Mark Latham Commodity Equity Intelligence Service

Thursday 31st March 2016
Background Stories on www.commodityintelligence.com

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    Russia Said to Plan Doubling Dividends at State Companies


    Russia is nearing a decision to double dividends paid by state-owned companies on last year’s profit as the government struggles to cover a widening budget deficit, according to an official at the Federal Property Management Agency.

    A draft decree on the proposal to raise the payout to a minimum of 50 percent of net income from 25 percent has been submitted to the cabinet, the official said, asking not to be identified as the document hasn’t been signed yet. The proposal covers all state companies including Gazprom PJSC, Aeroflot PJSC, Russian Railways OJSC, VTB Group, Alrosa PJSC, Bashneft PJSC and Rosneftegaz OJSC, which holds a majority stake in Rosneft OJSC.

    Russia, the world’s largest energy exporter, has been battling a decline in budget revenue as oil and gas prices plunged. With sanctions over the Ukraine conflict limiting its access to global financial markets, the government is seeking new ways to bridge the gap, which reached a five-year high last year. It has targeted the oil industry with tax increases and is now looking to raise more than the 140.5 billion rubles ($2.1 billion) it originally planned to reap from state-company dividends this year.

    The Finance Ministry in Moscow is sticking to its target of holding this year’s budget deficit at no more than 3 percent of gross domestic product with an average oil price of $40 a barrel. The 2016 budget was approved last year based on an average oil price of $50. Brent, used to price Russia’s main Urals export blend, gained 1.43 percent to $39.70 on Wednesday.

    Doubling dividend payouts may bring an additional 110 billion rubles to the budget, Olga Dergunova, deputy economy minister and head of the state property manager, said last month. The idea was opposed by Deputy Prime Minister Arkady Dvorkovich, who suggested the government should decide on dividends for each state-run company separately after studying their investment programs and current market conditions.

    http://www.bloomberg.com/news/articles/2016-03-30/russia-said-to-plan-raising-dividends-at-state-companies-to-50

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    US power generation by fuel type

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    Teck forges ahead with Fort Hills, expects big reward when cyclical markets recover


    Canadian diversified miner Teck Resources is aiming to end 2016 with more than $500-million cash in the bank despite funding its portion of the Fort Hills oil sands project construction, in Alberta, and dealing with low commodity prices across its core portfolio. 

    The Vancouver-based company, the largest producer of steelmaking coking coal in North America, as well as holding significant copper and zinc assets in the Americas, would rely on internal free cash flows from its core business units, excluding the Fort Hills project, to fund the remaining $1.2-billion of its share of $2.94-billion in capital expenses, placing significant strain on the company’s balance sheet during the commodity price downturn. 

    The company had managed to push its base metals and coal assets to a cash-flow positive position in the fourth quarter, an important part of its strategy to fund its portion of the C$13.5-billion Fort Hills project from existing facilities and internal cash flows. 

    Speaking during a webcast of Teck’s investor and analyst day held in Vancouver on Wednesday, president and CEO Don Lindsay stressed that Teck was maintained a long-term mind set, open to doing what was necessary in order to thrive, noting that in the event markets worsened significantly over the course of the oil sands build out, 

    Teck was in the enviable position of being able to pull many more levers than its peers could. He mentioned that beyond the ongoing focus on cost reduction, the company could consider to sell some of its infrastructure assets, non-operating assets, agreeing to another precious metals stream transaction, and also if worse came to worst, it had the option of selling royalties on each of its businesses, including on the not-yet-producing Fort Hills project.

    “We are doing due diligence on each of the options putting us in a position to act if we need to, but we will take our time to get it right, to decide which option is the best at the right moment,” Lindsay said. 

    He outlined the company’s priorities this year, stressing its target to hit positive cash flows from its core business this year, which would enable it to fund Fort Hills wholly from internal sources while protecting the company’s strong balance sheet. 

    The company would aim at not drawing upon its $3-billion credit facility this year and preserving its $1.8-billion cash balance as at February 10, to end the year with more than $500-million cash in the bank, all the while evaluating further options to strengthen its liquidity. “We are building a long-life company based on strong assets,” he said, noting that the company would not sell core assets whatever it did. Rather, get assets built during the downturn, as it was currently doing with the Fort Hills oil sands project.

    Lindsay outlined steps to navigate the extended low-price environment and emerge stronger, saying the company was building-out its production-per-share profile. He noted that the company was learning a lot as it progressed and the cyclical markets trended towards higher highs and lower lows. 

    Teck was developing the the Fort Hills oil sands project in partnership with 50.8% owner and operator Suncor Energy and France-based Total, which controlled a 29.2% stake. The miner reported that all critical milestones were being achieved and the partners were focused on opportunities to manage capital cost in the current low-oil-price environment. 

    Lindsay believed firmly in the project’s significant upside when the oil price turned favorably once more, looking forward to the project delivering significant free cash flows from 2018. “A project exposed to the highly cyclical market like oil has the ability to pay back billions in a matter of two or three good years. You just don’t know when. 

    When you look at a 50-year mine life, you are bound to get several of these good years,” he said. To date, crude oil markets had bounced back more than 40% since hitting a low of $26.21/bl early in February. Lindsay said the company was now focused on strong operating execution across its portfolio of long-life assets and resources

    http://www.miningweekly.com/article/teck-forges-ahead-with-fort-hills-expects-big-reward-when-cyclical-market-rebounds-2016-03-31

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    Eletrobras posts Q4 loss of $2.85 bln on impairments, provisions


    Brazil's state-run Eletrobras, Latin America's largest electricity utility, posted on Wednesday a net loss of 10.438 billion reais ($2.85 billion) for the fourth quarter, due to impairments and provisions for potential legal liabilities.

    The final quarter's results pushed 2015 losses to 14.954 billion reais for Centrais Eletricas Brasileiras SA, as the financially strapped company is also known.

    In the third quarter, Eletrobras posted a net loss of 4.01 billion reais due in large part to a massive impairment charge on its Angra 3 nuclear plant.

    http://www.reuters.com/article/eletrobras-results-idUSS0N153003
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    Oil and Gas

    Iran can add 500,000 bpd oil supply in a year- IEA chief


    Iran is expected to add half a million barrels of oil supply a day within a year from its existing oilfields after the lifting of sanctions against Tehran in January, but developing new fields would take time, the head of the International Energy Agency said on Wednesday.

    Iran, previously OPEC's second-largest exporter, would need to prove that the investment conditions were profitable to the international investors and also that there was predictability in the markets, Fatih Birol, IEA's executive director told Reuters.

    Birol's estimate of Iran's supply increase from existing oilfields was in line with previous market estimates.

    And increases in Iranian gas supplies would come after oil, he said.

    "It was misleading to believe that there would be a huge amount of new Iranian crude and natural gas production entering market in the short term," Birol said on the sidelines of an event in Beijing to mark the 20th anniversary of cooperation between China and IEA.

    "It would take some time in terms of developing new oil fields, finding transmission routes and having the necessary market conditions."

    Iranian oil officials were hoping for a quick rebound in oil sales to European clients, which accounted for over a third of Iran's exports, or 800,000 barrels per day, before the European Union imposed sanctions in 2012 over Tehran's nuclear programme.

    The IEA chief said that may take some time too given ample supply in the market and lack of growth prospects in Europe.

    http://www.reuters.com/article/china-iea-idUSL3N1723AO
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    OPEC oil output rises in March as Iran, Iraq growth offsets outages


    OPEC oil output is rising in March, a Reuters survey found, as higher supply from Iran after the lifting of sanctions and near-record exports from southern Iraq offset maintenance and outages in smaller producers.

    The survey also found no major change in production in top exporter Saudi Arabia - another sign that Riyadh is serious about freezing output to support prices, which hit a 12-year low near $27 a barrel in January but have since recovered to $40. Producers are meeting on April 17 in Qatar to discuss the plan.

    "The production freeze has put a floor under the price," said Carsten Fritsch, analyst at Commerzbank. "We see a risk of a short-term setback if the meeting produces a disappointment."

    Supply from the Organization of the Petroleum Exporting Countries has risen in March to 32.47 million bpd from 32.37 million bpd in February, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.

    The biggest rise came from Iran following the lifting of Western sanctions in January. Tehran, which wants to recover market share it lost under sanctions, has said it will not take part in the production freeze.

    Iran has increased output by 230,000 bpd since December, according to Reuters surveys. Iranian officials say the increase in supplies is much larger.

    Iraq, OPEC's largest source of supply growth in 2015, managed to raise output. An increase in southern exports to what may be a new record in March offset disruption to flows along a pipeline carrying oil from the Kurdish region.

    Angolan exports rose. In countries where output has fallen, the drop was the result of outages and maintenance rather than voluntary restraint.

    Output declined in the United Arab Emirates, where work on oilfields that produce Murban crude is curbing production. The maintenance will not be completed until April.

    There was a further decline in Nigeria due to a whole month of disruption to the Forcados crude stream operated by Royal Dutch Shell's local venture, but this was partially offset by higher supply of other grades.

    Libyan output, already at a fraction of rates seen before the country's civil war, fell due to apower outage. Supply in Venezuela edged lower.

    Saudi Arabia kept output steady compared with February, sources in the survey said, citing stable to slightly lower exports in March. Saudi production was assessed at 10.18 million bpd versus 10.20 million in February.

    OPEC production has surged since the group in November 2014 abandoned its historic role of cutting supply alone to prop up prices, in the hope that lower prices would curb the growth of more costly-to-develop competing supply sources.

    The extra OPEC crude added to a global glut, and this year's output freeze agreement represents the first cooperation on supply policy between OPEC and non-OPEC since 2001.

    http://uk.reuters.com/article/opec-oil-survey-idUKL5N1722LR

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    Sinopec to Double Natural Gas Output by 2020 as China Shuns Coal


    China Petroleum & Chemical Corp., one of the country’s state-run energy giants, plans to ride a wave of new gas discoveries to double annual output to 40 billion cubic meters by 2020 as the country pushes to replace coal with the cleaner fuel.

    Sinopec, as China Petroleum is known, will produce 29.5 billion cubic meters of conventional natural gas, 10 billion cubic meters of shale gas and 500 million cubic meters of coal-bed methane by 2020, almost doubling its 2015 gas output of 20.8 billion cubic meters, Chairman Wang Yupu said at a press conference in Hong Kong Wednesday.

    The 2020 target doesn’t include 2 billion cubic meters of annual output from a shale gas production facility in southern Sichuan province that Sinopec will begin building this year, President Li Chunguang said at the same event. The bulk of the company’s shale gas output comes from its flagship Fuling field in Chongqing, Li said.

    The Beijing-based company, which lost its spot as China’s No. 2 oil and gas producer to rival Cnooc Ltd. after cutting output from high-cost fields in 2015, sees natural gas as a more attractive expansion opportunity than crude. A price of $60 a barrel is needed for all Sinopec oil fields to make a profit, Wang said. Brent crude, the global benchmark, was trading in London at $39.69 on Wednesday, up 6.5 percent this year.

    China plans to cut coal consumption to 62 percent in the country’s energy mix by 2020 and raise natural gas consumption to more than 10 percent, according to China’s 2014-2020 energy development strategy released by the State Council. Coal last year accounted for 64 percent of China’s total energy consumption, while natural gas accounted for about 6 percent.

    Sinopec made several significant natural gas discoveries in China’s Sichuan province and the Erdos basin of Inner Mongolia in the past year, Wang said, adding the discoveries will provide strong support for the company’s natural gas expansion.

    The company will build pipelines and storage sites, as well as facilities to liquefy natural gas, in Sichuan and provinces along the Yangtze River to send gas to end users in populous riverside cities, Wang said.

    http://www.bloomberg.com/news/articles/2016-03-30/sinopec-to-double-natural-gas-output-by-2020-as-china-shuns-coal
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    Shell says Dutch investigators visit Shell headquarters in Nigeria oil probe


    Royal Dutch Shell said on Wednesday Dutch investigators recently visited its headquarters in the Hague in the Netherlands in relation to an investigation into a Nigerian offshore oil field.

    "Representatives of the Dutch Financial Intelligence and Investigation Service and the Dutch Public Prosecutor recently visited Shell at its headquarters, " a spokesman said.

    "The visit was related to OPL 245, an offshore block in Nigeria that was the subject of a series of long-standing disputes with the Federal Government of Nigeria."

    Shell is cooperating with the authorities and is looking into the allegations, the spokesman said.

    http://www.reuters.com/article/shell-nigeria-idUSL5N1722ME
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    Asia's record LPG shortfall to attract increasing U.S. exports

    Asia's record LPG shortfall to attract increasing U.S. exports

    Asia's supply shortfall of liquefied petroleum gas (LPG) will rise to record highs for at least the next two years, drawing ever more U.S. exports to fill the void.

    The deficit between what Asia can supply and demand for LPG will rise to a record of 1.42 million barrels per day (bpd) in 2016, surpassing last year's 1.3 million bpd, said David Wech, managing director of consultancy firm JBC Energy.

    This deficit will increase to 1.5 million bpd by 2017, he added. As a result, the region may draw almost 300,000 bpd of LPG from the United States in 2016 and 340,000 bpd in 2017, said Wech.

    U.S. exports to Japan, South Korea, Singapore and China, the world's largest LPG consumer, already hit a record in 2015, averaging 248,000 bpd, data from the U.S. Energy Information Administration showed.

    Importers of U.S. LPG include Japan's Astomos Energy Corp and Eneos Globe Corp, South Korea's E1 and China's Unipec.

    "Since 2009, every year has seen a new all-time high in Asia's LPG deficit due to strong LPG demand growth," said Wech.

    U.S.-based Enterprise Products Partners and Phillips 66 are poised to fill Asia's demand as they have either recently expanded their export capabilities or, in the case of Phillips, will be opening a new terminal later this year.

    "In the case of South Korea, around 80 to 85 percent of the LPG imports are from the Middle East (Asia's key supplier) and 15 to 20 percent from the U.S, which will likely increase its share from this year. It will be an interesting market," said a LPG consumer.

    The U.S. holds a price advantage over Middle Eastern suppliers with propane at the Mont Belvieu, Texas, hub at 43 cents per gallon, or about $230 a tonne, although that does not include freight for the voyage to Asia. That compares to the current contract price from Saudi Aramco at $283.

    LPG is a mixture of two gases, butane and propane. Asian consumers primarily use the fuel for cooking and heating but the gas also powers cars and is used as a petrochemical feedstock.

    Asia's growing dependence on U.S. LPG may mean higher propane and butane prices for American consumers as exports pull supply away, analysts at Barclays Capital said in a March 28 note.

    "As supply and demand fundamentals continue to improve due to increased export levels and domestic (U.S.) demand, we believe ethane and propane are well positioned," said Barclays.

    The region's total LPG consumption, including the Indian subcontinent, is projected to reach 113 million tonnes in 2016, or about 3.6 million bpd, said Yanyu He, director of Natural Gas Liquids Research at IHS, adding that the region has the most acute supply shortages in the world.

    This is up from 105 million tonnes in 2015 and it will grow to 121 million tonnes next year, said He.

    http://www.reuters.com/article/asia-energy-lpg-idUSL3N16N2KV

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    Petrobras to save $500 mln a year with reorganization plan


    State-controlled Petróleo Brasileiro SA, the Brazilian oil producer at the center of a sweeping corruption probe, plans to save 1.8 billion reais ($500 million) a year through a reorganization plan that includes the merger of several business units, job cuts and a streamlining of activities.

    In a securities filing, the company known as Petrobras said on Wednesday that a new governance model will lead to a 43 percent reduction in 5,300 jobs with diverse non-operational responsibilities. Petrobras is cutting costs, reducing capital spending and selling assets to stem the impact of slumping oil prices and the probe, which partially curtailed access to financing.

    http://www.upstreamonline.com/live/1428280/petrobras-job-cuts-exceed-target?utm_source=twitterfeed&utm_medium=twitter
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    Eurogas: European LNG imports up with rising gas consumption


    Eurogas, the association representing European gas distributors on Wednesday estimates the gas consumption went up 4 percent in 2015 compared to the year before.

    According to the initial estimates, European gas consumption reached a 426.3 billion cubic meters, which was reflected in a rise in LNG imports, a result of the supply diversification, Eurogas said in its report.

    As the association informs, this was the first rise in gas consumption in four years.

    Eurogas noted that LNG had the largest share of gains in imports in some countries, such as the Netherland where it almost doubled, while LNG imports in Italy jumped some 34 percent.

    One of the contributing factors was the weather as well as the economic recovery in countries such as the Czech Republic, France and Slovakia which posted an increase in industrial gas demand. Other countries did, however, post a decline in this sector.

    Due to a drop in gas prices, it also gained a share in the power sector in the United Kingdom, Italy and Greece while tax regime in Finland curbed the gas consumption.

    Compressed natural gas market developed in countries such as the Czech Republic where CNG consumption rose 46 percent year-on-year, Eurogas said.

    http://www.lngworldnews.com/eurogas-european-lng-imports-up-with-rising-gas-consumption/

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    BP and Kuwait Petroleum Corporation sign cooperation agreement


    BP and Kuwait Petroleum Corporation (KPC) have signed a framework agreement to explore possible joint opportunities for investment and cooperation in future oil, gas, trading and petrochemicals ventures.

    Signed by BP chief executive officer Bob Dudley and KPC chief executive officer Nizar Mohammad Al-Adsani, the agreement paves the way for both companies to jointly invest and cooperate in oil and gas projects in Kuwait and globally.

    'BP's commitment to Kuwait dates back to our participation in the discovery of the giant Burgan oil field in the 1930s and we are there today extending the life of the field,' Dudley said. 'We look forward to working with KPC to help the people of Kuwait realize the full potential of their nation's oil and gas resources and exploring new opportunities globally.'

    In addition to enhancing oil and gas recovery from Kuwait's existing resource base, the agreement also includes the intention to study opportunities for joint investment in future oil and gas exploration both inside Kuwait and globally. Other elements of the agreement cover possible future oil and gas trading deals including LNG trading and related ventures.

    Opportunities for cooperation and investment in midstream and petrochemical projects globally will also be considered under the agreement, including potentially deploying BP's proprietary paraxylene technology as part of KPC's petrochemicals projects.

    http://www.oilvoice.com/n/BP-and-Kuwait-Petroleum-Corporation-sign-agreement-outlining-cooperation-on-oil-gas-and-petrochemicals/fac1a4101e4f.aspx
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    InterOil provides drilling update and 2015 results


    -Antelope-6 identified 138 feet of dolomite with connectivity to rest of field
    -Antelope-5 extended well test confirms excellent reservoir qualities
    -Entering final stages of appraisal of the Elk-Antelope field
    -GLJ increases year-end Contingent Resource estimate
    -Raptor 3.6 Tcfe, Bobcat 2.4 Tcfe (independent est'd gross unrisked 2C resource)
    -$252 million liquidity at end 2015. Proposal to increase and extend credit facility.

    InterOil Corporation (NYSE: IOC; POMSoX: IOC) today provided an update on its operations and financial results for the fourth quarter and financial year ending December 31, 2015.

    InterOil Chief Executive Dr Michael Hession said momentum was building for the multi-billion dollar Papua LNG project with Antelope-6 intersecting 42 meters (138 feet) of dolomite with connectivity to the rest of the Antelope field. In addition the excellent reservoir qualities, identified by a short flow test last year at Antelope-5, were successfully confirmed by a longer flow-test in Q1 2016.

    'During 2015, significant milestones were achieved with the appointment of Total as operator and the selection of the Papua LNG project's key infrastructure sites. Analysis from independent sources suggests Papua LNG will be one of the most competitive new-build LNG projects globally, with short shipping distances to Asian markets and potential for attractive returns.

    'The data from the last three appraisal wells have surprised on the upside and extended flow tests have confirmed connectivity, deliverability and excellent reservoir quality across Antelope. This will mean a less complex and lower cost development,' said Dr Hession.

    'While the analysis of the Antelope-6 well and the Antelope-5 flow test is continuing, results to date have been encouraging and we remain confident of a two-train LNG development. On completion of the appraisal program, data will be submitted to two independent auditors for certification, a process which could take four to six months.'Following last year's restructuring and streamlining of the business, we have reduced guidance on our expected 2016 spend to a lower range of $155 million to $170 million, predominantly focused on the Papua LNG project. While we have $252 million in current liquidity at the end of 2015, we are in discussions with our lenders to increase and extend our credit facility. It is proposed to complete the increased and extended facility in the second quarter of 2016.

    'In 2015, the Company had the Raptor and Bobcat discoveries independently assessed for 2C natural gas and natural gas liquids. These equate to a gross unrisked resource estimate of 3.6 Tcfe and 2.4 Tcfe respectively. This first-time external assessment provides a good basis for discussions with various strategic partners.

    'Our focus in 2016 will be on completing the appraisal program, progressing the certification of Elk-Antelope volumes, advancing the world-class Papua LNG project from Basis of Design to FEED and monetizing our independently assessed discoveries with strategic partners,' stated Dr Hession.

    Following the full analysis of the recent flow test and drilling results, the PRL 15 JV is expected to decide in Q2 2016 if a further appraisal well, Antelope-7, is required. The encouraging appraisal data gathered to date continues to support InterOil's confidence in a two-train LNG development.

    http://www.oilvoice.com/n/InterOil-provides-drilling-update-and-2015-results/a7b628a6c57e.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Summary of Weekly Petroleum Data for the Week Ending March 25, 2016


    U.S. crude oil refinery inputs averaged over 16.2 million barrels per day during the week ending March 25, 2016, 414,000 barrels per day more than the previous week’s average. Refineries operated at 90.4% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.4 million barrels per day. Distillate fuel production increased last week, averaging over 4.9 million barrels per day.

    U.S. crude oil imports averaged over 7.7 million barrels per day last week, down by 636,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.0 million barrels per day, 9.8% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 516,000 barrels per day. Distillate fuel imports averaged 98,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.3 million barrels from the previous week. At 534.8 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.5 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 1.1 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.6 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 1.5 million barrels last week.

    Total products supplied over the last four-week period averaged 19.5 million barrels per day, up by 2.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 5.0% from the same period last year. Distillate fuel product supplied averaged 3.7 million barrels per day over the last four weeks, down by 3.4% from the same period last year. Jet fuel product supplied is down 1.9% compared to the same four-week period last year.

    Cushing crude -272k

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
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    US Oil production drops 16,000 bbl day in latest week


                                                  Last Week   Week Before    Last Year

    Domestic Production '000........  9,022            9,038             9,386

    http://ir.eia.gov/wpsr/overview.pdf
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    EIA report shows decline in cost of U.S. oil and gas wells since 2012

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    The profitability of oil and natural gas development activity depends on both the prices realized by producers and the cost and productivity of newly developed wells. Overall trends in well development costs are generally less transparent than price and productivity trends, which are readily observable in the markets or through analyses of well productivity trends such as EIA's monthly Drilling Productivity Report.

    In an effort to increase understanding of the costs of upstream drilling and production activity, EIA commissioned IHS Global Inc. (IHS) to study these costs on a per-well basis in the Eagle Ford, Bakken, Marcellus, and Permian regions, analyzing the Permian's Midland and Delaware basins separately. Upstream costs in 2015 were 25% to 30% below their 2012 levels, when per-well costs were at their highest point over the past decade. Changes in technology have affected drilling efficiency and completion, supporting higher productivity per well and lowering costs, while shifts towards deeper and longer lateral wells with more complex completions have tended to increase costs.

    Costs per well generally increased from 2006 to 2012, demonstrating the effect of rapid growth in drilling activity. Since 2012, costs per well have decreased because of reduced overall drilling activity and improved drilling efficiency and tools. Changes in costs and well parameters, such as the need to drill deeper or longer lateral wells, have affected the onshore oil plays differently in 2015, with recent per-well costs ranging from 7% to 22% below 2014 levels.

    Differences in geology, well depth, and water disposal options can affect costs for each onshore oil play area. The adoption of best practices and the improvement of well designs have reduced drilling and completion times, decrease total well costs, and increase well performance. Greater standardization of these drilling and completion practices and designs across the industry should continue to lower costs. The drilling cost per foot, based on total depth, and the completion cost per foot, based on lateral length, are both projected to maintain these lower cost trends through 2018. Sustained lower upstream costs may affect near-term oil and natural gas markets, and ultimately, the prices of these fuels.
    Image title


    Source: U.S. Energy Information Administration, Trends in U.S. Oil and Natural Gas Upstream Costs

    http://www.oilvoice.com/n/EIA-report-shows-decline-in-cost-of-US-oil-and-gas-wells-since-2012/2d54fa8f3eed.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29

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    EXCO Resources says borrowing base cut by 13 pct to $325 mln


    EXCO Resources Inc said its lenders have cut its borrowing base by 13 percent to $325 million amid a slump in oil prices.

    Small and mid-sized oil and gas companies are expected to see large cuts to their credit lines when banks reassess reserve-based loans this spring in the backdrop of a 60 percent drop in oil prices.

    The cut comes two days after larger producer Whiting Petroleum Corp said its borrowing base was slashed to $2.75 billion from $4 billion.

    http://www.reuters.com/article/exco-resources-borrowing-base-idUSL3N1723IZ
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    SandRidge hires advisers to evaluate options including bankruptcy


    The company said there was substantial doubt about its ability to continue as a going concern. 

    A more than 60 percent fall in oil prices since mid-2014 has eroded cash flows at several oil and gas producers, leaving them struggling to service debt payments.

    SandRidge, which is working with law firm Kirkland & Ellis and investment bank Houlihan Lokey on debt restructuring options, has drawn down its revolving credit line, and has tried to trim costs with asset sales and job cuts.

    Reuters reported in January that the heavily indebted oil and gas company has been exploring debt restructuring options, including a pre-packaged bankruptcy.

    Oklahoma City-based SandRidge, which reported results on Tuesday after delaying the filing, had about $3.63 billion in total debt as of Dec. 31.

    SandRidge, which produces oil and gas from shale formations in Oklahoma and Kansas, was founded in 2006 by Tom Ward, who also co-founded natural gas company Chesapeake Energy Corp (CHK.N). Ward was ousted as chief executive in 2013 by SandRidge's board after a proxy fight with shareholders.

    http://www.reuters.com/article/us-sandridge-restructuring-idUSKCN0WW1MB
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    Alternative Energy

    China’s State Grid Envisions Global Wind-and-Sun Power Network


    China’s State Grid Corp. already dominates its home market, operating most of the electricity grid that powers the world’s second-largest economy. Now it has big plans for the world: a $50 trillion global power network that harnesses Arctic winds and equatorial sunlight. As WSJ’s Brian Spegele reports:

    State Grid Chairman Liu Zhenya outlined his company’s vision Wednesday, saying a new global electricity network is the world’s best bet for overcoming resource scarcity, and limiting the effects of pollution and climate change. Knitted together by new, efficient, long-range transmission lines, the world grid, he said, could be running by 2050 and would tap advanced technology for renewable solar and wind resources.

    “This is the right thing to do to benefit all the people of the world,” Mr. Liu said at a media briefing during an international symposium on the project.

    Unaddressed by Mr. Liu were who would pay for one of the biggest infrastructure projects ever attempted and whether foreign governments would trust a Chinese company to lead development of a critical utility. The $50 trillion estimated price is nearly twice the economic output of the U.S. and China combined. State Grid is using and developing long-range transmission technologies, making the project in some respects a buzz-generating marketing campaign for the company.

    http://blogs.wsj.com/chinarealtime/2016/03/31/chinas-state-grid-envisions-global-wind-and-sun-power-network/
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    Tesla Model 3 Electric Car Seen Getting 225 Miles Per Charge


    When Tesla Motors Inc. unveils its Model 3 on today, the world will see the more affordable electric sedan that has been part of the company’s “master plan” for a decade.

    It’s not just a new car. It’s a new vehicle platform, giving Tesla the flexibility to add new bodies with relative ease. The company has said the Model 3 will include a sedan and will also be the basis for a crossover sport utility vehicle. Chief Executive Officer Elon Musk has also talked about his desire to build a pickup at some point.

    Sam Jaffe, an analyst at Cairn Energy Research Advisors, predicts in a report for clients on Wednesday that the Model 3 will have a 65 kilowatt-hour battery pack and a range per charge of about 225 miles (362 kilometers). Measured as kilowatt hours per kilogram or liter, the “energy density” of a battery determines range: The more watt hours, the more miles a vehicle can travel on a charge. High energy density at low cost is the holy grail of the battery industry, and Jaffe said he expects the new cells in the Model 3 will have roughly 35 percent more energy than each cell in Tesla’s Model S and Model X.

    Jaffe also said car sharing will become a significant part of Tesla’s business model in the coming years, in part because of autonomous driving features like “summon mode,” which lets the car on its own travel at low speed from a parking spot to it owner. If that ability could be expanded to entire neighborhoods, a fleet vehicle could hover nearby and be sent on demand.

    “Tesla Motors will become a major player in the car-sharing market,” Jaffe said in the report, noting that the company “controls both the vehicle technology and has the software development capabilities to control the software platform that would be at the heart of such a service.”

    http://www.bloomberg.com/news/articles/2016-03-30/tesla-s-model-3-to-give-electric-car-maker-platform-to-expand

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    Two arrested in REE investment scam.



    Officers from Plymouth Financial Investigation Unit (FIU) launched Operation Stagecoach after a Plymouth police officer made a routine visit to a man in his 80s on a completely separate matter earlier this year.

    The officer became concerned when she learned the man was about to invest a five figure sum in a scheme. She passed on her concerns to detectives from FIU who initially contacted the City of London Police.

    FIU officers from Plymouth have since taken the lead in the investigation which is understood to involve hundreds, possibly even thousands, of people across the UK, the majority of whom police say are elderly.

    The team are also now working with officers from Trading Standards and sources suggest the scale of the suspected fraud involves more than £20m.

    Police have said the suspected fraud involves people being ‘cold called’ and persuaded to invest substantial amounts of money in rare earth metal oxides.

    The alleged fraud centres around the true value of the items invested in.

    A 33-year-old man and a 39-year-old woman – both from Sandhurst in Wiltshire – were arrested by FIU detectives earlier this month on suspicion of fraud. They have been released on police bail until July 4, pending further inquiries.

    In addition, FIU officers recently executed a search warrant on offices at Canary Wharf, London believed to be connected with a company which sells investments.



    Read more: http://www.plymouthherald.co.uk/arrested-multi-million-pound-rare-metal-scam/story-18731344-detail/story.html#ixzz44TJ16rTr 
    Follow us: @heraldnewslive on Twitter | theplymouthherald on Facebook

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    Agriculture

    K+S chairman backs CEO after report of pressure to replace him


    Germany's K+S is happy with Norbert Steiner as chiefexecutive, the potash and salt mining group's chairman said in response to a report that there was board pressure to replace him with the K+S finance chief.

    German magazine Bilanz reported on Wednesday that "influential supervisory board members" at K+S were pressing for Chief Financial Officer Burkhard Lohr to be made CEO before its May 11 AGM because they were dissatisfied with the business.

    "The board is very satisfied with the work of Mr Steiner," supervisory board Chairman Ralf Bethke said in a statement in response to the report, which cited unnamed company sources.

    Bethke said the board had been looking intensively at the succession plan for Steiner, whose contract runs out after the 2017 annual shareholder meeting, and that it would publish its decision in due course.

    K+S warned earlier this month of a significant drop in operating profit, citing lower potash prices and output restrictions imposed by environmental regulators.

    Lohr joined as CFO in 2012, having held the same position at construction group Hochtief.

    Steiner, who recently said he expected to retire in May 2017 when his contract runs out, has had a tumultuous time of late.

    Last year, K+S fended off a 41-euro-per share takeover approach from larger Canadian rival Potash Corp, which withdrew its proposal in October.

    Steiner argued at the time the proposed bid failed to take into account the value of K+S's new mining project in Canada and its global salt business but K+S has seen its share price drop to 21 euros, hurt by lower global potash prices.

    The company is facing production outages this year because a environmental regulator in the state of Hesse in December gave only provisional approval for the disposal of waste water and imposed strict limits.

    K+S has said it expects to get the regulator's final approval, meaning that restrictions would be lifted, by summer of this year.

    Separately, German prosecutors are pressing charges against CEO Steiner and 13 other K+S employees over alleged illegal waste water disposal, but the court has yet to decide whether the case will go to trial.

    K+S has said a legal audit it had commissioned by an external law firm found no evidence of criminal conduct.

    http://www.reuters.com/article/ks-ceo-idUSL5N1722MQ
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    Base Metals

    Glencore to invest $1.1bn in Zambia, kwacha gains


    Glencore plans to invest over $1.1 billion in Zambia to sink three shafts with new technology that will extend mine life by over 25 years, pushing the kwacha to its highest in two months.

    “The news from Glencore obviously sent a positive signal but overall we are seeing a lot of dollar supply with very little demand,” analyst Maambo Hamaundu said.

    Glencore plans to make investments  now and 2018 and it was expected that Mopani Copper Mines (MCM) would be turned into a world-class mining operation by 2023, it said.

    “We firmly believe that we shall be able to overcome the challenges that we face today as a company and become profitable and operationally-efficient,” Mopani  said in a statement.

    Glencore was fully committed to Mopani and had invested over $3 billion in upgrading infrastructure and in major capital expansion programmes since 2000, Mopani said.

    An electricity shortage in Africa’s second-biggest copper producer and weaker prices have put pressure on Zmbia’s mining industry, threatening output, jobs and economic growth.

    http://www.mineweb.com/news-fast-news/glencore-to-invest-1-1bn-in-three-new-shafts-in-zambia/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A%20MasterGold%20%28Gold%20News%29&utm_term=MasterMetals
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    Steel, Iron Ore and Coal

    Shenhua may not go ahead with Watermark project, report


    China Shenhua Energy, the country’s top coal producer, may not go ahead with its Watermark coal mine project on the NSW Liverpool Plains, as low prices and weak demand make it unviable, the Sydney Morning Herald reported/

    http://en.sxcoal.com/0/143580/DataShow.html
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    German EconMin wants to help steel sector compete with China


    German Economy Minister Sigmar Gabriel backs demands from Europe's steel industry to create globally fair competition and has, with some EU counterparts, asked the EU to take measures to help, a spokeswoman said on Wednesday.

    "Overcapacity in China's steel sector should not be a burden on EU manufacturers," said an Economy Ministry spokeswoman, adding the industry's situation was serious in view of high levels of Chinese exports.

    "Minister Gabriel, with seven other European ministers, therefore wrote to the EU Commission and Council Presidency at the start of February and demanded trade policy measures to fight competition distortion in the steel sector," she said.

    http://www.reuters.com/article/germany-steel-idUSB4N16H005
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    Baosteel expects higher 2016 steel output even as China combats glut


    China's top listed steelmaker Baoshan Iron and Steel Co. Ltd (Baosteel) expects its total output to rise about 20 percent in 2016, even as the country steps up efforts to slash a massive capacity glut amid a rise in anti-dumping complaints.

    China has been aggressively shipping out its surplus steel products and selling them, according to other producing nations, at unfairly low prices. Exports hit a record 112 million tonnes last year and as recently as this week, India's Tata Steel put its British operations up for sale, blaming a glut in cheap Chinese steel for the move.

    Total steel capacity in China is estimated at around 1.2 billion tonnes and is expected to further increase this year, according to the China Iron and Steel Association.

    Baosteel's huge Zhanjiang steel production base, with an annual capacity of about 9 million tonnes, goes into operation later this year, its board secretary Zhu Kebing said.

    Baosteel, the listed arm of China's No.2 steel producer - the Shanghai-based Baosteel Group, produced 22.6 million tonnes of crude steel in 2015, and is likely to produce 27.1 million tonnes this year, Zhu added on Thursday.

    "As a result of the completion of main production lines at the Zhanjiang project in 2016, the scale of the company's output will show an increase," he said. Zhu, however, added that steel prices, currently near decade-lows, are expected to remain weak.

    The plunge in the prices of steel amid a slowdown in China's economic growth has taken a toll on producers' earnings, with Baosteel reporting a 82.5 percent year-on-year slump in 2015 net profits to 1.013 billion yuan ($156.70 million).

    Other steel firms fared even worse last year. Maanshan Iron & Steel reported losses of 4.8 billion yuan after a modest profit in 2014, Hunan Valin Steel also posted a loss of 2.96 billion yuan, while the Angang Steel Company reported losses of 4.59 billion yuan.

    With China's steel capacity surplus at around 400 million tonnes and average utilisation rates at under 70 percent, the government is aiming to shut around 100-150 million tonnes of capacity in the next five years.

    BAOSTEEL TO BENEFIT FROM REFORMS

    Local governments are currently working out how the capacity closure targets will be divided among producers, Zhu said.

    "Looking over the long-term, China's steel demand has already hit a peak and some capacity needs to be withdrawn from the market, or merged and restructured, and this will benefit the company by raising our market value," he added.

    Increased buying from Chinese steel mills has buoyed iron ore prices this year, but Zhu does not see this rally lasting.

    Spot iron ore prices .IO62-CNI=SI have risen 24 percent so far in 2016, but have fallen 16 percent from this year's high of $63.30 a tonne reached on March 8.

    "The price increase in March was the result of many different factors, and short-term fluctuations are normal, but (we) don't think it is sustainable," he said, adding that iron ore will remain oversupplied this year.

    http://www.reuters.com/article/china-steel-idUSL3N1731EZ

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