Mark Latham Commodity Equity Intelligence Service

Friday 18th December 2015
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    Oil and Gas

    Steel, Iron Ore and Coal


    Moody's places ratings of BHP Billiton on review for downgrade

    Global Credit Research - 18 Dec 2015

    Sydney, December 18, 2015 -- Moody's today has placed the ratings of BHP Billiton entities on review for possible downgrade. The ratings review includes the A1 senior unsecured ratings, (P)A1 senior unsecured medium term note (MTN) and shelf ratings and the (P)P-1/P-1 short term ratings of the subsidiaries of BHP Billiton Limited and BHP Billiton Plc, as well as the A1 issuer ratings of BHP Billiton Limited and BHP Billiton Plc. Other ratings placed on review include the A2 senior unsecured ratings of WMC Finance (USA) Limited, the A3 subordinated note ratings of BHP Billiton Finance (USA) Limited and BHP Billiton Finance Limited, and the (P)A2 senior unsecured MTN programme rating of WMC Finance Ltd.

    The review was prompted by the precipitous decline and persistent weakness in commodity prices and follows the recent downward revisions of Moody's oil and natural gas price assumptions on 15-December 2015 and Moody's base metals and bulk commodity prices on 08-December 2015.

    Moody's does not expect commodity prices shift significantly in 2016 from the low levels observed in late 2015, which have touched multi-year lows for several commodities. For the calendar years 2016 and 2017, Moody's current price assumptions for major commodities produced by BHP Billiton include: Brent crude averaging USD43 and USD48 per barrel; iron ore 62% Fe China averaging USD40 and USD45 per tonne (t); high quality metallurgical coal averaging USD80/t and USD85/t; and Copper averaging USD2.15 and USD2.35 per pound; respectively. Moody's also assumes Newcastle thermal coal will average USD55/t for both years.
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    Argentine Peso Collapses 29% After Government Lifts Currency Controls

    For those interested in a case study of what happens after a dramatic devaluation, you now have front row seats for what is likely to be a 25-30% peso plunge. Grab the popcorn.

    That's what we said on Wednesday evening in "Prepare For Peso Plunge: Argentina Lifts Currency Controls," after the country's FinMin Alfonso Prat-Gay announced that, as promised, new President Mauricio Macri would move to unify the official and black market exchange rates in the face of depleted FX reserves and still sky high inflation.

    Now let's just hope Macri's move to negotiate new terms for the $17 billion derivatives book amassed by former central bank governor Vanoli is enough to keep the country from taking a massive hit on its dollar futures.
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    Rival Libyan Factions Sign UN Peace Deal After Months of Talks

    Rival Libyan factions overcame last-minute disagreements and signed a United Nations-brokered peace deal on Thursday that supporters hope will help end years of deepening turmoil and counter Islamic State militants in the country.

    A majority of members from both the Tripoli-based General National Congress and the House of Representatives in the eastern city of Tobruk were present at the signing in Skhirat, Morocco. Along with delegates from around Libya, they represented about 80 percent of the nation’s diverse groups and factions.

    “Today is a historic day for Libya,” UN envoy Martin Kobler said. “All the parties have made concessions, putting the interests of the country first. The international community will continue its support for the future Libyan government.”

    The two opposing administrations, each with its own legislature and armed allies, have tussled over oil and power for more than a year, shattering the economy and creating a vacuum that allowed Islamic State to thrive. Analysts have cautioned the divisions are so deep, there is no guarantee the deal will hold.

    The UN road-map for a way to end the chaos triggered by the fall and slaying of ex-leader Muammar Qaddafi four years ago was endorsed by 17 nations in Rome last Sunday. They included the five permanent members of the UN Security Council, large EU states and Libya’s neighbors.
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    Brazil prosecutors charge 12 in SBM Offshore graft scheme

    Brazilian prosecutors on Thursday charged 12 people with a bribery scheme involving Dutch firm SBM Offshore NV, the world's top leaser of oil production ships, and state oil firm Petroleo Brasileiro SA .

    Police said they had four arrest orders as part of the scheme, dubbed "Operation Black Blood," though two of them involved suspects already in jail in the southern city of Curitiba, the epicenter of a broader investigation into price fixing and bribery on Petrobras contracts with engineering firms.

    Former Petrobras executives Pedro Barusco, Jorge Zelada and Renato Duque were charged with corruption along with former SBM sales agents Julio Faerman and Luis Eduardo Campos Barbosa da Silva, according to a statement from federal prosecutors.

    Anthony Mace and Didier Keller, both former SBM chief executive officers, were charged with racketeering and corruption as was Robert Zubiate, former senior vice president.

    Earlier on Thursday, police carried out raids and arrests in "Operation Black Blood" in Rio de Janeiro, Angra dos Reis and Curitiba, police said.

    The alleged bribery in the SBM probe in Brazil predates the better-known "Operation Car Wash," which is focused on graft involving engineering firms and Petrobras between 2003 and 2014.

    Between 1998 and 2012, there were "undue payments" in Switzerland of at least $46 million relating to contracts for floating oil production, storage and offloading ships, prosecutors said.

    They said Duque, who is currently in jail on corruption charges in Curitiba, asked SBM sales agents for $300 million for the ruling Workers' Party to fund its 2010 election campaign.

    An SBM representative in Brazil said none of the company's offices in Brazil had been raided. Petrobras did not immediately respond to request for comment.

    SBM, which supplies and operates floating production, storage and offloading vessels, is negotiating a leniency agreement with the Brazilian government, sources have told Reuters.

    The company settled with Dutch authorities in November 2014 for a record $240 million, ending a more than two-year inquiry into improper payments to government officials in Angola, Brazil and Equatorial Guinea by sales agents between 2007 and 2011.

    Dutch prosecutors said they received information from Brazilian authorities that SBM Offshore's Brazilian sales passed on some of their commissions to Brazilian government officials via offshore entities.

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    Joy Global swings to loss, cuts dividend

    U.S. maker of mining equipment Joy Global logged Wednesday an unexpected and sharp loss in its fourth quarter and announced it was cutting its dividend as it struggles to survive long-dragged drop in demand triggered mostly by low commodity prices.

    Announcing a loss of $1.32 billion for the fiscal fourth quarter ended Oct. 30, the Milwaukee-based maker of giant shovels, conveyor belts and jumbo drills also posted guidance for the current fiscal year well below analyst expectations.

    Joy now expects sales of $2.4 billion to $2.6 billion for the current year, down from $3.17 billion in the year ended Oct. 30. That means the mining equipment maker expects to sell less than half the $5.66 billion peak it reached only three years ago, around the time mining companies began cutting spending on new equipment and servicing of old machinery.

    The company took impairment charges of $1.34 billion during the quarter, citing a “prolonged severe downturn of global commodity markets.”

    The company took impairment charges of $1.34 billion during the quarter, citing a “prolonged severe downturn of global commodity markets.” The write down compares with profit of $129.7 million, or $1.31 per share, barely a year earlier.

    Joy Global said it had exceeded cost-reduction targets during the year and aims to cut another $85 million in 2016.

    "We are controlling the things we can, and are confident our strategies and operational execution will position us well for the future, but the state of our end markets sets up another challenging year in 2016," Chief Executive Ted Doheny said in a statement.

    The company, which gets more than 60% of its revenue from coal miners, forecast adjusted earnings of 10 cents to 50 cents a share for the current year, down from $1.95 per share in the year ended in October.

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    China Nov power consumption up 0.6pct on yr

    China’s power consumption stood at 465.8 TWh in November, rising 0.6% on year and up 3.72% on month, showed data from the National Energy Administration (NEA) on December 17.

    Power consumption by the residential segment was 54.7 TWh, rising 6.5% from the year prior but down 3.36% from October.

    For the non-residential segment, the primary industries – mainly the agricultural sector – used 7.4 TWh of electricity in November, rising 6.6% on year and up 1.37% on month.

    The secondary industries – mainly the industrial sector – consumed 347.1 TWh of electricity, falling 1.6% on year but up 5.25% from October.

    The industrial sector specifically, consumed 341.2 TWh of electricity in November, decreasing 1.6% from the year before but up 5.15% from October, with the heavy industry accounting for 83.1% or 283.6 TWh, dropping 2.4% year on year but up 4.84% on month.

    Power consumption by tertiary industries – mainly the services sector – reached 56.6 TWh in November, increasing 9.4% year on year and 2.17% higher from the month prior.

    Over January-November, China consumed a total 5,049.3 TWh of electricity, up 0.7% from the same period last year, the NEA said.

    Power consumption by the residential segment amounted to 668.6 TWh during the same period, gaining 4.7% from the previous year.

    Under the non-residential segment, the primary industries used 95.3 TWh of electricity, up 3% year on year; the secondary industries used 3,633 TWh of power, down 1.1% year on year, with the industrial sector at 3,569.8 TWh, down 1.1%; while the tertiary industries consumed 652.4 TWh, up 7.3%.

    Meanwhile, the average utilization of power generating units across the country dropped 7.91% year on year to 3,597 hours over January-November this year.

    Hydropower plants logged average utilization of 3,256 hours during the same period, dropping 4.09% from the previous year; while thermal power plants logged average utilization of 3,916 hours, falling 8.31% from a year ago.

    China added 90.44 GW of power generating capacity from January to November, including 13.31 GW of new hydropower capacity and 47.51 GW of new thermal power capacity.
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    Baltic Dry Crashes To New Record Low As China Demand Weakens.

    Despite a brief dead-cat-bounce late November, which Jim Cramer heralded as evidence of stabilization in China, the world's best known freight index has collapsed to new all-time record lows this morning. Amid a persistent glut of ships and ongoing concerns about Chinese steel imports, The Baltic Dry has tumbled to 471 - the lowest level in at least 30 years.

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    As Bloomberg adds, China, which makes about half the world’s steel, is on track for the biggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence...

    Owners are reeling as China’s combined seaborne imports of iron ore and coal -- commodities that helped fuel a manufacturing boom -- record the first annual declines in at least a decade. While demand next year may be a little better, slower-than-anticipated growth in 2015 has led to almost perpetual disappointment for rates, after analysts’ predictions at the end of 2014 for a rebound proved wrong.

    “It doesn’t help that Chinese steel production is about to see the most dramatic decline to the lowest in 20 years,” said Herman Hildan, a shipping-equity analyst at Clarksons Platou Securities in Oslo.“Demand growth is collapsing.”

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    US Industrial Production Crashes Most Since 2009, Weather Blamed

    For the third month in a row US Industrial Production dropped MoM, crashing 0.6% in November (against expectations of a mere 0.2% drop). This is the 9th month of 2015 with no MoM increase in industrial production and is the biggest MoM drop since March 2012. However, for the first time since Dec 2009, Industrial Production fell YoY (down 1.2%) signalling America is deep in recession. The excuse, blame, is "unusually warm weather" which sent the utilities index down 4.3% as demand for heating tumbled.

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    So if the wealther was to blame for November, what was to blame for January, February, March, April, May, June, September, and October?

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    China's cabinet approves major nuclear, hydro power projects

    China's cabinet approved major clean energy projects including hydropower and nuclear installations, according to a statement issued on Wednesday.

    The State Council, China's cabinet, gave approval to construction of a nuclear power plant in Fangchenggang in the southern province of Guangxi, and approved the expansion of a nculear power plant in the eastern province of Jiangsu, according to the statement.

    The statement gave no details on the size of the projects.

    The cabinet also gave the go-ahead for a hydropower plant straddling the southwestern provinces of Sichuan and Yunnan.
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    Killing Zone: 22/25 Equity returns sharply negative over 3 months.

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    Congress negotiators get tax, spending deal and oil exports

    Congressional negotiators on Tuesday wrapped up a sprawling deal to keep the U.S. government operating through next September, while setting new policies ranging from repealing a 40-year-old ban on oil exports to making many business tax breaks permanent, according to Republican lawmakers.

    House of Representatives Speaker Paul Ryan told his rank-and-file Republicans that weeks of negotiations with Democrats had culminated in a deal that would eliminate any possibility of government shutdowns until at least next October, according to lawmakers present.

    "That's my understanding, that there is agreement on both tax extenders and the omnibus" spending bill," Representative John Kline told reporters upon leaving a closed-door meeting of House Republicans.

    Republican lawmakers added that Ryan will put the tax and spending bills to a vote on Thursday, just before they leave town for the rest of the year. The Senate is also expected to vote by week's end.

    A senior Senate Democratic aide told Reuters that the legislative language was being reviewed to make sure it "reflects the negotiations."

    Even some of the most conservative House Republicans, who leveled searing criticisms of former Speaker John Boehner before he resigned in October, left the meeting with Ryan upbeat.

    Representative Steve King said he thought it would be difficult to pass the spending bill in the Republican-controlled House. But he told reporters that Ryan "got the best bargain that I think can be negotiated."

    Representative Ann Wagner confirmed that in return for a repeal of the oil export ban, Democrats won temporary tax breaks to boost wind and solar development, an important priority for President Barack Obama in the aftermath of a Paris climate change deal that calls for significant reductions in carbon dioxide emissions from burning fossil fuels.

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    Rio Tinto CEO says dividend in ‘strong position’

    “We are well positioned — the strongest balance sheet, the least debt of any of the majors,” Sam Walsh, chief executive officer of the second-biggest mining company, said in a Bloomberg Television interview in London. “It puts the dividend in a strong position.”

    Anglo American, Glencore and Vedanta have scrapped payouts in recent months as they battle a slump in prices for industrial metals to a six-year low. Rio Tinto and BHP Billiton are the only major miners still vowing to pay higher dividends each year, a policy viewed by some analysts as unsustainable given the ups and downs of the industry.

    “Dividends are very high on our radar screen,” said Walsh, 65, who became CEO in 2013. “Personally, for me, they are very, very important. We have shareholders who are invested in our business. They put their faith in us and I believe they need a fair return. At the end of the day, it’s a board decision, it’s not my decision.”

    Rio Tinto’s first priority in spending cash is sustaining global mining operations, costing about $2.5 billion a year, then the progressive dividend, Walsh said. New mines and operations are next, then paying down debt and more returns to shareholders, he said.

    The company raised its dividend payment 12% in the first half to $2.2 billion even as underlying earnings plunged 43% to $2.9 billion. Full-year profit is set to slide 48% to $4.85 billion, according to the average of 14 analyst estimates compiled by Bloomberg. Iron-ore prices are down 45% this year. The steelmaking raw material contributed $2.1 billion, or 72%, of Rio’s underlying earnings in the first half.

    “Quite frankly we haven’t finished the business improvement, there’s more ahead of us. You can’t turn around a business in two-and-a-half years, it takes longer than that,” Walsh said. “2016 is going to be tough again.”
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    China Names and Shames Provinces for Fudging GDP

    Stop the presses! There’s cheating going on in China’s official statistics!

    China’s official numbers have long been viewed skeptically in and outside of China. As party secretary of northeastern Liaoning province in 2007, China’s current premier, Li Keqiang, was quoted in a leaked diplomatic cable telling U.S. officials that Chinese provincial statistics were “manmade” and therefore unreliable.

    So the disclosures in recent days by the official Xinhua News Agency and People’s Daily that gross domestic product figures in China’s northeastern rust-bowl region were doctored was less surprising. What was noteworthy was that official media made the episode so public, suggesting official tolerance for official fudging is on the wane.

    The articles cite an anticorruption investigation after which they said local officials in the northeast provinces of Heilongjiang, Jilin and Liaoning admitted they had been falsifying economic data for years. The practice has encouraged corruption, undermined faith in the Communist Party-led government and led to distorted policy decisions, the articles said, without providing specific examples.

    The scale was such that the official data generated by some counties alone suggested that their economies rivaled Hong Kong’s in size, Xinhua said, quoting Jilin lawmaker Zhao Zhenqi. Mr. Zhao couldn’t be reached.

    For many years, the sum of China’s provincial growth figures exceeded the national total by as much as 11%. In recent months, under the banner of slower “new normal” growth, fudging has become less fashionable.

    Economists and analysts said they read a few things into the timing of the disclosures. While massaging figures is common among Chinese provinces, the practice appears more pronounced recently in the northeast – China’s slowest-growing region this year — given weak exports, stumbling resource and manufacturing industries and struggling real estate investment, some said.
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    "Dark" Days Ahead: Main Power Supplier For Brazil Olympic Games Pulls Out

    Back in July, we asked if Olympians at the upcoming summer games in Rio would be swimming in feces. “Extreme water pollution is common in Brazil, where the majority of sewage is not treated. Raw waste runs through open-air ditches to streams and rivers that feed the Olympic water sites,” AP explained. “As a result, Olympic athletes are almost certain to come into contact with disease-causing viruses that in some tests measured up to 1.7 million times the level of what would be considered hazardous on a Southern California beach.”

    Obviously, spending billions on modernizing the country’s basic sanitation infrastructure isn’t in the cards now that the government is mired in a fiscal crisis and desperately needs to cut spending in order to hit what certainly look like unrealistic primary surplus targets.

    We’ve long predicted that the country’s economic and political strife would end up having an adverse impact on the games and sure enough, we found out earlier this month that athletes in Olympic village will be asked to pay for their own air conditioning and will not have televisions in their rooms. In short, organizers can no longer depend on the government (and who knows what the government will look like by the time the games commence) to fund cost overruns. That means spending only as much as Brazil expects to take in from sponsorships, ticket sales, and a grant from the International Olympic Committee.

    Apparently, the games were already some $520 million over budget. The government was supposed to cover that (and more) but obviously that’s out of the question given Brazil’s worsening fiscal crisis. “By the time the Games begin, the committee plans to have 500 fewer paid staff than the 5,000 it originally expected,” Bloomberg said, adding that “the deepest cuts will probably come from operational areas like catering, transportation and cleaning services.”

    Well, if you thought all of the above was bad, consider that now, a major supplier of power has reportedly backed out of the event, suggesting that in addition to unsanitary conditions and no air conditioning, athletes could well run out of energy - literally.

    As Reuters reports, “longtime Olympic power provider Aggreko has pulled out of a tender to supply generators for the games in Rio de Janeiro next year, dealing a major blow to organizers rushing to secure an energy source for the world's largest sporting event.”

    With Glasgow-based Aggreko, it’s the experience that counts. The company has helped power nine Olympics and six World Cups and although Rio 2016 spokesman Mario Andrada told Reuters he was comfortable with the companies still competing for the tender, some say he probably shouldn’t be.

    "There is increased risk of it going to someone who doesn't have the experience. Are there people out there with enough equipment? Probably. But in terms of the operational side of things, Aggreko are pretty good at this," said Will Kirkness, an analyst at Jefferies.

    While Aggreko didn’t give a reason for pulling out, Reuters suggests they may have become exhausted with the planning process which, if you go by the 2012 London games, is behind by about 12 months.

    Of course it’s also likely that Aggreko worried it wouldn’t get paid. As noted above, and as we discussed two weeks ago, the government can’t fund cost overruns, which means that if the planning committee exceeds the budget, it’s not clear who would cover the bill.
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    NRDC suspends Oil market linkage!

    Development and Reform Commission to suspend the adjustment of domestic oil prices] Development and Reform Commission said that with the rapid economic development, China's environmental situation is increasingly serious, some areas with ozone, haze pollution is characterized by complex pollution increasingly prominent, vehicle emissions is caused by air pollution One of the important reasons.
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    Private equity, pension funds eye more metal streaming deals

    Private equity and pension funds may provide the next wave of funding to the slumping mining sector through metal streaming deals as dedicated funding sources struggle to raise their own cash, industry sources said.

    With many miners unwilling to issue equity given their weakened shares amid falling commodity prices, streaming may help them avoid credit downgrades and fund new mines.

    About $4.5 billion worth of these deals, an alternative form of financing where miners are paid cash upfront for future output, have been inked this year, making 2015 a record year for metals streaming as miners slash debt five years into a commodities downturn. 

    But the bumper deal-making year has reduced the coffers of dedicated stream funders like Silver Wheaton Corp, which face their own challenges raising additional debt and equity.

    Private equity groups and institutional investors, who are already minor players in the market, say this dynamic is likely to drive up returns, creating an opportunity to expand their presence.

    "While the classical mineral royalty and streaming companies are tight on funds, you're going to see private equity and other investment type groups step up to the plate," said Douglas Silver, portfolio manager at Orion Resource Partners, a U.S.-based mining-focused private equity group.

    Silver declined to disclose how much Orion would put into streaming deals in 2016, but said it intends to do more than in 2015. Orion, along with its partners, pumped more than $200 million into streaming transactions in 2015, equal to about half of that done by private equity and fund managers, according to a Thomson Reuters analysis of publicly announced deals.

    Two sources at two North American-based institutional investors who declined to speak on the record as it is not fund policy to talk to the media, said they are interested in doing streaming deals if the price is right.

    At current metals prices, returns on streaming deals are a mere 3-4 percent. But returns have already risen to mid-single digits on deals currently being negotiated, said a source at one of the streaming companies who is involved in several transactions.

    Private equity groups and institutions are also able to bolt streaming onto a broader funding deal that could include debt and equity, resulting in a higher blended return.

    An example is the $325 million construction financing package Lydian Internationalsigned earlier this month for its Armenia-based Amulsar gold project. [nCCN46DW2t]

    Potential new market entrants include CPPIB, Canada's top pension fund manager, and smaller fund PSP Investments.

    Incumbents expected to increase their exposure include investment firm Blackstone Group LP, Quebec pension fund Caisse de depot et placement du Quebec, and private equity group Resource Capital Funds.

    CPPIB, PSP, the Caisse, Resource Capital and Blackstone declined to comment.

    To be sure, stream funders face risks including losing the money they front if a miner goes bankrupt as they typically would rank behind senior secured creditors such as banks or other project finance lenders.

    There is as much as $4 billion worth of potential streaming opportunities available, Silver Wheaton's Chief Executive Randy Smallwood said in an interview on Nov. 4. Global miner Glencore is among those weighing such deals. 

    The world's five primary streaming and royalty companies, including Silver Wheaton, Franco-Nevada and Royal Gold, only have the capacity to fund about $2.4 billion worth of deals over the next year, with more than half of that amount funded by credit, RBC Capital Markets analyst Dan Rollins said in a Nov. 10 research note.

    "Investors are becoming increasingly concerned with the use of debt to fund future stream acquisitions," BMO Capital Markets analyst Andrew Kaip said.

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    Trafigura annual net profit rises to $1.1 billion

    Commodities trading firm Trafigura reported on Monday an increase in annual net profit as it racked up record oil trading volumes, as well as an increase in metals.

    The firm said it made a net profit of $1.1 billion, up 6.5 percent from the year before. Gross profit was $2.6 billion, an increase of 28 percent year-on-year, representing a gross margin of 2.7 percent compared with 1.6 percent the year before.

    The company said the volume of commodities traded by its main divisions - oil and metals - increased by 17 percent to 198.4 million tonnes from 169.5 million.

    "Trafigura is well positioned to cope with distressed markets and to seize new opportunities, thanks to our focus on both oil and metals and minerals trading, our sound finances, strong liquidity and careful risk management," Jeremy Weir, Trafigura’s chief executive officer, said in a statement.

    Revenue totaled $97.2 billion, a decrease of 23 percent from the year before, reflecting a sharp decline in commodity prices over the past year. Trafigura's financial year runs from September to September.

    Prices for major commodities, ranging from copper to corn and crude oil, witnessed one of their most rapid year-on-year falls since the depths of the 2008 financial crisis in the 12 months to Sept. 30, dropping by 30 percent. .TRJCRB

    The company said it spent $775 million on share buybacks, down from $885 million the year before, but more than double the $357 million it spent back in 2011.

    Trafigura said it planned to increase spending on buybacks in 2017 provided it generated enough profits.

    The company said current liabilities, including short-term bank borrowings declined to $25.6 billion in 2015, compared with $26.23 billion the year before.

    Read more at Reuters

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    Consol Energy secures 3yr thermal coal sales agreements, increases gas hedges through 2018

    US fossil fuels producer Consol Energy on Friday reported that it had closed several term coal deals totalling 10.8-million tons over a three-year period. 

    These agreements, along with 650 000 t of further commitments for 2016, increased Consol’s Pennsylvania operations’ 2016, 2017 and 2018 sold positions to 93%, 61%, and 49%, respectively, assuming the midpoint of the guidance range of 26-million tons, the company advised. 

    "These agreements demonstrate that even as markets continue to be challenged, customers are still incentivised to contract for term commitments to assure that they have a reliable supply of coal. 

    The Pennsylvania operations coal has a quality advantage due to its high British thermal units (BTUs) that not only optimises plant performance, but also travels well to compete in non-traditional markets,” president and CEO Nicholas DeIuliis stated. He noted that despite the domestic coal market being in the midst of a permanent structural shift, the company was capturing market share in the Upper Midwest, Ohio River Valley and South-Eastern US regions, which had traditionally been served by the company’s competitors in the Central Appalachian and Illinois Basins. 

    Consol expected its Pennsylvania operations to generate positive free cash flow in 2016, despite depressed natural gas prices and their linked effect on coal pricing. “For 2017 and 2018, where we have committed pricing, the pricing is in steady contango. 

    For the sold tons that are not priced in 2017 and 2018, our agreements are structured so that Consol will realise increases as natural gas prices improve and the new market realities begin to bring coal supply and demand into equilibrium,” DeIuliis said. 

    The company affirmed the previous estimated price range across the entire coal division for committed and priced tons in 2016 of $50/t to $55/t. Consol also advised that it had added more natural gas hedges to further reduce risks related to commodity price volatility. The company’s hedged gas volumes included a combination of NYMEX financial hedges and index financial hedges (NYMEX plus basis). To protect the NYMEX hedge volumes from basis exposure, Consol advised that it entered into basis-only financial hedges and physical sales with fixed basis at certain sales points. 

    The company continued to add gas hedges through 2018. Consol’s 2016 NYMEX plus basis hedge position increased to 222 Bcf at an average hedge price of $3.28/Mcf. NYMEX plus basis hedge volumes were not exposed to basis differentials but instead had protected revenue. For instance, in 2016, NYMEX plus basis gas hedges locked in revenue of about $730-million, Consol said.
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    Chinese officials admit to faking economic data

    Even a time of heightened uncertainty, there’s one thing a majority of markets agree upon: Chinese data is unreliable, particularly figures released by regional governments.

    Making the case for market mistrust, a report from Xinhua, a state-run government news agency, released over the weekend stated that “several” local officials in China’s Northeast region admitted to faking economic data in recent years to show high rates of growth when the real numbers were much lower.

    According to the China Daily website, citing Xinhua, several officials acknowledged they had significantly overstated data ranging from fiscal revenue and household income to GDP.

    “If the past data had not been inflated, the current growth figures would not show such a precipitous fall,” one unnamed official told Xinhua, attempting to explain why growth rates across the region were now among the lowest in the country.

    Reflective of just how sharp the deceleration in regional growth has been, Xinhua notes that three years ago Liaoning province’s GDP growth was reported at 9.5%, more than triple its current rate of 2.7%.

    While he has long moved on, current premier Li Keqiang was formerly the party committee secretary of the province in the 1990s.

    Jilin, to Liaoning’s north, reported growth of 12% three years ago, almost half the 6.3% rate recorded so far in 2015. Speaking to the China Daily, an unnamed source in provinces finance department said local officials competed each other to lure external investment projects.

    “They reported the promised investment value, whether it had been achieved or not, as the investment figure,” said the source.

    Guan Yingmin, an official in Heilongjiang province – the most northern of all China’s provinces – said past investment figures were inflated by at least 20%, which translates to nearly 100 billion yuan ($15.7 billion) according to calculations provided by Xinhua.

    Although the general perception is that national data is more accurate than that offered by regional governments, many analysts believe that official economic data – including closely watched GDP – is overstated by China’s government.

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    With landmark climate accord, world marks turn from fossil fuels

    The global climate summit in Paris forged a landmark agreement on Saturday, setting the course for a historic transformation of the world's fossil fuel-driven economy within decades in a bid to arrest global warming.

    After four years of fraught U.N. talks often pitting the interests of rich nations against poor, imperiled island states against rising economic powerhouses, French Foreign Minister Laurent Fabius declared the pact adopted, to the standing applause and whistles of delegates from almost 200 nations.

    "With a small hammer you can achieve great things," Fabius said as he gaveled the agreement, capping two weeks of tense negotiations at the summit on the outskirts of the French capital.

    Hailed as the first truly global climate deal, committing both rich and poor nations to reining in rising emissions blamed for warming the planet, it sets out a sweeping, long-term goal of eliminating net manmade greenhouse gas output this century.

    "It is a victory for all of the planet and for future generations," said U.S. Secretary of State John Kerry, who led the U.S. negotiations in Paris.

    "We have set a course here. The world has come together around an agreement that will empower us to chart a new path for our planet, a smart and responsible path, a sustainable path."

    It also creates a system to encourage nations to step up voluntary domestic efforts to curb emissions, and provides billions more dollars to help poor nations cope with the transition to a greener economy powered by renewable energy.

    Calling it "ambitious and balanced", Fabius said the accord would mark a "historic turning point" in efforts to avert the potentially disastrous consequences of an overheated planet.

    For U.S. President Barack Obama, it is a legacy-defining accomplishment that, he said at the White House, represents "the best chance we have to save the one planet that we've got."

    The final agreement was essentially unchanged from a draft unveiled earlier in the day, including a more ambitious objective of restraining the rise in temperatures to "well below" 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels, a mark scientists fear could be a tipping point for the climate. Until now the line was drawn only at 2 degrees.

    In some ways, its success was assured before the summit began: 187 nations have submitted detailed national plans for how they will contain the rise in greenhouse gas emissions, commitments that are the core of the Paris deal.

    While leaving each country to pursue those measures on its own, the agreement finally sets a common vision and course of action after years of bickering over how to move forward.
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    Congress averts government shutdown; funding talks drag on

    The U.S. House of Representatives on Friday passed a bill funding the government through Wednesday, giving congressional negotiators more time to work on a $1.15 trillion bill paying for federal programs through September.

    The House approved the stop-gap measure by a voice vote, and President Barack Obama promptly signed it into law.

    Without the legislation, federal agencies would have run out of money at midnight, forcing the closing of national parks and threatening to disrupt programs ranging from veterans' assistance to education loans.

    But Congress looked set to push up against the new deadline next week as talks on legislation to fund the government through September 2016 dragged on over efforts to attach controversial policy provisions to the spending measure. Those included Republican proposals to lift a ban on crude oil exports and tighten screening of Syrians seeking refuge in the United States.

    House Majority Leader Kevin McCarthy said the earliest votes planned for next week would take place on Tuesday evening, giving the Senate just over 24 hours to meet the new funding deadline.

    McCarthy dismissed talk among Democrats that a longer temporary funding bill, known as a continuing resolution or "CR," may be needed to carry the government over a holiday break into January. He said Republicans intended to finish the spending bill early next week.

    "It is our intention to have our work done and not need to pass any further CRs," McCarthy said in an exchange on the House floor.

    Commenting on parallel negotiations over a permanent renewal of several expired tax breaks, House Democratic Leader Nancy Pelosi warned that Democrats would not support the measure as proposed, adding that it should not be combined with the spending measure.

    Pelosi told a news conference that Republicans had loaded up the tax "extender" package was too expensive, with too many breaks for oil companies and other special interests. Republicans also had refused Democratic demands to index a child tax credit for working families to inflation.

    She said Republicans could pass their tax plan separately from the spending bill without Democratic votes, adding, "We will not be accomplices."

    Read more at Reuters

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    Brazil police to question Lula in bribery probe involving son

    Brazil's former President Luiz Inacio Lula da Silva has been called in for questioning next week by federal police in a bribery investigation involving his son Luis Claudio, according to a summons document seen by Reuters on Friday.

    Lula is not under investigation but will be questioned about the case in which police suspect a 2.5 million-real ($646,000) payment to one of his son's companies could have been a bribe to influence passage of legislation to help the car industry.

    The summons dated Dec. 1 instructs Lula to appear at police headquarters next Thursday to "provide clarifications." The summons was shown to Reuters by a source close to the investigation.

    Lula's attorney said the former president had no relation at all to the event being investigated and had not received the summons but would appear for questioning if summoned.

    Police raided the offices of a company owned by Lula's son on Oct. 26 as part of the bribery investigation that threatens to drag his family into yet another scandal. Police said at the time that evidence of bribery, extortion and influence trafficking prompted the raid.

    The former president is himself under investigation for influence trafficking after he left office in 2010 as Brazil's most popular president. The six-month probe has found nothing illegal, said attorney Cristiano Zanin Martins, of the Teixeira, Martins & Advogados firm that represents the Lula's family.

    "The former president is facing no criminal investigation. Like any citizen he can be called to help in criminal probes, and he has done so in one case before," the lawyer said.

    Lula's reputation has been tarnished by a huge kickback scandal at state-run oil company Petrobras that put the treasurer of his Workers' Party in jail and has implicated dozens of his political allies.

    Neither Lula nor his hand-picked successor, President Dilma Rousseff, are being investigated in the graft scandal spreading to other state companies, but Rousseff's government has been weakened and her opponents are trying to impeach her for breaking budget laws.

    On Wednesday, a judge accepted a police request to break bank and tax secrecy for Luis Claudio's company, LFT Marketing Esportivo, and a former Lula cabinet minister, Gilberto Carvalho.

    Martins said the payment in question was a sports marketing consultancy job duly reported to tax authorities. A police report published by Brazilian media said the advice provided for the contract was cut and pasted from Wikipedia.

    Read more at Reuters

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    Libya's rival factions agree date to sign U.N. peace deal

    Libya's rival factions on Friday agreed to Dec. 16 as a target date for signing a United Nations-backed national unity government agreement meant to end their conflict.

    The U.N. has been negotiating for a year to get Libya's two rival governments and armed factions to end their war that has plunged the North African state into chaos four years after rebellion ousted Muammar Gaddafi.

    Successfully signing an agreement would open the way for the international community to support Libya in the fight against Islamic State, which has gained ground in the chaos and controls the western city of Sirte.

    But hardliners in both camps have been resisting a deal. Several past deadlines to sign have fallen through after opponents balked at details or demanded more concessions from their rivals.

    "There was a wide consensus that only through rapid signature of the Libyan political agreement the country can be brought back to unity," U.N. Libya envoy Martin Kobler said in Tunisia after two days of talks.

    "Many problems remain, but this has to be solved by the new government in place. That's what governments are there for," said Kobler. He briefed the United Nations Security Council on the situation later on Friday.

    The 15-member council said that a unity government must be formed swiftly to counter the threat of Islamic State militants.

    U.S. Ambassador to the United Nations, Samantha Power, council president for December, said the body remained prepared to sanction those "who threaten Libya's peace, stability and security."

    For more than a year, Tripoli has been controlled by an armed faction called Libya Dawn, a coalition of former rebel brigades from Misrata and other armed factions in the capital, after they battled to force out rivals.

    They set up a self-styled government and reinstated the old parliament, known as the General National Congress. The internationally recognized government and the elected House of Representatives were forced to operate out of the east.

    Both factions are backed by loose alliances of former rebel brigades, tribal fighters and former Gaddafi soldiers, including Gen. Khalifa Haftar, who has been appointed armed forces commander by the government in the east.

    Helping to bring those military factions on board, training up a national army and providing assistance in dealing with Islamic State will be where the international community will look to help Libya if a unity government is formed.

    Libya's oil output is also now at less than half of the 1.6 million barrels per day that it produced before Gaddafi fell, leaving the central bank and state oil company struggling to manage an economy heavily dependent on crude.

    "The time has come to sign the agreement," Libya's U.N. Ambassador Ibrahim Dabbashi told the Security Council.

    Read more at Reuters
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    China signals it might unpeg the Yuan from US dollar

    China may be laying the groundwork for untying the yuan from the value of the US dollar.

    An editorial posted to the People’s Bank of China's website on Friday argued it made more sense to measure the value of the yuan versus that of a basket of currencies instead of just the US dollar's, The Wall Street Journal reported.

    The country’s foreign exchange system was thus set to start calculating a yuan exchange rate index on Friday to provide a reference against just such a basket, the PBoC said.

    Will the news affect the US Federal Reserve's policy decision next week? A strategist from UBS speaking on Bloomberg TV said you would need a "big" market dislocation to affect the result of that meeting, of about -8% in the case of the stockmarket.

    As of 14:48 front month Brent crude futures were lower by 2.397% to $38.80 per barrel in ICE trading.

    The S&P 500 was sent immediately lower and was on track for its worst week in a month, with energy and materials pacing losses and with all the sector gauges in the red.

    The yield on the benchmark 10-year US Treasury note was eight basis points lower to 2.16%.

    According to CME data the odds of a 25 basis point rate hike at the 15-16 December FOMC meeting was at 81.4% as of 15:05 versus approximately 83% before the headlines broke.

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    Trade rows brew as China helps home team tackle slowdown

    China is sowing the seeds of a global trade war as its smelters, refiners and manufacturers increasingly export goods they can't sell into a slowing domestic economy, prompting accusations of dumping and unfair subsidies from its trading partners.

    With China's exporters already gaining a competitive edge from its weakening currency, global metals producers are crying foul over Beijing's plans to cut export taxes, and the United States is complaining that a raft of government subsidy programmes disadvantage rival producers.

    Beijing hopes to gain market economy status under World Trade Organization rules a year from now, which would force trading partners to use China's domestic prices instead of a third party's to assess if it is exporting below market value, and it has warned that it will fight back if countries continue to resort to anti-dumping duties.

    Chin Leng Lim, a trade expert and professor of law at the University of Hong Kong, said a combination of factors could stoke trade tensions to a pitch not seen since the global financial crisis.

    "You've got a slowing economy in China, a huge push on exports, a pushback on the part of producers in the United States and an election looming, while there is a question hanging around some of the rules of the game. It's going to be exciting," Lim said.

    Growth in the world's second-largest economy has slowed to a 25-year low, hitting demand for industrial raw materials like steel and copper, so domestic producers are looking to sell their surplus on a saturated global market.

    "We don't make any big profit by exports, but we don't have other alternatives," said a senior exporter with a small steel mill in Hebei province.

    And Beijing appears to be helping the home team. The government said on Wednesday it would cut export taxes for some forms of steel and chemicals next year.

    "It is worrisome to see the Chinese government continue policies that are essentially aimed at exporting their over-production into the world market," said Jeff Henderson, director of Operations at the U.S. Aluminum Extruders Council.

    China's Commerce Ministry did not respond to a request for comment, but Shi Zihai, spokesman for the state planning agency, denied unfair government influence.

    "China has integrated into the global market. We are engaging in fair trade," he said.


    China's trade partners have already responded with about 330 protectionist policies in the past 12 months, according to Global Trade Alert, a website run by Simon Evenett, a professor at the University of St Gallen.

    The United States in particular, which in the past 12 months has seen import prices from China fall at their fastest rate in five years, has launched a barrage of anti-dumping and anti-subsidy challenges, arguing Beijing is trying to build up industries it sees as its new growth drivers.

    The U.S. Commerce Department on Wednesday hiked discounted anti-subsidy rates on aluminium extrusion imports from 38 Chinese companies and on Tuesday launched a WTO challenge to China's exemptions on value-added tax for locally produced aircraft.

    In February it took out a case at the WTO against "export-contingent subsidies" given to industrial clusters of enterprises in sectors including textiles, agriculture, medical products, light engineering, new materials and hardware.

    The European Union's Ambassador to the WTO Marc Vanheukelen told Reuters that the sensitivity in the United States about unfair Chinese behaviour would "definitely increase".

    "We always knew that China would be a partner with specific characteristics - after all this is state capitalism," Vanheukelen said. "I could well imagine that you are going to have further friction."

    The Economic Policy Institute in Washington said in a December report that the decline of American manufacturing over the past 15 years was due to currency manipulation and unfair trade, including China's "huge investments in 'leading and pillar' industries".

    "There is a sense that the global economy isn't operating fairly, that we face an uneven playing field, and that China lies at the heart of the problem," U.S. Trade Representative Michael Froman told U.S. business chambers in April.

    China, which joined the WTO in December 2001, says its policies comply with its obligations to the global trade body and don't extend an unfair advantage to its companies.

    It has told fellow WTO members that a clause in the accession protocol means it must be considered a market economy after 15 years' membership, and they will have to drop their "outdated, unfair and discriminatory" anti-dumping measures or expect legal action.

    University of Hong Kong professor Lim said there was a prickly debate brewing over that clause, and it was possible China might launch a case in 2017 if Washington didn't recognise its market status. "We are going to see a lot of action in the next year or so," he said.

    Read more at Reuters
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    Oil and Gas

    Billionaire Fredriksen to buy up distressed oil rig assets - paper

    Norwegian-born billionaire John Fredriksen has set up a company to snap up oil rigs from firms struggling with low crude prices, adopting a similar approach to the one he used in 2012 when the tanker market collapsed.

    In an interview with business daily Dagens Naeringsliv, the man with an estimated fortune of 100 billion crowns ($11 billion), said he was putting some of his money into the venture called Sandbox, but might seek outside investors in due course.

    "We have decided to establish a new company which will buy jackups and floating rigs when others have to throw in their cards," Fredriksen told the newspaper. "The Sandbox plan is to build a portfolio of newer drilling vessels, which are about to be completed at shipyards."

    The shipping tycoon, nicknamed "Big Wolf" or "Big John", controls companies in offshore drilling, shipping of oil and dry bulk and salmon farming after making a fortune from tankers during the commodities price boom at the start of the century.

    Rates for offshore rigs have more than halved since crude oil prices slumped from last year's peak to below $40 a barrel, and about 40 of the 350 rigs worldwide have been taken out of the market by oil companies to save costs.

    "We are looking at everything to do with distressed rig assets now. It will certainly take some time before the market comes back, but it is in bad times that it is possible to make reasonable investments," Fredriksen told the newspaper, explaining the plan for Sandbox.

    Fredriksen's business empire already has a rig company called Seadrill. Once the most valuable of its kind, its shares have lost 88 percent since their peak in September 2013 and are now valued at $1.9 billion making it the world's second largest offshore driller behind Transocean.

    Fredriksen has bought up some of Seadrill's debt and its Chief Executive Officer Per Wullf told the newspaper in the same interview that the company would of course survive.

    The billionaire adopted a similar model when the oil tanker market collapsed in 2012. He set up a company called Frontline 2012 which bought assets from his struggling Frontline. The two firms are now merging following a recovery in the tanker market.

    According to the newspaper, Fredriksen's holdings in Seadrill, Frontline, Golden Ocean , Marine Harvest and Norwegian Property account for about a third of his estimated fortune.

    Fredriksen said he has bought up about 20 dry bulk vessels privately with rates at an all time low. The ships are run commercially by Golden Ocean, which is struggling with the worst downturn in the dry bulk shipping market.

    In tankers, Fredriksen also said he would buy very large crude tankers (VLCCs) of 300,000 dead weight tonnes if the price was below $90 million.

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    APLNG to send its first ever cargo

    The ConocoPhillips-operated Australia Pacific LNG project is about to ship its inaugural cargo with the docking of the first carrier at the Curtis island facility.

    The 165,600 cbm Magellan Spirit, owned by Teekay is currently located at the A$25 billion (US$18 billion) LNG plant, shipping data reveals.

    The LNG cargo will be probably sent to China’s Sinopec, which holds a stake in the LNG project, according to a report by ICIS.

    APLNG is a joint venture between ConocoPhillips (37.5%), Origin Energy (37.5%) and Sinopec (25%).

    The Curtis Island LNG facility started producing the chilled gas last week. Gas being supplied to the LNG facility is from Australia Pacific LNG’s gas fields in the Surat and Bowen basins, operated by Origin Energy.

    The LNG facility will have two production trains with the ability to process up to 9 million tonnes per annum.
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    FERC approves Lake Charles LNG

    BG Group and Energy Transfer said that the Lake Charles LNG project in Lousiana received approval to site, construct and operate the natural gas liquefaction and export facility from the Federal Energy Regulatory Commission.

    The export project will be constructed at the existing LNG regasification facility in Lake Charles owned by Energy Transfer, the two companies said in a statement on Thursday.

    Lake Charles LNG project already has a conditional permission from the U.S. Department of Energy to export up to 15 million tons of LNG per year.

    Final investment decisions from both BG Group and Energy Transfer are expected to be made in 2016, with construction to start immediately following a positive decision and first LNG exports anticipated about four years later,” the statement reads.

    BG Group is in charge of selecting the engineering, procurement and construction contractor as well as managing the construction and will operate the plant upon the construction completion and also be responsible for the LNG offtake.

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    U.S. Oil Output has First Year-on-Year Drop Since 2011, API Says

    U.S. crude production in November posted the first annual decline in almost five years as falling prices curbed investment.

    The U.S. pumped an average 9.11 million barrels of crude a day in November, down 0.8 percent from a year earlier, the American Petroleum Institute said in a monthly report Thursday.

    Tumbling crude prices have lead companies to cut back on exploration and the development of new fields. The number of active oil rigs in the U.S. dropped to 524 in the week ended Dec. 11, the least in five years, according to data compiled by Baker Hughes Inc.

    "I think we’re about to see another round of cutbacks, which will result in further decline in output next year," said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut.

    West Texas Intermediate for January delivery dropped 1.6 percent to close at $34.95 a barrel on the New York Mercantile Exchange. It was the lowest close since February 2009. Prices have slipped 34 percent this year.

    Production of natural gas liquids, a byproduct of gas drilling, rose 6.4 percent from November 2014 to 3.32 million barrels a day, a record for the month and 28,000 barrels short of the all-time high reached in August.

    Total deliveries of fuel, a measure of demand, rose 1.2 percent from a year earlier to the highest November total since 2007. Consumption of gasoline and jet fuel increased while demand for distillate fuel, a category including diesel and heating oil, and residual fuel dropped.

    Gasoline consumption rose 3.2 percent from a year earlier and jet fuel demand climbed 6.2 percent, while distillate fuel slumped 1 percent and residual fuel use tumbled 46 percent as prices for natural gas declined.
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    Russia boosts oil sales in Asia, even as OPEC battles to win customers

    Russian oil producers have strengthened their position in Asia by supplying nearly a quarter more crude this year, shifting the balance of power in one of the few bright spots in the global market and blunting OPEC's high-profile drive to win customers.

    Aided by a weak rouble and new pipelines, Russia has replaced Iran as a top five supplier to Asia, boosting sales 23 percent to 1.3 million barrels per day in the first 11 months of 2015 from a year ago, according to data compiled by Reuters based on trade flows and customs information.

    Russia's share of the world's biggest oil market has risen to 7.3 percent from 4.7 percent five years ago and shows how President Vladimir Putin's efforts to court Asian countries such as China is bearing fruit as it looks to cut its dependence on its traditional markets such as Europe.

    China and South Korea saw the biggest jumps in Russian imports, according to the data. Given Russia's proximity to major crude buyers in North Asia, it can export crude on tankers via Sakhalin Island, and by pipelines directly to China or via the Russian port of Kozmino on the Sea of Japan.

    Another advantage for Russia has been the more than halving in the value of the rouble against the U.S. currency since mid-2014, slashing production costs in dollar-traded international oil markets.

    "Given Asia is the main crude short (undersupplied area) left in this market, the battle for market share remains intense," said Amrita Sen, chief oil analyst at consultancy Energy Aspects.

    Within the Organization of the Petroleum Exporting Countries (OPEC), Iraq has been the firm winner, raising its supplies to Asia by a quarter thanks to record production and heavy discounts that illustrate how intense the price war for customers has become even within OPEC.

    The expansion by Russia and Iraq in Asia this year has capped increases for Saudi Arabia, suggesting the strategy the OPEC kingpin is leading of pumping more oil to expand market share has only worked within limits.

    "OPEC did not make significant gains in market share in Asia in 2015," he added.

    While Saudi Arabia managed to halt a decline in its Asian market share last year and remains the region's top supplier by raising exports by 2.7 percent in the first 11 months this year to 4.2 million bpd, OPEC data shows that its sales to Asia peaked at 4.59 million bpd in 2013.

    Within OPEC, Iraq overtook Kuwait to become the third-largest crude supplier to Asia behind Saudi Arabia and the United Arab Emirates (UAE) this year.

    The second-largest OPEC producer boosted its crude deliveries to major customers in Asia by close to 360,000 barrels per day (bpd) to 1.77 million bpd in the first 11 months, Reuters data showed.

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    Israeli PM gives final go-ahead for Leviathan gas field development

    After years of political infighting, Israeli Prime Minister Benjamin Netanyahu signed a deal on Thursday giving final approval for the development of the Leviathan natural gas field off Israel's coast.

    Despite fierce criticism from opponents who argue Israel's largest gas reserve will be controlled by one group, limiting competition, Netanyahu has pushed the deal through, describing it as critical to national security interests.

    As part of the agreement, Texas-based Noble Energy and Israel's Delek Group, which discovered Leviathan in 2010, will retain control of the field, but are being forcing to sell other, smaller assets.
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    Price of OPEC Oil Slumps to 11-Year Low as Members Keep Pumping

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    The average price of crude sold by OPEC members slumped to the lowest in 11 years as members kept pumping into an oversupplied market.

    The reference basket of crudes produced by the Organization of Petroleum Exporting Countries dropped to $32.33 a barrel Wednesday, according to an e-mail from the organization’s secretariat in Vienna on Thursday. That’s the lowest since April 2004, according to data compiled by Bloomberg.

    Oil slumped after OPEC decided a year ago to defend market share by maintaining production and allowing lower prices to pressure rival suppliers. Saudi Arabia and Iraq, the group’s largest producers, are already pumping close to record volumes, while Iran and Algeria plan to boost output next year. The strategy has come at a cost for the group, which will forgo about $500 billion in revenue in 2015, according to the International Energy Agency.

    OPEC members will try to shore up revenue by pumping more next year, Goldman Sachs Group Inc. predicted. The organization will raise output by at least 640,000 barrels a day to 32 million in 2016, driven by gains in Iran and the group’s other Persian Gulf members, the bank said in a report.

    Iran plans to boost output by about 500,000 barrels a day within weeks of international sanctions being lifted next year, and eventually add about 1 million barrels a day of supplies, Oil Minister Bijan Namdar Zanganeh said last month. The nation will increase supplies by 285,000 barrels a day in 2016, and can tap about 35 million barrels stored on tankers, Goldman Sachs estimated.

    Algeria’s state oil producer Sonatrach Group plans to raise crude output by 5 percent next year, Salah Mekmouche, the company’s vice president of exploration and production, said in an interviewin Algiers. The nation pumped 1.1 million barrels a day last month, according to data compiled by Bloomberg.

    The OPEC basket is composed of Saharan Blend, Girassol, Oriente, Iran Heavy, Basrah Light, Kuwait Export, Es Sider, Bonny Light, Qatar Marine, Arab Light, Murban and Merey.

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    Anadarko Petroleum Issues Update; Boosts Q4 Oil Sales-Volume Outlook

    Anadarko Petroleum Corporation (NYSE: APC) announced extensions to the maturity dates of its credit facilities and also provided an interim update on its fourth-quarter performance.

    Anadarko extended the maturity of its $3 billion unsecured revolving credit facility to January 2021 and received commitments to renew its $2 billion 364-day credit facility upon its expiration in January 2016, to a new maturity in 2017, further supporting the company's strong liquidity position. These extensions were achieved with no changes to covenants or pricing and with 100-percent participation from the company's bank group.

    Operationally, performance continues to exceed expectations across the portfolio. Production increases relative to guidance are being driven by the company's core oil-producing areas in the Wattenberg field and the Delaware Basin. As a result, the company is increasing the midpoint of its fourth-quarter oil sales-volume guidance by more than 15,000 barrels of oil per day (BOPD) to a range of 314,000 to 319,000 BOPD. This outperformance is the primary contributor to a 2-million-BOE (barrels of oil equivalent) increase in the company's total fourth-quarter sales-volume guidance, resulting in a new range of 70 to 72 million BOE.

    Along with the strong production performance, the company's continued efficiency gains are driving lower capital expenditures, with fourth-quarter capital investment expected to be at or below the mid-point of current guidance. Additionally, the company is continuing to make meaningful improvements to its cost structure, with direct oil and natural gas operating expense per BOE expected to be below the low end of current guidance.

    Anadarko also announced it continues to make significant progress at its Heidelberg development in the Gulf of Mexico, which is well ahead of schedule and now expected to achieve first oil in the first quarter of 2016 from the three initial wells, pending regulatory approvals.

    "In 2015, we set out to preserve and build value by focusing a greater percentage of our capital investments on longer-dated projects, while driving improved efficiencies into every aspect of our business, carefully managing our cost structure and accelerating value through asset monetizations," said Anadarko Chairman, President and CEO Al Walker. "As we move closer to the end of the year and turn our focus toward 2016, I am increasingly encouraged by our results and proud of the work our employees and service providers have done to make Anadarko a better company by maximizing performance in a difficult macro environment. We are committed to a continued disciplined and value-focused approach in 2016 with capital spending expected to be significantly lower and aligned with cash in-flows from operations and targeted asset monetizations."

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    Britain awards more shale gas licences

    Britain awarded another 132 new onshore oil and gas exploration licences on Thursday, giving developers access to more land for shale gas fracking for the first time in seven years.

    Britain is estimated to have substantial amounts of gas trapped in underground shale rocks and Prime Minister David Cameron has pledged to go "all out" to extract these reserves, to help offset declining North Sea oil and gas output, despite opposition from environmental campaigners.

    Many other European countries, including France and Germany, have banned the use of shale gas hydraulic fracturing, or fracking, due to environmental concerns.

    The latest awards conclude Britain's first onshore oil and gas licensing round in seven years. Overall, it awarded 159 licences and 75 percent of the blocks covered were related to shale gas or oil, the government said.

    Companies which obtained new licences include established shale gas companies IGas, Egdon Resources, Cuadrilla Resources and INEOS. The latter won 21 new licences which it said now made it Britain's biggest shale gas by acreage.

    "We currently import around half of our gas needs, but by 2030 that could be as high as 75 percent," said British Energy Minister Andrea Leadsome in a written statement to parliament.

    "That's why we're encouraging investment in our shale gas exploration so we can add new sources of home-grown supply to our real diversity of imports."

    Britain on Thursday also said it will cut subsidies to renewable energy projects less than a week after a global climate change agreement was struck to wipe out carbon emissions this century.

    So far, shale gas fracking in its modern form has only taken place at one site in northeastern England. Local planning approvals for new projects have been slow because of concerns by residents about environmental, noise and visual impact.

    "The real challenge companies face is obtaining planning permission from local planning authorities, as the refusal of Cuadrilla's applications in June demonstrated," said Catherine Howard, a planning partner law firm Herbert Smith Freehills.

    Cuadrilla was refused planning permission for two shale gas projects earlier this year but the government has since announced it would use new powers to make its own decision on the matter.

    On Wednesday, lawmakers voted in favour of the use of fracking to extract shale gas under national parks, weakening a decision against fracking in national parks made earlier this year and giving shale gas explorers access to more resources.
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    Novatek, China’s Silk Road Fund ink Yamal LNG deals

    Novatek, China’s Silk Road Fund ink Yamal LNG deals

    Russia’s Novatek said on Thursday it has signed definitive agreements for the sale of a 9.9% equity stake in the $27 billion Yamal LNG project to China’s Silk Road Fund (SRF).

    The two companies also inked a deal under which SRF will provide a 15-year loan to Novatek worth about 730 million euros ($792 million) for the financing of the Artic LNG project. The larger part of the loan has been disbursed to Yamal LNG, Novatek said in a statement.

    Chairman of the Management Board of Novatek, Leonid V. Mikhelson said that the signing of the binding agreements is “another important step in the execution of the company’s long-term development strategy“.

    “With the closure of this transaction we will achieve the appropriate target shareholder structure, which will contribute to the planned financing of the project and further facilitate its successful implementation,” Mikhelson added.

    Yamal LNG project includes the construction of a liquefaction plant with annual capacity of 16.5 million tons per annum based on the feedstock resources of the South-Tambeyskoye field. The production from the LNG project is scheduled to start in 2017.

    Novatek now owns a 50.1% stake in the LNG project, while France’s Total and China’s CNPC hold 20% each.
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    Japan: November LNG imports down 2.7% YoY, utility consumption down 9%

    Japan’s imports of liquefied natural gas dropped 2.7 percent in November as compared to the same month a year ago.

    The world’s largest buyer of the chilled gas imported 6.69 million tonnes of LNG last month, preliminary data from Japan’s Ministry of Finance reveals.

    Japan paid 379,385 million yen for imports in November, down 41.5 percent as compared to 2014.

    LNG use by Japan’s ten independent regional electric power companies declined 9 percent to 4.28 million tonnes, according to the Federation of Electric Power Companies of Japan (FEPC).

    October purchases by the ten utilities were at 4.17 million tonnes of LNG, down 8.3 percent from 2014.

    Total electricity generated and purchased across the ten companies in November also dropped by 3.8% from a year to 66.82 billion kWh, FEPC said.

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    Woodside Petroleum cuts $US170m of spending

    Woodside Petroleum has advised spending this calendar year will be $US170 million ($206 million) lower than previously indicated, while production will be at the top end of guidance as the oil and gas producer battles with the impact of sliding global energy prices.

    In the update provided on Thursday, Woodside said that its total spending this year would be $US6 billion rather than the $US6.17 billion estimated in February, a 2.75 per cent reduction.

    Capital expenditure would be $US100 million lower than guided, while the exploration budget has fallen by $US70 million, it said.

    Woodside offered no commentary on the updated guidance, leaving it unclear whether the underspending stems from cutbacks because of the slump in oil prices, cost deflation or another reason. However all oil and gas producers have been reexamining spending plans to eliminate or defer non-essential investment as crude oil prices continue to slip to levels not seen for more than six years.

    Production for 2015 is now put by the Perth-based energy player at between 91 million and 93 million barrels of oil equivalent, an upward narrowing from its previous range of 88 million-93 million boe.

    "It's not clear to me my why they felt the need to put this out; it doesn't seem a material change," one analyst said.

    One suggestion was that Woodside's recently abandoned $11.6 billion play to take over Oil Search had fuelled speculation of negative news in the offing in the larger player's core business, which the company wanted to rectify. On the basis of the updated guidance, Woodside's 2015 output will be well towards the upper end of its April estimate of 86 million-94 million boe.

    Woodside shares slipped 0.85 per cent to $26.82, off the three-year lows it touched earlier this week but under-performing the broader energy sector. The company had its credit outlook downgraded by negative from stable by Moody's late Wednesday after the agency cut its 2016 Brent oil price assumption by $US10 a barrel to $US43.

    Woodside's spending for 2015 jumped from the original level of just over $US1 billion when it acquired Apache's stake in Chevron's Wheatstone LNG venture in Western Australia and other LNG assets earlier this year. The revised number of $US6 billion includes the $US3.65 billion purchase price.

    The company has yet to release capex plans for 2016, but UBS analyst Nik Burns said earlier this week he was anticipating a budget of about $US1.5 billion, a 39 per cent reduction from the circa $US2.4 billion of this year excluding the acquisition price for the Apache deal.

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    ConocoPhillips, 28 Energy Producers Face Moody's Rating Cuts

    ConocoPhillips and Anadarko Petroleum Corp. are among 29 U.S. oil and gas exploration and production companies whose ratings Moody’s Investors Service is reviewing for possible downgrades, spelling new trouble for the beleaguered industry.

    This comes as plummeting commodity prices have weighed on energy producers’ debt, with the industry’s investment-grade bonds falling 4.7 percent this year. Junk-rated energy securities have fared much worse, losing 21 percent, according to Bank of America Merrill Lynch indexes. Yields on speculative energy debt have risen to 14.91 percent, the highest since 2009.

    ConocoPhillips is rated A2 by Moody’s, while Anadarko, at Baa2, is just two steps above junk.

    Oil prices have tumbled 33 percent this year, trading Wednesday near a six-year-low at $35.79 a barrel. The Bloomberg Intelligence Independent Explorers and Producers Index of 61 equities has fallen 51 percent.

    Among the companies up for review are some of the best performers in the shale patch, a sign that the impact of lower oil prices is spreading. Shares of Newfield Exploration Co. have advanced 27 percent this year while Cimarex Energy Corp. and Pioneer Natural Resources Inc. are down less than 10 percent.

    "Industry conditions have weakened further, with oil and natural gas prices at multiyear lows," said Pete Speer, Moody’s senior vice president. "E&P companies will be stressed for a longer period with much lower cash flows, difficulty selling assets and limited capital-markets access."

    A Moody’s gauge of stress in the high yield oil and gas sector has risen to the highest since 2009. Energy defaults may rise as high as 5 percent next year, according to the ratings company.

    So far this year, at least 36 producers owing more than $13 billion have gone bankrupt, according to a Nov. 8 report from Haynes & Boone, a law firm with offices in Houston, New York and other cities. Magnum Hunter Resources Corp., filed for bankruptcy yesterday.
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    Halcon Resources sets 1:5 reverse stock split

    Halcon Resources sets 1:5 reverse stock split

    Oil and gas producer Halcon Resources Corp on Wednesday announced a one-for-five reverse stock split, effective Jan. 5.

    The New York Stock Exchange had told Halcon on Aug. 25 that the company's stock had fallen foul of its listing requirement that a stock must not trade at less than $1 for 30 consecutive trading days.

    Halcon's shares hit a record low of 31.06 cents on Wednesday. They have fallen 82 percent this year, hurt by a steep drop in oil prices.

    The company said on Wednesday that the stock split would not impact any stockholder's ownership on a percentage basis or their voting power.
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    Calfrac to issue equity to meet required debt ratio

    Canadian oilfield services provider Calfrac Well Services Ltd said on Wednesday it is raising C$27.5 million via an equity issue aimed at shoring up a key debt ratio, underscoring the level of pressure on energy sector companies hit by slumping oil and gas prices.

    The Calgary-based company said the proceeds of the offering will help it meet its required leverage ratios. Earlier this week, Calfrac entered into an agreement with its syndicate of lenders to make certain amendments to its credit facilities in order to provide it with greater financial flexibility.

    The offering dubbed an 'equity cure' will let the company maintain a specified funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio.

    If the net proceeds are not utilized as an 'equity cure', it is expected that they will be used by Calfrac to fund capital expenditures, to reduce its outstanding indebtedness, or for general working capital and corporate purposes.

    "Overall, the timing of the issuance seems sudden, but we understand the rationale," said Evercore analyst James West in a note to clients. "Calfrac is taking decisive action to bolster its status as a going concern. The dilution from the equity raise is offset by the removal of the covenant breach overhang."

    Oilfield services providers have been hurt as energy companies have slashed overall costs and have mothballed projects, as they scramble to deal with depressed oil and gas prices currently hovering around 11- and 15-year lows, respectively.

    Earlier this week, Canadian oil and natural gas producer Encana Corp slashed its dividend by about 79 percent and its 2016 capital budget by more than a quarter. This came just days after its rival Cenovus Energy Inc said it expects its capital spending to be 19 percent less next year than in 2015.

    Calfrac said it top single shareholder, Matco Investments Ltd, will participate in the offering to at least maintain its current ownership at 20.45 percent.

    The lead underwriter on the deal Peters & Co, along with a syndicate of other firms is purchasing 20.37 million shares in Calfrac at C$1.35 a share, guaranteeing the company gross proceeds of about C$27.5 million.
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    US domestic oil production rises slightly, still above last year

                                          Last Week  Week Before   Last Year

    Domestic Production.......   9,176           9,164           9,137
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    Summary of Weekly Petroleum Data for the Week Ending December 11

    U.S. crude oil refinery inputs averaged over 16.6 million barrels per day during the week ending December 11, 2015, 41,000 barrels per day less than the previous week’s average. Refineries operated at 91.9% of their operable capacity last week. Gasoline production increased last week, averaging 10.0 million barrels per day. Distillate fuel production decreased last week, averaging 5.1 million barrels per day.

    U.S. crude oil imports averaged over 8.3 million barrels per day last week, up by 291,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.9 million barrels per day, 6.3% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 660,000 barrels per day. Distillate fuel imports averaged 84,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.8 million barrels from the previous week. At 490.7 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.7 million barrels last week, and are in the upper half the upper half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 2.6 million barrels last week and are in the upper half of the average range for this time of year. Propane/propylene inventories fell 1.7 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 5.0 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.0 million barrels per day, down by 0.5% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.2 million barrels per day, up by 0.7% from the same period last year. Distillate fuel product supplied averaged over 3.5 million barrels per day over the last four weeks, down by 8.2% from the same period last year. Jet fuel product supplied is up 6.5% compared to the same four-week period last year.

    Cushing crude oil inventories rose 607,000 BBL
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    Motorists hit the roads in record volumes in October - U.S. DOT

    Motorists logged 273.5 billion miles on U.S. roads in October, a 2.4 percent increase over last year and the most ever for the month, according to data released Thursday by the U.S. Department of Transportation.

    The numbers are the latest example of strong U.S. gasoline demand, fueled by low pump prices and increased economic activity.
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    U.S. Natural Gas Production Continued to Drop in November: Platts Bentek

    Natural gas production in the lower 48 United States averaged 71.3 billion cubic feet per day (Bcf/d) in November, which is down about 0.46 Bcf/d, compared to the October average, according to Platts Bentek, an analytics and forecasting unit of Platts, a leading global provider of energy and commodities information. On a month-over-month basis, November natural gas production was down less than 1% from October.

    'U.S. natural gas production volumes in November did not live up to the expectations of the market, as the Northeast pipeline expansions underperformed,' said Sami Yahya, Platts Bentek energy analyst. 'The Northeast is the primary growth driver of production for the U.S., and the wave of new expansions that were brought online in November did not ramp up as quickly as expected. The Northeast grew only 0.3 Bcf/d out of the approximately 1.5 Bcf/d of new takeaway capacity.'

    Yahya explained that the combination of weaker demand, near-capacity storage fields, maintenance, and construction delays contributed to the underperformance of the projects. The Northeast is the only major region that saw month-over-month growth. The Southeast/Gulf region on average shed nearly 0.4 Bcf/d this month. While maintenance was a factor in the decline, this sharp dip could be a signal that some producers are intentionally chocking back production due to the depressed pricing environment, Yahya said. The Rockies region lost about 0.2 Bcf/d in volumes from October to November, as Texas and the Midcon region cut roughly 0.1 Bcf/d each.

    'Going at the rate it is going now, the Northeast is currently not very effective in offsetting production declines around the country,' said Yahya. 'However, as winter season comes on full throttle, it may lend the Northeast the needed push to not only reach new highs, but also eliminate the declining status of U.S. gas production. The downside risk is that December typically brings along the freeze offs season, which could introduce further curtailments to production in many areas, inside and outside the Northeast.'

    The Platts Bentek data analysis suggests 2015 U.S. natural gas production will average approximately 72 Bcf/d, with more growth still expected through the end of the year. Such would mark a year-on-year growth of 3 Bcf/d over 2014.

    The Platts Bentek data analysis is based on an extensive sample of near real-time production receipt data from the U.S. lower 48 interstate pipeline system. Platts Bentek production models are highly correlated with and provide an advance glimpse of federal government statistics from the U.S. EIA.
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    Sinochem signs 10-year deal to buy oil from Angola's Sonangol

    China's state-run Sinochem Group said on Wednesday it had signed a deal with Angolan state-owned producer Sonangol to buy crude oil for more than 10 years.

    The statement on the Chinese company's website did not give details of the supply amount or other financial details, but trading sources said the agreement was for four or five cargoes per month, which would make the company one of the largest holders of monthly contracts to buy Angolan crude.

    There are currently around 15 cargoes given to these so-called term buyers each month from Angola's export programmes of roughly 55 cargoes.

    The deal is a coup for Angola, as OPEC members fight for market share, particularly in China, the world's largest energy consumer.

    While payment terms were not disclosed, sources said the deal directly related to loans that the Chinese government has given to Angola as its commodity-reliant economy struggles with the more than 60 percent drop in crude oil prices over the past year.

    Along with the chairman of Sonangol, Angola's financial minister, Armando Manuel, was present at the signing of the deal, as was Zheng Zhijie, president of China Development Bank.

    A year ago, China agreed to lend Sonangol $2 billion to expand oil and gas projects, and Angolan President Jose Eduardo dos Santos was in China in June seeking a two-year moratorium on debt repayments along with financing for a variety of projects, including a $4.5 billion hydropower scheme.

    But the deal is also likely to push out another term contract holder, sources said. Sonangol has to trade some of its oil on a spot basis in order to establish prices for term agreements.
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    OPEC producers bearish on oil in 2016 as oversupply persists

    OPEC producers bearish on oil in 2016 as oversupply persists

    OPEC producers see little chance of significantly higher oil prices in 2016 as extra Iranian production could add to surplus supplies and the prospect of voluntary output restraint remains remote.

    OPEC delegates, including those from Gulf OPEC members, say higher oil prices are not around the corner yet, despite further growth in global demand and as a rise in non-OPEC supply is tempered by prices that have more than halved in 18 months.

    Some see a more balanced market by 2017 even though they expect further pressure on oil which could send prices to test the mid-$30 a barrel range on market sentiment rather than fundamentals, before slowly rebounding by the second half of next year.

    The comments, days after OPEC failed to agree a production ceiling for the first time in decades, show delegates in the producer group are pushing back their expectations of a stronger market. In August, Gulf delegates were hoping for oil at $60 a barrel by this month.

    "In the first half of next year, prices will be under pressure from supply being above demand and concern about Iranian supply," said an OPEC delegate from a major producer.

    "With the current low prices, I find it very hard to predict prices at more than $40-$45 for Brent in the whole year. I don't think it will reach $60."

    "You cannot be optimistic in such market conditions, keeping in mind that today Brent is below $39 a barrel," said a second OPEC delegate, from a non-Gulf member.

    "I believe that 2016 is not going to be any better than 2015 with an average of $50 at the most unless OPEC takes action to decrease production, which is unlikely."

    The world is awash in oil - more than 2 million barrels per day in excess supply is implied by OPEC's numbers - before any extra barrels that reach the market from Iran once Western sanctions are lifted.

    In addition, say some OPEC sources, an anticipated U.S. interest rate rise this week could push prices further down, even if only for a short period of time.

    But these sources also expect global inventories to start declining by the second half of 2016, supporting prices more towards the year-end.

    Supplies from high-cost producers such as U.S. shale drillers are also set to fall more quickly into next year, despite being resilient until now, as many have been already operating at losses, they say.

    "By the second half of next year it will show the real recovery. Then by 2017 you will have a more stable market," the delegate added. "But this is subject to the Iranian crude, when it will come and by how much."

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    Carrizo Oil & Gas Said to Seek Buyers for Colorado Shale Assets

    Carrizo Oil & Gas Said to Seek Buyers for Colorado Shale Assets

    Carrizo Oil & Gas Inc. is seeking buyers for its land in Colorado’s Niobrara shale formation, which could fetch as much as $200 million, according to people familiar with the situation.

    The Houston-based company is working with Royal Bank of Canada to seek buyers for the assets, said the people, who asked not to be identified because the matter isn’t public.

    U.S. explorers are selling off land to preserve cash and raise money for drilling in their best areas as they deal with a prolonged slump in commodity prices. Carrizo’s shares rose 1.5 percent to $33.27 at 1:38 p.m. in New York on Tuesday, giving the company a market value of about $1.94 billion.

    Analysts and investors consider Carrizo to be among the healthier U.S. shale explorers because it has a fairly liquid balance sheet and controls lots of valuable land in Texas, Colorado, Pennsylvania and elsewhere.

    The company has significant hedges to sell much of its oil at above-market prices through 2016, and was among more than a dozen U.S. explorers that made it through a recent evaluation of its bank loans with its credit line intact, according to company filings and data compiled by Bloomberg.

    Carrizo has 35,100 net acres in the Niobrara with proved reserves equivalent to 5.9 million barrels of oil, according to a December investor presentation. Its top competitors in the Niobrara include Whiting Petroleum Corp. and Noble Energy Inc., the presentation shows.

    Its Niobrara position is its second largest, based on net acres, behind its 84,000 net acres in the Eagle Ford Shale basin of Texas, where it is primarily focused. It has reduced spending in the Niobrara this year while allocating about 70 percent of its estimated $540 million 2015 capital budget to the Eagle Ford, according to the presentation.

    Carrizo also drills in the Permian basin of west Texas and New Mexico, and in the Utica and Marcellus Shale basins in the eastern U.S. The company reported a net loss of about $775 million during the first nine months of 2015, after earning about $93 million in the same period a year earlier, according to its third-quarter report.

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    Magnum Hunter Files for Bankruptcy as Gas Hits 14-Year Lows

    Magnum Hunter Resources Corp., an oil and gas explorer once heady with spending amid the U.S. shale boom, filed for bankruptcy as its heavy debt load was exacerbated by the glut in cheap energy.

    The company said Tuesday that it has the support of a majority of its lenders for a turnaround plan. Holders of 75 percent of the company’s debt have agreed to support the restructuring, which calls for a $200 million loan to keep Magnum Hunter operating in bankruptcy, according to a statement.

    The loan will convert to equity in a new, reorganized company in a process that Chief Executive Officer Gary C. Evans said will be efficient and cost-effective, and allow it to take advantage of the energy slump.

    “This restructuring will position Magnum Hunter as a market leader in the upstream sector with an ideal capital structure to capitalize on the large number of opportunities anticipated in our industry due to the precipitous commodity cycle downturn ,” Evans said in the statement.

    A bankruptcy judge would still need to approve any plan.

    Gas slumped to a 14-year low Monday amid record-breaking December warmth in the eastern U.S. Magnum Hunter blamed the slump, plus its own “substantial debt,” for the bankruptcy. The company had stopped drilling in its two main locations -- the Marcellus Shale and the Utica Shale -- at the start of this year due to the price drop.

    Magnum is among many other energy firms that have succumbed to financial troubles, including Samson Resources Corp., which filed for bankruptcy in September.

    Magnum listed debts of more than $1.1 billion in the Chapter 11 filing in Delaware. Among the biggest claims unsecured by collateral are notes due in 2020, listed in court papers at $634.6 million.

    Marcellus and Utica assets, as well as properties in Kentucky, accounted for 96 percent of Irving, Texas-based Magnum’s total proved reserves. The Williston Basin in North Dakota and Saskatchewan accounted for the rest, as of June 30, the company has said.
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    U.S. regulators seek more concessions to OK Halliburton-Baker Hughes deal

    Halliburton Co  and Baker Hughes Inc said U.S. antitrust officials were not satisfied with the concessions they offered to win approval for their proposed merger, and that officials said they would assess further proposals.

    The two oilfield service providers said it was unlikely they would be able to settle with the U.S. Department of Justice by Tuesday, the earliest closing date for the deal.

    The two companies also extended the deadline for closing the proposed merger to April 30, 2016.

    The earliest closing date for the deal, which would create the second-largest oilfield services company after Schlumberger Ltd (SLB.N), was extended to Dec. 15 after U.S. regulators requested more information from the companies.
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    Mexico's oil auction beats expectations despite oil price plunge

    Mexico's oil regulator awarded all 25 contracts on offer on Tuesday, beating expectations despite a dramatic plunge in crude prices, in an auction aimed at boosting new Mexican oil companies after a historic sector reform finalized last year.

    Peak oil production from the 25 onshore fields will reach 77,000 barrels per day and attract investment of $1.1 billion, Energy Minister Pedro Joaquin Coldwell said in a tweet following the auction. Mexican officials had said they would consider the auction a success if at least five contracts were awarded.

    "This is a triumph for Mexico," Juan Carlos Zepeda, president of Mexico's oil regulator CNH told local radio after the auction.

    Among the 14 consortiums with winning bids, there were a dozen small Mexican oil companies, marking a dramatic shift for a sector long dominated by state-owned Pemex.

    No international oil major participated in the auction, which featured relatively small onshore blocks where Pemex has drilled in the past.

    The Mexican consortium led by Geo Estratos was the auction's big winner, nabbing four contracts. Canada's Renaissance Oil Corp won three contracts, while Mexican start-up Strata Campos Maduros also claimed three.

    Diavaz Offshore, a longtime domestic service provider to state-owned oil company Pemex, won two contracts.

    "What we like about Mexico is that it's a place where there will be big opportunities going forward," said Pablo Christlieb, Renaissance Oil's lawyer, adding he expected crude prices to recover.

    The price of Mexico's mostly heavy crude export mix has plunged to below $28 a barrel, down more than 70 percent since last year and at its lowest level in more than a decade.

    The auction was designed to allow experienced Mexican oilfield service providers the opportunity to operate fields on their own, which is permitted under the reform.

    Competing alone and in consortia, some 80 mostly Mexican companies pre-qualified for the onshore auction run by the CNH, while only half registered to bid.

    The constitutional overhaul, finalized last year, ended Pemex's decades-long monopoly on crude production and aimed to reverse a prolonged slide in output by luring new expertise and private investment.

    The fields on offer include a mix of mature onshore fields, most of which feature ongoing production and others that have been underdeveloped or abandoned, with combined proven and probable reserves of about 49 million barrels of oil equivalent.

    Total production from 19 of the 25 fields currently hovers under 20,000 bpd.

    The CNH awards contracts based on which bidder offers the biggest share of pre-tax profits to the government via a weighted formula that also includes an investment commitment.

    The share of profits is 90 percent of the formula, while the investment commitment accounts for the rest.

    The winning bids ranged from 10.56 percent of pre-tax profits for the San Bernardo field won by Mexican firm Sarreal, to 85.69 percent for the Moloacan field won by a consortium led by the Netherlands's Canamex Dutch along with two Mexican firms.

    The total government take on the contracts will be even higher as it includes other taxes and royalties.

    The onshore auctions followed two previous offshore auctions in July and September, in which five of 19 contracts on offer were successfully tendered.

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    YPF, Dow To Invest $500M In Argentina Shale In 2016

    Argentina’s state-run oil company, YPF SA, and Dow Argentina, the local unit of Dow Chemical Co., said Tuesday they will invest $500 million in 2016 to explore for shale gas.

    The companies, which have already invested $350 million in a joint shale gas venture, said in a statement that total investment could reach $2.5 billion in coming years.

    The transaction will represent the first significant foreign investment announcement in Argentina since President Mauricio Macri took office last week. His administration is seeking to dismantle key policies of his predecessor and boost investor confidence to kick-start a moribund economy.

    The joint venture is the leading shale gas project of its kind in Argentina, with daily production of about 750,000 cubic meters. The aim is to triple that next year to about 2 million.

    YPF and Dow have already drilled 19 shale gas wells in Vaca Muerta, a massive shale oil and gas rich region in the province of Neuquén. They will drill 30 new wells next year and eventually increase that to more than 180 wells in the years ahead.

    Argentina ranks second in the world, behind China, in potentially recoverable shale-gas reserves, with 802 trillion cubic feet, according to the U.S. Energy Information Administration. Argentina also ranks fourth in shale oil with an estimated 27 billion barrels.

    YPF is also working with Chevron Corp. to produce shale oil in Vaca Muerta. The two companies have invested around $3.5 billion to drill unconventional oil wells, making Argentina the leading unconventional producer outside of Canada and the U.S. The companies could total $16 billion over the next 15 years.

    YPF has also joined with with Malaysia’s Petroliam Nasional Bhd, or Petronas, in a deal that could lead to up to $9 billion in investment over the next decade. And in September, YPF signed a deal with Russia’s OAO Gazprom that could lead them to develop shale projects.

    Dow, which began working with YPF in 2013, is eager to obtain gas for use as a key ingredient in its chemical business.

    “We are seeing extraordinary results, and we’re doubly enthused that a leading petrochemical company trusts us to develop its first upstream project,” Miguel Galuccio, YPF’s chief executive, said.

    Argentina’s government sets the price of newly produced gas at $7.50 per million British Thermal Unit, making it a profitable option for some companies in Argentina. In comparison, the spot price for a similar amount of natural gas in the U.S. is close to $2.

    After years of divestment by oil and gas companies, Argentina’s government expropriated YPF in 2012 and began a push to raise oil and gas production.

    The lack of investment had turned Argentina into a net oil and gas importer and led the government to spend billions of dollars every year to import energy. That, in turn, led to a shortage of U.S. dollars available to import other goods and make debt payments.

    Mr. Macri hopes that by reversing his predecessor’s key economic policies, he can boost investor confidence and spur foreign investment.

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    Diesel tankers make U-turn in mid-Atlantic as Europe stocks swell

    Tankers laden with diesel heading from the U.S. Gulf Coast to Europe are turning around in mid-ocean as European storage is nearly filled to the brim.

    At least three 37,000 tonne tankers - Vendome Street, Atlantic Star and Atlantic Titan - have made U-turns in the Atlantic ocean in recent days and are now heading back west, according to Reuters ship tracking.

    It is unclear if the tankers will discharge their diesel cargoes in the Gulf Coast or will await new orders, according to traders and shipping brokers.

    "European prices are so soft," one trader said. "Sellers must see better numbers."

    The Vendome Street was more than three quarters of the way to Europe, turning around just 800 miles off the coast of Portugal. Ship brokers said a turnaround so late in the journey would come at a cost to the charterer.

    European diesel prices and refining margins have collapsed in recent days to six-year lows as the market has been overwhelmed by imports from huge refineries in the United States, Russia, Asia and the Middle East.

    At the same time, unusually mild temperatures in Europe and North America further limited demand for diesel and heating oil, ptting even more pressure on the market.

    Gasoil stocks, which include diesel and heating oil, in the Amsterdam-Rotterdam-Antwerp storage hub climbed to a fresh record high last week.

    Prompt Low Sulphur Gasoil futures, the European diesel benchmark, have been trading at sharp discount to later contracts, in what is known as contango, prompting traders to store product.

    In some cases, traders opted to store product on tankers. At least 250,000 tonnes of diesel are currently anchored off Europe and the Mediterranean seeking a discharge port, according to traders.

    "The idea is to keep tankers on the water as long as you can and try to find a stronger market," a trader said.

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    Russia's Sberbank CEO says oil price under $40 'additional challenge'

    The head of Russia's top lender, Sberbank, said on Tuesday that oil prices below $40 per barrel presented an additional challenge to the country's banking sector, where a number of players have already received state support.

    The Russian government pledged aid of around 1 trillion roubles ($14.20 billion) in late 2014 to help banks after the rouble fell sharply on weaker oil prices and Western sanctions, which limited external financing.

    But in the last two months oil prices have fallen even further, hitting multi-year lows and posing risks to Russia's commodity-dependent economy.

    "Oil prices of under $40 per barrel are an additional challenge, but under all scenarios we are considering we (Sberbank) are stable even under a price of $35 per barrel," Sberbank boss German Gref told reporters.

    Russia's rouble is trading close to 2015 lows, hurt by new falls in the Brent crude price, which is now below $40 per barrel. At 1330 GMT Brent crude was quoted at $38.07.

    Russia's central bank head, Elvira Nabiullina, said last week that the regulator had drawn up a risk scenario under which oil prices stayed around $35 for the next three years.

    Still, she said, banks are ready from the start of 2016 to switch to a market exchange rate from the favourable one introduced at the end of last year to reduce pressure on their capital ratios.

    Sberbank, in which the central bank is a majority owner, did not use the state recapitalisation programme to boost its capital, in contrast to some other large domestic banks.

    "Never say never. But so far, none of our scenarios assume the need of a capital injection from the state. ... Even under $35 per barrel we won't need support but I am afraid to make any promises," Gref said.

    The Russian authorities are now deciding how to help VEB, the state development bank, and are considering a support package of as much as 1.2 trillion roubles to repay its debts and deal with bad loans.

    Attached Files
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    Nuclear restarts push Japan’s LNG demand down

    Japan’s consumption of liquefied natural gas is expected to dwindle due to a slower economy mixed with the restart of the country’s nuclear capacity and increase in renewable sources.

    Platts’ analytics unit, Eclipse Energy reveals that Japan’s demand for LNG is expected to fall from 86 million tons in 2014 to 77 million tons by 2020.

    In the first 10 months of 2015 Japan has already bought 3 million tons less LNG than it was the case in 2014.

    The country’s utilities are slowly restarting their nuclear reactors, and this is already showing effects on LNG consumption.

    Kyushu Electric, that has recently restarted it 890 MW nuclear reactors at Sendai, unloaded seven LNG cargoes at its Tobata terminal, 6 fewer than it was the case in November 2014, according to the report.

    In the period from September to November, Kyushu Electric received nine LNG cargoes at the Oita terminal, staying at the same level as in the same period the year before, the report said.

    However, it is expected that the restart of Kyushu Electric’s Genkai nuclear reactors will replace up to 4 LNG cargoes per month.

    Japan is also expected to import more LNG on long-term contracts, a number that is expected to rise from 82.3 million tons in 2017 to 88.2 million tons in 2019. On the demand side, Japan will see a drop to 77.2 million tons in 2020 from 78.2 million tons in 2017.

    Volumes contracted from LNG projects in the United States are predicted to be used during peak winter periods, but Eclipse Energy expects Japanese utilities to use around 25 percent of the total 17 million tons of LNG per year tolling arrangements during 2018 and 2019 with the utilization to reach 50 percent beyond 2020.

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    Trafigura announces increase in LNG volumes

    In its annual results for the year ended 30 September 2015, Trafigura has announced that its LNG volumes more than doubled compared to the previous year, from 1.7 million t to 4.2 million t.

    The company’s Oil and Petroleum Products Division also noted increased trading volumes across crude and refined products.

    The report read: “Trafigura was well positioned to grow its LNG book profitably during the year. We more than doubled traded volumes and developed significant new markets and customer relationships. We grew the team in Geneva, Houston and Singapore.”

    The report continued: “Looking forward, we see the LNG market continuing to grow in size and liquidity, with new American and Australian export flows likely to be a key focus on the supply side and European imports playing an important role in balancing demand. Our strategy is to maintain profitable volume growth, to provide innovative and flexible products to our clients and to invest opportunistically in infrastructure where we can add value.”
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    Saudi Arabia shipping more Nov-Dec crude to Asia to meet robust demand

    Saudi Arabia is shipping more crude oil to Asia over the last two months of the year as strong refining margins boost demand, trade sources said, helping the top oil exporter defend its market share amid fierce competition.

    Cheap Saudi oil - in comparison with prices for other Middle Eastern grades - has drawn several Asian refiners to request a few million barrels above contractual volumes as they ramp up crude run rates to capture robust margins.

    The increment in demand will require Saudi Arabia to pump at near record volumes just as a battle over global market share is expected to intensify following the failure of the Organization of the Petroleum Exporting Countries (OPEC) to set a production quota, and ahead of higher exports from Iran next year once sanctions over its nuclear programme are lifted.

    "There is a bigger call for Saudi crude as monthly supply nominations from Asian refiners have gone up," said an industry source familiar with the matter, adding that the kingdom will raise shipments to Asia by a few million barrels over November and December.

    The trend may continue into early next year as a drop in exports from key light sour producer Abu Dhabi has increased demand for Saudi grades of a similar quality.

    Saudi Aramco declined to comment.

    Nearly half of Saudi's crude production is exported to Asia. Saudi Arabia's major Asian customers received about 4.2 million barrels per day (bpd) of crude in the first 11 months this year, up 2.7 percent from the same period a year ago, data from Thomson Reuters Research & Forecasts showed.

    Saudi Arabia last raised oil exports to Asia over contract volumes in January and February this year to meet peak winter demand in the Northern Hemisphere. The OPEC member's offers of extra crude in low-season October, however, failed to attract interest from Asia.

    Demand for Saudi crude picked up again in November and December as refining margins rebounded.

    At least four Asian refiners lifted more crude as Saudi Aramco set more competitive official selling prices (OSPs), sources close to the matter said.

    Under oil contracts, the seller or buyer can adjust loading volumes, depending on demand and shipping logistics, using an operational tolerance that ranges from plus to minus 10 percent of the contracted volume.

    "The OSP is not bad and the (refining) margin is wonderful," said a trader with a North Asian refiner that has requested more Saudi crude.

    Saudi Aramco's Arab Extra Light OSP is about $7 a barrel below Abu Dhabi's Murban, the widest discount since August.

    Light sour crude supply is expected to tighten early next year as Abu Dhabi National Oil Company has cut Murban and Das crude exports on field maintenance and higher domestic demand.

    Light crudes typically yield more light products such as naphtha, whose crack to Brent NAF-SIN-CRK averaged $111.93 a tonne in November, the highest since September 2014.

    This helped boost refining margins at a typical complex refinery in Singapore to the highest in eight months in November.

    Taking the strong refining margins in Asia into greater consideration, Saudi Arabia cut its January OSPs for most of the crude grades it sells to Asia by a smaller extent than expected last week.

    Asian refiners are now waiting for other Middle Eastern producers to set their prices before deciding on how much Saudi crude to ask for in January, sources said.

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    Russia Sees No Oil Price Recovery In The Coming 7 Years

    “Lower for longer” is becoming the catch phrase of the global oil industry, as an increasing number of energy executives and government officials alike see no opportunity for prices to rebound to their levels of mid-2014.

    The latest such forecast came from Maxim Oreshkin, Russia’s deputy finance minister, who says he expects oil to sell for no more than $40 to $60 per barrel for the next seven years, and that Moscow is adjusting its budget planning accordingly, given that half the country’s annual budget relies on revenues from oil and gas sales.

    “In our estimates, one should hardly expect any serious growth of the oil price above $50,” Oreshkin told a breakfast forum hosted by Russian newspaper Vedomosti on Friday. “The oil industry is changing structurally and it may happen that … the global economy will not need that much oil."

    “Therefore we see a range from $40 to $60 somewhere for the next seven years,” Oreshkin said. “And these are the prices we should base our macroeconomic policy on.” They also must take into account the pressure on Russia’s economy brought by Western sanctions imposed because of Moscow’s annexation of Ukraine’s Crimean peninsula and its role in the country’s internal conflict.

    The Finance Ministry’s first step, he said, will be to address an expected deficit of 3 percent for the country’s 2016 fiscal year because his ministry forecasts that the average global price of oil will remain where it has been for the past few months, between $40 and $50 per barrel. In fact, the world’s two international benchmarks, Brent crude and West Texas Intermediate, recently dipped below $40.

    Specifically, Oreshkin said his country’s deficit forecast for fiscal 2016 is $21.7 billion if the price of oil remains around $40 per barrel for the next year. Revenues are expected to be $204 billion in 2016, compared with $238 billion in projected spending, he said.

    The low cost of fossil fuels, including gas and coal, may be a boon to consumers and businesses who still rely on such energy, but they’re devastating not only to oil companies but also to countries, including Russia, who rely on oil to balance their budgets.

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    ExxonMobil gets green light for Argentinian shale development

    The government of Neuquen, a southwestern province of Argentina, said Monday it has approved ExxonMobil's investment plan for developing shale resources in the Bajo el Choique and La Invernada blocks.

    The company will work with Gas y Petroleo del Neuquen (GyP), the province's state-owned oil company, on the project to invest an initial $229 million in the delineation of the blocks, the government said in a statement.

    This will consist of drilling five horizontal wells in the Vaca Muerta play with laterals of up to 2,500 meters (8,202 feet) and 25 frac stages.

    The companies will also build an oil separation and storage facility, a natural gas pipeline, among other infrastructure on the adjacent blocks, according to the province.

    After this pilot stage, the companies plan to invest an additional $13.8 billion in the mass development of the blocks by drilling 556 horizontal wells, the government said.

    Exxon has a 90% stake in the consortium, while GyP holds the rest.

    The companies have a 35-year concession for developing the blocks.

    Exxon has already invested $200 million in exploring the blocks through XTO Energy, a subsidiary that specializes in the drilling of unconventional oil and natural gas plays. Exxon transferred all of its unconventional assets in Argentina to XTO Energy at the start of 2015.

    Exxon has had good results so far in its exploratory drilling, finding shale oil and gas on the Bajo del Choique and La Invernada blocks.

    Argentina is betting on the development of Vaca Muerta to turn around a 20% decline in oil and gas production over the past decade that has slashed energy exports and pushed up imports. The country holds 27 billion barrels of shale oil resources and 802 Tcf of shale gas, far more than its proved conventional reserves of 2.5 million barrels of oil and 12 Tcf of gas, according to the US Energy Information Administration.
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    China may slow strategic oil reserve growth

    After more than doubling its strategic oil reserves since last year, China may apply the brakes to its buying spree as storage availability is expected to be limited, while a climate of depressed prices will reduce any urgency to snap up cargoes, market observers said Monday.

    The National Bureau of Statistics said Friday that China's SPR more than doubled its crude reserves to 26.1 million mt, or 191.31 million barrels by mid-2015, from 91.11 million barrels on November 20, 2014.

    The latest reported SPR stock were equivalent to around 29 days of China's crude imports, Platts calculations showed, based on the country's average imports of 6.63 million b/d over the first 11 months of the year, according to data from the General Administration of Customs.

    The government had earlier indicated it wanted to achieve 90 days of forward import cover by the end of 2020.

    "Although there is a long way to go to meet the target, the growth in strategic reserves that we saw in 2015 is unlikely to be repeated in 2016 due to the limited availability of crude storage capacity," said James Lu, senior analyst from Platts China Oil Analytics.

    This view was shared by Dong Xiucheng, an oil and gas expert at China University of Petroleum in Beijing, who said that although more SPR sites are expected to completed this year and next, it would take some time before they will be able to start accepting cargoes.

    One new site with 18.9 million barrels of capacity is expected to be completed in 2015, and two more sites with 62.9 million barrels capacity are expected to be ready next year, as estimated by Platts COA. An additional 31.45 million barrels of capacity would be ready in 2017.

    "The sites still need to be inspected and approved before turning fully operational. It takes time," said Dong.

    The government said it has been using several commercial crude oil tanks to store SPR crudes, indicating that there was a shortage of space.

    According to NBS' release, SPR stocks in mid-2015 were 11.41 million barrels higher than the total storage capacity of the eight completed SPR sites.

    In addition, the 18.9 million-barrel underground SPR site in Huangdao started to receive crude in June.

    All these imply that commercial tanks were used to occupy more than 11.41 million barrels.

    But availability of commercial tanks is also tight due to strong demand for stocking in China since oil prices are low, Lu added.

    In January-November, the country's crude stocks grew by 442,000 b/d, up 55% year on year, Platts calculation based on the last official data showed.


    Furthermore, the country's SPR stock building may slow as oil prices are unlikely to rebound in the short term, observers said.

    "The strong growth by mid-2015 was mainly due to a more than 50% drop in crude oil price from the second half of last year. To take advantage of that, China bought heavily for SPR in anticipation that prices could rebound anytime," said Lu.

    However, oil prices are showing no sign of bottoming out soon, Lu said. "China will adjust its SPR buying strategy to a slow pace amid low and stable oil prices," he said.

    A senior economist from CNPC's Economics & Technology Research Institute agreed, adding that China was in no hurry to fill all tanks as it is easy to buy barrels in the international market at low prices.

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    EIA ups world total for recoverable shale oil

    The Energy Department said on Monday that billions more barrels had been added in 2015 to its estimate of recoverable shale oil around the world.

    The U.S. Energy Information Administration said that new estimate comes after reviews of shale oil and natural gas reserves in four more countries — the United Arab Emirates, Oman, Chad and Kazakhstan.

    The new reserves in those countries pushed up the worldwide total of shale oil that can be recovered using existing technology to 419 billion barrels, a 13 percent rise over the EIA’s previous estimate, or about 48 billion barrels. The review also resulted in a smaller increase in shale gas reserves to 7.5 trillion cubic feet, a 4 percent increase.

    The EIA report noted that most countries, including the most recent four added to the report, still can’t deploy the drilling technology capable of accessing shale oil reserves that has turned the United States into the world’s largest oil producer. Only the U.S., Canada, China and Argentina are current shale oil producers, and the U.S. owns more than 90 percent of that production.

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    Brazilian state threatens new oil tax over royalty dispute

    Brazil's state of Rio de Janeiro, home to the bulk of the country's oil production, threatened on Monday to impose a new tax on oil and natural gas in the state if the country's oil regulator ANP does not adjust its royalty calculation.

    The state, whose budget has been hurt by a nearly 40 percent decline in the price of Benchmark Brent crude oil in the last year, has been pressuring the regulator to change the way it determines the so-called oil reference price.

    If the calculation is not changed, the government plans to apply a 2.71 real (69.8-cent) per barrel tax on each barrel of oil or natural gas equivalent produced in fields located in state waters.

    That would raise about 1.8 billion reais ($464 million) in 2016, slightly more than the 1.6 billion reais it is losing because of the current calculation, state officials told Reuters on Monday.

    Rio de Janeiro produces 67 percent of Brazil's oil and 40 percent of its natural gas. Among the state's main producers are state-run oil company Petroleo Brasileiro SA, BG Group Plc, Royal Dutch Shell Plc.

    The state's financial crisis has reached the point where the government is intentionally delaying payments and universities and hospitals have seen their services reduced. Some public servants are still waiting to receive their full November salaries.

    Local organizers of the Rio de Janeiro 2016 Olympic Games have been forced to make cuts to their remaining budgets.

    Royalty payments are paid as a percentage of the reference price for each barrel of oil produced. The reference price has typically been far below the Brent price because the bulk of Brazilian crude has been low-grade, low-price heavy crude.

    According to Rio de Janeiro-state Governor Luiz Fernando Pezão, the calculation, first developed in the 1970s, fails to properly account for large amounts of higher-grade medium and light crude being produced from new subsalt fields south of Rio de Janeiro.

    "We have a request in with the ANP and Petrobras where we show that the price per barrel or oil or gas is wrong and out of date," Pezão told reporters on Monday. "Brazil is producing another type of oil."

    Royalties typically range from 10 percent to as much as 40 percent depending on the size, productivity and profitability of the field.

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    China's CEFC to take control of unit of Kazakh state-run oil firm

    CEFC China Energy Company Ltd has agreed to acquire 51 percent of a unit of Kazakhstan's state oil and gas company which mainly owns refinery and fuel assets in Europe, the little-known private firm said in a statement.

    The agreement was part of a package of deals worth a total of $4 billion signed late on Monday in Beijing in sectors including oil and gas, telecommunications and nuclear power, with China looking to ramp up business with its resource-rich Central Asian neighbour.

    CEFC will take control of KMG International (KMGI), a fully-owned unit of Kazakh state oil and gas firm KazMunayGaz , according to the statement and two senior sources at CEFC. One of the sources valued KMGI at $500 million to $1 billion.

    KMGI officials said they were unable to immediately respond to requests for comment.

    Among KMGI's key assets are a 100,000 barrels per day refinery and a 400,000 tonnes per year fertilizer plant in Romania, along with nearly 1,000 petrol stations in Romania and other countries such as Spain and France, according to the CEFC source.

    CEFC, which has been branching into oil and gas after starting in the Chinese financial sector, plans to invest "billions" of dollars to expand the retail network to more than 3,000 gas stations, the source said.

    Part of the funding would come from China's $40 billion "Silk Road" infrastructure fund, the source added.

    "Kazakhstan is rich in oil and gas and has been China's friendly neighbor. The deal well fits the government's One Belt One Road plan," said the source, who declined to be named due to company policy.

    China is seeking to revive the old Silk Road with an ambitious plan to build railways, highways, oil and gas facilities, power grids and other links across Central, West and South Asian nations, under the so-called "One Belt, One Road" initiative.

    CEFC, with its main operations in Shanghai and Beijing, has been building up its oil trading team in Singapore, hiring nearly a dozen senior managers from state energy giants PetroChina and Sinopec, as well as former executives experienced in energy acquisitions.
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    Indonesia to have up to 60 uncommitted LNG cargoes in 2016

    Indonesia is expected to have as many as 55-60 of uncommitted LNG cargoes next year from the Tangguh and Bontang LNG plants, the head of upstream regulator SKK Migas' communications department, Elan Biantoro, said Monday.

    The available cargoes are likely to be offered on the spot market, Biantoro said. One cargo is typically 125,000 cu m.

    "Pertamina and BP will invite bids by tender on the spot market to get the best price. However, we will prioritize domestic needs, if they can't absorb it we will offer via tender," he said.

    The cargoes have become available because contracts have expired, according to Biantoro.

    Meanwhile Badak LNG, the operator of Bontang LNG plant, plans to produce 147 LNG cargoes in 2016, lower than this year's plan of 170 cargoes due to lower gas production, its president director Salis Aprilian said Monday.

    Bontang estimates gas supply of 1.466 Bcf/d from gas producers next year compared with 1.696 Bcf/d in 2015, Aprilian said.

    Bontang is supplied mostly from the Mahakam block in east Kalimantan, which is owned by Total and Inpex on a 50-50 basis.

    The block's contract will expire in 2017, and the government has appointed state-owned Pertamina to take a majority stake in the block, but Total and Inpex will still be allowed to have stakes.

    Indonesia has three LNG plants: Bontang in east Kalimantan, Tangguh in Papua and Donggi Senoro in central Sulawesi.

    The country closed down its Arun LNG plant in Aceh due to a fall in gas production and the expiry of LNG export contracts.

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    Tudor Pickering survey sees investors looking for $55 in 2016

    A survey of more than 200 investors by Tudor Pickering Holt & Co. indicated most investors expect oil futures prices will average $55/bbl during 2016.

    Ole Hansen, Saxo Bank head of commodity strategy, expects that oil prices will remain under pressure as Brent and light, sweet crude approach December 2008 financial crisis lows.

    “The carnage in oil markets is showing no signs of slowing,” Hansen said. “Negative fundamentals and negative momentum make it easy prey for short-sellers firmly in control. Increased oil exports from Iran and US (when for the first and if for the latter) are two of the drivers which today have sent both Brent and WTI closer to their December 2008 financial crisis lows.”

    Iran will increase production once sanctions are lifted next year and in the US oil groups and politicians are lobbying hard for the 40-year old export ban to be lifted.

    “Bloated US inventories, which are currently more than 110 million bbl above the 5-year average, have nowhere to go due to the ban that was put in place during the 1970s,” Hansen said. “If lifted, the US oil market would begin reconnecting with the global market, and the price discount to Brent crude, the current global benchmark, would disappear.”

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    Polish LNG terminal receives first cargo

    Polskie LNG has announced that Qatargas has completed the delivery of the first LNG cargo to the LNG receiving terminal in Swinoujscie, Poland. Polish Oil & Gas (PGNiG) provided assistance as an intermediary in the delivery.

    The 210 000 m3 capacity Q-Flex vessel, Al-Nuaman, delivered the cargo, with another delivery scheduled for February 2016.

    Khalid Bin Khalifa Al-Thani, the Qatargas CEO, said: “We are extremely delighted at this historic milestone and hope that our support in commissioning of this newly constructed LNG receiving terminal will in turn help to fuel sustainable economic growth and development throughout Poland, Eastern Europe and across all nations along the Baltic Sea basin. The Swinoujscie LNG receiving terminal is a clear manifestation of Poland’s vision and commitment to ensure diversified, reliable and secure supplies of LNG and natural gas.

    “Poland represents a new market for Qatargas’ premium LNG and the delivery of LNG into Poland further demonstrates our commitment to provide Europe with a clean energy source, reliably and safely. This terminal will further expand LNG’s reach into Europe – first into Poland and thereafter as a gateway into the land-locked countries in central Europe as well as into the Baltic region. The Swinoujscie LNG Terminal becomes the 17th LNG terminal that Qatargas provides deliveries and marks another significant milestone in Qatargas’ history. Qatargas is extremely proud to be associated with the Swinoujscie LNG terminal and with Poland.”

    The President of Gaz-System and Polskie LNG, Jan Chadam, said: “[The] LNG receiving terminal, along with dynamically-developed internal transfer grid and inter-system connections, gives Poland a chance to enter the international gas market and exerts a positive effect on price competitiveness of the resource. The receiving terminal’s potential makes us an important player in the area of energy independence of the whole region. We provide fuel security for Poland and the possibility to diversify the deliveries to other European states, which, by connecting their transfer systems, will facilitate establishing a competitive gas market. Poland is entering a group of independent, safe and modern countries.”

    The Vice President of the PGNiG Management Board, Waldemar Wójcik, added: “LNG deliveries are one of the most important measures to diversify Poland’s gas supply sources and a crucial element of PGNiG’s strategy to diversify its supply portfolio. LNG imports will afford more flexibility in responding to market conditions, while improving Poland’s energy security. We are happy that LNG deliveries have started to arrive at the Swinoujscie terminal, hoping that the contract between PGNiG and Qatargas will mark the beginning of a long-term partnership between the two companies.”
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    Ecopetrol Targets Lower Oil Output in 2016 Amid Investment Cuts

    Colombia’s state-controlled Ecopetrol SA is targeting reduced production next year as the company slashes its investment budget amid falling oil prices.

    The combined business group is targeting output of 755,000 barrels of oil equivalent per day next year, down from a 2015 target of 760,000 barrels, Ecopetrol said in a statement Monday. The board approved an investment plan of $4.8 billion for 2016, down from $6.7 billion of planned investments detailed in a Septemberpresentation. The new figure represents a drop of approximately 40% from 2015 investment.

    Oil fell below $35 a barrel in New York Monday for the first time since 2009 as Iran reiterated its pledge to boost crude exports, bolstering speculation OPEC members will exacerbate the global oversupply. Drillers in Colombia including Ecopetrol and Pacific Exploration and Production Corp. have scrambled to cut costs and investments as revenues shrink.

    Ecopetrol’s investments will be focused on production, the evaluation of recent discoveries and the completion of Reficar refinery modernization works, the company said.

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    Never Mind $35, The World's Cheapest Oil Is Already Close to $20

    As oil crashes through $35 a barrel in New York, some producers are already living with the reality of much lower prices.

    A mix of Mexican crudes is already valued at less than $28, an 11-year low, according to data compiled by Bloomberg. Iraq is offering its heaviest variety of oil to buyers in Asia for about $25. In western Canada, some producers are selling for less than $22 a barrel.

    “More than one-third of the global oil production is not economical at these prices,” Ehsan Ul-Haq, senior consultant at KBC Advanced Technologies Plc, said by e-mail. “Canadian oil producers could have difficulty in covering their operational costs.”

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    U.S. natural gas futures fall to 13-year low on weak heating demand

    U.S. natural gas futures fell over 5 percent to a 13-year low on Monday on forecasts of continued unseasonably mild weather that is expected to keep heating demand low through late December.

    After falling for three days in a row, front-month gas futures on the New York Mercantile Exchange were down 9.2 cents to $1.898 per million British thermal units at 9:16 a.m. EST (1416 GMT).

    That kept the front-month on track to remain in oversold territory for a
    sixth day in a row, the longest streak since July 2014.

    Gas futures for the winter and all of 2016 have been depressed for most of
    this year, with production at record levels, storage at record highs and
    forecasts for a warmer-than-normal winter caused by the El Niño weather pattern.

    The premium of January 2017 futures over January 2016 and the
    premium of April 2016 over March 2016 both climbed to all-time

    Speculators bet gas futures still have further to fall. Some of the most
    active American-style options on the NYMEX were the $1.50 April and February
    2016 and $1.75 January puts. Open interest in the contracts was near all-time

    The calendar year 2016 strip fell to a new low of $2.23, which
    would be below the current year average of $2.65, making it the lowest annual
    price since 1998.

    On the IntercontinentalExchange, next-day gas for Monday at the Henry Hub
    GT-HH-IDX benchmark in Louisiana and the Southern California Border
    W-SOBOR-IDX both fell to the lowest since November 2001, while Chicago
    MC-CHICIT-IDX declined to a record low, according to data going back to 2007.

    Traders said the price rout showed the market was unfazed by the slowdown in
    U.S. gas production over the past several weeks and an increase in exports to
    Mexico to record levels.

    Thomson Reuters Analytics forecast U.S. gas production in the lower 48
    states would fall below year-ago levels for an 11th day in the last 12, with
    output expected to hit 73.0 billion cubic feet per day on Monday versus 73.6
    bcfd a year earlier. Output hit a record of 76.5 bcfd over the summer.

    Exports to Mexico, meanwhile, rose to a record high of 4.1 bcfd. The federal
    government expects the United States to become a net exporter of gas in 2017 as

    pipeline exports to Mexico rise and liquefied natural gas exports to Europe and
    Asia start up next year. Imports from Canada meanwhile are expected to decline
    as U.S. shale production grows.

    Read more at Reuters

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    India's fuel demand rose 6.4 pct y/y in November

    India's fuel demand rose 6.4 percent in November compared with the same month last year, driven by higher sales of gasoline as discounts and festive season buying boosted passenger vehicle sales.

    Consumption of fuel, a proxy for oil demand, totalled 14.8 million tonnes, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed.

    The rise in India's fuel demand is in contrast with sagging oil consumption in China, the world's second biggest economy.

    The International Energy Agency last month said India would be the most important driver of energy demand growth in the world in the years to come.

    India's federal government ended subsidies on diesel sales in October last year and since then frequent changes in retail prices have narrowed the pricing gap with gasoline.

    Consumption of gasoil or diesel, which makes up about 40 percent of refined fuels used in India, grew at its lowest in five months, rising 1.6 percent to 6.1 million tonnes.

    A temporary ban on diesel vehicles and plans to ration road use in the Indian capital is likely to hit consumption.

    Sales of gasoline, or petrol, were 17.2 percent higher from a year earlier at 1.77 million tonnes as passenger car sales in the month rose a little more than one-tenth.

    Cooking gas or liquefied petroleum gas (LPG) sales increased 2.8 percent to 1.62 million tonnes, while naphtha sales surged 39.7 percent to 1.05 million tonnes.

    Sales of bitumen, used for making roads, were 2.1 percent lower, while fuel oil use edged up 0.4 percent in November.

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    Shell sees more job cuts as BG deal gets China green light

    Royal Dutch Shell expects to slash thousands more jobs to save costs if its takeover of BG Group goes through as planned early next year following a final green light from China.

    The acquisition, which was announced on April 8 and is biggest in the sector in a decade, has been cleared by China's Ministry of Commerce, Shell said on Monday, after earlier approvals from Australia, Brazil and the European Union.

    Shell and BG will now send a merger prospectus to their shareholders and hold special general meetings for votes on the deal. If approved, it will face a court hearing 10 days later and could be completed by early February.

    Some shareholders, however, have voiced concern over the merits of the acquisition following the sharp slide in oil prices. The fall in Shell's share price since April means the value of the deal has fallen to $53 billion from $70 billion.

    Shortly after announcing the green light from China, Shell issued a statement saying it expected to cut about 2,800 roles globally from the combined group.

    That would be nearly 3 percent of the group's combined workforce of about 100,000, or equivalent to more than half BG's roughly 5,000 employees.

    The Anglo-Dutch oil and gas company had already outlined steps to protect dividend payouts and cashflow following the merger, which include cost savings of $3.5 billion and $30 billion in asset disposals.

    The new job cuts are also in addition to previously announced plans to reduce Shell's headcount and contractor positions by 7,500 worldwide.

    A BG spokesman said the company would remain focused on its business plan until the deal is completed.


    The combination will transform Shell into the world's top liquefied natural gas (LNG) trader and a major offshore oil producer focused on Brazil's rapidly-developing sub-salt oil basin that would rival Exxon Mobil's position as the world's biggest international oil company.

    Shell has nevertheless had to battle a sharp slide in oil prices, which have fallen from $55 a barrel in April to below $40 a barrel, which some investors said undermined the deal.

    "The deal doesn't make financial sense at the current oil price. You have got to be pretty bullish on the current oil price to make this deal work." David Cumming, Head of Equities at Standard Life Investments, told BBC Radio on Monday.

    Analysts at Credit Suisse, however, said the deal still made strategic sense.

    "Yes, it is tough when one looks at spot oil prices ... We are in the camp of 'Yes', not just because of the strategic rationale longer term, but also because of Shell's CEO and Chairman, who we think are the right people at the helm in this environment," the bank said.

    Last month, sources told Reuters that the Chinese Ministry of Commerce had pressed Shell to sweeten long-term LNG supply contracts as the world's top energy consumer faces a large surfeit over the next five years.

    Read more at Reuters
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    Canada's Encana cuts 2016 dividend and capex

    Canadian oil and natural gas producer Encana Corp , responding to a sharp drop in oil prices, has slashed its dividend by about 79 percent and its 2016 capital budget by more than a quarter.

    Encana said it expects to spend $1.5-$1.7 billion in 2016, compared with $2.2 billion this year.

    Shares of Encana were down 4.8 percent at $5.75 in premarket trading on the New York Stock Exchange.

    The Calgary-based company, which cut its dividend for the first time since 2013, joins other oil and gas producers who have reduced or suspended dividend to shore up their finances amid a steep decline in oil prices.

    Canadian oil producer Canadian Oil Sands Ltd had slashed dividend, while Husky Energy Inc and Penn West Petroleum Ltd have suspended dividend this year.

    Oil prices were trading close to 11-year lows on Monday, on growing fears that the global oil glut would worsen in the coming months.

    Encana cut its annual dividend to 6 cents per share from 28 cents per share in 2015, and said it would discontinue its dividend reinvestment plan discount starting next year.

    The oil producer, which has accelerated its spending in the Permian basin in Texas, said it would direct about half of its capital budget for the next year to Permian.

    Encana said on Monday it expected to produce an average 340,000-370,000 barrels of oil equivalent per day (boepd) next year, down from 395,000-430,000 boepd it expects to produce in 2015.

    The company's four core assets are in Permian and Eagle Ford shale fields in Texas and Montney and Duvernay shale fields in western Canada.

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    Seismic Surveyor Dolphin Files for Bankruptcy as Oil Woes Spread

    Dolphin Group ASA, a Norwegian seismic surveyor that maps the seabed for oil and gas reservoirs, filed for bankruptcy as the collapse in crude prices claimed another victim.

    The Oslo-based company failed to reach a agreement with bondholders, banks and other stakeholders to restructure its debt and capital structure after months of talks and will file a petition for bankruptcy on Monday, it said in a statement. Trading in the company’s stock, which has plunged 96 percent this year to 0.11 krone, was suspended by the Oslo stock exchange and the Financial Supervisory Authority.

    “In light of the unpredictability of the oil price and subsequent spending cuts of our customers, it has become impossible to have the visibility needed to continue our business,” Chairman Tim Wells and Chief Executive Officer Atle Jacobsen said jointly in the statement. Subsidiary Dolphin Geophysical AS will also file a petition for bankruptcy with the relevant court, the company said.

    Oil companies have slashed spending as crude prices have tumbled by about 67 percent over the past June 2014, reducing demand for services and equipment from companies ranging from seismic surveyors to engineering firms and offshore drillers.

    French oilfield surveyor CGG SA proposed last week a sale of as much as 350 million euros ($383 million) of new shares while Petroleum Geo-Services ASA raised about 920 million ($106 million) kroner in a sale of shares in November. Polarcus Ltd., another Oslo-listed seismic surveyor, said last week that it started talks with banks and bondholders to restructure debt and halted all interest and amortization payments.

    Dolphin Group had senior unsecured bonds totaling 900 million kroner and a market capitalization of 45.7 million kroner at market close on Dec. 11.
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    Russia says no OPEC meeting in mid-December

    Russia on Monday poured cold water on prospects for a meeting with the OPEC oil cartel this month, despite oil prices plunging below $40 per barrel.

    Both Energy Minister Alexander Novak and Igor Sechin, the head of Kremlin-controlled oil firm Rosneft, said last month a meeting between independent producers and the Organization of Petroleum Exporting Countries (OPEC) was possible in mid-December.

    "As of now, no meeting is expected," a spokeswoman for the ministry told Reuters on Monday. Rosneft declined to comment.

    Russia, which had initially signalled its willingness to closely cooperate with OPEC, did not send a senior delegation to Vienna prior to the Dec. 4 OPEC meeting, as it did last year.

    Only Deputy Energy Minister Kirill Molodtsov, as well as the heads of Gazprom Neft and Lukoil, which are active in the Middle East, flew to Vienna for some separate meetings.

    Moscow is still unwilling to cut oil production, referring to its harsh climate, which makes it hard to restart oil wells.

    The OPEC meeting ended in disarray as the members could not agree on any policy change.

    Since then, the price of oil has plunged below $40 per barrel to trade at around $38 on Monday, close to the $35 level seen as breakeven by Bank of America Merrill Lynch for Russian oil producers.

    In November, Russia continued extracting oil at a post-Soviet high of 10.78 million barrels per day despite weak oil prices.

    Molodtsov has said Russian oil companies will trim investments next year but keep the pace of oil production growth.

    Attached Files
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    Cheniere replaces CEO Charif Souki

    Cheniere Energy’s board ousted CEO on Sunday, just weeks before the company becomes the first to export liquefied natural gas from the mainland United States.

    Souki’s departure comes after a long-running clash with activist investor Carl Icahn, who has become the Houston-based company’s largest shareholder and named two allies to the company’s board this summer. Icahn has sought to rein in Cheniere’s ambitious expansion plans and has criticized how much it has paid its top officers.

    Neal Shear, a current board member and former head of Morgan Stanley’s commodities business, will serve as CEO while the board seeks a replacement, according to the company’s announcement.

    Under Souki, Cheniere has invested billions into building massive liquefaction plants along the Gulf Coast. The facilities will cool natural gas from U.S. producers into a liquid so it can easily be shipped to customers abroad.

    The company’s Louisiana Sabine Pass plant is expected to begin operating by the end of 2015 after years of permitting and construction. Its first shipment will put Cheniere ahead of many companies rushing to build infrastructure that would allow cheap natural gas from prolific U.S. shale plays to reach higher priced natural gas markets.

    Sabine Pass will also bring a steady stream of cash to Cheniere, which has operated at a loss for years while it poured money into construction. The company has simultaneously launched another, billion-dollar export facility in Corpus Christi.

    The scale of the company’s ambition has irked some investors, including Icahn, who initially bought 19.4 million shares or an 8.2 percent stake in the company in August. Icahn then expanded his holdings to 13.85 percent with several purchases, including one announced last week.

    Icahn has also taken aim at Souki’s large compensation package. In 2013, Souki had the highest compensation package for a U.S. executive across all public companies, with a mostly stock package valued at $142 million, according to the Associated Press.

    In March of this year, Cheniere settled a lawsuit with investors who had sued to limit the company’s stock grants to executives. The agreement limits how much stock Cheniere can grant its corporate officers and requires the company to seek shareholder approval of future grants.

    Souki has since sold about one-third of the stock that he owns, totaling about $116 million, according to Bloomberg.
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    Shell, BG deal snaps up Chinese clearance

    Shell’s multi-billion takeover of BG has been given the go-ahead by Chinese officials, surpassing its final clearance hurdle.

    The Chinese Ministry of Commerce issued unconditional merger clearance.

    BG Group’s chief executive, Helge Lund said: “Following today’s approval from MOFCOM, all pre-conditional regulatory approvals for the combination have been received and we now move to the next phase. I am pleased that we have continued to deliver a strong operating and safety performance throughout the offer period which is a credit to our teams across the business. The proposed combination has strong industrial logic, particularly in deep water production and LNG, and will accelerate the delivery of value to our shareholders.”

    The deal has already been approved by authorities Australia, Brazil and the European Union.

    Shell’s chief executive Ben van Beurden previously said the £55billion deal would be a springboard to profits.

    Commenting on today’s clearance, he said: “We’re grateful to MOFCOM for its thorough and professional review of the recommended combination, and I am delighted we now have all the pre-conditional approvals needed to move to the next important phase.

    “This is a strategic deal that will make Shell a more profitable and resilient company in a world where oil and gas prices could remain lower for some time. We will now seek approval from both sets of shareholders as we move towards deal completion in early 2016.”

    A BG spokesperson added: “The proposed combination will require support from both BG Group and Shell shareholders and BG Group shareholders should now await further communications from their board.”
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    Exxon Names Refining Boss as Heir Apparent to CEO Rex Tillerson

    Exxon Mobil Corp. promoted Darren Woods to president, putting him on a path to succeed Chairman and Chief Executive Officer Rex Tillerson as leader of the world’s largest energy producer by market value.

    The elevation of Woods, who oversees Exxon’s sprawling global network of oil refineries and fuel terminals, signals an apparent end to the internal competition with production chief Jack Williams to replace Tillerson upon retirement some time between now and March 2017. The promotions were announced in a statement Friday by the Irving, Texas-based company.

    Woods, an electrical engineer by training who joined Exxon in 1992 as an analyst, is following the same trajectory as Tillerson in being named president and promoted to director. At 50, he is the youngest member of the 13-person board. Many observers had expected Exxon to favor Williams because he emerged from and runs the oil- and gas-producing business that generates almost 80 percent of the company’s profit.

    “The days of strictly just looking at your biggest business unit and plucking the next CEO from that pool of executives is over,” said Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis. “At Exxon, they look at who they think their best leader is, no matter what they operate.”

    Woods, a native of Wichita, Kansas, worked his way up through the refining and chemicals businesses until his appointment to the management committee that oversees day-to-day operations in 2014 alongside Williams. His promotion to president was made by the board on Dec. 9 but not announced until Friday.

    Stock Awards

    Exxon awarded Woods 26,400 restricted stock units on Wednesday, it disclosed in a filing. That award follows on the heels of 64,400 units in November, another filing shows. The units, which convert to shares, were worth a combined $6.75 million at Friday’s close.

    Tillerson will reach Exxon’s mandatory retirement age of 65 in March 2017. For now, he remains CEO and chairman of the board, according to the statement. Tillerson has been CEO since January 2006.

    Exxon follows big European rivals Royal Dutch Shell Plc and Total SA in tapping refining experts as their next leaders. Shell CEO Ben Van Beurden was director of downstream before his elevation in 2014; Total’s Patrick Pouyanne was plucked from the French company’s refining arm when longtime boss Christophe De Margerie was killed in a plane crash in Russia later that same year.

    “Investors really don’t care about this because nothing fundamentally is going to change based on who is the next CEO,” said Pavel Molchanov, an analyst at Raymond James Financial Inc. “With Exxon, all the executives are lifers who are steeped in the company culture. You don’t rise to the higher levels by rocking the boat so the next person to be put in charge isn’t going to be rocking the boat.”
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    BP faces Mexico class action lawsuit over 2010 oil spill

    A few months after reaching the largest corporate settlement in U.S. history, BP Plc faces a class action lawsuit in Mexico over its deadly 2010 Gulf of Mexico oil spill, which a civic group on Friday said it had filed against the company.

    Acciones Colectivas de Sinaloa, a group specializing in consumer and environmental class action claims, lodged the lawsuit against four BP units at a Mexico City court this week, said the head of its board, David Cristobal Alvarez.

    The claim was based on BP's acknowledgement of the damage caused when the Deepwater Horizon oil rig exploded on April 20, 2010, off the coast of Louisiana, and on studies supporting evidence of environmental damage in Mexico, Alvarez said.

    Because the Deepwater Horizon accident did not immediately contaminate the Mexican part of the Gulf of Mexico, no claims were made at the time, he added.

    "But with the maritime currents and the air, the contamination has reached the Gulf of Mexico, it's started to affect people on the coasts of the states in the Gulf of Mexico," Alvarez said.

    The explosion was the worst offshore oil disaster in U.S. history, killed 11 workers and spewed millions of barrels of oil onto the shorelines of several states for nearly three months.

    BP said in July it will pay up to $18.7 billion in penalties to the U.S. government and five states to meet nearly all claims from the spill, adding to the $43.8 billion it had already set aside for criminal and civil penalties and cleanup costs.

    Alvarez said the Mexican suit was seeking compensation for the environmental damage caused, if that was recognized.

    The court would likely need to decide by February or March whether to accept it as a class action suit, he added.

    Read more at Reuters
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    China Nov crude runs climb to new record - statistics bureau

    China's refinery throughput rose 3.3 percent in November from a year earlier to 43.92 million tonnes, or 10.69 million barrels per day (bpd), a Chinese record, data from the National Bureau of Statistics showed on Saturday.

    The daily run rate is up 2.6 percent compared with the 10.42 million bpd recorded in October.
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    Alternative Energy

    What Just Happened in Solar Is a Bigger Deal than Oil Exports

    The clean-energy boom is about to be transformed. In a surprise move, U.S. lawmakers agreed to extend tax credits for solar and wind for another five years. This will give an unprecedented boost to the industry and change the course of deployment in the U.S.

    The extension will add an extra 20 gigawatts of solar power—more than every panel ever installed in the U.S. prior to 2015, according to Bloomberg New Energy Finance (BNEF). The U.S. was already one of the world's biggest clean-energy investors. This deal is like adding another America of solar power into the mix.

    The wind credit will contribute another 19 gigawatts over five years. Combined, the extensions will spur more than $73 billion of investment and supply enough electricity to power 8 million U.S. homes, according to BNEF.

    "This is massive," said Ethan Zindler, head of U.S. policy analysis at BNEF. In the short term, the deal will speed up the shift from fossil fuels more than the global climate deal struck this month in Paris, and more than Barack Obama's Clean Power Plan that regulates coal plants, Zindler said.

    This is exactly the sort of bridge the industry needed. The costs of installing wind and solar power have dropped precipitously—by more than 90 percent since the original tax credits took effect—but in most places coal and natural gas are still cheaper than unsubsidized renewables. By the time the new tax credit expires, solar and wind will be the cheapest forms of new electricity in many states across the U.S.

    The tax credits, valued at about $25 billion over five years, will drive $38 billion of investment in solar and $35 billion in wind through 2021, according to BNEF. The scale of the new projects will help push costs down further and will stimulate new investment that lasts beyond the extension of the credits.

    Few people in the industry expected a five-year extension. Stocks soared. SolarCity Corp., the biggest rooftop installer, surged 34 percent yesterday. SunEdison Inc., the largest renewable-energy developer, climbed 25 percent, and panelmaker SunPower Corp. increased 14 percent.

    Congress is expected to vote by the end of this week on the tax credits as part of a broader budget deal that also lifts the 40-year-old ban on U.S. oil exports. Oil producers have lobbied for years to lift the ban, but it isn't likely to significantly affect either consumption of oil or deployment of renewables. Leaders from both parties reached an agreement on the bill late Tuesday.  

    The 30 percent solar tax credit was set to expire next year and will now extend through 2019 before tapering to 10 percent in 2022. The wind credit had expired at the end of 2014, and the extension will be retroactively applied from the start of 2015 through 2019, declining in value each year.

    Wind power has had an especially tumultuous relationship with U.S. lawmakers, who have kept the industry's credits alive through a disruptive ping-pong game of short-term extensions every year or two. "You open manufacturing plants and then you close them. And then you open them and you close them," BNEF's Zindler said. "It's economically inefficient. This will give them a good five-year line of sight on what the market will look like, and that's really important."

    Attached Files
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    Scottish Power sells tidal energy business to Atlantis

    Scottish Power Renewables has sold its tidal power business to Atlantis Resources in exchange for a six percent stake in Tidal Power Scotland Limited, the country's largest tidal power developer.

    The deal builds on Atlantis' leading position in Britain's tidal energy sector following its purchase of one of its rivals, Marine Current Turbine Limited, from Siemens in April.

    Tidal power converts energy harnessed from tidal movements into electricity via turbines. Scottish Power's tidal business includes two projects worth 6.6 million pounds, meaning TPSL, which now owns the projects, is valued at 110 million pounds.

    "It brings another highly credible industrial shareholder with deep skill sets, as well as positioning the company strongly for bringing in new investors into its projects," analysts at Peel Hunt said of Atlantis. Peel Hunt raised its target price by 10 pence on Atlantis on the back of the announcement and recommends buying the stock.

    TPSL, in which Atlantis retains a 94 percent holding, will now have a tidal power project portfolio of nearly 650 megawatts, making it Britain's largest tidal power player.

    The deal comes on the same day as the British government announced cuts to small-scale renewable energy subsidies in a bid to rein in costs for green energy projects.
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    UK government cuts domestic solar support less than expected

    The British government reduced financial support for domestic-scale solar power to 4.39 pence per kilowatt hour on Thursday and limited new spending on its feed-in-tariff (FiT) scheme at 100 million pounds ($150 million).

    Under the scheme, households, businesses or farms which install low-carbon energy sources such as solar panels or small wind turbines are paid for the electricity they generate and unused energy can be sold to electricity suppliers.

    The government had been expected to cut the feed-in-tariff for domestic solar to much less.
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    Norway's Statkraft ceases new offshore wind investments

    Norwegian utility Statkraft will cease investing in new offshore windfarms, including the world's biggest project off the coast of Britain, so it can continue paying dividends to its government owners despite a slump in Nordic power prices.

    The decision announced on Wednesday is a blow to Britain's plans to maintain its status as the world's biggest offshore wind market, with plans to double offshore wind energy capacity from the current 5 gigawatts (GW) by 2020.

    However Statkraft said it had changed its investment plans due to the Norwegian government overturning an earlier decision to allow the company to retain 5 billion crowns ($574 million) in dividends to support new investments.

    The company's revenue has been hurt by low Nordic power prices, which fell to a 15-year low of 13.4 euros per megawatt-hour (MWh) in the third quarter.

    "Offshore wind power is capital intensive. The reduced financial terms from the owner entail that it is not possible for Statkraft to invest in new offshore wind projects", said Statkraft Chief Executive Christian Rynning-Toennesen.

    Statkraft said it will not invest in Dogger Bank, expected to be the world's biggest offshore wind farm, and Triton Knoll, both off the east coast of England, although it would stay for the development phase.

    A spokesman for British green energy lobby group RenewableUK said Statkraft's decision was disappointing but he expected others to take its place.

    The Dogger project is being developed by a group dubbed Forewind which also includes RWE, SSE and Statoil. The group said it had consent for four 1.2 gigawatt (GW) projects and it was up to its members to determine the next steps forward.

    Triton Knoll is being developed by Statkraft and RWE. The later said it expected the project to go ahead. "Triton Knoll remains one of the most competitive projects in UK waters and both partners remain committed to ensuring its success," said a spokesman for RWE Innogy UK.

    Offshore wind is one of the more expensive forms of renewable energy because turbines are sited far out at sea. The British government recently said conditions for qualifying for subsidies would become much stricter as it tries to rein in costs.

    Statkraft may also postpone some overseas hydropower projects, including two in Chile, spokesman Knut Fjerdingstad said.

    Fjerdingstad added Statkraft will honour already agreed investment in the Dudgeon wind farm, which it is developing with Statoil and Abu Dhabi's Masdar, and will stay as operator of the Sheringham Shoal wind farm, its biggest investment in Britain so far.

    Attached Files
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    Energy storage focus: Storage worth its salt

    Two projects in Africa are showcases for the energy storage potential of molten salt. South Africa is abundantly sunny, so it makes sense to capture this natural resource and use it to turn the lights on.

    In recent years the South African government has taken action to stimulate delivery of renewable power generation capacity by awarding project agreements to developers through the Renewable Energy Independent Power Producer Procurement (REIPPP) programme.

    Mott MacDonald was the lead consultant to the government on the development of REIPPP. Projects have been awarded under five bidding windows so far, and many of these have achieved financial close. A sixth bidding window is expected to commence soon.

    The majority of projects selected for development under the programme are wind farms and solar photovoltaic (PV) plants. However, a small and slowly growing proportion has focused on an increasingly important player in renewable energy: concentrated solar power (CSP).

    Compared to PV, which is becoming ubiquitous, CSP is still nascent as a commercial-scale solar generation technology. But it has an advantage over PV in that it is easier to incorporate energy storage into a large-scale CSP plant.

    This is a valuable benefit for South Africa, given its power demand profile. A sharp peak in demand consistently occurs around sunset, when solar generation yield is tailing off. With energy storage, state-owned utility Eskom can deal with this peak in demand by calling on reserves of solar energy stored earlier in the day by CSP plants.

    Sub-Saharan Africa's first large-scale operational CSP plant, KaXu Solar One in South Africa, was commissioned in early 2015 after project owner and developer Abengoa successfully steered the scheme through REIPPP. Mott MacDonald was the lenders' technical advisor (LTA) during its financing and construction, and is now providing operational monitoring services on behalf of the lenders.

    It is easier to incorporate energy storage into a large-scale CSP plant than a PV project.

    As South Africa's first parabolic trough CSP plant, KaXu is a major achievement in itself. But it is about to be overshadowed by a 'big brother' being constructed next door: Xina Solar One.

    CSP uses giant curved mirrors - parabolic troughs - to focus the sun's heat onto horizontal absorber tubes filled with oil-based heat transfer fluid, which convey the thermal energy to a main heat exchanger where water is converted to steam. The steam drives a turbine, which produces power for the grid. Xina features a new generation of the technology based on a larger version of the trough collectors, meaning it can achieve the same yield as KaXu with fewer collectors.

    Salt is used for storage because it has exceptional heat retention properties.

    KaXu and Xina are notable for their use of innovative molten salt energy storage technology to retain thermal energy captured during the day. Salt is used because it has exceptional heat retention properties.

    To capture the energy, a proportion of the heat transfer fluid is diverted into a second heat exchanger, where it heats molten salts which are circulated from a cold salt storage tank to a hot tank.

    The molten salts are heated to approximately 400oC, then discharged into a separate tank for storage. After sunset, the system reverses to maintain power generation.

    Both KaXu and Xina use molten salt storage technology, but once again Xina has the advantage of size because its larger salt tanks mean it can store twice as much energy as KaXu.

    Xina's storage capacity is equivalent to the energy that would be produced by the plant operating for five hours at full capacity.
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    Vestas Offshore Wind Gets 330-Megawatt Order for U.K. Project

    MHI Vestas Offshore Wind A/S said it won a 330-megawatt order for a Dong Energy A/S project in the Irish Sea off the northwest coast of England.

    The order is for 40 V164 8-megawatt turbines, Vestas Wind systems A/S, one of the company’s parents, said in a regulatory statement. The contract covers supply and commissioning of the wind turbines and a five-year service contract at Dong’s Walney Extension West project, it said.

    MHI Vestas is a joint venture between Vestas and Mitsubishi Heavy Industries Ltd. Its 8-megawatt turbines can each generate at slightly more than 8 megawatts. Vestas said in Wednesday’s statement that it discloses MHI Vestas orders when they are worth more than 1 billion Danish Kroner ($146 million).
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    China's State Power Investment Corp buys Pacific Hydro

    China's State Power Investment Corp has bought IFM Investors' renewable energy business, Pacific Hydro, confirming an earlier report by Street Talk.

    IFM signed a deal to sell Pacific Hydro in its entirety on Wednesday afternoon following a hotly-contested auction which saw multiple bids for the business as a whole and for the separate Australian and South American units.

    Santander advised State Power Investment Corp. The sale price is said to be north of $3 billion, including debt.

    The deal is expected to close in late January.

    Pacific Hydro's globally-significant portfolio develops, builds and operates renewable energy projects in Chile, Australia and Brazil.

    Pacific Hydro expects $175 million earnings before interest, tax, depreciation and amortisation in the 2015 calendar year. About half of the earnings are scheduled to come from Chile, while 41 per cent is from Australian assets and the remaining 7 per cent from Brazil.

    Bank of America Merrill Lynch and Credit Suisse ran the sale for IFM.

    China's State Power Investment Corp beat off rival bids from the likes of Australian private equity firm Pacific Equity Partners, Morgan Stanley Infrastructure Fund, China's Huadian Corporation, ENGIE (the company which was formerly GDF SUEZ), Gas Naturale from Spain, TransAlta and Marubeni Corporation.

    Sources indicated that offers for the parts were close to the winning bid received for the business as a whole.

    Read more:
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    Solar Prospects Shine on Tax Credits and California Payments

    U.S. congressional leaders reached a deal that would extend tax credits for renewable energy. And California, solar’s biggest U.S. market, upheld payments for power sold from rooftop panels.

    Shares of solar companies jumped with SunEdison Inc., the world’s biggest renewable-energy developer, rising 13 percent at the close in New York.

    In Washington, House Speaker Paul Ryan told Republicans in a closed-door meeting on Tuesday that the House plans to vote Thursday on a $1.1 trillion spending bill that would extend tax credits for wind and solar power. In California, regulators rejected requests by utilities to increase fees and cut payments to new solar users in a proposed ruling that’s seen as a bellwether for how the rest of the country deals with the rapid emergence of power generated by customers.

    The California proposal issued by an administrative law judge at the California Public Utilities Commission on Tuesday offers rooftop solar installers “very significant positives that should secure profitable growth for the industry after 2016,” Patrick Jobin, an analyst for Credit Suisse Group AG, said in a research note.

    Under the proposal in California, solar panel owners would pay a one-time connection fee of about $75 to $150 and other small fees to fund low-income and energy efficiency programs, according to the administrative law judge’s filing. Solar companies and advocates lauded the plan while PG&E Corp., the state’s largest investor-owned utility, said regulators “could do more.”

    The California fees and charges are less than those proposed by utilities, the California Solar Energy Industries Association said in a statement.

    California utility owners PG&E, Edison International and Sempra Energy had asked the state to increase fees and cut payments to power-generating customers, arguing that customers who don’t have solar shouldn’t subsidize those who do. They’ve also said the program needs to better reflect the value of the power and the cost of upgrading the grid to handle it. The proposal is scheduled to be voted on at the commission’s Jan. 28 meeting.
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    Hazardous smog hits Shanghai as China's bad air spreads

    Smog in Chinese metropolis Shanghai hit its highest level since January on Tuesday, prompting schools to ban outdoor activities and authorities to limit work at construction sites and factories as polluted air spreads around the country.

    Last week, hazardous pollution levels in Beijing triggered the capital's first "red alert," meaning vehicles were ordered off the roads, classes were cancelled and heavy vehicles banned.

    Shanghai's heavy smog arrived just a day before the city hosts the closely-watched World Internet Conference, which will include a speech by President Xi Jinping. Attendees are expected to include global tech industry titans and the leaders of countries such as Russia and Pakistan.

    On Tuesday, a curtain of grey smog fell over Shanghai, China's business capital with a population of over 20 million. It limited visibility and drove the city's air quality index (AQI) above 300, a level deemed "hazardous" on most scales and which can have a long-term impact on health.

    The levels of PM 2.5, dangerous tiny pollutants, hit 281, the highest since mid-January, according to data compiled by the U.S. Department of State. PM 2.5 particles are a major cause of asthma and respiratory diseases, experts say.

    "Because of (the smog) my kid often gets sick, often has a stuffy nose and a cough," said Valen Wang, 40, a full-time mother in Shanghai.

    "At the moment, the pollution feels like it just keeps on getting worse, and all we can do is slow it down a little."


    The smog prompted Shanghai authorities to issue a "yellow alert," the third-highest level warning, and to advise elderly, young and sick residents to remain at home, avoid outdoor activity and keep the windows closed.

    China's pollution is causing a headache nationwide, with many rivers and lakes clogged with garbage, and heavy metals in the soil. Bad air sometimes causes flight delays.

    China will impose a nationwide credit system making it harder for environmental offenders seeking loans, the environmental protection ministry and state planner the National Development and Reform Commission, said.

    In contrast, businesses with a good environmental track record will "receive support" in seeking financial help, administrative certificates and government procurement projects, the government bodies said in a joint statement.

    They did not say when the plan would take effect.

    The heavy smog in Shanghai also comes as provinces to the north tighten pollution regulations for steel mills and cement plants, pushing production south.

    Some Shanghai residents donned masks to filter the air, while others shunned protection.

    "My throat is rather dry and it hurts," Cao Yonglong, a 30-year-old delivery man said. "I keep wanting to have a drink of water."
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    Solar deal from Corning brings US corporations to 3GW for 2015

    Even before December arrived, 2015 had proven a record-breaking year for corporate purchasing of large-scale wind and solar energy. Less than a month ago, the YTD contracted capacity stood at 2.1 GW, far exceeding the 1.2 GW of 2014 that previously held the record. But these final weeks of 2015 have seen corporations announce additional major renewable energy deals that are pushing the year-end total far higher—and companies affiliated with the Business Renewables Center (BRC) continue to be at the heart of the story.

    Earlier this month, Google announced a staggering 842 MW of new wind and solar, including from BRC companies Invenergy, EDF Renewable Energy, and RES Americas. BRC company Bloomberg also announced 20 MW from EDP Renewables to offset energy use of its New York offices with electricity from an in-state wind farm.

    Now today, Fortune 500 member Corning Incorporated announces ~50 MW of solar from BRC company Duke Energy Renewables, inching the market tantalizingly close to—and potentially beyond—the symbolic 3 GW number.

    Beginning in Q1 2016, Corning will purchase about 62 percent of the expected output from an 80 MW solar farm in Conetoe, North Carolina. When completed at the end of this year, it will become the largest solar-generating facility east of the Mississippi River. The deal will give Corning an estimated 120,300 MWh per year of solar energy, enough to equal the annual power usage of roughly 10,000 U.S. homes.

    “Corning now belongs among a select group of companies that have taken action on renewable procurement through long-term contracts. These contracts directly enable project developers to build new solar and wind capacity,” says Hervé Touati, a managing director at RMI and head of the BRC. “Beyond pioneers from the ICT sector, we are seeing this year large corporations such as Corning—coming from a variety of industrial and services sectors—entering the market for the first time as fast followers. It is a strong indication that long-term renewable energy contracts are becoming increasingly relevant to all Fortune 500 companies, and will soon become the standard way of running business.”
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    Trina Solar receives proposal to be taken private

    Chinese solar panel maker Trina Solar Ltd said it received a go-private proposal from a group comprising its chief executive and Shanghai Xingsheng Equity Investment & Management Co, valuing the company at more than $980 million.

    Trina Solar said the group offered $11.60 per American Depositary share, a premium of about 21.5 percent to the stock's Friday close.

    The company's shares rose to $11.20 in premarket trading on Monday.

    Trina Solar said it received a preliminary non-binding proposal from Chief Executive Jifan Gao and Shanghai Xingsheng on Dec. 12.

    The company's valuation is based on total outstanding shares as of Sept. 30.

    Trina Solar said on Friday it had withdrawn from the European Union's price undertaking.

    The EU said earlier this month it will extend trade protections aimed at helping European solar power manufacturers compete against cheaper Chinese products, hurting Trina Solar's global expansion plans.
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    Australia reverses ban on wind farm investment under new leader

    Australia has reversed a decision banning its clean energy fund from investing in wind power projects in the first sign that energy policy will be more favourable toward renewables under new leader Malcolm Turnbull.

    A new mandate to the Clean Energy Finance Corporation (CEFC) was issued this month and in a copy seen by Reuters on Sunday it showed that the fund would be allowed to invest in wind projects as long as they incorporate "emerging and innovative" methods.

    The shift is the latest from the government of Prime Minister Turnbull, which has also announced a boost to funding innovation startups and dropped a plan to deregulate university funding since the change in leadership three months ago.

    Former Prime Minister Tony Abbott was a vocal critic of wind farms, once describing them as ugly and noisy.

    Under his leadership, a Renewable Energy Target was cut by a fifth this year and the A$10 billion ($7.2 billion) CEFC was ordered in June to stop investing in wind farms, the country's second biggest clean energy source after hydropower.

    Turnbull replaced Abbott as leader the Liberal-National coalition government in September.

    Turnbull lost the leadership of the Liberal party six years ago over his support for a carbon pollution reduction scheme proposed by the then Labor government.

    Although Abbott's anti-wind farm decree was never ratified by parliament, it helped stall domestic and international investment in the renewable energy sector.

    The new mandate encourages the CEFC to "focus on offshore wind technologies".

    "This recognises that, in many circumstances, the financing requirements for mature and established clean energy technologies such as onshore wind technologies may be met from commercial financing sources," it said.

    The CEFC last week announced A$67 million in financing for what will be Australia's largest wind farm, eventually powering 120,000 homes.

    Debt support from funds such as the CEFC and Export Development Canada played an important part in the overall $200 million debt financing package, the company said in a statement.

    The CEFC was established by the former Labor government in 2012 to mobilise investment in renewable energy, energy efficiency and low emissions technologies.

    Australia is the developed world's highest per capita carbon emitter, and a major producer and exporter of coal. (Reporting by Morag MacKinnon; Editing by

    Read more at Reuters

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    Trina Solar withdraws from EU price undertaking

    Chinese solar panel maker Trina Solar Ltd said it withdrew from the European Union's price undertaking but will continue to serve EU customers through overseas manufacturing facilities.

    The European council, in December 2013, imposed anti-dumping and anti-subsidy duties on solar cells and solar panels imported from China.

    Chinese solar companies have been battered in the past few years by low panel prices and anti-dumping duties imposed by the United States and Europe on solar panel imports

    The EU said earlier this month it will extend trade protections aimed at helping European solar power manufacturers compete against cheaper Chinese products. The current trade protections put stiff import duties on Chinese solar products.

    Trina Solar Chief Executive Jifan Gao said on Friday that the current iteration of the EU price undertaking adversely affects the company's global expansion strategy.

    Read more at Reuters
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    Onshore wind generation ‘up by 62% this year’

    Onshore wind generation in the UK has increased by 62% compared to last year.

    That’s according to the UK Government’s latest report on energy trends for renewables – which compares last year’s Q2 with this year’s.

    Onshore wind generation went up from 3TWh to 4.9TWh whilst offshore wind increased from 2.1TWh to 3.6TWh – a growth of 70%.

    That’s due to higher wind speeds and more capacity, particularly for offshore wind  – even though average wind speeds in 2015 were only “marginally higher” than normal.

    Wind speeds for 2014 were the second lowest for quarter two since 2010.

    Solar generation more than doubled from 1.5TWh to 3.2TWh due to increased capacity.

    Renewable electricity capacity as a whole was 28.4GW in 2015 – which is a 26% growth compared to last year. That’s a 2.2% rise on the previous quarter due to a high growth in solar and wind capacity – especially offshore.

    In 2015 more than 3,500MW of capacity was installed and eligible for the Feed-in Tariff scheme – an increase of 29% – although the initiative was recently cut.

    Liquid biofuels consumption fell by 24% from 464 million litres in 2014 to 355 million litres. Liquid biofuels represented 3% of petrol and diesel consumed in road transport, which is down from 4% a year earlier.
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    Precious Metals

    Public Investment Corporation increases stake in Lonmin

    South Africa’s Public Investment Corporation (PIC) has increased its stake in platinum producer Lonmin to almost 30% after buying more shares via the company’s rights issue.

    The PIC, which manages South African government employee retirement funds, now owns 29.99% of miner, up from 7%, Lonmin said on Monday.

    Bruised by strikes, rising costs, a weak platinum price and slowing demand, South Africa-focused Lonmin also said it planned to raise another $370 million in loans to refinance debt currently due in May 2016.

    Lonmin said on Friday that its deeply discounted $400 million rights issue was undersubscribed, after its shareholders only bought 19.2 billion shares, or 71%, of its proposed 27 billion share issue.

    The outcome allowed PIC to increase its stake in the company after it had sub-underwritten a material portion of the issue, over and above its entitlement.

    The undersubscribed rights issue also forced underwriters, HSBC, J.P. Morgan Cazenove and Standard Bank, to take up shares in the company.

    Lonmin’s shareholders approved the share issue last month after the company warned that if it could not raise the cash trading in its shares could be suspended.
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    Base Metals

    Alcoa lands two Boeing contracts worth more than $2.5bln

    Metals company Alcoa Inc said on Thursday it has signed two long-term supply contracts with plane manufacturer Boeing Co worth more than $2.5 billion that will be part of its value-added business once the company splits in the second half of 2016.

    One of the contracts is for fasteners and the other for lightweight titanium seat track assemblies, which hold seats in place and bear the weight of passengers.

    The contracts involve providing parts for the 737 MAX, 777X and 787 Dreamliner.

    "This is a major contract for us," Alcoa Chief Executive Klaus Kleinfeld told Reuters. "This shows the strength we have been able to build in this complicated business."

    In October the company announced a similar $1 billion contract with Airbus to provide fasteners for the A350 XWB, A320neo and A330.

    Alcoa has bet on growth from titanium and high-strength aluminum sales to the aerospace industry as its order book swells for airplane production and amid renewed global spending on automobiles. About 40 percent of revenue for the new value-added business was generated by the aerospace sector.

    After the split next year, Alcoa's traditional business, which also includes better-performing bauxite and alumina, will retain the Alcoa name. The newer company has yet to be named.

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    OZ Minerals Hydromet trial a success

    OZ Minerals has successfully concluded the Hydromet demonstration plant trial, with first parcel upgraded to 53 to 55% copper and the second parcel upgraded to 58 to 60% copper.

    Some 150 tonnes of copper concentrate from Prominent Hill was treated in two separate parcels of differing mineralogical quality, with impurities in the concentrate reduced to well below penalisable levels in both cases.

    CEO and managing director Andrew Cole said the trial surpassed its expectations and has begun providing samples to existing and potential customers. He thinks such high quality concentrates will be in demand by the market, particularly at a time when copper grades are declining and impurities increasing.

    The South Australian state government has provided $10 million to fund a joint study with OZ Minerals and Adelaide University to add further value to copper concentrates produced in the South Australia Gawler Craton. OZ Minerals pledged an additional $8 million to find an established plant to quickly and efficiently start demonstration scale testing.
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    Oyu Tolgoi Signs $4.4 Billion in Project Finance

    Oyu Tolgoi Signs $4.4 Billion in Project Finance

    Turquoise Hill Resources  today announced that Oyu Tolgoi LLC  has signed a $4.4 billion project finance facility, one of the largest in the mining industry. The facility is being provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the United States and Australia, along with 15 commercial banks. All figures are in US dollars.

    Jeff Tygesen, Turquoise Hill's Chief Executive Officer, said, "The signing of project finance is an unprecedented milestone for Turquoise Hill and Oyu Tolgoi as well as a historic vote of confidence in both the project and Mongolia. We look forward to working with the Mongolian Government and Rio Tinto to complete the remaining steps leading to the restart of underground development."
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    Trafigura sees copper market in surplus by end-2016

    Commodity trading group Trafigura expects the copper market to be in balance during most of 2016 before a surplus emerges at the end of the year, it said on Monday.

    Worries about weak demand from top consumer China and excess supply have hit benchmark prices, which have slid about a quarter this year.

    "Copper industry fundamentals remain for now relatively healthy across the globe but have also been affected to some extent by the deceleration in China," Trafigura said in its annual report.

    Trafigura posted a 6.5 percent rise in annual net profit on Monday as it racked up record oil trading volumes, as well as an increase in metals.

    The group, which is the top trader in copper concentrates, said its traded volume of the material - partially processed copper ore - surged 29 percent to 3.1 million tonnes during its 2015 financial year to the end of September.

    Overall metals and minerals traded volumes rose 6 percent to 52.1 million tonnes.

    The trader said it concluded significant investments during the year which would support further volume growth, including taking a 30 percent stake in a new copper smelter owned by China's Jinchuan Group.

    During 2015, there was a major draw down in copper concentrate stocks, especially in China, bringing stocks back to normal levels towards the end of the year, Trafigura added.

    In zinc, Trafigura expects a supply shortfall to finally emerge by the end of 2016 after failing to materialise this year despite the closures of major mines.

    "From the point of view of concentrates demand, the Chinese market was healthy, with imports increasing year-on-year by between 50 and 60 percent and smelters increasing their capacity utilisation," it said.

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    "We don't understand it" Glasenburg on Nickel.

    Nickel miners are under mounting pressures to reduce production as falling prices have resulted in about half the global sector losing money, Australia's Independence Group said.

    "We are at price levels that are unsustainable in the long term," said Peter Bradford, managing director of Independence, which is expanding its footprint in nickel mining.

    "The capacity that will be shutting down will be the higher-cost nickel mine production," he said.

    Independence is constructing the Nova nickel mine Australia, with an eye to starting production in December 2016.

    The mine's rich ore indicates it will operate on a low-cost basis of around $1.57 per pound - less than half the current price of $3.92 a pound, or $8,660 a tonne - insulating it from much of the weakness underway in the global market, according to Bradford.

    "Nova is an extremely robust project that will be able to weather the commodity price cycle," Bradford said.

    Half the mine's forecast 26,000-tonnes-a-year nickel-in-concentrate production is under contract to BHP Billiton's nearby Nickel West smelting division and half to Glencore Plc

    Development of the mine comes amid mounting calls from within the industry for companies to mine less nickel to address a global supply glut and low metals prices.

    ANZ this month cut its 2016 nickel price forecast by 15.1 percent to $9,690 per tonne and its 2017 forecast by 10.7 percent to $12,504 per tonne.

    Ivan Glasenberg, chief executive of mining and trading group Glencore estimates the figure for nickel companies running at a loss could be even higher at 60 percent.

    "We don't understand it, we won't wait for the markets to turn to justify operations," Glasenberg told an investment briefing on Dec 10, according to media reports.

    Glencore is the world's fifth-largest producer of nickel metal, with operations in Australia, Canada, Norway, New Caledonia and Dominican Republic.

    Read more at Reuters

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    Steel, Iron Ore and Coal

    QHD thermal coal prices further rebound, stocks hit 20-mth low

    Prices of thermal coal traded at China’s top transfer port of Qinhuangdao continued to rebound at a faster pace this week, mainly due to increased demand and low rail supplies that have drawn stocks down to the lowest of the past 20 months.
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    Australian Isaac Plains coal mine to resume production in 2016

    The Isaac Plains coal mine in Australia, which was mothballed in 2014, will restart production next year despite an international move to cut output to improve environment, the operator Stanmore Coal said on December 17.

    Australian miner Stanmore Coal bought the mine from Brazilian mining giant Vale and Japanese firm Sumitomo for A$1 ($72 cents) this July.

    Isaac Plains coking coal operation is located in central Queensland state, and expects to produce at least 1.1 million tonne/year of coking coal over 2016-2018.

    Stanmore expected shipments of coking coal to commence in April 2016, creating A$7 million in royalties to the cash strapped Queensland state government, as well as other federal and state taxes.

    "Challenging commodity markets have presented an exceptional opportunity for Stanmore and in early 2016 we will become an independent producer of high quality coking coal for export to the steel industry in the region," Stanmore Coal managing director Nick Jorss said.

    "The acquisition of Isaac Plains for a nominal sum gives us a fully equipped coking coal mine with three years of mine life at current prices, and it comes with over A$350 million of plant and equipment including dragline and wash plant with excess capacity," Stanmore Coal chairman Neville Sneddon said.

    Stanmore said its low-cost approach and optimized mine plan for Isaac Plains, including targeting a lower strip ratio for coal in the mine's northern pits, are to result in a 35% reduction in cost.

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    Golden age of coal in China seems over, peak-demand scenario possible - IEA

    China could be facing peak coal demand for the first time ever as a cooling economy and structural changes in its industry hit consumption, paving the way for India to emerge as the main driver of global coal use by 2020, the International Energy Agency said.

    China is the world's top coal consumer but its uptake of the dirty fossil fuel has waned with the country moving more towards less energy-intensive sectors. State efforts to cap consumption in a bid to clear up the choking smog that smothers the country's major cities have also hit demand.

    "The golden age of coal in China seems to be over," the International Energy Agency (IEA) said on Friday in its Medium-Term Market Report to 2020, adding that a "peak coal" demand scenario was now probable due to stagnating housing and infrastructure development.

    Lower-than-expected power demand as the use of electricity drops in heavy industry will also contribute to the decline in coal consumption, the Paris-based group added.

    The IEA said China's coal demand would fall to 2,640 million tonnes of coal-equivalent (Mtce) by 2020 from 2,843 Mtce in 2014 based on the group's peak-demand scenario.

    As a result, global demand will dip to 5,509 Mtce in 2020 from 5,540 Mtce in 2014, the IEA said. Under a slightly less bearish outlook, however, demand could still see a 0.8 percent annual growth to 5,814 Mtce in 2020, it added.

    Slowing demand, environmental policies and more alternative fuels will keep coal prices low, the IEA added. Thermal coal prices have already fallen to or near decade troughs.

    "The continuous pressure from shale gas in the United States, stronger climate policies, and especially, the overcapacity and slowdown in China all contribute to the oversupply. This glut will be even more acute if a peak coal demand in China becomes real," the IEA said.

    The U.S. Institute for Energy Economics and Financial Analysis (IEEFA), which also published a coal outlook this week, painted a gloomy picture for coal demand as well.

    "The global traded coal industry is in dire straits," said Tim Buckley, IEEFA's director of Energy Finance Studies in Australasia.

    "(The) outlook for the global traded coal industry remains one of declining demand, excess supply ... relentless cost down initiatives, excessive financial leverage, asset write-downs and unprecedented stranded assets (and) shareholder wealth destruction," IEEFA said.

    India is expected to pick up some of the slack in Chinese demand with its coal use seen up 149 Mtce by 2020, accounting for half of the rise in world coal demand over the period, according to the IEA.

    The IEA did not include findings of the global climate change talks which took place in Paris earlier in December as the group said the report was being printed during the negotiations.

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    Mexico probes China, Taiwan cold-rolled steel imports

    Mexico's Economy Ministry is launching an anti-dumping investigation into imports of cold-rolled flat steel from China and Taiwan, according the government said on Thursday.

    Steel company Ternium requested the investigation in September, saying that importsfrom China and Taiwan increased sharply between January 2012 and April 2015 and that hurt local producers, the government said.

    Mexico has taken steps to protect its struggling steel industry this year, including introducing new import duties, anti-dumping quotas and enhancing customs controls to enforce the quotas.

    The Economy Ministry said in September it would investigate imports of steel wire rod from China.
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    Inner Mongolia Alax Jan-Nov coal output down 20pct on year

    Alax League in northern China’s Inner Mongolia produced a total 7.22 million tonnes of raw coal over January-November this year, down 20% year on year, showed data from the Alax Commission of Economy and Information Technology on December 17.

    Of this, the output of bituminous coal fell 29% on year to 4.22 million tonnes; while that of anthracite decreased 2% from a year ago to 3 million tonnes, impacted by weak demand and low prices.

    A’zuo Banner and A’you Banner in Alax contributed 5.09 million and 1.26 million tonnes of raw coal over January-November, sliding 28% and 5% on year, respectively.

    Tengri Economic Development Zone in Alax produced 870,000 tonnes of raw coal during the same period, up 41% year on year.

    The coal market in Alax League still faced a downturn in November, and most coal producers were in production cut or even halted operations.

    Meanwhile, high stocks of imported coal and subdued demand caused prices to decline further.

    Over January-November, raw coal imports through Ceke Border Crossing in Alax’s Ejin Banner, stood at 6.66 million tonnes, up 7% on year. Stocks of imported raw coal stood at 2.39 million tonnes.

    The average price of imported raw coal decreased 10% from 290 yuan/t in December 2014 to 260 yuan/t.

    By end-November, coal stocks in the league totaled 310,000 tonnes, with stocks at A’zuo accounting for 96.8% or 300,000 tonnes.

    Average price of anthracite in Alax fell 7% to 510 yuan/t ($78.68) by end-November from 550 yuan/t in the end of last year; that of bituminous coal fell 11.9% to 185 yuan/t from 210 yuan/t.

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    Whitehaven faces stellar first half in 2016

    Coal miner Whitehaven Coal this week told shareholders that its expected earnings before interest, tax, depreciation and amortization (Ebitda) would nearly double in the first half of 2016, compared with the previous corresponding period. 

    Ebitda for the first half of 2016 was expected to be in the range of A$100-million to A$105-million, meaning the miner would be profitable during that period. Furthermore, cash margin performance in the half-year was also expected to exceed the A$13/t margin reported in the year ended June this year, enabling Whitehaven to reduce its net debt over the 2016 financial year. 

    Full-year production guidance for run-of-mine coal production has also been upgraded from the previous estimate of between 18.8-million tonnes and 19.4-million tonnes, to between 19.5-million tonnes and 20.1-million tonnes. “During my recent visit to Asia, customers in Japan, Korea, and Taiwan emphasised the strong and growing demand for our Gunnedah basin coal. Our coal’s high calorific value, low ash and low sulphur qualities attracts pricing premiums of up to 5%,” said Whitehaven MD and CEO Paul Flynn. 

    “Production growth from our two tier-one mines, Narrabri and Maules Creek, has enabled us to expand our portfolio of quality customers.” Whitehaven was also given the go-ahead by the New South Wales Department of Planning and Environment to increase production at its Narrabri mine from eight-million tonnes a year to 11-million tonnes a year, and would see the miner install a 400-m-wide longwall face at the Narrabri mine.
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    CISA tells China iron ore importers to beware steel credit crunch

    China's iron ore importers need to keep a close eye on the country's steel mills as they mull output cuts and shutdowns amid a year-end credit crunch, the China Iron and Steel Association said Thursday.

    Prices of iron ore derivatives including futures, swaps and options have seen signs of recovery recently due to expectations of a better 2016 for China's steel sector, but the situation was unpredictable, CISA said in its latest iron ore monthly report.

    Importers need to be "alert to price volatility with possible steel production cuts or halts, or retrenchments among Chinese mills, in the near term, with their failure to secure financing or credit issuance from banks towards the year end," CISA said in the report.

    Iron ore imports in December are expected to be lower than in November due to tightening cash flow at most Chinese steel mills, market sources said. Platts IODEX fell below $40/dry mt CFR North China December 4 for the first time since assessments began in 2008, and hit a new record low at $38.50/dmt Tuesday, before edging up 65 cents/dmt to $39.15/dry mt CFR North China Wednesday.

    Iron ore market sources said a sustained price rebound was unlikely as Chinese steel mills struggled for cash flow and kept their iron ore inventories as low as possible.

    The market had been less pessimistic in November, when iron ore prices were hovering at a then year-to-date low of $40-$45/dmt CFR North China and some enthusiasm for restocking emerged, CISA's analysis confirmed.

    The number of Chinese companies importing iron ore rose to 545 in November from 527 in October, despite most mills operating at a loss, the analysis showed.

    The total volume of China's iron ore imports rose 15.1% month on month to 105.6 million mt in November, with Australia and Brazil's combined share rising to 86% of it from 84% the month before, CISA said.

    Term cargo arrivals from Australia surged 25.4% month on month to 61.9 million mt in November and from Brazil rose 10.4% on month to 19.6 million mt.

    Australia's supply of medium and lower grades ores with a ferrous content of 55-63% was up 11.1% month on month at 50.8 million mt in November, comprising 82% of the total, while Brazil supplied 11.4 million mt of higher grade material of 63% Fe and above, up 46.8% month on month and comprising 58% of its total shipments into China.

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    China Coal Energy Nov coal sales down 18pct on year

    China Coal Energy Co., Ltd, the second largest coal producer in China, sold 10.41 million tonnes of commercial coal in November, falling 17.7% on the year and down 3.5% on month, the fourth straight year-on-year and the third month-on-month drop, the company announced on December 16.

    Over January-November, the company sold 122.38 million tonnes of commercial coal, falling 14.7% from a year ago.

    Of this, self-produced commercial coal accounted for 7.63 million tonnes or 73.3% of the total sales in November, decreasing 1.5% on year and down 2.18% from October. The volume between January and November stood at 87.01 million tonnes, down 12% on year.

    Meanwhile, coal output of the company continued to fall, registering 7.66 million tonnes in November, sliding 5.9% on the year and down 8.2% from October.

    Total output over January-November dropped 16% on year to 87.59 million tonnes, or 58.4% of its target for 2015, which was set at 150 million tonnes.

    In 2014, the company’s raw coal output reached 150 million tonnes, down 4.1% year on year.

    In November, China Coal kept prices stable for most of its products, except for 20-30 yuan/t in three coal grades, in response to the government’s call for stabilizing the market and prepare for the annual contract talks before the year end.

    It meanwhile, continued to offer discounts for large-volume buyers and high-sulfur coals.

    Prices of thermal coal traded in China’s domestic market have stabilized since December, as supplies were negatively impacted by bad weather, while coal burns at power plants increased amid cold weather.

    Steady pricing by Shenhua, China Coal and large coal groups also was in favor of the market that has been on the downward trajectory over the past year.
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    Vedanta to continue iron ore transport in Goa

    Navhind Times reported that a day after the truckers agitation broke out for the second time, the management of Vedanta’s iron ore division said on Wednesday that it would not bow down to intimidatory tactics and would “go ahead” with ore transportation.

    Company sources said that they have no plans of stopping the transportation and are trying to meet their export order.

    But we are not giving anything more than the stated rate of Rs 8 per tonne per kilometer to transporters, the sources said.

    Vedanta is amidst a crisis as the agitating truckers have stopped the ore transportation. The company had to cancel one shipment of export order after the agitation turned violent.

    The sources said that they are willing to resolve the issue “through talks” but will not be agreeing to any higher rate demanded by a section of truckers.

    Of the 1,300 truckers registered with the DMG, the company has engaged 600 truckers who have agreed to the Rs 8 per tonne rate.

    The agitation is by the truckers who are from other places and not on our route, claimed the sources. Ministers, opposition leaders, trade unions, etc., are trying to resolve the truckers issue which has been politicized, the sources said, adding that they are caught between freefalling international ore prices on one side and bullying unleashed by truckers on the other side.

    The Vedanta sources added that there is no instruction from the government to stop transporting ore and efforts will be on to resolve the issue with transporters.
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    Heilongjiang to replace 17 mln T of low-quality coal in 2 years

    Northeastern China’s Heilongjiang province planned to invest more to retrofit coal-fired boilers and replace 17 million tonnes of low-quality coal with standard quality coal in two years, said Governor Luhao at a meeting on December 12.

    Those low-quality coals mainly refer to the coal from Inner Mongolia with transport distance over 600km and calorific value lower than 16.5MJ/kg, which are prohibited by the government.

    The province has more than 7,000 small boilers with annual capacity at and below 10 t/h, with Harbin owning over 1,300.

    The two-phase move was expected to ease air pollution in the northeastern industrial province.

    Firstly, Harbin and Suihua cities in the province would take the initiative in the heating season of 2016 to use standard coal in all of heating suppliers and other individuals, instead of low-quality coal.

    Meanwhile, the low-quality coal-fired boilers of those industrial firms with standard coal consumption at and above 10,000 tonnes would be retrofitted.

    In 2017, all the low-quality coal-fired boilers across the province should be replaced with standard ones, and small boilers with annual capacity at and below 10 t/h at the main urban zones of prefectural and higher levels would be completely eliminated.
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    Australia cuts iron ore forecast to USD 39 wiping out AUD 7 billion from budget

    Australian Financial Review reported that the Australian Federal Government has cut its key iron ore price forecast by USD 9 a tonne for 2015-16, wiping AUD 7 billion from its anticipated revenue take over the forward estimates. The updated commodity price forecasts, contained in its mid-year economic update on Tuesday, form part of a AUD 26 billion blow out in the budget deficit over four years, compared to the May budget.

    Iron ore price assumptions for this financial year have been scaled back from USD 48 per tonne, free on board, in May to USD 39 per tonne. This reduces anticipated company tax receipts.

    Iron ore delivered in China, which includes around USD 5 in transport costs, is now trading around the decade-low rate of USD 37 a tonne.

    Currency movements have, however, worked in the budget's favour, as a falling Australian dollar increases the value of iron ore, which is calculated in US dollars.

    Treasurer Mr Scott Morrison said on Tuesday that there were some specific seasonal factors weighing on the iron ore price that were reflected in the updated forecasts. He said "There are some particular factors impacting on the iron ore price in China at the moment. There's seasonal issues, there's weather issues, there are some financing issues which go to how credit is being made available at the back end of the year."

    Federal budget forecasts rely on an averaging of ore prices during a four week period leading up to the published figures. This has coincided with a period of price weakness for the key steel-producing material.
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    Japan 2016/17 crude steel output seen flat, exports to drop -industry

    Japan's crude steel output in the fiscal year that starts next April is likely to be flat from this year at around 105 million tonnes, with growing local demand offsetting faltering exports, an industry body said on Wednesday.

    That tepid outlook from the Japan Iron and Steel Federation follows a string of weak signals on the country's economy that have raised doubts about government efforts to reignite growth and end decades of deflation.

    It also comes as steelmakers around the world grapple with the fallout of massive exports of cheap steel from China, with producers there turning overseas as the local appetite wavers.

    "Domestic demand will certainly increase next fiscal year thanks to higher capital expenditure and consumer spending ahead of the planned sales tax hike in 2017, on top of Olympic-related construction demand," Koji Kakigi, chairman of the steel industry body, told a news conference.

    Japan plans to raise its sales tax to 10 percent from 8 percent in April 2017. The country is also gearing up to host the Olympics in 2020.

    "The problem is overseas demand ... It's difficult to make a forecast now, but we expect a slight drop in steel exports next fiscal year," Kakigi said, without giving further detail.

    Kakigi, also president of JFE Steel, a unit of JFE Holdings Inc, said appetite for the country's exports would be hit by increased shipments of Chinese steel.

    Japan's crude steel production has been in a downtrend since late last year, pressured by slack consumption of cars and houses after a sales tax hike in April 2014.

    Tumbling steel prices in Asia, hit by China's exports and weaker demand for energy-related steel products such as drill pipes because of plunging oil prices, forced steelmakers like Nippon Steel & Sumitomo Metal and JFE Steel to trim output.

    Japan's industry ministry has predicted the country's crude steel output would fall 3.7 percent in October-December from a year earlier.
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    Sinosteel says will extend bond redemption period for 3rd time

    Sinosteel, a state-owned steelmaker, said on Wednesday it will extend the registration period for early redemption on a putable bond that investors could originally elect to redeem in mid-October until Dec. 30.

    The statement posted on the website of one of China's main bond clearinghouses marked the third time Sinosteel has extended the redemption period.

    The latest extension comes after Sinosteel had asked bondholders of its 2 billion yuan ($309 million) October 2017 bond not to exercise a put option on Oct. 20, because the company would not be able to make a full payment, according to a letter seen by Reuters.
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    Glencore pulls the plug on Blakefield North

    Diversified miner Glencore on Wednesday confirmed that it would postpone the development of the Blakefield North underground mine, in New South Wales. 

    The project, which forms part of the larger Bulga coal complex, had been due to start longwall production in 2017, and would have extended the life of the existing underground operations at the Bulga complex. However, a spokesperson for Glencore told Mining Weekly Online on Wednesday that a decision has now been taken to place the underground project on hold, owing to continued low thermal and coking coal prices. 

    “Glencore is one of the most efficient longwall miners in Australia, but we are not immune from the ongoing market challenges. Unfortunately, the current market does not support the proposed project and we have decided to place Blakefield North on hold until we see improvement in the economic climate,” the spokesperson said. 

    “We remain confident of coal’s medium to long-term outlook and that our Hunter operations will play an increasingly important role in meeting this future demand. “Presently, however, we have to ensure that the volumes and qualities of coal we produce are aligned with market requirements. 

    We will not push incremental tonnes into markets that don’t want them or need them,” the spokesperson added. 

    The company estimated that some 340 employees and 60 contractors would be affected by this decision over the next two years, with employee consultation starting this week. “We appreciate this decision will have impacts on our employees and their families as current underground operations reach the end of their scheduled life in 2017, as well as the local communities and businesses supported by our underground operations. 

    “We will be working closely with those employees affected during this difficult time,” the spokesperson said. Operations at the Blakefield South underground mine would continue as planned until 2017, when its final longwall panels have been mined, while Glencore’s opencut mine at Bulga, which last year received regulatory approval to extend its mine life until 2035, would not be impacted by the decision.
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    Japan, S. Korea plan new coal-fired plants despite global climate deal

    Less than a week since signing the global climate deal in Paris, Japan and South Korea are pressing ahead with plans to open scores of new coal-fired power plants, casting doubt on the strength of their commitment to cutting CO2 emissions.

    Even as many of the world's rich nations seek to phase out the use of coal, Asia's two most developed economies are burning more than ever and plan to add at least 60 new coal-fired power plants over the next 10 years.

    South Korea did scrap plans for four coal-fired power plants as part of its pledge to the Paris summit, but 20 new plants are still planned by 2021.

    In Japan, 41 new coal-fired power plants are planned over the next decade, and taxes favor imports of coal over cleaner-burning natural gas.

    Officials at both countries' energy ministries said those plans were unchanged.

    Japan, in particular, has been criticized for its lack of ambition - its 18% target for emissions cuts from 1990 to 2030 is less than half of Europe's - and questions have been raised about its ability to deliver, since the target relies on atomic energy, which is very unpopular after the 2011 disaster at the Fukushima nuclear plant.

    Japan's Electric Power Development Co Ltd, the country's top thermal coal user, said the Paris deal would have no impact on its coal plans.

    "Our stance on new coal plants is unchanged," a spokesman said, adding that emissions would be cut as ageing coal plants were replaced by new ones using the latest technology.

    In South Korea, tax on imported coal for power generation was raised in July, but is still only just over a third of the import tax on natural gas.

    Coal-fired power plants there currently run at about 80% of capacity, compared with 35-40% for gas plants, according to calculations based on data from Korea Electric Power Corp (KEPCO), the country's largest power utility.

    Analysts say Japan and South Korea could reduce carbon emissions by much more than they pledged in Paris.

    "The focus in Asia has been more on China and India, so we haven't seen much attempt to put pressure on Japan and South Korea yet. But I imagine pressure will start to increase," said senior analyst Georgina Hayden at BMI Research, a unit of ratings agency Fitch Group.

    To be sure, China uses vastly more coal and has nearly a thousand more such plants in various stages of planning and construction.

    But it has also recently reformed its gas price system to encourage a switch away from coal.

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    China Nov crude steel output down 1.6pct on year

    China’s crude steel output fell 1.6% from the year prior and down 4.23% from October to 63.32 million tonnes in November, showed data from the National Bureau of Statistic (NBS) on December 14.

    Average daily crude steel output dropped 1.04% from October to 2.11 million tonnes in November, as producers cut output amid seasonally weaker demand.

    Over January-November, total crude steel output slid 2.2% on year to 738.4 million tonnes, data showed.

    During the same period, total output of steel products rose 1% year on year to 1.03 billion tonnes, while that of pig iron decreased 3.1% on year to 638.5 million tonnes.

    In November, China produced 93.96 million tonnes of steel products, increasing 2% on year but down 0.33% on month; while output from pig iron fell 0.8% on year and down 4.69% from October to 53.67 million tonnes.

    Prices of steel products further dropped in November, as demand reduced with the slowdown in construction activity as temperature fell in northern China. In late November, average price of 16-25mm HRB 400 rebar went down to 1908.4 yuan/t, down 108.9 yuan/t, while that of wires fell 143.7 yuan/t from ten days ago to 1997.3 yuan/t.

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    Arch Coal to delay bond interest payment

    Arch Coal Inc, the second-largest coal miner in the United States, said it has chosen to extend by 30 days a $90 million in bond interest payments that was due on Tuesday.

    The company, which ended a proposed debt swap in October that was seen as key to delaying a potential bankruptcy, said it plans to use the grace period to continue talks with creditors to restructure its balance sheet.

    Arch Coal, struggling under strict regulation and plummeting coal prices, had said last month that it could follow its smaller peers into bankruptcy in the near term, even if current talks with creditors yield a restructuring agreement.

    Competitors such as Walter Energy Inc, Alpha Natural Resources Inc and Patriot Coal have all filed for bankruptcy this year.

    Arch Coal had about $694.5 million in cash and short term investments as of September.
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    India’s coal imports may further decline this fiscal year: govt

    Coal imports by India will continue to decline this fiscal due to "unprecedented increase" in output of the fossil fuel by state-owned Coal India Ltd (CIL).

    "Imports will continue to come down (in the ongoing fiscal)," Coal Secretary Anil Swarup was cited by Press Trust of India (PTI) as saying.

    Mr Swarup had earlier said in a tweet that coal imports in November dropped to 11.6 million tonnes against 22.6 million tonnes in the same month of last year.

    "Consequent to a record production by Coal India, import of coal comes down for fifth successive month. Down by 8.9% during April-November," Mr Swarup tweeted.

    "Coal imports come down from 136.6 million tonnes in April-November (2014) to 119.9 in 2015. In value terms, down from Rs 68,822 cr to Rs 54,607 cr," he said in another tweet.

    CIL's production increased by 8.8% during the April-November period of the current fiscal year (2015-16) on a year-on-year basis.

    Production was up by almost 26 million tonnes during April-November 2015 compared to the same period previous fiscal year, a company official said.

    CIL produced 321.38 million tonnes of coal during April-November, 2015-16 as against 295.40 million tonnes in the year ago period.

    The state-owned firm, which accounts for over 80% of the domestic coal production, is eying to 1 billion tonnes production by 2020.

    Power and Coal Minister Piyush Goyal had said last month that coal shortages will be a thing of the past and India will not need to import dry fuel by 2017, except to meet requirements of power plants located near coastal areas.

    India had imported 212.103 million tonnes of coal worth over Rs 1 lakh crore last fiscal year.

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    EU orders registration of China, Russia steel imports

    The European Commission has ordered that imports of a certain type of steel from China and Russia should be subject to registration, part of its ongoing investigation into alleged dumping of product by the two countries.

    It told customs authorities to register imports of cold-rolled flat steel from Dec. 13, meaning duties would apply for incoming product from then if the Commission concludes that it is being sold at unfairly low prices.

    The Commission launched an anti-dumping investigation into imports from China and Russia in May following a complaint from European steel association Eurofer.

    It could apply provisional measures by Feb. 14, 2016, and make definitive duties, which typically last for five years, by Aug. 13.

    The registration order, published in the European Union's official journal, follows a request from Eurofer on Nov. 12.

    Eurofer says the average dumping margin - the amount by which the normal market price exceeds the export price - is 28 percent for China and 15-20 percent for Russian producers.

    The steel group says the registration procedure is justified because importers are well aware of dumping and that, since the investigation was launched in May, imports have increased.

    Imports of Chinese cold-rolled flat steel have risen 33 percent and of Russian product by 45 percent in the period May-September this year, compared with the same period in 2014. Import prices fell by a further 5 percent from both countries, the Commission said. 

    Read more at Reuters

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    Shenhua resumes coal export to Japan, first shipment at 67.48 kt

    China’s top coal miner Shenhua Group has resumed coal export to Japan, with first shipment of 67480 tonnes of coal shipped to Tohoku Electric Power on December 9, the group said on its website.

    The Shenhua coal was shipped from Tianjin port to the leading Japanese utility, Shenhua said, signaling its active exploration of market opportunities in a time of slack domestic market.

    This is the first time Shenhua has resumed coal export to Janpan in the past three years, after its export to Japan peaked around 10 million tonnes annually in 2000.

    Confirming the deal, trade sources said the deal was heard done at $62/t with VAT, FOB basis. This however, is yet to be confirmed by China coal Resource.

    The change in Shenhua’s sales strategy, mainly due to prolonged market weakness amid slowdown of Chinese economy, could help ease oversupply pressure in the domestic market, while intensifying competition in the Asia-Pacific market, with prices possibly going down further, industry insiders said.

    Shenhua has been actively tapping the international market. Shenhua would pay great attention to coal export to Japan, in the hope of restoring the target market and expanding export scale, said Han Jianguo, vice general manager of the group in mid-September.

    In late August, several key Japanese utilities including Tohoku Electric Power visited Shenhua and expressed interest in buying of Shenhua coal.

    One Japan-based trader said his company has decided to import coal from China and resell it to buyers in Japan and other countries, instead of selling coal from other countries to China.

    In August, Shenhua also sent representatives to South Korea to visit local traders and utilities for coal export, but a big bid-offer spread has led to no deals conclusion so far yet, two South Korea-based traders said in the month, adding future trades may seem feasible.

    Yet, Shenhua coal has to compete with low-priced Australian coal, offers for which are keeping declining.

    On December 11, the Fenwei CCI 5500 Import Index assessed imported 5,500 Kcal/kg NAR coal at $43.7/t, CFR south China ports, down $11.2/t from the start of this year.

    Presently, coal buyers in the Pacific Asia mainly come from Japan and South Korea, which prefer coal from Australia and Indonesia.

    Over January-October, China Shenhua Energy, the listed arm of Shenhua Group, exported 0.9 million tonnes coal, a year-on-year slump of 35.7%, it said in a statement on November 16.
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    China Nov thermal power output up 13.7pct on mth

    Electricity output from China’s thermal power plants – mainly coal-fired – stood at 353.2 TWh in November, increasing 13.68% year on year but down 1.5% month on month, showed data from the National Bureau of Statistics (NBS) on December 14.

    The monthly rise in China’s thermal generation was mainly attributed to increased electricity demand for heating purposes in in southern China.

    By contrast, China’s hydropower output decreased 22.01% on month but up 3% on year to 77.6 TWh in November, indicating a smooth development of hydropower station across the country.

    Total electricity output in China reached 466 TWh in November, edging up 0.1% from a year ago and up 4.63% on month, the NBS data showed. That equated to daily output of 15.53 TWh on average, rising 0.1% on year and up 8.07% from October.

    Over January-November, China produced a total 5,125.7 TWh of electricity, edging up 0.1% year on year, with thermal power dropping 2.4% on year to 3,823.2 TWh while hydropower output increasing 3.6% to 925.9 TWh.

    Over January-November, the share of thermal power generation from the total power generation rose from 74.52% over January-October to 74.59%; while hydropower fell from 18.22% in the past ten months to 18.06%.
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    Cliffs Natural Resources loses billions in bargain sell-off of Bloom Lake assets

    The Bloom Lake iron-ore mine in Quebec shows just how much value is being destroyed in the commodity meltdown.

    Cliffs Natural Resources Inc. acquired the mine as part of a $4.3-billion (U.S.) takeover of Consolidated Thompson Iron Mines Ltd. in 2011 when iron-ore prices topped $190 a metric ton. On Friday, a unit of Champion Iron Ltd. agreed to buy it and other assets for $10.5-million (Canadian) and $42.8-million (Canadian) in liabilities as iron ore falls below $40.

    In January, Cliffs suspended Bloom Lake production and sought creditor protection for an operation that as recently as 2013 was considered a critical part of the Cleveland-based company’s strategy to boost exports and mitigate its dependence on U.S. customers. The mine employed about 600 people when it was operational.

    The sale follows announcements this week from Anglo American PLC and Freeport McMoRan Inc. of deepening cutbacks as producers grapple to preserve cash amid the lowest metals prices in six years.

    “Those are three very strong indicators that we are now in a point of severe distress for the industry,” Garrett Nelson, a Richmond, Va.-based analyst at BB&T Capital Markets, said by telephone Friday.

    Cliffs was founded as the Cleveland Iron Mining Co. in 1846 to produce the commodity, which had just been discovered in Michigan’s Upper Peninsula. While the company has also sold timber, uranium, copper and oil in its history, it divested non-iron-ore assets during economic slumps, according to business historian Hoover’s Inc.

    The company expanded with coal mines and a chromite resource and in 2011 bought Thompson to expand in Eastern Canada. The ill-timed foray cost former CEO Joseph Carrabba his position. His successor, Gary Halverson, was ousted after six months when activist Casablanca Capital installed Lourenco Goncalves after a successful proxy battle.

    Mr. Goncalves has vowed to return the company to profitability by selling iron ore mined domestically to North American steelmakers. He placed coal mines and overseas assets up for sale, while putting Canadian assets including Bloom Lake and its Wabush assets into court-supervised debt restructuring.

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    China Nov steel output down 1.6 pct on yr - stats bureau

    China produced 63.32 million tonnes of crude steel in November, down 1.6 percent on the year, hit by stagnant demand and a collapse in prices.

    Total steel production in the first eleven months of the year reached 738.4 million tonnes, down 2.2 percent on the year, the National Bureau of Statistics said on Saturday.

    The Chinese steel sector, the world's largest, is struggling with weak manufacturing and construction demand, and overcapacity has dragged prices to record lows.
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    China Nov coal output down 2.7 pct at 320 mln T - stats bureau

    China produced 320 million tonnes of coal in November, down 2.7 percent from the same time last year, the country's statistics bureau said on Saturday, with struggling miners cutting output in order to minimise losses.

    Coal production for the first eleven months of the year was 3.37 billion tonnes, down 3.7 percent compared to the same period last year, the National Bureau of Statistics said.

    Coking coal production fell 7.8 percent in November to 36.66 million tonnes, with year-to-date output at 412.3 million tonnes, down 5.5 percent.

    The industry has been struggling with a supply glut and faltering demand, as a slowdown in major downstream sectors and government measures to reduce pollution have encouraged the use of cleaner fuels.

    Read more at Reuters
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    Glencore to sell Optimum Coal Mine in South Africa for $136 million

    Glencore has provisionally agreed to sell its troubled South African coal mine for 2.15 billion rand ($136 million), narrowly avoiding closing the operation and saving hundreds of jobs, the unit's business rescue practitioners said on Friday.

    The Optimum Coal Mine went into business rescue, or protection from creditors, in August after a slide in coal prices meant it was selling coal to power utility Eskom [ESCJ.UL], its main customer, for less than the cost of production.

    It is one of many Glencore-owned assets that have been hit by the slump in commodities prices, forcing the Swiss-based mining and trading company to revamp its global business.

    South Africa's business rescue law, similar to chapter 11 in the United States, allows a financially distressed company to temporarily delay creditors' claims against it or its assets.

    Proceeds from the planned sale of Optimum to South Africa's Tegeta Exploration and Resources will be used to pay down part of Optimum's 2.55 billion rand debt and Glencore will pay the balance, the practitioners said in a statement.

    The sale saved 500 jobs that were potentially going to be cut with the closure of the mine.

    Optimum produces 10 million tonnes of coal annually, half of which is sold to Eskom.

    The deal is subject to approval from the mines ministry, the competition watchdog and the final adoption of a business rescue plan for Optimum.

    The deal will be effective from Jan. 1 with the business rescue proceedings due to be completed by the end of February 2016.

    Tageta owns two mining rights for coal and has prospecting rights in four provinces in South Africa.

    Read more at Reuters
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    India slaps import duties on stainless steel to help local firms

    India imposed import duties for five years on some stainless steel imports from China, the European Union and the United States on Friday, as the government tries to protect local companies suffering from what it says is unfair competition.

    The government said the anti-dumping duties, on cold-rolled flat stainless steel products, ranged from 4.6 percent to 57.4 percent. Imports from South Korea, South Africa, Taiwan and Thailand will also be taxed.

    The moves follows the government's introduction of a 20 percent import tax on some other steel products in September, which failed to contain losses for Indian steel companies struggling to compete due to debts and high raw material costs.

    Firms including the Steel Authority of India, JSW Steel and Essar Steel have in recent months complained that surging imports are squeezing profit margins. They are lobbying the government to impose duties on a wider range of products to protect their market share.

    "It's a welcome step because today what is hurting the Indian manufacturing sector is dumping," said Seshagiri Rao, Joint Managing Director at JSW Steel.

    Other industry experts said the duties were limited in scope and would be easily circumvented because they only applied to products measuring up to a certain width.

    "On paper this step looks good but in the long run it is not going to help unless the government removes the restrictions on width," Indian Stainless Steel Development Association President N. C. Mathur told Reuters.

    The Directorate General of Safeguards, a branch of the finance ministry that can impose temporary import curbs, said on Tuesday it found prima facie evidence that increases in imports "have caused or are threatening to cause serious injury to the domestic producers", as it investigates local industry complaints.

    Indian Trade Minister Nirmala Sitharaman has said New Delhi will lobby for the freedom to raise tariffs temporarily to deal with import surges at upcoming World Trade Organisation talks, which begin in Nairobi next week.

    Imports of iron and steel declined slightly to $6.9 billion in the first seven months of the current financial year ending next March from $7.1 billion a year ago, Commerce and Industry Ministry data shows.

    Read more at Reuters

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