Mark Latham Commodity Equity Intelligence Service

Friday 17th March 2017
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    Datang Int'l Power 2016 loss at 2.6 bln yuan

    Datang International Power Generation Co., Ltd, a listed arm of China Datang Group, announced a loss of 2.62 billion yuan ($380.3 million) in 2016, plunging 193.39% from a net profit of 2.81 billion yuan in 2015, said the company in its annual report on March 16.

    The company realized 59.1 billion of operating revenue in 2016, a year-on-year drop of 4.47%. Its operating cost stood at 43.6 billion yuan, up 2.85% from a year earlier, according to the report.

    By December 31 last year, its assets totaled 233.2 billion yuan, 23.12% lower than the start of 2016.

    Total debts stood at 174.6 billion yuan last year during the same period, down 27.24% from the start of the year. Its asset-liability ratio was 74.88%.

    The company produced 172.47 TWh of electricity last year, up 1.62% from a year ago. The on-grid electricity reached 163.5 TWh, rising 1.67% year on year.

    By end of 2016, it had 44.3 GW of installed power capacity. Power projects totaling 1.58 GW gained approval last year, with 0.75 GW of photovoltaic capacity, 0.21 GW of hydropower capacity and 0.62 GW of wind power capacity.
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    South Australia offered a new $600m energy answer

    A group of former BHP Billiton and BP executives has opened discussions with the South Australian government over a $600 million private-equity funded solution to the state's gathering energy crisis.

    The proposal involves the construction of a 350 megawatt gas-fired peaking power plant that would be fuelled by gas from a floating re-gasification plant, whose feedstock would be liquid natural gas acquired either from the North West Shelf or Singapore.

    At a high level, the importance of the pitch assembled under the auspices of Melbourne management consultancy Integrated Global Partners is not whether Jay Weatherill invites it as his solution.

    Obviously, convincing the government to go with a plan that would relieve the state of just about all of the $550 million energy investment load announced by Premier Jay Weatherill on Wednesday is the core mission for IG Partners managing partner Herman Kleynhans – an 18-year BHP veteran.

    But what is really telling here is that the investment model that Kleynhans and his team have developed says that there is a lot of money to be made by shipping gas to South Australia from as far as Singapore and using it to generate electricity during periods of peak power demand in an Australian state.

    It is a prospect that sits as obviously counter-intuitive as it does confirmative of the oddly dislocated state of affairs that has been allowed to develop in Australia's gas markets.

    There really is no avoiding the naked absurdity of the situation.

    Here we have a plan that sees potential in buying relatively small shipments of gas from Singapore's relatively new break-bulk LNG facility. It is quite likely that some of that gas could be sourced from the Gladstone LNG plants that have more than tripled Australian gas demand. Some of the gas those plants are transforming comes from South Australia.

    The only way to get your head around the craziness of the situation is to imagine that the barges that will bring the LNG to South Australia as a flexible gas hose rather than the fixed hose that would bring the gas from the Cooper Basin – if it was available.

    Just on that point, we had a chat on Thursday to Oil Search's Peter Botten. He is just back from a Houston gabfest. The view there is that the LNG price is going nowhere but south. He reckons 2017-18 could see the price hit $US4GJ. It is currently about orbiting $US7.

    Now, $US4 would be seriously tough for the Gladstone producers, whose costs are higher than most in our region. If that price was to hold, you would really have to wonder whether or not the likes of Santos – the most pressured on the Queensland operators – might be able to sustain its second Gladstone train. If that happened, some of the shorter-term supply side pressures would be relieved.

    The potential to arbitrage regional and global LNG prices that are running along at historic lows with domestic gas prices that have hit crippling peaks has been obvious to many for some time. And the opportunity has been further crystallised by South Australia's very urgent and particular need to restabilise its electricity network by adding meaningful licks of conventional base load generation.

    In a report released earlier this week McKinsey & Company identified that the floating re-gas option would be viable at a $10 gigajoule gas price. This number concurs closely with the pricing matrix that underpins the IG Partners proposition.

    McKinsey's very, very useful addition to the national gas debate observed:"FSRUs (floating re-gas) offer a flexible option for increased supply and can be activated with a relatively short lead time.

    "LNG imports via an FSRU could add as much as ~150 PJ per year (which is just less that 25 per cent of domestic gas demand). The cost of LNG imports would reflect global LNG prices, with the addition of FSRU rental fees and capital costs of onshore gas receiving facilities.

    "FSRU imports have a breakeven above the netback economics of LNG exports from Queensland. An FSRU is estimated to breakeven at ~$10 per GJ. While this is more costly than other supply options, it could serve a role in meeting regional imbalances if a substantial price premium emerges in Victoria/NSW as compared to Queensland."

    The thing about the Weatherill plan is that it would very likely result in a regional gas demand imbalance that would drive the sort of premium gas pricing that McKinsey has observed is also likely in Victoria and NSW.

    Gas supply is the missing link in the Weatherill plan. The Premier wants to build a 250MW peaking power plant but there is no indication as to where the state might secure the flexible gas supply needed to make that plan technically or financially feasible.

    The IG Partners proposal would solve both those problems and deliver a bigger electricity reserve at a significantly reduced cost to the state, which would also be relieved of the construction and operating risk. In a perfectly aligned world, the project could be ready for a final investment decision by the end of 2017 with a power plant ready for commissioning by late 2020.

    Reduced to comprehensible simplicity, the plans is to acquire 7 petajoules of gas annually (which is equivalent of about 10 per cent of Australian domestic demand) and to convert and store that gas on a floating barge that would be sit offshore Port Adelaide and be linked to a 350MW generator sites not too far from Engie's Point Pelican.

    In proof of one of LNG's new growth paradigms – that small can be good too – the gas would arrive is comparatively small 6000-tonne shipments. There would be two shipments a week and the gas would be stored on the regas barge to ensure there was ready availability when the power station was needed to support the stater grid.

    The numbers suggest that the new plant would need a power price of about $100 a megawatt hour to justify pumping power. Based on the 2016 numbers, that means the new plant would have been in the system for 16 per cent of the generating year. It would have been in the money for 33 per cent of the opening months of 2017.

    The obvious challenge for IG Partners is to convince government that it has the financial capacity and functional expertise to deliver on the promise of what presently sits a classic example of the way markets work to find innovative and remunerative ways to solve problems.

    The best way to convince the government that it has the nous will be to gather financial backing and leadership of credibility known to the state government. That process is in train. Having worked on its plan for more than eight months, IG Partners is in meaningful discussions with private equity over funding and with a preferred chairman of deep experience and some considerable regional standing.

    With the chairman confirmed IG Partners will appoint a chief executive, who we understand is a former South Australian bureaucrat, and formalise the equity and organisation structure of their operating vehicle, to be called SEA LNG.

    Fiscal and functional credibility will be critical given that the venture requires one very particular gift from the state government.  SEA LNG will not sail without the security of a firm power supply contract from the South Australian government.

    The people working to secure that contract, and others, include two former BP executives, Kerrie Benham and Kellie Larson. Both worked in commercial roles at BP for more than 15 years. And they have been joined by Peter Monkhouse, who is an electrical engineer by training but who spent a working life in project management at BHP.  

    The size of the power station SEA LNG might operate suggests an ambitious level of capacity latency. It would seem very clear, not least because of the pedigree of the people involved here, that there are broader commercial possibilities here. South Australia is Australia's emerging copper super province with big expansions planned for BHP's Olympic Dam and for the nearby Oz Minerals fleet of prospects. The state could be producing 400,000 tonnes of copper in the relatively near future. But the security of power supply has become one of the missing links for miners.

    Whatever happens from here, it is plain that South Australia is in the grip of a market failure that requires some level of temporary state intervention. The plan Premier Weatherill revealed on Wednesday announces that reality. What SEA LNG announces is that there might be other more efficient, less risky and more complete ways of skinning this cat of crisis.

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    Capesize freight rates hit multi-month highs on tonnage tightness

    Capesize freight rates on the key Brazil-China and South Africa-China iron ore routes hit multi-month highs Wednesday as the availability of ballasters failed to keep pace with robust cargo demand.

    The front-haul iron ore route from Tubarao in Brazil to Qingdao in China hit a 19-month high Wednesday amid a shortage of vessels in the Atlantic for the late March-early April loading window.

    The Capesize Tubarao-Qingdao 170,000 mt (plus/minus 10%) route was assessed at $15.75/wmt Wednesday, the highest since August 6, 2015, when it hit $16.40/wmt.

    The Saldanha Bay-Qingdao 170,000 mt (plus/minus 10%) route was assessed at $12.00/wmt Wednesday, the highest since December 3, 2014, when it hit $12.25/wmt.

    Another key iron ore route, from Port Hedland in Western Australia to Qingdao for 170,000 mt (plus/minus 10%), was assessed at a year-to-date high of $6.65/wmt Wednesday.

    A strong rally in the freight derivatives market was adding to the booming sentiment.

    Market participants attributed the firmness to a reduction in the number of ballasters into the Atlantic region due to weak freight levels in February, which resulted in owners not being keen to fix vessels for long voyages at rates that, at the time, offered poor returns.

    The TCE rate on the Tubarao-Qingdao route was assessed at $16,581/day Wednesday, up six-fold from a year-to-date low of $2,664/day on February 16.

    The TCE for the Saldanha Bay-Qingdao route was assessed at $17,622/day and for the Port Hedland-Qingdao at $15,038/day, both the highest since S&P Global Platts began publishing TCE assessments January 3.

    Changing market dynamics were also playing a part.

    "I would say [there is a] totally different market for iron ore and coal now compared [with] a year ago. We have seen record high volumes going from Australia to China over the last few months, largely due to the cuts in Chinese domestic coal production," said Banchero Costa research director Ralph Leszczynski, who noted global coal prices had surged 53% year on year on the back of rising Chinese import demand.

    "The Chinese economy is significantly more active than a year ago. In part this is also because 2017 is an election year in China... Authorities will be keen to stimulate the economy and show the economic situation is healthy this year," he said.

    The stronger fundamentals in China have also boosted other segments of the dry bulk freight market since the start of 2017, with rates across the board seen at healthy levels.

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    New, safer U.S. rail cars gather dust even as ethanol trains grow longer

    While crossing a small wooden bridge in northwestern Iowa last Thursday, 20 rail tank cars in a mile-long train transporting ethanol flew off the tracks, sending fireballs into the sky, while thousands of gallons of the biofuel leaked into the creek below.

    No one was injured, in part because the accident occurred in a sparsely populated area. A similar derailment in the more dense Lac-Mégantic, Quebec, Canada, in 2013 killed 47 people after a train carrying crude oil crashed and exploded.

    But the incident in Iowa underscores the growing risk of another serious accident along with the increasing volume of the biofuel being moved in unit trains that are mile-long with about 100 rail cars - dubbed "rolling pipelines" - to slash freight costs.

    That is because ethanol shippers are still primarily using the type of rail cars that were deemed too unsafe to carry crude after the Quebec disaster, even though the biofuel is more explosive than oil.

    Thousands of replacement cars meant to better withstand an accident are sitting idle in rail yards around the country because the ethanol industry is not required to use them for another six years and as they cost about three time as much as the older cars, according to industry sources.

    The U.S. Pipeline and Hazardous Material Safety Administration (PHMSA) gave the ethanol industry until 2023 to employ cars with thicker shells and other safety features. Prior to the Iowa incident, PHMSA said it does not see any safety issues with relying on older cars, known as DOT 111s.

    Not everyone agrees.

    "We would like to see the shippers accelerate their schedule to get these legacy DOT-111 tank cars out of service when transporting flammable liquids — specifically crude oil and ethanol,” said Robert Sumwalt, member of the U.S. National Transportation Safety Board, an independent federal agency, at a Saturday press briefing in Iowa following the accident.

    The train in last week's accident was heading from Green Plains Inc's Superior, Iowa, terminal to the Gulf Coast. Green Plains did not comment for this story.

    The Renewable Fuels Association, which represents biofuels producers and shippers, said safety is a top priority for the industry and highlighted the rarity of these incidents.

    The NTSB has no regulatory authority to change things, Sumwalt said, adding that the power is vested with U.S. Congress.


    Ethanol production has grown sharply in the last decade thanks to government rules mandating increased use of the corn-based biofuel to reduce greenhouse gas emissions. Production is now about 1 million barrels per day.

    About 650,000 barrels of ethanol is transported by rail daily. A 2015 report by the Federal Railroad Administration estimated about 47 percent of ethanol shipments were by unit trains. But several sources interviewed, including four shippers, said their usage is increasing due to cost efficiencies.

    "Unit trains have been an increasing transportation efficiency...we are encouraged to do more unit trains," Kelly Davis, director of regulatory affairs at the Renewable Fuels Association, said at an NTSB roundtable in summer 2016.

    "Shippers want to utilize unit trains if they can to save money,” said Tom Williamson, a broker and owner of Sarasota, Florida-based Transportation Consultants. He said 11 of his 12 clients have switched to unit trains in the past two years.

    In the last two years, biofuels makers Archer Daniels Midland Co, Green Plains, and Eco-Energy Global Biofuels LLC, and terminal operator Kinder Morgan Inc have planned or built new unit train terminals.

    Eco-Energy did not respond to requests for comment, while Kinder Morgan declined comment. ADM, in a statement, said it is committed to making needed investments to meet new rail safety standards.


    Federal regulators have warned longer trains hauling hazardous materials increase the risk of disasters, particularly when using DOT 111 cars.

    There have been at least 17 significant ethanol or crude derailments since 2006, and nearly all involved DOT 111s.

    U.S. regulators gave the ethanol industry more time to shift because getting oil producers to stop using older cars was considered more important. A 2014 Federal Railroad Administration study found ethanol cars were 1.5 times more likely to explode than oil.

    As of September, there were 35,252 tank cars hauling ethanol, and 84 percent were DOT 111s, according to the latest Association of American Railroads data. Newer DOT 117s account for just 6 percent of the ethanol fleet.

    Based on current lease rates, a shipper using 1,000 of the older cars instead of the new models would save $5.4 million annually.

    BNSF Railway Co has started offering discounts to ethanol shippers this April if they agree to use DOT 117s.

    Generally, shippers have stuck with older cars because most railcar owners would hit shippers with financial penalties if they break long-term leases.

    “While we are having some success in getting ethanol customers to upgrade to DOT 117s when their leases expire, we are not seeing a lot of demand from customers to make this switch,” said Christopher LaHurd, a spokesman with GATX Corp, a leading U.S. leaser of rail cars.

    Current lease rates for DOT 111s are roughly $200 a month, while DOT 117s are around $650 a month, brokers said.

    In addition to GATX, Wells Fargo & Co, Bank of America Corp and Greenbrier Companies Inc are among the U.S. fleet owners.

    Spokesmen for Bank of America and Greenbrier declined comment. A Wells Fargo spokeswoman said the company is working with customers to shift to newer cars.

    It would cost about billions to replace all of the older cars with 117 model cars, Davis said in a phone interview.

    "Owners paid $100,000 for these (current) cars, and you're going to melt them down like a tin can to make a new one," Davis said. "That's a lot of stranded capital."

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    Trump reopens US fuel economy rules for 2022-25

    Framing the issue as a solution to US automakers moving operations overseas, President Donald Trump said Wednesday he was reopening US fuel economy standards for 2022-2025 and may ease them after a year of study.

    "We are going to restore the originally scheduled mid-term review and we are going to ensure that any regulations we have protect and defend your jobs, your factories," Trump told auto workers at the American Center for Mobility in Ypsilanti, Michigan.

    "We're going to be fair," he said. "This is an issue of deep importance to me -- for decades I've raised the alarm of unfair foreign trade practices. ... They've stolen our jobs, they've stolen our companies, and our politicians sat back and watched hopeless. Not anymore." Trump said he would also set up a task force in "every federal agency to identify and remove any regulation that undermines American auto production and any other kind of production."

    The president traveled to the Detroit area to tour auto plants and meet with CEOs to highlight job creation and auto manufacturing.

    The rules for corporate average fuel economy and greenhouse gas emissions impact automakers' decisions about vehicle body weights, engine specifications, and promotion of hybrid and electric vehicles.

    Smaller turbocharged engines used to boost fuel economy also increase demand for higher-octane gasoline. Premium gasoline accounted for 11.5% of total US motor gasoline sales in 2016, compared with 9.1% in 2009, the year the Obama administration proposed its first round of fuel economy targets, according to Energy Information Administration data.

    However, analysts do not expect a major shift in 2022-2025 gasoline demand as a result of Trump potentially rolling back the regulations.

    Related Capitol Crude podcast:Will Trump's energy policy erase Obama's climate legacy?


    PIRA Energy Group, an analytics unit of S&P Global Platts, said any changes to the CAFE targets would have minor impacts on fuel consumption by 2025, with any impacts being diluted by the fact that it takes around 10 years to turn over the entire US fleet of light vehicles.

    PIRA's current base case projects a secular decline in gasoline demand after 2020 of around 1% per year. Efficiency improvements in the gasoline-consuming fleet are part of the equation, and PIRA has also built in limited but growing electric vehicle penetration.

    Growth in the fleet size and vehicle miles traveled per vehicle remain important drivers, PIRA said. Retail gasoline prices will also matter a great deal to whether consumers favor cars with higher or lower fuel efficiency.

    Kevin Book, a managing director of ClearView Energy Partners, said freezing fuel economy standards at 2021 levels could increase US gasoline consumption by as much as 230,000 b/d -- which would only trim gasoline demand declines already expected for most of the next decade.


    To start a new review of the 2022-2025 standards, the White House is scrapping a final determination made in January by the Obama administration to keep the 2011 policy on track.

    A week before Trump's inauguration, the Environmental Protection Agency determined ahead of schedule that US automakers are meeting the targets quicker and at lower costs than expected, leaving the industry more than able to meet the 2025 goal of 54.5 mpg.

    A senior White House official who spoke to reporters on background said Obama's EPA broke its agreement with automakers by accelerating the midterm review and concluding it more than a year before the April 2018 deadline.

    He said the EPA also failed to consult with the National Highway Traffic Safety Administration and ignored a large volume of data submitted in comments during the review process.

    "We're going to get this agreement back on track," he said. "We're going to pull back the EPA's determination, because we don't think it's right.

    "And we're going to spend another year looking at the data, making sure everything is right so that we come to 2018 and we can set standards that are technological feasible, economically feasible and allow the auto industry to continue to grow and create jobs."


    Automakers have argued that adoption of hybrid and plug-in electric vehicles is not keeping pace with the CAFE standards, due in large part to the prolonged period of low gasoline prices.

    "Consumers just aren't buying those vehicles," the White House official said. "So that's a big problem. If that continues, we'll have to recalibrate" the fuel economy rules.

    The White House does not plan to revoke California's existing waiver allowing it to set tougher tailpipe standards than the national limit for cars through model year 2025, but it would work with the state to determine how to go forward after the midterm review.

    The California Air Resources Board said in January that it did not consider the waiver to be in jeopardy, despite reports of the Trump administration wanting to revoke it.

    Mitch Bainwol, president and CEO of the Auto Alliance trade group, said 18 automakers that objected to the EPA's final determination in January are pleased Trump is starting the review over from scratch.

    Automakers want to put the process back on track without pre-determining an outcome, using current data and "checking prior assumptions against new market realities," Bainwol said.

    "Now we will get back to work with EPA, NHTSA, CARB and other stakeholders in carefully determining how we can improve mileage and reduce carbon emissions while preserving vehicle safety, auto jobs and affordable new cars and trucks," he said.

    The Renewable Fuels Association, an ethanol trade group, called the first review rushed and cursory, saying it hopes the new one fully considers comments focusing on the role of fuels in enabling more efficient vehicle technologies.

    "High octane, low carbon fuels can play a significant role in helping to meet fuel economy targets in the future," RFA President Bob Dinneen said in a statement. "That is an omission that must be addressed moving forward if future vehicles can in fact help us address climate change without backsliding on other critical air quality and public health priorities."
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    Reallocation of laid-off workers remain a priority in capacity cuts, Premier Li

    Helping laid-off workers find new jobs is the most important issue for China as it works to reduce industrial overcapacity, Premier Li Keqiang said on March 15.

    "Last year, the central government set up a 100 billion yuan ($14.4 billion) fund to help workers and also asked local governments to set up similar funds," he told reporters after this year's National People's Congress session. "Assistance has already been provided to 720,000 laid-off workers."

    The premier said efforts to cut overcapacity will be extended this year to coal-fired power generation.

    Together with the people who are still to be re-employed from 2016, he said China will need to help about 1 million workers this year.

    "The key is to continue generating jobs," Li said. "Thanks to the initiative of massive entrepreneurship and innovation, many jobs have been created, while traditional drivers of growth have been upgraded, which is also generating job opportunities."

    He pledged that China will continue to make effective use of central government funds and push local governments and companies to fulfill their social responsibilities.

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    White House seeks to cut EPA budget 31 percent as Trump targets regulation

    President Donald Trump's administration is proposing a 31 percent cut to the Environmental Protection Agency's budget, eliminating its climate change programs and trimming back core initiatives aimed at protecting air and water quality, according to budget documents released on Thursday.

    The White House's proposed 2018 budget for the agency comes as Trump seeks to clear away regulations he claims are hobbling U.S. businesses - like oil drillers and coal miners. The proposed cuts are a starting point in negotiations with Congress, and could be tempered.

    The proposal would eliminate 3,200 EPA employees, or 19 percent of the current workforce, and effectively erase former President Barack Obama's initiatives to combat climate change by cutting funding for the agency's signature Clean Power Plan aimed at reducing carbon dioxide emissions.

    It would also eliminate climate change research and international climate change programs. Together, the cuts to climate change initiatives at the agency would eliminate some $100 million in spending.

    "Consistent with the President's America First Energy Plan, the budget reorients the EPA's air program to protect the air we breathe without unduly burdening the American economy," a summary of the agency's proposed budget said.

    Trump has expressed doubts about the science of climate change and has said the United States can reduce green regulation drastically without compromising air and water quality.

    But the proposed EPA budget cuts would extend well beyond climate change. It would cut some $427 million to regional pollution cleanup programs, including in the Great Lakes and Chesapeake Bay. Funding for the Superfund program to clean up the nation's most contaminated sites would drop by $330 million to $762 million.

    The budget summary said the rationale for the changes is to give local and state governments - often facing severe budget constraints themselves - responsibility for such clean-up efforts.

    Trump's proposal would also cut the budget for the EPA's enforcement division, which fines companies for pollution, by 31 percent. It would axe dozens of other programs including the popular Energy Star appliance efficiency program aimed at reducing U.S. energy consumption.

    One area that would see a small boost is for State Revolving Funds, low-interest loans for investments in water and sanitation infrastructure. The budget would add $4 million to the funds, bringing its budget up to $100 million.

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    Indian billionaire Agarwal to invest up to $2.46 billion in Anglo American

    Indian billionaire Anil Agarwal said on Wednesday he would buy a stake of up to 2 billion pounds ($2.46 billion) in Anglo American, but had no intention of trying to take control of the global miner.

    Agarwal, who has majority control of Hindustan Zinc Ltd through Vedanta Ltd, will make the investment via his family trust Volcan Holdings, Volcan said in a statement.

    Anglo, which has a market value of around 16.75 billion pounds ($20.55 billion), declined to comment.

    Two industry sources, speaking on condition of anonymity, said Agarwal was investing for his family trust and not in connection with Vedanta, and rather than using cash to finance the deal he is using a financial instrument that is a first of its kind.

    The official statement describes it as a mandatory exchangeable bond. The 2 billion pound bond is due in 2020 and is led by J.P. Morgan.

    One source said it was an efficient and innovative manner to buy a sizeable stake as acquiring around 12 percent of a company could be very difficult without attracting attention and potentially very expensive.

    The structure of the bond limits any downside, the sources said, adding the advantage of buying into Anglo American, whose portfolio includes diamonds and platinum, was to diversify Agarwal's holdings.

    "This is an attractive investment for our family trust ... I am delighted to become a shareholder in Anglo American plc," Agarwal said in the statement.

    Anglo, along with other mining companies, has recovered from a slump in commodity prices in 2015.

    The company's shares soared nearly 300 percent last year and it said in February it would resume paying dividends and slow down its asset sales as it was no longer under financial pressure.

    Wednesday's statement also said that neither Volcan nor Vedanta intended to make an offer to acquire Anglo American.
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    Brazil prosecutor files for 83 new cases before Supreme Court

    Brazil's top public prosecutor Rodrigo Janot asked the Supreme Court on Tuesday to open 83 new investigations into politicians named in plea bargain testimony by executives of the Odebrecht engineering conglomerate.

    Janot also requested that the Supreme Court send 211 other requests to lower courts, involving people without a right to trial before the Supreme Court. Under Brazil's constitution federal lawmakers and ministers can only be tried by the Supreme Court.

    A source told Reuters last week that Janot would seek authorization from the Supreme Court to investigate senior ministers in President Michel Temer's Cabinet and senators from his PMDB party for corruption.

    Brazil prosecutor files for 83 new cases before Supreme Court

    Brazil's top public prosecutor Rodrigo Janot asked the Supreme Court on Tuesday to open 83 new investigations into politicians named in plea bargain testimony by executives of the Odebrecht engineering conglomerate.

    Janot also requested that the Supreme Court send 211 other requests to lower courts, involving people without a right to trial before the Supreme Court. Under Brazil's constitution federal lawmakers and ministers can only be tried by the Supreme Court.

    A source told Reuters last week that Janot would seek authorization from the Supreme Court to investigate senior ministers in President Michel Temer's Cabinet and senators from his PMDB party for corruption.
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    China's fixed-asset investment up 8.9pct in Jan-Feb

    China's fixed-asset investment (FAI) grew 8.9% year on year to 4.1378 trillion yuan ($598.3 billion) in the first two months this year, up from 8.1% in 2016, the National Bureau of Statistics (NBS) said on March 14.

    Fixed-asset investment includes capital spent on infrastructure, property, machinery and other physical assets.

    FAI by state-owned enterprises climbed 14.4% year on year during the period, according to the NBS.

    Private sector FAI, which accounts for more than 60% of the total FAI, grew 6.7% in the first two months, accelerating from 3.2% in 2016 and marking the fastest growth since March 2016.

    In the agricultural sector, fixed-asset investment jumped the fastest, up 19.1% year on year. It was followed by 12.2% growth for the service sector and 2.9% for the industrial sector, the NBS data showed.

    Infrastructure investment expanded 27.3% in the first two months, while FAI in high-tech industries surged 18.4% during the period, according to NBS data.

    Other indicators released by the NBS included industrial production and retail sales, pointing to stabilization in the world's second-largest economy.
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    Zimbabwe mines output threatened by foreign payment delays

    Zimbabwe's mining output is under threat because banks are delaying processing foreign payments by up to three months due to a shortage of dollars, the southern African country's mining chamber warned on Monday.

    Mining generates more than half of Zimbabwe's foreign exchange and should be given priority by the central bankwhen making offshore payments, Chamber of Mines economist Pardon Chitsuro told a Parliamentary committee.

    Zimbabwe introduced a so-called bond note currency, which is denominated in US dollars, in November in a bid to ease cash shortages, but long queues continue outside banks while US dollars are slowly disappearing from circulation.

    Some businesses, especially those importing goods, are offering discounts on cash purchases in US dollars, while charging more for mobile or card transactions.

    Mining companies need to import machinery and inputs such as explosives and chemicals.

    Importers say they are struggling to pay for goods abroad because accounts held by local banks overseas have been depleted of foreign currency.

    "We have been facing a foreign payments gridlock with delays of up to 12 weeks impacting negatively on production," Chitsuro said.

    The world's two largest platinum producers Anglo American Platinum and Impala Platinum have operations in Zimbabwe, alongside local firms Bindura Nickel and Hwange Colliery Company.

    Bankers Association of Zimbabwe president Charity Jinya acknowledged the delays, which she blamed on a lack of dollars and depleted offshore accounts of local banks.

    Last month, the central bank said Zimbabwean banks only had enough cash in offshore accounts to finance about two weeks' worth of imports.

    Zimbabwe needs an average $430-million a month to pay for imports, according to central bank figures for 2016.
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    China Jan-Feb power generation rises 6.3pct YoY

    China generated 931.5 TWh of electricity over January-February, gaining 6.3% year on year, showed data from the National Bureau of Statistics (NBS) on March 14.

    Of this, thermal power output stood at 728 TWh, or 78.2% of the total power generation, rising 7% year on year; while hydropower output reached 122.9 TWh, or 13.2%, down 4.7% from the year prior; followed by wind power output at 39.8 TWh, rising 26.9% from a year ago; nuclear power output at 33.4 TWh, rising 12.4% year on year; and solar power output at 7.5 TWh, increasing 29.6% from the previous year.

    That equated to a daily output of 15.79 TWh on average in the first two months, up 6.3% year on year, data showed.

    China will eliminate, halt or delay construction of coal-fired power capacity by more than 50 GW, in order to covert risks of surplus capacity and enhance efficiency of the industry, said Premier Li Keqiang while presenting government work report on March 5.

    Relevant authorities have revealed detailed tasks of the move, with 5 GW of outdated thermal power generation capacity to be eliminated, construction of illegal projects totaling 38 GW to be halted and construction of projects totaling over 7 GW to be delayed.

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    Chinese watchdogs to conduct strict environmental checks in April

    Chinese watchdogs will launch strict environmental checks on 15 provinces in April, including Hunan, Anhui, Xinjiang Uygur autonomous region, Tibet, Guizhou, Sichuan, Shanxi, Shandong, Tianjin, Hainan, Liaoning, Jilin, Zhejiang, Shanghai and Fujian, said Chen Jining, minister of the Environmental Protection Ministry.

    Relevant environmental inspections have been finished in a total of 16 provinces, which were aimed at strengthening local governments' responsibility of environmental protection, tackling environmental problems and establishing effective long-term environmental systems.

    Inspired by the central government's thorough checks, China's 21 provinces have rolled out documents to detail responsibilities of protecting environment, and 24 provinces revealed provincial plans of safety checks.

    A total of 24 provinces have released detailed regulations of accountability for any behaviours disrupting ecological environment.

    Environmental inspection panel sent by the central government conducted air-quality checks on Beijing, Tianjin, Hebei, Shanxi, Shandong and Henan between February 15 and March 15 this year.
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    China's economy gets off to strong start in 2017 as investment rebounds

    China issued a raft of upbeat data on Tuesday showing the economy got off to a strong start to 2017, supported by strong bank lending, a government infrastructure spree and a much-needed resurgence in private investment.

    Solid growth is welcome news for China's policymakers as they turn their focus to containing risks from a sharp build-up in debt ahead of a major leadership reshuffle later this year.

    But economists are not sure how long the pace can be sustained as the central bank takes a tighter stance on credit and exporters brace for a surge in U.S. protectionism.

    Fixed-asset investment expanded more strongly than expected in the first two months of the year as growth in private investment more than doubled from 2016, while surging demand for steel for new roads, bridges and homes lifted factory output.

    That added to readings last week showing robust imports, particularly of commodities such as iron ore, and a sharp rise in producer prices which is boosting industrial profits.

    "Today's data appeared to be mainly driven by infrastructure spending and a rebound in the real estate sector," said Zhou Hao, a Singapore-based economist at Commerzbank.

    China has cut its growth target to around 6.5 percent this year to give policymakers more room to push through painful reforms to reduce financial risks created by years of debt-fuelled stimulus. The world's second-largest economy grew 6.7 percent last year, the slowest pace in 26 years.

    China's first-quarter economic growth could accelerate to 7 percent year-on-year, from 6.8 percent in the last quarter, economists at OCBC wrote in a note last week.

    But OCBC and many other China watchers expect that pace will begin to slow starting in spring as the payoff from last year's stimulus spree begins to fade.

    "This strength remains heavily reliant on rapid investment growth that will be difficult to sustain given clear signals that the fiscal and monetary policy stance will be less supportive this year," says Julian Evans-Pritchard, a Singapore-based China Economist at Capital Economics.

    China's new loans fell sharply in February from near-record levels the previous month but were still higher than expected.

    ANZ said the rapid credit expansion might trigger further hikes in short-term interest rates, following two early this year, as policymakers remain concerned about high leverage in the economy.


    Analysts singled out an unexpectedly strong rebound in investment as particularly encouraging for China's outlook.

    Fixed-asset investment growth accelerated to 8.9 percent in January and February from the same period last year, largely due to strong property and infrastructure construction.

    Economists had expected investment growth of 8.2 percent, quickening from 8.1 percent in the whole of 2016.

    Growth in private investment quickened to 6.7 percent, more than twice the pace of last year, suggesting private firms are growing more optimistic about the business outlook.

    Sheng Laiyun, a spokesperson for the statistics bureau, attributed the rebound largely to better implementation of Public-Private Partnership (PPP) projects, which the government has been pushing to attract more private capital into traditionally state-dominated areas.

    Private investment had cooled sharply last year, with many smaller firms facing tough access to financing, tight profit margins and a crowding out by big state companies. Private investment accounts for about 60 percent of overall investment in China.

    Industrial output rose 6.3 percent, slightly more than expected and the best pace in nearly a year.

    China's steel mills are churning out as much metal as possible, enjoying their best profits in years, even as they worry that a year-long rally in prices is running out of steam, executives said.

    China combines January and February activity data in a bid to smooth out seasonal distortions caused by the timing of the long Lunar New Year holidays, which began in late January this year but fell in February last year.


    While activity data suggested generally resilient growth, analysts pointed out two potential areas of concern.

    Real estate data was mixed, with some hints that the sector may be showing signs of heating up again, despite a slew of government curbs since October to tame sharp home price rises.

    China's property sales by area surged 25.1 percent in the first two months from a year ago, well above the annual rate last year which was the fastest in seven years. It was also a marked surge from December.

    Real estate investment growth moderated but only slightly, to 8.9 percent from 11.1 percent in December, according to Reuters' calculations. It rose 6.9 percent in all of 2016.

    A rebound in the sector could risk another round of cooling measures which could drag on broader growth.

    Retail sales also disappointed.

    Sales grew 9.5 percent in the first two months of the year, the slowest pace in nearly two years and cooling from 10.9 percent in December.

    But the statistics bureau's Sheng told reporters "there is no problem with consumption in China", stressing weaker growth is mainly due to a slowdown in auto sales after the government rolled back tax breaks on small cars.


    China's economic outlook is also being clouded by increasing fears of protectionism under U.S. President Donald Trump.

    Trump plans to host President Xi Jinping at a summit next month, according to media, as his administration seeks to smooth relations which have got off to a rocky start.

    During the election campaign, Trump had threatened to label China a currency manipulator and impose huge tariffs on imports of Chinese goods.

    He has not followed through on either move yet, but the U.S. Treasury will issue its semi-annual currency report in April.
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    Anglo American plans pay cap after shareholder revolt

    Major miner Anglo American is set to cap executive bonuses, it said on Monday, following a shareholder revolt last year over high payouts even when the company's share price had crashed.

    In its annual report, Anglo American said on Monday it would reduce maximum annual bonuses for Chief Executive Mark Cutifani to 300 percent from 350 percent of basic salary, bringing it in line with other executive directors.

    For Cutifani, the limit is 13.1 million pounds ($16 million).

    The company also said that from this year, the value of long-term incentive plans (LTIP) would be capped at twice the face value of the award at the time of vesting - a response to shareholder concern that executives could gain from share price swings when they were not backed up by improved company strategy.

    "We were determined to address investors' concerns about the potential windfall gains for executive directors," Philip Hampton, chairman of the remuneration committee, wrote in the report.

    Even then, executives would only be eligible for the limit of twice the face value if they met performance targets.

    Cutifani's pay for 2016 was just under 4 million pounds, which included a cash bonus but no LTIP award as targets were not met.

    In addition, Anglo American said it was increasing executive directors' salaries in 2017 by 2 percent after freezing them in 2016 "to recognize the challenges faced by the Company at the beginning of the year".

    The increase in 2017 is in line with pay awards to the overall British employee population, it said.

    The new policy will be voted on at Anglo American's annual general meeting (AGM) in April.

    At last year's AGM, opposition to the remuneration policy was significant at close to 50 percent as shareholders objected to windfalls for directors linked to volatile commodity markets rather than shrewd strategy.

    After a widespread commodity slump at the end of 2015 and in early 2016, Anglo American recovered strongly last year when it was the top performer on the blue chip FTSE, rising around 300 percent.
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    China's 102 SOEs total debt ratio at 66.6%

    China's 102 state-owned enterprises reported total debt ratio at 66.6% presently, down from a ratio of 66.7% last year, said Xiao Yaqing, director of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), at a meeting on March 12.

    It indicated that the debt risks of Chinese state-owned companies are controllable, Xiao added.

    "The fundamental way for enterprises to lower debt ratio is profitability improvement. The blind investment should be strictly capped, while financing through trades for business expansion purpose should be curbed," said Xiao.

    The state-owned enterprises will give priority to deleveraging and reducing debt risks in the near future, and the SASAC will strengthen relevant inspection and supervision.
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    Dow CEO: Chemical sector started manufacturing boom that can continue under Trump

    The shale boom offered a “lease on life” for the petrochemical sector to create new manufacturing in the U.S., and a broader manufacturing boom could continue under President Donald Trump, said Andrew Liveris, the longtime chairman and CEO of Dow Chemical.

    Recently tapped by Trump to lead his Manufacturing Jobs Initiative, Liveris said he sees the potential for an “American manufacturing renaissance” — one that embraces technology while training workers for the future.

    Speaking at the end of the CERAWeek by IHS Markit conference in Houston, Liveris promoted fair and open global trade, but he noted the understandable resistance to globalization.

    Liveris said he supported the notion of a globalization “pause,” but hopefully one that doesn’t last long. There’s a need to recalibrate and ensure that global growth doesn’t come at the expense of American workers. “It’s so important to not leave a substantial part of humanity behind,” he said.

    Liveris is taking more of a lead with Trump in part because he’s retiring later this year after the $130 billion Dow merger with DuPont is completed. DuPont CEO Ed Breen will be the CEO of the merged DowDuPont.

    However, Liveris, a native of Australia, was critical of Trump early in the presidential campaign, calling it the coming of the “Kardashian presidency.”

    Dow Chemical is buoyed of late by the cheap and ample natural gas feedstock in the U.S., leading to Dow investing more than $6 billion in expansions along the Gulf Coast, primarily south of Houston in Freeport and Lake Jackson.

    “‘We ain’t done yet,’ as Texans say,” Liveris said. “We’ve got more to invest.”

    However, he admitted the merger is largely investor driven. After the merger, DowDuPont will be splintered into three separate companies, including one still named Dow that would continue to own and run the Freeport complex.

    The materials science business would operate under the Dow name, the agribusiness under DuPont and specialty products under a yet-to-be determined brand.

    Not enough investors think long-term and that hurts larger businesses, Liveris said. “It does mean you have to go less diversified or more focused.” So there will be three highly focused DowDupont companies.

    “There’s a lot of money to be made in money,” he said. “The money sector is wanting to measure us.
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    Workers at France's EDF to strike again starting Mar 13 evening

    Workers at France's EDF will strike for 24 hours starting Monday at 9 pm local time (2000 GMT), the company said in a note posted on the website of French grid operator RTE on Thursday.

    The strike will end at 9 pm on Tuesday, EDF said, without giving any details on how much capacity could be affected.

    The last strike began Sunday evening and ended Wednesday night, affecting supply mostly on Tuesday and leading to a combined capacity cut of 2.03 GW at four nuclear reactors. There was a limited impact on prices, however, as high wind levels and weak demand offset the reduced nuclear availability.

    EDF's 900 MW Bugey-4 reactor was running at 430 MW capacity, while its 1.3 GW reactor Penly-1 had its capacity cut by 610 MW and its 900 MW Tricastin-1 reactor saw capacity reduced by 165 MW. The strike also resulted in the 1.3 GW Belleville-1 reactor operating at half its capacity and the 900 MW Chinon-3 nuclear unit running at 760 MW capacity.

    All of them returned online as planned at 9 pm local time Tuesday, with no impact from the strike seen on the nuclear fleet Wednesday, according to French grid operator RTE.

    The notice of the latest EDF action comes as labor unions representing professionals in the energy industry called Thursday for a national action day on Tuesday. The call to strike comes against the backdrop of a proposal to freeze the national base salary this year.

    "Noting the refusal of employers to respond to employee demands, the five unions unanimously decided in favor of a new day of actions and strike on Tuesday, March 14, 2017," France's main energy trade union, FNME-CGT, said in a statement on its website.

    The statement said the unions were asking for the reopening of negotiations on the national basic salary, the closure of sites "resulting from the destructive reorganizations of the public service" and an end to "massive job cuts."

    EDF workers have joined several recent calls for national action days organized by FNME-CGT and other unions, with the strike next week the fifth for EDF workers this year.
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    Beijing to shift from coal to clean energy in 700 villages this year

    China's capital city of Beijing decides to shift from coal to clean energy for heating in 700 villages this year, in an effort to improve air quality, local media reported.

    In 2016, 663 villages in Beijing successfully changed from coal-reliant to clean energy-powered heating in winter, which helped reduce 0.68 million tonnes of coal, reported the Beijing Morning Post.

    For those villages not included in the "coal-to-clean energy" plan, premium coal use is encouraged and a total of 1.18 million tonnes such coal has been booked.

    Attached Files
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    Bitcoin Soars Above $1300 For First Time Ahead Of SEC Decision

    With the SEC decision to approve a Bitcoin ETF looming, the payrolls data-inspired weakness in the USD appears to have sparked a sudden panic bid in Bitcoin, spiking the virtual currency to $1305 - new record highs.

    Hard to say if someone 'knows' something about the SEC decision or this is a kneejerk to the dollar drop...

    Additionally, as Bloomberg points ut, BitMEX, a bitcoin platform, is offering members the ability to place bets using the digital currency on whether the Winklevoss Bitcoin Trust (COIN) will be approved by the SEC. Based on the betting, the ETF has a 45% chance of approval. Odds started at about 33% a month ago and jumped to 70% last week before fading. The lawyer who worked on the initial application said it's unlikely to get approved, while some analysts call it a "coin toss."
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    ING, SocGen to test LNG trading with blockchain in months

    Banks ING and Societe Generale are in talks with traders to test liquefied natural gas (LNG) trading based on blockchain, the technology starting to shake up the traditional energy industry.

    Blockchain, which originates from digital currency bitcoin, works as an electronic transaction-processing and record-keeping system that allows all parties to track information through a secure network, with no need for third-party verification.

    While established energy suppliers and traders will continue operating as they are for the foreseeable future, blockchain is starting to break into the power market, nudging the status quo in an industry that has been slow to modernise.

    In February, ING and Societe Generale offered their blockchain platform to trading house Mercuria to sell an African oil cargo to China.

    The banks said their blockchain platform helped Mercuria reduce some processes from three hours to 25 minutes and make cost savings of up to 30 percent, supporting the case for expansion into LNG, natural gas converted to liquid form for easier storage or transport.

    “LNG is an area we definitely want to focus on because it’s a growing market but at the same time it’s controlled by a few very important players,” said ING’s managing director for trade and commodity finance, Patrick Arnaud.

    He is already talking to several companies active in the LNG market about testing a blockchain-based deal within months. He declined to name the companies.

    Mercuria Chief Executive Marco Dunand said last year blockchain payments could slash payment costs in a system stuck in the “17th or 18th century” by some 30 percent.


    Omar Rahim, a former energy trader at big utilities, founded Energi Mine in January to develop a blockchain-based trading platform linking big energy users with battery storage to buy electricity at the cheapest times.

    “For me, it’s the disruption that the energy industry has been waiting for. The companies that are going to dominate the energy sector are not the big generators, they will be the ones who understand data,” he told Reuters.

    Wien Energie is still testing the use of blockchain in wholesale gas trading together with start-up BTL and supported by consultancy EY.

    Big utilities too have started investing in blockchain, exploring the use of the technology in different parts of the sector.

    Germany’s Innogy said it is in talks with European peers Fortum, Enel and Enexis, among others, to apply blockchain technology to their networks of electric car charging stations.

    “This spring we want to offer charging infrastructure whose payment processes are based on blockchain technology,” said Carsten Stoecker, senior manager at Innogy’s innovation hub.

    Blockchain’s ‘smart contracts’, which form the base of two parties making a verified transaction automatically, are a way of enabling consumers to trade spare energy with each other. It still needs to be proven on a wider scale.

    In the U.S., engineer Siemens is cooperating with start-up LO3 Energy to develop a microgrid for blockchain-based energy trades among neighbours in Brooklyn who can sell spare electricity they produce.

    “The use of blockchain technology allows individuals and consumers to cancel out the central authorities or brokers as we’ve seen with bitcoin,” said Thierry Mortier, a partner in EY’s utilities practice.

    The replacement of central authorities in energy trading hits at the heart of exchanges that play a role in facilitating trades.

    But so far, energy exchanges see no threat from the technology.

    EEX, Europe’s largest energy exchange for electricity and gas trading, said its role of linking trading parties with each other would not be compromised.

    Even if entirely new traders emerge, the bourse’s core function to establish benchmark prices and regulate market access would remain its job, said Maximilian Rinck, a strategy and market design expert at EEX.

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    Oil and Gas

    Venezuela's cash-strapped PDVSA offers Rosneft oil stake - sources

    Venezuelan state oil company PDVSA has offered Russian counterpart Rosneft a stake in a joint venture in the country's Orinoco Belt extra-heavy crude area, five industry sources said, in a sign of the Latin American nation's dire economic situation and Moscow's growing muscle there.

    Rosneft, Russia's top oil producer, has been offered a 10 percent stake in the Petropiar joint venture.

    PDVSA, as Petróleos de Venezuela SA is known, has a 70 percent share, and U.S. oil company Chevron Corp (CVX.N) holds 30 percent of the venture, which includes an oil field and a 210,000 barrel-per-day oil upgrader.

    Two sources said the offer was part of a larger package offered to Rosneft as PDVSA seeks to raise money to pay suppliers and bond holders.

    It is unclear if Rosneft will accept the offer. Financial details of the potential transaction were not immediately available.

    PDVSA and Venezuela's Oil Ministry did not respond to requests for comments. Chevron and Rosneft declined to comment.

    A deal would see California-based Chevron working alongside state-owned Rosneft, which has been affected by U.S. sanctions against Russia.

    But Chevron's main concern is that accounting and transparency laws are less strict in Russia than in the United States, a source close to the matter said.

    The proposal highlights Venezuela's need for cash after the nation's oil output fell about 10 percent last year, according to the Organization of the Petroleum Exporting Countries. This has worsened a recession that has millions of Venezuelans skipping meals amid food shortages and spiraling inflation.

    The opposition-controlled National Assembly says President Nicolas Maduro's unpopular government is resorting to surreptitiously selling strategic assets to weather the unprecedented crisis.

    "Any deal of national interest must be approved by the National Assembly," tweeted lawmaker Jose Guerra, head of congress' finance commission, in reaction to Reuters' article. "If PDVSA sells 10 (percent) of Petropiar to Rosneft, that sale is null and void."


    Rosneft has already been gaining ground in Venezuela, an OPEC member.

    Last year, the company paid $500 million to increase its stake in the Petromonagas joint venture from 16.7 percent to 40 percent, the maximum foreign partners are allowed to have under oil sector regulations created under late leader Hugo Chavez.

    "The ballpark value of the two projects (Petromonagas and Petropiar) probably isn't that different," said Francisco Monaldi, fellow in Latin American energy policy at the Baker Institute in Houston.

    The Petromonagas sale also raised the ire of the National Assembly, which said the purchase was illegal because Congress did not approve it. Critics have also said the stake was sold too cheaply.

    In another controversial move, PDVSA last year used 49.9 percent of its shares in coveted U.S. subsidiary Citgo as collateral for loan financing from Rosneft.

    PDVSA said this month it had received $1.985 billion from an unnamed client in return for future oil shipments, with Citgo shares used as a guarantee.

    In total, Rosneft has lent PDVSA between $4 billion and $5 billion, but the details of those deals have not been disclosed.

    "We must thank life that Russia and the world have a Vladimir Putin," Maduro said at a deal-signing event with Rosneft head Igor Sechin last year.

    "I wanted to be here at this event because of how important relations with the new Russia are."
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    Halfway into 2017's oil supply cut, Asia remains awash with fuel

    Halfway into an OPEC-led oil supply cut, Asia remains awash with fuel in a sign that the group's efforts to rein in a global glut have so far had little effect.

    The Organization of the Petroleum Exporting Countries (OPEC) and other suppliers including Russia have pledged to cut production by almost 1.8 million barrels per day (bpd) during the first half of this year to rein in oversupply and prop up prices.

    Yet almost three months into the announced cuts, oil flows to Asia, the world's biggest and fastest growing market, have risen to near record highs.

    The Asian surplus will pressure global oil prices and weigh on the budgets of major oil producing nations but may also help spur growth in demand needed to soak up the excess.

    Thomson Reuters Oil Research and Forecasts data shows around 714 million barrels of oil are being shipped to Asia this month, up 3 percent since December when the cuts were announced.

    Responding to rising production, benchmark crude prices are down 10 percent since January, and analysts warn that more falls could follow.

    "Cuts are not enough to re-absorb the world's excess supply. So, unless oil demand growth rebounds to record levels in 2017, oil prices could head for another substantial fall," said Leonardo Maugeri, senior fellow at the Harvard Kennedy School's Belfer Center for Science and International Affairs.

    Not only are supplies from the Middle East and Russia to Asia still high despite the pledge to cut, but record volumes are flooding into Asia from the Americas and Europe.

    The result is a market awash with fuel. More than 30 supertankers are sitting off the coasts of Singapore and southern Malaysia filled with oil, despite a price structure that makes it unattractive to buy oil now and store it for sale at a later date. Crude for delivery in January 2018 is only 70 cents more expensive than that for delivery next May, making those floating storage vessels unprofitable.


    The ongoing glut poses a predicament for OPEC. Its members need higher oil prices to balance government budgets, but cutting back production to prop up prices means losing market share as other suppliers step in to fill the gap.

    OPEC's cuts early in the year pushed up Middle East Dubai crude price against the international benchmark Brent, allowing oil from outside the Middle East to head to Asia.

    Traders are shipping competitively priced crudes such as Russian Urals, Kazakhstan's CPC Blend, North Sea Forties and U.S. West Texas Intermediate to replace Middle East staples from Oman to Abu Dhabi.

    A record 10.5 million barrels of Russian Urals will arrive in Asia between April and June, Eikon data shows.

    Oil from Kazakhstan, the North Sea, Brazil, and the United States arriving in Asia in March is expected to reach 45 million barrels, double the volume in the same month a year ago.

    "The uptick in arbitrage has not gone unnoticed by the large Middle Eastern (OPEC) producers," analysts from consultancy JBC Energy said in a note to clients this week.

    In a move to beat off competition but which contradicts the announced cuts, OPEC's de-facto leader Saudi Arabia unexpectedly cut light crude prices last week.

    State-owned Saudi Aramco has also given additional supplies to Asian customers in April, trade sources said.

    Stiff competition and ample supplies have depressed prices for Middle East and Asia-Pacific grades, some of them to multi-month lows.

    May-loading for Qatar Marine crude sold at discounts to its official selling price for the first time in four months while spot premiums for Russian and Malaysia's flagship Kimanis crude have also hit lows.

    With few signs that producers will cut supplies deeply enough to end the glut, and indicators that output is rising in the United States, traders say only strong demand can eventually rein in the surplus.

    "Demand growth in Asia is about 700,000 bpd, so the glut will eventually clear," said Oystein Berentsen, managing director for oil trading company Strong Petroleum in Singapore.

    Not all are as confident.

    "Enduring excess supply could be eased by a robust demand growth," said Maugeri of the Belfer Center. "But preliminary data and analyses do not portend such a development, especially because of a significant slowdown in demand growth in China and India - the two major engines of world oil consumption growth."

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    Fire at Syncrude oil sands site extinguished after two days

    The fire at Syncrude Canada's oil sands plant in northern Alberta was extinguished on Thursday morning, the company said in a statement, as parts of the mining and upgrading facility ran at reduced rates.

    Syncrude said crews were still working to fully isolate the affected area of the Mildred Lake upgrader to allow safe entry to assess damage and development a repair strategy. The upgrader processes mined bitumen into refinery-ready synthetic crude

    Other operations remained stable at the 350,000 barrel per day mining and upgrading facility, roughly 40 kilometres north of the oil sands hub of Fort McMurray.

    Several upgrader units were shut down or running at reduced rates, while mining and extraction were being paced to balance lower bitumen demand, the company said.

    Syncrude spokesman Will Gibson said he did not have details of the impact on production volumes.

    The fire broke out on Tuesday afternoon after a line failure caused a treated naphtha leak, prompting an evacuation of the Syncrude site. One worker was injured and was at an Edmonton hospital, in stable condition.

    Syncrude is majority-owned by Suncor Energy, while Imperial Oil provides operational, technical and business management support.
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    Trump Weighing Eni Bid to Drill in Arctic Waters After Obama Ban

    The Interior Department is weighing Eni SpA’s request to explore for oil in waters north of Alaska, giving the Trump administration a chance to reverse course from former President Barack Obama’s attempt to curtail Arctic drilling.

    Eni’s exploration well would be in an area it previously leased from the federal government, and so it isn’t covered by the executive order Obama issued in December to block the sale of new drilling rights within huge swaths of the Chukchi and Beaufort seas. As the Trump administration considers ways it could reverse Obama’s directive, approving this plan could encourage more oil companies to consider Arctic exploration.

    Although some oil companies have abandoned plans to launch expensive quests for crude off Alaska’s coast, recent discoveries have fanned interest in waters near the shoreline that can be drilled at a lower cost.

    The Bureau of Ocean Energy Management is conducting an initial, 15-day review of the broad drilling blueprint filed by Italy’s Eni, which is aiming to sink a well in the federal waters of the Beaufort Sea before its leases expire at the end of the year.

    If the bureau deems Eni’s broad exploration blueprint complete, it would publish the document online and subject it to public comment while scrutinizing the plan’s details in a 30-day review.

    "By the end of the 30-day period BOEM will either approve the exploration plan, require modifications to the exploration plan or disapprove the exploration plan," bureau spokeswoman Connie Gillette said in an email. Before it could launch operations on its proposed Nikaitchuq North well, Eni also would have to win a drilling permit from the Bureau of Safety and Environmental Enforcement and secure other government approvals.

    Eni already uses a man-made gravel island to extract oil from leases in state waters hugging Alaska’s coast. Under its plan, the company would would use that same site -- known as Spy Island -- as a launching pad for extended-reach drilling that would target a potential oil reservoir in nearby federal waters.

    Eni, the lead operator on the project, owns 40 percent of the 13 leases set to be affected by the plan. Its partners are Royal Dutch Shell Plc, which also has a 40 percent share, and Spain’s Repsol SA, which claims the remaining 20 percent.

    In an emailed statement, Eni said it was planning to begin drilling by the end of the year. Eni could cite its proposed oil exploration in trying to convince federal regulators to issue a "suspension of operations" that would effectively extend its leases there.

    In February, the safety bureau approved Eni’s bid to consolidate 13 of its federal leases in a single unit -- a decision that could make it easier to prolong the life of all of them if drilling began in any one of those tracts.

    Still, U.S. law is designed to push oil companies to diligently develop their holdings -- and it sets a relatively high bar for granting time-outs. Eni’s targeted leases have already been suspended before -- some for roughly four years. Federal law does not give the Interior Department authority to issue blanket extensions and requires companies to lay out a specific plan for developing leased acreage in order to get more time.

    Environmental Opposition

    "Eni and the federal government must be cautious and responsible," said Michael LeVine, Pacific senior counsel for the conservation group Oceana, which closely monitors Arctic development. "The leases Eni owns have sat dormant for more than a decade and have already had their expiration dates extended in the past. There is no compelling reason to extend the leases again or to rush to grant last minute approvals."

    Under Obama, the Interior Department rejected bids by Shell and ConocoPhillips to extend the life of other Arctic leases. Shell initially appealed the decision but later dropped the effort after a challenge from environmentalists.

    Environmentalists argue the risks of Arctic drilling are too high -- potentially imperiling the seals, whales and walruses that live in the region as well as the Alaska Natives who live off those resources. Government auditors have warned that icy conditions, dark days and sparse infrastructure could make it impossible to adequately sop up a spill in the region.

    27 Billion Barrels

    Obama cut Arctic tracts from a five-year leasing plan issued last year, and issued a sweeping order that withdrew almost all U.S. Arctic waters from future sales. Neither action affects existing leases, such as that held by Eni. Trump is weighing how to reverse both of Obama’s moves, according to Alaska Senator Lisa Murkowski.

    The U.S. Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas, but energy companies have struggled to tap resources buried below the remote, icy waters at the top of the globe. Shell spent more than seven years and roughly $8 billion trying to find a large stash of crude in the Chukchi Sea, but it abandoned that quest in 2015 after a series of embarrassing mishaps and a test well yielded disappointing results.

    A different scenario is playing out closer to the coast, where recent discoveries -- and the prospect of far lower development costs -- may be luring oil companies. Caelus Energy Corp. claimed to have found at least 2 billion barrels of recoverable oil far beneath northwestern Alaska’s Smith Bay in 2016. And Repsol just announced a 1.2 billion-barrel discovery on Alaska’s North Slope.
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    India says producers can sell coal bed methane at market rate

    India has permitted coal bed methane (CBM) producers to sell gas at the market rate, a government statement said on Wednesday, a move that could help companies such as Oil and Natural Gas Corp and Reliance Industries.

    The producers can also now sell CBM gas to their affiliates if they are unable to find any other buyer, the government statement said.

    The government will announced a price for CBM gas, which will be used as a floor for calculating its royalty and other charges.

    But CBM producers will pay royalties and other dues to the government on the basis of sale or market prices, if it is higher than the official rate, the statement added.
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    Iraqi KRG faces obstacles to maintain crude oil export quality

    The regional government of semi-autonomous Iraqi Kurdistan appears to be struggling to maintain the quality of its oil exports, just as it has signed a landmark supply agreement with Rosneft aimed at opening up new markets for Kurdish crude.

    The problem surfaced last month in a regulatory filing by Gulf Keystone Petroleum, which produces heavy crude from Kurdistan's giant Shaikan field, disclosing a Kurdistan Regional Government decision to stop accepting Shaikan crude for blending into pipeline exports of Kurdish crude for delivery to the Turkish Mediterranean oil terminal at Ceyhan.

    Instead, the KRG has agreed to shoulder the cost of transporting Shaikan crude by truck for onward export as a stand-alone product and to continue paying Gulf Keystone a flat $15 million/month for current and past exports, the company said.

    Kurdish officials said the action was taken to preserve the quality of the crude exported by pipeline.

    The main problem for the KRG, however, is unlikely to be solely the low API and relatively high sulfur content of Shaikan crude, which so far has been pumped in limited quantities -- recently at a rate reported by Gulf Keystone of about 37,000 b/d.

    More likely, the KRG's unexpected decision to exclude Shaikan crude from the export pipeline reflects much bigger problems for the regional government in coping with a large drop in output from one of Kurdistan's major producing fields, compounded by delays in bringing new fields onstream.

    Taq Taq, a field operated by a joint venture between Genel Energy and Sinopec, is one of two major fields that for the past several years have been the mainstays of Kurdish light crude oil production. The other is DNO-operated Tawke.

    Until last year, the two fields had similar prospects, with reserves in each case estimated at over half a billion barrels and long-term prospects of expanding production to 200,0000 b/d.

    But their fortunes diverged sharply in late February 2016, when Genel stunned investors by slashing its estimate of Taq Taq's initial proven and probable reserves by nearly half, to 356 million barrels from 683 million, with gross remaining 2P reserves as at December 2015 of only 172 million barrels.

    The company also indicated output from the field could shrink to as little as 50,000 b/d by 2018 from the then-expected average for 2016 of 80,000 b/d.

    Last year, Tawke's output averaging 107,000 b/d easily outstripped Taq Taq's actual average output of only 60,000 b/d. As at December 31, 2016, Tawke still had 504 million b of proven and probable reserves.

    Tawke production continues to trend upwards but only gradually, and certainly not by enough to offset the big decline from Taq Taq. It averaged 110,000 b/d in December 2016, DNO reported.

    The other main source of crude contributions to the KRG's piped export stream is northern Iraq's major Kirkuk field, which lies in territory disputed between Eribil and Baghdad.

    In practice, the administration of the huge field's three oil domes has long been partitioned between the KRG and Iraq's federal government, with the KRG opportunistically strengthening its position following the major Islamic State group insurgency in mid-2014.

    But the Kirkuk field, which gave its name to northern Iraq's Kirkuk export crude grade long before the underdeveloped Kurdistan region started its own oil exports, is a source of medium-heavy crude.

    Beginning in the era of late Iraqi dictator Saddam Hussein, Kirkuk's crude has been made heavier by the injection of large volumes of excess heavy fuel oil into the reservoir -- an unwanted by-product from ageing Iraqi refineries.


    All this adds up to a ton of trouble for the KRG, which has struggled to pay its oil contractors and staff following Baghdad's suspension of federal budget transfers to the region in early 2014, and the crash in oil prices and major IS group insurgency later that year.

    The big question now is whether sufficient new sources of Kurdish light crude can be developed fast enough to offset Taq Taq's decline, allowing the KRG to shore up its reputation as a reliable exporter of a crude blend with Kirkuk grade specs.

    Only that, paired with better relations with Baghdad, could help the KRG substantially reduce the hefty discount to other regionally traded crudes at which it currently sells its oil to international buyers.

    Certainly there are other Kurdish fields with light crude waiting in the wings. One is Atrush, operated by Abu Dhabi National Energy Co., or Taqa. Another is Gazprom-operated Sarqala, and a third is Kurdamir, on a block operated by Repsol adjacent to Gazprom's license.

    Early-stage production has already begun at Atrush and Sarqala, while the partners in Kurdamir plan to file a revised development plan for their field by the end of this year.

    With a state-controlled or large international producer leading each development, production from all three fields could in theory be ramped up quickly.

    But even major producers and government-backed companies such as Taqa and Gazprom are currently balking at investing heavily in drilling campaigns while they remain deeply uncertain of the KRG's ability to pay for future crude exports.

    Even DNO, long entrenched in Kurdistan as an oil producer and currently the biggest producer of the region's crude, has said its investment in further drilling to bring Tawke's output capacity to 135,000 b/d is "contingent on regular and predictable export payments" from the KRG.

    After pledging early last year to make prompt and regular monthly payments for contractual volumes of oil delivered for export, the KRG is still running behind on such payments.

    DNO and Genel last week reported the receipt from the KRG of $36.73 million for gross December 2016 exports from Tawke and $17.46 million for gross exports from Taq Taq that month. They also received about $10 million in aggregate toward recovery of amounts owed for earlier exports.

    The one sliver of good news to emerge recently on the KRG's situation is that the regional government has not hung Gulf Keystone out to dry.

    The company last week reported receiving its standard $15 million payment for December exports, indicating the KRG has not yet been squeezed into giving up on prospects for Shaikan's vast store of heavy crude to become a future money-spinner.

    But for that to happen in anything sooner than the distant future, the KRG would probably have to build a new pipeline dedicated to heavy crude exports.

    Gulf Keystone's previous disclosures on the high cost of transporting Shaikan crude by truck to the Turkish Mediterranean port of Dortyol, as happened until May 2016, mean that any near-term profits from trucked exports of Kurdish heavy crude to the Turkish coast are likely to be marginal.

    Still, with Gulf Keystone's cash position standing at just $121.6 million as of last week, the KRG continues to treat the revenue-poor oil developer as a special case, ensuring it just about stays afloat.

    Kurdistan's known petroleum resources also include meaningful volumes of condensate in the Khor Mor and Chemchemal fields, for which the Pearl Petroleum consortium, led by UAE affiliates Crescent Petroleum and Dana Gas, hold development contracts.

    Much to the partners' disappointment, as indicated in Dana's regulatory filings related to an international arbitration case against the KRG, negotiations with the regional government to start development of Chemchemal, which holds major condensate reserves, have not yet reached fruition.

    Pearl currently produces gas from Khor Mor, used as feedstock for two Kurdish power plants, along with LNG and condensate. But those operations, too, are included in the arbitration case, in which Pearl partners also including OMV and MOL have already won a partial settlement award of about $2 billion.


    Nonetheless, officials at Iraq's federally-controlled North Oil Co. last week told S&P Global Platts gas condensate had been added to the Kirkuk export mix. One official said Khor Mor condensate was being added.

    Another official, who did not comment on the source of the condensate, said 10,000 b/d of condensate was being injected into gathering stations, swelling the 168,000 b/d flow of crude being sent for export from northern Iraqi oil fields under NOC control to 178,000 b/d.

    Since repeated IS group attacks on Iraq's federal export pipeline put the line permanently out of action three years ago, NOC has been sending limited volumes of crude from Kirkuk and smaller northern Iraqi fields for export through the KRG's pipeline under successive makeshift agreements between Baghdad and Erbil.

    While the use of Khor Mor condensate to thin Kirkuk and even Shaikan crude might seem an obvious way for the KRG to control the quality of the crude passing through its export pipeline, the regional government previously suspended that practice over a dispute with Pearl over payments for condensate.

    Given the continuing bad blood between the KRG and Pearl over the subsequent arbitration case, the reintroduction of Khor Mor condensate into the export stream points to growing KRG desperation.

    Adding to KRG woes is growing anti-government activism by supporters of the opposition Patriotic Union of Kurdistan party, which earlier this month briefly interrupted crude flows from NOC fields when a security force loyal to the PUK took over and temporarily halted operations at a pumping station.

    The activists' main complaint was that not enough Kirkuk crude was reaching a refinery near Kurdistan's Sulimaniyah province, where a large majority of voters support the PUK.

    Yet another potential problem is a recently signed energy cooperation agreement between Iraq's federal government and Iran, which includes a plan to build a 150 km crude oil pipeline from Kirkuk to Kaneqin, on the the Iranian border, to feed refineries in northwestern Iran.

    That pipeline, if built, would bypass the KRG export system and reduce exports from Ceyhan by Iraq's federal State Oil Marketing Organization, thereby lessening KRG political leverage in negotiations with Baghdad.

    Unless the KRG could compensate with higher output from the Kirkuk domes under its control, it might suddenly need to accelerate Shaikan's development to avoid deviating too far in the lighter direction from Kirkuk blend specs.

    How this will all pan out is far from obvious. The biggest hope on the near horizon for the KRG may be Atrush, which could be developed quickly with the help of Abu Dhabi government resources.

    Last week, in an operating and financial statement, junior Atrush partner Shamaran reported that construction of the 30,000 b/d Atrush phase 1 production facility was complete, with final commissioning in progress.

    Four production wells had been completed and connected to the production facility, ready for start-up, and work on pipelines to connect the field to the KRG export pipeline was well underway, with completion expected in Q2, the company added.
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    India approves use of LNG as fuel for transport

    India’s ministry of the road, transport and highways has given the green light for the use of liquefied natural gas (LNG) as fuel for road vehicles.

    Minister Nitin Gadkari told reporters that the LNG has been approved as fuel for vehicles with fueling stations expected to be made available across the country, Press Trust of India reports.

    Speaking after an agreement with India’s largest importer of liquefied natural gas, Petronet LNG, Gadkari said the standard for the use of LNG as fuel will be defined by a number of ministries including the ministry of Petroleum.

    He added that the wider use of LNG as fuel will reduce the cost of road transport.

    Prior to the agreement with the ministry, Petronet LNG signed an agreement with the Inland Waterway Authority of India to set up LNG stations along the inland waterways that will provide fuel for LNG-fueled barges.

    Petronet is in the process of preparing a detailed feasibility report for setting up LNG facilities at Haldia, Sahibganj, Patna and Ghazipur on NW-I (river Ganges).
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    Petrobras’ domestic output down on FPSO stoppage

    Brazil’s Petrobras saw its oil and natural gas production in February totaling 2.82 million barrels of oil equivalent per day (boed), with 2.703 million boed produced in Brazil and 113,000 boed abroad.

    Average domestic oil output stood at 2.20 million barrels per day (bpd), 1% down on the January figure. This was mainly due to a scheduled stoppage on FPSO Cidade de Paraty in the Santos Basin’s Lula Nordeste pre-salt field, and termination of the Anticipated Production System (SPA) test phase in the Búzios field under the Rights Transfer Agreement.

    The SPA was designed to gather information about the behavior of the reservoirs in the oilfield.

    In February, production of natural gas in Brazil (excluding liquefied gas) stood at 80.2 million m³/d, 1% down on the previous month, mainly because of a scheduled stoppage on the FPSO Cidade de Paraty.

    Pre-salt Production

    In February, oil and natural gas production managed by Petrobras (own and third party output) in the pre-salt layer was 1.53 million boed, showing growth of 41% against the February 2016 figure. However, compared to January this year, this figure is represents a 3% drop, which was due to a scheduled stoppage on FPSO Cidade de Paraty in the Santos Basin’s Lula Nordeste pre-salt field, and termination of the SPA test phase in the Búzios field.

    Gas and oil production abroad

    In February, oil output from oilfields abroad stood at 63.5 million bpd, 8% down on the previous month. Natural gas production amounted to 8.4 million m³/d, 3% down on the January 2017 figure. This was mainly due to operational stoppages in the Lucius and Hadrian South fields in the U.S. because of limitations in the distribution capacity of third-party facilities.
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    India's IOC buys its first Hibernia crude from Canada's Suncor

    Indian Oil Corp (IOC.NS) became India's first refiner to buy light sweet Hibernia crude from Canada's largest oil company, doing the deal after the opening of the arbitrage for Canadian oil to flow to Asia.

    A decision by the Organization of the Petroleum Exporting Countries (OPEC) to cut output strengthened Middle East benchmark Dubai against other regional markers, allowing oil from the Americas and Europe to be shipped to Asia at competitive prices.

    Production in North America, led by U.S. shale output, is increasing after supply cuts by OPEC and non-OPEC countries pushed oil prices to above $50 a barrel.

    This was also the first time that Suncor Energy (SU.TO) has sold a cargo of offshore Canadian crude to IOC, a Suncor spokeswoman Sneh Seetal said on Wednesday.

    Seetal declined to say how big the cargo was or when it would load, but confirmed Canada's biggest oil company had won an Indian Oil Corp tender.

    "We do market our offshore crude production globally on an opportunistic basis," she said.

    Trade sources said Suncor sold the 1 million barrel cargo of Hibernia crude to IOC on a free on board basis. Separately, IOC has also bought its first Russian Urals crude cargo in about a year in another tender.

    IOC previously bought a cargo of Canadian White Rose oil in November 2013. State-refiners like IOC were last year given the freedom to draw up the crude import strategies that would allow them to make swift gains from changing market dynamics.

    News of the Suncor cargo comes after market sources this week said two other vessels carrying Atlantic Canadian crude are on their way to China.

    The Stena Suede and the Jag Lalit, both Suezmaxes, loaded at Whiffen Head terminal, Newfoundland, according to Reuters ship tracking data. At least one of them was sold by Husky Energy (HSE.TO) to buyer PetroChina (601857.SS), two sources said.

    Husky had said in February it sold its first one-million-barrel cargo of offshore Atlantic Canada crude bound for China from its White Rose field.

    At the time a Husky spokesman said low shipping rates helped make the transaction worthwhile.
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    BP appoints new heads of production, drilling as output set to jump

    The chief of the production, exploration and development unit or upstream division, Bernard Looney, has appointed several executives including a new head of production and a new head of drilling, BP told Reuters.

    Gordon Birrell, who previously headed BP in Azerbaijan, will become chief operating officer for production, transformation and carbon in the BP upstream segment, reporting to Looney.

    Based in London, he will be responsible for global operations, global wells, global procurement, supply chain management and upstream engineering.

    He will also be accountable for upstream modernization and lead the development of the upstream approach to a low-carbon future, BP said.

    Andy Krieger will become the new head of drilling. Krieger, previously vice-president for drilling in the Gulf of Mexico, will report to Birrell.

    The previous head of drilling, Gary Jones, will lead operations in Azerbaijan. The country is a key global growth area where the company wants to expand the giant ACG oilfields and the Shah Deniz gas development.

    Jones will report to Andy Hopwood, chief operating officer for strategy and regions in BP's upstream segment.

    "Project execution followed by an underlying cashflow inflection will be the key steps (for BP) combined

    arguably with oil above rather than below $50 per barrel," analysts from JP Morgan wrote this week after meeting BP's chief financial officer, Brian Gilvary.

    They said BP's production growth was due to accelerate through 2017/18, pause thereafter and then see another step-up in 2020/21.

    The key start-ups this year are the Zohr gas field in Egypt, Juniper in Trinidad, Khazzan in Oman, Quad 204 in Britain and Persephone in Australia, JP Morgan said.

    Attached Files
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    Brazil audit court clears Petrobras to restart asset sales

    Brazil's federal audit court TCU on Wednesday allowed state-run oil company Petroleo Brasileiro SA to proceed with its divestment program, but required the company to restart the process except for two projects.

    The decision means that moves by Petrobras, as the company is known, to sell off a controlling stake in its fuels distribution unit BR Distribuidora will start from scratch.

    Petrobras had been prevented from signing any new asset sales while TCU reviewed its procedures and the court overturned an injunction that suspended sales in December.

    The two assets that Petrobras will be able to sell without restarting the process are the rights to operate the Baúna and Tartaruga Verde offshore oil fields, and a share of Petrobras' deepwater rights in the U.S. Gulf of Mexico.

    Other assets will have to be sold under new rules that were not immediately made public. Sale decisions will remain the responsibility of the board of directors, through direct negotiations with buyers instead of a bidding process.

    Petrobras said in a statement it would follow recommendations by the TCU to improve the divestment process and make it more competitive.

    "This decision is fundamental for the company to press ahead with its plan for partnerships and divestments, one of the pillars for reaching its target of reducing leverage," the statement said.

    Saulo Puttini, the TCU's infrastructure coordinator, told reporters the new rules will increase transparency and oversight in future asset sales.

    Petrobras has sold about 30 assets since 2012 when the divestment program began, Puttini said, noting that another 40 remain to be sold.

    The divestment plan has also been held up by an injunction obtained by the Alagoas oil workers union in Sergipe state, Sindipetro-AL/SE. The injunction has blocked the sale of the Baúna and Tartaruga Verde oil fields, the Baúna and Tartaruga Verde oil fields, as well as the inland fields in the states of Ceará, Rio Grande do Norte, Sergipe, Bahia and Espírito Santo.

    Petrobras's statement did not mention the oil worker's injunction.

    The union's lawyer, Raquel Sousa, said in an interview that the oil workers would not accept the sale of Petrobras assets without a bidding process as provided for by Brazilian law to protect the country's capital.

    The injunction in November forced Petrobras to suspend talks with Karoon Gas Australia Ltd on the sale of a 100 percent stake in the 45,000 barrels-per-day Bauna field, in the Santos Basin, and a 50 percent interest in Tartaruga Verde, still in development, in the Campos Basin.
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    Iraq Plans to Boost Crude Oil Production and Exports This Year

    Iraq pumped 4.57 million barrels a day of oil in February and plans to boost output later in the year even as the OPEC member reaffirmed its commitment to the group’s decision to cut production to counter a global glut.

    The country plans to increase output to 5 million barrels a day by the end of 2017, Oil Minister Jabbar Al-Luaibi said Wednesday at a news conference in the southern city of Basra. Iraq exported 3.87 million barrels a day from its southern and northern shipment hubs in February, the ministry’s spokesman, Asim Jihad, said in an emailed statement.

    Oil prices last week broke below $50 a barrel for the first time since December as rising U.S. shale oil supply muted the impact of reductions in output from members of the Organization of Petroleum Exporting Countries and 11 other nations that started on Jan. 1. Saudi Arabia, the biggest producer in the group, raised production last month, though the kingdom kept output below its ceiling under the cuts agreement and said it moved extra supplies into storage.

    The expected increase in shale oil poses a challenge to Iraq, Al-Luaibi said. The country is committed, however, to OPEC’s agreement to pare output to control global oversupply and support prices, the Oil Ministry’s Jihad said in the statement.

    The ministry is in talks with Exxon Mobil Corp. to develop the Ratawi and Omar oil fields, which together can produce half a million barrels a day, Hayyan Abdul-Ghani Abdul-Zahra, director general of state-run South Oil Co., told reporters in Basra. Iraq, OPEC’s second-largest producer, also plans to expand exports this year, Abdul-Zahra said.

    Missan Oil, another producer in southern Iraq, wants to almost double output to 700,000 barrels a day by 2020 from its current level of 385,000, the company’s Director General Adnan Sajet told reporters in Basra. The Oil Ministry will invite bids to develop three fields in southeastern Maysan province -- Dujail, Kumait and Rifaie -- in the second half of 2017, he said.
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    US crude imports

    Our ClipperData show that U.S. crude imports from Saudi Arabia averaged 1.06mn bpd in 2015, and 1.1mn bpd last year. After averaging 1.28mn bpd for the first two months of the year - as a large wave of Saudi crude exported at the end of last year made its way to U.S. shores - volumes have dropped considerably so far this month (hark, below).

    The OPEC kingpin has chosen to keep its export loadings strong into East Asia in the first couple of months, to the detriment of the U.S. That said, as Saudi loadings drop off towards East Asia in March, we are seeing a corresponding uptick in crude on the water bound for Uncle Sam.    

    We saw a counter-seasonal draw to crude inventories from today's weekly inventory report. This is, however, an anomaly caused by a drop in U.S. Gulf crude imports last week due to poor weather .

    Both gasoline and distillate inventories saw solid draws; the trend of stronger implied demand for distillates persists - causing a 4.2mn bbl draw to stocks when we generally see inventories holding steady. After holding at a seasonal record for the first six weeks of the year, a drop in profitability (aka crack spreads) has mired crude inputs for the last five weeks back in the five-year range.
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    Australian PM secures Gladstone LNG projects’ support to domestic gas market

    Australia’s prime minister Malcolm Turnbull has secured commitments from two of the three Curtis Island LNG projects to contribute to the domestic gas market.

    During a meeting with the gas industry representatives on Wednesday, Turnbull said measures were agreed on that will help deliver cheaper and more reliable energy to Australian households and increase gas supplies for businesses.

    The two projects that have already committed to boosting the domestic gas supplies are the QCLNG and Australia Pacific LNG while Santos GLNG has taken the matter on notice.

    During the meeting, gas producers guaranteed that gas will be made available to meet peak demand periods, among other measures.

    Speaking of the agreements, Shell Australia chairman Andrew Smith said that the QCLNG project has already “reduced LNG export shipments to supply additional gas to the domestic market.”

    However, he called for the development of additional local supply, especially in Victoria where the government banned conventional and unconventional gas exploration and development.

    In addition to LNG projects on Curtis Island near Gladstone, other producers have also agreed to revise their domestic gas production forecasts, while the Australian Energy Market Operator (AEMO) will produce an updated supply outlook.
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    Summary of Weekly Petroleum Data for the Week Ending March 10, 2017

    U.S. crude oil refinery inputs averaged about 15.5 million barrels per day during the week ending March 10, 2017, 20,000 barrels per day less than the previous week’s average. Refineries operated at 85.1% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.5 million barrels per day. Distillate fuel production decreased last week, averaging 4.7 million barrels per day.

    U.S. crude oil imports averaged 7.4 million barrels per day last week, down by 745,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.6 million barrels per day, 4.4% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 572,000 barrels per day. Distillate fuel imports averaged 79,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.2 million barrels from the previous week. At 528.2 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 3.1 million barrels last week, but are in the upper half of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 4.2 million barrels last week but are near the upper limit of the average range for this time of year. Propane/propylene inventories fell 0.8 million barrels last week but are in the middle of the average range. Total commercial petroleum inventories decreased by 7.8 million barrels last week.

    Total products supplied over the last four-week period averaged 19.8 million barrels per day, up by 0.3% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.0 million barrels per day, down by 4.5% from the same period last year. Distillate fuel product supplied averaged about 4.2 million barrels per day over the last four weeks, up by 13.4% from the same period last year. Jet fuel product supplied is up 5.6% compared to the same four-week period last year.

    Cushing up 2.1 mln bbls
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    US oil production continues to grow YoY

                                                       Last Week    Last Year   Year Before

    Domestic Production '000.......... 9,109          9,088           9,068
    Alaska .............................................. 528              527                517
    Lower 48 ...................................... 8,581           8,561             8,551
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    Mexico needs 15 successful upstream auctions to reach output forecast: AMEXHI

    Mexico would require at least 15 upstream oil and gas auction rounds as successful as Round 1 to fulfill the International Energy Agency's production forecast, a Mexican Association of Hydrocarbon Companies, or AMEXHI, study showed Tuesday.

    The IEA Mexican Energy Outlook forecast Mexico could produce 2.8 million b/d in 2040, adding the country requires investments of $640 billion to achieve this production level. From that 2.8 million b/d, 2.5 million b/d would come from new projects in 2040.

    "This is a titanic effort," said Pablo Zarate, information director of AMEXHI's research center, said at an AMEXHI event Tuesday.

    Only 2% of Mexico's total oil production comes from reservoirs that started producing in the last 25 years, Monica Boe, leader of AMEXHI's resource access committee, said at the event.

    This is a small amount compared with US' 7%, Venezuela's 8%, and the UK's 35%.

    "The amount of new discoveries in Mexico are very low. To reverse this, we need to explore intensively," said Boe.

    To achieve the 2.8 million b/d production level, Mexico would require drilling between 20 and 30 exploratory wells and 40 and 50 evaluation wells every year until 2040, said Boe.

    Under an investment analysis, Mexico would require investments of $26.6 billion per year.

    Zarate said that close to half of the required investment could come from Pemex, which would have to invest $14.3 billion per year, or $300 billion until 2040.

    These numbers were calculated under Pemex's investment levels in recent years, said Zarate.

    Pemex invested a historical record of $16.6 billion in 2014 with oil prices at $98/b, then invested $9.6 billion in 2015 with prices at $52/b, and $6.5 billion in 2016 with prices at $43/b.

    The private sector would have to invest $12.3 billion per year, or $340 billion under this period.

    According to Zarate, Mexico would require investments from 15 bid rounds as successful as round 1 to raise the remaining $340 billion.

    Mexico Energy Secretariat, or aSENER, predicted Round 1 would bring $41 billion. However, Zarate said after applying an exploratory risk factor, AMEXHI expects a minimum investment level of $20 billion will materialize from the round.
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    European LNG terminal owners looking for new ways to boost utilisation

    European liquefied natural gas (LNG) import terminal operators are constantly searching for new ways to improve capacity utilisation and make it commercially viable for their customers to bring more of the chilled fuel to the continent, Stefaan Adriaens, Commercial Manager at the Dutch Gate terminal told LNG World News in an interview on Wednesday.

    Despite overall natural gas demand growth in Europe in 2016, countries such as the United Kingdom, Belgium, and the Netherlands saw a decline in LNG imports as most of the fuel went to better-priced markets in Asia and the Middle East.

    According to the LNG data by Gas Infrastructure Europe, utilisation of the total installed capacity at the European LNG import terminals had been critically low during 2016, a trend that is continuing into this year.

    The average rate of LNG terminal utilisation in Europe has decreased significantly since 2010 to below 20 percent of the total send-out capacity last year, GIE data shows.

    On utilisation of European LNG terminals and Gate, Adriaens said that “for terminal operators booked capacity matters more than actual usage. Also one has to differentiate actual utilisation rates of the jetties, storage and regasification.“

    In order to keep their LNG terminals as attractive as possible, European operators have to constantly optimize utilisation at their facilities and foster investments in new LNG infrastructure.

    “A common theme (among European LNG terminal operators) has been to add new services constantly, we have done that, and also all other terminals have been doing that,” Adriaens said.

    “New services like truck loading, small and large LNG reloads and transshipment increase the optionality of outlets and thus make it a bit more attractive to bring in LNG,” he said.

    According to Adriaens, “more than two-thirds of the LNG imported into the Gate terminal left that way over 2016/17.”

    Gate terminal in the port of Rotterdam, owned by Gasunie and Vopak, is one of Europe’s largest LNG terminals, with an annual regasification capacity of 12 billion cubic meters – equal to around 180 cargoes per year.

    LNG throughput volumes at Gate dropped 26.1 percent to 1.7 million mt last year as compared to 2015.

    “We have had only 15 ships unloading instead of 21,” Adriaens said. “On the other hand, we still did 12 large LNG reloads, whilst in 2015 we had 14,” he said, adding that reducing reloads in 2016 was planned by the terminal’s management as the pricing gap all over the globe narrowed making it less economical to ship the fuel elsewhere.

    “The year turned out very different than it was anticipated, and we still see the same trend continuing so far in 2017,” Adriaens noted.

    Gate has conducted 2 large LNG reloads since the beginning of this year. These volumes landed in 3 destinations, namely Spain, Malta and Turkey.

    It has also loaded three smaller cargoes with previously imported LNG with final destinations being Norway and Sweden.

    To further boost its reloading business, Gate “may make small investments to increase reloading rates this year,” but this is still under consideration, Adriaens said.

    Second customer at third jetty

    Gate added an additional jetty in 2016 which enables the loading of small volumes of LNG, from 1,000-cbm up to 20,000-cbm.

    The third jetty will help boost the use of LNG as fuel for ships in northwest Europe.

    Since the opening of the new facility in late August, 6 vessels in total have docked at the new jetty, according to Adriaens.

    “An addition is also that we have a second customer at our third jetty, beside Shell as the launching customer.”

    “The second customer started using the jetty this year,” he said without revealing the name of the company.

    “Throughout the year, we expect the third jetty to be much more used particularly as we await the Shell bunkering vessel that should arrive in the second half of this year,” Adriaens said.

    Shell’s LNG bunkering vessel will be based at the port of Rotterdam and will load from the new berth at Gate. It will deliver the fuel to LNG-powered ships in northwest Europe and other locations.

    First U.S. LNG cargo to Gate?

    Cheniere’s Sabine Pass liquefaction terminal in Louisana, the first of its kind to ship U.S. shale gas overseas, started exporting the chilled fuel in February last year.

    Many predicted a “flood” of U.S. LNG to Europe but only a small number of these LNG cargoes landed in Europe, better said in the southern part of the continent.

    The bulk of these cargoes went to Latin America, Africa and Asia.

    However, only three liquefaction trains are currently in operation at the Sabine Pass facility and in the lower 48 states. The U.S. is expected to become the world’s third-largest LNG supplier by 2020 with an export capacity of 60 million mt coming from five terminals located along the Gulf Coast.

    Talking about the possibility of a U.S. LNG cargo landing at Gate, Adriaens said that “it has not yet happened, but I understand it was a couple of times quite close in decision making… They still rather go to southern Europe than to northern Europe.”

    “The moment will come, of course,” he added.

    Looking forward, Adriaens said he expects more LNG coming to Europe in 2017 but this will vary throughout the year depending on many factors such as prices and demand in Asia and Latin America.

    “There is a lot of LNG available… If European regas is economic, we should see a lot of it, if not – very little,” he said.
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    Iraq's talks with Exxon to develop new southern fields in progress: official

    Iraq's talks with U.S. oil major Exxon Mobil Corp to develop two small southern oilfields are progressing well, the head of state-run South Oil Co. said on Wednesday.

    Iraq has been in talks with Exxon Mobil and PetroChina about investing in a multi-billion-dollar project to boost output from the Luhais, Nassiriya, Tuba, Nahr Bin Umar and Artawi oilfields.

    "We have been in talks with Exxon Mobil for more than two years to develop Nahr Bin Umar and Artawi oilfields, and we have managed to reach advanced results," SOC's chief Hayan Abdul Ghani told reporters in the southern city of Basra. He did not elaborate.
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    IEA says oil market could tilt into deficit in the first half if OPEC sticks to cuts

    Global oil inventories rose for the first time in January as the market grappled with a swell in production last year, but if OPEC maintains its output cuts, demand should overtake supply in the first half of this year, the International Energy Agency said on Wednesday.

    The IEA's monthly report struck a more bullish note than that issued by the Organization of the Petroleum Exporting Countries on Tuesday.

    OPEC also flagged rising inventory levels, but raised its estimates for production outside the group and did not see a re-balancing between supply and demand until the second half of this year. 

    The IEA said crude stocks in the world's richest nations rose in January for the first time since July by 48 million barrels to 3.03 billion barrels, more than 300 million barrels above the five-year average.

    "The actual build in OECD stocks in January reminds us that it may be some time before global stocks start to fall," the agency said.

    The increase is the product of "relentless" supply growth in the latter stages of last year, particularly from OPEC countries that pumped at record levels, and from the U.S. shale oil basin, where drilling activity began picking up 10 months ago.

    Compliance by OPEC with its agreed output cut of 1.2 million barrels per day in the first half of this year was 91 percent in February and, if the group maintains its supply limit to June, the market could show an implied deficit of 500,000 bpd, the IEA said.

    "If current production levels were maintained to June when the output deal expires, there is an implied market deficit of 500,000 bpd for 1H17, assuming, of course, nothing changes elsewhere in supply and demand," the IEA said.

    "For those looking for a re-balancing of the oil market the message is that they should be patient, and hold their nerve."

    In its October report, before the November agreement between OPEC and some of its competitors including Russia, Mexico and Kazakhstan to limit output, the IEA warned the market risked running into a third successive year of excess supply without any action from the producer group.


    Within OPEC, Saudi Arabia has shouldered the burden of the production cuts, offsetting poorer compliance by other nations.

    In February, Saudi oil production staged a monthly rise of 180,000 bpd, but at 9.98 million bpd, its output remained below its agreed target of 10.06 million bpd and, according to tanker-tracking data, Riyadh is focusing its cutbacks on North America, the IEA said.

    "At 32.3 million bpd, the call on OPEC crude during the first quarter of 2017 is higher than average output of 31.9 million bpd so far this year, which could lead to a draw in global inventories," the IEA said, adding that it was not clear if the group will extend its supply agreement.

    "Beyond the nervousness about this legacy supply and concerns about rising production today from some non-OPEC countries; the implementation of the OPEC production agreement appears in February to have maintained the solid start seen in January."

    Saxo Bank senior manager Ole Hansen said the report did not rock the boat as the OPEC report did yesterday.

    "As long as OPEC stays on track and non-OPEC delivers on their agreed cuts the market will continue to balance," he said.

    Beyond OPEC, oil production rose 90,000 bpd in February, as increasing U.S. output offset declines elsewhere.

    Compared with last year, total non-OPEC supply was 285,000 bpd lower, of which the United States accounts for roughly half, the agency said.

    "The recovery path of U.S. tight oil is key to rebalancing the oil market over 2017, so is the compliance of the 11 non-OPEC countries that agreed to curb output," the IEA said.

    The IEA left its estimate of global demand growth unchanged from its last report at 1.4 million bpd in 2017.

    "The market is still dealing with a vast amount of past supply, which will take time to work its way through the system. Meanwhile, demand growth has not provided any further encouragement after three consecutive months when we upgraded our estimates," the IEA said.
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    January Atlantic LNG production falls 9% on year

    LNG production at Trinidad-based gas liquefaction complex Atlantic LNG totalled 2.2 million cubic meters in January, down 9% year on year, according to a bulletin released Tuesday by Trinidad and Tobago's Energy Ministry.

    Production at the Point Fortin, Trinidad, facility continues to be far short of capacity as a result of curtailments by natural gas producers.

    The shortfall, caused by upgrades to gas infrastructure and decreased upstream investment by energy companies, is expected to continue through at least this year, according to industry officials.

    January LNG sales and deliveries from Atlantic LNG were 52.0 million MMBtu, down 8% year on year, the ministry said.

    The company's sales and deliveries of NGLs in January totalled 450,401 barrels, up 2% year on year.

    The seven gas producers operating in Trinidad and Tobago produced an average 3.3 Bcf/d of gas in January, down 12% year on year. Gas production typically has averaged between 3.8 Bcf/d and 4.1 Bcf/d in recent years.

    The country's LNG sector used 1.8 Bcf/d of gas in January, down 8% year on year, according to the report.

    Atlantic operates and manages four LNG trains in Point Fortin, with each train owned by a holding company with various stakeholders. The shareholders are BP, BG, Shell LNG, Summer Soca LNG Liquefaction and the National Gas Co. of Trinidad and Tobago.
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    China makes first-ever US SPR crude oil purchase

    PetroChina International has bought crude oil from the US Strategic Petroleum Reserve -- the first such purchase by a Chinese company -- in a move that further underscores growing Chinese interest in US crude.

    PetroChina International, the overseas trading arm of state-owned oil giant PetroChina, bought 550,000 barrels from the SPR in the US Department of Energy's latest sale for a total of $28.8 million ($52.36/b).

    A Beijing-based senior crude trader with PetroChina International Tuesday said that the deal, announced last week by the US Department of Energy, was not yet completed and they have not decided whether to bring the barrels back to China or send them elsewhere as the volume is small. PetroChina's Houston office would not comment.

    "We notice that more and more crude barrels from North America are flowing into China, but we have not decided whether to send this cargo back," he said, declining to comment further.

    Deliveries of the crude, both by pipeline and vessel, are expected to take place in May and June, but there may be some early deliveries in April, the US DOE said Friday.

    The volume and price of the deal prompted a Shanghai-based analyst to call it a profile-building exercise by PetroChina.

    "It will be a milestone and a good headline for a Chinese company to buy [crude oil from] the US SPR," he said.
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    Total starts production from Moho Nord off Congo

    French oil company Total has started up production from the Moho Nord deep offshore project, located 75 kilometers offshore Pointe-Noire in Congo.

    Operated by the group, the project has a production capacity of 100,000 barrels of oil equivalent per day, the oil company said on Wednesday.

    “Moho Nord is the biggest oil development to date in the Republic of the Congo. A showcase for Total’s deep offshore operational excellence, it consolidates our leading position in Africa,” stated Arnaud Breuillac, President, Exploration & Production at Total.

    “Moho Nord will contribute to the reinforcement of the cash flow of the Group and to its production growth.”

    The Moho Nord field is developed through 34 wells tied back to a new tension leg platform, the first for Total in Africa, and to Likouf, a new floating production unit. The oil is processed on Likouf and then exported by pipeline to the Djeno onshore terminal, also operated by Total.

    According to the company, there will be no routine flaring and the all-electric design improves energy efficiency by optimizing the amount of power needed to run the installations. All the produced water will be reinjected into the reservoir.

    Total is the operator of the project with a 53.5% interest. Its partners are Chevron Overseas (Congo) Limited (31.5%) and Société Nationale des Pétroles du Congo (15%).
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    Baker Hughes introduces ‘smart’ drill bit

    Howard Hughes Sr. revolutionised the drill bit to more than 100 years ago to accelerate the oil boom that made Houston and Texas the nation’s energy capital. Today, his legacy company is aiming to make the next evolutionary step with new drill bits that automatically adjust to the underground rock terrain.

    The pressure-sensitive technology is part of a growing effort from Baker Hughes and other power players like Schlumberger and Halliburton to build more durable and faster-drilling bits that adapt to any type of shale rock.

    Houston-based Baker Hughes on Tuesday launches its TerrAdapt self-adjusting drill bit, which, for the first time, automatically extends diamond-material buttons to provide additional protection to the bit’s diamond cutters when the going gets too rough and retracts them when the rock softens up.

    Oilfield services companies used to just modify more expensive offshore drilling technologies to work onshore, but now they’re increasingly developing products specifically for shale rock drilling as the U.S. onshore market increasingly dominates the industry, said Byron Pope, an energy analyst with Tudor, Pickering, Holt & Co. in Houston. After all, horizontally drilled extensions from onshore wells now extend more than 10,000 feet on average.

    The new TerrAdapt drill bit that adjusts on the fly is a potential game changer, Pope said. “The difference with the technology is you don’t necessarily have to customize it for the Permian or Eagle Ford,” he said. “You can just have that one bit.”
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    Inpex's Ichthys LNG hit by another contract dispute

    Inpex's $37 billion Ichthys Australian liquefied natural gas project was hit by another subcontractor dispute, involving the termination of more than 600 workers, but the Japanese company said it was still on schedule for a July-September start.

    Members of a consortium building LNG storage tanks at the onshore site of Ichthys near Darwin are in dispute with each other and have stopped work, with one of them abruptly letting go 640 workers, said JKC Australia LNG, which is handling overall construction of the project, on Wednesday.

    Inpex said the tanks were 91 percent complete and the project remained on schedule to start shipping LNG to customers in the third quarter.

    Still, the disagreement is the latest potential delay in Australia's $200 billion LNG ramp-up, one of the biggest supply increases ever in the gas industry and which will lift Australia over Qatar as top global exporter of the fuel.

    The Ichthys dispute is not good news for the project's timely completion, said Saul Kavonic, a Perth-based analyst for global resource consultancy Wood Mackenzie.

    "Inpex is targeting a very aggressive construction completion ... to get a first cargo out by the end of September, given the central processing facility, the largest in the world, is still in a Korean ship yard," Kavonic said.

    Inpex is not directly involved in the disagreement because it's a matter between subcontractors, so it is not in a position to comment, the Japanese company said.

    The disagreement between consortium members Kawasaki Heavy Industries and Laing O'Rourke PLC involves a payment dispute, with JKC saying the latter has released about 245 local hires and 395 other workers that fly in and out.

    Ichthys was hit by an earlier contractual dispute in January when an engineering company building a power plant for Ichthys pulled out of the project.

    The Australian Manufacturing Workers' Union in a statement said the lay-offs were "due to an ongoing contractual dispute on the project regarding payments."

    Kawasaki Heavy has not paid its partner for work on the project for several months, Laing O'Rourke said in a statement.

    Kawasaki Heavy could not immediately comment.

    Most of the LNG plants being built in Australia, including Chevron's huge Gorgon facility and Royal Dutch Shell's floating Prelude production vessel, are having trouble keeping within budget and on schedule. More delays are expected.

    Once completed, Ichthys will produce 8.9 million tonnes of LNG per year.

    Inpex holds 62.245 percent of Ichthys and France's Total 30 percent. The rest is spread amongst Taiwan's CPC Corp and Japanese utilities Tokyo Gas, Osaka Gas, Kansai Electric, JERA Corp and Toho Gas .

    Attached Files
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    U.S. judge denies tribe's request to stop oil flow in Dakota Access pipeline

    A U.S. federal judge on Tuesday denied a request by a Native American tribe for an emergency injunction to prevent oil from flowing through part of the Dakota Access Pipeline, saying such a move would be against the public interest.

    The ruling, issued in court documents ahead of plans to start pumping oil through the pipeline next week, follows months of demonstrations in a remote part of North Dakota, where the Standing Rock Sioux tribe demonstrated in an attempt to stop the Dakota Access Pipeline crossing upstream from their reservation.

    Judge James Boasberg of the U.S. District Court for the District of Columbia issued his decision denying the request by the Cheyenne River Sioux Tribe, saying the court "acknowledges that the tribe is likely to suffer irreparable harm to its members’ religious exercise if oil is introduced into the pipeline, but Dakota Access would also be substantially harmed by an injunction, given the financial and logistical injuries that would ensue."

    The pipeline is nearing completion after President Donald Trump signed an executive order last month smoothing the path for construction. He also cleared the way for the Keystone XL project that would pipe Canadian crude into the United States.

    The Standing Rock Sioux and the Cheyenne River Sioux last week lost a legal bid to halt construction of the last link of the pipeline under Lake Oahe in North Dakota, which they say threatens tribal lands. The pipeline will be ready to carry oil by April 1.

    Among the Republican Trump's first acts in office was to sign an executive order that reversed a decision by the previous administration of Democratic President Barack Obama to delay approval of the Dakota pipeline, a $3.8 billion project by Energy Transfer Partners LP (ETP.N).

    Boasberg noted in his decision that any ruling to allow the tribe's request for an injunction preventing oil from flowing through the pipeline would likely be overturned on appeal.

    Thousands of Native American demonstrators and their supporters marched to the White House last Friday to voice outrage at Trump's decision.
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    Oil Rebounds on U.S. API Stockpile Drop Report as Saudis Lift Output

    Oil rebounded above $48 a barrel as a reported decline in U.S. crude stockpiles countered a boost in output from Saudi Arabia.

    Futures advanced as much as 2.4 percent in New York after slumping almost 11 percent the previous seven sessions. U.S. inventories fell by 531,000 barrels last week, the industry-funded American Petroleum Institute was said to report. Government data Wednesday is forecast to show stockpiles rose for a 10th week. Saudi Arabia’s production climbed back above 10 million barrels a day in February, according to an OPEC report on Tuesday.
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    East Libyan forces say they have retaken oil ports

    East Libyan forces said they had regained control on Tuesday of the major oil ports of Ras Lanuf and Es Sider from a rival faction that seized them earlier this month.

    Military spokesman Ahmed al-Mismari told Reuters that the eastern-based Libyan National Army (LNA) was pursuing fighters from the Benghazi Defence Brigades (BDB) towards the town of Ben Jawad, about 30 km (20 miles) west of Es Sider.

    Akram Buhaliqa, an LNA commander in the nearby city of Ajdabiya, also said BDB fighters were retreating towards Ben Jawad. The claims could not be independently verified.
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    Saudi Arabian oil production higher in February than January

    The monthly report by OPEC shows that Saudi Arabia increased production in February back above the level of 10 million barrels a day (to 10.011 million), according to figures submitted by the kingdom.

    Back on November 30, when the OPEC cartel of oil producers collectively agreed to cut production, the Saudis agreed to cut to 10.058 million barrels a day. The latest increase therefore still keeps production below the agreed-upon number.
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    Australia's ACCC head urges Gladstone LNG operators to supply domestic market

    The chairman of Australia's competition watchdog has urged east coast LNG operators to provide as much supply as possible to the struggling domestic market and raised concerns over their moves to sell additional volumes in the international spot market.

    "They would be well advised to support the domestic market as much as they can at this critical time," Australian Competition and Consumer Commission Chairman Rod Sims said, according to an early copy of his speech to the 5th Annual Australian Domestic Gas Outlook conference in Sydney obtained by S&P Global Platts.

    LNG exports over the past couple of years via the three terminals -- Australia Pacific, Gladstone and Queensland Curtis -- almost tripled demand in the eastern and southeastern states, Sims said.

    This stretched Australia's eastern seaboard's gas supply, pushing up prices, and resulting in warnings of a likely shortage.

    The ACCC conducted an inquiry in April last year and found that the east coast was expected to produce sufficient gas to meet both domestic demand and existing LNG export commitments until at least 2025.

    But, if LNG operators sell in the international LNG spot market, it could change the situation.

    "Most LNG producers are selling gas on the LNG spot market in addition to meeting their contractual commitments and these volumes are expected to increase going forward," he said.

    "The comment that I made [advising the LNG producers to support the domestic market] seems relevant here," he added.


    Sims called the discussion on the looming gas shortage in Australia and criticism of LNG producers as a strange debate.

    "As our inquiry pointed out, Australia has enormous gas reserves; gas availability is clearly not the issue," he said. "The Inquiry also pointed out that Australia has and will benefit enormously from the three large LNG projects in Queensland. These three projects also saw significant gas resources developed that otherwise would not have been."

    The only criticism of the three LNG gas developers to be made it is that they fell into the "usual commodity project trap of assuming then high $100 plus oil prices would continue," he added.

    Sims said that environmental restrictions, moratoria and bans on onshore gas production caught the market off guard and played a leading role in the creating supply concerns.

    "I doubt anyone in the industry expected Victoria to ban all onshore gas exploration and production, which has stopped even conventional gas projects; nor could they have foreseen the delays and uncertainty over projects in New South Wales and the Northern Territory," Sims said.


    While other states connected to the east coast's gas pipeline network are crimping access to their gas resources, South Australia -- which has suffered from widespread blackouts in recent months -- announced on Tuesday that it will provide incentives for gas exploration.

    "The state government will immediately provide an extra [A]$24 million for a second round of funding to incentivize companies to extract even more gas and create more jobs. This new round will open immediately," the South Australian government said Tuesday in its new energy plan.

    It will also provide 10% royalty to landowners whose property overlies a petroleum field that is brought into production, it said.

    "South Australia has vast untapped gas resources. It is estimated the Cooper Basin alone could potentially supply Australia's energy needs for more than 200 years," it said. The Cooper Basin straddles South Australia and Queensland.

    The South Australian government also said that it would build its own state-owned gas-fired electricity generator.

    "Due to the lack of clear national policy settings, investment in new thermal generation has stalled," it said. "The generator will provide up to 250 megawatts of generation, which can be switched on in times of emergency."
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    Lukoil reports fourth-quarter profit on higher oil price

    Lukoil reported a fourth-quarter profit on Tuesday as higher crude prices helped Russia's No.2 oil producer rebound from a loss a year earlier.

    Its net profit of 46.6 billion rubles ($790 million) was in line with the 45 billion forecast by analysts polled by Reuters.

    A year earlier it suffered a net loss of 65 billion rubles.

    Lukoil's shares were up 1.62 percent as of 1128 GMT, outperforming a 0.73 percent rise in the Moscow broader stock market.

    Last month, Lukoil's larger domestic rival Rosneft reported a small decline in 2016 net income.

    Lukoil, whose name comes from the names of west Siberian towns Langepas, Urai and Kogalym, has struggled with falling oil production at its brownfield sites.

    Its oil output fell by 9 percent last year.

    The average price of Russia's flagship Urals oil blend in the fourth quarter rose by 14 percent to $46.90 per barrel.

    For the whole of 2016, the average price fell by 18 percent to $41.14 per barrel.

    Fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) fell to 183.3 billion rubles from 186.3 billion on revenue of 1.40 trillion, up from 1.37 trillion.

    Free cash flow fell to 54.6 billion rubles from 104.7 billion.
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    OPEC says oil stocks keep rising despite supply cut deal

    OPEC said on Tuesday oil inventories had continued to rise despite the start of a global deal to cut supply and raised its forecast of production in 2017 from outside the group, suggesting complications in the effort to clear a supply glut.

    The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1, the first cut in eight years. Russia and 10 other non-OPEC producers agreed to cut half as much.

    But in its monthly report OPEC said oil stocks in industrialized nations rose in January to stand 278 million barrels above the five-year average, of which the surplus in crude was 209 million barrels and the rest products.

    "Despite the supply adjustment, stocks have continued to rise, not just in the U.S., but also in Europe," OPEC said in the report.

    "Nevertheless, prices have undoubtedly been provided a floor by the production accords."

    In the report, OPEC pointed to a increase in compliance by its members with their deal to cut output from Jan. 1.

    Supply from the 11 OPEC members with production targets under the deal fell to 29.681 million bpd last month, according to figures from secondary sources that OPEC uses to monitor its output.

    That means OPEC has complied by more than 100 percent with its plan to lower output for those nations to 29.804 million bpd, according to a Reuters calculation. OPEC didn't give a compliance figure in the report.

    But the report revised up its estimate of oil supply from producers outside OPEC this year, as higher oil prices following the OPEC and non-OPEC cut help spur a revival in U.S. shale drilling.

    Production outside OPEC is now expected to rise by 400,000 barrels per day (bpd), 160,000 more than previously thought. U.S. oil output in 2017 was revised up by 100,000 bpd.

    While the OPEC secondary sources said Saudi output fell in February, Saudi Arabia reported to OPEC that it increased

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    Iran will keep oil cap at 3.8 million barrels a day in second half 2017

    Iran will keep its oil production cap at 3.8 million barrels per day in the second half of 2017, the country's oil minister said on Tuesday, provided other OPEC members stick to the output level they agreed in November.

    "If OPEC members stay committed to the agreement (on freezing output), Iran will produce 3.8 million BPD of oil in (the) second half of the current year," Bijan Namdar Zanganeh was quoted as saying by state news agency IRNA.

    The Organization of the Petroleum Exporting Countries (OPEC) agreed on Nov. 30 to cut output by 1.2 million bpd to 32.5 million bpd for the first six months of 2017, in addition to 558,000 bpd of cuts agreed to by independent producers such as Russia, Oman and Mexico.
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    Petronas reports higher profits

    Malaysian energy giant Petronas reported a rise in its full year and fourth quarter profits despite the low oil prices and a challenging market environment.

    The company’s profit after tax reached RM23.5 billion (Approx: US$5.2 billion) for the full year 2016, showing a 12 percent increase.

    However, the company’s report shows that the revenue dropped 17 percent to RM204.9 billion from RM247.7 billion in 2015.

    The drop was attributed to the downward trend of key benchmark prices coupled with the impact of lower sales volume.

    The company’s fourth-quarter profit jumped 85 percent compared to the previous quarter reaching RM11.3 billion. The RM5.2 billion increase was driven by higher average realized product prices and sales volume mainly from LNG and processed gas as well as the impact of favorable exchange rate.

    Revenue for the quarter increased 20 percent from RM48.7 billion in the third quarter to RM58.6 billion in the quarter under review.

    Petronas also noted that the capital expenditure for the year dropped 22 percent to RM50.4 billion following project deferment and rephasing as well as cost optimization efforts.

    Petronas’ LNG sales for the year hit 29.01 million tons, marginally higher compared to 28.49 million tons in 2015 mainly contributed by higher volumes from Train 9 in Bintulu and GLNG in Australia, partially offset by lower trading volume.

    Looking ahead, Petronas is maintaining a conservative outlook and expects further price uncertainty through 2017.
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    Australia might 'change the ground rules' for east coast LNG exporters: PM

    Australia's Federal Government is considering implementing a gas reservation policy to tackle the country's gas and electricity supply concerns, which may also impact the east coast LNG businesses operations, Prime Minister Malcolm Turnbull said Friday.

    Platts Analytics has Australia tipped to become the world's largest exporter of LNG, surpassing Qatar, in 2019 aided by the boost in volumes by the start-up of shipments from the east coast's Australia Pacific, Gladstone and Queensland Curtis LNG terminals in the last couple of years.

    But those terminals have been blamed for playing a part in putting the eastern and south-eastern states of the country on a collision course for a gas supply crunch by the end of the decade.

    Now, the Federal Government is exploring options to deal with the looming crisis, including a gas reservation policy, with Turnbull saying national energy security will come before the interests of the LNG exporters.

    "What the gas companies would say -- their response to an imposing reservation on them would be to say 'you're changing the ground rules. We did this exploration. We built these LNG trains on the basis that there would not be a constraint on what we could export,'' Turnbull said on FIVEaa radio.

    "But clearly, security is the first responsibility of every government -- national security and energy security," he added.

    The Prime Minister is due to meet with the CEOs of east gas companies this week to discuss the matter.

    "They've been put on notice. I need to hear from them. I'll be demanding from them their explanation as to how they are going to deliver security for their customers," he said.

    The eastern state of Queensland -- where the east coast's LNG terminals are located -- is already testing the water in terms of a gas reservation policy.

    The State's Government announced in January it is allocating a small volume of potential gas supplies from freshly released land for exploration with strict Australia-only sale conditions.

    Opponents to the idea of a gas reservation policy say more regulation on gas developments will result in less being produced.

    "It's a very strange idea to think that the way to get more of a product is to increase regulation around that product and increase the costs of development," the Australian Petroleum Production and Exploration Association chief executive Malcolm Roberts said last month.

    APPEA last week said warnings of gas shortages in the region -- which Australia's energy market operator forecasts could be seen as soon as summer (December-February) of 2018-2019 -- are "the consequence of many years of policy failure by successive state governments in Victoria and New South Wales."

    "The response [to the warnings] has been policy indecision, restrictive regulations and politically motivated bans and moratoriums that have stymied exploration and development of local gas supplies," Roberts said.

    The Victorian Government announced last week that Parliament passed legislation that bans all onshore unconventional gas development in that state and extends a moratorium on onshore conventional gas development until 2020. Turnbull also blamed the State Government bans and moratoriums on onshore gas production as contributing to the crisis.

    "We have massive gas resources. We have so much gas. The problem we've got at the moment is the political opposition to its exploration," he said.

    "I encourage all parties, Liberal and Labor, to support the development of our gas resources," he added.

    Australia's LNG exports are forecast at 57 million mt in 2017, before surging to 73 million mt in 2018 and then to 83 million mt in 2019, Platts Analytics said.

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    Argentina's Pampetrol restarts oil field after exit of private operator

    Pampetrol, the state oil company of Argentina's La Pampa province, has brought back into production a formerly privately operated block, with an eye to boosting output, the provincial government said.

    "Pampetrol has started the first four production wells," the government said, adding each of the wells on Salina Grande I was producing an average of 94 b/d.

    The La Pampa government said these were the first of 10 existing wells that Pampetrol will gradually put back into operation on the block in the south-central province. The block had been inactive for a year, it said.

    Last August, La Pampa revoked the exploration and production permit of Salina Grande I's private consortium, saying the group had failed to comply with license requirements in terms of the pace of investment since winning the permit in 2006. The consortium was made up of Gregorio, Numo y Noel Werthein, Petrosiel and Energial, the latter of which was the operator of the block.

    La Pampa has also taken back under state control other blocks like Jaguel de los Machos from Brazil's state-run Petrobras.

    La Pampa produces 3.8% of the country's 511,000 b/d of crude and 0.8% of its 123 million cu m/d of gas, according to the Argentine Oil & Gas Institute, an industry group.
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    WPX Energy: Keeping its Permian Basin Service Costs in Check

    Planning in the supply chain: industry expects service costs to rise 10%-15%, but WPX has a firm handle on costs in the Permian

    Everyone knew it would happen eventually: service costs are going on the rise. Halliburton talked about it as early as July of 2016, and over the course of the EnerCom Dallas oil and gas investment conference we heard it again and again.

    As activity continues to pick up on the drilling side of the equation, E&P companies need more services from the oilfield side of the industry. After two years of layoffs and slower drilling programs that will translate into more demand for fewer crews and less equipment, which is starting to play out in a 10%-15% expected increase in service costs for the coming year, according to a number of sources ranging from E&P decision makers to buyside and sellside analysts.

    Nowhere is this becoming more apparent than in the Permian, where strong returns have attracted a rush of capital and drilling activity outpaces the next most active basin by 4.5 times, according to information from Baker Hughes Industries . Many companies had the forethought to plan ahead, though, and they intend to reap the rewards moving forward.

    WPX Energy operates in the Delaware Basin, right at the heart of the Permian, and the company has been able to contract approximately 70% of its drilling and completion costs through 2017, mitigating the company’s exposure to service cost inflation.

    To better understand how WPX keeps its service costs in check in the most active oilfield in the U.S., Oil & Gas 360® spoke with WPX Director of E&P Services Alan Killion about the company’s supply chain management.

    WPX Energy offers insight into what it takes to manage costs in the Permian Basin

    “WPX has been proactive over the past year to work with the service providers on longer-term partnerships that are shielding WPX from the brisk pace of inflation,” said Killion. “Our goals are to find partners who want to grow with WPX long-term. Contracting with those companies requires an understanding of not only the current marketplace but also an alignment of goals.”

    At WPX, Killion’s group specializes in contracts, negotiating, analytics and technical aspects, such as understanding the pipe market all the way back to the mill, according to WPX. Killion’s experience as both a production engineer and trader for Occidental Petroleum  before moving into his role at WPX made him the right fit to understand markets and develop those partnerships.

    “The environment at WPX is an advantage because there’s so much emphasis on planning and forecasting. Since things are more predictable, we can make more of an impact,” said Killion.”

    Stimulation services and sand look to be the most pressing matters for now

    “The stimulation side of the business has seen the most constraint in the supply chain.  As we know from economics, anytime there’s a constraint in an area we tend to see inflationary dynamics,” explained Killion.

    “Pressure pumping crews are in short supply. We estimate that the market is approximately at a 95% utilization rate.  Until future crews hit the market, pricing in the marketplace will be pressured. We have seen the pressure pumping market increase approximately 250% to 300% for horsepower since Q4 2016.  As companies continue to add crews some of the price inflation will start to subside.”

    Sand will also continue to be a source of cost inflation for many companies moving forward. “Current sand capacity is listed at 110 million tons per year. In 2016, demand was approximately 40 million tons per year.  2017 projections are around 50 million tons per year, with 2018 pushing more toward 80 million tons,” said Killion, but those numbers include all types of sand, not just the fine sand that is in high demand for the increasingly intense frac jobs completed across the United States.

    Sand has seen 75%-100% inflation since late 2016

    “With this move to finer sand types, longer laterals and higher proppant concentrations, the sand market has experienced inflation of 75%-100% since late in 2016,” said Killion. “We see the same dynamics starting to occur in the OCTG (Oil Country Tubular Goods) market as well.”

    Because of the increasing demand in those particular areas, WPX worked to ensure that it would have long-term contracts to mitigate as much inflation as possible, explained Killion. “WPX has hydraulic horsepower and frac sand contracts in place into 2018.”

    Killion and his team expect to see similar increases in service cost across all basins, as well. “We have seen the inflation agnostic to basins at this time.  As frac crews and frac sand is somewhat fungible, these services try to migrate toward the most active basins when possible,” he explained.

    Don’t discount continued improvements in efficiency

    Many E&P companies are already including the 10%-15% increase in service costs in their forward-looking projections, but that does not mean that drilling and completion costs will rise in lock-step with price inflation. Companies continue to improve their drilling designs and increase the speed at which they can drill higher-performing wells.

    “It is somewhat difficult to say [what a 10% to 15% increase in service costs would mean for well economics] because each basin and each formation holds different economics, but it could wind up being a wash when you think about how much better we’re getting on the performance side,” said Killion. “The industry continues to find ways to drill and complete wells that yield reduced drill times and increased EURs.

    “WPX continues to set the bar higher on each of these fronts.

    “Last year we raised EURs in all three of our basins. And we completed a 16-day well in the Permian, and we’re still in the early learning phase. We also reduced drilling times in the Bakken by 5 days from 2015 to 2016. We have seen approximately 10% to 15% increase in the number of stages our stimulation partners can frac in a single day.  These improvements should offset inflation at a minimum,” he said.

    It’s all about communication and credibility

    Successfully finding the sweet spot between supply chain management, operations and vendors will help Killion and his team continue to improve WPX’s supply chain moving forward, he explained.

    “The two most critical pieces to making everything work are the 2 Cs – communication and credibility,” said Killion. “That ongoing, open dialogue is paramount, and the supply chain management team has to be credible and earn the trust of operations. We are not the tail wagging the dog. Our role is to support our asset teams and their business objectives. We make recommendations. They make decisions.”

    Attached Files
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    U.S. shale oil output to soar in April, Permian to hit fresh record

    U.S. shale oil production in April was set for its biggest monthly increase since October as output in the Permian Basin, America's fastest growing shale oil region, was expected to hit another record high, government data showed on Monday.

    Total shale oil production was expected to rise 109,000 barrels per day to 4.96 million bpd, according to the U.S. Energy Information Administration's drilling productivity report.

    Oil production in the Permian Basin in Texas and New Mexico, the largest U.S. shale oil field, was set to rise 79,000 bpd to 2.29 million bpd, the highest level on records dating back to 2007.

    In the Eagle Ford region in Texas, output was expected to grow nearly 28,000 bpd to 1.14 million bpd, the highest level since November.

    Production in the Bakken, however, was set to drop 10,000 bpd to 964,000 bpd, the only month-on-month decline across all seven basins used in the report. That would be the third consecutive monthly decline in the North Dakota basin.

    Meanwhile, U.S. natural gas production was projected to increase to a record high 49.6 billion cubic feet per day in April, the EIA said.

    That would be up almost 0.6 bcfd from March and would be the fourth monthly increase in a row.

    The EIA projected gas output would increase in all of the big shale basins in April, including the Eagle Ford, where production had been declining since January 2016.

    Output in the Marcellus formation in Pennsylvania and West Virginia, meanwhile, was set to grow by almost 0.2 bcfd to a record high near 19.2 bcfd in April, a sixth consecutive increase.

    EIA also said producers drilled 807 wells and completed 716 in the biggest shale basins in February, leaving total drilled but uncompleted wells (DUCs) up 91 at 5,443, the most since April 2016.

    Attached Files
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    Russian oil major Rosneft says U.S. shale growth imperils OPEC deal

    A recovery in U.S. oil output may deter OPEC and non-OPEC producers from extending production cuts beyond June and might lead to a new price war, Russia's top oil major said on Monday.

    U.S. shale oil production had been in retreat as oil prices tumbled from above $100 a barrel in 2014 to below $30 in 2015, making costly fracking processes less profitable.

    A deal by the Organization of the Petroleum Exporting Countries with Russia and other producers to rein in output by 1.8 million barrels per day (bpd) for six months from Jan. 1 lifted prices but also encouraged U.S. firms to boost supplies.

    "It became evident that U.S. shale oil output has become and will remain a new global oil price regulator for the foreseeable future," Rosneft said in a written response to Reuters.

    "There are significant risks the (OPEC-led) deal won't be extended partially because of the main participants, but also because of the output dynamics in the United States, which will not want to join any deals in the foreseeable future."

    Russia agreed to join OPEC supply curbs late last year despite initial opposition from Rosneft's boss Igor Sechin, one of President Vladimir Putin's closest allies.

    "We think that in the long-term global oil demand dynamics and reduced investment during the period of ultra low prices will balance the market, but that the risk of a price war resuming remains," Rosneft wrote.

    Russia has yet to deliver on the pledged cuts, while Saudi Arabia has cut its production far below the levels it had pledged, compensating for waker compliance by other OPEC states.

    Rosneft said it came as a surprise to many observers that OPEC's compliance with cuts was more than 90 percent, and said the success was because the Saudi position on reducing production had "changed a great deal" from the past.

    The kingdom, the world's biggest oil exporter, had long refused to cut output under veteran oil minister Ali al-Naimi. He was replaced last year by Khalid al-Falih.

    "It was Saudi Arabia which initiated the pricing war in the first place with the aim of radically increasing its market share by squeezing out producers of 'costly' oil," Rosneft said, in a reference to shale producers.

    "This goal became impossible to reach because of the efficiency and viability of the Russian oil industry," it added.

    Naimi had forecast a collapse in output from Russia's mature fields. Instead, production has risen in the past two years to an all-time high of 11.2 million bpd, partly because a devaluation in the rouble reduced production costs.

    Rosneft said the only guaranteed route to balance the market was for all producers to limit supplies, but acknowledged this would not happen because U.S. shale producers would not join any such pact. U.S. law bars them from such action.
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    ‏Genscape Cushing inventory up

    Genscape Cushing +1.7mm bbls W/W

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    TransCanada Announces Successful Canadian Mainline Open Season Results

    News Release – TransCanada Corporation (TransCanada) today announced the successful conclusion of a long-term, fixed-price Open Season to transport natural gas on the Canadian Mainline from the Empress receipt point in Alberta to the Dawn hub in Southern Ontario. The company confirmed that its recent Open Season resulted in binding, long-term contracts from Western Canada Sedimentary Basin (WCSB) gas producers to transport 1.5 PJ/d of natural gas at a simplified toll of $0.77/GJ.

    “Today, WCSB producers are facing a much more challenging landscape than they have in the past. This new offering helps our customers compete more effectively by utilizing existing capacity on the Canadian Mainline, and demonstrates the importance and value of this system to deliver their products to markets in Eastern Canada and the Northeast U.S.,” said Russ Girling, president and chief executive officer, TransCanada.

    “This long-term agreement provides significant benefits for our customers, shareholders, communities and governments that depend on the economic benefits that are generated by natural gas exploration, production and transportation,” added Girling. “In addition to utilizing existing capacity and pipelines already in operation, the incremental revenue generated from this offering will make the Canadian Mainline more competitive.”

    Key highlights of the Revised Long-Term Fixed Pricing Open Season:

    Collectively, customers have signed long-term binding contracts to transport 1.5 PJ/d of natural gas from the Empress receipt point in Alberta to the Dawn hub in southern Ontario, at a single toll of $0.77/GJ.
    The term of the contract is 10 years and has early termination rights that can be exercised following the initial five years of service (upon payment of an increased toll for the final two years of the contract).
    The service can be provided entirely with existing facilities.
    The targeted in-service date is November 1, 2017. The company intends to file an application for regulatory approval with the National Energy Board in April 2017.

    Today, TransCanada transports more than 25 per cent of the natural gas consumed across North America, and millions of people rely on the energy we deliver every day to heat and cool their homes, fuel industries and generate reliable sources of power, and the Canadian Mainline is a critical piece of energy infrastructure that allows this to happen. The Canadian Mainline is a regulated cost of service system that currently transports about 20 per cent of the natural gas produced in the WCSB to serve Canadian markets and interconnects with the U.S.
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    EU says Gazprom offer to avoid antitrust fines allays worries

    Gazprom is ready to comply with EU rules to end a five-year antitrust case and avoid fines, the bloc's competition commissioner said on Monday, signaling a thaw in business ties between Moscow and Brussels despite tensions over Ukraine.

    Eight member states in the east, all formerly dominated by Moscow, now have until May 4 to object to the EU executive's view and could try to seek changes in Gazprom's offer.

    The Russian state gas exporter, which supplies a third of the EU's gas, has been on the radar of EU regulators since 2012, culminating in charges in April 2015 that it overcharged customers in Central and Eastern Europe and blocked rivals.

    Since then, Gazprom has offered concessions aimed at staving off a potential fine of up to 10 percent of its global turnover.

    EU Competition Commissioner Margrethe Vestager, who has brought actions and levied fines against major U.S. multinationals such as Google, said Gazprom's offer allayed worries and provided "a forward looking solution".

    "Combined we think that these measures are important improvements to ensure the free flow of gas at competitive prices," Vestager said.

    Gazprom has agreed to fixed transparent fees and to allow clients the right to price revisions clauses in long-term contracts, EU regulators said.

    As part of the deal, Gazprom will also adapt contracts to remove barriers on the free flow of gas across borders and drop clauses in its supply contracts with wholesalers and some industrial customers barring them from exporting its gas to other countries.

    Within a bloc divided over its stance on Russia, some EU nations see the move towards a settlement as running counter to calls for more sanctions on Russia over its bombing in Syria.

    "The fundamental question is how friendly are we going to be with Gazprom," one senior EU diplomat said. "To some, it looks strange that the Commission is going after Apple and Google but not Gazprom."

    Vestager insisted during a news conference that her view was purely based on enforcing EU law and not influenced by politics.

    The EU executive is likely to receive tough feedback from the eight states at the heart of the case, with many already locked in a battle with the Commission over what they view as lenient treatment of Gazprom in other cases.

    Poland has said it will "play rough" with the EU across the board after a dispute on another matter last week. The other countries being asked for their views on Gazprom are three Baltic states, Bulgaria, Hungary, Slovakia and the Czech Republic.

    Vestager responded to criticism by saying the decision was divorced from politics and "would be most helpful to have the future behavior of Gazprom changed".

    With a settlement, Russia would accept EU authority in applying competition law - something it has long balked at. If Gazprom failed to comply and meet its commitments, the EU could resort to fines without reopening its case, Vestager said.
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    Shell shelves Prince Rupert LNG project in British Columbia

    The Hague-based LNG giant Shell said on Friday it is ending development of the proposed Prince Rupert liquefied natural gas export project in Canada’s British Columbia.

    BG International Limited, a member of the Shell Group, confirmed in a statement that the company would discontinue development of the proposed LNG project, located on Ridley Island at the Port of Prince Rupert.

    Acquired as part of the Shell and BG Group combination in 2016, the Prince Rupert LNG project has been part of a global portfolio review of combined assets, which resulted in the decision to discontinue further development, the statement said.

    “During the global portfolio review the local project team has continued to engage locally and to support environmental initiative and social investment activities in the area,” the statement said.

    The Prince Rupert office will remain open through May 2017 to complete community engagement.

    Prince Rupert LNG was planned to be developed in two phases with a production capacity of up to 21 million tonnes of LNG per year. Natural gas to the Ridley Island facility would have been received from northeast British Columbia via pipeline.

    The project received authorization in April 2014 from the National Energy Board to export LNG from the proposed liquefaction facility.
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    Proposed Permian Refinery Could Take 50,000 BOPD from West Texas Producers

    It’s small when you compare it to the top ten largest U.S. refineries, most located on the Gulf coast, all having capacities between 300,000 barrels and half a million barrels per day, but a small Texas-based energy company has announced its intention to build a 50,000-barrels per day crude oil refinery in a well-selected location: in the heart of the Permian basin.

    MMEX Resources Corporation (ticker: MMEX) said it will need $450 million to build the proposed refinery 20 miles northeast of Fort Stockton, Texas, near the Sulfur Junction spur of the Texas Pacifico Railroad. MMEX said the 250-acre facility intends to utilize its connection to existing railways to export diesel, gasoline, and jet fuels; liquefied petroleum gas; and crude oil to western Mexico and South America.

    Why is this important?

    Because the Permian basin, and the Midland basin within it, are extremely fast growing oil plays in which many independent E&Ps can drill wells, produce oil economically at today’s commodities prices—or at least at last week’s oil prices. (Prices for West Texas Intermediate dipped below $49 this week after a larger than expected inventory build, following a consistent ride in the $50-$54 per barrel range in recent weeks.) But takeaway capacity is not keeping up with the Permian basin’s growing oil production.

    Calling the Wolfcamp “the largest estimate of continuous oil that the USGS has ever assessed in the United States,” the USGS last fall pegged the Wolfcamp formation in the Midland basin at 20 billion barrels. E&Ps have cemented the reputation by making the Permian a favorite target of M&A and A&D activity. And rig counts have been growing fast.

    MMEX Resources President & CEO Jack Hanks said, “The existing facilities and pipeline networks are largely unequipped to handle this growth and are limiting where products can be transported. By building a state-of-the-art refinery along the region’s existing railway infrastructure, we hope to bring a local and export market for crude oil and refined products.”

    MMEX said it plans to surround the Pecos County refinery with an additional 250 acres of buffer property and leverage state-of-the-art emissions technologies to yield minimal environmental impact. It also expects to feature closed-in water and air-cooling systems, which will require very little local water resources.

    The company anticipates the 18-month construction process will create approximately 400 jobs in the area during peak construction, as well as foster a significant number of indirect jobs and revenue for companies in catering, workforce housing, construction, equipment and other industries.

    Once operational, the facility is expected to provide an estimated 100 permanent jobs and generate substantial tax revenue for Pecos County, the company said.

    MMEX purchased the rights to the project from Maple Resources Corporation. Construction is slated to begin in early 2018, following the permitting process, and the facility is projected to begin operations in 2019.

    MMEX is involved in oil, gas, refining and electric power projects in Texas, Peru, and other countries in Latin America. The company’s ability to build the proposed Permian refinery is subject to the receipt of required governmental permits and completion of required debt and equity financing, MMEX said.
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    DOE economist talks SPR exports, storage and sales

    The presenter who arguably received the best questions at Wednesday’s Crude Oil Quality Association meeting in New Orleans was the US Department of Energy’s economist, Kenneth Vincent.

    His presentation was part overview, such as the locations of the four salt caverns that hold the more than 700 million barrels of US oil – Texas and Louisiana, and the maximum drawdown capacity – 4.4 million b/d. But there were also some nuggets not found on factsheets such as the how the physical salt caverns are shrinking due to geological pressures and how “distribution issues are a major concern (for the DOE) currently and going forward.”

    Following the presentation, the overflowing room of oil industry participants had plenty of questions for Vincent. And if they didn’t know the answers, and I didn’t know the answers, I reckon you might be interested too:

    Q: Are there any restrictions on who you can sell to? Could you export oil anywhere?

    A: Vincent said since the US oil export ban has been lifted, the office received a legal opinion that it can’t export but it can sell to anyone, who can then export it.

    Q: Do you look at the type of oil you are storing so that it is what we need when the time comes?

    A: “Yes,” Vincent said, which got some chuckles from the crowd.

    After a brief pause he continued to say the strategic petroleum reserve stores about 60% medium sour and 40% sweet crudes that are amalgams from a bunch of different streams.

    “Our goal is to have oil as fungible as possible and support as many types as possible.”

    He said a common question is if the SPR should focus more on heavy oils, which account for a bulk of imports and are consumed by USGC refineries. However, he said no, that SPR isn’t focusing on adding more heavy oils. He said that heavy oil is “really hard” to store for long periods of time and that there is a lot more sweet oil going into the US refinery fleet.

    “We ultimately decided we weren’t going to put a big stake in the ground for changing the type of oil in the reserve but that is something we follow very closely.”

    Q: Do you consider the price of specific crude grades when making sales from the SPR?

    A: “Yes. Absolutely.”

    Vincent said there is a very rigorous process in place in trying to maximize returns for taxpayers.

    Q: Does the DOE have any input on pipeline reversals?

    A: “Absolutely not,” Vincent said. “We have no say.”
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    Wood Group to takeover Amec in £2.2bn deal

    Two of the biggest North Sea services players this morning revealed plans to combine.

    Wood Group’s and Amec Foster Wheeler’s board of directors have reached an agreement on the terms of a recommended all-share offer by Wood Group to acquire the entire issued and to be issued share capital of Amec Foster Wheeler.

    The takeover is worth £2.2billion.

    Under the deal, each Amec Foster Wheeler Shareholder will receive for each Amec Foster Wheeler Share 0.75 New Wood Group Shares.

    The pair have said the deal will save $134million per annum. Of that, 40% is expected to come from operating efficiencies. An addittional 30% is expected to come from corporate efficiencies, including the reduction of duplicate costs across board and executive leadership teams.

    Robin Watson and David Kemp, currently CEO and CFO of Wood Group respectively, will continue as CEO and CFO of the combined group. Wood Group’s chairman Ian Marchant will remain the combined group’s chairman.

    Four members of the Amec Foster Wheeler Board will join the board of the combined group upon completion of the combination as non-executive directors, with Roy Franklin joining as deputy chairman and senior independent director.

    The final 30% is expected to come from administration efficiencies, including the consolidation of overlapping office locations, the elimination of duplicated IT systems and the reduction of duplicate costs across central support functions.

    Chairman Marchant said: “The Combination represents a transformational transaction for Wood Group, which accelerates our strategy and creates a global leader in project, engineering and technical services delivery across a range of industrial sectors. The Combination extends the scale and scope of our services, deepens our existing customer relationships, facilitates further development of our technology-enabled solutions and broadens our end market, geographic and customer exposure.

    “The Combination will create an asset-light, largely reimbursable business of greater scale and enhanced capability, diversified across the oil & gas, chemicals, renewables, environment & infrastructure and mining segments.

    “By leveraging Amec Foster Wheeler’s and Wood Group’s combined asset life cycle services across project delivery, engineering, modifications, construction, operations, maintenance and consulting activities, the Combined Group will be able to better capitalise on growth opportunities across a broad cross section of energy and industrial end markets.
    Delivering significant sustainable synergies will also result in a leaner and more competitive Combined Group, creating value for shareholders.

    Amec Foster Wheeler’s shareholders will become shareholders in the Combined Group, thereby gaining from the enhanced operating capabilities, and benefiting from a share of the synergies, a stronger balance sheet and Wood Group’s progressive dividend policy.

    “The Wood Group Board is confident that the Combination will build on the individual platforms of Wood Group and Amec Foster Wheeler to the benefit and advantage of customers, employees and other stakeholders.

    “The Combination has been unanimously recommended by the boards of Wood Group and Amec Foster Wheeler, and the Wood Group team looks forward to working with the Amec Foster Wheeler team to further develop the Combined Group over the longer term.”

    It comes the same day Amec reported a 8% slip in revenue to £5.4billion. Its profit fell from £374m in 2015 to £318million in 2016.

    John Connolly, chairman of Amec Foster Wheeler said: “Since the arrival of Jonathan Lewis as CEO, the executive management team has made significant progress towards the transformation of the business. This has been achieved through cost reduction initiatives, the disposal of non-core assets and a reorganisation of the business. The Board have fully supported the revised strategy and the preparations to deliver the appropriate balance sheet to support its standalone prospects.

    “However, the Board believes that a combination with Wood adds to the standalone prospects of the Company, by accelerating the delivery of the future value inherent in the Amec Foster Wheeler business and, at the same time, helps to realise the full potential of each of Amec Foster Wheeler and Wood. The all-share structure of the offer allows our shareholders to benefit from the significant synergies and other strategic benefits that are expected to be realised from the combination. Amec Foster Wheeler will also be well represented on the Board of the enlarged group, with four of our directors joining Wood’s board, including Roy Franklin, who will be appointed Deputy Chairman and Senior Independent Director.”

    The combination is expected to be completed in the second half of this year.

    Wood Group said it believes the combination “represents a compelling opportunity to accelerate the delivery of Wood Group’s strategy to become a global leader in project, engineering and technical services delivery across a broad platform of industrial sectors”.

    The firm also said it would afford it the ability to have a “stronger, more diversified platform better able to manage the inherent market and contract volatility that faces the oil and gas industry”.

    The combined group will employ 64,000 people globally. It will have a net debt of $1.6billion.

    The combination is expected to incur a one-off cost of £190million spread out over the first three years.

    In a company announcement Wood Group stated: “The Wood Group Board has, in addition, made the following assumptions, all of which are outside the influence of the Wood Group Board:

    there will be no material impact on the underlying operations of either company or their ability to continue to conduct their businesses;
    there will be no material change to macroeconomic, political, regulatory or legal conditions in the markets or regions in which Wood Group and Amec Foster Wheeler operate that materially impact on the implementation or costs to achieve the proposed cost savings;
    there will be no material change in current foreign exchange rates; and
    there will be no change in tax legislation or tax rates or other legislation or regulation in the countries in which Wood Group and Amec Foster Wheeler operate that could materially impact the ability to achieve any benefits.”

    Wood Group was advised by J.P. Morgan Cazenove and Credit Suisse. Amec was advised by Goldman Sachs International, BofA Merrill Lynch and Barclays.

    The combination is considered a Class 1 transaction for Wood Group. As such, the combination is conditional and will need final approval from Wood Group’s shareholders at its general meeting.

    Wood Group’s board said it considers the “combination to be in the best interests of Wood Group and the Wood Group Shareholders as a whole and intend to recommend unanimously that Wood Group Shareholders vote in favour of the relevant resolutions at the Wood Group General Meeting”.

    If approved, Amec Foster Wheeler Shareholders would own approximately 44% of the combined group.

    Attached Files
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    Rising Middle East straight-run fuel oil output displaces European flows to Asia

    Increased high sulfur and low sulfur straight-run fuel oil output in the Middle East, most specifically in the UAE, is providing competition for European straight-run flows into Asia in the second quarter, according to sources this week.

    Europe's straight-run fuel oil production is typically delivered into the US Gulf Coast or east Asia, although this latter supply pattern is being impacted by the higher output in the Middle East.

    According to sources, due to lower domestic demand in the Middle East for straight-run fuel and refineries opting not to re-use the product as feed for their own purposes, there has been a surge in production and exports recently.

    "Ruwais [in the UAE] is producing around 400,000 mt of very good quality fuel oil", said one fuel oil trader. "The vast majority of it is going to Asia, with around 70% to China."

    "This a lot more than the refinery typically produces," a second trader added.

    China is the second-biggest refiner in the world, after the US, home to a number of complex and basic refineries, and so is a key market for cheap feedstock material such as straight-run fuel oil.

    "China has a lot of demand for this stuff," said the second trader.

    In January, China imported 311,000 b/d, amounting to a total of 1.53 million mt of fuel oil per month, according to Platts China Oil Analytics. In the coming months, demand is expected to dip slightly to 265,000 b/d, but will again recover to above the 300,000 b/d mark.

    In addition, domestic European demand for the feedstock has been curtailed of late and is expected to rise once the major refineries complete their turnarounds. Producers had been looking to the east as a market for their supply, but the stiff competition has made this somewhat difficult.

    Sell tenders in the Black Sea and weak demand have already softened differentials for straight-run fuel oil in Europe, in addition to un-sold cargoes floating out in the open sea.

    A total of 300,000 mt of LSSR per month will be made available to buyers via tender, traders told S&P Global Platts.

    Some 200,000 mt will be supplied by Rosneft, with the remainder offered by the privately owned Ilsky refinery. Although not an unusual trend, weaker gasoline demand in the US has meant fewer willing buyers for the oil.

    Attached Files
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    U.S. offshore rigs climb up to 20 units

    The U.S. offshore rig count climbed up to 20 units last week, according to weekly rig count reports by the oilfield services provider Baker Hughes.

    The U.S. Offshore Rig Count is up 2 rigs from last week to 20 and down 7 rigs year over year.
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    Enbridge CEO says Canada only needs two more export pipelines

    Two new crude oil export pipelines will provide enough capacity to ship Canadian production to market until at least the mid 2020s, Enbridge Inc  Chief Executive Al Monaco said on Friday, making clear his company's Line 3 should be one of them.

    Monaco's comments come amid growing speculation that Canada faces pipeline overbuild after years of struggling with limited market access.

    The Canadian government approved Enbridge's Line 3 replacement project and Kinder Morgan's Trans Mountain expansion last November, while U.S. President Donald Trump invited TransCanada to reapply for a Keystone XL permit in January. TransCanada is also awaiting permits for its proposed Energy East project.

    If all four pipelines get built the 2.1 billion barrel per day surge in capacity would fast outpace industry forecasts of Canadian crude production growth of 850,000 bpd by 2021.

    "If you look at the supply profile and you look at our expansion replacement capacity for Line 3 and one other pipeline, that should suffice based on the current supply outlook, out to at least mid-next decade," Monaco said on a fourth quarter earnings call.

    Monaco said Enbridge had another 400,000 bpd of potential capacity expansion opportunities in addition to Line 3 but the company would be guided by the amount of supply coming out of western Canada.

    Wood Mackenzie analyst Mark Oberstoetter said his firm agreed with Monaco's assessment on the need for new pipelines.

    "We definitely need two of these pipelines by around 2025 and after that it depends on the supply outlook," Oberstoetter said. "There's not an evident need to get three or four pipelines built."

    Enbridge, Canada's largest pipeline company, also announced a C$1.7 billion ($1.3 billion) investment in a North Sea windfarm.

    The 50 percent ownership in EnBW's (EBKG.DE) Hohe See strengthens Enbridge's footprint in Europe's booming offshore wind power industry.

    Monaco said there could be more to come given the push towards renewable energy in a number of European countries.

    Enbridge reported fourth-quarter profit on Friday that included a C$373 million before-tax impairment charge related to its Northern Gateway pipeline, which the Canadian government blocked last year.

    Earnings attributable to the company's shareholders were C$365 million ($279 million), or 39 Canadian cents per share, in the fourth quarter, hurt by charges, including for asset impairment and restructuring.
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    U.S. oil and gas rig count climbs by 12

    Drillers sent another 12 rigs this week back into oil and gas fields across the nation, Baker Hughes said Friday.

    The number of active oil-drilling rigs climbed by eight, up to 768, in the eighth consecutive weekly increase. Meanwhile, gas rigs increased by five, up to 151. One rig classified as miscellaneous was removed from the oil field service company’s go-to list of active rigs.

    Four of the oil rigs were sent to the DJ and Niobrara basins in Colorado and nearby states.

    One went to the Permian Basin in West Texas, another went to the Utica Shale in Ohio, and several more headed for regions Baker Hughes does not track.

    The nation’s rig count has climbed from 404 in late May to 768 this week, as oil prices have risen and OPEC’s oil production cut spurred drilling activity in U.S. shale plays.
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    Hi-Crush crashes the Permian sand boom

    A Frac Sand Mine Lands In The Permian. This Could Transform The Competitive Sandscape [Exclusive Details]

    February 24, 2017 Infill Thoughts 4 Comments

    After the market closed Thursday evening, Hi-Crush Partners quietly dropped the equivalent of an atom bomb on the frac sand business. Few seem to have noticed yet – Hi-Crush is less widely followed than some of the other large miners, yesterday was a busy earnings day, and they announced the news with little fanfare.

    But make no mistake, this is big news for and from Hi-Crush. It is yet unclear if this is the start of a trend, but if it is, then it has disruptive implications for the entire frac sand value chain.

    The First Frac Sand Mine Lands In The Permian

    In an industry first, Hi-Crush announced plans to build a frac sand plant in the heart of the Permian Basin, the world’s busiest frac market. The new $50mm plant will produce 3mmtpa of 100 mesh frac. For context, that’s approx. 10% of expected Permian proppant consumption this year. The production will come from a 55mm ton deposit Hi-Crush has just purchased for $275mm. The plant will be built between closing in 1Q17 and early-4Q17 when it is expected to open.

    Hi-Crush did not disclose the precise location of the reserves, but industry sources tell us the plant site is located just outside of Kermit TX in Winkler County off Highway 115. In a quick glance at Google Maps, the sand deposits literally jump off the map. Per their announcement, Hi-Crush bought a 1,226-acre frac sand reserve with options on additional acreage.

    (click image to view in Google maps)

    This Has The Potential To Transform The Competitive Sandscape

    If this deal is a one-off, then it’s good for Hi-Crush and won’t impact the market much. But if this new plant is the start of a trend of regional mines entering the Permian, then this news will transform the US frac sand business. If this takes off, it has implications for the entire sand value chain.

    Much of the sand consumed in the Permian originates in Wisconsin, and rail transportation is the highest cost component of this sand (see chart below). If you can eliminate rail by placing sand mines in the heart of the Permian… the possibilities get interesting.

    If Hi-Crush can built a plant capable of producing 3mmtpa in the Permian, others will try to follow. If our sources are accurate, they will follow quickly.

    Over the past several weeks, we’ve been picking up chatter from multiple industry contacts in West Texas about the descent of dozens of buyers interested in the region’s sand deposits. Land owners sitting on sand in the Permian have been approached by buyers from established miners to private equity firms. We understand this particular Hi-Crush purchase was a hotly contested bidding process where at least one other big sand mine participated.

    If others can repeat Hi-Crush’s approach, we can imagine a world where 25-50% of Permian frac sand demand is supplied locally. Here are a few implications if this trend takes off and scale in local mining capacity is achieved:

    ·         Wisconsin reserves will be devalued.

    ·         It could eliminate the biggest cost of sand (rail transportation) for a portion of proppant consumed in the Lower 48’s biggest frac sand market.

    ·         That is a game changer because the Permian is expected to consume half the frac sand produced in the US going forward.

    ·         Wisconsin minegate sand prices could face some new headwinds.

    ·         Rail transportation demand could fall shy of current expectations (implications for cars and trains)

    ·         If it takes off, Permian transload demand could be adversely impacted.

    ·         More hauling would start at the mine not the terminal.

    But there is work to be done before this becomes a trend. There are potentially limiting factors that could cap the rise of Permian mines. Here are a few that come to mind:

    ·         Transportation infrastructure. If our sources are correct about Hi-Crush’s location, then it is right off the highway in a prime location. Deposits further away from the road may be harder to develop (and more costly).

    ·         Access to water. It is essential in sand mining (perhaps especially if the mines amount to scraping dunes) and could become constrained around these sand deposits in West Texas (especially those in more remote locations).

    ·         Stubborn Owners. We’ve heard that land owners sitting on sand have been hesitant to sell – continuous acreage around infrastructure may not be for sale at a reasonable price.

    ·         Seller’s Market. Hi-Crush paid a pretty penny in a hotly contested bidding process for this sand. Will other buyers be able to float the price to play in the Permian sandbox?

    ·         Regulation. As you move south in the sand deposit chain we believe Hi-Crush bought into, you approach the Monahans State Park (see map below). This area will likely be preserved from development by state law.

    ·         Geology. Hi-Crush has identified pay that it obviously believes it can develop – they wouldn’t buy this sized deal without geological conviction in the pay. Broader West Texas geology may pose limits to this trend. There are obviously dunes in the area, but how deep is the pay in other deposits? How good is the quality of the sand? What are  the grain sizes and what does that mean for import mix in the basin? It is yet unclear if the mine capacity Hi-Crush disclosed (3mmtpa) is repeatable in scale in the Permian.

    This is HUGE. Where’s The Fanfare?

    In a busy press release that disclosed two other transactions, Hi-Crush discussed in muted tones its plans for this game changing mine. They also released the news on one of the busiest earnings days of 4Q16 reporting season.

    There is a reason Hi-Crush slipped this announcement out with little fanfare: this is a transformative development, and they are now the first mover. If our sources are correct, others will soon attempt to follow.

    The End Justifies The Means (Mostly)

    At $5/ton, the purchase price Hi-Crush paid for these reserves might seem a bit high to folks used to seeing reserves trade at half that level. But the Permian Basin is expected to consume >40% of total US sand production this year and in 2018. Permian sand demand is as close to a sure thing as you will find in the oilfield these days. The next closest frac sand mine is more than 200 miles away in Brady, TX. This mine is within 75 miles of the Midland and Delaware Basin hot spots.

    Water access may play into the price, however details are limited at this point. As a first mover, Hi-Crush will be able to charge a premium by eliminating rail costs and selling its products FOB the plant to customers that are primarily completing wells in the Midland and Delaware Basins. Or they may even try to sell at the well site given proximity.

    All of the above factors support the price Hi-Crush paid. On the flip side, while finer grains have been en vogue lately, 100 mesh may be too fine in some cases. And 100 mesh is what Hi-Crush says they’ve bought here. We’ve recently heard talk of conductivity issues at 100 mesh, which has caused some E&Ps to mix slightly coarser grades into the blend. That said, these issues have been one-offs, and Hi-Crush can address with Permian imports.

    What’s The Over / Under On Permian Mine Capacity Announced By June?

    There’s big potential for a Permian mine trend to develop here, and the Hi-Crush deal proves it. This isn’t the last we’ll hear about it, but whether it marks the start of a Permian sand grab remains unclear at this point. If the E&P industry is an analog, perhaps the next acreage valuation bubble will form around Permian sand deposits.

    If you are familiar with West Texas then you know these sand deposits in the heart of the play as recreational areas where families play and camp out on the weekends among the sand dunes.

    On a personal note, this author spent plenty of time riding the dunes among the sand hills of the Monahans State Park as a kid growing up in Odessa, TX. In those carefree days, we never could have anticipated a more productive use for the sand than the quick adrenaline rush from whizzing down a dune on a perfectly waxed board.

    But the guys in suits have been knocking on land owner’s doors out in West Texas in growing numbers this year. We’ve heard of some property owners getting as many as 20 inquiries for their sand.

    There is a large sand formation that spans about 30 miles from Monahans in the south up to Kermit in the North. The deposits around Monahans are part of a state park and would-be exploiters will likely face regulatory challenges there. But the further up you go, the more these deposits are held by private interests with discretion over the mineral rights.

    There are also a few other deposits around the Permian that may have some potential, but it looks like Hi-Crush took the sweet spot in the first sand deal in the area.

    Will the Hi-Crush transaction thaw the new Permian dune market resulting in a rash of transactions, or freeze it because they took the sweet spot and priced others out of the marekt? It’s too early to tell, but this may be the beginning of a highly disruptive trend in the competitive landscape for sand supply.

    Now just imagine if US-style hydraulic fracturing starts to take off in Saudi Arabia… they’ve got an ocean of sand… 100-mesh you think?

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    Global LNG outlooks test conventional wisdom of supply glut

    Global LNG outlooks test conventional wisdom of supply glut

    When Shell last month presented its first global LNG Outlook since its 2016 acquisition of the UK's BG Group, it surprised some by effectively denying the existence of a global LNG supply glut, pointing instead to a well balanced market where all produced LNG cargoes were being consumed.

    Much of the commentary in recent months has been telling us the LNG market is already suffering a supply glut and is heading for a period of sustained oversupply until at least the start of the 2020s.

    LNG prices across the globe have fallen to multi-year lows -- other than a mostly weather-related spike in late 2016 -- and the expected slew of new project start-ups in 2017 from Australia and the US has been forecast to lead to a hugely oversupplied market with demand growth unable to keep pace.

    The report from Shell -- which is now more exposed than ever to LNG market dynamics since the BG purchase -- was in stark contrast to other views from the industry.

    Some players already talk of an oversupplied LNG market, with things only set to worsen in the coming years.

    Pablo Galente Escobar, head of LNG at global trader Vitol, said at a London conference last month his view of the LNG market was "very different" to Shell's.

    "We think the market will be significantly oversupplied over the next five years," he said, pointing to expected LNG supply growth to 400 million mt/year by 2020 from 240 million mt/year in 2015.

    This growth, he said, was unprecedented in the history of commodities, and represented the biggest "supply shock" he had ever known.

    The CEO of Italy's Eni pointed last month to a period of oversupply that would end only in time for some of its new LNG projects to start operations.

    "In LNG we have a situation of oversupply and we expect a re-balance early next decade when demand catches up," Claudio Descalzi told analysts at a London strategy presentation.

    "Then, we see a need for new supply, which is a huge opportunity for our gas projects coming on stream," Descalzi said, referring to Eni's planned Mozambique and Egypt LNG export projects, among others.

    BP, in its latest energy outlook in January, also pointed to strong LNG supply growth in the period 2017-2021, while Norway's Statoil said in its own outlook that the critical question was whether new gas supplies would be developed in time to meet future forecast demand, or if the current gas surplus would turn into a deficit and a tight market.

    "The global LNG market is exposed to boom-and-bust cycles -- the underlying growth in world LNG demand is itself not sufficient to absorb the scheduled growth in supply," Statoil said.

    But, as Statoil says, markets have to balance.

    Therefore, the LNG glut is likely to accelerate the transition of global LNG into a more regular commodity market.

    And this is an increasingly widely accepted view -- that LNG is becoming more and more commoditized and more and more of a global fuel.


    So, are these 'views' driven by the agenda of the view-giver?


    Vitol and the other global commodity traders are always on the lookout for opportunities to exploit margins, buoyed by price volatility, and over- and under-supply often lead to fast and unpredictable price movements.

    In addition, traders are more willing to trade with credit-risky countries -- the likes of Egypt -- which are using LNG imports to either replace domestic production or to kick-start a gas-to-power industry.

    A well supplied market is more likely to entice new countries into becoming LNG importers, giving traders like Vitol more room in a market that has been traditionally dominated by major oil companies.

    Likewise on the demand side, Hoegh LNG -- a leading supplier of floating storage and regasification units (FSRUs) -- said last week the "long LNG market and competitive LNG prices" had led to increasing utilization of new importing facilities, "the majority of which are FSRUs".

    No surprise there.

    As for Shell, well having spent more than $50 billion to buy BG in February 2016, it now has LNG sales of 57 million mt/year, around 22% of the global market.

    The sales price for its LNG obviously matters given its vast LNG portfolio, so the more balanced the market the better for its bottom line.

    "We read about a flood of LNG, and that is clearly not the case -- we just do not see it," Steve Hill, Shell's head of energy and gas marketing and trading, said at the London briefing in late February.

    Shell justifies its stance on LNG market dynamics by pointing to various pieces of evidence:

    1) Every cargo that could be physically produced in 2016 was produced and was consumed;

    2) LNG flows to the liquid markets of Europe -- often seen as the market of last resort in an oversupply situation -- were flat, and to Belgium and the UK down, which Shell said was a good sign and a "very clear demonstration" of the strength of demand in LNG;

    3) LNG prices were "healthily" priced as a percentage of crude oil.

    Hill said last month that demand growth would keep pace with supply growth in coming years and demand growth would be accelerated by low prices and many growing markets are those with already mature infrastructure like Egypt and Pakistan.


    Shell is not alone, meanwhile, in signaling caution over predictions of LNG market oversupply.

    The Oxford Institute for Energy Studies (OIES) last month published a paper entitled "The Forthcoming LNG Supply Wave: A Case of 'Crying Wolf'?" that warned against taking the wave of LNG supply growth for granted.

    Author Howard Rogers argued that the eventual outcome and levels of LNG supplied can be very different from expectations due to:

    1) Project construction schedule slippage (often associated with cost escalation above budget);

    2) Commissioning problems -- new plants can suffer unscheduled shutdowns and may remain offline for weeks during which modifications are carried out before commissioning is attempted again;

    3) Feed gas supply issues, which can constrain supply below nameplate capacity until upstream issues are resolved.

    The OIES echoed Shell's view that the market was not oversupplied in 2016 and that Europe did not take the bigger volumes it had been expected to absorb.

    But, despite its caution, the OIES said the wave would eventually come -- maybe more slowly than thought -- and that it would have an impact on Europe, the market of last resort for LNG.

    Platts Analytics' Eclipse Energy also sees evidence the market last year was more balanced than had been expected, due to a series of unplanned outages at the beginning of the year, coupled with the continued shutdown of the Yemen LNG plant and unexpected issues at Gorgon and Angola LNG.

    Asian LNG demand was also higher than expected, with Chinese imports up to support the drive for cleaner air and Japan and South Korea both needing more LNG than expected due to issues around nuclear generation.

    "Going forward the issues observed in 2016 remain key uncertainties to the realization of a global surplus, however the amount of new supply coming online should see the realization of an oversupplied market," Platts Analytics said.

    Looking at how much Europe -- the market of last resort -- imports is key to defining whether the global LNG market is oversupplied or not.

    Platts Analytics data showed European LNG imports remained flat in the 2014-2016 period despite the fact that a market becoming oversupplied may be expected to see European imports rise to soak up the oversupply.

    However, the relatively low LNG prices for much of 2016 did nothing to entice LNG into Europe despite higher demand.

    Instead, it was met by pipeline gas from Algeria, Norway and Russia.

    Of course, the main beneficiary of an oversupplied market for any commodity is the customer, not only because of cheaper prices but also to ensure security of supply.

    The International Energy Agency said in an LNG security report last November that the massive expansion of LNG export capacity was coming at a time of weaker-than-expected global gas demand, and that the temporary excess of supplies resulting from this situation "is providing a buffer that would mitigate the impact of possible supply disruptions".

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    Oil trading giant Vitol bets on fuel retail for growth

    From Pakistan to Turkey, the world's largest independent oil trader Vitol is betting on a spike in gasoline and diesel demand in young and growing nations by snapping up filling stations that disappointed oil companies are prepared to sell.

    With the sharp drop in global oil prices, major integrated oil companies have been shedding assets, including the marginally profitable retail outlets, to cut costs.

    But privately-held Vitol, which trades 6 million barrels per day of crude oil and refined products, says these assets present an opportunity to strengthen its presence in end-markets and in up-and-coming hubs.

    This month, Vitol secured more than 23 percent of Turkey's retail market after it agreed to buy Petrol Ofisi from Austrian oil firm OMV for $1.45 billion.

    "The volume we trade means integration into the distribution chain makes sense. Retail also allows you to participate in markets on an on-going basis, so it's not always ad hoc or spot," Chris Bake, a top Vitol executive, told Reuters.

    "It allows us to have different kinds of discussions with our suppliers," said Bake, who sits on Vitol's executive committee and is the chairman of retail unit Vivo Energy.

    The purchase will add another 1,700 outlets to Vitol's portfolio of 3,000 stations acquired through investments in the last few years in Viva Energy in Australia, Vivo Energy in Africa, Varo in central Europe and OVH in Nigeria.

    It has also consolidated its initial investments such as by buying Royal Dutch/Shell's stake in Vivo and Viva and its aviation business in Australia last year.

    The eastern Mediterranean is a major import market and Vitol sees Turkey as a good destination because of its proximity to transport routes from the Mediterranean, Black Sea and Red Sea.

    "With fuel and non-fuel retailing, we can optimize the system. We are able to look closely at how to streamline the assets and we are willing to invest capital. With Vivo, we have added around 100 new service stations per year," Bake said.

    Of its main trading competitors, only Trafigura is also vying for a piece of the retail pie. It has a large presence in Africa through its subsidiary Puma Energy and is set to acquire a large stake in India's Essar Oil.

    Glencore, Gunvor and Mercuria have favored upstream or midstream assets. Last year, Gunvor bought a refinery in Rotterdam, Mercuria bought oil and gas marketing and distribution assets in the United States and Glencore invested in oil deposits in Chad.

    Vitol's retail investments fit in with its view that transport will be the major driver of fuel demand growth, with aviation demand to outstrip that for cars, which is slated to peak in about 10 years time.

    "Global demand for gasoline and diesel will peak but you can't apply the macro picture to individual countries that have high growth prospects like Pakistan where the Chinese are investing tens of billions of dollars in the CPEC (China Pakistan Economic Corridor), so demand will grow compared with developed economies," Bake said.

    Last year, Vitol increased its stake in Pakistan's Hascol Petroleum Ltd that runs around 450 service stations from 15 to 25 percent.

    Like Turkey, apart from its own growth prospects, Pakistan will become even more a gateway to the rest of Asia as CPEC will see the Chinese government invest $57 billion, mainly in a network of rail, road and pipeline projects, to connect Western China to Pakistan's sea port of Gwadar.
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    Libya's oil output drops to 620,000 bpd -NOC head

    Libya's oil output has fallen to 620,000 barrels per day, a drop of about 80,000 bpd since clashes erupted around some of the country's major export terminals, the head of the National Oil Corporation (NOC) said.

    Mustafa Sanalla told Reuters that production by Waha Oil Co, a joint venture between NOC and foreign partners, had been entirely halted. Waha pumps oil to Es Sider, one of two ports that the eastern-based Libyan National Army (LNA) lost control of last Friday to a rival faction.

    A port official at Ras Lanuf, a neighbouring terminal that the LNA also withdrew from, said that production by another NOC joint venture, Harouge Oil Operations, had also been affected, without giving details.

    Libyan oil officials say staff at Es Sider and Ras Lanuf have been reduced to a minimum since a faction known as the Benghazi Defence Brigades (BDB) seized them in clashes, and that the area is effectively a military zone.

    The BDB say they have handed the ports over to a Petroleum Facilities Guard (PFG) force sanctioned by the U.N.-backed government in Tripoli, and that they would allow oil to flow.

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    Repsol Makes 'Largest U.S. Onshore Discovery in 30 Years'

    Repsol and partner Armstrong Energy state that they have made the largest U.S. onshore conventional hydrocarbons discovery in 30 years.

    Repsol and partner Armstrong Energy stated that they have made the largest U.S. onshore conventional hydrocarbons discovery in 30 years.

    The Horseshoe-1 and 1A wells drilled during the 2016-2017 winter campaign confirm the Nanushuk play as a significant emerging play in Alaska’s North Slope, Repsol said in a company statement.

    Contingent resources identified with the existing data in Repsol and Armstrong Energy’s blocks in the Nanushuk play in Alaska could amount to approximately 1.2 billion barrels of recoverable light oil, Repsol revealed.

    The Madrid-based energy company has been actively exploring Alaska since 2008, and since 2011 the company has drilled multiple consecutive discoveries on the North Slope along with partner Armstrong.

    “The successive campaigns in the area have added significant new potential to what was previously viewed as a mature basin,” a Repsol representative said in a company statement.

    “Additionally Alaska has significant infrastructure which allows new resources to be developed more efficiently,” the representative added.

    Repsol holds a 25 percent working interest in the Horseshoe discovery and a 49 percent working interest in the Pikka Unit. Armstrong holds the remaining working interest and is currently the operator.

    The Horseshoe discovery extends the Nanushuk play more than 20 miles south of the existing discoveries achieved by Repsol and Armstrong in the same interval within the Pikka Unit during 2014 and 2015, where permitting for development activities are underway.

    Preliminary development concepts for Pikka anticipate first production there from 2021, with a potential rate approaching 120,000 barrels of oil per day.

    The Horseshoe-1 discovery well was drilled to a total depth of 6,000 feet and encountered more than 150 feet of net oil pay in several reservoir zones in the Nanushuk section. The Horseshoe-1A sidetrack was drilled to a total depth of 8,215 feet and encountered more than 100 feet of net oil pay in the Nanushuk interval as well.
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    Kremlin says President Putin met new Exxon CEO

    Kremlin spokesman Dmitry Peskov told reporters on Friday that President Vladimir Putin had met new Exxon Mobil chief executive officer Darren Woods on Thursday.

    Russia's energy minister, Alexander Novak, and Rosneft head Igor Sechin attended the meeting, according to the spokesman.

    "This is a very big company and it is a major investor. This is why it receives special treatment," Peskov said in reference to Exxon Mobil.

    He also said Moscow will keep working on improving the environment for all foreign investors.
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    Oil industry revives quest for deepwater reserves

    Deepwater oil drilling can be expensive, time-consuming and a hard sell to investors. But the world's top energy firms are restarting their search for giant oilfields under the ocean after a two-year lull.

    A recovery in oil prices to about $50 a barrel from a 12-year low in 2016 is reviving oil majors' appetite for risk.

    Reductions in offshore production costs mean that some projects may be able to compete with North American shale fields, executives said at an energy conference in Houston this week.

    The recovery in the industry has so far been focused on onshore shale output from the largest U.S. oilfield, the Permian Basin.

    "Our competition over the past years has evolved from 'we want to be the best in deepwater' to 'we want to compete with shale' to 'we want to beat the Permian'," Wael Sawan, Royal Dutch Shell's executive vice president for deepwater, said in an interview.

    Shell is the largest deepwater producer among the world's top publicly traded oil companies and is set to pump 900,000 barrels per day (bpd) from such projects by the end of the decade.

    Firms such as Shell and Exxon Mobil, who specialize in complex offshore exploration, slashed budgets after oil prices collapsed in 2014. Spending cuts were so drastic that the Paris-based International Energy Agency warned this week of a looming supply crunch beyond 2020.

    Shell has cut well costs by at least 50 percent, reduced logistics cost by three quarters and cut staff by nearly a third to make developments in areas such as the Gulf of Mexico and Nigeria profitable at oil prices below $40 a barrel, on par with the most profitable shale wells, Sawan said.

    Other companies such as France's Total have seen similar cost cuts.


    After cutting the cost of deepwater development, companies are also reviving the search for new resources.

    They are focusing exploration efforts on areas close to existing fields to maximize the chances of discovery and minimize costs. Many such areas are in Brazil, the Gulf of Mexico and Southeast Asia.

    "It is a very selective, sniper focus," Sawan said.

    Some firms are poised to benefit from decreased competition, lower costs of marine seismic studies and drilling rigs, and cheaper opportunities to acquire exploration licenses from governments eager to attract investment.

    "Right now, we've entered the best time in the last decade to be in the exploration business," Gregory Hebertson, who heads Murphy's western hemisphere exploration, said at the CERAWeek conference in Houston. "There is probably a two- or three-year window that we can capture the cost efficiency in the market."

    Discovering new resources is essential for oil firms to grow and to offset natural decline of fields. But deepwater exploration requires money, time, expertise - and luck.

    Some shareholders would prefer that oil firms stick to other, less risky growth options, said Federico Arisi Rota, executive vice president Americas for Italy's Eni, which operates major offshore drilling projects.

    "We must compete with alternative growth options that might be considered more attractive," such as growth through mergers and acquisitions or investing in shale oil production, Rota said.

    Pressure to limit company spending amid a slow recovery in oil prices is also putting a break on big exploration campaigns.

    "We know exploration spending is not always appreciated by investors," Kevin McLachlan, head of exploration for Total said.


    Eni is considered one of the most successful explorers after the discovery of giant gas fields in Egypt in recent years. It aims at discovering 2 to 3 billion barrels of oil and gas this year through drilling 115 offshore wells near Africa, Mexico, Norway and Asia, Rota said.

    A "more aggressive" exploration program is planned to start in 2018 in riskier and more expensive regions such as the Arctic, which offer the potential big discoveries, he said.

    Deepwater resources will be required to keep up with the growing demand, regardless of output growth in shale oil fields, Total's McLachlan said.

    Such projects are "key to our long-term plan, and we believe it is the same for the industry no matter the near-term focus on the Permian," McLachlan said, referring to the largest U.S. oilfield in west Texas.

    Hess Corp Chief Executive John Hess said the company's Liza development, off the coast of Guyana, was crucial to his company's growth potential and estimated to have as much as 2 billion barrels of oil.

    "This is one of the largest oil discoveries in the last 10 years," Hess said in an interview.

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    Gazprom delays Baltic LNG start

    Russia’s Gazprom has delayed the launch of its planned Baltic liquefied natural gas facility to 2022-2023.

    The project’s commissioning date could be revised once the project documentation is finalized, Reuters reported citing a prospectus for a Eurobond issue.

    The liquefaction and export plant will have a capacity of 10 million mt of LNG a year. Initially, the production was expected to start in 2021.

    In June last year, Gazprom and Hague-based LNG giant Shell signed a memorandum of understanding regarding the Baltic LNG project.

    Under the MoU, the two companies agreed to study the possibilities for the construction of an LNG export plant in the port of Ust-Luga in the Luga Bay of the Gulf of Finland.
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    Engie Seeks to Sell Stake in India's Biggest LNG Importer

    France’s Engie SA plans to sell its entire 10 percent holding in India’s biggest importer of liquefied natural gas.

    GDF International, an Engie unit, has written to the four Indian state-owned companies that together own half of Petronet LNG Ltd. to offer shares in proportion to their holding in the company, Petronet said in a stock-exchange filing Thursday.

    “It is mandatory for GDF to offer its holding to other founders as per the shareholders agreement,” R.K. Garg, finance director of Petronet LNG, said in a phone interview. “Only if the other founders don’t buy, GDF can sell it to anyone it wishes.”

    Explorer Oil and Natural Gas Corp., refiners Bharat Petroleum Corp. and Indian Oil Corp., and gas distributor GAIL India Ltd. form the founder group, with a 12.5 percent stake each in Petronet. If any of the founders buy the stake, Petronet, which operates as a joint venture, could become a wholly government-owned company that would reduce its flexibility to take independent decisions.

    The founders may not buy the stake, said A.K. Srinivasan, director finance at ONGC.

    “It is not necessary for us to buy,” he said. “The structure has to be maintained otherwise government approval is required.”

    ADB Stake

    In 2014, Asian Development Bank had sold 39 million shares of Petronet LNG. It had first offered these to the four founders, who chose not to buy the shares. It eventually sold its 5.2 percent stake in the open market.

    Engie holds 75 million shares in Petronet valued at about 29 billion rupees ($434 million) at current market prices. Petronet rose 0.3 percent at 387.55 rupees as of 2:47 p.m. after falling as much as 2.2 percent following the announcement.

    “I’m not sure they can sell a 10 percent stake easily in the market,” said Sabri Hazarika, a Mumbai-based analyst at Phillipcapital India Pvt. “Some other strategic investors can come in like companies from Qatar or the UAE.”

    Subir Purkayastha, director finance of GAIL India, A.K. Sharma, the finance head of Indian Oil and P. Balasubramanian, director finance at BPCL, couldn’t be reached for comment on their mobile phones.
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    Alternative Energy

    Australia floats $1.5 billion hydro upgrade to help plug power gap

    The Australian government said on Thursday it may spend up to A$2 billion ($1.5 billion) to expand a huge hydro power scheme to help solve an energy crisis, although the main owners of the dam have yet to be consulted.

    The idea was floated by Prime Minister Malcolm Turnbull, the latest in a flurry of announcements over the past week as the country looks to plug a gap in power and gas supplies that has already led to blackouts and outages across the eastern half of the country.

    Australia is on track to become the world's largest exporter of liquefied natural gas (LNG), yet its energy market operator has warned of a domestic gas crunch from 2019 that could trigger industry supply cuts and broad power outages.

    The 2,000 megawatt expansion of the Snowy Hydro scheme could power the equivalent of 500,000 homes and meet demand in peak periods in the eastern states, Energy Minister Josh Frydenberg told the Australian Broadcasting Corp. on Thursday.

    "The cost will run into the billions of dollars but the Prime Minister has made very clear that we will make all steps necessary to ensure energy security," Frydenberg said.

    The plan so far is just for a feasibility study to be completed by the end of this year.

    The announcement was made without consulting the biggest shareholders in Snowy Hydro, the state governments of Victoria and New South Wales, and scientists said it could damage the sensitive environment around Australia's highest mountain.

    "There's no detail. We have the Prime Minister who's come out and made some pronouncement without actually thinking through how much it's going to cost, what does that mean for consumers, when it'll actually be able to be delivered," Victoria's energy minister, Lily D'Ambrosio, said on local radio, adding that she heard about the plan on the morning news.

    New South Wales energy minister Don Harwin said he looked forward to seeing the result of the feasibility study

    Industry experts said boosting hydropower storage would be an important long-term addition to power capacity, but would not meet immediate needs for more supply.

    "The thing to stress is you need to plug a gap between now and the next five years," said Gero Farruggio, managing director of Sustainable Energy Research Analytics.

    He said the government could boost energy storage within a year for the same A$2 billion by subsidizing installation of batteries in just a quarter of the Australian homes that have rooftop solar.

    Victoria and neighboring South Australia, which relies on wind and solar for 40 percent of its power, are seen at risk of blackouts next summer due to the closure of a 1,600 MW coal-fired power station this month.

    South Australia suffered a state-wide blackout last September, which paralyzed some industries for up to two weeks.
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    Is the lithium bubble about to burst?

    After rising aggressively, some would argue that lithium prices have already peaked.

    Reuters quotes Paul Robinson, director at consultancy CRU Group saying that prices have little upside because demand growth has been met with aggressive supply build up, similar to rare earths and vanadium in past cycles. Even though demand is projected to soar 60 percent to 300,000 metric tons of lithium carbonate equivalent (LCE) annually by 2020, the newspaper quotes a National Bank Financial report saying new players could flood the market.

    Strong Demand is Company, 60 percent Growth is a Crowd

     “It’s crowded, no doubt about it, and it will get culled,” said Jon Hykawy, president of Stormcrow Capital, calling lithium, the “latest bubble sector.”

    An indication of extent to which lithium fever has gripped investors and junior miners is illustrated in a Bloomberg article which reports that in the wake of President Mauricio Macri’s decision to remove currency and capital controls and taxes introduced by his predecessors, about 40 foreign companies began to consider opportunities in Argentina’s mining industry. More than half of those planning to mine lithium.

    The country may be about to flood the market with lithium,
    the newspaper reports, and while not all the projects are likely to go ahead, if they did, output would reach 165,000 tons/yr or about 45 percent of predicted global supply by 2021, according to government projections. Currently global supply is just 185,000 metric tons, illustrating the rate at which demand is expected to rise.

    Much of the enthusiasm for investment in more lithium production is fueled by a belief electric vehicle battery demand is about to take off.

    Taken in addition to new projects being planned in Chile, the U.S., Australia, and elsewhere, a surge of new supply could potentially lead to a collapse in prices.

    While lower lithium prices would be good for battery costs, too much of a fall would be bad for the industry. What it needs is stability to encourage responsible and well-funded investment for the long term, not boom and bust

    Attached Files
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    China's biggest nuclear power plant goes online

    Yangjiang nuclear power plant, China's biggest nuclear power plant located in southeastern Guangdong province, was put into operation on March 15, according to its operator China General Nuclear Power Corp (CGN).

    With construction beginning in November 2012, Unit 4 of the Yangjiang nuclear power plant, has had a good safety record, said CGN, which is the country's biggest nuclear operator with 19 nuclear power units in operation and an installed capacity of 20.38 GW at the end of 2016.

    The grid connection of Yangjiang's Unit 4 brings its total number of operational power reactors in operation to 20, with a combined installed capacity of more than 21.46 GW, said the company.

    Six units are planned for the Yangjiang plant, with Unit 1 entering commercial operation in March 2014, Unit 2 and Unit 3 in June 2015 and January 2016, respectively. And all six reactors will be put into operation by 2019, said the company.

    CGN's total annual nuclear on-grid power generation was roughly 115.58 GWh in 2016, a year-on-year increase of 30.8%, which is equivalent to a reduction in coal consumption of 37 million tonnes and carbon dioxide emissions of 90 million tonnes and sulfur dioxide emissions of 880,000 tonnes, it said.

    After the Fukushima disaster, nuclear power unit construction was suspended in China and all nuclear plants under planning or construction were reviewed.

    China's nuclear energy developers will be commissioning many more reactors during the 13th Five-Year Plan (2016-20) as nuclear power is a key source of clean energy along with hydropower.

    Installed nuclear capacity already more than doubled to 27.17 GW in the 12th Five-Year Plan (2011-15) and should double again by 2020 to 58 GW.
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    Greenland closer to building world’s fifth-largest uranium mine

    Greenland may soon start building the world’s fifth-largest uranium mine and second-biggest rare earths operation, which could fuel independence dreams in the island, an “autonomous administrative division” within Denmark since 2009.

    The proposed open pit mine in the southern town of Kvanefjeld is expected to process over 100 million tonnes of ore in the coming decades, helping Greenland to diversified its economy. According to Danish Radio, it would also alleviate the island’s dependence on a locked Danish subsidy of 3.2 billion DKK (about $500 million), which constitutes about half of its budget.

    The proposed uranium-rare earths mine could alleviate the island’s dependence on a locked Danish subsidy of 3.2 billion DKK (about $500 million), which constitutes about half of its budget.

    But Greenland Minerals and Energy’s (ASX:GGG) project, which would have an annual processing capacity of 3 million tonnes of ore a year and employ at least 325 locals, is facing opposition from those who don’t want to see major landscape and environmental changes.

    For a start, the proposed operation would dispose of its mining waste, consisting of crushed ore, water and chemicals used for extraction, in a nearby lake. Since that lake is not big enough, the company plans to build two extra dams to help contain the waste. Based on the project’s description, nearly 21,000 tonnes of chemicals will be used each year to extract the sought-after resources.

    Kvanefjeld’s shutdown period is considered by many as too long (it's expected to take another six years) and, after the final closure, it will be filled with rainwater, CHP Post Online reports.

    There is also the common argument raised against uranium mines, this project in particular, that radioactive dust could potentially fall on neighbouring settlements and farmland.

    But the mine, with an expected lifespan of about 37 years and the potential to hire around 800 people, will also be a contributor to the new global green economy, the company says. This, as 80% of the commercial deposits in Kvanefjeld are rare earth minerals, commonly used in wind turbines, hybrid cars and lasers, while uranium accounts for only 10%.

    Kvanefjeld is just one of several mining projects popping up in Greenland since 2013, when the parliament voted to remove the ban on uranium mining, opening the door to that project and many others. In fact, based on official data, there are currently 56 active licences to explore for gold, rubies, diamonds, nickel, copper and other minerals in the island.

    Just in January, Australian Ironbark Zinc Limited (ASX:IBG) was given the green light to begin construction of a zinc and lead mine on the northern coast.
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    Australia okays Mulga Rock uranium mine

    Western Australia may soon have a new uranium mine, after the last environmental hurdle was cleared by Vimy Resources to build its Mulga Rock uranium mine.

    Josh Frydenberg, Australia's minister of environment and energy, approved the development subject to conditions outlined by the Environmental Protection Agency (EPA), Perth-based Vimy announced on March 6. Four days later the company said it has started initial construction, and will expedite developing the project further once the final investment decision is made.

    "This is the final environmental approval required before work can commence," said Vimy chairman Cheryl Edwardes. "This approval has been more than three years in the making and has involved considerable effort on the part of all those involved."

    The process began in July 2013 when Vimy launched an application for the project. In December Western Australia's environment minister approved the mine, with 14 conditions. They include management plans to minimize impacts on flora and fauna, soil, groundwater and Aboriginal heritage sites. The EPA also concluded that potential radiation exposure is within acceptable limits, according to World Nuclear News.

    Located 240 km northeast of Kalgoorlie, in the Great Victoria Desert, the mine would produce 1,360 tonnes of uranium oxide (U3O8) per annum, according to a 2015 prefeasibility study. By comparison, Australia's Olympic Dam mine, the largest uranium deposit in the world, produces 4,500 tonnes of U3O8 per year.

    Mulga Rock has 76.8 million pounds of indicated and inferred uranium throughout four deposits, which will be open-pit mined for an expected life of 17 years. Cobalt, copper, nickel and zinc are also expected to be extracted, through a central processing plant. According to Vimy, Mulga Rock is the third largest undeveloped uranium deposit in Australia.
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    Uralkali sees potash demand picking up after 2016 earnings slump

    The logo of Russian potash producer Uralkali is pictured at the company's stand during the St. Petersburg International Economic Forum 2016 (SPIEF 2016) in St. Petersburg, Russia, June 16, 2016. REUTERS/Sergei Karpukhin

    Russia's Uralkali, the world's largest potash producer, said its core earnings fell 38 percent in 2016 as prices of the crop nutrient tumbled and sales volumes shrank.

    Uralkali, along with other potash producers, has been hit by strong competition and low prices for agricultural commodities, but the company said on Monday that it expects total global potash demand to rise by 1-2 million tonnes this year to 62 million to 63 million tonnes, driven by China.

    Last year the world's top potash importers - India and China - delayed signing new purchase contracts until the end of the second quarter and start of the third quarter, putting downward pressure on the global market.

    "Softening of the key markets, along with a severe export potash price decline resulted in a weaker performance in 2016," Uralkali said in a statement.

    It reported core earnings, or EBITDA, of $1.2 billion for 2016, and said revenues fell 27 percent to $2.3 billion. Its net profit, however, jumped to $1.4 billion from $184 million a year earlier due to a foreign exchange gain and fair value revaluation of swaps, the company said.

    Uralkali forecast China would buy between 14.8 million and 15 million tonnes of potash this year while India would purchase 3.9 million–4.2 million tonnes.

    Lower potash prices and carry-over stocks could lead to higher demand for Chinese imports this year, Uralkali said.

    Expectations for a good monsoon season and also low carry-over stocks are expected to support India's import demand, but India's potash subsidy reduction may be a challenge for demand growth, it said.

    Shares of Uralkali and its global peers rose last week after Belarusian President Alexander Lukashenko said he was ready for a mutually beneficial compromise in cooperation with Uralkali.

    Uralkali quit a trading alliance with Belarusian potash producer Belaruskali in 2013, intensifying competition in the global market. Lukashenko has said several times since then that he was ready to consider resuming cooperation.

    "We have always been and remain committed to constructive relations with Belarus and Belaruskali, but we have not been at the meeting (with Lukashenko) and cannot comment on its results," Uralkali's Chief Executive Dmitry Osipov told a conference call for analysts.

    Uralkali expects its 2017 capital expenditures to be flat at around $320 million and plans to refinance up to $1.4 billion of its debt, it told the call.
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    Precious Metals

    Chile’s Supreme Court casts shadow over Barrick’s plans to restart Pascua-Lama

    Plans by Barrick Gold to revive its Pascua Lama gold, silver and copper project straddling the border between Chile and Argentina may once again be postponed after Chile’s Supreme Court revoked this week a temporary closure permit granted by the country’s mining regulator Sernageomin in 2015.

    Such decision sought to relax certain requirements for Barrick to obtain a new environmental licence for the project, which the top court qualified as an irresponsible measure.

    “It authorizes the temporary closure of Pascua-Lama mining operations, without having the necessary measures in place to ensure the physical and chemical stability of the water sources affected by the project,” the judge said according to local paper Diario Financiero (in Spanish). “[Sernageomin also failed to previously determine] the extent of the damage caused by the project through its innumerable environmental violations,” it added.

    The giant gold, silver and copper project has been shut since 2013, when a court ordered Barrick to halt construction over environmental concerns. Later that year, the firm officially shelved the project.

    The regulator will have now to issue a new closure plan that includes comments from other government offices including the environmental watchdog (SMA), which is expected to rule on two pending cases against the Canadian miner by mid-year.

    The giant project in the Andes has been shuttered since 2013, when a court ordered the company to halt construction over environmental concerns. Later that year, Barrick shelved the project citing massive cost overruns and nose-diving metal prices.

    Ahead with the Lama portion

    When gold prices began their long-awaited recovery last year, Barrick announced the beginning of a “drastic revision” of Pascua-Lama. A few months later, it agreed to pay $140 million to resolve a US class-action lawsuit that accused the company of distorting facts related to the project.

    In September, the world’s No.1 gold producer by market value appointed a new executive, George Bee, to lead the development of the Argentine side of the mothballed project (the Lama portion).

    The company said at the time it would develop a “modest, scalable starter project” on that side using underground mining methods. If successful, the miner said it could use cash flow from Lama to fund additional development on both sides of the border over time.

    A few months later, it decided to strengthen its position in Latin America by hiring a new director for the region — Pablo Marcet — with decades of mining experience in the geographic area.

    Argentina has been an enthusiastic supporter of the project – while only around a fifth of the deposit is located in that country, many of the above-ground facilities will be built on that side of the border.

    If it ever comes into production, Pascua-Lama would generate about 800,000 to 850,000 ounces of gold and 35 million ounces of silver per year in the first full five years of its 25-year life.
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    India gold recycling plan fails to tempt households

    India's ambitious plan to recycle thousands of tonnes of gold lying idle in temples and households looks to have foundered on concerns over high costs and slight returns, in a blow to government hopes of cutting imports of the metal.

    After 16 months, temples and households have turned over just seven tonnes of gold out of the 24,000 tonnes believed to be in private hands, two industry sources and a government official said, with almost all the gold coming from temples.

    Families that hold about 80 percent of the idle gold have largely shunned the scheme, with some four dozen government-approved centers that opened to test purity still to process a single gram of household gold, said Harshad Ajmera, president of the Indian Association of Hallmarking Centres.

    "You hardly earn anything but you have to do so many things to deposit gold under the scheme. Why should I take all this pain?" said 54-year-old clerk Ganpat Shelke, who considered depositing 50 grams of gold.

    The struggling scheme was launched with much fanfare by Prime Minister Narendra Modi in November 2015, with India seeking ways to stem the spending of billions of dollars on a non-essential commodity that accounted for 27 percent of its trade deficit in the year to March, 2016.

    The country is the world's second-biggest gold importer behind China, buying about 800 tonnes a year for wedding gifts, religious donations and as an investment. (For a graphic on India's gold market click

    The plan was for holders of idle gold to lodge it with banks in return for interest and cash at redemption. The government would melt the gold and auction or rent it to jewelers, reducing the need for imports.

    But the scheme logistics mean the owners of the gold must shoulder the cost of testing its purity and melting it down, while the interest rate on offer of just 2.5 percent compares with 7-8 percent that banks offer for cash deposit rates.

    "If a consumer wants to have 25 grams jewelry converted the cost of converting and purity testing takes 3-4 percent of total value away," said Shekhar Bhandari, executive vice-president of Kotak Mahindra Bank.


    Even when holders of the precious metal want to take part in the scheme they have run into hurdles.

    "I visited four banks several times to deposit gold but they could not accept it," said Kushal Chatterjee, a businessmen from the eastern city of Kolkata. "They said they did not know the process."

    At least five bank branches visited by Reuters this week in Mumbai said they could not accept gold under the scheme as they had not been given directions by their head offices.

    A senior official with the Indian Banks' Association said the current scheme offered banks little or no profit.

    "There should be an incentive for banks," said the official, who declined to be named when commenting on a sensitive issue.

    Banks are also concerned that provisions allowing gold to be deposited for up to 15 years will raise currency and liquidity risks, the India Gold Policy Centre in a recent report.

    A finance ministry spokesperson declined to comment on the gold program.

    Gold refiners, who more than doubled capacity in recent years in anticipation of higher scrap supplies, are operating at well below capacity, said James Jose, secretary of the Association of Gold Refineries and Mints.

    "Except for the banks, all other stakeholders like purity centers, refiners are ready, but they are helpless without banks' participation," he said.

    The India Bullion and Jewellers Association urged the government to revisit the scheme, clearing doubts for consumers and putting pressure on banks to participate.

    "Otherwise Indian imports will not fall," said Association secretary Surendra Mehta.

    Attached Files
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    Diamond analyst Zimnisky sees buoyant Q1 diamond demand

    First-quarter demand for rough diamonds has increased over the preceding three-month period, and also relative to a year earlier, as a comparatively mediocre Christmas season 2016 was offset by strong 2017 Chinese New Year sales that have driven seasonal restocking demand.

    Most, but not all, Indian cutters have also started to show signs of recovery after the initial shock of the demonetisation in the country last year, independent diamond analyst Paul Zimnisky said in his latest market commentary.

    According to the New York-based analyst most miners had last year liquidated excess rough inventories which they accumulated in 2015, and have since ramped-up production into 2017, resuming more normal “pre-indigestion” output levels of three years ago.

    “Demand growth this year is likely to come from a post-election US market, where employment is stable and the stock market is at an all-time-high, driving positive sentiment that should translate into discretionary spending,” the analyst said, noting that the US is the largest diamond jewellery market in the world, representing 45% of global demand.

    China, the world’s second largest jewellery market, at 16% of global demand, should be driven by continued government stimulus and an ever-expanding middle-class consumer. India, representing 8% of the market, is forecast to show improvement year-over-year, as domestic demand for jewellery returns as the demonetisation impact is digested, especially in the second half of the year.

    Near-to-medium term risks to the industry are primarily tied to macro factors in the industry’s most important markets. For instance: the US economy struggling to absorb tighter monetary policy; Chinese economic deleveraging; a longer-than-expected recovery in the Indian market post-demonetisation; signs of further disintegration of the Euro-zone; and protectionist pressure on global trade, the analyst cautioned.

    Year-to-date, rough diamond prices are up 0.9%, and polished prices are down 4.1%. In full-year 2016, rough and polished were both up, 13.2% and 2.1%, respectively.

    In a statement to Mining Weekly Online, Zimnisky noted that the Zimnisky Rough Diamond Index is up 1.27% year to date (through the first week of March). The internal polished diamond index is down 1.3%.

    "Rough has been driven by a 4% to 5% price increase by De Beers in January in diamond sizes greater-than 0.75 ct. In February, there were small single-digit-percentage increases in diamonds 2 ct to 4 ct by both De Beers and Alrosa. Also, there are indications of demand picking up in smaller, lower-quality goods, the stones that have been affected by the demonetisation – parcels are now selling, but no price increases yet," he said.


    Early-2016 diamond manufacturer restocking demand, after a stronger than expected 2015 holiday season, combined with De Beers' and ALROSA's production curtailment, alleviated most of the industry-wide inventory indigestion by the second half of 2016.

    However, just as diamond supply/demand dynamics were beginning to normalise, India’s surprise demonetisation in November threw another blow at the already recovering industry. Over 90% of diamonds, by volume, are cut in India, a business that is heavily reliant on cash transactions. Indiahas also become the third largest end-consumer of diamond jewellery in the world, so the restriction also impacted domestic jewellery consumption as most Indian consumers are accustom to cash purchases, Zimnisky stated.

    The implication has primarily been felt on lower-quality rough diamonds, those that sell for less than $100/ct, produced at mines like Rio Tinto’s Argyle, Dominion’s Ekati, Petra’s Finsch, Alrosa’s Aikhal, and alluvial operationsaround the world.

    “Demand for these stones are typically driven by the hundreds of small, independent, cash-reliant Indianmanufactures, which buy on the secondary market; a lot of stones in this category eventually end up being purchased domestically by Indian jewellery consumers,” he explained.

    The larger manufacturers have been much less affected by the demonetisation, as they have a global presence, more structured businesses, adhere to more formal accounting measures, and are not reliant on cash for their Indianbusiness.

    Most of the smaller and medium sized Indian business that will survive are expected to have integrated more-transparent, digital payment processes by the second half of the year. The result will be a pickup in demand for lower priced rough, as these manufacturers bid to restock, competing to fill a pending shortage of smaller, lower-quality polished in the market that will be felt around the second quarter, the analyst noted.
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    Base Metals

    Rusal's Q4 core earnings jump 35 pct, beat forecasts

    Rusal's Q4 core earnings jump 35 pct, beat forecasts

    Russian aluminium giant Rusal said on Friday its fourth-quarter core earnings jumped by more than a third on recovery in metal prices, and forecast the market to remain in good shape this year.

    Quarterly earnings before interest tax and amortisation (EBITDA) rose 35 percent from a year earlier to $412 million, beating analyst expectations for a 31 percent rise to $400 million.

    Hong Kong-listed Rusal was overtaken by China's Hongqiao as the world's top aluminium producer several years ago as it reduced its production capacity due to a fall in prices for aluminium, used in transport and packaging.

    "We saw improved market conditions in the second half of the year," CEO Vladislav Soloviev said in a statement.

    "Solid results were down to our dedication to cost management, production discipline, and a stronger focus on innovation and value added products development."

    Full-year aluminium production edged up by 1.1 percent to 3.685 million tonnes, while costs per tonne fell 4.7 percent to $1,344 in the fourth quarter.

    Rusal said it expects the aluminium market to remain in "good shape" in 2017, with demand growing by 5 percent and a global market deficit widening to 1.1 million tonnes.

    It sees China's plans to constrict production next winter and help improve air quality tightening supply by around 1.2 million tonnes, while an anti-dumping case in the United States is likely to curb exports of semi-manufactured shapes of metal.

    Aluminium prices rose 12 percent in London since the start of 2017, to $1900 on Friday, on expectations of less supply from China.

    "In 2017, Chinese supply will be under pressure by significant cost inflation, environmental regulations as well as continuation of supply side reform," Chief Financial Officer Alexandra Bouriko told reporters on a conference call.

    The company sees demand for global aluminium growing by 5 percent to 62.7 million tonnes this year, driven by 6.7 percent demand growth in China to 33.5 million tonnes.

    Global aluminium supply will increase by 4.3 percent to 61.6 million tonnes, tempered by slower output growth in China, which is still seen up by 6 percent to 34.3 million tonnes.

    Russia's VTB said rising prices and a recovery in volumes "might drive 1Q17F EBITDA closer to $500 million."

    The company also said it had placed the first 1 billion yuan ($145 million) tranche of a Chinese yuan-denominated bond, known as a Panda bond, with a 5.5 percent per year coupon rate.
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    Strikers at BHP's Escondida mine in Chile block restart attempt at port

    Striking workers at BHP Billiton's Escondida copper mine in Chile, the world's largest, are blocking attempts by the company to renew operations at a key port nearby, BHP and an umbrella union said on Thursday, as the stoppage enters its sixth week.

    The company said on Tuesday it was gradually resuming operations at Escondida after the 2,500-member Escondida No. 1 Union, which has been on strike since Feb. 9, turned down three offers to return to the negotiating table.

    The company would at first restart operations unrelated to the negotiations, it said, before beginning some maintenance operations, and finally resuming copper production, which has been halted since workers walked off.

    But the striking workers blocked access to Coloso, a BHP-controlled port near the city of Antofagasta used to export copper, when replacement workers tried to enter it on Wednesday. The blockade continued on Thursday.

    "We roundly reject the various actions that the Escondida mine is taking to break the unity demonstrated by the members of the union," Gustavo Tapia, president of Chile's FMC mining umbrella union, said in a statement.

    The president of Escondida, a BHP representative, told a local newspaper that the company would insist on accessing the port, and later the mine itself, which is 170 miles southeast in Chile's high desert.

    He said if the company could not restart all of its operations, a partial resumption was possible.

    Under Chilean law, BHP was allowed to hire temporary workers 15 days after the strike started but said it would wait for 30 days to show its commitment to dialogue. Thursday marked day 36 of the strike.

    The strike at Escondida, as well as stoppages at Freeport-McMoran Inc's Grasberg mine in Indonesia and its Cerro Verde mine in Peru have pushed up global copper prices amid supply concerns.

    The union repeatedly has said it will not return to the table until BHP agrees not to trim benefits in the existing contract, not to make shift patterns more taxing, and to offer the same benefits to new workers as those already at the mine.

    Attached Files
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    BHP has lost $700 mln so far at Escondida

    World’s largest miner BHP Billiton has lost about $712 million due to an already 35-day-long strike at its Escondida copper mine in Chile, the world’s largest, but the company is about to put an end to the stoppage.

    A previous labour strike in 2006 ended after 25 days and the current wage deal was signed four years ago when copper was trading around $3.40 a pound.

    Escondida, located in the copper-rich Antofagasta region, in northern Chile, supports just over 10,000 full-time jobs and it is forecast to produce almost 1.1 million tonnes this year, according to BHP figures. That is equivalent to about 5% of the world’s total copper production.

    While majority-owned and operated by BHP, Rio Tinto and Japanese companies such as Mitsubishi Corp also hold stakes in the mine.
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    Russia's Nornickel 2016 core earnings fall less than expected

    Russia's Nornickel 2016 core earnings fall less than expected

    Russia's Norilsk Nickel reported a 9 percent drop in 2016 core earnings on Wednesday due to lower metals prices, but was cautiously optimistic about the nickel market for this year, saying a shortfall in supply could increase.

    Nornickel, the world's second-largest nickel producer after Brazilian miner Vale SA and the world's top palladium producer, has also been affected by a one-off fall in production due to a revamp of its downstream operations.

    "The last year marked as very challenging for the commodity industry as many metal prices touched their multi-year lows, while further exhibiting extreme volatility alongside exchange rates," Chief Executive Vladimir Potanin said in a statement.

    Lower metal prices saw 2016 earnings before interest, taxation, depreciation and amortisation (EBITDA) fall to $3.9 billion, although that beat analysts' average estimate of $3.7 billion in a Reuters poll.

    Potanin said he expected Nornickel's dividend for 2016 to be around 60 percent of EBITDA. The company has already paid a 9-month dividend of $1.2 billion.

    Norilsk, part-owned by Potanin and aluminium producer Rusal , said its 2016 net profit rose 47 percent to $2.5 billion mainly due to the appreciation of the rouble currency, while revenue fell 3 percent to $8.3 billion.

    For this year, the company sees the deficit in the global nickel market widening to 100,000 tonnes from 10,000 tonnes in 2016, although uncertainties include whether Indonesia resumes exports of unprocessed ore and whether demand from China softens.

    Nornickel said it expected the deficit in the palladium market to widen to 1 million troy ounces from 310,000 ounces in 2016 due to industrial demand growth and stable supply.

    The miner forecast its capital expenditure would rise to $2 billion in 2017 from $1.7 billion in 2016.
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    Japan Q2 aluminium premium talks progress as some players revise targets

    Japan's second quarter aluminium premium negotiations were progressing as a handful of sellers and buyers have indicated they were revising their target levels, market sources said Wednesday.

    Global producers Rusal, Rio Tinto and South32 have offered at $135/mt plus LME cash CIF Japan for Q2 contract premiums, up 42% from $95/mt plus LME cash CIF for Q1.

    Japanese buyers initially said they were eyeing $110-$120/mt CIF.

    However one Japanese buyer has since told producers $120-$125/mt plus LME cash CIF Japan could be considered, several Japanese buyers said. That buyer could not reached for comment.

    One producer has also suggested revising his $135/mt CIF offer, said a Japanese trader. None of the producers could be reached for comment.

    Producers told Japanese buyers last week they were suggesting a 42% hike in Q2 premiums from Q1 as strong US demand was impacting Asia, and metal supplies in Asia were moving to the US.

    Platts US Transaction premiums have remained at a multi-month high of 10 cents/lb ($220/mt) delivered Midwest since February 13.

    This equates to $120-$160/mt CIF Asia, factoring in Asia-US bulk freight at $30-$50/mt and inland US freight at $30-$50/mt, sources said earlier.

    "But premiums in Asia are capped at $110/mt CIF or slightly above, not going higher, because there are cancelled LME ingot warrants without final buyers," said one Japanese trader.

    Aluminium warrants at South Korean LME warehouses fell to 468,425 mt on March 13 from 534,950 mt on February 28, according to LME data. The warrants were cancelled for planned sales to the US, market sources said.

    But it seems not all 96,525 mt cancelled warrant supplies were shipped to the US, the sources said.

    T-bars and sows, widely used among US consumers, are moving to the US from Asia but some ingot supplies could not be sold to the US. "There is some Good Western and Indian ingot available in Asia," the Japanese trader said.

    An international trader has indicated possible Q2 sell interest at $120/mt plus LME cash CIF Japan, but has not made firm offers with shipping, volume and other terms specified, Japanese buyers said.

    The trader declined comment.
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    Indonesia's Amman Mineral commits to $9.2 billion copper expansion: government official

    Indonesia's Amman Mineral commits to $9.2 billion copper expansion: government official

    Indonesia's Amman Mineral Nusa Tenggara (AMNT) has committed to invest $9.2 billion to expand its mining business, including the construction of a new copper smelter near its mine in Sumbawa, West Nusa Tenggara, a mining ministry official told Reuters on Wednesday.

    AMNT is a unit of PT Medco Energi Internasional Tbk, which bought the Batu Hijau mine from Newmont Mining Corp last year.

    Bambang Gatot, director general of coal and minerals at the mining ministry, said $1 billion of the investment would be used to build a smelter. "It will start this year and to be completed by 2021," he said.

    Amman could not immediately be reached for comment.

    Attached Files
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    Cerro Verde strike may end next week if Peru rules against it

    A strike at Peru's top copper mine, Cerro Verde, may end next week if the labor ministry declares it illegal, the head of the union said on Tuesday after negotiations with owner Freeport-McMoRan Inc ended without an agreement on labor demands.

    Workers began the strike on Friday to demand better family health benefits and a bigger share of the mine's profits, but the ministry has issued a preliminary decision against the stoppage that the union is appealing, Cerro Verde Union President Zenon Mujica said on a phone call.

    The appeals process will likely take about a week and workers will have to go back to work if the ministry hands down a final ruling against the strike, said Mujica.

    Freeport-McMoRan did not immediately respond to requests for comment.

    Production at the mine, which churned out nearly 500,000 tonnes of copper last year, has fallen by 50 percent since some 1,300 of about 1,650 workers joined the strike, Mujica said.

    News of a possible return to normal operations at Cerro Verde could ease pressure on global copper prices as supply has been disrupted by a labor stoppage at BHP Billiton's Escondida mine in Chile and a dispute over export rights at Freeport's Grasberg mine in Indonesia.

    Mujica said Cerro Verde workers will vote this week on whether to call for regionwide protests.
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    Escondida copper mine in Chile says to restart operations

    The Escondida copper mine in Chile plans to restart operations after striking workers again rejected an invitation by controlling owner BHP Billiton to return to negotiations, an executive told reporters late Tuesday.

    The world's largest copper mine will first resume work in two areas of the mine that are unrelated to the current talks, Escondida Mine President Marcelo Castillo said at a news conference in the city of Antofagasta.

    The company will then begin to do additional maintenance work, before finally re-establishing mining operations and restarting copper production.

    "We hope that in some way opportunities for dialogue come about...but with the posture that we saw yesterday (from the union) and that all of you saw yesterday, it's difficult to be able to hope for a conversation in the short term," Castillo said.

    Under Chilean law the mine was allowed to hire temporary workers 15 days after the strike started on Feb. 9, but had said it would wait for 30 days to show its commitment to dialogue. Tuesday marked day 34 of the strike.

    In response to BHP's statement late Tuesday, the union said it was taking a level-headed approach to the latest development.

    "We are calm, and we are reviewing the (company's) statements with calm," a union spokesman told Reuters.

    Copper production has been halted since the 2,500-member union went on strike. On Monday, workers rejected a company invitation to return to the table, saying the invitation did not take into account workers' pre-conditions for dialogue.

    Union demands include that BHP agrees not to trim benefits in the existing contract, that shift patterns should not be made more taxing for workers, and new workers be offered the same benefits as those already employed at the mine.

    It was the third failed attempt to restart dialogue during the strike, which has pushed global copper prices higher due to supply concerns.

    On Friday, BHP invited the union to return to negotiations, but the union rejected that invitation on the same grounds.

    Throughout the process, negotiations have been tense, with the company at times accusing the union of violence, and the replacement of workers could lead to additional confrontation.
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    Glencore sells Rosh Pinah, Perkoa to Trevali for $400m

    Glencore is to sell two zinc mine in Africa for $400m to Trevali Mining Corporation, a Canadian listed company with ambitions to become a mid-tier zinc producer.

    The transaction, however, also sees Glencore accept part payment in Trevali shares which will increase Glencore’s stake to 25% from 4% and give it two board seats. Glencore will also market the zinc produced at Trevali’s mines including the African assets.

    "If you were truly bullish on zinc and those assets, you wouldn't let them go, you wouldn't decrease your zinc exposure," Ben Davis, an analyst at Liberum said of this week's deal.

    "But maybe they see more value in the (zinc) offtake than they do in the industrial side."

    The mines in question are Glencore’s 80% interest in Rosh Pinah, a zinc mine in Namibia, and its 90% stake in the Perkoa mine located in west Africa’s in Burkina Faso. Trevali already owns zinc mines in Peru (Santander) and Canada.

    This will be Trevali’s first investment in Africa and give it production of 230,000 tonnes of contained zinc a year – a transaction it described as “transformative”.

    It said the transaction more than doubles its current production scale and placed it among the top 10 of zinc producers worldwide. “The acquisition of Rosh Pinah and Perkoa is an historic event and unique opportunity for Trevali shareholders, and sets the stage for a multi-asset, low-cost global zinc producer,” said Mark Cruise, president and CEO of Trevali.

    The terms of the deal are that of the aggregate $400m consideration, some $244m will be paid by Trevali in cash to Glencore with the remaining $156m paid by Trevali through the issue of about 175.1 million shares. Trevali will also pay Glencore $30m to repay an existing debt facility. The transaction is expected to close by July.

    Investec Securities said in a note that sale price compared favourably against its valuation for the mines which was just over $300m. It added that the transaction underlined Glencore was in high activity mode. “Glencore is mooted to become increasingly active in merger and acquisition but as this shows, it is as happy to divest (at the right price) as it is to acquire,” it said.

    “While not a big amount for Glencore, the $244m cash inflow should be on the margin a small positive for Glencore as it would further allay balance sheet concerns,” said Goldman Sachs.

    Said Daniel Mate, head of zinc marketing for Glencore: “We have been working together as partners since their first mine was built and we share the same vision for the future growth of the business through value-creating organic and inorganic growth opportunities”.

    “We are excited to form part of this unique global zinc vehicle providing pure zinc exposure across a wide geographic footprint,” Mate added.

    Rosh Pinah has been operating since 1969 and is expected to have a further 14 years of operating life. Some 19.92% of the mine is owned by Namibian empowerment companies. Perkoa has a life of mine of a further six years.
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    CME Midwest aluminium swaps rebound on rising Asian premiums, stronger demand

    Trader quotes for Midwest aluminium premium financial swaps (AUP) on the CME rose on Friday and Monday back to above 9 cents/lb for all prompt months in 2017, following a recent dip which saw bids move to below 9 cents/lb in early March.

    The rise in CME bids came after the Platts spot transaction premium sustained at the 10 cents/lb delivered Midwest despite the recent downwards pressure in financial markets which saw offers for all prompt months at below the spot premium.

    As of Monday morning, a broker report showed the forward curve was flat across 2017, with bids for Q2-Q4, 2017 at 9.20 cents/lb and offers at 9.50 cents/lb. Bids and offers for Cal18 were 9.50 cents/lb and 10 cents/lb respectively.

    "We are hearing the physical is well supported and there might be an uptick this week, which was due to a turnaround as consumers waited for the sell-off to lift," a broker said.

    But the broker added that market perception was that the forward curve was still trading at a discount to the spot market.

    Despite the Platts Midwest premium remaining unchanged for over a month, physical market participants have indicated a growing variability in physical deals with some discounting being offset by deals done at close to 11 cents/lb delivered Midwest including net-30 payment terms.

    On Friday, 20 lots/month of AUP swaps for H2 2017 traded at 9.20 cents/lb, after the same strip of contracts had traded at between 9-9.25 cents/lb on Thursday.

    But this represented a 0.45 cents/lb rise from March 7 when H2, 2017 traded at 8.75 cents/lb.

    "There are a lot more buyers in the market right now with premiums in Japan moving up," a broker said. As of Monday, the Platts Japan spot assessment was $115-$125/mt CIF Major Japanese Ports, up 23% from the end of February.

    Swap quotes for the Japanese contract on the CME (MJP) were also reported lower than spot premiums, with bids and offers over H2, 2017 at $111/mt and $115/mt respectively on Monday. This was up from bids at $108/mt and offers at $111/mt the previous week.
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    Antofagasta full year EBITDA shine on higher prices

    Higher metals prices and lower cash costs helped push full year earnings before interest, tax, depreciation and amortisation at Antofagasta up 78.7% to $1.6bn.

    Group revenue in 2016 was $3.62bn, up 12.3% higher than in 2015. The final dividend for the year is 15.3 cents a, bringing the total dividend for the year to 18.4 cents.

    Group copper production in 2017 is expected to be in the range of 685,000 - 720,000 tonnes, similar to the 709,400 tonnes produced in 2016.

    "This year has started strongly following the upturn in the last quarter of 2016, bolstered by the continued improvement in sentiment towards copper and the production problems at some of the world's largest copper mines," the company said.

    "It seems that there is now a reflationary environment and this is positive for commodities. As many continue to adjust their forecasts for China, the group is confident that consumption there will continue to grow as they support their power and infrastructure requirements."

    "The higher level of mine disruptions experienced since the beginning of the year should keep pressure on refined copper availability and support the fundamentals for copper in the months to come. As a result, the Group does not foresee copper returning to the lows of 2016."

    "In the medium term the group expects to see a steady shift from a market in balance to a slight deficit, leading to a further improvement in prices. There are wild cards of course, but these are more likely to be positive for the copper price than negative. Potential higher demand in the US under the new administration is one, increased disruptions to supply is another."
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    Philippines' Duterte links miners to destabilisation plot, wants mining ban

    Philippine President Rodrigo Duterte on Monday accused some miners of funding efforts to destabilise his government as he talked about a possible plan to impose a ban on mining given the environmental damage producers have caused.

    "I know that some of you are giving funding to the other side to destabilize me," Duterte told a media briefing, referring to companies in the mining sector he did not name.

    Duterte, who has previously said the Southeast Asian nation can survive without a mining sector, added at the Monday briefing that it may be "worthwhile" for Environment Secretary Regina Lopez to implement a ban on mining.

    Duterte said he's looking at a total mining ban "and then we'll talk."

    There is currently no ban on mining in the Philippines, the world's top nickel ore supplier.

    Lopez last month ordered the closure of 23 of the country's 41 mines to protect watersheds. She also suspended another five for environmental infringements.

    Duterte said he wants to meet with local miners so they can explain to him what led to the destruction of the environment in areas where they operate.

    The firebrand leader has said the government can live without an estimated 70 billion Philippine pesos ($1.39 billion) a year in revenue from the mining sector.

    "You think you can live with it (environmental degradation) because of the 70 billion (pesos) or because they contributed to campaign funds? Not me," Duterte said, while showing pictures of the environmental harm mining has caused.
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    Iran says inks $1 billion deal to develop Mehdiabad zinc mine

    Iran has signed a $1 billion deal with private investors to develop Mehdiabad, one of the world's largest zinc mines, which it expects will go on stream in the next four years and produce 800,000 tonnes of zinc concentrate per year.

    The Iranian Mines and Mining Industries Development and Renovation Organisation (IMIDRO) said in a weekend statement it signed the deal with a consortium of six private companies, led by Iran's Mobin Mining and Construction Company.

    IMIDRO, a state-owned mines and metals holding company, said Mobin was also talking to international mining firms in Switzerland and Spain about joint ventures to develop the Mehdiabad mine, located in Iran's Yazd Province.

    Iran has struggled to lure foreign investors since the lifting of international sanctions against it following a historic deal signed in 2015 with six world powers in return for curbing its nuclear programme.

    As recently as January, the United States voted to extend its sanctions against Tehran, the latest of several such post-nuclear deal moves that have deterred western banks from financing trade or investment in Iran.

    Mehdiabad, a world class zinc, lead and silver deposit, has 154 million tonnes of proven reserves, according to IMIDRO, which expects the concentrate reserves to reach up to 700 million tonnes once exploration is completed.

    The private consortium will run the mine for 25 years, though their contract could be extended.

    On top of the targeted 800,000 tonnes of zinc concentrate, Mehdiabad is also expected to produce 80,000 tonnes of lead and silver concentrate a year, IMIDRO said.

    According to industry data, 13.2 million tonnes of ore with zinc content was mined globally last year.

    The Mehdiabad project has been under consideration since the 1990s but has faced multiple delays.
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    Vale to mothball century-old Ontario nickel mine

    Living past 100 is no mean feat for any mine, but for the Stobie operation in Sudbury, Ontario, the end finally came on Friday.

    The nickel mine in Sudbury began as an open-pit mine in 1890, then started underground mining in 1914. Producing 375 million tonnes of copper and nickel ore over its lifetime, Stobie and neighbouring Frood mine have been the most productive mines in the prolific Sudbury Basin.

    “The low grades at Stobie are no longer economical to mine in today’s challenging price environment”: Stuart Harshaw, Vale’s vice-president of Ontario operations

    Vale said a combination of factors led to the closure decision, including metals prices, unprofitable low-quality ore, and recent seismic activity that prevented workers from mining below the 3,000-foot level. About 230 jobs could be affected.

    “This is a necessary decision but a sad one,” Stuart Harshaw, Vale’s vice-president of Ontario operations, said in a statement. “Stobie has a rich history and has been integral to our success for more than a century. However, after more than 100 years of operation, the mine is approaching the end of its natural life. The low grades at Stobie are no longer economical to mine in today’s challenging price environment.”

    However union officials are hoping that some positions could be saved, through mine employees replacing current contractors on site, as per the collective agreement, Northern Ontario Business reported. Some older miners could be offered pensions. Other employees could be reassigned to other Vale operations in Ontario – Coleman, Totten and Copper Cliff – or the South mine if Vale follows through on plans to re-open it.

    The Stobie mine is expected to be put on care and maintenance later this year. In 2013 Brazil-based Vale received a record $1.05 million fine for an accident at Stobie that took the lives of two young men. The workers were buried by a torrent of wet mud and ore on June 8, 2011.
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    Auction for Peru metals smelter draws zero bids in first auction

    No company placed a bid on Peru's nearly 100-year-old polymetallic smelter La Oroya in the first of three public auctions held on Friday, the head of the bidding committee said.

    The minimum price for the smelter and a small copper mine will be reduced by 15% from about $270-million in the second auction on March 21, said Pablo Peschiera, the head of consulting firm Dirige that is tasked with finding a new buyer.
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    BHP's Escondida approaches striking union, eyes new offer

    Chile's Escondida coppermine, the largest in the world, has invited its union to resume talks as a first step towards ending a month-long strike, it said Friday.

    The strike, which began February 9 and has lasted for 30 days, is the longest in Escondida's history. With stoppages also in place at other important copper mines worldwide, global copper prices have risen on tighter supply expectations.

    "The company is insistent in its call to the union to restart talks, in order to arrive at a deal that will allow the strike to end as soon as possible," Escondida said in a statement late Friday.

    Escondida, controlled by BHP Billiton, has spoken to the union and is preparing a new contract offer that seeks to address some of their concerns, a source with knowledge of the situation told Reuters, without giving details on the fresh offer.

    The union did not give an immediate response to Escondida's statement. Union spokesperson Carlos Allendes said earlier Friday that the company had not been in contact with the union.

    The company has the right to use temporary replacement workers, but has previously said it would not exercise that right for the first 30 days, as it seeks to keep a lid on simmering tensions.

    It said Friday it "would evaluate day by day" whether it may begin to use temporary workers. However, there were no immediate plans to do so, the source said.

    After 30 days, workers can also break from the union and individually agree to accept the company offer. But the strikers remained determined to push for a good deal, Allendes said, and were unlikely to take the bait.

    When Escondida does restart, the initial focus will be on maintenance and projects such as the construction of a desalination plant and concentrator expansion, Escondidasaid. "We are not thinking of producing from day one," said corporate affairs head Patricio Vilaplana.

    Escondida produced over one-million tonnes of copper last year, around 5% of the world's total, and economists are expecting an impact to Chile's economy in February as a result of the strike, which has meant that no copper is leaving the site.

    Contract talks collapsed after the union and company disagreed on a number of points, including the treatment of new workers, changes to shift patterns, and the level of a one-off bonus.

    Rio Tinto and Japanese companies including Mitsubishi Corp hold minority interests in the mine.
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    Copper bulls get a stocks reality check

    The world's two biggest mines, Escondida in Chile and Grasberg in Indonesia, are losing production daily due to a strike and an export ban respectively.

    But the bullish ardour has also been dampened by a surge in copper "arrivals" at LME warehouses.

    In the space of just four days, 141,625 tonnes have hit the LME storage system. Headline inventory has risen to 325,500 tonnes from 196,425 tonnes a week ago.

    The coordinated nature of this inflow suggests the bear-bull battle that raged sporadically across the London market last year has started again.

    But it is also a timely reminder that commodities markets don't just flip from bearish surplus to bullish shortfall at the flick of a switch.

    The bulk of last week's inflow of copper into LME sheds was at three locations. Singapore received 52,700 tonnes, the South Korean port of Busan 39,025 tonnes and the Taiwanese port of Kaohsiung 22,000 tonnes.

    Such heavy warranting activity normally implies a degree of premeditation.

    This isn't metal that has just happened to arrive over the course of a couple of days. Rather, it was in all probability sitting in LME-approved warehouses waiting to be warranted, a process that can now be done with the stroke of a keyboard.

    And if you're experiencing a certain sense of deja vu, that's understandable.

    There were similar heavy "surprise" inflows of copper in June, August and December last year, with the same locations featuring.

    They were just one manifestation of a big bear-big bull confrontation that raged across LME spreads, outright price and, of course, the physical market, particularly that in Asia.

    The most recent LME stocks surge has all the hallmarks of a resumption of this long-running tussle for supremacy.

    The bear has just swamped the market with metal, sending the price sliding from its lofty perch above $6,000 per tonne.

    If last year's pattern repeats itself, expect the bull to steadily chip away at those "arrivals" with cancellations followed by physical load-out.

    The reaction may already have started.

    Singapore has already seen 13,250 tonnes of copper warrants cancelled in preparation for load-out over the last five days. South Korea's Busan has seen 16,650 tonnes and Kaohsiung 9,375 tonnes.

    The merry-go-round of refined copper between China and LME good-delivery locations has just been relaunched, it seems.

    The main casualty of this shuffling of metal is visibility, any trading signal from LME stock movements being obscured by the fog of merchant warfare.


    The bear who has just dumped so much metal into the LME system, however, has served up a timely reminder to copper bulls that there is still a lot of refined copper around.

    Away from the smoke and mirrors of the LME storage system, other visible inventory has also been rising.

    Stocks of copper registered with the Shanghai Futures Exchange jumped 12,859 tonnes over the course of the last week and at 326,732 tonnes they are now 180,134 tonnes higher than at the start of January.

    Metal is also hitting the COMEX warehouse network in the United States on a daily basis. The headline figure, adjusted to metric tonnes, stands at 120,401 tonnes, up 40,288 tonnes so far this year.

    There are, quite evidently, plenty of surplus units floating around. Most of them are in the Asian region, but the LME system has also seen inflow at both Rotterdam and the British port of Hull, while the COMEX system reflects the state of play only in the U.S. market.

    This might seem to undermine the newly minted bull consensus among analysts that copper is heading for a year of supply shortfall.
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    Strike halts output at top Peru copper mine Cerro Verde: union

    Workers at Freeport-McMoRan's Cerro Verde started an indefinite strike on Friday that halted output of about 40,000 tonnes per month at Peru's top copper mine, a union official said on Friday.

    The 1,300 unionized workers at Cerro Verde downed tools at 7:30 a.m. (12:30 GMT), said union leader Cesar Fernandez.

    According to Fernandez, the company plans to mitigate the effects of the strike using non-unionized workers. He said 300 or 400 employees at the mine do not belong to the union and do not normally work in areas key to production.

    Cerro Verde and Freeport representatives did not immediately respond to requests for comment.

    Three-month copper on the London Metal Exchange was up 1.2 percent at $5,760 a tonne. Prices had fallen to $5,652, their lowest since Jan. 10, in the previous session.

    The Cerro Verde union initially scheduled a five-day strike but voted this week to stop work indefinitely to push for family health benefits and a bigger share of the mine's profits, Fernandez said.

    Freeport-McMoRan owns a 53.56 percent stake in Cerro Verde, which more than doubled its production to nearly 500,000 tonnes of copper last year because of an expansion.

    Sumitomo Metal Mining Company Ltd controls a 21 percent stake in the mine, and Buenaventura has 19.58 percent.
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    Steel, Iron Ore and Coal

    Peabody eyes bankruptcy exit in April

    Peabody Energy Corp, the world's largest private sector coal producer, said on Thursday it expects to exit its Chapter 11 bankruptcy in early April after a U.S. judge said he would approve its plan to slash over $5 billion of debt.

    U.S. Bankruptcy Judge Barry Schermer said he was ready to sign an order to approve Peabody's bankruptcy emergence once language regarding a late settlement of certain U.S. Department of Justice complaints had been finalized.

    St. Louis-based Peabody will leave bankruptcy amid dramatically improved short-term prospects for its business compared to a year ago, when it sought Chapter 11 protection.

    "Peabody has accomplished the goals set out nearly a year ago, against an industry backdrop that has strengthened," Chief Executive Officer Glenn Kellow said in a statement.

    The reorganization plan, which will repay secured lenders in full, received overwhelming support from its creditors.

    Peabody plans to re-list on the stock market, coinciding with increased demand from Asia and anticipation of eased regulation under U.S. President Donald Trump that has fueled investor enthusiasm for coal.

    Coal producer Ramaco Resources Inc recently completed an initial public offering and Warrior Met Coal has filed to sell shares in an IPO.

    Peabody's plan is being financed through a $1.5 billion sale of stock, consisting of a $750 million rights offering available to bondholders and a $750 million private placement of preferred equity for institutional investors.

    A small group of asset managers opposed the plan because they said it was proposed in bad faith and attacked the private placement for enriching the select funds that helped negotiate the company's bankruptcy plan.

    "The value of the private placement is truly extraordinary," said Andrew Leblanc, a lawyer who represented the opponents to the plan. He said they would appeal the bankruptcy confirmation.

    The opponents argued in court papers that the main funds backing the plan stood to reap hundreds of millions of dollars in profits because the plan underestimated Peabody's potential.

    Hedge funds Elliott Management and Aurelius Capital Management played a key role in crafting the reorganization plan by urging Peabody to use an accounting change to weaken the position of the company's lenders.

    The dispute went into mediation and eventually formed the basis for the reorganization plan.

    Peabody reached last-minute settlements on a number of objections to the plan, including one from individual investors who said they were wrongly blocked from the private stock sale.

    Peabody, which owns prime assets in Australia and coal-rich Wyoming in the United States, also recently settled objections over its environmental liability policy and a mine workers union retirement plan.

    Schermer overruled other objections, including from shareholders whose stock will be wiped out in the reorganization.

    The plan also includes a stock bonus plan for employees and executives, including about $15 million for CEO Kellow and $3 million to $5 million for five other top executives.
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    South Korea Feb thermal coal imports up 31.4% YoY

    South Korea imported 9.33 million tonnes thermal coal (including bituminous and sub-bituminous coal) in February, surging 31.4% from the year prior but down 4.01% month on month, showed the data from South Korea Customs.

    Of this, bituminous coal imports posted a year-on year increase of 29.03% but a month-on-month decrease of 6.64% to 8.53 million tonnes.

    South Korea mainly imported thermal coal from Indonesia, Australia and South Africa in February. Indonesia supplied the largest volumes to South Korea, totaling 2.5 million tonnes, up 7.21% from the year-ago level but sliding 27.99% from the month before.

    This was followed by Australia with a shipment of 2.22 million tonnes, falling 16.78% from a year ago but up 3.24% from the previous month; South Africa at 1.28 million tonnes, surging 63.48% on the year.

    The country imported 797,100 tonnes of sub-bituminous coal in February, soaring 63.51% from the year prior and 37.55% month on month. During the same period, Shipments from Indonesia surged 109.17% year on year and 39.34% from January to 709,100 tonnes.

    Imports value of bituminous coal totaled $681 million in February, a decrease of 2.08% from the preceding month. That translated into an average import price of $79.77/t, up 57.69% compared to the year-ago level and 4.89% from the previous month.

    Import value of sub-bituminous coal witnessed a month-on-month increase of 64.14% to $51.30 million in February, which translated into an average price of $64.36/t, rising 43.14% from the year-ago level and 19.33% from January, breaking the record of import price averaged since December, 2014.

    Meanwhile, South Korea's anthracite coal imports rose 6.59% from the same period last year but down 24.45% from January to 435,000 tonnes in February.
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    Anyang Iron and Steel swings to profit in 2016

    Anyang Iron and Steel Co., Ltd, the largest steel maker in China's Henan province, swung to profit last year, with net profit of 123 million yuan ($17.8 million), announced the company in its annual report late March 15.

    It realized 22.04 billion yuan of operating revenue in 2016, a year-on-year increase of 8.25%, according to the report.

    The company produced 8.18 million tonnes of pig iron last year, down 3.54% from the year prior; its output of crude steel and steel products stood at 8.08 million and 8.09 million tonnes during the period, down 2.42% and 6.26% year on year, respectively.

    It believed that a downward adjustment of China's GDP to 6.5% from last year's 6.7% would lead to further slowdown of domestic economy, which will not bolster up steel demand.

    China will continue to implement the supply-side structural reform to optimize the industrial structure this year. The country's consumption of crude steel is expected to drop to 650 million-700 million tonnes or so during the 13th Five-Year Plan period (2016-2020), and crude steel capacity will reduce 100-150 million tonnes per annum (Mtpa).

    In 2017, the company plans to produce 8.48 million tonnes of pig iron, 8.46 million tonnes of crude steel and 8.39 million tonnes of steel products. The sales revenue is expected to reach 25.4 billion yuan.

    Attached Files
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    Vale to get $733m by month-end from Moatize stake sale to Mitsui

    Brazilian mining company Vale said on Wednesday it is nearing conclusion of a deal to sell a stake in Mozambique's Moatize coal project to Japan's Mitsui & Co.

    Vale said it expects to receive by the end of this month an initial payment of $733-million from Mitsui from the equity sale. The company said it would receive $2.7-billion more after the financing for the project of the mine and the transportation system is concluded.

    Vale has been in talks with Mitsui over the Moatize project for almost three years. But the firms previously had said that any payments or the conclusion of the deal would only take place once financing was sealed. Now, the two processes are being handled separately.

    Mitsui will have an option to transfer back to Vale the stake in the project if financing is not completed by December, the statement said.

    The Japanese company is buying 15% of Vale's 95% share in the coal mine. It is also acquiring 50% of Vale's 70% stake in the Nacala logistics corridor, a railway system connecting production at the mine to the Nacala port, in Mozambique.
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    China bulls kick iron ore price back above $90

    Renewed optimism about the strength of Chinese demand saw iron ore and steel prices spike on Wednesday after statistics showed the economic rebound in the world's top commodities consumer accelerating into 2017.

    The Northern China import price of 62% Fe content ore rose 4.2% to trade at $92.1 per dry metric tonne according to data supplied by The Steel Index after the world's most traded steel futures contract – Shanghai rebar – jumped to the highest since February 2014. Volatile trading on the Dalian Commodities Exchange saw domestic iron ore price surge 5.5% to triple digits on Wednesday.

    The Statistics Bureau of China said yesterday industrial production led by the construction industry jumped 6.3% in January and February of 2017 (released together to smooth out distortions in the data caused by the Chinese new year).

    Beijing's policies to clean up and consolidate the domestic steel industry is also playing into the hands of iron ore miners
    Fixed asset investment shot up by 8.9% compared to 8.1% for 2016 as a whole thanks to strong private sector investment.

    After a 85% rise in 2016, the price of iron ore is up another 16%  this year and has more than doubled in value since hitting near-decade lows at the end of 2015.

    China forges as much steel as the rest of the world combined and completely dominates the 1.3 billion tonne seaborne iron ore market.

    Beijing's policies to clean up and consolidate the domestic steel industry is also playing into the hands of iron ore miners with low grade furnaces – particularly those that use scrap – being forced out of business. Authorities are also clamping down on pollution from sintering plants, a necessary extra step when using low grade ore (domestic Chinese iron content averages only about 20%) to make steel.

    Import, import, import

    While worries about supply and  stockpiles at record highs have plagued the market, imports by China continued to strengthen in 2017 after hitting an all-time high last year.

    The all-time record in terms of dollar value was set in January 2014, when the country imported $11.3 billion worth of iron ore back when prices were firmly in triple digits

    Trade figures released last week showed China imported 83.5 million tonnes of ore in February, up 13% compared to last year.

    Total imports for January-February climbed 12.6% to 175.3 million. Iron ore is averaging $84.90 a tonne in 2017, compared to less than $45 during the first two months last year.

    The all-time record for monthly Chinese imports in terms of volume was in December 2015 with shipments totalling 96.3 million tonnes. But the price of iron ore fell to below $40 a tonne pushing the value of shipments below $5 billion.

    The all-time record in terms of dollar value was set in January 2014, when the country imported $11.3 billion worth of iron ore back when prices were firmly in triple digit territory. Chinese imports of iron ore for the full year 2016 topped one billion tonnes for the first time.

    The 1.024 billion tonnes constitute a 7.5% increase over the annual total in 2015 and is indicative to what extent exporters from Brazil and Australia has been able to displace high-cost domestic producers.

    Attached Files
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    Daqin spring maintenance may postpone to late April

    The routine spring maintenance of coal-dedicated Daqin railway may postpone to late April or even early May this year, in order to meet restocking demand from utilities, sources said.

    Last year, the maintenance of Daqin, connecting Datong, Shanxi to Qinhuangdao port, started on April 6 and lasted for 25 days.

    Presently, coal burns at power plants under the six coastal utilities stayed at a relatively high level of 650,000 tonnns, due to robust industrial activities and low hydropower output.

    However, coal stockpiles at these power plants fell 5.5% from the previous week to 9.79 million tonnes on March 15, which could last for 15.2 days of consumption, down from 15.8 days a week ago.

    Utilities may start a new round of restock in April, as coal stocks were not enough to meet consumption.

    The spring maintenance usually lasts for 20-25 days. Total rail coal transport during the maintenance may reduce 16.6%, with daily transport falling from 1.2 million tonnes to 1-1.05 million tonnes.
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    China's late Feb key mills daily output up 3.5% MoM

    Daily crude steed of China's key mills stood at 1.74 million tonnes over February 21-28, increasing 3.48% to 58,400 tonnes from previous ten days, according to data released by the China Iron and Steel Association (CISA).

    During the same period, the country's total crude steel output was estimated to climb 69,800 tonnes or 3.15% from ten days ago to 2.29 million tonnes each day on average, the CISA said.

    As of February 28, stocks of steel products at key steel mills stood at 13.09 million tonnes, down 1.18 million tonnes or 8.26% from ten days ago, the CISA data showed.
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    Hebei deputy suggests supportive policies for competitive coal firms

    Government authorities should roll out more supportive policies for competitive coal firms to facilitate the de-capacity move, said one deputy from Hebei at the just-concluded parliamentary sessions.

    "The aim of shedding insufficient surplus capacity is to spare room for advanced capacity by shutting outdated capacity," said Wang Chang, director of Hebei State-owned Assets Supervision and Administration Commission.

    Wang suggested financial institutions to implement differentiated credit policies while prioritizing loans to competitive coal firms.

    Attached Files
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    India looks to Australian coking coal for steel and power industries

    As highly dependent on imports for this crucial raw material needed for steel and power generation, India has decided to tackle its coking coal deficit by acquiring a foreign coking coal asset and washing certain grades of coal to make it fuel-ready, Metal Miner reported on March 14, citing Power Minister Piyush Goyal.
    Goyal expressed that one of the ways the government was contemplating reducing its reliance on imports was to wash certain grades of coal to make available 20 million tonnes of coking coal in the next three to four years for the domestic steel industry.

     Chairman and Managing Director of Coal India Ltd.(CIL) S. Bhattacharya has reiterated that coking coal requirements for the domestic steel industry are still not being met. The country's near-monopoly coal producer is said to be looking at coking coal assets overseas as the country was faced with constraints of commercially viable domestic metallurgical coal reserves, the Minister told Parliament in a statement.

     CIL is looking to appoint a merchant banker to assist it in acquiring assets overseas.

     According to some media reports, CIL is considering buying coal assets in Australia for over $1 billion. The state-run company is likely to raise debt to fund the said assets in Australia. CIL is also reportedly mulling entering into strategic partnerships in FY 2017-18 to import some coking coal.

     Ironically, India sits on a huge natural stockpile of coking-grade coal, but these resources have not been fully exploited, and much of it is not suitable for power plants, forcing India to rely on imports for electricity.

    India generates about 60% of its total energy from coal and about 10% using natural gas and even diesel fuel. In view of the climate commitments made by India at the Paris Climate Conference, it needs to bring non-fossil fuels up to 40% of its energy mix and down its carbon intensity of GDP to 33% by 2020. Washing of the low-grade coal would mean it can then be used as coking coal for steel plants, and cheaper imports of coal for power plants can then be used.

    CIL is on its way to raising its annual coal output up from 560 million tonnes to 905 million tonnes in 2020. Private coal mines allotted by the ministry of coal to private producers for captive power generation are expected to mine 500 million tonnes of coal by 2020. This is expected to bring India's total coal output up to 1.5 billion tonnes by 2020.
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    U.S. remains net coal exporter in 2016

    The United States exported 60.3 million short tons and imported 9.8 million short tons, remained a net exporter of coal in 2016, according to EIA's data.

    U.S. coal exports fell 22.7% compared to 2015, falling for the fourth consecutive year, with 2016 exports less than half of the record volume of coal exported in 2012 (125.7 million short tons). Slow growth in world coal demand combined with supplier competition were the major factors contributing to the decline in U.S. coal exports.

    Despite mid-year increases in international coal prices, U.S. coal exports declined through most of 2016. Lower mining costs, cheaper transportation costs, and favorable exchange rates continue to provide a market advantage to other major coal-exporting countries such as Australia, Indonesia, Colombia, Russia, and South Africa.

    Nearly 80% of the coal exports of the United States in 2016 went to 10 countries. Declining exports to 9 of those 10 countries accounted for two-thirds of the total drop in U.S. exports. One of the few increases in 2016 was exports to Brazil, which increased by nearly 0.6 million short tons. China and Morocco also received increased amounts of U.S. coal, but only absorb a small fraction of total U.S. coal exports.

    U.S. coal exports are mainly shipped from eight customs districts, which accounted for 95% of U.S. coal exports in 2016. Norfolk, Virginia, the largest coal port, shipped 23.1 million short tons of coal and accounted for 38% of total U.S. coal exports.

    In 2016, U.S. coal imports in 2016 are 13% lower than the 11.3 million short tons imported in 2015 and the first decline in imports since 2013. The majority (90% in 2016) of coal imported into the United States is steam coal.

    Colombia remained the largest source of U.S. coal imports of 8.3 million short tons in 2016, despite a decrease of 12% year on year. Metallurgical coal imports, primarily imported from Canada is 1.018 million short tons, fell by 44% in 2016.
    U.S. coal imports are mainly offloaded at a few customs districts, with six districts receiving 90% of U.S. imports in 2016. Tampa, Florida, remained the largest recipient of coal imports in 2016, though imports into Tampa declined by 16%.
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    High Q1 ferrochrome price settled at lower Q2 level – Merafe

    High Q1 ferrochrome price settled at lower Q2 level – Merafe

    The European benchmark ferrochrome price has been settled at US$1.54/lb for the second quarter (Q2) of 2017, a decrease of 6.7% on the high-flying US$165/lb first quarter (Q1) price, Merafe Resources announced on Wednesday.

    The settled Q2 price is well up on the average 2016 European benchmark ferrochrome price of US$95.5/lb and the average US$1.07/lb of 2015.

    Ferrochrome and chrome ore prices recovered from rock bottom in the first quarter of last year and despite market volatility in the 12 months to December 31, coupled with the challenges and cost pressures faced by the South African ferrochrome industry, Merafe reported its second highest headline earnings ever.

    Ferrochrome-using stainless steel production is projected to grow by 3.5% in 2017 and by 3.8% in 2018, which should be followed by increased ferrochrome demand.

    The JSE-listed Merafe, headed by CEO Zanele Matlala, shares in 20.5% of the earnings of the Glencore-Merafe Chrome Venture, South Africa’s lowest-cost ferrochrome producer with a capacity of 2.3-million tonnes of ferrochrome a year.
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    Indian DRI plants face iron ore shortage

    Indian sponge iron or direct reduced iron (DRI) manufacturing units were facing an acute shortage of iron-ore despite the government liberalising norms for the allocation of iron-oreblocks and with the country poised to achieve a five-year high in the production of the raw material.

    The shortage of iron-ore faced by DRI units have become so acute that a Minister of the southern Indian province of Karnataka, in a meeting with federal government officials earlier this week, sought urgent and immediate supplies of raw materials to units located in the southern province.

    Karnataka has sought federal government directive to the state-owned and operated largest iron-ore miner NMDC Limited to increase volume shipments to DRI units in the region.

    According to officials in Karnataka government, an estimated 75% of the 69 sponge iron manufacturing units in the region were either closed down or operating at drastically reduced capacities from shortage of iron-ore or pellets available in the open market.

    The latest cry of a crisis by a Minister in Karnatakagovernment followed persistent pleas for assured supplies of raw material from the Karnataka Sponge Iron Manufacturers’ Association ever since October last year.

    In October the Association had raised a specter of DRI units closing down as iron-ore miners were to not making any specific allocation of raw material to sponge iron producers and that the estimated 27-million tonnes a year production in the province was mostly bagged by integrated steel producersleaving very little supplies for DRI units which were largely in small and medium scale sectors.

    DRI units in the southern province require an estimated nine-million tonnes of iron-ore each year to be able to  operate at full capacity.

    However, officials in Mines Ministry have been caught by surprise by the shortage of raw material faced by DRI units particularly at a time when India was expected to close the current fiscal with a five-year high iron ore production of around 180-million tonnes.

    It was pointed out by the officials that the government also made structural changes in the legal environment and liberalised auction rules that would address iron-ore supplies to DRI units, in the long term.

    The officials said that in the auction rules first framed in 2015, sponge iron units and pellet plants were disadvantaged as the rules heavily favoured large integrated steel producersin bidding for iron-ore blocks at the auctions.

    However, the Mines Ministry late last year tweaked the rules which now enabled provincial governments to set aside specific iron ore blocks within their respective territories on basis of end-use.

    Under this provision, iron-ore bearing provinces were empowered to reserve iron ore blocks for specific sectors like DRI units or pellet plants, the officials added.

    Simultaneously, the Steel Ministry had scrapped the practice of categorising steel plants as integrated, secondary or major producers and thereby bringing all steel producers irrespective of sourcing of raw material, technology used or size of operation to a level playing field where uniform norms would be applicable to them.

    However, at least two DRI plant operators pointed out that most of such manufacturers were in the small and medium sector and did not have the financial or managerial wherewithal to participate in competitive bidding to secure iron ore blocks through the auction route.

    Also owing to their limitations in size and financial muscle, securing raw material through e-auctions conducted by various provincial government controlled mining agencies were a challenge and bulk of volumes offered through e-auctions too were mostly bagged by large steel mills, the operators added.
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    Hallador CEO sees higher coal production, sales in 2017

    Lower US natural gas inventories in 2017 should translate into higher domestic coal sales and perhaps encourage electric utilities to move off their current "short" coal-buying strategy, Hallador Energy president and CEO Brent Bilsland said Tuesday.

    On the heels of a mild winter, what could really help domestic coal pricing, though, is a long, hot summer, Bilsland told analysts during a conference call to discuss his company's fourth quarter and full-year 2016 earnings.

    "We expect our customers to burn more coal in 2017 than in 2016," said Bilsland, whose company owns Illinois Basin thermal coal producer Sunrise Coal.

    Hallador already has committed coal sales of about 6 million st this year and is confident it will sell another 500,000 st or so in the remaining months of 2017.

    Almost all of that coal is expected to come from the Oaktown underground mining complex in Knox County, Indiana. Oaktown's No. 1 and No. 2 continuous mining operations essentially have been merged into a single large mine that produces about 5 million st annually.

    At present, Oaktown is running at only 60% capacity, according to Bilsland. Oaktown's cash costs are estimated at $28-$30/st in 2017 and could drop even lower if production picks up.

    "We ran the mine a little harder in the fourth quarter and costs dropped to [around] $26/st," he said.

    Bilsland spent considerable time talking about the interaction between gas prices and coal demand. Declining gas prices over the past few years -- they reached historic lows of around $2/MMBtu in early 2016 -- have been cited as a key reason for falling coal output, as many utilities switched away from higher-priced coal.

    Now, however, "there is a lot less gas to compete against than in years past," Bilsland said, pointing out that US-produced gas is being diverted for uses other than electric generation and is exported to Mexico. "We expect gas inventories to be half above the norm of what they were last year. This is going to create a lot more coal to be burned."

    Moreover, gas prices are forecast to be higher in 2017, in excess of $3/MMBtu, compared with an average price of $2.49/MMBtu last year. In general, nevertheless, most utilities still are playing the short game in terms of coal purchase contracts, opting for a year or less.

    "Utilities are taking a wait-and-see approach," he said. "They're going to wait to see what the summer heat brings and laying in spot purchases as they get there."

    Indeed, such a buying strategy has led to historically short contract positions for Hallador, Bilsland noted.

    With declining coal inventories late last year and an increase in exports, he believes utilities may have been poised to enter into longer coal purchase agreements if the winter had cooperated.

    But after a seasonably cool December in the Midwest, January and February produced above-average temperatures for the second year in a row.

    Utilities "started to get a little more panicky. They know we're in a market that isn't as liquid as it was," Bilsland said. "Playing the short side works until you run out of fuel."

    This summer's temperatures, particularly in June and July, are likely to dictate whether coal prices show much upside movement in 2017.

    "On pricing, it's going to be weather-dependent," Bilsland said. "When the market moves, it's going to move very quickly. If buyers need to fill 10% of their needs, pricing is going to be flat. If they need to fill 30% of their needs, pricing is going to move fairly dramatically" because of a dearth of domestic coal supply as dozens of producers have closed mines, curtailed operations or gone out of business in recent years.

    Bilsland said Hallador has sealed about 80% of its Carlisle underground mine in Sullivan County, Indiana, once its flagship operation.

    Still, the company hopes to restart Carlisle at some point, albeit as a smaller, lower-cost operation.

    "When we do bring Carlisle back on line," he said, "its cost structure will look a lot better."

    Hallador CFO Larry Martin said the company recorded a net loss of $3.8 million in the fourth quarter of 2016 but earned $12.5 million for the entire year.
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    Steel intensity increasing in US shale plays

    The number of active rigs in the US is not likely to reach the highs of the shale revolution, but demand for steel in the energy industry is expected to be higher than it was prior to the collapse of the energy market, Nicole Leonard, project manager for S&P Global Platts Analytics Oil & Gas Consulting, said Monday.

    "Going forward, by 2019, we predict steel demand in the Permian is going to equal steel demand in 2014," Leonard said at Platts' 13th annual Steel Market North America Conference in Chicago.

    Even though US producers are drilling less wells, the amount of steel used per well has been on the rise, Leonard said. For example, in 2010 the average gas well would require roughly 210 mt of steel, now it's closer to 400 mt, she said.

    As lateral lengths have gotten longer and wells have gotten deeper, steel intensity has increased significantly, she said. Steel demand per well has increased 45% per well since 2010, according to Leonard.

    Lateral lengths differ depending on the geology of the shale play, but overall lengths are expected to increase going forward, Leonard said. Currently, producers are reporting lateral lengths as long as 20,000 feet in shale plays throughout Ohio and Pennsylvania.

    "Steel intensity is increasing significantly," she said.
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    Jizhong Energy Group signs debt swap deal with BoCom

    Jizhong Energy Group, a large state-owned coal producer in Hebei province, signed a debt-to-equity swap agreement with the Bank of Communications (BoCom) on March 8, said the company on its website.

    The agreement with BoCom, the country's fifth-biggest lender, represented the latest effort to deal with the debt burden of Chinese state-owned enterprises.

    The move is expected to help debt-laden firm to lower leverage and bolster up real economy development, said Mao Yushan, vice director of the provincial Development and Reform Commission.

    "It will play a significant role in optimizing the group's asset structure, enhancing operation and management, as well as accelerating transformation and upgrading," said Cao Haiyan, deputy secretary of Hebei branch of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC).
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    China Jan-Feb coke output up 4.6pct on year

    China coke output totalled 69.26 million tonnes over January-February this year, up 4.6 year on year, showed data from the National Bureau of Statistics (NBS).

    During the same period, China's pig iron output witnessed a year-on-year increase of 5.6% to 113.54 million tonnes; China's crude steel output stood at 128.77 million tonnes over January-February this year, climbing 5.8% year on year, according to the NBS.

    China's steel products output reached 166.55 million tonnes during the same period, up 4.1% from the year-ago level.

    Coke producers at main producing areas started to raise their prices of the steel-making material on the back of favourable sales and low stocks.

    Coke makers may further expand production if the downstream steel market prospers in the future.
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    China Jan-Feb coal industry FAI drops 21pct on year

    China's fixed-asset investment (FAI) in coal mining and washing industry amounted to 8.1 billion yuan ($1.17 billion) over January-February, decreasing 21% from the previous year, compared to a 24.2% year-on-year drop in 2016, showed data from the National Bureau of Statistics (NBS) on March 14.

    Private investment in the sector stood at 4.8 billion yuan, falling 28.6% year on year, accelerating from a year-on-year decline of 18.3% in 2016.

    Fixed-asset investment in all mining industry in the first two months in the country increased 4.1% year on year to 40.7 billion yuan; of that, private investment in mining industry stood at 20.8 billion yuan, down 16.7% from the previous year.

    During the same period, the total fixed-asset investment in ferrous mining industry witnessed a year-on-year drop of 0.2% to 4.2 billion yuan; that in non-ferrous mining industry stood at 5.5 billion yuan over January-February, down 15.4% from the year-ago level, according to the NBS data.

    The fixed-asset investment in non-metal mining industry stood at 10 billion yuan during the same period, down 4.9% from the year-ago level.
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    China cracks down on low-quality coal imports as traders report customs delays

    China is ramping up controls on imports of low-quality coal due to concerns about smog and overcapacity in the world's top coal consumer, a government official said on Wednesday, as traders report some cargoes have been delayed by customs checks.

    "As long as coal meets standards, we don't forbid imports, but we are imposing controls on low-quality coal imports," said Zhi Shuping, head of the Administration of Quality Supervision, Inspection and Quarantine which oversees imports safety.

    "If we let all kinds of coal import into domestic market, it will hit the domestic market," Zhi said, speaking on the sidelines of the annual meeting of China's parliament.

    Sustained checks will unsettle global miners and traders who have enjoyed months of a coal buying spree by China that helped propel prices to multi-year highs, bringing the industry out of a prolonged bear market. Prices have soared to multi-year highs this week amid broader concerns about tighter supplies and robust demand.

    Delays in processing imports could further constrain supply, sending domestic prices higher. That could have the effect of undermining government efforts to keep prices stable as Beijing seeks to close outdated mines, increase use of cleaner, renewable fuels and make bloated heavy industry more efficient.

    Zhi's comments come as some international traders have complained about delays running into weeks in getting some cargoes cleared through customs in China due to tougher inspections for sulphur and mercury content at ports. Last year, Zhi's agency rejected 1.5 million tonnes of imported coal, he said - less than 1 percent of China's total coal imports.

    One official at a global merchant, speaking on condition of anonymity, said his company's shipments into Jiangsu province took longer than usual to get customs clearance.

    It's not clear how widespread the checks are and Zhi did not say when the crackdown started. Some experts said it could be linked to the two-week annual meeting of China's parliament, which ends on Wednesday.

    Last week, a senior politician from Shanxi, one of the country's top producing regions, proposed curbing imports of low-quality coal as a radical measure for curing China's overcapacity problem.

    Speaking on the sidelines of parliament, Wang Fu, vice governor of the province, suggested targeting coal from Indonesia, which accounted for almost 40 million tonnes, or 15 percent of total arrivals, last year.

    The proposal is unlikely to get passed into law and would likely face hefty resistance from power producers, which still rely on coal. But the comment underlines the challenge of getting wary provincial governments on board to tackle excess and close inefficient operations.
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    Shaanxi Feb raw coal output slides 25.2pct on month

    Shaanxi province, one major coal production base in northwestern China, produced 25.52 million tonnes of raw coal in February, climbing 9.48% from the year-ago level but dropping 25.2% from January, showed the latest data from the Shaanxi Administration of Coal Mine Safety.

    In the first two months, the province's coal output stood at 59.65 million tonnes, edging down 0.15% year on year, data showed.

    Coal mines owned by the central and provincial governments produced 14 million and 19.71 million tonnes of raw coal over January-February, decreasing 3.94% and rising 4.71% from the year prior, respectively.

    Coal output of the mines owned by municipal and prefecture governments stood at 25.94 million tonnes, dipping 1.52% year on year.

    In February, raw coal sales stood at 24.72 million tonnes or 96.87% of the total coal output of the province, gaining 36% year on year but falling 25.7% from January.

    Coal sales in the first two months increased 8.43% from the preceding year to 57.99 million tonnes, accounting for 97.23% of its total coal output.
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    China's Shanxi province launches crackdown on illegal coal mines: document

    China's Shanxi province has launched a new campaign against illegal coal mining, according to a document seen by Reuters on Tuesday, as one of China's top producing regions seeks to get tough on cutting overcapacity.

    Shanxi province accounts for a quarter of China's coal output and has pledged to cut 20 million tonnes of overcapacity this year as part of Beijing's plan to remove 150 million tonnes across the whole industry as it battles smog and tries to make heavy industry more efficient.

    But recent price gains have tempted some coal mines into producing more than they have been allowed, the Shanxi Administration of Coal Mine Safety and the Shanxi Coal Industry Bureau said in the document, dated March 12.

    Two sources who received the document confirmed its authenticity.

    The agencies declined to comment when asked to confirm the move.

    "We will pay surprise visits, sometimes at night, and increase the frequency checks on state-owned mines," they said in the document.

    Coal mines that are still subject to production limits should operate 276 days a year or at 84 percent of their capacity, they said.

    In addition, coal mines that are vulnerable to seismic activity should operate at 80 percent of the capacity.

    News of the stricter controls on production provided further support to coal prices, analysts said.

    Most-active May futures rallied over 3 percent to 619 yuan per tonne, their highest since the contract launched in May 2015.

    The Shanxi authorities said in the document that they had found some coal mine operators using "fake invoices, fake data, fake graphics" to avoid supervision, and some mines that had been shut down had been reopened.

    The Shanxi government will suspend production for at least one month at coal mines that produce 10 percent more than they're allowed.

    Coal mines that reported more than one major accident over a three-month period will be closed if they are still operating, it said.

    Attached Files
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    Steel plate prices in the US continue to trend upwards

    Steel plate prices were on the rise following price increase announcements approximately 10 days ago, sources said Monday.

    New prices following the $30-$50/st increases, dependent on product and producer, plate mills looked determined to approach $800/st on a delivered basis.

    A mill source said he was seeing "a lot of optimism" after meeting with customers at a recent industry event. New plate prices were being quoted between $760-$800/st on a delivered basis but it was "too early to tell if $800/st is the new number after the most recent increase," the mill added.

    New prices were likely between $770-$780/st on a delivered basis, according to one service center source. He was skeptical he could still buy at a $760/st level. However, he had not actively tried to buy any new spot material since the increases.

    A second service center source was also skeptical of being able to still buy at $760/st on a delivered basis. He agreed price levels were between $770-$790/st on a delivered basis.

    The energy sector was helping to drive some of the growth in the plate market, according to a second mill source.

    "We are seeing optimism that has not existed for some time," he added. New prices were between $770-$790/st on a delivered basis, the mill source agreed.

    "The plate market has some positive signs and the mills are holding firm to the prices," according to a third service center source. "Time will tell how this all unfolds, but demand will ultimately be the driver."

    S&P Global Platts increased its daily A36 plate price assessment to $730-$740/st from $700-$720/st on an ex-works Southeastern US mill basis.

    Attached Files
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    'Millions of tons' of line pipe capacity available for pipeline work: producers group

    US line pipe producers have "millions of tons" of capacity available to ramp up to provide the steel needed for future US pipeline projects, the American Line Pipe Producers Association said Thursday.

    Voicing its support for President Donald Trump's memorandum promoting the use of American-made pipe and steel in constructing new US pipelines, the group said its members and other US line pipe producers have "substantial available production capacity and stand ready to meet demand."

    "As a result, using American-made line pipe will not require new mills to be built or prevent pipeline companies from acquiring enough line pipe for their projects," the group said in a statement. Stupp Corp., American Steel Pipe, Berg Pipe and Dura-Bond formed the American Line Pipe Producers Association earlier this year, focusing on the large-diameter segment of the market.

    In his first week in office, Trump signed a series of executive memorandums to revive the Keystone XL and Dakota Access pipeline projects and has directed the US Commerce Department to make sure all future pipelines built in the US are constructed out of steel melted and finished in the US.

    The Dakota Access and Keystone XL pipelines, however, will not be required use US steel as Trump's memorandum is specific to new pipelines or those that are being repaired, the White House said last week. Since Trump's announcement, concerns have been raised that US producers may not have the capabilities to furnish the type of pipe needed, however as imports of large-diameter line pipe have "undercut the US market in recent years ... most US producers [are] operating well below their capacity levels," the association said.
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    Shanxi delegation suggests controlling coal imports

    Shanxi delegation suggested during the recent parliamentary sessions to control import of low-priced inferior coal and increase use of domestic clean coal, local media reported.

    The delegation called for stricter control on the quality of imported coal, and encouraging large coastal state-owned power plants to take the lead to cut coal imports.

    The inflow of imported coal squeezed space of demand for domestic market and weakened the effect of the government's de-capacity drive, said the delegation.

    Impacted by the capacity cut last year, China's coal production slumped 9.4% year on year to 3.36 billion tonnes last year.

    However, China's coal imports surged 25.2% from the previous year to 256 million tonnes last year.

    The share of low-CV, high-ash and high-sulphur coal, including lignite, was high in the total imports, which is harmful for the environment.

    Most imported coal came from Indonesia and Australia, and most Indonesia thermal coal was lignite with calorific value below 4,500 Kcal/kg NAR, data showed.
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    CNOOC to construct 4 bcm coal-to-gas project in Shanxi

    China National Offshore Oil Corporation (CNOOC), a major state-owned oil and gas producer, signed contract with Shanxi's leading miner Datong Coal Mine Group to construct a coal-to-gas project in the province, state media reported.

    The project is located in Zuoyun coal chemical base of Datong. It's one of the nation's key projects during the 13th Five-Year Plan period ended in 2020.

    Total investment into the project was estimated to reach 25.85 billion yuan ($3.7 billion).

    The project, with designed annual capacity at 4 billion cubic meters, will produce clean gas to replace polluted fuels such as Sanmei, inferior coal and petroleum coke.
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    China's Jan-Feb coal output dips despite push to raise supplies

    China's coal output fell 1.7 percent in the first two months of the year, even after Beijing urged miners to ramp up output to replenish supplies during the cold winter months, reversing tough measures to cut the country's reliance on fossil fuels.

    Miners produced 506.78 million tonnes of coal in January and February, the National Bureau of Statistics said. That compares with 513.5 million tonnes in the first two months of 2016 and 546.5 million tonnes in 2015.

    The Statistics Bureau provided information for January and February together to smooth the impact of the Lunar New Year holiday, and did not give a separate monthly breakdown.

    In November, the government lifted a limit on the number of days thermal coal miners can operate each year, in a bid to meet surging demand from utilities during the months-long winter heating season.

    Major coal miners have since been pushing for Beijing to reinstate the limits on output after the key winter heating season due to weakening demand and growing supply.

    The country's state planner signaled last week that it will not introduce such drastic measures this year, chastened by last year's wild markets.

    Even so, Beijing continues to crack down on the country's inefficient and ageing excess mining capacity. The world's top coal consumer has vowed to cut more than 150 million tonnes of excess capacity this year.

    Attached Files
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    China Jan-Feb steel output rises 5.8 pct from year ago -stats bureau

    China's steel output in the first two months of 2017 rose 5.8 percent from the same period a year ago, data showed on Tuesday, as mills boosted production amid higher prices and firm demand as Beijing moves to cut excess capacity in the sector.

    China's steel output for January and February combined rose to 128.77 million tonnes, the National Bureau of Statistics (NBS) said. The NBS provided information for January and February together to smooth the impact of the Lunar New Year holiday, and did not give a separate monthly breakdown.

    Steel output gained this year as China's policy to shut excess steel production has pushed up prices for lower-quality rebar, used mainly in construction. Rebar futures on the Shanghai Futures Exchange have climbed 23 percent since the beginning of this year.

    Steel mills are currently making a profit of up to 800 yuan ($115.74) a tonne by producing rebar, the strongest level since 2011, analysts said.

    "Production in the first two months of last year was low as soft prices discouraged mills to produce. But high profits has driven mills to churn out more metal," said Qiu Yuecheng, an analyst with the steel trading platform Xiben New Line E-Commerce in Shanghai.

    China, the world's top steel producer, started the policy to shut output last year and for 2017 plans to cuts 50 million tonnes of capacity as the world's No. 2 economy deepens efforts to tackle pollution and curb excess supply.

    China produced 808.4 million tonnes of crude steel output in 2016, up 1.2 percent.
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    Top iron miners' cash juggernaut set to survive price crash

    The world’s biggest iron ore miners will be able to withstand the expected plunge in prices because their race to cut production costs has dramatically lowered the industry’s margin pressure point, allowing them to keep fueling a cash juggernaut that’s revived the mining sector.

    More than 90% of producers in the global seaborne market can generate profits at a benchmark price of $60 a metric ton, Adrian Doyle, a Sydney-based senior consultant at researcher CRU Group, said by phone. That compares with about 65% of suppliers able to avoid losses at the same price point three years ago, he said.

    “There have been fantastic cost reductions in a lot of instances,” while producers have also been boosted by lower oil prices, Doyle said. “If we were thinking of a pressure point where we’d start to see a bit of stretching in the industry, previously it would’ve been around $60/t, now it’s closer to $50/t-to-$45/t to stress test everyone but the majors.”

    Benchmark iron ore dropped under $90 a metric ton last week for the first time since Feb. 10 amid rising supply in the 1.4 billion ton seaborne market and surging stockpiles in China. Ore with 62% content in Qingdao was at $86.72 a dry ton Friday, according to Metal Bulletin Ltd. Prices rallied to $94.86/t on Feb. 21, the highest since August 2014. Futures in Dalian surged 4.3% to 684.5 yuan/t on Monday, the highest at close since March 3.

    Producers including BHP Billiton and Fortescue Metals Group have warned prices are poised to retreat after they reported a surge in profits last month fueled by the price rally and their cost cuts. Perth-based Fortescue has more than halved cash costs in the past two years to about $12.54/t in the last quarter, while BHP lowered them by more than 25% to $15.05/t in the final six months of last year, according to filings.

    Prices are likely to move closer to $60/t by the end of this year, Sally Auld, chief economist and head of fixed-income and currency strategy for Australia at JPMorgan Chase & Co., told Bloomberg TV in an interview. They will drop to $56.89/t in the final quarter of 2017, according to the median estimate among 14 analysts surveyed by Bloomberg.

    About 14% of global producers lose cash at $60/t, according to Deutsche Bank analysts including Paul Young and Anna Mulholland. At $40, around 31% of the sector are loss-making, they wrote in a March 8 note. With prices at $90/t, only 1% of miners fail to generate profits.

    “The fundamentals all point in the direction of a softening of that iron ore price,” BHP’s CFO Peter Beaven said Thursday at a Sydney conference. “Supply continues to increase, particularly from Brazil,” and there’s a waning impact on demand from China’s fiscal stimulus. The third-largest exporter is prepared for a “much lower iron ore price.”

    Brazil’s Vale SA, the biggest exporter, is delivering its first cargoes to China from its $14-billion S11D mine and has cash costs that are likely to fall below $10/t, according to Australia’s Department of Industry, Innovation and Science. Rival producers including Rio Tinto Group, BHP, Fortescue and Roy Hill Holdings would all remain profitable at prices below $50/t, the department said in a report published in January.
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    Tightening supply supports near record thermal coal prices

    China's thermal coal prices rose to the highest level since mid November due to tightening supply, shrugging off concerns that prices will fall after policy makers delay introducing radical production controls.

    Benchmark thermal coal prices at the port of Qinhuangdao rose 2.5 percent this month to $87.6 on March 10, nearing the $90 per tonne record reached in November. Average prices in March also recorded their highest levels in at least three years.

    The upward momentum in coal prices was due in part to a ban on explosives used by coal producers and expectations that Beijing will impose strict limits to cut overcapacity this year.

    Analysts said China's state planning agency called the first meeting with producers on Monday to discuss coal supply as well as capacity cut plans.

    The informal ban on explosives affected both large scale and small producers in top producing region Inner Mongolia, as well as Shanxi and Sha'anxi provinces, forcing utilities to buy more expensive coal on the spot market as the supply of cheaper coal under long term contracts fell.

    The contract price is at a 60 yuan discount to the spot market, according to traders.

    An executive with Shandong Energy Group said the fourth largest producers by revenue can only meet 70 percent of the volumes required by their long term contract clients. Shenhua Group, one of China's largest coal producers, halted sales of spot cargo, at some north ports, including Qinhuangdao.

    Producers and utilities are expecting prices to fall when the ban expires at the end of this week.

    "Overall the market is in oversupply. In addition, we have more power supply from hydro power in the second quarter. Considering the policy market has not introduced the output limit, I think the price is very likely to fall starting April," Li Jinping, president of Luoan Mining Industrial Group told Reuters on the sidelines of the annual parliament meeting.

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    India's Adani applies to Aus govt fund for coal mine railway financing

    India's Adani Enterprises has applied for financing from an Australian infrastructure fund to build a rail line that is part of a $16 billion coal project in the state of Queensland, Australia's resources minister said on Monday.

    Financing from the A$5 billion Northern Australian Infrastructure Facility (NAIF) would offer a boost to Adani after some major banks said they would not participate in the controversial coal project.

    Since starting work on the Carmichael development over five years ago, Adani has battled opposition from green groups who say it will contribute to global warning.

    "(NAIF) is considering Adani's proposal at the moment," Matthew Canavan told Reuters in an interview in Tokyo on Monday, when asked if the Indian company had approached the infrastructure fund.

    Canavan, visiting the Japanese capital to meet with buyers of Australian commodities, said Adani had not yet asked for financing for parts of the project other than the rail line. He did not disclose how much funding Adani had requested.

    Adani's Australian unit was not immediately available for comment.

    NAIF was set up by the Australian government last year to promote the economic development of Australia's north by offering loans for infrastructure projects including airports ports and railroads.

    Adani, which has secured the major state and federal government approvals it needs for Carmichael, has still to announce funding for the project.

    Environmentalists have lobbied banks not to provide loans and a number, including Germany's Deutsche Bank and Commonwealth Bank of Australia, have stated they will not participate in the project.

    The Indian company wants to start construction in the middle of this year, Adani Australia chief executive Jeyakumar Janakaraj told reporters in December, when he announced an agreement with the Queensland state government to hire local workers.

    Comprising six open-cut pits, five underground collieries and the rail line, to the Queensland coast, environmentalists also fear the mine will produce so much coal for export to India that it will require a mega-port expansion into the Great Barrier Reef World Heritage Area.

    Adani has said the project would not threaten the reef, while creating thousand of jobs and providing India with cleaner burning coal only found in Australia.
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    Proposed curbs to free pricing of iron-ore triggers face-off with India's miners

    The Indian government has started working on measures to curb free pricing in the iron-ore sector, triggering fears of another face-off with miners.

    The government, as per statements emanating from the Steeland Mines Ministries, has taken a policy stance that iron-oreshould be made available to domestic steel producers at a cheaper rate to ensure steel producers' competitiveness.

    To that end, the government believes checks on iron-orepricing would be useful in countering the inflow of cheap steel products into the country.

    The detailed contours of methodology to check the current free pricing regime in the iron-ore sector were yet to be disclosed, with government officials claiming that, while the "principle has been laid down, the details are in the works".

    However, at least two other officials and sources in standalone mining companies said that, while a definitive cap on the selling price of iron-ore was unlikely, several other options to curb free pricing were "up for discussion by the Steel and Mines Ministries".

    Other options included setting a price band within which iron prices would be allowed to fluctuate or laying down a cost plus formula, which would be mandatory for all iron-oreminers to adopt in setting their market selling price, the sources said.

    In a media statement earlier this week, Steel Secretary Aruna Sharma said, “ there should be some sharing of profits by iron-ore producers. We are working on the end-formula and will come up with the logic very shortly”.

    Iron-ore miners have termed the government's move to check prices as "foolish".

    Clearly, the battle lines were being drawn between the government and miners at a time when India is poised to record a five-year high in iron-ore production at 180-million tonnes at close of current financial year on March 31.

    The Federation of Indian Mineral Industries (FIMI), the representative body of miners, in a statement pointed out that India had recently adopted the auction route for the allocation of all mineral resources.

    According to FIMI, the very rationale of the auction process was based on investors putting in bids and compete to secure natural resource and bids were based on returns assumed on free pricing ability of the investor for the produce. Curbs on free pricing or limits to profit margins would negate the very basis of competing for natural resource allocation and would be a throwback to times when commodity prices in Indiawere administered by the government.

    An official in FIMI also pointed out that if the government’s contention was that iron-ore miners were making very high profits and needed to share it with steel producers, then it was hard to explain why steel producers seldom put in bids to secure their own iron-ore blocks which were put up for auction but instead complained of high domestic prices for the raw material.

    As per industry estimates, in the case of steel producers with captive iron-ore source, the cost of iron-ore constitutes about 10% of the cost of production of steel. The cost moves up to around 25% for those steel mills based on merchant purchase of the raw material.

    In a submission to the government, miners said curbs on free pricing on one segment of the industry, namely raw material suppliers, and pricing freedom to another downstream player, namely steel producers, belied any economic logic.

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    China iron ore eyes worst week in nearly 3 months as port stocks climb

    Iron-ore futures in China were little changed on Friday, but were headed for their biggest weekly drop since December as the rally in steel prices lost steam and stockpiles of iron ore at Chinese portsrose to the most in at least 13 years.

    Iron-ore prices have rallied with steel this year despite a sustained increase in stocks of imported ore at China's ports. But as steel prices pulled back, concerns emerged in the market over the growing mountain of the steelmaking raw material that could increase further.

    The most-traded iron ore on the Dalian Commodity Exchange was flat at 654.50 yuan ($95) a tonne by midday. The contract, which touched a record high of 741.50 yuan last month, has lost 3.5% this week, the most since the week ending December 23.

    The most-active rebar on the Shanghai Futures Exchange was up 0.2% at 3,396 yuan per tonne. The construction steel has dropped 7% since scaling a three-year high on February 27.

    Stockpiles of iron ore at major Chinese ports reached 130.05-million tonnes as of March 3, SteelHome said, the most since 2004 when the consultancy began tracking the data.

    The continued inventory buildup shows Chinese "demand is failing to consume the surplus volumes," UK steelconsultancy MEPS said in a note.

    "With reduced export opportunities, as a result of trade actions in various countries, China now looks to its own domestic market and its investment in infrastructure to consume the oversupply," it said.

    China's steel exports fell to a three-year low of 5.75-million tonnes in February.

    As iron ore futures slid this week, so did spot prices with deals slow in physical markets, traders said.

    Iron ore for delivery to China's Qingdao port fell 0.5% to $86.79 a tonne on Thursday, the lowest since February 10, according to Metal Bulletin.

    The spot benchmark was down 5% so far this week, on course for its biggest such loss since mid-November.
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    Molybdenum climbs further as sellers hold back units

    Tight availability of molybdenum units continued to push molybdenum prices higher.

    In Asia, a Chinese trader source said it had received a flurry of inquiries following the higher overnight prices led by buying in Europe and India. Deals in Busan were concluded at $8.10/lb and $8.20/lb.

    Offers were made at $8.25-$8.30/lb in Asia, with one Chinese trader rejecting bids at $8.10/lb.

    European market participants said they had seen no change in supply and were receiving higher offers for limited quantities. One seller source said he had sold several lots of briquettes and had run out of material to offer.

    Oxide powder sales were reported at $8.40 and $8.50/lb CIF India, $8.25/lb in Rotterdam. Briquettes in Europe were reported at $8.40/lb and $8.50/lb in Rotterdam as well to consumers at $8.50/lb DDP 45 days and $8.45/lb DDP 30 days.

    Ferromolybdenum prices were also higher, with traders reporting offers above $20.50/kg.

    "There is not too much Korean material in the market and the Russians are doing well in consuming their own production," one seller said.

    Others agreed there had been little South Korean material exported to Europe over the last few months because of lower conversion rates and competitively priced Chinese ferromolybdenum.

    "Nobody has bought anything from over there. South Korean prices were too high and nobody had the guts to take a position," a European trader said.

    Market participants agreed the lack of briquettes and ferromolybdenum has been pulling up the oxide price. Offers for oxide powder were at $8.65/lb in Rotterdam at the end of the European day while sellers held back briquettes.

    Ferromolybdenum sales were reported up to $20.35/lb for 20 mt lots in Rotterdam, a European steel mill was heard to have bought at $19.95/kg DDP with payment terms.

    The Platts daily dealer oxide assessment climbed to $8.10-$8.50/lb from $7.95-$8.25/lb while Platts daily European ferromolybdenum assessment was at $19.15-$19.80/kg from $19.90-$20.35/kg.
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    Shaanxi Binchang Mining Feb rail coal delivery hit record

    Shaanxi Binchang Mining Feb rail coal delivery hit record

    Shaanxi Binchang Mining Group, a large coal producer owned and operated by Shaanxi Coal and Chemical Industry Group, reported its rail coal deliveries to other provinces at 1.09 million tonnes in February, hitting a record high on monthly basis, said Shaanxi Coal and Chemical Industry Group on its website.

    In the first two months, the company's outbound coal transport via railways exceeded 2 million tonnes, mainly attributed to the enhancement of coal quality and sufficient transport capacity in Shaanxi province during the Spring Festival holidays.

    The rail coal delivery accounted for as much as 60% of the company's total coal transport over January-February, converting its previous dependence on trucks.
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    China's steel mills race for profits as rally looks vulnerable

    China's steel mills are churning out as much metal as possible, enjoying their best profits in years, even as they worry the months-long rally in prices in the world's top steelmaking market is running out of steam, executives said.

    The strategy to pump out more may threaten the bull market, during which prices for steel rebar used in construction have skyrocketed to their highest since 2014 in recent weeks.

    As metal piles up in the country's major cities, executives say the price surge has mainly been fuelled by another bout of speculative buying rather than underpinned by a pick up in industrial demand.

    Speculators have splurged on futures for iron ore and steel, betting on higher prices after Beijing has pledged billions of dollars in construction and infrastructure projects as part of its stimulus programme.

    But Zhang Wuzong, president of Shiheng Special Steel Group in Shandong province, reckons the market is on the verge of dropping sharply.

    "I think the current rally in steel price is a mentality issue and it cannot last," he said on the sidelines of the annual meeting this week of China's parliament, the National People's Congress.

    Last year, the majority of steel companies were bleeding cash, said Zhang.

    Steel mills are currently making a profit of up to 800 yuan ($115.74) a tonne producing rebar, the highest since 2011, spurring them to fire up furnaces, analysts said.

    On Feb. 27, steel rebar futures rocketed to 3,648 yuan ($527.41) per tonne, their highest in three years. That's up 60 percent since September.

    The burst of activity and soaring prices are undermining the government's years-long push to cut capacity in its bloated steel sector to make the industry more efficient and tackle smog. Beijing's crackdown has mainly targeted low-grade products like rebar.

    On Sunday, the government announced plans to slash another 50 million tonnes of capacity this year, on top of the 65 million removed last year.

    However, many of the plants closed last year were already idled and output from the still-open plants actually rose 1.2 percent to 808.4 million tonnes.


    The tailwinds are about to turn into headwinds as rising inventories point to oversupply.

    Last month, rebar stockpiles across 35 major cities MYSTL-IRBC-35CT hit 8.7 million tonnes, their highest in almost three years, data from consultants Mysteel showed.

    Dong Caiping, chairman of Zenith Steel in eastern Jiangsu province, said he is "worried" the market will be in oversupply by the second half as mills increase output due to bumper margins.

    Soaring stockpiles of iron ore, a key ingredient in steelmaking, also highlight the trend, analysts say. Inventories CUS-STKTOT-IORE hit 127.9 million tonnes, their highest in at least a decade and equivalent to 1-1/2 months of imports, Custeel reported.

    Most of that is low-grade ore, sidelined while mills rush to use higher-quality feed to maximise product and offset higher coking coal prices, according to Wood Mackenzie.

    "Steel margins are quite healthy, so mills are trying to produce as much as possible. And using high grade ore will maximise steel production," said Rohan Kendall, principal iron ore analyst at Wood Mackenzie.

    "We're not seeing enough government stimulus to justify the surge in prices."

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    Shanxi contributes nearly 80 pct of China's 2016 coke exports

    Northern China's coal-rich Shanxi province exported 7.65 million tonnes of coke in 2016, down 7.9% from the previous year, accounting for 75.6% of China's total coke exports, showed data from Taiyuan Customs.

    Shanxi exported 54,000 tonnes of coke in December 2016, surging 30.4% year on year and 598.7% from November. The value of December coke exports stood at 93.33 million yuan, rising 159.9% from the year-ago level and 736.2% month on month.

    Japan was the largest buyer of Shanxi coke, accounting for 57% of Shanxi's total coke exports in 2016. The UK took 19.6% of Shanxi's coke exports last year, followed by India at 9.1% and Australia at 4.4%, data showed.
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    Israel cancels coal-fired power plant plans

    Israel's Energy and Water and Finance Ministries have decided to cancel plans to build a fifth coal-fired plant, the Energy and Water Ministry confirmed on Thursday.

    The project was first approved in 2001 prior to the discovery of huge offshore natural gas reserves.

    The two ministries agreed to remove the proposed project -- delayed for years -- from the development program of the state-owned Israel Electric Corp.

    Following the discovery of the offshore gas environmental, groups and residents of Ashkelon, where the 1150 MW plant was to have been built, mounted a campaign against building a new coal plant.

    The latest decision is in line with moves by Energy and Water Minister Yuval Steinmetz to reduce coal use in Israel.

    The ministry mandated a 15% reduction in coal consumption at the country's four coal plants in 2016 and a further 5% reduction this year.

    Coal consumption in the first half of 2016 totaled 4.3 million mt from 5.315 million mt in H1 2015.

    Israel Electric has not yet released its 2016 annual report but energy sources said the company's coal consumption was less than 10 million mt last year and is expected to drop further still this year.

    In addition, the ministry decided last year that beginning in 2021 the four Orot Rabin units (1440 MW) will be shut down and or converted to natural gas.
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    Regional authority blocks plans for Chile's largest iron ore mine

    Authorities in northern Chile have rejected plans to build the country's largest iron ore mine, citing flaws with its environmental plan.

    In a meeting Thursday, the environmental commission for Coquimbo region decided against approving the environmental impact study for the $2.5 billion Dominga project, with seven votes against versus six for as regional government head Claudio Ibanez cast the deciding vote.

    If it goes ahead, the project, which included open pit mining, a processing plant, a desalination plant and a port, would produce 12 million mt of iron ore annually, compared with the 10.4 million mt/year produced by CAP's Los Colorados mine.

    It would also produce 150,000 mt/year of copper in concentrates over its 22-year mine life.

    The project was the largest of a series of iron ore mines in development in Chile before a collapse in the price from 2014 onwards froze investment.

    Construction of the mine and infrastructure would have created almost 10,000 jobs.

    But a majority of commissioners decide to block its development, citing a series of irregularities, including the project's proximity to a popular national marine reserve and the failure to consult local communities over its impact.

    Politicians had already called on the project to thrown out given its links to a political scandal.

    The project is majority controlled by Chilean businessman Carlos Alberto Delano, who is under investigation for tax fraud and bribery after contributing millions of dollars to the election campaigns of dozens of politicians.

    Delano put the project up for sale in 2016, but has yet to find a buyer.

    Meanwhile, government supporters have accused former president Sebastian Pinera, who is planning to run in this year's presidential elections, of intervening on behalf of the project during his first term in government, when his family were shareholders in the project. The billionaire businessman has rejected the suggestions.
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