Mark Latham Commodity Equity Intelligence Service

Friday 3rd July 2015
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    Oil and Gas


    US Factory Orders Scream Recession: Annual Drop Biggest Since 2008

    This has never happened outside of recession... Year-over-year, factory orders dropped 6.3% (adjusted) but 8% non-adjusted, the most since the financial crisis. Against expectations of a 0.5% drop MoM, manufacturers saw new orders tumble 1.0% and previous months were revised dramatically lower. Factory orders has now missed 10 of the last 11 months.

    Factory Orders have fallen for 9 of the last 10 months...

    Seasonally adjusted things look terrible...

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    Brazil police arrest another former Petrobras exec in probe -paper

    Brazilian police have arrested Jorge Zelada, former head of Petrobras' international division, as part of an ongoing investigation into bribery and corruption at the state-run oil producer, a local newspaper reported on Thursday.

    Zelada is accused of money-laundering, appropriating public funds, corruption, tax evasion and contract fraud, Folha de S. Paulo newspaper reported. He was taken into custody early Thursday as part of the graft probe centered on Petrobras that has already ensnared several of Brazil's top executives.

    According to a police statement, the 15th phase of the investigation, dubbed "The Monaco Connection," led to search and seize warrants for three other suspects, though none were named.

    Zelada is the fifth ex-Petrobras executive implicated in the 16-month old investigation.
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    U.S. construction spending rises to 6-1/2-year-high

    U.S. construction spending rose in May to its highest level in just over 6-1/2-years as outlays increased across the board, the latest sign of momentum in the economy.

    Construction spending increased 0.8 percent to an annual rate of $1.04 trillion, the highest level since October 2008, the Commerce Department said on Wednesday.

    April's outlays were revised slightly to show a 2.1 percent gain instead of the previously reported 2.2 percent rise.

    Economists polled by Reuters had forecast construction spending rising 0.5 percent in May. The government revised construction spending data going back to January 2013.

    The construction spending report added to robust data on employment, consumer spending, consumer confidence and housing, in suggesting that growth was gaining steam after gross domestic product shrank at a 0.2 percent annual rate in the first quarter.

    The economy was hit by bad weather, port disruptions, a strong dollar and spending cuts in the energy sector at the start of the year.

    In May, construction spending was lifted by a 0.9 percent increase in private construction spending to the highest level since July 2008. Outlays on private residential construction rose 0.3 percent, reflecting gains in home building and a slight increase in renovations.

    Spending on private non-residential construction projects increased 1.5 percent to the highest level since December 2008.

    Public construction outlays rose 0.7 percent to a seven-month high. Spending on state and local government projects - the largest portion of the public sector segment - gained 0.2 percent, also touching a seven-month high.

    Federal government outlays jumped 6.3 percent after two straight months of declines.
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    Ukraine has stopped receiving gas from Russia - Ukrtransgaz

    Ukraine's state gas transport monopoly, Ukrtransgaz, said on Wednesday it had stopped receiving gas from Russia on July 1 but was still supplying Europe at the usual rate.

    "From today, Ukraine is not getting gas from Russia. Transit supplies are as normal," Ukrtransgaz spokesman Maksim Belyavsky said.

    Gas supply talks between Russia and Ukraine fell apart on Tuesday in Vienna after energy officials were unable to agree on a pricing plan for the next period.
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    Brazil police uncover another fraud scheme at finance ministry

    Brazilian police on Wednesday raided the offices of the federal tax agency and national mint as part of an investigation in a fraud scheme that allegedly channeled 100 million reais ($32.26 million) in bribes to finance ministry officials.

    Public servants from both entities linked to the finance ministry were allegedly paid bribes to give the company SICPA a multi-billion service contract to monitor the production of cold beverages such as beer and soft drinks, the ministry said in a statement.

    The federal tax agency charges taxes on beverage' companies based on their monthly production. The national mint is involved in the selection of the contract to monitor output.

    The case comes only two months after authorities uncovered a massive corruption scheme at the tax agency's appeals board that may have cost taxpayers up to 19 billion reais.

    Although it made no arrests the police has seized the assets of the main suspects in the latest corruption case and is looking into their banking accounts, the ministry said.

    Since last year Brazil's political establishment has been rocked by a corruption scandal at state-run oil company Petrobras that resulted in the arrest of the top executives of the country's largest engineering companies.
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    Strong US Auto sales

    The biggest automakers posted mostly improving U.S. vehicle sales in June to cap the best first half in a decade and predicted an even better finish to the year.

    Already accelerating auto sales will find a new gear in the year’s second half, according to several automakers. General Motors Co. has redesigned versions of the Malibu and Camaro coming. And Ford Motor Co. is finally reaching full production of its aluminum-bodied F-150 pickup and is promising a second-half sales surge of the top-selling vehicle line in America.

    Prices and profits are also rising along with auto sales. Relatively low gasoline prices and interest rates continue to drive up sales of sport utility vehicles and pickups, which favor the Detroit Three automakers that specialize in those big rigs. The average vehicle sold for $33,340 last month, up 2.5 percent from a year ago, according to automotive researcher Kelley Blue Book.

    “Auto sales continue to push higher and are slated to have one of the strongest years ever,” said Mark Williams, an analyst for Kelley Blue Book. “Demand for SUVs and trucks continues to drive the market, which resulted in several top automakers posting higher sales.”

    Industrywide auto sales are on pace to have risen about 4 percent last month, Ford said. Analysts estimated that industry sales volume would be the best for June in nine years at 1.49 million. New products and growing consumer confidence will push the pace even higher the rest of the year.

    “We just wrapped up the U.S. auto industry’s best six months in a decade,” said Kurt McNeil, GM’s U.S. vice president of sales operations. “People feel good about their jobs and the direction the economy as a whole is taking, so the second half of the year should be strong, too.”

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    EU to curb pollution from mid-sized power plants

    EU member states on Tuesday agreed new rules to limit pollution from hundreds of thousands of medium-sized power plants that had previously escaped regulation.

    The compromise deal to curb sulphur dioxide, nitrogen oxide and dust from combustion plants with a thermal input rated between one and 50 megawatts now requires just a formal sign-off from the European Parliament, expected later this year.

    Environmental campaigners said the draft rules had been weakened significantly during negotiations so existing plants would get more time to comply than new plants.

    But they said the rules were a step in the right direction as, until now, only large plants, such as coal- or gas-fired power stations, oil refineries and steel producers, had been subject to limits.

    "This is a key piece that was missing and that will help to significantly reduce the potential risks to human health and the environment," Kaspars Gerhards, environment minister for Latvia, holder of the EU presidency, said in a statement.

    According to EU figures, there are 143,000 medium-sized combustion plants, including coal- and biomass-fired facilities and district heating, in the European Union.

    Louise Duprez, a senior policy officer at the European Environmental Bureau, called on member states to introduce more stringent limits than those required by the new law.
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    No Growth? The Entire S&P 500 Free Cash Flow Is Going To Shareholders

    In perhaps the best example of just how massive the impact of returns to shareholders have become, Deutsche Bank shows a snapshot the S&P's consolidated income statement as of 1995 and 2015.

    While there are some clearly material changes transformations: the rise of financials' revenues above energy companies for one, the drop in net interest expense margin courtesy of ZIRP, the record high net income margin as a result of massive, if double seasonally-adjusted layoffs, one thing stick outs: virtually all of the corporate Free Cash flow in 2015 will go back to shareholders, as dividends and buybacks represent 94% of total S&P FCF uses.

    Contrast this with "only" 60% of FCF in 1995 going back to shareholders and one can see why the US economy is caught in secular contraction in which virtually nobody wants to invest for the future and instead is forced to distribute all unretained earnings here and now.
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    China starts construction on Shanxi-Nanjing UHV project

    China kicked off construction on an ultra-high voltage (UHV) power transmission project on June 29 in order to transmit electricity generated in coal-rich Shanxi province to the eastern city of Nanjing, local media reported.

    The 1,119 Km 800 KV DC line will start from the Jinbei substation in Shuozhou City of northern Shanxi and reach Nanjing substation in Jiangsu’s Huaian City. Investment in the project is estimated at 16.2 billion yuan ($2.65 billion).

    The project gained approval from the National Development and Reform Commission in June this year and is expected to come into operation in 2017.

    Upon completion, Shanxi is expected to transmit 45 TW of electricity or equivalent of 20.16 million tonnes of coal per annum to eastern China.

    Jiangsu’s power consumption ranked the first in China over January-May. Total outsourced power accounted for 12% of its power consumption during the same period.

    Presently, total installed capacity of coal-fired and wind power in Shanxi have reached 55 GW and 5GW, with around 90% wind power at northern and central parts of the province.

    It is predicted that northern Shanxi’s newly-added installed capacity of coal-fired and non-coal-fired power would reach 15 GW and 7.8 GW during 2015-2020.
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    Rousseff slams graft informants, denies illegal donations

    Brazil's President Dilma Rousseff on Monday drew on her own experience as a political prisoner during the country's dictatorship to denounce informants in a corruption scandal that has pummeled her popularity.

    Rousseff also forcefully denied her campaign had received illegal donations originating from the scandal, which involves kickbacks allegedly paid by construction companies to politicians and former executives at state-run oil firm Petrobras.

    Speaking to journalists in New York, Rousseff contrasted her experience in jail in the early 1970s opposing Brazil's dictatorship with that of informants cooperating with prosecutors investigating the Petrobras scandal.

    "I do not respect informants because I know, I was jailed in the dictatorship and they tried to turn me into one," she said following a speech to investors focused on infrastructure projects. As a young Marxist, Rousseff was jailed, hung upside down and tortured with electric shocks.

    Many of the key informants in the Petrobras corruption scandal have turned state's witness after serving lengthy pre-trial jail terms.

    Rousseff spoke after Veja magazine reported on Friday that Ricardo Pessoa, an executive linked to the scandal, had said in plea bargain testimony that part of the money resulting from the overpricing of contracts was donated to the campaigns of several politicians, including for Rousseff's 2014 re-election.

    Pessoa, the head of Brazilian construction firm UTC Engenharia, is under house arrest. He was jailed last year and prosecutors say he may have led the cartel. Veja did not say how it obtained the details of his testimony.
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    South African regulator rejects Eskom tariff hike request

    South Africa's energy regulator rejected on Monday a request from cash-strapped utility Eskom to raise tariffs, and the state-owned power company said it would consult with the government on alternative ways of funding.

    Eskom, which provides virtually all of South Africa's electricity, is scrambling to repair its aging power plants and grid, forcing it to impose almost daily power cuts that are hurting economic growth.

    Jacob Modise, chairman of the National Energy Regulator of South Africa (NERSA), said crucial information was missing in the application for an average 9.58 percent increase in tariffs.

    The utility wants to raise tariffs to pay for diesel to be used to run gas turbines, and to pay for power from independent electricity producers to help make up a shortfall in electricity while some of its coal-fired plants are undergoing maintenance.

    Eskom said it would consult with the government, its only shareholder, about whether to make a new application to raise tariffs or find new funding sources.

    "We are not blackmailing or making threats, we need diesel and we need to get some kind of assurance of where we can get the money," Eskom spokesman Khulu Phasiwe said.

    The energy regulator also said it was considering imposing penalties if plants did not function properly after maintenance was done. At a public hearing into Eskom's tariff application last week, NERSA said documents submitted by the utility showed that 50 percent of plants break down after Eskom conducts maintenance.

    Eskom has already raised its tariffs once this year, in April, and the requested price hike would bring the total increase this year to more than 22 percent.

    South Africa's public enterprises minister, Lynne Brown, has said the utility would have to tap debt markets if it failed to get the tariff increase.

    The power company is facing a funding gap to 2018 of up to 200 billion rand ($16 billion) as it struggles to keep its mostly coal-fired plants running. The government has pledged to inject 23 billion rand of capital into Eskom.
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    U.S. Rails Skid Into Bear Market on Triple Whammy Cargo Slump

    U.S. railroads, Wall Street favorites for much of the past decade, are slumping into a bear market amid a three-way squeeze from plunging coal, crude-oil and grain shipments.

    An index of the four largest publicly traded U.S. carriers has dropped 20 percent from its peak in November, paced by Kansas City Southern, as the companies struggle to offset the loss of volumes. They haven’t tumbled this much since 2011.

    Those difficulties are likely to drag on, leading to the first annual industrywide earnings decline since 2009, as low natural gas prices sap coal demand, U.S. oil drilling slows and harvests return to normal after a record crop. That threatens to crimp a rally that made the group one of the top performers in the Standard & Poor’s 500 Index.

    “It’s going to be a tough year,” David Vernon, a Sanford C. Bernstein & Co. analyst, said in a telephone interview after publishing a note last week whose title predicted second-quarter profit reports that would be “Dark and Full of Terrors.”

    Earnings per share for the largest U.S. railroads -- the other three are Union Pacific Corp., CSX Corp. and Norfolk Southern Corp. -- will fall 0.6 percent in 2015, based on analysts’ estimates compiled by Bloomberg. Last year, they gained 19 percent. Analysts predict revenue will drop 2.8 percent this year after jumping 6.7 percent in 2014.
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    China says thousands arrested suspected of environmental crimes

    Chinese police arrested thousands of people suspected of environmental crimes last year, a minister told parliament on Monday, as the world's most populous country vows to get serious on protecting the environment.

    Facing mounting public pressure, leaders in Beijing have declared a war on pollution, vowing to abandon a decades-old growth-at-all-costs economic model that has spoiled much of China's water, skies and soil.

    But forcing growth-obsessed local governments and powerful state-owned enterprises to comply with the new laws and standards has become one of its biggest challenges.

    Beijing has repeatedly promised to strengthen monitoring and law enforcement, and a new environmental law in force since Jan. 1 gives it the clout to impose unlimited fines and jail sentences on repeat offenders.

    Environment Minister Chen Jining told a bi-monthly session of the National People's Congress's standing committee that 3,400 companies and 3,700 construction sites were found to have violated laws last year, while more than 3,100 workshops were forced to shut down following inspections.

    According to a transcript of his address published on the parliament's official website (, he said the number of criminal cases handed over to the police by environmental protection departments in 2014 reached 2,080, twice the total number during the previous decade. More than 8,400 people were arrested.

    He added the central government had allocated 9.8 billion yuan ($1.58 billion) in special funds to control air pollution in 2014, which helped "leverage" additional private investment of 300 billion yuan.

    Chen said China would aim to cut key air pollutants sulphur dioxide and nitrogen oxide by 3 percent and 5 percent respectively this year, and would work to improve vehicle fuel standards nationwide.
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    Rideshares, Uber, AirBnB

    And in Germany, General Motors launched a CarUnity app that lets owners of any brand rent their vehicles to Facebook friends or people in the app's network.

    "This is a big bang moment for the auto industry," said Thilo Koslowski, vice president at research firm Gartner Inc., who estimates that by 2025, 20% of the vehicles in urban centers will be dedicated to shared use.

    "Imagine all of a sudden 20% of your vehicles sales in the classic sense — to individuals who will be the only user of that car — go away," he said.

    Each vehicle that goes into a full-time car-sharing service, such as short-time rental company Zipcar, supplants four to six new car sales and postpones the purchase of up to seven more, said Susan Shaheen, a transportation expert and professor of civil and environmental engineering at UC Berkeley.

    As people share vehicles, cars become "less sexy and more just transportation tools," Koslowski said.

    The ultimate effect on car sales is unclear. Population growth and a burgeoning middle class in developing countries are creating new customers at a steady clip. But sales could take a serious hit if people decide it's cheaper to forgo owning a car in favor of renting or ride-sharing for the occasional errand.

    "This will force the auto industry to rethink how it markets its products," Koslowski said.


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    Up to 12,000 London cabbies caused gridlock in London when they refused to work in protest over Uber’s fare-by-distance calculations, which the Licensed Taxi Drivers Association argued works like a taxi meter and is therefore illegal for private cars to use.

    The move backfired. While the black taxi drivers were “holding London to ransom” and “causing significant economic impact” to the city worth £125m, according to Uber, the cab-hailing app was granted a free ride to the front page and said that sign-ups soared by 850pc compared with the previous week.

    “The results are clear: London wants Uber in a big way,” the company said at the time.

    Attached Files
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    Oil and Gas

    Oil prices drop on rising U.S. rig count

    Oil prices dropped on Friday as a rising U.S. rig count stoked fears of oversupply and after Chinese regulators opened an investigation into suspected stock market manipulation.

    Front-month U.S. crude futures CLc1 were trading at $56.70 per barrel at 0439 GMT, down 23 cents from their last settlement.

    That means U.S. crude has fallen from a price range of $57-62 per barrel that it had been in since early May.

    Brent crude futures LCOc1 were down 14 cents at $61.93 per barrel. But the contract remained in a downward trend that has been in place since early May and which has seen prices fall almost 10 percent.

    "Negative sentiment stemmed from an increased U.S. oil rig count (by 12 to 640), after dropping for six months. U.S. shale producers have brought down the breakeven cost from $35 to $20 per barrel," ANZ bank said on Friday.

    "The current U.S. horizontal and vertical rig count across the Permian, Eagle Ford, Bakken and Niobrara shale plays implies that U.S. oil production growth will reach 135,000 barrels per day year-on-year by 4Q15," Goldman Sachs said on Friday.

    The rising U.S. rig count adds to near record production by OPEC and Russia.

    Attached Files
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    Engie pens LNG supply deal with Beijing Gas

    Engie, French LNG-player formerly known as GDF Suez, signed an LNG supply deal with Beijing Gas Group of China.

    Under the deal, Engie will deliver two LNG cargoes to BEG to meet Beijing City’s natural gas needs in winter. The first delivery will be in November and the second in January.

    The deal was signed during Chinese Prime Minister Li Keqiang’s visit to France.

    The companies also agreed to work on energy projects in China with the French major willing to help usher BEG into the international market by jointly investing in LNG projects in third party countries, Engie informed in a statement.

    This deal will be followed by a 10-year LNG supply agreement as soon as the price is settled.
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    BP settles 2010 U.S. oil spill claims for $18.7 bln

    BP Plc has reached a comprehensive $18.7 billion settlement with the U.S. government and five states, a landmark deal that effectively ends years of litigation over environmental damage and human casualties caused by the 2010 Gulf of Mexico spill.

    It could be the largest settlement with a single entity in U.S. history, the U.S. Justice Department said.

    The April 20, 2010, rig explosion killed 11 workers and spewed millions of barrels of oil for nearly three months onto the shorelines of several states.

    The agreement covers U.S. Clean Water Act fines and natural resources damages, along with claims by Alabama, Florida, Louisiana, Mississippi, Texas and 400 local government entities.

    BP's London-listed shares rose as much as 5.3 percent as the extent of the company's liabilities became clear for investors, even as it increased its cumulative pretax charge for the disaster by about $10 billion to $53.8 billion. BP's New York-traded shares rose 5 percent to $41.20.

    "This is a realistic outcome which provides clarity and certainty for all parties," BP Chief Executive Officer Bob Dudley said in a statement. "For BP, this agreement will resolve the largest liabilities remaining from the tragic accident."

    The size of the settlement was slightly more than the $17.6 billion that investors had feared BP would be fined under the Clean Water Act for gross negligence.

    The maximum possible Clean Water Act fine was later trimmed to $13.7 billion after U.S. District Court Judge Carl Barbier found 3.19 million barrels spilled, less than the U.S. government claimed.

    Barbier was expected to rule on that issue later this year, but even after that, BP would have still faced years of lawsuits to address claims by states and by the federal government under a natural resources damage assessment.

    The settlement announced Thursday closes off the remaining liabilities and will bring over $6.8 billion to states.
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    Enbridge makes equity investment in Fairwood LNG

    Fairwood Peninsula Energy Corp. has announced that it has signed a strategic alliance with Enbridge Inc.

    Under the deal, Enbridge has made a 5% equity investment in Fairwood LNG, as well as entered into a Joint Development Agreement with Fairwood LNG to assist in the development of offshore LNG facilities in the Gulf of Mexico.

    Fairwood Peninsula Energy Corp. is the parent company and 100%-owner of Delfin LNG LLC.

    Frederick Jones, the Chief Executive Officer of Fairwood LNG and Founder of Delfin LNG, said: “Enbridge is a world-class company with a long and admirable history in the North American midstream energy sector. We are thrilled to be establishing this alliance, which we believe provides a strong platform for future growth. We look forward to a long-term relationship with Enbridge.”

    Dave Weathers, Vice President of Development, Enbridge US Midstream, said: “We are pleased to make this investment. As part of the development agreement, we will bring our expertise to the table regarding pipeline project management, pipeline operations and sourcing gas to facilities.”

    As a result of the equity position, Enbridge will hold one of the seven board of director seats.
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    Asia oil refining margins hit 2015 low, Mideast supply to drag

    Rallying oil refining margins have ground to a halt in Asia. Currently at a 2015 low, they could drop another 20-30 percent this quarter, led by declining profits in diesel as supply from the Middle East adds to a global glut.

    While softer Asian demand for diesel will be a drag, margins will likely draw some support and stay above last year's low as the region's gasoline uptake remains healthy.

    Asian refining margins DUB-SIN-REF enjoyed a stellar run in the first half of this year on weak oil prices and hit a two-year top above $10 per barrel in June. But they have almost halved this week to $5.60 with supply of refined products from traditional importers in the Middle East building up.

    "We see refining margins weakening on worsening diesel fundamentals, particularly east of Suez, though gasoline should be supportive," said Robert Campbell, head of oil products research at Energy Aspects.

    Energy Aspects estimates a near 20 percent drop in third-quarter Asian crude refining margins versus April-to-June levels, while consultancy FGE sees a 30 percent drop.

    This could force refiners to cut production to avoid eroding their margins further in an already well-supplied market. Middle Eastern producers have added at least 1.2 million barrels-per-day (bpd) of capacity over the past two years.

    New refineries are typically configured to produce about 30 to 50 percent of middle distillates, comprising diesel and jet fuel, which has led to a glut of these products.

    In fact, global diesel inventories rose by more than 25 million barrels in April from a year ago and are expected to continue growing this year, Standard Chartered said in a report.

    This comes at a time when demand at one of Asia's largest diesel consumers, China, is slowing down.

    As a result, "a lot of diesel will be trapped in the Far East and this will lead to run cuts in places like Japan and South Korea as the arbitrage to the west will be closed by growing Middle Eastern supplies", said Campbell.
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    UK's Hunting warns of profit slump as rig counts fall further

    Oilfield services company Hunting Plc warned operating profit may slide by up to 75 percent this year as weak oil prices lead to ongoing cuts in oil drilling, although there were some signs that demand is stabilising.

    The oil slide left a massive oversupply of drilling rigs and oilfield services firms, such as Hunting, scrambling for business and franctically cutting costs.

    Well completion in the industry fell by about a third in the second quarter from the first, Hunting said, with North American rig counts halving since the beginning of the year.

    But it added that weekly data showed the declines had slowed and it had seen some improvement in both its order book and customer sentiment.

    The company, which supplies equipment and services for drilling and maintaining wells, said operating profit slumped 76 percent in the first five months of the year.

    It said operating profit would likely fall 50-75 percent in the year to Dec. 31, adding that this estimate was dependent on an improvement in activity levels.

    The London-based firm said it had cut a quarter of its workforce so far this year, saving about $41 million. In some divisions half of the jobs had been cut.

    "We don't think they will cut (jobs) materially more from here. They will start to see the benefits of those cost cuts in terms of margins in the second half, thus helping the recovery," said analyst David Farrell, from Macquarie Research.

    Hunting employed about 4,000 people at the end of 2014, of which about 60 percent were in the United States.
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    Chesapeake sells Oklahoma oil land for $840 million

    Two units of Chesapeake Energy Corp. are selling oil and gas properties to a Colorado-based FourPoint Energy for $840 million, one of the U.S. petroleum industry’s largest asset acquisitions this year.

    The oil land sold off in the deal covers 250,000 net acres in west Oklahoma near the Texas Panhandle, with about 1,500 wells pumping oil and gas from subterranean reservoirs called the Cleveland, Tonkawa and Marmaton formations that straddle the state border.

    The purchase more than doubles FourPoint’s footprint over the western portion of the Anadarko Basin, an oil and gas deposit that runs from the Panhandle to Kansas and Colorado. And it bolstered its well count in the region by a third.

    The wells there produced 21,500 barrels of oil equivalent per day in the 12 months before April, with roughly 55 percent of that coming from oil and natural gas liquids, the rest from natural gas.

    Chesapeake, which had drilled nearly 200 wells in the region since 2012, pulled its drilling rigs out of the area in the first quarter after oil prices tanked. FourPoint plans to continue where Chesapeake left off, and hopes to do it for less money as drilling and completion costs have fallen, said Kamil Tazi, FourPoint’s executive vice president and chief operating officer.

    “FourPoint is eager to leverage the knowledge that Chesapeake has developed,” he said, “to position the company to grow production and cash flow.”

    FourPoint, a three-year-old private equity-backed firm, will use $619 million in new equity issued to private equity fund GSO Capital and will borrow cash from its credit facilities, corporate loans from which companies can borrow, pay back and borrow again.

    Tad Herz, the chief financial officer at the private equity firm, says the purchase will bolster FourPoint’s balance sheet and give it enough cash to pursue further growth and more acquisitions. Issuing equity “allows FourPoint to maintain a balanced debt to equity capital structure and allows for GSO to share in future upside potential on the assets.”
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    Union Pacific imposing hefty surcharge on older crude railcars

    Union Pacific Corp will impose a $1,200 per-car surcharge on oil shippers that move crude in older railcars, the company told customers this week, becoming at least the second U.S. railroad to charge extra amid widespread safety concerns.

    In a revised tariff taking effect Aug. 1, a copy of which was seen by Reuters, the No. 1 U.S. railroad posted rates that will charge shippers more if they use so-called DOT-111 railcars, which are not as strong as cars built to a higher standard the industry adopted in October 2011.

    For DOT-111s carrying an average of 700 barrels of crude per car, a $1,200 surcharge would add an additional cost of $1.71 per barrel shipped.

    Union Pacific said it changed its tariff in response to stronger U.S. rules for handling flammable liquids that were recently announced after a string of fiery crashes.

    Oil by rail proliferated in tandem with the U.S. shale oil boom. Coastal refiners, in particular, used rail to tap cheaper domestic crudes and buy fewer costly imports.

    However, U.S. oil by rail shipments have dipped from more than 1 million barrels per day in the fourth quarter 2014 to 850,000 bpd in April, U.S. government data shows, as crude prices fell during a global oil glut.

    Berkshire Hathaway Inc-owned BNSF Railway in January imposed a similar $1,000 per DOT-111 surcharge on shippers.

    In March, the American Fuel and Petrochemical Manufacturers, which represents refiners and petrochemical companies, sued BNSF, alleging the surcharge violates the railway's obligation to transport hazardous materials such as crude under U.S. regulations.

    BNSF countered that it did not refuse to accommodate DOT-111s, and AFPM's complaint centers on whether the surcharge is reasonable.
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    Sete Brasil gets debt relief as talks continue, sources say

    A group of five Brazilian banks will refinance about 11.5 billion reais ($3.6 billion) in loans for ailing Sete Brasil Participações SA for a further 45 days, in a bid to keep the oil rig maker afloat, two sources with direct knowledge of the matter said on Thursday.

    State banks Banco do Brasil SA and Caixa Econômica Federal, as well as private-sector lenders Itaú Unibanco Holding SA, Banco Santander Brasil SA and Banco Bradesco SA waived immediate repayment to allow Sete to continue with a reorganization program, said the sources, who requested anonymity due to legal restrictions on discussing the issue publicly.

    Sete's restructuring plan involves trying to reduce the company's obligations by slimming down its operations, the first source said, adding that the plan should make debt-servicing sustainable by as early as September. The banks had previously agreed to forego repayment of the loans in April, when they extended them for an initial 90 days.

    When Sete Brasil was founded in 2011, it pledged to spend more than $25 billion to build as many as 28 deepwater drilling platforms that would be leased to state-controlled Petróleo Brasileiro SA. But the latter, known as Petrobras, has been engulfed in a corruption scandal involving key contractors and engineering firms, which stalled rig and equipment purchases.

    Rio de Janeiro-based Sete Brasil, founded by Petrobras and banks including Grupo BTG Pactual SA, faces a chronic cash-flow shortage after Petrobras delayed payments and borrowing costs spiked. The second source said the debt relief hinged on Sete Brasil's ability to effectively reduce the scope of its business plan.

    Under those terms, Sete Brasil will obtain the necessary financing to produce 14 rigs, with the ownership of another five being shared with Japanese and Singaporean creditors, sources told Reuters in May.

    Sete Brasil declined to comment, as did the five banks.

    On another front, Sete Brasil and a number of Asian, European and North American investors are in preliminary talks about a potential capital injection, the first source said. Any proposals may only be considered around October, by which time the main aspects of Sete Brasil's operational restructuring will have been agreed upon, the source added.
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    South Korea turns to cheap spot crudes as glut grows

    Refiners in South Korea, the world's fifth-largest crude oil importer, have stepped up spot purchases this year, buying at prices depressed by an oil glut as they run their plants at high rates to catch strong processing margins.

    With the Organization of the Petroleum Exporting Countries (OPEC) and other producers keeping crude taps open in spite of soft global demand growth, tens of millions of unbought barrels have built up in floating storage sites and dragged down international oil markets.

    Still, the profit earned on turning a barrel of Dubai crude into fuel have held at $7.50-$9 a barrel DUB-SIN-REF-MA this year - well above annual averages since at least 1997 - as crude benchmarks dipped to multi-year lows, sparking consumer demand for gasoline and naphtha.

    "Refining margins are firm thanks to rising demand triggered by weak oil prices, which has supported higher throughput rates and spot purchases have increased to cover them," said a senior source at SK Trading International, owned by SK Innovation which also owns the largest South Korean refiner SK Energy.

    Spot crude purchases by South Korean refiners over January-May rose to 32 percent of the total, up from 26 percent for the same period a year ago and greater than the five-year average, according to data from state-run Korea National Oil Corp (KNOC) and Reuters calculations.

    With the refiners taking many of the spot barrels from producers in the Middle East, this has hampered efforts to diversify South Korea's crude sources to include a greater percentage of oil from West Africa, Latin America and Russia in order to improve the security of its energy supplies.

    Even with the market flooded with cheap spot crude from other producers, South Korea increased its Middle East purchases to 85 percent of the total over the first five months of the year, up from 82 percent a year earlier.

    Refining sources attributed the rise to guaranteed quality and shorter shipping distances.

    The same trends are being seen in other markets as Asian buyers are attracted to the cheap spot prices. In India, the third-biggest crude importer, refiners have cut volumes from long-term contracts with Middle East suppliers to switch to West African oil.

    Taiwanese refiner Formosa Petrochemical Corp has increased its spot crude buys to 50 percent of total purchases this year, compared with 30 percent last year, a source familiar with the matter said.

    Spot purchases by Japan are also on the rise because of the favourable prices, industry sources there said.

    Three of South Korea's four refiners are increasing spot crude imports from Middle East producers such as Iraq and the United Arab Emirates, as well as from Nigeria, Ecuador and Russia, according to refining sources and KNOC data.

    South Korea imported 2.8 million barrels per day over January-May, up 13 percent from the same period last year.
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    EIA sees small fall in US oil production

                                                          Latest          Week ago      Year ago

    Domestic Production .................... 9,595             9,604             8,442
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    U.S. commercial crude oil inventories increased by 2.4 million barrels

    Summary of Weekly Petroleum Data for the Week Ending June 26, 2015

    U.S. crude oil refinery inputs averaged over 16.5 million barrels per day during the week ending June 26, 2015, 1,000 barrels per day less than the previous week’s average. Refineries operated at 95.0% of their operable capacity last week. Gasoline production increased last week, averaging over 10.0 million barrels per day. Distillate fuel production increased last week, averaging over 5.0 million barrels per day.

    U.S. crude oil imports averaged over 7.5 million barrels per day last week, up by 748,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.0 million barrels per day, 3.5% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 760,000 barrels per day. Distillate fuel imports averaged 173,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.4 million barrels from the previous week. At 465.4 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 1.8 million barrels last week, and are in the upper half of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.4 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.6 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 10.3 million barrels last week.

    Total products supplied over the last four-week period averaged over 20.0 million barrels per day, up by 7.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.5 million barrels per day, up by 6.4% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, up by 4.1% from the same period last year. Jet fuel product supplied is down 0.2% compared to the same four-week period last year.
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    Red-hot fuel demand can't shore up the oil price alone

    Sales of transport fuels have exceeded all expectations this year, making demand from reviving economies the mantra of bulls who say the oil price is well on the mend.

    But warning signs, especially in Europe, may derail that view. Growing stocks, and early stress signals for some oil products, such as diesel, are throwing a cautionary signal to those who believe the shale oil-driven glut in physical crude markets will be absorbed by demand alone.

    Gasoline consumption has bounced far higher, with U.S. drivers joining those in India, Indonesia and China in driving more often, and in some cases in less fuel efficient cars. Diesel for goods-laden trucks and jet fuel has also been in higher demand.

    The consumption strength across products led the International Energy Agency (IEA) to revise its demand forecast higher several times, with a current estimate of 1.4 million barrels per day, or 1.5 percent, in growth.

    But with refineries worldwide working flat out, whether or not consumers want the products, because their margins are so rewarding, the glut could be moving from crude oil into its refined by-products.

    "The global crude surplus is being converted into a product surplus. Refiners are being guaranteed a margin by the massive overhang of crude," said Jonathan Leitch, chief oil analyst with Wood Mackenzie.

    Analysts say middle distillates in Europe are showing particular signs of early stress. Diesel demand fell in France and Italy in May, and growth began to sputter in Spain. The building storage is also casting a shadow on some of Europe's early-year growth.

    In the Amsterdam-Rotterdam-Antwerp hub, a key indicator of demand health, distillate stocks hit an all-time high last week, according to PJK International. Industry monitor Genscape show them nearly 20 percent higher than the same time last year. German heating oil stocks have remained above average all year. 

    "It's almost as if middle distillates are coming out as a byproduct of gasoline," Leitch said. "I don't think it's just a European problem. Wherever refineries can, they are running hard."

    Leitch and others note that a colder-than-usual European winter was behind at least part of the demand boost in the first quarter. A change to cleaner grade shipping fuel accounted for a portion as well.

    Questions around the driver of the early-year demand, along with the building stocks, have raised fresh questions about whether the growth will continue apace - and even so, if that would be enough.

    "There has been some underlying growth of demand. But the supply response has been greater," said Olivier Jakob, oil analyst with PetroMatrix, said. "Demand needs to increase more to absorb."

    While gasoline can continue to support refiner profits for months to come, building stocks could simply be masking for now the extent of the oversupply in oil markets.
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    Shell to build its largest Gulf of Mexico platform for Appomattox development

    Royal Dutch Shell plc has today made the final investment decision (FID) to advance the Appomattox deep-water development in the Gulf of Mexico.

    This decision authorises the construction and installation of Shell’s eighth and largest floating platform in the Gulf of Mexico. The Appomattox development will initially produce from the Appomattox and Vicksburg fields, with average peak production estimated to reach approximately 175,000 barrels of oil equivalent (boe) per day.

    The Appomattox development host will consist of a semi-submersible, four-column production host platform, a subsea system featuring six drill centres, 15 producing wells, and five water injection wells.

    The platform and the Appomattox and Vicksburg fields will be owned by Shell (79%) and Nexen Petroleum Offshore U.S.A. Inc. (21%), a wholly-owned subsidiary of CNOOC Limited.
    “We have again delivered a globally competitive investment scope for another significant deep-water project,” said Marvin Odum, Shell Upstream Americas Director. “Appomattox opens up more production growth for us in the Gulf of Mexico, where our production last year averaged about 225,000 boe per day, and this development will be profitable for decades to come. With its competitive cost and design, Appomattox is next in our series of deep-water successes.”

    During design work for Appomattox, Shell reduced the total project cost by 20% through supply chain savings, design improvements, and by reducing the number of wells required for the development, the company has said.
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    RIL to defer R-Series development and satellite gasfields in KG-D6 block

    Reliance Industries may defer the development of R-Series and other satellite gasfields in the eastern offshore KG-D6 block if the price outlook is uncertain, its junior partner Niko Resources of Canada said. RIL has made 19 oil and gas discoveries in the KG-DWN-98/3 block in the Bay of Bengal and so far only three, Dhirubhai-1 and 3 gas and MA oil and gasfields have been brought to production.
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    As Indonesia gas demand falters, floating LNG plant lies idle

    A $400 million floating plant for changing LNG back to gas has sat idle off Indonesia's coast for around six months despite only being commissioned last summer, hit by faltering demand for the cleaner fuel as oil prices drop and the economy slows.

    The stoppage could stoke government worries over the strength of appetite for gas in Southeast Asia's largest economy, another blow to the administration of President Joko Widodo which has been pushing for greater consumption of the fuel to curb pollution and diversify energy sources.

    Tepid Indonesian demand also means more liquefied natural gas is likely to spill into regional markets, already struggling near their lowest since before the Fukushima crisis in 2011 boosted usage as Japan shut all its nuclear reactors.

    "Electricity demand is down significantly, so gas from LNG has become less competitive," said Chairani Rachmatullah, gas and fuel division chief at state-owned power firm Perusahaan Listrik Negara (PLN), which was supposed to be one of the main customers of the idle plant.

    Floating storage and regasification units (FSRU) convert LNG shipped from producers back into gas, before transferring it onshore via a pipeline. They are typically cheaper and quicker to build than land-based LNG receiving terminals.

    But the Lampung FSRU, an 82,000-tonne vessel moored off the coast of Sumatra with a capacity to process 2 million tonnes of LNG a year, has not transferred any gas since January, according to officials from PLN and state gas utility Perusahaan Gas Negara (PGN), which operates the facility.

    That amount of LNG could provide about 14 percent of Indonesia's total power demand in 2014, according to Reuters calculations.

    Electricity demand growth in Indonesia slumped to 2.05 percent in the first five months of the year, down from 6.14 percent in the same period in 2014, according to PLN, dragged lower as economic expansion slipped to its weakest in six years.

    Appetite for gas has also been curbed by declining prices for rival fuels coal and diesel, which plunged this year on abundant supply and demand worries. Analysts said demand for regassified LNG has been worse hit than demand for piped gas as it is typically more expensive due to processing costs.
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    US LPG exports rise to record high, driven by propane/propylene: EIA

    US LPG exports rise to record high, driven by propane/propylene: EIA

    US petroleum liquids exports climbed 20.58 million barrels to 148.3 million barrels in April, driven largely by record high exports of liquid petroleum gasses and an increase in distillate exports, Energy Information Administration data showed Tuesday.

    US LPG exports climbed 4.07 million barrels to 23.16 million barrels, continuing an upward trend that has been in place for roughly five years. In April 2010, the US exported just 3.65 million barrels of LPGs.

    The LPG exports have been driven primarily by propane/propylene, the result of a rapid increase in output stemming from the rise in natural gas production. Combined field and refinery production of propane/propylene was 51.55 million barrels in April, up from 45.84 million barrels in April 2014, with an increase in field production leading the way higher.

    The glut of supply has pushed propane prices lower in the US, opening up arbitrage opportunities. The spot price of non-LST Mt. Belvieu propane averaged 54.58 cents/gal in April, roughly 24 cents/gal below the average price of Northwest Europe propane, and 46 cents/gal below the average price of Japan refrigerated propane, Platts data shows.

    Those discounts have since widened to average 32 cents/gal and 58 cents/gal so far in June, respectively.

    The EIA publishes country of origin data for total LPG exports, although propane/propylene exports at 19.09 million barrels made up the bulk of the total. China was the number one destination of LPGs in April at 3.32 million barrels, with Brazil coming in second at 2.94 million barrels, and Mexico third at 2.89 million barrels.

    US refined products exports climbed 9.23 million barrels to 86.18 million barrels in April, driven largely by a 5.39 million barrel rise in distillate exports to 37.05 million barrels, the EIA data showed.

    The bulk of US distillate exports continue to head to Latin America and Europe. Exports to Europe averaged roughly 475,000 b/d in April, climbing from 228,000 b/d in March, the EIA data showed, driven by increases to the Netherlands and France.
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    Gastar Exploration: Strong Production on Second Utica/Point Pleasant Well

    Gastar Exploration reported today initial and 30-day average production on its second Utica Point/Pleasant well.  The Blake U-7H well located in Marshall County, West Virginia produced at a peak 48-hour gross sales rate of 36.8 MMcf/d of natural gas on a 32/64ths choke with approximately 6,235 psi of flowing casing pressure.  On a restricted flow basis, the well's post peak rate 30-day production averaged 20.2 MMcf/d on a 26/64ths choke with approximately 5,312 psi of flowing casing pressure.  The most recent 5-day average rate is 14.8 MMcf/d at approximately 5,008 psi of flowing casing pressure.  The Blake U-7H well was drilled with a lateral length of 6,617 feet and was completed with 34 hydraulic fracturing stages that used approximately 14.8 million pounds of proppant.  Gastar has a 50% working interest in the Blake U-7H well and 41.1% net revenue interest in the well.

    J. Russell Porter, Gastar's President and Chief Executive Officer, commented, "We are very pleased with the results of our second dry gas Utica well as it demonstrates the consistency of the prolific production from the Utica/Point Pleasant play across our leasehold.  Currently, we have no plans to drill another Utica/Point Pleasant well on our acreage until regional natural gas prices improve and returns on investment become competitive relative to our other internal investment opportunities."
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    China's apparent oil need up as demand grows

    China's apparent oil demand in May rose 8.2 percent from a year earlier to 43.8 million tons on the back of growing market across all oil product categories, according to a latest Platts analysis of Chinese government data.

        "This was the fastest pace of growth since June 2013, when demand grew by 11.53 percent," said Mriganka Jaipuriyar, Platts analyst for Asia oil. "Demand for all key products showed year-on-year increase in the month."

        During the first five months of this year, China's total apparent oil demand averaged 10.45 million barrels per day, up 5.2 percent from the same period of 2014. This marked the fastest pace of year-to-date growth since 2011 and defied a weak macro-economic outlook.

        China's refinery throughput in May averaged 10.38 million barrels per day, up 7.4 percent from 2014, data from the National Bureau of Statistics showed.

        On the other hand, China was a net oil product exporter of 120,000 tons in May, according to latest data from the General Administration of Customs.

        Demand for gasoil, the most widely consumed oil product in China, has been hit in the last three years because of declining economic growth. Yet apparent demand in May grew by a robust 7.4 percent annually to 15.39 million tons.
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    Oklahoma court rules earthquake victim can sue oil companies

    An Oklahoma woman who was injured when an earthquake rocked her home in 2011 can sue oil companies for damages, the state's highest court ruled on Tuesday, opening the door to other potential lawsuits against the state's energy companies.

    Oklahoma has experienced a dramatic spike in earthquakes in the last five years, and researchers have blamed the oil and gas industry's practice of injecting massive volumes of saltwater left over from oil and gas drilling.

    The state saw nearly 600 quakes of magnitude 3.0 or greater in 2014, compared to just one or two per year prior to 2009, according to the Oklahoma Geological Survey.

    Oil production in Oklahoma has doubled in the last seven years, in part because drillers can dispose of vast amounts of saltwater found in oil and gas formations relatively cheaply by injecting it back into the ground.

    That practice is separate from hydraulic fracturing or "fracking," which has been linked to some smaller quakes but is not believed to be causing Oklahoma's tremors.

    Oklahoma, home to major energy companies including Chesapeake Energy Corp., Devon Energy Corp., and Sandridge Energy Inc., has already tightened regulations on injection wells. The state is considering tougher rules , and lawsuits would further boost costs for energy companies.

    Falling rocks injured Sandra Ladra's legs when a 5.0-magnitude quake toppled her chimney in 2011. She has sued two Oklahoma oil companies, New Dominion LLC and Spess Oil Company, which operate injection wells near her home in Prague, Oklahoma.

    A lower court ruled that the case had to go before the Oklahoma Corporation Commission, the regulator overseeing oil and gas, and dismissed Ladra's case in 2014.

    On Tuesday, the Oklahoma Supreme Court reversed that decision, ruling that the commission's authority does not extend to the power to "afford a remedy" to those harmed by the violation of its regulations. The case will return to district court to decide whether Ladra should be granted any damages.

    Ladra's lawyer, Arkansas-based Scott Poynter, told Reuters he can now move forward on several other potential suits from Oklahoma residents seeking compensation from energy companies for damages resulting from earthquakes.

    Industry advocates on Tuesday downplayed the significance of the court's ruling, and cast doubt on whether Ladra and her attorneys could prove specific wells were responsible for the earthquake that caused her injuries.
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    U.S. walrus protections hit Shell's Arctic drilling plan

    The Obama administration dealt a setback to Royal Dutch Shell's Arctic oil exploration plans on Tuesday, saying established walrus and polar bear protections prevent the company from drilling with two rigs simultaneously at close range, as it had planned.

    The U.S. Fish and Wildlife Service issued Shell a permit which emphasized that under 2013 federal wildlife protections, companies must maintain a 15-mile (24-km) buffer between two rigs drilling simultaneously.

    The rule is meant to protect populations of animals sensitive to sounds and activities of drilling. Walruses have been known to plunge off rocks into the sea during drilling, putting some at risk. The animals are already at risk from reduced habitat due to global warming.

    Drilling with only one rig at a time would slow Shell's drilling progress, but by how much was unclear. Shell, which has invested about $7 billion in its Arctic exploration over several years, is evaluating the permit and "will continue to pursue" its drilling plan, spokesman Curtis Smith said. The company hopes to begin producing oil there in 10 or 15 years.

    "Our goal is to safely accomplish as much work as we can before the end of open water season." The return of ice in late September ends the drilling season.

    In Shell's 2015 Arctic drilling plan, no two of its wells are more than 15 miles apart. Two of the wells it had been planning to drill in the Chukchi Sea off Alaska are about nine miles (14 km) apart.

    The move by the federal government came the same day that Shell began to send the Noble Discoverer, the second of two drilling rigs, up to Alaska from the Seattle area, for drilling starting in late July. Shell was hoping to return to Arctic drilling for the first time since its mishap-plagued 2012 season.

    Last week, green groups had said the wildlife rules could hamper Shell's drilling season. On Tuesday, an environmentalist blasted the company's blueprint for the Arctic that the Interior Department conditionally approved in May, pending permits including Fish and Wildlife's.

    "Shell's whole drilling plan is premised on a plan that is unlawful from the start," said Erik Grafe, a lawyer at Earthjustice in Anchorage.

    Shell can still drill with one rig at a time this summer, if it gets a few more permits, the Interior Department said.
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    Israel to let US-led consortium keep control of biggest offshore gas field

     Israel plans to leave its biggest offshore natural gas project, Leviathan, in the hands of a U.S.-Israeli consortium while opening the industry up to more competition, under a proposal announced on Tuesday.

    Texas-based Noble Energy and Israel's Delek Group , which own a number of recently discovered gas fields that supply factories and Israel's electric company, will keep control of Leviathan under the plan, Energy Minister Yuval Steinitz told a news conference.

    Leviathan, with estimated reserves of 22 trillion cubic feet (tcf), will take about 3 and 1/2 years to develop and is expected to supply billions of dollars of gas to Egypt and Jordan in addition to supplying Israel.

    However, Delek - through its units Delek Drilling and Avner Oil Exploration - will have six years to sell its entire 31.3 percent stake in a second large field, Tamar, and Noble will have to trim its stake in Tamar to 25 percent from 36 percent.

    The companies will also be forced to sell two smaller fields, Tanin and Karish, within 14 months.

    Tamar, with reserves of about 10 tcf, began production in 2013 to supply the domestic market and is due to be expanded for export. Tanin and Karish hold a combined 3 tcf.

    The government will also put a cap the price of gas sold in Israel, Steinitz said.

    "It is not simple or easy for the energy companies and I'm happy they agreed to accept these not-simple conditions," Steinitz said of the proposals.

    Steinitz said he was confident the companies would find buyers much sooner than the time allotted. Steinitz said he expected the government to approve the plan within a month.
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    Eni inks deal with Pertamina for LNG from Jangkrik field

    Eni, together with its partners ENGIE (formerly GDF SUEZ) and Saka Energi Muara Bakau, signed today two agreements with PT Pertamina (PERSERO) for the purchase and sale of liquefied natural gas (LNG) coming from Jangkrik Fields Development Project, offshore Indonesia.

    Under such Sale & Purchase Agreements, Pertamina will purchase 1.4 million tonnes per annum of LNG starting from 2017.

    “The signing of these agreements represents a key milestone for the Jangkrik Field Development Project. It is one of the first deep-water gas projects in Indonesia being developed under a fast track scheme, and confirms Eni’s commitment in supplying gas for the development of the Indonesian domestic market. I’m very pleased with the strong and fruitful relationship with the Indonesian Authorities, Pertamina and our Joint Ventures Partners in Jangkrik,” Eni’s CEO, Claudio Descalzi, said.

    The Jangkrik Fields Development  Project which consists of Jangkrik and Jangkrik North-East fields requires the drilling of production wells to be linked to a Floating Production Unit for gas and condensate treatment, and subsea pipeline laying for transportation to the Bontag Terminal. Production start-up is expected in 2017.

    The Jangkrik fields, discovered in the Muara Bakau block in 2009 and 2011, are located at a depth of 400 meters in the Makassar Strait, approximately 100 km east of Balikpapan.

    Eni is the operator of the block with 55% of working interest, whereas the other JV partners are GDF Suez Exploration Indonesia, a subsidiary of ENGIE, formerly GDF SUEZ, with 33.334% stake and Saka Energi Muara Bakau with 11.666% stake.
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    Cenovus to sell royalty business to Ontario Teachers' for C$3.3 bln

    Canadian oil producer Cenovus Energy Inc said it would sell its royalty lands business, Heritage Royalty Limited Partnership, to Ontario Teachers' Pension Plan for about C$3.3 billion ($2.66 billion).

    The decision to sell the business was made after considering several alternatives including an initial public offering, Cenovus said on Tuesday.

    Royalty lands are privately held oil and gas properties that are not subject to the royalties that producers pay to governments for operating on publicly owned lands. For privately held lands, producers pay a mineral tax to governments and royalties to the owners of the properties.

    Heritage Royalty owns about 4.8 million acres in Alberta, Saskatchewan and Manitoba, Cenovus said.

    The move comes about a year after Encana Corp spun out similar properties in PrairieSky Royalty Ltd, raising over C$4 billion.

    Cenovus said its consolidated production would fall by 7,800 barrels of oil equivalent per day of third-party royalty interest volumes.

    Ziad Hindo, senior vice president at Ontario Teachers' Pension Plan, said the deal was in line with the fund's shift in investment approach to "more direct and diversified energy sector holdings."
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    Cheniere moving ahead with condensate export terminal in Texas

    Cheniere Energy Inc is moving ahead with a $550-million export terminal in Texas that will ship processed condensate to international markets, a top executive said on Monday. 

    In addition, the terminal will be able to export any type of domestic oil if the decades-old US crude export ban is ever lifted, said Nelson Lee, director of crude trading and origination at Cheniere. "The reason why we're going ahead with that project is we think that we will have unfettered crude oil exports in US at some point, and there aren't the sort of logistics for the crude to exit the US," Lee said at an energy conference in Houston. 

    Lee recently joined Cheniere from BHP Billiton, where he headed condensate exports. BHP was the first company to export condensate without waiting for approval from US regulators. Speaking at American Business Conferences' North American Crude Markets and Storage Summit, Lee said that the terminal, slated to start up in 2017, will have two-million barrels of oil storage and dock infrastructure that can accommodate Aframax-sized tankers. 

    Cheniere also is building liquefied natural gas (LNG) export terminals in Corpus Christi, Texas, and Cameron, Louisiana. The oil terminal will have storage and stabilisation at a hub in San Patricio near Corpus Christi, which will be connected via pipeline to Cheniere's operations in Ingleside, Texas, on the Corpus Christi Bay. There, processed condensate will ship out. 

    Cheniere axed plans to build a condensate splitter at the terminal, focusing instead on stabilisation capacity, he said. Splitters "split" condensate into various components including jet fuel, diesel and naphtha, a building block for gasoline. Stabilisers provide less sophisticated processing that removes natural gas liquids. In 2013, US regulators started telling companies that such minimal processing is enough to qualify super-light oil, prevalent in the nearby Eagle Ford shale in Texas, as an exportable refined product that does not violate the crude export ban.
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    Saudi Aramco spending becoming more sensitive to lower oil prices: analyst

    State-owned Saudi Aramco is becoming more sensitive to movements in international oil prices, with sharp effects on spending, analysts at Jadwa Investment said.

    In May, the government's Council for Economic and Development Affairs approved Aramco's restructure, with a clear separation of the company from the Ministry of Petroleum and Mineral Resources to which it was previously closely aligned.

    "We view Saudi Aramco's restructuring as a step towards making it a more commercially-driven organization with increased independence in financial matters," Jadwa said in a research.

    Whereas Aramco had previously taken orders from the petroleum ministry, it will now be overseen by a 10-member Supreme Council for Saudi Aramco, headed by Mohammed bin Salman, the son of king Salman. Some analysts see the move as likely to result in better governance of Aramco, as its management seeks to trim costs and improve operational efficiency.

    But the restructure also means Aramco will become more sensitive to movements in oil prices, with forecast prolonged periods of lower prices affecting spending more sharply, "much like other international oil companies," it said.

    The state-owned oil giant has spent the last five years spending heavily on infrastructure, in particular in downstream, with investments in three new refineries.

    Aramco said in its 2014 annual review, published in May, that it will continue to invest significant sums over the next decade, but with a greater emphasis on upstream as it seeks to maintain a crude oil production capacity of 12 million b/d -- to reinforce its position as the world's "pre-eminent" producer and supplier -- along with developing 5 Bcf/d of new non-associated gas processing capacity for domestic consumption.

    Aramco's 2014 crude exports totalled 2.5 billion barrels (6.85 million b/d).
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    Netanyahu faces political crisis over Israel's natural gas monopoly

    Prime Minister Benjamin Netanyahu on Monday faced his first major coalition crisis since his re-election, with ministers withholding support for government plans for developing Israel's natural gas fields.

    At least three cabinet members cited conflicts of interest - personal or business-related - in seeking to be recused from a parliament vote later in the day meant to pave the way for a gas deal that would circumvent anti-trust regulation.

    Netanyahu, who has a one-seat majority in the 120-member parliament, held emergency meetings to try and resolve the impasse.

    Under the proposed deal, Texas-based Noble Energy and Israel's Delek Group would keep ownership of the massive offshore Leviathan field while stakes in smaller projects are put up for sale, industry officials said.

    The agreement has become the focus of national debate with critics saying Netanyahu was putting big oil profits above what could be a windfall for the state and citizens hoping to lower energy prices.

    Netanyahu says the more pressing issue is to get the gas out of the ground and fast-track the development of Israel's natural resources.

    Development of Leviathan, which could supply billions of dollars worth of gas to Egypt and Jordan, has been held up for a few years by regulatory issues. Israel's anti-trust authority objects to the monopoly arrangement.

    Facing possible defeat in parliament, Netanyahu could declare the vote a ballot of confidence in his government, political analysts said. That could effectively force recalcitrant ministers to back the measure.

    Netanyahu's original plan to push the deal through swiftly last week, was derailed by his economy minister, Aryeh Deri of the ultra-Orthodox Shas party, who declined to sign off on the agreement. He cited monopoly concerns.

    That in turn forced Netanyahu to go to parliament in order to give the government the required authorization to finalise the deal with Noble and Delek, which currently control a number of gas fields off Israel's shore.
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    Kurdistan ramps up independent oil sales

    Iraq's semi-autonomous Kurdistan region has ramped up independent oil sales since mid-June while cutting allocations to Iraq's state oil firm SOMO in an escalating dispute over export rights and budget payments.

    Kurdistan has sold at least 9 million barrels of oil in 11 tankers from the Turkish port of Ceyhan so far in June, according to shipping data and traders, compared to 5 million it allocated to SOMO in early June after which transfers largely stopped.

    June became the first month of large independent sales since December last year, when Kurdistan agreed a deal with Baghdad to transfer up to 550,000 barrels per day to SOMO in exchange for Baghdad allocating Arbil 17 percent of budget payments.

    The deal has faced troubles ever since with Baghdad accusing Arbil of allocating smaller-than-agreed amount of oil and Arbil saying Baghdad is paying less than a half of what is due. Neither side has yet called the deal dead but the blame game has continued for weeks.

    "Unfortunately the (Kurdistan) region has not complied with it until now," Iraqi Prime Minister Haider al-Abadi said in his weekly address on Sunday.

    That followed a statement from the government of Kurdistan (KRG) earlier in June in which is said it remained committed to oil transfers to SOMO but accused Baghdad of reneging on the deal.

    "If Iraq's federal government does not commit to the federal budget law, the KRG is obliged to consider other solutions to provide for the livelihoods of the Kurdistan region's people and to solve the financial and economic crisis," it said.

    The KRG said its need for money was especially acute given the fight against Islamic State militants and the sheltering of a large number of refugees from Syria and Iraq.

    Kurdistan's independent shipments have created havoc at Ceyhan where tankers - which were previous meant to be loading oil from SOMO - have been queuing for weeks.

    Last week, BP and Cepsa cancelled loadings due to a lack of oil in SOMO's tanks and this week Total, Kogas and Gazprom Neft cancelled their loadings.

    Meanwhile, Kurdish independent exports have returned to the patterns seen in 2014, when oil sailed in tankers of shipping company United mainly to the Israeli port of Ashkelon from where oil was resold back to the Mediterranean market.

    "The buyers are mainly those who don't have ties with SOMO," a trading source involved in the process said.
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    Alberta Oil & Gas Production Falls in Q1 2015

    Q1 2015 saw a significant fall in oil and gas production across Alberta, with many companies recording large declines in core operating areas compared to the end of 2014.

    Between Q3 2014 and Q1 2015, overall Alberta production - excluding oil sands - has fallen by 8% (56,880 boe/d) and between Q4 2014 and Q1 2015, overall production has fallen by 5% (34,165 boe/d). This is due to a number of factors; the fall in global commodity prices is perhaps the major reason for this decline, but companies have also suffered due to other external pressures such as pipeline difficulties or maintenance periods, for example. CanOils Assets is a powerful new tool that can identify both where production declined to the greatest degree and which companies recorded the biggest net decline.

    In Which Regions has Production Declined the Most?

    Alberta is divided into 7 regions by the Petroleum Services Association of Canada ('PSAC Regions' - see note 1) and the production from each for any given period can be quickly downloaded from the CanOils Webmap. The data shows that, excluding oil sands production, all PSAC regions in Alberta with the exception of the Foothills region have recorded declines in quarterly production since Q3 2014 when commodity prices began to fall.

    Source: CanOils Assets
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    Petrobras Forgoes Growth Plans in 37% Spending Cut to Ease Debt

    Petrobras is giving up a dream of becoming one of the world’s biggest oil producers by cutting spending and output targets under the strain of the industry’s heaviest debt load, development bottlenecks and a slump in crude prices.

    Capital expenditures through 2019 will be $130 billion, down 37 percent, while domestic oil production will average 2.8 million barrels a day in 2020, compared with a prior target of 4.2 million, the Rio de Janeiro-based company said in a statement Monday. The average spending estimate of three analysts surveyed by Bloomberg was $136 billion.

    Petroleo Brasileiro SA, as Brazil’s state-controlled producer is known formally, is focusing on exploration and production, scaling back investment in refineries that have become the subject of Brazil’s biggest corruption scandal. Investors have been waiting for clarity on how the company will fund development of giant fields in the South Atlantic without having to return to equity markets to raise cash. In 2010, it held a $70 billion share sale, the world’s largest, and failed to deliver on promised output growth.

    “No one can celebrate an almost 40% cut in investment and a slash in production, but for the first time in many years we see a business plan that fits the company’s reality and international scenario,’’ Adriano Pires, the head of Rio de Janeiro-based infrastructure consulting firm CBIE, said by telephone. ‘‘It shows this management has a mandate.’’

    ‘‘The plan’s investment portfolio prioritizes oil exploration and production projects in Brazil, mainly in pre-salt,” Petrobras said in the statement. The production targets “were updated, reflecting the postponement of projects of lower maturity and the delays in the delivery of production units.”

    Petrobras, whose total debt stands at $125 billion, joins other oil companies in cutting spending after Brent prices dropped by more than half in the past year.

    The plan is based on the company not losing money from selling imported fuel in Brazil, Petrobras said, after it lost about $40 billion between 2011 and 2014 because of rules requiring it to subsidize gasoline prices.

    The company expects Brent prices of $60 a barrel in 2015 and $70 a barrel from 2016 to 2019, it said in Monday’s filing.

    Petrobras is planning $42.6 billion in divestments and restructuring in 2017-2018 and boosted expected asset sales to $15.1 billion for this year and next.

    Attached Files
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    Sevan Marine appoints law firm to investigate Petrobras corruption claims

    Offshore drilling firm Sevan Marine has engaged the law firm Selmer to conduct an investigation into allegations of its involvement in the Petrobras graft scandal which has rocked the Brazilian oil and gas giant.

    The company said it is responding to a number of articles in the Brazilian press which refer to a former manager and agent of Sevan Marine being named in connection to the scandal. In a statement, Sevan Marine said that it has offered full co-operation and has been in contact with the relevant authorities on this matter.

    Among the well-known corporate names suspected of illegal payments are South Korea’s Samsung Heavy Industries Co Ltd, Swedish builder Skanska AB, Danish oil and shipping group Maersk and British engineer Rolls-Royce Holdings.

    The crux of the scandal involves construction and engineering firms paying hundreds of millions of dollars to win inflated contracts from Petrobras. Substantial swathes of money found their way into the coffers of the governing Workers Party and the pockets of other politicians.
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    U.S. light oil exports double in May, mostly to Europe

    The United States exported between 120,000 and 140,000 barrels per day (bpd) of condensate last month, according to  traders and ClipperData, which tracks ships and terminal loadings, up from about 60,000 bpd at the start of the year.

    The condensate is lightly processed through stabilizers due to rules banning crude exports in the United States, now the world's third-largest oil producer.

    The rise comes as more companies look to take advantage of the ability to ship the oil overseas, including to places like the Netherlands, France, South Korea and Brazil.

    "One of the main surprises is that the majority of the exports have been to Europe rather than anywhere else, when we thought the concentration would be to Asian markets," said Abudi Zein, chief operating officer at ClipperData, adding this was probably to do with the size of the cargoes and freight costs.
    Enterprise Products Partners led the pack with 1.8 million barrels of exports per month, or 60,000 bpd. It sold a year's supply to Mitsubishi Corp and Vitol at the start of this year.
    BHP Billiton has been selling a 700,000-barrel cargo every month, though has delayed a plan to double exports to two cargoes a month due to production issues, traders said.

    Meanwhile, in the first condensate shipment to Latin America, some 636,000 barrels reached Petrobras' San Sebastiao dock in May, according to data from ClipperData and trading sources.        
    The oil exported by Enterprise, BHP and BP is of a heavier grade with API gravity at 52-54 degrees, which goes to Europe, traders said. API gravity is an indicator of the crude's density and hence its quality.
    Asian refiners prefer lighter grades of API with a gravity of 61 degrees containing more petrochemical feedstock. This grade is exported by Royal Dutch Shell, Plains All American LP and Trafigura.
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    Japan May LNG imports fall to 5.75 mil mt, lowest volume since Oct 2010

    Japan's LNG imports fell 11.4% year on year to 5.75 million mt in May, the lowest volume since October 2010 when it was 5.22 million mt, data released Monday by the Ministry of Finance showed.

    Mild temperatures and sluggish demand in downstream markets were partly responsible for the decline in imports, it added.

    Shipments from Australia fell 14.8% from a year ago to 1.2 million mt due to the unplanned shutdown of the North West Shelf plant in Western Australia.

    Australia was, however, still the biggest supplier of LNG to Japan.

    Imports from Malaysia and Qatar, the second and third largest suppliers, also registered a fall in May. Malaysia sent 0.98 million mt of LNG, down 12.5% from a year earlier and 11.3% from April.

    Imports from Qatar slipped 4.7% year on year and 20.6% month on month to 0.96 million mt.

    No LNG cargoes came from European countries in May despite the wider spread between the JKM Marker and National Balancing Point.

    The spread widened by more than $1/MMBtu, in particular toward the end of the month, with July JKM around $7.70/MMBtu and ICE NBP futures for July around $6.50/MMBtu.

    Japan Customs Cleared crude oil price was $59.227/barrel for May, down 45.7% from a year earlier but up 5.6% from April.

    Some of Japan's long-term LNG contracts are linked to the JCC crude price but with a lag of a few months, so fluctuations in oil prices typically take some time to be reflected in LNG prices.
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    Total rig count finally rises, but oil rigs are down again

    The number of U.S. rigs drilling for oil declined for a 29th consecutive week, but the total number of operating rigs increased for the first time this year.

    The amount of rigs drilling for natural gas increased by five for the week, which was more than the loss of three oil rigs from last week,  according to data from oil services provider Baker Hughes.

    Although the oil rig count is still in decline, the pace has slowed to a crawl and analysts have projected the dip could cease any week now. The U.S. oil benchmark is hovering steadily near $60 a barrel and the rig count is down by more than 60 percent since its fall peak.

    The total U.S. rig count is at 859 rigs this week, according to Baker Hughes, while the oil rigs count dropped down to 628 rigs.  The number of active oil rigs has plummeted by 981 rigs, since the peak of 1,609 in October.

    The small increase in total rigs came partly from Louisiana, which added six active rigs from last week. Texas lost two rigs during the same time frame.

    The U.S. Energy Information Administration projects that U.S. oil production will fall in June.
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    Nigerian president dissolves state oil company board

    Nigeria's new President Muhammadu Buhari dissolved the board of the state-owned oil company on Friday as a first step in cleaning up the sector in Africa's biggest crude producer.

    Inaugurated on May 29, Buhari came to power on an anti-corruption ticket and a pledge to make the sector that provides 80 percent of government revenues more transparent.

    "The president has said he will clean up the oil sector. That is the beginning of the clean up," said the president's spokesman Femi Adesina.

    Buhari, who has yet to announce his cabinet, is likely to keep the oil portfolio for himself rather than trust others with the lifeblood of Africa's biggest economy and an industry that has long been mired in corruption scandals.

    A presidency source who declined to be named said the management team of the state-owned Nigerian National Petroleum Corporation (NNPC) was also likely to go in the coming weeks.

    "It is significant," Bismarck Rewane, economist and CEO of Lagos consultancy Financial Derivatives. "The whole structure of the NNPC is completely and utterly dysfunctional."

    In 2013, then central bank governor Lamido Sanusi said tens of billions of dollars in oil revenues had failed to make it into state coffers while watchdogs say the government may be losing billions more through opaque contracts in which crude oil is swapped for refined imports such as diesel.

    The lower house of parliament decided on Wednesday to investigate whether the government had been short-changed by the state oil company scheme to swap crude for the refined products.

    "You can't possibly have the same board in place while the place is being investigated and with the intention to change the way things are being done there," said Adesina.

    "It's the country's cash cow. It has a bright future. It's just that transparency and accountability have to be introduced into how it operates and this is the beginning of that process."

    The NNPC will report to the presidency until a new board is appointed, said Ohi Alegbe, a spokesman for the oil company.

    Nigeria's anti-corruption agency has investigated various oil scandals in the past, including a fuel subsidy fraud costing the government $6.8 billion between 2009-2011. But due to a lack of political will, only a handful were prosecuted.
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    Iran gas exports to Iraq delayed again by security concerns

    Iran's plans to export natural gas to Iraq have been pushed back indefinitely, an Iranian official was quoted as saying on Saturday, blaming the poor security situation in Iraq for the delay.

    The oil-producing neighbours signed an agreement in 2013 under which Iran would start exporting gas to Iraq to feed three power plants in Baghdad and Diyala. But two years later, exports have still not begun.

    "The lack of security and presence of Daesh (Islamic State) is behind the delay of gas exports to Iraq," Ali-Reza Kameli, head of the National Iranian Gas Exports Company, was quoted as saying by Shana, a news agency linked to Iran's Oil Ministry.

    When asked when exports might begin, he replied: "That depends on the security situation in Iraq."

    In March Kameli said exports to Iraq could begin in May if security conditions improved. Iran first announced a delay in September last year, shortly after Islamic State militants took control of large swathes of Iraqi territory.

    Iran has huge gas reserves and exports small quantities to Turkey, but production has failed to keep pace with high domestic consumption. Northern Iran relies heavily on gas imports from Turkmenistan, especially for heating in winter.

    Tehran is in talks with six world powers to curb its nuclear programme in exchange for relief from international sanctions, which could open up Iran's energy sector to foreign investment within a year.

    Iraq, which like Iran is a major oil producer and member of the Organization of the Petroleum Exporting Countries (OPEC), has struggled to attract foreign investment to develop its gas industry and suffers severe power shortages.
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    Argentina will pursue judge order on Falklands drillers- minister

    Argentina will pursue judge order on Falklands drillers- minister

    Argentina will pursue in Britain and the United States a local judge's order to seize assets of oil drillers operating in the disputed Falklands Islands, the foreign minister said in an interview published in local media on Sunday.

    On Saturday, a federal judge in Tierra del Fuego ordered the seizure of $156 million in bank accounts, boats and other property of six European and U.S. oil companies operating in the islands.

    A source with knowledge of the situation said the ruling was meaningless because the companies do not generally hold assets in Argentina or use Argentine waters.

    Foreign Minister Hector Timerman told local newspaper Tiempo Argentino on Sunday that on Monday he will formally request that the stock exchange regulators in London and New York implement the judge's order.

    The companies named in the order are Premier Oil Plc , Falkland Oil and Gas Ltd, Rockhopper Exploration Plc, Noble Energy Inc y Edison International Spa.

    "The companies can defend themselves in foreign courts, but that will have a cost or penalty to their market listing," Timerman said.

    He said that international law forbid altering the state of territory where the United Nations has accepted that there is a sovereignty dispute, and that the companies had breached the rule by drilling wells.

    Argentina claims sovereignty over the South Atlantic islands which it calls the Malvinas, located about 435 miles (700 km) off the coast of Tierra del Fuego and occupied by around 3,000 people who mostly say they wish them to remain a British overseas territory.

    Britain and Argentina fought a short war in 1982, after the then Argentine military dictatorship briefly seized the islands, and tensions have escalated again in recent years with the discovery of oil deposits.

    Ahead of Argentine elections in October, rhetoric is heating up. "What the United Kingdom is doing is what it did in classic colonialism: appropriate resources from its colonies and take them back to their country," said Timerman on Sunday.

    Falkland Oil and Gas and Rockhopper declined to comment. Noble Energy, the British foreign office and the other mentioned companies could not immediately be reached for comment.
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    Gazprom Neft nearly doubles production at Iraq’s Badra field

    A fourth well has been brought into production at Iraq’s Badra field, which is operated by Gazprom Neft. This new high flow-rate well (Р-05) has allowed total production at the field to nearly double to 27–28,000 bopd.

    Badra field lies in eastern Iraq's Wasit Province. Image: Gazprom Neft.

    The launch of the Р-05 well has seen production at Badra field reach levels comparable (in quantitative terms) with Gazprom Neft's fields in Western Siberia, where oil production exceeds one million tonnes per year.

    Bringing well P-05 into production will allow geological and engineering operations to be conducted at existing wells (P-08 and BD-04) in the near future, with no impact on totalproduction volumes.

    Further field development is ongoing, with drilling being completed and a further well (P-04) being brought online with an expected flow rate of around 10,000 bopd.

    In addition to this, drilling of a further two wells (under a contract already in place with Chinese company ZPEC) is ongoing, with another currently being prepared. The total number of drilling rigs at Badra field is expected to increase from three to seven by the end of 2015.
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    Many pipeline projects coming to the Marcellus Shale

    Pittsburgh Post-Gazette PowerSourcereports that as many as 17 new pipeline projects may come to the Marcellus Shale in the next three years.

    These 17 pipelines will be able to ship nearly 17.3 billion cubic feet of natural gas per day from Pennsylvania, Ohio and West Virginia. Some of the end markets for the gas include the Northeast, Midwest, eastern Canada and the South.

    Pipeline infrastructure is needed in the Utica and Marcellus Shale plays as existing pipelines have maxed out due to increased production in the region.
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    Rosneft First-Quarter Net Falls 35% After Oil Prices Slumped

    OAO Rosneft, Russia’s largest oil producer, said first-quarter profit fell 35 percent after last year’s drop in crude prices.

    Net income dropped to 56 billion rubles ($1 billion) from 86 billion rubles a year earlier, the Moscow-based company said in a statement on its website. That was better than the average 36.5 billion-ruble estimate of nine analysts surveyed by Bloomberg.

    The state-owned company has sought to cut costs while maintaining output as it repays debt piled up in the $55 billion acquisition of Russia’s third-largest oil producer, TNK-BP, in 2013. U.S. and European sanctions in response to Russia’s support for separatists in Ukraine have complicated Rosneft’s task by limiting its access to debt and equipment. That was compounded by a more than 50 percent slump in the average oil price in the first three months of 2015 compared with the year-earlier period, according to Rosneft.

    Net debt fell to $43.3 billion in the quarter, the company said. Rosneft’s hydrocarbons output rose to 5.2 million barrels a day from 5.09 million a year earlier.

    Earnings before interest, taxes, depreciation and amortization decreased 8.3 percent to 265 billion rubles, which was higher than the 241 billion-ruble estimate of nine analysts. Sales declined 6.3 percent to 1.29 trillion rubles.

    BP Plc holds almost 20 percent of Rosneft’s shares. Rosneft, almost 70 percent owned by the Russian government, announced changes to its accounting method for foreign-currency risk earlier this year.
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    Asian LNG: These beautiful contracts.

    The uncertain geopolitical landscape of today’s natural gas markets has led increasingly to renegotiation of long-term gas supply contracts. Such contracts, which can be worth billions of dollars, often include price adjustment mechanisms which are intended to ensure that over the lifetime of the contract the contractual price can be adjusted to reflect changes in the market. Those mechanisms can provide for negotiations with a backstop of arbitration. While negotiations will be the preferred method to respond to minor changes in the market, when market fluctuations are volatile enough one (or both) parties may be incentivized to push instead for arbitration. This may be a significant roll of the dice, and some recent arbitral awards show that arbitral tribunals are not afraid of determining the appropriate price in accordance with the underlying contract and price review mechanism.


    Any significant market shift will lead to buyers or sellers across the market seeking renegotiation of price under long-term contracts. For example, recent reductions to gas spot prices have led buyers to seek to trigger price review mechanisms under gas supply contracts. Suppliers have either agreed to the price review or taken the disputes to arbitration. Further complications arise when such gas supply agreements include a “take or pay” condition, where the buyer pays the supplier for specified quantities of gas irrespective of the buyer’s needs.

    There can be ambiguity as to whether a price review mechanism is triggered. Often such mechanisms are drafted in general terms in order to provide flexibility between the parties. However, the language surrounding the triggering of such a clause—and the point at which any dispute should be elevated from negotiations to formal dispute process such as arbitration—should be carefully drafted if the parties wish to avoid a lengthy dispute processes as to whether the clause is even engaged (and only then as to what the price should be).


    There are, or have been, a number of recent high-profile gas pricing disputes which demonstrate that commencement of arbitration can be one aspect of a negotiation process, or indeed can provide resolution of a valuable dispute by a neutral panel which allows the parties to carry on with performance of a long term contract.

    For example, the Turkish pipeline operator BOTAS has been reported as having brought a claim against the National Iranian Gas Company in 2005 for alleged refusal to lower gas prices despite low production rates and poor quality product. That arbitral procedure took four years, at which point the arbitral tribunal issued an award in favour of BOTAS for US$760 million. From publicly available information, those companies continued their contractual relationship following that arbitral award, and more recently a second arbitration was commenced by BOTAS in January 2012 under the same underlying agreement. That second arbitration remains on-going.

    This story is not unique to that case and as many buyers and suppliers under long-term gas supply contracts will know, arbitration can be a somewhat costly but otherwise helpful neutral process by which a dispute as to pricing can be resolved, otherwise allowing the parties to carry on with their contractual arrangements.

    While arbitration can be a useful neutral mechanism, parties will be wary of arbitrators becoming overly assertive in applying a new or different formula which goes beyond what the parties originally negotiated or envisaged.

    For example, the decisions in recent cases such as those in the cases of RWE v. Gazprom (2013) andRasgas v. Edison LNG (2012) indicate that tribunals are ready to depart from the wording of a gas supply contract, particularly where the contract price is linked to the price of oil. In the RWE award, the arbitral tribunal adjusted the contract price formula by linking it to gas spot prices instead of oil prices, as was agreed under the agreement. It is difficult to analyze these cases and draw conclusions as the awards and the respective contracts are confidential. However, at first glance, it appears that such decisions have caused justifiably concern for the parties, in particular suppliers.

    Similarly, in Atlantic LNG Company of Trinidad and Tobago v. Gas Natural LNG SPA (2008), the arbitral tribunal came up with a two-part pricing scheme and imposed its own preferred pricing structure, which neither party requested or desired.

    Recently, in partial award of BOTAS Petroleum Pipeline Corporation v. the National Iranian Gas Company (2014), the tribunal dismissed BOTAS’s claim that the NIGC failed to meet Turkish gas demands and thus sought both specific performance and a US$13 billion price cut on that basis. The second claim of US$25 million, for reduction in the price of gas on the basis of a price revision clause, is yet to be ruled upon by the tribunal.

    Attached Files
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    Alternative Energy

    Low solar prices in Texas

    A recent announcement from Austin Energy, the city of Austin’s utility agency, illustrates the solar power price has dipped to a record low following bids on the utility’s 600 MW procurement plan. Some 7,976 MW worth of solar projects were bid in April in competition for the procurement, according to Khalil Shalabi, Austin Energy’s vice president of resource planning. 1,295 MW of those solar project bids came in below $0.04/kWh, which is, in a word, astounding.

    The cost figures we’re discussing are actually for solar power bids, which is technically a more accurate label. Also on a “technically speaking” note, the price in Austin factors in solar power subsidies, which are not present in Dubai. However, the Texas price is competitive on the global market even without the 30 percent federal tax credit, still coming in under $0.06/kWh.

    Attached Files
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    Tamil Nadu to get 1,000 MW more solar power this month

    Tamil Nadu’s ambitious plan to tap solar energy to narrow the power deficit  will get a boost with the government set to finalise deals assuring 1,000 MW solar energy by the end of this month.

    Addressing an international conference and Exposition on Renewable Energy 2015, organised by the Confederation of Indian Industry (CII) here on Thursday, Electricity Minister Natham R. Viswanthan said that already deals for 1,000 MW were on (including the proposed 700-MW solar plant by Adani Group).

    Agreements for another 1,000 MW would be signed by July-end and by the end of this year the government expects to get 2,000 MW of solar power, he said.

    The State had set a target of 3,000 MW of solar power generation by 2015. At present, the installed capacity is 149 MW.

    Tamil Nadu was a pioneer in the new and renewable energy sector with an installed capacity of 8,482 MW, which accounted for 35 per cent of the sector in the country.

    The State’s Energy secretary, Mr. Rajesh Lakhoni, suggested that every person who purchases a new air-conditioner buy 1KW of solar panel.

    Explaining the statistics behind the idea, he said, “Tamil Nadu offers Rs. 20,000 subsidy per KW of solar roof top installation in addition to the 30 per cent Central subsidy. With an investment of about Rs. 60,000 on solar power, a household could save up to Rs. 10,000 per annum on power bill. It makes a lot of economic sense.”
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    Delhi Metro will run completely on solar power soon - DMRC

    A senior central government official said that the Delhi metro could soon go fully solar. The Delhi metro rail corporationis looking at the possibility of buying electricity from a 500 MW solar facility in Rajasthan.

    A senior DMRC official confirmed that the proposal might involve the DMRC signing a power purchase agreement with a third-party developer in Rajasthan.

    The official said that “We do not plan to spend any money of our own. We could bid out the contract via an open and transparent process. The DMRC is looking at buying solar power at a tariff lower than INR 6.94 per KW per Hour, the rate at which it currently buys thermal power. An initial proposal is likely to be moved within a week.”

    A DMRC spokesperson said that “In order to be carbon neutral and insulate itself from electricity price increase which has been about 20% per annum in last five years, DMRC is planning to explore the possibility of purchasing power to meet its entire requirement from a solar developer who will be selected through transparent bidding process.”

    At present, the Delhi metro has a peak power requirement of 150 MW, which is likely to go up to 250 MW by the time the third phase of its construction is completed.

    The official said that “Out of this, 50MW can potentially be met through solar rooftop power. Since the average plant load factor for solar power is in the range of 20%, it would require an installed capacity of 500 MW.”
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    EU carbon system needs more protection from market abuse - auditor

    The European Union's carbon market is still failing to be managed properly and more improvements are needed to protect it from abuse, the EU's auditor said on Thursday.

    The EU's Emissions Trading System (ETS) is central to the 28-member bloc's efforts to cut greenhouse gas emissions but has endured a series of damaging scandals over its 10-year existence, including value-added tax fraud, the resale of used credits, phishing scams and cybertheft.

    The system, which is supposed to cap the carbon emissions of about 11,000 factories and power plants, has also seen a permanent surplus of permits called EU allowances since its launch in 2005.

    The glut was exacerbated by the financial crisis, which cut economic output and pollution, leading to prices that are too low to drive a shift to low-carbon energy sources.

    The system is being reformed to reduce the surplus but the European Court of Auditors did not examine the effectiveness of those measures, focusing instead on steps to protect its integrity.

    The auditors' report found the European Commission and member states had not adequately managed the ETS, particularly during its second phase (2008-12).

    Although steps have been taken to protect the market, issues still need to be addressed, such as controls on the opening of ETS accounts, transaction monitoring, market supervision and the verification of emission levels at firms under the scheme.

    "Improvements are needed to the framework for protecting market integrity and the system as a whole needs to be better implemented," said Kevin Cardiff, the court member responsible for the report.

    Even though the ETS has now been included in the scope of the bloc's financial market regulation, there are still concerns regarding bilateral over-the-counter spot trading and smaller market participants.

    At the EU level, there is no specific body responsible for overseeing the market, and cooperation between national regulators and the executive Commission has been insufficient.
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    Discovery brightens solar's future, energy costs to be cut

    Scientists in Switzerland announced a clean-energy breakthrough on Wednesday; a cheaper, solar technology that splits water molecules to create clean-burning hydrogen fuel.

    The solar panel design will make it cheaper to produce hydrogen, but a simple version won't be available for average citizens for at least 10 years, scientists said.

    Splitting water molecules to create hydrogen allows the sun's energy to be more easily stored to generate electricity or power clean cars.

    The discovery has major implications for climate change, as improved solar energy would reduce fossil fuel dependence.

    Previous solar hydrogen technologies were too expensive to commercialize, scientists from the Ecole Polytechnique Federale de Lausanne, said in their article appearing in the journal "Nature Communications".

    "We want to convert solar energy into hydrogen in an economically competitive way," Kevin Sivula, one of the report's authors, told the Thomson Reuters Foundation.

    The technology is "a huge increase (in efficiency) on what's been done before... and it opens new pathways for solar development," he said.

    The new solar panel looks similar to the traditional version mounted on rooftops, except sunlight first passes through a thin layer of water contained inside the device.

    Tungsten diselenide, a non-toxic chemical, acts as a photocatalyst and is critical for using the sun's energy to split water into oxygen and hydrogen.

    Currently, about 1 percent of the energy from the sunlight passing through a panel can be converted into hydrogen energy; efficiency must increase to about 10 percent for the discovery to have mass, commercial appeal, Sivula said.

    He estimated that when scientists are able to obtain "the same efficiency as traditional solar-to-hydrogen conversion, our cheap device production method would reasonably lead to a price for hydrogen that is five-to-10-times less expensive."

    Sivula and his colleagues believe it is only a matter of time and research before the new technology's efficiency is improved.
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    Siemens to open plant to turn electricity from wind into hydrogen

    Siemens will on Thursday start an energy project to convert wind power into hydrogen for re-use as a general fuel or in natural gas pipelines.

    Siemens' electrolysis plant in Mainz is based on Proton Exchange Membrane (PEM) technology, which allows the capture and storage of electricity into hydrogen.

    It said the plant can process up to 6 megawatts of electricity, making it the biggest PEM installation of its kind worldwide and able to supply 2,000 fuel cell cars.

    PEM technology, which is capable of responding to fluctuations in power production within just milliseconds, has also been tested successfully by another Siemens partner, utility RWE.

    The plant is a collaboration between Siemens, the Mainz energy utility, industrial gases company Linde, and the Rhein-Main University of Applied Sciences.

    Energy storage is needed by power grids in Germany as they become increasingly vulnerable to gaps in output, as a result of the closure of nuclear reactors and increasing reliance on intermittent green energy such as wind or solar power.

    Linde will be responsible for cleaning, compressing, storing and dispensing the hydrogen. It can be fed to industrial uses, or fill tanker lorries to go to hydrogen-based car filling stations, or into the gas pipeline network.
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    South Korea to cut emissions by 37% by 2030′

    South Korea has planned to cut emissions by 37% by 2030. That’s an increase from the 15% to 30% reduction it initially proposed.

    The target is set to be submitted to the UN today confirming the country’s Intended Nationally Determined Contribution (INDC).

    That’s part of a new global emissions reduction deal which will be agreed at the Paris conference in December.

    South Korea’s emissions are set to reach 850.6 million tonnes of CO2 equivalent by 2030 based on business-as-usual levels, according to the government.

    The South Korean government has been reported as saying: “We decided to raise the target from the reduction scenarios, considering our leadership in climate changes such as inviting GCF (Green Climate Fund), our global responsibility and opportunity to develop new energy business and innovate manufacturing sectors.”

    The country has been working to tackle emissions, launching the world’s second largest carbon trading scheme and pioneering a major green stimulus package in the wake of the 2008 financial crisis.

    So far, 11 countries and the EU have formally submitted climate action plans to the UN under the INDC regime including Switzerland, Norway and Mexico.
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    United Airlines investing $30 million in biofuels producer

    United Airlines is investing $30 million in a company that makes biofuels for airplanes.

    United said Tuesday that the investment in Fulcrum BioEnergy Inc. could provide it with up to 180 million gallons of fuel per year.

    That’s just a drop in United’s fuel consumption — the Chicago airline burned 3.9 billion gallons last year — and the investment is a tiny fraction of United’s $1.1 billion profit last year.

    Still, United Continental Holdings Inc. says it’s the biggest single investment in biofuels by a U.S. airline.

    Pressure is building on airlines to reduce carbon emissions from burning oil-based jet fuel. The Obama administration has taken early steps toward limiting emissions, following the lead of an international aviation authority.
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    Amyris Surges After Total Raises Stake in Biofuel Venture

    Amyris Inc., a U.S. developer of biofuels, jumped the most in four months after the French oil company Total SA boosted its stake in their joint venture to spur commercial production of jet fuel made from plants.

    The two companies formed a 50-50 joint venture in December 2013 to produce renewable fuels. The French oil producer will now own 75 percent after a restructuring agreement announced Tuesday by Emeryville, California-based Amyris. Total is also Amyris’s largest shareholder with a 20 percent stake as of January, according to data compiled by Bloomberg.

    Under the restructuring, Total and Temasek Holdings, the second-largest Amyris shareholder, are converting about $138 million in debt into common shares priced at $2.30 each. That’s a 37 percent premium over Monday’s closing price.

    Amyris plans to restructure an additional $37 million in convertible debt. The moves will shore up its balance sheet and “open the way for proceeding with commercialization of its jet fuel technology over the coming years,” according to the statement.

    Amyris uses genetically modified microorganisms to convert plant sugars into fuels and specialty chemicals.
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    U.S., Brazil pledge to up renewable energy in power production

    The United States and Brazil pledged on Tuesday to increase their share of renewable energy in electricity generation from sources other than hydro-power to 20 percent by 2030 in an effort to show commitment to fighting climate change.

    The two countries made the announcement in a joint statement issued while U.S. President Barack Obama and Brazilian President Dilma Rousseff met at the White House.

    Brazil also committed to reforest 12 million hectares of forests by 2030 and agreed to put forward a broader climate change plan that is "fair and ambitious" and that "represents its highest possible effort beyond its current actions," the statement said.
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    Europes largest solar farm to connect to grid in October

    The solar farm, located near Bordeaux in south-west France, will generate more than 350GWh a year with a peak capacity of 300MW. Eiffage Energie operates on behalf of Clemessy, which pilots a consortium of several investors, including Neoen, formed to build, operate and maintain the farm.

    Approximately one million solar panels will cover 250ha of land divided into 25 solar plants. The farm will be connected to the grid in October 2015.

    Nexans' Energyflex cables will provide durable, high-performance in-field connections between the PV panels and the inverters that will transform the solar energy into usable AC electricity. Energyflex cables were developed by Nexans to meet the increasing demand for reliable, efficient cables in the specialised photovoltaic market.
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    Shanghai CO2 market flounders as supply glut hits prices, trading

    Shanghai's carbon market ended its compliance year on a subdued note on Tuesday, with not a single transaction on the last day and permit prices near record lows after shuttered firms covered by the scheme dumped their permits onto the market.

    The firesale of permits by several firms in economic distress over the last two weeks removed the need for any last-day transactions, and also allowed firms to meet their carbon mitigation obligations cheaply.

    But it also further eroded investor confidence in China's nascent CO2 markets, which have been damaged by regulatory uncertainties and a huge supply surplus.

    Permits in Shanghai's pilot market were quoted at 15.5 yuan on Tuesday, 61 percent lower than at the end of the last compliance year in June 2014.

    Before the deadline, companies are obliged to surrender permits to cover their total emissions for the whole of the compliance year.

    China's economic slowdown has slashed emissions from industrial sectors, leaving many companies with a surplus of permits and little incentive to trade.

    Carbon prices in Shanghai fell to a record low of 12.5 yuan in mid-June, hitting the downside limit. The rapid drop forced the local exchange to narrow the daily fluctuation range from 30 percent to 10 percent in order to curb panic selling.

    "The price plummeted because some bankrupt companies were dumping permits at all costs. Their remaining permits are useless because they have closed down," said a trader in Shanghai.

    Shanghai requires the withdrawal of only half of the permits allocated to companies that have ceased operating for more than half of a year, making it even harder for the supply surplus to be eased, said a staff member at the Shanghai Environment and Energy Exchange.

    Shanghai has traded 2.6 million permits in the second trading year ending on Tuesday. Under the scheme, companies aiming to cover their emissions targets can either buy permits or offset credits from eligible mitigation projects.

    Shanghai has been struggling to improve liquidity in the market, and said last week that it would allow speculative traders to borrow permits and trade them on the exchange, but with demand weak, few have taken advantage so far.
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    SolarCity Announces Energy Storage and California Fixed-Rate Pricing

    SolarCity today announced energy storage for new homes and a special low, fixed-rate solar power offering for California homebuilders and their buyers.

    Founded in 2011, the SolarCity Homebuilder Program currently works with builders across the nation to give many new home buyers the option to add solar power systems without increasing the home's purchase price, and pay less for solar electricity than they would otherwise pay for utility power. SolarCity also handles everything from design and installation to monitoring and repairs.

    The SolarCity Homebuilder Program is now taking orders for solar and home energy storage systems. The new energy storage service, in conjunction with solar power, includes the Tesla Powerwall battery pack, advanced hybrid inverter, monitoring and control systems and a warranty and service agreement. While battery backup is the primary application, depending on utility service territory, SolarCity's management system may in the future enable the Powerwall to be configured for a broad range of uses including time-of-use shifting and grid response. The Powerwall is quiet and odorless, can be mounted indoors or outdoors and requires no fuel-all significant advantages over traditional backup generators.

    - See more at:
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    Scotland emergency summit on onshore wind.

    Scotland announced plans to hold an emergency summit in early July to discuss a British decision to end government support for the onshore wind industry.

    Scottish Energy Minister Fergus Ewing said British ministers need to "clarify the position regarding onshore wind projects already in the pipeline, and how many of them can expect to continue to receive investment during the grace period before funding is cut off."

    London said $1.2 billion in government support last year helped onshore wind power generate 5 percent of total British electricity and bring the region closer to its climate change goals. With momentum building, the government announced plans to end public subsidies for new onshore wind farms starting in April 2016.

    With 70 percent of the region's onshore wind situated in Scottish territory, Ewing said the government in Edinburgh "strongly disagrees" with the decision to end subsidies.

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    Orocobre Limited $32.3 Million Capital Raising Completed

    Orocobre Limited wishes to announce that it has raised A$32.3 million through a Placement to both domestic and international institutional and sophisticated investors. The raising was significantly oversubscribed, with support shown by both existing and new shareholders.

    The proceeds will be used principally to provide funding to the Olaroz Lithium Facility joint venture company, Sales de Jujuy SA (SDJ SA), where Orocobre's ownership structure requires the Company to contribute 75% of the project funding. Use of funds includes: working capital and capex requirements at the SDJ SA project level during the production ramp up period at the Olaroz lithium facility, financing costs during the ramp up period, and costs incurred in rectifying operational issues and production bottlenecks (US$7m). The funds will be provided to SDJ SA through a shareholder loan mechanism.

    As discussed in the update announcement on 17 June 2015, production ramp up has been slower than expected due to equipment limitations and early operational issues, however these areas have now been identified and rectified, with the final rectification in the purification circuit anticipated to be completed within 3-4 months. It is expected that the nameplate monthly run rate of 1,450 tonnes will be met during Q4.

    The slower than anticipated production ramp up has impacted the working capital position of SDJ SA. During the ramp up period, operating costs of a typically fixed nature have been incurred, whilst lower revenue was received due to slower than anticipated production quantities.
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    U.S. bankruptcy judge refuses Molycorp request for loan

    Molycorp Inc failed to get approval from a U.S. Bankruptcy judge on Friday to borrow about $44 million at the rare earth producer's first bankruptcy hearing.

    Judge Christopher Sontchi agreed with the objection by an affiliate of Oaktree Capital Management that Molycorp could not justify its need for the money, which would deepen the company's insolvency.

    The company will discuss with its creditors how to structure the loan and will return to court on Thursday at 10 a.m., according to Sontchi's chambers.

    Molycorp, which filed for bankruptcy on Thursday, sought the money for its operations and to signal to customers and employees that the company would meet its commitments. Molycorp was seeking the money on an interim basis and had planned to return to court to seek approval to borrow up to $225 million.

    Oaktree, which had loaned the company about $250 million in September, argued Molycorp was essentially two businesses, a profitable developer and distributor known as Neo and the unprofitable Mountain Pass mining operation in California.

    Oaktree's loans are guaranteed by the Neo business. It objected to the additional borrowing, arguing it was burdening the profitable business with unnecessary debt to finance the development of Mountain Pass.

    Molycorp's chief financial officer, Michael Doolan, testified that the Neo business could survive without the bankruptcy loan. He also said Mountain Pass provided less than 30 percent of Neo's raw material and acknowledged the board considered closing the mine.

    "Neo would be wounded, no question," he said, speculating on the impact of not getting the loan. But "it would not be a fatal blow in and of itself," he added.

    The Mountain Pass side of the business had issued $650 million in senior secured notes, and the investors holding those notes had committed to providing the $225 million bankruptcy loan.

    Molycorp plans to swap ownership of the company to the secured bondholders in return for their debt.
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    Indian Railways to float tenders to procure solar energy

    PTI reported that Indian Railways will float tenders to procure at least 200 MW of solar energy in the next two months, a step which will promote use of non-conventional energy in its daily functioning.

    Mr Manoj Kumar Sinha, Union Minister of State for Railways, said that the Centre is presently working out details of the plan.

    The tender is part of Railways' plan to procure 1000 MW of solar energy over the next 5 years.

    He said that "We have fixed a target of procuring 1000 MW solar power in the whole Indian Railways. We are working on it. We are going to float a tender for at least 200 MWs in next two moths. We have plenty of rooftops available in Indian Railways to install the panels."

    The Ministry has commissioned one MW solar power plant, the largest such project in the country till now, at Katra Railway station in Jammu and Kashmir on March 30 this year.

    A senior Northern Railway official said that "This initiative was taken after Prime Minister Narendra Modi's instructions during inauguration of the Udhampur-Katra section of Kashmir Rail Link Project."

    Railways proposes to harness solar energy by utilising rooftop space through public private partnership mode as per feasibility, the modalities of which are being worked out.

    According to the plan, Railways plans to install solar power plants of about 8.8 MW capacity at railway stations, railway office buildings and level crossing gates throughout the country under railway funding.

    These include provision of 10 KWp solar PV modules each at 200 stations under various Zonal Railways, provision of total 4.05 MWp Solar Photo Voltaic (SPV) at roof top of 21 railway office buildings and provision of total 1.3 MWp capacity Solar Photo Voltaic plants at 2000 Level Crossing gates on Indian railways.
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    World Bank supports solar energy projects in Jordan

    Jordan Times reported that the Multilateral Investment Guarantee Agency, the political risk insurance and credit enhancement arm of the World Bank Group, is backing the development, construction and operation of four solar power projects in Jordan, adding 50 MW of clean, renewable energy generation capacity to the country's grid.

    According to a MIGA statement, the plants in Maan and Mafraq benefit from a 20 year power purchase agreement with the National Electric Power Company.

    The statement said that MIGA's investment guarantees of USD 15.6 million cover equity investments by private-equity fund Adenium Solar Jordan for up to 20 years against the risks of transfer restriction, expropriation, breach of contract, and war and civil disturbance. The World Bank Group's International Finance Corporation is also supporting the projects as a lender.
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    K+S rejects Potash Corp's takeover approach

    German potash miner K+S said Potash Corp of Saskatchewan's 7.85 billion euro ($8.70 billion) takeover approach was too low and the Canadian firm could be planning to dismantle and downsize its rival, putting jobs at risk.

    Potash Corp's 41 euro per share takeover proposal "completely disregards" the value of a Canadian mining project under construction known as "Legacy", which should be up to 21 euros per share when the book value of the mine and future cash flows from 2017 onwards are taken into account, K+S said on Thursday.

    K+S, said it was not convinced that Potash Corp was interested in continuing the German group's fertiliser and salt businesses in their current form.

    K+S is the world's largest salt supplier but derives most of its earnings from potash fertilisers.

    "Potash Corp sites in Canada produce at significantly lower costs than our German sites. But they are under-utilised. Obviously, it makes ultimately little sense for PotashCorp to operate our German sites at the current level," Chief Executive Nobert Steiner said.

    The offer values the German group's equity at 7.85 billion euros, or 9.5 billion euros when net debt of 1.65 billion euros is included.

    K+S said the stock market was currently not attributing any value to Legacy, the first new mine in the potash industry in almost 40 years, which will start producing by the end of 2016.

    "It is clear that Potash Corp is trying to take advantage of this valuation gap to acquire K+S at a bargain price to gain control of Legacy," the CEO said.

    Potash Corp, the world's largest fertiliser company by capacity, does not plan any closures at K+S AG if its bid for its German peer proves successful, people familiar with the matter told Reuters on Sunday.

    But K+S said on Thursday Potash had made no firm commitments to protect the interests of the more than 14,000 employees of K+S worldwide.

    "Despite repeated requests to address this question, PotashCorp's answers have remained vague", K+S said in a statement.
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    Indian monsoon falters in key month for farmers

    After drenching India with above-average rains in June, the monsoon has weakened in what is typically the wettest and most crucial month for millions of farmers growing oilseeds, rice, cotton and pulses.

    Weather forecasters said the monsoon, critical for about half the farmland that lacks irrigation facilities, has hit a dry spell and rains could be sparse in at least the first half of July. The official forecast remains that India could suffer its first drought since 2009 because of the emergence of an El Nino
    weather pattern.

    "If the current dry spell continues for another week, then there will be an adverse impact on yields," said Harish Galipelli, head of commodities and currencies at Inditrade Derivatives and Commodities. "In some areas, crop wilt and farmers will be forced to cultivate them again."

    The monsoon delivered 28 percent more rain than normal from the start of the season to June 25, accelerating sowing of summer crops. But it has weakened since last Thursday, especially in central, northwestern and southern India, reducing the surplus to 16 percent.

    A drop in yields could stoke food inflation and force the world's biggest importer of edible oils and pulses to increase  overseas purchases and limit exports of rice and cotton.

    "Poor rainfall in July, with cloudy weather, can increase infestation of pest and diseases," said Amit Magre, a director of Bajrang Pulses and Agro Products in western India. "Higher temperatures could also hinder crop growth."

    Good rainfall this year is key to boosting a rural economy hit by delayed and lower rains last year, as well as keeping a lid on food inflation and giving India's central bank more scope to cut lending rates.
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    Sirius Minerals shares soar after green-light for York Potash

    Sirius Minerals shares soared over 70% opening deals on Wednesday after it received the go-ahead to build the proposed York Potash project.

    It was announced locally last night that a special planning committee of the North York Moors National Park Authority approved planning permission. A narrow vote, eight for and seven against, favoured the proposed development.

    "The case for the Project has always been compelling because it will not only generate so many jobs and economic benefits, but also because it is accompanied by such extensive mitigations, safeguards and environmentally sensitive design.

    The company said it will update investors next week on the next steps for York Potash and the milestones on the path to first production.

    The project is forecast to add over £1bn to the UK’s GDP, but, as the mineral deposit is based within a national Park the plans had been scrutinised very carefully.

    York Potash would be a huge undertaking with an estimated pre-production capital cost of US$1.7bn. It will be 13mln tonne per annum operation and the development will involve two phases of construction.

    To minimise the impact on the national Park, an underground conveyor-based system will be built to transport the fertiliser from the mine-site to port via five 7.5km tunnels.
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    Australia tightens rules on foreign ownership of farmland

    Australia tightened rules on Monday requiring overseas investors to declare holdings of agricultural land in order to strengthen oversight, amid concerns that Australia is losing control of its own food security.

    Foreign ownership of Australian land has become a touchy issue. Official estimates put foreign ownership at 10 percent, but there are concerns that it is far higher.

    Australian Treasurer Joe Hockey said foreign owners should declare their interests with the country's tax office from July 1. The tax office will collect information on the location and size of property, size of interest acquired and country of origin of the foreign investor.

    The information will be entered in a national register that will be made available to the public.

    The move marks a further tightening in rules governing ownership of Australia's farmland. In March, Australia lowered the threshold for purchases of agricultural land by foreign entities requiring regulatory approval.

    Foreign purchases of agricultural land over A$15 million ($11.48 million) will be subject to regulatory approval from Australia's Foreign Investment Review Board.

    Previously, Australia had only required regulatory approval on foreign purchases of agricultural land of more than A$240 million.
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    Potash Corp would not shed K+S operations in a deal -sources

    Potash Corp of Saskatchewan Inc , the world's largest fertilizer company by capacity, does not plan any closures at K+S AG if its bid for its German peer proves successful, according to people familiar with the matter.

    Potash Corp and K+S have both acknowledged the bid publicly but have disclosed no other details. Sources told Reuters last week that K+S is concerned that Potash Corp wants to take capacity out of an oversupplied market in order to boost profitability.

    Potash Corp, however, intends to keep K+S's German mines operational, would not divest its market-leading salt business, and would continue with the development of a $4 billion legacy mining project in Canada, the people said on Sunday.

    Potash Corp also views K+S's assets as complementary, with the latter's specialty business that commands high prices diversifying Potash Corp's more commoditized potash, nitrogen and phosphate business, the people said. It also sees the stable, strong cash flow of K+S's salt business as attractive, the people added.

    Friendly talks between Potash Corp and K+S started last year, the people said. The chief executives of the two companies met in February to discuss a merger, with Potash CEO Jochen Tilk arguing that a full combination was the most attractive opportunity, according to the sources. Potash Corp submitted a written acquisition proposal to K+S at the end of May, the people added.

    Since then, however, K+S has refused to engage in negotiations with Potash Corp, without communicating a reason, the people said. This is despite Potash Corp's assurances that any deal would not be based on labor and other cost savings, and that K+S's management would be offered important roles in the combined company, the people added.

    Potash Corp also sees a strong fit between its business in the United States and K+S's footprint in Europe, the people said. It expects to maintain K+S's headquarters in Kassel, Germany, as the combined company's European headquarters, they added.

    Potash Corp has offered to pay around 41 euros per K+S share, valuing the company at close to 8 billion euros ($8.9 billion), a person familiar with the matter told Reuters on Friday.

    This would amount to a 57 percent premium to the average price of K+S for the 12 months prior to news of Potash Corp's offer emerging.
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    Organic rules ok?

    It almost sounds like some crazy science fiction future, and that's no accident. The growBot project is part of the Public Design Workshop with Dr. Carl DiSalvo, and the whole idea is to imagine the future how you think it ought to be, and then figure out how to make it happen. Lady Rogue explained that imagining and a whole lot more when we chatted last week.

    Lady Rogue: I think we commonly conflate "technology" with "industrialization," and we forget that tools like plows, rakes and tractors are technology. Organic farming is an alternative to industrial food production. we'd like to strengthen the viability of organic farming by helping to create new tools and technology.
    Lady Rogue: The future of industrial food production is clear: genetically identical plants will be harvested by robots. This future is about 15 years away, give or take a recession or environmental collapse.
    Lady Rogue: Our food is already processed by plants, packaged by robots, shipped with sophisticated RFID embedded pallets to centralized distribution points that are increasingly controlled by intelligent algorithms. That is the clear-cut future progression of industrial food production. Our job is to help organic farmers to imagine tools that will help them create a viable production model as an alternative to this future.
    Lady Rogue: I haven't met a farmer yet who isn't interested in a way to preserve their way of life. I haven't met a farmer who isn't hoping that young people take up the siren call and become food producers themselves. So, no, I don't think that farming is anti-technology at all. It's just tainted with a wee bit of mistrust because the technology in recent years has tended to benefit industrial food production, and not organic.


    Myth #1: Organic Farms Don't Use Pesticides

    When the Soil Association, a major organic accreditation body in the UK, asked consumers why they buy organic food, 95% of them said their top reason was to avoid pesticides. They, like many people, believe that organic farming involves little to no pesticide use. I hate to burst the bubble, but that's simply not true. Organic farming, just like other forms of agriculture, still uses pesticides and fungicides to prevent critters from destroying their crops. Confused?

    So was I, when I first learned this from a guy I was dating. His family owns a farm in rural Ohio. He was grumbling about how everyone praised the local organic farms for being so environmentally-conscientious, even though they sprayed their crops with pesticides all the time while his family farm got no credit for being pesticide-free (they're not organic because they use a non-organic herbicide once a year). I didn't believe him at first, so I looked into it: turns out that there are over 20 chemicals commonly used in the growing and processing of organic crops that are approved by the US Organic Standards. And, shockingly, the actual volume usage of pesticides on organic farms is not recorded by the government. Why the government isn't keeping watch on organic pesticide and fungicide use is a damn good question, especially considering that many organic pesticides that are also used by conventional farmers are used more intensively than synthetic ones due to their lower levels of effectiveness. According to the National Center for Food and Agricultural Policy, the top two organic fungicides, copper and sulfur, were used at a rate of 4 and 34 pounds per acre in 19711. In contrast, the synthetic fungicides only required a rate of 1.6 lbs per acre, less than half the amount of the organic alternatives.

    The sad truth is, factory farming is factory farming, whether its organic or conventional. Many large organic farms use pesticides liberally. They're organic by certification, but you'd never know it if you saw their farming practices. 

    Myth #2: Organic Foods are Healthier

    Some people believe that by not using manufactured chemicals or genetically modified organisms, organic farming produces more nutritious food. However, science simply cannot find any evidence that organic foods are in any way healthier than non-organic ones - and scientists have been comparing the two for over 50 years.

    Just recently, an independent research project in the UK systematically reviewed the 162 articles on organic versus non-organic crops published in peer-reviewed journals between 1958 and 2008 11. These contained a total of 3558 comparisons of content of nutrients and other substances in organically and conventionally produced foods. They found absolutely no evidence for any differences in content of over 15 different nutrients including vitamin C, ?-carotene, and calcium. There were some differences, though; conventional crops had higher nitrogen levels, while organic ones had higher phosphorus and acidity - none of which factor in much to nutritional quality. Further analysis of similar studies on livestock products like meat, dairy, and eggs also found few differences in nutritional content. Organic foods did, however, have higher levels of overall fats, particularly trans fats. So if anything, the organic livestock products were found to be worse for us (though, to be fair, barely).

    Myth #3: Organic Farming Is Better For The Environment

    As an ecologist by training, this myth bothers me the most of all three. People seem to believe they're doing the world a favor by eating organic. The simple fact is that they're not - at least the issue is not that cut and dry.

    Yes, organic farming practices use less synthetic pesticides which have been found to be ecologically damaging. But factory organic farms use their own barrage of chemicals that are still ecologically damaging, and refuse to endorse technologies that might reduce or eliminate the use of these all together. Take, for example, organic farming's adamant stance against genetically modified organisms (GMOs).

    GMOs have the potential to up crop yields, increase nutritious value, and generally improve farming practices while reducing synthetic chemical use - which is exactly what organic farming seeks to do. As we speak, there are sweet potatoes are being engineered to be resistant to a virus that currently decimates the African harvest every year, which could feed millions in some of the poorest nations in the world15. Scientists have created carrots high in calcium to fight osteoperosis, and tomatoes high in antioxidants. Almost as important as what we can put into a plant is what we can take out; potatoes are being modified so that they do not produce high concentrations of toxic glycoalkaloids, and nuts are being engineered to lack the proteins which cause allergic reactions in most people. Perhaps even more amazingly, bananas are being engineered to produce vaccines against hepatitis B, allowing vaccination to occur where its otherwise too expensive or difficult to be administered. The benefits these plants could provide to human beings all over the planet are astronomical.

    Yet organic proponents refuse to even give GMOs a chance, even to the point of hypocrisy. For example, organic farmers apply Bacillus thuringiensis (Bt) toxin (a small insecticidal protein from soil bacteria) unabashedly across their crops every year, as they have for decades. It's one of the most widely used organic pesticides by organic farmers. Yet when genetic engineering is used to place the gene encoding the Bt toxin into a plant's genome, the resulting GM plants are vilified by the very people willing to liberally spray the exact same toxin that the gene encodes for over the exact same species of plant. Ecologically, the GMO is a far better solution, as it reduces the amount of toxin being used and thus leeching into the surrounding landscape and waterways. Other GMOs have similar goals, like making food plants flood-tolerant so occasional flooding can replace herbicide use as a means of killing weeds. If the goal is protect the environment, why not incorporate the newest technologies which help us do so?

    Myth #4: It's all or none

    The point of this piece isn't to vilify organic farming; it's merely to point out that it's not as black and white as it looks. Organic farming does have many potential upsides, and may indeed be the better way to go in the long run, but it really depends on technology and what we discover and learn in the future. Until organic farming can produce crops on par in terms of volume with conventional methods, it cannot be considered a viable option for the majority of the world. Nutritionally speaking, organic food is more like a brand name or luxury item. It's great if you can afford the higher price and want to have it, but it's not a panacea. You would improve your nutritional intake far more by eating a larger volume of fruits and vegetables than by eating organic ones instead of conventionally produced ones.

    What bothers me most, however, is that both sides of the organic debate spend millions in press and advertising to attack each other instead of looking for a resolution. Organic supporters tend to vilify new technologies, while conventional supporters insist that chemicals and massive production monocultures are the only way to go. This simply strikes me as absurd. Synthetic doesn't necessarily mean bad for the environment. Just look at technological advances in creating biodegradable products; sometimes, we can use our knowledge and intelligence to create things that are both useful, cheap (enough) and ecologically responsible, as crazy as that idea may sound.

    Yields compared.

    1. Comparing the yields of organic and conventional agriculture Seufert, V., Ramankutty, N. & Foley, J. A. Nature (2012)

    Summary ... Our analysis of available data shows that, overall, organic yields are typically lower than conventional yields. But these yield differences are highly contextual, depending on system and site characteristics, and range from 5% lower organic yields (rain-fed legumes and perennials on weak-acidic to weak-alkaline soils), 13% lower yields (when best organic practices are used), to 34% lower yields (when the conventional and organic systems are most comparable). Under certain conditions—that is, with good management practices, particular crop types and growing conditions—organic systems can thus nearly match conventional yields, whereas under others it at present cannot...

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    Precious Metals

    Diamond boss sees more pain amid credit crunch

    De Beers’s former finance chief, who is developing a diamond mine in southern Africa, expects the industry to remain depressed this year as retail sales languish and traders struggle to turn a profit.

    “I don’t see the second half of 2015 being that positive,” Stuart Brown, chief executive officer of Firestone Diamonds Ltd., said by phone. “Retail needs to recover and the midstream needs to sort itself out and that will take a bit of time. 2016 is still going to be a year of recovery.”

    Rough diamond prices fell about 15 percent in the past 12 months after KBC Groep NV decided to wind down its Antwerp Diamond Bank unit, crimping credit to the Belgian port city’s traders, cutters and polishers. At the same time buyers have baulked at the prices demanded by De Beers, forcing the world’s biggest producer to lower them.

    Brown, who was chief financial officer at De Beers from 2006 to 2011, is more pessimistic than some of his rivals. Dominion Diamond Corp. said last month that the industry had overcome its liquidity concerns, while Petra Diamonds Ltd. said in April that the market had stabilized.

    Firestone is developing the Liqhobong mine in Lesotho and plans to start production at the end of 2016. The mine will produce about 1 million carats a year.

    Brown welcomed the founding of the Diamond Producers Association, a trade group designed to promote the gems and protect the industry from threats such as synthetic stones.

    “I think it’s good for the industry and everyone should be supportive of it,” said Brown, who expects Firestone to join the association once it starts mining.
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    Barrick’s cyanide breakthrough on gold solves a puzzle for gain

    Barrick Gold has pioneered a way to produce gold without having to depend on cyanide’s chemical ability to separate the precious metal from ore.

    As much as 60% of the planet’s gold is currently produced using cyanide, a 120-year-old practice that carries environmental risks of groundwater contamination.

    The new technique, used by Barrick to get gold from cyanide-resistant ore at its Goldstrike mine in Nevada, will let the world’s largest producer recover about 2.25 million ounces of gold worth $2.6 billion over five years. The technology could also spur other companies to consider new ways to limit the use of cyanide in mining.

    “Now there’s a plant up and running it takes away some of the risk,” said Paul Breuer, a Perth-based principal research scientist at Australia’s Commonwealth Scientific and Industrial Research Organization, which worked with Barrick on the process. “People will be very seriously looking at it.”

    Barrick and the CSIRO developed a way to use non-toxic thiosulfate to process so-called double refractory ore. The research group has also worked with companies including Newcrest Mining Ltd., Australia’s biggest producer, on techniques to limit cyanide use.

    Researchers have been working on the thiosulfate technique since the 1970s. Breuer stressed that it’s not suitable for all mines and may add to production costs.

    “We know that cyanide is a concern for some stakeholders,” Barrick spokesman Andy Lloyd said in an e-mail. “The potential to use alternatives to cyanide at certain operations in the future may help to address those concerns.”
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    China targets counterweight in gold trade with yuan fix

    A decade after China kicked off a series of gold market reforms, plans to establish a yuan price fix mark one of Beijing's biggest step so far to capitalise on the country's position as the world's top producer and a leading consumer.

    While no immediate threat to the gold pricing dominance of London and New York, the benchmark could ultimately give Asia more power over bullion trade, particularly if the yuan becomes fully convertible, industry sources say.

    The yuan fix is due to launch by the end of 2015 via the Shanghai Gold Exchange (SGE), which last year allowed foreign players to trade gold using offshore yuan.

    "Across the commodity markets as a whole, we're seeing some very significant initiatives by the Chinese authorities," said Nic Brown, head of commodities research at Natixis.

    "For the gold market, it's an attempt to provide a Chinese counterweight that offers liquidity, offers physical metals, offers futures trading for the markets in the Asian time zone," he said.

    Asia is the top buyer of gold, with China and India alone accounting for about half of global consumption, but London and New York are regarded as price benchmarks for spot and futures trading respectively.

    In the last year, other attempts have been made to create a regional benchmark, including by Singapore, but China is being the most aggressive.

    "The SGE and China wants to become the premier marketplace for gold trading and set the reference price as their view is this is where most of the gold is held and produced," said a long-time bullion trader in Asia.

    At a gold conference in Shanghai last week, SGE's vice president, Shen Gang, said efforts towards internationalisation of the China market and building the exchange into an influential one globally would continue.
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    IAMGOLD updates production guidance for 2015 Westwood Mine viable

    IAMGOLD Corporation announces that following an intensive review of the impact of a localized seismic event that took place on May 26, 2015 at the Company's Westwood Mine in Quebec, IAMGOLD remains confident in the long-term viability of the mine.  In the short-term, however, the Company's Q2 2015 production is expected to be slightly below the production of 208,000 ounces in Q1 2015 and this has led to a downward revision of the Company's production guidance to a range of 780,000 to 815,000 ounces for 2015.  Although the cost impact is still being assessed, the lower production guidance is expected to adversely impact Westwood's production costs.

    The review confirmed the Westwood mine's positive attributes of:

    a continued ability to operate following the May seismic event;
    an average grade of measured and indicated resources of over 11 g/t gold, as previously disclosed (see news release dated February 18, 2015);
    its anticipated long mine life of approximately 20 years;
    an exploration upside;
    location in the prolific Abitibi region of Quebec;
    the potential to be IAMGOLD's lowest cost mine when ramped up to full production;
    excellent reconciliation on grade, recovery and dilution; and
    a strong mine management and workforce with over 30 years of experience at Westwood's predecessor mines: Doyon and Mouska.

    IAMGOLD's President and CEO, Steve Letwin said, " Safety is our number one priority.   We and the other companies mining underground in the region know that this district is prone to seismic activity and we are taking the necessary measures to keep our excellent safety record intact.   Westwood is still in its infancy and similar to mines in the area, we expect it to have growing pains as we gain operational experience in this mining environment.
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    Base Metals

    Chile gives copper giant Codelco much-needed $225 million cash injection

    Codelco's $25 billion investment plan seeks to revamp its aging operations and build new ones to keep production rising.

    Chile-owned Codelco, the world’s top copper producer, has been promised $225 million by the government to help the company fund its ambitious $25 billion investment plan aimed at expanding its aging operations and build new ones to keep production rising.

    The cash injection, said the miner in a statement (in Spanish), will come from the company’s own 2014 profits, since the miner gives its profits to the state.

    In October last year, President Michelle Bachelet enacted a special law to spur the output of the state-owned copper giant, which allowed the government to commit to provide Codelco $4 billion in financing through 2018, including around $3 billion via treasury-issued debt and about $1 billion from returned profits.
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    Sierra Gorda copper mine in Chile begins commercial production

    Japan's second-largest copper producer, said on Wednesday the Sierra Gorda mine in Chile that it owns jointly with Polish producer KGHM Polska Miedz began commercial production at the end of June. 

    The mine had been operating for more than 60 days at 65% of its designed capacity as of the end of last month, six months behind its schedule for establishing commercial output, the company's spokesperson Hirokazu Miyauchi said. 

    "It took longer than expected to ramp up output as there were some technical issues, but our plan to produce 123 000 t of copper ... in 2015 remains unchanged," he said. 

    The Sierra Gorda mine, which is 55% owned by KGHM, started output of copper concentrates in July 2014 and produced 11 000 t of copper in 2014. SMM aims to bring the mine's output to full capacity, processing 110 000 t/d of copper ore, as soon as possible, he said. 

    SMM holds a 31.5% stake in the mine and Japanese trading house Sumitomo Corp has 13.5%. 

    The owners aim to make a final decision as early as this year on a plan to double output capacity at Sierra Gorda to 220 000 t/y of copper, with expansion work to start in the April-September period of 2016, Miyauchi said. The mine also produces molybdenum concentrate as by-product.
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    Global refined copper market swings into surplus - ICSG

    World refined copper production from scrap exceeded 1 million tonnes in the first quarter of this year and helped ensure a significant overall market surplus, according to data from the International Copper Study Group (ICSG).

    Total refined production increased around 5% to 5.556 million tonnes, with primary production climbing 3% to 4.552 million tonnes while secondary production from scrap leapt 12% from 896 000 tonnes in the first three months of 2014 to 1.004 million tonnes in the corresponding period this year.

    The refinery capacity utilisation rate increased to 81% from 80% in the same period of 2014. World apparent usage of refined copper is estimated to have declined by around 3% from 5.542 million tonnes in the first quarter of 2014 to 5.389 million tonnes in January-March this year, with China recording a drop of 4% based on a 20% decrease in net imports from the high level in early 2014.

    These figures indicate, therefore, that the world refined copper market switched from a deficit of 233 000 tonnes in the opening quarter of 2014 to a surplus of 167 000 tonnes in the corresponding period this year, the ICSG points out.
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    LME proposes rent caps to tackle long warehouse queues

    The London Metal Exchange is to address the problem of existing and potential queues at warehouses with proposals that include rent caps from May 1, 2016, the LME said on Wednesday.

    Big banks and traders that own or owned warehouses and charge rent have profited from letting long queues build up. Rent caps will remove the financial incentive to maintain or create queues.

    "The introduction of queue-based rent capping would also help to provide further certainty as to the elimination of existing queues, and could prevent the occurrence of future queues," the exchange said in a statement.

    The exchange also recommended increasing the minimum load-out rate, the pace at which metal leaves LME registered warehouses, to cut queues at a faster pace.

    "The new minimum daily load-outs for warehouses storing between 150,000 tonnes and more than 900,000 tonnes range between 2,000 tonnes and 4,000 tonnes a day, scaled according to the amount of metal stored," it said.

    Currently warehouses holding more than 900,000 tonnes have to load out a minimum of 3,000 tonnes a day.

    Warehouse companies that fail to deliver out queued metal within 30 calendar days would be required to halve the maximum published rent and after 50 days no rent could be charged at all, the LME said.

    By May 2016, remaining warehouse queues should fall below the 50-day threshold, which would mean all warehouse firms will be equally impacted by the new measures, the LME said.
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    Olympic Dam’s Svedala Mill Resumes Operations

    BHP Billiton confirmed that the Svedala mill, part of its Olympic Dam surface processing operations in South Australia, has safely resumed operation ahead of schedule. In January, the mill suffered an electrical failure and was safely placed in the maintenance position. A complete diagnostic review was undertaken and revealed damage to the motor stator coil.

    Subsequently, a repair and remediation plan was implemented and this week the mill has re-commenced operation, having passed all commissioning checks. The mill’s operations will be ramped up over the coming weeks and a return to full production at Olympic Dam is expected by the end of July. As previously advised, BHP Billiton estimated there will be a reduction in copper production of between 60,000 and 70,000 metric tons (mt).
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    Indophil expects mid-July deal with Glencore on $5.9 bln Philippine mine

    Indophil Resources said a final agreement may be signed in the middle of July allowing it to take control of the long-delayed $5.9 billion Tampakan copper-gold project in the Philippines from Glencore Plc .

    Indophil, previously listed in Australia until its takeover this year by the Philippines' Alsons Group, would be able to start planning its next steps for the project once the agreement was signed, spokesman Gavan Collery said.

    "There are a number of conditions, notifications and actions that must take place before the anticipated mid-July formal signing of the agreement," he said in an email.

    Commodity trader Glencore announced the sale of its 62.5 percent interest in Tampakan operator Sagittarius Mines Inc last week without providing details.

    Glencore had previously flagged it was reviewing the Tampakan project along with other greenfield projects elsewhere.

    Tampakan, one of the biggest undeveloped copper-gold mines in Southeast Asia and previously touted as the largest foreign direct investment in the Philippines, has been stalled by a provincial ban on open-pit mining in place since 2010.

    Leo Jasareno, director of the Mines and Geoscience Bureau (MGB), said the government welcomed Indophil's interest "to move the project forward" and said Glencore's exit had nothing to do with domestic policy issues.

    The MGB's support for the project, at the same time as a local mining ban is in place, highlights conflicting policies that have hampered development and foreign investment in the country's untapped mineral resources worth $1.4 trillion based on recent industry estimates.

    There are also pending bills in Congress seeking to hike mining taxes and royalties that are already among the highest in the world.
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    Rio Tinto aluminium smelter in New Zealand faces possible power crunch

    Rio Tinto's aluminium smelter in New Zealand, which has suffered losses in two of the last three years, faces a July 1 deadline to decide whether to extend its power supply contract with utility Meridian Energy .

    The decision could determine the future of the 350,000-tonne-per-year smelter, which is the country's single biggest energy consumer, beyond 2017 following a battle by the plant's owners to slash its power costs.

    The smelter has struggled with weak aluminium prices and a high New Zealand dollar for several years, and has been seeking cheaper power, even though it returned to an underlying profit of NZ$56 million in 2014 after two years of losses.

    The plant was given a NZ$30 million subsidy in 2013 by the government to bridge the price gap between Meridian and the plant's owners, New Zealand Aluminium Smelters (NZAS), which is a joint venture between Rio Tinto and Sumitomo Chemicals.

    NZAS also has an option later in the year to reduce the amount of power it buys from Meridian by about 30 percent.

    The two sides have been holding talks on the issues, but NZAS declined to comment, while a Meridian spokesman said it did not know what the decision would be.

    In April, NZAS Chief Executive Gretta Stephens said in a statement the plant faced "an extremely tough operating environment here in New Zealand."

    Some analysts said that the likelihood of the smelter remaining open had increased after the local dollar had fallen 12.6 percent so far this year, improving the smelter's export returns and helping to offset a renewed weakness in aluminium prices which are hovering around one year lows.

    "With the lower New Zealand dollar, most expect NZAS will seek to maintain power contracts, with some potential to gain some supply from another generator," said analyst Craig Stent at Harbour Asset Management.

    The smelter is one a few worldwide making high-quality aluminium used in plane construction and electronics, and the costs of closing the plant and cleaning up the site has been estimated at hundreds of millions of dollars.

    Longer term, the New Zealand power sector regulator is looking at reforms to setting transmission charges which might deliver savings of as much as NZ$50 million a year.

    The smelter, close to the southern city of Invercargill, consumes about 13 percent of New Zealand's power output and a decision to close would cause a glut, sending prices lower in a market which has seen scant growth.
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    New report outlines value of copper exploration

    When looking at global exploration budgets for copper, which reached $11-billion in 2010, it is evident that the nonferrous metal carries perennial importance, mining analysis company SNL Metals & Mining says in its 'Copper Discoveries 1990-2014' report, released on Monday. 

    “After almost doubling by 2012, the total nonferrous metals exploration budget returned to 2010 levels again in 2014. Over those five years, the copper budget increased more or decreased less as a percentage year-on-year than the total budget; and more remarkably, copper's share of the total budget increased in each of the five years, even as budgets were shrinking. 

    “In 2014, copper accounted for fully a quarter of the [nonferrous] industry's total budget, a 15-year high for the red metal,” the group reported on Monday. Further, SNL Metals & Mining noted that it was “no surprise” that acquiring companies paid more for copper in mineable reserves than they paid for resources, since reserves could either immediately increase a company's production, or add to its pipeline of potential production, without the expenditure and time otherwise required to prove up reserves. 

    “The prices paid per pound for copper in reserves and copper in total reserves and resources generally moved in tandem from 2005 to 2009,” it noted. However, these prices diverged sharply after the 2008/9 financial crisis, with the reserves price soaring close to 50c/lb by 2011 – the highest price paid in the ten-year period – while the price paid for combined reserves and resources increased much more slowly. “The divergence partly reflects most major producers' then strategy of increasing production. 

    With recovering copper prices seemingly headed for the stratosphere, adding mineable reserves seemed like a good investment at the time,” SNL Metals & Mining highlighted. However, the copper price started declining in 2012, and “angry investors” started forcing the major companies to curb spending and focus on increasing value. 

    As a result, mergers and acquisitions (M&A) spending in 2013 dropped by three-quarters from a record $30-billion in 2012, and the price paid for copper reserves fell to 30c/lb in 2013 – on par with the ten-year average through 2014. M&A activity revived somewhat in 2014, with the price paid for copper reserves perking up slightly and the total price paid in copper acquisitions jumping 45% from the 2013 price. 

    The report outlined 201 copper discoveries over the past 25 years, each containing at least 500 000 t of copper, and included the relationship between corporate exploration budgets and discovered copper, and separate sections for discoveries by year, by location, by company type and by classification as greenfield or brownfield.
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    China's 10 non-ferrous metal output up 8.74% in Jan-May to 20.7 mln tons

    The combined output of the ten non-ferrous metals gained 8.74% year on year to 20.7 million tons in the Jan-May period, according to the latest statistics released by the China Non-ferrous Metals Industry Association.

    The output of refined copper rose 9.51% year on year to 30.86 million tons in the five-month period, and the output of primary aluminium saw an increment of 10.25% year on year to 12.82 million tons.

    Meanwhile, the output of lead edged down 1.19% year on year to 1.67 million tons in the period, and the output of zinc went up 13.39% from a year earlier to 2.51 million tons in the first five months.

    In the month of May 2015, the country's average daily output of 10 non-ferrous metal products hit 139,800 tons, 11.26% higher than in the corresponding period of last year.
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    Abu Dhabi buys into Trafigura's Spanish mines as part of new venture

    Trading house Trafigura has sold half its stake in three Spanish copper and zinc mines to Abu Dhabi investment company Mubadala as part of a joint venture they are setting up to invest in base metals mining, the companies said on Monday.

    The deal marks yet another move by the Swiss oil-to-metals trader to grow via joint ventures and to raise money by selling stakes in subsidiaries rather than floating the parent company.

    Sources close to the deal said it valued the mines business at around $1.4 billion, meaning Mubadala would be paying around $700 million for its stake.

    For Mubadala, set up in 2002 by the Abu Dhabi government to help diversify the economy, the purchase is part of a push to invest in assets other than oil. It has a portfolio valued at more than $66 billion.

    Mubadala will buy 50 percent of Trafigura's mining operator Minas de Aguas Teñidas (MATSA) which owns the Agua Teñidas, Sotiel and Magdalena mines in southern Spain producing copper, zinc and lead concentrates. Trafigura will retain the other 50 percent stake, the two companies said in a statement.

    A number of private investors, such as the former boss of Xstrata Mick Davis, and private equity funds such as KKR, have earmarked capital to invest in the mining sector as prices hover near multi-year lows.

    "Investing in MATSA is a key step in growing and diversifying our existing metals and mining portfolio," Ahmed Yahia Al Idrissi, chief executive officer of Mubadala Technology and Industry, said in a statement.

    "This builds on our existing sector strategy and partnership with Mubadala. We are identifying new opportunities and investing thoughtfully together in ways that complement our existing portfolio," Trafigura CEO Jeremy Weir said.

    Trafigura is nearing completion of a two-year investment and expansion plan for MATSA which includes construction of a new treatment plant, which will double annual processing capacity to 4.4 million tonnes per year.
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    Zambia asks copper miners to curb electricity use

    Zesco Ltd., Zambia’s state-owned power utility, has asked mining companies in Africa’s second-biggest copper producer to cut power usage amid a shortage caused by low dam levels, spokesman Bestty Phiri said.

    Phiri could not immediately say by how much Zesco asked companies to curb usage, in response to a text message. Zesco, which has a generating capacity of about 2,200 megawatts, has a 560-megawatt shortfall, state-owned broadcaster ZNBC said Thursday, citing the company. Zambia produces over 90 percent of its electricity from hydropower, and low rainfall has caused water levels to drop.

    “We are looking forward to a full analysis of the power supply situation and subsequent discussion with all major stakeholders on how the power deficit will be managed,” Jackson Sikamo, president at the Zambia Chamber of Mines, said in reply to e-mailed questions Wednesday.

    Zambia’s copper production probably won’t top last year’s, when output fell to a three-year low, because of a tax dispute between producers and the government, Mines Minister Christopher Yaluma said June 11. The power shortage could exacerbate a decline, as producers of the metal account for more than half of the country’s electricity demand.
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    First Nickel under TSX delisting review

    Mining and exploration company First Nickel reported it has received notice that the TSX is reviewing the eligibility of the company’s common shares for continued listing on the TSX. 

    The company advised on Friday that the TSX was reviewing whether First Nickel met its continued listing criteria in terms of the company’s financial condition and operating results, whether First Nickel had adequate working capital and an appropriate capital structure, and if the share price of First Nickel’s common shares had been so reduced as to not warrant continued listing. 

    First Nickel was being reviewed under the TSX’s remedial review process and had 120 days to comply with all requirements for continued listing. If the company could not meet the requirements of the TSX on or before October 28, First Nickel’s common shares would be delisted 30 days from that date.

     First Nickel assured, in a statement, that it intended to cooperate fully with the TSX review process, including the consideration of listing alternatives for its common shares. Any continued listing or alternate listing of the company’s common shares would be dependent on numerous factors. 

    In light of the status of First Nickel’s operations under the current nickel price environment, there was no assurance that the company would be able to maintain a listing of its common shares on the TSX, or obtain an alternate listing on another exchange, the company said.
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    $8 trillion alternative energy boom is a win for copper

    Here’s a bit of energizing news: In 2014, for the first time in four decades, the global economy grew along with energy demand without an increase in global carbon emissions.

    That’s according to energy policy group REN21’s just-released Renewables 2015 Global Status Report, which attributes this stabilization to “increased penetration of renewable energy and to improvements in energy efficiency.”

    What this means is that as the world’s population continues to grow, and as more people in developing and emerging countries gain access to electricity, the role alternative energy sources such as wind, solar and geothermal play should skyrocket. Between now and 2040, a massive $8 trillion will be spent globally on renewables, about two thirds of all energy spending, according to Bloomberg New Energy Finance. Solar power alone is expected to draw $3.7 trillion.

    This is good news indeed for copper, necessary for the conduction of electricity in all energy technologies, whether they be traditional or alternative. The use of some carbon-emitting fossil fuels—coal, for instance—will likely drop off over the years, but copper will remain an irreplaceable component in our ever-expanding energy needs.

    Global copper consumption is poised to increase not just because electricity demand is growing. New energy technologies typically require more of the red metal than traditional sources. Each megawatt of wind power capacity, for instance, uses an average of 3.6 tonnes of copper. Electric trolleys, buses and subway cars use about 2,300 pounds of copper apiece. Where we’ll see the most significant growth, though, is in the production of hybrid and electric cars, which use two to three times more copper than internal combustion engines.
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    Steel, Iron Ore and Coal

    China’s crude steel output totals 340.17 million mt in Jan-May

    In the first five months of the current year, China’s crude steel output amounted to 340.17 million mt, down 1.6 percent year on year, as announced by China’s National Development and Reform Commission (NDRC) on June 30. The growth rate in question was 4.3 percentage points lower than that recorded in the same period last year.

    In the first five months of the current year, China’s overall outputs of metallurgical coke and ferroalloys amounted to 187.81 million mt and 14.35 million mt, down 2.8 percent and 3.4 percent respectively, both on year-on-year basis. The growth rates of coke and ferroalloy production in the given period were 1.2 and 14.3 percentage points lower than in the same period of 2014. Meanwhile, in the January-May period this year, China’s exports of finished steel amounted to 43.52 million mt, up 28.2 percent on year-on-year basis.
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    Iron ore slide continues

    Iron ore for immediate delivery to China .IO62-CNI=SI stood at $55.80 a tonne, its weakest since late April, Reuters data showed.

    "This is the downside of the $50-$60 range where iron ore belongs in this stage of the cycle," said Morgans Financial analyst James Wilson.

    "It could continue to creep lower if companies start showing strong quarterly production figures this month, as expected," he said.

    Iron ore exports to China from Australia's Port Hedland rose 3 percent to 32.61 million tonnes in June from a month earlier.

    The June increase at the world's biggest iron ore terminal helped sweep total iron ore exports for the fiscal year ended June 30 to 439.6 million tonnes, up 21 percent and also a record, according to the Pilbara Ports Authority.

    Of that total, 373.24 million tonnes were destined for China.
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    US coal production and consumption

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    CIL record output at 121.23 MT Apr-Jun 2015

    Image Source: Money ControlMoney Control reported that Coal India, the world's largest miner of dry fuel, recorded an output of 121.33 million tonnes (MT) in April-June 2015, recording a 12 percent growth over the same period previous fiscal. The coal giant achieved 99 percent of the target during the period.

    The development comes at a time when the government has already fixed a target of one billion tonne of production for the miner by 2019.

    However, the miner missed its June target by about 2 million tonnes, producing 38.83 MT of coal. CIL produced 121.23 MT of coal during April-June quarter of the current fiscal as against a target of 123.04 MT, the miner said in a filing to the BSE. Performance wise, its Jharkhand-based arm Central Coalfields Ltd (CCL) registered the maximum 26.6 percent increase in output of 12.59 MT as against a target of 10.50 MT during the period.

    The coal giant said the target for June was fixed at 40.73 MT but the miner could produce only 38.83 MT. The offtake of coal at the miner's end stood at 129.48 MT during the April-June period this year against the target of 135.35.65 MT.
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    Why not sell coal from Chhattisgarh mines to JPL - HC to CIL

    Money Control reported that Delhi High Court suggested to Coal India Ltd (CIL) to sell to Jindal Power Ltd (JPL) the coal it has started to mine from two Chhattisgarh mines if it did not have the space to store the mineral. A bench of justices Badar Durrez Ahmed and Sanjeev Sachdeva gave the suggestion after CIL moved an application seeking permission to sell the coal it has started to mine from Gare Palma IV/2 and IV/3 mines after receiving environmental clearance.

    It moved the application as the high court on May 27 had kept in abeyance a letter issued by CIL cancelling the e-auction in which JPL had won 49,000 metric tonnes of coal to be mined from the two mines. CIL put before the bench three options - selling the coal by way of a fresh e-auction, selling it to those companies with whom the public sector unit has a fuel supply agreement or sale to National Thermal Power Corporation Ltd (NTPC) - and asked the court which method should it go for. The counsel for CIL told the court that the problem was that after it had received environmental clearance, it had commenced mining and now the mineral was accumulating at the site with no space to store it.

    It also sought clarity on whether the court's May 27 order would prohibit it from selling the coal it was mining. The court, however, only suggested that CIL can sell the coal it was mining to JPL or hold a fresh e-auction in which the power company can participate and did not pass any order. It listed the matter for further hearing on July 7. CIL's application was filed in the main petition of JPL which has challenged a May 16 letter by which the PSU claimed the e-auction was cancelled.
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    Australia seeks answers after China rejects coal cargoes

    Australia's government is looking into allegations by an industry group that Australian coal cargoes are being unfairly rejected by China.

    A powerful mining lobby group in Australia said it was working with trade ministers over instances where China rejected cargoes on the grounds they did not meet quality requirements.

    Coal is Australia's second-biggest export after iron ore.

    The Minerals Council of Australia, which counts some of the world's biggest coal miners as members, including BHP Billiton , Rio Tinto and Glencore , said cargoes were being rejected on grounds they failed to meet new quality import restrictions introduced on Jan. 15.

    "Australia produces some of the highest quality export coal in the world so producers have confidence in their product," Minerals Council coal division head Greg Evans told Reuters.

    "However we have less confidence in the associated testing protocols as they are not universally applied in a transparent manner." Evans said.

    A spokeswoman for the federal trade minister, Andrew Robb, said he was aware of concerns raised by the coal industry regarding the potential trade impact of China's new coal quality standards.

    "The government is doing everything reasonable to resolve these concerns, and will work together with China to ensure Australia remains a reliable supplier of high quality coal," she said.

    China's new rules are not uniform across the country, but for exporters, the most relevant ones are conducted in cities in the southern Pearl River Delta, the eastern Yangtze River Delta and three northern cities including Beijing, Tianjin and Hebei.
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    First Valemax to unload at China port for two years will discharge iron ore

    Valemax Yuan Zhuo Hai owned by China Ocean Shipping Company, or Cosco, is expected to discharge iron ore at China's Dongjiakou port Wednesday, the first Valemax to unload in China for two years, according to local media reports.

    The 400,000 dwt Valemax is expected to be part-laden, having called at Vale's Subic Bay iron ore transhipment terminal in Philippines after loading its initial cargo at the miner's Brazilian Itaqui port, according to Platts vessel tracking tool, cFlow.

    In a deal worth $445 million, Cosco acquired the ownership of the Yuan Zhuo Hai, as well three other Valemaxes, Yuan Zhen Hai, Yuan Shi Hai and Yuan Jian Hai, from Vale June 2.

    These vessels were then chartered back by Vale on a long-term basis for 25 years.

    In a parallel agreement, the two counter-parties also signed a 20-year contract of affreightment (renewable for another five years) for 10 Valemaxes to be built by Cosco for the transport of 6 million mt/year of iron ore and manganese into China.

    Up to February this year, fully-laden Valemaxes were banned from docking in Chinese ports with officials citing safety concerns.

    The ban was lifted by China's transport ministry when an amendment was made to the Design Code of General Layout for Sea Ports, allowing the enlistment of dry bulk cargo ships of 400,000 dwt.

    The last Valemax to arrive into China was in April 2013, where it unloaded about 220,000 mt iron ore into Lianyungang port.
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    Baosteel develops auto recycling line in China

    China’s Baosteel has developed the first dismantling line for auto recycling in China and the project itself would be a national-level auto recycling prototype, according to Baosteel on June 26.

    It takes less than half an hour to dismember auto body, chassis, engine, tire etc and metal elements, rubber and even gasoline and lubricant oil can be recycled after purification treatment, according to the Baosteel.

    All test indicators, particularly environmental protection and efficiency ones, have met or excelled national standards and production of most parts of the line has been localized; the project has its own technological edges such as waterjet cutting, said Baosteel.

    Baosteel Engineering & Technology Group Co Ltd, one of Baosteel Group six multiple industries, is a wholly-owned subsidiary of Baosteel Group.

    The line has been already delivered it to Bayi Steel’s Jinye Scrap Auto Recycling (Disassembling) Co Ltd.
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    China develops technologies to use inferior iron ore resources

    China has discovered methods that could utilize up to 8 billion tons of magnetite and hematite iron ore resources with inferior chemical prosperities, according to China Mining News, the official publication of national Ministry of Land and Resources, on June 30.

    The new technologies, developed by the laboratory with Bureau of Land and Resources Chendu, is able to unleash 2 billion tons of magnetite iron ore with the mixture of low content of fe, vanadium and titanium, 3 billion tons of oolitic hematite and 3 billion tons of iron ore buried deeply underground, according to the report.
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    Germany to shut down coal-fired plants, extend power grid

    The German government decided on Thursday to order the shutdown of several coal-fired plants in order to reach its ambitious climate goals by 2020, government sources told Reuters.

    Chancellor Angela Merkel and the leaders of her two junior coalition parties also settled a dispute over high-voltage power lines which are planned to carry green energy from the breezy north to the industrial south, the sources said.

    Energy minister Sigmar Gabriel is expected to explain the results of the coalition negotiations which lasted more than four hours at a news conference on Thursday morning 

    "Coal-fired plants with a capacity of 2.7 gigawatts will be shut down," said the government sources, who declined to say how many plants will be closed.

    "The affected power plants will not be allowed to sell electricity on the normal energy market," they said, adding that with this step Germany would manage to reach its goal to curb CO2 emissions by 40 percent by 2020 compared with 1990 levels.

    Gabriel originally proposed putting a levy on CO2 emitted by the oldest and most-polluting power stations above a certain threshold to help reach a target of cutting CO2 emissions from the coal sector by a further 22 million tonnes by 2020.

    Unconfirmed media reports earlier in the week have said the utilities may be allowed to move 2.7 gigawatts of old coal-fired capacity into a reserve scheme in the coming years, netting a few hundred million euros in the process.
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    Glencore to go ahead with closure of some Optimum Coal assets

    Global mining firm Glencore said on Wednesday it would go ahead with a plan to close some operations at its Optimum Coal subsidiary in South Africa due to weak coal prices, a move which will result in the loss of 600 to 700 jobs.

    The Swiss-based company said it would place on care and maintenance certain opencast operations, large parts of the coal processing plants and associated support services at the mine and would consider reopening them if market conditions improve.

    South Africa's National Union of Mineworkers had bitterly criticised the company's plan to shut down these assets, accusing the firm of having dismissed other options such as a trade sale of the operation.

    "These operations are financially not viable in the current market conditions and ... there are no measures available to avoid the retrenchments," Glencore said in a statement.

    Optimum produces about 10 million tonnes of coal annually, half of which is sold to power utility Eskom while the rest is exported.
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    Activity in China's steel industry is collapsing

    While activity in China’s manufacturing sector recorded tepid growth in June, the same cannot be said for the nation’s steel producers. Activity collapsed last month.

    As this table shows, posted on Twitter by Luke Kawa, the separate steel industry PMI slumped to 37.4 from 42.4 in May.

    it’s a terrible result.

    Aside from an increase in new export orders, which rose to 50.7 from 43.7 in May, the rest of the report is dire. Output slumped to 34.2 from 40.7 while new orders, a gauge on domestic demand, slumped to 27.9. Indicative of building inventory levels, the gauge on finished goods jumped to 55.1 from 50.3.

    This means despite a slump in output, inventory levels are continuing to expand. Not a very encouraging result, either for the month or period ahead.
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    Iron ore tumbles below $US60

    The price of iron ore has slipped below $US60 a tonne in overnight trade .

    At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US59.30 a tonne, down 2 per cent on its prior close of $US60.50 a tonne.

    The second half of June has proven to be a challenging period for the commodity, with prices slipping 10 per cent through a losing run that has seen just one positive session in 13. It has left iron ore at its lowest mark in five weeks.

    Continued softness this week has come despite fresh stimulus from the People’s Bank of China, with traders shrugging off the potential impact of the weekend’s rate cut.

    Instead, they have focussed on rising supply as well as concerns about demand in China.

    The worries have led analysts at Capital Economics and ANZ to issue warnings about the potential for heavy falls in the second half of the year.

    Capital Economics analyst Caroline Bain said prices could retreat below $US40 before the end of 2015, while ANZ recommended shorting the commodity due to its $US53 a tonne forecast for the third quarter.

    Similar bearish sentiment was echoed by the federal government on Tuesday, with the Federal Department of Industry and Science trimming its 2015 forecast by 10 per cent to $US54.40.

    The production lift is slated to come from Brazil and Australia, with the report tipping a 10 per cent jump in local iron ore exports in 2016 after a projected 4 per cent lift in 2015.

    The 2016 mining output gain is seen driven by Gina Rinehart’s new Roy Hill mine as well as expansions from Rio Tinto and BHP Billiton.
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    Malaysia to impose final safeguard duty on steel plate imports

    Bernama reported that Malaysia will impose a final safeguard duty on Hot Rolled Steel Plate (HRP) imports with effect from July 2nd 2015, for a period of three years to protect the local industry.

    This safeguard duty is imposed to prevent and remedy the effects of serious injury to the domestic industry caused by the surge in imports of HRP, the Ministry of International Trade and Industry said in a statement.

    The implementation of the measure, shall by way of progressive liberalisation for the period of three years, starting from July 2,2015 - July, 1, 2016 (17.40 per cent), July 2, 2016 - July 1, 2017 (13.90 per cent), and July 2, 2017 - July 1, 2018 (10.40 per cent).

    The provisional safeguards duty would replace the provisional duty of 23.93 per cent on Dec 14, 2014.

    The government had initiated the safeguard investigation on Aug 18, 2014 based on a petition filed by Ji Kang Dimensi Sdn Bhd on behalf of domestic HRP producers. The petitioner alleged that the increase in the import of HRP from 2011 to 2013 have caused serious injury to the domestic industry.
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    Cheap imported cargoes of plates hitting Indian steel mills below the belt

    The outlook for steel plates products in Indian domestic market is looking quite bleak for the month of July as low prices imports cargoes are landing all over Indian shores and it is expected that Indian steel mills would be forced to reduce their prices substantially in coming days to keep their market share.
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    China May rail coal transport down 13.2 pct on yr

    China’s rail coal transport stood at 165.45 million tonnes in May, down 13.2% year on year but up 3.8% month on month, showed the latest data from the National Development and Reform Commission.

    Over January-May, China transported a total 859 million tonnes of coal through railways, down 10.6% year on year, data showed.

    Of this, 578.65 million tonnes or 67.4% of the total was railed to power plants, down 12.4% from a year ago, with May haulage sliding 9.6% year on year to 115.41 million tonnes.

    Coal-dedicated Daqin line transported 35.43 million tonnes of coal in May, down 12.8% on year but up 15.6% on month. Total haulage between January and May dropped 7.4% year on year to 172.06 million tonnes.
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    Mr Obama signs trade bill strengthening US steel companies to fight steel imports

    President Mr Obama signed two significant trade initiatives - Trade Promotion Authority (TPA), and the extension of the Africa Growth and Opportunity Act and other trade preference programs, which includes renewal of Trade Adjustment Assistance (TAA) and trade remedy improvements.

    Trade legislation that includes the Leveling the Playing Field Act, a bill introduced by US Sen Sherrod Brown, D-Ohio, in March and co-sponsored by US Sen Rob Portman, R-Ohio, that will give US companies especially the US steel industry tools to fight against unfair trade practices.
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    Australia cuts 2015 iron ore price forecast by 10 pct

    Australia on Tuesday cut its price forecast for iron ore in 2015 by 10 percent to $54.40 a tonne, citing a weak outlook for the commodity's main market, China's steel sector.

    The forecast by the Department of Industry and Science is a sharp decrease from the $60.40 a tonne predicted three months ago and is way off the $94 a tonne touted in January.

    "China's steel production is forecast to contract in 2015 and 2016 as the seaborne supply of iron ore increases," the department said in its latest quarterly update. Iron ore is a key ingredient of steel.

    Since the last forecast on March 17, iron ore has tumbled as low as $46.70 a tonne, standing at $60.40 a tonne this week. .IO62-CNI=SI

    Australia & New Zealand Bank commodities analysts predict the price will fall to $53 over the next three months and stay under $60 a tonne in 2016.

    That's more bullish than Citi, which expects iron ore to fall to $48 a tonne in the third quarter and as low as $38 in the fourth quarter.

    Analysts blame the negative sentiment on a massive increase in production and over-estimates of China's appetite for imported ore by sector titans Vale of Brazil and Australians Rio Tinto and BHP Billiton which continue to expand.

    The department also cut its forecast for total Australian iron ore exports by 4 percent to 733.2 million tonnes in fiscal 2014/15 and by 3 percent to 795 million tonnes in 2015/16.

    Attached Files
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    X2 in 'serious' talks for Rio Tinto's coal assets in Australia -FT

    Former Xstrata boss Mick Davis' X2 Resources is in "serious" talks to purchase some of Rio Tinto Plc's Australian coal assets, the Financial Times reported citing people familiar with the matter.

    The multibillion-dollar deal talks are at an early stage and have generated solid interest from both sides, the FT reported. 

    The discussions could also extend to include Rio's metallurgical coal assets in Queensland, the newspaper said.

    A sale of Rio's thermal coal assets in New South Wales would be the biggest divesture by the company under Chief Executive Sam Walsh, for the past two and a half years, the FT said.

    Earlier this month, Reuters reported that X2, which was long considered a front runner for Barrick Gold's Zaldivar copper mine in Chile, bowed out of the race after it was outbid in the first round of the sale process.

    More than a year after he launched his private fund, Davis has been coming under pressure to build a new mining empire with the $6 billion in capital he has raised.

    X2 has so far expressed interest in a number of assets in copper, coal and other commodities, but has yet to make its first acquisition.
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    U.S. top court invalidates Obama administration mercury air pollution rule

    The U.S. Supreme Court on Monday invalidated a key Obama administration environmental regulation aimed at limiting emissions of mercury and other hazardous pollutants mainly from coal-fired power plants.

    The court ruled in a 5-4 decision, with its five conservative justices in the majority, that the U.S. Environmental Protection Agency should have weighed the cost of compliance in deciding whether to regulate the pollutants.

    The court sent the case back to the U.S. Court of Appeals for the District of Columbia Circuit, which will ask the EPA to reconsider its rule-making. In the meantime, the rule remains in effect, according to lawyers working on the case.

    Justice Antonin Scalia, writing on behalf of the court, said that a provision of the Clean Air Act that said the EPA can regulate power plants for mercury and other toxic pollutants if it deems it "appropriate and necessary" must be interpreted as including a consideration of costs. The EPA had decided it did not have to consider costs at that stage of the process.

    "The agency must consider cost - including, most importantly, cost of compliance - before deciding whether regulation is appropriate and necessary," Scalia wrote.

    Industry groups and 21 states appealed after an appeals court upheld the regulation in June 2014. The challengers said the EPA's refusal to consider the estimated $9.6 billion-a-year costs would lead to bigger electricity bills for Americans.

    When the EPA issued the regulation, it outlined what it saw as the rule's costs and benefits, including preventing up to 11,000 premature deaths annually. The agency also said the regulation could generate billions of dollars in benefits including a reduction in mercury poisoning, which can lead to developmental delays and abnormalities in children. Overall, the EPA said the benefits could be worth up to $90 billion a year.

    The EPA says the rule, which went into effect in April, applies to about 1,400 electricity-generating units at 600 power plants. Many are already in compliance, the U.S. Energy Information Administration said.

    Vickie Paton, general counsel of the Environmental Defense Fund, which backed the Obama administration, said the EPA should be able to address the concerns raised by the court because it has "already analyzed the economics showing that the health benefits for our nation far outweigh the costs."

    Attached Files
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    China Coal Energy H1 loss may reach 0.8-1.2 bln yuan

    China coal energy Co., Ltd., the country’s second largest coal producer, may suffer a loss of 0.8-1.2 billion yuan ($130.9-196.4 million) during the first half of the year, said the company on June 26.

    This was the first loss since 2012, data showed, compared to a net profit of 686 million yuan from the same period last year.

    The company attributed the loss mainly to falling prices caused by weak demand amid slowing Chinese economy and a supply glut in the Chinese market.

    The Fenwei/Platts CCI1 Index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed at 395.5 yuan/t on June 26, inclusive of VAT, FOB basis, down 21.8% from the start of the year.

    China Coal realized net profit of 151 million yuan in the first quarter of the year, down 97.2% year on year, according to its quarterly report.

    That means the company’s operation have further worsened during the second quarter.

    By end-June, China coal has reduced the FOB Qinhuangdao price of its 5,800 Kcal/g NAR coal by 18.5% from the end of the first quarter to 510 yuan/t, VAT inclusive; while the decline in 5,000 Kcal/kg NAR coal was slightly bigger at 18.9% from March to June.

    Coal sales price averaged 347 yuan/t in the first quarter, down 13.5% from the year before and down 5.4% from 2013.

    China Coal Energy produced 9.93 million tonnes in May, down 4.2% on year but up 38.1% on month -- the 11th consecutive year-on-year drop. Over January-May, it produced 37.65 million tonnes of coal, down 24.8% year on year, it said in a statement early this month.

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    5 Indian steel companies facing financial stress on projects delays - RBI

    Business Line reported that according to the Financial Stability Report published by RBI on last Thursday, 5 of the top ten private steel companies are facing sever financial stress due to delay in implementation of their projects,

    Listing out the woes of the industry, the central bank in its half-yearly review of the economy said steel companies’ expansion projects are getting delayed due to problems with land acquisition, environmental clearances among other factors. Though the sector holds good long-term prospects it is currently under stress, necessitating a close watch by lenders.

    The industry is also facing other challenges with respect to access to capital for investment, shortage of iron ore, low-paced mechanisation of mines, lower level of capacity-utilisation of coal washeries, dependence on imported coking coal and volatility in the currency market.

    Accessing the overseas market, the report said the industry faces high domestic port charges amidst low domestic demand.

    The depressed global steel prices have taken a toll on Indian steel companies on the pricing front in domestic market. A mismatch in steel pricing leads to large-scale imports. “These factors have created stress in the sector in general and more particular in case of private sector companies,” the report said.

    Attached Files
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    China Hebei steel production drops 2.4 pct y/y in May

    Northern China's Hebei, the country's biggest steelmaking province, produced 16.11 million tonnes of the material in May, down 2.4 percent on the year, hit by weak underlying demand and a seasonal construction downturn.
    Crude steel output from Hebei in the first four months of the year reached 83.28 million tonnes, 0.3-percent lower than the same period last year, according to figures from the National Bureau of Statistics.
    Hebei's total output amounted to 23 percent of the national total in May and 24.5 percent in the first five months. Hebei's steel sector is one of the principle targets of China's "war on pollution", with the province under pressure to slash annual steel capacity by 60 million tonnes over the
    2014-2017 period.

    China's Ministry of Industry and Information Technology is about to release details of a plan to curb nationwide capacity by 80 million tonnes over the 2015-2017 period, with small and private mills in Hebei likely to bear the brunt of the cuts.  
    An official with the ministry told a forum on Saturday that environmental rules for the steel sector were also likely to be tightened over the 2016-20 period and firms that fail to comply will be forced to close, state news agency Xinhua reported.
    Hebei's production decline has been offset by increases in Jiangsu on the eastern coast, which has seen output rise 12.5 percent to 44.93 million tonnes over the January-May period of2015.
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    China May thermal coal imports down 40.8pct on yr

    China’s thermal coal imports, including bituminous and sub-bituminous coal, dropped 40.8% on year and down 26.0% on month to 6.48 million tonnes in May, according to the latest data released by the General Administration of Customs (GAC).

    Australia remained the largest supplier, exporting 3.8 million tonnes of bituminous and sub-bituminous material to China in May, falling 17.8% on month and down 20.9% on year.

    In the same month, China's imports of Indonesian thermal coal fell 39.8% from April and down 40.2% from a year ago to 1.84 million tonnes.

    Thermal coal imports from Russia slumped 51.7% on year and down 15.6% on month to 0.78 million tonnes in the month.

    Over January-May, China imported a total 36.14 million tonnes of bituminous and sub-bituminous material, down 44.0% from the year before, data showed.

    Top supplier Australia exported a total 18.61 million tonnes of thermal coal to China during the same period, down 21.9% from the year before.

    Meanwhile, total imports of lignite dropped 32.0% from the previous year to 20.85 million tonnes during the same period, with May imports decreasing 29.3% on month and down 24.9% on year to 3.54 million tonnes.

    Lignite imports from the top supplier Indonesia stood at 19.48 million tonnes between January and May, down 31.8% on year.
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    Indian steelmakers upset as Japan, S.Korea eat local market share

    India could raise steel tariffs further to check a surge of imports, a minister said on Friday, but local steel firms are concerned that free trade agreements with Japan and South Korea would still let those countries boost shipments.

    Amid a global glut, steel imports jumped 72 percent in the last fiscal year to March to 9.3 million tonnes. South Korea and Japan together sent 3.5 million.

    Imports in April and May, the first two months of the new fiscal year, rose 55 percent to 1.67 million tonnes. But shipments from Japan soared 111 percent and those from South Korea 51 percent.

    Heavy industries minister Anant Geete said he would meet finance ministry officials within a week to discuss more measures to "safeguard" the local industry and check the qualityof imported steel, after companies complained recent duty increases of up to 2.5 percentage points were inadequate.

    But billionaire Sajjan Jindal, chairman of JSW Steel Ltd , said Japan and South Korea pay little or no duty when they sell steel to India.

    "I don't think any more duty increase is likely to happen, and actually, that is not even helping, because 50 percent of the imports is coming from FTA countries," Jindal told Reuters, referring to countries with free trade agreements with India.

    "Therefore, right now what we're working on (with the government) is anti-dumping and safeguard measures."

    Further dismaying local firms such as JSW and Kalyani Steels , this week India extended a deal to provide high-grade iron ore to Japan and South Korea as part of bilateral ties.

    "When the agreements were signed, it was a flourishing industry," said A.S. Firoz, chief economist at a steel ministry research unit. "But things have changed now and the domestic industry is really vulnerable."

    The steel ministry is in favour of taking steel out of the FTAs, according to government and industry sources with knowledge of the issue, but such a decision is unlikely in the near term, given government-to-government relations.

    Growth in Indian steel demand is expected to be the highest among the world's 10 biggest users this year and the next, the World Steel Association says.

    April-May consumption rose 7 percent after growth of 3 percent last fiscal year, but local mills have not benefited: their output rose just 0.8 percent in April-May while exports slumped 36 percent.
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