Mark Latham Commodity Equity Intelligence Service

Friday 21st April 2017
Background Stories on

News and Views:

Attached Files

    Oil and Gas


    Datang Int'l Power Q1 power output up 22.96pct on year

    Datang International Power Generation Co., Ltd, a listed arm of China Datang Group generated 44.2 TWh of electricity in the first quarter this year, up 22.96% year on year, the company said in its quarterly report on April 19.

    Of this, thermal power output increased 27.25% on year; hydropower output dropped 10.36% from the year-ago level; wind power and photovoltaic power jumped 17.66% and 35.34% from the year prior, respectively.

    The company's on-grid electricity stood at 41.7 TWh, increasing 22.79% from the preceding year.

    As of March 31, the average on-grid electricity price was 377.03 yuan/MWh, the company said.
    Back to Top

    For whats its worth: French Election,

    Image title
    Back to Top

    MAN Diesel in 3D printing gas turbine breakthrough

    Germany’s MAN Diesel & Turbo is now equipping gas turbines with 3D-printed components.

    Chief executive Dr Uwe Lauber said that the company was “the first manufacturer in the world to use complex 3D-printed metallic components not only for test runs, but also for serial production”.

    He said the move has come “after a decade of research and development”.

    Dr Roland Herzog, head of material technology in MAN Diesel’s Strategic Business Unit Turbomachinery, said that 3D pinting – also known as additive manufacturing – offers “huge potential for our product range, especially when it comes to the production of gas turbine components”.

    “Additively-manufactured guide vane segments that we are now incorporating into our type MGT6100 gas turbines have proven particularly suitable. The approval for serial production is the result of intense co-operation with highly-specialized suppliers and development partners such as the Fraunhofer Institute for Laser Technology.”

    In order to further exploit the potential of 3D printing, MAN Diesel is currently investing €2.6m ($2.7m) in what it calls the MAN Centre for Additive Manufacturing, based at the company’s turbomachinery works in Oberhausen.

    The company said design specialists, materials experts and production engineers will come together at the so-called ‘MANCAM’ “to extend the benefits of additive manufacturing to further components and products, for example compressor impellers or fuel nozzles for engines”.

    Herzog added: “As well as shortened development cycles, 3D printing gives more freedom for innovative, superior component designs, reduces production and delivery times and enables us service-wise to produce spare parts on call.”

    Lauber said the the standardized use of additive manufacturing “is a strategic milestone” for MAN Diesel. “3D printing gives us clear competitive advantages in terms of our products supporting the decarbonization of industry and power generation. The techniques considerably reduce the path from an innovative design to a finished product. The digital data from our R&D departments can be converted into better products more quickly than before, while customers are supported throughout the entire product lifecycle with 3D-printing-based services.”
    Back to Top

    Toluene-fed chemical production margins soften on weaker benzene, xylenes

    Falling benzene prices and continued softness in xylenes have significantly dented toluene-fed chemical production margins in the US and pushed prices to levels not seen since late fourth-quarter 2016.

    Hydrodealkylation (HDA) margins fell to minus $35.87/mt Tuesday while toluene disproportionation (TDP) and Mobil selective toluene disproportionation (MSTDP) margins were at minus $6.69/mt and $44.43/mt, respectively, according to S&P Global Platts data.

    Margins have fallen dramatically since the beginning of the month with HDA margins hit hardest, falling $79.71/mt and deep into negative territory since April 3. TDP and MSTDP margins have seen similar declines during the same period.

    One of the primary drivers behind the weaker margins is falling benzene prices. Spot benzene values on a DDP USG basis have fallen roughly 6% thus far in April and closed Tuesday at 264 cents/gal. Further, toluene prices have been stable in a stagnant market and were assessed Tuesday at 230 cents/gal FOB USG, 8 cents higher than at the beginning of the month.

    Lower margins are likely to translate into reduced operating rates and subsequently curbed supply, particularly on products such as benzene, sources said. This reduced supply, coupled with fewer imports from South Korea and increased demand from downstream styrene units, could lend support to benzene prices and help boost toluene-fed chemical production margins, sources said.

    Spot benzene prices on a DDP basis have bounced back from the 262 cents/gal assessment on Monday and ranges for April barrels were seen at 266-275 cents/gal DDP USG Wednesday morning.
    Back to Top

    Taxes, costs cut to help businesses grow in China

    New tax cuts to spur economic dynamism were approved at the State Council's executive meeting, presided over by Premier Li Keqiang, on April 19, China Daily reported.

    Some pilot taxation incentives will be expanded, and the value added tax will be consolidated.

    They are the first tax incentives since the two sessions legislative and advisory meetings, and they must be fully implemented in a timely manner, Li emphasized.

    Tax burdens on businesses will be eased by about 350 billion yuan ($50.8 billion), a goal set in this year's Government Work Report in March. The government will further streamline tax structures as part of a flatter and more transparent tax system.

    Li promised to cut businesses' taxes and the costs of internet, electricity and logistics by about 1 trillion yuan.

    The meeting produced a series of tax measures:

    • The nationwide value-added-tax reform will have a flatter structure. Starting in July, four VAT brackets will be streamlined into three, with tax rates of 17%, 11% and 6% on different products.

    • Tax incentives for small enterprises with limited profits are being applied to more companies between 2017 and 2019. Eligibility is extended to businesses with income under 500,000 yuan, instead of the previous 300,000.

    • Pretax deductions for innovation-based tech firms will be expanded from 50 to 75% of primary research and development costs from 2017 to 2019.

    • Tax incentives for venture capital firms will be available to fledging high-tech companies in eight designed locations as well as at Suzhou Industrial Park starting this year.

    • Additional tax cuts for commercial health insurance will be applied nationwide, with an upper limit on deductions of 2,400 yuan per person.

    It also was decided that a package of tax cuts that expired in 2016 will be available for the next three years.

    The above measures are expected to cut taxes by 380 billion yuan this year.

    China's efforts to ease financial burdens for businesses are paying off, as figures released on Monday show GDP growth hit 6.9% for the first quarter, with investment picking up and retail rebounding.

    "At the same time, we must drop unnecessary nontax charges for enterprises for a greater competitive edge," Li said.

    Attached Files
    Back to Top

    SDIC Power Q1 electricity output up 12.31% on year

    SDIC Power Holdings Co., Ltd, a listed subsidiary of State Development & Investment Company (SDIC), generated 28.93 TWh of electricity over January-March this year, up 12.31% from a year earlier, said the company in a statement released late April 18.

    On-grid electricity totaled 28.14 TWh in the first quarter, a year-on-year increase of 12.12%; the average on-grid electricity price slid 1.91% year on year to 0.132 yuan/KWh, data showed.

    Over the same period, hydropower output of the company was 18.31 TWh, up 6.7% from the year-ago level; on-grid hydroelectricity amounted to 18.21 TWh, up 6.71% year on year; the average on-grid price was 0.286 yuan/KWh, down 8.17% from a year earlier.

    Thermal power output stood at 10.28 TWh, surging 23.26% from a year ago; on-grid thermal electricity was 9.60 TWh, up 23.36% year on year; the average on-grid price was 0.354 yuan/KWh, up 9.21% from the year before.

    Wind power generation stood at 300 GWh, up 32.18% year on year; on-grid wind power stood at 293 GWh, up 32.57% year on year; the average on-grid price was 0.496 yuan/KWh, down 13.55% from a year earlier.

    Solar power generation stood at 46 GWh, up 25.43% from the year-ago level; on-grid solar power was 45 GWh, up 24.03% year on year; the average on-grid price was 1.034 yuan/KWh, down 7.89% year on year.

    Fluctuation in average on-grid power price was mainly caused by continuous reform of the power trading market and power price regulation in some cities and provinces.

    Attached Files
    Back to Top

    China sees higher risk of mass unemployment, pledges more support

    China's cabinet said on Wednesday that risks of mass unemployment in some regions and sectors have increased and pledged more fiscal and monetary- policy support to address the potential rise in the jobless rate.

    The government plans to cut further excess and inefficient capacity in its mining sector and "smokestack" industries this year, part of efforts to upgrade its economy and reduce pollution, but the move threatens to throw millions more out of work.

    The State Council said China faces "intensified structural conflicts" in its current job market, but it must place employment as a top policy priority and address the new challenges to keep its employment rate stable.

    China's official unemployment rate - which only accounts for urban, registered residents - has held around 4 percent for years, despite a slowdown that has seen growth cool from the double-digits to quarter-century lows of under 7 percent.

    In a guideline post on its website that sets the policy tone on employment issues, the State Council said provincial governments in those regions should take measures such as increasing the stipend for firms under job-shedding pressures.

    "If new urban jobs shrink or jobless rate jumps, (China) should step up fiscal and monetary policy support," it said.

    The government will continue to encourage entrepreneurship and help small enterprises thrive as key ways to create more jobs, by building more start-up industrial parks and incubation bases, along with more tax policy bonus for start-ups.

    University graduates and workers from sectors affected by capacity cuts such as steel, coal, and coal-fired power were identified as "key groups" that needed extra support, the guidelines said.

    Data from the Ministry of Human Resources and Social Security showed 7.95 million students are expected to graduate from university this year in June, 300,000 more than in 2016.

    Graduates will be encouraged to diversify their employment options, such as working in less-developed countryside areas and working for small enterprises. China will also appropriately reallocate affected workers, it said.

    China created 3.34 million new jobs in the first quarter of the year and helped some 720,000 laid-off workers find new jobs last year, according to state media reports.

    Beijing aims to create more than 11 million jobs this year, 1 million more than last year's target, according to this year's government work report.

    Attached Files
    Back to Top

    Atlanta fed vs Bloomberg economic surprise index

    Image title
    Back to Top

    China's energy guzzlers Q1 power use up 9.4%

    Power consumption of China's four energy-intensive industries rose 9.4% on year to 417.2 TWh in the first quarter of the year, compared to a 5.8% drop in the same period of 2016, accounting for 28.8% of the nation's total power consumption, showed data from China Electricity Council on April 17.

    Of that, the chemical industry consumed 106.1 TWh of electricity, up 1.8% from the year-ago level, compared with a year-on-year increase of 3.4% in 2016; while power consumption of building materials industry stood at 60 TWh, rising 4.1% from the year-ago level, compared to a 4.7% decline in 2016.

    Ferrous metallurgy industry and non-ferrous metallurgy consumed 117.5 TWh and 133.5 TWh, climbing 12.8% and 16% from year before, compared to a 14% and 5.7% decrease a year prior, respectively.

    In March, China's four energy-intensive industries consumed 144.5 TWh of power, up 5.2% year on year, compared to a 2.9% increase in the same period of 2016, accounting for 28.1% of the nation's total power consumption, data showed.

    Attached Files
    Back to Top

    China says to deepen structural reforms in 2017

    China plans to deepen reform of its economy, cutting more excess factory capacity while making its state-owned firms more competitive and currency regime more market-driven, Reuters reported on April 18, citing guidelines issued by the country's cabinet.

    China's State Council said it endorsed the reform guidelines drafted by the National Development and Reform Commission, the country's state planner, according to an announcement published on the cabinet's website.

    The guidelines, which include a raft of measures aimed at improving the economy, also call for reducing leverage in the country's corporate sector and pushing forward with fiscal and tax reform.

    The guidelines represent an annual outline of government reform priorities. State sector reform, including shutting down excess industrial capacity, is among this year's priorities.

    Merger and reorganization of central government-owned conglomerates will be further promoted this year, the guidelines said, alongside the introduction of qualified non-state strategic investors.

    A special plan for deepening reform of state-owned enterprises in China's struggling northeast region will also be formulated, the document said.

    The cabinet said China would further improve the yuan's market-based mechanism, increase the currency's flexibility and maintain its stable status in the global monetary system, while steadily pushing forward yuan internationalization.

    China will quicken interest rate reforms to build a market-based benchmark interest rate and yield curve, it said.

    Attached Files
    Back to Top

    In Indonesia, labour friction and politics fan anti-Chinese sentiment

    A bitterly fought election to govern Indonesia's capital that has fanned religious tensions has also thrown a spotlight on anti-foreign sentiment, as conspiracy theories swirl about an influx of illegal Chinese workers spurring vigilantism.

    Foreign direct investment from China hit a record high of $2.67 billion last year after President Joko Widodo rolled out the red carpet to Chinese investors, who are typically willing to take on risks for infrastructure and other big projects.But the cheap funding comes at a price: Chinese companies often bring in their own workers and machines, creating friction with locals, according to interviews with labor groups, company executives and government officials.

    Indonesian investment chief Thomas Lembong said a "freak-out over foreign workers" had been politicized, fuelling tensions surrounding the Jakarta poll, which pits the ethnic Chinese Christian incumbent Basuki Tjahaja Purnama against a Muslim rival.

    Purnama is backed by Widodo's ruling party and Lembong said the issue of anti-foreign and - in particular anti-Chinese - sentiment had been harnessed by rivals of the government.

    "It's part of a broader effort to turn political sentiment anti-foreigner and anti-Chinese at a time when Chinese investment is poised to be the biggest factor driving the Asian economy," Lembong told Reuters.

    The number of Chinese work permit holders jumped 30 percent in the past two years to 21,271 in 2016, the latest data from Indonesia's manpower ministry showed. In comparison, there were 12,490 from Japan and 2,812 from the United States last year.

    While the issue had been compounded by discredited reports circulating on social media claiming that 10 million Chinese workers had flooded Indonesia, labor unions still dispute official figures.

    Chinese companies have been mis-using a visa-free route meant for tourists to bring in "hundreds of thousands" of low-skilled Chinese workers, said labor leader Said Iqbal.

    Since February, the Confederation of Indonesian Workers' Union (KSPI) has been compiling unofficial data on Chinese workers suspected of not having proper documentation and it has asked the manpower ministry to take action, he said.

    "Local unskilled labor cannot work because the jobs have been filled by the Chinese," the KSPI's Iqbal told Reuters.

    Liky Sutikno, the Beijing-based chairman of the Indonesian Chamber of Commerce in China, said some Chinese companies temporarily bring in their own "technical workers", who would return to China once the local teams take over.

    These workers may have a better knowledge of products and processes, on top of being faster in executing steps such as installing machinery, Sutikno said.


    Late last year, around 150 college students on Sulawesi island, where several Chinese smelters are being built, stopped vehicles they suspected of carrying illegal Chinese workers and brought them to the authorities.

    The group planned more raids this year, said Erik, one of the students, who declined to give his full name.

    Maruli Hasoloan, a manpower ministry official, acknowledged some labor friction and vigilantism over the past few months. While the ministry was coordinating with other authorities to prevent any abuse of visa-free entry, it does not condone a vigilante crackdown on foreign workers, he added.

    Indonesia has suffered bouts of anti-Chinese and anti-communist sentiment over its history, though this has usually been directed at its minority ethnic Chinese community.

    On average, Indonesian Chinese are far wealthier than other ethnic groups. During riots leading to the fall of President Suharto in May 1998, ethnic Chinese were targeted, making up many of around 1,000 people who were killed in the violence.

    Under Suharto, Chinese culture and language were severely restricted, but at the same time he cultivated some ethnic Chinese businessmen who became hugely rich.


    The capital Jakarta has seen a series of mass rallies led by hardline Islamists calling for Purnama, Jakarta's first Christian and Chinese governor, to be jailed even as he was put on trial over allegations that he had insulted the Koran.

    Purnama, who is competing against former education minister Anies Baswedan, denies what are regarded by critics as politicized charges.

    While it is too soon to assess whether all this could have an impact on Chinese investment decisions, some Chinese business groups say they are worried about the uglier mood and also about potentially losing a business-friendly leader of Jakarta.  

    Many Chinese companies favor Purnama for his perceived ability to execute Widodo's infrastructure reform agenda, which is aligned with Chinese President Xi Jinping's "One Belt, One Road" policy to invest billions of dollars in global projects.

    Jakarta, a city of more than 10 million people, accounts for nearly a fifth of national economic output and is home to major construction projects including a $5 billion Chinese-backed rail connecting the capital to the West Java city of Bandung.

    The anti-Purnama movement has also revived jitters about the racial and religious under-currents in Indonesia, which has the world's largest Muslim population.

    "Chinese concern is stability and consistency of the rule of law," Sutikno said. "What they are scared of the most is a repeat of 1998, that the Chinese will be singled out again."
    Back to Top

    China cabinet approves state planner's 2017 guidelines

    China's cabinet has endorsed guidelines by the country's state planner to reduce leverage in the corporate sector and push forward with mixed-ownership reforms at state-owned enterprises this year.

    Notification of the State Council approval of the National Development and Reform Commission's key plans was published on the State Council's website on Tuesday.
    Back to Top

    China March power consumption up 7.9pct on year

    China March power consumption up 7.9pct on year

    China consumed 513.9 TWh of electricity in March, up 7.9% year on year, showed the latest data from National Energy Administration (NEA) on April 14.

    From January to March, the average utilization hours of power generating units across the country was 888 hours, 2 hours more than a year ago, according to the NEA data.

    Of this, hydropower plants logged average utilization of 623 hours, a decrease of 68 hours from the preceding year; the average utilization of thermal power plants increased 31 hours year on year to 1037 hours.

    China added 21.87 GW of power generating capacity during the same period, including 1.93 GW of new hydropower and 11.39 GW of new thermal power capacity.

    China consumed 1,446 TWh of electricity in the first quarter this year, up 6.9% year on year, the NEA said.
    Back to Top

    Steel, stimulus drive China's strongest economic growth since 2015

    China's economy grew faster than expected in the first quarter as higher government infrastructure spending and a gravity-defying property boom helped boost industrial output by the most in over two years.

    Growth of 6.9 percent was the fastest in six quarters, with forecast-beating March investment, retail sales and exports all suggesting the economy may carry solid momentum into spring.

    But most analysts say the first quarter may be as good as it gets for China, and worry Beijing is still relying too heavily on stimulus and "old economy" growth drivers, primarily the steel industry and a property market that is overheating.

    "The Chinese government has a tendency to rely on infrastructure development to sustain growth in the long term," economists at ANZ said in a note.

    "The question is whether this investment-led model is sustainable as the authorities have trouble taming credit. We need to watch closely whether China’s top leadership will send a stronger signal to tighten monetary policy shortly."

    Even as top officials vowed to crack down on debt risks, China's total social financing, a broad measure of credit and liquidity in the economy, reached a record 6.93 trillion yuan ($1 trillion) in the quarter -- roughly equivalent to the size of Mexico's economy.

    Spending by the central and local governments rose 21 percent from a year earlier.

    That helped goose the pace of growth in the first quarter well above the government's 2017 target of around 6.5 percent, and pipped economists' forecasts of 6.8 percent year-on-year.

    Such a strong bolt from the gate could see Beijing once again meet its annual growth target, even if activity starts to fade later in the year, as many analysts widely expect.

    "Main indicators were better than expected...which laid a good foundation for achieving the full-year growth goals," statistics spokesman Mao Shengyong said at a news conference.


    Once again, China's policymakers leaned on infrastructure and real estate investment to drive expansion. Growth in both areas has accelerated from last year and helped offset slightly weaker growth in the services sector.

    "Faster growth in industrial output is the primary factor in the first quarter surprise, and due mostly to higher value-added growth related to supply-side consolidation in heavy industry," said Brian Jackson, China economist at IHS Global Insight.

    Fixed asset investment rose 9.2 percent on-year, trouncing estimates, but IHS believes the growth was due entirely to faster spending in industry and construction.

    Real estate investment remained robust, expanding 9.1 percent, while new construction quickened despite intensifying government measures to cool soaring home prices.

    Most analysts agree the heated property market poses the single biggest risk to China's growth, but predict the cumulative weight of property curbs will eventually temper activity, not produce an outright crash.

    "Sales (growth) has started falling, which means tightening measures are starting to take effect," said Shen Jianguang, an analyst at Mizuho Securities in Hong Kong.

    More than two dozen cities announced property cooling measures in recent weeks, after curbs late last year appeared to have little lasting effect.

    The construction boom has helped fuel the best profits for China's industrial firms in years, giving them more cash flow to pay down debt or invest in more efficient plants.

    Buoyed by a near 12 percent increase in housing starts, China produced a record amount of steel in March, Reuters data showed. But analysts say warning signs are flashing.

    Rising inventories and recent falls in steel prices suggest output is growing faster than China's demand, raising worries of a glut later in the year, which could heighten trade tensions with the U.S. and other major trading partners.


    There were also positive signs on the consumer front.

    After slowing for five quarters, disposable income growth picked up to 7.0 percent, the fastest since late 2015.

    Retail sales rebounded 10.9 percent on-year as consumers shelled out more for appliances and furniture for new homes.

    Auto sales also showed signs of recovering after weakening early in the year after the government reduced subsidies.

    Analysts are closely watching for signs that consumption is accounting for a greater share of China's economy, which would

    make growth more broad based but also reduce the need for more debt-fueled stimulus and reliance on "smokestack" industries.

    Another bright spot was a further rebound in private investment, which had cooled in recent years, leaving the government to bear more of the burden of supporting the economy.

    Private investment growth accelerated to 7.7 percent.


    Though policymakers have pledged repeatedly to push reforms to head off financial risks, the government is keen to keep the economy on an even keel ahead of a major leadership transition later this year.

    China's central bank has gingerly shifted to a tightening policy bias in recent months, and is using more targeted measures to contain risks after years of ultra-loose settings.

    It has nudged up short-term interest rates several times already this year and further modest increases are expected, especially if U.S. rates continue to rise, which could risk a resurgence in capital outflows from China.

    "I think China should be directing the economy to slow down its growth in the long term...but on the contrary, growth is accelerating," said Hidenobu Tokuda, senior economist at Mizuho Research Institute in Tokyo.

    "This is good for now but it makes it difficult to see how China's economic slowdown will land in the future. Uncertainties remain high."
    Back to Top

    Trump says U.S. not to label China as currency manipulator

    U.S. President Donald Trump said on Wednesday that his administration won't label China as currency manipulator, and complained that the U.S. dollar is too strong.

    In an interview with Wall Street Journal on Wednesday, Trump said "they (China) are not currency manipulators," according to the report.

    Trump during the election campaign had accused China of manipulating its currency to gain from exports, while many economists have argued that the Chinese currency, RMB, has been at equilibrium level in recent years.

    The International Monetary Fund declared the RMB as no longer undervalued in 2015.

    In the interview, Trump again complained that the U.S. dollar is too strong. "I think our dollar is getting too strong, and partially that's my fault because people have confidence in me. But that's hurting -- that will hurt ultimately," Trump said.
    Back to Top

    Confucius on politics

    When the Master went to Wei, Zan Yu acted as driver of his carriage.
    2. The Master observed, 'How numerous are the people!' :
    3. Yu said, 'Since they are thus numerous, what more shall be done for them?' 'Enrich them,' was the reply.

    4. 'And when they have been enriched, what more shall be done?' The Master said, 'Teach them.' 
    Back to Top

    US Bond Yield follows EU bonds.

    Image title
    Back to Top

    China: Coal

    Protection of the Ministry of Atmospheric Administration issued the "Beijing-Tianjin-Hebei and the surrounding area 2017 air pollution prevention and control work program" (hereinafter referred to as "work program"), Beijing-Tianjin-Hebei air pollution transmission channel Beijing, Tianjin and Hebei, Shanxi, Shandong, Henan 4 provinces of 26 cities. Among them, 26 cities are: 8 cities in Hebei Province (Shijiazhuang, Tangshan, Langfang, etc.); Shanxi Province 4 cities (Taiyuan, Yangquan, Changzhi, Jincheng City); Shandong Province 7 cities (Jinan, Zibo, etc.) Zhengzhou, Kaifeng, Jiaozuo, etc.).

    The above "work program" clearly requires the implementation of special emission limits for sulfur dioxide, nitrogen oxides and particulate air pollutants discharged from all steel and coal-fired boilers in the "2 + 26" urban administrative area by the end of September; Tianjin, Hebei and the ring The end of October before the end of the city to complete the illegal "small scattered pollution" enterprises to ban and small coal-fired boilers "cleared by the end of October, the city of Bohai, "Work, Beijing, Tianjin, Langfang, Baoding to complete the" coal forbidden zone "construction tasks, the other completed every city to 50,000 to 100,000 to coal or coal on behalf of the coal on behalf of the coal; before the end of December, 28 cities are required to install 10 sets (sets) left and right fixed vertical remote sensing equipment, 2 sets (sets) mobile remote sensing equipment.

    Back to Top

    Oil and Gas

    Malaysian crude June trading cycle kicks off under strong downside pressure

    Price differentials for June-loading Malaysian crude cargoes faced strong downside pressure Friday, weighed by hefty supply of light and medium sweet crude barrels from Southeast Asia and Oceania for the month.

    Petroleum Brunei kicked off the June trading cycle for light sweet Malaysian grades on a bearish note this week, with the Southeast Asian supplier receiving weaker premiums for its Kimanis crude cargo.

    Latest market talk indicated that Petroleum Brunei could have sold a 600,000-barrel cargo of the light sweet Malaysian grade for loading June 4-8 to Thailand Integrated Services at a premium of around $1.10-$1.50/b to the Platts Dated Brent crude assessments on an FOB basis, sharply lower than the premiums of around $2.20/b that regional buyers paid for May-loading cargoes in the previous trading cycle.

    Taking the latest spot trade deal into consideration, Kimanis crude was assessed at a premium of $1.40/b to Platts Dated Brent crude assessments on an FOB basis Thursday, the light sweet grade's lowest-ever price differential reported by S&P Global Platts.

    "It's going to be a bloody month," said a trader with a Japanese trading company, indicating that Malaysian crude suppliers would have to fend off competition from numerous trading houses and producers from Vietnam and Australia looking to sell their share of light sweet crude barrels for June. Platts previously reported that various trading firms could offer a combined total of around 2.5 million barrels of Vietnamese light Bach Ho crude into the Asian secondary market.

    Adding to the already growing pool of regional light and medium crude supply, a variety of low sulfur Australian crude grades including Barrow Island, Varanus, Cossack and Mutineer are also available for sale in the spot market this month.

    "I am sure [Malaysian crude] sellers want to sell [their June barrels] as quick as possible and they are already on the move... the longer they take [to clear cargoes] the deeper the premiums could fall," the trader added.

    Trade sources said Petronas was already offering some of its Miri crude barrels for loading in June. Market talk indicated that the Malaysian producer was recently seen offering a parcel of Miri crude at Dated Brent plus $2.50-$2.70/b.

    "Buyers are thinking much below that... I doubt it will sell anywhere near that level," said a Southeast Asian sweet crude trader.


    The preliminary June-loading program for Kimanis showed ample supply of the middle distillate-rich crude for the month.

    A total of ten 600,000-barrel cargoes of the light sweet Malaysian grade are scheduled for export in June, one more than in May.

    Malaysia's state-owned Petronas will load four of the 10 cargoes out of the Sabah Oil and Gas Terminal.

    Shell and ConocoPhillips were allocated two cargoes each, while Petroleum Brunei and Indonesia's Pertamina hold one cargo each.

    The four Petronas cargoes are expected to load June 1-5, June 10-14, June 16-20 and June 25-29 respectively.

    Shell is likely to have its cargoes loading over June 13-17 and June 28-July 2, while ConocoPhillips is scheduled to export its cargoes around June 7-11 and June 22-26.

    Trade sources said Pertamina is expected to take its equity cargo loading in June 19-23 into its own system.

    Attached Files
    Back to Top

    More oil: Permian keeps on drilling

    Drillers in the Permian Basin just keep cranking out more oil.

    Crude production in the Permian increased by 57,700 barrels per day from February to March, according to a new report from the Federal Reserve Bank of Dallas. Wells drilled but not completed — a sign of production to come — also increased, and are now at their highest count in more than three years.

    “The firming of crude oil prices since the OPEC agreement has likely boosted confidence in the sector,” said Dallas Fed senior research analyst Kunal Patel.

    And those wells drilled but not completed to 1864 wells means Permian operators can quickly produce more oil when crude prices rise.

    Permian Basin production increased in March by almost 3 percent to 2 million barrels per day, double the increase in South Texas’ Eagle Ford, where production rose by a little more than 1 percent to 1 million barrels per day. Operating rigs numbered 310 in the Permian and 80 in the Eagle Ford in March.

    The Fed also reported an increase in oil and gas employment in Texas, of 3,000 jobs in February to roughly 208,300 total.
    Back to Top

    Murky oil inventory picture leaves market grappling for clarity

    The jury is still out over whether an OPEC-led production cut aimed at tightening oil markets is working, or if the producer club has simply enabled higher prices without making much of a dent in the global fuel supply overhang.

    Analysts say there are early indications that at least some inventories, key in gauging the health of the market, are starting to draw down.

    However, inventory levels are hard to judge outside of the United States, as many countries do not release specific figures. Oil shipments show an ongoing excess, while price activity in oil futures suggests sagging optimism the imbalance is being corrected.

    Over two years into a 50 percent price slump, the Organization of the Petroleum Exporting Countries (OPEC) and some other producers, including Russia, pledged to cut production by almost 1.8 million barrels per day (bpd) during the first half of the year.

    But more oil than ever is currently traversing the world's oceans. Thomson Reuters Eikon data shows global crude shipments, which monitor tanker movements but exclude pipeline flows, hit a record 47.8 million bpd in April, up 5.8 percent since December, before cuts were implemented.

    This is in part due to a jump in production and exports from producers who did not agree to cuts, especially the United States.

    "OPEC seems more like a magician who is keeping the audience's attention fixed firmly on his hands (its production policy) while the actual trick takes place elsewhere (non-OPEC supply)," said Carsten Fritsch, oil analyst with Commerzbank.

    U.S. production is soaring, jumping by almost 10 percent since mid-2016 to 9.25 million bpd C-OUT-T-EIA. This brings its output close to the world's top two producers, Saudi Arabia and Russia.

    Futures prices suggest skepticism the market is rebalancing. Early this year the forward curve for Brent crude futures moved from contango, in which future prices are more expensive than those for immediate delivery, to flat or even briefly into backwardation, suggesting a balancing in prompt markets. This has since reversed sharply.

    “If they're (OPEC) so busy complying, how come we're taking so much extra inventory? Why is the whole curve in free-fall when supplies are supposedly tightening?” said Robert Yawger, energy futures strategist at Mizuho Americas.


    To fully determine the state of oversupply, looking at storage levels is key, but it is not easy. U.S. inventories remain bloated C-STK-T-EIA, but outside the United States, it is notoriously difficult to reliably count stored barrels.

    There are some signs these harder-to-track inventories are easing. The International Energy Agency (IEA) said crude in less-visible places, such as barrels outside the developed world and those in floating storage, decreased in the first quarter.

    But IEA data on the 35 Organisation for Economic Cooperation and Development (OECD) countries paints a more bearish picture. OECD stocks fell by 17.2 million barrels in March, but since the OPEC-led cut started at the beginning of the year, inventories are up by 38.5 million barrels.

    "If stocks are still rising strongly, you've still got an oversupplied situation," said Jamie Webster, a fellow at Columbia University's Center on Global Energy Policy.

    "It doesn’t make sense for OPEC to pat itself on the back for strong compliance. That’s what they agreed to, not what the impact is."

    Some of the oil sloshing around the world could also have been taken out of OPEC's own storage to meet customer demand despite cuts. Saudi Arabian Energy Minister Khalid al-Falih said on Thursday in an interview with the Saudi-owned al-Hayat newspaper that supplies remained elevated in part because traders were selling oil out of tanker storage.

    Russia has also been boosting oil exports, despite cuts under the deal.

    Millions of barrels of Nigerian oil stored in South Africa's Saldanha Bay have been sold in recent weeks, and more are scheduled to leave in May.

    In Asia, the world's fastest growing consumption region, many countries, especially China, treat inventory data as strategically sensitive. But trade flows around Singapore, a key way station for virtually all tankers from Europe and the Middle East to Southeast Asia, are a bellwether.

    There has been a noticeable drop in crude storage around Singapore this year, although some cautioned these barrels will be quickly replaced by incoming cargoes from the United States and Latin America.

    Attached Files
    Back to Top

    Preliminary agreement reached among some OPEC ministers to extend production cuts: Falih

    Saudi energy minister Khalid al-Falih on Thursday said that he saw an extension of the OPEC/non-OPEC production cut agreement likely if global oil inventories do not fall to sufficient levels.

    "There has been a strong level of commitment in the past three months," Falih said at the GCC Petroleum Media Forum in Abu Dhabi. "Unfortunately we still have not reached our goal."

    If stocks remained too high, "we will extend this agreement to nine or even 12 months (from January 1) because our target is the level of (inventories), and this will be the indicator of the success of our initiative," he added.

    OECD stocks remained 336 million barrels above the five-year average at the end of February, the International Energy Agency said in its most recent monthly oil market report.

    OPEC ministers have said their aim with the production cuts is to bring inventory levels down to the five-year average.

    Under the six-month deal, which expires in June, OPEC was to cut 1.2 million b/d of crude production from October levels and 11 key non-OPEC producers led by Russia to cut output by 558,000 b/d.

    OPEC ministers will meet on May 25 in Vienna to decide whether to extend the production cuts, with a monitoring committee composed of Kuwait, Algeria, Venezuela, Russia and Oman to provide a formal recommendation before that.

    "We will have increasing demand for the rest of the year, and I expect we will have an extension of this agreement," Falih said. "We are still trying to know about the trends of other countries to know that we have a consensus on the extension."

    Though many ministers have indicated their support for an extension of the production cuts, Falih said that OPEC was "still communicating with many countries. And we will work to watch the market for April and May to ensure our colleagues in OPEC and outside OPEC will take the right measures in this regard."

    He said the production cut agreement, which was signed late last year, was needed to stimulate investment in the oil sector after two years of a price slump prompted by the oversupply in the market.

    "We in Saudi Arabia, and I think the market will agree, are concerned with what will happen in three to four years," Falih said. "The levels of investment in the producing counties and oil companies continue at the low levels we have seen during the last two years. And what we agreed with our partners, countries that are outside OPEC, was an important agreement."
    Back to Top

    Iraq may seek exemption from OPEC oil cuts to boost own output -Hakim

    Iraq may seek to be exempt from a deal between oil exporters to reduce global supply in order to support crude prices and ask to boost its own output, the leader of the nation's Shi'ite ruling coalition Ammar al-Hakim told Reuters.

    OPEC is due to meet in May to decide on an extension of supply curbs decided late last year to lift prices.

    Speaking in Cairo, Hakim cautioned that Baghdad could ask to be exempted from taking part in the supply curbs as the nation needed its oil income to fight Islamic State.

    "Given these sensitive circumstances, it is the right of Iraq to hope for an exemption by the other OPEC member states and have an opportunity to increase its production," Hakim, an influential cleric, said in an interview late on Wednesday.

    "But we are with the principle of reducing the overall OPEC supply to lift prices."

    Hakim is the president of the National Alliance, a coalition of the main Shi'ite political groups including Prime Minister Haider al-Abadi's Dawa party. The Shi'ite community forms a majority in Iraq.

    Iraq is OPEC's second-largest producer, after Saudi Arabia, with an output of 4.464 million barrels per day (bpd) in March, a reduction of more than 300,000 bpd on levels before OPEC cuts were implemented from Jan. 1.

    Baghdad reluctantly agreed to take part in the current agreement to restrain output. Hakim was one of the Iraqi leaders whom OPEC Secretary Mohammed Barkindo met while on visit to Baghdad in October when trying to broker a deal.
    Back to Top

    Court orders Shell-Exxon criminal probe over Dutch gas quakes

    A Dutch court ordered prosecutors to open an investigation on Thursday into whether a Shell-Exxon joint venture bears any criminal responsibility for earthquakes triggered by production at the country's largest gas field.

    No physical injuries have been caused by numerous small quakes, which have damaged thousands of buildings and structures across the north-eastern province of Groningen, and prosecutors had previously declined to act, arguing it was a civil matter.

    However, the Leeuwaarden-Arnhem Appeals Court directed them to open an investigation, saying they had not looked carefully enough at whether a crime could be proved.

    The government was formally censured by the country's Safety Board after a magnitude 3.6 quake hit the town of Huizinge in 2012. This was larger than had been deemed possible by NAM, the Royal Dutch Shell and Exxon Mobil joint venture that oversees production at Groningen.

    "The court observes that there is evidence that the NAM is culpable of...damaging buildings with threat to human life," the court said in Thursday's ruling.

    NAM, which has accepted civil responsibility for damage caused by the quakes and is paying damages of more than 1 billion euros ($1.1 billion), said in a statement it was surprised by the decision over Groningen, which was discovered in 1959 and is one of the world's largest gas fields.

    "In earlier rulings, prosecutors and the court have continually found that there was no reason for prosecution," it said, adding that investigations do not automatically lead to charges being brought.

    Earlier this week, the Dutch government said it will again cut output at the field to lessen the risk posed by quakes, the fourth such move since the Safety Board's pivotal February 2015 report said authorities had ignored potential risks at Groningen for decades and were putting lives in danger.

    Output at Groningen has been steeply reduced from 53.9 billion cubic meters in 2013 to a maximum of 24 billion cubic meters on an annual basis at present; in October that will be further cut to 21.6 bcm.

    Attached Files
    Back to Top

    ConocoPhillips says keen to tap proposed trans-Australia gas pipe

    ConocoPhillips will consider diverting natural gas from fields in northern Australia along a proposed transcontinental pipeline that would link directly to markets in the southeast, a senior executive told Reuters on Thursday.

    The U.S. oil major is also leaning towards developing the Barossa gas field offshore northern Australia, with a final decision due in the first quarter of 2018, Kayleen Ewin, the company's vice president for sustainability, communications and external affairs, said in an interview. That is earlier than the company had previously indicated.

    Ewin said the proposed transcontinental pipe would open Australia's domestic market for northern producers. The system would carry natural gas from the Northern Territory to Moomba in South Australia, the hub for gas to the country's main southeastern markets. Australia's government said last month it would study and possibly contribute to building the pipeline.

    That offers another opportunity for developing gas resources in a region where Royal Dutch Shell, Malaysia's Petronas, Italy's ENI SpA, and Australia's Santos and Origin Energy have undeveloped interests.

    "Really our only route to market at the moment is LNG (liquefied natural gas) for northern Australia gas, and we always welcome anything that opens up another route to market," Ewin said.

    "We'd definitely look in to it ... southeast Australia for LNG has historically been and will be in future a big market for us. Proximity to market just means there is a cost advantage in terms of competing."

    A looming gas shortage for Australia's populous east has seen prices spike and the government search for solutions, including calling a crisis meeting this week with producers, some of whom have drawn gas from the domestic market to meet export contracts.

    Another pipeline linking central Australia with the east is delayed.

    ConocoPhillips announced on Wednesday it is also considering adding a second production unit, or train, at its Darwin LNG plant and possibly processing gas from rivals' undeveloped fields.

    ConocoPhilips is also in the final stages of picking a new gas field to fill the plant's existing train, when supply from its current gas source, the Bayu-Undan field, runs out around 2022.

    "Barossa looks to be the lowest cost development," Ewin said, adding its proximity and the ease of extraction means the company is leaning toward preferring it over the larger Poseidon field.

    The project is expected to cost up to A$10 billion ($7.5 billion).

    The company had said in February a final decision was due late in 2018 at the earliest.
    Back to Top

    Woodside ups drilling as March quarter falls short

    Woodside Petroleum has increased its already-busy drilling program in Myanmar this year and may add extra wells in its African exploration venture in Senegal as it puts the emphasis on building its pipeline of development opportunities over potential acquisitions.

    News of the increased activity came as the oil and gas producer reported what analysts described as a "soft" quarter as cyclones and storms hit production in Karratha.

    Three exploration wells will now be drilled off the coast of Myanmar this year instead of two, bringing the total schedule to five firm wells, with potentially another two to be added depending on results.

    In Senegal, Woodside is talking with its partners on two further exploration wells that may be drilled towards the year-end, chief executive Peter Coleman said.

    Woodside reported sales of $US895 million in the March quarter, down 8.8 per cent from a year earlier. Production slid 9.7 per cent to 21.4 million barrels of oil equivalent, impacted by a worse-than-usual cyclone season and the expiry of a domestic gas sales contract. The company still maintained its full-year guidance for production.

    RBC Capital Markets analyst Ben Wilson said quarterly production fell 5 per cent short of his expectations, while sales revenues missed by 10 per cent.

    Mr Wilson described the three months as "a soft production quarter, explained by adverse weather events".

    JPMorgan's Mark Busuttil also said production, sales volumes and revenues were all below his estimates.

    But Mr Busuttil highlighted Woodside's guidance that it would finalise the broad design concept this year for both its Browse gas development and for the Scarborough gas venture, both off Western Australia, signalling progress at both large projects.

    Woodside said it now preferred developing Browse gas through existing onshore LNG plants on the Burrup Peninsula, rather than through floating LNG which it was focusing on previously. That stance is "subject to reaching acceptable terms with the Burrup infrastructure owners," Woodside said.

    Both the Woodside-operated North West Shelf venture and Woodside's majority-owned Pluto LNG venture have their plants on the Burrup Peninsula. The company said in February it had revived work on potential expansion options for Pluto.

    Woodside also reported it had inked new medium-term LNG sales contracts for up to 16 cargoes, to be delivered by 2019

    Read more:
    Follow us: @FinancialReview on Twitter | financialreview on Facebook
    Back to Top



    Back to Top

    ConocoPhillips takes slow, steady route in race for oil profits

    ConocoPhillips has beaten its 2017 asset sales target less than four months into the year, after shedding $30.8 billion worth of energy assets in six years.

    But instead of a chorus of cheers on Wall Street, Chief Executive Ryan Lance is facing investor skepticism that the company can deliver growth from remaining oil and gas fields.

    ConocoPhillips' most recent sales of Canadian oil-sands properties and U.S. natural gas wells for a combined $16 billion will part with nearly 30 percent of its proved reserves in order to deliver near-term shareholder payouts and pare debt. For a graphic, click

    Lance told Reuters the sales to Cenovus Energy (CVE.TO) and Hilcorp Energy Co will fulfill promises to reduce long-term debt by 42 percent to $15 billion, fund $6 billion in share purchases and help reshape the company for an era of low and volatile energy prices.

    Drilling in two shale regions should help restore falling U.S. output by the fourth quarter.

    "I don't worry about production and reserves in the company," he told Reuters in an interview, citing oil and gas fields that could be upgraded to proved reserves over time.

    ConocoPhillips can achieve flat to 2 percent annual production growth on its properties, after adjustments for sales, and deliver shareholder payouts, he said.

    But interviews with portfolio managers, former employees and industry analysts point to the frequent sales as a short-term fix. They worry ConocoPhillips' plan for modest production growth, flat capital spending and steady shareholder payouts pales in comparison to rivals that have retooled themselves to deliver sharply higher growth rates.

    The danger of its reliance on fewer assets was driven home in recent weeks as a fire at a supplier hurt its ability to ship crude from oil-sands properties.

    Mike Breard, who tracks energy stocks for Hodges Capital Management, said the strategy lacks appeal.

    "If I wanted yield, I'd buy something else. If I wanted growth, I buy something else. I just don't see what customers would want to be in that in-between situation," Breard said.

    The Houston company projects its daily production of crude and natural gas will fall 26 percent after the latest sales to about 1.16 million barrels of oil equivalent (boe). Barclays expects overall it won't return to production growth on a full-year basis until 2019.

    "They've sold a very valuable asset," said Marc Heilweil, senior portfolio manager at Atlanta-based investment firm Gratus Capital, referring to the oil-sands holdings.

    The deal will "make it harder for them to fully replace reserves down the line" because shale-oil properties have shorter productive lives, he said.

    To ensure growth, oil producers must continually add reserves to offset production and the natural decline that occurs in oil-and-gas properties.

    In 2012, ConocoPhillips spun off its refining business, leaving the ranks of the large, integrated companies like Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N), and putting it among a group of mostly-small U.S. independent exploration and production companies.

    Lance, who was the company's technology chief, became ConocoPhillips' chairman and CEO upon the spin off. He pledged to boost output by 3 percent to 5 percent annually by tapping its large pool of deep-water, oil-sands and conventional oil-and-gas properties. That goal ended two years later as prices collapsed, forcing it to borrow heavily to cover its spending on production. ConocoPhillips later cut its dividend.

    Its lack of exposure to refining has helped its shares stand out recently. The company's stock is down 4.3 percent year to date, even after an about 9 percent jump following the March 29 disclosure of a $3 billion addition to its share buy backs. In contrast, Chevron is 11.5 percent lower and Exxon is off about 10.8 percent in the same period.

    Of analysts with published ratings on the stock, 7 rate it a strong buy, 11 rate it a buy and 6 rate it a hold. That compares to Chevron with 6 strong buy ratings, 12 buy ratings and 3 hold ratings.


    Last fall, Lance recast ConocoPhillips as an energy company able to offer steady shareholder returns on flat production spending of about $5 billion a year. It shaved its growth target to as much 2 percent, instead of up to 5 percent, and promised 20 percent to 30 percent of operating cash flow would go to holders via dividends and buy backs.

    He insists the remaining assets can generate substantial cash from operations even if oil CLc1 falls below $40 a barrel. ConocoPhillips is ramping up output from its Eagle Ford and Bakken shale wells, from another oil-sands property and liquefied natural gas (LNG) from operations in Australia.

    Meanwhile, rivals have cranked up their production much faster. U.S. shale-focused companies project 15 percent volume growth this year, says consultancy Wood Mackenzie, and the larger oil producers such as Chevron are raising output and delivering fatter dividends.

    ConocoPhillips will be producing an average 1.25 million boe a day in 2019, estimates Barclays. In contrast, Chevron projects its daily output this year will rise between 103,000 boe and 233,000 boe over 2016's average 2.59 million boe, excluding divestitures. Chevron pays a 4 percent dividend.

    The risk for ConocoPhillips investors is the growth in production doesn't generate higher free cash flow for share buy backs, and the 2 percent dividend yield, about half that of Chevron, becomes the bigger part of returns.

    Henry Smith, co-chief investment officer at Haverford Trust, which invests in companies offering revenue growth and dividend gains, sold ConocoPhillips shares ahead of its 2016 dividend cut and has not been tempted back by the new strategy.

    ConocoPhillips' pledge to deliver steady returns and growth is appealing, said Smith. But, he added: "Exxon over the years has fit that bill." Haverford's oil-industry holdings are Exxon Mobil Corp (XOM.N), Chevron and Schlumberger NV (SLB.N), he said.

    Tom Bergeron, an equity analyst at Frost Bank, also prefers other oil producers such as Chevron and Occidental Petroleum Corp (OXY.N) for what he said is their expected growth and their higher dividend yields.

    Lance, who worked summers as an oilfield roughneck while studying petroleum engineering in Montana, said he understands investors want proof the company can deliver regular payouts without the asset sales.

    "It'll probably take performance through a cycle to demonstrate we have the position and the passion to deliver," he said, referring to the industry's boom and bust periods.
    Back to Top

    German February imported BAFA natural gas price below German, Dutch spot

    The average price of natural gas imported into Germany in February was Eur18.15/MWh, according to export control agency BAFA, below German NetConnect and GASPOOL and Dutch TTF February spot and front-month contracts for February delivery.

    The BAFA price is the monthly average price of natural gas on the border, based on a formula including long-term contracts linked to oil, spot gas and other mechanisms.

    The price of imported gas in January was up 2.4% from January and 15.7% higher year on year. In comparison, the price of imported gas in January was up 0.7% from December and up 10.1% year on year.

    Gas prices in February showed some strength month on month and year on year on cooler weather at the beginning of the month combined with low stocks.

    S&P Global Platts assessed average day-ahead prices at Germany's GASPOOL and NCG in February at Eur19.569/MWh and Eur20.063/MWh, respectively, Eur1.42/MWh and Eur1.91/MWh above BAFA prices.

    On the Dutch TTF hub, the contract in February was assessed at Eur19.586/MWh, Eur1.44/MWh above the BAFA price.

    Looking at the month-ahead price in January for February delivery, the contracts at the three hubs were also above the BAFA price, at Eur19.333/MWh for GASPOOL, Eur19.837/MWh for NCG, and Eur19.794/MWh for TTF.

    In February, BAFA was once again about the same level as Platts Northwest Europe Gas Contract Indicator for February, which was at Eur18.14/MWh. This indicator shows the theoretical value of an old-fashioned, oil-indexed long-term gas import contract.

    The BAFA price was also above Platts Analytics' Eclipse Energy oil-indexed range (901) of Eur17.60/MWh in February. Platts Analytics oil-indexed range also includes some spot indexation and prices renegotiation.

    But German and Dutch spot February and front-month contracts for February delivery were also above Platts Analytics' oil-indexed range.

    The value of imported natural gas in January and February was Eur4 billion from Eur3.1 billion in the same period last year, BAFA said.
    Back to Top

    WoodMac: 60 pct of US LNG supplies to land in Europe

    Europe is expected to be the number one destination for U.S. liquefied natural gas (LNG) supplies by 2020, consultancy Wood Mackenzie said.

    Houston-based Cheniere started exports from the Sabine Pass liquefaction plant in Louisiana, currently the only such facility to ship U.S. shale gas overseas, in February last year.

    Since then, it shipped more than 100 cargoes to various locations around the globe.

    Many predicted a “flood” of U.S. LNG to Europe but only a small number of Sabine Pass LNG cargoes landed in Europe since February last year, better said in the southern part of the continent.

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

    The U.S. is expected to become one of the world’s largest LNG suppliers by 2020 with an export capacity of about 60 million mt coming from five export terminals located along the Gulf Coast.

    “Between now and 2035, the US will become an important LNG supplier and, by 2020, 60% of US LNG will find a market in Europe,” Wood Mackenzie said in a report published last week.

    However, while demand is there, some US producers will be unable to recover the cash cost of shipping to Europe, as oversupply forces gas prices to stay low, the consultancy said.

    “It is likely some US LNG will be shut-in on a seasonal basis until the mid-2020s,” it added.

    According to Wood Mackenzie, volumes delivered to Europe will continue to increase to 2025 before falling once more as competition from other new LNG suppliers and destinations causes US volumes to be diverted elsewhere.

    China to become world’s top LNG importer

    China’s long-term growth potential remains considerable, despite recent downward revisions, Wood Mackenzie said in the report.

    “Chinese gas-into-power demand will grow 366% from 2016 to 2035, as the country becomes the world’s largest importer of LNG, overtaking Japan whose gas-into-power demand will fall 33% as the nuclear fleet ramps up again,” it said.

    In India, gas demand is projected to rise 156% from 2016 to 2035, or about 5% per year, according to Wood Mackenzie.

    “India will account for only 3% of the global market by 2035, but nevertheless will be the world’s largest importer of LNG – a neat illustration of the increasing fluidity of the global gas market in the years to come,” the consultancy said.

    Such varied growth in regional gas demand will make it difficult for supply and demand to balance without international trade, Wood Mackenzie noted in the report.

    In addition, the distance between supply regions and centres of demand is fostering the growth of the global LNG market as a solution.

    Wood Mackenzie expects that such significant change will herald a shift away from oil indexation in the gas market, creating more independent global hydrocarbon prices.
    Back to Top

    Santos bumps revenue as costs drop

    Australian LNG operator Santos further reduced its debt and costs in the first quarter of 2017, as sales revenue rose compared to the corresponding quarter year.

    The company reported a revenue of US$684 million, up 14 percent from $600 million in the first quarter of 2016.

    Speaking of the results, the company’s managing director and CEO Kevin Gallagher said the 2017 forecast free cash flow breakeven has been reduced from $47 per barrel mark at the beginning of 2016 to $34 per barrel.

    “Strong free cash flow combined with cash proceeds from asset sales and the share purchase plan enabled us to reduce net debt by $380 million in the first quarter,” Gallagher said.

    The net debt currently stands at $3.1 billion, down from $3.5 billion at the start of the year and the company is still targeting a $1.5 billion reduction in net debt the end of 2019.

    In April the company made an early repayment of $250 million of its $1.2 billion export credit agency supported uncovered syndicated facility, scheduled to mature in 2019, and extended the term of $860 million of bilateral bank loan facilities to 2022.

    Santos noted in its quarterly report that the 2017 guidance remains unchanged with capital $700-750 million range.
    Back to Top

    Exxon confirms Texas site for $10B petrochemical complex

    Exxon Mobil and its Saudi partner have agreed on a spot near Corpus Christi for a proposed $10 billion petrochemical facility, the companies said Wednesday.

    The Irving-based oil company and the Saudi Basic Industries Corporation, known as SABIC, still don’t expect to make a final decision on whether to assemble the joint-venture project until next year.

    But selecting a San Patricio County site for the ethane cracker moves Exxon a step closer to plans for a $20 billion spending surge on Gulf Coast projects over the next decade.

    Exxon’s plans for the site got a boost last month when the Gregory-Portland School Board delivered tax breaks worth $460 million in a late-night vote.

    The proposed ethane cracker would each year produce 1.9 million tons of ethylene, a chemical used to make plastics. The companies believe that would make it the largest facility of its kind in the world, and that it would be in a spot where it could take advantage of cheap shale gas still gushing across the United States.

    The next step, Exxon Mobil said, is applying for air and wastewater permits form the Texas Commission on Environmental Quality. The joint venture partners also plan to study initial engineering designs and the technical and commercial aspects of the project before making a final investment decision, SABIC said in a statement on the Saudi stock exchange.
    Back to Top

    Last stand: Nebraska farmers could derail Keystone XL pipeline

    When President Donald Trump handed TransCanada Pipeline Co. a permit for its Keystone XL pipeline last month, he said the company could now build the long-delayed and divisive project "with efficiency and with speed."

    But Trump and the firm will have to get through Nebraska farmer Art Tanderup first, along with about 90 other landowners in the path of the pipeline.

    They are mostly farmers and ranchers, making a last stand against the pipeline - the fate of which now rests with an obscure state regulatory board, the Nebraska Public Service Commission.

    The group is fine-tuning an economic argument it hopes will resonate better in this politically conservative state than the environmental concerns that dominated the successful push to block Keystone under former President Barack Obama.

    Backed by conservation groups, the Nebraska opponents plan to cast the project as a threat to prime farming and grazing lands - vital to Nebraska's economy - and a foreign company's attempt to seize American private property.

    They contend the pipeline will provide mainly temporary jobs that will vanish once construction ends, and limited tax revenues that will decline over time.

    They face a considerable challenge. Supporters of the pipeline as economic development include Republican Governor, Pete Ricketts, most of the state’s senators, its labor unions and chamber of commerce.

    "It’s depressing to start again after Obama rejected the pipeline two years ago, but we need keep our coalition energized and strong," said Tanderup, who grows rye, corn and soybeans on his 160-acre property.

    Now Tanderup and others are gearing up for another round of battle - on a decidedly more local stage, but with potentially international impact on energy firms and consumers.

    The latest Keystone XL showdown underscores the increasingly well-organized and diverse resistance to pipelines nationwide, which now stretches well beyond the environmental movement.

    Last year, North Dakota's Standing Rock Sioux, a Native American tribe, galvanized national opposition to the Energy Transfer Partners Dakota Access Pipeline. Another ETP pipeline in Louisiana has drawn protests from flood protection advocates and commercial fishermen.

    The Keystone XL pipeline would cut through Tanderup's family farm, near the two-story farmhouse built in the 1920s by his wife Helen's grandfather.

    The Tanderups have plastered the walls with aerial photos of three "#NoKXL" crop art installations they staged from 2014 to 2016. Faded signs around the farm still advertise the concert Willie Nelson and Neil Young played here in 2014 to raise money for the protests.

    The stakes for the energy industry are high as the Keystone XL combatants focus on Nebraska, especially for Canadian producers that have struggled for decades to move more of that nation's landlocked oil reserves to market. Keystone offers a path to get heavy crude from the Canada oil sands to refiners on the U.S. Gulf Coast equipped to handle it.

    TransCanada has route approval in all of the U.S. states the line will cross except Nebraska, where the company says it has been unable to negotiate easements with landowners on about 9 percent of the 300-mile crossing.

    So the dispute now falls to Nebraska's five-member utility commission, an elected board with independent authority over TransCanada’s proposed route.

    The commission has scheduled a public hearing in May, along with a week of testimony by pipeline supporters and opponents in August. Members face a deadline set by state law to take a vote by November.


    TransCanada has said on its website that the pipeline would create "tens of thousands" of jobs and tens of millions in tax dollars for the three states it would cross - Montana, South Dakota and Nebraska.

    TransCanada declined to comment in response to Reuters inquiries seeking a more precise number and description of the jobs, including the proportion of them that are temporary - for construction - versus permanent.

    Trump has been more specific, saying the project would create 28,000 U.S. jobs. But a 2014 State Department study predicted just 3,900 construction jobs and 35 permanent jobs.

    Asked about the discrepancy, White House spokeswoman Kelly Love did not explain where Trump came up with his 28,000 figure, but pointed out that the State Department study also estimates that the pipeline would indirectly create thousands of additional jobs.

    The study indicates those jobs would be temporary, including some 16,100 at firms with contracts for goods and services during construction, and another 26,000, depending on how workers from the original jobs spend their wages.

    TransCanada estimates that state taxes on the pipeline and pumping stations would total $55.6 million across the three states during the first year.

    The firm will pay property taxes on the pumping stations along the route, but not the land. It would pay a different - and lower - "personal property" tax on the pipeline itself, said Brian Jorde, a partner in the Omaha-based law firm Domina Law Group, which represents the opposition.

    The personal property taxes, he said, would decline over a seven-year period and eventually disappear.      


    The Nebraska utilities commission faces tremendous political pressure from well beyond the state it regulates.

    "The commissioners know it is game time, and everybody is looking," said Jane Kleeb, Nebraska's Democratic party chair and head of the conservation group Bold Alliance, which is coordinating resistance from the landowners, Native American tribes and environmental groups.

    The alliance plans to target the commissioners and their electoral districts with town halls, letter-writing campaigns, and billboards.

    During the televised ceremony where Trump awarded the federal permit for the pipeline, he promised to weigh in on the Nebraska debate.

    "Nebraska? I'll call Nebraska," he said after TransCanada Chief Executive Russell Girling said the company faced opposition there.
    Back to Top

    Saudi's balancing act

    Saudi's balancing act

    After a lesser draw than expected to crude inventories, oil is selling off on this third Wednesday in April. As strong imports from the Middle East this week should help to buoy inventories for next week's report.

    Much is being made of Saudi Arabia's February exports, which showed a drop to the lowest since mid-2015, according to JODI data. But we can see in our Clipperdata that this drop is superseded by a solid rebound in March exports. We see exports rebounded to over 7.2 million barrels per day, with flows bound for East Asia (think: Japan, South Korea, China) accounting for 45 percent of loadings.

    This is the second-highest monthly volume heading to East Asia from Saudi on our records. The highest was in January. In the aftermath of the OPEC production cut, East Asia has been strongly favored for OPEC barrels. Total OPEC loadings bound for East Asia in March have clambered above the 10mn bpd level, the highest on our records, although April so far is looking considerably weaker as total OPEC export volumes drop.

    It is also interesting to note that Saudi Arabia oil inventories rose in February amid the export lull. We discussed earlier in the month how JODI data showed that oil inventories dropped to 262 million barrels in January, down from a peak of 329 million barrels in October 2015.  

    After dropping thirteen out of the previous fourteen months - and for seven months in a row - Saudi crude inventories for February rebounded by 2.74mn bpd. This appears due to less crude leaving the country, and more finding its way to be both refined and put into storage:
    Back to Top


    Back to Top

    Summary of Weekly Petroleum Data for the Week Ending April 14, 2017

    U.S. crude oil refinery inputs averaged over 16.9 million barrels per day during the week ending April 14, 2017, 241,000 barrels per day more than the previous week’s average. Refineries operated at 92.9% of their operable capacity last week. Gasoline production decreased last week, averaging 9.8 million barrels per day. Distillate fuel production increased last week, averaging just about 5.2 million barrels per day.

    U.S. crude oil imports averaged over 7.8 million barrels per day last week, down by 68,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.9 million barrels per day, 2.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 843,000 barrels per day. Distillate fuel imports averaged 167,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.0 million barrels from the previous week. At 532.3 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.5 million barrels last week, and are near the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 2.0 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories fell 0.7 million barrels last week and are in the lower half of the average range. Total commercial petroleum inventories decreased by 1.7 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.7 million barrels per day, down by 0.8% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.3 million barrels per day, down by 0.7% from the same period last year. Distillate fuel product supplied averaged 4.3 million barrels per day over the last four weeks, up by 9.9% from the same period last year. Jet fuel product supplied is up 7.3% compared to the same four-week period last year.

    Cushing down 800,000 bbls
    Back to Top

    US lower 48 oil production increases 21,000 bbls in last week

                                                       Last Week  Week Before  Last Year

    Domestic Production '000.......... 9,252           9,235           8,953
    Alaska .............................................. 530               534               513
    Lower 48 ...................................... 8,722   .        8,701          8,440
    Back to Top

    China gathers state-led consortium for Aramco IPO - sources

    China is creating a consortium, including state-owned oil giants and banks and its sovereign wealth fund, that will act as a cornerstone investor in the initial public offering of Saudi Aramco, people with knowledge of the discussions told Reuters.

    Saudi Aramco, a key exporter to China along with Russia's Rosneft (ROSN.MM), is due to list next year, with a potential $100 billion equity sale that is expected to be the world's largest to date.

    The planned Chinese investment makes it more likely that the national energy giant would seek a listing in Asia, with Hong Kong currently the frontrunner among bourses in the region, the same people said.

    Reuters reported earlier this month that Saudi Aramco's board would meet in Shanghai in May, its first meeting in China in seven years, as Chinese and Asian investors eye the share offering from the world's biggest oil exporter.

    Saudi officials have said Chinese companies were interested in investing in the Aramco IPO as the country - the second biggest consumer of oil globally - seeks to secure crude supplies, but have not commented on how that would be done.

    Half a dozen sources with knowledge of the discussions said China Investment Corporation (CIC), the country's $800 billion sovereign wealth fund, oil majors Sinopec (600028.SS) and PetroChina (601857.SS) (0857.HK), and the country's state-run banks were among the state-backed entities set to participate in the Chinese investment consortium.

    They did not name the banks. Reuters reported in February that Industrial and Commercial Bank of China International Holdings, a unit of Industrial and Commercial Bank of China (601398.SS), and China International Capital Corporation (CICC) were among the Chinese banks pitching for a role in the IPO.

    One person involved in discussions between Aramco and potential Chinese investors said the ultimate size of the consortium's stake had not yet been decided. That source said the entity that would lead the consortium had also not been decided, with many state-run groups keen to take on the high-profile role. That is likely to be decided by China's cabinet, the State Council, over the coming months.

    "The IPO will help decide whom, or which country, can secure the crude supplies from the company and Saudi Arabia going forward," the person said, adding the size of each company's stake in the Chinese consortium would depend on its current relationship with Aramco and the Saudi government.

    "For instance, if you were already a strategic investor or plan to become one in the long-term, things would become easier."

    The State Council Information Office, CIC, Sinopec and PetroChina did not respond to requests for comment.

    Last month, PetroChina's president and vice chairman, Wang Dongjin, said the company would consider participating in the IPO depending on market conditions, while Sinopec has said the oil giant would discuss the IPO with Aramco.

    Saudi Aramco said in an email it did not comment on "rumor or speculation".


    Saudi authorities plan to list up to 5 percent of Aramco on the Saudi stock exchange in Riyadh, the Tadawul, and also one or more international markets.

    The $100 billion IPO price tag is based on Aramco being valued at $2 trillion, although some analysts believe the ultimate valuation could be much lower.

    One of the sources who spoke to Reuters said the Chinese government was pushing hard for Aramco to list in Hong Kong in return for the consortium's investment, while three other sources said Aramco was leaning towards having an Asian - likely Hong Kong - listing along with possibly a London listing.

    A final decision has not been made, the sources said.

    Other mooted Asian options include Tokyo and Singapore.

    "The Saudis are serious about Asia. They can maintain market share there. At the end of the day, Aramco needs to sell its oil. This is just another way of guaranteeing a long-term market," one industry source said.

    This month, British Prime Minister Theresa May and London Stock Exchange Group CEO Xavier Rolet visited Saudi in a bid to win the London listing. A spokesman for the LSE Group declined to comment.

    In February, HKEX chief Charles Li said the bourse was working "very hard" to snag the deal.

    On Tuesday, a HKEX spokesperson said the exchange was an attractive venue for international companies because it can serve as a gateway to Greater China's "vast liquidity pool".
    Back to Top

    European polyethylene prices turn bearish as market lengthens

    Sentiment in the European polyethylene market appears to have turned bearish as many in the industry expect price declines in May because of weak demand, an increase in imports and high industry stock levels.

    The high density polyethylene market was heard to be particularly long, with converters leveraging high stock positions to rebuff any proposed price hikes.

    "We have a large stock, so there is no hurry to purchase [HDPE] in April if the price is not low enough," a source said Tuesday. "We have the same expectation for May."

    Similar sentiment was expressed in the low density polyethylene market, with converters heard to be destocking ahead of expected price softening in the coming weeks.

    "There is sufficient material available [in the market] and demand is very slow," another source said Tuesday. "Customers are destocking and waiting for further price decreases in May."

    The European LDPE spot price Tuesday fell Eur20/mt FD NWE to be assessed at Eur1,330/mt.

    Over the past couple of months linear low density polyethylene prices had been bullish amid reportedly tight availability stemming from reduced imports. However, the trend looks to have reversed amid a softening in demand with those industry participants seeking material now able to find it.

    "We haven't experienced as much tightness as we expected," another source said. "The feeling of shortness is just not there."

    Mirroring trends seen in the LDPE market, LLDPE prices fell Eur20/mt Tuesday to be assessed at Eur1,280/mt.

    Attached Files
    Back to Top

    Vietnam's Bach Ho crude likely to flood Asian secondary market: traders

    Low sulfur crude suppliers across Southeast Asia and Oceania may have to put in extra effort to clear their June-loading barrels this month as close to 2.5 million barrels of Vietnamese light Bach Ho crude are expected to flood the Asian secondary market, regional traders said Tuesday.

    Award details of recent spot tenders from Vietnam raised concerns among rival producers in neighboring Malaysia as PetroVietnam Oil Corp. recently sold 82,500 b/d of light Bach Ho for loading in June to Socar Trading Singapore, Gunvor, Vitol and Glencore.

    Traders said the entire lot being bought by trading companies made other regional producers worried as there was a high chance that most of the medium sweet Vietnamese crude will slip back into the secondary market.

    "You could say this was possibly the worst-case scenario for [rival] producers [across Asia and Oceania]. The best outcome [for rival suppliers] would have been for a big Chinese end-user to have taken the entire [June barrels offered by PV Oil] ... but it wasn't to be," said a Singapore-based sweet crudes trader.

    Light Bach Ho, with a gravity of 39-40 API, was rarely offered in the spot market in recent years. However, it was offered via spot tender late last month ahead of the upcoming turnaround at the country's 130,000 b/d Dung Quat refinery, market sources said.

    Binh Son Refining and Petrochemical, operator of the refinery, plans to shut the entire plant over May-July.

    PV Oil has not offered light Bach Ho crude in the spot market since July 2016.

    Market participants had been expecting PV Oil to sell some Bach Ho crude, but the large volume took many traders by surprise.


    Traders said that they expected strong competition among regional suppliers in the June trading cycle since the 2.5 million barrels of Bach Ho would add to the already growing pool of light and medium sweet crude supply in the Asian spot market this month.

    A slew of new loading programs for the Oceania crude complex emerged in recent weeks with early indications showing ample supply of light sweet Australian crude for loading in June.

    The Japanese consortium of Mitsui and Co. and Mitsubishi Corp., or MIMI, holds a 600,000-barrel cargo of Cossack crude for loading over June 11-15, while Santos has a similar-sized cargo of Mutineer crude for loading over June 16-20, a market source with direct knowledge of the monthly Australian loading program said.

    Itochu was likely to offer some light sweet Barrow Island crude for loading in June, while Australia's Woodside Petroleum might offer some light sweet Balnaves and/or Varanus crude for loading in June, although no details could be verified.

    Vietnam's PV Oil offered additional 2.05 million barrels of various medium and heavy sweet grades including Ruby, Chim Sao, Te Giac Trang and Thang Long for loading in June, apart from the Bach Ho.


    In Malaysia, fresh loading programs for its benchmark export grades including Kimanis and Kikeh have yet to emerge, but sentiment was fragile as the large volume of Bach Ho for loading in June could hamper regional end-user demand for light sweet Malaysian crudes.

    Kimanis, for one, with a gravity of around 38.6 API, with sulfur content of 0.06%, often competes directly with various medium sweet Vietnamese grades like Chim Sao, Thang Long and light Bach Ho, as they are coveted for their yield of middle distillates such as jet fuel/kerosene and vacuum gasoil.

    "There are several well-known refiners [in Southeast Asia and Australia] that are flexible to process either Malaysian or Vietnamese [crudes]," said a North Asian sweet crude trader, citing Thailand's Rayong refinery, Malaysia's Port Dickson plant, Australia's Kwinana, Lytton and Geelong refineries as examples.

    "If the end-users find Bach Ho more economical, then the Malaysian [grades] could be pushed [back to become the] second or even third option," the trader added.

    Sources said that the four trading companies could have paid a premium of between 10 cents/b and $1.20/b to Platts Dated Brent crude assessments on an FOB basis for the June-loading Bach Ho crude.

    Taking the latest tender award details into consideration, S&P Global Platts assessed the Vietnamese grade at a premium of $1.10/b to Platts Dated Brent crude assessments on an FOB basis Monday, the lowest cash differential since July 15, 2016 when it was pegged at a premium of $1/b.

    In comparison, Malaysia's light sweet Kimanis crude was assessed at a premium of $1.80/b to Dated Brent crude assessments on Monday, while Kikeh was assessed at a premium of more than $2/b.
    Back to Top

    US evaluating whether to continue lifting sanctions on Iran oil: Tillerson

    While Iran has complied to date with its requirements under the nuclear deal, its support for terrorism has the US evaluating whether to continue lifting sanctions on its oil sector, US Secretary of State Rex Tillerson said late Tuesday.

    Reimposing sanctions on Iran's oil sector would have a significant impact on the oil markets. Iran has more than doubled its oil exports to about 2.2 million b/d in March since sanctions were lifted in January 2016, when exports were about 1 million b/d.

    In a letter to US House of Representatives Speaker Paul Ryan, Tillerson said President Donald Trump has ordered a National Security Council-led review of the nuclear deal, formally called the Joint Comprehensive Plan of Action, "that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States."

    He did not give a time frame for the review.

    Iran produced 3.77 million b/d of crude oil in March, according to the most recent S&P Global Platts OPEC survey.

    The country has said it aims to regain its pre-sanctions production level of some 4 million b/d, though oil minister Bijan Zanganeh has said Iran would be willing to hold its output at around 3.8 million b/d if an OPEC production cut agreement is extended through the second half of the year.

    The nuclear deal relaxed restrictions on Iran's oil sector in exchange for concessions on its nuclear program.

    It was a signature foreign policy achievement for previous US President Barack Obama, but Trump has vehemently criticized the deal, without definitively saying that the US would unilaterally walk away from it.

    US officials have criticized Iran for its destabilizing activities in the Middle East, including ballistic missile tests.

    In his letter to Ryan, Tillerson said that "Iran remains a leading state sponsor of terror through many platforms and methods."
    Back to Top

    OPEC hopes more non-OPEC producers will help manage market: Barkindo

    OPEC is hoping to attract other oil producers from outside the bloc to join in its efforts to manage the oil market, Secretary General Mohammed Barkindo said Wednesday.

    OPEC in December signed a deal with 11 key non-OPEC producers led by Russia to cut a combined 1.8 million b/d to hasten the market's rebalancing, but Barkindo told S&P Global Platts on the sidelines of the GCC Petroleum Media Forum in Abu Dhabi there is still time for other non-OPEC nations to sign on.

    "We are calling on all non-OPEC producers who are not yet part of the broad platform of the 24 countries that signed the declaration of cooperation," he said. "But it is in their interest to join this platform. It's a broad global platform that is in the best interest of the industry as well as the global economy. So if I am a producer who has not signed the declaration of cooperation I would rush to do it now. This is the time to join."

    No other countries have committed so far, Barkindo acknowledged, but he said he was "using this opportunity to invite them."

    As for OPEC members Libya and Nigeria, which are exempt from the production cut deal, the secretary general told reporters "it is not on the card at the moment" for them to participate in the cuts.

    But the OPEC/non-OPEC monitoring committee set up to oversee the deal will "thoroughly monitor market conditions" before issuing its recommendation at OPEC's next ministerial meeting May 25 in Vienna on whether the deal should be extended and, if so, what conditions should be attached, he said.

    The extension decision will be based on the market fundamentals at the time, in particular stock levels -- both in volume terms relative to the five-year average and in days of forward cover -- Barkindo said.

    "This rise in stock levels over the past several years, the equation has gone out of balance, and to bring this equation back to balance, we'll have to address this variable," Barkindo said at the forum, where Gulf ministers have gathered to discuss the market.


    He said OPEC was "comfortable" with the pace of the market's rebalancing, even though it has taken longer than expected. Stock levels are drawing, he said, and the market was "steadily moving" towards an equilibrium price where supply and demand converge.

    "We would like to see supply and demand converging, we would like to see an equilibrium price of some sort that will again encourage investors to come back not only on short-cycle projects that you are seeing in North America but also in the long-cycle projects which are the load-base for demand," Barkindo said.

    The production cut deal, signed late last year, calls for OPEC to cut 1.2 million b/d from October levels and the 11 non-OPEC producers to cut a combined 558,000 b/d. The agreement runs from January to June.

    The deal came after two years of OPEC's pump-at-will market share policy that helped contribute to the slump in prices.

    The secretary general said compliance among the 23 nations in the pact stood at 94% in March and would likely be even higher in April. The monitoring committee will hold a technical meeting in Vienna on Friday to review the latest production figures and market statistics.

    Russia, however, has only gradually phased in its cuts and has yet to come into full compliance. Russia needs to trim its crude production by roughly another 60,000 b/d to meet its 300,000 b/d cut commitment, according to S&P Global Platts calculations based on energy ministry data.

    But Barkindo said the country's lag in compliance was "quite understandable," given that unlike OPEC members, whose production is monitored monthly by independent secondary sources, including Platts, non-OPEC producers are not accustomed to such close scrutiny.

    "People should not take for granted the fact that they came volunteering and joined in December," he said. "The fact that they have started implementing their obligations and are gradually moving to higher levels of conformity is a great success. And they are also committed in achieving full and timely implementation of their obligations."


    Barkindo will be in Moscow for the May 31 Russia-OPEC Energy Dialogue and then attend the St. Petersburg International Economic Forum June 1-3.

    He said OPEC was now in a position to "dictate the pace of events" in the oil market, rather than react to them. The producer bloc was largely caught off guard by the rise of US shale, and its continued strength remains a bane in OPEC's efforts to draw down inventories.

    The US Energy Information Administration on Monday forecast that US oil production from shale and unconventional plays would grow by 124,000 b/d in May from the previous month to 5.193 million b/d, matching oil growth rates in late 2014, which helped precipitate the current price slump.

    Barkindo has made a determined effort to meet with US shale producers to gain better understanding of their short-cycle operations.

    "For the first time in history in Houston, we broke the ice and we sat side by side across the table with the shale producers in order to...understand ourselves," he said. "The time has come to break those barriers and to work as an industry. We received very warm reception and we began to understand ourselves."

    But the secretary general declined to predict how US shale production would fare going forward.

    Attached Files
    Back to Top

    ConocoPhillips, partners weigh expansion of Darwin LNG

    ConocoPhillips and its partners are considering expanding their Darwin liquefied natural gas (LNG) plant in Australia, with backing from other companies with undeveloped gas resources that could feed the plant.

    ConocoPhillips has previously talked only about developing a new gas field for around $10 billion to fill the plant's single production unit, or train, when supply from its current gas source, the Bayu-Undan field, runs out around 2022.

    The U.S. oil major has also previously said an expansion in the current market would be challenging due to low oil and LNG prices, and costs that have risen steeply since Darwin LNG was built more than a decade ago.

    A $650,000 feasibility study on building a second train is due to be completed this year, the Northern Territory government said on Wednesday, announcing that it would contribute $250,000 toward the study.

    "The Territory Labor Government is supporting the feasibility study because this is a significant investment toward the business case for potential expansion at Darwin LNG, potentially creating thousands of jobs during construction and operation," Northern Territory Chief Minister Michael Gunner said in a statement.

    Five joint ventures with undeveloped gas resources off the coast of the Northern Territory are backing the study, with stakeholders including Royal Dutch Shell, Malaysia's Petronas, Italy's ENI SpA, and Australia's Santos and Origin Energy.

    "With Darwin LNG, five upstream joint ventures and the Northern Territory Government involved, it is a pioneering example of all of industry and government collaborating on solutions to unlock major investments," ConocoPhillips Australia West vice president Kayleen Ewin said in a statement.

    Darwin LNG is co-owned by ConocoPhillips, Santos, Japan's Inpex, ENI, Tokyo Electric Power Co and Tokyo Gas Co.
    Back to Top

    Oil Search revenue declines as LNG expansion plans gather momentum

    Oil Search remained upbeat over its slight drop in revenue in the first quarter as the company saw momentum building behind the LNG expansion plans in Papua New Guinea.

    The company’s revenue reached $343.7 million in the first three months of 2017, in comparison to $345.6 million in the previous quarter.

    Despite a 9 percent drop in total sales which was a result of the timing of liftings, with three LNG cargoes on the water at the end of the quarter, revenue declined only 1 percent as the realized prices recovered.

    Compared to the previous quarter levels, the average realized LNG and gas price was up 9 percent, reaching $7.4 mmBtu, Oil Search said in its quarterly report.

    Commenting on the results, Oil Search managing director, Peter Botten said that the “first quarter production of 7.57 mmboe was one of the highest quarterly outputs ever achieved by the company.”

    He added that the ExxonMobil-operated PNG LNG project, in which Oil Search holds a 29 percent stake, recorded an annualized operation rate of 8.3 mtpa, 20 percent above the nameplate capacity of 6.9 mtpa.

    The report shows that the PNG LNG project sold 26 cargoes during the quarter, of which 23 were sold under long-term contract and three on the spot market, with three cargoes on the water at the end of the quarter.

    PNG LNG recertification opens doors for expansion

    Recent recertification of the resources in all the PNG LNG fields carried out by Netherland, Sewell and Associates during 2016, resulted in a 50 percent increase in the company’s 1P PNG LNG gas reserves compared to the 2015 reserve booking (equivalent to a 2.8 tcf increase on a gross basis) and a 12 percent increase in the 2P gas reserves.

    Botten noted that this confirms “there is more than sufficient gas available” to support the project’s higher level of production.

    He added that this will enable the project to place additional volumes in either term contracts, for uncommitted production above 6.6 mtpa, or in the spot market.

    ExxonMobil recently commenced marketing up to 1.3 mtpa from the project. Consistent production above the nameplate capacity, allows the project to enter into additional term or spot sales.

    In addition to the resource recertification, the completion of appraisal drilling and a technical reassessment of the Elk-Antelope fields in PRL 15 increased Oil Search’s 2C contingent resources by 21 percent. Combined with resources at P’nyang this could underpin at least two additional PNG LNG-sized trains, the report reads.

    Following the completion of its acquisition of InterOil Corporation during the quarter, ExxonMobil became an equity partner in PRL 15.

    “Discussions have now commenced between Total SA, the operator of PRL 15, ExxonMobil and Oil Search on how to optimally develop the Elk-Antelope gas fields,” Botten said.

    Oil Search anticipates that this will be undertaken in conjunction with the development of the P’nyang gas field and will utilize the existing downstream infrastructure of the world class PNG LNG project.

    Talks regarding the next phase of LNG development are expected to continue during 2017 with binding commercial agreements targeted before the end of the year.

    The PRL 15 joint venture is targeting to enter front end engineering and design (FEED) in late 2017 or early 2018 and take a final investment decision in late 2018 or early 2019, according to Botten.

    Botten also said the company expects that the new government, to be formed in August, will have the LNG expansion talks high on its agenda.
    Back to Top

    US Gulf Coast distillate exports to Europe for April to exceed 1 million mt

    Around 1.150 million mt of distillates have departed the US Gulf Coast for arrival in Europe in April, according to data from cFlow, S&P Global Platts trade flow software.

    Six vessels have departed over the past week, constituting around just under 300,000 of middle distillates -- the overwhelming majority 10 ppm ultra low sulfur diesel -- based on estimate derived from the vessels' deadweight tonnage.

    Three of the vessels are Long Range 1-sized, two of which left Marathon's 539,000 b/d refinery transporting 10 ppm, according to shipping and trade sources.

    The overall volume expected to land in April is the highest since October as maintenance in the US Gulf Coast has ended and European markets have been relatively tight to balanced for 10 ppm diesel recently.

    The Mediterranean, in particular, has been on the short side. The Medium Range tanker Kouros was seen to divert from Antwerp to Valencia, Spain, but others have not redirected yet.

    The lack of inbound flow from US, has served to prop up differentials as the market is more hindered from the supply-side rather than demand, which has been fairly steady of late, according to sources.
    Back to Top

    Australia's LNG Exports Face Review Amid Gas Crisis at Home

    Australia’s competition regulator said the possible sale of natural gas intended for the country’s domestic market to overseas customers instead must be reviewed amid high wholesale prices at home.

    Ahead of a meeting Wednesday between Prime Minister Malcolm Turnbull and energy producers over Australia’s potential gas shortages, the regulator said the ability of the Santos Ltd.-led Gladstone LNG project to export third-party gas must be examined. The $18.5 billion project will buy more than 20 percent of gas available for users on the country’s east coast this year due to shortages from its own fields, according to consultancy Wood Mackenzie Ltd.

    GLNG “was clearly short of gas and has had to buy it from the domestic market to meet its overseas contracts,” Rod Sims, chairman of the Australian Competition & Consumer Commission said in an interview. The purchases by Santos, along with state bans on drilling, “has created a crisis for Australian manufacturing, which does need to be addressed.”

    The supply squeeze has contributed to the spot price of wholesale gas in Australia tripling in the last two years, according to a February report from the Australian Industry Group, and led to calls to restrict exports to Asia. Royal Dutch Shell Plc, which operates the Queensland Curtis LNG export plant, said in March that the purchase of gas intended for the domestic market by the state’s LNG exporters had compounded the issue of gas shortages. It didn’t name any specific companies.

    “It is not acceptable for Australia to be shortly the world’s largest exporter of LNG and yet to have a gas shortage on the east coast in its domestic market,” Turnbull said at a briefing Tuesday. “We will defend the energy security of Australians and reliable and affordable gas supply is a key part of that.”

    Gas Pledges

    The Australian government extracted pledges from oil and gas executives a month ago to raise production of the fuel. Supply deals for the domestic market from two of the Queensland LNG operators -- QCLNGand Origin Energy Ltd. have since been announced.

    Santos didn’t answer questions from Bloomberg and referred to an interview Chief Executive Officer Kevin Gallagher gave to Sky News on Tuesday. The CEO said that the Adelaide-based company would be happy to send gas to local markets it can free up but has little supply available because of state restrictions on exploration.

    Australian Energy Minister Josh Frydenberg said in an interview with ABC Radio Wednesday domestic purchases of gas by Santos that are then exported have boosted prices across the country. The minister said he would have a frank conversation with Santos during today’s meeting and say that the situation occurring with gas supplies is “unacceptable.”

    The nation’s leading industry group said Monday a gas swap may alleviate domestic shortages while conceding that gas could again be scooped up for export leaving the local market short.

    Gas Development

    “The apparent travails of Santos and its GLNG partners in meeting even their base level of commitment mean this is a real threat,” Australian Industry Group Chief Executive Officer Innes Willox said in a letter. “Indeed, we are told by producers that some gas has already been sold to help the domestic market, then onsold to GLNG.”

    The most viable short-term source of boosting domestic supply is via the Queensland LNG projects, according to Wood Mackenzie, although challenges remain to get the gas from the northern state down to Victoria and South Australia. New low-cost supplies must be developed over the long-term, the consultancy said.

    “One of the the best prospects for lower cost long term new supply could be onshore gas on Victoria and New South Wales,” said Saul Kavonic, lead analyst for Australia with Wood Mackenzie, in emailed comments. “But policy restrictions on drilling there would need to be lifted for that to be realised.”
    Back to Top

    China crude oil stocks rose 49.70 mil barrels in March

    China crude oil stocks rose 49.70 mil barrels in March, highest stock increase in single month, according to PlattsOil calculations


    Attached Files
    Back to Top

    Saudi Oil Exports Drop to 2015 Low as Kingdom Sticks to Cuts

    Saudi Arabia trims exports to a 21-month low in February as local refineries took advantage of more abundant supplies and processed a record amount of crude.

    (Bloomberg) -- Saudi Arabia, the world’s largest crude shipper, trimmed exports to a 21-month low in February as local refineries took advantage of more abundant supplies and processed a record amount of crude.

    Oil exports fell to 6.95 million barrels a day, the lowest since May 2015, from 7.7 million a day in January, according to data published Tuesday on the Riyadh-based Joint Organisations Data Initiative website. The kingdom boosted production to 10 million barrels a day from 9.7 million a day, the data show.

    Saudi Arabia is bearing the brunt of the output cuts that members of the Organization of Petroleum Exporting Countries pledged to make in the first six months of this year. It committed to pump no more than 10.058 million barrels a day, as OPEC and other major producers sought to rein in global oversupply and support prices.

    Saudi refineries increased the amount of crude they processed in the month by 26 percent to 2.67 million barrels a day, the highest in JODI data going back to January 2002. The amount of crude used directly as fuel in power plants and other facilities also rose, as did volume in storage. Stockpiles increased to 264.7 million barrels at the end of February from almost 262 million barrels in January.

    Saudi Arabian Oil Co. was planning an 80-day maintenance work at its Riyadh refinery starting in late February to last through mid-May, according to two people with knowledge of the situation. The refinery has capacity to process 120,000 barrels of crude a day, according to data compiled by Bloomberg.

    “It seems that Aramco is preparing for the long shutdown of the Riyadh refinery by increasing production from other refineries as they need to keep some products in stocks while the refinery is closed,” said Mohamed Ramady, an independent London-based analyst. “The amount of crude not being processed at the Riyadh refinery is reflected in the oil stockpiles in February as they increased from January.”

    The country plans to double refining capacity to as much as 10 million barrels a day within 10 years, Saudi Energy Minister Khalid Al-Falih has said. Saudi Arabian Oil Co., the state producer known as Saudi Aramco, expects to start operating a 400,000 barrel-a-day refinery next year at Jazan on the Red Sea, adding to two other plants of the same size that have come online since 2013.
    Back to Top

    Exxon plans to boost shale gas output in Argentina: governor

    ExxonMobil plans to ramp up natural gas production from the Vaca Muerta shale play in Neuquen, Argentina, the governor of that province said.

    Neuquen Governor Omar Gutierrez said he met with senior executives of Exxon and its XTO unit in Houston, Texas, last week during a road show to promote a series of tenders for 56 blocks in the southwestern province, according to a statement Monday.

    The Irving, Texas-based company "is evaluating the potential of gas development in the Los Toldos 1 Sur block," and is poised to request a 35-year production license for the block, Gutierrez said.

    Exxon's focus is to be on developing gas from Vaca Muerta, among the world's most promising shale plays, where the company will have invested $750 million by the end of this year, the governor added.

    Exxon was not available for immediate comment on the governor's statement.

    The focus on gas has been driven by an extension of pricing incentives this year through 2021, as the quicker a company can get a block into production, the more they can profit from the higher prices, Gutierrez said.

    The incentives are designed to pay producers $7.50/MMBtu for output through 2018 and then gradually decline to $6/MMBtu in 2021, before free-market pricing takes effect in 2022, when prices are expected to average $4/MMBtu, or about $1/MMBtu less than current market averages.

    The pricing incentives, which started in 2013, have led a rise in output from Vaca Muerta and several tight plays to 123 million cu m/d in 2016, up 8.2% from a 10-year low of 113.7 million cu m/d in 2014, according to Energy Ministry data.

    Gutierrez said Exxon plans to enter into the production phase in May, without specifying on what block. The company will drill horizontal wells with laterals of 2,500-3,000 meters (8,202-9,843 feet), he added.

    By tapping into its experience in US shale plays and using advanced technology, Exxon and XTO expect to "accelerate gas production" to reach 5 million cu m/d in the next two to three years from the blocks it operates or has stakes in, according to the statement.

    Last year, XTO launched a pilot project on the combined blocks of Bajo del Choique and La Invernada with an investment of about $250 million. If the results prove promising, an additional $13.8 billion will be invested in the development of the combined block by drilling 556 horizontal wells, each with 2,500-meter legs and 25 frac stages, according to the company's investment plan approved by the Neuquen government in 2015.

    Exxon is part of a new wave of investment in Vaca Muerta that gained speed this year after the governments of Argentina and Neuquen reached an agreement with companies and labor unions to extend the gas pricing incentives, cap tax pressure, improve labor productivity and expand infrastructure capacity. The aim is to bring down drilling and completion costs, helping to boost profit potential.

    Tecpetrol, a leading local producer, recently announced a $2.3 billion investment to ramp up gas production to 10 million cu m/d from a Vaca Muerta block over the next three years.

    Gutierrez has said he expects more companies to come forward with investment plans this year, initially with a focus on gas.

    The country expects to close a 30% gas deficit by 2021-22, allowing it to resume exports to the region.

    Neuquen produces 20% of the country's 510,000 b/d of oil and 48% of its gas, according to data from the Argentina Oil and Gas Institute, an industry group.
    Back to Top

    Oil slides more after U.S. settlement on API inventory report

    Oil prices fell on Tuesday, then slid more in post-settlement trade after an industry group reported that U.S. crude stockpiles fell less than expected in the latest week while gasoline stockpiles grew unseasonably.

    U.S. crude prices were down more than 1 percent at $52.32 a barrel in post-settlement trade after the American Petroleum Institute released its weekly data, indicating that crude stockpiles declined less than analysts had forecast.

    Oil futures fell during the trading session, touching their lowest in 11 days as the U.S. government reported that shale oil output in May was expected to post the biggest monthly increase in more than two years.

    The oil market has been caught in a tug-of-war, with OPEC production cuts supporting prices while signs of rising U.S. production have pressured crude on concerns about a glut. On Tuesday, U.S. West Texas Intermediate crude touched a low of $52.10 before bouncing on suggestions that Saudi Arabia is holding crude off the market.

    "We're right at the battle ground: the bulls and the bears are facing off against each other, trying to make their last stand," said John Kilduff, Partner at Again Capital in New York.

    Global benchmark Brent crude futures swooned as low as $54.61, the lowest since April 7, then settled down 47 cents at $54.89 a barrel.

    U.S. WTI futures settled at $52.41 a barrel, down 24 cents. U.S. crude's intraday low was also the weakest since April 7.

    At a time when OPEC and other producing nations have been trying to cut output, government drilling data showed U.S. shale production next month was set to rise to 5.19 million barrels per day (bpd). Output from the Permian play, the country's largest shale region, was expected to reach a record 2.36 million bpd.

    Members of the Organization of the Petroleum Exporting Countries are cutting oil production 1.2 million bpd from Jan. 1 for six months, the first reduction in eight years.

    "The battle between the 'sheiks and the shale oil producers' is far from decided ... with all attempts by OPEC to achieve a lasting production deficit on the oil market being torpedoed by non-OPEC producers – first and foremost the U.S.," analysts at Commerzbank wrote.

    The energy minister of OPEC member the United Arab Emirates predicted healthy oil demand growth this year and said inventories would fall, but it would take time.

    OPEC leader Saudi Arabia tightened February crude oil exports to the lowest since mid-2015, official data showed.

    "We've fought to a draw today and the inventory report will help break us out of this logjam," Kilduff said.

    The market will watch Wednesday morning to see if U.S. government data confirms the API report. A Reuters poll showed analysts expected data to show U.S. crude stocks fell in the week to April 14.
    Back to Top

    East Coast refiner shuns Bakken delivery as Dakota Access Pipeline starts

    Philadelphia Energy Solutions Inc, the largest refiner on the U.S. East Coast, will not be taking any rail deliveries of North Dakota's Bakken crude oil in June, a source familiar with delivery schedules said on Tuesday - a sign that the impending start of the Dakota Access Pipeline is upending trade flows.

    At its peak, PES would have routinely taken about 3 miles' worth of trains filled with Bakken oil each day. But after the $3.8 billion Dakota Access Pipeline begins interstate crude oil delivery on May 14, it will be more lucrative for producers to transport oil to refineries in the U.S. Gulf Coast.

    The long-delayed pipeline will provide a boost for Bakken prices and unofficially end the crude-by-rail boom that revived U.S. East Coast refining operations several years ago.

    "It's the new reality," said Taylor Robinson, president of PLG Consulting. "Unless there's an unforeseen event, like a supply disruption, there will be no economic incentive to rail Bakken to the East Coast."

    PES declined to comment for this story.

    The 1,172-mile (1,885-km) Dakota Access line runs from western North Dakota to a transfer point in Patoka, Illinois. From there, the 450,000 barrel per day line will connect to large refineries in the Nederland and Port Arthur, Texas, area.

    The project became a focus of international attention, drawing protesters from around the world, after a Native American tribe sued to block completion of the final link of the pipeline through a remote part of North Dakota.

    The Standing Rock Sioux tribe said the pipeline would desecrate a sacred burial ground and that any oil leak would poison the tribe's water supply.

    But after U.S. President Donald Trump took office in January, one of his first acts was to sign an executive order that reversed a decision by the Obama administration to delay approval of the pipeline. The tribe also lost several lawsuits aimed at stopping the project led by Energy Transfer Partners LP.

    PES has scheduled just five rail deliveries of crude for May and none for June at its facility in Philadelphia, according to the source familiar with the plant's operations, who spoke on condition of anonymity because they are not authorized to speak about company operations. Deliveries are often scheduled months in advance to manage logistics like storage and manpower.

    In recent months, PES was getting roughly one unit train per day, the equivalent of 75,000 barrels a day. During the boom years between 2013 and 2015, PES would routinely receive three trains a day of Bakken.

    PES and other refiners built large rail terminals on the East Coast in recent years to accommodate cheap Bakken flowing from North Dakota. The PES refinery terminal, which opened in 2013, was able to handle roughly 280,000 barrels a day, making it the largest on the U.S. East Coast.

    Rail volumes of Bakken crude peaked at 420,000 bpd, resulting in bumper profits for those refiners. But Bakken crude's discount to U.S. crude slowly eroded as pipeline capacity out of North Dakota expanded, increasing competition for the heavy oil.

    That forced the East Coast to rely more heavily on foreign, waterborne crude. Currently, Bakken barrels at the delivery point in Nederland, Texas, in June are trading around $1.25 to $1.50 a barrel over U.S. crude futures. Higher rail costs would boost those barrels to $7 to $8 more than U.S. crude.

    The East Coast has averaged roughly 100,000 bpd of crude rail deliveries in recent weeks, according to energy industry intelligence service Genscape.

    Monroe Energy, a subsidiary of Delta Air Lines, stopped receiving Bakken by rail for its 185,000 bpd refinery outside Philadelphia in January of last year. East Coast refineries operated by Phillips 66 and PBF Energy are still receiving modest volumes of Bakken crude.

    "At this point, there are no good reasons to rail crude to the East Coast," said Sarah Emerson, a managing principal at ESAI Energy LLC, a consultancy.

    Attached Files
    Back to Top

    China seen moving swiftly to rein in oil blending frenzy

    China is inching closer to imposing a consumption tax on mixed aromatics, light cycle oil and bitumen blend, a move that will likely curb inflows of those products and stem surging oil product exports by Asia's biggest oil consumer.

    The planned policy change will also likely increase China's imports of lighter crudes for gasoline production to offset the squeeze in the blending pool if consumption taxes are imposed, market participants told S&P global Platts.

    Beijing is widely expected to levy consumption taxes on mixed aromatics and light cycle oil. Although there has been no official confirmation, market participants expect details to be released some time between May 1 and July 1.

    Sources with knowledge of the matter said the consumption taxes for mixed aromatics, LCO and bitumen blend would use the current consumption taxes on gasoline, gasoil and fuel oil as a reference; these currently stand at Yuan 1.52/liter, Yuan 1.20/liter and Yuan 1.20/liter respectively.

    "This means importers will have to pay Yuan 1,000-2,000/mt more for importing those products, which is expected to largely curb inflows of these grades, just like what happened to fuel oil a few years ago," a market source said.

    China's fuel oil imports have fallen dramatically since Beijing imposed the consumption tax in 2008.

    Mixed aromatics is the main blending material for gasoline, and LCO for gasoil. Bitumen blend is a mixture of fuel oil and heavy crude, which can be used as a refining feedstock.

    "Blending profit will immediately be eliminated due to the consumption tax," said one Guangzhou-based importer.

    China's imports of mixed aromatics and LCO have surged in recent years, as both are currently free of consumption tax. China's mixed aromatics imports jumped 81.4% year on year to 11.7 million mt in 2016, while LCO imports soared 135% to 4.46 million mt, General Administration of Customs data showed.

    The mixed aromatics inflows in 2016 translated roughly into 39 million mt of gasoline supply from the blending pool, in addition to the official output of 129.32 mt from refineries. LCO inflows resulted in an additional 10 million mt of gasoil supply on top of the 179.18 million mt output from refineries.

    The impact on bitumen blend import volumes from a consumption tax is expected to be softer as imports of the grade have been sliding since 2015, when independent refineries started using crude oil as feedstock. China imported around 3.69 million mt of bitumen blend in 2016, down 72.5% year on year, according to customs data.


    According to Platts China Oil Analytics, huge imports of blending components into China resulted in "hidden demand" last year as blended fuels were not captured by official production data.

    "We estimate that gasoil and gasoline demand last year was understated by at least 290,000 b/d and this did not include finished grades produced by independent fuel blenders, which is difficult to quantify," it said in a report issued April 11.

    The additional supply from the blending pool was responsible for pushing up China's gasoline and gasoil exports by 64% and 114% year on year respectively in 2016 to 9.7 million mt and 15.4 million mt.

    When the consumption tax takes effect, China's exports of gasoline are expected to drop, as refineries would need to boost supply to the domestic market to make up for the supply cut from oil blenders, sources said.

    "Once the import window for mixed aromatics is closed, less gasoline will be available for export out of China," said a Beijing-based analyst.

    A Singapore-based market observer said gasoil exports would be somewhat sustained as LCO accounted for a relatively smaller portion of the gasoil pool. Mixed aromatics makes up a crucial portion of the gasoline pool.

    However, China is unlikely to have adequate gasoline or gasoil inflow to compensate for the supply reduction from blenders, because Beijing has suspended issuing import quotas for these products in 2017, except for a small volume with special specifications for car racing.

    "Despite pushing for deregulation in the refining sector by encouraging more players into the market to compete on a level playing field, the theme is veering toward control and consolidation, with the government now appearing to take an active stand to curb exports," Platts China Oil Analytics said in the report.


    Plans to impose consumption taxes on mixed aromatics and light cycle oil are already taking a toll on freight rates for Medium Range tankers, brokers across East and North Asia said.

    Large numbers of mixed aromatic cargoes are shipped out of Singapore to China in MR tankers. These tankers then load distillates for delivery to Singapore, the Philippines and South Korea, among other destinations.

    The proposed consumption tax, refinery turnarounds and lower export quota volumes for oil products from China have started to hurt freight rates for MRs across the region.

    "The MR market is collapsing," said a broker in Seoul.

    The lump sum freight on the South Korea-Japan route was assessed last Friday at $290,000, down 27% from $395,000 at the start of the year, Platts data showed.

    The South Korea-Hong Kong and the Singapore-Hong Kong rates were assessed at $250,000 and $260,000 respectively, down from $325,000 and $320,000 at the start of the year, the data showed.

    "Exports [of distillates] from China have been slow from end March," said an MR broker in Singapore. Prompt ships are in oversupply, he added.

    Meanwhile, domestic refineries in China, especially state-owned refineries, are expected to benefit from the move, as the heavy tax on mixed aromatics and LCO would eliminate competition from oil blenders, sources said. "Once China imposes consumption taxes on mixed aromatics and LCO, the country's gasoline and gasoil needs have to be increasingly met by refineries, especially state-owned refineries," a source with a Singapore trading house said.

    "Independent refineries are also expected to benefit from less competition from oil blenders," the source added.

    A source with state-owned Sinopec Guangzhou refinery said: "Our domestic sales of gasoline will increase if the news turns out to be true. We will raise output too."
    Back to Top

    Chevron begins Gorgon LNG Train 2 restart

    US-based energy giant Chevron began restart activities at its Gorgon LNG project’s second liquefaction train.

    “Restart activities are underway on Gorgon train 2. We continue to produce LNG from trains 1 and 3 and load LNG cargoes,” Chevron’s spokeswoman told LNG World News.

    No exact deadline for the Train 2 production restart has been given.

    Chevron suspended production at its second liquefaction train at the Gorgon LNG plant at the end of last month to carry out maintenance to “improve the train’s capacity and reliability.”

    The $54 billion Gorgon LNG project is operated by Chevron that owns a 47.3 percent stake, while other shareholders are ExxonMobil (25 percent), Shell (25 percent), Osaka Gas (1.25 percent), Tokyo Gas (1 percent) and Chubu Electric Power (0.417 percent).
    Back to Top

    Brazilian court suspends Petrobras’ field sale to Statoil

    A Brazilian court is blocking the transfer of Petrobras’ stake in the BM-S-8 offshore exploration block, which contains the Carcará oil field, to the Norwegian oil company Statoil.

    According to a Monday statement by the Brazilian oil giant, the 2nd Federal District Court, Sergipe state, granted an injunction to suspend the transfer of the stake to Statoil and the exploration of the field, until further court deliberation.

    The Brazilian and the Norwegian oil company agreed last July for Statoil to acquire Petrobras’ 66% operated interest of the BM-S-8 offshore license in Brazil’s Santos basin for $2.5 billion. The acquisition included a substantial part of the Carcará oil discovery, which Statoil claimed to be one of the largest discoveries in the world in recent years.

    Statoil estimated the recoverable volumes within the BM-S-8 license to be in the range of 700 to 1,300 million boe. BM-S-8 holds exploration upside that may significantly increase its resource base. The license was in its final exploration phase with one remaining exploration commitment well to be drilled by 2018.

    On completion of the transaction in November, Statoil paid Petrobras $1.25 billion, which is half of the total consideration, with the remainder paid at the passage of certain future milestones.

    In the statement on Monday, Petrobras also noted that this transaction had already been finalized after the fulfillment of all the precedent conditions set forth in the contract, with no restrictions, such as approval by the Administrative Council for Economic Defense (Cade) and by the National Agency of Petroleum, Natural Gas and Biofuels (ANP).

    Furthermore, the Brazilian company stated that the amount received after the closing of the transaction was used in full for early settlement of part of the financing contract between Transportadora Associada de Gás S.A. (TAG), a wholly-owned Petrobras subsidiary, and the National Bank for Economic and Social Development (BNDES), where such a measure was adopted to reduce its indebtedness.

    Petrobras added that it will take the appropriate legal action on behalf of its investors and own interests.

    Sale ‘result of competitive process’

    Offshore Energy Today has reached out to the Norwegian oil company seeking further details about the suspension and the company’s course of action.

    A spokesperson for Statoil confirmed the court suspended the Carcará sale process and all activities related to it.

    When asked about the reason behind the suspension, the spokesperson said: “We cannot speculate in the reason for this decision, but are confident that Brazilian institutions will confirm the legality of the transaction and Statoil will take appropriate actions to support this.

    “The deal was a result of a competitive process as part of Petrobras’ divestment plan and the deal was closed on 22 November 2016. It has been approved by the Brazilian anti-trust agency (CADE), the National Petroleum Agency (ANP) as well as the partners in the license.

    “Statoil was also named in the decision and we are currently evaluating our next steps.”

    Further regarding the reason for the suspension, Reuters reported that the National Federation of Oil Workers said it had filed the lawsuit because Petrobras, as a state-controlled enterprise, is required to hold an open bid for any asset sale.
    Back to Top

    Despite alliance, Russian shipper holds Venezuela oil hostage over debts

    Venezuela's state-run oil company, PDVSA, sent a tanker in October to the Caribbean with the expectation that its cargo of crude would fetch about $20 million - money the crisis-stricken nation desperately needs.

    Instead, the owner of the tanker, the Russian state-owned shipping conglomerate Sovcomflot, held the oil in hopes of collecting partial payment on $30 million that it says PDVSA owes for unpaid shipping fees.

    Despite a longstanding alliance between Venezuela and Russia, Sovcomflot sued PDVSA in St. Maarten, a Dutch island on the northeast end of the Caribbean.

    "The ship owners ... imposed garnishment on the aforementioned oil cargo," reads a March decision by the St. Maarten court.

    Five months after crossing the Caribbean, the NS Columbus discharged its cargo of crude at a storage terminal on St. Eustatius, an island just south of St. Maarten, under a temporary decision by the court. Another tribunal in England will decide if Sovcomflot will ultimately take the oil.

    The dispute, which is being heard by the United Kingdom Admiralty Court, highlights how shipping companies are becoming increasingly aggressive in pursuing PDVSA's debts.

    It also shows that political allies such as Russia are losing patience with delinquent payments from Venezuela, whose obsolete tankers are struggling to export oil and even to supply fuel to the domestic market.

    PDVSA also owes millions of dollars to Caribbean terminals - including the one in Saint Eustatius, which is owned by U.S. NuStar Energy, according to a PDVSA executive and an employee at one of the facilities.

    NuStar and a lawyer representing subsidiaries of Sovcomflot declined to comment. The Russian conglomerate PDVSA did not respond to requests for comment.

    PDVSA did not respond to written questions regarding its tanker fleet or its debts to shipping companies.

    PDVSA's tangled web of payment disputes now spans the globe, from unpaid shipyards in Portugal and half-built tankers in Iran and Brazil to the seized cargo in tiny St. Eustatius, whose strategic location in the Caribbean made it an 18th century colonial-era trading hub.


    The oil price crash starting in 2014 hit Venezuela particularly hard. Once a paradise of oil-fueled consumption, the OPEC nation is now a Soviet-style economy of empty supermarket shelves and snaking food queues.

    Russia has consistently supported President Nicolas Maduro with financing arrangements and oilfield investments. State-run oil firm Rosneft has lent money to PDVSA since 2016 and last month was in talks to help PDVSA make a hefty bond payment, according to Venezuelan government and banking sources.

    But problems had been brewing for months between Venezuela and Sovcomflot, which provides about 15 percent of vessels that PDVSA charters to ship crude to its clients amid a steady deterioration of its own fleet, according to a captain and two shipbrokers working with PDVSA.

    Debts to Sovcomflot had by 2016 swelled enough that company's top brass complained in person to PDVSA President Eulogio Del Pino in the Russian city of Sochi, according to source from PDVSA's trade department with knowledge of the meeting.

    Del Pino agreed to a payment schedule proposed by his trade and fleet executives and accepted by Sovcomflot, the source said. But PDVSA - saddled with heavy bond payments and billions of dollars in unpaid bills to oilfield services providers - was unable to make sufficient payments to avoid Sovcomflot's unusually public debt-collection gambit.

    A PDVSA representative denied that Del Pino was confronted by Sovcomflot in Sochi, saying the account was false, without elaborating.

    Detentions of oil cargoes have been unusual because creditors rarely have sufficiently detailed information on tanker movements to obtain timely court orders.

    Venezuela also tends to ensure that any cargoes that leave its ports legally belong to the clients rather than to PDVSA, meaning they are rarely in a position to be seized.

    The Sovcomflot dispute was different in that the creditors are the tanker owners. Although the crude onboard the NS Columbus had already been sold to Norway's Statoil, the cargo was being carried in a tanker navigating with a bill of lading under PDVSA's name, according to two inspectors and a representative of one of the companies involved.
    Back to Top

    JKM monthly: May-delivery LNG averages $5.454/MMBtu, down 10% on month

    The Platts JKM for May LNG averaged $5.454/MMBtu over the March 16 to April 13 assessment period, down 10.3% from the previous month.

    Oversupply concerns added to the downward pressure earlier in the assessment period but following supply outages at the Pacific Basin's Sakhalin 2 and Gorgon projects, it recouped some of the losses. Higher oil prices also helped provide support.

    UK National Balancing Point hub front-month gas futures averaged $4.977/MMBtu over the JKM May assessment period and the JKM-NBP spread narrowed to $0.488/MMBtu from $0.630/MMBtu a month earlier.

    Production at the Sakhalin-2 LNG plant was suspended after an accident at one of its platforms.

    Sources said Japanese utilities with long-term volumes tied to the Sakhalin and Chevron-operated Gorgon projects were encouraged to pick up some shipments in case of long cargo delays and continued cold weather at home.

    Sporadic demand was also observed from South Korea and India.

    India's IOC issued a two-cargo buy tender for H1 and H2 June while its peer Gail also launched a tender looking for an early May cargo. In South Korea, SK E&S was looking for at least two May cargoes.

    In Asia, some end-users were said to have relatively low stocks and so might look for spot cargoes, although it was not clear how firm their requirements would be.

    In the Atlantic, production at Angola LNG appeared robust and since March 27, Angola has launched four tenders.

    Supply was ample in the Atlantic, thanks to volumes from the Sabine Pass liquefaction project on the US Gulf Coast, although traders said not many of them had been directed to Asia as yet.

    In the Middle East, Egypt's Egas was said to be trying to defer 2017 cargoes to 2018 due to increased domestic gas production, particularly from the North Alexandria Concession controlled by BP.

    The number of cargoes that would be affected was unclear, with sources saying that 10 to more than 20 cargoes would be rolled into next year.
    Back to Top

    ConocoPhillips has potential buyers for LNG plant in Alaska

    ConocoPhillips is negotiating with potential buyers for the company's mothballed liquefied natural gas plant at Nikiski, on the Kenai Peninsula south of Anchorage, a company spokeswoman said Monday.

    The plant, which has a capacity to manufacture up to 1.5 million mt/year of LNG, was built in 1968 by Phillips Petroleum and made regular shipments of LNG to Tokyo Gas and Tokyo Electric under long-term contracts until 2012, when the contracts expired.

    Periodic shipments have been made to Japan and South Korea since then on a spot-sale basis, the last being in 2015.

    ConocoPhillips put the plant up for sale in November and also recently sold the North Cook Inlet gas field, which supplies gas to the plant.

    "We had requested that initial bids be submitted by March 17. The data room that was set up to market the Kenai LNG Facilities is closed and we have received interest," company spokeswomen Amy Jennings Burnett said in a statement.

    "We are currently evaluating the bids to determine next steps. We believe the plant is a strategic asset that offers good opportunities for the right buyer," she said.

    Although LNG prices in Asia are currently low the plant does provide a potential market for companies now exploring and developing new gas discoveries in Cook Inlet. The regional utility market is now supplied by contracts extending beyond 2025 and unless there is a way to market new gas, such as through LNG exports, future development may be stymied, state officials have said.

    Phillips and Marathon Oil built the LNG plant in the 1960s as a way of marketing Cook Inlet gas discoveries that were stranded at the time. When exports began these were the world's first long-distance shipments of LNG and Japan's first imports of LNG.
    Back to Top

    Petrobras’ oil output suffers due to FPSO stoppage

    Brazilian state-owned oil company Petrobras has said that its total production of oil and natural gas in March was 2.74 million barrels of oil equivalent per day (boed), of which, 2.61 million boed produced in Brazil and 130,000 boed produced abroad.

    Average oil production in the country was 2.12 million barrels per day (bpd). This volume represents a 3% drop compared to February, mainly due to maintenance stoppages on FPSO Cidade de Angra dos Reis, located in Lula field, in the Santos Basin pre-salt, and on P-37, in Marlim field, in the Campos Basin. The company’s domestic oil output was also down in February for a similar reason, the stoppage of the FPSO Cidade de Paraty.

    In March, the production of natural gas in Brazil, excluding the liquefied volume, was 77.7 million m³/d, 3% lower than in the previous month due to the mentioned stoppages.
    Pre-salt production
    In March, the production of oil and natural gas operated by Petrobras in the pre-salt layer, own portion and that of partners, was 1.50 million boed, volume 2% lower than in the previous month due to the stoppage on FPSO Cidade de Angra dos Reis.

    Compared to March 2016, there was a 36% production increase mainly due to the beginning of production on FPSO Cidade de Saquarema, in the Lula Central area, and on FPSO Cidade de Caraguatatuba, in Lapa field, in addition to the production increase on FPSO Cidade de Marica, in the Lula Alto area, during the period.
    Production of oil and natural gas abroad
    In March, oil production in overseas fields was 66,000 bpd, volume 4% higher than in the previous month. This performance resulted mainly from the return to production after stoppages in Lucius and Hadrian South fields, in the US, which took place in February.

    Natural gas production was 11.0 million m³/day, a 31% increase over the volume produced in February 2017. This increase resulted from a greater demand of gas production in Bolivia and from the resumption of production in Lucius and Hadrian South fields.
    Back to Top

    Woodside’s Karratha gas plant suffers production outage

    Australian LNG player Woodside said its Karratha gas plant had suffered an unexpected production outage on Saturday.

    “At approximately 11.30am on Saturday 15 April, Karratha gas plant experienced a production outage. No injuries were sustained during the incident and everyone is accounted for,” Woodside said in a statement trough its social media channels.

    “People in the Karratha area will have seen black smoke from the KGP flare towers. This is a safety function used during a production outage,” the company added.

    Woodside said that the cause of the outage was being investigated. The company did not provide any additional information.

    The Karratha gas plant is located some 1260 kilometres north of Perth, Western Australia. It is a part of the North West Shelf project facilities.

    The Karratha gas plant facilities include five LNG processing trains, two domestic gas trains, six condensate stabilisation units, three LPG fractionation units as well as storage and loading facilities.

    It has an annual LNG export capacity of 16.9 mtpa which is supplied mainly to companies in the Asia Pacific region.

    Woodside operates these facilities on behalf of the NWS project participants. Other NWS JV partners are BHP Billiton, BP, Chevron, Japan Australia LNG (MIMI) and Shell.
    Back to Top

    China's March shale gas output surges 50pct YoY

    China's shale gas output surged in March, and natural gas production also expanded, indicating improved energy structure as the country shifts away from reliance on traditional energy sources, Xinhua News Agency reported on April 17.

    Shale gas output jumped 50.4% year on year to 1.15 billion cubic meters in March, showed data from the National Bureau of Statistics (NBS).

    In the first quarter, shale gas output stood at 2.67 billion cubic meters, up 17.4% year on year, data showed.

    The fast growth was mainly due to the increased production by the Changning-Weiyuan national-level shale gas pilot zone in southwest China's Sichuan province, run by the country's oil and gas giant China National Petroleum Corporation.

    China has been making efforts to improve its energy structure, shifting away from traditional energy sources such as coal. Breakthroughs have been made in shale gas capacity and drilling techniques, making China one of the top shale gas suppliers in the world.

    By 2020, the proved reserves of shale gas will surpass 1.5 trillion cubic meters, according to plans released by authorities at the beginning of the year.
    Back to Top

    EnerCom Effective Rig Count Rises to 1,765

    EnerCom Effective Rig Count Rises to 1,765

    EnerCom released its EnerCom Effective Rig Count today. Launched in January, the Effective Rig Count seeks to account for improved productivity from recent development. New technologies and techniques have allowed wells to be drilled faster and produce more hydrocarbons. Each rig yields greater production now than it did before the downturn.

    Based on the Effective Rig Count, rigs in the Utica have seen the greatest productivity increase, yielding 4.4x as many barrels of oil equivalent on an individual basis in March 2017 (the last month with available data for both rigs and production) than rigs in the region were producing in January 2014, when oil prices were at their peak in the triple digits.

    Significant productivity gains are also seen in the Permian and Niobrara. 347 rigs were active in these two basins in March, but increased productivity means these rigs are creating production equivalent to 1,193 rigs from early 2014.

    Nationally, rigs are producing 3.1x more production than they were before the crash. While 541 rigs are currently active in the major basins, increased productivity means that 1,765 January 2014 rigs would be required to yield the same amount of production that 541 rigs generate in 2017.
    Back to Top

    May U.S. shale oil output seen rising most in over two years

    U.S. shale production in May was set for its biggest monthly increase in more than two years, government data showed on Monday, as producers stepped up their drilling activity with oil prices hovering at over $50 a barrel.

    May output is set to rise by 123,000 barrels per day to 5.19 million bpd, according to the U.S. Energy Information Administration's drilling productivity report. That would be the biggest monthly increase since February 2015 and the highest monthly production level since November 2015.

    In the prolific Permian play located in West Texas and New Mexico, oil production is forecast to rise by nearly 76,000 bpd to 2.36 million bpd, data showed, a new record for the largest U.S. shale play.

    In the Eagle Ford region, output is set to rise by 39,000 bpd to 1.22 million bpd, the third monthly increase. Production in the Bakken is forecast to drop 1,400 bpd to 1.02 million bpd, the third consecutive monthly decline.

    U.S. natural gas production was projected to increase to a record 50.1 billion cubic feet per day (bcfd) in May. That would be up about 0.5 bcfd from April and be the seventh monthly increase in a row.

    The EIA projected gas output would increase in all of the big shale basins in May.

    Output in the Marcellus formation in Pennsylvania and West Virginia, the biggest shale gas play, was set to edge up to a record high near 19.0 bcfd in May, a seventh consecutive increase. Production in the Marcellus was 18.0 bcfd in the same month a year ago.

    EIA also said producers drilled 854 wells and completed 743 in the biggest shale basins in March, leaving total drilled but uncompleted wells (DUCs) up 111 at 5,512, the most since March 2016.
    Back to Top

    Blackstone Bets There's Gas Money to Be Made in the Oil Patch

    With its $2 billion takeover of EagleClaw Midstream Ventures LLC, Blackstone Group LP on Monday became the latest company to bet on gas in a basin better known for its oil reserves. Its interest lies in “associated gas” -- a term used to describe the gas that comes out of an oil well along with the crude. Gas volumes will rise fivefold in five years on the EagleClaw system, said David Foley, chief executive officer of Blackstone Energy Partners LP.

    Gas output from the Permian, which accounts for more than a quarter of America’s oil production, has risen to a record every month this year, government data show. That’s driving deals in the region, including Targa Resources Corp.’s purchase of gas pipelines from Outrigger Energy and a deal by Williams Cos. to exchange its stake in a Texas gas-gathering system with Western Gas Partners LP-owned networks in Pennsylvania.

    Drilling for Permian oil is covering a bigger area and moving south, boosting gas volumes, Foley said.

    “We’ve got beachfront property, basically,” Foley said by phone. “And the beach is continuing to extend. We’ve already got, existing or under construction, three-quarters of a billion cubic feet per day of processing capacity” for natural gas.

    Gas Exports

    Blackstone says it’s targeting the Permian Basin because crude production there is linked to global oil prices. In contrast, natural gas prices in eastern U.S. basins, such as the Marcellus shale, have been weighed down by a glut of supply.

    Permian gas may be easily exported to Mexico via pipeline and as liquefied natural gas from terminals on the Gulf of Mexico, he said. Texas gas also sells at less of a discount to the benchmark Henry Hub in Louisiana, compared with Marcellus supplies, according to data compiled by Bloomberg.

    “Export is the single biggest source of growth in natural gas demand in the U.S., and this asset is next door,” Foley said.
    Back to Top

    US rig count expands yet again in 13th weekly gain

    US rig count expands yet again in 13th weekly gain

    Helmerich & Payne motor man Michael Palmer, left, and floor hand Travis Palmer, right, move equipment as a section of pipe is drilled into the ground for oil and gas extraction on a Diamondback Energy lease Wednesday, Sept. 14, 2016 outside of Midland. 

    Oil companies set up more drilling rigs in U.S. oil fields over the past week, expanding the nation’s rig count for the thirteenth consecutive week, Baker Hughes said Thursday.

    All told, drillers dispatched 11 oil rigs and idled three natural gas rigs, lifting the fleet by eight to 847, a figure more than twice the rig count’s multi-decade low point reached in May.

    Eight oil rigs went to the Permian Basin in West Texas, and another three went to the Eagle Ford Shale in South Texas. Four more rigs were placed in Oklahoma, Colorado and North Dakota. Some were removed from fields Baker Hughes doesn’t name.

    The drilling surge is especially stark in Texas, home to about a third of the nation’s oil production. The state’s rig count has climbed from 173 in May to 419 this week.
    Back to Top

    Dakota Access Pipeline to start interstate service May 14

    The controversial Dakota Access Pipeline will begin interstate crude oil delivery on May 14, according to a filing with the U.S. Federal Energy Regulatory Commission.

    Energy Transfer Partners LP on Thursday filed what is known as a tariff, which lays out details about the line and the oil to be delivered.

    The 1,172-mile (1,885-km) Dakota Access line runs from western North Dakota to Patoka, Illinois. The $3.8 billion project became a focus of international attention, drawing protesters from around the world, after a Native American tribe sued to block completion of the final link of the pipeline through a remote part of North Dakota.

    The Standing Rock Sioux tribe said the pipeline would desecrate a sacred burial ground and that any oil leak would poison the tribe's water supply.

    Thousands of protesters demonstrated in North Dakota and Washington, D.C., many staying to support the tribe in a makeshift camp near the pipeline's construction site last fall. Many opponents also said reliance on the pipeline and the petroleum it was intended to carry would exacerbate climate change.

    The outgoing administration of Democratic President Barack Obama said it would reconsider the permits issued for the pipeline's route near tribal lands, delaying the project by several months.

    But that move was quickly reversed after the inauguration of Republican President Donald Trump in January.

    Among Trump's first acts in office was to sign an executive order that reversed a decision by the Obama administration to delay approval of the pipeline.

    The tribe also lost several lawsuits aimed at stopping the pipeline.
    Back to Top

    Fracking Comes To Alaska, Triggering New Oil Boom

    Hydraulic fracturing is coming to Alaska, and one professor thinks it could change global politics in favor of U.S. interests.

    Companies have discovered in the last year at least 5 billion barrels of recoverable oil on Alaska’s North Slope — a 14 percent increase in U.S. proven reserves. These finds could significantly increase U.S. oil production, changing the global energy game in the U.S.’s favor.

    “If these new discoveries become producing fields, the Alaskan Arctic will write a new chapter in the U.S. oil industry’s dramatic ascent,” Dr. Scott L. Montgomery, a professor of international relations at the University of Washington, wrote in an op-ed for The Conversation. “It will increase our leverage over [Organization of Petroleum Exporting Countries] OPEC and may help to counter Russia’s geopolitical influence.”

    “This prospect raises a new question: How will we will use our clout as the world’s most important new oil power?” Montgomery wrote.

    Montgomery argued fracking for Alaskan oil will make the U.S. a major oil exporter. Montgomery says Alaskan oil will be sold to Asia and undercut OPEC’s share of that market.

    “Oil remains our one unreplaceable energy source,” Montgomery wrote. “Global mobility and a modern military are, as yet, inconceivable without it. Growth in global demand, centered in developing Asia, will continue for some time, as it did even from 2010 through 2014 when prices were above $90 per barrel.”

    The U.S. is the world’s largest and fastest-growing producer of oil and natural gas, surpassing both Russia and Saudi Arabia. U.S. oil production grew 80 percent higher than it was in 2008.

    Companies recently found massive untapped oil deposits in Alaska that could be access through fracking. Major oil companies like Conoco are purchasing Alaskan land and developing cost effective methods of fracking in remote regions.

    Fracking in Alaska could accelerate as oil prices rise. Fracked Alaskan oil could be profitable to drill at $50 a barrel, which is just under current crude prices.

    The Trump administration also has plans to open up the Beaufort and Chukchi seas to offshore drilling, reversing an Obama-era order largely making those areas off-limits to drilling.

    Attached Files
    Back to Top

    ConocoPhillips sells San Juan basin assets for $3 bln

    ConocoPhillips said on Thursday it would sell natural gas-heavy assets in San Juan basin, spanning New Mexico and Southwestern Colorado, to an affiliate of privately held Hilcorp Energy Co for about $3 billion.

    Conoco will receive $2.7 billion in cash.

    The deal also includes a contingent payment of up to $300 million.

    Hilcorp has a partnership with private equity firm Carlyle Group LP to acquire and develop North American oil and gas properties.
    Back to Top

    After years of soaring growth, Asia's fuel demand falters

    After years of often explosive growth, fuel consumption in Asia's biggest economies is stuttering, undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to end a global supply glut and lift prices.

    Gobbling up over a third of global supplies, Asia is the world's biggest and fastest growing region for oil consumption, and its seemingly insatiable fuel thirst has long been a core support for prices.

    Now, some say that picture of buoyant growth in demand is crumbling.

    "The signs of growing demand aren't quite what they seem. Chinese fuel growth is at a three year low, Japanese fuel demand is down," said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai. "Considering the sheer volume of product available... sooner or later I think we could see some distressed sellers."

    Brent crude oil futures LCOc1 have risen by around 5.5 percent this month to $55.75 per barrel as traders bet on a broader commodity market recovery and price in a Middle East risk premium after the U.S. missile attack on Syria last week.

    But in a sign that there remains an abundance of oil available to buyers and that the more opaque physical oil market is not as convinced by the rally in financial markets, top exporter Saudi Arabia this month lowered the price for its May crude for Asian customers by 30 cents versus April, and to a discount of 45 cents compared with the benchmark Oman/Dubai average.

    It is showing up in various parts of the region's economy. China's gasoline exports in February climbed to their second-highest monthly level on record as refiners increasingly turned to exports to Asian markets to drain a domestic supply glut that almost wiped out imports altogether.

    Even India, which is often touted as the next driver of global demand growth, fuel consumption fell 0.6 percent in March from a year earlier.

    "The stutter in Indian demand may have been caused due to the effects of demonetization," said Sukrit Vijayakar, director of energy consultancy Trifecta.

    With little notice, India abolished the then existing 500 and 1,000 rupee notes late last year, which made up the bulk of the country's cash in circulation. That crimped consumption, affecting many consumers and disrupting many businesses.

    And while India's annual fuel demand is still expected to grow this year, analysts say, it is unlikely to recover enough to fully offset the demonetization impact.

    M. K. Surana, chairman of Hindustan Petroleum Corp, said he expects India's fuel demand to rise by 5.5 to 6 percent this year. Though that is still a high growth rate by global standards, it is a far cry from 2016's refined product demand growth of more than 10.9 percent.


    Consumption in other major Asian oil buyers is in terminal decline.

    Countries like Japan and South Korea face major demographic problems because of low birth rates and an aging population. A Japanese government agency this week forecast that the nation’s population will fall nearly a third by 2065. Add in improving fuel efficiency and the longer-term picture for oil producers trying to sell to Japan appears to be bleak.

    "Because of structural factors such as the improvement of vehicle fuel economy, domestic demand has been weakening... and that is continuing," said a spokesman for JXTG Nippon Oil & Energy Corp, which has a 50 percent share of Japanese gasoline sales.

    Japan's oil demand is expected to fall by more than 1.5 percent per year on average over the next five years, forecasts by the government's energy committee show.

    In South Korea, oil products demand fell by 0.4 percent in January-February from a year earlier, according to data from Korea National Oil Corp.

    "This year's overall domestic oil products demand growth is expected to slow," said Lee Seung-moon, a research fellow at the state-run Korea Energy Economic Institute.

    The longer-term trend in South Korea is similar to that in Japan, as rising efficiency, alternative fuels, and an aging population take their toll on oil demand.


    With demand faltering in Asia's four biggest oil consuming countries, efforts led by OPEC and Russia to cut output by 1.8 million bpd during the first half of the year to rein in a global fuel supply overhang could be undermined, resulting in calls by Saudi Arabia to extend the cuts into the second half of 2017.

    Goldman Sachs said in a note to clients on Wednesday that its long-term forecast for benchmark U.S. crude is $50 per barrel CLc1 versus the current price of $53.08 per barrel.

    Data from Thomson Reuters Eikon shows that global oil supplies on average exceeded demand by 680,000 bpd in 2016, and that 2017 will still see oversupply, albeit of less than 100,000 bpd, excluding stored oil.

    Still, lots of fuel remains stored on tankers in Asia's oil trading hub around Singapore. Eikon data shows that around 20 supertankers are currently sitting offshore Singapore and southern Malaysia, filled with oil.

    While this figure is slightly lower than a month ago, it is a sign of continuing oversupply.

    Keeping oil on tankers is only profitable if fuel prices for future delivery are significantly higher than those for imminent discharge.

    Yet the forward price curve for Brent crude futures <0#LCO:>, the international benchmark for oil prices, shows only a slight increase of 90 cents in prices between now and a peak in November, at $57.20 per barrel.

    "That's not enough to make it profitable to store oil on tankers," one ship broker said on condition of anonymity.

    What's worse, Brent prices start falling from November onward, back toward $56 a barrel for delivery toward the end of 2018 and into 2019.

    Such a price curve, “makes it commercial suicide to store oil on tankers, so the only reason to do that is if you have nowhere else to put it," the broker added.

    Attached Files
    Back to Top

    Libya's Wafa oil and gas field reopens, force majeure lifted - NOC

    Libya's National Oil Corporation (NOC) has lifted force majeure on production from the Wafa field after an armed group reopened oil and gas pipelines leading to the Mellitah terminal, the company said in a statement on Wednesday.

    Production of oil, gas and condensates had been interrupted at Wafa by a shutdown that started on March 26 near the town of Nalut. Wafa is operated by Mellitah Oil Co, a joint venture between NOC and Italy's ENI.

    The reopening would allow Mellitah to restore production of about 450 million cubic feet of gas, 9,000 barrels per day (bpd) of oil, and 7,500 bpd of condensate, NOC said.

    Earlier on Wednesday, an engineer at the Al-Rwais power plant that gets gas from Wafa said the gas pipeline had reopened, and a source at Nalut municipality told Reuters two pipelines had been reopened after local elders negotiated an accord with the armed group.

    The NOC has also been pushing to end a stoppage at the major Sharara oil field that began on Sunday, just one week after a previous, week-long shutdown at Sharara had been lifted.

    Sharara had been producing about 220,000 bpd, out of total national production of some 700,000 bpd.

    The NOC faces another blockade at El Feel, a southwestern field, which pumps oil to Mellitah. A blockade there by the Fezzan branch of Libya's Petroleum Facilities Guard (PFG) that began on Dec. 20 has cost more than $460 million in lost revenue, according to the NOC.

    "We are still exerting pressure to reopen it," NOC Chairman Mustafa Sanalla said on Wednesday.

    Libya's national output remains well below the 1.6 million bpd it was producing before the country's 2011 uprising.

    Along with Nigeria, Libya is exempted from recent production cuts agreed by the Organization of the Petroleum Exporting Countries, but the NOC faces complex political, financial and security challenges in its efforts to revive output.

    An armed group has again blocked gas pipelines from Libya's Wafa oilfield to a local power plant and the Mellitah gas export terminal on the coast, a source from state energy firm NOC said on Friday. The NOC earlier this week lifted a force majeure on Wafa and said its pipelines were open

    Attached Files
    Back to Top

    UK's Rough gas storage unable to inject for 2017-18 storage year: CSL

    Injection services into the UK's only long-range natural gas storage facility, Rough, will be unavailable until May 2018 at the earliest, owner- operator Centrica Storage Ltd. said Wednesday.

    "CSL has concluded that...based upon the results of its well testing program, Rough cannot safely re-commence injection operations in the 2017-18 Storage Year," the company said in a statement.

    CSL said the decision was made in addition to having "extensive discussions" with independent technical well advisors, with the well testing program drawing to a close after CSL established the condition of two-thirds of the wells.

    "CSL will continue to conduct such further testing and analysis as it considers appropriate on a number of wells in order to allow CSL to make an assessment of the future pathway for commercial operation of the facilities," the company said.

    CSL will continue to offer withdrawal services for the 2016-17 Storage Year (May 1, 2016, to April 30, 2017), with the Rough reservoir having begun Tuesday's gas day with 387 million cu m in stock, 155 million cu m down on the year and 654 million cu m shy of the five-year average.


    Market participants cited both imports from Continental Europe and LNG supplies as key heading towards the Winter 2017-18 delivery period to make up the loss from the Rough reservoir.

    "LNG is a question mark, the key is the price spreads [between the UK and Continental Europe] for pipeline flows," said one UK-based gas trader. "The spreads will have to widen in order for the UK to get the last bits."

    The ZEE/NBP Winter 17 basis was assessed at 2.10 pence/therm Tuesday -- the TTF/NBP Winter 17 basis was assessed at 3.537 p/th Tuesday.

    The UK saw an increased reliance on imports through both the BBL and Interconnector pipelines last winter, importing a gross 5.24 Bcm compared to the gross 3.13 Bcm from the Winter 2015-16 delivery period, National Grid figures showed.

    This was in part due to the lower gross storage withdrawals, 3.31 Bcm last winter against 4.13 Bcm in Winter 2015-16, but mostly because of weaker LNG regasification levels. LNG regas during Winter 2016-17 totaled 1.93 Bcm, a drop of 70% compared to the 6.44 Bcm from Winter 2015-16.

    With little extra room for an increase in supply from both the Norwegian and UK Continental Shelves following strong flows last winter (40.41 Bcm), as with last winter, NBP Winter 17 pricing look set to track the TTF and ZEE hubs closely, with the NBP premium set to be influenced by the amount of LNG regas levels from the UK's three LNG terminals.
    Back to Top

    S Korea looks towards US, Russian crudes amid Middle East squeeze

    South Korean oil refiners are stepping up purchases of US and Russian crudes, in the wake of a squeeze in supplies of Middle Eastern grades after output curbs by the Organization of the Petroleum Exporting Countries.

    The country's fourth-biggest refiner Hyundai Oilbank said Monday that it had purchased 2 million barrels of US Southern Green Canyon crude oil, the country's first import of the grade.

    "We have purchased 2 million barrels of US Southern Green Canyon from Shell, and they will arrive in South Korea from next month," a company official told S&P Global Platts. The first and second cargoes will arrive in May and June, respectively, he said.

    The company official said there would be no problems using Southern Green Canyon at its crude distillation units, which are equipped to run sour and heavy crudes.

    Hyundai Oilbank, the only South Korean refiner that can run very heavy, sour crudes without the need for blending, is focused on procuring heavy grades and is not interested in light, sweet crudes.

    The refiner currently runs two crude distillation units with a combined capacity of 390,000 b/d at its Daesan complex on the west coast. In addition, Hyundai Oilbank began commercial operations at its 130,000 b/d condensate splitter in November last year, which had raised its overall refining capacity to 520,000 b/d.

    "We purchased the US crude due to weaker prices and low freight rates. We have no immediate plans to import more crude from the United States, but we will seek to import from sources other than the Middle East as part of diversifying supply sources," the official said.

    Another Hyundai Oilbank official said the company might consider importing Eagle Ford from the US for the condensate splitter, if it can be co-loaded with Mexican Maya. It has a term deal with Pemex to import Mexican Maya crude to the tune of 50,000-60,000 b/d.

    The narrowing quality spread between low sulfur crudes in the West against high sulfur crudes in the Middle East has made low sulfur crudes more economically viable to non-traditional buyers in the East.

    The quality spread, typically measured through the Brent/Dubai Exchange of Futures for Swaps, averaged at $1.33/b in March -- the lowest since August 2015, when it averaged at 79 cents/b, Platts data showed. The EFS was last assessed at $1.24/b on Monday.

    Related video:Asian refiners diversify crude oil supplies to reduce impact of OPEC-related output cuts


    South Korea's second-biggest refiner, GS Caltex, also plans to import 500,000 barrels of Eagle Ford crude in June.

    GS Caltex imported 2 million barrels of Eagle Ford over November-December, the country's first purchase of American crude other than condensate and Alaskan crude since Washington lifted a 40-year restriction on crude exports in late 2015.

    GS Caltex is monitoring costs and economics of US cargoes on a per cargo basis, according to a company source. GS Caltex is a 50:50 joint venture between South Korea's GS Group and US' Chevron.

    South Korea's top refiner SK Innovation is scheduled to receive 1 million barrels of Russian Urals it purchased earlier this year, as part of its diversification efforts.

    "The cargo of the Urals crude is expected to arrive in South Korea as early as this week or next week," a company official said, adding that the volume is the refiner's first purchase of Urals in 10 years.

    It is very unusual for South Korea to buy Russian Urals because of the shipping cost and the size of the vessel.

    The Urals, typically loading from the Black Sea port of Novorossiisk, are transported on Suezmax or smaller vessels as VLCCs which can carry a full cargo of 280,000 mt are unable to pass through the Suez canal. A Suezmax, with a maximum load of 140,000 mt, will be able to easily pass through the Suez canal.

    Urals can be one of the alternatives to South Korean refiners as the OPEC-led production cuts had reduced exports of Middle Eastern sour crudes, pushing up their price differentials, the SK Innovation official said.

    Despite the OPEC-led production cuts from January, South Korea's crude imports from the Middle East climbed 4.1% year on year to 154.41 million barrels in the first two months of this year, from 148.4 million barrels a year earlier, according to data from state-run Korea National Oil Corp.

    The proportion of Middle East crude in the refiners' total crude imports further increased to 84.7% over January-February, from 82.7% in the same period last year, highlighting South Korea's deep dependence on Middle Eastern crude.

    "The proportion is expected to decline when volumes from the US and Russia arrive in South Korea, while refiners are making more efforts to diversify crude supply sources," a KNOC official said.
    Back to Top

    Alternative Energy

    California oversupply volumes grow, ISO curtails more renewables

    The California Independent System Operator is curtailing growing amounts of renewable generation, Mark Rothleder, the grid operator's vice president for market quality and integrating renewables, said.

    Speaking Wednesday during a meeting of the Western energy imbalance market board, Rothleder said the ISO curtailed about 60,000 MWh in February and about 80,000 MWh in March, up from about 21,000 MWh and 47,000 MWh a year earlier.

    Matching the increased curtailment volumes, the ISO experienced curtailments in 31.1% of its market intervals so far this year, up from 21.1% a year ago, 15.9% in 2015 and 9.6% in 2014, he added.

    California's net load -- actual load minus wind and solar production -- and its late afternoon ramps are at levels the ISO expected to see in 2020, according to Rothleder.

    When the ISO first put out its "duck curve" chart several years ago, the grid operator underestimated the amount of behind-the-meter solar that would be added in the state, he said, noting that there is about 5,000 MW of rooftop solar, with more being added every day.

    On April 9, the ISO had a net load of 10,386 MW, roughly 1,700 MW less than the grid operator forecast in its duck curve chart for a typical spring day in 2020.

    The ISO has roughly 10,000 MW of nuclear, hydroelectric and qualifying facilities on its system that "you can't move," Rothleder said, which leads to renewable curtailments in low load periods.

    Most of the curtailments come via economic bids, but some are manual, he said.

    The Western energy imbalance market has provided an opportunity for California to sell energy from renewables that would be otherwise have been curtailed, according to Rothleder. In some periods of oversupply, California exports up to 2,000 MW, he said.

    The ISO has also been able to import energy via the EIM to address its ramping periods when solar production falls off in the late afternoon, Rothleder said.

    However, so far this year, the amount of avoided curtailments has dropped compared with a year ago. It is unclear why this is happening, Rothleder said.

    In an effort to better address oversupply conditions, the ISO about three weeks ago started issuing oversupply forecasts so that market participants can prepare ahead of time for the oversupply conditions, Rothleder said.

    Meanwhile, Portland General Electric is on track to begin participating in the EIM on October 1, according to Petar Ristanovic, ISO vice president for technology and EIM executive sponsor.

    PGE's participation will add about 450 MW of bi-directional transfer capacity between the utility's balancing authority area and the western part of PacifiCorp's footprint, Ristanovic said. It will also add 450 MW of transfer capacity to the north and 300 MW to the south, he said.

    PGE expects joining the EIM will save it up to $4 million a year while it is expected to bring up to $3.7 million in benefits to the rest of the market.

    PGE has 3,843 MW of generating resources and gets about 15% of its electricity from non-hydro renewables, according to Larry Bekkedahl, PGE vice president for transmission and distribution. Oregon has a renewable portfolio standard that ramps up to 50% by 2040.

    PGE is working with smaller balancing authority areas to help them join the EIM, Bekkedahl said. "Our hope is to make it as easy as possible" for them to join, he said.

    Also, the ISO is preparing to start a stakeholder process by July that aims to develop rules for non-EIM entities to donate transmission capacity for EIM transfers in exchange for congestion rents, according to Brad Cooper, ISO manager for market policy.

    A proposal is expected to go to the EIM governing body and the ISO board by the end of the year, he said.

    The ISO is also preparing to start a process to establish an EIM wheeling charge to address a drop in transmission revenue caused by EIM transfers across participating balancing authority areas, Cooper said. Before the process starts late this year, a working group will determine exactly how much transmission revenues have dropped, he said.

    Attached Files
    Back to Top

    Turnbull says Tasmania wind, hydro can become “energy battery” for Australia

    Prime minister Malcolm Turnbull has extended his vision of large-scale pumped hydro and storage to Tasmania, outlining plans to expand the island’s existing hydropower system, and possibly add 2,500MW in pumped hydro, and describing the possibility that the state could become the “renewable energy battery” for Australia.

    The announcement comes just weeks after Turnbull unveiled a new study to investigate the so-called “Snowy 2.0”, a plan to add 2GW – with up to 175 hours of storage – in pumped hydro capacity in the Snowy Mountains; a move that would effectively kill the prospect of new coal or gas plants.

    The latest announcement, made in Launceston with the Tasmanian premier and the state-owned Hydro Tasmania on Thursday, canvasses the possibility of adding a new cable between the island and the mainland, and significantly boosting both hydro capacity and wind energy to supply “baseload” renewables to the major markets.

    Turnbull said the Australian Renewable Energy Agency (ARENA) was in the process of assessing applications from Hydro Tasmania to support feasibility work into redeveloping the Tarraleah scheme and enhancing the Gordon Power Station.

    It’s also considering an application to explore the utility of several new pumped hydro energy storage schemes that could deliver up to 2500MW of pumped hydro capacity: Mersey Forth-1, Mersey Forth-2, Great Lake and Lake Burbury – with capacity of around 500-700 MW each – and an alternative of nine small scale sites totalling 500MW.

    “Its importance has become greater as the energy market has evolved. there is an opportunity for more wind and hydro today,” Turnbull said.

    “We recognise that as the energy sources changes, we need to ensure that we have the storage … we have announced a study for the Snowy Hydro, but there is the opportunity here in Tasmania.

    “It can double the capacity of hydro Tasmania, and it has the best wind assets in Australia. The roaring forties … are fantastic for wind farms. There is an opportunity for Tasmania to play a bigger part in ensuring that Australia has reliable and affordable energy, and meet emission reduction targets.

    “Tasmania could become a renewable battery storage for Australia in an era of distributed, renewable power.”

    The announcement came in tandem with the release of a study by Dr John Tamblyn into a second interconnector. Dr Tamblyn’s report finds another interconnector might be beneficial, but will depend on the ongoing development of the electricity system in Tasmania and the National Electricity Market.

    Hydro Tasmania’s CEO Steve Davy said the company was looking to upgrade and expanding Tasmania’s hydropower network, as well as the potential for new private wind farm development and pumped storage opportunities, “to help lead Australia through the challenging (energy) transition.”

    “We have nation-leading expertise in integrating renewable energy into the grid in a stable and affordable way. We’ve done that innovatively and successfully in Tasmania, and it’s the very challenge mainland Australia is starting to grapple with,” Davy said in a statement.

    The studies would include an investigation into replacing one of Tasmania’s oldest operating power stations at Tarraleah in the Central Highlands, and expanding it from around 550GWh of renewable energy each year  to more than 760GWh. The proposal involves constructing a 17-kilometre long underground tunnel from Lake King William and adding pumped hydro capacity.

    There is also a study to add a third, smaller turbine to the Gordon power station, the largest in Tasmania, and the only station on the Gordon/Pedder scheme.
    Back to Top

    U.S. wind, solar prices on downward slope, even without tax credits

    Wind and solar power purchase agreement (PPA) prices have declined dramatically in recent years, establishing a trend that continues.

    The levelized prices for power from utility-scale solar projects (5 MW and larger) declined by 73 percent from a capacity-weighted average of $154.20 levelized (in real $2015 dollars) in 2009 to an average of $41.10 per MWh levelized in 2015. Recent solar PPAs in California, the Southwest and Texas are priced as aggressively as $35/MWh levelized, or lower.

    At the same time, wind power PPAs have declined by more than 45 percent since 2009, from an average of $69.06 per MWh levelized (in real 2015 dollars) in 2009 to an average of $37 per MWh levelized in 2015.

    Recent PPAs in the interior U.S. have been cheaper still, within a range of $20.68 to $26.43 per MWh levelized (in real 2015 dollars).

    These steep declines in have been driven by sharp drops in installation costs and improvements in operating efficiencies and performance. All of these PPA prices also have benefitted from subsidies in the form of the wind production tax credit (PTC) and the solar investment tax credit (ITC).

    However, it is becoming widely acknowledged that wind and solar will remain highly competitive even when these subsidies are gone.

    NextEraEnergy (NEE), one of the largest generators of solar energy in the U.S., has said that due to continuing declines in costs, wind power PPA’s will be in the range of $20 to $30 per MWh levelized, even without any subsidies.

    NEE also projects that after 2020 new solar PPA prices will remain in the range of $30 to $40 per MWh levelized, again without any subsidies.

    Further, UBS analyst Julien Dumoulin-Smith agrees that these low unsubsidized prices for wind and solar are achievable by early 2020 due to continued pricing pressures driving down wind and solar installation costs. UBS says that the prices for solar panels are headed down towards $0.20 per Watt, “Just a matter of when this becomes widespread.”

    Thus, by the early 2020s, unsubsidized wind and solar prices will be below the variable costs of operating coal and natural gas plants, just like subsidized prices are today.

    Attached Files
    Back to Top

    China renewable power waste worsens in 2016 - Greenpeace

    The amount of electricity wasted by China's solar and wind power sectors rose significantly last year, environment group Greenpeace said in a research report published on Wednesday, despite government pledges to rectify the problem.

    China promised last year to improve what it called the "rhythm" of construction of power transmission lines and renewable generation to avoid "curtailment," which occurs when there is insufficient transmission to absorb the power generated by the renewable projects.

    But Greenpeace said wasted wind power still rose to 17 percent of the total generated by wind farms last year, up from 8 percent in 2014. The amount that failed to make it to the grid was enough to power China's capital Beijing for the whole of 2015, it added.

    Wasted wind generation in the northwestern province of Gansu was 43 percent of the total generated last year, it said.

    Solar curtailment rates across China rose 50 percent over 2015 and 2016. More than 30 percent of available solar power in Gansu and neighbouring Xinjiang failed to reach the grid.

    In an earlier report Greenpeace said total solar and wind investment between now and 2030 could reach as much as $780 billion.

    But, rising levels of waste had cost the industry as much as 34.1 billion yuan ($4.95 billion) in lost earnings over the 2015 to 2016 period, it said on Wednesday.

    China produced 12.3 billion kilowatt-hours (kWh) of solar power in the first quarter of 2017, up 31 percent year-on-year but accounting for just 1.1 percent of total generation over the period, according to official data on Monday. Wind rose to 62.1 billion kWh, 4.3 percent of the total, but was dwarfed by the 77.9 percent share occupied by thermal electricity.

    Grid construction has fallen behind, with China focusing on expensive ultra-high voltage cross-country lines, which are better suited to large-scale power generation projects, including large hydropower facilities in the southwest.

    "Upgrades to the system are urgently needed, including a more flexible physical structure of the grid, efficient cross-region transmission channels and smart peak load operation," said Greenpeace climate and energy campaigner Yuan Ying.

    Many regions have used wind and solar only as back-up electricity sources during peak periods, and much of it falls idle when power use drops.

    According to official data, the renewables base of Zhangjiakou, north of Beijing, has more than four times the wind and solar installations than the local grid can handle, and capacity is still set to increase rapidly.

    Attached Files
    Back to Top

    German auction attracts first subsidy-free offshore wind deal

    Germany’s first competitive auction for offshore wind projects has not only delivered an average bid price that was “far below expectations” according to the Bundesnetzagentur, but also included what is likely one of the world’s first subsidy-free offshore wind projects.

    Germany’s federal energy markets regulator, the Bundesnetzagentur, announced Thursday the results of its first auction for offshore wind farms — which included bids for grid connections and funding for existing offshore wind farm projects. According to the Bundesnetzagentur, the average weighted average was 0.44 Euro cents per kilowatt hour ($A0.061/kWh), which was “far below expectations.”

    This shows the auction has unlocked medium and long-term cost reduction potential, which will lead to a reduction in funding to an extent that had not been expected,” said Jochen Homann, Bundesnetzagentur President. “Offshore wind energy is categorically proving its competitiveness. This is good news for all electricity consumers who contribute to funding renewable energy through the renewable energy surcharge. It remains to be seen, however, whether the prices in the next auction will be as low.”

    A total of four bids were accepted, with a total volume up for auction of 1,490 megawatts (MW) (out of a possible 1,550 MW), all located in the North Sea.

    DONG Energy was awarded the right to build three offshore wind projects in the German North Sea, for a total capacity of 590 MW: They were the 240 MW OWP West, the 240 MW Borkum Riffgrund West 2, and the 110 MW Gode Wind 3. All three projects are expected to be commissioned in 2024.

    “We’re pleased with being awarded three projects in the first of two German auction rounds, and we have good opportunities to add further capacity to our winning projects in next year’s German auction,” said Samuel Leupold, Executive Vice President and CEO of Wind Power at DONG Energy. “Today’s results contribute to our ambition of driving profitable growth by adding approximately 5GW of additional capacity by 2025.”

    Most importantly, however, for two of the projects — OWP West and Borkum Riffgrund West 2 — DONG Energy made bids of zero, meaning that these two projects will not receive, nor need government subsidy on top of the wholesale electricity price. The Gode Wind 3 project was awarded on a bid price of €60 per MWh.

    “The zero subsidy bid is a breakthrough for the cost competitiveness of offshore wind, and it demonstrates the technology’s massive global growth potential as a cornerstone in the economically viable shift to green energy systems,” Samuel Leupold continued.

    “Cheaper clean energy will benefit governments and consumers – and not least help meet the Paris COP21 targets to fight climate change. Still it’s important to note that the zero bid is enabled by a number of circumstances in this auction. Most notably, the realization window is extended to 2024. This allows developers to apply the next generation turbine technology, which will support a major step down in costs. Also, the bid reflects the fact that grid connection is not included.”

    DONG Energy wasn’t the only big winner, nor the only winner to present a zero bid. EnBW received approval for its 900 MW He Dreiht offshore wind farm, which was won at a bid of zero.

    “We are extremely pleased with this result,” said EnBW CEO Frank Mastiaux.

    “Our bid demonstrates that integrating offshore technology into the market by the middle of the next decade is possible and that offshore wind energy can make a significant contribution towards Germany meeting its energy and climate policy targets. Following on from very good energy yields, offshore technology has also made a quantum leap in terms of efficiency to now qualify as a true driver of the German Energiewende. He Dreiht thus demonstrates our clear commitment to the further responsible and cost-efficient expansion of offshore wind energy and symbolises our contribution to the Energiewende”

    Attached Files
    Back to Top

    Chinese energy giant to build world's largest offshore wind farm

    The State Power Investment Corporation (SPIC), one of the top five power generators in China, is making swift progress in raising its planned 800 MW wind power farm off the coast of eastern China's Yancheng, Jiangsu province, China Daily reported on April 13.

    Once completed, the farm will eclipse the 630 MW London Array as the world's largest offshore wind farm. It is set to enter full operation in 2018.

    Maturing technology and increasing competition have helped to reduce costs, making offshore power increasingly competitive. The push to expand offshore has been driven by the fact that many major economic hubs in China are located near the coast, analysts said.

    The construction of Yancheng project will occur in three phases. The first 100 MW installed capacity consists of twenty-five 4 MW Siemens turbines. By March 2017, this portion of the project had generated 190 GWh of electricity.

    The second phase of construction is currently underway, set to boost installed capacity by another 400 MW by October 2017 using 100 wind turbines.

    The third phase of the project will start in the second half of 2017, and is expected to complete in 2018. Wind turbines with capacity of 300 MW will be erected in the water at a depth of 18 meters, 36 kilometers from the shore.

    SPIC is a global green energy provider with a total installed capacity of 117 GW. It is engaged mainly in coal, aluminum, logistics, finance, environmental protection and advanced technology industries.
    Back to Top

    Shell lobbies Dutch government to quadruple offshore wind target by 2030

    Anglo-Dutch oil major Royal Dutch Shell said it has urged the Dutch government to come up with bolder offshore wind targets and quadruple the goal for installed capacity to 20 gigawatts (GW) by 2030.

    Europe's biggest oil company, which has traditionally invested little in green energy sources, is ramping up renewable energy investments to $1 billion a year by the end of the decade after pressure from shareholders to do so and as it sees governments turning to less carbon intensive and more flexible fuels.

    Some of its recent activities in renewable energy include winning a contract, as part of a consortium, to build a wind farm off the coast of the Netherlands and bidding for an offshore wind licence in the United States.

    In the Netherlands, where it is by far the largest listed company, it is lobbying the government to raise its long-term offshore wind target to give investors clarity on priorities further out.

    "We need to lower the costs of development, but we would also want the Dutch government to come up with the policy for a further rollout of 10-15 GW in capacity for the period until 2030," said a spokeswoman for Shell in the Netherlands.

    The Netherlands is lagging other European countries in renewable energy investments and was ordered by a district court in The Hague in 2015 to cut carbon emissions by 25 percent within five years after losing a court case brought by environmental campaigners.

    The government has since launched a programme to speed up renewable energy projects, including tenders to build 4.5 GW of offshore wind farm capacity and more beyond that.

    As part of a group of the Netherlands' largest companies, Shell has called on policymakers making up the next Dutch government to adopt a comprehensive climate law that will help the country meet targets set out in the 2015 Paris climate accord.

    Shell said in its sustainability report published on Wednesday that it is "helping" policymakers in the Netherlands to find an energy mix that allows reducing greenhouse gas emissions.

    The oil major, which operates the Netherlands' largest operating gas field in Groningen jointly with Exxon Mobil, is also pushing for the use of gas to complement erratic renewable energy production.

    The Dutch government has capped the amount of gas that can be produced from the Groningen field because of related earthquakes and wants to continue winding down output as part of its emissions-cutting plans.

    "The largest contribution Shell can make to reducing emissions globally in the near term is to continue to grow the role of natural gas," Shell Chief Executive Ben van Beurden said at an industry event last month.
    Back to Top

    European clean energy investment down sharply in Q1 at 2006-low: BNEF

    European investment in clean energy fell sharply in the first quarter to $7.9 billion, the lowest quarterly level since 2006 and down 62% compared with the first quarter of 2016 which was boosted by a number of large offshore wind projects, the quarterly report by Bloomberg New Energy Finance (BNEF) shows.

    Germany and France doubled their clean energy investment, while the UK was down 91% at $1.2 billion mainly as there was no new offshore wind financing to rival last year's crop, BNEF said.

    The financial close for the 479 MW Ho he See offshore wind project in the North Sea lifted German investment 96% on the year to $3 billion, while French clean energy investment jumped 145% on year to $1.1 billion with the two nations alone now accounting for over half of Europe's total investment, the BNEF data showed.

    Worldwide, clean energy investment totaled $53.6 billion in the first quarter, down 17% from Q1 2016, BNEF said.

    "Q1 this year reflects, once again, the declines in average capital costs per megawatt for wind and solar. This trend means that year-by-year it's possible to finance equivalent amounts of capacity in these technologies for fewer dollars," Bloomberg New Energy Finance CEO Jon Moore said, adding that a 60% drop in offshore wind investment decisions and lower investments in the two biggest markets -- the US and China -- added further downward pressure.

    The US saw $9.4 billion invested in Q1, down 24%, and China $17.2 billion, down 11%, BNEF said. BNEF analysts are currently expecting both wind and solar to see similar -- or higher -- numbers of megawatts added this year than last, it said.

    According to BNEF, the quarterly data does not include certain categories of investment such as energy storage projects, which will only be reflected in the annual report.

    Last year, global investment in renewable energy already fell 18% after reaching a record $329 billion in 2015, the data showed.

    According to Platts European Renewable Power Tracker, installed wind and solar capacity in Europe's five biggest markets -- Germany, the UK, France, Spain and Italy -- is now approaching 200 GW with output from those wind turbines and solar panels reaching a new monthly record of over 30 TWh in March.

    Attached Files
    Back to Top

    Stability of Renewables.

    Image title
    Back to Top


    China eyes trillion-yuan nuclear power market along Belt and Road Initiative

    Chinese companies are craving access to the colossal untapped potential of the nuclear power industry in Belt and Road Initiative countries, which could yield a market of up to 4 trillion yuan ($580 billion), China Daily reported, citing the chairman of one of the country's largest nuclear power developers.

    "About 72 countries have been or are planning to develop nuclear power, among which 41 are along the Belt and Road Initiative, and most of them are still in the earliest stages of nuclear power development. We estimate that if their nuclear energy were raised to reach development levels comparable to those of the US or Japan, it would spawn a market worth 4 trillion yuan," remarked Wang Shoujun, chairman of China National Nuclear Corp (CNNC).

    The Belt and Road Initiative, proposed by Chinese President Xi Jinping in 2013, aims to build a trade and infrastructure network connecting Asia with Europe and Africa along ancient trade routes, in an unprecedented effort that will unite up to 65 countries.

    As domestic demand for electricity soars in China, and the country accelerates its shift to renewable energy, nuclear power will be one of the highest-priority projects. China currently operates 36 nuclear reactors, and is in the process of building 20 new ones, according to an official with the Ministry of Environmental Protection.

    By the end of 2020, China aims to have 58 million kW of nuclear power capacity in operation and more than 30 million kW under construction, ranking second in the world for number of installed units.

    When it comes to homegrown technologies, China is gathering steam to occupy a position of leadership in the world.

    According to Wang, CNNC has successfully exported six nuclear power units and eight reactors to at least seven countries, and has established links with more than 40 countries for further cooperation spanning the full nuclear industrial chain.
    Back to Top


    Pesticide maker Dow tries to kill risk study

    Dow Chemical is pushing the Trump administration to scrap the findings of federal scientists who point to a family of widely used pesticides as harmful to about 1,800 critically threatened or endangered species.

    Lawyers representing Dow, whose CEO also heads a White House manufacturing working group, and two other makers of organophosphates sent letters last week to the heads of three Cabinet agencies. The companies asked them "to set aside" the results of government studies the companies contend are fundamentally flawed.

    The letters, dated April 13, were obtained by The Associated Press.

    Dow Chemical chairman and CEO Andrew Liveris is a close adviser to President Donald Trump. The company wrote a $1 million check to help underwrite Trump's inaugural festivities.

    Over the last four years, government scientists have compiled an official record running more than 10,000 pages showing the three pesticides under review — chlorpyrifos, diazinon and malathion — pose a risk to nearly every endangered species they studied. Regulators at the three federal agencies, which share responsibilities for enforcing the Endangered Species Act, are close to issuing findings expected to result in new limits on how and where the highly toxic pesticides can be used.

    The industry's request comes after EPA Administrator Scott Pruitt announced last month he was reversing an Obama-era effort to bar the use of Dow's chlorpyrifos pesticide on food after recent peer-reviewed studies found that even tiny levels of exposure could hinder the development of children's brains. In his prior job as Oklahoma's attorney general, Pruitt often aligned himself in legal disputes with the interests of executives and corporations who supported his state campaigns. He filed more than one dozen lawsuits seeking to overturn some of the same regulations he is now charged with enforcing.

    Pruitt declined to answer questions from reporters Wednesday as he toured a polluted Superfund site in Indiana. A spokesman for the agency later told AP that Pruitt won't "prejudge" any potential rule-making decisions as "we are trying to restore regulatory sanity to EPA's work."

    "We have had no meetings with Dow on this topic and we are reviewing petitions as they come in, giving careful consideration to sound science and good policymaking," said J.P. Freire, EPA's associate administrator for public affairs. "The administrator is committed to listening to stakeholders affected by EPA's regulations, while also reviewing past decisions."

    The office of Commerce Secretary Wilbur Ross, who oversees the Natural Marine Fisheries Service, did not respond to emailed questions. A spokeswoman for Interior Secretary Ryan Zinke, who oversees the Fish and Wildlife Service, referred questions back to EPA.

    As with the recent human studies of chlorpyrifos, Dow hired its own scientists to produce a lengthy rebuttal to the government studies showing the risks posed to endangered species by organophosphates.

    The EPA's recent biological evaluation of chlorpyrifos found the pesticide is "likely to adversely affect" 1,778 of the 1,835 animals and plants accessed as part of its study, including critically endangered or threatened species of frogs, fish, birds and mammals. Similar results were shown for malathion and diazinon.

    In a statement, the Dow subsidiary that sells chlorpyrifos said its lawyers asked for the EPA's biological assessment to be withdrawn because its "scientific basis was not reliable."

    "Dow AgroSciences is committed to the production and marketing of products that will help American farmers feed the world, and do so with full respect for human health and the environment, including endangered and threatened species," the statement said. "These letters, and the detailed scientific analyses that support them, demonstrate that commitment."

    FMC Corp., which sells malathion, said the withdrawal of the EPA studies will allow the necessary time for the "best available" scientific data to be compiled.

    "Malathion is a critical tool in protecting agriculture from damaging pests," the company said.

    Diazinon maker Makhteshim Agan of North America Inc., which does business under the name Adama, did not respond to emails seeking comment.

    Environmental advocates were not surprised the companies might seek to forestall new regulations that might hurt their profits, but said Wednesday that criticism of the government's scientists was unfounded. The methods used to conduct EPA's biological evaluations were developed by the National Academy of Sciences.

    Brett Hartl, government affairs director for the Center for Biological Diversity, said Dow's experts were trying to hold EPA scientists to an unrealistic standard of data collection that could only be achieved under "perfect laboratory conditions."

    "You can't just take an endangered fish out of the wild, take it to the lab and then expose it to enough pesticides until it dies to get that sort of data," Hartl said. "It's wrong morally, and it's illegal."

    Originally derived from a nerve gas developed by Nazi Germany, chlorpyrifos has been sprayed on citrus fruits, apples, cherries and other crops for decades. It is among the most widely used agricultural pesticides in the United States, with Dow selling about 5 million pounds domestically each year.

    As a result, traces of the chemical are commonly found in sources of drinking water. A 2012 study at the University of California at Berkeley found that 87 percent of umbilical-cord blood samples tested from newborn babies contained detectable levels of chlorpyrifos.

    In 2005, the Bush administration ordered an end to residential use of diazinon to kill yard pests such as ants and grub worms after determining that it poses a human health risk, particularly to children. However it is still approved for use by farmers, who spray it on fruits and vegetables.

    Malathion is widely sprayed to control mosquitoes and fruit flies. It is also an active ingredient in some shampoos prescribed to children for treating lice.

    A coalition of environmental groups has fought in court for years to spur EPA to more closely examine the risk posed to humans and endangered species by pesticides, especially organophosphates.

    "Endangered species are the canary in the coal mine," Hartl said. Since many of the threatened species are aquatic, he said they are often the first to show the effects of long-term chemical contamination in rivers and lakes used as sources of drinking water by humans.

    Dow, which spent more than $13.6 million on lobbying in 2016, has long wielded substantial political power in the nation's capital. There is no indication the chemical giant's influence has waned.

    When Trump signed an executive order in February mandating the creation of task forces at federal agencies to roll back government regulations, Dow's chief executive was at Trump's side.

    "Andrew, I would like to thank you for initially getting the group together and for the fantastic job you've done," Trump said as he signed the order during an Oval Office ceremony. The president then handed his pen to Liveris to keep as a souvenir.

    Rachelle Schikorra, the director of public affairs for Dow Chemical, said any suggestion that the company's $1 million donation to Trump's inaugural committee was intended to help influence regulatory decisions made by the new administration is "completely off the mark."

    "Dow actively participates in policymaking and political processes, including political contributions to candidates, parties and causes, in compliance with all applicable federal and state laws," Schikorra said. "Dow maintains and is committed to the highest standard of ethical conduct in all such activity."
    Back to Top

    China to work off corn stockpile in next three to five years: COFCO executive

    Farmers collect corn for a cargo at a farm in Gaocheng, Hebei province, China, in this September 30, 2015 file photo. REUTERS/Kim Kyung-Hoon/File Photo

    China will work off its corn stockpile in the next three to five years, said an executive at one of the country's top corn processing firms on Wednesday, as firms ramp up processing capacity to use up the grain.

    China National Cereals, Oils and Foodstuffs Corp (COFCO) will boost its annual corn processing capacity to more than 10 million tonnes by 2020 from 6 million tonnes currently, said Tong Yi, general manager of COFCO Biochemical, on the sidelines of a conference.

    China's total corn processing capacity will hit 70 million tonnes by the end of 2018, up from more than 50 million tonnes currently, he added.
    Back to Top

    Agrium completes commissioning of $720m Borger urea plant, Texas

    Agrium has commissioned its new urea plant at the Borger Nitrogen Operations facility, in Texas, having completed its first run of urea production – widely used in fertilisers as a source of nitrogen.

    The Calgary-based company, which controls the largest retail distribution network in North America and is in the process of merging with Canadian counterpart PotashCorp of Saskatchewan to create a new $36-billion entity, said Tuesday that it continued to ramp up output and that it expected to reach full capacity by the end of the current quarter.

    The new $720-million urea facility has a capacity of 610 000 t of urea, of which 100 000 t of urea equivalent will be dieselexhaust fluid (DEF), an aqueous urea solution used to lower smog-related nitrogen oxide concentrations in the dieselexhaust emissions from diesel engines.

    "The successful completion of our first run of urea production from our Borger nitrogen expansion project continues to emphasise our commitment to operational excellence and creating shareholder value at Agrium. We look forward to bringing our reliable and high-quality urea and DEF productsto existing and new customers in this key agricultural region of the US," stated Agrium president and CEO Chuck Magro.

    According to Agrium, nitrogen – the most important crop nutrient in terms of global use and trade – represents about 60% of the total volume of crop nutrients used globally. It is also the crop nutrient for which reduced application rates within a growing season are most likely to immediately and adversely impact yield for most crops.

    For Agrium, nitrogen is the most important nutrient in terms of capacity, production and sales, representing nearly 60% of its nutrient capacity.

    Natural gas is the primary input for producing ammonia – the base for virtually all nitrogen products. Ammonia can be applied directly as a fertiliser, or upgraded to products such as urea, UAN [a solution of urea and ammonium nitrate in water] solutions and ammonium nitrate.

    Agrium currently has global nitrogen capacity of about 5.7-million tonnes a year, placing the company among the world’s top five publicly traded nitrogen producers.
    Back to Top

    Turkmenistan invites bids for second potash plant construction

    Turkmenistan invited official bids on Monday for a project to build the Central Asian nation's second potash plant, stepping up the government's push to compensate for a downturn in its natural gas sector.

    The announcement published by state-run Turkmenhimiya said the plant would be based at the Karabil potash deposit. It provided no financial details, but two sources at the company told Reuters the project is worth about $1.4 billion.

    Turkmenistan, which has faced foreign currency shortages after its gas exports were hit by declining prices and volumes, is banking on the start of potash production and other projects to bolster the economy.

    The former Soviet republic opened a $1 billion Belarussian-built potash plant last month, aiming to export an annual 1.2 million tonnes of fertiliser to China and India as part of its drive to diversify away from natural gas exports.

    As a potash exporter, Turkmenistan will compete with its former Soviet overlord Russia, home to the world's biggest producer Uralkali, and Belarus.

    Belarussian companies built the plant launched last month and Minsk has said it will help Turkmenistan to market the product.
    Back to Top

    New study on Monsanto weedkiller to feed into crucial EU vote

    Results of a new animal study into possible health risks of the weedkiller glyphosate will be published in time to inform a key EU re-licensing vote due by the end of 2017, according to the researcher leading the trial.

    A row over possible effects of glyphosate - an ingredient in Monsanto's big-selling herbicide Roundup - has prompted investigations by congressional committees in the United States and forced a delay in Europe to a decision on whether it should be banned or re-licensed for sale.

    Giving details and preliminary findings of the latest study to Reuters, Italian scientist Fiorella Belpoggi said experimental rats exposed to the herbicide at levels equivalent to those allowed in humans showed no initial adverse reaction.

    "Exposed animals had no evident differences from non-exposed animals," Belpoggi, who is director of the Cesare Maltoni Cancer Research Centre at the Ramazzini Institute in Italy, said in a telephone interview.

    "But this tells us very little at the moment, because the examinations of key parameters that could be affected by exposure are still being done (and) we are waiting for those results," Belpoggi added.

    Those parameters include any genetic changes, as well as potential toxic effects on measures related to fertility, such as sperm, embryo development and offspring growth, she said.

    Argument over glyphosate centers on whether it is carcinogenic. Scientists at the International Agency for Research on Cancer (IARC) say it probably does cause cancer, putting them at odds with scientists at the European Food Safety Authority, the U.S. Environmental Protection Agency and multiple other safety and regulatory agencies around the world, who say it likely doesn't.

    Congressional committees in the United States have raised questions about the work and funding of IARC, which is based in Lyon, France, and the Ramazzini Institute, based in Bologna.

    IARC and Ramazzini defend the independence of their work and say their research is conducted to the highest scientific standards.


    A spokesman for Monsanto said: "There are nearly a thousand scientific studies from decades of research that are already available to every regulatory agency in the world, which have all concluded that glyphosate is safe to use."

    According to data published by IARC, glyphosate was registered in more than 130 countries as of 2010 and is one of the most heavily used weedkillers in the world. Analysts have estimated Monsanto could lose out on up to $100 million of sales if glyphosate were banned in Europe.

    Belpoggi said her team decided to conduct their trial to produce fresh, independent results in an effort to settle differences over glyphosate's health effect.

    But she stressed that due to time constraints, the study is not able to analyze the weed killer's potential carcinogenicity, which would take several years to research properly, given the time any tumors might take to develop and grow.

    "We are focused on reproductive and developmental issues, in other words, whether glyphosate ... affects the development of embryos, fetuses and pups," she said.

    Chemicals that can affect hormones and reproduction are known as endocrine disruptors and, like carcinogens, are subject to strict regulations in the European Union.

    This study involves scientists working at five laboratories, Belpoggi's and one other in Italy, and three outside the country. "This was to ensure we would have the best experts analyze each end point," Belpoggi said. The study is funded by the Ramazzini Institute, a research cooperative of around 28,000 members who are its co-owners and raise funds for its work.

    Using laboratory rodents known as Sprague Dawley rats, the researchers exposed them to low levels of glyphosate and its formulation Roundup in their diet, equivalent to U.S. Acceptable Daily Intake (ADI) levels permitted in humans.

    The U.S. ADI for glyphosate is 1.75 milligrams per kilogram of body weight per day while the European Union ADI for consumers is 0.5 milligrams per kilogram of body weight.

    Full results should be available by June, Belpoggi said, and will be submitted in a paper for peer review and publication in a scientific journal. A draft copy of the results will be sent at the same time to the European Commission.

    The Commission has said it expects to restart talks with EU member states by August on re-approving the use of glyphosate in herbicides. A decision is due before the end of 2017.

    "We would like to have the results in time to help regulators have a good judgment about this chemical," Belpoggi said. "If it is negative (no effect), then I will be happy because I am also exposed. But if there is some damage, then we would like everyone to know."
    Back to Top

    Precious Metals

    GDXJ: Index changes portend some savage selling.

    Image title
    GDXJ adds on the basis of increasing the mcap limit in the index.

    Funded by:
    Image title
    Back to Top

    China's Shandong Tyan says talks over on bid for Barrick's Kalgoorlie over

    Shanghai-listed Shandong Tyan Home said on Wednesday its negotiations with Barrick Gold Corp to buy a 50-percent stake of the Canadian operator's Kalgoorlie mine have ended without a deal, citing new capital and acquisition rules in China.

    Reuters reported in November that Toronto-based Barrick was reviewing the financial backing behind an approximate $1.3 billion bid for its stake in Kalgoorlie mine by Minjar Gold, a unit of Shandong.

    Barrick, the world's largest gold producer, was not immediately available for comment.

    Shandong said in a filing to the Shanghai stock exchange on Wednesday that it had been in contact with Barrick about buying a stake in the mine, but did not reach any formal investment agreement. Due to the recent capital outflow curbs and tightened review of overseas acquisitions "we did not continue the negotiation," it said.

    Shandong had trumped offers by Australian, Chinese and Canadian companies for the asset, sources had told Reuters.

    Newmont Mining, Barrick's joint venture partner at Kalgoorlie and mine operator, has said it was interested in buying the remaining stake, but price has been a sticking a point.
    Back to Top

    The GDXj: too big for its opportunity set!

    How An ETF Gets Too Big For Its Index

    April 10, 2017


    Can an exchange-traded fund get too big for its index? That's the question investors in one popular gold miner ETF are grappling with after rapid asset growth pushed it to significantly deviate from its underlying index.

    The ETF in question is the VanEck Junior Gold Miners ETF (GDXJ), which tracks the MVIS Global Junior Gold Miners Index. Since early 2016, assets in the fund ballooned from a little more than $1 billion to $5.4 billion currently. Some of that was due to rising share prices―GDXJ nearly doubled from $19.80 at the start of 2016 to $36.71 today, an 85% gain, thanks to the rebound in gold.

    But a lot of it had to do with the enormous amount of new money that came into the fund. Since Jan. 1, 2016, inflows into the ETF have totaled $3.3 billion. For almost any ETF, that's a big amount, but especially for one that targets a relatively niche area like junior gold miners.

    Back to Top

    Gold vs Fear.

    Image title
    Back to Top

    Base Metals

    China spot alumina prices fall on expected Xinjiang smelter cuts

    China's spot alumina prices fell Thursday on the back of news this week that Xinjiang smelters in northwest China will be cutting around two million mt/year of new aluminum capacity which have yet to receive required government approvals.

    The ex-works Shanxi daily spot alumina assessment by S&P Global Platts stood at Yuan 2,350/mt ($342/mt) full cash terms, down Yuan 50/mt day on day, Yuan 60/mt lower week on week and a fall of Yuan 350/mt from a month ago.

    A spot trade was heard done at Yuan 2,350/mt cash to full credit terms, ex-works Henan basis for 20,000 mt of refiner East Hope's alumina sold to a trader, market participants said.

    Refiners, traders and smelters said Yuan 2,350/mt cash was the current market clearing rate for both Henan and Shanxi spot alumina.

    A source from East Hope denied having done the trade but did not rule out that the company's alumina may have been traded via other channels at Yuan 2,350/mt.

    Another Henan refiner who also heard of the trade said it was "very possible due to East Hope's anticipated Xinjiang smelter cuts...even though it has not started, they will have extra supply so that is definitely a pressuring factor now."

    A third Chinese refiner/trader agreed, adding he expected this trade to further dampen alumina and push prices down even lower near term.

    A Shanxi refiner, however, continued to put spot prices closer to Yuan 2,400/mt cash "as East Hope is not a pure refiner, they have a smelter and anticipated cuts, so their price may not be repeatable for others. But prices will reach the Yuan 2,300/mt levels soon, just maybe not now, not yet."

    The front-month aluminum contract on the Shanghai Futures Exchange closed at Yuan 14,250/mt, up from Yuan 13,935/mt last week and from Yuan 13,680/mt a month ago.
    Back to Top

    Turquoise Hill output falls on lower grades

    Rio Tinto subsidiary Turquoise Hill Resourceshas reported a 23% drop in concentrate production at the Oyu Tolgoi copper/gold mine, in Mongolia, as it processed lower grades from phases 6 and early 4A of the openpit, as well as stockpile material, during the three months ended March.

    Concentrate production slumped to 176 000 t in the period, in line with expectations, offset by the concentrator recording record throughput on the back of benefit from earlier productivity improvements, Turquoise Hill CEO Jeff Tygesen stated on Wednesday.

    During the quarter, openpit operations focused mainly on Phase 6, which has higher copper grades but relatively low gold grades. Ore treated during the period increased 2.7% over the prior period, and average daily throughput of 112 100 t for the first quarter increased by 5.1% over the December quarter.

    Copper output for the quarter decreased 16.3% quarter-on-quarter to 38 100 t and gold output fell 49% over the prior comparable period to 25 000 oz owing to lower grades, with recoveries at the lower end of the grade recovery curve.

    Oyu Tolgoi is expected to produce 130 000 t to 160 000 t of copper and 100 000 oz to 140 000 oz of gold in concentrates for 2017.

    Rio Tinto operates the Oyu Tolgoi copper/gold mine, which is 66% owned by its Turquoise Hill arm and 34% owned by the Mongolian government.
    Back to Top

    Iluka revenues soar

    Revenue from mineral sand sales from ASX-listed Iluka Resources increased by 118.5% during the three months to March, compared with the previous corresponding period, reflecting an increase in sales volumes.

    Total revenue for the quarter reached A$218.5-million, compared with A$102.1-million in the previous corresponding period, as total mineral sands production increased from 232 200 t to 336 900 t.

    Iluka said on Thursday that improved mineral sands market conditions were evident in the first quarter of 2017, with the company recording a 131.5% increase in total zircon, rutile and synthetic rutile sales volumes, compared with the first quarter in 2016.

    Higher weighted average received prices were also recorded for both zircon and rutile.

    The production and sales volumes are inclusive of Sierra Rutile, which Iluka recently acquired.

    During the quarter under review, Iluka’s only operating mine continued to be the Tutunup South operation, which is the principal source of ilmenite for the synthetic rutile kiln in the south-west of Western Australia.

    The Jacinth-Ambrosia mine remained suspended, to enable Iluka to further draw down on heavy mineral concentrate inventories.

    During the quarter, the company processed some 154 000 t of heavy mineral concentrate and processed 366 000 t.

    Meanwhile, Iluka on Thursday flagged that operations at its Hamilton processing plant, in the Murray Basin in Victoria, will be suspended from October this year, as the plant will only be processing the remaining heavy mineral concentrate from the Murray Basin operation.

    The suspension of Hamilton will last until Iluka’s next planned mining development in the region, the Balranald deposit, in New South Wales.
    Back to Top

    Alcoa swaps New York for the city of steel as Harvey simplifies

    Alcoa is giving up the glamour of New York City and going back to Pittsburgh, as new CEO Roy Harveysteps up efforts to streamline the aluminiummaker.

    Changing headquarters and closing seven locations across the US, Europe and Asia is part of a push to lower costs after the producer of the light-weight metal split from its jets- and auto-parts business last year. Alcoa called Pittsburgh, known as the steel city, home for decades until it moved to New Yorkin 2006.

    At an industry conference in February, Harvey said his key priorities for the company moving forward would sound like “apple pie and ice cream” to Americans in the audience: “simplify, simplify, simplify.”

    “Today’s announcement is another step in our drive to be a more competitive, operator-centric company,” Harvey said Wednesday in  statement. “We are taking every opportunity to streamline Alcoa to reduce complexity.”

    The move would come as little surprise to analysts on calls with the new Alcoa management team, which has been quick to point out its frugality. The company once regarded as a corporate bellwether has eliminated a Geneva office and reduced its office space on Park Avenue, in Manhattan, to one floor. As Alcoa CFO William Oplinger noted in a November call: “We did not take any of the corporate jets with us.”

    Arconic, the downstream business that split from Alcoa in November, remains in New York. Arconic is involved in a proxy battle with activist investor Elliott Management that this week led to the departure of Klaus Kleinfeld as CEO and chairman. Among Elliott’s complaints were Arconic’s corporate overhead expenses and Kleinfeld’s globe-trotting lifestyle.

    Alcoa expects annual savings of $5-million in corporate expenses once it finalises the changes. Affected employees will relocate to other offices or facilities or telecommute.

    Attached Files
    Back to Top

    Peru's Southern Copper workers mark 10 days on strike

    Workers at mining company Southern Copper in Peru completed their tenth day of an indefinite strike on Wednesday, though the company said it had not significantly impacted output.

    Jorge Campos, the secretary general of the Unified Union of Workers of Southern Copper, said some 3,000 workers have walked off the job demanding a greater share of profits and more medical benefits.

    "We are completing 10 days of a general indefinite strike... the company is sending letters of dismissals to the workers and other measures of intimidation when the administrative processes in the strike have not even been completed," Campos told reporters after visiting Peru's Congress.

    A Southern Copper representative said the strike had not "significantly" affected production as the company was operating at 92 percent capacity on average in Peru and had sub-contracted workers. The refinery was operating at 100 percent capacity, the company said.

    Campos said workers and the company would attend talks with Peru's labor ministry on Thursday.

    Southern Copper operates the Toquepala and Cuajone mines and the Ilo refinery in Peru. Toquepala and Cuajone, both in southern Peru, together produced some 310,000 tonnes of copper last year, according to government data.

    Southern Copper, owned by Grupo Mexico, boosted its copper output by 21 percent to 900,000 tonnes last year on the back of an expansion at a mine in Mexico.
    Back to Top

    Freeport Indonesia has initial approval to resume copper exports -spokesman

    Freeport McMoRan Inc has received preliminary approval to resume copper concentrate exports from its Indonesian operation and hopes to lodge an application for an export permit this week, a company spokesman said.

    Indonesia halted Freeport's copper concentrate exports in January under new rules requiring the Arizona-based company to adopt a special licence, pay new taxes and royalties, divest a 51 percent stake in its operations and relinquish arbitration rights.

    However, hopes of a resumption of exports from Freeport's Grasberg mine have improved since the end of March, when the mining minister said a temporary licence would be granted while discussions on longer-term issues continued.

    "We have approval for exports and are working on finalising an export permit," Freeport Indonesia spokesman Riza Pratama told Reuters on Tuesday.

    Mining ministry officials could not be reached for comment on the matter.

    An earlier recommendation for Freeport to export up to 1.1 million tonnes of concentrate would still apply, but the company still needs an export permit from the Trade Ministry, Director General of Coal and Minerals Bambang Gatot said at that time.

    The latest deal is expected to allow Freeport to export copper concentrate for six months, while working to reach agreement with the government on the other disputed issues.

    The stoppage has resulted in thousands of layoffs and cost both sides hundreds of millions of dollars. In February Freeport served notice, saying it has the right to commence arbitration in 120 days if no agreement is reached.

    Freeport's joint venture partner at Grasberg, Rio Tinto , has also warned several times it is considering whether to continue the partnership at the world's second-largest copper mine, given the uncertainties surrounding Freeport's negotiations over long-term mining rights in Indonesia.
    Back to Top

    Copper production jumped by a million tonnes last year

    Copper production jumped by a million tonnes last year

    The latest report by the International Copper Study Group which includes full year 2016 estimates shows world mine copper production jumped by 5.3%, or 1 million tonnes last year to 20.16 million tonnes.

    According to the report the increase was mainly due to a 38% (650,000 tonnes copper) rise in Peruvian concentrate output that benefitted from new and expanded capacity brought on stream in the last two years; a recovery in production levels in Canada, Indonesia and the US, and expanded capacity in Mexico, and low frequency of supply disruptions due to strikes, accidents or adverse weather conditions.

    However overall growth was partially offset by a 3.8% (220,000 tonnes) decline in production in Chile, the world’s biggest copper mine producer, and a 4.5% decline in the Democratic republic of the Congo where output is being constrained by temporary production cuts.

    On a regional basis, production rose by 6% in the Americas and 11.5% in Asia but declined by 3.5% in Africa while remaining essentially unchanged in Europe and Oceania.

    ICSG estimates world refined production increased by about 2.5% (530,000 tonnes) in 2016 with primary production (electrolytic and electrowinning) increasing by 3% and secondary production (from scrap) declining by 2%.

    World refined copper balance for 2016 indicates a deficit of around 50,000 tonnes, mainly because of a 2.5% increase in Chinese apparent demand. The refined copper market balance for the month of December 2016 showed a small surplus of around 20,000 tonnes.

    Preliminary production by the top 10 copper mining companies totalled nearly 9.5m tonnes last year, a 4% increase compared to 2015, and some 45% of global production.

    Six out of 10 companies increased their copper output while four of them declined. All companies in the Top 10 that disclose production costs reported significant reduction in copper unit costs.
    Back to Top

    Labour action threatens Chile's Chuquicamata copper mine

    Chile, the world's biggest copper producer, faced a fresh threat of labour action in the sector on Wednesday when a union at the large Chuquicamata mine said it had blocked access as a "warning" over planned changes to job opportunities.

    Mine owner Codelco said the union's action, which affected the early shift, was "illegal." It ended by 9 am and the impact on production was being evaluated, it said in a statement.

    Earlier, Codelco said output had been unaffected as workers from the previous shift had continued to keep operationsgoing.

    The state-run company signed new 27-month contracts with its six Chuquicamata unions in December after relatively rapid talks.

    However, union No 1 said Wednesday that the contracts were not being fulfilled, as Codelco was making changes that were reducing the possibility of promotion.

    "They are cutting off the careers of Chuqui workers, particularly the youngest," union leader Jaime Graz told Reuters. "This is a warning action until they commit to comply with what was agreed."

    Codelco said it was complying with the agreed contract terms. "It is not possible to open up and hire for positions that are not needed by the business," it said, adding that it was inviting "constructive dialogue."

    The union's move came less than a month after the end of a six-week strike at BHP Billiton's massive Escondida coppermine, which was the longest strike in the country's mininghistory and which ended without a real resolution.

    Chuquicamata, a century-old pit which is being expanded underground, produced 302 000 t of copper last year, out of world No 2 copper miner Codelco's 1.8-million tonnes total.
    Back to Top

    China Aluminium: Weiqiao rumbles on.

    Development and Reform Commission on the "clean up the electrolytic aluminum industry illegal project action program" or recently announced

          16 evening, the printing out of the "Development and Reform Commission Office [2017] No. 656 - on the issuance of" clean up the electrolytic aluminum industry illegal project action program "notice. At this point, spread more than two months to the production capacity of rumors or will be landing, the file or in the recent disclosure in the official website, please pay attention to investors.

    Xinjiang halted the three electrolytic aluminum project aluminum supply side is expected to gradually stronger reform

    0 Comments2017-04-17 10:16:00 Source: Securities Market Red Weekly See the main force to buy what!

      Xinjiang Changji government issued a notice on the 14th, decided to stop the three companies in Changji City, illegal construction of electrolytic aluminum production capacity projects, with a total capacity of 200 million tons. It is reported that one of the 800,000 tons project is not approved by the first building, has been completed. Although Xinjiang has a low price advantage, but the local is also facing water shortage and other issues.

      Since the beginning of this year, all levels of government departments have expressed in different occasions on the positive side of the reform of the supply side of electrolytic aluminum . With the establishment of the new security zone, green environmental protection is becoming the focus of the Beijing-Tianjin-Hebei region, the market supply of aluminum policy on the introduction of the policy is expected to gradually warming.

      Institutional research report that if the supply side to reform the production capacity to reach 300 to 500 million tons, and then consider deducting part of the zombie production and heating season production, supply will tend to tight balance, and may even be in short supply.Coupled with the recent global aluminum stocks continued to decline, aluminum prices are now easy to rise or difficult to fall.

    Commodity Intelligence- Weiquiao (9).pdf

    Back to Top

    Steel, Iron Ore and Coal

    Post cyclone coking coal price plunge

    The price of coking coal dropped sharply on Thursday with the industry benchmark price tracked by the Steel Index losing 4.6% to $289.50 a tonne as supply disruption following tropical storms in Australia begin to ease.

    Last week the price of Australia free-on-board premium hard coking coal jumped to highest since the second quarter of 2011. That price spike was also the result of flooding in Queensland that saw quarterly contract prices negotiated at an all time high of $330.

    While coking coal is returning to more expected levels, iron ore's unnerving decline appears to have been arrested

    Cyclone Debbie caused serious damage to key rail lines serving mines in the state of Queensland and while three lines have now reopened according to operator Aurizon, but large sections of the Goonyella railroad in the centre of the network is only be expected to be up and running in a week's time.

    Earlier expectations were that roughly 12–13 million tonnes of Australian met coal cargoes destined for China, India and Japan could be delayed, but Aurizon said this week up to 21 million tonnes have been affected.

    A total of 221 million tonnes of coal was exported last year from Queensland, according to the Queensland Resources Council quoted by Reuters and of that at least 75% be steelmaking coal.

    Customs data released last week showed Chinese imports of coal – both thermal and metallurgical coal – in March rose 12.2% from a year ago and 25% from February to 22.1 million tonnes.

    The global met coal market is around 300 million tonnes per year with premium hard coking coal or PHCC constituting more than a third of the total market. More than half of PHCC seaborne coal come from Australian producers according to TSI data.

    A reduction in allowable work days at China's coal mines last year sparked a massive rally in coal prices, lifting met coal prices to multi-year high of $308.80 per tonne by November from $75 a tonne earlier in 2016. But the speculative rally fizzled soon fizzled out with the commodity hitting a 2017 low of $150.10 a tonne last month.

    While coking coal is returning to more expected levels, iron ore's unnerving decline – more than a third over just the last month  – appears to have been arrested.

    The Northern China import price of 62% Fe content ore advanced for a second day on Thursday trading at $64.70 a tonne after dipping to a six-month low of $61.50 per dry metric tonne on Tuesday according to data supplied by The Steel Index.
    Back to Top

    Vale’s iron ore output just hit another record

    Brazil’s Vale, the world’s No.1 iron ore miner, said output of the steelmaking material hit a fresh record high in the first quarter as its massive S11D mine in the Amazon continued to ramp up.

    The Rio de Janeiro-based company said iron ore production jumped 11% to 86.2 million tonnes in the January-March period, compared to the same quarter a year earlier.

    The figure however, was 6.7% lower than total iron ore output of 92.386 million tonnes in the prior three months, and the company said it might restrain supply even further in coming months to support prices if necessary.

    For now, however, the mining giant reiterated its output guidance for the year of between 360 million and 380 million tonnes of seaborne.

    The commodity has been steadily falling in the last few days, to a near six-month low this week, on the back of fresh signs of a supply glut and ramped-up production in China.

    While prices have recovered slightly in the past two days — ore with 62% content in Qingdao added 76 cents overnight to $65.36 a tonne on Thursday according to the Metal Bulletin — analysts expect supply to surpass demand for the foreseeable future.

    For some, such as Stan Wholley, president for the Americas at CSA Global, the current downtrend is nothing but a expected correction. “I think people got exuberant about iron ore on the way up and we are seeing a bit of reality check right now,” he told

    He noted that at least one of the main factors dragging prices down at the moment — high level of stockpiles in China and the anticipated increases in supply coming from Vale and Roy Hill — may soon reverse its course.

    “There is not a great deal that can be done about the new supply — it will happen. However, there are indications that stockpiles in China are decreasing (albeit from record highs) which may slow or even halt the decline,” he said.

    “I also think the handover of power that will be occurring in China later in the year will have a stabilizing influence, as the incoming government will not want to see wild swings in the economy and will want to see growth maintained as they assume power,” said the CSA Global consultant, who has more than 25 years of experience in exploration and mining geology, particularly in the iron ore sector.

    Longer term, Wholley thinks iron ore fundamentals are sound. Steel production in China increased in 2016 and it’s predicted to do so again this year to support infrastructure projects as Beijing tries to stimulate the economy.

    At Macquarie, analysts seem to be on board of a very different boat. In a note Thursday, the bank said it expected to see iron ore find support at around $50 per tonne, suggesting that falls of a further 20% are in store.
    Back to Top

    Sichuan cuts 10.7 Mtpa steel capacity

    Southwestern China's Sichuan province has slashed 10.7 million tonnes per annum (Mtpa) of steel capacity through removal of 27 companies' medium frequency furnaces since December last year, local newspaper reported.

    Sichuan realized the goal to shut 8.64 Mtpa outdated steel capacity during the 12th Five-Year Plan period (2011-2015).

    The province eliminated 4.2 Mtpa of crude steel in 2016, achieving the target ahead of time.

    It also shed 0.38 Mtpa of iron making capacity and 0.77 Mtpa of steel marking capacity in 2016, respectively.
    Back to Top

    Asia steelmaker shares rise despite Trump salvo on trade

    Shares of most Asian steelmakers rose on Friday, deflecting the first salvo of a long-anticipated anti-dumping campaign from U.S. President Donald Trump.

    Citing concerns about national security, Trump on Thursday launched a trade probe against China and other exporters of cheap steel into the U.S. market, raising the possibility of new tariffs.

    In Japan, shares in Nippon Steel rose 1.3 percent, after five weeks of steady losses, partly on speculation that any action by the U.S. would mostly target China which is easily the world's largest producer.

    South Korean steelmaker Posco followed with gains of over 2 percent, while Taiwan's China Steel advanced 1.3 percent.

    "Trump is targeting China, although he says the steel import probe has nothing to do with China," said Choi Moon-sun, a steel analyst at Korea Investment & Securities in Seoul.

    "Only about 5 percent of South Korea's steel produce goes to U.S., so any impact will be very limited for Posco. China will feel the pain if there is any wider import restrictions."

    Trump won many votes in industrial states like Michigan and Pennsylvania with a pledge to boost manufacturing and crack down on Chinese trade practices.

    His move diverges from the Obama administration's approach to the issue, which relied largely on filing complaints to the World Trade Organization (WTO).

    China is the largest national steel producer and makes far more than it consumes, selling the excess output overseas, often undercutting domestic producers.

    Investors in most Chinese producers seemed to absorb the news well, in part because it had been so long telegraphed.

    China's stock markets often march to their own drummer and, despite Trump's talk of massive dumping, U.S. steel demand really isn't that big of a deal for China.

    The Asian behemoth accounts for almost a quarter of global steel exports, yet less than 1 percent of those exports went to the United States last year, according to data from the U.S. Commerce Department.

    Shares in Baotou Steel were up 1 percent, while Angang Steel added 0.3 percent and Baoshan Iron & Steel Co held steady.

    Beijing has long pledged to downsize the industry which is plagued by oversupply from inefficient, high-polluting mills, but has baulked at the potential loss of jobs.

    Many Chinese investors seem to favour a rationalisation in production which would boost the price of steel as shares in lower-cost producers rally whenever cutbacks are floated.

    "The key thing is that we don't know enough about this, and whether the Trump administration is somehow going to reduce the supply of steel coming out of China, because that would actually be positive for steelmakers everywhere and would increase steel prices," explained a director of equity cash sales at a foreign securities house in Tokyo.

    Prices for steel and iron ore in China were indeed rallying on Friday, after a rough few weeks when fears that production was starting to outstrip domestic demand hammered markets.

    Inventories are swelling, adding to fears of a supply glut later in the year.

    China's crude steel output reached a record 72 million tonnes in March as mills ramped up output.

    Its exports of steel products rose about 32 percent to 7.56 million tonnes in March from February, when they were at a three-year low.
    Back to Top

    Strong power demand to support Chinese thermal coal in 2017: Citi

    Chinese domestic thermal coal prices are expected to be supported by robust industrial power demand and slower-than-expected supply additions this year, Citi analysts said Thursday.

    The Chinese 5,500 kcal/kg NAR thermal coal price could average Yuan 500-600/mt in 2017, the analysts said in their second-quarter commodity market outlook.

    Thermal coal prices more than doubled last year after China reduced the number of working days at most of its mines, hitting production, while rains in Indonesia disrupted supply.

    However, the Chinese government later relaxed its production policy to meet growing demand. Coal production in major mining provinces in China was also affected this year by adverse weather and intesive safety inspections.

    The price of FOB Qinhuangdao 5,500 kcal/kg NAR coal has surged nearly 81% since the start of 2016 to be assessed Wednesday at Yuan 660/mt, S&P Global Platts data showed.

    "We anticipate Chinese thermal coal demand to stay flat in 2017 after a slight 1% year-on-year decline in 2016, thanks to robust industrial power demand, and supply rising 7% year year on year after a 8% decline last year," Citi analyts said.

    Chinese thermal power generation rose 7% year on year in the first two months of the year, supporting thermal coal prices.

    "Thermal coal looks tightish in the near term, but Chinese supply should come back rapidly in the second half of 2017, and overseas miners are targeting marginally higher output," the analysts said.

    However, the analysts sounded a bearish note on India, another major buyer of imported coal.

    "India's thermal coal imports should continue to disappoint the global market," the analysts said.

    Earlier this month, Australia's Resources and Energy Quarterly report said it estimated India's total imports of thermal coal to fall to 161 million mt in calendar 2017 from an estimated 166 million mt in 2016, and to 157 million mt in 2019 before rising to 175 million mt by 2022. SUPPLY IMPACT

    On the supply side, the analysts do not see a significant impact on Australian thermal coal shipping volumes from the disruption caused by Cyclone Debbie earlier this year.

    "But the cyclone disruption could give producers better bargaining positions ahead of the April JPU contract negotiation with Japanese buyers," the analysts noted.

    Talks to finalize the benchmark price for April 2017-March 2018 shipments of Glencore's Australian thermal coal to Japan's Tohoku Electric Power are still ongoing, sources say, despite being nearly three weeks past their deadline.

    Indonesian exports may continue to be affected by rains and other logistics bottlenecks in Kalimantan province in the short term, Citi said, adding that they expect about 5% year-on-year supply growth for 2017.

    Exports of Indonesian thermal coal totaled 227.66 million mt in 2016, sliding 5% year on year on year, according to customs data.

    "As in 2016, iron ore, thermal coal and coking coal markets should take their cues from Chinese government actions in cutting capacity and actively managing short-term output," Citi analysts said.
    Back to Top

    Russian steelmaker Severstal says Q1 core earnings more than double

    Severstal, one of Russia's biggest steelmakers, said on Thursday its core earnings more than doubled in the first quarter as it benefited from rebounding metals prices, although its results lagged market expectations.

    Earnings before interest, taxation, depreciation and amortisation (EBITDA) totalled $578 million, up from $273 million in the first quarter of last year, but below a Reuters poll forecast of $591 million.

    Chief Executive Alexander Shevelev said Russian steel demand was likely to increase by 1.5-2 percent this year due to the improving domestic economy.

    Russian steelmakers such as Severstal and market leader NLMK struggled over the last two years as world steel prices plumbed 11-year lows and Russia's economic crisis sapped domestic demand, but their prospects have improved as metals prices picked up. They are seen brightening further this year as the Russian economy is expected to return to growth.

    "Severstal entered into 2017 delivering a robust financial performance supported by high raw material and steel prices," Shevelev said in a statement. "Overall, we expect 2017 to be a better year for the steel industry globally."

    Severstal, controlled by billionaire Alexei Mordashov, reported revenues of $1.77 billion for the first quarter, up 61 percent year-on-year.

    Net profit totalled $359 million, up 33 percent from the same period last year, the company said, but including a forex gain of $19 million.

    "Adjusting for this non-cash item, Severstal would have posted an underlying net profit of $340 million," it said in the statement.

    Severstal's crude steel production fell 2 percent quarter-on-quarter in the first three months of the year to 2.86 million tonnes, due to planned maintenance at its major Cherepovets Steel Mill in northwest Russia.

    The company's overall output could fall by 1-2 percent in 2017, from last year's 11.6 million tonnes, due to further planned maintenance, Chief Financial Officer Alexei Kulichenko told Reuters last week.

    Severstal said on Wednesday its board had recommended a dividend payment of 24.44 roubles ($0.4323) per share for the first quarter.

    "Results are weaker than expected and huge dividends ($350 million, 3 percent yield) does not look nice in this situation," BCS analysts said in a note.
    Back to Top

    CSX Q1 coal revenues soar 31% with improved export markets

    CSX saw a slight climb year on year in its first-quarter coal traffic, but a 31% surge in revenues from the sector as a result of an improved export market, the company said Wednesday in its earnings report.

    The railroad's Q1 coal volumes grew by 500,000, or 5,000 carloads, compared with the same quarter last year, but revenues climbed to $522 million from $399 million thanks to port deliveries. Income was boosted by a 28% increase in revenue per unit to $2,546 from $1,995.

    The company said "temporal strength in export coal" led to increased profits.

    CSX's Q1 total export volumes rose 50% year on year to 8.7 million st. Metallurgical coal volumes grew 23% to 5.3 million st and thermal volumes more than doubled with a 127% increase to 3.4 million st.

    Domestic thermal volumes coal fell 11% year on year to 11 million st for the most recent quarter and domestic coke and iron ore volumes fell 24% to 3.5 million st.

    CSX will host an earnings call Thursday with investors and media.

    Attached Files
    Back to Top

    Rains cut Rio first-quarter iron ore output 3 percent

    Global miner Rio Tinto on Thursday said first-quarter iron production from Australia fell 3 percent from the same period a year ago due to wet weather at its mines, but kept its full-year guidance intact despite weakening ore prices.

    Pilbara mines output totaled 77.2 million tonnes, the company said.

    Full-year shipping guidance was kept at 330 million-340 million tonnes.

    Shipments from the Australian mines in the first quarter were flat at 76.7 million tonnes against the year-ago period, but down 13 percent from the previous quarter.

    Ship loading was impacted by a cyclone, with parts of its rail line hit by heavy rainfall.

    "Despite these disruptions, shipments were in line with the first quarter of 2016 and guidance for 2017 remains at 330 to 340 million tonnes," the company said.

    Rio Tinto and rivals Vale, BHP Billiton and Fortescue Metals Group are facing a rapidly declining iron ore price amid waning demand from China, the biggest market for ore.

    The worldwide iron ore surplus reached 70 million tonnes last year - more than total U.S. consumption last year - and could balloon to 90 million tonnes in 2017, according to Citigroup.

    Iron ore prices are down more than 33 percent since a mid-February peak of $94.86 a tonne and forecasters are warning of a further pullback.

    Australia’s Department of Industry, Innovation and Science predicted iron ore prices would backtrack to U$55 a tonne in the fourth quarter.

    Next year’s forecast calls for iron ore prices to reach $51.60 a tonne, according to the department.

    In other minerals, Rio Tinto stuck to a full-year target of producing between 3.5 million 3.7 million tonnes of aluminum following a 2 percent rise in first-quarter production.

    But mined copper guidance was reduced to 500,000-550,000 tonnes from as much as 665,000 tonnes as a result of a strike at the Escondida mine in Chile and the curtailment of production at the Grasberg mine in Indonesia.

    Refined copper production guidance remains unchanged at 185,000 to 225,000 Rio said.
    Back to Top

    Teck: no plans to reopen Quintette met coal mine

    Teck could benefit in the short term from a windfall of soaring metallurgical coal prices and a recovery in other commodities it mines or processes such as copper and zinc.

    The price for steelmaking coal, which makes up more than 40% of the company’s business, shot above US$300 per tonne again recently. That’s about US$100 per tonne higher than the price Teck was using for an update of its earnings forecasts at the end of March.

    “We could essentially be looking at something like 2011,” said Joe Aldina, energy and mining analyst for S&P Global Platts.

    That’s when coal reached record prices of US$300 per tonne because of cyclones in Australia – the same reason they were back above that high-water mark last week. In 2011, weather-related flooding took Australian mines out of production, pushing up prices. By the time they were back online and supplying the market, demand for metallurgical (met) coal had begun to fall due to slowing growth in China, and by 2015 met coal prices had dropped below US$80 per tonne.

    Four metallurgical coal mines in B.C. were shuttered as a result, and proposed new mine projects, including Teck’s Quintette mine near Tumbler Ridge, were put on the back burner. Toward the end of 2016, met coal prices briefly rose back above US$300 per tonne, then fell back to half that price by the end of March.

    More recently, a cyclone took out a key railway link for met coal mines in Australia. Aldina expects spot prices for met coal will remain high for several weeks, which could provide a windfall for producers who are able to increase production and shipments.

    Of the four met coal mines that were shut down in B.C., two in Tumbler Ridge were restarted last year by new owners Conuma Coal Resources Ltd. But in an email to Business in Vancouver, Teck communications officer Chris Stannell said, “We have no near-term plans to reopen Quintette.”

    Teck is focused on completing the Fort Hills project in Alberta, as well as a copper mine expansion in Chile. Fort Hills production is expected to start in 2017’s fourth quarter. Teck owns 20% of the project; Suncor Energy Inc. (TSX:SU) owns 51%.
    Back to Top

    Trump 'Buy American' edict may have little impact on U.S. steel

    U.S. President Donald Trump's "Buy American, Hire American" executive order on Tuesday left questions about how the government would enforce the order and whether it would make a real difference in output and employment, according to steel executives and analysts.

    "Buy American" provisions already exist in U.S. law but policing them has been difficult because of waivers granted to foreign companies that undercut their U.S. counterparts on pricing. Earlier on Tuesday, Trump ordered a review of government procurement rules favoring American companies to see if they are actually benefiting, especially the U.S. steel industry.

    Trump's executive order promises to properly police those provisions, but avoided detail about how that will happen.

    Bill Hickey, president of Chicago-based Lapham-Hickey Steel, which has seven steel mills in the Midwest and Northeast, said he has heard talk of "Buy American" for decades, but American or foreign contractors frequently find loopholes to use imported steel.

    "Politicians all talk the same, but at the end of the day it just doesn't work," Hickey said, citing waivers to existing provisions.

    Charles Bradford of Bradford Research said focusing on "Buy American" for U.S. steel does not take into account that some steel products - including tin plate and semi-finished products - are not made in the United States. So if enforced improperly, it could cause supply problems in a U.S. market in which up to 25 percent of steel was imported in the first quarter of this year.

    "The people who have pushed for this don't have a clue and they don't know math," said Bradford.

    Cutting off the supply of goods not made in the United States would create fresh problems for U.S. companies, he said.

    In the construction industry, there also are concerns over "too strict a definition of what constitutes U.S.-made steel products," said Kenneth Simonson, chief economist of the Associated General Contractors of America.

    Simonson cited concerns with steel that might have been melted down from scrap metal that could have come from outside the United States, for example, and tracing its origins before that point.

    Trump's White House track record so far also helps fuel skepticism inside the industry.

    Instead of bold action promised last year by then-candidate Trump on the North American Free Trade Agreement, on China, and free trade agreements, the new administration has "not shown much evidence of doing so," said KeyBanc Capital Markets steel analyst Philip Gibbs.

    "I'm a lot less optimistic than I was three-and-a-half months ago because so far what I've seen coming out of the Trump administration is the same as the prior administration," he added.

    As a result, Gibbs said investors should dial back expectations that Trump will do anything meaningful on trade, or on infrastructure which is where such an order could make a difference.

    Investors seemed to shrug off Tuesday's executive order.

    Nucor Corp shares closed up 0.2 percent at $57.33, AK Steel Holding Corp gained a penny to end at $6.32 and United States Steel Corp closed down 0.5 percent at $28.73.

    AK Steel did not respond to requests for comment. Nucor and U.S. Steel both welcomed the president's executive order.

    The move was welcomed by labor unions. The United Steelworkers said that under current practice, "contractors often try to avoid the law through loopholes to buy cheap and often substandard foreign products like many from China."

    Thomas Gibson, chief executive of lobby group the American Iron and Steel Institute, said in a statement that "Buy American" provisions "are vital to the health of the domestic steel industry, and have helped create manufacturing jobs and build American infrastructure."

    Veteran steel industry analyst Michelle Applebaum said while it remains to be seen how thoroughly the Trump administration will police the steel industry, the executive order sends a clear message to steel importers. "Trump has just created more risk for anyone who wants to import steel," she said. "If he puts money behind enforcement that will force people to play by the rules and that will be a good thing."
    Back to Top

    India revives coal export plans to check rising pithead stocks

    With rising pithead stocks across the country, India is considering exports to cope with surpluses.

    “The government is now looking for new consumers for the surplus coal,” Minister for Power, Coal and Mines PiyushGoyal said in an address to members of the media. “We are open to the idea of exporting coal; however to export we have to address the issue of quality . . . as pollution generated from Indian coal is higher,” he said.

    Late last year, the Ministry of Coal started planning to enter international coal markets, starting with shipments to neighbouring Nepal and Bangladesh. However, even a modest starting offer of 10-million tons did not find many takers in the two countries, which were averse to buying low-grade, high ash content Indian coal. As such, within four months of planning to start exports, the government jettisoned the plan.

    However, with the government once again keen to explore export options to check mounting stocks, miners, including Coal India Limited (CIL), are increasing beneficiation volumes as a prerequisite to woo international buyers of Indian coal.

    It has been pointed out that attempts to export beneficiated coal will be a “challenge” considering limited domestic beneficiation capacity of not more than 70-million tons a year.

    Among other consumers that the government is expecting to woo in order to tackle the problem of plenty are thermal power plants which are currently resorting to imports.

    According to data sourced from the Central Electricity Authority, total coal imports between April 2016 and February 2017 were estimated at about 61-million tons. Of this, 19-million tons were imported by 29 power companies for blending with domestic coal, while 11 other companies imported 42-million tons for undiluted feeding into their plants.

    CIL officials said that if domestic miners were able to replace at least half of the imported volume with domestic coal, it would mitigate the rising problem of pithead stocks.

    In March 2017, pithead stocks had mounted to 69-million tons, up from around 49-million tons in May 2016.

    A senior official in the Coal Ministry further said CIL did not have to increase the rate of coal production.

    Citing a recent communication from the Ministry of Power, he said domestic thermal power plants would require an estimated 584-million tons of coal during 2017/18.  Hence, he said that based on past trends wherein thermal powerplants accounted for about 75% of domestic coalconsumption, total coal consumption during the year would be 780-million tons, which could be adequately met at the current rate of production by domestic miners.

    Attached Files
    Back to Top

    Indian buying interest prompts European thermal coal reloads: sources

    Increased Indian buying interest for lower specification grades of thermal coal has prompted up to two reloads out of the Amsterdam-Rotterdam-Antwerp trading hub in a rarely seen trading move, numerous sources told S&P Global Platts April 13.

    The Capesize vessel Mineral Kyushu entered the port of Rotterdam April 4, according to S&P Global Platts vessel tracking software, with a current destination of Port Said, north of the Suez Canal, slated.

    A large producer-trader was heard to have attempted to charter the vessel in late March for loading in Rotterdam and delivery in Kandla, India, via the Suez Canal around April 17 at a cost of $49,000 -- or around $19/mt -- although the deal was widely reported to have fallen through for reasons unclear.

    However, sources close to Rotterdam port facilities confirmed the vessel had reloaded thermal coal over the weekend, although the final destination of the vessel remained unconfirmed.

    Also of interest was the Capesize Celigny which appeared to have entered Amsterdam for a potential reload after delivering thermal coal from Puerto Bolivar to Ijmuiden, sources said.

    The vessel, currently located off the coast of Portugal, had left Amsterdam March 25 and was also bound for Port Said, suggesting it would transit through the Suez Canal into the Asia Pacific basin.

    A number of sources said the vessel was likely bound for India, but this could not be confirmed.

    Several sources questioned the motives behind the apparent reloads given the associated port costs and additional shipping.

    "I can only assume they are getting better prices for the material in India than what they would get in Europe," one Switzerland-based trader said.

    The source added that the coal was likely to be US high sulfur material or possibly South African 4,800 NAR given that European traders had purchased both grades towards the end of 2016, when premiums against futures for high specification material had blown out to over $10 on tighter availability and keen Chinese buying interest.

    At that time, discounts for South African 4,800 NAR against index 6,000 NAR prices were as high as $25-$26, but had since narrowed to around $18-$19 on dwindling availability.

    "Prices are decent in India for certain grades at the moment," one UK-based seller said. "It seems there are a few offers for US coal around and Asia is coming under a bit of pressure now, so it could be the seller of this cargo decided it was the right time to move it."

    A London-based trader said the apparent reloads could also be an attempt to re-balance stocks in Europe which were now running above 5 million mt at a time when the market traditionally slows down.

    "It's unlikely [that the charter of the Mineral Kyushu] would be [a backhaul] picking something up on the way back [to deliver into the Asia Pacific basin] as its not their [the sellers'] ship, they hired it," a London-based trader said, explaining that the seller of the coal would likely use a portfolio vessel to make such a move in order to avoid incurring additional shipping costs associated with a short-term charter.
    Back to Top

    Guangxi Qinzhou port Q1 coal imports up 34.8% on year

    Guangxi-based Qinzhou port imported 1.65 million tonnes of coal over January-March, surging 34.8% from a year earlier, customs data showed.

    Import value totaled $119.86 million during the same period, up 116.3% year on year, data showed.

    Anthracite coal imports via Qinzhou port amounted to 145,000 tonnes over January-March, accounting for 8.77% of the port's total coal imports and rising 49.27% year on year.

    Continued overcapacity cut and rising prices in China rendered imported coal more price-competitive, attracting buying interest from end users in metal smelting, cement and other industries in Guangxi.

    With abundant coal resources, especially anthracite coal, Vietnam, adjacent to Guangxi, is gaining favour among buyers in Guangxi.

    Attached Files
    Back to Top

    Wet weather rains on Atlas parade

    Wet weather conditions has seen iron-ore miner Atlas Iron ship less tonnes during the three months to March, while C1 cash costs increased from A$34/t to A$36/t, compared with the previous corresponding period.

    The volume of ore shipped during the March quarter declined from the 4-million tonnes shipped at the end of the December quarter, to 3.2-million tonnes, with wet weather and the expected decline at the Wodgina mine, as it approached the end of its mine life, resulting in lower production.

    Mining at Wodgina was completed, as scheduled, on April 6.

    MD Cliff Lawrenson told shareholder on Tuesday that despite the decline in production, the company had made significant progress on all fronts.

    “Atlas has posted a solid production result despite the challenging weather. Margins were good and free operating cash flow was strong.”

    The adverse weather conditions caused disruptions across all Atlas sites, and impacted haulage, Lawrenson said, noting that ports were shut due to the weather, and unscheduled repairs and scheduled maintenance reduced both shipment and haulage, leading to increased inventory at ports and sites.

    C1 and full cash costs were up slightly, driven by reduced portfee relief, reduced fixed cost dilution and higher seaborne freight.

    Meanwhile, during the quarter under review, Atlas approved the A$47-million to A$53-million development of its Corunna Downs project, which had the potential to deliver four-million tonnes a year of lumps and fines direct shipping ore over an initial five- to six-year mine life.

    First ore from Corunna Downs is now expected to be shipped in the March 2018 quarter.
    Back to Top

    China March raw coal output up 1.9%pct on year

    China's raw coal output stood at 299.76 million tonnes in March, increasing 1.9% from the year prior, data showed from the National Bureau of Statistics (NBS) on April 17.

    From January to March, China produced 809.23 million tonnes of raw coal, down 0.3% from the preceding year, compared with 2% decrease during the same period of 2016.
    Back to Top

    China to create 10 'mega' coal companies through M&As: report

    China aims to create 10 "mega" coal producers by the end of the decade as part of its drive to consolidate the industry and tackle overcapacity, the official China Daily reported on Friday, citing an energy official.

    Wang Xiaolin, deputy director of the National Energy Administration, said China was preparing guidelines to create 10 new industry giants each with annual production capacity of more than 100 million tonnes.

    The report said China already has six firms with production capacity above 100 million tonnes.

    According to the China Coal Trade and Distribution Association, the new guidelines will compel coal mining regions to consolidate smaller mines over the next two years, and close those that are not restructured.

    The association said large-scale state miners, including the Shenhua Group, China's biggest coal producer, are also set to undergo restructuring.

    China is in the middle of a program aimed at tackling price-sapping supply gluts in the coal sector, and aims to shut at least 500 million tonnes of production capacity by the end of the decade, with smaller mines shut or consolidated.

    China aims to shut at least 150 million tonnes of coal production capacity this year alone, and the campaign has helped drive up coal prices by more than a quarter since the beginning of the year.
    Back to Top

    Australia's Aurizon slashes profit guidance, coal tonnage after cyclone

    Australian coal railway line operator Aurizon Holdings Ltd on Tuesday slashed its annual profit guidance by up to 16 percent and said as much as 21 million tonnes less coal would be carried to ports as a result of Cyclone Debbie.

    The cyclone in the northern state of Queensland led to the temporary closure of four of Aurizon's haulage lines in the world's largest coking coal export region.

    Three of the lines have reopened already. Goonyella, the largest in terms of export tonnage, is expected to open on April 26 - about 1-1/2 weeks ahead of an earlier forecast - though with speed restrictions and reduced capacity, Aurizon said.

    Aurizon said its latest forecast for underlying earnings before interest and tax was for A$800 million ($605 million) to A$850 million for the year ending June 30, down from previous guidance of A$900 million to A$950 million before the cyclone. The lower guidance accounts for lost revenue and flood repair costs, it said.

    Aurizon shares fell by as much as 4.5 percent on Tuesday after it exited a trading halt to disclose the revised forecast.

    Aurizon's major customers include coal miners BHP Billiton , Glencore PLC, Peabody Energy Corp , Rio Tinto and Anglo American PLC .

    Aurizon said it expected to haul between 12 million and 14 million tonnes less coal in the year to June 30 as a result of the cyclone. Overall tonnage for the year, including that hauled by other operators on Aurizon lines, is expected to fall by 19 million to 21 million tonnes.

    Attached Files
    Back to Top

    POSCO says Q1 operating profit more than doubled

    South Korean steelmaker POSCO said on Tuesday that its first-quarter operating profit more than doubled from the same period a year earlier, beating its own earlier estimate, as solid demand in China boosted steel prices.

    The world's fourth-largest steelmaker said consolidated operating profit for January-March was 1.37 trillion won ($1.20 billion), compared with a preliminary estimate it issued in late March of 1.2 trillion won, and 659.8 billion won reported a year ago.
    Back to Top

    Coking coal price jumps to six-year high of $314/t

    The price of coking coal gapped higher again on April 13 with the industry benchmark price surging 4.6% to $314/t due to continued supply outages following tropical storms in Australia, according to Steel Index tracking data.
    It's the highest price for Australia FOB premium hard coking coal since the second quarter of 2011. That price spike was also the result of flooding in Queensland that saw quarterly contract prices negotiated at an all time high of $330.
    Coking coal has more than doubled in two weeks on the back of disruption to Australia's coal exports associated with Cyclone Debbie which caused serious damage to key rail lines serving mines in the state of Queensland.
    Three lines are set to reopen by the end of this week according to operator Aurizon but large sections of the Goonyella railroad in the centre of the network could be still closed until May.
    Roughly 12–13 million tonnes of Australian met coal cargoes destined for China, India and Japan could be delayed.
    Customs data released on April 12 show Chinese imports of coal (both thermal and metallurgical coal) in March rose 12.2% from year on year and 25% from February to 22.1 million tonnes.
    The global met coal market is around 300 million tonnes per year with premium hard coking coal or PHCC constituting more than a third of the total market. More than half of PHCC seaborne coal come from Australian producers, according to TSI data.
    A reduction in allowable work days at China's coal mines last year sparked a massive rally in coal prices, lifting met coal prices to multi-year high of $308.80 per tonne by November from $75 a tonne earlier in 2016. But the speculative rally fizzled soon fizzled out with the commodity hitting a 2017 low of $150.10 a tonne last month.
    Back to Top

    Beijing warns China steelmakers it plans 'year of attack' on mill overcapacity

    China's steel mills need to prepare for an even tougher assault on overcapacity this year as the government bids to make "fundamental" progress in reforming the sector, an official from the country's top planning body told an industry meeting.

    "Although capacity reduction targets were achieved early last year, the overcapacity problem in China's steel sector has not fundamentally been improved," said Xia Nong, supervisor at the industry department of the National Development and Reform Commission (NDRC).

    Xia described 2017 as a "year of attack" and said the state would make even bigger efforts, warning a gathering of industry officials and executives in Beijing on Thursday that they should plan in advance. Officials at the meeting insisted last year's 65 million tonnes of capacity cuts were already substantial.

    "Do not delay, don't play wait and see," Xia said.

    The world's biggest steel producing country vowed last year to reduce annual crude steel capacity by 100-150 million tonnes within three to five years.

    It aims to close 50 million tonnes this year, and has also vowed by the end of June to completely eliminate low-grade steel furnaces, responsible for as much as 100 million tonnes of illegal substandard production every year.

    "We don't permit leaving things to chance, and we don't permit lying low during the crackdown on low-grade steel capacity," Xia said.

    Environmental group Greenpeace estimated earlier this year that actual capacity in operation increased by 35 million tonnes in 2016, with much of the closure programme focusing on already defunct plants.

    China's steel output increased 1.2 percent to 808.4 million tonnes in 2016, and Greenpeace said the country needed to consider cutting production rather than capacity in order to rein in the sector.

    Luo Tiejun, supervisor of the raw materials department at China's Ministry of Industry and Information Technology, rejected that notion, saying Beijing was still committed to letting the market decide production levels.

    "China will only cut steel capacity and will not set a level for output," he said. "It is wrong to say that China's steel capacity is increasing."

    However, the central government has already launched an investigation into steel firms in the city of Tangshan in Hebei province, focusing on mills that have "cut capacity but actually increased output".

    Tangshan, home to dozens of private steelmakers, produced 88.3 million tonnes of steel in 2016, up 6.8 percent on the year - and more than the whole of the United States.

    Steel prices rose 76.5 percent in 2016, boosting profit margins and helping mills turn losses into gains, according to data from the China Metallurgical Industry Planning and Research Institute.

    With output up 6 percent in the first two months this year, industry watchers say the price recovery may have encouraged some mills to overproduce.

    Attached Files
    Back to Top

    M&As to gather pace in China coal sector

    Mergers and restructuring among China's coal sector are accelerating, with about ten enterprises producing more than 100 million tonnes of coal annually projected to be established by 2020, Economic Information Daily reported on April 13.

    Related departments have been asked to issue guidance on promoting the sector's mergers, restructuring, transition and upgrade. Small coal mines based in different regions will implement mergers and restructuring within two years, meanwhile, about ten big companies will be set up by 2020, the newspaper said.

    The government also encouraged enterprises to strengthen trans-regional cooperation to cut overcapacity through stock swap.

    China will reduce coal production by at least 150 million tonnes this year, Premier Li Keqiang said.

    The government pledged to make more use of market- and law-based methods to address the problems of "zombie enterprises" and encourage enterprise mergers, restructuring and bankruptcy liquidations.

    Last year, six enterprises' production exceeded 100 million tonnes, while in 2015, it was eight, Zhang Hong, deputy secretary-general of China National Coal Association, told the newspaper.

    The State-owned Assets Supervision and Administration Commission earlier said that the number of centrally administered State-owned enterprises (SOEs) will be reduced to no more than 100, which now stands at 102.

    The government also promised measures such as introducing a mixed ownership system and more efforts to make SOEs leaner and healthier, especially in the steel, coal and power sectors.

    There will be about 3,000 coal enterprises in 2020, mostly large companies, running about 6,000 collieries nationwide, with large-capacity coal mines the majority, according to the coal industry 2016-2020 development plan.
    Back to Top

    China March steel products exports down 24.2% on year

    China exported 7.56 million tonnes of steel products in March, down 24.2% year on year but up 31.5% from the previous month, showed the latest data from the General Administration of Customs (GAC).

    The year-on-year decline was mainly owing to weakening price edge of China's steel products in the international market and increasing anti-dumping investigation from other countries.

    Total steel products exports amounted to 20.73 million tonnes over January-March, decreasing 25% from the year-ago level.

    China imported 1.3 million tonnes of steel products in March, climbing 2.4% from the preceding year. From January to March, total steel products imports reached 3.48 million tonnes, gaining 11.3% year on year.
    Back to Top

    Arch looking to cash in on surging high-vol A export prices: CEO

    By leveraging its large-output, high-vol A mines, Arch Coal is better positioned to take advantage of the latest surge in metallurgical export prices than most US miners, the company's CEO said Wednesday at the Coal Transportation Association's Spring Conference.

    In his presentation, John Eaves highlighted the dramatic price increases seen off the US East Coast since Cyclone Debbie blew through Australia and washed away infrastructure to disrupt transportation to ports.

    He noted that with expected railroad delays of up to five weeks in Australia, US met export prices are rising so fast that figures used in his presentation pulled from indexes just days earlier were already out of date.

    "In the last couple weeks we've seen a pretty significant uptick," Eaves said. "Prices are up $15 to $25 a day and continue to run. We don't think that's sustainable, but were trying to capture some of that value as we see that happen."

    High-vol A prices gained another $10 on Wednesday to increase to $285/mt. High-vol A pricing has surged $122.50, or 75.4%, since March 31 and surpassed the year-ago high of $265/mt seen in mid-November.

    Arch's Leer mine is the largest high-vol A mine in the US, and its Sentinel mine ranks fifth in output. Both mines are in West Virginia.

    US Mine Safety and Health Administration data showed Leer produced almost 3.6 million st last year and about 830,000 st in the first quarter this year, while Sentinel's output totaled 1 million st in 2016 and 347,000 in Q1 this year, which marked its highest quarterly output in five years.

    While Arch is able to increase production from longwalls at Leer, many other US producers would likely struggle to ramp up output to meet new demand, especially of high-vol A grades, Eaves said.

    Central Appalachia has lost about 30 million st/year of met production since 2013, the CEO said, and while Arch expects output to increase about 7 million st this year to 66 million st because of the seaborne market, a majority of the coal coming online will be of lower quality.

    Much of current met production has already been committed to deals made in the past eight months since the revitalization of the market, and companies looking to hire employees, even Arch, have struggled to find skilled workers as many miners laid off during coal's downturn have left the business altogether, Eaves noted.

    "It's going to be tough, but people are going to bring any meaningful production online," Eaves said. "Everybody's going to look at what they can do -- but we see a real high-vol A scarcity."

    In what has become a much more balanced global met market, Eaves said that in the past few years miners have learned "when there is a real interruption in transportation or production -- up or down -- it can have a real impact on prices."

    Attached Files
    Back to Top

    Shaanxi found lax in cutting coal use, troubled by poor air quality

    Shaanxi province was found lax in reducing coal burns and upgrading industrial structure, which caused a worsening air quality in Xi'an and other cities last year, environmental inspectors sent by the central government said.

    During the one-month environmental inspection that started on November 28 last year, officials identified 1,309 pollution problems in the province, said Li Jiaxiang, head of the inspection team.

    As of end-February, 222 polluting companies had been shut down and 26 people responsible for pollutions were detained, the Ministry of Environmental Protection said in a statement.

    In addition, 492 government officials from the province were summoned to talk with the inspectors and 938 officials were held accountable for poor performance in pollution controls, the ministry said.

    It is the first province that had received results in the second round of environmental inspections. The other six regions, including Beijing, Shanghai and Chongqing, will receive their results in the coming days.

    The teams of central inspectors, headed by ministerial-level officials, set out on a pilot one-month inspection in Hebei province on Jan 4, 2016. Over January 4-December 30, they have held two rounds of inspections covering another 15 provincial-level regions.

    "In these 16 provincial regions, over 6,300 government officials were summoned for talks and another 6,400 were held accountable," Chen Jining, minister of Environmental Protection Ministry, said last month. The inspectors will visit the remaining 15 provincial-level regions this year, he added.

    Shaanxi province was expected to cut coal consumption by 3 million tonnes in 2015, while the reduction was only 110,000 tonnes. Meanwhile, three coal-fired power plants in Xianyang that had been required to reduce coal consumption actually increased coal use by over 180,000 tonnes.

    In 2014, the province cut coal consumption in large companies by 2.95 million tonnes, far less than the targeted 10 million tonnes, according to the ministry's statement on Tuesday.

    The ministry blamed the worsening air quality in Xi'an and Xianyang last year on weak controls over coal consumption and other poor implementation of pollution control policies.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP