into spot market

    Producers and importers of liquefied natural gas (LNG) are preparing to trade the fuel more actively on a spot basis as a looming supply surplus threatens to overwhelm decades-old bilateral contracts and pressure prices lower.

    With the advent of 130 million tonnes of LNG capacity in Australia and North America by 2020, producers such as Woodside Petroleum and Chevron, and traditional buyers such as Japanese utilities, have expanded trading teams to handle excess cargo flows and navigate a more open market.

    Australia, with investments of almost $200 billion in new production, is on track to overtake Qatar as the world's biggest LNG exporter before the end of the decade.

    In North America, U.S. company Cheniere Energy plans to export its first LNG cargo in January, and Canada is also planning to start exports in the next few years.

    "Buyers will be able to have their choice ... (of) very large supply sources that can deliver pretty much at a moment's notice," Cheniere Chief Executive Charif Souki said this week at a conference in Singapore.

    Excess supply, along with rising demand, is key to establishing a liquid commodity market as in tight conditions producers and consumers tend to enter long-term fixed supply agreements rather than trade openly.

    And while new demand is popping up in countries such as Jordan, Dubai, Egypt and Pakistan, it is unlikely to be enough to offset the slower-than-expected consumption growth in China and the falling demand in top importers Japan and South Korea.

    Some major players in the industry disagree, though, on how quickly a robust spot market will develop.

    Last year, less than 5 percent of total volumes were sold on a prompt delivery spot basis, said Ann Collins, vice president for LNG at BG Group, at Gastech on Thursday.

    "A rapid tilt towards a commoditization of LNG seems unlikely in the near term," she said.

    Still, Ernst and Young (EY) says liquefaction capacity has more than doubled since 2000 and exceeded demand last year.

    This surplus, along with slow-growth demand, will keep prices under pressure until the end of the decade, consultancy Wood Mackenzie said in statement this week.


    Japanese power utilities - traditionally strictly buyers of LNG for gas-fired generators - are selling to each other or reselling to emerging smaller local buyers, even as nuclear reactors restart and the country's overall electricity demand falls with a shrinking population.

    Japan's JERA Co, a joint venture set up by Tokyo Electric Power and Chubu Electric Power, will renew only a minimum of the long-term contracts that supply 80 percent of its gas, and instead meet its needs via mid-term and short-term contracts or spot purchases.

    Australia's Woodside, one of the biggest producers of LNG, has traditionally sold its volumes on contracts that last 20 years or more, yet now says it needs more LNG tankers to deal with rising spot and short-term sales.

    "We're becoming more sophisticated in our marketing and trading activities," Chief Executive Peter Coleman told reporters at the industry meeting this week in Singapore.

    Chevron, which up to now has also dealt mostly in long-term supply agreements, has established an LNG trading desk in Singapore to handle output - mainly from its Australian projects - that is not committed to buyers.

    Commodity trading houses are also getting ready for the increase in supply, with Glencore planning to double its trading team as it mounts a challenge to rivals Trafigura and Vitol to become the top merchant LNG trader.

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    Russian Crude Output Hits Post-Soviet Record Defying Price Slump

    Russian oil production broke a post-Soviet record in October for the fourth time this year as earlier investments boosted output and producers prove resilient to lower crude prices.

    Production of crude and gas condensate, which is similar to a light oil, averaged 10.776 million barrels a day during the month, according to data from the Energy Ministry’s CDU-TEK unit. That is an increase of 1.3 percent from a year earlier and up 0.3 percent from the previous month.

    “Russian oil production is still reflecting oil prices above $100 a barrel due to long lead times in the investment cycle,” Alexander Nazarov, an oil and gas analyst at Gazprombank JSC, said by e-mail from Moscow. “The reason behind growth this year dates back to 2010-2014, when a number of projects were financed.”

    Output has kept growing even as the Organization of Petroleum Exporting Countries chose to defend market share rather than cut output amid a supply glut last year, a decision that sent prices tumbling. Gazprom Neft PJSC and Novatek OJSC are ramping up output at one of the country’s biggest new projects. Russia’s tax policies insulate the industry from swings in oil prices, with the state bearing most of the risk and reward.

    The ruble’s slump over the past year, which has tracked weaker crude prices, has made oilfield services, including drilling, cheaper and supported operating margins, Nazarov said.

    Russian crude exports rose to 5.42 million barrels a day in October, a 10 percent gain from the previous year and up 1.7 percent from the previous month.
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    Exxon 3rd-qtr profit falls 47 pct but beats expectations

    Exxon Mobil Corp said on Friday its third-quarter profit fell 47 percent hit by low crude prices, but results were better than expected, helped by higher profits in the oil company's refining business.

    Crude prices have fallen more than 50 percent from last year's high over $100 a barrel. While the crude decline hurt Exxon's largest oil and gas business, it also boosted profit margins in refining by lowering feedstock costs.

    "Quarterly results reflect the continued strength of our downstream and chemical businesses and underscore the benefits of our integrated business model," Exxon Chief Executive Officer Rex Tillerson said in a statement.

    The Irving, Texas, company posted profit of $4.24 billion, or $1.01 per share, compared with $8.07 billion, or $1.89 per share in the same quarter a year earlier.

    Analysts on average had expected a profit of 89 cents per share, according to Thomson Reuters I/B/E/S.

    Refining profits nearly doubled from a year-earlier to $2 billion in the third quarter, while earnings at Exxon's exploration and production business fell $5.1 billion to $1.4 billion.

    Oil and gas output increased 2.3 percent from a year earlier to 3.9 million oil-equivalent barrels per day (mboed).
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    Chevron Cuts More Jobs and Spending as Oil Downturn Saps Profit

    Chevron Corp. said it’s cutting its workforce by about 10 percent amid the worst oil-market slump since the 1980s even as the company posted third-quarter profit that surpassed analysts’ expectations.

    Chevron said in a statement Friday that it will cut 6,000 to 7,000 jobs, numbers that include 1,500 layoffs announced earlier this year. The company earned $1.09 a share, 33 cents more than the average of 21 analysts’ estimates compiled by Bloomberg. Profit from refining oil into fuels jumped 59 percent to $2.2 billion.

    Spending in 2016 will be 25 percent less than this year, said Chevron Chairman and Chief Executive Officer John Watson in the statement.

    "We expect further reductions in spending for 2017 and 2018," Watson said. "We are focused on improving results by changing outcomes within our control."

    The price of Brent, the benchmark crude used by most of the world, declined by half since June 2014 to an average of $51.30 during the July-to-September period. After a brief rebound, oil entered its second bear market in a year after an avalanche of supplies from U.S. shale fields and the Persian Gulf flooded markets at a time of faltering demand growth in China and other developing economies.

    Boosting Production

    Watson has stuck to plans to boost production 20 percent by the end of 2017 and continue dividend payouts to investors, even as the downturn erodes cash flow for the second-largest U.S. oil producer.

    Chevron’s stock has fallen 20 percent this year, putting it on pace for the worst annual performance since 2002. Every $1 decline in the average quarterly price of Brent crude reduces Chevron’s cash flow by $325 million to $350 million.

    The company is expected to outspend cash flow until at least the end of 2016, according to the average of six analysts’ estimates in a Bloomberg survey. The almost 45 percent drop in Brent crude during the past year represents the steepest 12-month decline since 1988, according to data compiled by Bloomberg.

    Net income fell to $2.04 billion from $5.59 billion, or $2.95, a year earlier, Chevron said. The statement was released before the opening of regular U.S. trading. Chevron rose 0.1 percent to $89.89 Thursday in New York. The company has 12 buy ratings from analysts, 16 holds and two sells.

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    Brazil's main oil union to strike against Petrobras from Sunday

    Brazil's largest oil workers union said on Friday it will start an open-ended strike against Petrobras on Sunday in a bid to overturn moves to shrink the state-run oil company.

    FUP, which represents platform, refinery and other workers, will join a number of smaller unions already on strike.

    In a statement, FUP said the decision to strike had been made after more than 100 days of negotiations with Petroleo Brasileiro SA, as the company is formally known.

    Petrobras, in an emailed statement, said oil production or refining is not affected by the strike. The company was meeting with unions and had made a new salary proposal, it added.

    Petrobras wants to pay down debt, which at about $120 billion is the most of any oil company, and generate cash for investment and revive investor confidence after a massive corruption scandal.

    FUP said it wants asset sales stopped, work on refineries resumed, local content rules maintained, and a guarantee that Petrobras remain the sole operator in Brazil's sub-salt offshore oil area.
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    Santos sells Stag field for $50 mln in sale to Malaysia's Sona Petroleum

    Santos Ltd, which rejected a $5 billion takeover offer last month in the hopes of getting better value from selling assets, made its first sale on Monday with a small deal to exit the Stag oil field off northwestern Australia.

    Malaysian company Sona Petroleum Bhd said it had agreed to buy the ageing oil field from Santos and private firm Quadrant Energy for $50 million, in a statement.

    Santos, scrambling to pay down A$8.8 billion ($6.3 billion) in net debt, had been looking to sell its two-thirds stake in Stag before it effectively put all its assets up for sale in August.

    "Stag had delivered a strong production performance over the life of the field but it was now mature and no longer core to the company's strategy," Joe Ariyaratnman, Santos' general manager for Western Australia and Northern Territory said in an emailed comment.

    Wood Mackenzie valued Santos' stake in the field, which as of June was producing 4,600 barrels a day, at $13 million.

    Santos shares rose 2.6 percent on Monday, defying weakness in other energy company shares.

    The company has declined to comment on reports it is in talks to sell down part of its coveted 13.5 percent stake in the Papua New Guinea liquefied natural gas (PNG LNG) project to Japan's Marubeni Corp.

    That stake alone could be worth A$6.5 billion ($4.6 billion) based on the value implied in a recent bid by Woodside Petroleum for Oil Search Ltd, a bigger stakeholder in PNG LNG.

    Sona plans to pay for the acquisition from cash it raised in its initial public offering two years ago.

    It expects to extend the life of the Stag field, producing since 1998, by adding new wells to boost oil recovery and has agreed to take over environmental liabilities which kick in at the end of the field's life.
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    US rig count resumes decline, drops 12 units

    The overall US drilling rig count dropped 12 units to 775 rigs working during the week ended Oct. 30, resuming its downward trend after sitting unchanged a week ago, according to data from Baker Hughes Inc. (OGJ Online, Oct. 23, 2015). The new total is the lowest since Apr. 26, 2002.

    The usual flurry of third-quarter earnings reports began to hit newswires this week, with net losses and freshly trimmed capital budgets again a common theme among the major US exploration and production firms.

    ConocoPhillips reported the termination of a rig contract for a Gulf of Mexico deepwater drillship, which resulted in aftertax impacts of $246 million. Hess Corp., meanwhile, expects to operate 4 rigs in the Bakken in 2016 compared with an average of 8.5 rigs this year.

    Oil rigs drop in 9th straight week

    Oil-directed rigs declined for the 9th consecutive week, losing 16 units to settle at 578, down 1,004 year-over-year and touching their lowest level since June 18, 2010. Since Aug. 28, 97 oil-directed rigs have gone offline.

    Land-based rigs dropped 11 units to 738, down 1,124 year-over-year. Rigs engaged in horizontal drilling resumed their decline after posting their first increase last week in 2 months, falling 14 units to 577, down 776 year-over-year. Directional drilling rigs edged down a unit to 86.

    Two rigs operating offshore Louisiana went offline, bringing the US offshore total to 32, down 20 year-over-year. Rigs drilling in inland waters edged up a unit to 4.

    Edging up a unit to 191, Canada’s rig count increased for a 5th straight week. While most of the recent rise is attributed to oil-directed rigs, which were unchanged this week at 84, the lone unit to come online this week was gas-directed, bringing that total to 107.

    Texas drops in 9th straight week

    Texas led the losses of the major oil- and gas-producing states with a 7-unit decline to 339, down 562 year-over-year and its lowest total since July 10, 2010. The state’s count has fallen in 9 consecutive weeks, during which time it has lost 47 units.

    The Eagle Ford dropped 2 units this week to 75, down 143 year-over-year.

    Oklahoma followed closely behind Texas, posting a 6-unit decrease to 84, down 124 year-over-year and its lowest level since Nov. 20, 2009.

    Louisiana fell 2 units to 71. North Dakota, Ohio, and West Virginia each edged down a unit to 62, 20, and 16, respectively. North Dakota, now down 118 year-over-year, is at its lowest level since Dec. 18, 2009.
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    Permian works below $50

    The company earns a 35% return on its best wells even when oil trades at between $45 and $50 a barrel, he said. Pioneer began putting additional drilling rigs to work in the area in July, and says it will add a pair of rigs each month through the first quarter of next year.

    “The Permian Basin has the highest quality shale rock in the United States,” Mr. Dove said. “We’re really looking at decades of inventory.”

    Bigger players aren’t overlooking the area either. Exxon on Friday said it acquired leases on 48,000 new acres in the Permian to add to the portfolio of its shale-drilling affiliate, and Chevron Corp. also has said it is looking to expand there.

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    U.S. oil demand growth slows to 2.1 pct in Aug as driving slows down

    The resurgence in U.S. oil demand is showing signs of flagging, with drivers easing off the gas pedal a bit in August, according to U.S. data on Friday that may weaken one of the key arguments for bullish oil traders.

    After several months of near 4 percent growth in fuel use that has helped offset weakness in demand from China, U.S. consumption climbed by just 2.1 percent or 414,000 barrels per day (bpd) in August versus the same month a year ago, U.S. Energy Information Administration data showed.

    Separate data from the Department of Transportation helps explain why: The number of miles Americans drove in August rose at the slowest pace this year, up 2.3 percent from a year ago.

    While that pace is still relatively strong for a country where gasoline use has been flat or declining since the financial crisis in 2007-2008, a sustained slowdown could prolong a global oil supply glut that has halved prices to below $50 a barrel. The United States consumes about a fifth of the world's oil.

    The tamer growth rate is surprising because pump prices in August were down about 10 percent from summer peaks near $3 a gallon. They have tumbled further to around $2.30 a gallon this month, potentially helping revitalize domestic consumption.

    Demand for gasoline climbed by just 1.7 percent, or 156,000 bpd, to 9.467 million bpd, the EIA data showed. Consumption of diesel and related distillate fuels eked out a small 0.3 percent gain to 3.888 million bpd, the same as in July, depressed in part by the slowdown in oil drilling.

    Since late last year, U.S. consumers have responded with surprising vigor to falling gasoline prices, which have declined about 90 cents a gallon from 2014.

    Typically, demand tapers after Labor Day weekend around the first Monday in September, but this year, may still stay above normal seasonal levels if consumers continue to be encouraged by low prices.
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    Canadian Natural in talks over royalty land sale - sources

    Canadian Natural Resources Ltd has discussed spinning off royalty assets with some pension plans and strategic buyers, according to three sources familiar with the situation.

    The company, which had said in May it intended to sell the assets this year, has engaged with the Canada Pension Plan Investment Board, Ontario Teachers' Pension Plan and PrairieSky Royalty Ltd, said the sources, who spoke on condition of anonymity as the talks are not public.

    The move comes about four months after Cenovus Energy Inc agreed to sell its royalty lands to Ontario Teachers' for C$3.3 billion and more than a year after Canada's largest natural gas producer Encana Corporation spun off its royalty assets though PrairieSky.

    PrairieSky and Teachers were not immediately reachable for comment. Canadian Natural and CPPIB declined to comment.

    Shares in Canadian Natural closed up less than 1 percent at C$23.17 on Friday.

    Analysts estimate the value of the assets range from C$1 billion to C$2.5 billion.

    Canadian Natural, the country's second-largest oil and gas producer, is keen on ensuring that it gets cash, and not equity, the sources said.

    "The good thing is that they're not motivated sellers like some others. Unlike other sellers they are in a strong position, and can wait for the right window, or price," said one source, adding that it is going to be "very difficult" for Canadian Natural to get the valuation that Cenovus got on their lands.

    Given the volatility in the price of oil, the company is keeping all options open and has not made a decision to sell the assets right away, the sources said, adding it could hold off until prices improve.
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    Phillips 66 Profit Rises as Oil Market Downturn Lowers Costs

    Phillips 66, the largest U.S. refiner by market value, said profit rose as the worst oil market in decades continues to benefit companies that turn the crude into fuel.

    Third-quarter net income climbed to $1.6 billion, or $2.90 a share, from $1.18 billion, or $2.09 a year earlier, the Houston-based company said in a statement Friday. Excluding one-time items, the per-share result was 77 cents more than the $2.25 average of 16 analysts’ estimates compiled by Bloomberg.

    "It was a beat across the board in every one of the company’s segments," Justin Jenkins, an analyst at Raymond James in Houston who rates the shares the equivalent of a buy and owns none, said Friday in a phone interview. "Refining is clearly the healthiest segment of the overall energy value chain at the moment, and that’s probably going to continue for some time."

    Since being spun out of ConocoPhillips in 2012, the company has more than doubled in value. Refiners, which have far outperformed the rest of the energy sector this year, have surged as U.S. shale drilling produced an abundance of crude, allowing them to purchase oil domestically for less than it was selling abroad.

    "The companies are running better business models that they learned from past experience," Fadel Gheit, an analyst at Oppenheimer & Co. in New York, who rates the shares the equivalent of a buy and owns none, said in a phone interview before the results were released. "They are returning cash aggressively to shareholders."

    Capital Budget

    Capital spending is expected to fall 16 percent to $3.88 billion in 2016 from this year’s $4.6 billion, the company said Friday.

    "Our best quarterly earnings this year were driven by stronger results from refining and marketing," Chief Executive Officer Greg Garland said in the statement.

    The largest shareholder in Phillips 66 is Warren Buffett’s Berkshire Hathaway Inc., which has amassed a stake valued at more than $5 billion.

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    Alternative Energy

    Germany Cuts Onshore Wind, Biomass Plant Subsidies From 2016

    Germany will cut subsidies for onshore wind farms and biomass plants starting in January, the nation’s grid regulator said.

    Above-target onshore-wind installations resulted in a 1.2 percent subsidy cut, while below additions for biomass plants meant a lower cut of 0.5 percent, Jochen Homann, president of Bundesnetzagentur, said in a statement on Friday.

    As much as 3,666 megawatts of German onshore wind were installed in the 12 months through July, exceeding a target range of 2,400 megawatts to 2,600 megawatts. Biomass plant additions of 71 megawatts in the same period was below a 100-megawatt target, according to the regulator.

    If net installations of onshore wind farms stay within the target range, subsidies will be cut 0.4 percent each quarter. Any deviations will result in higher or lower subsidy cuts. In June 2014, German lawmakers backed an extensive revision of the country’s clean-energy law to curb subsidies.

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    World's largest offshore wind farm to be built in the UK

    When the UK government began pulling subsidies for onshore wind farms, it meant that private companies dedicated to harvesting renewable energy would no longer receive financial kickbacks when they sold their electricity to energy suppliers. The decision could have affected the UK's total wind-collecting footprint, but offshore wind farms have remained exempt, allowing companies like Dong -- Denmark's largest energy company -- to commit to new, massive installations in British waters. The company announced it is tobuild the world's biggest offshore wind farm in the Irish Sea, around 19 kilometres off the coast of Cumbria.

    Dong says it has completed all of the necessary paperwork for its 660-megawatt Walney Extension project and expects it to open in 2018. The company will rely on turbines built by MHI Vestas Offshore Wind and Siemens, allowing it to surpass the current record-holder, the 630-megawatt London Array, which is another Dong installation. When the Walney Extension goes live, Dong will contribute 5,089 megawatts of offshore wind energy to UK and German infrastructure, enough to cover the needs of more than 12.5 million people.
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    Floating wind farm to be installed off Peterhead

    A floating offshore wind farm will be installed in the North Sea off the coast of Peterhead after the Scottish government gave it consent.

    Norwegian energy firm Statoil has been granted a licence for the pilot scheme of five turbines.

    They will be attached to the seabed by a three-point mooring spread and anchoring system, making them easy to install in deep water.

    It is expected that the Hywind project could power up to 19,900 homes.

    The turbines will transport electricity via an export cable from the pilot park to the shore at Peterhead in Aberdeenshire just over 15 miles (25km) away.

    The pilot project is designed to demonstrate the technology on a commercial scale, according to Statoil.

    Construction is planned to start as early as next year with final commissioning in 2017, according the company.

    Currently offshore wind turbines are rigidly attached to the seabed which makes them difficult and expensive to install in deep water.

    The Carbon Trust believes that floating wind concepts have the potential to reduce generating costs to below £100/MWh in commercial deployments, with the leading concepts such as Hywind producing even lower costs of £85-£95MWh.
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    Kyushu Electric Says Atomic Power Windfall Showing in Earnings

    Kyushu Electric Power Co. said restarting two nuclear reactors at its Sendai facility could boost annual profit by more than half a billion dollars, underscoring the benefits it’s already seeing by becoming the first utility in Japan to bring its reactors back online under post-Fukushima rules.

    The Sendai reactors in southern Japan will increase profit by 80 billion yen ($663 million) in the 12 months ending in March, the company said Friday as it reported first-half earnings.

    Highlighting nuclear’s impact even after only a few weeks of operations at Sendai, Kyushu Electric on Friday reported it swung to a profit in the first half. While the gain was mainly from the decline in the price of oil, nuclear restarts played a role.

    Net income was 53.6 billion yen for the six months ended Sept. 30, compared with a 35.9 billion yen loss a year earlier, the company said in a statement. Sales were almost unchanged at 931.4 billion yen.

    The company, which uses oil to generate almost a fifth of the electricity it sells, didn’t provide an overall full-year profit forecast, though it said annual sales may fall about 0.5 percent to 1.87 trillion yen. The average price of oil purchased by the company fell to $51 per barrel in September, compared with $106 a year ago.

    Fukuoka, Japan-based Kyushu Electric restarted the No. 1 reactor at its Sendai facility on Aug. 11, and resumed operation of its No. 2 unit earlier this month. The unit boosted the company’s profit by 11 billion yen during the period.

    Japan’s nuclear fleet was gradually taken offline in the years since the Fukushima disaster, with the last of the country’s 43 operable commercial reactors closed in September 2013.

    Kyushu was forced to replace lost atomic power with oil-, coal- and gas-fired power plants.

    Nuclear is the cheapest form of electricity production, according to data compiled by Japan’s government.

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    Shenhua to compete for nuclear power operating license

    China Shenhua Group will participate in nuclear power construction by buying shares of nuclear projects, and strive for getting nuclear power operating license, said Ling Wen, general manager of the coal giant on October 28.

    The group would seek and reserve two 2-3 nuclear plants in the future, added Ling.

    In end-May, the merger of China Power Investment Corp (CPI) and State Nuclear Power Technology Corp got the green light, creating another big nuclear power giant to compete with two traditional nuclear players – China National Nuclear Corp (CNNC) and China General Nuclear Power Group (CGN).

    China is poised to greatly expand the country’s nuclear power generation, making itself the world’s top generator in terms of both capacity and number of reactors by 2030.

    The government plans to make nuclear power a pillar of it economic policy and increase support for related government organizations and industries.

    Under this circumstance, many power and coal giants, including China Nuclear Engineering Group Corp (CNEC), Huaneng Group and Datang Group, started to compete in getting the fourth nuclear power operating license of the country.

    Shenhua posted a 44.1% year-on-year drop in its net profit in the first three quarters, mainly due to a slump in sales in its coal and power businesses amid falling prices.

    Shenhua has to change the idea of development and transform from a traditional coal supplier to a world-famous provider of clean energy, said Ling.

    By 2020, Shenhua will realize overall ultralow emission in its coal-fired units. It has already realized ultralow emission in over 20 units with total annual capacity at 15 GW.

    “We will continue to expand solar and wind power output, making the profit or revenue share of renewable energy, unconventional natural gas and hydrogen industry reach more than 20% of the total ”, added Ling.
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    Cameco Q3 adjusted profit falls amid oversupply

    Cameco Corp , the world's second-largest uranium producer, reported lower adjusted quarterly earnings on Friday, as an oversupply in the market continued to affect demand and pricing.

    The company said its quarterly profit, excluding one-time items, was hurt by a smaller gross profit from its uranium segment and lower tax recovery in the quarter ended Sept. 30.

    Cameco's uranium sales fell about 23 percent to 6.9 million pounds in the quarter, while its average realized uranium price fell about 5 percent to $43.61 per pound.

    On an adjusted basis, earnings fell to C$78 million, or 20 Canadian cents per share, compared with C$93 million, or 23 Canadian cents per share, a year earlier.

    The oversupply in the uranium market continues to affect demand and price, the company said, but reiterated its positive long-term view, saying that its Cigar Lake, Saskatchewan mine had exceeded its 2015 production target range.

    The mine, which began production in March 2014, was expected to produce 6 million to 8 million pounds of uranium concentrate this year, the company had said in January.

    Accordingly, Cameco raised its forecast for total production to 27.3 million pounds of uranium in 2015, from a previous range of 25.3 million to 26.3 million pounds.

    Total revenue in the quarter rose about 11 percent to C$649 million.

    Shares of Cameco, the world's second-largest uranium miner behind Kazakhstan's KazAtomProm, were down about 9 percent in very light aftermarket trade.
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    Base Metals

    Risking trade friction, China set to unleash more aluminium onto world markets

    China is likely to sell more aluminium onto world markets by offering its struggling smelters cheaper power prices to keep them operating, adding to growing trade tensions with rival producers in countries such as the United States and Russia.

    The world's top aluminium producer is making far more than it needs with record amounts of the metal being exported, adding to a global glut that has sent prices to six-year lows.

    The surge in shipments is already triggering calls for action to stem the flow in some countries and risks creating similar anger that soaring Chinese steel sales have caused.

    China exported a record 3.1 million tonnes of semi-manufactured aluminium products in the first 9 months of the year, even with a dip in the third quarter when weaker global prices made exporting less attractive.

    "As the price differential becomes attractive for exports, it's that much easier to hit the 'go' button and start exporting again," said analyst Paul Adkins of consultancy AZ China, noting recent falls in local prices would reinvigorate Chinese exports.

    The falls have come after China said it planned to cut wholesale prices of electricity for the second time this year, a move that would cut production costs for aluminium producers further.

    AZ China estimates average monthly aluminium production costs at at least a five-year low around 13,000 yuan a tonne, as power, carbon and alumina costs fall.

    Attached Files
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    Steel, Iron Ore and Coal

    China new five year plan puts Coal in the cross hairs

    China will strive to build a clean, safe, efficient and modern energy system, according to a communique released on Thursday after the fifth plenum of the 18th Communist Party of China (CPC) Central Committee that adopted proposals for economic and social development in the 13th Five-Year Plan (2016-20).

    In terms of energy development in the next five years, the government will focus on capping total energy consumption, developing cleaner sources of energy and implementing reforms targeting the sector, according to a report on the website of the China Energy News.

    As the last five-year plan before 2020, the year in which China is supposed to meet its goal of building a moderately prosperous society in all respects, the plan gained wide attention.

    China will enforce a strict limit on total coal consumption, the Xinhua News Agency reported, citing Li Haofeng, deputy director of the National Energy Administration's coal office.

    China will promote the clean, efficient usage of coal by using some of the world's most advanced process to support industrial upgrades, Li said.

    China was the world's largest energy consumer in 2014, with coal accounting for 66.03 percent of the country's primary energy consumption, according to the BP Statistical Review of World Energy 2015, which was released in June.

    The goal is to make coal account for 50 percent of China's total primary energy consumption by 2050, according to China's National Coal Association in September. Both coal prices and coal producers' profits slid during 12th Five-Year Plan period (2011-15), said Li Chaolin, a Beijing-based coal researcher.

    "Facing the prospect of falling coal production, the drop in oil and gas prices, and the continuous pressure from seaborne coal, coal producers will face hard times during the next five years as they struggle with high production costs," Li told the Global Times.

    As the energy demand is expected to slow with China's economic rebalancing, its energy policy is shifting away from ensuring sufficient supply to improving efficiency and making the sector more environmentally-friendly, said Jenny Huang, associate director of corporate research with Fitch Ratings.

    "Improving people's quality of life has taken priority for the nation to build a moderately prosperous society," Huang told the Global Times in an e-mail on Friday. "That means controlling consumption will remain an important part of the future energy plan for China to cap its primary energy consumption at 4.8 billion tons of coal equivalent by 2020, compared with 4.3 billion tons in 2014."

    Coal consumption, in particular, will be tightly monitored in air pollution control areas to ensure it does as little damage to the environment as possible, Huang said.

    New technologies such as coal extraction automation, which reduces the number of operators, and more detailed management will also play a bigger role in bringing down costs, Li noted.

    Attached Files
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    BHP pins future of Indonesian coal mine on new rules

    The world's top exporter of coking coal, BHP Billiton , said plans to develop a massive mine in Borneo will hinge on a revision of Indonesia's mining rules, including on compulsory divestment and contract extensions.

    BHP in September said it had started mining at the Haju mine, part of the first stage of the IndoMet Coal project, in the forested Central Kalimantan province.

    "As we continue to cautiously proceed with a small scale mine at Haju, a regulatory regime with certainty will be essential in supporting future investment decisions," a BHP spokeswoman said in an email.

    BHP is continuing to evaluate the potential for larger scale developments at IndoMet and has already received buyer interest in the coal, she said.

    The project, in which Indonesia's Adaro Energy also holds a stake and is estimated to have at least 1.27 billion tonnes of resources, has come under fire from environmental groups, with BHP fending off criticism at its annual meeting in London last week.

    "If we were to leave ... it is unlikely that these areas would be set aside for conservation," Chairman Jacques Nasser told shareholders, noting that Indonesia wanted to develop the area, regardless of which company did it.

    "The area of interest has had accelerated development pressures over the last 20 years and it is not the pristine wilderness it was two decades ago," he said.

    Discussions on the rules on BHP's Coal Contracts of Work were ongoing, and the company expected these would not be finalised until the Indonesian government completed a review of regulations, the spokeswoman said.

    Adhi Wibowo, director of coal at Indonesia's energy ministry, said while the area was home to orangutans, BHP had received environmental permits and the government would help it get further forest-use permits if necessary.

    "There should be no more obstacles," he told Reuters, adding if they did not want to develop it they could return the concession.

    But he said the government was still reviewing rules on divestment and contract extensions, adding "we are waiting for parliament."

    Indonesia's mining rules are sometimes subject to debate because in some cases they overlap with contractual requirements, PwC mining analyst Sacha Winzenreid said.

    The fact that this project covered seven contracts of work, each held by a separate legal entity, meant negotiations may be particularly difficult, Winzenreid said.

    According to Friends of the Earth Indonesia (WALHI), the concessions "lie within the remote and largely undisturbed forests of Central Borneo, forests recognised globally for their biodiversity."

    As well as being home to indigenous Dayak groups, orangutans, pygmy elephants, clouded leopards, proboscis monkeys and numerous other rare and endangered species also lived in the forests, it said in a 2014 report.
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    Datong Coal 3Q loss over 1.1 bln yuan

    Datong Coal Industry Co., Ltd, the listed subsidiary of Datong Coal Mine Group, suffered a loss of 1.15 billion yuan ($180.5 million) in net profit in the first three quarters this year, plunging 301.8% on year, it said late October 29.

    Total revenue of the company stood at 5.7 billion yuan during the same period, a decline of 15.7% from a year ago, it said.

    The slump in net profit was mainly attributed to the plunge of non-operating income, which slumped 98.5% on year to 18.4 million yuan during the same period.

    Over January-September, the company produced 27.11 million tonnes of coal, exceeding by 5.8% of its annual output target of 25.63 million tonnes.

    The company’s coal output stood at 30.27 million tonnes in 2014.

    However, coal sales reached 17.96 million tonnes between January and September, accounting for 86.7% of its annual target.

    The revenue of coal sales contributed to 5.46 billion yuan or only 66.4% of the whole year’s plan.

    The company’s total operating costs fell 5.4% on year to 6.52 billion yuan in the first three quarters, with sales cost at 3.6 billion yuan.

    The company may see a sharper year-on-year decrease in total net profits for 2015, it predicted.
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