Mark Latham Commodity Equity Intelligence Service

Friday 25th November 2016
Background Stories on

News and Views:

Attached Files

Oil and Gas

Steel, Iron Ore and Coal


Swiss nuclear exit vote raises prospect of more fossil fuels

Switzerland votes in a referendum on Sunday on whether to make a speedy withdrawal from atomic energy production, a move that would reduce nuclear risks but raise reliance on fossil fuels from Germany or imported nuclear power from France.

The opposition Swiss Greens and Social Democrats have pushed for a vote since the 2011 Fukushima disaster in Japan, but the government and industry oppose a quick exit, saying Switzerland would be unable to replace power supplies with renewable energy.

Recent surveys from the gfs.bern polling institute show the "Yes" and "No" camps in the referendum are neck and neck.

Switzerland prides itself on the fact that two thirds of its power is hydroelectric, from reservoirs in the Alps, but it also counts on nuclear energy for a third of its power output.

Anti-nuclear groups are pushing for it to follow neighboring Germany, which shut 40 percent of its nuclear reactors after Fukushima and will close the rest by 2022.

Swiss reactors Muehleberg and Beznau I and II would be closed next year, followed by Goesgen in 2024 and Leibstadt in 2029.

That would leave insufficient time to develop solar and wind alternatives, the government says. Nor would Switzerland be nuclear free, due to a long-term nuclear energy supply relationship with France which relies on atomic power stations for three quarters of its electricity.

"The Swiss would relinquish some of their autonomy in power and they would have to get used to the idea of getting more coal- and gas-fired power from cheaper Germany," said Philipp Goetz, a senior consultant at Berlin-based Energy Brainpool.

Reliance on nuclear energy is being debated across Europe: while Germany is getting out, France is shoring up its industry and Britain recently signed a deal to build its first nuclear plant in decades.

Advertising by the "No" campaign in the referendum asks the Swiss if they really want "dirty power" from Germany. Supporters of the "Yes" vote for a quick exit say Switzerland's nuclear fleet is aging -- Beznau I, launched in 1969, is the world's oldest operating nuclear plant -- and is too close to urban areas. "Safety of the people is a matter of highest importance," said Regula Rytz, a co-president of the "Alliance for an orderly Atomic Exit" and a Green Party lawmaker. The government wants to phase out nuclear power eventually, but energy minister Doris Leuthard has raised the prospect of blackouts if a referendum vote accelerates the process.

"In our view, it would be a disorderly exit," Leuthard said last month. "Suddenly, we will have endangered the energy supply for 1.6 million households."

Swiss power network operator Swissgrid has also said it is unlikely to be ready by 2017 to accommodate the shutdown.

"Our grid infrastructure cannot be quickly modified to handle the changes," the private company said in a statement.

Poyry Management Consulting Switzerland has calculated that the impact on prices for consumers would be small as imports would be relatively inexpensive because of a German capacity surplus.


Germany's move to shut down its nuclear reactors has public backing, but Berlin faces billions of euros' worth of lawsuits as dispossessed operators try to reclaim losses.

Should the Swiss initiative succeed, the nation's utilities have likewise suggested they would pursue more than 7 billion Swiss francs ($6.89 billion) in "economic damages" from having to shut their plants before the end of their lifespan.

Swiss utilities argue the best option, at least for now, is to keep nuclear stations running as long as possible, to recoup their investments and stock up on decommissioning and storage reserves amid a transition to different sources of power.

Alpiq, which owns slices of Goesgen and Leibstadt, has branded a voluntary early shutdown "economically unacceptable."  "Regardless of how the vote goes, exiting nuclear power will cost billions of dollars," an Alpiq spokesman said in an email. "For Alpiq, under the present conditions, continuing to operate the plants is the one option that will cause least damage."
Back to Top

Copper cable companies in trouble!

Copper prices rose birth grimace, cable companies are hurt?

Waste Headlines  2016-11-24  17

Whether the recent surge in copper prices suddenly make copper terminal companies by surprise? SMM It is understood that the cost of cable companies uplift caused some corporate earnings compressed, and some intermediate processors of copper rod business has therefore been liquidated, even more shocking is that cable companies will then sell the finished product back to the copper plant. But overall, as companies adopted various countermeasures, cable companies have been hit much.

Copper prices rose birth grimace

1, the cable and then sell the finished stripping copper Enterprises:

It SMM understood that, because copper prices pulled up sharply, causing some cable companies produce finished goods inventory increase, leading cable companies will be part of the industry appears finished and then sold to scrap copper wire stripping corporate profits thus obtained more than direct sales of finished .

2, copper rod business is breach of contract rate rise

Due to the recent rally in copper cable companies make terminal under more cost pressure, especially the part of the cable manufacturer's product prices are mostly locked in advance.There are copper rods companies said that cable companies have recently when its breach of contract, an adverse effect on the part of the copper rod business. But it is understood, because the maintenance of long-term credit transactions, default minority enterprises.

3, refined copper scrap spreads widening use ratio rises

In addition, due to the recent copper prices pulled, refined copper spreads widening sharply, according to SMM statistics, November 15 the average price of refined copper spreads up to 3371 yuan / ton, for the January 2011 highs.

Section copper rod manufacturers use raw materials, used in a proportion of copper has increased, partly refined copper rod production companies, said copper rod-making enterprises increased their market share in the near future have a certain impact.

Back to Top

Science and Academia are shifting on Climate Change

Image title

Carbon has a bad name. 

But carbon — the element — is not the enemy. Climate change is the result of breakdowns in the carbon cycle caused by us: it is a design failure. Anthropogenic greenhouse gases in the atmosphere make airborne carbon a material in the wrong place, at the wrong dose and for the wrong duration. 

Rather than declare war on carbon emissions, we can work with carbon in all its forms. To enable a new relationship with carbon, I propose a new language — living, durable and fugitive — to define ways in which carbon can be used safely, productively and profitably. Aspirational and clear, it signals positive intentions, enjoining us to do more good rather than simply be less bad.

It is easy to lose one’s way in the climate conversation. Few of the terms are clearly defined or understood. Take ‘carbon neutral’. The European Union considers electricity generated by burning wood as carbon neutral — as if it releases no CO2 at all. Their carbon neutrality relies problematically on the growth and replacement of forests that will demand decades to centuries of committed management. 

Such terms highlight a confusion about the qualities and value of CO2. In the United States, the gas is classified as a commodity by the Bureau of Land Management, a pollutant by the Environmental Protection Agency and as a financial instrument by the Chicago Climate Exchange.

A new language of carbon recognizes the material and quality of carbon so that we can imagine and implement new ways forward. It identifies three categories of carbon — living, durable and fugitive — and a characteristic of a subset of the three, called working carbon. It also identifies three strategies related to carbon management and climate change — carbon positive, carbon neutral and carbon negative.

Attached Files
Back to Top

Odebrecht to sign $2 billion leniency deal in Brazil graft probe: source

Brazilian engineering conglomerate Odebrecht SA has agreed to plea bargains and a massive leniency deal under which it would pay around 7 billion reais ($2.1 billion) in fines for its role in Brazil's biggest corruption scandal, a person familiar with the matter said.

The deals sent shockwaves through Brazil's political establishment as they could incriminate as many as 200 lawmakers for taking graft money from Odebrecht , which prosecutors said had a department dedicated to bribery.

If approved by the judge leading the "Operation Car Wash" probe into corruption at state-controlled oil firm Petrobras, the Odebrecht deal would be the world's largest plea and leniency agreement.

The Salvador, Brazil-based company told Reuters it has no comment on "an eventual deal with the courts." A spokesperson for the prosecutor general's office declined to confirm any deal had been signed.

A source close to the negotiations, however, told Reuters that more than 70 executives at Odebrecht, Latin America's largest engineering company, would sign plea bargain deals on Wednesday or Thursday.

Under the deals, the executives would become states witnesses and provide prosecutors with details of bribes paid to executives of Petrobras and other state companies, plus kickbacks to dozens of politicians.

A separate leniency deal for Odebrecht is almost ready and will be signed within a few days, said the source, who spoke on condition of anonymity due to the sensitivity of the matter.

A settlement figure of 7 billion reais reported by local media was broadly accurate, the source said, without confirming the amount.

Such a deal involving admission of guilt by the company, return of embezzled funds and payment of fines, would allow Odebrecht to bid for government contracts again by lifting a suspension imposed after the Petrobras scandal broke in 2014.

Reuters reported this month that the deal would exceed the record 2008 agreement in which German engineering company Siemens AG paid $1.6 billion to U.S. and European authorities for paying bribes to win government contracts.

Prosecutors are expected to take months to take plea statements and verify their details, prolonging political instability caused by a corruption scandal that contributed to the removal of leftist president Dilma Rousseff this year.

Political turmoil in Congress could delay passage of fiscal reforms by new President Michel Temer and delay Brazil's recovery from its deepest recession since the 1930s.

The price on Odebrecht's 7.5 percent perpetual bond jumped more than 1 cent on the dollar to 54 cents in midafternoon trading. At that price, yields slid to 14.05 percent from about 14.25 percent.

Odebrecht has been accused by prosecutors of overcharging state-controlled oil company Petróleo Brasileiro SA and other state companies for contracts and paying bribes to politicians.

The agreement is key to the restructuring of the company's 110 billion reais in debt.

Since August, law firm E. Munhoz Advogados has been advising the talks with banks and investors.

Marcelo Bahia Odebrecht, Odebrecht's former chief executive officer and the scion of the family that owns the conglomerate, has been in jail since June 2015 and was sentenced to 19 years.

The patriarch of the family-owned business, Emilio Odebrecht, is also making a plea statement to prosecutors.

Attached Files
Back to Top

US Manufacturing PMI Rebounds To 13 Month Highs On Post-Election Optimism

Following the bump in Eurozone PMIs this morning, Markit reports November US manufacturing at 53.9 (better than 53.5 expected) and its highest since Oct 2015, showing "further signs of factories and their customers moving away from destocking to inventory-building amid a more optimistic outlook."

However, hope in the PMI survey seems to be decoupling from reality in actual production.

Under the covers, everything looks awesome with new orders rising (highest since Oct 2015), employment spiked to one of the largest of the year, and output jumped to its highest since March 2015.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“US manufacturers enjoyed a strong post-election bounce in November, further tilting the scales toward the Fed hiking rates in December. Many factories reported that demand from customers had picked up as uncertainty about the election result cleared. Domestic demand rose especially sharply, helping to make up for subdued export growth, linked in turn to the strong dollar.

“The survey also found further signs of factories and their customers moving away from destocking to inventory-building amid a more optimistic outlook, accompanied by an upturn in hiring. The increase in employment was one of the largest seen so far this year.

“Inflationary pressures remained muted, with average prices charged barely rising, despite some further upward movement in many commodity prices.

“The buoyant post-election picture of the manufacturing economy and signs of increased optimism about the futurewill further fuel the conviction that the Fed will raise interest rates at its December 14th meeting, and may also raise the possibility that policymakers might be inclined to tighten somewhat more aggressively in 2017 than previously thought, although much of course also depends on the new government’s policy framework.”
Back to Top

Anglo productivity up 40%

Mining company Anglo American, which has reduced the number of assets in its portfolio from 68 in 2012 to 42 now, is producing more product from those 42 assets than it was with the 68.

As a consequence, the product produced per person is currently 40% higher than it was four years ago.

With that, the company has seen a 33% reduction in operating costs and is on track to deliver a $1.6-billion cost improvement and a $1-billion cash flow improvement when it reports in February.

While continuing to adhere to its announced strategy of reducing the asset number still further to 37, Anglo currently finds itself in a position to be considerably more price assertive when dealing with offers for its mining businesses outside of diamonds, platinum and copper – the chosen three.

It is becoming increasingly comfortable to continue operating and investing in its iron-ore, thermal coal, coking coal and other assets earmarked for disposal, until offers arise that match or better the price tags set for them – and also benefit the countries concerned.

Anglo CEO Mark Cutifani makes the point that Anglo’s sale of Rustenburg platinum mine to South Africa’s Sibanye Goldwas right for South Africa because Sibanye is committed to investing in the asset for the long term, whereas Anglo American Platinum has other investment priorities.

Meanwhile, it is continuing to go all out to meet all the commitments to shareholders, which could mean that it will have only 37 assets when it reports in February, as it is not deviating from its disposal strategy despite the improved commodity price climate.

It laid the foundation for change in 2015, began experiencing the benefits of that this year buoyed by better commodity prices, and expects to be set up for the future as it goes into next year.
Back to Top

What Exactly is Trump saying on Climate Change?

Trump to scrap Nasa climate research in crackdown on ‘politicized science’

Nasa’s Earth science division is set to be stripped of funding as the president-elect seeks to shift focus away from home in favor of deep space exploration.

Bob Walker, a senior Trump campaign adviser, said there was no need for Nasa to do what he has previously described as “politically correct environmental monitoring”.

“We see Nasa in an exploration role, in deep space research,” Walker told the Guardian. “Earth-centric science is better placed at other agencies where it is their prime mission.

“My guess is that it would be difficult to stop all ongoing Nasa programs but future programs should definitely be placed with other agencies. I believe that climate research is necessary but it has been heavily politicized, which has undermined a lot of the work that researchers have been doing. Mr Trump’s decisions will be based upon solid science, not politicized science.”


TRUMP: You know the hottest day ever was in 1890-something, 98. You know, you can make lots of cases for different views. I have a totally open mind.

My uncle was for 35 years a professor at M.I.T. He was a great engineer, scientist. He was a great guy. And he was … a long time ago, he had feelings — this was a long time ago — he had feelings on this subject. It’s a very complex subject. I’m not sure anybody is ever going to really know. I know we have, they say they have science on one side but then they also have those horrible emails that were sent between the scientists. Where was that, in Geneva or wherever five years ago? Terrible. Where they got caught, you know, so you see that and you say, what’s this all about. I absolutely have an open mind. I will tell you this: Clean air is vitally important. Clean water, crystal clean water is vitally important. Safety is vitally important.

And you know, you mentioned a lot of the courses. I have some great, great, very successful golf courses. I’ve received so many environmental awards for the way I’ve done, you know. I’ve done a tremendous amount of work where I’ve received tremendous numbers. Sometimes I’ll say I’m actually an environmentalist and people will smile in some cases and other people that know me understand that’s true. Open mind.

JAMES BENNET, editorial page editor: When you say an open mind, you mean you’re just not sure whether human activity causes climate change? Do you think human activity is or isn’t connected?

TRUMP: I think right now … well, I think there is some connectivity. There is some, something. It depends on how much. It also depends on how much it’s going to cost our companies. You have to understand, our companies are noncompetitive right now.

They’re really largely noncompetitive. About four weeks ago, I started adding a certain little sentence into a lot of my speeches, that we’ve lost 70,000 factories since W. Bush. 70,000. When I first looked at the number, I said: ‘That must be a typo. It can’t be 70, you can’t have 70,000, you wouldn’t think you have 70,000 factories here.’ And it wasn’t a typo, it’s right. We’ve lost 70,000 factories.

We’re not a competitive nation with other nations anymore. We have to make ourselves competitive. We’re not competitive for a lot of reasons.

That’s becoming more and more of the reason. Because a lot of these countries that we do business with, they make deals with our president, or whoever, and then they don’t adhere to the deals, you know that. And it’s much less expensive for their companies to produce products. So I’m going to be studying that very hard, and I think I have a very big voice in it. And I think my voice is listened to, especially by people that don’t believe in it. And we’ll let you know.

Attached Files
Back to Top

Shanxi coal firm to invest in UK power plant

A Shanxi-based company principally engaged in the coal business will invest 3 billion yuan ($440 million) in the Hinkley Point power plant in the United Kingdom.

Wintime Energy Co Ltd, a company principally engaged in the exploitation, operation, washing, selection and processing of coal, recently made the investment, together with China General Nuclear Power Corporation.

The two companies are to jointly carry out several clean energy projects, including Guangdong Lufeng Power Station, Hinkley Point C power plant and some non-nuclear power plants, according to a project cooperation agreement signed between the two companies on Nov 21.

CGN signed a final agreement on the 18 billion pound ($23.4 billion) Hinkley Point C power plant two months ago with the French utility EDF and the British government. The project has been hailed as a gateway to promote Chinese nuclear technology.

He Yu, chairman of CGN, said China's nuclear technology being used abroad will lead to more countries having confidence in Chinese reactors and pushing forward its global market development.

Wintime Energy, which mainly operates in the domestic market, will become a major partner of the Chinese investment consortium for the project by laying out 10 percent of the total investment in Hinkley Point, which is around 3 billion yuan.

Chinese power firms are currently pacing up mergers and acquisitions at home and abroad, motivated by their financial strength, poor domestic markets and policy support.

"The developers' balance sheets are now the strongest in at least five years, enhancing their financial strength for mergers and acquisitions," said Joseph Jacobelli, senior analyst with Asia Utilities and Infrastructure Research of Bloomberg Intelligence.

"China's power supply has grown at a pace faster than demand, leading to sinking plant utilization rates, especially for coal-fired power. Government policy also strongly supports local power companies' expansion abroad."

Profit reporting shows that the performance of domestic coal companies turned weaker than earlier expectations in 2015, due to overcapacity, poor demand and lower prices, with 39 listed coal companies reporting a net loss of 5.1 billion yuan in 2015, plummeting 1,120 percent year-on-year.

Wintime Energy Co Ltd, together with other 18 companies however, still reported net profit last year.

The company mainly operates in Shanxi province. In addition, it is also involved in hotel business, as well as the production and sale of building materials.

According to the company, participation in the overseas project, while in accordance with the government's going global strategy and in line with the Belt and Road Initiative, still presents certain risks in investment decision-making and management.

In addition, the challenge for Chinese enterprises related to the electric power industry in operating overseas may also lie with the understanding of the local market, especially in developed economies such as the UK, said Jacobelli.
Back to Top

FX Markets Signal Brexit-Like Disruption As Italy Referendum Looms

FX traders are pricing in as big a potential disruption event for Italy's referendum as they did (correctly) for the Brexit vote. So-called 'currency-vigilantes' are buying EURUSD protection across the Dec 4th date of the vote in size as Italian bond spreads (over Bunds) push to 30-month highs.

Anticipated euro-dollar price swings for the period of the Italian vote surged. Two-week implied volatility climbed to 12.5 percent, approaching the highest since the aftermath of the Brexit vote in June... and the premium for that protection across the referendum date is now at its highest since Brexit...

As Bloomberg reports, selling the euro before Italy’s vote “makes a lot of sense given the potential for more expansionary fiscal and tighter monetary policy in the U.S., coupled with the increased focus on political risk and the increased likelihood of more policy from the ECB,” said James Athey, a money manager in London at Aberdeen Asset Management Plc, which oversees more than $400 billion.

“For FX, politics is the new economics,” HSBC Holdings Plc analysts including David Bloom wrote in a note last week. “QE has constrained the bond market, distorted equity prices and narrowed yield differentials. This means FX is uniquely placed to reflect political developments.”

Trump’s election has boosted speculation that Italians will reject the reforms on which Renzi has staked his political future. Deutsche Bank AG economists say there’s a 60 percent chance the vote will fail, while political risk-advisory firm Eurasia Group changed its call this month, and now assigns a 55 percent probability to a “no” vote.

“Markets are anticipating two risks at the moment: reflation and populism in Europe,” said Marc Chandler, head of currency strategy at Brown Brothers Harriman & Co. in New York. “If one thinks that the Italian referendum is going to be lost, and it’s not priced in, selling the euro -- which is also being weighed down by other factors -- seems the path of least resistance compared with a rate position.”
Back to Top

Japan's Fukushima hit by 7.3 magnitude earthquake

A 7.3 magnitude earthquake hit offshore Fukushima early Tuesday, leading to a coal-fired power plant being shut and the suspension of oil product shipments from northeastern Japan.

The earthquake hit at a depth of 10 km offshore Fukushima in northeastern Japan at 5:59 am local time Tuesday (2059 GMT Monday), the Japan Meteorological Agency said.

Tsunami warnings were issued for Fukushima and Miyagi prefectures in the northeast, and advisories for the Pacific Coast in Aomori, Iwate, Ibaraki and Chiba prefectures, the JMA added.

The impact of the 7.3 magnitude earthquake is given below, based on company reports as well as information from the Ministry of Economy, Trade and Industry. METI information is current as of 9:30 am local time.


The 600 MW No. 9 coal-fired Nakoso unit operated by Joban Joint Power Company had an automatic shutdown as a result of the earthquake, and it was not immediately clear when it will be restarted, according to METI.


Japan's largest refiner JX Nippon Oil & Energy on Tuesday suspended truck and waterborne oil product shipments from its 145,000 b/d Sendai refinery in the northeast and the 252,500 b/d Kashima refinery on the east coast as a result of the earthquake, a company official said.

JX had restarted its truck oil product shipments at its Sendai refinery at 12:40 pm local time but its waterborne shipments at its Sendai and Kashima refineries remain suspended, the official said.

Refining operations were not affected, the official added.

JX and Cosmo Oil have also restarted oil product shipments from the Hachinohe terminal at Aomori in northern Japan and Onahama terminal in Fukushima in the northeast after suspensions earlier in the day, according to company officials.

Cosmo Oil's Shiogama truck oil products shipments have also been restarted after suspension, according to a company official.

Waterborne and truck oil product shipments from Idemitsu Kosan's Hachinohe and Shiogama terminals have also been restarted after suspension earlier in the day, a company official said.

Refining operations and oil product shipments at the Chiba facilities of Idemitsu Kosan and Cosmo Oil were unaffected by the earthquake, company officials said.


A cooling system for nuclear fuel pool had an automatic shutdown of the No. 3 reactor at the Fukushima-2 nuclear power plant in the northeast at around 6:10 am but the system was restarted at 7:47 am local time, Tokyo Electric Power Company Holdings said.

METI reported that there were no other abnormalities at nuclear power plants, including Fukushima-1 and Tohoku Electric's Onagawa plant, all of which were currently not operating.


METI said that no incidents were reported at gas facilities following the earthquake.


Operations were suspended at the 260,000 mt/year Onahama copper smelter in Fukushima prefecture early Tuesday following the earthquake and tsunami warning, a spokesman for Mitsubishi Materials said.

The melting furnace was shut for safety inspections, he added.
Back to Top

Quarterly: All Change!

In which we move our focus from Gold/Oil to 'Activity'. 

Politics matters. Image title

Attached Files
Back to Top

Trump outlines plans for first day in office, meets with Cabinet hopefuls

U.S. President-elect Donald Trump outlined plans on Monday for his first day in office, including withdrawing from a major trade accord and investigating abuses of work visa programs, and met with Cabinet hopefuls at his Manhattan office tower.

Trump met with Oklahoma Governor Mary Fallin, Democratic U.S. Representative Tulsi Gabbard and former Texas Governor Rick Perry. But he announced no further appointments, keeping candidates and the public guessing about the shape of the administration that will take office on Jan. 20.

Fallin, Gabbard and Perry were the latest of dozens of officials who have made their way across the opulent lobby of Trump Tower for talks with the Republican president-elect in a relatively open - and unconventional - transition process since his election victory on Nov. 8.

Trump, who has not held a news conference since his election, issued a video on Monday evening outlining some of his plans for his first day in office, including formally declaring his intent to withdraw from the Trans-Pacific Partnership, or TPP, trade deal, which he called "a potential disaster for our country."

The 12-nation TPP is Democratic President Barack Obama's signature trade initiative and was signed by the United States earlier this year but has not been ratified by the U.S. Senate.

The president-elect said he would replace the accord with bilaterally negotiated trade deals that would "bring jobs and industry back onto American shores."

"My agenda will be based on a simple core principle: putting America first. Whether it’s producing steel, building cars or curing disease, I want the next generation of production and innovation to happen right here on our great homeland, America, creating wealth and jobs for American workers," he said.

Japanese Prime Minister Shinzo Abe said on Monday the TPP "would be meaningless without the United States."

Trump said he would cancel some restrictions on producing energy in the United States on his first day in office, particularly shale oil and "clean coal," which he said would create "many millions of high-paying jobs."

He promised to direct the Labor Department to investigate abuses of visa programs for immigrant workers. The main U.S. visa program for technology workers could face tough scrutiny under Trump and his proposed attorney general, U.S. Senator Jeff Sessions, a longtime critic of the program.

Trump had made eliminating regulations and withdrawing from the TPP central to his campaign, but he sent mixed signals during the campaign about his views on visa programs including the main H-1B visa for high-tech industry workers.


Trump has so far picked two Cabinet members and three top White House advisers, but aides said he was not expected to make further announcements on Monday.

"They could come this week, they could come today, but we're not in a rush to publish names," Kellyanne Conway, a senior adviser, told reporters. "We've got to get it right."

Trump spoke often with reporters camped out at his New Jersey golf course over the weekend, but has not held a traditional news conference to talk about his priorities. He held an off-the-record meeting with a group of television anchors and executives on Monday afternoon and was scheduled to meet with print media representatives on Tuesday.

The Washington Post reported that four participants at Monday's meeting described it as a contentious but generally respectful session.

They told the Post that Trump singled out reporting of his campaign by CNN and NBC that he considered to be unfair.

Trump also returned to Twitter on Monday night, saying "many people" would like to see Brexit campaigner Nigel Farage as British ambassador to the United States. "He would do a great job!"

Farage, who helped lead the successful referendum fight for Britain to leave the European Union, spoke at a Trump rally during the U.S. campaign and visited the president-elect after his victory.

Trump's first meeting on Monday was with Iraq war veteran Gabbard, a representative from Hawaii who backed U.S. Senator Bernie Sanders in his unsuccessful 2016 Democratic presidential nominating contest against Hillary Clinton.

The "frank and positive" discussion focused on the war in Syria, counterterrorism and other foreign policy issues, Gabbard said in a statement. She did not say whether a Cabinet role was part of the discussion.

Gabbard has veered from Democratic Party positions at times, backing policies cracking down on immigration to the United States by Muslims.

Fallin told reporters she was not offered a position but discussed "a wide range of topics" with Trump. The Republican governor's spokesman said that included a focus on the Interior Department, an agency whose responsibilities include oversight of oil and gas leases on public lands.

Former Republican U.S Senator Scott Brown of Massachusetts told reporters he had a "great" meeting about veterans' issues with Trump.

Trump also met with former House of Representatives Speaker Newt Gingrich and Elaine Chao, the U.S. labor secretary under former President George W. Bush, advisers said.

Trump's transition team said Perry, the former Texas governor, was being considered for Cabinet posts including defense, energy and veterans affairs.

Attached Files
Back to Top

Companies told to halt production in northern Chinese city in anti-pollution drive

Residents on their bicycles and electric bikes wait for the traffic at an intersection amid heavy smog in Shijiazhuang, Hebei province, China, December 10, 2015. Picture taken December 10, 2015. REUTERS/Stringer

About half a dozen listed Chinese companies, mainly in the pharmaceutical sector, have temporarily halted production in China's northern city of Shijiazhuang as part of a Chinese government anti-pollution drive, the companies said on Monday.

Shijiazhuang has suspended factory production in seven industries until the end of this year, affecting plants in the pharmaceutical, cement, foundry, iron and steel, coal-electricity, coking and boiler sectors, the companies said.

Companies including ENN Ecological Holdings Co Ltd and Jikai Equipment Manufacturing Co Ltd were told by the Shijiazhuang government to suspend production at their factories, they said in separate statements.

Several pharmaceutical companies, including CSPC Pharmaceutical Group Ltd, SSY Group Ltd, North China Pharmaceutical Co Ltd, received similar orders, according to their statements.

"The group has been actively cooperating with the government on environmental protection work and is making an application to the Shijiazhuang municipal government for permission to

continue its normal pharmaceutical production in Shijiazhuang," CSPC said in a filing to the Hong Kong stock exchange

China has been trying to tackle pollution over the past few years by implementing various measures to reduce the blankets of smog which shroud many of the country's northern cities in the winter and have been hazardous to health and traffic.
Back to Top

China's energy guzzlers Oct power use edges up 2.7pct

Power consumption of China's four energy-intensive industries rose 2.7% on year to 152.0 TWh in October, accounting for 31.1% of the nation's total power consumption, the China Electricity Council (CEC) said on November 17.

Of this, the chemical industry consumed 35.8 TWh of electricity, dropping 1.0% on year; while power consumption of building materials industry stood at 29.6 TWh, rising 9.7% from the year-ago level, non-ferrous metallurgy industry ferrous metallurgy industry consumed 42.9 TWh and 43.7 TWh, separately, rising 2.2% and 1.8% compared to the same month last year, respectively.

In the first ten months of the year, the four energy guzzlers consumed 1435.9 TWh of electricity in total, or 29.4% of the country's total power consumption, declining 1.5% from the year-ago level, compared to a 2.4% drop a year prior.

The ferrous metallurgy industry consumed 396.4 TWh of electricity during January to October, falling 6.2% year on year, compared to the drop of 7.8% from the previous year; while the non-ferrous metallurgy industry used 419.9 TWh of electricity, down 1.2% year on year, against a 3.7% rise from the year prior.

The chemical industry consumed 358.6 TWh of electricity over the same period, up 1.5% year on year, against a 2.2% rise from a year ago; while power consumption of building materials industry increasing 1.8% year on year to 261.1 TWh, compared to a 6.5% decline a year ago.

Attached Files
Back to Top

Japan boosts October LNG and coal imports

Japan, the world’s largest LNG consumer, raised its imports in October by 3.7 percent year-on-year.

The East Asian island country imported 6.28 million mt of LNG in October, as compared to 6.06 million mt last year, according to the provisional data released by Japan’s Ministry of Finance.

The data also showed that the Japan’s coal imports for power generation increased 7.4 percent to 10 million mt.

Japan paid about US$2.18 billion for LNG imports in September, down 32.1 percent on year.

To remind, the price of spot LNG cargoes arriving in Japan in October was at $5.7/mmBtu on DES basis.
Back to Top

Hollande says Paris is 'irreversible'

French President Francois Hollande on Tuesday urged the United States to respect the "irreversible" Paris Agreement on climate change, and said France will lead a dialogue on the topic with President-elect Donald Trump "on behalf of the 100 countries that have ratified" the deal.

Speaking to a U.N. climate conference in Morocco, Hollande praised U.S. President Barack Obama for his role in getting the landmark pact adopted in the French capital last year.

"The United States, the most powerful economy in the world, the second-largest emitter of greenhouse gases, must respect the commitments that were made," he said. "It's not simply their duty, it's in their interest."

Attached Files
Back to Top

Queensland’s new groundwater law a ‘risk’ to resource projects – miners

Despite objections from the resources sector and dire warnings about the impact it would have on the development of coal projects, the Queensland Parliament has backed the Environmental Protection (Underground WaterManagement) and Other Legislation Amendment (EPOLA) Bill.

In essence, the Bill is aimed at strengthening the effectiveness of the environmental assessment of underground waterextraction by resource projects, while allowing for the ongoing scrutiny of the environmental impacts of underground water extraction during the operational phase of a resource project.

The Bill is also aimed at improving the ‘make good’ framework in the current Water Act, ensuring that the administering authority for the Environmental Protection Actis a decision- maker for specific applications relating to environmental authorities.

Further, the Bill will ensure that mining projects that are advanced in their environmental and mining tenure approvals are appropriately assessed for their impact on the environment and underground water users, and that opportunities for public submissions and third-party appeals are provided before underground water is taken in a regulated area for mine dewatering purposes.

It is this last objective that is causing havoc among the resource companies in Queensland, which are arguing that additional approval requirements for projects already in the development pipeline could impact on project scheduling and financial investment decisions.

In its submissions to the Parliamentary committee inquiry into the Bill, the Queensland Resources Council (QRC) pointed out that, to date, the coordinator-general had made decisions and imposed and recommended conditions relating to groundwater on coordinated resource projects, while the Land Court had made recommendations about specific groundwater conditions.

In particular, detailed groundwater models had been prepared by several miners as part of the environmental-impact statement (EIS) process and the QRC noted that the proponents had proactively entered into ‘make good’ agreements with potentially affected landholders.

The QRC added that mining projects in Queensland were also subjected to strict environmental requirements through the environmental-impact assessment process and extensive review through the Independent Environmental Scientific Committee and the Commonwealth government’s Environmental Protection and Biodiversity Conservation Act approval process.

“These Commonwealth processes extensively scrutinise any impact on or [extraction] of groundwater and explicit conditions [are] imposed to deliver environmentaloutcomes,” the QRC said.

The industry body said the changes imposed by the EPOLA Bill would further increase the duplication with the “increasingly redundant” Commonwealth groundwater laws, unless there was a way of recognising earlier public consultation.

The QRC told the committee that there should be no requirement for an associated water licence for advanced mining projects that had already completed an EIS process and developed a detailed groundwater model that identified potentially affected third-party landholders and entered into ‘make good’ agreements with the majority of the landholders.

However, the Queensland Parliament seemed to disagree, ratifying the EPOLA Bill in early November.
Back to Top

Radical Thoughts.

Image title

With the blockchain, Wal-Mart will be able to obtain crucial data from a single receipt, including suppliers, details on how and where food was grown and who inspected it. The database extends information from the pallet to the individual package.

“It gives them an ability to have an accounting from origin to completion,” said Marshal Cohen, an analyst at researcher NPD Group Inc. “If there’s an issue with an outbreak of E. coli, this gives them an ability to immediately find where it came from. That’s the difference between days and minutes.”

Image titleWork to be done

Global trade may have peaked. Future supply chains will be less dependent on distant, low-cost labour and natural resources. The race to return home is on, and the world is watching.

It's no longer necessary for retailers to stock goods themselves

In the early days of e-commerce, retailers would carry inventory for each product listed on their website. However, in today's model many retailers never physically touch the products they sell online. Instead, online orders for these products are routed to a third party for fulfilment. Both third-party logistics providers and niche e-commerce fulfilment houses offer services in which they will pack and ship items on behalf of retailers.

Image title

The world of 3D printing has officially booked a new high fashion runway show, now that luxury fashion house Alexander McQueen has developed an edgy, one-of-a-kind 3D printed umbrella as part of its autumn/winter 2016-17 collection. I am not ashamed to admit that I used to watch a lot of “America’s Next Top Model” and “Project Runway,” and so I was especially excited to write this story…those qualify as high fashion, right?

The limited edition piece is patterned in a black skull motif – too bad it wasn’t out in time for Halloween! It features an ergonomic, 3D printed handle, which perfectly fits the grasp of an actual human fist. Spooky…

Image title

But something interesting, and a little unexpected, is happening. FFF machines print using reels of plastic filament (usually PLA or ABS). The choice of materials has been limited because the filaments are typically produced by small-scale companies, serving a low-end market. But we’re now seeing large materials firms entering the filament market, and this can’t be explained by a sudden, unexpected growth in the number of people who want to print novelty plastic Eiffel Tower models at home.

One of the stars of the show of K 2013 was Arburg’s Freeformer. The Germany-based injection moulding machine maker surprised many with a machine that made rapid prototypes using fused droplets of extruded polymer to build up a 3D shape, in a process akin to FFF but without the need for filament.

A selling point of the Freeformer was the freedom to use materials that weren’t available in filament form because it created a melt stream from ordinary granules.

Material choice has limited FFF in the past. According to Covestro, one of the large material firms which entered the 3D printing filament market, whilst ‘‘over 3,000 materials are available for conventional component manufacturing, only about 30 are available for 3D printing’’.

And the process has suffered by association with the ‘homebrew’ hobbyists. Proper, professional, 3D printers used proper, professional 3D printing processes such as stereolithography (SLA) and selective laser sintering (SLS), with high resolution results. FFF has a tendency to create visible stripes, indicating the individual layers of print that have built up on top of one another, leading to a perception of it being a lower-quality technique.

Three years on, FFF is now being treated as a proper, professional process by proper, professional companies and the problem of limited material choice is being blown away. Covestro demonstrated new materials for 3D printing at K 2016. This portfolio of new materials included TPU powders for SLS and liquid PU-based resins for SLA, but also filaments for FFF from flexible TPUs to high strength PC.

Love them or hate them, industrial robots are here to stay. While there are plenty of critics who are against the modern advancement and widespread adoption of robotic technology, these devices can be of great benefit to employees, business owners, and even mainstream consumers. In fact, robotics has already found its way into the day-to-day operations of several different industries.

Here is a look at four of them:


Generally speaking, manufacturing operations provide the perfect environment for the large-scale implementation of robots and automation technology. In fact, the International Federation of Robotics has forecasted the introduction of no less than 1.3 million industrial robots to global manufacturers by 2018. This is in addition to the robotics already in use around the world.

Tesco Towers: supermarket enters the fray with a radical new solution to the housing crisis

Typically, flats are built on top of existing buildings. Recent developments have involved flats being constructed off-site, then crane-lifted into place on a building.

It won’t be long before the cities of the world begin to look very differently than we know them now. 3D printed houses and other buildings have gone from a distant fantasy to a reality seemingly overnight, and 3D printed construction technology is advancing at an almost dizzying pace. New companies – and new technologies – are springing up everywhere, each with the goal of taking 3D printed architecture and construction further than anyone ever has before.

Cazza Construction Technologies may be a young company, but they’re already making significant progress towards an ambitious goal – the construction of 3D printed smart cities across the world. It may sound like a far-fetched goal, but Cazza has the the technology and expertise to back it up. CEO Chris Kelsey is only 19 years old, but has already built and sold a major tech company. He created the app development company Appsitude, which brought in over $10 million in revenue per year, when he was only 17.

Along with co-founder and COO Fernando De Los Rios, a former Ernst & Young employee, Kelsey started Cazza with the goal of making construction faster, more cost-effective, and more environmentally friendly. Over the last two years, he and De Los Rios have been working with more than 50 renowned engineers from across the globe to develop the technology, which is capable of building a 100-square-meter concrete house within 24 hours, or a 1,000-square-foot house within 10 days, using only one machine.

  • We're dying at 1% GDP growth; we don't make things anymore. (Oct 2016)
  • Economic machine to increase US growth rate to 5% or 6%. (Oct 2016)
  • U.S. 1% growth is almost no growth, and due to high taxes. (Oct 2016)
  • FactCheck: Fed keeps interest rates low, but apolitically. (Sep 2016)
  • Our jobs are fleeing to Mexico; China uses us as piggy bank. (Sep 2016)
  • Worst recovery since Great Depression; we're in a bubble. (Sep 2016)
  • The Fed should refinance debt to reduce interest payments. (May 2016)
  • Make economy dynamic; bring back jobs from China & Mexico. (Oct 2015)
  • Use increasing debt ceiling as bargaining chip. (Oct 2015)
  • Strong on debt limit; ask for a pound of flesh. (Oct 2015)
  • Grow the economy at 6% annually by ending inversions. (Oct 2015)
  • Cut defense budget, & entire EPA & Dept. of Education. (Oct 2015)
  • If debt reaches $24T, that's the point of no return. (Jun 2015)
  • We prospered after 9/11; we'll prosper after Great Recession. (Apr 2010)
  • 2006: Warned about impending implosion of financial sector. (Apr 2010)
  • Prepare for upcoming crash, bigger than 1929. (Jul 2000)
  • Rent control only benefits a privileged minority. (Jul 1987)
  • One-time 14.25% tax on wealth, to erase national debt. (Nov 1999)
  • Predicts 35% boost to economy from eliminating national debt. (Nov 1999)

Attached Files
Back to Top

Oil and Gas

Canada: B.C. signs LNG benefits agreement with Saulteau First Nations

Saulteau First Nations and the B.C. government have reached a new agreement on the Coastal GasLink natural gas pipeline project to help ensure that the Saulteau community can participate in and benefit from B.C.’s LNG opportunity.

Pipeline benefits agreements with First Nations are part of the B.C. government’s plan to partner with First Nations on LNG opportunities, which also includes increasing First Nations’ access to skills training and environmental stewardship projects.

As part of the agreement, Saulteau First Nations will receive approximately C$3.9 million in funding as construction related milestones are reached. In addition, Saulteau and other First Nations along the natural gas pipeline route will share C$10 million per year in ongoing benefits once the pipeline is in service.

Partnering with Saulteau First Nations is part of the B.C. government’s efforts to build meaningful relationships and partnerships with First Nations.

In 2015, the government and Saulteau signed a New Relationship and Reconciliation Agreement which will help to protect areas of traditional importance and guide natural resource development in the province’s Northeast.

B.C. has so far reached 62 pipeline benefits agreements with 29 First Nations for four proposed natural gas pipelines, Prince Rupert Gas Transmission (PRGT), Coastal GasLink (CGL), Pacific Trail Pipeline (PTP) and the Westcoast Connector Gas Transmission (WCGT) natural gas pipeline project.

Attached Files
Back to Top

Centrica and Tokyo Gas sign LNG deal

Centrica has signed a Memorandum of Understanding for LNG collaboration with a Japanese company.

Under the agreement with Tokyo Gas, the companies will swap locations in an effort to achieve LNG transportation savings and lower the overall cost of procurement in the Atlantic and Asia-Pacific markets.

Both companies also intend to enter into a legally binding contract on the basis of this framework.

Jonathan Westby, Centrica’s Co-Managing Director of Energy, Marketing and Trading said: “We are delighted to formalise our long-standing relationship with Tokyo Gas and we welcome the opportunity to expand our LNG activities in Asia Pacific.

“Building alliances, such as this, helps towards lowering LNG procurement costs and this can benefit customers around the world.”
Back to Top

Israeli refinery Paz inks $700 mln Leviathan natgas supply deal

Israel's Paz Oil said on Thursday it signed a deal worth up to $700 million to buy 3.12 billion cubic meters of natural gas for its oil refinery from the Leviathan field.

Paz, Israel's largest distributor of refined oil, said the deal was for 15 years or sooner, if it consumes the amount of the contract in a shorter period.

Leviathan, which is expected to start production in 2019 or 2020, was discovered in the eastern Mediterranean in 2010 and is one of the world's largest offshore gas discoveries of the past decade. It is owned by Delek Drilling, Avner Oil Exploration, Ratio Oil and Texas-based Noble Energy.
Back to Top

5-year LNG contracts available from brownfield projects: Australia's Woodside CEO

LNG contract durations, particularly from brownfield projects, are becoming shorter, and Australia's North West Shelf will be offering "five-year plus" LNG contracts as existing agreements expire, said Peter Coleman, CEO of Australia's Woodside, Thursday.

However, Coleman also said that new greenfield projects still require long-term LNG contracts for financing purposes.

He expects that as some of the newer Asian LNG markets mature, they will increasingly prefer long-term LNG contracts to guarantee baseload gas supply for their industrial sectors.

As for pricing, Coleman said Woodside is prepared to look at non-oil LNG price indices.

"But the index needs to be related to the market from which it's getting supplied," he said in an interview with S&P Global Platts.

For that reason, Coleman said, he does not want to use an LNG price index related to the US Gulf of Mexico for pricing Australian LNG supply.

Most destination clauses have already been negotiated out of Woodside's existing LNG contracts, according to Coleman.

In return, buyers typically give the supplier flexibility regarding which supply source the volumes are delivered from.

In the new LNG contracts, destination clauses are unlikely to be signed with Japanese buyers, he said.

In addition, Woodside is also flexible regarding negotiating other contractual flexibilities with buyers, particularly at price reviews.

LNG buyers now have a wide range of potential suppliers from whom they can obtain their desired flexibilities, by contracting from a diverse portfolio of supply sources, each with different flexibilities.

LNG buyers are also becoming more sophisticated by balancing their portfolios across different suppliers and using more transparent LNG trading platforms, according to Coleman.

Woodside intends to prioritize its LNG investment towards extending the lifespan of its existing producing assets, Pluto and North West Shelf, stated Coleman.

Following that, the three-field Browse development, containing an estimated 16 tcf of gas, will likely be developed in a phased manner, either via FLNG or onshore infrastructure.

A more concrete Browse development plan should emerge by mid-2017, according to Coleman. Meanwhile, investment in the proposed Kitimat and Sunrise LNG projects will be evaluated with the other project joint-venture partners and governments, he added.

Attached Files
Back to Top

New Exillon Energy chief sees robust future for Russian independent sector

The head of Russia's Exillon Energy, Dmitry Margelov, has predicted a secure future for the country's independent upstream sector, but says a surge of merger and acquisition activity could be on the cards in the next two to three years.

In an interview, Margelov, who became chief executive of the London-listed company in March, said he saw little threat to the independent sector from the centralizing tendencies seen in Russia's oil industry in recent years. He also played down the significance of any effort by Moscow to curb oil output in collaboration with OPEC, saying the burden of such a move would probably fall on large companies.

"I think our government is interested in having independent producers," Margelov said. "For now I don't see any political risks for our company." "Yes, there is a process of centralization, but from my point of view this pretty strange and unpredictable situation with Bashneft is not a sign that now all assets will go to Rosneft," he said, referring to state-controlled Rosneft's recent acquisition of Bashneft, a deal that led to bribery charges against a government minister.

As a company, "we are in a very strong position and we have every chance to develop our production and sometime maybe in future to acquire new assets," he added.

Exillon is currently producing around 15,000 b/d of light, low-sulfur oil, most of it from the Kayumovskoe and Lumutinskoe fields in West Siberia, plus some in the Timan Pechora basin in Russia's far north. It plans a new drilling program in the first half of next year aimed at reviving its declining output.

The reboot of the company follows a change of ownership in 2013 in which property investors Alexei Khotin and Alexander Klyachin took the place of Kazakh businessman Maksat Arip as its largest shareholders.

Margelov said Exillon had slashed its drilling expenditure at the time of the oil price downturn in 2014, but had now accumulated $100 million of cash, enabling it to take advantage of much-reduced prices in the supply chain and associated rig availability.

This is likely to mean horizontal drilling, but from existing wells. Exillon's core West Siberian fields benefit from a tax exemption applicable to challenging geologies, but its estimated lifting costs last year were just $3.3/b and it benefits from easy access to transport infrastructure.

The company has avoided entering long-term sales contracts, preferring to be flexible on how it sells its oil, which has an API gravity of around 41 and sulfur content of just 2.2% for the west Siberian fields. The majority of its revenue was from domestic sales last year and it has estimated oil reserves of 500 million barrels.

In terms of costs, Margelov said the tendency of larger companies to carry out more drilling in-house and reduce their use of service companies was a boon for upstream independents. "Prices for drilling services in Russia are now really low. There are a lot of companies that have their drill rigs standing with no bidders -- they're very flexible, both on pricing and in terms of payment."

Concerning Russia's offers to join OPEC in curbing output, a suggestion balked at by some large producers, Margelov said he was confident Exillon and others like it would be unaffected, not least due to questions of implementation.

"I don't think someone would ever want to freeze the production of a small and independent producer like Exillon -- they don't have any mechanism to do this. I don't think [the government] would like to change taxation right now because people are worried about this," he said.

The government "would take measures that would apply to governmental companies like Gazprom Neft, Rosneft, because it's easier."


As for the Russian upstream market, Margelov said asset holders currently tended to have an inflated view of the value of their assets, but were likely to modify this as financial stresses on the sector increase. If past cycles are anything to go by, some upstream assets may end up in the hands of banks, which would then want to offload them, he added.

"There are some assets that are intended to be sold, but their owners still believe the oil price is around $100/b and expect too much. It takes time for asset owners to understand what the fair price is. Now we will see that some companies will not be able to pay their debts to commercial banks and maybe in some years we will see that some banks got some nice assets just as security... Then of course they would like to sell them," Margelov said.

"In two or three years we will see a wave of interesting M&A transactions in Russia."
Back to Top

Nigerian Oil Misses Goals After Legal Gridlock Deters Investors

When OPEC exempted Nigeria from its plan to cut oil output for the first time in eight years, it highlighted how far Africa’s biggest producer has fallen.

From January to October, just over three wells a month were drilled in Nigeria, down from a monthly average of almost 22 in 2006, according to petroleum ministry data. While output rebounded to 2.1 million barrels a day from the 27-year low in August, that’s just half the government’s goal at the start of the millennium.

While OPEC members try to implement a deal in Vienna next week, Nigerian lawmakers in Abuja must unblock an eight-year legislative impasse that’s seen oil majors from Royal Dutch Shell Plc to Chevron Corp. quit fields in the West African nation. To end the regulatory uncertainty, Nigeria needs to set tax rates that spur investment in a stagnating deep-water sector and address unrest that has disrupted production in the Niger Delta.

“Any business requires clarity on the operating environment before committing to investments,” said Pabina Yinkere, an energy analyst and head of research at Lagos-based Vetiva Capital Ltd. “The uncertainty surrounding the passage of the petroleum industry bill definitely stalled possibly hundreds of billions of dollars commitments on many projects.”

Since the oil bill was first sent to Nigerian lawmakers in 2008, international producers have sold at least $5.2 billion of assets to local companies. Most of those sales came before oil prices slumped in mid-2014.

Officials at Shell, Exxon Mobil Corp., Chevron, Total SA and Eni SpA declined to comment on the impact of regulatory uncertainty on their operations. Oil majors in joint ventures with state-owned Nigerian National Petroleum Corp. pump about 80 percent of the country’s oil.

Regulatory Uncertainty

The lack of clarity “was one of the main contributory factors behind divestments by Shell, Chevron and ConocoPhillips,” said Antony Goldman of London-based PM Consulting, which advises on risk in West Africa’s oil and gas industry. “No other international company, including the Chinese, were among the buyers.”

Nigeria has been granted an exemption from OPEC’s supply-management plan after output fell as low as 1.39 million barrels a day in August, following attacks by militants on oil pipelines supplying the Forcados, Qua Iboe, Brass River and Bonny export terminals. The conflict, combined with lower oil prices, has blighted the economy which is heading for its first full-year recession in 2016 since 1991, according to the International Monetary Fund.

While exacerbated by low prices and violence in the Niger Delta, the decline in the nation’s oil industry goes back more than a decade as investors reined in exploration, said Goldman. Nigeria’s crude reserves have dropped to less than 32 billion barrels from 37 billion barrels 15 years ago, and far short of a 2010 target for 40 billion barrels, according to Yinkere.

Lost Investment

Nigeria may have lost $200 billion in investment, according to the Abuja-based Nigeria Extractive Industries Transparency Initiative.

Even recent discoveries, such as Exxon’s 1 billion-barrel deep-water asset last month, largely reflect old efforts paying off in a part of the Gulf of Guinea known for its prodigious prospects, said Yinkere.

President Muhammadu Buhari, who promised to end the legislative logjam after winning elections last year, has yet to present a new draft of a bill that would end squabbling among regions over the distribution of revenues.

In December, frustrated lawmakers will push a private-members bill to address oil company concerns over proposals to increase tax rates on offshore fields from 50 percent, Senate President Bukola Saraki said in a Nov. 10 interview in Abuja.

“We have to engage with the operators, hear their views and also look at Nigeria’s interest from our revenue point of view,” Saraki said. “We can’t dictate as government, a take-it-or-leave-it approach. It has to be a win-win.”

Emmanuel Kachikwu, Nigeria’s minister of state for petroleum, has said he’ll work with the Senate to ensure the reform bill is passed in the next year.

Without the law and clear “contractual terms” for operators, Nigeria won’t reverse the decline in its oil industry, according to Goldman. “In eight years the bill has gone through many forms and no one knows when that’s going to end.”

Attached Files
Back to Top

Rosneft approves $17 billion rouble bond programme

Russia's largest oil producer Rosneft is to return to the county's domestic bond market after a two-year absence with a programme worth 1.071 trillion roubles ($16.6 billion), the company said on Thursday.

Rosneft said the money raised might be used for foreign projects, new upstream business as well for planned refinancing of outstanding debt. The bonds issued under the programme would have a maturity of up to 10 years.

Rosneft, which is under Western sanctions due Moscow's role in the Ukraine crisis, faces limits on raising funds outside Russia.

A large Rosneft bond issue at the end of 2014 coincided with a steep slump in the rouble.

Russia's central bank declined to comment on Thursday on the possible effects of a new Rosneft bond programme on the country's money and forex markets when contacted by Reuters.

In December 2014, Rosneft had issued 625 billion roubles of bonds in the domestic bond market. This caused volatility in domestic money markets, which had expected the company to use the money to buy foreign currency. The company said at the time that proceeds were not used to buy foreign currency.

In January 2015, Rosneft placed another 400 billion roubles in domestic bonds. It has not been active in the domestic bond market since then.

Rosneft said in a statement the latest bond programme would be conducted in separate issues taking into the account the timing of investments and planned refinancing.

A Rosneft spokesman declined immediate comment on when first bond issue might take place and the amount.

The company also said its subsidiaries would be able to buy its bonds as part of the programme.

Rosneft also said its board has also approved Gazprombank as the arranger for the bond issue and it also might buy up to 173.2 billion roubles in Rosneft bonds. A Gazprombank spokesman was not available for immediate comment.

Under a state privatisation plan, Rosneft is to buy a 19.5 percent stake from parent company Rosneftegaz in a deal worth around 700 billion roubles. Russia's budget should receive funds from this privatisation by end-2016.
Back to Top

Woodside moving forward with Browse, Scarborough projects at similar pace

Woodside Petroleum is moving forward with its Scarborough area gas fields and its delayed Browse liquefied natural gas (LNG) project at a similar rate, and can't say at this stage which will be developed first, its CEO told Reuters.

Woodside agreed in September to buy half of BHP Billiton's stake in the Scarborough area fields off Western Australia for $400 million, in a move that could help speed a decision to develop a project that has been stuck on the drawing board since its discovery in 1979.

With LNG prices depressed, the Australian oil and gas company earlier shelved its Browse project.

"I honestly don't know," Chief Executive Peter Coleman said, when asked which project would be developed first during an LNG conference in Tokyo on Thursday.

"We are going to be moving both at the same pace ... Both are very active at this point in time and I wouldn't want to say which one will go first because I will probably get it wrong," Coleman said.

At a time of plentiful supply, LNG buyers are not committing to long term contracts.

"On the buyers side, they are looking for flexibility in contracts. In our view, they are not ready to sign up to a lot of long green field project contracts," Coleman said.

LNG suppliers have been put in a tough spot as demand from the world's top importers of the past few decades, Japan and South Korea, has declined due to slowing economies, more efficient use of power, and switches to coal and renewables. That has led to a number of projects like Browse being delayed.

It is too early to say whether Scarborough would be able to supply gas to the North West Shelf LNG plant, Australia's oldest and biggest, when its existing fields start to run out of gas in the next decade, Coleman said.
Back to Top

Oil Companies Shoulder Pain Of Downturn With Lower Output

The world's listed oil companies have slashed oil output by 2.4 percent so far this year during one of the industry's worst downturns as OPEC battles to agree on its first production cut since 2008.

The aggregated production of 109 listed companies that produce more than a third of the world's oil fell in the third quarter of 2016 by 838,000 barrels per day from a year earlier to 33.88 million bpd, data provided by Morgan Stanley showed.

By comparison, the Organization of the Petroleum Exporting Countries produced 33.64 million bpd in October. OPEC has struggled to agree on a joint production freeze or cut to support oil prices before its Nov. 30 meeting in Vienna.

In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley.

The firms include national oil champions of China, Russia and Brazil, international producers such as Exxon Mobil and Royal Dutch Shell, as well as U.S. shale oil producers like EOG Resources and Occidental Petroleum .

The drop in oil companies' output is particularly compelling given the increase in 2015, when third-quarter production rose by some 1.9 million bpd.

"Clearly, we have seen a large swing in the year-on-year trend in production, from strong growth as recent as a year ago, now to steep decline. This is the outcome of the strong cutbacks in investment," Morgan Stanley equity analyst Martijn Rats said.

Capital expenditure for the companies combined more than halved from $136 billion in the third quarter of 2014 to $58 billion in the same period this year, according to Rats.

Oil executives and the International Energy Agency have warned that a sharp drop in global investment in oil and gas would result in a supply shortage by the end of the decade.

Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop.

Cost reductions and increased efficiencies have only partly offset the drop in production as a result of the lower investment. Technological advancements have also helped boost onshore U.S shale production.

"These declines should temporarily soften in 2017 as new fields are coming on-stream in Canada, Brazil, the former Soviet Union and U.S. tight oil probably stabilises," Rats said.

"Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond."
Back to Top

Oil India soars 4% ahead of board meet to consider bonus issue

State-run oil exploration company Oil India   shares gained 4 percent intraday to hit fresh 52-week high of Rs 444.20 Thursday ahead of board meeting for bonus issue. 

"The board of directors would consider issue of bonus shares in the board meeting scheduled to be held on November 28, 2016," the company said in its filing. On the same date, the board members will also approve unaudited financial results for the quarter and half year ended September 30, 2016 (Q2) on standalone basis. 

Therefore, the trading window for insider trading will be closed between November 18-30 (both days inclusive), Oil India said. 

The last bonus issue, which was in the ratio of 3 shares for every 2 shares held, was announced by the company in 2012. The Government of India holds 67.64 percent stake in the company that has 39 oil exploration blocks in India and 15 blocks globally.

Read more at:
Back to Top

Russia Tries to Dress Up Oil Freeze as Cut Amid OPEC Pressure

Facing pressure from OPEC to make a significant output reduction, Russia reiterated its readiness to freeze oil production at current levels, arguing that the offer amounted to a cut compared with next year’s plans.

A production cap would mean Russia pumping 200,000 to 300,000 barrels a day less than planned in 2017, Energy Minister Alexander Novak told reporters in Moscow on Thursday. That means a freeze would be “quite a difficult and harsh situation for us as our plans envisioned an output growth next year,” he said.

OPEC, which is seeking to finalize its own supply cuts of as much as 1.1 million barrels a day next week, has asked non-members to cooperate by cutting daily production by 880,000 barrels for six months starting January, Azerbaijan’s Energy Minister Natig Aliyev said in a newspaper article.

The Organization of Petroleum Exporting Countries reached a preliminary agreement in September to reduce collective output to 32.5 million to 33 million barrels a day, compared with the group’s estimate of 33.6 million in October. Talks on individual production quotas continued this week with the aim of securing a final pact by the ministerial meeting in Vienna on Nov. 30. It will meet with non-OPEC producers to discuss cooperation on Nov. 28.

While Russia, the largest crude supplier outside OPEC, has reiterated its preference for a freeze over a cut for several months, members of the group including Saudi Arabia had been expecting the nation would eventually join a cut, according to people briefed on the matter. If Russia and other non-OPEC producers balk at the idea of cutting output, the exporters’ group could reconsider pushing ahead, the people said.

Russia’s position “has remained unchanged and consistent,” Novak said Thursday. “As our president said earlier, we are ready to freeze production at the current levels.” Russian President Vladimir Putin on Monday reaffirmed Russia is willing to freeze, adding he sees no obstacles to an OPEC agreement this month after the group made major progress in overcoming differences.

Russia drafts its 2017 budget using an oil-production estimate at about 11 million barrels a day compared to an average 10.9 million expected this year. Output increased to a record 11.205 million barrels a day in November, near a post-Soviet record. The country has raised its production forecasts several times a year since 2015.

A delegation from Moscow is scheduled to meet OPEC experts in Vienna on Monday. Azerbaijan and Mexico are also set to participate, according to people familiar with the arrangements. Azerbaijan’s Aliyev co-chaired similar talks last month.

"While there’s actually nothing new from Russia today, Moscow is changing its rhetoric to show its commitment to a deal,” said Alexander Kornilov, an analyst at Aton LLC in Moscow. “The new wording shows Russia is trying to convince OPEC partners.”

Attached Files
Back to Top

India Cavern for crude is now full

Vizag unit helps India join the US, Japan, China that have strategic reserves.
 India’s first massive underground strategic storage facility at a rock cavern built at Vizag to store crude oil for emergency requirements of the country is all tanked up.

Visakhapatnam: India’s first massive underground strategic storage facility at a rock cavern built at Vizag to store crude oil for emergency requirements of the country is all tanked up. The facility, developed by India Strategic Petroleum Reserves Ltd (ISPRL), has been commissioned. It was to have been commissioned by Prime Minister Narendra Modi last year. The filling of another cavern built at Mangalore has also begun in October.

The ISPRL planned caverns at Vizag, Mangalore and Pudur. The Vizag’s cavern storage capacity is 1.3 million metric tonnes and the facility is a 7.5-km long tunnel with several caverns to store various grades of crude oil. The roof of these caverns is 162 metres below sea level. Its initial capa-city of 1 MMT was later increased by 0.3 MMT, and cost Rs 1,129 crore. The total capacity of the thr-ee facilities will be 5.3 MMT and can meet 90 days of energy needs in case of oil supply disruption due to any emergency.

Consignments of the crude oil were brought in Very Large Crude Carrie-rs and unloaded at HPCL’s single point moo-ring berth at Vizag port. “Under Strategic Petro-leum Reserve project Ph-ase-I, underground rock caverns for total storage of 5.33 MMT of crude oil at three locations, Visak-hapatnam (1.33 MMT), Mangalore (1.50 MMT) and Padur (2.5 MMT) ha-ve been created. The Vis-akhapatnam and Mangalore storage facilities have already been commissioned. The facility at Vizag has already been filled up and nearly one-fo-urth of Mangalore storage facility has also been filled. The storage facility at Padur has also been completed. The total app-roved expenditure is Rs 4,098.35 crore of which Rs 3,552.59 crore has alrea-dy been disbursed,” said Union petroleum minister Dharmendra Pradhan in reply to Congress Lok Sabha member Veer-appa Moily. India joined countries like the US, Japan, and China that have strategic reserves with the Vizag facility coming into operation.
Back to Top

Bruised Oil Nations Seek Solace in Fastest Growing Guzzler

As the oil market anxiously awaits OPEC’s decision next week, some of the countries hardest hit by the biggest price crash in a generation may have found a lifeline outside of the group.

India, the world’s fastest growing crude consumer whose appetite for fossil fuels is forecast to surge in the next two decades, will likely decide next month on whether to advance $15 billion to Nigeria for future supplies. Essar Oil Ltd., operator of India’s second-biggest refinery, has struck a $13 billion deal which may lead to the plant processing more oil from Venezuela.

With prices languishing at under $50 a barrel, about 55 percent below its 2014 peak, smaller sellers have been the most vulnerable to falling revenues. Nigeria has been pushed to the brink of its first full-year economic contraction in 25 years, while Venezuela struggles to ward off a debt default at its national oil company. Now the two crude producers are finding their own means of survival as OPEC seeks to resolve an impasse over output cuts aimed at stabilizing the market.

“Countries like Venezuela and Nigeria, reeling under financial crisis, will challenge any OPEC decision that works against their economic interests,” said Kunal Agrawal, an analyst with Bloomberg Intelligence. “These countries want to secure long-term supply contracts with the likes of India and China.”

India, which imports more than two-thirds of its oil from the Middle East and whose demand is forecast to double through 2040 to 10.3 million barrels a day, is seeking to diversify its purchases to guard against the geopolitical risks tied to the world’s biggest suppliers like Saudi Arabia and Iraq. Over 80 percent of India’s crude is imported, and with a burgeoning population and an economy projected to grow 7.4 percent next year, companies such as the U.K.’s BP Plc and Russia’s Rosneft PJSC are eyeing a piece of an oil retail market already worth $117 billion.

Rosneft has indicated it intends to process crude from its share of oil fields in Venezuela at Essar’s refinery after the Russian company’s acquisition of the facility at Vadinar in western India. Nigerian oil minister Emmanuel Ibe Kachikwu said last month that the West African nation is looking to sign a pact with the Indian government for $15 billion in advance payments for its oil in December.

Welcome Respite

“You can’t depend on one country, but you have a basket of countries from where you take,” said Mukesh Kumar Surana, chairman of India’s state-run refiner, Hindustan Petroleum Corp. “So there will be opportunities for smaller producers.”

Those deals are a welcome respite for Nigeria and Venezuela. Nigeria, which counts oil as its biggest foreign-exchange earner, could see its gross domestic product shrink 1.7 percent this year, according to the International Monetary Fund, its first full-year contraction since 1991. Venezuela has faced widespread shortages of food and essential products as the price of oil, which accounts for 95 percent of its foreign currency earnings, collapsed.

The Latin American nation’s state-owned oil company, Petroleos de Venezuela SA, has struggled with its finances this year after the price it receives for its exports has plummeted 63 percent from over $100 a barrel in 2014. PDVSA, as the company is known, said last month that creditors holding $2.8 billion of bonds that come due over the next year agreed to extend maturities in a highly anticipated swap that will buy the company some time.
Back to Top

IEA expects oil investment to fall for third year in 2017

Investment in new oil production is likely to fall for a third year in 2017 as a global supply glut persists, stoking volatility in crude markets, the head of the International Energy Agency (IEA) said on Thursday.

"Our analysis shows we are entering a period of greater oil price volatility (partly) as a result of three years in a row of global oil investments in decline: in 2015, 2016 and most likely 2017," IEA director general Fatih Birol said at an energy conference in Tokyo.

"This is the first time in the history of oil that investments are declining three years in a row," he said, adding that this would cause "difficulties" in global oil markets in a few years.

Oil prices have risen to their highest in nearly a month, as expectations grow among traders and investors that OPEC will agree to cut production, but market watchers reckon a deal may pack less punch than Saudi Arabia and its partners want.

The Organization of the Petroleum Exporting Countries meets next week to try to finalise to output curbs.

U.S. shale oil producers will increase their output if oil prices hit $60 a barrel, meaning OPEC will have to walk a fine line if it curtails production to prop up prices, Birol said last week. Brent crude stood around $49 a barrel on Thursday.

He said that level would be enough for many U.S. shale companies to restart stalled production, although it would take around nine months for the new supply to reach the market.
Back to Top

End of downturn at hand? Operators' behavior suggests so: Fuel for Thought

The way US E&P operators are adding rigs, planning activity ramp-ups, preparing to raise capex and looking forward to renewed production growth in 2017, you'd be tempted to write finis to a harrowing two-year industry downturn.

During third-quarter 2016 earnings calls in the last few weeks, oil operator after operator unveiled what became surprisingly repetitive near-term plans: stirring the production pot by slipping a rig or two into the field during the final months of this year, kicking up the capital budget modestly and then returning to production growth in 2017.

'Third quarter results tell the story of good, old fashioned American ingenuity,' Robert W. Baird analyst Ethan Bellamy told S&P Global Platts. 'Costs are down, productivity is up, and capital is flowing into the most productive regions.'

CEOs certainly displayed sunnier dispositions on conference calls than a couple of quarters ago when the specter of what then was a recent period of $30/b oil was fresh in their minds.

But now, with a new year looming, oil executives seemed energized by their victory over a low-priced oil world after two years of squeezing costs and efficiencies from oil fields and developing precise completion designs to extract still more oil and gas per well. So they appeared willing to open the purse strings a bit next year-and if oil prices cooperated, rev up the drilling machine and production spigot in the months to come.

But beneath their show of confidence, oil executives appeared mindful of the sobering and ongoing volatility of oil prices. Most clearly conveyed that any stepped-up activity would be done prudently until price signals indicated otherwise. Larger operators in particular said higher prices of mid-$50s/b to $60/b were needed for next-stage growth.

Paul Horsnell, head of commodities research for Standard Chartered Bank, noted industry still is not investing according to the oil price curve. Front-month WTI closed Friday at $45.69/b, while forward prices in June and December 2017 settled at $49.49/b, and $50.60/b, respectively.

'On average, they are maybe planning on the basis of the curve minus at least $5' per barrel, Horsnell said. 'So, not overly aggressive.'

But even as the outlook for 2017 turns up, independent E&Ps as a group showed financial losses from July to September for the eighth straight quarter, he said.

Despite losses, rig count growing

While the losses were half that of three months before and only 15% of the loss in the same 2015 period, 'it was another loss on top of a lot of other losses,' he said.

Q3 results 'show an industry that is behaving like survivors from a storm: very happy to be alive, but still facing the task of clearing up a lot of wreckage,' Horsnell added.

While 153 oil rigs have been added in US fields during the last six months, and 19 in the last week alone, not all operators are necessarily planning production growth. Some are preparing for flat output next year. ConocoPhillips is eyeing flat to 2% growth in 2017 output while others, like Whiting Petroleum and Murphy, could hold next year's output flat with Q4 2016.

On the other hand, several operators have forecasted double-digit output growth, notably from the Permian Basin in West Texas and New Mexico: Pioneer Natural Resources expects 13% to 17% production increase next year that includes 23% to 27% oil output growth. Concho Resources sees 20% per year total production growth for 2017-2019 and Diamondback Energy eyes more than 30% output growth.

To meet those estimates in the Permian Basin, operators added 50 rigs in Q3 and so far in Q4 have added another 26 to a total of 229 rigs, nearly 100 more than all other major US shale plays combined.

Although the EIA has forecasted US oil production down 110,000 b/d or 1.2% for 2017 year over year, the agency 'may be underestimating the capital efficiency being realized by US E&Ps, UBS analyst Bill Featherston said in a recent investor note. And that could potentially 'prolong the oil price recovery or lower the medium-term normalized oil price.'

UBS' own oil production model, based on EIA data, currently calls for 2017 volumes to be down roughly 340,000 b/d year over year or 4%, and 2018 output up around 85,000 b/d or 1% year on year.

While oilfield service and equipment providers recently cautioned they would likely soon take back some of the 15% to 30% or more in price concessions granted to oil companies early in 2015, this may not happen until late next year or possibly even 2018, Robert W. Baird analyst Dan Katzenberg said.

Attached Files
Back to Top

Canacol Energy announces new gas sales contracts, private pipeline, and 2017 and 2018 gas forecast

Canacol Energy Ltd. is pleased to provide the following update concerning the execution of 100 million standard cubic feet of new gas sales contracts to existing and new customers located on the Caribbean coast of Colombia, and the initiation of a private pipeline venture that will deliver 40 MMscfpd of new gas production to new and existing customers located on the Caribbean coast in 2017.

New Gas Sales Contracts

Further to its November 10, 2016 announcement of a new transportation agreement with Promigas S.A. to ship 100 MMscfpd of new gas production, the Corporation has negotiated 4 new take or pay gas sales contracts totalling 100 MMscfpd with existing and new thermoelectric, refining, industrial, and commercial customers located in Cartagena and Baranquilla. The contracts all commence in December 2018, have a term of between 5 and 10 years, and are with large, established offtakers. The pricing of these new contracts, combined with the Corporation's current multi-year take or pay gas contracts, and the private pipeline sales as described below, results in an average contract price of approximately US$ 5.00/mcf for the anticipated 230 MMscfpd of production in December 2018.

Private Pipeline

A Special Purpose Vehicle ('SPV') has been formed to build a new private gas pipeline connecting the Corporation's gas facility located at Jobo to the Promigas operated pipeline at Sincelejo. The private pipeline will consist of approximately 80 kilometers of flowlines and two compression stations, and is designed to transport 40 MMscfpd of Canacol's gas to new and existing customers located in Cartagena under take or pay contracts at existing prices. Surveying and permitting for the new pipeline is underway, with first gas transportation anticipated in December 2017. The SPV is anticipated to raise approximately US$ 50 million in a combination of equity and debt, outside of Canacol, to construct and operate the pipeline.

Corporate Gas Production Forecast 2017 and 2018

Based upon the above mentioned new private gas pipeline, the new gas sales contracts, and the recently announced agreement whereby Promigas will add 100 MMscfpd of new transportation capacity to the existing pipeline to Cartagena and Baranquilla by December 2018, the Corporation is planning to increase current gas sales from 90 MMscpf to 130 MMscfpd in December 2017, and to 230 MMscfpd in December 2018.

The Corporation expects to have approximately 190 MMscfpd of productive capacity from the 11 existing wells drilled in its Nelson, Palmer, Nispero, Trombon, Clarinete and Oboe gas fields combined with two remaining 2016 development wells (Clarinete 3 and Nelson 8) being drilled prior to year end 2016. In addition, the Corporation's facility located at Jobo has 190 MMscfpd of gas processing capacity.
Back to Top

Iran oil exports into EU increase

Image title

The ramp up we have seen in Saudi, Iraqi - and particularly - Iranian oil exports. The chart below highlights how Iranian oil exports have flowed back into the EU after the lifting of sanctions at the beginning of the year.

Iranian flows have also increased into Europe as Nigerian flows have dropped off, with West African exports rising to the U.S. East Coast as Bakken production has drifted lower and as crude by rail economics have become increasingly unfavorable. The chart below also highlights the recent increase in Libyan exports as production returns. The vast majority of Libyan oil exports head to Europe:    

Attached Files
Back to Top

Summary of Weekly Petroleum Data for the Week Ending November 18, 2016

U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending November 18, 2016, 271,000 barrels per day more than the previous week’s average. Refineries operated at 90.8% of their operable capacity last week. Gasoline production decreased last week, averaging 9.7 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day.

U.S. crude oil imports averaged about 7.6 million barrels per day last week, down by 845,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 8.1 million barrels per day, 13.3% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 855,000 barrels per day. Distillate fuel imports averaged 136,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.3 million barrels from the previous week. At 489.0 million barrels, U.S. crude oil inventories are at the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 2.3 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 0.3 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.8 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories decreased by 0.1 million barrels last week.

Total products supplied over the last four-week period averaged about 19.9 million barrels per day, up by 1.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.2 million barrels per day, up by 0.6% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, up by 1.9% from the same period last year. Jet fuel product supplied is up 10.2% compared to the same four-week period last year.

Cushing down 100,000 bbl
Back to Top

Small increase in US oil Production

                                                      Last Week    Week Before   Last Year
Domestic Production '000............ 8,690              8,681            9,165
Alaska ............................................ 511                      514               528
Lower 48 ........................................ 8,179              8,167             8,637
Back to Top

Another partner gives financing nod for Coral South FLNG

Mozambique’s state-owned energy firm Empresa Nacional de Hidrocarbonetos (ENH) has given its approval for the financing of the development of the Coral south FLNG project.

The approval comes less than a week after Italian oil and gas firm Eni, which is the operator of the Coral offshore gas discovery, gave its financing approval for the project.

The Area 4, located in the deep waters of the Rovuma Basin, contains the giant Coral South gas field for which the investment decision was made by Eni’s board of director last week.

Mozambican media have reported that the expected total investment for the project will be $8 billion, of which ENH will provide $800 million.

ENH owns a 10 percent stake in the project. Eni operates the offshore Area 4 with a 50 percent indirect interest, owned through Eni East Africa (EEA), which holds a 70 percent stake of Area 4. The remaining 20 percent stake in EEA is owned by China’s CNPC. EEA’s partners in Area 4 are Galp, Kogas, and ENH with a 10% stake each.

All the partners need to give their financing approvals before the Final Investment Decision (FID) is made. The FID is expected to be reached by the end of 2016.

The FID will represent the first phase of development of 5 trillion cubic feet of gas in the Coral discovery in deep waters some 80 kilometers offshore of the Palma bay in the northern province of Cabo Delgado.

The giant discovery, made in May 2012 and outlined in 2013, proved the existence of a high quality field of Eocenic age with excellent productivity. It is estimated to contain 15 trillion cubic feet of gas in place, wholly located in Area 4.

Eni in October secured a major push towards the Final Investment Decision. Namely, Eni and its partners in the Area 4 concession have managed to find a major customer for the gas to be produced there – British energy major BP.

Under the agreement, BP will buy all the LNG to be produced by Eni’s Coral South Floating LNG unit, which will be installed offshore Mozambique, over a period of 20 years. Commercial details of the agreement were not disclosed.
Back to Top

U.S. Gulf Coast Refinery Maintenance Nears Completion

U.S. Gulf Coast refinery utilization has nearly recovered from fall maintenance season with only two units left in restart mode following planned work as of November 21.

The 124,500 bpd fluid catalytic cracker and associated 26,600 bpd alkylation unit remained below normal operating levels since being shut late September at Marathon's 464,000 bpd Garyville, LA, refinery. October was the heaviest month of maintenance in the Gulf Coast this year, according to Genscape.

The largest maintenance projects this fall were at Valero's 292,000 bpd Port Arthur, TX, refinery, which completed after the restart of a hydrocracker on November 6, and Marathon's Garyville refinery, where units are restarting. Valero's plant-wide overhaul was expected for completion in late October, according to Reuters.

A multi-unit overhaul underway at Valero’s 292,000 bpd Port Arthur, TX plant on Oct. 3. Maintenance activity was completed on Nov. 6 with the restart of a hydrocracker. Click to enlarge

During the maintenance season, at least 11 percent of Gulf Coast FCC capacity was shut in October. Monitored FCCs that shut for planned work in October include Shell's 70,000 bpd unit in Deer Park, TX, Petrobras' 56,000 bpd Houston unit, Valero's 96,000 bpd unit in Corpus Christi, TX, and Marathon's 124,500 bpd unit in Garyville, LA.

Marathon's Garyville FCC will be down for the longest period, shut for 56 days as of November 21. The Garyville FCC was also the only FCC monitored by Genscape that was shut in October 2015 for planned work. The 2015 work was completed in 19 days, according to Genscape.

Fall maintenance in the U.S. Gulf Coast increased in 2016, reaching a maximum capacity offline of 11 percent on October 10. Maintenance in 2015 was uncharacteristically low with companies running units to capture relatively healthy refining margins and relatively weak crude prices. The maximum capacity offline monitored by Genscape in fall 2015 was 2.46 percent, or 226,000 bbls, on November 3, 2015. The U.S. benchmark West Texas Intermediate (WTI) price closed that day at $47/bbl. In 2014, the maximum outage was 8.22 percent, or 550,000 bbls, on November 1.

Genscape's North American Refinery Intelligence Service combines observations obtained from infrared cameras with in-house analytical and technological expertise to provide an unrivaled view into real-time operations at U.S. and Canadian refineries. Genscape currently monitors 80 percent of overall refinery capacity in the United States, including 92 percent of East Coast refineries, 84 percent of Midcontinent refineries, and 91 percent of Gulf Coast refineries. To learn more, or request a free trial of the North American Refinery Intelligence Service, click here.

- See more at:
Back to Top

North Sea Oil Glut to Get Short-Term Relief as Flows Go East

A glut of North Sea oil that’s helped depress global prices and heap pressure on OPEC is poised for short-term relief after traders booked tankers to take as much as half of the region’s key oil flow to Asia.

Mercuria Energy Group Ltd. and Royal Dutch Shell Plc booked Forties crude onto tankers that typically haul 2 million barrels each for loading this month, according to lists of charters and four people involved in the market. Statoil ASA provisionally booked a ship to collect North Sea oil by Dec. 5. The combined outflow could exceed 500,000 barrels a day over an 11-day period, more than half the rate of key Brent, Forties, Oseberg and Ekofisk loadings.

“For now, it’s kind of a short-term relief,” said Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland, adding that there are still too many moving parts to determine when and how a global excess will be eliminated.

The bookings come at a time when insufficient demand is causing traders to store millions of barrels of North Sea oil on tankers because there’s not enough space on land. At the same time, the Organization of Petroleum Exporting Countries is working on a plan to try to eliminate a global surplus and stem a price slump. The group meets in Vienna on Nov. 30, attempting to finalize an accord it set out eight weeks ago in Algiers to trim as much as 1.5 million barrels a day from supply.

Contango Trading

North Sea oil is trading in a pattern known as contango, where a physical-market surplus pushes down immediate-month future contracts below those in later periods. That gap got so wide this month that it cost investors more than $1 a barrel to extend, or roll, bullish trades when most-immediate Brent contracts expire, from less than 50 cents earlier this year. The spread narrowed to as little as 93 cents on Wednesday, the smallest since Nov. 16, ICE Futures Europe data show.

As much as 12 million barrels of benchmark North Sea grades are now in floating storage off the U.K. coast as land sites fill up, according to ship-tracking data compiled by Bloomberg. While that puts pressure on Brent, it also makes the grade more attractive to buyers in other parts of the world.

“Now the North Sea is priced not only to go to floating storage, but also to be exported to all regions,” said Jakob.

The region next month is scheduled to load an average of 2.1 million barrels of crude a day, the most in 4 1/2 years, according to data compiled by Bloomberg. That oil may either be stored or exported. For the key Brent, Forties, Ekofisk and Oseberg grades, that flow is less than 1 million barrels a day.

Mercuria is set to load the vessel Argenta at Hound Point on Nov. 25, from where it will sail to China, the fixtures show. Shell is to load the Victory I from the same location on Nov. 29. The tanker’s destination after that is still unclear but most supertankers head to Asia once they’ve loaded North Sea barrrels.

In addition, Statoil ASA provisionally chartered the supertanker Bunga Kasturi Lima to load at the Norwegian port of Mongstad from Dec. 1-5, where it will then sail for South Korea, shipping fixtures show. If that loading proceeds, the tanker will be the first to head to Asia from Mongstad since November 2012, according to data compiled by Bloomberg.
Back to Top

Global LNG buyers, sellers meet as Japan probes contract clauses

A new Japanese regulatory probe into sales restrictions for liquefied natural gas (LNG) contracts will be at the forefront of discussion as the industry's biggest buyers and sellers gather in Tokyo this week.

Representatives from major LNG producers Qatar, Australia and Malaysia will meet with buyers from companies including Japan's Jera Co, the world's biggest buyer of the fuel, and Taiwan's CPC Corp to find ways to address a market where demand is only about 76 percent of supply, Thomson Reuters Eikon data shows. The overhang is leading the industry to question everything from how the fuel is priced to how it is sold.

Adding to the disruption, the Japan Fair Trade Commission is examining whether destination clauses, long-time features of LNG sales contracts that restrict buyers from selling cargoes to third parties, are anti-competitive. The investigation could force the renegotiation of billions of dollars of existing LNG contracts.

Buyers in Japan, the world's biggest LNG importer, have long complained about destination clauses and will voice their displeasure again at the LNG producers and consumers conference on Thursday.

"It is desirable to have no destination restrictions," Takehiro Honjo, president of Osaka Gas, Japan's second biggest city gas company, said on Friday. He added that about 20 percent of its current LNG contracts do not have the clauses.

Japan's buyers are now overcommitted to their contractual LNG cargoes as demand is dropping. They want more leeway to resell the spare cargoes but are prevented by the clauses.

"Japan appears to be following Europe's example, (which) led to these clauses being reviewed in a number of gas and LNG supply arrangements and supported improved flexibility," said Kerry Anne Shanks, vice president, Asia gas and LNG research, at Wood Mackenzie.

She pointed to the example of Spain, where re-exports of cargoes totalled nearly 4 million tonnes in 2014. A cargo is typically about 110,000 tonnes.

Producers have rebuffed the objections. But, they are having to reconsider that position because of increasing U.S. LNG exports, which do not carry the destination restrictions.

Japan, Europe, South Korea, China and India, which together account for about 80 percent of the world's total LNG imports, have jointly called for relaxing or abolishing the destination clause, Japan's trade ministry said.

Major sellers could be convinced to relax or remove the restrictions if buyers would make other concessions, said a source familiar with their thinking.

"Cancelling the clause will have to result in some give elsewhere," said the source.

But with prices down by nearly two-thirds from their 2014 high LNG-AS and more supply coming to market, gas consumers, who use the fuel for power generation and for cooking, have more power to force through changes.

"It's a buyers market now. We are asking them (sellers) not to include destination restrictions as much as possible and we have made some progress on reaching an understanding," Tokyo Gas Executive Officer Kentaro Kimoto, who is in charge of the company gas resources department told reporters on Monday.

Attached Files
Back to Top

Norway oil companies lower 2017 spending plans-survey

Norway's oil companies have lowered their 2017 investment plans, a Statistics Norway survey showed on Wednesday, raising the chances of a central bank interest rate cut in the coming months.

Norway's biggest industry has curbed spending in the wake of a more than 50 percent fall in oil prices over the last two years, bringing the economy to a near standstill.

The country's oil companies plan to invest 146.6 billion crowns ($17.21 billion) next year, the survey showed, down from 150.5 billion crowns when surveyed in August by Statistics Norway.

"The decline is mainly due to lower estimates for exploration and shutdown and removal (of platforms). Exploration wells and removal projects originally planned for 2017 are now postponed," Statistics Norway said in a statement.

Plans now point to a 10 percent cut versus 2016, economists at Handelsbanken said, much deeper than the approximately 4 percent cut expected by the Norwegian central bank.

"This suggests that the offshore oil sector will continue to drag down Norway's industrial sector and economic activity next year, by maybe more than we thought," Handelsbanken Chief Economist Kari Due-Andresen said.

The oil sector accounts for 20 percent of the Nordic country's economy.

Due-Andresen expects the central bank to leave its key policy rate unchanged at 0.50 percent on Dec. 15 but she said the bank could cut its rate path, or outlook.

Norges Bank has said since September that it expects the key policy rate to stay at 0.50 percent "in the period ahead".

Kyrre Aamdal an economist at DNB Markets, agreed that the central bank would likely leave the rate untouched as it worries about overheating in the housing market.

However, "the downside risk is high and has increased after the oil investment numbers," Aamdal said.
Back to Top

IMO Low sulphur decision:- 1month on.

However, the study, performed by CE Delft, a group of consultants in the Netherlands, concluded that the global refining industry will be able to meet increased demand for middle distillates in the marine sector. With its decision, the IMO has now eliminated the uncertainty with respect to the timing of the implementation of the new sulphur regulations. However, question marks remain on the actual impact on the oil and tanker markets.

Shipowners have two fundamental options on how to deal with the new emissions cap: (1) Burning low sulphur fuel (maximum 0.5% sulphur) or (2) installing Exhaust Gas Cleaning Systems (often called scrubbers), which will allow vessels to continue using high sulphur fuel oil. Existing engines can typically burn low sulphur fuel oil, either lighter gas oil or low sulphur heavy fuel oil, without significant modifications. The use of LNG is also an option but, since using this fuel will require significant modifications to existing vessels, including the installation of separate fuel tanks, LNG is only a viable option for newbuilding tonnage. At the moment, the lack of availability of LNG bunkering facilities worldwide is also a limiting factor, especially for ships involved in tramp shipping such as tankers.

The sulphur cap creates an interesting dilemma for both ship owners and refiners. Shipowners have to decide whether to install scrubbers at an estimated cost of $3m to $6m, depending on the vessel size and design, or to burn higher cost low sulphur fuel. The payback period for a scrubber investment will be relatively short if the price differential between high sulphur and low sulphur fuel remains high or increases. The spread will be high if there is limited demand for heavy fuel oil (HFO), which happens if not many owners install scrubbers and/or refiners do not convert significant volumes of residual fuel oil into lower sulphur products.

For refiners, a similar dynamic applies; they have to decide whether to modify their facilities to reduce residual fuel oil output, as the value of this commodity will drop when demand declines. Less sophisticated refineries could reduce the sulphur content in their output by increasing the use of low sulphur crude grades, but such crudes will likely increase in price.

Currently, global residual fuel demand is about 7.3m barrels per day (Mb/d). The IEA estimated that, in 2014, marine bunker demand accounted for 43% (~3.3 Mb/d) of global residual fuel oil demand. In their market outlook published earlier this year, IEA forecasts that in 2020, about 2 Mb/d of marine HFO demand will convert to MGO.

Back to Top

Libya: Sirte oilfields out of action

Libya's National Oil Corp. forced to shut production at Sirte oilfields after an explosion at control building Tuesday

Back to Top

Reversing Middle East Dependence: U.S. Begins Exports Of Shale Gas To Oil-Rich UAE And Kuwait

Here’s a crazy thought: Imagine that exports of American energy began flowing to importing countries in the Middle East, and that those countries were growing increasingly dependent on U.S. exports.

Sound bizarre?

Since March of this year, that is exactly what has been happening.

Amid all the election tumult, the United States quietly began exporting natural gas to the Middle East.

Two cargoes of shale gas liquefied at Cheniere Energy’s Sabine Pass terminal in Louisiana were exported to Kuwait. A third went to the United Arab Emirates. Jordan imported two more.

Kuwait and the UAE are two of the most petroleum-rich countries on earth, with a combined 12% of global oil and 4% of global gas reserves.

The usual narrative suggests that America is dependent on the Middle East for energy, not the other way around. President-elect Trump is even suggesting we reduce our dependence by halting imports from Saudi Arabia.

Why would Kuwait and UAE need American gas? They sit in a region that holds more than 40% of global gas. Iran alone owns 18% of known reserves. Qatar has 13%.

And, just 90 miles from Kuwait City, Iraq flares off 700 million cubic feet per day of associated gas from its southern oilfields. Estimates put the value of the wasted gas at $1.8 billion per year.

How on earth is it possible that these two countries are importing shale gas all the way from America?

Is it a political deal? Maybe a “thank you” for the security the US Navy provides their oil shipments?


Even though Kuwait and the UAE each hold more than 100 years of gas reserves at current rates of production, they are genuinely short on natural gas.

The root cause is government subsidies that fix domestic natural gas prices at very low levels – less than $2 per million BTUs. At those prices, demand for gas is rampant. So is demand for electricity, which is also subsidized.

But with prices fixed at a dollar or two, nobody wants to invest in natural gas production. There is no money in it.

As it happens, non-associated gas reserves in Kuwait and the UAE are challenging. The gas is either tight or ultra-deep, or sour – laced with deadly hydrogen sulfide. That makes it expensive.

The UAE has seen ConocoPhillips drop out of one sour gas production contract. It had to use creative incentives to entice Occidental to take over.

Kuwait and the UAE have also been frustrated in their attempts to import gas from their neighbors. Some of this is politics. Neither country has good relations with Iran. A gas pipeline crossing the Gulf from Iran to the UAE sits unused because the two countries cannot agree on a price.

Kuwait and Iraq are not on speaking terms. And Kuwait’s attempt to import gas from Qatar has been blocked by Saudi Arabia, which refused permission for a pipeline to cross its territorial waters.

Meanwhile, in America, high gas prices led clever entrepreneurs to figure out a way to coax gas from reserves considered too costly and difficult to develop. Now American gas is cheap.

Attached Files
Back to Top

Pioneer denied request to reclassify oil wells

The Railroad Commission of Texas last week denied Pioneer Natural Resources’ request to reclassify several oil wells as gas wells, citing concerns that the company was looking to take advantage of a tax exemption for gas wells.

State regulations allow oil and gas operators to classify wells as oil-producing or gas-producing, based on their production ratios. But gas wells grant operators a decades-old tax credit, known as the high-cost gas credit, which was put in place to encourage natural gas production.

But the request also opened a discussion on how the Railroad Commission, which regulates the oil and gas industry, classifies wells, specifically if it should add another category.

Pioneer made the argument that several of its oil wells in the Eagleford basin should be reclassified as gas wells, a claim that the commission’s staff disputed. The company’s arguments included a claim that the presence of natural gas liquids in the wells makes them gas wells.

During an October meeting, Paul Dubois, a technical examiner for the agency, told the commissioners that Pioneer had given them no proof that it would suffer if the wells retained an oil classification. But, Dubois pointed out, reclassifying them as as gas wells  “will get them a significant severance tax reduction.”

Pioneer disputed Dubois analysis, arguing that the wells were clearly producing gas and the potential for tax breaks was not the company’s motive in seeking reclassification. .

The commission ultimately denied Pioneer’s request during it’s Nov. 15 meeting, but Commission Ryan Sitton raised the issue of creating a third classification to cover natural gas condensate, or liquids. Natural gas liquids are considered valuable and useable, but regulators aren’t sure if it should be declared natural gas or oil.

“The essential issue in this case is how we consider condensate,” said Sitton. “There is a a long record of saying it is not oil, but there is no precedent considering it gas.”

Attached Files
Back to Top

Mexico Set to Receive a $2.9 Billion Windfall From Oil Hedges, IMF Says

Mexico is set to earn about $2.9 billion from its oil hedges for 2016, reaping a windfall from plummeting crude prices for a second straight year, according to the International Monetary Fund.

Mexico has spent an average of almost $1 billion a year over the past decade buying put options through deals with banks that have included Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co., according to government documents. The payout for 2016 will be about $2.9 billion, the IMF said in an e-mailed response to questions on Tuesday after completing its annual review of the nation’s economy.

Mexico earned $6.4 billion from hedging in 2015, its biggest payout so far, and $5.1 billion in 2009, in the aftermath of the global financial crisis. Since it started shielding its exposure to crude prices through derivatives contracts in 1990, the Latin American country had never collected a gain two years in a row. The government spent $1.09 billion last year on put options allowing it to sell 2016 oil exports at $49 a barrel; that’s about 42 percent above the $34.43 average price for the nation’s crude mix over the past year.

"It’s been a tool that has helped the economy to smooth the negative shock from lower oil prices," said Carlos Capistran, the chief Mexico economist at Bank of America Corp. "It has given the Finance Ministry breathing room to adjust other variables. It certainly has been a good tool."

Mexico’s Finance Ministry declined to comment on the payout before the completion of the hedge, which runs through the end of this month.

Mexico Set for 2016 Windfall From Sovereign Oil Price Hedge

Despite Mexico’s hedging success, few other commodity-rich countries have followed suit. Ecuador hedged oil sales in 1993, but losses on the bets triggered a political storm and the nation hasn’t tried again. More recently, oil importers Morocco, Jamaica and Uruguay have bought protection against rising energy prices.

Hedging is a financial strategy that involves buying or selling a commodity in advance in the expectation the price will be higher or lower, depending on the position, at the time the hedging entity has to take delivery or make delivery of the goods. Put options give the buyer the right, but not the obligation, to sell an underlying commodity when it reaches a specified price.
Back to Top

Colombia, FARC rebels to sign new peace deal on Thursday

Colombia, FARC rebels to sign new peace deal on Thursday

A new peace accord between Colombia's government and Marxist FARC rebels will be signed on Thursday and sent to Congress for approval, President Juan Manuel Santos said on Tuesday, bringing a formal end to the 52-year civil war ever closer.

The revised document will be signed in Bogota between FARC leader Rodrigo Londono and Santos, who won the Nobel Peace Prize last month for his efforts to end the conflict with the insurgent group.

"We have the unique opportunity to close this painful chapter in our history that has bereaved and afflicted millions of Colombians for half a century," the president said in a televised address.

The government and the Revolutionary Armed Forces of Colombia (FARC) have been in talks in Havana, Cuba for the last four years, hammering out a deal to end a conflict that has killed more than 220,000 and displaced millions in the Andean country.

The government published the revised peace deal last week in a bid to build support after the original draft was rejected in an Oct. 2 referendum amid objections it was too favorable to the rebels.

Santos and Londono signed the original deal two months ago in an emotional ceremony before world leaders and United Nations Secretary General Ban Ki-moon.

The decision to ratify the revised accord in Congress instead of holding another referendum will anger members of the opposition, particularly former President Alvaro Uribe who spearheaded the push to reject the original accord and wants deeper changes to the new version.

"This new accord possibly won't satisfy everybody, but that's what happens in peace accords. There are always critical voices; it is understandable and respectable," said Santos, 65, warning another plebiscite could divide the nation and put in danger the bilaterial cease-fire.

The expanded and highly technical 310-page document appears to make only small modifications to the original text, such as clarifying private property rights and detailing more fully how the rebels would be confined in rural areas for crimes committed during the war.

Uribe has criticized it as just a slightly altered version of the original and wants rebel leaders to be banned from holding public office and for them to be jailed for crimes.

The FARC, which began as a rebellion fighting rural poverty, has battled a dozen governments as well as right-wing paramilitary groups.

An end to the war with the FARC is unlikely to end violence in Colombia as the lucrative cocaine business has given rise to dangerous criminal gangs and traffickers.
Back to Top

Ecopetrol announces 2017 investment plan

-During 2017 Ecopetrol will invest approximately USD 3,500 million.

-Nearly USD 2,850 million will be allocated to exploration and production. The planned investment in this segment doubles the amount budgeted for 2016, in line with the 2020 Business Plan.

-Investment in exploration will be increased from USD 282 million in 2016 to USD 650 million in 2017.

-The Ecopetrol Group will continue to produce an average of about 715 thousand barrels of oil equivalent per day during 2017. This production level lays the foundation for Ecopetrol's expected increase in production by 2020 of between 760 and 830 thousand barrels of oil equivalent per day, depending on international crude oil prices.

Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) reports that its Board of Directors has approved an investment plan for approximately USD 3,500 million for 2017.

This plan addresses the goals set forth in the 2020 Business Plan, allocating more than 80% of investments to profitable exploration and production projects.

Exploration and production projects will largely focus on developing key production assets and identifying Colombian onshore and offshore resources, maintaining our position in foreign assets.

More than 95% of investments will be made in Colombia, with the remainder made abroad.

The investments of the Ecopetrol Group are broken down by segment below:

Image titleThe midstream and downstream segments will complete ongoing projects and required maintenance, ensuring reliable, efficient and safe operations.

The funds required to finance the Ecopetrol S.A. investment plan will come from internal cash generation, with no need to incorporate additional net financing.

Under this plan, the Ecopetrol Group will continue to demonstrate its commitment to ethics, clean and safe operations and stronger ties to communities. Our operations will continue to give priority to excellence in HSE, our ongoing promotion of employee satisfaction and our commitment to development by all of our employees and stakeholders. Innovation and knowledge generation will be levers for growth.

Attached Files
Back to Top

New infrastructure aims to increase takeaway capacity of natural gas from Utica region

Image title

Source: U.S. Energy Information Administration pipeline database
Note: Proposed capacity shown on the graph reflects only the projects discussed in this article. Other proposed projects in the area are smaller or have not yet progressed through the approval process.

A number of pipeline projects that have been approved, or are in various stages of the approval process, would increase capacity to transport natural gas from the Utica production region in Ohio to natural gas markets. Collectively, these projects could add up to 6.8 billion cubic feet per day (Bcf/d) of takeaway capacity out of the Utica region by the end of 2018.

Over the past several years, natural gas production in the Appalachian basin from the Marcellus and Utica shaleshas grown significantly. Because pipeline projects often have longer lead times than production projects, transport infrastructure for accessing natural gas demand centers and export locations in the Appalachian Basin has not kept pace with production capability. This situation has resulted in a lower price for natural gas from the Appalachian region relative to many other natural gas trading hubs in the United States.

Construction of a new interstate natural gas pipeline in the United States requires approval by the Federal Energy Regulatory Commission (FERC), which can be a lengthy process. Construction on a pipeline can begin once a final environmental impact statement is issued, pending that project receiving Clean Water Act, Coastal Zone Management Act, Clean Air Act, and other necessary state permits.

Key projects that are undergoing FERC review and may enter service in the next few years include:

The Rover pipeline, which recently received a final environmental impact statement from FERC, is designed to transport 3.25 Bcf/d of natural gas from the Marcellus and Utica Shale areas to various market hubs.  

The Leach Xpress project, which received a draft environmental impact statement (DEIS) from FERC, seeks to add 1.5 Bcf/d of natural gas takeaway capacity along the Columbia Pipeline Group’s network.

The Rayne Xpress project, which received a DEIS, will augment the Leach Xpress project.  The Rayne Xpress Project seeks to add 0.6 Bcf/d in takeaway capacity from the Columbia Pipeline system to Gulf Coast markets, which will help facilitate liquefied natural gas exports, among other uses.

The Nexus Gas Transmission project, which received a DEIS from FERC in July 2016, is designed to deliver 1.5 Bcf/d of natural gas supplies from the Utica region to markets in northern Ohio, southeastern Michigan, the Chicago Hub in Illinois, and the Dawn Hub in Ontario, Canada.

Source: U.S. Energy Information Administration

More information about existing natural gas pipeline infrastructure is available in EIA's spreadsheet of State-to-State Capacity. Projects that are planned or under construction are listed in the Pipeline Projects spreadsheet.

Attached Files
Back to Top

Petronet expects LNG-fueled transport to lift demand

Petronet LNG, India’s largest importer of the chilled fuel intends to focus on ships and vehicles fueled by liquefied natural gas to push the demand up.

Prabhat Singh, the company’s CEO said the shift to using LNG as fuel in transportation in India, where a number of industrial users are not linked to the natural gas grid, will create ‘reasonable demand’, Reuters reports.

In addition, Singh said that a larger portion of 200,000 trucks joining India’s roads on an annual basis could run on LNG.

He also revealed that India’s government could officially allow the use of LNG as fuel for transport in the coming week.

The country launched its first LNG bus at the beginning of November. The bus will run on a trial basis as a part of a pilot project before it can be certified for commercial application.

The bus was delivered to the Kochi LNG terminal for fueling, and as the company prepares to build retail outlets, the terminal, that is currently operating at about 6 to 7 percent capacity due to the lack of connection to the natural gas grid, could start operating at full capacity.

India is also working on increasing its LNG import capacity from 21.3 million tons per annum currently, to 50 mtpa by 2022.

Petronet LNG has recently fully commissioned the expanded Dahej LNG terminal raising the its capacity from 10 mtpa to 15 mtpa.

Attached Files
Back to Top

Iran not exempt from OPEC cuts?

According to latest update, Iran was to be included in the 4.5 pc production cutting OPEC nations, refuting that it would be exempt.


OPEC to debate oil output cut next week but Iraq, Iran hesitate

OPEC will debate an oil output cut of 4.0-4.5 percent for all of its members except Libya and Nigeria next week but the deal's success hinges on an agreement from Iraq and Iran, which are far from certain to give full backing.

Three OPEC sources told Reuters a gathering of experts from the oil producer group in Vienna had decided on Tuesday to recommend that a ministerial meeting on Nov. 30 debate a proposal from member Algeria to reduce output by that amount.

Such a cut would bring OPEC's current output down by more than 1.2 million barrels per day (bpd), according to Reuters calculations based on the group's October production, and is towards the upper end of market expectations.

But sources also said the representatives of Iran, Iraq and Indonesia had expressed reservations during talks that continued for 11 hours about their level of participation in what would be the group's first supply-limiting deal since 2008.

Brent oil futures were trading slightly up at around $49.2 per barrel at 2010 GMT, having lost most of their earlier gains of around $1 a barrel.

In September, the Organization of the Petroleum Exporting Countries agreed to reduce production to between 32.5 million and 33.0 million bpd - an effort to prop up prices - from OPEC's own latest production estimates of 33.64 million bpd.

OPEC's deal faces potential setbacks from Iraq's call for it to be exempt and from Iran, which wants to increase supply because its output has been hit by sanctions.

Iraq's foreign minister said on Tuesday in Budapest that OPEC should allow Iraq to continue raising output with no restrictions.


Iran and Iraq raised certain conditions for participating in the deal, according to sources, who were not allowed to speak on the record because the experts were meeting behind closed doors.

Sources said Saudi Arabia and its Gulf allies have signaled they were prepared to cut close to 1 million bpd of their output.

The Algerian proposal would see all member countries, except Nigeria and Libya, cutting 4-4.5 percent from OPEC's estimates of their October production with the aim of reaching a total output target of 32.5 million bpd, OPEC sources have said.

That would mean Saudi Arabia alone could cut up to 500,000 bpd, sources said.

OPEC's own estimates, based on what it calls "secondary sources", are usually lower than countries' direct submissions to the organization.

Iraq was asked to cut about 200,000 bpd. Baghdad is also still debating whether it should cut from the levels of OPEC's estimates or its own, higher, production figures.

"Eighty-five percent of proposed OPEC cuts are from Gulf countries but Iran is still not in favor," one source said.

Non-OPEC producer Russia was also still not agreeing to cut production but favoring a freeze, a senior OPEC delegate said.

"This will make it difficult for OPEC alone to rebalance the market and bring prices up," the source said.

Attached Files
Back to Top

Unconventional wisdom, WoodMac

How diverse can so-called Diversified Independents* remain? More capital is being allocated to tight oil, increasing their weighting to this resource hotspot. We use our benchmarking by investment, financials, value, production and reserves to understand the importance of tight oil in the next phase of portfolio development for this peer group.

Get our exclusive benchmarking analysis — companies included: Anadarko, Apache, ConocoPhillips, Hess, Marathon, Murphy Oil, Noble Energy, Occidental Petroleum and Repsol.

Outlook for
Diversified Independents:
Back to Top

Singapore's SGX, Japan's TOCOM to jointly develop Asian LNG market

Singapore Exchange (SGX) and Japan's Tokyo Commodity Exchange (TOCOM) said on Tuesday they have signed a memorandum of understanding to jointly develop Asia's liquefied natural gas (LNG) market, as well as electricity futures.

As part of the accord, the exchanges plan to explore opportunities like co-listing LNG derivatives, as well as synergies between the pair's market distribution networks.

SGX, which listed Asia's first electricity futures in 2015, will also share its experience with its Japanese counterpart, Loh Boon Chye, SGX's Chief Executive Officer, said in a statement.

"We also look forward to drawing on SGX's experience in electricity futures, as a liquid electricity market is closely linked to the development of the LNG market," said Takamichi Hamada, President and Chief Executive Officer of TOCOM.

SGX began pricing LNG in October 2015 when it launched its Singapore Sling index, assessing cargoes on a free-on-board Singapore basis. In September this year it launched a second index, the North Asia Sling.

The latter index, which will price the super-cooled fuel for the Japanese, South Korean, Taiwanese and Chinese markets, was seen by market participants as a signal that the market continues to take pricing signals from traditional buyers in North Asia.

Singapore, already Asia's main trading location for oil and refined fuel products, and Japan, the world's biggest consumer of LNG, had previously been in competition to establish Asia's main LNG hub.

The city-state of Singapore has so far been seen to lack a big enough consumer base to warrant a real trading hub, although investors and market participants appreciate Singapore's well established trading regulations, as well as the fact that English is its operating language.

On the other hand, Japan's status as the world's biggest consumer was seen by LNG producers as creating a market that was too importer-biased.

With the two now cooperating, these concerns may be addressed, making it harder for other aspirant trading hubs - including Seoul and Shanghai - to succeed.
Back to Top

Uganda names Sinopec among firms interested in refinery

Oil firms including China's Sinopec have expressed an interest in developing Uganda's planned oil refinery and an investor for the project will be selected by February 2017, a top government official said on Tuesday.

The East African country, which discovered oil fields in 2006 but has yet to start production, began trying to secure a private investor for the project nearly two years ago, but a previous tendering process collapsed earlier this year.

Energy and Mineral Development Minister Irene Muloni told an oil conference in Kampala that some new firms had expressed interest in the project and that fresh talks were underway.

"There are a number of companies that have expressed interest in joining us in the development of this refinery," Muloni said, adding interested parties included China's China Petroleum & Chemical Corp (Sinopec).

"We hope by February next year we should have identified a lead investor," she said.

Ugandan oil fields were found in the Albertine Rift Basin along its border with the Democratic Republic of Congo, but wrangling over taxes and the viability of the refinery have been blamed for delaying production, which is now projected for 2020.

Uganda said it was negotiating with Russia's RT Global Resources on a final agreement in 2015, but the talks broke down this year. Subsequent negotiations with a consortium led by South Korea's SK Engineering also collapsed.

Kampala estimates crude resources at 6.5 billion barrels, of which 1.4 to 1.7 billion barrels is considered recoverable.

This year, Uganda agreed with Tanzania to develop a pipeline to help export its crude, snubbing Kenya which wanted to host the export route via its newly-discovered oil fields.

Muloni said France's Total, one of the three explorers operating in the country alongside China's Cnooc and Britain's Tullow Oil, had indicated it would take up a 10 percent stake in the refinery project.

Kenya and Tanzania have also committed to taking up stakes of 2.5 percent and 8 percent respectively, Muloni said.
Back to Top

Record ME oil loadings

Middle East OPEC members (Iran, Iraq, Kuwait, Qatar, Saudi, UAE) had record crude oil export loadings last week


Attached Files
Back to Top

USGC distillate exports to Europe at 1 mil mt in Nov to date

A total of about 1 million mt of US Gulf Coast distillates could land in Europe and North Africa in November, according to an estimate based on Platts trade flow software cFlow.

S&P Global Platts calculates cargo volumes based on the size of each ship and standard diesel export sizes from the US to Europe.

In total, 25 vessels were spotted on the US Gulf Coast-Europe route, including eight heading towards the Mediterranean. Of the 17 ships sailing towards Northwest Europe, nine are heading towards the Amsterdam-Rotterdam-Antwerp hub.

Some cargoes originally expected to discharge in Europe diverted over the course of last week, resulting in a lower arbitrage volumes week on week. This notably included the Medium Range tanker Turquoise, originally headed for Milford Haven in the UK and now en route for Brazil.

Trading sources said that on the back of healthy demand, Latin America was competing with Europe to attract US barrels, even though arbitrage economics to ship distillate across the Atlantic remain poor.

In October, about 1.16 million mt of distillates were exported from the US Gulf Coast to Europe.
Back to Top

Oil Speculation Rule Gets Final CFTC Push Before Trump Takeover

Timothy Massad, the top U.S. derivatives regulator, is trying to push ahead before President-elect Donald Trump takes office with controversial rules that clamp down on traders’ ability to speculate in oil and other commodities, according to people familiar with the matter.

Massad recently gave his latest plan that caps the number of contracts a trader can have to the Commodity Futures Trading Commission’s other two members, the people said. That move raises the prospect that the chairman is trying to schedule a vote before the end of President Barack Obama’s term. Consumer advocates and Democrats have pushed for years for the so-called position limits as a way to reduce excessive speculation that they blame for driving up commodity prices.

The new draft takes into account some industry demands, giving certain traders more leeway to speculate than originally proposed, said one person, who asked not to be named since the plan hasn’t been made public. The version by Massad, who has said repeatedly even prior to the election that he wanted to get the regulation done, may still draw a fight though from exchanges, banks and Republicans who have railed against previous iterations of the rule.

Commissioner J. Christopher Giancarlo, the panel’s only Republican who’s likely to become acting chairman in January, has been a consistent critic of the limits. Industry opponents are already lobbying lawmakers and CFTC officials to try to thwart the effort, according to people familiar with the meetings.

A spokesman for the CFTC declined to comment.

“Deeply Controversial”

“The position limits rulemaking remains a deeply controversial proposal,” Representative Mike Conaway, a Texas Republican who chairs the House’s Agriculture Committee which oversees the CFTC, said in a letter on Friday to Massad urging him not to move ahead with his efforts. “The final supplement the commission proposed remains far short of a workable rule.”

The surprise election of Trump now makes it more likely that Massad, an Obama nominee who said before the election that he planned to stay on the job until his term ended in April, will step down sooner. While Massad hasn’t yet scheduled a vote on the rule, circulating it through commissioners’ offices is a step toward finalization. The measure would require majority approval by the three-person panel.

The effort could also all be for naught if the next Congress decides to review the regulation and override it, which they could do before it could be implemented next year.

“He took too long,” said Tyson Slocum, energy program director at advocacy group Public Citizen, which has urged for the limits to be put in place. “Having a hard, federally-enforced limit takes a lot of autonomy away from the exchanges.”

Rule Rejected

The rule that the CFTC proposed in 2013 set limits in 28 commodities for derivatives traded on exchanges such as those owned by CME Group Inc. and Intercontinental Exchange Inc., and in the swaps market. That version came after a federal judge in 2012 rejected the agency’s previous final rule in a case filed by the International Swaps and Derivatives Association and Securities Industry and Financial Markets Association.

While the surging gas prices that prompted Congress to include position limits in the 2010 Dodd-Frank Act have subsided, some lawmakers still want to see the rule finished. Senator Debbie Stabenow, the ranking Democrat on the Senate Agriculture Committee, said in an e-mailed statement on Friday that she supports Massad’s plan to complete the rule.

“Position limits are an important tool to ensure Wall Street speculation does not lead to high energy costs for families at home or at the pump,” she said.
Back to Top

Venezuela's PDVSA says made bond payments despite delay talk

Venezuela's state oil company PDVSA said on Monday it had made bond coupon payments due this month on its 2021, 2024 and 2035 bonds despite a JPMorgan report of delays.

"The information about a PDVSA default spread by the enemies of the fatherland is totally false," PDVSA president and Oil Minister Eulogio Del Pino said on Twitter.

Earlier, JPMorgan analysts said PDVSA had delayed $404 million in payments though they expected the company to make the missing disbursements within a 30-day grace period.

"This highlights the cash difficulties and mismanagement of PDVSA with regards to its liabilities," the analysts wrote.

But PDVSA, in a statement, said it had paid "punctually" its obligations due this month for 2021, 2024 and 2026 papers, and was also "in the process of executing" interest payments for the 2035 bond.

"In this way, PDVSA honors its commitment ... ratifying the financial solidity of Venezuelans' main industry," it said.

The JPMorgan report had noted that PDVSA did make a $135 million coupon payment on its 2026 bond, citing information provided by paying agent Citi and settlement group Clearstream.

Citi did not immediately respond to request for comment.

Prior to PDVSA's response, Torino Capital had said the reported delay appeared to be "a technical mistake" rather than an indication of default.

It noted that payments were being made "through accounts not conventionally used for these purposes" and that some PDVSA management changes had occurred, both of which could have contributed to a delay.

"Our tentative conclusion is thus that the delay in payments likely reflects administrative and technical issues of the type that the 30-day grace period is designed to handle," wrote its chief economist Francisco Rodriguez in a note to clients.

"We do not believe it reflects a change in authorities' willingness to service its international obligations."

Venezuela bonds trade at distressed levels as a result of investor concern that a steep recession and spiraling inflation will leave it without resources to meet heavy commitments.

The country's sovereign bonds on average pay 26 percentage points more than comparable U.S. Treasury Notes, according to JPMorgan's Global Diversified Emerging Markets Bond Index.

Socialist President Nicolas Maduro says the country will meet all its debt commitments and calls default talk a right-wing conspiracy against him.

He has also accused global banks of leading a "financial blockade" that has left Venezuela with few financing options amid the oil market downturn.

Attached Files
Back to Top

Tesoro Logistics to buy North Dakota energy assets for $700 mln

Tesoro Logistics LP said on Monday it would buy crude oil, natural gas and other gathering systems in North Dakota from a consortium for about $700 million.

Tesoro Logistics also said it would buy terminal and storage assets located in Martinez, California from a subsidiary of oil refiner Tesoro Corp for about $400 million.

Tesoro Corp owns about 34 percent of Tesoro Logistics.

The consortium selling the North Dakota assets include Whiting Oil and Gas Corp, GBK Investments LLC and WBI Energy Midstream LLC, Tesoro Logistics said.
Back to Top

Kashagan oil field starts commercial output

The Kashagan oil field has started commercial output, Kazakhstan's energy minister said on Monday, marking a milestone for $55 billion project which is more than a decade behind its original production plan.

The offshore field in the Caspian Sea has produced about 0.5 million tonnes (3.8 million barrels) of oil since test pumping began on Sept. 28, Kanat Bozumbayev told parliament, and daily output has exceeded 75,000 barrels since Nov. 1.

Kashagan has recoverable oil reserves estimated at 9-13 billion barrels and is one of the world's biggest discoveries in the last 40 years, according to the Kazhak oil ministry.

The former Soviet republic expects Kashagan to produce up to 1.1 million tonnes of oil this year and 4.0-8.0 million tonnes next year, helping to offset declines at mature fields in the country.

Discovered in 2000, the field was named after a 19th century Kazakh poet, Kashagan Kurzhimanuly. With its production difficulties, the field has lived up to its name which means "restive, uncontrollable."

Production, originally due to begin in 2005, did not start until 2013 and then was halted shortly afterwards due to technical problems with gas pipelines.

Costs have also ballooned. The initial estimate was $57 billion for the project's 40-year lifetime, but it has already cost about $55 billion to develop, according to analysts' estimates.

The NCOC consortium developing Kashagan comprises China National Petroleum Corp, Exxon Mobil, Eni , Royal Dutch Shell, Total, Inpex and KazMunaiGas.

The field is set to ramp up output further during 2017 thanks to reinjection of sour gas into its reservoir, which will increase production to more than 150,000 bpd in 2017 and 230,000 bpd in 2018. Kazakhstan's total production this year is forecast at about 1.6 million barrels per day.

Kazakhstan, whose economy is dominated by oil, is keen to push up production, but further expansion may be delayed if oil prices remain low, some analysts have said.

Attached Files
Back to Top

India gets muted response to small discovered field auction

India's first auction of small discovered fields drew a tepid response with local firms dominating the auction for operating assets estimated to hold 625 million barrels of oil and oil equivalent gas.

India has received 134 bids from 42 companies, including five foreign bidders, for 34 contract areas, according to a government statement issued on Monday. No bids were received for 12 areas.

India, the world's third biggest oil consumer, conducted foreign roadshows and eased rules to lure foreign investment and tap the nation's vast energy resources. India launched the auction after a gap of six years.

The blocks were offered in May under a revenue-sharing model with eased tax rules, offering pricing and marketing freedom to the operators.

Oil and Natural Gas Corp and Oil India Ltd gave up these blocks as uneconomical due to size, geography and low state-set energy prices.

"The bid round took place in a challenging global market environment when oil and gas prices have been volatile and investment in the exploration and production sector has seen substantial decline," the statement added.

However, the oil minister Dharmendra Pradhan tweeted: "This response despite low oil prices is testimony of India emerging as an attractive investment destination."
Back to Top

Elliott asks Marathon Petroleum to consider breaking up company

Hedge fund Elliott Management, which owns about 4 percent of Marathon Petroleum Corp (MPC.N), urged the refiner to conduct a strategic review and consider splitting into three businesses.

Marathon should consider separating its chain of gasoline and convenience stores or break into three businesses, focused on retailing, refining and midstream operations that hold pipeline and storage assets, Elliott said on Monday.

Marathon shares were up 4 percent at $45.02 in early trading.

The activist investor, which also called the company "severely undervalued", said Marathon Petroleum could also look at transferring assets, which could go into a master limited partnership, to MPLX LP.

"Marathon's undervaluation is most glaring when the value of its three businesses is summed together," Quentin Koffey, a portfolio manager at Elliott, said in a letter to Marathon's board.

Elliott said its recommendations could help the company generate $14 billion–$19 billion for shareholders and boost the stock by more than 80 percent.

Marathon said last month it would transfer some assets into MPLX, the master limited partnership that it created in 2012.

The move came after activist hedge fund Jana Partners, which raised its stake in Marathon Petroleum to about 0.8 percent last week, pushed the company to separate its pipeline and other midstream assets.

Jana's managing partner, Barry Rosenstein, said in October he supported the shift of assets to MPLX and the possible changes to Marathon's financial reporting that would result.

Up to Friday's close, Marathon Petroleum shares had fallen about 16.5 percent this year.
Back to Top

ConocoPhillips selling Kenai LNG export plant

Houston-based energy giant and LNG player ConocoPhillips said it is in the initial stages of marketing the liquefied natural gas export facility on the Kenai Peninsula in Alaska.

According to the company’s statement, the efforts to market the plant are consistent with the company’s efforts to regularly review its assets to ensure it is optimizing its portfolio.

“Our current focus is on our North Slope operations,” the company said in a statement.

ConocoPhillips believes the facility is a strategic asset offering “good opportunities for the right buyer.”

The export plant operated for six months during 2015, liquefying 20 Bcf of natural gas and delivering six LNG cargoes.

“Due to market conditions, ConocoPhillips did not conduct an export program in 2016,” the company’s statement reads, adding that the plant is operational and ready to resume exports.

The facility was the world’s largest plant when it started operations in 1969, and for 47 years has been the only export plant in North America.

Since February, the Sabine Pass LNG plant in Louisana, operated by Cheniere, began exporting liquefied natural gas produced from U.S. shale gas from its Train 1.

The Kenai LNG plant complex includes docking and loading facilities to transport LNG, and has shipped over 1,300 cargoes primarily to Japan.
Back to Top

Why Saudi Arabia’s Oil Giant Aims to Be Big in Chemicals, Too

Saudi Arabian Oil Co. has been the world’s single largest crude producer for decades. It wants to be a lot more than that now, as a new petrochemical complex shows.

Aramco, as it is commonly known, until recently focused on pumping great quantities of oil and, like the Standard Oil companies of John D. Rockefeller, processing it through its refineries. Aramco now aims to vastly expand its petrochemical operations, turning itself into a modern integrated energy company along the lines of Exxon MobilCorp.

Thousands of miles away, near the Saudi Arabian city of Al Jubail on the Persian Gulf, an army of workers is finishing the $20 billion Sadara petrochemical complex, an Aramco joint venture with Dow Chemical Co. Sadara will use ethane refined by Aramco nearby to make a petrochemical called butadiene to ship world-wide to facilities, likely including its Dutch plant.

Aramco's Shifting Flow

Saudi Arabian Oil Co., the world's largest crude producer for decades, is expanding into petrochemicals to become an integrated energy company.

“Aramco’s capabilities will be fully unleashed,” Saudi oil minister and Aramco Chairman Khalid al-Falih said in a briefing with several reporters this year. “The company will be able to go global in multiple ways.”

Aramco declined to answer detailed questions, referring instead to speeches such as one by Aramco Chief Executive Amin Nasser in September. He signaled why the company was interested in a growing petrochemical industry. He said the Gulf region was home to only 2.5% of global petrochemical revenue and less than 1% of the industry’s jobs.

“Considering the Gulf’s endowment of oil and gas, as well as our geographic proximity to major markets in Europe and Asia,” he said, “both those figures should be much, much higher.”

New jobs, revenue

Aramco’s moves position it for a future when crude demand may peak and when owning reserves won’t be as attractive. Even if electric-vehicle adoption and alternative-fuel use soar, cutting global thirst for fuel, demand for petrochemicals is likely to remain strong. By developing more chemical manufacturing of its own, Aramco could attract jobs and revenue to the kingdom, which recently issued $17.5 billion in bonds to shore up its finances.

Aramco’s reinvention as a public company invested in producing gasoline, diesel and specialty chemicals could mean abdicating Saudi Arabia’s traditional role as de facto head of the Organization of the Petroleum Exporting Countries. Historically, the kingdom, through Aramco, has opened the spigot when prices rise too high and restricted supply when they fall too far. To do this, Aramco has kept unused spare production capacity, which shareholders would frown on, say some oil-industry consultants.

It isn’t clear how much of the change will come to pass at Aramco or in the Saudi economy. The government relies on oil for the vast majority of its revenue and has for decades talked about needing to diversify, without much change.

Richard Mallinson at Energy Aspects, a London global-energy-market consultant, says he thinks the diversification plan “will fall a long way short of the lofty ambitions” and “is just too much of a jump from where they are today.”

The strategy of directly owning more petrochemical plants to create outlets for crude and refined products has long been pursued by large firms such as Exxon Mobil and Royal Dutch Shell PLC. “Aramco is the powerhouse in the area of oil. They want to get bigger in chemistry,” says Matthias Zachert, chairman of Aramco’s German joint-venture partner Lanxess AG. “But you don’t create a leading chemical company overnight.”

Several advisers involved in the IPO planning say the transformation will be so complex it could go beyond 2018. The 5% stake targeted for the IPO is so large—Aramco has been valued at $2 trillion to $3 trillion—that finding a deep enough pool of investors may require Aramco to float the stock on several stock exchanges and to face multiple sets financial-disclosure rules, they say. It is a special challenge for bankers, they say, because the company and the kingdom are so deeply intertwined in ways that aren’t public.

A prince’s role

The company has said it will begin disclosing financial statements in 2017. Its operations are shrouded in secrecy and wouldn't meet governance requirements of most exchanges, such as board diversity. Its board includes no women and few outsiders.

King Salman bin Abdulaziz has already shaken up the kingdom’s ruling elite by empowering his son, Deputy Crown Prince Mohammed Bin Salman. Prince Mohammed is moving ahead with a plan drawn up by McKinsey & Co. consultants to wean the country off its oil dependence. In May, he proposed the IPO and the transfer of proceeds to a sovereign-wealth fund that will invest in other sectors.

Deputy Crown Prince Mohammed Bin Salman is moving ahead with a plan to wean Saudi Arabia off its oil dependence. PHOTO: CHARLES PLATIAU/REUTERS

By taking on the transformation, the 31-year-old Prince Mohammed is challenging the established order in ways that could prove difficult to implement, say people close to the current establishment. Even giving shareholders partial control over Saudi Arabia’s oil reserves would be tough because taking control of those assets was a defining moment for the kingdom.

The prince is working with Mr. Falih, Aramco’s chairman, and a tight circle of advisers to map out the future of Aramco and the Saudi economy, say people familiar with the discussions. They are making many decisions surrounding Aramco with little input from the company’s bureaucracy, these people say.

Members of the company’s board learned of the IPO plans from media reports, rather than from Mr. Falih or Mr. Nasser, Aramco’s CEO, one Aramco official says. “In some occasions even the chief executive is not fully aware of the latest update,” the official says of Mr. Nasser. Aramco didn't make Mr. Nasser, Mr. Falih or other executives available for interviews. A spokesman for the prince declined to comment.

Aramco owns directly or through joint ventures plants capable of processing 5.4 million barrels a day in markets that are its biggest crude customers: the U.S., South Korea, Japan, China and Saudi Arabia.

Making Aramco’s integrated model more lucrative, its operating costs for extracting oil remain among the world’s lowest—perhaps $6 a barrel, compared with an average of $10 in Texas’ Permian Basin, according to oil consultant Wood Mackenzie.

“The idea of control of the end market is very important to them,” says Anas Alhajji, an independent energy economist in Dallas. “This is their outlet to the market.”

Aramco presented an exhibit at a September conference in Bahrain for the refining and petrochemical industries, fields in which the Saudi company is expanding. PHOTO:HAMAD I MOHAMMED/REUTERS

That philosophy led Aramco earlier this year to break up a strategic partnership: Motiva, its two-decade-old joint venture with Shell. A key asset was a Port Arthur, Texas, refinery, North America’s largest.

Motiva had begun buying American crude oil, which was competing with Saudi oil, say people familiar with the Motiva relationship.

Shell spokesman Ray Fisher says ending such a long venture with numerous assets and liabilities is “a very complex process, involving various adjustments and changes along the way before final agreements can be reached.”

The breakup will let Aramco cement its U.S. foothold. From Port Arthur, it could ship gasoline, jet fuel and diesel to military bases in Virginia, airports in the Washington, D.C., area and service stations in New York.

The split will free Aramco from certain limits imposed by the Motiva deal, allowing it to expand, for instance, on the West Coast. The Saudi company has looked at buying a large refinery along the Gulf Coast or a stake in a refinery, say people familiar with the company.

Aramco is negotiating with the Malaysian national oil company, Petronas, to work together on a $21 billion refining-and-petrochemicals project near Singapore, The Wall Street Journal reported in October. The project would operate as a joint venture and serve as another major Asian beachhead for Saudi oil.

Aramco owns a stake in the giant Fujian Refining & Petrochemical complex, supplying oil that is turned into gasoline and plastics for China.

Aramco’s roots

Aramco has its roots in Texaco and Standard Oil of California, which formed a partnership that found enormous oil deposits on the Arabian Peninsula. In the early 1970s, the kingdom bought a stake in Aramco and by the 1980s had acquired it all.

In 1991, Aramco began looking overseas when it bought a stake in a South Korean refiner. In terms that Aramco would repeat, it agreed to supply the refinery with crude for two decades. Over the years, it bought and built more refineries.

Still, Aramco remained a company almost entirely focused on producing crude. The first inklings of a new strategy emerged in 2011 when Aramco and Dow Chemical agreed to create Sadara, among the world’s largest petrochemical complexes.

After signing the deal, Mr. Falih, then Aramco’s CEO, explained his vision. Aramco, he said, will “become the world’s leading integrated energy company by the year 2020.”

Attached Files
Back to Top

Israel Gas Partners Close to $4 Billion Financing for Leviathan

The companies that own the rights to Israel’s largest natural gas pool are close to securing the $4 billion financing needed to develop the field, according to the chief executive officer of one of the partners.

"The Leviathan financing agreements are in the final stages of negotiations," Delek Drilling LP CEO Yossi Abu said in a Tel Aviv conference on Monday, referring to the Israeli gas reservoir.

With a large export contract already in hand, obtaining the funds is the next milestone for the gas explorers looking to tap the Leviathan pool, led by U.S.-based Noble Energy Inc. and billionaire Yitzchak Teshuva’s Delek Group Ltd. The partners signed a $10 billion deal with Natural Electric Power Co. of Jordan two months ago.

The companies have been in talks with major banks ever since clearing antitrust issues with Israel’s government earlier this year. Ratio Oil Exploration 1992 LP, which owns a 15 percent stake in Leviathan, has sold new debt and equity this year, raising about a third of its $600 million portion of the project.

The Leviathan partners will decide on a strategy to deploy the funds in December, Abu said.

The TA-Oil & Gas Index rose as much as 1.1 percent, before paring gains to 0.6 percent at 12:54 p.m. in Tel Aviv.
Back to Top

Rowan, Saudi Aramco create new offshore driller

Offshore driller Rowan Companies and the Saudi Arabian Oil Company (Saudi Aramco) have signed an agreement to create a 50/50 joint venture to own, operate, and manage offshore drilling rigs in Saudi Arabia.

According to the agreement signed through subsidiaries of the two companies, the new joint venture company will use Rowan’s business in Saudi Arabia as its base with a scope of operations covering Saudi Arabia’s existing and future offshore oil and gas fields. The new company is anticipated to start operations in the second quarter of 2017.

Tom Burke, President and Chief Executive Officer, stated, “Rowan has had a long and mutually beneficial relationship with Saudi Aramco and we welcome this opportunity to further strengthen our partnership and extend our commitment to the region.

“The new company will uniquely position Rowan to participate in the growing Saudi Arabian offshore drilling market, and provide Rowan with a compelling opportunity for a long-term partnership with the world’s leading oil and gas company, and create a long-term, profitable growth platform with firm rig commitments.”

At the beginning of operations of the new company, Rowan said it will contribute three of its jack-up drilling rigs and Saudi Aramco will contribute two of its jack-up drilling rigs. Rowan will contribute an additional two jack-up rigs as they complete their current Saudi Aramco contracts in late 2018.

The new company will also manage the operations of five Rowan jack-up rigs currently in Saudi Arabia, until their associated drilling contracts expire, which then may be released, leased by or contributed to the new company thereafter.

In addition, Rowan and Saudi Aramco have committed the new company to purchase future newbuild rigs that will be constructed in Saudi Arabia.
Back to Top

Petrobras ordered to stop sale of two offshore fields to Karoon

Australian energy company Karoon Gas has hit an obstacle in its efforts to buy stakes in two fields offshore Brazil from the state-owned oil giant Petrobras as the latter was ordered by the court to stop the sale process.

Petrobras revealed back in October this year it was in talks with the Australian company Karoon for the sale of its participation in the Baúna and Tartaruga Verde fields, located in Santos and Campos basins, respectively.

The potential transaction considered the sale of 100% of the stake in the Baúna field and 50% of the stake in the Tartaruga Verde field, where Petrobras would remain the field operator.

At the time, Petrobras noted that the transaction was subject to the negotiation of its terms and final conditions and to the approval by the responsible bodies at Petrobras and Karoon, as well as the approval by the competition supervisory body CADE (Administrative Council for Economic Protection) and the National Agency of Petroleum, Natural Gas and Biofuels- ANP.

Petrobras’ disposal of interest in these two fields was part of the company’s 2015-2016 Divestment Plan.

On Monday, Karoon informed the company has become aware that court proceedings have been initiated by José Hunaldo Nunes Santos against Petrobras and the Brazilian oil and gas regulator ANP.

According to the Australian company, the court proceedings contend that the sales process did not comply with relevant Brazilian regulatory requirements. As part of these proceedings, an interim injunction has been made which orders Petrobras and the ANP to cease the sale process at this time.

The interim injunction is not final and is subject to appeal proceedings which have now been initiated, Karoon stated.

The company also added it is currently investigating the court proceedings, including their possible effects on the timing of any acquisition of an interest in the Baúna and Tartaruga Verde fields by Karoon.
Back to Top

Oil Bets Are Biggest in 9 Years Amid OPEC, Trump Volatility

Money managers, producers and consumers made the biggest bets on West Texas Intermediate crude prices in nine years, amid signals more volatility is coming.

Global markets were roiled after Donald Trump’s election as U.S. president and as OPEC continued negotiations on a deal to cap output. The U.S. dollar climbed to the highest since January. A measure of oil volatility surged last week to a seven-month high, a sign that traders were anticipating bigger price swings.

Wagers on higher and lower prices held by speculators and hedgers reached 1.47 million contracts in the week ended Nov. 15, the most since 2007, U.S. Commodity Futures Trading Commission data show. Trading volume of calls giving investors the right to purchase WTI futures surged to a record that day. The CBOE Crude Oil Volatility Index reached the highest since April.

“There’s tension in the market, with both producers and consumers worried about what OPEC does or won’t do on Nov. 30,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “They want to be protected from surprising price moves.”  

OPEC Meeting

Investors are weighing the chances that the Organization of Petroleum Exporting Countries will complete a deal to cap output at its Nov. 30 meeting in Vienna. While Saudi Arabian Energy Minister Khalid Al-Falih told Al Arabiya television he’s optimistic a deal will be reached, only 7 of 20 analysts surveyed by Bloomberg last week expect the group to set output targets for its members.

OPEC agreed in September to cut their collective output to 32.5 million to 33 million barrels a day and has been trying to persuade other suppliers, notably Russia, to join the cuts. OPEC Secretary General Mohammed Barkindo said he’s confident the group can reduce record oil inventories and bring forward the rebalancing of the market.

“The Saudis are working hard to reach a deal,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “You don’t fight the Fed in the bond market and when it comes to oil you don’t fight the Saudis.”

The September agreement marked the end of OPEC’s two-year long experiment with pumping at will. Saudi Arabia led the group in the effort to grab market share and curb the development of more expensive reserves such as U.S. shale.

U.S. Production

While U.S. production has dropped from last year’s 44-year high, the decline is slowing. The Energy Information Administration this month raised its output forecast for 2017. Rigs targeting oil in the U.S. rose the most in 16 months last week, according to Baker Hughes Inc.

Producers and merchants increased short positions, or protection against lower WTI prices, to the highest level since March 2011. They added 66,613 bearish contracts over the past two weeks as prices retreated from last month’s peak at above $50 a barrel.

“The Saudis want higher prices but won’t sacrifice just to see a major competitor, U.S. shale, benefit,” said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts. “The Trump election changes things. In one day the U.S. shale business got better. The government will be more responsive to the industry.”

Money managers’ net-long position in WTI advanced for the first time since mid-October, climbing by 3,906 futures and options to 163,321. Shorts climbed 14 percent while longs rose 8.1 percent. WTI gained 1.8 percent to $45.81 a barrel in the report week. It rose 1.1 percent to $46.20 as of 12:27 p.m. in Singapore on Monday.

In fuel markets, net-bullish bets on gasoline decreased 35 percent to 25,796 contracts, as futures slipped 2.5 percent in the report week. Money managers were net-short 393 contracts of ultra low sulfur diesel, from net-long 7,791 the previous week. Futures advanced 0.2 percent.

“I suspect that when the OPEC meeting is over there will have been a lot more smoke than fire,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “If they don’t come up with a convincing agreement, they’ll be forced to revisit the issue before long.”
Back to Top

Iraq to make suggestions to facilitate OPEC supply cut agreement

OPEC logo is pictured ahead of an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers, Algeria September 28, 2016. 

Iraq's oil minister Jabar Ali al-Luaibi will make suggestions at a meeting of OPEC oil ministers at the end of the month to implement an agreement to restrain crude supply in order to push up prices, according to a statement from his ministry on Monday.

The statement didn't indicate what these suggestions are but hinted that Iraq would not be contributing to any output cut.

Iraq's "legitimate demands should not constitute an obstacle to a new agreement to freeze output," Luaibi said in the statement. Iraq "will offer new thoughts and suggestions to bring the members closer to an agreement."

Luaibi last month said Iraq should be exempted from OPEC crude output restrictions as it needs the income to fight the war on Islamic State, the ultra-hardline group.

Iran, Libya and Nigeria, whose output has been hit by sanctions or conflict, have also asked to be exempted.

The Organization of the Petroleum Exporting Countries agreed in Algiers on Sept. 28 to reduce production, its first output cut since 2008, but left aside the delicate task of how much each of the 14 members will produce.
Back to Top

Rig count jumps by 20; largest increase in two years

The number of oil and gas rigs in U.S. fields boomed this week, rising by 20 — the largest jump since the peak of the shale oil boom two years ago.

U.S. oil drillers collectively sent 19 more rigs into the patch, the Houston oilfield services company Baker Hughes reported Friday. Gas drillers added one rig.

The rise was driven largely by drillers in West Texas’ Permian Basin, which added 11 rigs.

The total rig count rose to 588, up from a low of 404 in May. U.S. oil companies haven’t added this many rigs since May of 2014, when oil was still bringing $100 a barrel.

The count, however, still lags the same period last year, when 757 drilling rigs were operating in U.S. oil and gas fields.

The number of active oil rigs jumped to 471 this week. Gas rigs ticked up to 116. Even the number of offshore rigs rose, by 3 to 23, down 7 year over year.

Total rig counts lifted by eight in Texas, four in Louisiana, four in Oklahoma, three in Ohio and two in Colorado. They fell by one in North Dakota, Pennsylvania and Wyoming.

Drilling activity has followed the modest rebound in prices, from February’s low of about $26 a barrel to more than $50 in recent weeks.

Prices stabilized this week at about $45 a barrel.

Attached Files
Back to Top

Iran, Iraq Signal Deal Hope Before Vienna Meeting

 Oil extended gains as Iran signaled optimism OPEC will agree to a supply-cut deal and Iraq said it will offer new proposals to help bolster the group’s unity before members meet next week in Vienna.

Iranian Oil Minister Bijan Namdar Zanganeh said it’s “highly probable” members will reach a consensus, according to comments published by the country’s Shana news service. Iraq will offer three new proposals for the output cut deal this week that are consistent with the group’s policies, The Wall Street Journal reported, citing Iraq Oil Minister Jabbar al-Luaibi.

Oil has rebounded since hitting the lowest in almost two months last week as members of the Organization of Petroleum Exporting Countries began making renewed diplomatic efforts before their meeting Nov. 30 to finalize the output deal informally agreed to in September. The group is seeking to trim output for the first time in eight years, a plan that has been complicated by Iran’s commitment to boost production and Iraq’s request for an exemption to help fund its war with Islamic militants.

“It’s pretty clear that some people are convinced in the market that this could lead to production cuts,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone. “The potential for breaches of any announced agreement is very high, but it is a solid move and it is coming on pretty reasonable volumes.”

OPEC Optimism

It’s likely that OPEC producers will honor the output cut agreement and will try to put it into action, Iran’s Zanganeh said after meeting with OPEC’s secretary-general, Mohammed Barkindo, in Tehran on Saturday. Iraq’s new proposals “are based on other variables and will make it easier for OPEC members to make a decision,” Oil Minister al-Luaibi was cited as saying in an interview with The Wall Street Journal.
Back to Top

Russia's Putin sees no difficulties for Moscow to freeze oil output

Russia is ready to freeze its oil output - among the world's highest - at current level as there would be no problems for Moscow to do so, Russian President Vladimir Putin said on Sunday.

OPEC nations are due to agree a world oil freeze pact with non-OPEC countries on Nov. 30.

"We will do everything that our partners from OPEC are expecting. To freeze crude production is not an issue for us," Putin told a news conference in Lima after the APEC summit.

He added that Russia's oil firms are ready to do so.

Putin also said he has seen a "high probability" that the deal aiming to prop up the markets and boost prices would be reached in an OPEC meeting next week.
Back to Top

Iraq's exports from Kirkuk fields drop on power outages - official

Iraq's exports from the Kirkuk oil field through an export pipeline to Turkey have dropped because of power outages, an official at state-run North Oil Co. said on Saturday.

Export are currently running at 100,000 barrels per day (bpd), compared with 133,000 bpd in October, the official said.

The pipeline delivers crude to Turkish terminal of Ceyhan, on the Mediterranean. It also carries crude produced in fields developed by the Kurdistan Regional Government (KRG), an autonomous region in north Iraq.

OPEC's second-largest producer after Saudi Arabia, Iraq exports most of its oil through the southern ports, on the Gulf.

Total exports for September, including the KRG, were 3.871 million bpd, of which 3.276 million bpd were shipped from the southern ports, according to the last figures published by the nation's state-oil marketer SOMO, in October.

North Oil resumed exports through the Kurdish-controlled pipeline in August, after a five-month halt caused by a dispute on oil revenue sharing between Baghdad and the KRG.
Back to Top

Carl Ichan Sells Rest of his Chesapeake Stock, Good Riddance

Now that the damage has been done, evil corporate raider Carl Ichan has sold off the rest of his Chesapeake Energy stock–completely exiting the company.

The one solace we have is that Ichan didn’t make any money from his dalliance with the company. He lost something like over $1 billion, according to our best guess.

We’ve chronicled the rise and fall of Ichan, and of Chesapeake, over the past four years. The purpose of investing, for people like Ichan, is to seize control of the company, fire a bunch of people, sell off a bunch of assets, which leads to a rise in the stock price. Said corporate raider then sells his shares and makes boatloads of money.

Except that didn’t happen with Ichan’s investment in Chesapeake…
Back to Top

Nigerian oil output to slump further as Forcados gets shut-in: market sources

Nigeria's hopes of ramping up its oil output this year have been diminished, as renewed attacks on oil infrastructure in the Niger Delta have shut-in production of popular export grade Forcados in the past week, market sources said Friday.

Nigerian oil output had recovered sharply in the past few months on the return of Qua Iboe, Forcados and Bonny Light as militant attacks were slowing down.

October output rose to around 1.84 million b/d, including condensate grade Akpo, according to S&P Global Platts estimates but with Forcados -- whose production ranged between 150,000-200,000 b/d the previous month -- now out, output for the rest of the year will again plummet.

Forcados output has been down since last week, after an oil spill caused by an attack on the Trans-Forcados pipeline impacted the transportation of the crude.

On November 2, the Trans-Forcados pipeline, which transports the popular export grade, was bombed, barely hours after Nigerian President Muhammadu Buhari met with senior Niger Delta leaders to end the militancy, outlining the fragility of a possible peace deal.

Sources told Platts that Forcados production was affected more than initially expected, and with no signs of a December and January loading program, exports of this grade were likely to be out until early next year.

"[The situation] in Forcados is not looking good at the moment -- [we're] trying to get some clarity," a trading source said.

Sources said that incident caused an oil spill which damaged the pipeline, and with exports of this grades also facing loading and operational delays, production has been suspended,

One source also said the oil spill came about from the explosion that occurred on the Trans-Forcados pipeline while engineers were trying to fix the facility previously attacked by militants.

The spill was hindering repair works and was seen as one of the reasons why market participants were doubtful that more loading programs would be issued.

A Shell spokeswoman declined to comment on the oil spill but confirmed that Forcados was still under force majeure.

Loadings of Forcados briefly resumed in early October for the first time in eight months but barely a month late the grade is again offline.

Loadings of Forcados were suspended in early-February after the 48-in export pipeline feeding into the Forcados oil terminal was bombed in February by the militant group Niger Delta Avengers.

Nigerian oil output plummeted to near 30-year lows of around 1.3 million-1.4 million b/d in May from 2.2 million b/d earlier this year as attacks on oil facilities in the Niger Delta rose at an alarming pace due to resurgent militancy.

Attached Files
Back to Top

Oil Wildcatters Flee African Deep Water to Weather Rout

Drillers burned by a two-year slump in crude prices are slowing exploration of deep-water prospects off the coast of Africa, undermining a key driver of growth on the continent.

In the 25 years since 1982, African oil output doubled to more than 10 million barrels a day. Now, with prices sitting below $50 a barrel, international drillers have cut their plans for capital expenditure in the next five years by $100 billion, according to a Nov. 2 report by Wood Mackenzie Ltd. The change could drop the region’s oil production 46 percent by 2030, the report said.

Hardest hit: Nigeria and Angola, countries that are already struggling economically and depend on oil for almost all their foreign income. To revive deep-water exploration on the continent, crude prices would have to rise to $60 to $70 a barrel, according to Keith Myers, managing director of the consulting firm Richmond Energy Partners.

“Africa suffered the most of any region in terms of the decline in frontier exploration," Myers said in an e-mail. Deep-water exploration was “the driver for production growth in the region.”

In September, the number of offshore oil and gas rigs in Africa fell to just nine, down from a high of 48 in November 2014, according to Baker Hughes Inc. data. That’s the lowest level in more than a decade. Overall, the number of rigs on the continent dropped to a five-year low of 77.

“We’re being more disciplined,” said Oliver Quinn, director of Africa and global new ventures at Ophir Energy Plc, speaking at the Africa Oil Week conference in Cape Town this month. The London-based explorer has plans to drill three to five frontier wells over the next two years, split between Africa and Asia, according to Quinn.

“We don’t want to go out and spend capital that we can’t replenish to do exploration,” he said.

Nigeria, the continent’s biggest oil producer and most populous nation, is dependent on the fuel for more than 90 percent of its foreign income. The country, facing ongoing violence in its crude-producing Niger Delta region, saw inflation accelerate to an 11-year high in October as revenues from oil tumbled and import costs for consumer goods and machinery rose.

Angola, which depends on oil for almost all its exports, said in July it was generating “barely enough” revenue to pay off its debt.

Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA are among the biggest players in Nigeria, where deep-water fields have so far escaped the militant attacks that curbed output in the Niger Delta. The biggest deep-water producers in Angola include BP Plc, Exxon and Chevron Corp., which canceled an ultra-deep water semi-submersible rig with Maersk Drilling Services A/s at the end of March.

Shallower Water

Tullow Oil Plc has turned away from deep water, even as the Africa-focused explorer prepares to renew its hunt for new discoveries on the continent. The company is more focused on "shallower water" prospects, said Tullow Chief Executive Officer Aidan Heavey.

In relation to exploration, “a dollar spent today is probably the same as $3 spent a couple of years ago,” Heavey said in an interview in Cape Town.

Over the past decade, sub-Saharan Africa accounted for 42 percent of global deep water frontier drilling, according to Richmond Energy Partners. That kind of exploration is key to sustaining output in the longer term, Myers said. With the lower price of crude, however, global companies are increasingly looking for easier access to their product.

Brent, the global benchmark, is down 41 percent in the past two years. The contract for January settlement was little changed at $46.55 a barrel on the London-based ICE Futures Europe exchange at 11:02 a.m. on Friday.

As an example, Houston-based Noble Energy Inc., which has assets off the coast of Equatorial Guinea, this year will focus two-thirds of its $1.5 billion in spending on U.S. shale. Companies have to “justify investment in new deep water projects,” said Susan Cunningham, executive vice president of exploration and new ventures at Noble, in an interview in Cape Town this month.

“We’re not going to be doing much in deep water” for the next two years, she said.

Battered by falling oil prices, some African governments have been slow to trim the share of profits they take from deep-water projects, deterring investment.

“Deep water can still work but you need to make sure that the fiscal terms in the country you are operating will generate a return in the current commodity price environment,” said Geoff Callow, investor relations manager at Ophir Energy. “Some governments are adjusting terms and they are seeing investment and others are being slower to adjust and are consequently finding it harder to attract investment.”

Attached Files
Back to Top

Venezuela taps China credit line for $2.2 billion oil output push

Venezuela said it would tap $2.2 billion from a Chinese credit line to boost oil output at joint ventures with China National Petroleum Corp, in a boost for the South American country's struggling oil industry and a show of unity with a key ally.

CNPC, China's largest state energy group, and Venezuela's state oil company PDVSA [PDVSA.UL] will seek to boost production in the OPEC country by around 277,000 barrels per day, President Nicolas Maduro said in a televised address.

Funds will come from a credit line of up to $9 billion with China, Maduro said after a meeting with CNPC in Caracas on Thursday.

The agreement will be a boon to Venezuela's oil industry, which has seen its production tumble this year amid a steep recession. It is also welcome public backing for Maduro from a strategic ally amid a political and economic crisis.

"Many thanks for all the support you have given Venezuela in 2014, 2015, and especially 2016," Maduro said in a televised speech. "Our older sister China has not left Venezuela alone in moments of difficulty."

Venezuela has borrowed over $50 billion from China under a financing arrangement created by late socialist leader Hugo Chavez in 2007, in which a portion of its crude and fuel sales to the world's second-biggest economy are used to pay down loans.

The increased oil output at the joint ventures would boost shipments to China to over 800,000 bpd, the president said.

Venezuela is undergoing a brutal recession due to a collapsing state-led economy, made worse by the tumble in oil prices. The rout in oil markets has also left Maduro's government struggling to meet the original terms of the oil-for-loans agreement, which require that PDVSA set aside more barrels for debt services when prices fall.

CNPC has minority stakes in oil joint ventures with Caracas-based PDVSA, which oversees the world's biggest oil reserves but has seen output fall amid the country's cash crunch, low investment, and debts with service providers.

Output increases are planned at the Petrourica, Petrozumano, and Sinovensa joint ventures, Maduro said. A deal was also reached to rehabilitate 500 light crude wells with a potential of some 42,800 bpd.

Oil Minister and PDVSA president Eulogio Del Pino said the projects would be rolled out in coming months.

It was not immediately clear if China would free up more oil funds via the credit line.
Back to Top

Alternative Energy

Economics to Keep Wind and Solar Energy Thriving With Trump

On the plains of West Texas, new wind farms can be built for just $22 a megawatt-hour. In the Arizona and Nevada deserts, solar projects are less than $40 a megawatt-hour. Compare those figures with the U.S. average lifetime cost of $52 for natural gas plants and about $65 for coal.

Environmental rules and government subsidies are no longer the key drivers for clean power. Economics are.

That’s why Donald Trump will have limited influence on the U.S. utility industry’s push toward renewable energy, according to executives and investors. Companies including NextEra Energy Inc., Duke Energy Corp. and others that invest billions in power plants are already moving forward with long-term plans to generate electricity with cleaner and more economic alternatives.

“We said before the election that whoever is elected president, we would be continuing our efforts to go to a low-carbon fleet and also pursue renewables,” said Tom Williams, a spokesman for Duke, the second-largest U.S. utility owner.

Wind and solar have been the two biggest sources of electricity added to U.S. grids since 2014 as utilities closed a record number of aging coal-fired generators. Trump has derided clean energy and assailed environmental regulations that hinder jobs, while pledging to revive the mining industry. In an interview Tuesday, Trump softened his view, telling the New York Times that he has an ‘‘open mind’’ on the Paris climate accord and noting that “there is some connectivity” between human activity and climate change.

And it’s not just cost that makes clean energy attractive to utilities -- it’s time. A solar farm can go up in months to meet incremental increases in utility demand; it takes years to permit, finance and build the giant boilers and exhaust systems that make up a coal plant, and they can last for a generation. A four-year presidential term is hardly a tick in that energy clock, and companies are already planning projects that will commence after Trump leaves office, even if he serves two terms.

Uneconomical Coal

Over the next four years, utilities have announced plans to close 12 gigawatts worth of coal plants, largely because cheap natural gas has made them uneconomical -- the equivalent of switching off a dozen nuclear reactors.

Trump will have some levers at his disposal to influence how they’ll be replaced. He has vowed, for instance, to kill President Barack Obama’s Clean Power Plan, which would require states to reduce emissions from power plants. And two federal subsidies -- the investment tax credit and the production tax credit -- remain key components to making solar and wind affordable.

He hasn’t indicated whether he’ll push to repeal the tax credits for wind and solar, which were extended for five years at the end of 2015 with bipartisan support. And the Clean Power Plan, which has been suspended pending a U.S. Supreme Court ruling, isn’t scheduled to take effect until 2022. Utilities, meanwhile, are marching ahead.

“We are moving forward with plans that call for replacing some of our coal generation with natural gas, low-cost wind energy and expanding solar options for customers,” said Frank Prager, vice president of policy and federal affairs for Xcel Energy Inc., which owns utilities in eight states.

Even without the Clean Power Plan, Bloomberg New Energy Finance forecasts that wind and solar energy will grow 33 percent over the next two years, adding 40 gigawatts. A lot of that will be driven by state, rather than federal, policies.

More than half of U.S. states require utilities to incorporate renewable energy into their generation mix, including the traditionally Republican strongholds of Texas, Arizona and Montana. California and New York have set goals to source half of their power from clean energy by 2030.

“I’m skeptical that there is a lot you can do to stop this coal plant replacement cycle from happening,” said Bryan Martin, a managing director at D.E. Shaw & Co., a New York hedge fund that manages about $38 billion and invests in wind and solar projects. “Renewables are the cheapest form of new power in most of these markets.”

Even if renewable energy loses support from the West Wing, it remains popular in corner offices across America. Electricity-hungry tech giants including Alphabet Inc.’s Google, Inc. and others have increasingly sourced energy in recent years directly from wind and solar farms, signing at least 20 power-purchase agreements totaling 2.3 gigawatts in 2015 alone. Over the next nine years, companies have pledged to buy another 17.4 gigawatts, according to New Energy Finance.

“Wal-Mart will continue to build stores, and Apple will continue to build energy-intensive data centers that will be powered by renewables,” said Kyle Harrison, a New Energy Finance analyst in New York. “We don’t expect the election to have a significant impact on renewable energy.”

There are indirect ways Trump may impede clean energy. His proposal to cut corporate tax rates could blunt the effectiveness of the tax credits for wind and solar. He could cut research-and-development funding. Rolling back environmental regulations may make coal more competitive. And Trump will have the opportunity to appoint at least two members to the Federal Energy Regulatory Commission.

Utilities aren’t waiting to see how it pans out.

“We’d love to see more funding to ensure that fossil fuels can stay in that framework,” said Nick Akins, chief executive officer of American Electric Power Co., which owns utilities from Texas to Ohio. “But as we go through this process, I think from AEP’s perspective, we’re going to continue the investments that we’re making.”

Attached Files
Back to Top

EPA raises ethanol mandate higher, riling oil companies

Corn is unloaded from trucks into the grain elevator at the Mid Missouri Energy ethanol plant in Malta Bend, Missouri. (Patrick Fallon/Bloomberg)

The amount of ethanol and other biofuels that must be blended into the nation’s fuel supply must increase by 6 percent next year, the U.S. Environmental Protection Agency announced Wednesday.

That represented a significant gain over the four percent the EPA put forward in a draft proposal in May, which had drawn protests from biofuel producers arguing the EPA was failing to keep pace with the schedule outlined by Congress when they passed a renewable fuel mandate more than a decade ago.

“The move will send a positive signal to investors,” Bob Dinneen, president of the Renewable Fuels Association, said in a statement.

Dinneen predicted the new biofuel levels will “stimulate new interest in cellulosic ethanol and other advanced biofuels” and  “drive investment in infrastructure to accommodate E15 and higher ethanol blends.”

Under the mandate for 2017, 15 billion gallons of conventional corn-based ethanol would be blended into the fuel supply – compared to 14.5 billion gallons this year. In addition, 4.3 billon gallons of advanced biofuels like biodiesel and cellulosic ethanol would be added – compared to 3.6 billion gallons this year.

The hikes follow a recent turnaround in what had been a steady decline in the amount of fuel American motorists were consuming. In August retail gasoline sales exceeded 26.5 million gallons a day, the highest level for that month since 2012, according to the U.S. Energy Information Administration.

That allowed the EPA to increase ethanol production without increasing ethanol’s share of the total fuel supply to as great a degree.

The ratio of ethanol to gasoline in the fuel supply has been the source of longstanding debate, with oil companies and the federal government arguing over what percentage represents the “blend wall” – the point at which ethanol could damage conventional car engines.

Even with rising gasoline consumption, the EPA is projecting the proportion of ethanol in the fuel supply would likely increase to 10.7 percent in 2017 – well above the 10 percent ratio most oil companies argue represents the blend wall.

“We are disappointed that EPA has taken a step backwards with this final rule,” the American Petroleum Institute’s Downstream Group Director Frank Macchiarola said in a statement. “Today’s announcement only serves to reinforce the need for Congress to repeal or significantly reform the [Renewable Fuel Standard].”

Rep. Bill Flores, R-Waco, has joined with other congressman on a bipartisan bill that would force the EPA to keep the ethanol mandate at less than 10 percent of the total fuel supply.

While that bill has gained some support in Congress – a BP executive put the consponsors at 117 House members last week – a number of gas station chains including RaceTrac and Murphy USA are already going ahead and increasing the amount of ethanol in standard gasoline to 15 percent.

A 2011 study the U.S. Department of Energy declared it was safe to use gasoline mixed with up to 15 percent ethanol on cars manufactured in 2001 or later.

Cellulosic ethanol, which aims to turn farming and yard waste into fuel, has struggled to achieve the technological breakthroughs envisioned a decade ago. Under the schedule set by Congress, cellulosic production was supposed to hit 5.5 billion gallons next year. The mandate announced by EPA Wednesday only called for 311 million gallons

Right now there are only two cellulosic ethanol plants operational in the United States, both in Iowa, said Paul Winters, spokesman for the trade group Biotechnology Innovation Organization.

“We think this rule will provide a a strong signal to investors that EPA supporting this technology,” he said.

Attached Files
Back to Top

Yunnan 2016 power transmission exceeds 100 TWh

Southwestern China's Yunnan province transmitted 100.2 TWh of electricity to eastern cities of the country from January 1 to November 22 of 2016, showed data from National Development and Reform Commission.

Of this, electricity generated by clean energy accounted for 85%, which could reduce 68 million tonnes of greenhouse gas emissions from the burning of 27 million tonnes of coal.

Rich in water and solar energy resources, the province is expected to see its annual power transmission exceed 100 TWh for the first time to reach 109.6 TWh by the end of the year, rising 28% yearly from 32.3 TWh in 2011.

Yunnan's "West-to-East" power transmission capacity has nearly tripled to 25.2 GW, compared to 9.3 GW in 2011, accounting for 59% of the total capacity of "West-to-East" power transmission projects under China Southern Power Grid.

The province's power transmission capacity is anticipated to reach 36 GW by the end of 13th Five-Year Plan (2016-2020).
Back to Top

EDF in talks on offshore wind partnership in China

EDF in talks on offshore wind partnership in China

The renewable energy unit of French state-owned utility EDF (EDF.PA) is in talks with Chinese companies about a possible partnership to build offshore wind parks in China, the company said.

EDF CEO Jean-Bernard Levy said last year the firm wants to nearly double its renewable energy capacity worldwide to more than 50 gigawatts by 2030 from about 28 GW.

EDF Energies Nouvelles (EDF EN) CEO Antoine Cahuzac told reporters on Tuesday that EDF will target areas with growing power needs like Latin America, China, India and sub-Saharan Africa.

It will also focus on offshore wind, a new and growing industry in which EDF is still a minor player for now.

"We've started discussions with some Chinese partners to see whether we will go into offshore wind in China," Cahuzac said.

He said that given high power demand and urban density in southern China, offshore wind would make sense there.

Cahuzac said EDF is the only European utility with a dedicated renewables unit in China following its July 2016 acquisition of UPC Asia Wind Management, which has over 1.3 GW under development, construction or operation in China.

Including that deal, EDF EN now operates more than 10 GW in installed wind capacity globally.

Compared to Dong Energy (DENERG.CO) of Denmark and Germany's E.ON (EONGn.DE), EDF is a newcomer in offshore. It operates the small 62 MW Teesside park in Britain, has a 9 percent stake in Belgium's 325 MW C-Power park and this summer launched construction of the 100 MW Blyth park in Britain.

In 2012 it won a tender to build 1,500 MW on France's Atlantic coast, but due to red tape and legal recourse the turbines will not come online before 2021.

"We have the capacity to operate in the offshore wind industry," Cahuzac said. EDF will start close to home but wants to develop internationally and China is one of its targets.

Cahuzac said EDF EN is one of the world's top 10 wind developers and in the top five when excluding Chinese firms, who operate mainly domestically. He said EDF EN the top wind developer in North America in 2015.

EDF typically develops its own wind parks, then sells stakes to investors, keeping about 50-60 percent ownership.

He said its developments are mostly funded with project finance, unlike Italy's Enel (ENEI.MI), which uses more corporate funds to finance its developments.

In recent years, EDF has spent 1.5-2 billion euros per year to develop renewables. Cahuzac said that EDF has a pipeline of about 12 gigawatt of projects in France, the United States, Latin America and other areas.
Back to Top

Argentina biodiesel producers fear losing access to U.S. market

Argentina's biodiesel producers fear losing access to the United States, the destination of nearly all their exports, after Donald Trump's surprise victory in presidential elections earlier this month, representatives of the sector said.

The Republican candidate, who is skeptical of climate change and has advocated scrapping or renegotiating trade deals, has raised alarms in a sector already reeling from a series of setbacks in international trade in recent years.

Argentina is one of the world's largest biodiesel exporters, and is home to processing plants belonging to multinational producers like Cargill Inc and Bunge Ltd.

"The level of uncertainty is very high," said Claudio Molina, executive director of the Argentine Biofuel Association in a recent emailed statement. He said the sector was worried Trump might scrap policies meant to reduce the United States' contribution to climate change, affecting demand for biofuels.

In 2005, the U.S. Environmental Protection Agency (EPA) implemented a policy requiring a minimum level of renewable fuels to be blended into transportation fuel.

Trump has said he supports the program, known as the Renewable Fuel Standard (RFS).

Argentine exports to the United States grew substantially after 2015, when the EPA made it easier for Argentine biofuel to qualify for the RFS.

That filled a vacuum that had been left when the European Union (EU), then the South American country's largest export market, slapped anti-dumping tariffs on Argentine biodiesel in 2013.

But Trump's promises to slap tariffs on imports and renegotiate trade deals have worried the Argentine sector, which would send more than 90 percent of its 1.5 million tonnes of biodiesel exports to the United States, according to Molina.

"The outlook, keeping in mind what he said during the campaign, is not good," Gustavo Idigoras, director and specialist in international biofuels trade at consultancy Business Issue Management said on Friday. "These strong protectionist policies could have an unfavorable impact on biodiesel imports."

Earlier this year, the World Trade Organization ruled in favor of and annulled the tariffs, but that may not mitigate any potential disruption to U.S. exports.

"The process of revising the (EU) measure will take some time," Idigoras said. "Losing the U.S. market would thus be a nearly fatal blow."
Back to Top

Chile regulator says purchase of SQM stake may require public share offer

Chile's SVS securities regulator said on Tuesday that the eventual buyer of Oro Blanco's stake in Pampa Calichera must make a public offer to shareholders in fertilizer company SQM if the acquisition allows the purchaser to control SQM's board.

An indirect stake in Chile's SQM , one of the world's biggest lithium and iodine suppliers, has been for sale since December when holding company Oro Blanco invited buyers to make an offer for its entire 88 percent interest in Pampa Calichera.

Pampa Calichera in turn owns about 23 percent of SQM, also a major producer of potash and fertilizer chemicals.

The SVS note came in response to a regulatory inquiry by Hong Kong's HK Scott Minerals Company, one of the firms interested in buying the stake.

"Any person or entity that acquires a controlling stake in Pampa Calichera ... must launch a public share offer to SQM shareholders if the operation allows the buyer to elect enough SQM board members to control decision making," the securities regulator said.
Back to Top

Tesla solar roof cheaper than regular roof, says Musk – electricity “just a bonus”

Tesla founder and CEO Elon Musk has again set tongues wagging, this time with his declaration that his newly launched integrated solar roof tiles could actually cost less to install than a regular roof – making the renewable electricity they produce “just a bonus”.

The claims, which are already being carefully dissected by various media pundits, were made by Musk last Thursday, after Tesla and SolarCity shareholders voted in favour of a $2 billion deal to merge the two companies.

“It’s looking quite promising that a solar roof will actually cost less than a normal roof before you even take the value of electricity into account,” he said.

“So the basic proposition would be, ‘Would you like a roof that looks better than a normal roof, last twice as long, cost less and by the way generates electricity?’ Why would you get anything else?”

As we reported last month, Musk unveiled four different types of surprisingly stylish looking solar shingle options at a much-hyped LA launch event in October.

At the time, the cost of the shingles was unknown – and their release was somewhat overshadowed by the the unveiling of Tesla’s second generation Powerwall home battery storage units, at twice the capacity and half the cost per kilowatt-hour.

But the shareholder approval of the Tesla-Solar City merger put Musk’s solar roof right back in the picture and gave him the impetus to make his next big announcement.

According to Bloomberg, it was just minutes after the deal was approved that Musk told the crowd  that he had just been advised by his engineering team that the company’s solar roof would actually cost less to manufacture and install than a traditional roof – even before savings from the power bill. “Electricity,” he said, “is just a bonus.”

Of course, as Bloomberg and many others have noted, the high-end terracotta and slate tiles that Tesla’s solar shingles have been designed to look like are among the most expensive roofing materials on the market, so this must be taken into consideration against Musk’s rather sensational claim.

And as Gizmodo noted, how this cost compares to the average cheap Australian corrugated iron roof remains to be seen.

But then Musk has noted that his tempered-glass roof tiles, engineered in Tesla’s new automotive and solar glass division, will weigh as little as a fifth of current products and are considerably easier to ship – being more robust.

Thus, as Bloomberg reports, much of the cost savings Musk is anticipating will come from shipping the materials.

As for the “bonus” electricity generation component of the tiles, Tesla will produce the solar cells for the roof with Panasonic at its manufacturing facility in Buffalo, New York. And at a November conference call, SolarCity CEO Lyndon Rive said the companies were aiming for 40 cents a Watt, which puts it in line with the competition.

Attached Files
Back to Top

China on-grid wind capacity further up, but utilization rate waning, NEA

China's grid-connected wind power capacity continued to pick up, but the utilization rate was waning after years of capacity expansion, Xinhua News Agency reported, citing the latest data from the National Energy Administration (NEA).

China's total installed capacity of wind power generation facilities connected to the power grid reached 139 GW by the end of September, up 28% from a year earlier, according to the NEA.

The growth rate outpaced that of the nation's total power use, a key barometer of economic activity, which totaled 4.5% year on year for the first nine months, official data showed.

China also saw newly added grid-connected wind power generation capacity hit 10 GW during the first nine months, said the NEA.

However, those power generation facilities had average utilization hours of 1,251 over January to September, declining by 66 hours from a year earlier.

Of all provincial areas, southwest China's Yunnan Province registered the largest gain in grid-connected wind power capacity of 2.26 GW in the first nine months.

China, the world's second largest economy, has been trying to develop a clean energy network and pursue green growth in recent years.
Back to Top

Gamesa secures Chinese order for its largest wind turbine

Gamesa has secured the first order for its largest turbine from the renewable energy subsidiary of Sinohydro, one of China’s largest manufacturing groups.

The order is a fresh milestone in Gamesa’s sales and product strategy. It is also the first order for the supply of turbines from the company’s 5 MW platform in Asia, specifically in China. Under the terms of the contract, Gamesa will supply, install and commission 18 of these turbines (90 MW) at the Nangang wind complex located in Tianjin. The turbines will supplied during the last quarter of 2017 and commissioned during the first quarter of 2018.

The 5-MW platform is one of the most powerful in the onshore market. The G132-5.0 MW turbine comes with a blade length of 64.5 metres and a rotor diameter of 132 metres. In addition, it is designed with redundant modules, guaranteeing reliable performance and maximising energy output, thereby streamlining the cost of energy.

“This contract marks an important strategic landmark for Gamesa: not only is it the maiden order from the 5-MW platform in Asia, it is the first signed order for the G132-5.0 MW” said Álvaro Bilbao, Gamesa's CEO in China.

The turbine also stands out for its light weight, which reduces the cost of related wind farm civil engineering work. It is capable of generating enough energy to supply 5,000 households a year and last May received type certification from DNV GL, thereby culminating the certification process and endorsing the turbine's technology.

In addition to its 132 metre rotor, capable of generating power in medium and strong wind conditions, the 5-MW platform can also be configured with a 128 metre rotor featuring the firm's patented Innobladetechnology, enabling the manufacture of the blades in two segments for assembly when the facility is being erected in order to facilitate the transportation and installation of the turbines.

Gamesa's presence in the Chinese market, where it was the number one non-Chinese OEM by capacity instalments in 2015, dates back 16 years. In total, the company has supplied more than 4,000 MW in China to date. The region accounted for 13 percent of the company's total sales volumes (measured in MW) in 2015.
Back to Top

Vestas considers buying Chinese United Power - report

Danish wind turbine maker Vestas is looking at buying Chinese competitor United Power, reported on Friday.

The report said several independent sources, with knowledge of both Vestas' and United Power's strategies, had confirmed that a takeover or a partial takeover was on the table.

However, Vestas Head of Communications Michael Zarin told Reuters the company's strategy is still based on organic growth.

"We have said before, given our industry-leading position and strong balance sheet, we are open to other opportunities to accelerate our growth strategy should such arise, but the core organic growth strategy remains the same," Zarin told Reuters.
Back to Top


Dismissive of 2037 nuclear timeline in IRP base case, Eskom to release RFP by year-end

State-owned power utility Eskom indicated on Tuesday that it planned to move ahead with a controversial request for proposals (RFP) for nuclear before the end of 2016, despite the base case in a draft Integrated Resource Plan (IRP) update indicating that the first reactor would only be required by 2037.

Speaking at the long-awaited release of the draft IRP base case, head of generation Matshela Koko dismissed arguments that the base case lowered the urgency for the issuance of the nuclear tender.

He also made a distinction between testing the nuclearmarket and actually signing a contract, noting that Eskomissued a Nuclear 1 enquiry in 2008, but had never actually contracted with either Areva or Westinghouse, the two vendors invited to participate, for any new reactors.

Koko argued that Eskom, which was recently confirmed by Cabinet as the procurer, as well as the owner and operator, of any new nuclear capacity, needed to plan for a scenario of even tighter carbon constraints and for limits on how much new renewable energy could be added in a single year.

Under this hand-picked scenario, which is one of many that will be debated ahead of the finalisation of the new IRP in the early part of 2017, Koko argued that the model showed that 1 359 MW of new nuclear would be required by 2025. For this reason, he insisted that Eskom could not delay in testing the market by going out on enquiry.

“We need a ten-year lead time [to plan for nuclear],” he said.

By contrast, the IRP base case, which includes the same self-imposed limits used in the IRP 2010 for how much renewables can be introduced in a single year, outlines the introduction of the first 1 359 MW of new nuclear only in 2037, climbing to a total of 20 385 MW in 2050.

It also caters for the addition of 17 600 MW of new solar photovoltaic (PV) capacity between 2021 and 2050 and 37 400 MW of onshore wind over the same period.

The South African Photovoltaic Industry Association (Sapvia) described the 17 600 MW for solar as a “step in the right direction”. However, it added that the allocation fell short of the immense potential South Africa had to offer in this sector. “Independent modelling, based on up-to-date figures from South Africa’s REIPPPP bidding rounds confirm that renewables are the best policy choice in order to meet South Africa’s energy needs at the least cost, while still maintaining our carbon obligations,” Sapvia said in a statement.

New coal-fired capacity is limited to 15 000 MW and hydropower to 2 500 MW, while 13 332 MW and 21 960 MW have been allocated to open-cycle gas turbines and combined-cycle gas turbines respectively.

Interestingly, no provision has been made for concentrated solar power, or CSP, a technology that is the subject of a dispute between Eskom and the developers of the 100 MW Redstone CSP project in the Northern Cape. The projects has been adjudicated and approved, but Eskom is refusing to sign off on a power purchase agreement, citing affordability concerns.


However, Department of Energy deputy director-general for policy, planning and clean energy Ompi Aphane stressed that the figures changed materially from scenario to scenario and indicated that at least 12 scenarios would be tested before the IRP was finalised. One of these would include an option for “unconstrained renewables”, which could exclude, or at least diminish, the role of nuclear in South Africa’s future mix.

In a recent study, the Council for Scientific and Industrial Research found that a future mix comprising 70% solar PV and wind and backed up by natural gas would be the cheapest for the South African power system. It argued, too, that this “re-optimised” mix would be almost R90-billion-a-year cheaper by 2040 than the business-as-usual scenario, which relies more on coal and nuclear.

Energy commentator Johan van den Berg, who previously led the South African Wind Energy Association and who sits on the Ministerial Advisory Council on Energy, which has been critical of the inclusion of nuclear, said the IRP appeared “robust” in terms of the assumptions used.

However, he stressed that these assumptions included that of major constraints on the deployment of renewable energy, which, if loosened, would materially alter the IRP.

“The assumptions could have been more optimistic on renewables and we could have moved more towards an unconstrained base case, but I am confident that will get discussed,” Van den Berg said.

Even given what was outlined in the base case, which was described as a “starting point”, he still expected a “high penetration” of renewables in the future mix, owing to the fact that costs were falling and the solutions could be added incrementally, rather than in large chunks.

On moving ahead with a nuclear procurement in the absence of a final IRP Van den Berg quipped: “If you were even-handed, you would also plan for an unconstrained renewables future and you should put out similar [procurement] documentation for renewables by the end of the year.”
Back to Top

Japan's nuclear export ambitions hit wall as Vietnam set to rip up reactor order

Vietnam is poised to abandon plans for Japanese firms to build a multi-billion dollar nuclear power plant, damaging Prime Minister Shinzo Abe's drive to begin exporting reactors after the Fukushima disaster left the industry in deep-freeze at home.

The Japanese government said in a statement this week that it had been informed by Vietnamese Deputy Prime Minister Trinh Dinh Dung that Hanoi was close to a decision to cancel the project. Japan's Minister of Economy, Trade and Industry, Hiroshige Seko, described the move as "very regrettable."

Vietnam's decision, attributed to lower demand forecasts and rising costs as well as safety concerns, also deals a broader blow to the global nuclear business. Countries from Germany to Indonesia have decided to either pull out of nuclear energy or cancel development plans in the wake of the Fukushima nuclear disaster in 2011, the world's worst since Chernobyl in 1986.

"Vietnam is only the latest in a long list of countries, including more recently Chile and Indonesia, that have postponed indefinitely or abandoned entirely their plans for nuclear new-build," said Mycle Schneider, a Paris-based energy analyst.

Though it has sought contracts for years, Japan has never led a nuclear project to completion overseas and Abe has lent his office's prestige to attempts to win contracts, most recently in Turkey. The dented ambitions for exports come at a time when Japan is struggling to restart dozens of reactors shut down in the wake of Fukushima.

"This is a major blow to Japanese ambitions to, finally, export their first nuclear reactors," said Schneider.

Hanoi first awarded the contract to Japan in 2010. Under the plan, private utility-led Japan Atomic Power was coordinating a consortium of firms, including Fukushima operator Tokyo Electric Power and equipment makers including Hitachi and Toshiba.

A spokesman for Japan Atomic Power said the company had not been in touch with Vietnam since finishing a feasibility study, without providing further details. According to the World Nuclear Association, the study was completed in 2013.



U.S. native groups promised input on development as pipeline dispute looms
UPDATE 3-U.S. native groups promised input on development as pipeline dispute looms

Vietnam's parliament is set next Tuesday to formally approve scrapping the Japanese deal, as well as the country's first nuclear project, which was awarded to Russia's Rosatom, according to state media. Rosatom said it would not comment until the Vietnam parliament formalised the decision.

The Japanese and Russian nuclear plants were supposed to have been located in central Ninh Thuan province.

The two plants would have had a combined capacity of 4,000 megawatts. The Ninh Thuan 2 No. 1 reactor was due to begin operations in 2021, followed by the Ninh Thuan 2 No. 2 unit in 2022, both to have been supplied by Japanese companies. The Rosatom reactors at the Ninh Thuan 1 plant were due to start operating in 2020.

With its power consumption growth now forecast to slacken, the fate of longer-range plans to build out a nuclear power capacity to 15,000 megawatts is shrouded in doubt.

Vietnam's annual power demand growth is projected at 11 percent between 2016 and 2020, and 7-8 percent through 2030 , Duong Quang Thanh, chairman of state utility Vietnam Electricity group was quoted as saying by state-run Voice of Vietnam radio.

That compares with a 17-20 percent annual increase forecast when the government first kicked off its nuclear plans.
Back to Top


Hot, dry weather could hit recovery in Australia cattle industry

Hot, dry weather is expected to hit Australia's largest cattle producing region over the next three months, potentially curbing the beef industry's recovery from multi-year drought in the world's No.4 exporter of the meat.

The Australian Bureau of Meteorology on Thursday said the country's east coast had an 80-percent chance of above average temperatures in the coming three months, with just a 35-percent chance of exceeding average rainfall.

Australia's cattle industry is rebuilding after a three-year drought drove the size of the national herd to at least a 20-year low.

The government has been pushing to shift the economy away from its reliance on mining, with beef one of Australia's main rural exports.

"A dry summer will push domestic prices down as it will remove quite quickly restocking demand," said Phin Ziebell, agribusiness economist, National Australia Bank.

Australia's northeast coast accounts for more than a third of its annual red meat exports of around 1 million tonnes.

However, analysts said wet weather across the country in recent months meant that farmers would have enough pasture and feed crops to avoid mass slaughtering as long as the dry conditions did not last too long.

Australia's chief commodity forecaster earlier this year lowered its estimate for beef exports by nearly 7 percent - opening the door to international competitors such as Brazil to expand shipments to markets such as China, a market Australia had almost exclusively supplied as recently as 2014.
Back to Top

Canada may phase out farm pesticide that harms midges, mayflies

A Canadian government agency recommends phasing out an insect-killing chemical used on farms to protect crops, saying that it also harms aquatic bugs, including midges and mayflies.

The Pest Management Regulatory Agency (PMRA) said on Wednesday that imidacloprid, used on a variety of crops, should be phased out in three years, or five years for uses that do not have alternatives.

Imidacloprid is part of a group of pesticides called neonicotinoids, also called neonics, that are applied as a seed treatment or spray on plants' leaves.

Imidacloprid has been shown to harm aquatic insects in farm areas that are food for fish and birds, said Scott Kirby, director general of environmental assessment at PMRA.

After a consultation period, the phase-out could begin next year.

The European Union limited use of neonics, including imidacloprid, two years ago, after research pointed to risks for bees, which are crucial for pollinating crops. There is no such ban anywhere in North America yet, Kirby said.

PMRA is still assessing neonics' risks to bees.

The decision is a surprise, said Dave Carey, manager of government affairs and policy at Canadian Seed Trade Association, whose members include seed suppliers Syngenta AG , Dupont Pioneer and Monsanto Co.

"There are always concerns when a product that companies and growers rely on is taken off the market," Carey said.

But Ron Bonnett, president of Canadian Federation of Agriculture, said phasing out the chemical may not cause problems for farmers because other neonics are still available.

"I don't see a lot of red flags right now," he said.

PMRA is also reviewing two other neonics, clothianidin and thiamethoxam.

The move was greeted with cautious optimism by Canadian beekeepers, who have been concerned about a possible link between neonics and spikes in bee deaths.

Phasing out imidacloprid may result in fewer bee deaths, but it depends on what chemicals farmers replace it with, said Rod Scarlett, executive director of Canadian Honey Council.

Environmental Defence, an activist group, said the decision is welcome, but the phase-out is unnecessarily long.
Back to Top

Potash Corp cuts production, lays off 140 from Cory mine

Canada’s Potash Corp. of Saskatchewan, the world’s largest producer of the fertilizer by capacity, said Wednesday it would cut jobs and production at its Cory potash mine west of Saskatoon.

The Saskatoon, Saskatchewan-based company said approximately 100 full-time workers and 40 temporary positions are being laid off. Most of the cuts will take place in February with the remainder during the company’s 2017 third quarter.

Production will also be halted for six weeks at Lanigan mine starting in January and for 12 weeks at Allan, beginning in February.

Potash Corp said it plans to drop production of one type of potash at Cory, lowering the mine’s operational capability by 43% to about 800,000 metric tons of the key fertilizer ingredient. It also said the mine will continue to employ about 350 people.

“We are making this decision to optimize production to our lowest cost operations, including Rocanville and other Saskatchewan sites,” Mark Fracchia, president of the company’s PCS Potash operations said in the statement.

Rocanville mine, also in Saskatchewan, has a production capacity of 3 million tons.

Potash will also curtail output for six weeks at two other operations in the province in early 2017 to help match supply with market demand. Production will be halted for six weeks at its Lanigan mine starting in January and for 12 weeks at Allan, beginning in February.

Potash Corp, which agreed in September to merge with peer Agrium, said additional temporary layoffs will result from the curtailments, adding that specific numbers haven’t yet been determined.

Sector struggles

A global oversupply of the fertilizer has caused prices to tumble in the past year, leading to layoffs and mine closures across the sector.

Prices for the fertilizer ingredient began their decline four years ago, as weak crop prices and currencies weakness pinched demand. Potash has also suffered from increased competition following the breakup in 2013 of a Russian-Belarusian marketing cartel that previously helped limit supply.

Potash's collapse picked up speed in the past year, putting additional pressure on producers, whose profits have been hit by falling prices, largely due to weak currencies in countries such as Brazil and low grain prices.

Crop prices have also been hurt, with corn and wheat at seven-year and 10-year lows respectively, which have reduced farmers’ willingness to maximize production with fertilizers.

Earlier this year, BHP Billiton, revealed it might place its Canadian Jansen potash project in the back burner if prices for the fertilizer ingredient don’t pick up by the end of the decade.
Back to Top

Morocco's OCP and Ethiopia sign large fertiliser plant deal

Morocco's Office Cherifien des Phosphates (OCP), the world's largest phosphate exporter, signed a deal with Ethiopia on Saturday to build a $3.7 billion plant to produce fertilisers.

The North African country's firms, including banks and insurers, have invested heavily in Sub-Saharan Africa in the past few years. Last month, OCP signed an agreement with Rwanda to build a blending unit.

The agreement signed with state-run Ethiopian firm Chemical Industries Corporation (CIC) will enable the construction of a new plant in the town of Dire Dawa in eastern Ethiopia.

The project is expected to produce 2.5 million tonnes of fertiliser in its first phase by 2022, and a second phase would see a further $1.3 billion invested to increase production to 3.8 million tonnes three years later.

"Its funding will first be from equity and the second part through debt," the firm's representative in Ethiopia Faycal Benamer told Reuters.

Faycal did not give a date when the plant construction will start, and said they were about to complete its designs.

Ethiopia at present imports around 900,000 tonnes of fertiliser each year. OCP will ship its own phosphoric acid to the plant, while potash will be transported from large reserves in the Horn of Africa country's northeast, he said.

OCP, a major earner of foreign currency for Morocco, reported a 23.2 percent fall in first-half net profit to 3.07 billion dirhams ($317 million) due to low prices in the international markets.

It has invested heavily and made a series of acquisitions to improve its infrastructure and boost its output. It aims to raise output to 47 million tonnes of crude phosphate rock in 2017, from around 34 million tonnes in 2013.

It is also targeting an increase in fertiliser production to 12 million tonnes by 2017 from 7 million in 2014, which would make it the world's leading producer.

Saturday's agreement was signed during a visit by Morocco's King Mohammed VI. The two countries inked deals to develop several projects.
Back to Top

Precious Metals

$6 Billion Puke Sends Gold Plunging Below $1200 As Dollar Index, Bond Yields Spike

As Chinese Yuan collapses to fresh lows (USD Index spikes), and bond yields surge, this morning's durable goods data sparked an extended collapse in gold, crashing them below $1200 as over $6 billion of pressure flowed through futures.

EUR down, Stocks down, Bonds down, Gold down...Yuan just keeps crashing...Bonds are dumped as USD soars...

Dollar index makes new high...Sending gold reeling... as 50,000 contracts are dumped. The gold liquidity moment started it (around 0825ET) but the US macro data sparked the break below $1200...Pushing Gold to its lowest since Feb...

Attached Files
Back to Top

Randgold and Newcrest team up in the Ivory Coast

Randgold announced on Friday it has committed to a joint venture with ASX-listed Newcrest Mining for the exploration and development of an “area of interest” in southeastern Cote d’Ivoire.

According to the announcement: “Randgold will manage the exploration programme as well as any mines that it produces.  A technical committee of senior geologists from both companies will work closely with the Randgold exploration team and a joint venture board will oversee the exploration programme and any consequent development projects.”

CEO Mark Bristow has spoken glowingly of the Ivory Coast over the last year or so citing the country’s sound infrastructure and mining regime as making it one of the most attractive countries in Africa to do business. This, together with the country’s relatively unexplored geology, means Randgold is devoting more resources to exploration there than any other country in which it operates.

The announcement noted the area of interest “covers the extension of some of the more prolific Ghanaian gold belts and associated structures.”

The creation of the joint venture seems to indicate Randgold anticipates the discovery of another world-class gold deposit in this area. Bristow has defined “world-class” as being a three million ounce deposit that yields a 20% return on based on a gold price of $1 000 an ounce.

“The bigger the footprint, the greater the opportunity, and both Newcrest and Randgold believe in Côte d’Ivoire and the potential for the discovery of truly world-class gold deposits,” he said.
Back to Top

Platinum market deficit set to shrink in 2017 - WPIC

Platinum market deficit set to shrink in 2017 - WPIC

The platinum market deficit will shrink to its narrowest since 2011 next year, the World Platinum Investment Council said on Tuesday, as a drop in investment and
diesel's waning share of the European car market pressure demand.

The WPIC also cut its expected platinum market shortfall for this year to 170,000 ounces from the 520,000 ounces predicted in September, citing a larger than expected drop in Chinese platinum jewellery demand, and higher recycling.

That deficit will likely shrink to 100,000 ounces in 2017, it said, cutting above-ground stocks of the metal to 2.045 million ounces by the end of next year, the WPIC said.

"It's all good and well to say that metal is available from above-ground stocks, but as soon as the vaulted holdings aren't for sale, any deficit makes for concern, especially from industrial users," the WPIC's director of research Trevor Raymond said.

Autocatalyst demand is expected to decline 1 percent next year, the WPIC said, as diesel's overall share of the autocatalyst market shrinks.
Demand for platinum for use in catalytic converters was flat this year, it said, in the face of concerns that last year's Volkswagen emissions scandal would dent demand for diesel cars, which use a higher loading of platinum in their autocatalysts.
At the moment, the 2016 percentage of diesels on European roads is 50 percent. Our forecast for next year includes a 48.5 percent diesel share, so that's a fairly aggressive fall,"Raymond said. There has also been a move to other forms of
emissions control technology, he said.

Investment in platinum, which is expected to have risen 15 percent this year on the back of strong coin and bar demand, particularly in Japan, is forecast to fall by more than a quarter next year, the WPIC said.

It expects bar and coin investment to lighten, and demand for platinum-backed exchange-traded funds, which tailed off recently after a strong start to the year, to be little changed.

Overall platinum demand is tipped to fall 3 percent this year to 8.04 million ounces, the WPIC said. Jewellery demand is expected to slip by 10 percent, or 300,000 ounces, as buying in number one consumer China drops for a second year.

On the supply side of the market, refined production by mining companies is predicted to have fallen 3 percent this year. The WPIC revised up its forecast for recycled platinum supply this year to 1.86 million ounces from 1.745 million in
September, due chiefly to rising jewellery recycling in China.
Back to Top

Asia Gold-India premiums surge to 2-yr highs on fears of import curb

Gold premiums in India jumped to two-year highs this week as jewellers ramped up purchases on fears that the government might put curbs on imports after withdrawing higher-denomination notes from circulation in its fight against black money.

Retail demand was subdued due to a cash crunch following the government's move on high-value banknotes, but dealers in the world's No.2 consumer of the metal were charging a premium of up to $12 an ounce this week over official domestic prices that include a 10 percent import tax.

The premium was the highest since mid-November 2014, and compared with a premium of up to $6 an ounce last week.

"There was a rumour that after scrapping 500 and 1,000 rupee notes, the government will ban gold imports. It prompted many jewellers to increase buying," said a Mumbai-based dealer with a private bank.

"Jewellers were running businesses with limited stocks after good sales during the Diwali festival. Now they are keen to replenish inventory as prices have fallen."

The government last week withdrew 500 and 1,000 rupee banknotes from circulation, in a surprise move designed to bring billions of dollars worth of cash in unaccounted wealth into the mainstream economy.

"We are seeing some jewellery demand due to the ongoing wedding season and crash in prices. But the cash constraint is going to be really tough for the gold industry in the near future, especially from rural areas," said Chirag Thakkar, a director with Amrapali Group.

Two-thirds of gold demand comes from rural areas where jewellery is a traditional store of wealth.

"Our business has nearly stalled due to the cash crunch," said Mangesh Devi, a jeweller based in Satara, Maharashtra, who caters mainly to farmers.

Gold was on track to post a second straight weekly fall on rising expectations of a rate hike by the U.S. Federal Reserve. Spot gold has declined 1.5 percent so far this week.

Meanwhile, premiums in China rose up to $10 an ounce against the international benchmark from $5 last week.

"It (the buying) could be driven by the panic in reaction to the recent depreciation of the yuan," said Zhirui Ji, an analyst with Thomson Reuters-owned metals consultancy GFMS.

The yuan fell to an 8-year low on Friday on resurgent dollar.

In Hong Kong, sellers were offering a premium of up to $1 an ounce compared with 50 to 70 cents last week, while in Singapore premiums were unchanged at 80 cents.

Demand in Japanese markets continued to remain tepid with premiums flat to a discount of 10 cents.
Back to Top

Base Metals

Zinc shoots to 8-year high on expected metal deficit

The last time the benchmark zinc price was this high, Americans were in the throws of an election that saw Barack Obama defeat George W. Bush.

Worries about mine closures have sent the metal used for galvanizing steel on a wild ride; the benchmark zinc price rose 2.1% today to $2,725 a tonne, which is the highest it's been since March of 2008. The 30-day spot zinc price was at $1.20 a pound, 11.2% higher than it was a month ago. Chinese funds in particular are piling into zinc.

Apart from steelmaking raw materials iron ore and coking coal, zinc is the best performing mined commodity in 2016; the benchmark price has nearly doubled (up 90%) since it fell to a 6.5-year low in January of $1,444.40 a tonne.

What's driving the surge? Mine closures. Last year two major mines closed – Australia's Century and the Lisheen mine in Ireland. The two mines had a combined output of more than 630,000 tonnes. The shuttering of top zinc producer Glencore’s  depleted Brunswick and Perseverance mines in Canada in 2012 brings total tonnes going offline since 2013 to more than a million tonnes.

At the end of October Glencore added another lead and zinc mine to the list, its Black Star open-pit mine at Mount Isa in Queensland, Australia.

A Reuters survey predicts the zinc market will be in deficit this year by 400,000 tonnes, which portends more good news for the price. Although, dark clouds could be swirling for zinc bulls in the form of zinc inventories built up in London Metal Exchange (LME) warehouses. Reuters notes that Macquarie, an Australian investment bank, estimates 1.4 million tonnes of zinc could trickle into the market, thus offsetting the expected supply deficit.

Shanghai Metals Market (SMM), a Chinese market intelligence site, is sanguine on the zinc price for the medium term, predicting that zinc smelters may have to suspend production in the first quarter of 2017 due to falling material inventories.

"This may help LME zinc breach $3,000 per tonne, $3,500 per tonne, or even higher. Nonetheless, there are still some uncertainties from macroeconomic front, such as liquidity, investment, US dollar and Chinese yuan’s trend," according to SMM.
Back to Top

China reaches preliminary agreement with Peru to expand Toromocho copper mine

China's leading mining company Aluminium Corporation of China has reached a preliminary agreement with Peru's government to expand the Toromocho copper mine, China's biggest overseas copper project.

China's state industry supervisor SASAC, which announced the agreement in a statement on Wednesday, did not give details of the expansion plan for the Chinese-owned mine.

The mine began operation in 2013 and produced 31,407 tonnes of copper and 5,500 tonnes of zinc in the first quarter of this year, but has also faced problems concerning environmental contamination and strikes by workers demanding higher wages.

China's President Xi Jinping signed a series of other cooperation agreements with Peru during his visit last week.
Back to Top

Atalaya sees quarterly increase in recoveries, ramps up production at Proyecto RioTinto

Copper production at dual-listed European mining and development company Atalaya’s operations increased 97% quarter-on-quarter, from 4 442 t in the second quarter to 8 752 t in the third quarter, owing to a 83.6% increase in recoveries.

The miner also maintained copper concentrate grades of over 21%, consistent with the previous quarter, with penalties now well below the maximum levels stipulated by some smelters.

Further, Atalaya processed 50% more tonnes of ore in the third quarter than in the second.

Meanwhile, ramp-up at the company’s Proyecto RioTinto, in Spain, is progressing according to plan, as mechanical completion of Atalaya’s expansion project was achieved in May, with minimal additional capital expenditure required until the end of the year. The company is targeting nominal plant capacity of 9.5-million tons a year.

Proyecto RioTinto’s water treatment plant is now fully operational after successful commissioning during the quarter with the dewatering of the Cerro Colorado openpit progressing according to plan.

On the financial side, Atalaya’s working capital position improved by €4.2-million in the second quarter, with cash costs reduced to $1.97/lb of copper in the third quarter. The miner has targeted further reductions for the coming months.

Atalaya’s earnings before interest, taxes, depreciation and amortisation (Ebitda) improved significantly compared with the first half of the year, when it posted a loss of €3.6-million owing to an increase in the volume of copper concentrate sold, lower cash costs and higher realised copper prices.

It also reported a positive Ebitda of €1.9-million for the period, compared with a negative Ebitda of €1.6-million for the year to date.

"We are gradually beginning to see the fruits of our efforts, with positive cash flows from our operations. The combination of falling operating costs and improved levels of recovery and production reflect the increasing on-site efficiencies,” commented CEO Alberto Lavandeira.

He added that the effect of the recent increase in the copperprice on Atalaya’s share price demonstratesd the group’s leverage to copper.

“With the plant working now almost at nameplate capacity, we are well placed to benefit from any future improvements in the copper price,” he added.
Back to Top

SNC-Lavalin awarded EPC contract from Codelco for sulphuric acid plant construction

Chile-based Corporación Nacional del Cobre de Chile (Codelco), the world’s largest copper producer, has appointed TSX-listed engineering and construction group SNC-Lavalin to construct two sulphuric acid plants at the Chuquicamata copper smelter complex, located in the Antofagasta region of northern Chile.

Codelco’s project incorporates sulphuric acid production technology by MECS, a wholly owned subsidiary of DuPont, with whom SNC-Lavalin has successfully executed projects for more than 50 years. The plants, which will produce up to 2 048 metric tonnes of market grade sulphuric acid a day, will treat off-gas from the Chuquicamata smelter.

These new plants will replace those currently in operation at the facility and are part of Codelco's ongoing environmental compliance plans.

Construction is expected to begin in early 2017 with SNC-Lavalin providing basic and detailed engineering services, procuring equipment, and constructing the acid plants through their Santiago and Toronto offices.

"Following our recent contract award for the replacement of the effluent treatment plant at the Chuquicamata copper  smelter, this new contract again supports our strong position in Latin America", noted SNC-Lavalin mining and metallurgy president José J Suárez, adding that the company was proud to be part of a project that would be a key element in Codelco’s future environmental programme.

"Codelco's environmental values are closely aligned with those of SNC-Lavalin and this adds to an already excellent working relationship," he concluded.
Back to Top

China construction, power, other sectors to use 29.2 mil mt copper in 2016-20

China's construction, power, transport, home appliance and manufacturing sectors are forecast to consume a total of 29.2 million mt refined copper in the 13th Five Year Plan period (2016-20), up 14% from the 12th Five-Year Plan period (2011-15), major Chinese copper producer Tongling Nonferrous Metals Group said in a report on its website Wednesday.

The rise is attributed to demand growth in the five sectors in the coming years, with the sectors accounting for more than 50% of mainland China's annual copper demand, according to the report.

In accordance with China's plans for the 13th Five-Year Plan period, the country will build a high-speed rail network in 2016-20, linking Lianyungang City, Jiangsu Province, East China and Urumqi City, Xinjiang Uyghur Autonomous Region, Northwest China, plus linking Beijing City and Hong Kong, with an extra high-speed rail distance estimated to total 11,000 km in the next five years, covering more than 80% of Chinese cities, according to the China Nonferrous Metals Industry Association.

The power industry is expected to be the biggest driver of China's copper demand in 2016-20, due to investment in clean energy, new energy vehicles, as well as building modern urbanization facilities, state-run metals consultancy Beijing Antaike told an industry seminar in March in Beijing.

China's refined copper demand in 2016 is forecast at 9.53 million mt, up 4.2% year on year, according to Antaike.

The Beijing agency forecast China's refined copper imports and exports in 2016 at 3.2 million mt and 220,000 mt, respectively, up 9.86% and 4.76% year on year.

It estimated China's national refined copper output this year at 7.95 million mt, up 7.29% year on year, with the domestic refined copper surplus expected to narrow to 1.4 million mt this year, from a surplus of 1.6 million mt last year.
Back to Top

Global refined copper surplus reaches 154,000 mt in August: ICSG

The global refined copper market showed an apparent production surplus of around 154,000 mt in August, mainly due to weaker Chinese demand and seasonally weak usage in other regions, according to preliminary data released Monday by the International Copper Study Group.

When making seasonal adjustments for world refined production and usage, August showed a production surplus of about 56,000 mt, the Lisbon-based research group said.

For the January-August period, indications suggest a production deficit of around 91,000 mt, and a seasonally adjusted deficit of about 93,000 mt, according to the ICSG.

That compares with a production surplus of around 10,000 mt (a seasonally adjusted surplus of about 19,000 mt) for the same eight-month period of 2015.

World apparent refined usage in the first eight months is estimated to have increased by around 3.8% (570,000 mt) compared with the same period of 2015 mainly due to increases in China, the ICSG said.

"Chinese apparent demand increased by around 7.5% compared with the same period of 2015 based on an 8% increase in net imports of refined copper," according to ICSG analysts.

"However, July and August net refined copper imports at 176,000 mt and 175,000 mt, respectively, were the lowest since April 2013 and compares to a net monthly imports average of 312,000 mt in the first half of 2016," they said.

Aggregated usage in the European Union, Japan and the US remained essentially unchanged over the eight-month period, the ICSG said.

"On a regional basis, usage is estimated to have increased by 2.5% in Europe and 6% in Asia (when excluding China, Asia usage increased by 1.5%), while declining by 11% and 4.5% in Africa and in the Americas, respectively, and remaining essentially unchanged in Oceania.

World mine production is estimated to have increased by around 5.8% (730,000 mt) in the first eight months of 2016 compared with production in the same period of 2015, according to the ICSG.

Concentrate production increased by 7.5% while solvent extraction-electrowinning declined by 0.5%.

"The increase in world mine production was mainly due to a 45% rise in Peruvian output that is benefitting from new and expanded capacity brought on stream in the last two years," ICSG analysts said.

"A recovery in production levels in Canada and the United States, expanded capacity in Mexico and a ramp-up in production in Mongolia, also contributed to world growth."

However, overall growth was partially offset by a 4% decline in production in Chile, the world's biggest copper mine producer, and a 7% decline in Democratic Republic of Congo, where output was constrained by temporary production cuts, the ICSG said.

On a regional basis, production rose by 7% in the Americas, 9% in Asia and 7% in Oceania but declined by 4% in Africa while remaining essentially unchanged in Europe.

The average world mine capacity utilization rate for the eight-month period of 2016 increased to 85% from 84% in the same period of 2015.

World refined production is estimated to have increased by about 3.1% (470,000 mt) in the first eight months of 2016 compared with refined production in the same period of 2015: primary production was up by 2.5% and secondary production (from scrap) was up by 5.5%, the ICSG said.

The main contributor to production growth was China (+7%), followed by the US (+14%) and Mexico (+19%), where expanded SX-EW capacity contributed to refined production growth.

Output in Chile and Japan, the second and third leading refined copper producers, increased by around 2% and 3%, respectively, during the period, according to the ICSG. Refined production in the DRC and Zambia declined due to the impact of temporary production cuts.

On a regional basis, refined output is estimated to have increase in the Americas (5%), Asia (6%) and Oceania (10%), while declining in Africa (-13%) and in Europe (-3%).

The average world refinery capacity utilization rate for the first eight months of 2016 remains practically unchanged from that in the same period of 2015 at around 83%, according to the ICSG.
Back to Top

German authorities approve Iluka’s acquisition of Sierra Rutile

Australia-based mineral sands miner Iluka’s £215-million acquisition of London-listed Sierra Rutile is back on track after the German competition authorities approved the transaction.

The German Antirust Authority last month referred the merger for a phase 2 review, which could have lasted up to three months. However, Iluka announced on Tuesday that the competition body had approved the merger, paving the way for the transaction to close before the end of next week.

The merger has already gained Sierra Rutile shareholder approval.

The acquisition of Sierra Rutile will enhance Iluka's rutile portfolio position and sits alongside its existing position as the largest global zircon producer.

Iluka’s stock gained 3.30% on the ASX on Tuesday to trade at A$6.26 a share.
Back to Top

Indonesia to cut royalty for processed nickel to 2 pct -official

Indonesia will cut the royalty charged on sales of processed and refined nickel to 2 percent, a mining ministry official said on Tuesday, part of a revision of government rules on non-tax revenue from the coal and minerals sector.

The revision is needed to encourage more miners to develop smelters, said Coal and Minerals Director General Bambang Gatot, referring to a government drive to develop downstream industries and increase returns from Indonesia's mineral resources.

The royalty, paid by miners to the government, is currently 4 percent of each sale.

"If it's 4 percent it's as if it gives no incentive for processing and refining. It gives no stimulus to companies to (build smelters)," Gatot told parliament.

The reduction in royalties may come as welcome news to investors in Indonesia's budding smelter industry, which include Vale Indonesia, China's Tsingshan, Eramet and state-owned miner Aneka Tambang (Antam). The sector has been rocked by recent uncertainties over the country's ban on unprocessed ore exports.

The revised regulation is currently being checked by the law and human rights ministry, Gatot said, adding that royalties for other metals would also change under the new rules, but stopped short of saying when the new regulation would be released.

"This is for miners like Vale," he said, referring to the Brazilian miner which is the top nickel producer in Indonesia.

A royalty of 4 percent would still be charged against sales of nickel ore, Gatot said.

Indonesia, where thousands of coal mines went out of business as commodity prices cratered, is confident of achieving its target of 30.11 trillion rupiah ($2.24 billion) non-tax revenue from mining this year, Gatot said last month.

The world's top thermal coal exporter missed its 2015 non-tax revenue target by 43 percent.
Back to Top

DRC govt gains additional 15% stake in Ivanhoe’s Kamoa–Kakula project

TSX-listed Ivanhoe and its joint venture partner Zijin Mining Group have transferred a further 15% interest in the Kamoa-Kakula copperproject to the Democratic Republic of Congo(DRC) government.

The government now owns 20% of the project, while Ivanhoeand Zijin each hold an indirect 39.6% interest and Crystal River Global an indirect 0.8% interest.

“This is an historically significant event for the people of the DRC. We now are united as partners committed to working closely together toward our shared objective of ensuring that the major copper discoveries we have made at Kamoa and Kakula during the past eight years can be predictably, efficiently and expeditiously developed into a world-scale mining venture with a lifespan of multiple generations,” said Ivanhoe chairperson Robert Friedland.

CEO Lars-Eric Johansson added that the agreement “paves the way to fulfil Kamoa-Kakula’s promise of decades of substantial, long-lasting economic and social benefits for the Congolese people and the strengthening of the national government’s capacity to support the development of international trade and building of the country”.

Kamoa Holding will transfer 300 Class A shares in the capital of Kamoa Copper − representing 15% of Kamoa Copper’s share capital − to the DRC government, in consideration for a nominal cash payment and other guarantees.

Kamoa Holding will also be required to provide all shareholder loans to Kamoa Copper and/or procure financing from third parties for the development of the project.

The DRC government has reaffirmed Kamoa Copper’s mineral tenements and has guaranteed that the project will not be subject to any taxes or duties other than those legally required by the applicable statutory and regulatory provisions for the life of the project.

Kamoa Holding will have a pre-emptive right, and right of first refusal, to buy any or all of the DRC government’s shares in Kamoa Copper should it wish to divest of its interest in the project.
Back to Top

Nyrstar hedges more zinc as price downside protection

European base metals business Nyrstar has entered into further short-term strategic hedging arrangements utilising put and call collar structures to mitigate potential down side risks to the zinc price.

The global multi-metals business, with a market leading position in zinc and lead, said Thursday that for the first quarter 2017, protective hedges were already in place for 70% of the free metal produced by the metals processing business segment, or 8 000 t/m of zinc metal.

It has also hedged 3 000 t/m of the payable zinc metalproduced in concentrate by the mining segment, resulting in full exposure for the hedged volume in the first quarter to a floating zinc price between $2 127/t and $2 496/t. In the current and first quarter, Nyrstar retains full exposure at a price above $2 800/t.

Belgium-incorporated Nyrstar, which has mining, smelting and other operations located in Europe, the Americas and Australia, advised that protective zinc price hedges have also been completed for the second quarter and fourth quarter of 2017, for 70% of the free metal produced by the metals processing segment (8 000 t/m of zinc metal), plus 5 350 t/m of the payable zinc metal produced in concentrate by the mining segment, resulting in full exposure to a floating zinc price between $2 172/t and $2 543/t.

In the second quarter of 2017 to the fourth, Nyrstar again retains full exposure at a price above $3 117/t.

Nyrstar's said it will continue to review and potentially apply strategic hedges to limit downside risks for key commodity price and foreign exchange sensitivities during the implementation of the company's transformation and turnaround plan.

Zinc spot prices have risen about 15% to $1.14/lb in the last 12 months, as an emerging supply gap and a run-down of stock supported the trend.
Back to Top

Steel, Iron Ore and Coal

China Oct thermal coal imports up 31.4pct on year

China imported 7.32 million tonnes of thermal coal (including bituminous and sub-bituminous coal) in October, rising 31.42% on year but down 10.07% on month, showed the latest data released by the General Administration of Customs.

The value of the imports totaled $426.45 million, translating to an average import price of $58.26/t, rising $7.46/t from a year ago and up $0.94/t from the month prior.

In the first ten months, China imported 75.94 million tonnes of thermal coal, up 9.55% from the year-ago level. Total value stood at $3.78 billion, down 8.44% year on year.

Meanwhile, China imported 6.95 million tonnes of lignite in October, surging 92.52% year on year but down 19.65% on month, with the value increased 103.63% year on year to $271.7 million.

Total lignite imports in the first ten months reached 55.65 million tonnes, up 35.9% year on year, with value at $1.91 billion, up 10.73% year on year.

Separately, the country exported 620,000 tonnes of thermal coal in October, with value at $40.12 million. Thermal coal exports from January to October stood at 3.1 million tonnes, with value at $218.08 million.

China's export of lignite gained 7.3% on year to 32.38 million tonnes over January-October, with values at $231,000; lignite export in October was 181 tonnes, with value at $2,000.
Back to Top

China to probe illegal expansion in coal, steel sectors

China will send inspection teams to investigate and severely punish illegal expansion by coal and steel firms as part of its efforts to slim down the two industries, Prime Minister Li Keqiang said in an executive meeting of the State Council on November 24.

With most of the country's steel and coal enterprises making losses in 2015, China promised in February to slash 500 million tonnes of coal production capacity and 100-150 million tonnes of crude steel capacity over the next three to five years in a bid to reduce price-sapping supply gluts.

The State Council said in a notice that this year's targeted closures had already been "basically completed", but some firms were still illegally expanding capacity.

China has traditionally struggled to rein in its massive steel and coal sectors, with local governments often turning a blind eye to expansion projects that provide additional local employment and economic growth.

But this year the country has been trying to keep its regions on a tighter leash, and inspection teams from the Ministry of Environmental Protection have criticized several provincial authorities for failing to restrict capacity growth in the two sectors.

The State Council statement said it will also encourage "high-quality firms" in the two sectors to step up restructuring efforts along the lines of the merger between the state-owned Baoshan Iron and Steel and Wuhan Iron and Steel groups.

It added that China would unveil financial incentives for regions currently trying to deal with overcapacity, and would provide more support when it comes to re-employing laid-off workers.

Attached Files
Back to Top

Shuohuang Railway Development completes annual transport target

Shuohuang Railway Development Company, operator of China's second largest coal-dedicated Shuohuang rail line, has accomplished its annual coal transport target 39 days ahead of schedule, it said on its website on November 23.

By November 22 this year, the company transported a total 243.56 million tonnes of coal, surging 29.2% year on year, exceeding the annual target of 243.25 million tonnes.

Shuohuang line, connecting Shuozhou, Shanxi province with Huanghua port in Hebei province, also transported 5.62 million tonnes of non-coal products, accounting for 85% of the annual target.

Attached Files
Back to Top

BHP Vale to fund, extend credit over Samarco disaster

BHP told Reuters in October it expects to complete work by year-end to contain the remaining waste that spewed from the Samarco iron ore project, causing Brazil's worst environmental disaster on record.

When the Fundao dam burst at the mine, enough mud to fill 12,000 Olympic swimming pools flattened an entire village, killed 19 people and left hundreds homeless.

BHP said the funds will be released to Samarco subject to the achievement of key milestones.

"The short-term facility allows BHP Billiton Brasil to

preserve the value of its investment as options for restart continue to be assessed," it said.
Back to Top

Traders on edge as volatility surges in China's iron ore futures

Surging volatility in China's iron ore futures is sending global prices on a roller-coaster ride, spelling risks for traders and steel mills, some of whom are losing faith in a market swayed by speculative Chinese money.

Amid wild swings in futures, spot iron ore prices surged by a record 23 percent in the second week of November, only to fall nearly 10 percent the following week.

At the same time, steel producers say a near 80 percent rise in spot iron ore prices this year despite plentiful supplies does not reflect physical demand, raising concerns that buyers could be left with costly iron ore in the event of a sharp pullback. Some are sitting out the volatility and holding back purchases.

"I cannot imagine the price hit $70, it's crazy. Supply of iron ore is bigger than before," said an iron ore buyer for a mill in China's Fujian province.

Unlike oil, gold and copper, whose benchmark pricing is set in London and New York, iron ore is one of the few commodities whose global pricing takes its cue from China.

Because of the massive volumes of iron ore futures traded on the Dalian Commodity Exchange, the direction of prices set there virtually dictates the path for the physical market. In March, the futures volume reached a record 7.6 billion tonnes, or more than five times the annual global iron ore trade.

On Wednesday, the most-active iron ore contract on Dalian posted its most volatile trading day since July 2015 when futures prices hit their lowest since the contract began in 2013, based on Thomson Reuters data.

The contract has moved in a 10 percent trading range on some days this month, a huge move in the once-staid iron ore market.


Price moves have been partly driven by an attempt by Chinese commodity exchanges to crack down on speculative trading, which led to a steep selloff last week after a series of sharp rallies. Futures surged back this week, pushing prices to near three-year highs, before coming off again.

"Prices are changing too fast. It's difficult to strike a deal," said an iron ore trader in Shanghai.

A sudden price drop could prompt a buyer who bought a cargo at a higher price to walk away from the deal while a trader would try to renegotiate a cargo he sold at a low price when the market abruptly shoots up, he said.

"This kind of market is not good for anybody," he said.

Iron ore's surge has surprised many in the market, because unlike supply-deprived coal, there remains plenty of iron ore, with stocks at China's ports the biggest in more than two years.

While spot prices have tracked futures higher, traded volume in the physical market is "very low," said a trader at a global trading firm in Singapore.

"Market participants are losing faith in the market. There's too much speculative money in China that is affecting physical prices," he said.

With the seasonally weak winter period approaching, some Chinese steel producers are holding back from purchasing iron ore and waiting for prices to stabilize, he added.
Back to Top

Coal exports to China from Australia's DBCT slumps 38% on month in Oct: DBCT Management

Coal exports to China from the Dalrymple Bay Coal Terminal in Queensland, Australia, slumped in October by 38% month on month and 44% year on year, at 741,006 mt, according to data released Thursday by the terminal operator.

The China-bound October shipments were 34% lower than the 12-month rolling average of 1.13 million mt/month, and follows a similar slump in August when a 12-month low of 700,425 mt was sent, data collected from DBCT Management showed.

Exports to China from Australia had surged in recent months following Beijing placing restrictions on domestic production. Exports peaked in March, when 1.60 million mt was sent to China from DBCT.

DBCT exports to India, which surged in September, making it the largest export destination for the month, eased back in October.

The Queensland state government-owned common user facility shipped 909,707 mt to India in October, down 42% month on month but up 241% year on year, the figures showed. The monthly total is 7% above the 12-month rolling average for exports to India of 850,619 mt.

In September, India was sent the lion's share of DBCT coal with 23%, but its share sank to 17% in October, dropping below both Japan and South Korea.

Exports to Japan from DBCT were at a seven-month low of 1.12 million mt in October -- down 13% month on month and 17% year on year -- and were 7% lower than the 12-month rolling average of 1.20 million mt.

Shipments to South Korea fell 11% from September's 1.17 million mt to 1.04 million mt in October, but were up 35% year on year and 19% higher than the 12-month rolling average of 944,203 mt, data showed.

South America was sent its largest volume in 11 months with 335,467 mt in October, which is up 285% month on month and 200% year on year, and 50% higher than the 12-month rolling average of 223,320 mt, according to the figures.

Anglo American, BHP Billiton, Glencore, Peabody Energy and Rio Tinto are among the coal producers that ship via DBCT.

Europe, Taiwan and parts of Asia were among the other destinations for coal sent from the DBCT terminal in October.

Shipped volumes from DBCT totaled 5.51 million mt in October, according to DBCT Management, which is down 17% from September, up 5% year on year and only slightly below the 12-month rolling average of 5.57 million mt.

The breakdown of how much coal shipped from DBCT is thermal and metallurgical is not immediately available, however, a source close to the facility said earlier this year that generally it is 18% thermal coal and about 82% metallurgical coal.

The terminal has an 85 million mt/year shipment capacity, and from January to October, it has shipped 56.90 million mt, which translates to an annualized rate of 68.10 million mt/year, the DBCT Management figures showed.

On Thursday, there was one coal vessel loading at DBCT and nine at anchor, which is fairly well in line with the average of around two loading and nine queuing seen in October, DBCT Management data showed.
Back to Top

Grande Cache coal mine looking to restart operations

The Canadian coking coal producer Grande Cache Coal plans to reopen its shuttered surface mine and coal-processing plant next year, CBC News reported.

The surface mine will resume operations by the end of Q1 2017, and the coal processing plant will start operating within a month of the resumption of mining operations, the company said.

But the plans depend on shareholders' approval and the negotiation of key contracts, and the pre-production activities would start in January.

The company also said it plans to apply to the Alberta Energy Regulator to mine one of its underground coal seams and not to abandon it.

The company was acquired by Chinese coal producer Up Energy Development Group in 2015. In February of that year, Grande Cache Coal suspended surface-mine operations and 175 workers were let go. In December 2015, it ceased underground operations as well, putting 220 more people out of jobs.

But times have changed in the coal industry. In 2015, the price of coking coal averaged $120/t. Now, it's selling for more than $300/t -- prices not seen in five years.

Taje said restarting the surface mine could create between 100 and 130 positions. "Current production capacity is about a million tonnes per year, which is relatively small. High prices may allow them to recoup their investments and prepare for a bigger operation," he said.
Back to Top

Shandong strives to cut coal use to mitigate emissions

Eastern China's Shandong province planned to reduce annual coal consumption by 20 million tonnes by the end of 2017 compared to 2012, as it tries to cut high level of emissions, sources learned from a provincial meeting on environment held on November 23.

Shandong consumes around 400 million tonnes of coal in a year, accounting for 80% of its total energy consumption and 10% of China's total.

This has led to higher pollutant emissions, with sulfur dioxide, nitrogen oxide and chemical oxygen demand emissions ranking first in the country, and ammonia-nitrogen emissions ranking second.

The province will popularize efficient and environmental friendly pulverized coal fired boilers, and upgrade around 80% of its industrial coal boilers with capacity above 10 T/h (7 MW) by the end of 2017 and the remaining 20% by end-2018.

It will also promote ultralow emissions transformation of coal-fired unit; cut down use of 9.12 million tonnes of "sanmei" primarily used for scattered end users like households, by burning clean coal and gas, and adopting centralized heating and electric heating.

Shandong, one major coal producer in eastern China, produces some 150 million tonnes of coal each year, and had to buy large quantities of coal from other provinces or the abroad to meet local demand.
Back to Top

China to overfulfil 2016 coal capacity cut target, official

China is expected to overfulfil its coal capacity cut target of 250 million tonnes per annum (Mtpa) for 2016, said Jiang Zhimin, vice president of China National Coal Association, on November 23.

Jiang said the outcome to be definitely settled, though official statistics are yet to be available.

The resettlement of redundant workers and debt disposals are underway, and related financial policies on closed mines have been formulated, Xinhua News Agency reported, citing the vice president as saying.

China's coal prices have been rising rapidly since July, after edging up steadily in January from declining all the way during last year, while some coal enterprises are still in the red with average selling price lower than the year-ago level, Jiang pointed.

To cool the red-hot market and stabilize market expectation, Chinese miners and utilities have settled contract price of 5,500 Kcal/kg NAR thermal coal to be supplied next year at 535 yuan/t FOB with VAT, which would be adjusted moderately with the market changes.

According to Jiang, drastic fluctuation of coal prices may not happen next year, if the term contracts can be implemented strictly.

The country has also completed 2016 steel capacity cut target of 45 Mtpa, the National Development and Reform Commission announced on November 11.

Attached Files
Back to Top

U.S. steelmakers push Trump team for more trade defenses

The top U.S. steelmakers' association said it has been in contact with President-elect Donald Trump's transition team since his election on Nov. 8, as the industry seeks tougher trade defenses under his incoming administration.

Trade restrictions are tantalizing for an American steel industry struggling with foreign competition, but analysts say new measures could trigger a backlash from U.S. carmakers and other consumers who want unfettered access to overseas markets.

"We initially communicated with the transition team prior to the election and are continuing that effort post-election," said Lisa Harrison, a spokeswoman for the American Iron and Steel Institute (AISI), whose members include ArcelorMittal USA, Nucor Corp, U.S. Steel and AK Steel Holding Corp.

She did not comment on the content of the talks or who was involved, but said Trump adviser Dan DiMicco, a former Nucor chief executive who is the leading contender for U.S. trade representative in the Trump administration, is a strong advocate for the industry.

"We are proud of the prominent role he played in the campaign - and now in the transition," she said.

DiMicco has accused China, a top world steel producer, of "rampant and destructive trade cheating" in his blog.

Officials in Trump's transition team did not immediately respond to requests for comment. The New York businessman campaigned on a promise to promote the U.S. steel industry and toughen up trade terms with China and other countries.

U.S. steel traders said they were confident that the industry's representatives were pushing Trump's transition team hard for more trade restrictions, and expected that DiMicco was bringing those ideas directly to Trump.

"They have Trump's ear big-time in the form of DiMicco," one of the traders said, asking not to be named.

But he added that he expected auto manufacturers to push back: "Eventually its going to backfire massively. Carmakers will start screaming. But for now it’s a question of who lobbies the hardest."

U.S. steel company stocks have surged 25 percent since Trump’s election victory, fueled by bets for stronger trade defenses, tax cuts and infrastructure spending.

Trump has pledged to spend $1 trillion over 10 years on infrastructure, slash corporateand top-rate individual taxes, redraw trade deals to win back American jobs, and slap punitive import tariffs on Mexican and Chinese goods.

While investors have cheered his tax cut and infrastructure plans, his protectionist stance on trade has some worried. Protectionism stokes inflation and while this might initially help protected sectors like steel, it risks sparking a trade war that could ultimately damage U.S. and global growth.

"Higher steel prices are negative for actual economic activity and the risk for steel in the longer term is that price-sensitive demand could ultimately decrease," said Jefferies analyst Seth Rosenfeld.

Ford said last week that Trump's plan to slap 35 percent tariffs on cars and trucks imported from Mexico would hurt the auto industry and the U.S. economy, and has remained committed to making small cars in Mexico despite the tariff threat.

"Frankly these jobs that have left, they're not coming back and many jobs haven't left, they've been automated," said a U.S. trade lawyer who represents steel consumers.
Back to Top

Solomon gets green light for 3-fold expansion

The last thing the iron ore market needs is more production, but the company behind the expansion of a major iron ore hub in Western Australia claims it has no plans to increase ore output. Yet.

The country's Environmental Protection Authority has sanctioned a three-fold expansion of Fortescue Metals Group's Solomon Hub, which comprises the  Firetail and Kings producing mines. Together, Firetail and Kings have an annual production capacity in excess of 70Mt. The Solomon Hub made #6 on's World Top 10 Iron Mines in 2015.

“The company has no current plans to increase production from the Solomon Hub.”

Fortescue CEO Andrew Forrest famously called for a cap on iron ore production when the price of the steelmaking ingredient plumbed $55 a tonne lows in 2015, and has criticized top iron miners Rio Tinto and BHP Billiton for trying to squeeze smaller players like Fortescue out by keeping production high, thus suppressing the price.

But according to a post in today's Guardian, the company has no plans to ramp up production, even though documents from the EPA application allow it to grow output by 80 million tonnes a year.

“Fortescue began seeking regulatory approval for sustaining production at Solomon several years ago as a procedural measure to achieve the necessary permits for ongoing mining operations,” an FMG spokesman told the newspaper. “The company has no current plans to increase production from the Solomon Hub.”

While that seems a little hard to believe, what is more certain is that the environmental approval will turn up the volume on opposition against growing the mine. The area to be cleared for the expansion totals just over 12,000 hectares of native vegetation, which is double the footprint of the existing mine. But it gets worse for pro-mining advocates. Six hectares that would be bulldozed for mining purposes is currently habitat for two endangered species – the northern quoll and Pilbara leaf-nosed bat – along with the Pilbara olive python, which is considered vulnerable. State authorities have also raised concerns over the need for a new field of water bores, which could reduce the flows into nearby Hamersley Gorge by 12%.

The EPA has imposed 19 conditions on the proposed expansion, including management of flora and fauna, and prevention of groundwater contamination. The proposal still needs approval from state and federal environmental ministers. If it passes, the expansion will allow mining for the next 35 years.

Attached Files
Back to Top

Rio Tinto may cut iron ore output as it targets $5bn cash flow boost

Rio Tinto chief executive Jean-Sébastien Jacques said the mining giant can boost cash flow by $5m over the next five years via a new "productivity drive".

On top of its current $2bn cost-cutting target for the end of next year, Jacques told investors at an seminar in Sydney the company would prioritise "value over volume" and would drive productivity by "focusing on operational excellence to generate superior shareholder returns through the cycle".

For 2017, based on current production forecasts, Rio will generate operating cash flow of around $10bn based on the average prices during the recent quarter.

Jacques told investors he was prepared to cut iron ore output if it would improve cashflow, Bloomberg reported from the event, which would represent a major about-turn on the sector-wide strategy of recent years.

The CEO also predicted the rise in coal prices from China's recent output cut could not last, other outlets noted.

"I can tell you, we have been surprised by what the Chinese government did on the coking coal market," the France-born Londoner said. "Let's be clear, nobody saw it. But you can say for sure that at some stage they are going to increase capacity and coal prices will go down. There's no doubt about it," he said.

Rio, which on Wednesday agreed to sell its assets at Lochaber in Scotland to SIMEC for $410m (£330m) and earlier in the month sacked two directors over a controversial payment connected to assets in Guinea, continues to expect total cash returns to shareholders over the longer term to be in a range of 40-60% of underlying earnings, Jacques assured.

"We have placed our assets at the heart of the business to drive improved performance and ensure our resilience through the cycle.

"We are well on track to meet our target of $2 billion of cash cost savings by the end of next year. We are also taking advantage of any opportunity to generate value from mine through to market.

"Lifting the productivity on our $50 billion asset base creates a low risk and highly attractive return. It will deliver an additional $5 billion of free cash flow over the next five years."
Back to Top

JSW Steel to restart coking coal mining in US

JSW Steel to restart coking coal mining in US

JSW Steel plans to restart mining at nine coking coal mines with cumulative resources of 123 million tonnes at West Virginia in the US by March next year, following sharp rise in prices during the last few months, The Hindu reported on November 23.

Spot coking coal prices have more than trebled from $90/t to $310/t since July, on the back of strong demand from China and predictions of worst-ever cyclone in Australia.

These coking coal mines, which were acquired from a string of US-based companies in 2010, could not be developed due to fall in coal prices following global financial crisis and the subsequent economic slowdown.

"It has thrown a great opportunity to restart iron ore and coking coal mines in Chile and the US, though the increase in coking coal and iron ore prices are eating into the company's margins," said Seshagiri Rao, joint managing director of JSW Steel.

The company is closely evaluating the sudden spike in iron ore and coking coal prices to understand whether they are sustainable at the higher levels.

Fundamentally, there is no reason for iron ore and coking coal prices to go up. Given that there is incremental iron ore supply of 56 million tonnes, the game being played in the international markets is very difficult to understand, he said. When coking coal prices were above $310/t in 2008 and 2011, the steel prices were about $900/t.

However, steel prices today are below $500/t and coking coal prices are at $310/t and iron ore prices are at $90/t, said Rao.

Attached Files
Back to Top

Rio Tinto CEO didn't see coal price going up, but expects it to fall

Rio Tinto CEO didn't see coal price going up, but expects it to fall

Rio Tinto Chief Executive Jean-Sébastien Jacques on Wednesday admitted he didn't see the recent meteoric rise in coal prices coming. But he is already predicting the fall.

Jacques, named five months ago to run the world's second-biggest mining company, said it's now clear China's mandate to rid its skies of pollution by restructuring its state-owned coal industry was behind a tripling of coal prices since January.

"I can tell you, we have been surprised by what the Chinese government did on the coking coal market," Jacques told Rio Tinto's annual investment day seminar.

"Let's be clear, nobody saw it. But you can say for sure that at some stage they are going to increase capacity and coal prices will go down. There's no doubt about it," he said.

In April, China's State Administration of Work Safety introduced new coal-production caps, restricting the number of annual working days for its coal miners to 276 days from 330 previously. China also imposed import restrictions and banned imports of coal containing more than 3 percent sulfur and more than 40 percent ash.

Jacques said the "big uncertainty" was the speed at which state-owned enterprises will continue to restructure, and also admitted to being unsure of where to next for Chinese policy on industry.

Beijing earlier this year pledged to cut as much as 240 million tonnes of domestic steel output over the next five years, leaving Rio Tinto to scale back its hopes that production would hit 1 billion tonnes a year. Rio is one of the world's biggest importers of iron ore to China.

Rio Tinto also got it wrong on Chinese domestic iron ore production - a key determinant on how much iron ore China will import - said Jacques.

"If you had asked me the question six months ago, I would have said we believed they (Chinese mines) would produce 230 million tonnes," Jacques said. "Today, all the signs are they are producing 260-270 million."

Attached Files
Back to Top

South Korea Oct thermal coal imports drop nearly 23.8 pct on month

South Korea imported 6.73 million tonnes of thermal coal (including bituminous and sub-bituminous coal) in October, dropping 7.68% on year and 23.76% on month, customs data showed.

Of this, 95.1% or 6.40 million tonnes were bituminous coal, falling 4.82% from the year-ago level and down 22.22% from September.

Indonesia remained the largest supplier of bituminous coal in October, shipping 2.50 million tonnes, increasing 4.46% on year but down 19.2% on month.

This was followed by Australia with a shipment of 1.85 million tonnes, down 41.3% from a year ago and down 27.74% from the previous month; Russia at 1.03 million tonnes, rising 13.63% on year but down 41.98% on month.

The country imported 335,200 tonnes of sub-bituminous coal in October, sliding 41.36% from a year prior and down 44.59% on month, all from Indonesia.

Korea imported 931,800 tonnes of anthracite coal in October, down 8.82% compared to the same month last year but up 22.41% from September.
Back to Top

Equatorial Resources aims to invest $1.2 billion in Congo iron project

Africa-focused Australian mining company Equatorial Resources Ltd will aim to invest around $1.2 billion to develop its Badondo iron ore project in Republic of Congo, the company said.

John Welborn, a non-executive director of Equatorial Resources and chief executive of its Congolese unit Congo Mining Exploration Ltd, met Prime Minister Clement Mouamba on Tuesday and submitted an application for a mining license.

"The recent improvement in the price of iron ore makes Equatorial confident that it will find the necessary financing to develop the mine," the company said in a statement distributed late on Tuesday after the meeting.

African mining, particularly large iron ore projects, has been hit hard by the global commodities crash.

However, the S&P 1500 composite steel index .SPCOMSTEEL has surged since the U.S. election, bolstered by U.S. president-elect Donald Trump's perceived support for the steel industry.

Chinese iron ore futures are also rising amid news that production at steel mills in northern Hebei province will be curbed or even shut for as long as four months in an effort to combat pollution.

Equatorial Resources estimates annual iron ore production of 40 million tonnes at the Badondo mine and its feasibility study foresees construction beginning next year, the statement said.

Plans for the building of new infrastructure, including construction of a rail line and port to facilitate exports, must be finalised before the project can be developed, it said.
Back to Top

Samarco licensing moving forward despite fines, regulator says

Samarco’s quest to obtain permits for resuming its Brazilian iron-ore operations is progressing despite environmental fines and a court order, with a mid-2017 restart still possible, the state licensing agency said.

The venture owned by BHP Billiton and Vale, which halted work a year ago after a tailings dam collapse, is seeking a new operating license as well as additional permits to deposit waste into an unused pit called Alegria Sul rather than building a new dam. Minas Gerais state environmental regulator Semad sees merit in the Alegria Sul option, which the company says would allow it to resume at partial capacity for about two years.

“The benefit and the environmental balance is very positive,” Anderson Silva de Aguilar, who is overseeing the licensing requests, said in an emailed response to questions. "Environmentally, it is a lot better than depositing in an area that was not prepared or would have to be prepared for this purpose."

For now, Semad has received all the documentation requested from Samarco and is analyzing the plan to use the vacant pit while it formulates a set of guidelines for the mining complex license.

The regulator’s decision to look at re-licensing the mine’s main complex under a single “corrective” permit rather than requiring dozens of individual licenses, will simplify the process, according to Semad’s press office.


Samarco Mineracao, as the operating company is known formally, was the world’s second-largest producer of iron-orepellets before the dam collapse sent billions of gallons of sludge into the Rio Doce river valley. The incident killed as many as 19 people, contaminated waterways in two states, put thousands out of work and is threatening repayments on more than $3-billion in debt.

As it seeks new licenses, the mine is facing other regulatory and legal challenges that threaten to increase costs. Earlier this month, Brazil’s federal environmental agency Ibama said Samarco had yet to fully contain leakage from the dam that ruptured more than a year ago, imposing a fine of 500 000 reais ($149 000) a day until it proves otherwise.

Separately, a federal judge in Minas Gerais ruled Samarco had failed to prove it has definitively contained leaking. The judge gave the company 90 days to provide proof that the situation has been rectified, and 30 days to come up with a 1.2-billion-real guarantee.

While Samarco will need to also prove to Semad it has contained the leaking of mining waste before it can secure licenses, the issue is not slowing the agency’s work, according to Semad’s press office.

Attached Files
Back to Top

Indian state ports Oct thermal coal imports down 14.5pct on yr

India's 12 major government-owned ports imported 6.86 million tonnes of thermal coal in October, falling 14.5% year on year but increasing 10.4% from September, according to latest data released by the Indian Ports Association (IPA).

Coking coal shipments received by the 12 ports in October were 4.13 million tonnes, dropping 6.96% from a year ago but up 11.4% from the month prior, the data showed.

Paradip port on the east coast handled the highest volume of thermal coal in the month at 2.58 million tonnes, down 6.29% from a year ago.

The port also handled the highest coking coal shipments at 1.17 million tonnes, surging 56.9% from 746,000 tonnes in the same month last year.

The 12 ports are Kolkata, Paradip, Visakhapatnam, Ennore, Chennai, VO Chidambaranar (Tuticorin), Cochin, New Mangalore, Mormugao, Mumbai, Jawaharlal Nehru Port Trust (JNPT) and Kandla.

Cochin, JNPT, Kolkata and Chennai ports did not import any coal cargoes in October.

By end-October, India's thermal coal imports dropped 6.53% on year to 56.06 million tonnes during 2016-17 fiscal year (April-March), while its coking coal imports slid 6.17% on year to 29.04 million tonnes over the same period.
Back to Top

Iron ore price nudges $75

Volatility in the iron ore price continued on Tuesday as traders digested the latest news out of China.

On the Dalian Commodities Exchange iron ore futures climbed 6%, while the import spot price for 62% Fe content ore at the port of Tianjin closed up 6.5% to US$74.90 a tonne, reversing declines seen in the last two trading sessions.

A frenzied month of trading and the election of Donald Trump pushed the spot price to a two-year high on November 10, and it continued to climb to $80 a day later. That was followed by a 9% drop on the 15th, with the price settling a week ago at $72.20.

Chinese authorities recently upped trading fees and margin requirements to cool down the credit-fuelled speculation in iron ore, met coal and rebar. The steelmaking ingredient is up 72.1% year to date.

The fresh gains are down to strength in Chinese steel prices following further production cuts in the Northern China city of Tangshan, a major producer of Chinese steel, according to analysts at Metal Bulletin.

“The city has imposed restrictions on the production of coke, iron and steel in a bid to improve air quality in the region,” the group said, adding the restrictions will be in place for the next four months. “News of steel and coke production restrictions in Tangshan gave ferrous futures an upward push, sending the rebar contract to its daily limit of 2,900 yuan ($421) per tonne,” said Metal Bulletin.

The move up could also be a result of a bullish commodity report by influential bank Goldman Sachs.

The bank today raised its 3-month iron ore price forecast to $65, and 6 and 12-month predictions to $63 and $55, respectively, per tonne.

“Steel consumption is more resilient than expected and demand for iron ore is likely to be supported further by incremental restocking across the steel supply chain,” said Goldman. “Further, the pace of supply growth has slowed as a result of delayed capital expenditure and operational challenges.”
Back to Top

China, Brazil should work together on steel overcapacity: MOC

China and Brazil should work together to address steel sector overcapacity, as protectionism only compounds the situation, China's Ministry of Commerce (MOC) said Tuesday, after Brazil launched probes into Chinese steel products.

"The Chinese government has always held that trade remedies should be used in a cautious and restrained manner, and encouraged its businesses to solve trade frictions through trade, investment and technological cooperation with their foreign counterparts," said Wang Hejun, head of the MOC trade remedy and investigation bureau.

Protectionism will do no good in overcoming difficulties in the global economy and steel sector. On the contrary, it will hinder normal trade, Wang said.

The two emerging economies are closely-related in the steel sector as Brazil boasts vast iron ore deposits, and China is the largest steel producer in the world.

Wang's remarks came after Brazil announced Monday its first anti-subsidy investigations into hot rolled steel plate from China. Chinese steel products saw 14 anti-dumping probes from the Brazilian government in the past five years, with most cases ending in restrictive measures.

But Chinese steel accounts for less than two percent of the Brazilian market, according to Wang.

Plagued by excess production, the global steel sector has seen more trade disputes in recent years, with Chinese companies suffering the most.

China is calling for unity in tackling severe overcapacity, and has achieved remarkable progress in downsizing its domestic steel industry.

The country has reduced more than 90 million tons of excess capacity during the past five years, and the government plans to slash more by 2020.
Back to Top

Shanxi coking coal to ink term contracts with leading steel makers

Shanxi coking coal group China's top producer of the key steel making ingredient will sign mid to long term contracts with a group if six steelmakers including Baosteel ans Angang Group this afternoon.

This will be the first time term contracts have been signed for coking coal, following an industry meeting on November 12th.

It was not clear what terms for pricing and volume would be signed.
Back to Top

Brazil says China, Russia dumping steel; holds fire on tariffs

Brazil's International Trade Secretariat characterized exports of hot rolled steel from China and Russia as "dumping" in an announcement in the Official Gazette on Tuesday but requested more information before raising tariffs.

"A preliminary judgment has determined in the affirmative in regards to dumping," the entry read, adding the secretariat's decision was to hold off on taking any immediate action.

The investigation was opened in July at the request of Brazilian steel companies CSN and Gerdau SA as well as the Brazil subsidiary of ArcelorMittal .

The companies complained that cheap steel imports were unfairly eating into the domestic market when steelmakers in Latin America's largest economy are struggling due to a deep recession.
Back to Top

China's coastal coal freight falls on lower demand from power plants

Freight rates for shipping coal from northern China's Qinhuangdao port to the ports of Zhangjiagang, Shanghai and Guangzhou in the east and south fell in the week ended November 22, the port operator said Tuesday.

The freight rate from Qinhuangdao to Zhangjiagang in eastern China's Jiangsu province for 20,000-30,000 mt vessels dropped to Yuan 48/mt ($6.96/mt) on November 22, down Yuan 6.80/mt week on week, the Qinhuangdao port operator said.

The rate from Qinhuangdao to Shanghai for vessels with a capacity of 40,000-50,000 mt fell by Yuan 11.10/mt week on week to Yuan 36.50/mt.

The rate from Qinhuangdao to Guangzhou in southern China for 50,000-60,000 mt vessels dropped Yuan 6.60/mt week on week to Yuan 50.60/mt on November 22.

Less coal buying activity by downstream power generators was the reason for the fall in coastal coal freight, the report said.

Meanwhile, coal stocks at Qinhuangdao port stood at 6.58 million mt on November 22, up from 6.08 million mt on November 15, port figures showed.

Attached Files
Back to Top

Hebei finishes 2016 coal and steel capacity cut goals

Hebei province, the biggest steelmaking province in northern China, had eliminated 14.62 million tonnes per annum (Mtpa) of steel capacity by the end of October, achieving this year's target of 14.22 Mtpa ahead of schedule, Xinhua news reported on November 21.

Hebei, a northern province near the country's capital, is responsible for nearly a quarter of China's total steel output and has pledged to cut steel capacity by 31.17 Mtpa by 2017 and by 49.13 Mtpa by 2020.

Earlier this year, the province lifted its capacity cutting goals for this year to 14.22 Mtpa from 8.2 Mtpa in steelmaking, and to 17.26 Mtpa from 10.39 Mtpa in ironmaking.

Hebei had shed 15.79 Mtpa of ironmaking capacity by October, 91.48% of its target for 2016.

The province had completed its coal capacity cut goal ahead of schedule, by reducing 14 Mtpa at 54 mines by October.

It planned to shut 141 coal mines in the next three to five years, cutting 75.63 Mtpa of capacity. By 2020, the number of coal mines is expected to be below 60, with capacity combined at some 50 Mtpa.

Attached Files
Back to Top

Top China steel city orders more plant closures in pollution fight

China's top steelmaking city has ordered many of its industrial factories to curb production or even close for as long as four months through to March in a bid to clear the skies of smog.

Tangshan, a city in northern Hebei province, will seek to reduce steel production by requiring producers to cut emissions by as much as 50 percent from Nov. 15 to Dec. 31, according to a document published in the official Tangshan government newspaper late on Monday.

Steel plants with sinter facilities - those that process smaller particles of iron ore into lumps - that do not have desulfurization equipment are required to partially shut during the period, the document said.

The curbs may only have a limited impact on steel output from Tangshan since blast furnaces, or the big machines used to make steel, "are basically not impacted," said Richard Lu, analyst at CRU consultancy.

"That is actually not new to the steel industry there as the Tangshan government has implemented the same measures several times this year," said Lu.

Tangshan accounts for about half of the steel output in Hebei where nearly a quarter of China's total steel is made.

The city will also close all cement plants and coal-fired power plants that did not reach the minimum emission standards for four months from Nov. 15.

Coke production furnaces will be required to extend their production period to 36 hours before the new year. After Jan. 1, the production period will be further extended to 48 hours if the emission standard is still not met.

Tangshan will also limit the times vehicles can drive in the city between Nov. 23 and March 15.

"The pollution-related mandates are now increasingly used by local government in northern cities as a key way to fight smog," said a coal analyst with a Shanghai-based securities firm who declined to be named because he was not authorised to speak to media.

The latest restrictions in Tangshan may further curb supply of coke, he said. "Coke inventory is very low because of weather factors, transportation difficulties and tight coking coal supply," he added.

On Monday, about half a dozen listed Chinese companies, mainly in the pharmaceutical sector, temporarily halted production in China's northern city of Shijiazhuang as part of an anti-pollution drive.

China has adopted various measures over the years to reduce the smog that covers many of the country's northern cities in the winter, causing hazardous traffic conditions and disrupting daily life.

Attached Files
Back to Top

Shaanxi Coal & Chemical cuts coal prices for key utilities

Shaanxi Coal & Chemical cuts coal prices for key utilities

Shaanxi Coal and Chemical further lowered its coal price to local and 6 key utilities from November 22.

The group cut prices 5 Yuan to 6 out of Province utilities. On November 5th the company had lowered its prices by 10 Yuan to the same 6 utilities.
Back to Top

India aims to boost low-grade coal sales while global prices high

India is trying to boost sales of its low-quality coal and lower freight costs in a bid to cut imports, while global prices are high, Reuters reported.

State-controlled Coal India, the world's largest miner of the fuel, has sharply boosted output in the past two years but has struggled to sell all of that due to softer domestic demand and the availability of superior-grade foreign coal at competitive rates, until recently.

Benchmark Australian coal prices have more than doubled this year, helped by reduced Chinese mining and strong demand across Asia and Europe just when exporters cut output. But prices have begun to recoil this month as China eased restrictions on domestic mining.

"Our prices are already very competitive," India's Coal Secretary Anil Swarup said. "If transportation costs can be brought down, more and more private companies will bid to buy from Coal India."

Swarup met Railways Minister Suresh Prabhu late last month to discuss lowering the charges to move coal in some routes to lure private firms away from foreign coal.

Daily dispatches of coal had already jumped by a fifth this month to around 1.6 million tonnes, said a senior Coal India official, adding the company is set to make a record amount of coal available to be sold through auctions. The company typically sells only 10% of total output through auctions to private companies but the government has relaxed that limit.

Higher international prices and the rise in local output are expected to cut India's imports by around 20 million tonnes this fiscal year from the 181 million tonnes brought in for the year ended March 31, 2016, said the Coal India official.

Coal imports fell 16% to around 10 million tonnes in September, the lowest level since April 2013, according to brokerage Motilal Oswal.

Attached Files
Back to Top

Mongolia Jan-Oct coal exports soar 64pct on yr

Coal-rich Mongolia exported 18.70 million tonnes of coal over January-October this year, soaring 64.07% from 11.40 million tonnes the same period last year, showed data from the Mineral Resources Authority of Mongolia.

In October, coal exports of the country dropped 15.9% from September to 2.14 million tonnes, the data showed.

Exports of washed coking coal increased 25.9% on month to 0.16 million tonnes in October, while that of raw coking coal dropped 34.8% from September to 0.70 million tonnes.

The country exported 0.57 million tonnes of thermal coal in the month, rising 21.1% on month.

In the first ten months, Mongolia produced 24.42 million tonnes of coal, with output in October gaining 20.3% on month to 3.70 million tonnes.

Its coal output stood at 24 million tonnes last year, down 1.64% year on year.

Over January-October, Mongolia sold 24.36 million tonnes of coal, with domestic sales at 5.52 million tonnes.

In October, coal sales slid 4.3% on month to 3.03 million tonnes, with domestic sales rising 43.6% on month to 0.89 million tonnes.

Attached Files
Back to Top

Will coal price retreat be a Dunkirk or Stalingrad?

 It may be a tad early to call a peak in the price of thermal coal in top-consuming region Asia, but at the very least the momentum seems to have been lost from a commodity that has surged some 130 percent in the past 10 months.

If coal prices have already peaked, the question is which of the World War II battles of Dunkirk or Stalingrad will the retreat most resemble.

A Dunkirk-style retreat would see coal prices hold on to much of their gains this year, just as the British Army managed to keep much of its fighting strength by evacuating from France in the face of a German victory in 1941.

A Stalingrad-style defeat would see coal prices surrender most of their gains in a rout similar to what happened when the German Sixth Army was surrounded and annihilated by Soviet forces in the winter of 1942-43 at Stalingrad.

So far, the pullback in thermal coal prices has been very modest, with the Australian benchmark, the weekly Newcastle port index dropping to $100.52 a tonne in the week ended Nov. 18.

This was down from the 44-month high of $109.69 a tonne the previous week, and the first downward move since last August.

The index rose 131 percent between its 10-year low of $47.37 a tonne on Jan. 22 to its peak on Nov. 11.

While this is an exceptionally strong rally, history suggests that the retracement may be quite robust as well.

Between November 2006 and July 2008, the index surged 372 percent, with coal reaching its all-time high of $194.79 a tonne on July 4, 2008.

It then slumped by 69 percent, taking coal back to $60.30 a tonne by March 2009. However, this price was still almost $20 more than the starting point of the prior rally.

From the trough in March 2009, Newcastle coal rallied 126 percent to $136.30 a tonne by Jan. 14, 2011.

That peak marked the start of a five-year downward trend during which coal dropped 65 percent to the low in January this year.

Given that the two previous rallies in the Newcastle index were both followed by pullbacks of more than 60 percent, is it likely that history will repeat itself this time around?


It's still possible that prices may not have peaked yet, given we are just at the start of peak northern hemisphere winter demand period.

But, if the $109.69 a tonne from Nov. 11 does represent the peak of this cycle, then a retreat in the order of 60 percent would take prices back to around $43 a tonne.

This seems extremely unlikely as an entirely different set of circumstances are prevailing this time around compared with the price plunges of 2008-09 and 2011-15.

In the rally up to July 2008 coal prices had been pulled along with other commodities as investors believed China's appetite for natural resources was insatiable.

The 2008 financial crisis and global recession crushed those hopes, and coal fell dramatically in tandem with other commodities as world economic growth stumbled.

In the rally from 2009-11, stimulus spending by China provided a platform for rising prices, especially since the supply response was slow in coming.


Australia shares end at month high led by miners, energy firms; NZ down
Platinum market deficit set to shrink in 2017 - WPIC

But when new mines came on stream and existing ones pumped up output, the rally fizzled and coal was set up for an extended slump as the excess capacity was worked through.

In stark contrast, the rally so far in 2016 has been mainly driven by Chinese domestic considerations, with the most important factor being the decision by the authorities in Beijing to limit the number of days coal mines could operate.

This led to a sharp drop in production, with China's output falling 11 percent in the first 10 months of 2016 from the same period a year earlier.

Imports couldn't make up for this shortfall, hence the sharp rise in the main Asian benchmark prices.

It's likely that this rally will be ended by Chinese political decisions, with Beijing reversing course and allowing mines to operate for 330 days a year, up from 276 before, ensuring supply will be adequate but not enough to collapse prices.

To suggest coal prices are heading for a rout also ignores the fact that there is far less spare capacity around currently, with those mines that survived the five-year slump operating as efficiently as they can.

And the pullbacks after the previous rallies had different dynamics, the first being a global recession and the second being an extended period of oversupply.

Neither of these are currently the case, suggesting that the pullback in coal prices will be more modest.

Given China's primacy in Asian coal markets, it's likely coal will drop to a level at which the majority of Chinese domestic mines can operate profitably and meet their debt obligations, while still selling at a price that won't stoke inflation or damage power utilities.

Where that magic number lies is open to debate, but it's unlikely to be above $100 a tonne or below $60.
Back to Top

About 500 iron ore jobs to go at Rio Tinto

Iron ore accounts for almost 90% of Rio's earnings, but that market is expected to remain oversupplied. (Image of the Paraburdoo operation, in the Pilbara, courtesy of Rio Tinto)

World's second largest miner Rio Tinto is cutting more jobs across its iron ore division in Western Australia as part of a major restructuring of its most profitable division, announced in June.

While the company did not release numbers, it did confirm that  "rolling reductions" were underway, which are estimated to be around 500 jobs or 4% of Rio Tinto’s ore division’s workforce, the Australian Broadcasting Corporation (ABC) reports.

Fresh job cuts at Rio’s iron ore business are part of a major restructuring of the division, the miner’s most profitable one.

This would be Rio’s third major staff cut in the last two years. Currently, the company employs about 11,000 people after shedding about 700 workers early this year and about 800 in March 2015.

"The market outlook remains challenging and we currently have 1,000 initiatives underway across our business to reduce costs, improve productivity and ensure we remain internationally competitive," it said in a statement quoted by ABC.

Speaking to reporters Monday, Western Australia’s Premier Colin Barnett urged Rio to ride out the tough times.

"Companies have got a responsibility to maintain workforce," he said according to AAP. "Only two years ago, they were all saying they didn't have enough workers. The world hasn't changed that much.”

"Let's face it – iron ore prices are pretty good," Barnett said.

Iron ore prices went up close to $80 a tonne early this month and the steelmaking ingredient was selling for $70.34 on Monday, dropping more than $2 per tonne since Friday, according to the Metal Bulletin Index. BHP, Rio Tinto and Fortescue Metals Group have all flagged that they expect iron ore prices to fall further next year, perhaps back to about $40 per tonne.

A Rio spokesman would not comment on the latest job cuts but confirmed the company believes the market remained “challenging”.

Last week, the company announced it would suspend mining at one of its local operations for the first time since the global financial crisis forced Rio to begin to cutting costs.

Attached Files
Back to Top

Iron-ore’s party gives way to hangover as China stockpiles surge

For iron-ore, it is the morning after the night before. Prices have given up most of the gains inspired by Donald Trump’s surprise win and a speculative frenzy in China, with a surge in port stockpiles in the top user reminding investors that fundamentals still count.

“The speed of the recent rally leaves it open to the charge that price action has been too much, too fast,” Dane Davis, an analyst at Barclays in New York, said in a note that asked “After the party....the hangover?” The balance of risk for iron as well as copper is skewed to the downside as the dollar strengthens and the effects of Trump’s win wear off, according to Davis.

iron-ore prices barreled to a two-year high this month as investors celebrated Trump’s victory on the outlook for infrastructure spending at the same time that commodities futures volumes surged in China. The rally has been thrown into reverse after mainland exchanges raised charges to quell the fervor, and the US currency advanced on prospects for higher interest rates. The port holdings data have added to the bearish mix, reinforcing signs of ample supply.

“As it did earlier this year, China has cracked down on speculation in the iron-ore market,” Davis said. “With these stricter standards in place, the iron-ore price should continue to ease off recent highs, though it may find support from continued highs in other steel raw materials, such as met coal, and a domestic steel market that looks to set to grow production in 2016.”


In Asia, the SGX AsiaClear contract was at $67.13 a ton at 2:05 p.m. in Singapore on Monday. That follows a 15% drop last week, and puts prices little above the $64.78 close on Nov. 8, the last day of trade of before Trump’s win. On the Dalian Commodity Exchange, futures are at 562 yuan ($81) a ton, compared with the 519 yuan close on Nov. 8, and the Nov. 14 high of 627 yuan.

Benchmark spot with 62% content at Qingdao fell 8.8% last week to $72.79 on Friday, capping the first weekly drop in almost two months, according to Metal Bulletin Ltd. Prices, which remain 67% higher in 2016, may average $58 this quarter and $50 next year, according to Barclays.

As prices sank last week, port inventories in China climbed to the highest since September 2014, according to Shanghai Steelhome Information Technology Co. The holdings rose 2.6% to 110.58-million tons, the biggest%age increase in more than a year. They’re up 19% in 2016.

Miners’ shares have been whipsawed by iron-ore’s sudden surge and slump. In Sydney, Fortescue Metals Group Ltd., Australia’s No. 3 shipper, dropped 7.8% last week after a 19% advance the week before. Brazil’s Vale gained 15% in the period to November 11, then lost 6% last week.

The recent surge in prices “has to do with speculation, and trading has since become more rational,” said Dang Man, an analyst at Maike Futures Co. in Xi’an, China. “iron-ore’s fundamentals have never been great. The huge increase in port stockpiles doesn’t bode well.”

Attached Files
Back to Top

Indian coal imports to reach 160 Mt in FY 2016-17

India is expected to import around 160.16 million tonnes of coal in fiscal year 2016-17 (April-March), down 20% year on year, Minister of State for Coal, Power, Renewable Energy and Mines Piyush Goyal said.

The demand of coal in fiscal year 2016-17 is initially estimated to be 884.8 million tonnes, against which supply plan from indigenous sources has been estimated to be 724.7 million tonnes, leaving a demand supply gap of 160 million tonnes to be met through imports by consuming sectors, he said.

The country has imported 86.5 million tonnes of coal valued at Rs 3,3489.3 crore ($4.92 billion) during April-August in the ongoing fiscal.

Of the estimated supply of 724.71 million tonnes this fiscal year, state-run Coal India Limited (CIL) will supply 598.61 million tonnes.

On account of increased production by CIL in the last financial year, coal imports have fallen 8.22% on the year to 199.8 million tonnes in 2015-16, Goyal added.

In order to meet coal demand internally and make India self-sufficient in coal production, the government is focused on increasing domestic production, which includes efforts to expedite environment and forest clearances, land acquisition and coordinated efforts with the railways ministry for movement of coal, the minister said.

CIL is also aiming to produce 1 billion tonnes of coal by 2019-20.

Attached Files
Back to Top

China's Hebei province completes 2016 steel capacity cuts

China's biggest steel making province Hebei had eliminated 14.62 million tonnes of steel capacity by the end of October, achieving this year's target of 14.22 million tonnes ahead of schedule, Xinhua news reported on Monday.

Hebei, a northern province near the country's capital, is responsible for nearly a quarter of China's total steel output and has pledged to cut steel capacity by 31.17 million tonnes by 2017 and by 49.13 million tonnes by 2020.

Earlier this year, the province lifted its capacity cutting goals for this year to 14.22 million tonnes from 8.2 million in steel making, and to 17.26 million tonnes from 10.39 million in iron nmaking.

Hebei had eliminated 15.79 million tonnes of iron making capacity by October, 91.48 percent of its target for 2016.

The local government also said Hebei had completed its capacity cutting for coal output ahead of schedule, by reducing 14 million tonnes by October.

Attached Files
Back to Top

China association protests markup by overseas iron ore producer

The China Iron and Steel Association (CISA) has protested at a markup by a leading iron ore producer that targets Chinese buyers.

"It is obviously unfair," a CISA official said on Friday, who did not name the company but hinted it is among the world's top-three iron ore miners.

When discussing new agreements with Chinese steel firms, the company decided to impose a premium in addition to prices published by Platts, a benchmark price assessment in physical energy markets, the official said.

The official said the practice damaged the current pricing mechanism and disturbed trade order, and called on the two sides to "sit down and talk" to solve the problem together.

China is the world's biggest consumer of iron ore, with the imports up 8.9 percent year on year in the first ten months.
Back to Top

China steel exports to remain high in 2017: report

China's steel exports will remain high in 2017 due to flat consumption domestically and slow capacity rationalization, a recent report pointed out, forecasting exports at 100 million tons next year.

International rating agency Fitch expects Chinese apparent steel consumption to remain between 700 and 705 million tons next year, reflecting decelerating property growth, stable infrastructure investment growth, and a favorable outlook for Chinese automobile and appliance consumption.

On the other hand, capacity rationalization will remain a key theme of the sector, with a target of 14 million to 27 million tons annually until 2020.

As a result, exports should remain high in 2017 as Chinese producers continue to benefit from the yuan's exchange rate and lower raw-material prices, the report concludes.

China's over-supplied steel sector experienced years of plunging prices and factory shutdowns due to the sluggish economy. However, with encouragement from the upward trend of prices from the beginning of this year, many steel mills are resuming production.

Official data showed China's crude steel production increased 0.4 percent year on year to 603.78 million tons in the January-September period.
Back to Top

China Shenhua Oct coal sales rise 34.9pct on yr

China Shenhua Oct coal sales rise 34.9pct on yr

China Shenhua Energy Co., Ltd, the listed arm of coal giant Shenhua Group, sold 35.6 million tonnes of coal in October, rising 34.9% on year but dipping 1.66% on month, the company announced in a statement late November 19.

The increase was mainly bolstered by a 147.8% year-on-year rise in sales of outsourced coal, which edged up 0.88% from September.

Sales of self-produced were 24.2 million tonnes in the month, up 11% on year but down 2.81% on month.

The company sold 323.8 million tonnes of coal over January-October, increasing 6.06% from the year prior. Coal sales price averaged 293 yuan/t during the period, exclusive of VAT, down 1.7% on year.

Coal sales via northern ports in October climbed 2.03% on month and up 30.5% on year to 20.1 million tonnes, with those from Huanghua port at 14.4 million tonnes or 71.6% of the total, surging 97.3% on year but down 2.7% on month.

Total coal sales via northern ports stood at 190.4 million tonnes in the first ten months, up 13.9% on year.

The company produced 25.4 million tonnes of coal in October, up 9.48% year on year and unchanged from September.

Total coal production stood at 238.7 million tonnes in the first ten months, gaining 2.1% from the year prior, it said.

Shenhua Group and other three major miners in China would cut prices by 5 yuan/t for spot 5,500 Kcal/kg NAR thermal coal to 680 yuan/t FOB Qinhuangdao with VAT, effective November 21.

For those who had not signed term contracts, the company has stopped thermal coal supply since November 15.
Back to Top

Indonesia targets to halve coal exports by 2019

Indonesia aims to halve coal exports over the next three years as domestic demand grows and production falls, Reuters reported, citing an energy ministry official.

Coal exports are expected to drop to 160 million tonnes in 2019, down from a forecast 308 million tonnes this year, said Hersonyo Wibowo, who heads the coal division at Indonesia's energy ministry.

"After 2019 production is targeted to be flat at 400 million tonnes, but in the future domestic consumption will increase, especially for electricity, and exports will decline," Wibowo said.

The world's top thermal coal exporter aims to produce 419 million tonnes of coal this year but it was not immediately clear how the government planned to limit production, the bulk of which is currently shipped to China and India.

Last year Indonesia produced 460 million tonnes of coal, Wibowo said, noting that he expects output to exceed the targeted amount this year, due to higher prices.

Demand for coal at Indonesia's power plants, meanwhile, is expected to climb to 119 million tonnes in 2019, up from the 86 million tonnes that are expected to be consumed domestically this year, Wibowo said.
Back to Top

Tokyo Steel to raise all Dec product prices by 5,000 yen/T

Tokyo Steel Manufacturing Co Ltd said on Monday it would raise the prices of all of its products by 5,000 yen ($45.12) per tonne for December delivery, reflecting a rally in raw material prices and higher product prices abroad.

Tokyo Steel's pricing strategy is closely watched by Asian rivals such as South Korea's Posco and Hyundai Steel Co and China's Baoshan Iron & Steel Co (Baosteel) that export to Japan.

The flat increase means product prices for Japan's top electric-arc furnace steelmaker will rise by about 7 to 11 percent in December depending on the product, Tokyo Steel's managing director, Kiyoshi Imamura, told reporters. The increase comes amid rising prices for scrap metal and a series of price hikes by global steel mills to pass on surging coking coal prices, he said.

Tokyo Steel left its prices unchanged in November but cut October delivery prices by up to 13 percent.

"Global steel market has entered in a clear bullish trend as steelmakers worldwide have been boosting product prices in the face of surging coking coal prices," Imamura said.

Recycled scrap metal, a main feed material for electric-arc furnaces, has soared by 5,000 to 7,000 yen a tonne since hitting a bottom in August, tracking a rally in coking coal, a key steelmaking material for blast furnaces, he said.

Coking coal has more than tripled this year as China, the world's biggest coking coal producer, has cut supply to curb overcapacity and pollution.

Based on the flat increase, prices for the Tokyo Steel's main product, H-shaped beams, which are used in construction, will climb by 8 percent to 70,000 yen per tonne. Steel bars, including rebar, will rise by 11 percent to 52,000 yen. The company produces 15 different steel products.

This is its first across-the-board price hike since May.

"If the bullish trend in steel market continued, we may raise product prices again for January delivery," Imamura said.

However, his market outlook was cautious, adding the recent rally has been driven by higher raw material costs instead of stronger demand growth and tighter supply.

"We are not so confident that the steel market's rally will continue as the fundamental problem of oversupply due to China's massive output has not been changed," he said.
Back to Top

Brazilian judge accepts criminal charges for Samarco dam disaster – report

A federal judge in Brazil has accepted the criminal charges brought by prosecutors against four companies and 22 employees for a burst tailings dam at the Samarco mine last November, the G1 news sitereported on Friday.

Prosecutors last month accused Samarco, its joint venture owners Vale and BHP Billiton, and consultant VogBR of environmental crimes, while employees were accused of homicide for the disaster that killed 19 people and polluted a major river.
Back to Top

Shanxi launches safety check over coal mines

Northern China's coal-rich Shanxi province has launched a safety check over coal mines since November 10, according to a notice jointly released by the Shanxi Coal Industry Administration and Shanxi Coal Mine Safety Bureau.

The safety check, which will last until January 10 next year, will cover coal mines in operation, under construction and those that have suspended production, according to the notice.

The move came after water inrush accidents at Ping'an Mine owned by Shouyang-based Duanwang Coal Industry Group on October 13 and Yishun Mine owned by Shuozhou-based Xiyi Energy Group on November 2, and a gas explosion at Chongqing-based Jinshangou Mine on October 31.

The inspection consists of self-examination of coal producers and supervision from municipal and provincial governments, including ten aspects of requirement for coal mines in the province, in order to further improve safety levels at all local mines.

The province's safety check was aimed at ruling out illegal mining, safety loopholes, unapproved production resumption and production beyond approved capacity, among others.

Those mines violating the suspension order will be closed according to laws, and those ordered to cut coal capacity yet still in production will be enforced to halt production.

Attached Files
Back to Top

Huanghua port has become China's top one coal handling port, said local marine bureau at a press conference on November 10.

The port realized coal handlings of 168 million tonnes as of November 6, surging 57.01% from the year-ago level, according to the Cangzhou Marine Bureau.

This was mainly attributed to increased coal supply from newly-commissioned Zhunchi railway.

In addition, Huanghua port has been opened to all coal producers since 2015, instead of being exclusive to Shenhua Group.
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