Mark Latham Commodity Equity Intelligence Service

Friday 2nd October 2015
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    Oil and Gas


    U.S. fuel economy data on cars inaccurate and getting worse, study finds

    The U.S. government's testing underestimates how much fuel cars will burn on the road, and the problem has gotten worse, according to a study released on Thursday.

    The release of the study funded by the Department of Energy's Oak Ridge National Laboratory comes as regulators in the United States, Canada and Europe tighten their scrutiny of how cars perform in real-world conditions.

    That comes after Volkswagen admitted last month to equipping its diesel cars with software that made the cars run clean in laboratory tests in order to hide actual emissions .

    The gap between the better performance of cars in testing by regulators and the lower fuel economy drivers experience has been widely known. But a wider gap could jeopardize the United States from reaching its targets for reducing carbon emissions, according to the study by researchers at self reported the University of Tennessee and Oak Ridge

    Fuel economy measurements used to certify compliance with federal regulations overestimated engine efficiency by roughly 15 percent for much of the 1990s and 2000s, research found.

    But the Oak Ridge study found that driver-cited fuel economy was 25 percent below government estimates in 2013 and about 22 percent lower this year and last.

    "The important thing is to see that the gap has been increasing by model year. We have to keep track of it and monitor to see that it doesn't increase," said David Greene, a senior fellow at the University of Tennessee, Knoxville, and one of the researchers.

    The report analyzed approximately 75,000 individual fuel economy estimates reported by drivers to the EPA online.

    Responding to the report, the EPA said that while its "testing cannot and does not purport to reflect national average driving behavior, weather, and traffic conditions," its fuel economy label on cars accounts for those variables.

    "Since 2008 average fuel economy as reported by drivers has been very closely aligned with the fuel economy labels," said Christie St. Clair, a spokeswoman with the EPA.

    The VW scandal was unearthed by researchers at the U.S.-based nonprofit International Council on Clean Transportation, which hired researchers at a West Virginia University lab.

    A 2013 study by the ICCT found an even wider gap between testing and real world carbon emissions. That study found the gap had increased from 8 percent in 2001 to 38 percent in 2013. The study concluded that up to half of that gap could be the result of manufacturers designing vehicles that would perform better in lab testing.

    The EPA said last week that it would step up its emissions testing on all kinds of vehicles in road driving conditions after the VW admission of cheating on emissions testing.

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    U.S. EPA says "likely" recall of VW diesel cars

    The U.S. Environmental Protection Agency said on Thursday that a recall of affected Volkswagen < diesel cars in the ongoing emissions scandal would "likely" take place.

    "EPA will require VW to remedy the noncompliance. It is likely that there will be a recall of affected vehicles," an EPA spokesperson said, adding that no specific timeline had been ordered yet.

    The German car maker has said it would refit up to 11 million diesel vehicles worldwide.
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    New Limit for Smog-Causing Emissions Isn’t as Strict as Many Had Expected

    The Obama administration on Thursday unveiled a major new regulation on smog-causing emissions that spew from smokestacks and tailpipes, significantly tightening the current Bush-era standards but falling short of more stringent regulations that public health advocates and environmentalists had urged.

    The Environmental Protection Agency set the new national standard for ozone, a smog-causing gas that often forms on hot, sunny days when chemical emissions from power plants, factories and vehicles mix in the air, at 70 parts per billion, tightening the standard of 75 parts per billion set in 2008. Smog has been linked to asthma, heart and lung disease, and premature death.

    The smog rule is the latest in a string of major new Clean Air Act pollution regulations that have become a hallmark of the Obama administration. Republicans and the coal industry have attacked the rules as job-killing regulatory overreach. In August, the E.P.A. proposed climate change regulations aimed at greenhouse gas pollution, which could shutter hundreds of coal-fired power plants. But with the new ozone rule, the Obama administration appears to have tempered its environmental ambitions and sought a politically pragmatic outcome that would sit better with business.

    Even so, the E.P.A. estimated that the annual cost to the economy would be $1.4 billion, making it one of the most expensive regulations in history. But it said those costs would be vastly outweighed by annual economic benefits of $2.9 billion to $5.9 billion because of fewer premature deaths, missed days of school and work, asthma attacks and emergency room visits.
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    Claude Dauphin Passes as Trafigura Tested by Commodities Slump

    The death of Claude Dauphin, the billionaire who co-foundedTrafigura Beheer BV and built it into one of the world’s biggest commodity trading houses, leaves the firm with fresh challenges amid unprecedented turmoil in the sector.

    Dauphin, 64, died in a Bogota hospital Wednesday while on a business trip. He remained until the end a key deal maker for the world’s second-largest metals trader, despite being diagnosed with cancer two-and-a-half years ago.

    A protege of Marc Rich, before co-founding Trafigura in 1993, Dauphin negotiated oil deals from Angola to Russia and secured metals and minerals from Zambia to Mongolia as chief executive officer and chairman. Despite reporting record first-half profit of $654 million in June, Dauphin’s passing comes as other traders struggle with plunging raw-materials prices and as crude oil lost half its value in the past 12 months.

    While traders can profit from commodity price volatility and declines, shares of Glencore Plc, the world’s largest metals trader and one of the five biggest mining firms, have dropped about 68 percent this year on concerns over the Baar, Switzerland-based company’s debt and slumping metals prices.

    Trafigura has been caught up in the turmoil. The yield on the firm’s 550 million-euro bond, maturing in 2020, widened by 18 basis points to a 11.57 percent as of 12:41 p.m. in London. The yield has almost doubled over the past six weeks.

    During a week when his own company’s shares were whipsawed from a record drop on Monday, before recovering most of those losses in a two-day rebound, Glencore CEO Ivan Glasenberg paused to pay tribute to Dauphin, his rival and former colleague.

    “He was a respected competitor,” Glasenberg said in a statement. “Our thoughts and condolences are with his family and friends.”

    Dauphin, a French citizen who held U.K. residency, was the closely held company’s largest owner with a stake of less than 20 percent. He became executive chairman after stepping aside as CEO of the world’s second-biggest metals trader in March 2014 for medical treatment. He was the last of the firm’s six founders with an executive role. A group of 600 employees own the balance of the company.

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    Glencore gives trading details as share price falls

    Glencore has revealed key details of its trading operations and told investors its plans to cut its debt are on track in an effort to reassure traders nervous about the impact of falling commodity prices.

    Since Glencore floated, its “marketing” or trading arm has been regarded by many investors as black box trading operation run by the people who liked to think of themselves as the “smartest guys in the room”.

    Analysts have struggled to forecast profits for the business because Glencore discloses very little, arguing that more information would empower private rivals such as Trafigura and Vitol.

    In a meeting with investors this week Glencore gave more details on a part of its balance sheet that has been under scrutiny — its $17bn of inventories that are used for its trading and marketing operations.

    Glencore does not include these inventories to its own definition of its group net debt, which it puts at $30bn as of the end of June. However, credit rating agencies and some investors do count the inventories towards the group’s overall debt, affecting their view of its creditworthiness.

    Glencore gave more details of the inventories to support its view that they could be quickly liquidated if needed, saying that about two-thirds, or $12bn, related to oil and had a trading cycle of only eight days.

    Glencore’s metals business, which has a much longer 40-day trading cycle, makes up a smaller proportion of the inventories.

    As part of its debt reduction efforts, Glencore plans to cut some of its less profitable trading activity, which it says will allow it to cut a large amount of working capital relative to a small hit to operating profits.

    In the investor meeting — which was hosted by Barclays, a bank that was among those working on Glencore’s recent equity raise — the commodities house also said its marketing inventories carried minimal price risk, with almost all being either sold forward or hedged as of the end of June.

    Most trades were hedged on exchanges, Glencore said, according to Barclays’ account of the investor meeting. About 3 per cent of trading — involving more esoteric metals such as vanadium, where there is no liquid forward or futures market — could not be hedged.

    Shares in the company remain more than 20 per cent under the level at which Ivan Glasenberg, chief executive, other executives and investors backed the $2.5bn equity raise last month.

    Attached Files
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    Polystyrene prices drop sharply


    Downward pricing trends continued in September for solid polystyrene and PET bottle resins in North America.

    Solid PS prices plunged an average of 9 cents per pound, marking the second straight monthly decline for that material. Prices had slipped an average of 2 cents per pound in August, holding to a number that was pre-announced by PS makers Americas Styrenics and Styrolution.

    The September PS price drop was more extreme, however, as the material followed benzene feedstock prices, which slipped 79 cents per gallon to finish September at $2.01 — a drop of about 28 percent.Image title

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    Petrobras: Corruption closes in on Dilma

     Messages sent by mobile by the owner of UTC Engenharia, Ricardo Pessoa, and an executive of the group, at the end of July 2014, suggests that donations of contractor for the reelection campaign of President Dilma Rousseff were related to the receipt of values of contracts he holds at Petrobras, shows analysis by the Federal Police on the basis of the material attached to the records of Operation Lava jet. In one of the passages of the material analyzed by PF, a person subordinate in UTC suggests that transfers the contractor to PT's election campaign were "rescued" diverted Petrobras money. This month, the Supreme Court decided to open an inquiry to investigate the minister Edinho Silva (head of the Secretariat of Social Communication), who was the treasurer of the president of the campaign last year. The exchange of messages indicates that the chief of staff Edinho Silva, Manoel Araújo Sobrinho, was the bridge of levying such amount paid in two installments. At 10h33 on 29 July 2014 when he was worth the official calendar of the election campaign, Walmir Pinheiro, one of the executives UTC writes to the person: "RP, u think I should call the contact that bovine Religious spent ???. "The Federal Police did not identify who would be" religious beef ". But two hours later, Ricardo Pessoa replied that he was with a caller, whose name was withheld by stripe in the PF document and passes the guidance of those who seek and value "hit": "The person you have to call it Manoel Araújo tel:... 16 (...) Hit 2.5 5/8 day (up) and 2.5 to 30/8 Call him who is waiting The problem is much greater Give me answer. ". Coincident In the Superior Electoral Court ( TSE) for the registration of two donations of $ 2.5 million for Dilma campaign on dates coinciding with the communications Ricardo Pessoa and his subordinate in UTC. A donation took place on August 5, as indicated by person, and the other on 27 August, three days before the combination. Of the total donations made in the UTC 2014 elections - R $ 52.2 million, the campaign the PT received R $ 7.5 million. There was a third transfer of $ 2.5 million on 22 October. The name of Manoel Araújo hit the radar of Lava jet were found when the UTC donation records. In one, the name of the chief of staff appears as contact Rousseff's campaign committee and the minister's name Edinho Silva, responsible for issuing the receipt. In one of the records, written down in ink, stated: "2500 - 05/08 / 2500 - 30/08?". One of Araujo contact telephone numbers is the same as the message sent by its Executive Person with area code 16. The other is the phone of the presidential campaign committee in Brasilia. The analysis of the equipment seized from executives UTC also shows that on July 24, 2014, person received an email from a caller scheduling committee meeting in the presidential campaign in Brasilia,
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    Caixin PMI: China's Factories Hit By Export Slump

    Conditions in China’s manufacturing sector deteriorated “at the sharpest rate since March 2009,” according to latest data from the private Caixin China Purchasing Managers’ Index survey, while the country's services sector barely managed to stay afloat, the PMI data showed.

    The monthly Caixin PMI reading, which measures orders and output in the private sector, and at small and medium enterprises, declined to 47.2 in September, down from 47.3 the previous month. Any reading below 50 implies a contraction in the sector, and the figures are the latest confirmation of the slowdown in China’s economy, hit in part by falling exports.

    China’s services sector is also seen as a key driver of the country’s growth, particularly with export-driven manufacturing struggling, and the Caixin PMI figure for the sector -- while remaining in positive territory at 50.5 -- represented a sharp fall from 51.5 in August, with new orders growing at their slowest pace for more than a year.

    Caixin, the respected Chinese financial magazine that compiles the index, said new export orders were down by their fastest pace since March 2009, while overall factory orders fell at the fastest pace in three years. Factory inventories of unsold goods also saw their sharpest rise in three years as a result. And companies were responding by laying off workers and cutting output at the fastest pace since early 2009 in the midst of the global financial crisis, Caixin said.

    Meanwhile official figures released by China's National Bureau of Statistics (NBS) showed that overall manufacturing PMI, which includes large state enterprises as well as smaller businesses, inched up to 49.8 in September from 49.7 in August, with new orders back in positive territory, rising to 50.2 from 49.7. Export demand also rose fractionally, but remained in negative territory at 47.9. The official PMI figure for the service sector remained unchanged in September, at 53.4.
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    Official China manufacturing PMI ticks up but still below 50

    Official China manufacturing PMI ticks up but still below 50

    An official manufacturing index based on a survey of factory purchasing managers edged up to 49.8 in September from August's 49.7, which was the lowest level since August 2012. In July, it was 50.0. Numbers below 50 indicate contraction. China's economic growth held steady at 7 percent in the latest quarter ending in June, which was the weakest performance since the 2008 global crisis. Officials hope to maintain the growth rate for the rest of the year but many economists doubt the target will be met, particularly if manufacturing weakens further.
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    Human reproduction, health broadly damaged by toxic chemicals - report

    Exposure to toxic chemicals in food, water and air is linked to millions of deaths, and costs billions of dollars every year, according to a report published Thursday by an international organization of medical professionals.

    Among the poor health outcomes linked to pesticides, air pollutants, plastics and other chemicals, according to the report from the International Federation of Gynecology and Obstetrics (FIGO), an organization representing obstetrical and gynecological associations from 125 countries, are miscarriage and still births, an increase in cancer, attention problems and hyperactivity.

    "Exposure to toxic environmental chemicals during pregnancy and breastfeeding is ubiquitous and is a threat to healthy human reproduction," the report states.

    The piece was written by a team of physicians and scientists from the United States, the United Kingdom and Canada, including from the World Health Organization. It was published in the International Journal of Gynecology and Obstetrics ahead of a global conference on women's health issues next week in Vancouver, British Columbia.

    "We are drowning our world in untested and unsafe chemicals and the price we are paying in terms of our reproductive health is of serious concern," Gian Carlo Di Renzo, a physician and lead author of the FIGO opinion.

    Chemical manufacturing is expected to grow fastest in developing countries in the next five years, according to FIGO.

    The group said international trade agreements such as the Transatlantic Trade and Investment Partnership (TPP), under negotiation between the United States and the European Union, lack much-needed protections against toxic chemicals.

    The report also cited several examples of the range of the problem: seven million people worldwide die each year because of exposure to indoor and outdoor air pollution; healthcare and other costs from exposure to endocrine disrupting chemicals in Europe are estimated at a minimum of 157 billion euros a year; and the cost of childhood diseases related to environmental toxins and pollutants in air, food, water, soil and in homes and neighborhoods in the United States was calculated at $76.6 billion in 2008.

    FIGO said health professionals should advocate for policies to prevent exposure to toxic environmental chemicals as well as to ensure a healthy food system, among other recommendations.
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    Chicago PMI

    The brief dead cat inventory-stacking bounce in Chicago PMI is over.With a print of 48.7, back below 50, (against hope-strewn expectations of 52.9) this was below the lowest economist estimate and the lowest since May. Aside from employment (which somehow rose), the components were ugly with New Orders and Prices Paid all tumbling, while Production was the lowest since 2009 at 43.6.

    Chicago confirms Richmond, New York, Philly, Chicago, and even Kansas Cityregional surveys all flashing recessionary warnings.

    Welcome back into contradictory sub-50 levels.

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    Two Very Disturbing Forecasts By A Former Chinese Central Banker

    Earlier today, Yu Yongding - currently a senior fellow at the Chinese Academy of Social Sciences in Beijing but most notably a member of the PBOC's Monetary Policy Committee from 2004 to 2006 as well as a member of China's central planning bureau itself, the Advisory Committee of National Planning - gave a speech before the Peterson Institute, together with a slideshow.

    Since the topic was China's debt, economic growth, corporate profitability, and since, inexplicably, it wasn't pre-cleared by the Chinese department of truth, it was not cheerful. In fact it was downright scary. Among other things, the speech discussed:

    Capital efficiency – low and falling (capital-output ratio rising)
    Corporate profitability – has been falling steadily
    Share of finance via capital market – Very low
    Interest rate on loans – High
    Inflation rate – producer price Index is falling

    A key observation was the troubling surge in China's capital coefficient, first noted here two weeks ago in a presentation by Daiwa which also had a downright apocalyptic outlook on China, and wasn't ashamed to admit that it expects a China-driven global meltdown, one which "would more than likely send the world economy into a tailspin. Its impact could be the worst the world has ever seen."

    The former central banker also discussed the bursting of China's market bubble. This, he said was created deliberately for two government purposes:

    To enable debt-ridden corporates to get funds from the equity market
    To boost share prices to stimulate demand via wealth effect

    He admits this shortsighted approach failed and "to save the city, we bombed the city" adding that it brings "authorities’ ability of crisis managing into question."

    He also observes that the devaluation that took place on August 11 was the government's explicit admission that its attempt to reflate an equity bubble has failed, and it was forced to find an alternative method of stimulating the economy. Of the CNY devaluaton Yu says quite clearly that it was simply to boost the economy: "In the first quarter of 2015 China’s capital account deficit is larger that than that of current account surplus" which is due to i) The Unwinding of Carry trade; ii) the diversification of financial assets by households; iii) Outbound foreign investment; and iv) capital flight.

    And now that China has officially unleashed devaluation (which Yu believes should be taken to its logical end and the RMB should float) there are very material risks: "the implication of episode can be more serious than the stock market fiasco, with much large international consequences" and that "the failure will have serious consequences on China’s financial stability"

    His ominous outlook: "Two bubbles have burst, what next?"
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    Watchful lenders remain supportive of embattled Glencore

    Lenders remain supportive of embattled commodities trader and mining company Glencore , which has around $13 billion of liquidity available and can financeits debt maturities for two years, sources familiar with the situation said on Tuesday.

    Glencore's shares rose sharply on Tuesday after the company said that it remained "operationally and financially robust" in response to wild gyrations in its equity and bond prices this week.

    Its shares sank to a record low on Monday on concerns that the group is not doing enough to cut its $29.6 billion debt pile to help to withstand a prolonged slump in commodities prices. But loan bankers are taking a more sanguine view.

    "We are watching quite carefully, but without the concern or type of hysteria you are seeing in equities," a head of loan syndicate at a bank said. "If the company is left to resolve its own issues, we are quite confident that they will do so."

    Glencore signed a $15.25 billion revolving credit in June this year, which is its main corporate funding facility and the second largest loan in Europe, the Middle East and Africa so far in 2015, according to Thomson Reuters LPC data.

    Glencore's half-year report said $6.57 billion of the loan had been drawn by June 30, leaving $10.4 billion of liquidity.

    The company raised an additional $2.5 billion in a share placement in September, giving a total of around $13 billion of unrestricted liquidity, including cash on its balance sheet, the sources familiar with the situation said.

    Glencore's $15.25 billion loan is not affected by recent equity volatility as it does not havefinancial covenants.

    "There is no issue of financial covenants," the syndicate head said.

    Although Glencore's cash flow has dropped and it is not meeting its earnings forecast, there are no covenant conditions, he added.

    Glencore's $15.25 billion loan consists of a $8.45 billion, 12-month revolving credit and a $6.8 billion, five-year revolving credit. Both tranches have extension options and can be extended until 2018 and 2022 respectively.

    Bankers do not expect Glencore to make any major additional drawings on the revolving credits to avoid increasing leverage after saying that it intends to reduce net debt by a third by the end of next year.

    "The company has not indicated to us that they plan to draw large amounts of those facilities," the loan syndicate head said.

    Glencore is currently paying an interest rate of 40-45 basis points (bp) over U.S. Libor on drawings under the existing $15.25 billion loan, the company said.

    Further draw-downs on the revolving credit could threaten Glencore's investment-grade credit rating. Glencore is currently rated BBB by Standard and Poor's and Baa2 by Moody's Investors Services.
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    Putin wins parliamentary approval to deploy Russian forces abroad - reports

    Russia's upper house of parliament, the Federation Council, has approved a request by President Vladimir Putin to authorise the the use of military force abroad, according to local reports.

    The Kremlin did not say which country the decision would apply to, but Russia is in the process of building up its military presence in Syria where it supports the government forces of President Bashar al-Assad.

    The use of the military abroad will be related to national interests and will be limited to the use of the country's air force, local agencies reported.

    The last time the Russian parliament granted Putin the right to deploy troops abroad, a technical requirement under Russian law, Moscow seized Crimea from Ukraine last year.

    The Kremlin said the request was for "the deployment of a military contingent of the Russian Federation" outside the country on the basis of the "universally recognised principles and norms of international law."
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    Insolvency on Brazil electricity market grows - traders

    Insolvency on the Brazilian electric energy market has spread to critical levels, energy traders said on Tuesday, as hydroelectric generators balk at hefty bills for which the local regulator says they are on the hook.

    After nearly two years of drought and long delays in completion of new generation projects such as large scale dams in the Amazon, Brazil's hydro generators have been unable to produce enough electricity to cover their supply contracts.

    And the energy market regulator Aneel said they must buy energy on the spot market to cover their commitments.

    Conditions on Brazil's energy markets continue to deteriorate due to a growing number of hydroelectric companies that have secured court injunctions exempting them from paying these additional costs for costly spot energy, local energy traders said.

    The CCEE is next due to settle accounts between buyers and sellers of energy again on Oct. 14-15.

    Cristopher Vlavianos, president of energy trader Comerc, said 80 percent to 90 percent of the expected 5 billion reais ($1.2 billion) settlement coming due will not be paid because offinancial distress among such hydropower producers.

    "If you have insolvency of this size, whoever has credit (for supplying energy) will not be paid," said Vlavianos.

    The problem has been growing in recent months. The CCEE was unable to settle payments in June and Aneel thought it had reached an agreement with generators by offering loans to the hydro plant operators to get them to lift their injunctions.

    But now dozens of hydroelectric generators have secured court injunctions suspending their obligations to pay.

    "I'd guess 80 percent of the settlement will not be paid," said Andrew Frank, president of energy trader America Energia.

    Brazil's thermoelectric plants, which run on natural gas, fuel oil and diesel, have been picking up the slack in generation while the hydro plants remain partially off line but could soon run into cash flow problems if they do not receive payments due from the CCEE.

    Brazil's state-run oil company Petroleo Brasileiro SA , is one of the largest operators of thermoelectric plants here, and is already struggling with cash flow problems.

    Petrobras is also the main distributor of fuels for thermoelectric plants in the country.

    The rules of Brazil's energy market say that in case of default by a participant, the group as a whole must cover the shortfall. And this has led to even more court injunctions by members to suspend payments, traders said.
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    VW Sales forecasts for september

    Meanwhile, based on online shopping data, predicted VW would be the only major manufacturer to see year-over-year sales losses in September. predicted VW sales would go down about 2 percent in September compared with September 2014. That doesn’t sound like much, but expects the rest of the market to improve 13.9 percent to about 1.4 million. TrueCar estimated VW Group sales, including Audi, could go down about 5.2 percent in September.

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    Refrigerated vehicles ‘could cost the EU €2bn’

    Refrigerated vehicles could cost the EU almost €2 billion (£1.4bn), a year on health and the environment by 2025.

    That’s according to a new report by cold energy firm, Dearman which stated “if nothing is done” it could cost EU countries €22 billion Euros over the next decade.

    The report also stated one million transport refrigeration units in Europe have the equivalent impact on air pollution as up to 56 million diesel cars.

    The cooling in these vehicles is often powered by an unregulated secondary diesel engine, which is inefficient and disproportionately polluting, it added.

    Dearman claim they can emit up to 13 million tonnes of carbon emissions and 40,000 tonnes of Nitrogen Oxide.

    Toby Peters, Chair in Power and Cold Economy, University of Birmingham and CEO of Dearman said: “Until now, nobody has given transport refrigeration units a thought. We all shop at food stores, eat in restaurants or have chilled and frozen food delivered but the impact of transport refrigeration units has never been investigated, let alone addressed.

    “They are unregulated, use out-dated, fossil fuelled technology and are disproportionately polluting. What’s worse, their pollution is concentrated on city streets where it does the most damage to our health.”

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    BHP tests climate-deal scenario

    BHP Billiton Ltd, the world's biggest miner, says a global agreement on climate-change action would slow but not stop demand growth for most of the commodities it produces.

    Revealing projections for the first time as December's Paris Climate Conference nears, BHP Chief Commercial Officer Dean Dalla Valle assured investors in London on Tuesday that the company has "stress-tested" its global resources business, which includes coal mines and oil fields.

    The test: Could it withstand policy shifts that would follow an agreement limiting carbon emissions to cap global average temperatures at no more than 2 degrees Celsius (3.6 degrees Fahrenheit) above preindustrial levels?

    The conclusion, according to the BHP report: "Even in an orderly or rapid shift to a 2-degree world, we forecast growth in long-term demand for most of our commodities, although at a slower pace than in [our] central case." That "central case" assumes an average temperature rise of 3 degrees.

    Mr Dalla Valle added, though, that "the opportunities and risks associated with climate change will not be spread evenly between businesses or sectors." Energy coal, used to generate electricity, would be worst hit, BHP projected, as energy providers switch to natural gas or renewable technology. BHP added, though, that this switch could drive up demand for its own gas and uranium.

    Mr Dalla Valle, who called the report "a major step forward in disclosure," said measures to reduce emissions in steel manufacturing could also increase the price BHP receives for its iron ore, which tends to be higher-quality than some rival miners'.

    Assuming "an orderly transition" between now and 2030 to meet a 2-degree climate target, BHP forecast a doubling in earnings before interest, taxes, depreciation and amortization. That is only marginally below the company's core outlook, based on a 3-degree trajectory.

    "As climate change risk continues to evolve, so too will our approach," said Mr Dalla Valle, referring to BHP's strategy. In recent times the company has shifted its investment focus to copper and oil from coal and iron ore.

    Climate change has been high on US President Barack Obama's agenda as he approaches his final year in office. He has been working to secure support for an international climate-change agreement ahead of the Paris meeting, which will bring world leaders together with the aim of clinching a deal to succeed the Kyoto Protocol.

    United Nations officials concede an accord on a 2-degree cap is unlikely, given that many major carbon emitters haven't submitted emissions targets. Indian Prime Minister Narendra Modi this week expressed "uncompromising commitment on climate change" but stopped short of making new pledges for reducing emissions.

    Mr Dalla Valle separately said BHP remains confident China's economy is on track despite a drop in industrial profits in August that was the biggest in four years, and shook world resources markets. "No doubt there is going to be a lot of volatility, and I think people are reading into that," he told reporters. But "we haven't changed our position."

    In August, BHP forecast China's economy will pick up speed to meet Beijing's growth target for 2015 of about 7 per cent.
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    Mining and trading company Glencore said on Tuesday its business remained "operationally and financially robust" and it was confident in the medium and long-term fundamentals of its commodities.

    Glencore shares fell to a record low on Monday over concerns it was not doing enough to cut its debt to withstand a prolonged fall in global metals prices.

    "We have positive cash flow, good liquidity and absolutely no solvency issues," a company spokesman said in a statement.

    "Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding."

    Chief Executive Ivan Glasenberg had to bow to shareholder pressure this month by agreeing to cut Glencore's $30 billion debt pile and protect its rating after the prices of its main products, copper and coal fell.

    Glencore plans to suspend dividends, sell assets and raise cash, among other measures, to cut its net debt by a third by the end of 2016.

    London-listed Glencore has already raised $2.5 billion through a share placement.

    After Glencore announced its debt-cutting plans, Moody's credit-rating agency affirmed its Baa2 rating on the company but changed the outlook to negative from stable, "to reflect the scope for a prolonged difficult market that may cause a slower recovery in Glencore's financial profile".

    S&P affirmed Glencore's BBB rating and kept a negative outlook, citing worries over economic slowdown in China and copper prices.

    And: Add another looming problem to the list for Glencore Plc, the commodity group that’s lost almost $45 billion in market value this year.

    A quarter of the beleaguered firm’s bonds and credit lines are due for refinancing by next May, compared with 9 percent for its peers, according to data compiled by Bloomberg. Glencore may have options for delaying the deadline for part of that $13.8 billion in lifeblood financing, but given that some of its debt is already trading like junk as the stock plummets, any bond refinancings will probably be pricey.

    Shares of Glencore dropped 73 percent this year as a rout in commodities fuelled by a slowdown in China’s economic growth threatened to shrink the company’s revenue as it attempts to manage its debt load. The company earlier in September announced a $10 billion debt-reduction program and cut its $30 billion of borrowings to protect its credit rating amid the commodity selloff.

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    China caps overseas withdrawals

    China has capped the amount of money Chinese holders of bank and credit cards can withdraw outside the country, in its latest effort to discourage people from moving badly needed capital offshore.

    China's foreign-exchange regulator put a new annual cap on overseas cash withdrawals using China UnionPay Co. bank cards, a UnionPay official said on Tuesday. Under the new rules, UnionPay cardholders can withdraw up to 50,000 yuan ($US7,860) overseas during the last three months of this year, while that amount will be capped at 100,000 yuan for all of next year, the official said.

    State-run UnionPay has a virtual monopoly on processing card transaction in China, meaning the limits extend to nearly all Chinese bank- and credit-card holders. It wasn't clear when the new cap was issued.

    The new cap is in addition to an existing 10,000 yuan daily withdrawal limit -- part of China's already tough limits on how much money can flow across its borders.

    The move by China's State Administration of Foreign Exchange is the latest by Beijing to scrutinize capital outflows and encourage companies to bring more money into the country. The People's Bank of China, the country's central bank, said earlier this month that its foreign-exchange reserves fell by $US93.9 billion, the biggest monthly drop ever, after it surprised the market on August 11 with its decision to devalue the yuan by around 2 per cent.
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    CDS's over 200: Killing Zone.

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    China to prosecute former senior judge for corruption - watchdog

    China will prosecute a former senior judge from its highest court on suspicion of corruption after accusing him of crimes including illegally accepting public funds, Beijing's anti-graft watchdog said on Tuesday.

    Xi Xiaoming, the former vice president of the Supreme People's Court, came under investigation in July for "serious violations of discipline and laws", the terminology China usually uses for corruption.

    He is one of the most senior judicial officials to be ousted by President Xi Jinping's anti-corruption campaign since the downfall of Zhou Yongkang, the former domestic security chief whose brief included law enforcement and courts.

    Xi Xiaoming had been a member of the ruling Chinese Communist Party for 40 years but has been accused of abusing his position to help his relatives obtain benefits for their business activities, the party's Central Commission for Discipline Inspection said in statements on its website.

    Other charges include illegally accepting public funds, breaching confidentiality rules, and leaking secrets related to judicial work.

    His case has been transferred to legal authorities, the watchdog said, meaning that he will face prosecution. He has also been expelled from the party.

    It was not possible to reach Xi Xiaoming for comment and it was not clear if he has a lawyer.

    China's leaders have pledged to continue combating graft, seen as crucial to the party's survival, and have vowed to go after "tigers" in senior positions as well as lowly "flies".

    Zhou was sentenced to life in jail in June after he was found guilty at a secret trial of bribery, leaking state secrets and abuse of power, in China's most sensational graft scandal in 70 years.

    Xi Xiaoming, 61, was the number four official in the Supreme People's Court, where he specialized in economic law cases.

    A native of eastern Jiangsu province, he rose from working as a policeman in the northern city of Shenyang in the 1970s to the highest echelon of China's judiciary, where he was also a member of the court's leading Party members' group.

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    China's Xi says to prioritize energy cooperation with Iran

    Iranian President Hassan Rouhani and Chinese President Xi Jinping greet children during the welcome ceremony at the Xijiao State Guesthouse in Shanghai

    China and Iran have close diplomatic, economic, trade and energy ties, and China has been active in pushing both the United States and Iran to reach agreement on the nuclear issue.

    Under the multilateral deal, agreed in July, sanctions imposed by the United States, European Union and United Nations will be lifted in return for Iran agreeing to long-term curbs on a nuclear program that the West has suspected was aimed at creating a nuclear bomb.

    Meeting in New York on the sidelines of the United Nations, Xi told Rouhani that once the nuclear agreement was put in force "Iran will have ever more opportunity for foreign cooperation, and Sino-Iran ties will face a new development opportunity", China's Foreign Ministry said on Tuesday.

    China wants increased cooperation in the fields of railways, roads, iron and steel, auto manufacturing, electricity and high-technology, Xi said.

    "(We) must prioritize energy and financial cooperation," he added, without elaborating.

    China is the biggest customer of Iranian oil.

    Last week, a senior Chinese envoy offered Iran help with upgrading its manufacturing technology to boost its economy.

    China had long railed against unilateral sanctions imposed on Iran by the United States and Europe, though it has supported U.N. ones, and had denounced threats of force.
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    Read the entire complaint filed by Gates Foundation against Petrobras


    1. This action is to recover damages for losses Plaintiffs have suffered on certain securities issued by Petrobras and purchased by Plaintiffs between January 2, 2009 and September 24, 2015, inclusive (the "Relevant Period").

    2. This case arises from a pervasive bribery and money laundering scheme carried out by Petrobras and willfully ignored by PwC. Senior Petrobras executives have admitted to the conspiracy and described it in detail, Switzerland and Monaco have frozen over $400 million in secret bank accounts held by Petrobras executives and other co-conspirators, and Petrobras and PwC have now admitted that Petrobras’ financial statements overstated the value of Petrobras’ Case 1:15-cv-07568 Document 1 Filed 09/24/15 Page 1 of 103 2 assets and profitability by at least $17 billion, a figure which is likely understated and will only continue to grow.

    3. The depth and breadth of the fraud within Petrobras is astounding. By Petrobras’s own admission, the kickback scheme infected over $80 billion of its contracts, representing approximately one-third of its total assets. Equally breathtaking is that the fraud went on for years under PwC’s watch, who repeatedly endorsed the integrity of Petrobras’ internal controls and financial reports. This is not a case of rogue actors. This is a case of institutional corruption, criminal conspiracy, and a massive fraud on the investing public.

    Lots, Lots more:
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    Glencore: A crisis of confidence.

    Now that after long last the market has turned its attention not only to Glencore's mining operations, which as we have repeated said are a secondary aspect to the company's business model, the key being its trading operations which transact in billions of commodities every single day, and the stocks just plunged to fresh intraday lows down a historic 30%, here is a quick pointer at what traders should be looking at next: the company's own disclosure on counterparty risk from its most recent annual report.

    But before we get into it, here is a reminder of Glencore's most recent disclosed financial situation: $30Bn net debt on $6.5bn in EBITDA. EBITDA, which as a reminder, drops by $1.2BN for every 10% drop in copper pricesaccording to the company itself.

    All the detail:

    Perhaps the punchline: $19 billion in derivative liabilities. As a reminder, every collateral netting chain (this is for the very confused "gross is not net" punditry out there) is only as strong as the weakest counterparty. Should GLEN fail, those gross liabilities become net.
    Image titleImage titleThe company has lost more than 70% of its value this year as commodity prices have slumped, making it the worst performer in the FTSE 100 index and the JSE.

    Glencore’s drive to sell assets to cut heavy debts failed to soothe fears over slumping metals prices.

    Traders cited a bearish Investec note that raised doubts over Glencore’s valuation if spot metal prices did not improve. The note pointed to high debt levels at the company.

    Glencore earlier this month sold $2.5bn of new shares to pay down debt to help protect its credit rating amid a rout in commodities prices.

    Glencore sold the stock at 125 pence a share, a 2.4% discount to the closing price on Tuesday, 15 September. Glasenberg paid about $210m to buy shares in the sale in order to maintain his 8.4% stake, honouring a commitment that he and other senior managers representing 22% of the company wouldn’t dilute their holdings.

    Glasenberg was responding to investor concern that a debt- laden balance sheet can’t withstand the slump in commodity prices. The share sale is part of a wider $10bn debt-reduction programme on 13 September, which saw the company scrap dividends and plan asset sales to cut its $30bn of borrowings.

    “The challenging environment for mining companies leads us to the question of how much value will be left for equity holders if commodity prices do not improve,” Investec said in a note to investors Monday.

    The bank said that if major commodity prices remain at current levels, almost all Glencore’s equity value would evaporate in the absence of substantial restructuring.
    “It’s a pure fear trade,” said 
    Tom Voorhees, a corporate bond-trader atBrean Capital LLC in New York. Investment-grade credit investors “have less tolerance for loss,” which is exacerbating selling and price declines, he said.

    Image titleInvestec put out this chart.

    Credit ratings: In light of the Group’s extensive funding activities, maintaining strong Baa/BBB investment grade ratings is a financialpriority/target. The Group’s credit ratings are currently Baa2 (stable) from Moody’s and BBB (stable) from S&P.
    Value at riskOne of the tools used by Glencore to monitor and limit its primary market risk exposure, namely commodity price riskrelated to its physical marketing activities, is the use of a value at risk (VaR) computation. VaR is a risk measurementtechnique which estimates the potential loss that could occur on risk positions as a result of movements in risk factorsover a specified time horizon, given a specific level of confidence. The VaR methodology is a statistically defined,probability based approach that takes into account market volatilities, as well as risk diversification by recognisingoffsetting positions and correlations between commodities and markets. In this way, risks can be measured consistentlyacross all markets and commodities and risk measures can be aggregated to derive a single risk value. Glencore has seta consolidated VaR limit (1 day 95%) of $100 million representing less than 0.2% of equity, which was not exceededduring the period.Glencore uses a VaR approach based on Monte Carlo simulations and is either a one day or one week time horizoncomputed at a 95% confidence level with a weighted data history.Average market risk VaR (1 day 95%) during the first half of 2015 was $41 million, representing less than 0.1% of equity.Average equivalent VaR during the first half of 2014 was $30 million.
    Image titleWe understand this is at CSFB (Zurich)

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    Shanghai shuts factories for Disney

    Shanghai Shuts Down Factories For Disney
    Shanghai will close down 153 factories near Disney to ensure blue sky for
    the opening day in 2016.
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    China Industrial Profits Fall Most Since 2011 as Growth Ebbs

    Chinese industrial companies reported profits fell the most in at least four years, as the pillars of China’s infrastructure-led growth model suffered from a devalued yuan, a tumbling stock market and weak demand.

    Industrial profits tumbled 8.8 percent in August from a year earlier, with the biggest drops concentrated in producers of coal, oil and metals, the National Bureau of Statistics said Monday in Beijing. It was the biggest decline since the government began releasing monthly data in October 2011, according to data compiled by Bloomberg.

    China’s stock-market plunge and currency devaluation are adding new challenges for the world’s second-largest economy as it struggles with excess capacity, sluggish investment and weaker manufacturing. The nation’s official factory gauge slumped to a three-year low last month, while Bloomberg’s monthly gross domestic product tracker remained below the government’s 7 percent goal in August with a reading of 6.64 percent.

    “Companies are facing enormous operational pressures,” said Liu Xuezhi, a macroeconomic analyst at Bank of Communications Co. in Shanghai. “The momentum of growth is weak, and the downward pressure on the economy is relatively large.”

    Profits in coal mining plunged 64.9 percent in the first eight months of this year from the same period last year, while oil and gas profits tumbled 67.3 percent, the report said. Ferrous metal smelting earnings fell 51.6 percent.

    The drop in profit was attributed to falling product prices, lower investment returns and foreign-exchange losses, He Ping, an NBS official, said in an analysis on the agency’s website. The report is a gauge of earnings from industrial companies that have 20 million yuan ($3.1 million) or more in annual “core business income,” according to NBS.

    The Shanghai Composite Index retreated 0.2 percent to 3,086.34 as of 11:30 a.m. local time.

    Contributions from investment returns fell amid China’s stock-market rout, while exchange-rate losses rose “noticeably” due to yuan volatility, pushing the companies’ financial costs up by 23.9 percent last month from a year earlier, compared to a 3 percent drop in July, according to the bureau.
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    EU urges all member states to investigate emissions rigging devices

    The European Commission wants all member states to investigate how many cars use illegal defeat devices to cheat emissions tests in light of the scandal at Volkswagen, a Commission spokeswoman said.

    Volkswagen has said 11 million of its diesel cars around the world could be implicated after the U.S. Environmental Protection Agency revealed VW had been using software to mask pollutants.

    "We are inviting all member states to carry out an investigation at national level," Commission spokeswoman Lucia Caudet told reporters. "We need to have a full picture of how many vehicles were fitted with defeat devices, which break EU law."

    The Commission has proposed new legislation on tightening its vehicle testing regime to produce results more in line with real driving conditions, which it says is the responsibility of member states to enforce.

    It is also looking at whether the European Union's system of type approval, when new models are put on to the market, should be changed and has said it has called a meeting with national authorities, but it is not clear when this will happen.
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    VW cheats on trucks.

    Is there no end to the huge emissions scandal Volkswagen done?Apparently not, for now, also reported that Volkswagen has cheated with its light trucks.

    Volkswagen Transporter

    In Germany it has come up data on additional cheats by Volkswagen. Transport Minister Alexander Dobrindt announced earlier on Friday that while Volkswagen Commercial Vehicles / Commercial vehicles, namely light trucks, have been affected by manipulated emissions from diesel engines.

    It is still unknown which engines and light trucks concerned, but Volkswagen vehicles includes models Amarok, Caddy (in different versions) and T-series models Transporter, Caravelle, Multivan, California and Crafter.

    Earlier today announced Alexander Dobrindt a figure of how many Volkswagen cars affected by the cheating in Germany: 2.8 million cars. A figure that may be growing as Volkswagen's small 1.2-liter diesel engine is under the microscope right now.

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    Oil and Gas

    Gazprom chief says gas exports to Europe up 23 pct in third quarter

    Russian gas giant Gazprom has exported 41.4 billion cubic metres of gas to Europe and Turkey in the third quarter, up 23 percent from the year-earlier period, the company's head Alexei Miller said on Friday.

    In September, gas exports stood at 13.3 bcm, an increase of 24 percent.

    European buyers of Russian gas have increased purchases before the cold season and as the price of the commodity, pegged to prices of oil with a lag of six to nine months, fell.

    Miller said that Germany, the largest buyer of Russian gas, increased purchases by 19 percent to 11.2 bcm in third quarter. Italy boosted intake by 69 percent to 7 bcm.
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    Russian oil output reaches post-soviet record in September

    Russian oil output rose to a post-Soviet record last month as producers take advantage of the weak ruble to push ahead with drilling.

    The nation’s production of crude and condensate advanced to 10.74 million barrels a day, 1 percent more than a year earlier and topping a record set in June, according to data from the Energy Ministry’s CDU-TEK unit.

    The increase comes at a time when Organization of Petroleum Exporting Countries are defending market share rather than cutting production amid a global output glut. Russia, which gets about half of its budget income from oil and gas revenues, is maintaining its own supplies in the face of Brent crude prices that fell 50 percent in the past year.

    Oil producers, which earn in dollars, pay for services using the ruble, which has weakened to 65.65 to the dollar from 39.56 to the dollar a year earlier.

    Crude exports rose 3.4 percent from the previous year to 5.27 million barrels a day, according the data. Exports rose 5 percent from the previous month.
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    Platts Report: China Oil Demand Grows 10% Year over Year in August

    China's apparent oil demand* rose 10.2% in August from a year earlier to 11.19 million barrels per day (b/d), according to a just-released Platts analysis of Chinese government data.

    Barring gasoil and naphtha, China's apparent demand for all other key products--gasoline, liquefied petroleum gas (LPG), jet/kerosene, and fuel oil--saw double digit year-on-year growth in August.

    China's refinery throughput in August averaged 10.49 million b/d, up 6.5% from a year earlier, data from the country's National Bureau of Statistics (NBS) on September 12 showed.

    Meanwhile, China's net imports of oil products surged 131% year on year to 700,000 b/d in August, driven by strong inflows of LPG, fuel oil and naphtha, according to data released September 21 by the General Administration of Customs.

    During the first eight months of this year, China's total apparent oil demand averaged 11.14 million b/d, an increase of 8.2% from the same period of 2014.

    China's actual oil demand growth could be higher since stocks of key products have fallen, Platts estimates show. "Inventories of gasoil, gasoline and jet/kerosene fell by between 2.5% and 9.7% at the end of August, from end July," said Platts Associate Editorial Director for Asia Oil News Mriganka Jaipuriyar.

    China's apparent oil demand is expected to remain steady at 11.1 million b/d for the rest of the year, according to data from Platts China Oil Analytics, an on-line platform for supply/demand, refining margins, volume forecasts, trade flows and the like. However, it indicates that overall growth for 2015 could moderate to just over 5%, given the high base in the fourth quarter of last year.

    Gasoil is the most widely consumed oil product in China and the nation's declining economic growth over the last three years has hit gasoil demand.

    Apparent demand in August rose 3.4% year over year to 3.50 million b/d, but actual demand could be higher given the stock draw down, Platts China Oil Analytics indicate.

    Stocks of gasoil fell 7.6%, or near 7.5 million barrels, in August from July to an estimated 90.38 million barrels, Platts calculates, based on Xinhua's China Petroleum Stockpile Statistics.

    "Some of the government's stimulus measures implemented in prior months are likely filtering down through the economy," said Song Yen Ling, Platts senior analyst for Asia Pacific oil markets. "Industrial production growth improved marginally in August, while other indicators such as highway freight traffic also showed positive growth."

    Up to 70% of the fuel is used in the transport sector while the remainder is used by various sectors - including construction, farming and fishing, and industrial heating - to power machinery.

    Apparent demand for gasoil rose 3.7% over January to August to 3.58 million b/d.

    Demand for LPG surged 27.3% year on year to 1.27 million b/d in August. Growth was supported by import demand from new propane dehydrogenation plants. Net imports of LPG rose 168.5% year over year to an average 376,000 b/d for the month.

    Year to date, apparent demand for LPG is up approximately 21.4% versus a year ago to 1.21 million b/d.

    Apparent demand for gasoline rose 21.6% year over year to 2.75 million b/d, with January-August demand rising 11.4% to 2.69 million b/d.

    According to Xinhua's China Petroleum Stockpile Statistics, gasoline stocks fell 9.7% year over year at the end of August, suggesting actual demand could be higher than Platts estimates.

    Even though overall auto sales contracted in August, China's sales of gasoline-guzzling MPVs and SUVs, which have been the key demand drivers, rose 10% and 44.5% respectively, year on year, according to data from the China Association of Automobile Manufacturers.

    Fuel Oil
    Apparent demand for fuel oil in August rose 27.20% year over year to 695,000 b/d. Demand for the January to August period rose 14.3% year over year to 952,000 b/d.

    Net imports of fuel oil rose 58.5% in August on a year-over-year basis to 549,000 b/d, led in large part by a jump in imports of petroleum bitumen blend.
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    Titanium Corp. Surges Most Since 1999 After Agreement With Syncrude

    Titanium Corporation Inc. shares gained the most in more than 16 years after reaching an agreement that gave the company access to heavy minerals at Syncrude Canada Ltd.’s oil sands sites.

    The stock price rose 78 percent to the intraday high of C$1.39 at 3 p.m. Thursday in Toronto, the biggest increase since April 1999.

    Titanium will have “first right” to recover heavy minerals from waste generated at Syncrude oil sites using a patented technology it owns, the company said in a release. Syncrude was given a 50 percent interest in the patented technology, which will also extract bitumen from the waste deposited in tailing ponds.

    The company spent 10 years negotiating with oil-sands producers including Syncrude, Suncor and Canadian Natural Resources Ltd. to apply its technology, Scott Rattee, former senior analyst at Edgecrest Capital Corp., said in a phone interview.

    The stock is “surging today because people are amazed it finally happened,” he said.

    The technology could give Titanium access to “several hundred million” dollars a year worth of minerals including zircon and titanium dioxide that are now dumped, Rattee said. The technology also raises bitumen extraction by 2 percent to 3 percent and makes the resulting tailing ponds much cleaner as a result, he said.

    Scott Nelson, Titanium’s chief executive officer, didn’t return a phone call seeking comment.

    Oil-sands companies, which emit more carbon than traditional oil producers and leave vast swaths of wasteland from their mining operations, have sought to reduce their environmental impact in recent years.
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    Penn West Seen Selling Most-Prized Oil Assets as Debt Weighs

    Penn West Petroleum Ltd. is trying to avoid parting with its best assets as the oil market crash brings its debt into focus. The company appears to be running out of other options.

    Penn West has exceeded a target set with its debt holders of selling C$650 million ($489 million) of assets outside its areas of focus, with a deal announced Thursday to dispose of its 9.5 percent stake in the Weyburn oil field in southeast Saskatchewan for C$205 million. That brings the total sold this year to C$810 million, not enough to keep debt in check, according to Desjardins Capital Markets and Dundee Capital Markets Inc. estimates.

    “Frankly, I think they have to sell one of their jewels if they want to survive, the jewel being the Viking, most likely,” Brian Kristjansen, an analyst at Dundee in Calgary, said in a phone interview. The Viking tight oil asset in Saskatchewan produces light crude, generates high returns and is probably worth at least C$800 million, he said, which would bring Penn West’s total asset sales to at least C$1.61 billion.

    “The resulting company won’t be as attractive because it’s their highest net-back asset.”

    An oil market slump that began last year is keeping prices below $50 a barrel for the U.S. benchmark, curbing cash flow for producers. Calgary-based Penn West will probably violate a covenant on its debt in the first three months of 2016 if it doesn’t sell a key property, Kristjansen said.

    The producer’s debt remains “a significant headwind,” at more than six times its cash flow, according to a note by Kristopher Zack at Desjardins in Calgary.

    In a statement Thursday announcing the Weyburn sale, Penn West said it would stick to its strategy of selling “non-core” assets to further lower debt and will continue to focus on primary operations. A company spokesman declined to comment further.

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    Stripper Wells Burning Cash at $30 Oil to Speed U.S. Output Drop

    The speed at which oil producers shut down wells spitting out their final drops of unprofitable crude may hold the key to an eventual rebound if prices fall further.

    Crude prices tumbling to $30 a barrel would threaten the profitability of about 206,000 barrels per day of production from older wells that produce minimal amounts of oil, according to areport Thursday from Bloomberg Intelligence.

    Output from older U.S. wells less profitable as oil prices fall

    Image title

    The wells, which are most prevalent in Texas’ Permian Basin, are about 25 years old on average and produce no more than 15 barrels a day. They require regular maintenance to help pump even that much after years of sagging pressure.

    "These wells dance on the edge of profitability," Peter Pulikkan and William Foiles, analysts at Bloomberg Intelligence, wrote in the report. "The reaction of smaller mom-and-pop operators to sustained low oil prices will dictate how quickly uneconomic supply is removed from the market."

    Stripper wells represent more than 80 percent of total wells in the U.S. and 12 percent of total production, according to the report. In total, they generate about 1.1 million barrels of oil a day, nearly as much as Algeria, the third-largest African crude producer.

    The key decision will be whether operators continue to let the wells produce at losses to hold the lease in hopes that oil prices soon recover, or shut in production and potentially surrender the well, the analysts wrote. While most of the little wells are operated by tiny producers, the two companies with the greatest production from stripper wells are Chevron Corp. and Occidental Petroleum Corp.

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    Chesapeake Bonds Crater on New Debt Leeway in Amended Revolver

    Chesapeake Energy Corp. bonds plunged Thursday after the energy producer announced an amendment to its credit line that would allow the company to incur as much as $2 billion in junior debt.

    The oil and gas producer’s $1.3 billion of 6.625 percent unsecured notes due in August 2020 dropped 8.1 cents to 65.6 cents on the dollar at 8:34 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

    The Oklahoma City-based company’s $4 billion revolving credit line will now be secured. In exchange, Chesapeake was able to extract some concessions from its lenders, such as the ability to incur new debt and the removal of the total leveraged ratio covenant, according to the statement.
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    Oil rallies on U.S. storm fears, Syria

    Oil prices jumped as much as 4 percent on Thursday, boosted by a rally in U.S. gasoline on worries about potential damage to oil installations from a hurricane headed for the U.S. East Coast, traders said.

    Heightened geopolitical risk from the worsening war in Syria also boosted crude futures in earlier trade.

    Weather forecasters said Hurricane Joaquin could hit the New York metropolitan area as a tropical storm on Tuesday, potentially following the destructive course of Hurricane Sandy in 2012.

    Traders watch Atlantic hurricanes because they can lead to precautionary shutdowns of Gulf of Mexico oil and gas platforms, and in exceptional cases damage energy infrastructure.
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    Egypt Expands Energy Import Options with Second LNG Terminal

    Taking another step towards easing its energy demand challenges, Egypt welcomed the arrival of a second liquefied natural gas import terminal this week, opening another avenue for needed natural gas imports.

    According to media reports, Cairo took in the floating LNG terminal with plans to begin operations later in October, complete with storage and regasification capacity.

    The unit was sent by Singapore-based Norwegian group BW Gas, has a capacity of 600 to 700 million cubic feet per day, according to Reuters.

    The arrival comes at a time when Egypt continues to struggle to meet its domestic demand, as well as draw down significant debts to international producers.  Egypt has a long history of energy challenges, though they grew significantly more daunting over the last four years. With the collapse of the long-standing government of Hosni Mubarak, the country of over 80 million found itself economically isolated, which served to reduce its foreign reserves and with it, the ability to keep up payments to oil and gas importers.

    At the same time, the country’s domestic production has continued to slow, a situation made worse by a series of attacks on eastbound gas pipelines to buyers in Israel and Jordan, further reducing needed energy sector revenue.

    Despite such set-backs, Egypt is now flush with confidence thanks to the recent discovery of a “super giant” natural gas discovery off its Mediterranean coastline. According to a Bloomberg report on the discovery, Italy’s Eni outlined a potential “super giant” field that could potentially be home to 30 trillion cubic feet of gas, making it the biggest find in the Mediterranean.

    However, even in the best case scenario, access to that gas is a long way down the road, making short-term solutions like LNG terminals all the more important.
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    NDIC Considering Extending Completions Deadlines

    When considering the likely production of crude oil in the U.S. in the coming months, and the affect that production will have on prices, one of the large variables is the rate of completions, particularly in the Willison Basin in North Dakota.  That is because there are more than 900 drilled but uncompleted wells in the state.  However, NDIC regulations require that, unless extended, an operator must complete a well within one year of the issuance of the drilling permit.

    The tension created by this rule in the era of depressed prices is obvious.  As Ron Ness, the president of the North Dakota Petroleum Council (NDPC) recently stated:  “Why would we want companies to be forced to spend money or complete the wells when the economics don’t warrant it?  In today’s economic of an over-supplied oil market, it makes no sense.”

    As a result, the NDIC has “indicated they are leaning towards leniency in their treatment of operators that have drilled but not completed wells within the one-year time frame permitted. Instead of assuming such wells are abandoned, which would otherwise mean an expired drilling permit and about $200,000 in plugging costs, the State plans to give operators more time.”   The NDIC has stated that they are “leaning toward” issuing a greater number of temporary abandonment permits which in general give operators a one-year grace period, with potential extensions by the NDIC.

    The NDPC favors such extensions from the NDIC.  As Mr. Ness succinctly put it – “Just defer completions.  So they sit on them two years.  What’s the difference.”
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    ONGC supports Cairn India plea for Rajasthan block's term extension

    As a shot in the arm for Cairn India, its partner Oil and Natural Gas Corp has asked the government to extend the tenure of prolific Rajasthan oil block by 10 years without any changes in terms and conditions.

    Cairn, which holds 30% interest in the Rajasthan block, wants to retain the Rajasthan block beyond the contractual deadline of 2020. And for such an extension the nod of the state-owned firm, which is a licence of the block holding 30% interest, was necessary.

    A top official said that ONGC has agreed to the Cairn proposal and written to the Oil Ministry saying the licence term should be extended by 10 years on the existing terms and conditions.

    Unlike in 2011, when it had given conditional approval for Cairn being acquired by Vedanta Group to resolve the royalty dispute, ONGC has not put any pre-condition this time.

    He said that after ONGC nod, the ministry has now sought a view from the upstream regulator, the DGH for extension of the license term.

    Cairn's contractual term for exploring and producing oil and gas from the Rajasthan Block RJ-ON-90/2 expires in 2020 and the area is to return to the block licensee, ONGC.
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    Iran invites foreign firms to develop its oil, gas industry - official

    Iran is inviting foreign investors to actively develop the OPEC member's energy industry after implementation of a historic nuclear deal reached between Iran and six global powers, deputy Oil Minister Rokneddin Javadi told Reuters on Thursday.

    "We welcome all oil companies, including the Americans, that meet Islamic Republic's requirements to invest in Iran," Javadi said by telephone from Tehran.

    Iran plans to increase crude output by 2 million barrels a day from about 50 energy projects slated for investors at a conference in Tehran next month, National Iranian Oil Co. Managing DirectorRoknoddin Javadi said.

    The package will also aim to boost natural gas production by 7 billion standard cubic feet, Javadi said at a conference in Berlin Thursday. Oil production is now about 2.8 million barrels a day,data compiled by Bloomberg show. Iran has the world’s largest gas reserves and the fourth largest oil reserves, according to BP Plc figures.

    Iran will need $30 billion of investment over five years to boost oil production, starting with about 350,000 barrels of new output next year, Goldman Sachs Group Inc. said in a report Thursday. The supplies could keep pressure on oil prices and delay the market’s return to balance, Henry Tarr, a Goldman analyst, said in the report.

    “The global oil market will stay bearish in the short to medium term,” Javadi told the conference.

    The July deal agreed by the U.S., France, China, Russia, U.K. and Germany to remove sanctions on Iran in exchange for curbs on its nuclear program point to an early 2016 start if all conditions are met, Goldman’s Tarr said in the report.

    Potential investors will be asked to consider contracts over 20 to 25 years, Javadi said. Iran’s council of ministers endorsed a new model contract for the projects in a meeting chaired by PresidentHassan Rouhani in Tehran, the state-run Mehr news agency reported Wednesday. The conference is set for Nov. 16 to Nov. 20 in Tehran. Another seminar about the projects is scheduled Oct. 19 to Oct. 21 in Tehran, with Iran’s Oil Minister Bijan Zanganeh set to attend. There is another conference set for London in February.

    Iran needs 210 million cubic meters a year of natural gas, with production seen reaching about 300 million cubic meters by the end of next year, Javadi said. That would leave up to 90 million cubic meters a year available for export. Talks have been renewed with European Union countries to supply them with natural gas via pipeline and liquefied natural gas, with plans to bring its first LNG plant into operation within 2 1/2 years with capacity of 10 million tons a year, he said.

    Attached Files
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    First Nations join in support of LNG corridor

    First Nations elected and Hereditary Chiefs from across Northern British Columbia have joined together to sign a letter that declares their support for the development of a multibillion-dollar energy pipeline corridor through their traditional territories by Eagle Spirit Energy.

    First Nations leaders support the government of B.C.’s position that the shipment of LNG is the priority. The proposed energy corridor is not only the solution for shipping B.C. LNG but also Alberta oil, reads a joint statement by the First Nations.

    Eagle Spirit Energy was formed as a First Nations-led initiative to develop an energy corridor from Alberta to B.C. tidewater. An energy corridor means that pipelines can be built to efficiently and safely transport liquefied natural gas, and later on oil, to a proposed tanker loading export facility located on tidewater in northern B.C.

    This letter to Prime Minister Harper, and Premiers Clark, Notley and Wall states, “our support is for moving forward with Eagle Spirit to continue to meet with all communities, to continue the necessary due diligence in terms of the environmental protection, to assess the viability of the project, and to clearly establish the benefits to our communities.”

    This is the first time that First Nations have come together with such a resolution. It is a responsive model developed to provide appropriate consultation, enhanced land and marine environmental protections, and fair compensation for the Province of British Columbia, First Nations, and northern communities.

    Exclusivity and benefits agreements, and non-disclosure agreements have been signed by those First Nations through whose traditional territories the pipelines would cross. The initial and ongoing participation of impacted First Nations will be incorporated into the project through the formation of a Chiefs’ Council.

    The parties are presently working together to determine the final route and towards the completion of final binding agreements
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    Senate Bank Commitee votes 13-9 in favour of Oil exports.

     A bill to lift the 40-year-old ban on U.S. oil exports passed the Senate Banking Committee on Thursday, but the future of the measure is uncertain in the full chamber, after a controversial amendment was added to it.

    Senator Pat Toomey, a Republican of Pennsylvania, added an amendment to the bill that would make Iran compensate U.S. victims of Iranian backed terrorism, language that senators said would doom the bill's future.

    "The bill is dead," because of the addition of the Toomey amendment that the White House likely opposes, said Senator Jon Tester, a Democrat of Montana.

    A similar bill to lift the ban passed earlier in the year in the Senate Energy Committee. This bill too was only supported by one Democrat, Senator Lisa Murkowski of oil-producing Alaska, the head of the panel. Backers of the bill need six Democrats to pass the bill if all 54 Republicans vote for it.

    If all 54 Senate Republicans vote for the bill, supporters will need six Democrats to reach the 60 votes needed for approval.

    Heitkamp and other supporters of lifting the ban sought to gain Democratic votes by including a provision that would allow the president to halt exports if he deemed they were not in the interest of national security. Heitcamp said that mechanism was put into the legislation to respond to concerns about runaway gasoline prices.

    The White House said on Wednesday it does not support Senate efforts to reverse the ban even though Heitkamp's bill contains the provision.

    However, Heitkamp said she and others were talking with senior White House officials on a regular basis. She said she was confident President Barack Obama could support a balanced bill doing away with the ban if it included measures such as backing renewable energy like solar and wind power.

    Pulling that off could be difficult. Adding a measure to make tax breaks for renewables permanent could cause other senators in states heavily reliant on coal sales to back away from the bill.

    Heitkamp said it was premature to discuss what kinds of deals could be made to eventually pass the bill, but that some of the issues on the table could be "surprising."

    Oil producers say the domestic drilling boom will eventually be choked if the trade restriction, which Congress passed in 1975 after the Arab oil embargo, is not lifted.

    Opponents to lifting the ban say it could hurt employment in oil refining and shipbuilding and damage the environment.

    Attached Files
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    Concho Resources Inc. Announces Upsizing of Common Stock Offering

    Concho Resources Inc. today announced that it has priced an upsized public offering of 7,700,000 shares of its common stock for total gross proceeds (before underwriters’ fees and estimated expenses) of approximately $712 million.

    The underwriters have an option for 30 days to purchase up to an additional 1,155,000 shares of common stock from the Company. Proceeds from the offering are expected to be used to repay all outstanding borrowings under the Company’s credit facility, which were used in part to finance recent acquisitions, and for general corporate purposes, including funding potential future acquisitions.
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    Canada regulators green-light Enbridge crude Line 9

    Canadian regulators approved the hydrotest results of Enbridge Inc's Line 9 crude oil pipeline on Wednesday, clearing the way for the delayed 300,000 barrel-per-day route to the east of the country to start operating.

    The newly reversed Line 9 will ship mainly light inland crude from Sarnia, Ontario, to Montreal, Quebec. It previously flowed in the opposite direction, taking imported crude to Ontario.

    The line, originally expected to start up in late 2014, was held up after the National Energy Board ordered hydrostatic tests at three locations along the line in June.

    Prior to that, regulators had asked for additional data on shut-off valve placements at major water crossings. {ID:nL1N0VG160]

    The NEB said on Wednesday there were no further pre-operation requirements on Line 9.

    "The successful hydrotests confirm the NEB's confidence in the integrity of the pipeline and its confidence that the line can safely be returned to operation," the regulator said in a statement.

    The Line 9 approval is a rare bright spot for backers of Canadian pipeline projects, which include TransCanada Corp's Keystone XL and Enbridge's Northern Gateway.

    These projects have run into fierce environmental opposition, and last week Democratic U.S. presidential candidate Hillary Clinton said she opposed Keystone XL.

    The approval was welcomed by the Canadian Association of Petroleum Producers and Suncor Energy, which owns a refinery in Quebec and is one of Line 9's biggest customers.

    "We have long said the pipeline is critical in terms of improving access to inland crude and providing supply options to the Montreal refinery, which in turn enhances its competitiveness," said Suncor spokeswoman Sneh Seetal.

    Valero Energy Corp also has a refinery in Quebec and will likely benefit from being able to replace imported crude with cheaper inland barrels.

    Once the pipeline becomes operational the NEB has imposed conditions including biweekly patrols, quarterly integrity testing and an in-line inspection within the first year of operation.

    Enbridge is also required to limit the pressure of the pipeline for its first year of operation. It was not immediately clear whether pressure restrictions would affect the capacity of the pipeline and the company does not yet have an expected in-service date for the pipeline.

    "There are still some technical preparations that are required and line-fill is not an exactly timed process, so we will not speculate at this time on a specific date for return to full service," White said.
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    PBF Energy to buy Exxon Mobil's Torrance refinery

    PBF Energy Inc said it would buy Exxon Mobil Corp's refinery in Torrance, California and restore it to full working order before the deal closes in the second quarter of 2016.

    The $537.5 million purchase of the refinery and related logistics assets will help PBF Energy increase its throughput capacity to about 900,000 barrels per day, the refiner said in a statement.

    The 149,500 barrels-per-day refinery has been shut since a Feb. 18 explosion that destroyed equipment critical to controlling emissions from a gasoline-making fluid catalytic cracking unit.
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    Mexico's second oil tender - a success

    More on Mexico's second attempt to lure the world's energy companies to its oil fields.

    After a flop the first time round, when only two of the 14 blocks on offer were awarded, Mexico bounced back in its second oil auction, awarding three of the five blocks and netting juicy terms for the state.

    ENI of Italy won the first block; Argentina's Pan American Energy in consortium with E&P Hidrocarburos took the second; Fieldwood of the US in partnership with Petrobal of Mexico took the fourth. Two blocks failed to attract bids, writes Jude Webber in Mexico City.

    The five blocks, containing a total of nine fields, are located in the shallow waters of the Gulf of Mexico and reserves have already been discovered, reducing risk.

    The only block containing heavy oil attracted no bidders; the remainder have reserves of light oil and two fields in the first block also lie over salt structures which could be explored.

    Bids came in well above the minimum threshold set by the government.

    Norwegian major Statoil lost its bids. CNOOC of China bid on two fields and Lukoil of Russia had one offer, but all were outgunned.

    The consortium containing companies which swept the board in the first tender also missed out this time around.
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    Repsol sells part of piped gas business for 652 mln eur

    Spanish oil major Repsol on Wednesday said it had sold part of its piped gas business to Gas Natural Distribution and Redexis Gas for 652 million euros ($728 million), helping it reach its asset disposal target.

    The company said it had now surpassed its goal to sell $1 billion in non-strategic assets, a target it set itself after acquiring Canada's Talisman. It also sold its stake in fuel logistics firm CLH earlier this month.

    Redexis Gas is owned by Goldman Sachs' infrastructure fund.
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    Weekly US oil production

                                      Last Week        Week Before     Year Ago

    Domestic Production...... 9,096               9,136              8,837
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    Summary of Weekly Petroleum Data for the Week Ending September 25, 2015

    U.S. crude oil refinery inputs averaged 16.0 million barrels per day during the week ending September 25, 2015, 241,000 barrels per day less than the previous week’s average. Refineries operated at 89.8% of their operable capacity last week. Gasoline production increased last week, averaging about 9.7 million barrels per day. Distillate fuel production decreased slightly last week, averaging 5.0 million barrels per day.

    U.S. crude oil imports averaged about 7.6 million barrels per day last week, up by 378,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.3 million barrels per day, 1.7% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 990,000 barrels per day. Distillate fuel imports averaged 56,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.0 million barrels from the previous week. At 457.9 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 3.3 million barrels last week, and are near the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 0.3 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.7 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 3.7 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.5 million barrels per day, up by 1.5% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.1 million barrels per day, up by 4.2% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the last four weeks, up by 0.2% from the same period last year. Jet fuel product supplied is up 11.8% compared to the same four-week period last year.
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    Parex Resources announces agreement to develop Aguas Blancas light oil field, Colombia

    Parex Resources Inc., a company focused on oil exploration and production in Colombia is pleased to announce the execution of a formal binding agreement with Empresa Colombiana de Petroleos S.A. whereby Parex will farm-in to operate and earn a 50% working interest in the Aguas Blancas light oil field located in the Middle Magdalena Basin of Colombia.

    Aguas Blancas Oil Field

    The Aguas Blancas oil field is located in the Middle Magdalena Basin immediately south of the La Cira-Infantas oil field which has produced approximately 850 million barrels of oil to date. Aguas Blancas was discovered in 1962 and was initially appraised with five wells in the period between 1962 and 1964. No wells have since been drilled. Cumulative oil production from the field is approximately 1 million barrels of light oil (28-33 API). The main producing horizon is the Mugrosa 'C' Formation at depths of 4,000-7,000 feet. Gross reservoir interval thicknesses in the Mugrosa 'C' range from 300-500 feet with up to 150 feet of net oil pay.

    In 2011 a 3D seismic survey was acquired in anticipation of the field's development, however, no wells were drilled on it. The 3D survey indicates that the existing Aguas Blancas field is approximately 4,300 acres in aerial extent. Further, Parex believes that a satellite structure to the south of the main oil accumulation that has been tested by one well could be up to an additional 1,500 acres in aerial extent.

    Ecopetrol had previously stated that it intended to offer undeveloped oil fields to industry operators. Pursuant to this strategy, Ecopetrol offered companies the opportunity to acquire up to a 50% working interest in the Aguas Blancas field in a competitive bidding process. Parex' winning bid requires investment during the initial earning phase of approximately $61 million by undertaking delineation drilling and waterflood pilot programs at its sole cost to earn a 50% working interest in the field. Subsequently, all future capital investment will provide Ecopetrol a 10% carry whereby Parex will spend 60% and Ecopetrol 40%. Revenues and operating costs will be based on the parties' 50% working interest.

    The initial earning phase has a term of 3 years commencing after the transfers of the existing applicable operating and environmental permits have occurred, which is expected to be in place within 1 year. Parex has agreed to provide a performance bond to Ecopetrol for the full amount of its initial phase earning commitment of $61 million. Including the initial earning phase, the farm-in agreement has a term of 25 years and the agreement has a royalty regime that is consistent with the applicable Agencia Nacional de Hidrocarburos ('ANH') contracts.
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    Saudi increases propane and butane prices

    Saudi Aramco sets Oct propane, butane CPs at $360/mt, $365/mt respectively, up $45/mt, $20/mt on month, above market expectations

    Platts Oil
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    San Leon Hits Gas in Morocco amid Buyout Speculation

    San Leon Energy announced Wednesday that the Laayoune-4 well, located on the Tarfaya conventional license onshore Morocco, has discovered gas.

    The well, which encountered gas shows within its reservoir section, was drilled on time, within budget and with no incidents. Laayoune-4 has now been suspended, pending further studies, and to allow future re-entry. San Leon Energy and Office National des Hydrocarbures et des Mines (ONHYM) intend to jointly apply for a new eight year exploration license in the area. During the first period of the new license San Leon plans to acquire a 3D seismic survey across the multiple channels of the Tertiary play, one channel of which was drilled by the Laayoune-4 well. Based upon the results of the seismic, San Leon stated that it would consider “the option of re-entering the Laayoune-4 well (including testing), drilling an additional well, or both”.

    “We are very pleased with the results of the Laayoune-4 well. Confirming the presence of gas shows and good reservoir quality is encouraging for the potential of the block and leads naturally to applying for a new eight year license in the area, which would allow for seismic acquisition to be performed over the full channel complex. It would also enable additional data to be acquired over the deeper Jurassic and Triassic prospects. We are grateful to the operational team and to the local workers who together ensured that the well was drilled efficiently and safely.”

    The latest development follows an announcement by San Leon on August 24, 2015 that it had received a bid approach that could lead to an offer being made for the company. San Leon confirmed the approach in its half year results statement, also released Wednesday, but stated that it’s unknown what type of offer, if any, would be made:

    “There can be no certainty that an offer will be made or as to the terms on which any offer might be made. As a result, the board has decided not to make any forward-looking statements.”

    San Leon reported an operating loss of $4.89 million in the first half of 2015, compared to an operating loss of $7.04 million during the same period last year. The company announced on June 1, 2015 that it had conditionally agreed to raise $44.1 million from existing and new shareholders, which will be used to fund the firm’s development. This fundraising program was completed in July 2015. San Leon holds a 75 percent interest in the Tarfaya license with ONHYM holding 25 percent.

    - See more at:
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    OPEC Guide

    OPEC's next meeting is just ten weeks away and, barring some unforeseen development, there's little sign of a policy change in the offing.

    If anything, forecast declines in non-OPEC production may bolster Saudi Arabia's argument (assuming the kingdom doesn't have second thoughts) that the market share policy is working and must be allowed to continue to work.

    A couple of weeks before OPEC's November 2014 meeting that launched the battle for market share, the International Energy Agency said US production growth was showing few signs of abating.

    Falling prices might well trim investment in US light tight oil but any potential cuts would probably pale in comparison with gains in LTO productivity, it said at the time.

    Back then, the agency forecast demand for OPEC's crude to average 29.2 million b/d this year.

    Fast forward to the IEA's latest monthly report, released two weeks ago, and the picture is very different.

    Demand for OPEC crude is now expected to average 29.7 million b/d -- 500,000 b/d higher than the figure forecast last November.

    The increased forecast for the 2015 call on OPEC is due to the IEA's upwardly revised forecasts for world oil demand rather than to falling non-OPEC supply.

    In fact, the agency has also increased its non-OPEC supply projection for 2015 to 58.1 million b/d.

    But a clear trend showing a rising call on OPEC and a falling off in non-OPEC supply has begun to emerge in the forecasts for 2016, the first of which were published in July.

    World oil demand continues to grow in 2016, forecast at 95.2 million b/d in July and now at 95.8 million b/d in September.

    But non-OPEC supply, projected at 58 million b/d in June and revised down to 57.7 million b/d in September, is declining.

    And demand for OPEC crude continues to climb. In June, the IEA forecast the 216 call on OPEC at 30.3 million b/d.

    Two months on, the agency's revisions have taken the forecast up by 1 million b/d to 31.3 million b/d -- the volume Platts estimates OPEC to have pumped in August.

    But it is in the second half of next year where the numbers look startling, with the IEA forecasting demand for OPEC crude at 31.8 million b/d in the third quarter and 32.2 million b/d in the fourth, some 1 million b/d higher than OPEC's current flows.

    Good news for OPEC, it would seem, in terms of overall market share. But at what cost, especially to those members which, unlike Saudi Arabia and its Gulf allies, do not have the financial reserves to cushion the blow of low prices?
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    An oil dispute in Niger is exposing big problems with Chinese investment in Africa

    On August 14, a compressor failed at the Soraz oil refinery near Zinder, Niger, crippling one of the very few pieces of industrial infrastructure in one of the poorest countries in the world.

    The thing is, there may never have been a compressor blowout.

    According to multiple energy-industry sources who spoke with Business Insider, the shutdown of the Soraz refinery — which has driven up gas and cooking-oil prices throughout Niger and pushed parts of the country of 16 million to the edge of a serious fuel shortage — was a deliberate decision by the refinery’s state-owned Chinese operators and co-owners.

    “The compressor is just to tell people something, but there are many problems,” an energy-industry expert told Business Insider. “The real problems are behind the compressor.”

    The shutdown has been the subject of widespread speculation inside Niger. One headline on the news website TamTam Info framed the issue this way: “Halting Production at Soraz: The Chinese Want to Overthrow the Government.”

    That may be hyperbole, but the refinery shutdown is still the likely result of a deliberate Chinese strategy, one that Niger is struggling to counter.

    China conducts nearly $200 billion in annual trade with Africa. Its companies have dug over 200 oil wells in Niger since 2010, discovering a billion barrels of oil in the process. Chinese companies built the Soraz refinery and the domestic pipeline leading to it.

    “China put in the investment that all the French and the US companies didn’t,” one Niamey-based energy expert told Business Insider. “They did what Exxon didn’t do in 30 years.”

    But Chinese investment can have a price. The standoff over Soraz shows how unprepared even fairly stable and democratic African governments can be in dealing with China.

    And it reveals the consequences of Chinese state-owned companies trying to import its domineering way of doing business to far different political, economic, and social contexts.

    Soraz shut down amid tensions between Sonidep, the Nigerien state petroleum company, Soraz, and the China National Petroleum Corp. (CNPC).

    The refinery, which opened in 2011, is about 350 miles from the oil fields in the Diffa region in eastern Niger. Soraz is connected to the oil fields through a domestic pipeline that ends at the refinery. For internal Nigerien political reasons, the refinery was constructed in an area that’s far from the nearest export pipeline, which begins in neighboring Chad.

    The pipeline and refinery are set up in a way that makes it difficult to get Nigerien oil to the international market. The infrastructure, however, does at least ensure that Niger can achieve a degree of energy independence that most developing nations can only dream of.

    But a toxic dynamic has recently taken hold. For reasons even insiders can’t quite explain, Sonidep owes Soraz some 40 billion West African Francs, or roughly $68 million. Meanwhile, Soraz is nursing its own gaudy debt owed to the CNPC, perhaps as much as $100 million.

    The first debt is likely attributable to Nigerien government dysfunction. Niger experienced its latest military coup in 2010 and is in the midst of what has so far been a successful democratic transition, with open national elections scheduled for early next year. But government remains opaque and unaccountable, particularly on financial matters.

    The second debt — the one that Soraz owes to CNPC — is the partial result of financing arrangements on the refinery, which were being renegotiated as of 2014 and are widely considered to be favorable to Beijing.

    And it has exacerbated by a related problem: Under a 2012 agreement, Soraz must purchase oil at prices fixed in 2012 at about $70 a barrel. This means that in times of price spikes, Niger has some of the cheapest gas in West Africa.

    But when oil plunged to under $50 a barrel in mid-2015, the refinery, and the country at large, was placed at a huge disadvantage.
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    Petrobras Raises Gasoline and Diesel Prices Amid Cash Crunch

    Petroleo Brasileiro SA raised fuel prices for the first time in almost a year in a move that will help Brazil’s state-controlled producer offset the impact of lower oil prices and the decline of the local currency. Its bonds and shares rallied.

    Petrobras, as the Rio de Janeiro-based company is known, will raise the prices charged at its refineries by 6 percent for gasoline and 4 percent for diesel starting Wednesday, it said in a statement. The increase should add 6.9 billion reais ($1.7 billion) to annual earnings before interest, taxes, depreciation and amortization, or Ebitda, Bank of America analysts Frank McGann and Vicente Flanga said in a note to clients.

    “It should help to limit concerns that the effect of a weak currency on Petrobras’s cash-flow generation could go unchecked and cause further deterioration in an already weak financial situation,” McGann and Flanga said.

    The move comes after Chief Executive Officer Aldemir Bendine, who took over in February, vowed to limit government interference in company policies. The deep-water producer lost tens of billions of dollars from subsidizing fuel imports during the oil price boom from 2011 through 2014 as part of a wider effort by the government to control inflation. BBVA economist Enestor dos Santos raised his estimate for Brazil inflation in 2015 to 9.5 percent from 9.2 percent, citing the Petrobras fuel price increase.

    The last time Petrobras raised fuel prices was in November.
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    Petronet LNG breaks Qatar 'oil index' contract to gain from low spot prices

    Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar.

    The company is taking only 70% of the volumes it agreed to in 25-year contracts with the Persian Gulf state, potentially triggering a fine, finance director R.K. Garg said. It’s paying about $8 per million British thermal units of spot LNG, about 36% less than its fixed price with Qatar’s RasGas Co.

    “The major issue has always been price, and since spot prices are down we continue to have the advantage of the spot prices over long-term,” Garg said by phone, declining to say how much Petronet is saving buying more spot cargoes. The company is “trying to see what can be done about the penalty.”

    Petronet, which had agreed to take 7.5 million tonnes of LNG a year from RasGas, is among the first companies in Asia to break a long-term purchase deal as weaker demand, higher supply and oil’s slump push down spot prices. Elsewhere in the region, China is deferring Qatari cargoes, while Japanese and South Korean importers are renegotiating contracts.

    Petronet is running a significant risk. Purchasing less than 90% of contracted volumes from Qatar could result in a penalty of as much as Rs.9,000 crore, according to brokerage KR Choksey Shares and Securities Ltd. That’s equivalent to 10 years’ profit for Petronet.

    The New Delhi-based company is taking its chances as the battle for market share forces sellers to be more flexible. Should a fine be levied at the end of the year, Petronet may pass it on to its customers, potentially including its state-run owners that buy most of the fuel, Garg said.

    Attached Files
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    Midstream stocks slammed again

    Pipeline companies had a rough Monday on the stock markets, and things got worse on Tuesday.

    The Alerian MLP Index fund, which tracks 50 of the largest midstream master limited partnerships, has lost 11 percent so far this week and now trades at its lowest level since 2010, eliminating nearly a half-decade of gains related to the shale production boom and wiping billions in value from some of nation’s largest energy companies.

    The tax advantaged master limited partnership corporate structure has been popular among midstream companies and their investors, called unit-holders.

    But lower stock prices threaten the future growth potential of energy infrastructure businesses, said Rob Desai, an energy analyst at financial services firm Edward Jones. Many companies sell units to fund new pipelines and processing infrastructure, and cheaper stock means they’ll have to sell more shares and ultimately pay more in dividends later on.

    “It’s drastic,” Desai said. “It lowers return on the projects. The result is the shares are hit again.”

    Midstream companies, which transport and process oil and gas, weren’t hit as hard as other energy sectors when prices first fell, because they operate under long-term contracts that insulate them from swings in commodity prices.

    But traders who once viewed the oil glut that send prices down as a short-term problem now expect it to last years.

    They’re starting to exit pipeline investments on fears that declining production will cut into the need for new pipes and processing plants.
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    Origin Energy to Sell A$2.5 Billion in Shares to Reduce Debt

    Origin Energy Ltd. will sell A$2.5 billion ($1.8 billion) in shares at a 34 percent discount as part of an effort to improve its balance sheet and maintain its investment-grade rating after a plunge in oil prices.

    Origin, preparing to start its A$24.7 billion gas-export project with ConocoPhillips on Australia’s east coast, also plans to sell as much as A$800 million in assets, reduce its dividend and cut spending, the Sydney-based utility said Wednesday. Origin expects the measures to lower net debt to below A$9 billion.

    “It’s important to take action to deal with what is the fundamental issue, which is a high level of debt in Origin that’s unsustainable in the current environment,” Managing Director Grant King told analysts on a conference call. “We must reduce debt now.”

    The debt-reduction plan comes amid a tumble in commodity prices that has punished producers. Oil’s decline of about 50 percent over the past year is cutting revenue for liquefied natural gas projects whose contracts with Asian buyers are linked to the price of crude. Origin said last month that the price slide may significantly reduce the contribution from its LNG project.

    Origin plans to reduce spending by A$1 billion across the financial years ending in June 2016 and June 2017 as part of a A$2.2 billion program to preserve cash, it said.

    Assets potentially for sale include its interests in the Cooper and Perth basins of Australia, investments in wind power and infrastructure such as pipelines, Origin said.

    The company plans to sell the shares to investors on a 4 for 7 basis at A$4 a piece, a 34 percent discount to its closing price of A$6.10 on Tuesday, the company said. The stock has fallen 59 percent in the past 12 months.

    The Australia Pacific LNG project is expected to deliver its first cargo in November, according to the statement. The plant will follow two other export developments on the Queensland coast operated separately by BG Group Plc and Santos Ltd.
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    Chesapeake Energy is aggressively eliminating jobs

    The energy exploration company said on Tuesday that it plans to slash about 15% of its workforce, or 740 employees. Most of the job cuts will take place in Oklahoma City, where Chesapeake (CHK)is based.

    Chesapeake specifically cited current oil and natural gas prices as the reason for the cuts.

    "We must remain focused on building an enduring, resilient and profitable enterprise -- one that can flourish in any commodity price environment," said Doug Lawler, Chesapeake's CEO, in a memo to employees.

    The cost-cutting moves will cause Chesapeake to take a one-time charge of about $55.5 million in the third quarter related to employer payroll taxes.

    While it's been great for most American drivers on the road, the energy industry has been slammed by the crash in oil prices. Crude oil prices have fallen from over $100 a barrel in June 2014 to just $45 today. Chesapeake's shares have plunged 71% over the past year.
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    Energy XXI Reports Fiscal Year-End Results

    Energy XXI  today announced fiscal fourth-quarter and full-year financial and operating results for the period ended June 30, 2015, and provided an operations update. Highlights include:

    Production remaining stable into fiscal first quarter at 58,300 BOE/d
    Current liquidity is $679 million

    $124 million available on $500 million revolver

    Proved reserves estimated at 183.5 MMBOE, 75 percent oil
    Non-cash impairment causes ceiling test write-down due to commodity prices
    Acquisitions and divestitures in fiscal fourth-quarter and to-date

    Monetized Grand Isle Gathering System
    Sold East Bay field
    Acquired producing Gulf of Mexico assets from M21K, LLC

    Cost control efforts driving per barrel equivalent costs lower

    LOE down 30 percent from fiscal 4Q2014 to 4Q2015
    G&A down 36 percent from fiscal 4Q2014 to 4Q2015

    Principal and cash interest expense reduction through open market bond purchases

    "As an organization, we responded aggressively to the challenging commodity price environment in fiscal 2015. We focused on our low risk assets, including horizontal drilling and recompletions, which allowed us to maintain production and arrest base declines," Energy XXI Chairman, President and Chief Executive Officer John Schiller said. "Our operations team is doing an excellent job of reducing costs in the field and delivering development opportunities that offer attractive yields in today's commodity price environment and we continue to practice capital discipline across our operations. We are actively managing our balance sheet and our liquidity. We continue to focus on reducing our debt and to date we have retired over $425 million in face value of debt lowering our projected annual interest expense by over $32 million."

    For the 2015 fiscal fourth quarter, adjusted EBITDA was $121.8 million on revenues of $219.5 million, as volumes averaged 59,300 barrels of oil equivalent per day (BOE/d), 71 percent of which was oil. These results compare with 2014 fiscal fourth-quarter adjusted EBITDA of $184.1 million on revenues of $301.3 million and volumes of 46,100 BOE/d, 69 percent oil. Net loss attributable to common shareholders in the 2015 fiscal fourth quarter totaled ($1.7) billion, or ($17.92) per diluted share, compared with fiscal 2014 fourth-quarter net loss attributable to common shareholders of ($18.3) million, or ($0.24) per diluted share.

    For the full fiscal year ended June 30, 2015, adjusted EBITDA was $760.5 million, compared with $729.7 million generated in fiscal 2014. Fiscal 2015 net loss attributable to common shareholders was ($2.4) billion, or ($25.97) per diluted share, on revenues of $1.4 billion and production of 58,900 BOE/d. These results compare with net income available for common shareholders for fiscal 2014 of $6.6 million, or $0.09 per diluted share, on revenues of $1.2 billion and production of 45,000 BOE/d.

    Results for the fiscal fourth-quarter and fiscal year-end 2015 were significantly impacted by non-cash ceiling test write-downs of oil and gas properties, driven by lower commodity prices.
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    Utica shale bulks up: Dividend cuts at majors.

    Call it the Golden Triangle of natural gas. The region where southwestern Pennsylvania, southeastern Ohio and northern West Virginia mash up near the Ohio River is turning out to be the natural gas version of Fort Knox. Monster dry gas wells seem to be fulfilling the promise of geologists who claim Utica Shale production might end up being bigger than its Marcellus cousin.

    That’s saying something, because the Marcellus already produces more than 17 billion cubic feet per day (Bcf/d) and is the largest producing gas field in the world.

    As a result, traditional Appalachian pipeline flows are changing for the first time since the 1940s, with gas and NGLs now set to flow south to the Gulf Coast, east to New Jersey and Maryland LNG export points, and west via the reversed Rockies Express Pipeline to Midwest markets.

    Bernstein Research forecasts that by 2018, the Marcellus and Utica combined will produce 23 Bcf/d or a third of all U.S. gas production. About 3.7 Bcf/d of new and expanded pipeline capacity comes on line this year and another 6 Bcf/d comes on line in 2016.

    All you need to know:

    Attached Files
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    Russia oil output could fall 5-10 pct if prices low for years: Deputy PM

    Russian oil production could fall by up to 10 percent if world prices stay consistently low for a long period, Russian Deputy Prime Minister Arkady Dvorkovich told the Reuters Russian Investment Summit on Tuesday.

    But he said it was unlikely that prices would drop below their current level, of around $48 per barrel, for a sustained period because it was not in the interests of most oil producers to endure low prices for more than two years.

    "We calculate the budget based on a price of $50 a barrel," Dvorkovich said at the summit, held in the Reuters office in Moscow.

    "If prices remain at a low level for a very long time, then a reduction in production of 5-10 percent is entirely possible, that is if the prices stay at a low level for several years," he said.

    He said the government would not take artificial steps to reduce output, but that a reduction would be the natural consequence of low prices for oil companies' investment plans.

    Despite a sharp fall in prices, Russia has refused to cut production. It has instead maintained and even increased crude output, putting up with low prices in the hope it can increase its own share in the world oil market at the expense of others who cut back their output.

    Asked about the prospect of a further fall in oil prices, Dvorkovich said: "Low prices for an extended time are not in the interests of the majority of producing countries, therefore that scenario is unlikely."

    "We understand that some people can wait under low prices - some for one year, others for two, but we don't see countries that want to live with low prices for more than two years."

    He said Saudi Arabia, the world's biggest oil producer, could technically afford to endure low prices for longer, but that even it would have to cut back investment in new production, threatening its position as market leader in the long term.

    Even if Saudi Arabia held out, in the meantime other countries would be forced to cut production, Dvorkovich said, pushing prices back up again before Russia reached the point where it too would have to cut.
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    Iranian condensate exports at 2015 high as China resumes buying -sources

    Iran's condensate exports in September hit the highest monthly total so far this year, after its top client China resumed buying of the ultra-light crude for the first time in six months, two sources familiar with the matter said on Tuesday.

    The sales come as Chinese President Xi Jinping told his Iranian counterpart Hassan Rouhani on the sidelines of the United Nations this week that he wanted to prioritise its energy and financial cooperation with Tehran ahead of a potential lifting of sanctions.

    Iran has had to store tens of millions of barrels of oil, mostly condensate from its South Pars gas fields, onboard ships due to a drop in China's demand over the summer and an outage at a major plant.

    "Unlike crude oil that could be cut back, Iran has had to keep South Pars pumping to supply its local gas market," said one of the sources with direct knowledge of supplies to China.

    The source said that China's Unipec, the trading arm of Asia's largest refiner, Sinopec , imported about one million barrels of Iranian condensate in September, with the same monthly amount due to be shipped through to March.

    A Sinopec spokesman declined to comment, citing business confidentiality.

    Iranian condensate exports in September were around 210,000 barrels per day (bpd), topping 200,000 bpd for the first time this year after China resumed imports, a second source with knowledge of the data said.

    Other buyers included Japan, South Korea, the United Arab Emirates and Poland, said the source.

    Iran has the capacity to export about 500,000 bpd of condensate, but buyers took about 180,000 bpd on average in the first nine months this year, according to the sources.

    Sanctions on Iranian oil exports are expected to ease only next year as Tehran has to first comply with terms set out in a July agreement with world powers on its nuclear program, but the fight for market share in Asia among OPEC producers has already intensified.

    Attached Files
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    Platts: October spot LNG prices to Asia drop

    Prices of spot liquefied natural gas for October delivery to Asia averaged $7.538 per million British thermal units, according to latest Platts Japan/Korea Marker data for month-ahead delivery.

    The figure reflects the daily JKM assessed between August 17 and September 15, expressed as a monthly average.

    The marker, which fell 5.9% month over month, started the assessment period at $7.95/MMBtu, but weakened over the course of the month to be assessed at $7.00/MMBtu on September 15, as supply concerns from the previous month eased following multiple sell tenders from projects in the Asia Pacific region.

    Although the market was moving into the traditional peak winter season, demand among northeast Asian buyers remained weak owing to high inventories in tank and moderate temperatures. Demand among portfolio sellers and traders, who had previously provided some support to prices, was also lackluster, as most short positions had now been covered. Arbitrage opportunities between the two basins had also narrowed on tighter spreads between the Platts JKM and U.K. onshore National Balancing Point gas prices.

    “High inventories continued to result in weak demand from South Korea, Japan, and Taiwan,” saidStephanie Wilson, managing editor of Asia LNG at Platts. “In Japan, Kyushu Electric was unable to take delivery of a cargo due to high inventories, while in Taiwan, CPC, the only North Asian buyer to have shown sustained demand for additional LNG in 2015, was recently heard to be looking to defer contractual volumes due to high stocks.

    Furthermore, Chinese downstream demand is also weak, with state-owned LNG buyer CNOOC issuing a supply tender, the first sell tender from a traditional northeast Asian LNG consumer, said Wilson.“Demand is looking uncharacteristically soft leading up to winter,” Wilson said.

    On the supply side, there were numerous sell tenders from the majority of Asia Pacific projects, as sellers found it difficult to market extra volumes. Tenders from Australia, Indonesia, Papua New Guinea, and Russia were issued during the month.

    This is the eighth consecutive month that Platts JKM prices have been range bound between $7-8/MMBtu since declining from the $9-10/MMBtu level seen over January and February delivery.

    Meanwhile, the price of possible competing fuel thermal coal also decreased 21.1% year over year, while fuel oil was also down 60.0% from the same month in 2014.

    Attached Files
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    Morgan Stanley Has Given Up on Energy Stocks

    Toward the beginning of 2015, with crude oil prices in free fall, Morgan Stanley's equity strategy team made a bold call, upgrading the energy sector to overweight.

    But there's been no reprieve for those stocks this year, with the S&P 500 energy sector index losing nearly one-quarter of its value year-to-date:

    Now, in a display of candor that's rare on Wall Street, chief U.S. equity strategist Adam Parker is waving the white flag.

    "We made a really bad call by going overweight energy at the beginning of this year," he wrote.

    Morgan Stanley downgraded the sector to market weight, indicating the supply glut in oil may not improve for another year, at a minimum, and that investors will likely find a better entry point in six to nine months.

    In rationalizing the downgrade, Parker adapted a phrase often attributed to John Maynard Kenyes: "When the facts change, I change my mind. What do you do, sir?"

    There's been new information "… since the original upgrade and our judgment is, why hold a losing bet when we have new information?" wrote Parker, noting that the full effects of the shale revolution are now being crystallized. "Companies can make the same margins at $60 oil today as they could at $90 oil a couple of years ago."

    The strategist recounted how his dream scenario in energy turned into a nightmare:

    Our original thesis when we went overweight the energy sector at the beginning of the year was that they were cyclical stocks that were down a lot, you had to be anticipatory and the valuation was compelling. We thought the falling rig count would be a catalyst to spark a dream of higher oil. Well, we now think rig counts aren’t the way to think about it. It is production, and production isn’t down really at all in the US. While the sector rallied in February and March in anticipation of achievable estimates in April, the sector has lagged massively since because of stronger than expected supply. The valuation argument only works with a dream of a much higher oil price in the future, and that dream has been a bit of a nightmare.

    A scary thought for the remaining oil bulls: Parker posits that oil is perhaps much more like natural gas than is currently acknowledged, implying that meaningful upside from current levels might not be on the horizon. The futures curve for West Texas Intermediate is sending a similar signal, with contracts through 2023 priced below $60 per barrel.

    But in the same breath as he lowered his rating of the sector, Parker expressed concern that he's making this call at exactly the wrong moment.

    Attached Files
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    Icahn raises stake in Cheniere Energy to 11.43 pct

    Activist investor Carl Icahn raised his stake in liquefied natural gas company Cheniere Energy Inc to 11.43 percent, according to a regulatory filing on Monday.

    Icahn raised his stake to 9.6 percent on Sept. 14.

    The biggest investor in the company as of Sept. 14, Icahn now owns 27 million shares of the Houston-based company. 

    Cheniere appointed Icahn Enterprises directors Jonathan Christodoro and Samuel Merksamer to its board last month, weeks after Icahn disclosed his stake in the company.

    Attached Files
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    So far, less pain than feared as U.S. shale firms renew loans

    A number of U.S. shale oil and gas companies are securing unchanged or even increased credit allotments during their semi-annual loan reviews, defying expectations that banks would slash small firms' credit lines in response to low crude prices.

    According to a Reuters review of disclosures made by 19 independent U.S. shale oil and gas companies since Aug. 1, at least 11 have said their borrowing bases have been or will be maintained or increased. In contrast, just five talked about cuts.

    It is too early to tell if the whole sector will emerge equally largely unscathed from the reviews. Many more companies from a batch of about 60 U.S. independents typically tracked by investment banks will probably make disclosures after the usual loan reset deadline of Oct. 1.

    But outcomes so far suggest an expected pullback by banks may be far less severe than many in the industry have feared.

    "I've seen some companies maintaining borrowing bases and some companies even increasing borrowing bases, though other companies are cutting," one energy lawyer in Houston said. "It really is on a case-by-case basis."

    The Office of the Comptroller of the Currency has voiced concern about banks' exposure to oil's nearly 60 percent slide given crude prices serve to determine the value of borrowers' assets.

    A survey of a broad range of 182 energy industry professionals this month by the law firm Haynes & Boone showed they expected borrowing bases linked to valuations of oil and gas reserves to fall on average by 39 percent.

    However, a quarterly survey of 40 energy lenders by the advisory firm Macquarie Tristone showed the average oil price they use to size their loans has edged down only about 5 percent in the last six months, suggesting just a modest pullback in lending.

    Bankers also expect crude prices to recover from six-year lows in the months ahead. They see the U.S. benchmark price averaging at $48 per barrel this year and $54 next year and climbing above $61 in 2018 from around $45 now.

    A combination of bank lending and private equity financing has allowed many U.S. companies to keep producing crude and adding to a global glut even after funding in public capital markets began drying out in June.

    "Many firms were able to hedge in June, so that allowed them to be better positioned coming into redeterminations," said an energy banker in Dallas. "Price decks have largely been maintained ... and most banks are fairly optimistic."

    Banks, anticipating an oil market recovery, have also trimmed their price estimates used to size loans, so-called price decks, much less than the drop in crude would suggest.

    Finally, by driving down costs companies have helped keep chunks of their reserves, used as collateral for credit, economically recoverable.

    Some, such as Gulfport Energy Corp, which operates in Ohio and Louisiana, have also acquired new oil fields during the downturn. Back in February, Gulfport reported its proved reserves had tripled from the previous year and earlier this month the company said The Bank of Nova Scotia had increased its borrowing base to $700 million from $575 million.

    Others, such Gastar Exploration Ltd., which operates in Oklahoma, West Virginia and East Texas, credited their hedging for keeping lending bases steady.

    Even with cuts, many firms appear to have some financial leeway. Bank of America Merrill Lynch Global Research said this month only a fifth of the 59 oil companies it tracks have used more than half of their borrowing bases.

    Private equity funds are also there to plug financing gaps, albeit at a steeper cost than typical loan rates of around 8.5 percent.

    "There's a very robust private capital market," said J.P. Hanson, managing director at New York-based investment bank Houlihan Lokey. "For at least a few companies that need a lifeline, there is capital available."
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    Russia Reconsiders Tax Proposals to Ease Oil Producer Fears

    Russia will weigh lowering oil-export duties at a slower rate than planned instead of raising an extraction tax as the government seeks to plug its budget deficit without hurting the prospects for the country’s biggest crude producers.

    “The government is considering the variant where the export duty is reduced more slowly,” Natalya Timakova, a spokeswoman for Prime Minister Dmitry Medvedev, told reporters on Monday at his residence outside Moscow. Medvedev decided that Russia won’t make changes to an oil-extraction tax, she said.

    Finance Ministry plans to raise more than 600 billion rubles ($9.1 billion) of additional tax revenue next year prompted concerns that a higher extraction levy would curb Russian oil production. The collapse in crude prices sees Russia facing its widest budget gap this year since 2010, forcing the government to choose between deeper austerity, tax increases and a freeze on pension-fund contributions as the nation experiences its first recession in six years.

    The government had originally planned to lower the export duty on oil to 36 percent next year from 42 percent, Economy MinisterAlexei Ulyukayev told reporters. Each percentage point decrease is worth about 37 billion rubles to Russian producers, he said, citing the companies’ accounting.

    “In essence, the proposal is not to do this decrease in full,” according to Ulyukayev, who said Russia is also considering other sources of budget revenue, including export duties on natural gas and central bank earnings. “We have sources that aren’t linked to actions in energy, including, for example, central bank profits.”
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    Sanchez Energy Enhances Liquidity With $345 Million Midstream Asset Sale

    Sanchez Energy Corporation today announced that it has executed an agreement with Sanchez Production Partners LP pursuant to which the Company will divest, and SPP will acquire and operate, certain pipeline, gathering and compression assets located on the Western part of its Catarina asset in the Eagle Ford Shale in South Texas, for cash consideration of approximately $345 million, subject to normal and customary closing and post-closing adjustments. The transaction is expected to close in October 2015.

    Proceeds from the Western Catarina Midstream Divestiture further enhance Sanchez Energy's strong liquidity position, which is expected to enable the Company to pursue growth opportunities through opportunistic asset acquisitions, the acceleration of cost-efficient drilling and completion activities, and the strategic leasing of additional acreage in its core areas of operations. Sanchez Energy previously reported that it maintained liquidity of $572 million as of June 30, 2015, which included $300 million in available capacity on the Company's undrawn bank credit facility. As a result of the sale of midstream assets, pro forma liquidity will increase to approximately $918 million, inclusive of cash on hand and the $300 million elected commitment under its undrawn revolving credit facility.
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    Freeport-McMoRan Announces Positive Drilling Results at the Horn Mountain Deep Project

    Freeport-McMoRan Inc. announced today positive drilling results from the Freeport-McMoRan Oil & Gas 100-percent-owned Horn Mountain Deep well in the Deepwater Gulf of Mexico . Initial production from this well, which will be tied back to existing facilities, is expected in first half 2017. This well, combined with two follow on development wells at Horn Mountain Deep, may be capable of producing an aggregate of 30,000 barrels of oil equivalents per day (BOE/d).

    During September 2015, the Horn Mountain Deep well was drilled to a total depth of approximately 16,925 feet. Logging while drilling logs indicated that the well encountered a total of approximately 142 net feet of Middle Miocene oil pay with excellent reservoir characteristics. In addition, these results indicate the presence of sand sections deeper than known pay sections in the field. The 100-percent-owned Horn Mountain production facilities in FM O&G’s Mississippi Canyon area are capable of processing 75 MBbls of oil per day. The positive results at Horn Mountain Deep and our geophysical data support the existence of prolific Middle Miocene reservoir potential for several additional opportunities in the area, including the 100-percent-owned Sugar, Rose, Fiesta, Platinum and Peach prospects. FM O&G controls rights to over 55,000 acres associated with these prospects.

    Since commencing development activities in 2014 at its three 100-percent-owned production platforms in the Deepwater GOM, FM O&G has drilled 12 wells, all with positive results. Three of these wells have been brought on production, and FM O&G plans to complete and place the remaining additional wells on production in late 2015, 2016 and 2017.

    The success at Horn Mountain Deep follows the positive drilling results announced in July 2015 from three wells drilled in the Horn Mountain area, including the Quebec/Victory (QV), Kilo/Oscar (KO) and Horn Mountain Updip tieback prospects. In aggregate, these wells may be capable of producing over 27,000 BOE/d, with initial production expected in mid-year 2016.
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    Halliburton, Baker Hughes plan more divestitures for deal approval

    Oil services provider Halliburton Co and Baker Hughes Inc will sell additionalbusinesses in connection with Halliburton's pending acquisition of its smaller rival, the companies said in a joint statement.

    Halliburton's proposed acquisition of Baker Hughes ran into regulatory hurdles with the U.S. antitrust enforcers who believe the $35 billion merger will lead to higher prices and less innovation.

    Halliburton said in April that it would sell three of its drilling businesses and on Monday said it had received proposals from multiple interested parties for each business.

    Halliburton also said it would additionally divest its expandable liner hangers business, while Baker Hughes will divest three businesses.

    Baker Hughes will divest its core completions business, its sand control business in the Gulf of Mexico and its offshore cementing businesses in Australia, Brazil, the Gulf of Mexico, Norway and the United Kingdom.

    The companies also said they have agreed with the U.S. Department of Justice to further extend by three weeks the earliest closing date of the department's review.

    Now, the review will, at the earliest, close on the later of Dec. 15 - from the current date of Nov. 25 - or 30 days after the date on which the two companies fully comply with the DOJ's second request.
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    With cash from Russian sales, Gunvor readies European expansion

    Gunvor is close to buying its third refinery in Europe, reinvesting money from asset sales in Russia, in a major turnaround for the Swiss trading house since its deep links with Moscow nearly brought it to a collapse only 18 months ago.

    Industry and banking sources told Reuters on Monday Gunvor had entered into exclusive talks with Kuwait Petroleum Corp (KPC) to buy its Dutch refinery in Rotterdam adding to its refining portfolio in Germany and Belgium.

    The quick overhaul at Gunvor, led by Chief Executive Torbjorn Tornqvist, has surprised many rivals and market watchers many of whom had predicted tough times for the company after its co-founder, Russian businessman Gennady Timchenko, was put on a U.S. sanctions list.

    In March 2014, the United States slapped sanctions on Timchenko and other allies of President Vladimir Putin following Russia's annexation of Crimea. The U.S. Treasury said it believed Putin had investments in Gunvor and may have access to its funds although it never elaborated.

    The move plunged Gunvor into brief turmoil even though it said Timchenko had sold out his 50 percent stake in the firm a day before sanctions were imposed.

    "It was a question of the firm's survival," one insider said, as some banks and peer trading houses had briefly stopped dealing with the firm.

    Tornqvist, a Swedish oil trader who started his career at BP , said at the time it was the most challenging moment in Gunvor's history.

    The situation improved after U.S. officials said they did not want sanctions on Timchenko to affect Gunvor. Most counterparties quickly resumed dealings with Gunvor which trades oil, refined products, gas and metals across 100 countries.
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    The Saudi Royal Letter demanding change, and $70bn withdrawn.


    A senior Saudi prince has launched an unprecedented call for change in the country’s leadership, as it faces its biggest challenge in years in the form of war, plummeting oil prices and criticism of its management of Mecca, scene of last week’s hajj tragedy.

    The prince, one of the grandsons of the state’s founder, Abdulaziz Ibn Saud, has told the Guardian that there is disquiet among the royal family – and among the wider public – at the leadership of King Salman, who acceded the throne in January.

    The prince, who is not named for security reasons, wrote two letters earlier this month calling for the king to be removed.

    “The king is not in a stable condition and in reality the son of the king [Mohammed bin Salman] is ruling the kingdom,” the prince said. “So four or possibly five of my uncles will meet soon to discuss the letters. They are making a plan with a lot of nephews and that will open the door. A lot of the second generation is very anxious.”

    “The public are also pushing this very hard, all kinds of people, tribal leaders,” the prince added. “They say you have to do this or the country will go to disaster.”Image title

    Saudi Arabia has withdrawn as much as $70 billion from global asset managers as low oil prices continue to put financial pressure on OPEC’s largest producer, according to financial services market intelligence company Insight Discovery. Saudi Arabia is likely to post a deficit of 19.5% of GDP this year amid low oil prices due to a global glut,according to information from the International Monetary Fund.

    Critical Section of this letter:

    'And how we like the massive bleeding of state funds, including more than double spending
    In the past years?

    The first Scottna is the one who allowed the accumulation of risk, and we have to move aggressively on this move have on the level of
    Decision-making and finding a real solution impotent King Salman to the problem that exploits and his young teenager. We will not stop
    The financial bleeding and adolescence political and military risks, but a mechanism to change the decision even if need be to change the King

    Then we have to recall that our people has become a high degree of awareness has available to him the tools that can be pursued
    Where the situation, it is folly and audacity to behave as if in the judgment was absent ignorant people unable to follow up
    Juvenile Affairs. Therefore we do not want to fool citizens have a responsibility to disregard them, and do not want to bear
    The responsibility of political and media act without evoke developments and means of communication and information as well as activities
    Opponents who monitor the efficiency of what we are trying to hide or mislead people about him.'

    Named Saudi princes who have 'great competence':
    /continues for several pages, and is signed:

    Your son Savior
    One of the descendants of the founder King Abdul Aziz bin Abdul Rahman Al-Faisal Al-Saud

    Attached Files
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    Eni finds more gas in Guendalina field

    Eni has found gas at a sidetrack well in its Guendalina gas field in the Adriatic Sea, offshore Italy.

    A partner in the field with 20% working interest, Rockhopper Exploration plc announced on Monday that the sidetrack well reached its target depth (TD) at 3,276m measured depth on schedule and budget.

    According to Rockhopper, wireline logging has confirmed that all the target levels are gas bearing and have been encountered slightly higher to prognosis in an up-dip position with good reservoir characteristics and with an additional deeper gas level. The well is now being completed as a producer with gas production expected to start in late October at which time a further announcement will be issued, the company said.

    Sam Moody, Chief Executive Officer, commented: “This is positive news for Guendalina, and we look forward to increasing production from the field later in the year, which will enhance our already strong cash position.”
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    U.S. Oil-Rig Count Falls to 640

    The U.S. oil-rig count fell by four to 640 in the latest reporting week, extending a recent streak of declines, according to Baker HughesInc.

    The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year.

    After a six-week streak of modest growth, the rig count has now declined for four consecutive weeks.

    Crude oil prices rose 1% to $45.38.

    There are now about 60% fewer rigs working since a peak of 1,609 last October.

    According to Baker Hughes, the number of gas rigs fell by 1 to 197.

    The U.S. offshore rig count was 33 in the latest week, up two from last week but down 29 from a year ago.

    For all rigs, including natural gas, the week’s total was down four to 838.
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    The $12 Billion Reason BP Isn't Worried About a Hostile Takeover

    Oil giant BP Plc, which was said to be readying defenses for potential takeover offers, has a little-known ace in the hole: a disclaimer in its Macondo spill settlement that could tack $12.6 billion onto the price tag.

    A potential buyer might be forced to accelerate the payment of up to two thirds of the $18.7 billion in penalties the company agreed to pay the U.S. and several states, according to company filings. As it stands, BP has more than 15 years.

    An option that gives the federal government and some states the ability to demand faster payment in a takeover effectively hands them a veto power over any deal. Together with the company’s exposure to Russia amid sanctions and the worst oil crash in decades, it amounts to a powerful deterrent to suitors, said William Arnold, a former banker and executive at Royal Dutch Shell Plc.

    “This would be an important factor for those looking at possible opportunities” in many of the deal-focused war rooms that form in oil and gas down cycles, said Arnold, who teaches at Rice University in Houston. “To have to make such substantial upfront payments at a time when cash flows are down so much would make an attempt a lot more difficult.”

    - See more at:
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    Shell Halts Alaska Oil Drilling After Disappointing Well Result

    Royal Dutch Shell Plc will stop exploring for oil and gas offshore Alaska after abandoning a well, citing high costs and “challenging” regulation.

    “This decision reflects both the Burger J well result, the high costs associated with the project, and the challenging and unpredictable federal regulatory environment in offshore Alaska,” the company said.

    Shell will abandon the Burger J well after indications of oil and gas weren’t sufficient to warrant further exploration, the company said in a statement on Monday.
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    Ukraine to pay around $230/tcm for gas in Q4 - Russian energy minister

    Ukraine will pay a price for Russian gas of around $230 per thousand cubic metres in the fourth quarter, including a discount, Russia's Energy Minister Alexander Novak said on Saturday, Russian news agencies reported.

    Russia cut off its gas supplies to Ukraine in July when an existing contract expired. Ukraine had refused to keep paying the price of $247 per thousand cubic metres that it had paid in the second quarter.

    The two countries have been haggling since then over the price that would be embodied in a new agreement to secure winter gas supplies.

    "In the region of $230 dollars plus or minus," Novak said when asked about the price of gas for the fourth quarter, according to comments cited by RIA news agency.

    Novak added that the exact price would depend on a formula that takes the caloric value of the gas into account.

    He was speaking after the conclusion of gas talks between Russia, Ukraine and the European Commission which led to a tentative agreement that has not yet been signed.

    A price of $230 per thousand cubic metres would be slightly more than the $220 that Ukraine has described as acceptable, but below the $235-$242 that Russia has said is the average for its long-term European customers in 2015.

    European energy chief Maros Sefcovic said after the talks that the price would be "at a competitive level comparable to the prices offered to the neighbouring EU countries."

    The provisional agreement also involves supplying 2 billion cubic metres of gas in October. Ukraine's Naftogaz will pay Russia's Gazprom $500 million for those supplies, with the money supplied by European and international financial institutions.

    Commenting on the agreement on Saturday, Gazprom chief Alexei Miller said that there was no guarantee Ukraine would be able to pay for further supplies in November and December.

    "Today we are establishing that Ukraine has received money - this $500 million, and will begin to take Russian gas from the start of October," Miller said, in remarks to Russia 24 television channel cited by RIA.

    "But 2 billion cubic metres doesn't solve the problem... Therefore if this winter is unusually cold, one could still expect problems."
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    Oil exports from northern Iraq to Turkey restart - Kurdish ministry

    Oil exports from northern Iraq have restarted after "thieves" sabotaged the main pipeline to Turkey, the Kurdistan region's ministry of natural resources said in a statement on Saturday.

    The flow of crude resumed on Friday following an outage of around 9 hours, the ministry said in the statement.

    The pipeline, which pumps oil to the Mediterranean port of Ceyhan from fields in Iraq's autonomous Kurdistan region and Kirkuk, has been repeatedly targeted inside Turkey since a ceasefire between Ankara and Kurdish militants broke down in late July.

    Exports from northern Iraq fell to an average of 472,832 barrels per day (bpd) in August from 516,745 the previous month as a result of damage to the pipeline, which is the region's main economic lifeline.

    "Without such revenue, salaries of peshmerga forces, the security forces and other key government workers cannot get paid," the ministry said in a statement. "These treacherous acts of theft and sabotage harm the ability of Kurds across the region to fight Islamic State terrorism."
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    Stone Energy Corporation shuts-in Appalachia gas field

    On September 1, 2015, Stone shut-in its Mary field in Appalachia curtailing approximately 100-110 Mmcfe of production per day, leaving approximately 25 Mmcfe per day producing from the Heather and Buddy fields in Appalachia. Low commodity pricing, including negative differentials in the region, combined with fees for transportation, processing and gathering, reduced the operating margins to an unacceptable level.

    As a result, despite being above production guidance for the first two months of the third quarter, production for the quarter is now expected to be below the previously stated guidance range of 39-41 Mboe per day, or 234-246 Mmcfe per day, and is being revised to 37.5-38.5 Mboe per day, or 225-231 Mmcfe per day.

    If the Mary field remains shut-in, the annual guidance of 42-44 Mboe per day, or 252-264 Mmcfe per day, will need to be adjusted to account for these curtailed volumes. Given the low margins in Appalachia, the cash flow impact from the curtailed volumes is not expected to be material for the third quarter. Higher margin Gulf of Mexico volumes experienced minimal downtime in the third quarter.
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    Fighting New England's natural-gas pipeline battle

    Though they live only a few hundred miles from North America's largest and most productive shale gas field, New Englanders still pay the highest energy costs in the continental U.S.  

    Any explanation for why this densely populated region is still waiting for access to the Marcellus gas play starts with a grass-roots anti-pipeline sentiment, though it's more complicated than that. What isn't hard to understand is that it's costing New Englanders lots of money.

    For example, according to Intercontinental Exchange Group Inc., Boston's wholesale gas price averaged $24.09 per million BTUs in January and February, compared with just $10.79 per million BTUs in Chicago and $3.37 in Pennsylvania.

    In the previous winter, customers saw their monthly electric bills, already double the national average, rise a whopping 37 percent over the year before.

    The hike came as a particularly cruel blow to homeowners who, caught in an equally tight oil market at the time, had to pay as much as $500 to $700 per month to fill household oil tanks. Facing annual energy bills in the thousands of dollars, even the toughest New Englanders are expressing new concerns over the region's economic future.  

    Compounding the problem is that the region's electric power providers are increasingly dependent on natural gas as a generation fuel now that aging coal, oil and nuclear plants are being retired.  

    Fifteen years ago, about 15 percent of New England's electric energy production came from generators fueled by gas, notes Marcy Reed, president of National Grid of Massachusetts. Her utility serves all of Rhode Island and more than 1 million customers in Massachusetts.

    "By 2014, that number had risen to nearly 50 percent." she said. "Meanwhile, pipeline capacity for gas transmission into New England has not kept pace. ... There is simply not enough gas coming into the region to reliably or affordably power these plants and meet the needs of millions of residential and commercial gas customers."

    According to various analysts and regulators, the area would need 1 billion to 2 billion cubic feet of additional capacity to prevent price spikes during peak demand periods.

    A recent report released by the New England Coalition for Affordable Energy - a newly formed organization of business and labor groups advocating for the expansion of all means of energy infrastructure throughout the region - quantified the economic consequences should the region remain in its current stasis.

    The report estimates that ongoing energy constraints have already cost the region $71 billion, on top of the estimated $7.5 billion in higher energy costs seen over the past three winters.  

    According to the authors' prognostications, failure to expand new energy infrastructure - including natural-gas pipelines - within the next five years will result in a train wreck of consequences that threaten to jeopardize the region's ability to compete economically, which would hurt job-creation.
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    Iran is all set to surprise West on oil exports - Official

    Image Source: Operation WorldA senior energy official said that Iran sees its oil exports rising by 500,000 barrels per day by late November or early December much sooner than some in the West expect.

    Mr Ali Kardor, director of investment at the National Iranian Oil Company, said Iran also expects to add 1 million barrels a day to its current exports by the spring of 2016.

    In August, Minister of Petroleum Mr Bijan Zangeneh ordered directors of oilfield operating and terminals companies as well as NIOC international affairs to be prepared for raising production by 500,000 barrel per day.

    Another official said at the time that a test operation of major oilfields for stepped-up recovery carried out last year would be repeated on all deposits.

    Mr Kardor said on the sidelines of the second Iran-Europe Forum which opened in Geneva Thursday and continues on Friday that “We are ready.”

    Iran, which currently exports about 1 million barrel per day to Asia as well as Turkey, plans to return to the pre-sanction sales levels in the shortest possible time when the restrictions are lifted.

    Mr Kardor said that more exports to Asian countries like China and South Korea will begin sooner than some in the West expect, adding the two countries have announced readiness to increase imports.

    Earlier this week, Mr Zangeneh said that Iran’s oil production will reach 4.2 million barrels per day by the end of 2016.

    Mr Kardor said that Iran will ask other OPEC members to make room for the country’s return to normal production levels at the group’s next meeting in Vienna in December.

    He said that “Some countries should reduce their production. They should reach a compromise.”

    Record production by the US and Saudi Arabia has led to a glut in the market, pushing prices as low as USD 40 from last summer’s highs of above USD 100 per barrel.

    Mr Kardor added that the return of the Iranian oil at pre-sanction levels will not lead to a price crash, adding the market will absorb it at a rate of USD 3 to USD 4 drop in prices.
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    Repsol sells 10% stake in Compañía Logística de Hidrocarburos

    Repsol has reached an agreement to sell the 10% stake it held in Compañía Logística de Hidrocarburos (CLH) to investment company Ardian for 325 million euros.

    This sale is part of a program to optimise Repsol's portfolio through selective divestments of non-strategic assets launched after the acquisition of Talisman Energy, which significantly increased production and the quality and quantity of Repsol's asset base.

    The sale of CLH will generate a capital gain for Repsol of 300 million euros. The company has carried out an extensive process involving almost 150 potential investors, generating significant interest and competition, before selecting the winning bid.

    Following this agreement, in which BBVA has acted as Repsol's exclusive financial advisor, investment company Ardian holds a 25% stake in CLH.
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    Highlands signs indicative terms for a Licence Agreement with Schlumberger in respect to DT Ultravert

    Highlands Natural Resources, the London listed oil and gas company, announces that it has signed indicative terms for a licence agreement with Schlumberger Technology Corporation, a 100% owned subsidiary of Schlumberger Limited, the world's leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry, in relation to Diversion Technologies, LLC's proprietary 'DT Ultravert' re-fracking technology. Highlands owns a 75% stake in Diversion's current patent applications both in the US and globally.

    The indicative agreement provides that Schlumberger will evaluate DT Ultravert by assessing the data gained from five field trials within one year.

    Highlands CEO Robert B. Price said:

    'Highlands will continue to work closely with Schlumberger and the engineers and geologists on our Advisory Board to perfect the DT Ultravert technology by designing fracs in several basins throughout the world. Trials will be undertaken to demonstrate its effectiveness, which will provide us with valuable data regarding its application.

    'We believe that if successful, DT Ultravert could represent a major disruptive force in the market and generate significant future revenue for Highlands.'
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    Total: "We don't want to be the first"

     We are preparing the group to face low oil prices for a long time,” Total Chief Financial Officer Patrick de la Chevardiere told reporters. “We don’t want to be the first group to cut the dividend.”
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    Alternative Energy

    India unveils climate target to cut carbon intensity

    India has promised to make its economy more energy efficient and cut the carbon produced per unit of GDP growth by 33-35 percent by 2030 from 2005 levels in a climate-change policy statement released ahead of a U.N. summit in Paris in December.

    India, the world's third-largest emitter of greenhouse gases, also said it would target 40 percent cumulative installed power capacity from non-fossil fuel sources by 2030, though said this would require U.N. financial support.

    The pledges, submitted to the United Nations late on Thursday, were broadly in line with expectations, given emerging economies such as India have resisted setting specific targets to cut emissions.

    India is not yet prepared to go as far as China, the world's biggest emitter, which pledged at the end of June to reduce its carbon intensity by 60-65 percent by 2030, partly through the use of carbon trading. Beijing also said it would bring its absolute emissions to a peak by "around 2030".

    As well as not setting such a timeline, India did not give a commitment in its submission to establishing carbon trading.

    New Delhi also stressed that coal would continue to dominate power generation for its more than 1 billion people in the future, though stressed its commitment to clean energy technologies.

    India said it planned to develop 25 Solar Parks, supply 100,0000 solar pumps to farmers and convert all 55,000 petrol pumps across the country to solar.

    It also pledged to "aggressively" develop hydro and nuclear energy.

    India said its plans were "fair and ambitious considering the fact that India is attempting to work towards low carbon emission pathway while endeavoring to meet all the developmental challenges the country faces today."

    Preliminary estimates indicate India would need to spend around $206 billion between 2015 and 2030 for implementing adaptation actions in agriculture, forestry, fisheries infrastructure, water resources and ecosystems, the submission said.

    "India's climate actions have so far been largely financed from domestic resources. A substantial scaling up of the climate action plans would require greater resources...," said the statement, which was lodged with the U.N. Framework Convention on Climate Change.

    A preliminary estimate suggests that at least $2.5 trillion will be required for meeting India's climate change actions between now and 2030, it said.

    Indian Prime Minister Narendra Modi met U.S. President Barack Obama and France and Britain's leaders last month, and called for a climate change agenda that helps developing countries with access to finance and technology.
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    India’s expensive solar power birth pangs

    Free Press Journal reported that amidst all the euphoria about India’s tremendous progress in incremental solar power addition, there is a sudden realization that all is not picture perfect. Not yet.

    The most painful part is the cost at which India generates solar power. In the US, solar power installations offer power against 20 year power purchase agreements at a tariff of under 4 cents a unit. India, on the other hand, has seen the lowest tariff of just around INR 5.50 per KWh.

    That makes India’s solar power at least twice as expensive as that which can be got in the US or even in the Middle East or Israel.

    This in turn, raises the question: is India an inefficient producer? Or are its entrepreneurs greedier than their counterparts in other parts of the world? In fact, if you ask experts, you discover that the truth lies elsewhere.

    As one expert explains, the difference in US and Indian solar-power-tariffs is on account of several reasons. First, most countries, especially the US, enjoy a lower cost of funds, of 3% to 4% as against 10% to 11% in India. Then there is the need to hedge foreign exchange loans for importing solar power equipment.

    But the killer in cost escalation is the cost of land acquisition and of power evacuation. Thanks to populist policies of previous governments, India faces the most painful land acquisition costs. And nothing shows it up as clearly as in the cost difference between solar tariffs in the US and in India.

    Obviously, since land acquisition costs will be difficult to roll back, India will have to opt for solar power installations where the cost of land and of evacuation is the lowest. There are only two places where this is feasible.

    One would be water reservoirs next to hydro-electric power stations, where solar power panels could be built on the top of water surfaces. This is what Gujarat has done on its canals along the Sardar Sarovar Nigam project. The second would be by going in for rooftop solar more aggressively than has been the case till now.

    Hitherto, the government has opted for solar PPAs only from large solar installations which require very large tracts of land. The good thing about rooftop solar is that the cost of land becomes zero. Instead, allow the building occupiers to use the solar power themselves. All that would be required is a bi-directional metering facility which measures the amount of solar energy used, and the additional power drawn from the grid.

    Since the wires have already been laid out in the building, the cost of evacuation of solar power would also get minimized. Any surplus power generated as on holidays, when power is generated but not consumed by the building’s occupiers is sold to the grid.

    And as experience in Germany has shown, the adoption of rooftop solar also allows for large scale employment generation for installation and maintenance of these systems. Today, thanks to solar power, this sector accounts for more employees in Germany than does its famed auto sector. Fortunately, some states have begun to wake up to the tremendous advantages rooftop solar installations hold out for India.

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    China eyes huge solar-thermal power projects

    China is planning a series of solar-thermal power pilot projects to help develop the technology.

    The industrial scale of solar thermal power needs to be expanded, and an industrial chain on thermal equipment manufacturing and processing should be established, according to an announcement by the National Energy Administration (NEA) on Wednesday.

    To achieve that, the statement demanded, the pilot projects must be large enough to be used commercially, with capacity being no less than 50,000 kilowatts per unit.

    Industry experts will review the technical proposals and equipment, and all preliminary work for the project.
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    Xinjiang renewable energy generation capacity accounts for 21pct

    Northwest China’s Xinjiang Uygur Autonomous Region saw its power generation capacity by renewable energy account for 21% of the total 55 GW capacity, said one senior official with the local government recently.

    Xinjiang added 2.41 GW of power generation capacity in the first half of the year, with combined wind and solar power capacity contributing 33% at 249 MW and 580 MW, respectively, 5 times higher than the same period last year, official data showed.

    Over January-August this year, the region generated 140.9 TWh of electricity, up 17.31% year on year. Of this, hydro, wind and solar power output contributed 8.85%, 7.5% and 2.49% to 12.47 TWh, 10.57 TWh and 3.51 TWh, respectively, up 16.8%, 19.4% and 35.5% on year, separately.

    Xinjiang is one China’s important renewable energy strategy base, with available wind power generation capacity exceeding 80 GW, accounting for 40% of the nation’s total. Vast gobi deserts are suitable for construction of large-scale photovoltaic power stations, analysts said.
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    China may lift 2020 solar target to 150GW

    Deutsche Bank analysts say local media reports in China suggest that the country’s 2020 solar power target could be lifted to 150GW from the current target of 100GW – meaning more than 20GW of solar would need to be added in each year from 2016 – 2020.

    Climate diplomacy: in a another joint announcement from the US and China, president Xi Jinping committed to an emissions trading scheme in 2017. EPA/Michael Reynolds

    The reports come as China president Xi Jinping pledged during a visit to the US and meetings with President Barack Obama to introduce a nation-wide emissions trading scheme in 2017, and give priority to renewable energy installations.

    As the Rocky Mountain Institute noted on Monday, China has historically had dispatch quotas on fossil generation, often leading to curtailment of renewables and the running of inefficient coal plants. In the first half of 2015 this has led to curtailment of 15 percent of wind and 10 percent of solar generation.

    China now proposes a competitive power dispatch that prioritises the emissions-free, near-zero marginal dispatch cost of renewables. RMI says this should result in an immediate reduction of 200 million metric tons of carbon emissions per year, but more importantly, supports the economic expansion of renewables.

    China is not the only one considering a big boost to its targets for solar and other renewable energy sources. India is reportedly going to announce this week that it will aim for a 40 per cent renewable energy target by 2030, which would require some 250GW of solar and some 100GW of wind energy.

    Brazil earlier this week said it will lift its share of non-hydro renewable energy to 23 per cent by 2030, from 15 per cent now. Total renewables, including hydro, will account for 40 per cent of power production. Even Bangladesh is looking to install 5GW of solar.

    Deuutche Bank says the key to meeting the raised target will be financing and “normalisation” of the subsidy payment that is currently being delayed.

    Deutsche Bank estimates that China will install around 15GW of solar in 2015 and 20GW in 2016.  It noted that China’s National Energy Administration (NEA) announced this week an additional construction quota of 5.3GW for solar power projects in 2015, mainly released to provinces which made good progress in solar farm construction.

    “So far, there have been 24.1GW of new construction quota approved for 2015, including 17.8GW announced in March, 1GW demonstration projects in Shanxi in June, and 5.3GW announced today; while there is no cap on roof-top distribution projects. Not all the 24.1GW can be connected to grid in 2015, though.”

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    ABB energises 1st phase of India’s most advanced UHVDC power link

    Business Line reported that ABB, power and automation technology group, has energised the first pole of the North-East Agra 800 KV ultra-high voltage direct current transmission link, which will supply clean hydropower from northeastern India to a nodal substation in Agra and from there, feed it across north India.

    The project is being executed by ABB together with Bharat Heavy Electricals Limited on a turnkey basis, including design, system engineering, supply, installation and commissioning for Power Grid Corporation of India Ltd, India’s central transmission utility.

    This completes phase one of the project, which enables transfer of up to 1,500MW of electricity along this link, across a distance of 1,728 kilometers. When fully commissioned in 2016, the link will become the world’s first multi-terminal UHVDC connection, capable of transmitting enough electricity to serve around 90 million people, based on average national consumption.
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    India backs solar power as Paris climate talks loom

    Image Source: economictimesAFP reported that under a blistering sun, workers install a sea of solar panels in a north Indian desert as part of the government's clean energy push and its trump card at upcoming climate change talks in Paris.

    After years of betting big on highly polluting coal, India is under huge pressure to commit to cutting carbon emissions ahead of the major meet aimed at forging a global climate pact.

    But the world's third largest emitter argues the burden should lie with industrialised countries, which have been accused of hypocrisy in heaping demands on poorer nations.

    Instead, Prime Minister Narendra Modi's government is banking on increasing solar capacity fivefold to help cut crippling blackouts and bring power to 300 million Indians currently living without.

    The government is expected to hike its renewable energy targets again on Thursday night when it becomes the last major economy to release its pledges for the Paris talks.

    A cornerstone of its climate change policy, the solar plans come even as India boosts coal production to meet its growing needs, ignoring calls to slash its dependence on fossil fuels.

    With its year-round sunshine, barren plains and low-cost labour, the northern desert state of Rajasthan lies at the heart of Modi's renewable energy ambitions.
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    SMA Solar hikes sales and profit guidance for second time

    Germany's largest solar company SMA Solar raised its 2015 guidance for a second time this year, citing successful product launches and pushing its shares up more than 10 percent.

    SMA, which is emerging from a painful round of cost cuts, said on Tuesday it expected to swing to an operating profit of up to 10 million euros ($11 million) from a 2014 loss of 165 million.

    It previously expected to post a loss before interest and tax (EBIT) of as much as 25 million euros.

    "Due to the SMA Group's extensive transformation in the current fiscal year, we are emerging stronger from the years of structural change in the solar industry and will generate sales growth again this year for the first time since 2010," SMA Chief Executive Pierre-Pascal Urbon said in a statement.

    The group, which had already increased its guidance in July, now expects sales to come to between 850 and 900 million euros, compared with a previous forecast of 800 to 850 million.

    Shares in SMA Solar were up 10.8 percent at 32.20 euros by 0850 GMT. The stock has more than doubled since the beginning of the year, also supported by strong demand for its inverters in markets outside Europe, most notably North America.
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    Drax to pull out of UK White Rose CCS project when ends

    British power producer Drax said on Friday it would not invest further in the White Rose carbon capture and storage (CCS) project when it is completed and will then withdraw as a partner in the developer Capture Power Ltd.

    The project, aimed at proving CCS technology on a commercial scale, is due to end in six to 12 months. It is exploring the feasibility of capturing 90 percent of carbon emissions from a new coal-fired power station next to Drax's existing power plant in Yorkshire and storing them under the North Sea.

    When the project has ended, Drax will not invest further but will make the site, which it owns, and the power plant infrastructure available for the project to be built.

    "This is for us a sad decision but ultimately investment is about choices and we are in a very different financial situation today than we were two years ago when we decided to invest in the project," Drax Chief Executive Dorothy Thompson told the BBC radio.

    "There have been changes to the government's renewable policy but there have also been dramatic movements in the commodity markets and that has greatly reduced our profitability," Thompson said.

    Other partners in Capture Power are energy technology firm Alstom and industrial gas supplier BOC, which is part of the Linde Group.

    Capture Power said it was still committed to delivering the CCS project and a final investment decision will depend on the outcome of an engineering and design study.

    Britain, along with many other countries, will need CCS to help meet its emissions reduction targets if it is still running fossil fuel power generation plants.

    The British government has committed 1 billion pounds ($1.5 billion) for two CCS projects - one at a coal plant and one at a gas plant which is being developed by Shell and SSE and which could be operational by the end of the decade.

    In general, CCS technology has so far failed to live up to early hopes of wide adoption. After many years of research, Saskatchewan Power opened the world's first coal-fired power plant retrofitted with CCS last year, but European utilities have struggled.
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    CGN’s nuclear power capacity at 29.37 GW

    CGN’s nuclear power capacity at 29.37 GW

    China General Nuclear Power Group (CGN), a large clean energy enterprise in China, saw its total nuclear power capacity – including capacity in operation and under construction – at 29.37 GW at present, said the group’s spokesman Hu Guangyao on September 29.

    It has 12 nuclear power generating units under construction, with total installed capacity at 14.45 GW. That accounts for 18.6% of the global nuclear installed capacity under construction – the NO.1 in the world, and 52.4% of China’s total volume under construction, said Hu.

    The group has 14 nuclear power units in operation, with combined installed capacity at 14.92 GW, accounting for 60.5% of China’s total nuclear installed capacity in operation.

    In addition, the group’s non-nuclear clean energy installed capacity amounted to 12.49 GW by end-August this year, with wind power at 7.4 GW, solar energy at 0.7 GW, hydropower at 5.26 GW.
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    Cigar Lake mine officially starts production

    Last week Cameco and Areva senior management including Cameco president and CEO Tim Gitzel cut the ribbon on the mine, located in the uranium-rich Athabasca Basin of northern Saskatchewan. They also led dignitaries including Saskatchewan Economy Minister Bill Boyd and community leaders from northern Saskatchewan on a tour of the underground workings.

    "We are happy to celebrate these two major uranium mining assets in Saskatchewan, the Cigar Lake mine and the McClean Lake mill,” said Olivier Wantz, member of the executive committee and senior executive vice-president, mining and front end business group for Areva Resources Canada Inc, which owns 37 percent of the project. “Their successful operation demonstrates the determination and expertise of our employees to ensure the safe start-up and continued production.”

    The Cigar Lake uranium deposit is the second largest high-grade undeveloped uranium deposit in the world, with concentrations of uranium 100 times the world average (the largest is the nearby McArthur River mine). However, the deposit, which according to Cameco has 117.5 million pounds U3O8 at an average grade of 17.84 percent, is also considered one of the most technically challenging to mine.

    Construction started in 2005 but it was soon hit by catastrophic floods in 2006 and 2008. Costs also ballooned from nearly half a billion dollars to $2.6 billion, as Cameco and partners struggled to figure out how to mine the deposit which lies almost half a kilometre underground.

    Mining at Cigar Lake began in March 2014, but was suspended last July to allow the ore body to freeze more thoroughly. The freezing was done to improve ground conditions, prevent water inflow and improve radiation protection. Commercial production at Cigar Lake was declared on May 1, 2015.

    The high-grade ore is removed using custom-made machines that inject water at high pressure to cut away the rock. The resulting ore slurry is then collected through pipes, run through underground grinding and thickening circuits and then pumped to surface. At the surface, the ore is loaded in special containers for truck transport to Areva's McClean Lake mill located 70 kilometres away, where it is processed into uranium concentrate.

    Cameco says it produced between 6 and 8 million packaged pounds for Cigar Lake and McClean Lake in 2015. The production target is 18 million pounds by 2018. Once the expansion at McLean Lake mill is complete, the mill will have capacity to produce 24 million pounds of uranium per year. The mine currently employs over 600 people, the majority from northern Saskatchewan, while the mill has a payroll of around 350.

    Operator Cameco owns 50% of the mine, followed by Areva (37%), Idemitsu Canada (7.9%) and TEPCO Resources Inc. (5%). The McClean Lake mill is owned by Areva Resources Canada Inc. (70%), Denison Mines Inc. (22.5%) and OURD Canada Co. Ltd. (7.5%).
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    China reportedly to start operations at 31 new nuclear plants

    China's nuclear energy authorities have recently finished investigative research on 31 nuclear power plants in inland regions, indicating a commencement of operations at the nation's new reactors.

    "A report based on the research has been submitted to the State Council. Once approved, it will be a signal of the beginning of the operations of new nuclear reactors," an anonymous energy expert at the Energy Research Institute of the National Development and Reform Commission, told the Beijing-based China Times.

    The research, aimed at ensuring the safety of operations, was jointly conducted by the Chinese Academy of Engineering and China Nuclear Energy Association (CNEA).

    China halted its nuclear power projects after the Fukushima nuclear disaster in Japan, only approving several such projects in eastern coastal areas. Although the resumption of the inland nuclear power projects has yet to be officially announced, at least 10 provinces have already proposed to develop a nuclear power industry.

    According to the 13th Five-Year Plan (2016-20), installed nuclear power capacity will reach 58 million kilowatts by 2020. The capacity of those currently under construction is 30 million kilowatts.

    "It's difficult to reach that goal without new nuclear power reactors in inland regions," the expert was quoted as saying.

    Three nuclear reactors in inland regions have already obtained approval from the National Development and Reform Commission and are waiting to be established. They are the Taohuajiang nuclear power plant in Hunan Province, the Xianning nuclear power plant in Hubei Province and the Pengze nuclear power plant in Jiangxi Province.

    As of the end of 2013, the Taohuajiang nuclear power plant has received 4.6 billion yuan ($700 million) in investments while the other two plants attracted about 3.4 billion yuan each.

    "If the nuclear power projects in inland regions restart, the three plants will be the first to start operation," an insider who requested anonymity, told the China Times. The China Times reporter learnt from a nuclear power conference that the country will focus on developing nuclear power projects along the east coastal regions, and only develop one or two projects in inland regions.
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    Mosaic settles claims with U.S. environmental agencies

    Fertilizer maker Mosaic Co's unit said it reached settlements with U.S. federal and state environmental agencies to resolve claims regarding waste management practices at its manufacturing plants in Florida and Louisiana.

    The company said it will invest $170 million on environmental cleanup and other projects and will place $630 million in a trust to support the closure and long-term care of its phosphogypsum stack systems.

    Phosphogypsum is a by-product of fertilizer production from phosphate rock and is stored indefinitely because of its weak radioactivity.

    Mosaic also agreed to pay penalty of $8 million and take up two environmental projects worth $2.2 million in the two states.

    The company said it does not expect the claim settlements to "adversely' hurt its output volumes.

    The deal still needs to be finalized by the court, Mosaic said.
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    Herbicide scrutiny mounts as resistant weeds spread in U.S.

    Concerns about the world's most popular herbicide continue to mount, as U.S. agricultural experts note spreading weed resistance to glyphosate.

    As the key ingredient in Monsanto Co's Roundup herbicide products as well as about 700 other products, glyphosate is widely used on farms as well as residential lawns.

    But the chemical has come under increasing scrutiny in recent years in part because scientists and environmentalists have warned that weed resistance to glyphosate has become a significant problem that impacts crop production.

    In the latest account of glyphosate-resistant weeds, U.S. weed scientist Dallas Peterson said this week that resistance is increasing rapidly in the key farming state of Kansas. The trend is a worrisome sign as weed resistance spreads from the southern U.S. into the Midwest and Plains farming states, he said.

    Peterson, who is both a weed scientist at Kansas State University (KSU) and president of the Weed Science Society of America, said Kansas soybean farmers in particular are experiencing weed problems, particularly with a type known as Palmer amaranth. Wet weather along with the weed resistance contributed to the problem, he said.

    "It's really kind of exploded," he said.

    Farmers in other Midwestern states, including Missouri, Nebraska, and Illinois have reported mounting problems with weed resistance as well.

    Weeds can choke off nutrients to crops hurting production, and raise costs for farmers who often use added chemicals or other means to combat the troublesome weeds.

    Weed resistance across U.S. farmland is becoming such a significant problem that a briefing on the matter is being planned for Dec. 4 in a meeting room of the U.S. House of Representatives agriculture committee.

    The U.S. Department of Agriculture said that reliance on glyphosate by many farmers is the primary factor for the problem. Fourteen glyphosate-resistance weed species have so far been documented in U.S. crop production areas, according to USDA.

    The use of glyphosate by farmers surged after Monsanto introduced glyphosate-tolerant "Roundup Ready" soybeans and other crops in the mid-1990s.

    Monsanto and DowAgroSciences, a unit of Dow Chemical , are bringing new herbicides to market, combining glyphosate with dicamba from Monsanto, and glyphosate with 2,4-D from Dow.

    Peterson warned, however, that tests at KSU showed that these combinations still had trouble controlling Palmer amaranth weeds.

    Both companies said research shows their new herbicide combinations are highly effective, but they also advise farmers to use multiple strategies to fight the troublesome weeds.

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    China's COFCO says Nidera biofuel losses won't impact firm's future

    Chinese grain trader and food processor COFCO, the majority shareholder in Nidera, has said it still has confidence in the Dutch grain and oilseeds merchant after an ethanol trader racked up significant losses through fraudulent activities.

    COFCO bought a majority stake in Nidera last year and is in talks to increase its holding in the company, sources have told Reuters.

    "Nidera has dealt with the issue, which has not affected the company's daily operation. As a shareholder, we are confident in Nidera's development and looking forward to more in-depth cooperation in the future," COFCO said in an email sent to Reuters late on Friday.

    Nidera suffered a "significant loss" in biofuels trading but none of its other trading activities were involved, a spokesman said on Thursday.

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    Precious Metals

    NUM says accepts gold wage offer

    South Africa's National Union of Mineworkers (NUM) said on Friday its members had accepted the latest pay offer from gold producers covering the next three years. "Our members have accepted the offer," David Sipunzi, NUM's general secretary, told Reuters. 

    NUM is the biggest union in the sector, representing over 50% of the industry's workers. Two smaller unions which represent mostly skilled workers have also accepted the offer. But the Association of Mineworkers and Construction Union (AMCU), which represents close to 30% of workers in the sector, has not and it remained unclear if they would accept. 

    The offers vary from company to company but will see pay hikes on the basic wage for the lowest-paid, entry-level members of up to around 14% in the first year. Including allowances, the deal ensures that entry-level, underground employees will receive guaranteed pay of between R13 728 rand and R14 611 a month in the third year. This would equate to increases for the entire package by the third year of between 26.5% and 32%. 

    The four companies are AngloGold Ashanti, Harmony Gold, Sibanye Gold and Evander Gold, a unit of Pan African Resources. They made it clear that they could not afford big hikes as they grapple with depressed prices and soaring costs in the world's deepest mines.

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    Co-owner of Russia's Polyus Gold makes offer for remaining 60 pct stake

    Said Kerimov, the 20-year-old son of Russian tycoon Suleiman Kerimov, made a cash offer on Wednesday to buy the remaining 60 percent stake in Russian gold miner Polyus Gold that he does not already own, his firms Sacturino and Wandle said.

    Said Kerimov, who controls a 40 percent stake in Russia's largest gold miner together with the 'Suleyman Kerimov Foundation', has been considering the offer since early September.

    The offer price of $2.97 per Polyus Gold share has remained the same since early September and represents a 1.4 percent premium to the stock's closing price on Sept. 29. The offer values the whole of Polyus Gold at $9 billion.

    The independent committee of Polyus Gold's board said in a separate statement that the offer materially undervalued the company and advised shareholders other than Wandle to take no further action at this stage.

    However, Wandle has already received letters of intent to accept the offer from two other large Polyus Gold shareholders - Oleg Mkrtchan and Gavril Yushvaev - who own 39.98 percent of the shares in total. Polyus' official free float is 19.8 percent.

    Said Kerimov's father, Suleiman, who Forbes magazine estimates is worth $3.4 billion, is not allowed to hold assets directly because of his membership of the Federation Council, Russia's upper house of parliament.

    Sources told Reuters previously that the offer reflected a view among the secretive Kerimov family that a London listing was less attractive now because of tighter access to Western capital and sanctions imposed over Moscow's role in the Ukraine crisis.

    "It is the opinion of Wandle that, in the current geopolitical context and prevailing market dynamics occurring in Russia in particular, the long-term development of Polyus Gold's portfolio of Russian assets would be best undertaken by a private company," it said in the statement.

    Following implementation of the offer, Wandle will seek to re-register Polyus Gold as a private limited company, it added.

    The deal will be financed by a loan facility of up to $5.5 billion arranged by VTB Bank, Russia's second largest state-controlled lender.
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    Platinum extends rout, dips below $900 on Volkswagen scandal

    Platinum fell below $900/oz on Tuesday for the first time since January 2009 on fears that the Volkswagen emissions scandal would reduce demand from the auto sector. Spot platinum slid to $899.80/oz, before paring some losses to trade at $921.83. The metal, which has fallen for seven sessions out of eight, has been hurt by news of Volkswagen AG’s falsification of U.S. vehicle emission tests as investors believe it could affect demand for diesel cars. Platinum is widely used as a component in emissions-cleaning catalytic converters for diesel cars.

    “We tend to think that platinum prices have been oversold in the face of the emissions concerns and worries about diesel vehicle sales going forward,” said HSBC analyst James Steel. “It strikes us that not enough attention is being given to the likelihood that tighter emissions legislation and increased vigilance by the auto makers will increase platinum demand,” he said. Upcoming European legislation on CO2 emissions will make it harder for the authorities to back a war on diesel, analysts have said.
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    More rough diamond price cutting needed –

    A further reduction in the price of rough diamonds is needed, according to the World Federation of Diamond Bourses (WFDB). Last month Anglo American-controlled De Beers cut the prices of its rough by up to 10% and this month State-controlled Alrosa of Russia followed suit, against the background of diamond manufacturers laying it on the line that they simply could not be expected to pay high prices for rough at a time of falling polished prices. 

    Now WFDB said it expected to see the trend repeated at other diamond sales and tenders. “I believe we need to see a further reduction in rough prices,” said WFDB president Ernie Blom in a media release sent to Mining Weekly Online. Blom singled out the Indian manufacturing sector in particular for carrying out a much-needed downscaling of polished production and also drew optimism from this month’s “solid and stable” Hong Kong Gems and Jewellery Fair, which he said served as a useful barometer of diamond industry sentiment owing to the global nature of its exhibitors, buyers and visitors. 

    The decision of many diamantaires to hold off on manufacturing would also help put a firm floor under prices. "We had a situation where there were simply too many polished goods on offer. Now that some major players have cut production, there will be lower levels of polished inventories and possibly shortages in some items,” said Blom, who believed a rise in business transactions would result. He forecast lower levels of polished inventories and possibly shortages in some items as a result of the cutbacks of polished diamonds at a time when the work of World Diamond Mark to raise consumer demand was bearing fruit. 

    While the collective efforts were a cause for greater optimism, the situation in the diamond business remained “far from easy”, which was why a further reduction in rough prices was expected. Last week alluvial diamond miner Rockwell Diamonds reported that it had averaged a 24%-lower $1 791/ct for rough diamonds on 28%-lower total diamonds sales over 12 months and miner Trans Hex reported 21%-lower dollar prices and 9% lower rand prices than those fetched in the 12 months to March 31.

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    Swiss watchdog opens bank probe into precious metal collusion

    The Swiss competition watchdog has launched an investigation into possible collusion in the precious metals market by several major banks, it said on Monday, the latest in a string of probes into gold, silver, platinum and palladium pricing.

    Global precious metals trading has been under regulatory scrutiny since December 2013, when German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of gold and silver benchmarks by banks.

    Even though the market has moved to reform the process of deciding on its price benchmarks, accusations of manipulation have refused to go away.

    Gold prices have also shed some 9 percent in the last two years as investors lose faith in its status as a store of value.

    Switzerland's WEKO said its investigation, the result of a preliminary probe, was looking at whether UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui conspired to set bid/ask spreads.

    "It (WEKO) has indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned," WEKO said in a statement.

    A WEKO spokesman said the investigation would likely conclude in either 2016 or 2017, adding that the banks were suspected of violating Swiss corporate rules.

    The banks face financial penalties if WEKO finds them guilty of wrongdoing, the spokesman said, though he declined to comment on the size of any possible fine.

    WEKO could add more banks to its investigation if it finds cause for suspicion, the spokesman said.

    The move comes a month after press reports that the European Union's competition regulator was investigating anticompetitive behaviour in precious metals spot trading, and follows news of a U.S. probe by the Department of Justice (DoJ) and the Commodity Futures Trading Commission earlier this year.

    U.S. authorities are investigating at least 10 major banks for possible rigging of precious metals markets, according to reports. HSBC and Barclays said earlier this year that they were cooperating with the investigation.

    Aside from regulatory probes, a number of lawsuits have also been filed in U.S. courts alleging a conspiracy to manipulate precious metals prices.

    Commenting on the WEKO probe, a Julius Baer spokesman said the bank was cooperating with authorities.

    In a statement, Deutsche Bank said it was cooperating with requests for information from "certain regulatory authorities" over precious metal benchmarks but declined to comment further.

    Representatives for UBS, Barclays, Morgan Stanley and HSBC declined to comment. Mitsui was not immediately available for comment.
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    Silver Wheaton faces potential C$353m CRA tax bill for offshore revenue

    The world’s largest precious metals streaming firm Silver Wheaton is set to challenge the Canadian Revenue Agency (CRA) over the agency’s decision to reassess the company’s 2005 to 2010 tax years and collect taxes on income earned by Silver Wheaton’s offshore subsidiaries. 

    The TSX- and NYSE-listed company, which provided financing to miners in exchange for the right to buy a share of their future metal output, reported late on Thursday that it had received notices of reassessment from the CRA, in line with the CRA proposal Silver Wheaton said it had received early in July. According to the notices of reassessment, the CRA was looking to increase Silver Wheaton’s income subject to tax in Canada for the relevant tax years by about C$715-million, which would result in federal and provincial tax of C$201-million. 

    The CRA was also seeking to impose transfer pricing penalties of about C$72-million and interest and other penalties of C$81-million for the period. The total tax, interest and penalties sought by the CRA for the relevant taxation years amounted to C$353-million. Management held that Silver Wheaton had filed its tax returns and paid applicable taxes in compliance with Canadian tax law and the company intended to “vigorously and expeditiously defend its tax filing position”. 

    President and CEO Randy Smallwood was at a recent Toronto investor presentation at pains to defend Silver Wheaton’s position that its Cayman Islands-registered subsidiaries, where it took delivery of precious metals under its forward-sales contracts, were independent from the Canadian parent. It was up to the sovereign state of the Cayman Islands to determine the corporate tax rates the subsidiaries would be subjected to, which just happened to be 0%, he advised. 

    Silver Wheaton intended to file a notice of objection within the available 90-day period provided under the Income Tax Act and that it would be required to make a deposit of C$177-million, representing half of the reassessed amounts. The company would seek to post security in the form of a letter of credit for this amount as opposed to a cash deposit.
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    Dieselgate: Palladium the big winner

    On Friday, the rally in the palladium price continued to build as the outlook for diesel vehicle sales becomes murkier following top automaker Volkswagen's admission a week ago that it's been cheating on pollution tests.

    Nymex palladium contracts for December delivery exchanged hands for as much as $678.00 an ounce on Friday, up another 3% on the day for a more than $60 an ounce or 11% gain since the news broke.

    The price of palladium reached 13-year highs above $900 an ounce in September 2014

    In August the metal plunged to $532 an ounce, but quickly recovered. The price of palladium reached 13-year highs above $900 an ounce in September 2014 on the back of supply disruptions and a robust outlook for the US and Chinese auto markets.

    Palladium finds application in gasoline engines and is more exposed to the Chinese and US markets, where diesel hardly features in the passenger vehicle segment. Roughly 75% of palladium demand is from the autocatalyst sector and in the longer term the metal would benefit from a move away from diesel.

    After a bounce back yesterday from more than six-and-a-half year lows platinum, which is mainly used in to scrub emissions in diesel engines, in New York fell again on Friday.
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    Base Metals

    Norilsk to cut spending as no nickel price pickup seen soon

    Norilsk Nickel PJSC, Russia’s largest mining company, plans to cut investment and freeze some projects because it sees the risk of the metals prices remaining low.

    First Deputy Chief Executive Officer Mr Pavel Fedorov told reporters in Moscow on Wednesday "The sentiment in the commodities market is indeed negative and among the worst in almost two decades. The company plans to save USD 500 million in the next three to four years by cutting capital expenditure and putting projects on hold.”

    He said “We cannot entirely discount the probability that the current $10,000 a tonne nickel price will be the grim reality for the medium term.”

    Mr Fedorov said “New and untapped projects, including the Maslovskoye deposit on the Taymyr peninsula or Severniy Glubokiy upstream project on the Kola peninsula, will be put on hold. It will proceed with investing in the Bystrinsky copper mine that’s near the border with Mongolia and China because it’s already received financing for it and it’s a lesser risk. Norilsk will proceed with the most profitable expansion projects, including its Talnakh concentrator plant.”

    Mr Fedorov said that the company would face more pressure should the government decide to increase a mineral extraction tax
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    Deutsche Bank seeks to buy OZ Minerals stake for KKR

    Deutsche Bank was last night seeking to buy up close to 10 per cent of copper miner OZ Minerals on behalf of an investor.

    After a flurry of speculation yesterday evening over the bidders’ identity, sources are pointing to an activist fund manager.

    According to a term sheet sent to shareholders last night, the request for stock has been pitched at $3.55 a share, a 7.3 per cent premium to the last traded price.

    The 30.3 million shares will be bought on a first-come, first- served basis with the trade due to close tomorrow.

    While the purchaser is described as a “financial buyer”, sources said it may be an activist investor intent on piling pressure on the board.

    The interest in OZ Minerals comes as copper prices continue to touch multi-year lows.

    U.S.-based KKR & Co LP has bought a 10 percent stake in Australian copper miner Oz Minerals Ltd, a relatively rare step by private equity into mining that sent Oz shares soaring to their biggest one-day gains in 14 years.

    The disclosure by KKR followed media reports that a term sheet had been sent to Oz shareholders late on Wednesday requesting stock at a price of A$3.55 ($2.50) a share, a 7.2 percent premium to the last traded price.

    Oz shares stood 20 percent higher at A$3.97 at 0435 GMT. It was their biggest one-day rise since the 47 percent jump in April 2001.

    In a statement, KKR Asia Pacific public affairs director Steven R. Okun said the firm bought the stock since Oz Minerals was "a good company that was undervalued in the public markets when we made our investment".

    KKR is buying into mining at time when many investors are turning away from the sector due to a sharp downturn in metals prices, underscored by the dramatic drop in shares of miner and trader Glencore this week.

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    Deaths in Mining Protest Spur Emergency Declaration in Peru

    Peruvian President Ollanta Humala on Tuesday declared a state of emergency, suspending civil liberties and authorizing military patrols in a highland region where three people died and scores were injured in protests at a Chinese-owned $7.4 billion copper project.

    Humala decreed the emergency for 30 days in the southern Andean regions of Cusco and Apurimac, where the mine, Las Bambas, owned by China's MMG Ltd., is under construction. The state of emergency applies to six provinces.

    Apurimac Governor Wilber Venegas said Tuesday that three people protesting the project had died in clashes with police in the town of Challhuahuacho and scores were wounded.

    Rallies called on MMG to revise its environmental plan so that mineral concentrates would be piped out of town. Protesters also demanded that the company hire more locals as construction work linked to the mine is dropping.

    Some 1,500 police and 150 military officers were sent to the region ahead of protests that started Friday.

    Venegas and other local authorities said police fired live bullets at protesters during rallies that had been largely peaceful. Humala's government said police resorted to lethal weapons to defend themselves from violent protesters who broke into Las Bambas installations.

    Humala has declared several emergencies during his four years in office to calm protests against mining projects, including Newmont Mining Corp.'s suspended $4.8 billion Conga project and Southern Copper Corp.'s recently derailed $1.4 billion Tia Maria mine.
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    Collahuasi copper mine to cut output amid price rout

    Chile's second-biggest copper mine Collahuasi, owned by Anglo American and Glencore , said on Tuesday it will cut output by 30,000 tonnes, becoming the latest major producer to protect itself against sinking prices in the biggest rout in years.

    "In line with the stabilization of its operations that has been implemented in recent years, and considering the complex market scenario for commodities worldwide, (the mine) is restructuring its operations," said Collahuasi in a statement.

    Reductions would affect the leaching plant and associated activities and take some 30,000 tonnes of refined copper annually out of the market, the company said, without specifying a timetable for the cuts.

    It added that there would also be an unspecified number of job losses.

    The union representing the majority of Collahuasi workers said it was waiting for further information on the cuts to make a decision as to its next move.

    The cut represents 7 percent of the mine's output last year of 470,000 tonnes.

    Still, the measures by a significant player in the world's top producing nation reflect deepening pain as copper's year-long rout hurts producers' margins and the industry faces its biggest test since the 2008 financial crisis.

    Fears over economic growth in key consumer China have led commodities prices to tumble. The copper price has weakened around 20 percent this year, falling below $5,000 a tonne.

    Shares in mining and trading giant Glencore slumped by around a third in a sell-off on Monday, before clawing back some ground on Tuesday.

    The six-year low in the price of copper, used in construction and wiring, has already led Glencore to suspend operations at two mining units in Africa, while in Chile, U.S.-listed Freeport McMoran Inc is slashing output.

    And the world's largest producer, Chile's state-run Codelco, has delayed important expansion projects.

    As well as complicating plans for companies, the potential job cuts and falling income from copper have also created a headache for Chilean President Michelle Bachelet, at a time when she is struggling with sharply declining popularity.

    Copper makes up over half the country's exports, and analysts are expecting an austerity budget from the government this week as it fights to balance the books.
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    First Q4 Japanese aluminium premium settlement at $90/mt, down from Q3

    The fourth-quarter aluminium contract premiums have settled at $90/mt plus London Metal Exchange cash CIF Japan among some Japanese buyers and producers, down from $90-100/mt for Q3, buyer and producer sources said Monday.

    The negotiations are continuing, among buyers seeking $80-90/mt premiums and sellers $90-95/mt, negotiators said.

    Four deals were reported done to date at $90/mt plus LME cash CIF Japan for over 500 mt/month of P1020/P1020A ingot for loading in October-December, payment cash over documents.

    Three global producers offered $110/mt plus LME cash CIF Japan, up from Q3, attributing the increase to demand recovery in Southeast Asia and the stable Japanese demand.

    Japanese buyers had counter-bid at $80-$90/mt plus LME cash CIF Japan, saying that main port stocks of 500,000 mt was discouraging fresh import demand.

    "There was resistance from producers who wanted the premiums back up to three-digit level [from Q3's $90-100/mt], but they came down to $90/ we are grateful they are listening," said one consumer, indicating that talks were drawing to a close.
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    Alcoa to Split Into Two Companies

    Struggling Aluminium maker Alcoa Inc. said Monday that it would split into two publicly traded companies next year, joining the recent wave of companies looking to spur growth by breaking up.

    Alcoa said its upstream company, which will keep the Alcoa name, will include its bauxite-mining, alumina-refining and aluminium-production businesses. The company would have had revenues of $13.2 billion in the year ended June 30.

    The other company, which Alcoa is calling its value-add company, will include its global rolled products, engineered products and solutions, and transportation-and-construction businesses. The company would have had $14.5 billion in revenue in the year ended June 30.

    Alcoa said a big chunk of the company’s revenue will come from the aerospace industry, through its strength in areas such as jet engine and industrial gas turbine airfoils and aerospace fasteners.

    Chief Executive Klaus Kleinfield will lead the value-add company as chairman and CEO, and he will also chair the upstream company initially.

    The move comes as Alcoa has struggled with the price for raw aluminium remaining under pressure as China floods the global markets with steel, aluminium and other industrial metals.

    The deal is expected to close in the second half of next year.

    Alcoa shareholders will own all outstanding shares of both companies. Alcoa said it expects the deal to qualify as a tax-free transaction for shareholders.
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    China’s bonded copper stockpiles plunge to lowest in three years

    Copper stockpiles in China’s bonded warehouses declined to the lowest in more than three years as users withdrewmetal to take advantage of relatively high prices in the Shanghai market.

    Inventories were about 350,000 metric tons in late September, the lowest since Feb. 2012, according to a survey by CRU Group, a London-based commodities research firm. That’s 20 percent less than the 440,000 tons a month before. Bonded warehouses are located in free-trade zones and are exempt from tariffs and value-added tax.

    The stockpiles, which aren’t formally disclosed by any organization, represent a gray area in global commodity trade and the estimates are widely followed as a measure of China’s demand. Traders are selling copper into the Shanghai market because prices are higher than London, leading to a slide in inventories, said Matthew Wonnacott, a consultant at CRU in London.

    “Essentially it’s been mostly arbitrage-related,” Wonnacott said in an interview. “It’s possible that domestic production has been a little bit weaker than maybe expectations so that could have been drawing material into the domestic market.”
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    Hudbay aims to start construction at Rosemont copper mine in Arizona in 2016

    Toronto-based Hudbay Minerals plans to start construction at its Rosemont copper, silver and molybdenum project in Arizona next year once permitting is complete, CEO David Garofalo said.

    The company recently hired Ausenco to work on detailed engineering studies at the project over the next eight to 10 months before starting a two-year construction period, Garofalo said.

    Hudbay, which acquired the 20,100-hectare property in July 2014, has drilled 43 drill holes at Rosemont to confirm proven reserves for 279 million mt of 0.44% copper. The project could produce up to 150,000 mt/year of copper and have similar cash costs to its $1.7 billion Constancia copper mine in Peru, he said.

    "While the permitting is going on one track, on a parallel track we're doing engineering. ... We have to advance both of those on a parallel track so we're in a position to make an investment case next year," Garofalo said in an interview on the sidelines of a mining conference in the southern highland city of Arequipa, Peru. "Hopefully we'll start work next year on Rosemont."

    Hudbay, which started production at Constancia at the beginning of the year, is currently operating at 12-15% above capacity of 80,000 mt/year of copper, Garofalo said, adding that costs are running at the lower end of guidance at about $9/mt.

    Hudbay will invest more capital in junior exploration firms such as Panoro Minerals rather than buy exploration properties outright in a market in which metals prices are slumping, he said.

    "I'm short-term somewhat bearish and medium-term bullish. Copper prices are slightly below where equilibrium is," Garofalo said. "There isn't another generation of producer supply coming on to replace the inevitable decline in mine ore grades."

    The company aims to produce 140,000-175,000 mt of copper, 95,000-120,000 mt of zinc and 135,000-170,000 oz of gold equivalent this year. Last year, Hudbay produced 37,644 mt of copper, 82,542 mt of zinc, 73,377 oz of gold and 745,910 oz of silver.
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    NALCO to invest over INR 65,000 crore

    NALCO to invest over INR 65,000 crore

    PTI reported that buoyed by 106 per cent jump in profit, aluminium giant NALCO is all set to invest over INR 65,000 crore to launch ambitious projects in the country and abroad, besides undertaking expansion and diversification into power and mining sectors in a big way.

    NALCO CMD T K Chand said “Investment to the tune of INR 65,000 crore is proposed to be made for a number of projects, including a greenfield aluminium smelter abroad.”

    He said “The company is exploring countries like Oman, Iran and Indonesia to set up the proposed smelter plant with an estimated investment of INR 20,000 crore. Location would be finalised after examining factors like availability of low-cost power and infrastructure.”

    The smelter unit is sought to be of 5 mtpa capacity together with 150 mW captive power plant, Chand said, adding that though NALCO is ready to go for the project alone, it is open to a joint venture if a suitable partner comes forward.

    While power is cheap in Oman and Iran, abundant coal is available at low cost in Indonesia. Port facilities would also be a major factor, the CMD said adding the project is likely to take off this year itself as NALCO aims to emerge as a major global player in mining, metal and energy sectors.

    Turning to the domestic turf, he said that after getting the allocation of Utkal D and E coal Blocks, NALCO is now hopeful of the Odisha government’s consent for allocation of the Pottangi bauxite Mines in Koraput district.

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    Steel, Iron Ore and Coal

    Peabody Energy leads coal stocks lower on Moody's grim outlook

    Peabody Energy Corp. led coal stocks lower Thursday after Moody's Investors Service issued a weak forecast for the coal industry. "The outlook for the North American coal industry remains negative amid ongoing challenges for both metallurgical and thermal coal, including declining coal consumption and low met coal prices," said Moody's in a report.
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    Vale gain is iron market pain as giant project ahead of schedule

    The world’s top iron-ore producer has some bad news for the oversupplied market.

    The world’s top iron-ore producer has some bad news for the oversupplied market: its biggest project is running ahead of schedule.

    S11D, part of the Carajas mining complex in northern Brazil, is on track to beat a targeted December 2016 start date, Vale SA Chief Financial Officer Luciano Siani said in an interview Wednesday.

    The project — the industry’s largest and, according to Vale, the most profitable — will add 90 million metric tons of annual capacity to global supply, although Vale intends to control the speed at which it hits the market, Siani, 45, said in Toronto, where he is holding meetings with investors and analysts.

    “We will manage the ramp up in order to preserve the premium for this high grade ore,” he said.

    While S11D coming on stream sooner than planned would be a boon for Vale’s debt-reduction ambitions, it looms as another strain on an iron-ore market buffeted by a series of expansions by Vale and its main rivals in Australia at a time of slowing Chinese growth.

    Chief Executive Officer Murilo Ferreira– on Monday said it planned to reduce this year’s dividend to the lowest since 2006 amid slumping metal prices and the need to preserve cash.

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    Australia takes cautious, maybe premature, bullish iron ore view:

    It's a brave analyst these days who would call a bottom in the iron ore price, which makes the call for better times by 2017 from the normally cautious Australian government forecaster all the more interesting.

    While any forecast for iron ore prices to rise is worth more than just a glance, there are a few things to note about the Australian Department of Industry's Resource and Energy Quarterly, published on Wednesday.

    The most important is that the government forecaster isn't calling for a dramatic rebound in iron ore, rather for modest gains.

    The second is that the recovery isn't expected until 2017, with next year expected to show further losses for the steel-making ingredient.

    The report projected that iron ore will rise to average $60.40 a tonne in nominal terms in 2017, up from $51.20 in 2016 and $52.90 this year.

    By way of comparison, the department's June quarter report forecast iron ore would average $54.40 a tonne in 2015 and $52.10 in 2016, but didn't provide forecasts for further out years.

    What has effectively happened is that the department has become slightly more bearish on the view for this year and next, before expecting a modest recovery from 2017 onwards.

    Just how modest is the recovery expected to be?

    The spot price of iron ore in Asia .IO62-CNI=SI was $54.40 a tonne on Wednesday, down about 24 percent from the end of last year, but up from the $44.10 reached on July 8, which was the lowest since spot assessments started in November 2008.

    The department is therefore expecting iron ore to be 5.9-percent weaker in 2016 than it is currently, before gaining to be 11 percent higher in 2017 than the present spot price.

    While the improvement by 2017 is not that dramatic in percentage terms, it still makes the department a bit of an outlier among iron ore forecasters.
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    China NDRC releases monthly power coal price indices

    China has released the first monthly national and regional price indices for thermal coal used for power generation on a trial basis, aiming to better reflect market changes of the fossil fuel and provide guidance to coal miners, end users and related government authorities.

    The indices, initiated by the National Development and Reform Commission (NDRC) and compiled by nine industry information providers including China coal resource (, assess the delivered prices of domestic 5,000 Kcal/kg NAR coal to power plants on a monthly basis.

    The indices, which included a national index and 32 regional indices covering 30 provinces, are based on prices from over 1,600 firms, covering main power firms, coal mining companies, transfer ports and traders.

    The index series are available on the website of the NARC’s price monitoring center and the websites of all the nine information platforms, and are expected to be officially released from January 2016, following trials in the last five months of 2015.

    In August, the national index for domestic 5,000 Kcal/kg NAR coal was assessed at an average of 340.79 yuan/t with VAT, delivered basis, falling 7.31 yuan/t on month.
    As China's premier coal industry information provider, China coal resource has been providing intelligence and insight for the industry for 18 years, with independent market analysis and price indices better assisting industry players to understand the market dynamics and make decisions wisely.

    The Fenwei CCI index series assess the Chinese domestic and import markets on a daily basis, based on first-hand information collected from market participants in the world's top coal producer and importer.

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    China 'highly polluting project' decision to spur coal subsidy talks

    China's promise to curb public funding of "highly polluting projects" has isolated Japan and increased the pressure to close a deal to phase-out coal export subsidies after months of wrangling.

    The Paris-based Organisation for Economic Cooperation and Development has been hosting talks on the issue since last year.

    Japan, wary of regional competition from China, has been at the vanguard of opposition to phasing out coal export credits that help OECD nations send coal plant technology abroad and benefit companies such as Toshiba Corp.

    But on Friday in a joint U.S.-China statement on Climate Change, China signalled it would take similar steps to those already promised by the United States, the World Bank and others to end coal financing overseas.

    "Japan will have difficulty in exporting coal technologies," Mutsuyoshi Nishimura, special advisor on climate change to the Japanese government, said when asked about China's change of stance.

    In the joint statement, China promised to strengthen green and low-carbon policies "with a view to strictly controlling public investment flowing into projects with high pollution and carbon emissions both domestically and internationally".

    EU officials, speaking on condition of anonymity, said the statement needed to be clarified, but should inject momentum into negotiations that resume in Paris at the OECD on Nov. 16.

    With time running out to get a deal before the U.N. climate talks start in Paris on Nov. 30 on an international pact on global warming, previous OECD coal talks ended in statemate at the start of this month.

    Rache Kyte, the World Bank's special envoy on climate change, told Reuters that China's announcement was significant to the debate at the Paris-based club of developed nations.

    "It is an important signal that China is part of an international community of investors that is trying to move in a cooperative way," she said.

    "It would be perverse for a country to use their development finance to invest in things that are not moving toward a lower-carbon trajectory."

    Environment campaigners say the statement isolates Japan and addresses concerns that China-dominated development banks might start lending to overseas coal projects if Western banks refused to help.

    "Countries that don't want an outcome can no longer make a facile argument that they will just lose market share to China," said Steve Herz, a senior attorney for U.S. environment group the Sierra Club.

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    Rio Tinto coal divestment starts with around $600 mln sale

    Global miner Rio Tinto on Wednesday said it had agreed to sell its 40 percent stake in the Bengalla coal mine in Australia to New Hope Corp for $606 million, the latest shuffle of Australian coal assets amid a sector-wide downturn.

    Bengalla is the smallest of three coal mines in the Hunter Valley near Sydney in which Rio Tinto is a stakeholder. It produced 8.6 million tonnes of coal in 2014.

    New Hope, capitalised at A$1.37 billion ($959 million), said last week it was hunting for acquisitions after reporting a 25-percent rise in annual profit to A$51.7 million before one-offs as cost cuts outweighed a drop in sales despite energy coal prices plunging to six-year lows.

    Analysts at Macquarie and Morgan Stanley said Rio had fetched a strong price for the Bengalla stake relative to their valuations of its coal assets.

    Rio has been looking to offload less profitable businesses to ensure it can stick to a promise to raise dividends and focus on iron ore and copper mining amid a broad slump in commodities prices caused by slowing economic growth in China.

    Rio, advised by Deutsche Bank, earlier this year put all its coal stakes in the Australian state of New South Wales up for sale.

    Until recently Glencore Plc was regarded as a front runner for possible purchases as it also mines coal in the same area.

    But those prospects are fading as concerns over its debt mount and some analysts speculate it could begin selling its own mines.

    Glencore has said it will suspend dividends, sell assets and raise cash, among other measures, to cut its $30 billion debt pile and protect its rating after the prices of its main commodities fell.

    As part of the Bengalla sale, Japan's Mitsubishi Corp and Rio have agreed to disband a coal joint venture in the Hunter Valley and will each take direct stakes in mines previously owned via the venture, potentially making it easier for Rio to sell its remaining stakes.

    Rio declined to comment on whether it was still looking to sell any of the stakes in those bigger mines.
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    Mexico announces import duties on steel products for six months

    Mexico on Tuesday announced new levies for six months to protect its steel industry following a simmering dispute with China over imports from the Asian giant that steelmakers said are hurting local business.

    The duties of around 15 percent would apply to five types of products including cold-rolled steel, hot-rolled steel and wire rod, from countries that do not have free trade agreements with Mexico, the economy ministry said.

    China does not have such an agreement with Mexico.

    Mexico said earlier this month it would conduct an anti-dumping probe into steel wire rod from China following a request from three firms operating in Mexico which complained that cheap, fast-rising imports were hurting the local industry.

    The three companies were ArcelorMittal Las Truchas , Deacero, and Ternium Mexico.

    In recent months, Mexico has taken several steps to protect the industry, including new import duties, anti-dumping quotas, and enhancing customs controls to enforce the quotas.
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    Kobe Steel cuts profit target by 58%

    Kobe Steel Ltd has more than halved its full-year profit target after China’s slowing economy hurt sales at its construction machinery unit and a power outage at its Kakogawa steelworks pushed up costs.

    The steelmaker now forecasts net income at 25 billion yen ($207 million) for the year to March 2016, 58 percent lower than its July forecast of 60 billion yen

    Kobe Steel had a profit of 86.5 billion yen in the year to March 2015.

    Kobe Steel, Japan’s third biggest producer of the metal, cut its full-year sales forecast by 2.6 percent to 1.9 trillion yen and its operating profit target by 24 percent to 95 billion yen, according to its statement. The Kakogawa plant in west Japan is one of two, and profits there will be hit by higher safety costs after July’s power outage and reduced output, it said.
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    Baosteel starts production at new mill in Zhanjiang

    Baoshan Iron & Steel Co (Baosteel) started production at its new project in China's southern port city of Zhanjiang even as steel prices plunge amid sluggish demand in the country, which  is facing its slowest pace of economic growth in 25 years.

    The No. 1 blast furnace of the project, designed to have an annual capacity of 4.1 million tonnes of melted iron, was ignited on Friday, China's biggest publicly traded steelmaker said in  a filing to the Shanghai Stock Exchange yesterday.

    The project will be fully operational a year later with an expected annual crude steel production of 8.75 million tonnes, Baosteel said.

    It usually takes three to six months of trial production before a new steel mill begins commercial operation.

    Chinese mills face declining domestic demand for the first time in a generation amid a property slump, which crushed prices in the nation that produces more than half of world output.

    Baosteel last month said that it expected a 50 percent to 60 percent drop in net income for the first nine months of the year, citing foreign exchange losses related to debt restructuring  after a surprise yuan devaluation.
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    NEA publishes updates on China’s coal mines capacity

    China’s National Energy Administration (NEA) published an announcement on September 21, giving updates on production capacity of operating coal mines, following efforts to curb mines that producing beyond their approved capacity.

    Shaanxi and Shanxi topped the list, with capacity of coal mines publishing for the first time or changing capacity totaling 133 million and 117 million tonnes per annum by the end of June this year, respectively, the NEA said.

    In Shaanxi, the capacity was dominated by 28 coal mines, seven of which with capacity in excess of 10 million tonnes per year; while the capacity in Shanxi was mainly from 67 mines, with 22 mines above 900,000 tonnes per annum and two mines over 10 million tonnes per annum.

    Inner Mongolia and Xinjiang Uygur Autonomous Region followed, with capacity all above 10 million tonnes per annum.

    Among those coal mines whose capacity would no longer be published by the NEA, either to be closed or merged with others, 97 coal mines were in Hunan province, with combined capacity totaling 5.65 million tonnes per annum.

    Chongqing province ranked second, with 91 small coal mines at a combined capacity of 5.44 million tonnes per year; Xinjiang followed with 32 coal mines at 2.92 million tonnes per year.

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