Mark Latham Commodity Equity Intelligence Service

Tuesday 13th September 2016
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    China August factory output, retail sales beat expectations

    China's industrial output grew the fastest in five months in August as demand for products from coal to cars rebounded thanks to higher government spending and a year-long credit and property boom.

    China's steel industry, in particular, has perked up in recent months as capacity cuts and production curbs have boosted prices and profits, while a government infrastructure spree and housing boom have spurred demand for building materials from steel to cement.

    Improvements in August, while only slight, suggest China's third-quarter economic growth is holding up better than expected just a few months ago and likely remains within the government's 2016 target range of 6.5-7 percent, despite an alarming drop in private investment which is leaving the economy more dependant on government spending.

    "In general, today's activity data are in line with the (upbeat) trade data and inflation figures released last week," Commerzbank economist Zhou Hao wrote in a note.

    "It is a good time for China to deliver on structural reform, especially on the SOE side, to restore confidence in China's economy," he said, referring to a long-promised overhaul of the country's often bloated and inefficient state-owned enterprises.

    Industrial output rose 6.3 percent in August from a year earlier, the National Bureau of Statistics said on Tuesday, surprising analysts who had expected it to pick up only slightly to 6.1 percent.

    China's biggest listed steelmaker, Baoshan Iron & Steel (600019.SS) (Baosteel) said earlier on Tuesday it has raised its prices for October.

    Retail sales also handily beat expectations, with growth accelerating to 10.6 percent from 10.2 percent the previous month. Analysts had forecast an increase of 10.3 percent.

    Car sales in particular have been strong in China this year, hitting a 3-1/2 year high in August as buyers rushed to get new wheels before a tax cut expires at year-end.

    Fixed asset investment was unchanged at 8.1 percent over the first eight months of the year, marginally better than expected.

    Still, the rate of growth in investment remained the slowest since December 1999, and details showed a growing imbalance between public and private spending that raised questions about China's longer-term growth prospects.

    Highlighting Beijing's increasing reliance on government spending to drive the economy, investment by state firms surged 21.4 percent in the first eight months of the year, though the pace did ease slightly from 21.8 percent in January-July.

    China's fiscal spending rose 12.7 percent in January-August from the same period last year, and was up 10.3 percent in August alone.

    Property remained a bright spot, however, despite fears that a near one-year-long housing boom may be peaking.

    Property investment rose 6.2 percent in August from a year ago, according to Reuters calculations, compared with 1.4 percent in July. Real estate investment directly affects about 40 other business sectors in China.

    "A property investment rebound means it will continue to contribute positively to gross domestic product this year, albeit probably not as significantly as seen in the first half," said Ma Xiaoping, an economist at HSBC.


    Private investment grew just 2.1 percent over the first eight months of the year, the same pace as in January-July and remaining at record lows.

    However, on a monthly basis, private firms boosted spending 2.3 percent, reversing a two-month slide.

    Chinese policymakers have focused on improving conditions for the private sector this year, including calling for better access to credit and fair market access. But private firms still complain of unfair competition with state firms and restricted market access, especially in key parts of the services sector.

    Trade data last week showed stronger domestic demand as imports rose for the first time in nearly two years, while exports fell less than expected.

    While economic activity in China has cooled this year, it

    appears less at risk of a hard landing than feared in 2015. The broader economy remains relatively stable, albeit sluggish, despite continued weakness in the massive export sector and overcapacity plaguing many industries.

    However, analysts say China may face a renewed slowdown as previous policy support fades and the government holds off on further easing over concerns of rising debt and housing bubbles.

    "We think that momentum behind the economy will fade in 2017, when the property market will be on a downward cycle and the automotive sector likely to be facing overcapacity issues," Tom Rafferty, Asia Economist at the Economist Intelligence Unit, said in a note.
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    China Aug thermal power output up 6.4 pct on mth

    Electricity output from China's thermal power plants – mainly coal-fired – rose 7.5% on year and 6.4% on month to 413.8 TWh in August, showed data from the National Bureau of Statistics (NBS) on September 12.

    By contrast, China's hydropower output climbed 5.5% on year to 110.6 TWh in the month; nuclear power output rose 19.6% from the year-ago level to 20.2 TWh; wind power output rose 16.6% on year to 13.6 TWh; and solar power output rose 24.3% on year to 3.6 TWh.

    Total electricity output in China reached 561.7 TWh in August, rising 7.8% from a year ago and 2.0% from the previous month, the NBS data showed. That equated to a daily output of 18.12 TWh on average in the month.

    Over January-August this year, China's total power output increased 3% on year to 3,877.2 TWh.

    Of this, thermal power stood at 2,863.9 TWh, dropping 0.5% year on year; while hydropower reached 715.7 TWh, up 12% from the year prior; followed by nuclear power output at 136.4 TWh, rising 23.7% on year; wind power at 135.8 TWh, rising 16.3% on year; and solar power output at 25.2 TWh, increasing 28.9% on year.

    Over the period, thermal power generation accounted for 73.86% of the total power generation, while hydropower output accounted for 18.46%.
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    Uniper's $4.4 bln listing unveils huge valuation gap

    Investors put a price tag of 3.9 billion euros ($4.4 billion) on power plant and energy trading firm Uniper on Monday, giving shareholders in former parent E.ON insight into the potential writedowns it faces.

    E.ON, which holds 46.65 percent of Uniper after the spin-off, said last month it valued the division at some 12 billion euros in its books and warned further charges might follow once Uniper started trading on the stock exchange.

    In a market debut closely watched by investors, Uniper's shares traded at 10.58 euros apiece at 1100 GMT, above the opening price of 10.015 euros and towards the upper end of potential valuations given by analysts. E.ON slumped 15 percent.

    By midday, about 27 million shares in both companies had changed hands, accounting for about half of all trading activity among German blue-chips.

    "We see a major buying opportunity in Uniper because of the near-term share price volatility based on forced index related selling and investor rotation following the demerger," Macquarie analysts said, starting the company with an "outperform" rating.

    Due to selling pressure from index trackers, who got Uniper stock by virtue of being E.ON shareholders but have to dump it because it will be excluded from Germany's DAX index, analysts had expected Uniper to trade anywhere between 5.50-13.00 euros.

    E.ON hopes that carving out the ailing gas- and coal-fired power plants will unlock the value of its future core businesses - networks, renewable energy and retail - and ultimately raise the value of both companies as separate entities.

    This was reflected in the group's joint market valuation on Monday, which showed a combined 17.4 billion euros, higher than E.ON's 15.9 billion valuation at Friday's closing price.

    Smaller rival RWE is also in the process of spinning off its power grids, renewables and costumer business into a company dubbed Innogy and it said on Monday it would sell shares in a secondary offering alongside a capital increase.
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    Oil and Gas

    Re-balancing the oil market will take longer than we thought: IEA

    Global oil demand growth is slowing at a faster pace than first thought, the International Energy Agency (IEA) said in its latest market update, warning that markets would have to wait "a while longer" for markets to rebalance.

    "Global oil demand growth is slowing at a faster pace than initially predicted. For 2016, a gain of 1.3 million barrels a day (mb/d) is expected," the IEA said in its September report published on Tuesday, equating to a downgrade of 100,000 barrels a day from its previous forecast.

    The downgrade was "due to a more pronounced slowdown" in the third quarter of 2016, it said before forecasting a further slowing next year. "Momentum eases further to 1.2 mb/d in 2017 as underlying macroeconomic conditions remain uncertain."

    The predictions will be worrying for oil markets at a time when a delicate rebalancing of supply and demand is hoped to be taking place. Oil prices have dropped steadily since mid-2014 on the back of a glut in global oil supply and the failure of demand to keep pace.

    The glut was exacerbated by OPEC, a 14-member oil producing group which includes major Middle Eastern producers, to defend its market share in the face of rivals rather than the oil price. The strategy has put pressure on the cartel's members, who have seen oil export revenues fall, while having the planned effect of putting rival non-OPEC producers out of action.

    The IEA noted on Tuesday that non-OPEC supplies continued to decline. "World oil supplies fell by 300,000 barrels a day in August, dragged lower by declines in non-OPEC," the IEA said although it noted that this decline in global supply was offset by a rise in OPEC production, which has defensively kept its own output at record levels.

    "At 96.9 mb/d, global oil output was 300,000 b/d below a year ago, but near-record OPEC supply just about offset steep non-OPEC declines," the IEA said.

    Uphill struggle ahead

    The price of benchmark Brent crude and West Texas Intermediate (WTI) are currently hovering around the $45-$47 mark with prices fluctuating every time a piece of data signals whether oil demand could rise or fall and on how much of the oil glut remains.

    On Tuesday, for example, oil prices fell in early trade on Tuesday on concerns over increased drilling in the United States, Reuters reported, and as investors took profits after oil prices rose close to 1 percent in the previous session.(103934220)

    Ultimately, oil markets are currently in what the IEA called a waiting game, pondering when demand and supply will return to balance. The outlook was not clear or necessarily rosy, the agency cautioned.

    "When will the world oil market return to balance? That is the big question today. With the price of oil at current levels, one would expect supply to contract and demand to grow strongly. However, the opposite now seems to be happening. Demand growth is slowing and supply is rising. Consequently, stocks of oil in OECD countries are swelling to levels never seen before," the IEA said.

    "Our latest numbers provide some clues as to why. Recent pillars of demand growth – China and India – are wobbling. After more than a year with oil hovering around $50 a barrel, the stimulus from cheaper fuel is fading. Economic worries in developing countries haven't helped either. Unexpected gains in Europe have vanished, while momentum in the U.S. has slowed dramatically."

    "The result has been a slump in oil demand growth from a robust 1.4 mb/d in the second quarter to a two-year low of 0.8 mb/d in the third. Even with a modest weather-related uptick forecast for the end of the year, oil demand growth in 2016 will struggle to get above 1.3 mb/d. Refiners are clearly losing their appetite for more crude oil.

    During the fourth quarter, they are expected to process only 0.1 mb/d more crude than a year ago."

    As such, the IEA warned that the data suggested "that this supply-demand dynamic may not change significantly in the coming months."

    "As a result, supply will continue to outpace demand at least through the first half of next year. Global inventories will continue to grow: OECD stockpiles in July smashed through the 3.1 billion barrel wall. As for the market's return to balance - it looks like we may have to wait a while longer."
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    OPEC Flips Forecast to Predict Rebound in Rival Supply Next Year

    OPEC flipped its forecasts for rival supplies in 2017, predicting an increase in output from outside the group instead of a decline, the latest sign that the global surplus is persisting.

    Production from outside the Organization of Petroleum Exporting Countries will grow by 200,000 barrels a day next year, according to the group, which a month ago had projected a drop of 150,000 a day. The gain is driven by the startup of the Kashagan oil field in Kazakhstan. That means the organization’s total output of 33.24 million barrels a day in August was 757,000 a day higher than the average amount the world will need from OPEC in 2017.

    “For 2017, non-OPEC supply growth has also been revised up,” the organization’s Vienna-based research department said in its monthly market report. “This is mostly due to new production from Kashagan next year.”

    Oil climbed above $50 a barrel last week on speculation that OPEC may reach an accordon output levels with competitors such as Russia at informal talks scheduled in Algeria later this month. Prices have since retreated amid doubts that any agreement will mean a reduction of supplies as long as producers are resolved to defend their share of world markets.

    Stockpiles in developed nations remained 341 million barrels above their five-year average in July, OPEC estimated. The surplus is poised to diminish in the coming months as a result of surprisingly strong demand in major consuming nations, according to the report.

    “This, along with a potentially improving oil supply picture, would contribute to a reduction in the imbalance of market fundamentals,” it said.

    Still, the report indicates that the market will continue to be defined by abundant supply in 2017. As a result of OPEC’s increased projections for rival output, the group cut estimates for the volume of crude it will need to provide next year, by 500,000 barrels a day to 32.5 million a day.

    Representatives of producing nations held a flurry of meetings last week ahead of their gathering in Algiers, with Saudi Arabia’s influential Deputy Crown Prince Mohammed bin Salman meeting with Russia President Vladimir Putin on Sept. 4, and OPEC’s Secretary-General Mohammed Barkindo speaking with Saudi and Algerian ministers on Friday.

    Kashagan Boost

    OPEC pumped 33.24 million barrels a day in August, according to external sources compiled by the organization. Output was 23,100 barrels a day lower than July, as a result of declines in Libya, Nigeria and Venezuela.

    OPEC’s revised outlook for Kazakhstan’s long-delayed Kashagan project follows a similar change made by the International Energy Agency, the adviser to oil-consuming nations, in its report a month ago. The startup of the field by a consortium including Total SA and Eni SpA dragged on for more than a decade, prolonged by the need to build remote islands to support drilling equipment. U.S. output is still projected to decline next year by 170,000 barrels a day.

    The organization kept its estimates for world oil demand unchanged, forecasting that consumption will increase by 1.15 million barrels a day next year to average 95.42 million a day, driven by growth in India, China and the U.S.

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    Here's One Sign That 'Peak Oil' Is Dead

    Google Inc. searches for the idea that once helped propel oil prices to nearly $150 per barrel have dwindled to almost nothing, according to a Sanford C. Bernstein analysis.

    The theory that oil prices would have to rise as supply inevitably declined gained hold on popular imaginations in the mid- to late 2000s, but has since languished in internet obscurity, as new discoveries and technology, including the shale revolution that helped push U.S. oil production to a 40-year high, have ensured plentiful amounts of crude in recent years.

    Underscoring the trend is the fact that Google searches for "too much oil" recently outstripped searches for "Peak Oil." Prices per barrel are currently languishing around $45.

    "As interest in shale-led supply peaks, then naturally interest in the old concern of 'Peak Oil' has all but disappeared after the surge in focus on this during the mid-2000s," Oswald Clint and Mark Tabrett, Bernstein analysts, wrote in a note lamenting the "short-termism" of the oil market and its tendency to seize on a particular narrative to predict future price moves.

    While Google searches might not capture the entirety of oil investors — including professional traders who presumably have access to data not available to curious web browsers — they are a useful indicator of the ideas currently capturing the market's collective hearts and minds, Bernstein argues. Since early 2015, for instance, searches for "oil inventories" have dominated and surpassed searches for "oil demand" and "oil supply," as investors attempt to gauge the size of the supply glut — particularly in the U.S.

    "When it comes to oil markets, short-termism remains rife," the analysts said. "This is evident from changes in Google search trends. Shortly after oil prices started to fall, searches for oil inventories picked up and have only increased since. Oil demand related searches have increased over the same time but oil supply searches have hardly changed."
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    China fuel exports cast fourth-quarter pall over global oil products

    China's state oil refiners are readying to export more diesel and gasoline in coming months as a bleak outlook for what is typically the nation's period of greatest consumption sends shivers through an already saturated global market.

    Even with winter heating demand looming and drivers expected to hit the roads for a week-long national holiday in October, more than a dozen refiners, traders and analysts in the world's second-largest oil consumer said the fourth quarter will be governed by a supply glut and sluggish local uptake.

    Slackening demand this year and surging output from China's small independent refiners have swollen local inventories and spurred state-owned oil companies to sell refined products abroad. In July, such shipments hit a record, with the country becoming a net exporter of fuel for the first time in at least three years.

    "Sales guys at refiners are now really scratching their heads worrying about meeting monthly targets," said Li Yan, a Zibo Longzhong Information Technology analyst, of the difficulty the state companies are having in their domestic markets.

    Analysts from Zibo Longzhong and China Sublime Information Group now say combined demand for diesel and gasoline will fall in the fourth quarter for the first time on an annual basis since the world economic crisis of 2009.

    Sources at four plants - owned by Sinopec, PetroChina and CNOOC and ranked among China's top ten oil refineries - said the outlook leaves them little choice but to branch out further into foreign markets.

    PetroChina's Dalian plant, its largest with a capacity of 410,000 barrels per day (bpd), illustrates the dilemma the refiners face.

    Instead of preparing for a seasonal uptick in domestic demand, the plant is looking to sell more in foreign markets in November and December as local margins weaken, a senior manager at the plant told Reuters. He declined to be named because he's not authorised to speak to the press.

    Struggling to find local buyers for its products, PetroChina has also already cut the Dalian plant's utilization rate to 80 percent from 85 percent in recent months.

    "The start of the fishing season (in October) will bring more diesel demand for us, but (the) market remains saturated with oversupply," the manager said.


    While refineries along the coast and near big cities are making decent profits as demand is more robust, in the north and south margins have declined as consumption has waned and a supply glut has ballooned.

    "Cutting runs will be our last resort if the overseas markets are full and we cannot export," said a senior manager at CNOOC's major plant in Huizhou in southern Guangdong province.

    China's rising exports and the managers' complaints about low refinery profits are the latest signs of the diverging fortunes and mounting tension between state-owned players and their upstart independent rivals.

    Since Beijing allowed the refiners known as teapots to import cheap crude last year, this small, nimble group of mostly private companies has ramped up output and undercut the state refiners in retail markets.

    That pain has intensified as gasoline and diesel demand fell 7 percent in the first seven months of 2016, according to Reuters calculations.

    That compares with gasoline and diesel demand growth of 3 percent in 2015 and 6 percent in 2014.

    Fourth quarter demand - though expected to be down versus a year ago for the first time in seven years - will improve slightly from the previous quarter, but not enough to wipe out the glut, analysts and industry insiders said.


    Threats of more exports will be tough to swallow for a region already reeling from China's accelerating pace of shipments.

    The shipments also intensify the battle for market share with rivals in South Korea and Japan, sources in those countries said, with repercussions to be felt well beyond Asia.

    "A step up from current levels is sky high. The middle distillates market will die if that's true," said an official with a refiner based in Japan.

    A manager at Sinopec's Guangzhou refinery in South China said that PetroChina's plans to launch its 260,000 bpd plant in southwest Yunnan province in October will exacerbate the market's woes.

    Sinopec has said it expects to cut domestic sales in the second half of the year by 3 percent to 84 million tonnes.

    It made no forecast on overseas sales, but Sinopec's product exports rose 18 percent in the first half of 2016, outpacing a 3 percent rise in home deals.

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    China Oil Output Drops to 6-Year Low as State Giants Shut Fields

    China’s crude oil output dropped to the lowest in more than six years as the country’s state-run energy giants continued to pump less from aging, high-cost fields.

    Production during August in the world’s largest energy consumer dropped 9.9 percent from a year ago to 16.45 million tons, according to data from the National Bureau of Statistics on Tuesday. That’s about 3.89 million barrels a day, the lowest since December 2009, according to Bloomberg calculations. Output is down 5.7 percent during the first eight months of the year.

    “As crude prices fluctuate at a relatively lower level, there is no incentive for China’s high-cost producers to raise output any time soon,” Tian Miao, an analyst with policy researcher North Square Blue Oak Ltd., said by phone before the data were released. Production will continue to decline through the rest of the year, Tian said.

    Output from China, which was the world’s fifth-biggest producer last year, has been sliding as state-run companies shut fields too expensive to operate after prices fell earlier this year to the lowest since 2003. The country is forecast to lead production declines across Asia, helping tighten the global market as the world’s largest-consuming region relies more on overseas supplies. China’s importsrebounded last month to the highest since April.

    Supply Destruction

    “The global oil market rebalancing is progressing,” said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong. “Massive capital expenditure cuts have translated to more oil supply destruction.”

    The country’s biggest producer, PetroChina Co. cut its 2016 domestic crude outputtarget to 103 million tons (about 2.06 million barrels a day), a drop of about 6 percent from the previous year, as it shuts some high-cost fields. Production from China Chemical & Petroleum Corp., known as Sinopec, is on track to shrink by a similar amount to about 763,000 barrels a day, company forecasts show.

    “China’s crude output won’t see an apparent rebound unless Brent recovers to $60 a barrel level, as most of China’s aging oilfields can’t make a profit below this price,” Tian said. Brent crude, the global benchmark, has lost about half it’s value in the past two years. Prices have averaged almost $43 a barrel this year, compared with $99 in 2014.

    While coal production in August rose 3 percent from the previous month to 278.09 million metric tons, production was down 11 percent from the same period last year, according to the statistics bureau. Coal mining in the first eight months slowed 10.2 percent to 2.18 billion tons.
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    Petrobras Cost-Cutting Is Making Traders in Oil-Rig Bonds Uneasy

    Oil giant Petroleo Brasileiro SA’s cutbacks are reverberating in the bond market.

    QGOG Constellation SA, which rents rigs to Brazil’s state-controlled crude producer, has seen its $700 million of notes due in 2019 drop 11 percent in the past three months.

    The slump reflects mounting concern that Petrobras, as the oil company is known, may not renew rig-leasing contracts with QGOG. Petrobras, the world’s most indebted major oil producer, plans to slash investments to $17.5 billion this year, the lowest in a decade.

    That’s a problem for QGOG, which has five contracts expiring in the next two years. The prospect of a decline in revenue means QGOG may need additional financing to repay the bonds, said Lucas Aristizabal, an analyst at Fitch Ratings. QGOG has $700 million in notes outstanding and another $469 million in loans, according to data compiled by Bloomberg.

    “You’re exposed to contract renewals, and it’s looking very difficult for the company because Petrobras has decreased demand for units,” he said.

    In an e-mail, Petrobras said it’s adjusting the size of its drilling fleet to a new level of demand, considering the current scenario in the oil industry. It also said it doesn’t comment on specific contracts. QGOG referred all questions on contract renewals to Petrobras.

    Oil prices are down 62 percent from their high in 2011.

    While QGOG is making bond investors uneasy, its sister company, QGOG Atlantic/Alaskan Rigs Ltd., is inspiring confidence. That’s because the latter is on pace to repay its notes due in 2018 before any of its contracts with Petrobras expire. There’s currently just $201.5 million outstanding of the original $700 million bond. The securities also are backed by the rigs themselves, which means bondholders can seize them if the company defaults. The QGOG Constellation bonds aren’t backed by any physical assets.

    QGOG Atlantic/Alaskan Rigs -- which like QGOG is a unit of of industrial conglomerate Queiroz Galvao SA -- also has surpassed performance targets, said Fitch’s Aristizabal.

    “The cash flow from the contracts pay the debt in full before the expiration,” Aristizabal said. “That’s why its performance is key. The risk of a unilateral cancellation is low if total performance continues to be high.”
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    Is China Deliberately Trying To De-Rail The Russia/Saudi Oil Deal?

    China, the world’s largest oil consumer, has been increasing oil imports and feasting on the low crude oil prices. Could Russia and Saudi Arabia’s plan to stabilize crude oil prices cut into China’s oil hoarding plans?

    Chinese oil imports have increased to 32.85 million tons in August, the second highest figure after the record 33.19 million tons import figures of December 2015. It’s a 7 percent increase over the same period last year, and a 6 percent increase over July. Currently, the Asian giant imports 66 percent of its crude oil requirements.

    “Chinese oil majors are no longer under orders to increase domestic production, as they were doing so at a loss,” said Adam Ritchie, executive general manager for supply at Caltex Australia Ltd. “China’s change to let economics decide between imports and domestic production is a big change,” reports Bloomberg.

    Russia and Saudi Arabia, the two largest suppliers, have been battling it out to increase their market share in China. While Russia has increased its market share in China from 12.6 percent last year to 13.6 percent this year, Saudi’s have seen their share dip from 15.1 percent to 14 percent during the same period.

    “There’s a market-share battle going on mainly among the Middle East producers and Russia,” Olivier Jakob, managing director of Petromatrix, said by phone from Zug, Switzerland. “Rivals are making a big push into China,” reports Bloomberg.

    An agreement between both the competing producer nations reduces the bargaining power of the Chinese refiners, who had started to choose the spot sales offered by Russia against the long-term contracts policy of Saudi Arabia.

    Nevertheless, the Chinese can breathe easy, because like many other experts globally, even the Chinese analysts are not confident that the deal between Saudi Arabia and Russia will result in any substantive action.

    "It will be very difficult to implement this agreement, as the volume for each exporter country is different. Many countries - producers of oil and gas rely on exports, so they are unlikely to agree to the terms of the agreement," a senior consultant for Sinopec Yang Qixi said.

    However, Saudi Arabia’s Minister of Energy, Industry and Mineral Resources Khalid Al-Falih is optimistic that other large oil producers will join forces with Russia and Saudi Arabia to take appropriate steps to stabilize the markets.

    "We are optimistic that Algiers meeting will provide a forum, and pre-Algiers that consultations which will take place bilaterally and in groups will bring us to Algiers with some sort of coordinated decisions. But the two countries agree that even if there is no consensus, we will be willing to take joint action when necessary," said Al-Falih.

    Along with this, China and the U.S. announced their formal joining of the Paris agreement. China has to wean the economy away from the use of fossil fuels if it expects to achieve its target of carbon emissions by 2030. In order to realize this shift, China will have to make an initial investment of $5.2 trillion in lean energy technologies, which will lead to $8.3 trillion in savings by 2050, according to a study Reinventing fire: China.

    Hence, as a major importer of oil, China will want the recently announced cooperation between Saudi Arabia and Russia to fail so prices will remain low. If that happens, China can postpone investments into fossil fuels and divert that money towards clean technology, which will help it to reduce its carbon footprint.
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    Dongming eyes acquisitions in China's changing refining landscape

    China's biggest independent refiner Dongming Petrochemical is looking at acquisitions of domestic rivals, with the refining landscape in the country set undergo massive restructuring and consolidation over the coming years, Zhang Liucheng, a vice president at the company, said Thursday.

    Speaking on the sidelines of the S&P Global Platts Asia Pacific Petroleum Conference 2016 in Singapore, Zhang also said that a deal between Dongming and two Qatari companies is still being negotiated.

    In April 2015, QID Group and Hamad Bin Suhaim Enterprises announced plans to invest $5 billion in Dongming for a 49% stake.

    "As oil prices fell, the companies have been under pressure for investment, while Dongming's value has grown significantly since the MOU was signed," Zhang said.

    Against the backdrop of consolidation in China's refining sector that will likely eventually leave the country with around 10 big state-owned and independent refining companies, instead of the numerous small ones that currently exist, Dongming is "looking at possibly acquiring some independent refinery," Zhang said.

    Dongming's strategy is in line with the government's guideline to support and upgrade refineries with potential and shut down the ones that cannot be improved, he said, adding that a number of small independent refineries are likely to shut down.

    The independent refining sector accounts for around 25-30% of China's total 15 million b/d refining capacity. In Shandong province, where most of these refineries are located, there are around 38 refineries which have a primary processing capacity of above 1 million mt/year (20,000 b/d), while the number of refineries with lower capacity is even higher.

    In Dongying City, one of the three refining hubs in Shandong, there are about 80 independent big and small refineries.

    In addition to Dongming, independent trading company CEFC Energy is also keen to acquire around 10 million mt/year independent refining capacity in Shandong, a source close to the matter told Platts on the sidelines of APPEC.


    Zhang said oil product exports from independent refineries will rise in the future but this hinges on certainty about the government's export policy, which would enable refiners to invest in the necessary infrastructure.

    "The current [export] volume is limited by concerns about policy issues, which stops us from investing in infrastructure... because we are not sure if the government will still allow us to export after the end of this year," Zhang said.

    The Ministry of Commerce in mid-November last year said it would allow independent refiners that have already won crude import quotas the right to export oil products, but the permission is only effective until end 2016.

    The independent refineries have exported 421,000 mt of oil products so far this year and have total product export quotas of 1.26 million mt, Platts data showed.

    This is only a small proportion compared to China's total oil product exports of 29.74 million mt over the first eight months, according to data from the General Administration of Customs.

    High land freight is a big challenge the sector faces in boosting exports. With no pipeline connecting the independent refineries with the ports, every barrel needs to be transported via trucks.

    However, even if the sector starts to invest in infrastructure, the projects will require long lead times to get approval from all stakeholders.

    For example, the long-expected Yanzi crude oil pipeline for independent refineries in Shandong took five years to build and was completed in July. Zhang said he expects the pipeline to be launched by the end of this year.


    The China Petroleum Purchasing Federation of Independent Refineries, a union of 18 independent refiners, plans to secure 60% of the members' feedstock via term contract in 2017, Zhang, who is chairman of the union, said.

    Currently, Dongming and its Singapore-based trading arm Pacific Commerce has signed three supply agreements on behalf of the union with BP, Shell and Unipec, according to Zhang.

    But these framework agreements are more symbolic than binding as they lack details on price, volume and specification.

    So far, Dongming has only bought 2 million barrels from BP since they signed the agreement in November last year for 8 million barrels of crude supply over a year.

    "In the first half this year, the union has imported around 5.7 million mt (41.78 million barrels) of crude oil -- Dongming took 3.7 million mt while 2 million mt were for the other union members," said Zhang.

    Dongming early this year spearheaded a union of refineries with the purpose of collaborating on crude procurement. It currently has 18 members, all of them independent Chinese refiners. Twelve of them are crude imports quota holders, with total 980,000 b/d quota.

    Zhang also said the company will expand its Singapore trading arm from current over 10 staff to 20 by the end of this year to strengthen its trading ability.

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    Oil Search, ExxonMobil buy exploration acreage offshore PNG

    Oil Search and ExxonMobil, partners in the US$19 billion PNG LNG project, have agreed to purchase acreage in the Gulf of Papua from a company owned by China’s CNOOC Limited.

    The two companies entered into agreements with Gini Energy Limited to acquire each a 40% interest in PPL 374 and PPL 375, located approximately 150 kilometres south of Port Moresby in the deep water section of the Gulf of Papua. Gini will retain a 20% interest in each licence, Oil Search said in a statement on Monday.

    The licences cover a combined area of 24,936 km2 , with water depths ranging between 1,000 and 2,500 metres.

    Commenting on the farm-ins, Oil Search’s Managing Director, Peter Botten, said: “During 2015/16, we undertook a comprehensive study of exploration opportunities in PNG. This work identified the offshore Papuan Gulf as an area where there is significant gas potential, with several multi-tcf gas leads and prospects already delineated in these licences.

    We are delighted to be partnering with ExxonMobil, which has significant experience in exploration and production in deep water, and we also welcome the opportunity to work with CNOOC Limited for the first time. Entering these licences is consistent with the company’s strategy to focus on areas that have the potential to support the company’s expanding LNG portfolio.”

    The completion of the farm-in agreements and the acquisition of the licence interests is subject to conditions precedent, including regulatory approvals.
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    How Does America Keep Finding Vast Stores of Energy?

    Last week, the Wall Street Journal reported on an energy bonanza. A company discovered a new field with “the equivalent of at least two billion barrels of oil” that “has the promise to become one of the biggest energy finds of the past decade.”

    But the discovery wasn’t made by a foreign company in the Amazon, or deep in the waters off the coast off Africa, or in Kazakhstan—or any of the other politically treacherous, high-risk, low-infrastructure places where Big Oil has been prospecting for gigantic new gushers. Instead, the lucky firm was Texas-based Apache Corporation, which struck black gold in Texas’s Permian Basin, one of America’s most prolific and picked-over sources of oil and natural gas for decades. It’s as if vintners discovered millions of acres of previously unknown prime grape-growing territory in the Loire Valley. Or the owners of Vail Mountain suddenly happened upon miles of previously untouched ski slopes.

    What has been dubbed the “Alpine High” is just the latest output of an energy equation that works for America and American firms in a way that doesn’t work anywhere else. You start with an embarrassment of natural resources arrayed across an expansive territory, multiply it by new technology and innovation that allows for the efficient mining and harnessing of the resources, add capital, and then raise it to an exponential power through the propensity to scale. The result? While many parts of the world suffer from energy and power scarcity (I just returned from Tanzania, where only about one-quarter of the population has electricity), and while many companies and countries are looking far beyond their borders for the fuel that can satisfy their customers, the U.S. is solving the problem of expensive energy and forging new domestic industries.

    It’s as if the owners of Vail Mountain suddenly happened upon miles of previously untouched ski slopes.

    Let’s take Apache’s big find first. The oil and natural gas have always been there, locked in the rocks. But it wasn’t until the U.S. developed a new technology (hydraulic fracturing, or fracking) that it became apparent that it could be liberated. That story has been written several times over. But an equally significant story has received less notice. In the last several years, a global glut of natural gas and oil production has developed, thanks to higher U.S. production and the desire of OPEC members to pump more oil in the face of lower prices. But rather than sit on their hands or shut wells, the U.S. fracking industry has evolved and innovated. Fracking has become a cheaper, more refined, and more effective means of getting at fossil fuels. So while the price of both natural gas and oil has fallen sharply in recent years, so too has the break-even point for profitable extraction.

    Rather than go into hibernation, Apache was able to raise capital, hoover up several hundred thousand acres in a new region, and start drilling for resources on a profitable basis. In doing so, it has “discovered” an asset that is essentially reinventing an already large company. “This is a giant onion that is going to take us years to unveil and peel back,” Apache Chief Executive John Christmann IV told theJournal. “The industry dogma about this area, all the fundamental premises that most people had about it, were just wrong.”

    We see evidence that this same cycle is playing out in other sectors of the energy and power industry. America’s oil and natural gas industries got started in Pennsylvania in the 1860s, then petered out in a few decades. But in the past decade, Pennsylvania’s Marcellus Shale has been one of the epicenters of the shale gas revolution. Again, the increase of raw production is a well-told story. But the application of technology and infrastructure at scale—the construction of pipelines and multi-billion-dollar terminals that enable export—is creating new industries. Earlier this year I noted that ethane distilled from natural gas in Pennsylvania is being sent to industrial plants in Europe. You can watch the progress of tankers like the Ineos Inspiration and Ineos Ingenuity as they ply the cold waters of the North Atlantic from the Marcellus Hook Terminal in Pennsylvania to Norway. In February, ahuge terminal in Louisiana constructed at immense expense began shipping natural gas to distant points. By the end of the second quarter, the terminal’s owner, Cheniere Energy, said it had shipped five cargoes of liquefied natural gas. Meanwhile, investments in infrastructure outside the U.S. are encouraging the export gas industry to scale more rapidly. This summer, a tanker that left Cheniere’s Sabine Pass terminal became the first ship to carry natural gas through the expanded Panama Canal.

    It’s happening in renewables, too. Wind has always been a force on the Great Plains, and farmers harnessed it for years on a very small scale. But in recent years, wind has been “discovered” as a major supply of fuel for producing electricity. In the middle of the country, there are abundant wind resources. There’s the availability of land—vast, unused acreage that allows the establishment of extensive onshore wind farms. Companies have developed and harnessed the latest technology—i.e. larger and more powerful wind turbines. Capital has been raised to finance scale—the construction of wind turbines and the build-out of transmission lines that can convey wind power to population centers. So instead of building a few small turbines as an adjunct to the power system, developers in Iowa are now planning to construct a 2-gigawatt field that will make wind a major power source.

    I’m old enough to have lived through more than one energy crisis. It turns out the answers to them were here all along.
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    The region leading the US oil recovery

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    In the tentative upturn in the US shale oil industry since May, most of the additional drilling and much of the acquisition spending has been focused on one hotspot: the Permian basin of western Texas and eastern New Mexico.

    This formation, about 300 miles long and 250 miles wide, holds some of North America’s most accessible shale oil reserves. Companies that have been lucky enough, or smart enough, to build strong positions there — such as Pioneer Natural Resources and Concho Resources — can expect to have a competitive advantage over other oil producers, in what remains a very difficult market.

    As share prices of US exploration and production companies have rebounded this year, those focused on the Permian have been the best performers. Shares in Diamondback Energy and RSP Permian, for example, have been hitting record highs, up 48 per cent and 66 per cent respectively over the past 12 months.

    Even ExxonMobil and Chevron — the two largest US oil groups, which were left behind by smaller, more innovative rivals as the shale boom took off — now have opportunities in the Permian to make up some lost ground.

    Although the Permian was not immune as activity across the US oil industry slumped after the crude price crash of two years ago, it has proved the most resilient of the “big three” US shale regions. From peak production, crude output has dropped by 40 per cent in the Eagle Ford shale of south Texas, and by 25 per cent in the Bakken formation centred on North Dakota. In the Permian, by contrast, the drop is only 2 per cent.

    In a sign of the region’s attractions, EOG Resources, one of the most successful of the independent US shale producers, last week announced a $2.5bn deal to buy privately-held Yates Petroleum. Yates’ most valuable assets are drilling rights on 324,000 acres of the Permian.

    EOG pioneered oil development in the Eagle Ford, and it is still the largest producer there. But William Thomas, EOG’s chief executive, told analysts on a call last month that it would spend 45 per cent of next year’s capital budget in the Delaware, a sub-basin on the western side of the Permian.

    Since May, the number of rigs drilling horizontal shale oil wells in the US has risen by 77 to 325, according to the oilfield services company Baker Hughes. Of those, 49 were added in the Permian, compared with just four in the Eagle Ford and six in the Williston Basin, which includes the Bakken.

    At the same time, the Permian has been a focus for deals. Of the $30.4bn spent on mergers and acquisitions in the US exploration and production sector so far this year, 48 per cent has gone to the Permian, according to research company Wood Mackenzie.

    Companies have been attracted to the Permian because it holds some of the lowest-cost oil in North America.

    Production costs can vary widely within each area, and the best spots in the Eagle Ford and Bakken are still competitive but overall the Permian has the most attractive economics. At current crude prices, bringing a well in the Delaware basin into production will generate an internal rate of return of about 18 per cent on average, according to Platts Analytics. That is higher than for any other shale region.

    Coming relatively late to the shale party, behind the Bakken and the Eagle Ford, the Permian has offered greater scope for companies to cut costs and raise production. Since 2012, average peak output per well has risen by 122 per cent in the Permian, compared with 67 per cent in the Eagle Ford and 78 per cent in the Bakken, according to data analysis firm NavPort.

    Meanwhile, costs are falling sharply. Concho Resources told investors at a Barclays conference last week that it had cut the cost per foot of its wells by about 40 per cent since the first quarter of 2015.

    Long-term prospects for the region were also underlined last week when Apache, the US exploration and production company, announced the discovery of a “significant new resource play” in the Permian, which could hold more than 3bn barrels of oil and 75tn cubic feet of gas, in a part of a formation that had been neglected by other companies.

    Geologists sometimes describe the Permian as a “layer cake” of multiple different oil-bearing formations, with names such as Wolfcamp, Spraberry and Bone Spring. Companies are experimenting with techniques to optimise production from as many of these layers as possible.

    Exploration in the Permian has a long history, with the first oil struck in 1923, and west Texas has experienced several cycles of boom and bust. Drilling rights are often held by smaller companies that are prepared to sell out, giving larger operators a chance to build positions. That also opens the door for private equity investors such as Blackstone, which last month committed $1.5bn to two oil producers to buy Permian assets.

    Exxon and Chevron also see great potential in the region. Exxon came into the Permian through its takeover of XTO Energy in 2010, and added on subsequent smaller acquisitions, while Chevron has a large legacy position. But they see similarly bright prospects.

    Exxon said last month that it had cut unit development costs on the Permian by 70 per cent over the past two years, and “a large part” of the inventory of wells it could drill would be economically viable with crude at about $40 a barrel.

    Chevron said it had cut unit development costs by 30 per cent since last year, and raised production by 24,000 barrels per day. It was using six rigs there last month, and plans to raise that to 10 by the end of the year.

    Heightened levels of M&A activity suggest other companies will add more rigs, too, even if the oil price remains at its present level of about $45 for US crude. “You don’t typically do a billion-dollar deal and then wait for market conditions to improve,” points out Benjamin Shattuck of Wood Mackenzie. “You get rigs in the field.”

    On that basis, the Permian seems set to remain a hot location for a long time to come.

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    Hess: North Dakota ready once oil prices recover

    The oil price recovery isn't quite strong enough to support a program targeting production growth from North Dakota, energy company Hess Corp. said

    Hess last year set a 2016 spending target of between $2.9 billion and $3.1 billion. By January, the company revised its full-year guidance lower to $2.4 billion, 40 percent below 2015 spending levels.

    In July, the company said it was upbeat about the potential for growth in North Dakota, where exploration and production had shown some recovery. Speaking from the podium of an energy conference in New York, CEO John Hess said the market still wasn't ripe enough for a strengthened focus on operations in the state's Bakken shale oil reserve, however.

    "We do not believe that it makes sense to accelerate near-term production in this low-price environment and drill up our best locations at the bottom of the cycle," he said in a transcript provided over email by the company.

    Hess said the company has moved to cut its exploration and production budget considerably as the pressure from lower oil prices endures. In the Bakken, he said the company is nevertheless in a good position once the market recovers.

    "This is all from operating improvements and efficiency," he said.

    The inventory in North Dakota is there to support a stronger portfolio, but the company does not want to "give the oil away" if oil hovers near the $40 range for West Texas Intermediate.

    "As WTI prices approach $60 per barrel, we plan to increase activity which would allow us to both resume production growth and generate free cash flow from the Bakken," the CEO said.

    The price for WTI, the U.S. benchmark price for crude oil, was around $45 per barrel early Monday.
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    Halcon Resources Exits Bankruptcy in Just 1.5 Months

    Getting a pre-packaged bankruptcy today is like ordering a McDonalds Happy Meal–just order and drive up to the window and pick it up. Simple.

    In July Halcon Resources, a Utica Shale driller that “guessed wrong” by leasing 140,000 Utica Shale acres in the northern part of the play (in Ohio) and currently doesn’t drill on any of that acreage, filed for a pre-packaged bankruptcy.

    Less than a month and a half after first filing, Halcon has emerged from bankruptcy court with $1.8 billion worth of debt magically erased. When Halcon filed back in July, they listed $3.12 billion in debt and $2.85 billion in assets.

    In August the company’s market capitalization, calculated as the number of outstanding shares of stock times the per share price, otherwise know as the company’s “worth” or “value”–was under $50 million . When debtors have no other choice than to accept a plan turning their debt into equity (shares of stock), it doesn’t take long to file the paperwork and be on your way.
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    Freeport to sell U.S. Gulf assets to Anadarko for $2 billion

    Freeport McMoRan Inc said on Monday it will sell its deepwater Gulf of Mexico oil and natural gas assets to Anadarko Petroleum Corp for $2 billion as it looks to cut its heavy debt load.

    The sale to Anadarko, which is betting the deal will help more than double its U.S. Gulf production within five years, comes after earlier attempts by Freeport to sell all or part of its oil and gas business failed. In May, Freeport withdrew plans to launch an initial public offering for that business.

    Anadarko said it would offer 35.3 million shares to fund the deal. Secondary stock offerings tend to be unpopular with existing shareholders and shares of Anadarko fell 2.9 percent in after-hours trading to $57.79 per share.

    Shares of Freeport gained 7.7 percent in Monday trading, closing at $11.08, though the stock was not trading in after-hours sessions.

    After the deal closes, which is expected by the end of the year, Freeport's 2016 asset sales will exceed $6 billion, Freeport Chief Executive Richard Adkerson said in a statement.

    Freeport, the world's biggest publicly listed copper miner, said in July it was confident of cutting its $18.8 billion of net debt to as low as $10.5 billion by the end of 2017 on the back of asset sales and cash earned.

    The transaction comes as something of a surprise after Freeport failed to find a buyer for all or part of its oil assets last year and earlier this year, said Clarksons Platou Securities analyst Jeremy Sussman.

    "It was probably a combination of stronger oil prices and better operational results that ultimately led to a transaction that was frankly better than expected," Sussman said.

    The deal, which is effective Aug. 1 and is expected to close in the fourth quarter, will help Anadarko add about 80,000 net barrels of oil equivalent per day.

    Anadarko said it expected to increase its 2016 full-year capital guidance, not including the acquisition, to a range of $2.8 to $3.0 billion, primarily reflecting the increased activity in the Delaware and DJ basins.

    Anadarko plans to add two rigs in the U.S. Gulf by the end of the year, with more in 2017. Within five years, Anadarko said it expects its U.S. Gulf production to more than double to 600,000 barrels of oil equivalent per day.

    Anadarko offers 35.25 million shares in a secondary offering.

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    Alternative Energy

    Coal India lines up capex for thermal and solar power generation

    CoalIndia Limited (CIL) has committed $758-million in the current financial year for its foray into thermal and solar power generationprojects.

    According to preliminary plans, CIL’s entry into thermal andgreen energy is likely to include two 800 MW coal-basedpower plant in the eastern Indian province of Odisha and anaggregate 600 MW of solar projects spread across four provinces. The company plans to extend its power generation capacity by another 1 000 MW in the second phase of its investment plans.

    However, no clarity is available on whether CIL’s venture intopower generation is linked to falling demand for coal, which is the primary business of the mining behemoth.

    The thermal power project will be implemented through super-critical technology and linked to coal feedstock from CIL’s Mahanadi coalfields in Odisha, a company official says.

    Last month, CIL’s coal production was recorded at 32.4-million tons, down 10.4% year-on-year, while the target for September has been set at 40-million tons. During April to August, coal offtake was recorded at 211.38-million tons, a growth rate of a mere 0.2% year-on-year. Pithead stocks were estimated at around 40-million tons as offtake by thermalpower plants across the country slowed down.

    Government data shows that the country’s thermal powerplants are operating at an average plant load factor (PLF) of 59.28%. CIL estimates that coal offtake will improve the average PLF to levels of above 70%.

    Nonetheless CIL officials are cagey in linking the downturn incoal demand to its foray into energy generation projects, underlining that the miner’s plans to achieve a one-billioncoal production target by 2020 are well on track, and categorically denying recent media reports suggesting that the target was diluted owing to the surplus coal availability in the country.

    CIL’s green energy projects will involve setting up floatingsolar panels on water bodies. The miner has numerous waterbodies, which formed after mines closed down. While the miner is equipped to set up floating solar panels on shallowwater, it is developing in-house technology to put up solarpanels on deep water.

    However, CIL is not the only coal miner venturing into green energy. NLC (formerly Neyveli Lignite Corporation) has drawn up plans to implement aggregate solar powergeneration capacity of  4 000 MW and last month kick-started it by starting a 65 MW solar power plant.
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    Spruce Introduces Residential Solar Loan, Simplifies Solar Sales Process

    Solar Power International, Spruce Finance Inc. is making residential solar finance sales easier than ever by adding a new solar loan to its existing power purchase agreement (PPA) and lease product suite. (The term “loan” includes both traditional loans and retail installment contracts, or RICs, which are available in different geographies.) The loan and PPA are available on Spruce’s new platform, SpruceFlow™, which uniquely allows solar companies to offer homeowners multiple products from a single finance provider, on a single platform, with a single credit check.

    “Sales reps need to have the right product for the right customer, and they need a sales process that’s fast and easy-to-understand,” said Nat Kreamer, CEO of Spruce. “Offering homeowners both a loan and a PPA at the point of sale with a single credit check helps our partners reduce their acquisition costs and close more deals.”

    Spruce’s solar loan is both simple and flexible. It is available for a variety of homes, including townhomes, condos and duplexes, as well as for ground mounts. Sales reps can highlight either lifetime or immediate savings; tailor the product to homeowner preferences with a variety of tenor, APR and payment terms; and close the sale quickly with instant credit and e-signature options. The loan will be available in 25 states in October.

    “Our position as financier allows us to control the terms of our products and make them attractive to both solar companies and homeowners,” said Kreamer. “Spruce is a licensed consumer lender in 50 states and Washington, DC: that and our consistent access to low-cost capital makes us an ideal finance partner for solar companies across the U.S.”

    The SpruceFlow platform makes the sales process more efficient and improves salesforce productivity. Sales reps can prescreen prospects before the sale to improve conversion rates. In addition to qualifying homeowners for multiple products with a single credit check, sales reps can also toggle between products at the point of sale, allowing homeowners to compare their options. The platform intuitively guides the process, and is optimized for mobile and tablet during in-home sales.

    About Spruce

    Spruce™ is a technology-enabled provider of consumer financing for residential solar and home efficiency improvements. Its mission is to empower people to improve their environments. The company’s national network of verified channel and contractor partners offer homeowners Spruce financing for technologies that can help them reduce their total utility spend on power, water, and heating and cooling. A private company headquartered in San Francisco, Spruce has raised more than $2B and serves more than 50,000 homeowners in all 50 states and Washington, DC. To learn more about the company, visit
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    Tidal energy project launches in Scotland

    Scotland’s First Minister Nicola Sturgeon today launched a 398 MW tidal stream energy project.

    The MeyGen scheme is owned by Atlantis Resources, backed by £23m of Scottish government investment, and located inScotland’s Pentland Firth.

    A fully assembled 1.5 MW Atlantis tidal power turbine with foundations was unveiled today at a ceremony is Nigg before being loaded onto a jack-up vessel and transported to the MeyGen for installation.

    In total, four turbines will be installed this month as part of the first 6 MW phase of the scheme and they will be the first of 269 turbines to be installed at the site.

    Sturgeon said she was “incredibly proud of Scotland’s role in leading the way in tackling climate change, and investment in marine renewables is a hugely important part of this”.

    “MeyGen is set to invigorate the marine renewables industry in Scotland and provide vital jobs for a skilled workforce, retaining valuable offshore expertise here in Scotland that would otherwise be lost overseas. Highly skilled operation and maintenance jobs will also need to be carried out locally, providing strong local employment opportunity for rural areas.”

    She said that “the eyes of the world are on this project, which is why the Scottish government’s investment is so crucially important”.

    And she added that “it is absolutely vital that the UK government honours its earlier commitment to provide a ring-fenced allocation for marine energy in its renewables support scheme. They must tackle the current uncertainty that exists before they cause irreparable damage to the long term prospects for the sector.”

    Atlantis Resources chief executive Tim Cornelius said: “Today marks a historic milestone not just for Atlantis and our project partners, but for the entire global tidal power industry. This is the day the tidal power industry announced itself as the most exciting new asset class of renewable, sustainable generation in the UK’s future energy mix.”
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    Novel Hybrid Solar PV-Geothermal Energy System Piloted in Sweden

    Research out of the SP Technical Research Institute of Sweden has provided proof of concept for a novel hybrid renewable energy system featuring combined hybridsolar PV and geothermal power.

    The new concept is based around a system integrating hybrid solar PV, ground-source heat pump (GSHP) and borehole thermal energy storage (BTES) technologies. The result is a system in which outputs of each technology are highly complementary to one another, and carry the potential to increase energy efficiency and cost effectiveness of individual components.

    “It’s one of the first demonstrations of hybrid solar combined with GSHP in Sweden,” Pernilla Gervind, one of the lead researchers on the project, told Renewable Energy World.

    A critical feature of the system is the role played by the hybrid solar PV. Unlike conventional solar PV, hybrid solar PV (sometimes referred to as hybrid solar photovoltaic/thermal (PV/T)) is a popular, well-established method for cooling PV cells. Hybrid solar PV modules consist of conventional PV cells with embedded systems containing some form of cooling agent, typically water or air, which is circulated through PV panels. The intention here is to reduce PV cell temperatures, as it is known that overheating — through either solar radiation or ambient temperatures — reduces PV cell efficiency significantly.

    The new system advances the hybrid solar PV concept by making use of the output water within a vertical loop GSHP system to which it flows.

    Pernilla explained: “Having passed through the PV panels, water is heated to around 10-degrees Celsius; it is then directed into the cold side GSHP system and used as heat source; if there is a surplus of heat, this is then directed down into boreholes. Here, the thermal energy of water is absorbed by the surrounding ground as a result of a temperature differential that arises from the ambient temperature of the ground being between 2 to 3 degrees Celsius. The now-cooled water is then cycled back up the system, and re-used in the cooling of PV panels in a closed-loop system.”

    Heating boreholes with direct heat is not new — it’s a process referred to as ‘recharging,’ and is a common method for increasing efficiency of heat pumps in response to temperatures surrounding boreholes declining over time, in part through absorption of thermal energy. Commonly, however, direct heat is generated through more conventional means, or through concentrated solar power (CSP). Using hybrid solar PV in this recharging context is unique.

    The system may be used for the purposes of seasonal storage of thermal energy, as Gervind explains: “In Sweden, seasonal temperatures vary greatly, providing options for how the system can be used accordingly. In the summer we can generate solar thermal energy, but it’s not required for anything — so we can use boreholes to store this excess energy for use during the winter when it is required.”

    The system stands to be especially useful in Sweden, where geothermal energy is dominated by low temperature, shallow systems featuring GSHPs used for space heating and domestic hot water heating. About 20 percent of the Swedish buildings use GSHPs, according to the International Geothermal Association.

    In the study, which was supported by the Swedish Energy Agency together with Energiförbättring Väst, the system was piloted through 2015 on the west coast of Sweden over 70 terraced houses.

    “Our focus was on evaluating the system, and ensuring it worked,” Jessica Benson, Gervind’s co-researcher, told Renewable Energy World. “On this level, we’re very confident in the potential of the system.”

    Monitoring system performance allowed the researchers to make mid-study adjustments. Benson explained an example of those adjustments: “In the original system design, solar heat was first directed down to the boreholes and then to the heat pumps. This was adjusted so that the heat is now first directed to the GSHP and only the surplus is directed to the boreholes.”

    The changes in directing the solar heating first to the GSHP, Benson said, increased the efficiency of the heat pumps due to the increased temperature of the heat source.

    Owing to relative success of the pilot, the researchers are looking towards future studies, as Benson explained: “We have already begun conducting a follow-up study to investigate key performance issues; for instance the effect of cooling on PV cell efficiency, and efficiency of GSHPs. There’s much work to do in studying the dynamics of heat transfer from boreholes to ground and how best to ensure added thermal is retained in a manner optimal for thermal storage solutions.”
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    NRG Energy wins auction for SunEdison wind and solar projects

    Houston-based NRG Energy Inc has won the auction for bankrupt renewable power plant developer SunEdison Inc 's wind and solar projects in Texas and other states with a $144 million bid, according to a court filing.

    The sale is one of several that SunEdison, once the fastest-growing U.S. renewable energy company, is holding since filing for Chapter 11 bankruptcy protection in April after an unsuccessful debt-backed acquisition drive.

    Judge Stuart Bernstein in Manhattan will hold a hearing to approve the NRG bid on Thursday, a court filing by SunEdison showed last week.
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    Korea's KEPCO in talks with Toshiba, Engie to buy stake in NuGen -source

    South Korean power utility Kepco in talks with Japan's Toshiba and France's Engie about buying a stake in the Toshiba-Engie British nuclear joint venture NuGen, a source familiar with the situation told Reuters on Monday. The source did not specify whether KEPCO would buy a part or all of the stakes of Toshiba or Engie. Both companies are looking for partners to reduce their share in the capital-intensive project. The NuGen consortium is competing with French power utility EDF's 18 billion pound Hinkley C project in Somerset, southwest England, which is no longer certain to go ahead since the intervention of the UK's new prime minister Theresa May. The Financial Times on Monday reported that Korea Electric Power Corporation (KEPCO) had resumed talks about joining NuGen after negotiations stalled three years ago and is mulling taking an equity stake and a role in constructing the new nuclear plant near Sellafield, northwest England.
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    Potash Corp, Agrium to merge to create $36 billion company

    Canada's Agrium Inc and Potash Corp of Saskatchewan Inc said they would combine, a deal that would create a fertilizer and farm retailing giant with proforma enterprise value of $36 billion but also trigger U.S. regulatory scrutiny.

    Potash Corp, the world's biggest crop nutrient company by capacity and Agrium, North America's largest farm retailer, said the combined company will be largest crop nutrient company in the world and third largest natural resource company in Canada.

    The companies had said on Aug. 30 that they were in talks to merge. The merger will create a company dominant in North America, controlling nearly two-thirds of potash capacity, 30 percent of phosphate production capability and 29 percent of nitrogen capacity, National Bank analyst Greg Colman had said at the time.

    The deal would be the latest in a string of agriculture merger attempts, including potential combinations of seed giants Monsanto Co and Bayer AG, and ChemChina [CNNCC.UL] and Syngenta.

    Fertilizer companies have suffered lower profits as crop nutrient prices tumbled due to excessive supply and weak demand. Crop prices have also been hurt, with corn and wheat at seven-year and 10-year lows respectively, giving farmers less incentive to maximize production with fertilizer.

    Potash Corp shareholders will get 0.400 common shares of the combined company for each share they hold and Agrium shareholders will get 2.230 common shares for each share they own, the companies said on Monday.

    Potash Corp U.S.-listed shares were up slightly at $17.03 in light premarket trading. Agrium U.S.-listed shares, which closed at $95.21 on Friday, were untraded.

    Potash Corp shareholders will own about 52 percent of the new company, with Agrium shareholders owning the rest after the deal closes, which is in mid-2017.

    The combined company would have had 2015 net revenue of about $20.6 billion and earnings before interest, taxes, depreciation and amortization (EBITDA) of $4.7 billion before synergies, on a proforma basis, the companies said.

    The companies expect annual operating synergies of up to $500 million from the merger.

    Agrium Chief Executive Chuck Magro will lead the combined company. Potash Corp CEO Jochen Tilk will be its executive chairman.
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    Precious Metals

    Barrick Gold partners with Cisco in bid to boost productivity

    Barrick Gold Corp, the world's biggest gold producer, said on Monday it would partner with Cisco Systems to incorporate digital technology in all aspects of its mining business, aiming to improve productivity and reduce costs.

    Toronto-based Barrick said it planned to spend around $100 million between now and the end of 2017 working with Cisco to embed technology in various parts of its operations to deliver better, faster and safer mining.

    Mining sector players have long lamented the lack of technological innovation in the industry although some miners such as Dundee Precious Metals (DPM.TO) have started using wireless technology and software platforms to track underground operations in real time.

    "Barrick of three years ago is going to be very, very different indeed going forward," Barrick Chief Operating Officer Richard Williams said in an interview.

    "We think actually that all mining companies will have to do the same if they are going to remain in existence," he said.

    The technology project is the latest move by Barrick Chairman John Thornton to transform the miner into a profitable, low-cost producer after cost-blow outs, overpriced acquisitions and a weak gold price knocked 80 percent off its share price between 2010 and late-2015.

    Williams said the technology initiative will help Barrick meet its target of reducing its all-in sustaining costs to below $700 per ounce of gold by 2019.

    Barrick's Cortez gold mine in Nevada will be the first operation where it will roll out new technology. Early projects there include using technology to predict maintenance in its fleet of haul trucks to reduce down time, said Michelle Ash, Barrick's senior vice president of transformation and innovation.

    The company also plans to set up a central data repository where any Barrick employee can access any piece of data across any site.

    "At the moment it sometimes takes us weeks to compile as all our data is in silos and you have to access to that particular silo, and we have hundreds of them," Ash said in an interview.

    Barrick said the technological shift will help it reduce its environmental impact and allow it to be more transparent with indigenous communities, local governments and non-governmental organizations.
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    Steel, Iron Ore and Coal

    China Aug coal output up nearly 3pct on month: NBS

    China produced 278.09 million tonnes of coal in August, down 13.1% year on year but up 2.99% from July, said the National Bureau of Statistics (NBS) on September 12.

    The rise from July was mainly because some coal mines that had halted production previously recovered production amid spiking prices in the domestic market.

    Over January-August, China produced a total 2.18 billion tonnes of coal, down 10.2% on year, compared with a decline of 10.1% in the first seven months this year, showed the NBS data.

    In a move to reduce overcapacity and save the coal industry from further downturn, the Chinese government set ambitious capacity reduction target earlier this year.

    China had cut 150 Mtpa in coal production capacity in the first eight months this year, about 60% of the 250 Mtpa coal reduction target for 2016, according to the National Development and Reform Commission.
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    China's August steel output rises for sixth straight month

    China's crude steel output rose 3 percent in August from a year ago, the sixth straight monthly rise and the latest sign that a rally in prices and pick up in demand spurred mills in the world's top producer to ramp up production.

    Total output for the month was 68.57 million tonnes, the National Bureau of Statistics data showed on Tuesday.

    The rise was the fastest pace in percentage terms since at least June last year.

    Mills increased output even as the government shuttered plants in the eastern city of Hangzhou, which hosted the G20 summit earlier this month, in a bid to guarantee blue skies and clear air for the gathering of the world's leaders.

    "When the mills saw the profits in August, they lost motivation to cut output," said Li Wenjing, an analyst at Industrial Futures in Shanghai, noting increases in northern China offsetting those in the south for the G20.

    Mills' profits hit 300 yuan-400 yuan ($44.92-$59.89) per tonne, their highest since November 2014, and blast furnaces operated at 80.66 percent capacity, up from 78.04 percent, she said.

    Li believes the rapid increase last month may be a one-off as Beijing pushes ahead with market reforms to tackle its steel glut, forcing more cuts before the end of the year.

    For the first eight months of the year, total production edged only slightly lower, by 0.1 percent, to 536.3 million tonnes, casting doubt on that plan. Beijing has said it aims to eliminate 100-150 million tonnes of annual production.

    Average daily steel output rose 2.64 percent from the previous month, according to Reuters' calculation based on NBS data.
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    India's Tata Steel reports $477 million first-quarter loss on Europe plant sale

    India's Tata Steel Ltd reported on Monday a $477 million consolidated first-quarter net loss as it sold a business in Europe, and said talks continued for a proposed partnership to run its European plants.

    Consolidated net loss widened to 31.83 billion rupees ($477 million) for the three months to June 30, from 3.17 billion rupees loss a year earlier, Tata Steel, Britain's largest and Europe's second-biggest steel producer, said in a statement.

    The company, which has been hit hard in Europe due to a fall in steel demand, excess capacity and rising imports from China, recorded a loss of 32.96 billion rupees from discontinued operations related to the sale of its long products business in the United Kingdom to Greybull Capital LLP in May.

    In July, Tata Steel halted a planned sale of its British Port Talbot plant which has been hit by huge losses and massive pension liabilities. The company said it would instead look for an alliance, and named biggest German steelmaker Thyssenkrupp AG (TKAG.DE) among potential partners.

    "We continue to progress the conversations," Tata Steel's Group Executive Director Koushik Chatterjee told a news conference on Monday. He said the company was also consulting all stakeholders on the pension liability issue.

    Tata Steel's business in Europe, which accounts for nearly 60 percent of the company's 24 million-tonnes-a-year steelmaking capacity, reported an operating profit of 8.56 billion rupees, Chatterjee said, citing benefits from a weaker pound and an ongoing restructuring exercise that included job cuts.

    Net profit for Tata Steel's Indian operations rose 35 percent from a year earlier to 5.75 billion rupees, the company said. India has set a floor price to prevent cheap imports from China, Japan, South Korea and Russia, helping local steelmakers.
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    U.S. says Chinese stainless steel strip, sheet imports being dumped in U.S.

    The U.S. Commerce Department on Monday said it had made a preliminary finding that imports of stainless steel sheet and strip from China are being dumped in the U.S. market at below fair value.

    The department set preliminary antidumping duties ranging from 63.86 percent and 76.64 percent.

    Any final decision to lock in duties would be subject to a finding by the U.S. International Trade Commission that domestic producers had been damaged.

    The companies that had sought an investigation are AK Steel Corp, Allegheny Ludlum LLC, ATI Flat Rolled Products, North American Stainless and Outokumpu Stainless USA LLC.
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