Mark Latham Commodity Equity Intelligence Service

Friday 22nd January 2016
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    Oil and Gas


    Top-Ranked Analyst Says BHP May Need $10 Billion Stock Sale

    BHP Billiton Ltd. needs to raise as much as $10 billion in a sale of new stock to its investors if it wants to keep its credit rating, according to the top-ranked analyst covering the world’s biggest mining company.

    As prices for key commodities such as iron ore and oil have tumbled, BHP’s stated goal of retaining its A+ credit rating at Standard & Poor’s and A1 rating at Moody’s Investor Service is under pressure, Richard Knights of Liberum Capital Ltd. wrote in a note on Friday. Raising $5 billion to $10 billion through a share sale to existing investors is required to fill the shortfall in cash flow to keep the rating, he said.

    “Slashing capital expenditure and even cutting its dividend to zero are not sufficient for BHP to realistically retain a ‘solid A’ credit rating, if spot commodity prices and currencies persist,” said Knights, who’s the top ranked analyst covering BHP’s London shares according to Bloomberg data. “Given the company continues to be married to the idea of a ‘solid A’ rating throughout the cycle, a rights issue looks likely.”

    Miners have been battered by headwinds from slowing growth in China, their biggest customer, and gluts in metals to energy markets. That’s forced competitors to scrap dividends and sell assets, while smaller rivals such as Glencore Plc and Freeport McMoran Inc. have already sold shares to strengthen their finances.

    The Melbourne-based miner could raise as much as $15.4 billion through a share sale to allow it to buy assets of distressed rivals, Bank of America Corp. analyst Jason Fairclough wrote in a note to clients earlier this month. Such a sale might accelerate the distress of more indebted companies in the industry and force the sale of quality mines, according to Fairclough.

    In addition to a cut to its dividend, BHP has options to make further reductions to capital expenditure and to continue to trim operating costs.

    “Given the optionality additional capital would give BHP around M&A at this point in the cycle, we feel a raise at the higher end of this range is more likely,” Liberum’s Knights wrote of his $5 billion to $10 billion estimate. “The threat of a capital call will weigh on the shares.”
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    Chinese consortium buying and storing metal with bank finance.

    China's plans to set up funds to manage coal and steel capacity closures and stockpiling schemes offer nervous markets some clarity on the likely future make-up of the country's sprawling and predominantly state-run metals and mining industries.

    As the world's largest producer of aluminium, steel and other metals, and the biggest consumer of copper and iron ore, China is crucial to global metals markets which have slumped in the past year as Chinese industrial demand growth slowed.

    China's slowdown has hit revenue at global miners such as BHP Billiton and Rio Tinto , and the market is keen to know what China plans for its own state-run mining and metals giants - many of which have kept producing even as prices drop below the cost of production.

    After weeks of talks between government officials and leading metals producers, Beijing looks set to take a direct approach to managing capacity cuts and layoffs in coal and steel. It will provide smaller-scale financing deals to groups of producers of non-ferrous metals, such as aluminium, for stockpiling and capacity cutback initiatives.

    On Thursday, state media reported that Beijing will allocate 30 billion yuan ($4.56 billion) over the next three years to support the closure of small and inefficient coal mines, and re-deploy some 1 million workers. Similar measures are expected to be unveiled for the steel sector. Both industries have huge over-capacity.

    Last week, six big aluminium producers - Aluminum Corp of China (Chinalco) , State Power Investment Corp, Yunnan Aluminium, Jiugang Group, Jinjiang Group and Weiqiao Aluminium & Electricity - agreed to set up a new company to handle a proposed stockpiling scheme and to coordinate and monitor production levels across the group, said two people with direct knowledge of the matter.

    Similar group-based initiatives are being considered by zinc and copper producers, but these are at a less advanced stage.


    The aluminium stockpiling programme is part of a bigger plan proposed late last year by smelters and the state-controlled China Nonferrous Metals Industry Association.

    The producers have been in talks for several weeks with state-owned China Development Bank (CDB) for loans, and the establishment of the new joint company was a necessary step to access funding, the two knowledgeable people said.

    "(We) have invited the CDB to support (the funding)," said one of the two individuals, adding the bank funding would be used to stockpile nonferrous metals, and its scale would depend on smelters' needs. He said aluminium stockpiling could start before the Lunar New Year holiday in February, when demand was weak.

    Local media and postings on Chinese chatrooms say loans could total around 30 billion yuan and mature in three years. About a third would be used to stockpile aluminium, with another third used to buy nickel

    Traders warned that commercial stockpiling was unlikely to support prices over the longer term, with demand still weak, and stronger prices could tempt some to re-start idled capacity, adding to the supply glut. Nearly 5 million tonnes of aluminium capacity was idled last year, according to the industry body.

    "Stockpiling may support prices for 1-2 months. After that, we have to see demand and production cuts," said a trader at a state-owned investment firm.

    Traders are also concerned the stocks could be hedged in futures markets, which could be a drag on prices. The aluminium producers have not discussed whether or not to hedge the stocks, the second knowledgeable individual said, and today's low prices should discourage hedging.

    The CDB loans could also help cover the cost of closing capacity at cash-strapped state-owned aluminium smelters, said a smelter executive briefed on the stockpiling programme.

    "Some firms want to get out ... but an exit route has not been opened up. Some local governments continue to urge steel firms to produce in the interests of local economic development and social stability," Zhang Guangning, outgoing chairman of the China Iron and Steel Association, said at a meeting last week.

    Shenwan Hongyuan Securities estimates the funds required to make a real dent in coal and steel capacity could be as much as 200 billion yuan ($30.4 billion).

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    South32 slashes debt to weather coal, metals slump

    South32 Ltd has cut net debt by about 70 percent since the end of June to $115 million, it said on Thursday, shoring up the miner of coal and metals against shrinking earnings from weaker output and plunging prices for most of its commodities.

    South32, spun off last year by BHP Billiton , has already cut or suspended output at its high cost South African manganese ore mines, and some smelters and said it would do more to help it ride out the tough market.

    "Further decisive action will be taken as we seek to maximise short-term cash flow, while preserving longer-term value," Chief Executive Graham Kerr said in a statement.

    South32 cut its forecast output of Australian coal by 7 percent to 8.3 million tonnes for the year to June 2016 after running into geological challenges at two mines.

    However, it reaffirmed full-year output guidance for its other products, including alumina, South African coal, nickel, silver, lead and zinc, while it continues a review of its South African manganese operation.

    Except for zinc, all production is expected to be lower than last year.

    Zinc output in the December quarter rose 31 percent from a year earlier to 22,200 tonnes, well ahead of a Goldman Sachs' forecast of 18,794 tonnes, boosted by a sharpimprovement in the amount of ore recovered per tonne of rock.

    South32's shares, down 58 percent since they listed last May, rose 1.1 percent on Thursday after the production report, roughly in line with the broader market.
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    Last year was hottest on record globally -U.S. science agencies

    Last year's global average temperature was the hottest ever by the widest margin on record, two U.S. government agencies said on Wednesday, adding to pressure for deep greenhouse gas emissions cuts scientists say are needed to arrest warming that is disrupting the global climate.

    Data from U.S. space agency NASA and the National Oceanic and Atmospheric Administration showed that in 2015, the average temperature across global land and ocean surfaces was 1.62 degrees Fahrenheit (0.90 Celsius) above the 20th century average, surpassing 2014's previous record by 0.29 F (0.16 C).

    This was the fourth time a global temperature record has been set this century, the agencies said in a summary of their annual report.

    "2015 was remarkable even in the context of the larger, long-term warming trend," said Gavin Schmidt, director of NASA's Goddard Institute for Space Studies.

    The sharp increase in 2015 was driven in part by El Niño, a natural weather cycle in the Pacific that warms the ocean surface every two to seven years. But scientists say human activities - notably burning fossil fuels - were the main driver behind the rise.

    "We would not have seen the record warming without the long-term trend," Schmidt said.

    The latest El Niño started in late 2015 and will last until spring 2016. It is among the strongest ever recorded but Schmidt and others say the weather phenomenon played just a supporting role in the earth's temperature rise.

    The 2015 data underscores the urgency of cutting greenhouse gas emissions if the world is to hold temperature increases to well below 2 degrees C, the target agreed to by more than 190 countries at climate talks in Paris last December.

    Schmidt said the fact that the world is now halfway to the U.N. goal has led many scientists to argue that even that target is too high and more stringent goals are needed.

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    China says to invest 800 billion yuan on rail infrastructure this year

    China Railway Corp. (CRC), the operator of country's railroads, has planned to invest 800 billion yuan on infrastructure in 2016, up from 823 billion yuan in 2015 and 809 million yuan in 2014, its general manager Sheng Guangzu,said at a press conference on January 17.

    While spending in 2015 was the second most in the nation's history, the CRC data showed it lost over 9.4 billion yuan in the first three quarters last eyar, nearly three times more than the losses in the corresponding period of 2014.

    The company this year aims to increase passenger traffic by 10% from 2015 and freight transport by 2%, Sheng said.

    Some 2.5 billion people traveled by rail in China in 2015, the third straight year of 10% growth. However, the amount of rail freight fell by about 10% from last year, the largest decline the country has ever seen, Sheng said. He blamed the slump on fewer shipments of bulk commodities such as coal and steel.

    To boost the freight industry, the CRC plans to take more orders for shipping merchandise such as consumer goods, speed up freight trains and develop high-speed units for cargo transport, Sheng said.

    To resolve the problem of mounting debts, it will also try to diversify its sources of income, he said. The company has announced plans to sell ad space on tickets, and Sheng said it may build commercial districts around stations.

    China says to invest 800 billion yuan on rail infrastructure this yr

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    Peak 'stuff'? Ikea sustainability head speaks his mind.

    The appetite of western consumers for home furnishings has reached its peak – according to Ikea, the world’s largest furniture retailer.

    The Swedish company’s head of sustainability told a Guardian conference that consumption of many familiar goods was at its limit.

    “If we look on a global basis, in the west we have probably hit peak stuff. We talk about peak oil. I’d say we’ve hit peak red meat, peak sugar, peak stuff … peak home furnishings,” Steve Howard said at a Guardian Sustainable Business debate. He said the new state of affairs could be called “peak curtains”.

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    Mining giant BHP pessimistic on iron ore, coal prices in next few years

    Mining giant BHP pessimistic on iron ore, coal prices in next few years

    BHP Billiton flagged on Wednesday that it sees no recovery in iron ore or coal prices in the next few years, while holding out hope for a rebound in copper and oil as it fights slumping earnings set to hit its long-protected dividend.

    The top global miner reinforced the bleak outlook for most commodities in the near term, with markets slammed by oversupply as the economy slows in China, the world's biggest metals consumer.

    In a sign the company may cut its dividend, ending a long-held policy to maintain or raise its payout every year, BHP Chief Executive Andrew Mackenzie said in a quarterly production report that it was focused on defending its investment grade credit rating.

    "In this environment, we are also committed to protecting our strong balance sheet so we have the financial flexibility to manage further volatility and take advantage of the expected recovery in copper and oil over the medium term," Mackenzie said.

    He made no mention of any recovery in iron ore or coal prices.

    BHP is reeling as oil prices have slumped further than expected at the same time as its other products have plunged to multi-year lows. Average prices for its commodities slumped between 20 and 51 percent in the first half of its financial year compared to a year earlier, with crude oil worst hit.

    BHP shares fell 4 percent on Wednesday to their lowest in over a decade at A$14.14 as oil prices sank to their weakest since September 2003.


    Analysts said the production report was largely in line with forecasts, adding that they were watching for further spending cuts when BHP reports financial results in February.

    "We have written that BHP will either need to meaningfully cut future capex or its dividend, and we stick to that view," said Clarksons Platou analyst Jeremy Sussman.

    As expected, the company trimmed its full-year forecast for iron ore output by 10 million tonnes to 237 million tonnes, following a dam burst at the Samarco venture in Brazil that killed 17 and devastated a nearby village.

    BHP reaffirmed guidance for declines in copper, coal and petroleum output in the year to June 2016. It has slashed the number of rigs at its U.S. shale fields amid the collapse in oil prices.

    Copper output is still expected to fall 12 percent to 1.5 million tonnes, metallurgical coal down 6 percent to 40 million tonnes and thermal coal down 2 percent to 40 million tonnes from a year earlier.

    BHP's oil and gas output, which sets it apart from other big miners, fell 5 percent to 60.2 million barrels of oil equivalent (mmboe) in the December quarter. However it still sees full-year petroleum output at 237 mmboe, with offshore production helping to offset shale declines.

    BHP produced 57 million tonnes of iron ore in the December quarter. Quarterly copper output fell 9 percent to 400,000 tonnes because of lower grade ores at the Escondida mine in Chile.

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    EU agrees to improve European grid to curb need for Russian gas

    EU member states on Tuesday endorsed a plan to invest more than 200 million euros ($217 million) in cross-border energy infrastructure projects designed to help curb dependence on Russian gas.

    The European Commission is seeking to improve power and gas connections across the European Union's 28 member states to allow better distribution of available supplies as part of a single energy market.

    The EU is keen to reduce reliance on Russia, which supplies about a third of EU oil and gas.

    The dominant position of Russia's Gazprom has become particularly divisive since relations between Brussels and Moscow deteriorated after Russia seized the Crimean region of Ukraine in 2014.

    The Commission wants every member state to have at least three possible sources of gas.

    "We must press ahead with the modernisation of our energy networks to bring any country still isolated into the European energy market," European Climate and Energy Commissioner Miguel Arias Canete said, announcing the funding.

    Of the 15 proposals selected for total funding of 217 million euros, nine are in the gas sector and six in the electricity sector.

    Called projects of common interest because they benefit more than one member state, the projects are entitled to accelerated planning permission as well as EU funding, which the Commission hopes will attract private sector cash.

    Most of the 15 projects are in central and southeastern Europe, where dependency on Russian gas is most marked.

    Britain is not directly affected by the Russian crisis as it is not dependent on its gas, but it is nervous about the adequacy of national supplies and the extra costs it might incur from emergency back up plans.

    The new funding will also help pay for a grid link between France and Britain being built by Britain's National Grid and France's Reseau de Transport d'Electricite (RTE).
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    Libya's presidential council names new government amid divisions

    Libya's Presidential Council announced a new government on Tuesday aimed at uniting the country's warring factions, though two of its nine members rejected it in a sign of continuing divisions over its U.N.-backed plan for a political transition.

    Western powers hope the new government will deliver stability to Libya and tackle a growing threat from Islamic State militants, but critics say the agreement was forced through too quickly and does not evenly represent the country's groups and factions.

    EU foreign policy chief Federica Mogherini called the announcement by the Tunis-based council, tasked with overseeing Libya's political transition, "an essential step".

    The council had delayed its announcement by 48 hours without giving a reason.

    Mogherini said only a unity government would be able "to end political divisions, defeat terrorism, and address the numerous security, humanitarian and economic challenges the country faces".

    Libya has become deeply fractured since the fall of Muammar Gaddafi in 2011. Since the summer of 2014 it has had two rival governments and parliaments, operating from the capital Tripoli and from the east.

    Both are supported by loose alliances of armed brigades of rebels who once fought Gaddafi.

    Late on Monday, one of the council members who did not sign the document naming the new government, Ali Faraj al-Qatrani, announced he was withdrawing from the process, saying eastern Libya was underrepresented and there was not sufficient support for the armed forces allied to the eastern government.

    He claimed there had been "a lack of seriousness and clarity in dealing with our basic demands" during the Presidential Council's negotiations.

    The internationally recognized parliament in eastern Libya now has 10 days to approve the new government. There has been no announcement on how and when it would be able to establish itself in Libya.

    Tripoli is controlled by a faction called Libya Dawn, and the head of the self-declared government that it backs said last week that preparations by the Presidential Council to secure the capital violated military law.

    The eastern military forces are led by Gen Khalifa Haftar, a former Gaddafi ally who has become one of the most divisive figures among Libya's rival groups.

    In a statement on Tuesday, U.N. Libya envoy Martin Kobler urged the chamber "uphold the country's national interest above all other considerations and promptly convene to discuss and endorse the proposed cabinet".

    The new government will be led by Fayez Seraj, a lawmaker from the eastern parliament, known as the House of Representatives. He also heads the Presidential Council.

    Key ministerial nominations include Khalifa Abdessadeq as oil minister.

    Libya's current oil production is under 400,000 barrels per day, less than a quarter of a 2011 high of 1.6 million bpd.
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    Reliance Profit Surges to 8-Year High as Refining Margin Widens

    Reliance Industries Ltd.’s third-quarter profit surged to the highest in eight years as margin for turning crude into fuels widened at the operator of the world’s biggest oil-refinery complex.

    Net income increased to 72.2 billion rupees ($1.07 billion) in the three months ended Dec. 31 from 50.8 billion rupees a year earlier, the Mumbai-based company said Tuesday in a stock exchange statement. That beat the 70.1 billion-rupee mean of 17 analyst estimates compiled by Bloomberg. Sales fell 29 percent to 565.7 billion rupees.

    Asia refiners, including Reliance, have benefited from a collapse in oil prices with Brent crude falling more than 70 percent over the past 18 months. The company controlled by billionaire Mukesh Ambani depends on earnings from two adjacent refineries in western India to boost profit as it prepares for the commercial start of a $15-billion telecommunications service this year.

    “We expect the earnings momentum to continue as refining margins will remain strong,” said Dhaval Joshi, an analyst at Emkay Global Financial Services Ltd. “The next trigger will be the commercial launch” of the telecommunications business, he said.

    Refining Margin

    Reliance earned $11.50 for every barrel of crude it turned into fuels in the quarter, the highest in seven years, compared with $7.30 a barrel a year earlier and $10.60 a barrel in the three months ended September, the company said.

    The twin refineries at Jamnagar in the western state of Gujarat have a combined capacity of 1.24 million barrels a day and can process cheaper, lower grades of crude into high-value products. Brent oil, the global benchmark, averaged about $44.69 a barrel in the quarter, 42 percent lower than a year earlier.

    A majority of the fuels and chemicals that Reliance produces are exported and paid for in dollars. A lower value of the rupee against the dollar increases export earnings when converted to the local currency. The rupee averaged 65.925 per dollar in the quarter ended Dec. 31, 6.3 percent lower than 62.011 in the same period a year earlier.

    Reliance shares rose 2.6 percent to 1,043.60 rupees at the close in Mumbai. The earnings were announced after trading ended.

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    China economic growth slowest in 25 years

    China's economy grew by 6.9% in 2015, compared with 7.3% a year earlier, marking its slowest growth in a quarter of a century. Economic growth in the final quarter of 2015 edged down to 6.8%, according to the country's national bureau of statistics.

    China's growth, seen as a driver of the global economy, is a major concern for investors around the world.

    Beijing had set an official growth target of "about 7%" for the world's second-largest economy.

    Chinese Premier Li Keqiang has said weaker growth would be acceptable as long as enough new jobs were created.

    But some observers say its growth is actually much weaker than official data suggests, though Beijing denies numbers are being inflated.

    Analysts said any growth below 6.8% would likely fuel calls for further economic stimulus.
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    China 2015 power consumption up 0.5pct on year

    China 2015 power consumption up 0.5pct on year

    China’s power consumption rose 0.5% on year to 5500 TWh in 2015, showed data from the National Energy Administration on January 15.

    Power consumption by the residential segment was 727.6 TWh, rising 5.0% on year.

    For the non-residential segment, the primary industries – mainly the agricultural sector – used 102 TWh in 2015, up 2.5% from the year prior.
    The secondary industries – mainly the industrial sector, consumed 4004.6 TWh, dropping 1.4% on year.
    The industrial sector specifically, consumed 3934.8 TWh of electricity in 2015, down 1.4% on year, with the heavy industry accounting for 82.9% or 3262 TWh, dropping 1.9% on year.
    Power consumption by tertiary industries – mainly the service sector – increased 7.5% on year to 715.8 TWh.
    In 2015, the average utilization of power generating units (annual capacity over 6 MW) across the country was 3,969 hours, 349 hours or 8.08% lesser than the year before.
    Of this, hydropower plants logged average utilization of 3,621 hours, a yearly decline of 1.31% or 48 hours; the average utilization of thermal power plants decreased 410 hours to 4,329 hours, dropping 8.65 % on year.
    In addition, China added 129.74 GW of power generating capacity in 2015, including 16.08 GW of new hydropower capacity and 64 GW of new thermal power capacity.
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    India's Dec exports fall for 13th month, exporters brace for tough times

    Jan 18 India's merchandise exports fell for the 13th successive month in December, as orders from the United States and Europe shrank and exporters grappled with a competitively weaker Chinese yuan.

    The deteriorating global economic growth outlook and rising volatility in currency markets have dampened Indian exports, although the blow has been softened by a collapse in the country's oil import bill.

    "We are facing terrible times as orders from the U.S. and Europe have dried up," said S.C. Ralhan, president of the Federation of Indian Export Organisations (FIEO), referring to shipments to India's two largest markets.

    "The slowdown in China and depreciation of its currency have further hit exports," he said, adding that total merchandise exports could fall to about $250 billion in the fiscal year ending on March 31.

    Exports in December fell 14.75 percent from a year earlier to $22.3 billion while imports stood at 33.96 billion, data from the Ministry of Commerce and Industry showed on Monday.

    India's merchandise exports declined 3.5 percent in 2014/15 to $310 billion from the previous year while imports were down 0.5 percent to $448 billion.

    Cheaper Chinese exports have undercut exports of Indian engineering goods, which constitute around a quarter of total merchandise exports.

    Engineering exports could fall to near $60 billion in the current fiscal year from $72 billion a year earlier, said T.S. Bhasin, chairman of the Engineering Export Promotion Council.

    "My own exports are down by more than 30 percent, forcing me to retrench contract workers and sell in the local market at a lower price," he said, adding more than 100,000 employees in engineering might lose their jobs.

    Prime Minister Narendra Modi has made his Make in India programme, which seeks to attract foreign investment in export-oriented manufacturing, a centrepiece of an economic recovery plan that needs to create a million jobs a month to succeed.

    India's trade deficit with China widened to $35.6 billion during the April-Nov period from $32.4 billion a year earlier. During that period, its exports to China fell to $6.2 billion from $7.9 billion a year ago, reflecting a severe imbalance in trade between the world's two most populous countries.

    The government offered a fiscal package of about 27 billion rupees ($400 million) a year, in November to provide subsidised credit to exporters, hoping it could marginally help stabilise exports in coming months.

    Finance Minister Arun Jaitley, who will present his annual budget for 2016/17 on Feb. 29, is unlikely to provide much relief to exporters, officials said, as he faces a tough challenge to meet his fiscal deficit targets.

    "We do not have much hope though exporters' survival is at stake," Ralhan from the FIEO said.

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    Manufacturing in America continues to struggle.

    Image title
    The New York Fed's Empire Manufacturing index plunged to -19.37 in January from  -6.21 in December.

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    Henan 2015 power output down 4.32pct on year

    Central China’s Henan province produced 255.89 TWh of electricity in 2015, down 4.32% on year, showed data from the National Energy Administration (NEA) on January 15.

    Of this, output of hydropower and new energies-fueled power in 2015 climbed 12.98% and 25.38% on year to 10.87 TWh and 3.97 TWh, respectively; thermal power output stood at 241.06 TWh, sliding 5.35% from the year prior, data showed.

    The average utilization hours of power generating units stood at 3,902 hours in 2015, falling 446 hours from a year ago.

    By end-December, total installed capacity across the province rose 8.85% on year to 67.44 GW. Of the total, the installed capacity of thermal power was 61.63 GW or 91.39%; that of hydropower stood at 3.99 GW or 5.91%; that of power from new energies stood at 1.82 GW or 2.7%.

    Power consumption of the province in 2015 reached 288 TWh, a decline of 1.37% on year.

    Of this, power consumption by the residential segment was 36.9 TWh in 2015, down 4.81% from the year prior.

    For the non-residential segment, the primary industries – mainly the agricultural sector – used 5.44 TWh of electricity, decreasing 20.5% on year.

    The secondary industries – mainly the industrial sector – consumed 217.9 TWh of electricity during the same period, falling 0.73% on year.

    The industrial sector, specifically, consumed 215.48 TWh of electricity in 2015, decreasing 0.79% from the year before, with the heavy industry accounting for 86.58% or 186.56 TWh, dropping 1.55% year on year.

    Power consumption by tertiary industries – mainly the services sector – reached 27.7 TWh last year, increasing 3.26% year on year.

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    Bears storm the market.

    Bearish sentiment, measured by the number of respondents who believe the market will fall in the next six months, jumped to 45.5% in the latest week, the highest since the week of April 18, 2013, when it hit 48.2%. That compares with 38.3% in the previous week and 23.6% in the last week of 2015.

    In contrast, investors who are bullish and expect the market to rise in the next six months fell to 17.9%, the lowest since April 14, 2005, when only 16.5% respondents expressed optimism. Last week, 22.2% of survey participants said they were bullish. The eight-week moving average of the bullish sentiment gauge also slid to 25.7% this week, recordImage titleing its seventh week of decline.

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    Oil and Gas

    SaudiAramco plans to double crude oil, oil products exports to China

    SaudiAramco plans to double crude oil, oil products exports to China, say senior executives at the state-owned oil giant.

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    Schlumberger Cuts Another 10,000 Jobs as Crude Rout Deepens

    Schlumberger Ltd. cut another 10,000 jobs to cope with a crude market collapse that’s forced its customers to slash spending for two consecutive years.

    The world’s largest oilfield service provider reported a loss of $1.02 billion, or 81 cents a share, compared to profit of $302 million, or 23 cents, a year earlier, the Houston- and Paris-based company said in a statement Thursday. Excluding charges, Schlumberger earned 65 cents a share, 2 cents more than the average 63 cents estimated by 37 analysts in a Bloomberg survey.

    Schlumberger, which has fallen 44 percent since the downturn began 19 months ago, will launch a new $10 billion stock buyback program as its current repurchase plan of the same amount wraps up.

    "It’s always nice to know the company is investing in itself," Matt Marietta, an analyst at Stephens Inc. in Houston, who rates the shares the equivalent of a buy and owns none, said in a phone interview. "All things considered, I think their cost-savings program can be viewed positively."

    The company took $2.1 billion in charges to account for the latest layoffs and restructuring. That exceeded the $1.77 billion in charges from a year ago as the company completed its first major round of restructuring amid plunging oil prices. Total job cuts for the company since the third quarter of 2014 now add up to 34,000 -- 26 percent of its workforce, according to Joao Felix, a spokesman.

    Schlumberger’s revenue dropped 39 percent in the quarter to $7.74 billion, the lowest in five years.

    "The decrease in land activity was the sharpest seen since 1986," Chief Executive Officer Paal Kibsgaard said in the statement. With the rig count dropping so steeply, "the massive over-capacity in the land services market offers no signs of pricing recovery in the short to medium term."
    The company’s operating profit margin could slip to as low as 5 percent in North America by the first quarter, after it was 8.9 percent in the third quarter, Lemoine said. It may not be until late 2017 that Schlumberger and its peers will gain the ability to push prices back up for some of their highly competitive services such as hydraulic fracturing, he said.

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    US Oil production shows very small increase, just ahead of last year

                                               Last Week   Week Before   Last year

    Domestic Production '000..... 9,235            9,227             9,186
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    Summary of Weekly Petroleum Data for the Week Ending January 15, 2016

    U.S. crude oil refinery inputs averaged 16.2 million barrels per day during the week ending January 15, 2016, 233,000 barrels per day less than the previous week’s average. Refineries operated at 90.6% of their operable capacity last week. Gasoline production increased last week, averaging about 9.5 million barrels per day. Distillate fuel production decreased last week, averaging about 4.6 million barrels per day.

    U.S. crude oil imports averaged 7.8 million barrels per day last week, down by 409,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.8 million barrels per day, 9.6% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 512,000 barrels per day. Distillate fuel imports averaged 185,000 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 486.5 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 4.6 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 1.0 million barrels last week but are near the upper limit of the average range for this time of year. Propane/propylene inventories fell 1.9 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 6.6 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.3 million barrels per day, down by 1.8% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 8.8 million barrels per day, down by 2.8% from the same period last year. Distillate fuel product supplied averaged 3.3 million barrels per day over the last four weeks, down by 15.4% from the same period last year. Jet fuel product supplied is down 3.1% compared to the same four-week period last year.

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    Rosneft says has financial resources to meet debt obligations

    Russia's top oil producer Rosneft has the resources to meet its 2016 debt obligations of $13.7 billion in full this year, the company told Reuters on Thursday, as the value of the rouble against the U.S. dollar and euro has plummeted.

    Rosneft, under Western sanctions over Moscow's role in the Ukraine crisis which limit its ability to borrow on global markets, bought TNK-BP, its smaller competitor, for $55 billion in 2013.

    Rosneft said on Thursday it had a total of around $23 billion in free cash and short-term financial assets as of Sept-end, 2015, enough to meet its debt obligations this year.

    Rosneft, which accounts for 40 percent of Russian oil output, said last year it had paid international banks $7.9 billion in the third quarter of 2015.

    The company's net debt was down by 40 percent to $24.5 billion in the third quarter, quarter-on-quarter, thanks to the forward payments by its clients worth more than 1 trillion roubles ($11.9 billion).

    Rosneft did not elaborate on Thursday whether it expected more such forward payments this year.

    The company raised 625 billion roubles in rouble bonds at the end of 2014, in a deal described later by the central bank governor Elvira Nabiullina as "non-transparent, unclear to the market and... an additional factor of volatility."

    Rosneft said at the time it did not use the funds raised to buy foreign currency.
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    Southwestern Energy to lay off 1,100 workers amid oil slump

    Southwestern Energy Co said it would lay off 1,100 employees, or nearly 40 percent of its workforce, as it slows down drilling activity in response to a prolonged slump in oil prices.

    Oil futures dropped to their lowest levels since 2003 this week on worries of a growing crude glut amid slowing demand due to economic weakness, especially in China.

    Southwestern had no drilling rigs in operation at the start of 2016 and is yet to finalize its capital budget and operating plan for the year.

    The company said on Thursday it expects to record a pre-tax charge of about $60 million to $70 million related to the job cuts in the first quarter.

    Southwestern also said the latest round of job cuts along with the 102 layoffs in August would lower its annual costs by $150 million to $175 million.

    Attached Files
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    China's Dec diesel exports up 264 pct on year -customs

    China's December diesel exports rose 264 percent from a year earlier to 980,000 tonnes, the country's General Administration of Customs said on Thursday, the second-highest month in 2015.

    Full-year diesel exports rose 74.6 percent in 2015 to 7.16 million tonnes.
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    Norway's Statoil, Det norske looking for more acquisitions

    Norwegian oil firms Statoil and Det norske are looking at more acquisitions after recent deals, their chief executives told Reuters, hunting for bargains after a plunge in energy prices.

    Statoil last week bought an 11.9-percent stake in Sweden's oil firm Lundin Petroleum for $540 million, increasing its dominance on the Norwegian continental shelf where it already operates more than 70 percent of Norway's oil and gas output.

    "We have done a transaction with Lundin, and we are of course monitoring other possibilities closely," Statoil CEO Eldar Saetre said in an interview, adding that Statoil has no current plans to raise its stake in Lundin.

    "It is most likely that this (mergers and acquisitions) will increase," he said, speaking generally about the sector.

    Last year saw a flurry of deals in Norway's biggest industry, with private equity investors buying up assets, betting on a recovery in crude prices, from energy firms happy to generate some cash.

    The price of Brent crude is down 77 percent since June 2014, putting pressure on the budgets of energy companies but offering scope to pick up assets at attractive prices for those bold enough to bid.

    Norway's Det norske, controlled by Norwegian billionaire Kjell Inge Roekke, has been another active buyer.

    The exploration and production company bought the Norwegian units of Marathon Oil, Svenska Petroleum and Premier Oil's over the past 18 months.

    "We want to play an active role in this market," Det norske CEO Karl Johnny Hersvik told Reuters on the sidelines of a company investment seminar. "We are looking for further opportunities."

    Smaller player OKEA, a private-equity backed Norwegian newcomer which this month took over a 60 percent stake in a North Sea oilfield from Repsol of Spain, said it was looking at more deals this year.

    "We think we can bring in more money as we make more good deals ... I hope that we can make one or two more deals in 2016," OKEA partner Erik Haugane told Reuters.

    "Changes like this (in the oil price) is a catalyst for action. Some will buy more resources like we do, while others will clean out their portfolio to focus their business."
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    Legal uncertainties delay flow of Iranian oil to Europe

    European companies and trading houses are not rushing to buy Iranian oil because of legal uncertainties over the lifting of sanctions that are likely to take weeks to clarify.

    A lack of dollar clearing, the absence of an established mechanism for non-dollar sales, insufficient clarity on ship insurance and the reluctance of banks to provide letters of credit to facilitate trade are all giving cause for caution.

    Iran used to sell as much as 800,000 barrels per day (bpd) to European refiners in Italy, Spain and Greece before sanctions over its nuclear programme were imposed. European markets have since then been inundated with extra oil from Saudi Arabia, Russia and Iraq.

    Iran ordered a 500,000-bpd increase in oil output, of which 200,000 bpd will go to Europe, after the nuclear-related international sanctions were lifted on Saturday. But many European firms are wary of violating other sanctions that were imposed by the United States and have not been lifted.

    Russian oil major Lukoil's chief executive, Vagit Alekperov, said it was still not clear whether the company's refineries in Italy or the Netherlands were free of legal risks to buy Iranian oil.

    "It is all clear on the petrochemical side. We can transfer the money and buy and sell their products. On the crude side, our lawyers are looking into this," he told Reuters Television on the sidelines of the World Economic Forum in Davos.

    Marco Dunand, chief executive of Swiss trading house Mercuria, also believes Iranian oil imports into Europe remain complicated.

    "As a European citizen, I can probably trade it again provided I don't use U.S. dollars. But then if you use a euro-dollar conversion, does it become a grey (uncertain) zone?" he said.

    Dunand said a lot of additional explanatory work needed to be done by European governments on how ship insurance and banking would now work before imports to Europe resume.

    An executive from a European firm which was a big buyer of Iranian oil before the sanctions were imposed said it could take weeks to clear up many aspects.

    "Up until Monday, banks and ship insurers were simply refusing to have any conversations about this," he said.

    Another senior oil executive at the Davos meeting said his firm would eventually resume imports from Iran but was still exercising caution due to a lack of clarity.

    Market players, however, expect that companies which bought Iranian crude before the sanctions - such as Royal Dutch/Shell , Total, Eni, Hellenic Petroleum and traders such as Vitol and Glencore - will resume purchases at some point later this year.
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    Saudi-Israel pipeline?

    A Saudi-Jordan-Israel oil and gas pipeline is the only answer.  It’s the shortest distance between the two points of Saudi Arabia and the Eastern Mediterranean.  That was the historical path of the westward oil pipeline before Israel was created in 1948, and the Arabs declared endless war.  Egypt is too unstable to protect and control its own pipeline through the Sinai, let alone anything grander.  Therefore, the Sunni oil kingdoms have one and only one choice: a pipeline through Israel.

    Israel is the perfect hub for all the non-evil-axis (though far from democratic) regional players: Turkey, Egypt, Cyprus/Greece, and Saudi Arabia.  The reason is that they all trust Israel not to attack each of them, whereas they all believe each would attack the other if they gained a contiguous border.  In short, Israel keeps all of the major players honest.  Therefore, Israel is the perfect buffer state for them. 
    Israel is the military glue that not only acts to protect all the parties but acts as the key middle transit area connecting all the players.  For all of the players this is a key element.  Israel has the necessary military power projection for all the players without the usual threat projection that comes from the power projection. Israel can play a key role in protecting the pipeline from attack.
    Such a pipeline will be an economic boom for Jordan and other Arabs in the area.  They will hopefully come to see Israel as the enabler of their economic base, and not an enemy.  For, if Israel were harmed, the pipeline would be doomed for destruction along with their economies.  In this regard, Turkey would be the greatest beneficiary because it would be guaranteed a secure source of gas and oil for its own use as well as for piping through to Europe.
    Israel is not only an ally of Saudi Arabia and the Arab Sunnis in the military struggle against the waxing Persian Safavidic hegemon Iran, it is also a vital partner in the economic war against the ayatollah's regimeilo.
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    China's CNPC Boosts Overseas Oil, Gas Production to Record High

    China National Petroleum Corp., the country’s biggest oil and gas producer, boosted overseas output in countries from Central Asia to Africa to a record amid tumbling oil prices and currency fluctuations.

    CNPC raised its equity oil and natural gas production in countries including Iraq by 10.5 percent to record 72.02 million metric tons last year, it said in its online newsletter on Thursday. That’s nearly 1.45 million barrels a day. Equity output refers to the company’s share of production split between project partners.

    “In 2015, the overseas operation was challenged by low oil prices, geopolitical instability and worsening security in some countries, as well as big currency fluctuations,” CNPC said in the statement. “The company has been coping with the difficult time through cutting costs.”

    Oil collapse below $30 a barrel has forced global producers from Royal Dutch Shell Plc to CNPC’s state-run rival China National Offshore Oil Corp. to cut spending. CNPC last year cut investments in its Kazakhstan operations by 50 percent and lowered spending in Latin America by more than 60 percent, it said.

    CNPC added 98.86 million tons of overseas recoverable oil and gas reserves last year, 29 percent above its target, in countries including Kazakhstan, Sudan and offshore Brazil. Total overseas output at projects it operates climbed 8.5 percent to 138 million tons, a figure that includes oil and gas owned by project partners.

    Attached Files
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    Woodside Sees Up to $1.2 Billion in Writedowns Amid Oil Rout

    Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, expects writedowns of as much as $1.2 billion for 2015 after the slide in energy prices.

    The charges will be finalized when it reports earnings next month, Perth-based Woodside said Thursday in its fourth-quarter production report. Sales in the quarter fell 37 percent to $1.11 billion from $1.76 billion a year earlier.

    Woodside is among energy companies coping with worsening market conditions and oil prices that have fallen to the lowest levels since 2003. With a relatively strong balance sheet and new projects across the industry in doubt, Woodside may seek acquisitions after abandoning its pursuit of Oil Search Ltd. last month, according to Morgans Financial Ltd.

    “Given that they walked away from their approach for Oil Search, perhaps they are in the hunt for additional acquisitions to fill that growth profile,” Adrian Prendergast, an analyst at Morgans in Melbourne, said by phone. “They certainly have the firepower.”

    The Australian producer is weathering oil’s slump better than competitors, its shares sinking 22 percent in Sydney trading over the past year compared with a 33 percent slide in the MSCI AC Asia Pacific Energy Index and a 60 percent tumble for rival Santos Ltd.
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    Kinder Morgan swings to loss on $1.15 billion charge

    U.S. pipeline company Kinder Morgan Inc swung to a fourth-quarter loss after a $1.15 billion writedown on natural gas assets, and said weak commodity and stock markets could bring more trouble.

    "Let me give you this warning, if commodity and equity prices continue to fall, then we may have impairments in future quarters," Chief Financial Officer Kimberly Allen Dang told analysts on a quarterly earnings call on Wednesday.

    Kinder Morgan, the largest energy infrastructure company in North America, cut its 2016 capital budget to $3.3 billion from its previous estimate of $4.2 billion, based on West Texas Intermediate crude oil trading at $38 per barrel.

    Kinder Morgan, which also disclosed a $285 million writedown mainly in its carbon dioxide segment, said it does not expect to access the capital markets to fund growth projects in 2016.

    The Houston-based company, once resilient in the face of falling oil prices, last month cut its dividend, by 75 percent, for the first time since going public to maintain cash.

    President and Chief Executive Steven Kean said the company shaved its capital budget largely by dropping acquisitions, which he did not identify, cutting costs and lowering carbon dioxide spending.

    The company also delayed completion of $5.4 billion Trans Mountain Pipeline expansion by a year, to the third quarter of 2019, as it awaited regulatory approval. The capacity expansion, to 890,000 bpd from 300,000 bpd, has met fierce environmental and aboriginal opposition.

    One shareholder on the conference call raised concerns about continued capital spending. "Now there's the fear that the dividend isn't even secure," he said.

    "I'm the largest shareholder," Chairman Rich Kinder responded, noting that the company would use cash flow as it saw best given volatile market conditions. "I want to see all kinds of value derived by the common shareholders of this company."

    Kinder Morgan posted a net loss of $637 million in the quarter ended Dec. 31, compared with a profit of $126 million a year earlier.

    Excluding items, profit fell to $491 million from $664 million. Revenue dropped 8 percent to $3.63 billion.
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    Range Resources Ethane Heading to Marcus Hook Beginning February

    Range Resources’ ethane will start to flow through a “fully operational” Mariner East 1 pipeline to the Marcus Hook refinery in February, according to an announcement by Range.

    Mariner East 1 has been up and running for some time, but has not, until now, flowed ethane. Yesterday’s announcement states the ethane will be loaded onto ships.

    Range doesn’t say where the ethane on those ships will go, but we already know that part of the story. The ethane (at least some of it) is headed for Norway, Scotland and possibly Panama.

    Fantastic news that the Mariner East 1 pipeline is about to be fully, 100% ethane operational, after a very long battle to complete it…
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    Petrobras says in talks to sell Argentine assets

    Brazil's state-run oil company Petroleo Brasiliero SA is in talks to sell its Argentine assets, it said on Wednesday in a filing, but added there was no assurance that a deal would be signed.
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    In Private Davos Meeting, Oil Chiefs Push Plan to Reduce Costs

    The world’s largest oil companies, grappling with lowest crude prices in 12 years, met behind closed doors at Davos in a push to cut costs by standardizing some of the equipment used in exploration and production, according to two people who attended.

    The meeting, attended by the heads of Saudi Aramco, BP Plc, Statoil ASA and Repsol SpA, as well as senior executives from Royal Dutch Shell Plc, Total SA and Chevron Corp., is the latest sign the industry is moving away from the bespoke kit designed on a project-by-project basis that seemed affordable during the decade-long boom in prices.

    As have prices have tumbled, reaching a 12-year low below $28 a barrel in New York on Wednesday, companies have taken an ax to spending. Investments in oil and gas fields worldwide probably dropped to $572 billion last year, 20 percent lower than the $715 billion spent in 2014, the International Energy Agency, said in November. Spending is likely to drop by a similar amount this year, Fatih Birol, executive director at the Paris-based agency said at the time.

    The biggest oil companies believe they can reach a technical consensus with their suppliers so everyone in the industry uses the same kind of kit in some areas, including giant valves and submerged oil well equipment, the people said, asking not to be identified because the meeting was private.

    Shell declined to comment. Saudi Aramco, BP, Repsol and Total didn’t immediately respond to requests for comment.

    CEO Eldar Saetre participated at the Community Project Working Dinner for the Oil & Gas Industry in Davos yesterday, along with executives of more than 50 companies, Statoil spokesman Baard Glad Pedersen said by phone. He declined to provide details of what was discussed over dinner.

    The share prices of oil-services companies that supply the industry have fared even worse than producers in the slump as projects are canceled and spending pared back. The Schlumberger Ltd., the world’s largest oil-services provider, has fallen 22 percent over the last year, while Exxon Mobil Corp. is down 16 percent over the same period.

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    Venezuela requests emergency OPEC meeting on oil price

    Venezuela has requested that OPEC hold an emergency meeting to discuss steps to prop up oil prices, which have fallen to their lowest since 2003, two OPEC sources said on Wednesday.

    But four other delegates from countries in the Organization of the Petroleum Exporting Countries said such a meeting was unlikely to happen. OPEC's Gulf members including Saudi Arabia have opposed earlier calls for emergency meetings.

    "Venezuela has requested an extraordinary meeting," said an OPEC delegate from a Middle East member-country. Another OPEC source confirmed that such a request had been made.

    The next scheduled OPEC meeting is not until June.

    OPEC's statutes say support from a simple majority of the 13 members can trigger an extraordinary meeting. But delegates say that in practice, none will occur without support from Saudi Arabia and other top producers.

    The last extraordinary meeting to discuss a price slump, in 2008, resulted in OPEC making its largest-ever production cut, paving the way for prices to double within a year.
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    New Study Shows China's Oil Demand Slowing Down by Almost 60%

    Today, ESAI Energy released a new study, 'Balancing Act: China's Oil Demand and Energy Mix to 2030' that takes an in-depth look at China's oil demand trends to 2030, projecting energy mix and demand for thirteen oil and alternative fuel products The study shows in detail that the pace of oil demand from 2015 to 2030 will slow by almost 60% versus the 2000-2015 period.

    The study examines China's efforts to balance the delicate relationship between coal, natural gas and oil and handle the dramatic changes in its oil products market. Beyond demand, the study looks at refining developments and estimates China's net trade position for each petroleum product. China will become an even larger supplier of gasoline to the world and will eventually export fuel oil while continuing to absorb significant quantities of LPG.

    As the Chinese stock market continues to keep the global oil and financial markets on tender hooks, ESAI Energy's sector analysis of oil demand provides a road map for the future of the second largest oil consumer and largest oil importer in the world.

    'Understanding China puts any player at an advantage in an increasingly competitive energy market,' says ESAI Energy's Megan Wu, 'especially in the current low oil price environment where almost every supplier is looking at China for market share.'
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    Oil's Plunge Drags Gazprom's Gas Price in Europe Down by 37%

    Russia’s natural gas prices in Europe will probably slump 37 percent this quarter to levels not seen since 2005 because of the rout in oil.

    The first-quarter price may drop to about $180 per 1,000 cubic meters compared with $284 a year ago, Gazprom PJSCchairman Viktor Zubkov said Wednesday at a conference in Vienna. Gazprom meets about 30 percent of the European Union’s gas demand.

    Russia is still committed to oil-linked pricing in its long-term supply accords even as crude hovers near its lowest since 2003. The company in October forecast that its gas prices in Europe may drop to the lowest level in 11 years in 2016. That estimate was based on an average price of $50 a barrel set in the nation’s budget. So far this year, Brent crude has averaged $32 a barrel.

    “It’s extremely dangerous to be guided by here-and-now profits in such a forward-looking industry as gas -- that may undermine” the market, Zubkov said.

    The government in Moscow is now considering changes to the budget, possibly
    using $40, according to the Finance Ministry. Gazprom gas prices in Europe may
    then average $177 a thousand cubic meters in 2016, the country’s Economy Ministry said. That estimate would mean that the European price would be the lowest in 12 years, with export revenue shrinking by more than a quarter in dollar terms to about $28 billion, Bloomberg calculations based on company data show.


    While gas supplies to Europe will depend on the market, the company so far sees volumes stable at about 160 billion cubic meters this year, Zubkov said. Gazprom sees increasing demand for imported fuel in the region given the drop in production in the European Union, Gazprom export arm’s head Elena Burmistrova said at the same event.

    “Europe will need a great deal of natural gas in the coming decades, and there will be room enough for all in the gas market,” Burmistrova said.
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    Genel forecasts lower revenue

    Genel Energy, one of the main oil producers in Iraqi Kurdistan, forecast lower revenue and production for this year, hurt by weak oil prices, sending its shares down to a record low on Wednesday.

    The company forecast revenue of $200 million-$275 million for 2016, assuming Brent oil price at $45 per barrel. Genel reported revenue of $342 million for 2015.

    Genel also forecast this year's production at 60,000-70,000 barrels per day (bpd). The higher end of the range was 17.5 percent lower than the 84,900 bpd that it produced on average for 2015.

    Oil producers across the globe are trying to deal with the financial fallout of a sharpdecline in crude prices.

    Crude futures slumped again in Asian trade on Wednesday, with U.S. oil dropping more than 3 percent towards $27 a barrel and its lowest since 2003, on worries about global oversupply.

    However, the company said it was well-positioned to weather the downturn in oil prices as its production cost was $2 per barrel and due to recent efforts at cutting capital expenditure and overhead expenses.

    The London-listed company, which was owed $409 million by the Kurdistan Regional Government (KRG) for oil exported from the region as of October, said it received almost $100 million in four consecutive payments.
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    Gazprom warns Europe: We need clear rules to prevent gas crisis

    Kremlin-controlled energy giant Gazprom warned the European Union on Wednesday of a wide-scale gas market crisis and underinvestment amid falling commodity prices unless Brussels revises its "contradictory" energy policies.

    Gazprom supplies Europe with a third of its gas needs. Its exports to the European Union and Turkey last year rose by 8 percent to 159.4 billion cubic metres as consumers took advantage of falling gas prices, which are pegged to those of oil with a six- to nine months lag.

    Gazprom's chairman Viktor Zubkov told a conference in Vienna on Wednesday that Russian gas prices in Europe will likely fall by more than a third in the first quarter to $180 per 1,000 cubic metres and that exports this year will remain broadly the same.

    However, he painted a gloomy picture for years ahead as oil prices have plummeted to 12-year lows and suppliers are facing financial constraints.

    "There are actually only quite a few countries that can continue their investment when prices are as low as they are now. In the future, when there won't be enough investments for 2017-18 there might be huge problems on the gas markets," he told the conference.

    Russian gas supplies to Europe have become increasingly politicised after Moscow's relations with the West dramatically worsened in 2014 following Russia's annexation of Ukraine's Crimea peninsula and introduction of sanctions by the EU and United States.

    The EU had introduced new sets of regulations, known as Third Energy Package in 2009, which angered Gazprom and forced it to sell stakes in some assets in Europe.

    The regulations, entered into force in the EU in 2009, also set a huge obstacles to Gazprom's plans to build the South Stream undersea gas pipeline to Bulgaria - a project eventually scrapped by President Vladimir Putin in 2014.

    Zubkov, a close ally of Putin, told the conference that Russia "needs to understand the role the EU gives to Russian gas in its energy mix".

    "We need to know clear rules of the game on the market because investments... will depend on this," he said.

    "The situation is rather difficult now and it could be a great risk for security of supply. We need balanced cooperation with our partners," Zubkov said, reassuring that Russia will always be a reliable energy supplier.

    "We call upon our European partners to keep up a long term balance of the interests of all participants of the market. We don't know how long the prices will be as low as they are now."

    Last year, Gazprom agreed with a number of European companies to expand the Nord Stream pipeline which should double the existing capacity of the route and help Russia to avoid Ukraine as a transit country for some of its gas flows to Europe.

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    U.S. refiners brace for possible glitches amid first winter test

    U.S. refineries along the East Coast and the Midwest are facing their first major test of the winter season since last year's blistering cold set off a string of outages, sending gasoline and diesel prices soaring.

    Freezing temperatures have descended upon the U.S. Northeast and Midwest ahead of a potentially historic storm that threatens to dump as much as 24 inches (61 cm) of snow in parts of the I-95 highway corridor running between Boston and Washington this weekend, according to the National Weather Service.

    Temperatures are also expected to remain below 20 degrees Fahrenheit (-7 degrees Celsius), about 10 to 15 degrees below normal.

    Marathon Petroleum's refinery in Catlettsburg, Kentucky emerged over the long weekend as the first victim of this year's freezing temperatures, shutting down several key units after pipes froze in single-digit temperatures. Workers were struggling to restart the units on Tuesday.

    Although most refineries, particularly those in northern climes, are designed to operate throughout the winter, increasingly extreme weather conditions in recent years have tested their resilience. Last February more than a third of the East Coast's capacity was abruptly shut down due to glitches.

    "At 30 degrees and 10 inches of snow, we're ok. At 15 degrees, and 10 inches of snow, there could be problems," said one East Coast refinery worker.

    Operators are expected to call in additional workers later this week or at the weekend if the storm hits to help apply steam to pipes and gauges to prevent freezing, according to industry sources at the region's refineries.

    Some have already applied the lessons learned last year.

    At Delta Airlines' refinery outside of Philadelphia, among the hardest hit by the cold last year, workers spent a good portion of the last year identifying and eliminating idle sections of piping within the plant, known as "dead legs," a source familiar with the plant's operations said on Tuesday.

    Those segments, which can explode or snap as the residual product in the line expands and contracts, were partly responsible for glitches that shut down much of the plant for nearly two weeks last year, the source said. Its supply of water used for coolant had also frozen.

    "It was a big priority," the source said.

    Monroe Energy, the subsidiary of Delta that runs the plant, did not respond to requests for comment.


    Additional refinery glitches could offer some relief to traders who have voiced fears that a rapidly growing surplus of diesel fuel - swollen by the lack of demand for heating fuel during the warmest fourth quarter on record - coupled with an emerging excess of gasoline could trigger a renewed slump in oil prices.

    Gasoline demand, along with healthy margins, have been the one bright spot in the collapse in oil prices. The RBOB crack LRBc1-LCOc1, an indicator of profit margins for refining crude into gasoline, settled at $15.70 per barrel Tuesday, nearly double the $8.65 per barrel a year ago.

    Gasoline inventories on the East Coast have risen the past four weeks to 62.9 million barrels, while distillate stocks are at the highest levels in the region for this time of year since 2007, according to the U.S. Energy Information Administration.

    "We have plenty of product, so a disruption may not be a bad thing," John Auers, a vice president at Turner Mason, said. "Also, the cold weather is a welcoming thing from a distillate demand standpoint."

    Last winter, freezing temperatures caused a spate of refinery problems, particularly on the East Coast.

    During four weeks of February, when plants would normally have been running flat out due to robust profit margins and intense winter demand, output dropped 40 percent to 773,000 bpd REFCR-1-EIA, one of the lowest weekly rates ever recorded, according to Energy Information Administration data. It rebounded in March as they recovered.

    For the moment, U.S. plants are still running at breakneck rates. The U.S. refinery utilization rate last week was 91.2 percent, among the highest levels ever for this time of year, EIA data shows.

    At Phillips 66's 238,000-bpd Bayway refinery in Linden, New Jersey, the largest in the region, they're also bracing for the cold weather and potential storm. Last year it suffered delays in restarting a crude unit after planned work. Severe cold froze lines that fed the system.
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    Pioneer says something interesting.

    Wells with EURs averaging >1.3 MMBOE with an estimated cost of $8.0 MM generate IRRs >30% at current strip prices1
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    Ko-gas says gas use declines sharply.

    South Korean state-owned Korea Gas Corp.'s LNG sales in December dropped 22.8% from a year earlier to 3.49 million mt, compared with 4.52 million mt a year earlier, the company said Tuesday.
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    US oil imports from Canada on the rise

    Image title


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    BG Group production grows 16% in 2015

    British oil and gas company BG Group expects to post full year E&P production volumes at an average of 704 thousand barrels of oil equivalent per day in 2015, around 16% higher than 2014.

    In its operational update on Wednesday, the company said the growth in production, ahead of guidance of 680-700 kboed, reflected growth primarily in Australia, Brazil and Norway.

    Volumes in Australia more than doubled to 88 kboed and in Brazil, almost doubled to 146 kboed. In Norway, Knarr came onstream in March and has produced an average of 12 kboed during 2015. This growth was partially offset by the expected decline in Egypt, down 18 kboed to 44 kboed, combined with lower volumes in Trinidad & Tobago, down 13 kboed to 52 kboed.

    Helge Lund, BG Group’s Chief Executive, said:

    “Our excellent operational performance in 2015 is expected to deliver results in line with, or ahead of, our guidance for the year. Ramp up of both LNG trains at our QCLNG project in Australia and the start-up of our sixth FPSO in Brazil drove a strong E&P operational performance while our LNG Shipping & Marketing business delivered 282 cargoes, an increase of 58% on 2014, in difficult market conditions.”

    The company expects to post total results earnings of at least $2.3 billion, which are expected to include a post-tax gain of at least $0.6 billion in respect of disposals, re-measurements and impairment.  Capital investment on a cash basis of around $6.4 billion, lower than guidance of around $6.5 billion.

    BG Group explained that expected total results for the year does not include the impact of future transaction fees and other financial implications of the completion of the recommended cash and share offer for BG Group plc by Royal Dutch Shell plc.

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    Husky cuts spending and production forecasts, scraps dividend

    Husky Energy cut C$800 million ($549.07 million) from its 2016 capital budget and slashed production guidance by 15,000 barrels of oil equivalent per day on Tuesday in the latest sign that Canadian producers are scrambling to cope with low oil prices.

    The company also scrapped its fourth-quarter dividend, just a few months after surprising investors by switching to a stock dividend from cash payments.

    Calgary-based Husky said it will spend between C$2.1-2.3 billion this year, down 27 percent from its original capital budget, and produce between 315,000-345,000 boepd.

    The company said savings would be achieved primarily through deferring discretionary activities in Western Canada, but its Sunrise oil sands plant and three new heavy oil thermal projects in the Lloydminster region on the Alberta-Saskatchewan border will not be affected.

    Spokesman Mel Duvall said about half the reduced production impact would be felt in Alberta and was mostly gas, with the rest being spread across Husky's portfolio.

    "Deferral of capital is in those areas that can be quickly switched on as commodity prices recover," Husky's chief executive, Asim Ghosh, said in a statement.

    Husky, controlled by Hong Kong billionaire Li Ka-shing, produces oil and natural gas in Canada and Southeast Asia, and holds numerous exploration licenses offshore of Atlantic Canada.

    The company said it had adjusted the schedule for deploying an offshore drilling rig in the Atlantic region and was deferring select drilling in Western Canada.

    Despite the cut in production and spending forecasts, Husky still plans to add 29,500 barrels per day through its heavy oil thermal projects and the Sunrise oil sands plant, a joint venture with BP Plc, which will ramp up to 60,000 barrels per day by the end of 2016.

    The company's overall earnings breakeven point is expected to be below $40 U.S. crude by the end of 2016, and Husky said it expected further gains through reduced operating and sustaining costs.
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    Petronas plans cuts and review to counter oil price slump

    Petroliam Nasional Bhd (Petronas) plans to cut spending by up to 50 billion ringgit ($11.4 billion) over the next four years and review its business structure in response to the profit-sapping slump in oil prices.

    The state-owned Malaysian company brings in nearly half of the Southeast Asian country's oil revenue and its woes are bound to add pressure to an economy already reeling from a slide in the ringgit and political uncertainty after a scandal surrounding state investor 1Malaysia Development Bhd (1MDB).

    Petronas said in November that it would cut its 2016 dividend to the government by nearly 40 percent after a 91 percent drop in profit, with analysts suggesting the payout could be trimmed back again in future.

    Petronas made its announcement on spending cuts in an internal memo, a copy of which was seen by Reuters.

    "We will go through another round of CAPEX (capital expenditure) and OPEX (operating expenditure) review to target cuts up to RM50 billion over the next four years. This means that we are going to have to defer some of our projects," CEO Wan Zulkiflee Wan Ariffin said in the memo dated Monday.

    In February last year Petronas said it planned to cut capital spending by 10 percent and operating expenses by up to 30 percent in 2015. It also said at the time that it would cut 2016 capital spending by 15 percent. Its 2014 capital expenditure was about 65 billion ringgit.

    "We have also made a strategic decision to begin a review of Petronas' businessoperating model for better efficiency in response to the external environment," Wan Zulkiflee said in the memo. The review will result in a change to the organization's structure, details of which will be disclosed in March.

    Contract jobs in the company's non-core businesses will be affected, he said.

    In an emailed statement late on Tuesday, Petronas said it has circulated an internal communication on its efforts to cut costs to address the impact of the continuous fall in crude oil prices, but it did not provide details.

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    Insurer caution to slow oil tanker market's return to Iran

    Foreign oil tanker owners are expected to make a slow return to Iran despite the lifting of many sanctions as insurers tread carefully, leaving shipping players unwilling to pick up cargoes as quickly as Tehran has wanted.

    A nuclear deal between world powers - known as the P5+1 - and Iran led to the removal on Saturday of international oil export prohibitions as well as restrictions on banking, insurance and shipping for Tehran.

    With U.S. sanctions still in place, which exclude U.S. persons, banks and insurers from trading with Iran including dollar business, shipping and marine insurance sources say many foreign companies are likely to take their time.

    They are also mindful of sanctions being reimposed in a "snap back" if Iran reneges on commitments.

    "In shipping terms, we think the impact will be a slow development. The initial oil sales will be the oil currently stored on (Iranian) ships in the Persian Gulf," said Paddy Rodgers, chief executive of oil tanker company Euronav .

    "It will take time for this increase in production to be transported on the commercial tanker fleet given the financial sanctions still in place and reluctance of insurance providers to cover given the snapback provisions in the P5+1 agreement."

    "So, any additional increase in Iranian barrels being produced will be shipped on Iranian vessels."

    Securing international insurance cover as well as reconnecting with the internationalbanking system will be key to determine how quickly Iran can ramp up oil exports and re-engage with the foreign shipping sector.

    Third-party liability insurance and pollution cover for vessels is provided by P&I clubs - marine insurers owned by shipping clients and reinsured internationally.

    "There will be a time period whilst all financial services and businesses sit there and work out what the opportunities are, what the risks are before re-engaging," said Mike Salthouse, deputy global director with ship insurer North of England P&I Association.

    "Some of the teething issues will need to be worked through."

    Salthouse said since the 2008 financial crisis, the financial services industry had become more focused on compliance, which included sanctions regulations.

    "There is probably less appetite for risk in the world today than in 2010 and we are all much more aware of the risks presented by any jurisdiction that presents compliance-type issues," he said.

    Washington slapped new sanctions on companies accused of supporting Iran's ballistic missile programme, drawing an angry response from Iranian officials.

    "There will also be a continuing issue of having to take care about not supporting transactions with sanctions targets where designations remain in place," a separate ship insurance source said.

    "And one suspects that banks might prove to be slow to be willing to support transactions involving Iran again, especially any transactions in U.S. dollars, with continuing irritant effects for all doing business there."

    Another ship insurer, Swedish Club, said the continued U.S. sanctions could mean "U.S. insurers and reinsurers in various global marine reinsurance programs may be unable to meet their obligations and pay a claim with an Iranian nexus".

    Industry association Intertanko, whose independent members own the majority of the world's tanker fleet, said the removal of sanctions opened up opportunities for owners.

    "We foresee a cautious return, given U.S. domestic sanctions may well still limit reinsurance," said Intertanko's general counsel, Michele White.

    "It will also mean a return from storage to regular trade of the Iranian tanker fleet, both increasing available tonnage and oil onto an already saturated market."
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    Iran Cuts Oil Prices in North West Europe, Mediterranean in February

    Iran said it will cut crude prices to Europe next month in line with similar reductions by Saudi Arabia, signaling that it wants to compete with its largest rival but without making deep discounts after international sanctions were lifted on its oil.

    In a price list published on its website in recent days, the National Iranian Oil Company said it will reduce its official prices in North West Europe by $0.55 a barrel for its light crude and by $0.15 a barrel in the Mediterranean for delivery next month.

    By contrast, NIOC increased its prices in Asia by $0.60 a barrel.

    The changes come after Saudi state-owned Saudi Aramco said earlier this month that it was deepening the discount for its light crude by $0.60 a barrel to Northwest Europe and by $0.20 a barrel in the Mediterranean for February delivery. It also increased prices in Asia by $0.60 a barrel for the same grade.

    An end to sanctions on Iranian oil—including the lifting of a European Union embargo—over the weekend has led to speculation Iran may carry a deep rebate against its rivals. But officials from the Islamic Republic have said they favor carrying crude-for-goods swaps or investing in oil refineries that will use Iranian oil rather than selling the commodity at a discount.

    NIOC and Aramco prices are set every month at a discount or premium to various regional benchmark prices, which go up and down based on supply, demand and other factors considered by the market.

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    Sanchez Energy announces Q4 2015 operating results and updated 2016 capital budget

    Highlights from operations include:

    Record production of 5.4 million barrels of oil equivalent reported by Sanchez Energy for an average production of 58,115 barrels of oil equivalent per day ('BOE/D') during the fourth quarter of 2015
    Better than expected production results during the fourth quarter of 2015 were driven by Catarina production of 46,030 BOE/D, the highest quarterly production level recorded to date from the asset, as well as strong performance from new wells in the Cotulla area
    Record quarterly average daily production of 58,115 BOE/D
    Average well costs at Catarina for the fourth quarter of 2015 were $3.5 million per well
    Completed the 50-well annual drilling commitment at Catarina for the period July 1, 2015 through June 30, 2016, which provides the Company with significant financial flexibility in 2016
    Closed the Western Catarina Midstream Divestiture during the fourth quarter of 2015 for approximately $345 million in cash
    Entered a joint venture with Targa Resources Partners LP (NYSE: NGLS) ('Targa') during the fourth quarter of 2015 to construct a cryogenic processing plant and high pressure gathering pipelines near Catarina, which is expected to provide a path to improved yields, lower processing fees, and significant marketing benefits
    2016 Capital Budget guidance lowered to $200 - $250 million that is expected to maintain nearly flat year-over-year average production, a reduction of $50 million from prior estimates resulting from improved well results and cost efficiencies

    Management Comments

    '2015 was a strong year for Sanchez Energy,' said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy. 'Record-high production and improved well economics, including efficiency gains leading to as much as 60% lower well costs, in addition to two pivotal midstream transactions have positioned us with the financial flexibility and tailwinds for our expected continued success in 2016's commodity price environment and beyond.'

    'During the fourth quarter of 2015, we continued to realize significant operational success, which resulted in higher production levels and declining well costs,' he continued. 'Production for the fourth quarter of 2015 averaged approximately 58,115 BOE/D, significantly above the high end of our guidance range of 48,000 to 52,000 BOE/D for the quarter. Results were driven by Catarina production of 46,030 BOE/D, the highest quarterly production level recorded to date from the asset, as well as strong performance from new wells in the Cotulla area. Our fourth quarter of 2015 record production represents an increase of approximately 32% when compared to fourth quarter of 2014 production. For the full year, our 2015 average production was approximately 52,560 BOE/D, an increase of approximately 72% over 2014 average daily production.'

    'At Catarina, well performance continues to exceed our initial expectations as we have extended the efficiency gains realized since acquiring the asset in 2014. We are now routinely drilling and completing wells at Catarina for approximately $3.5 million per well, which represents a reduction of almost 60% when compared to average well costs around the time of our acquisition.'

    'As of January 1, 2016, we have successfully met the 50 well drilling commitment at Catarina for the period July 1, 2015 through June 30, 2016. Since we can bank up to 30 wells drilled during the remaining term of this commitment period towards the next annual drilling commitment period, which runs from July 1, 2016 through June 30, 2017, we have significant financial flexibility to execute our plans in 2016. At the same time, efficiency gains and cost reduction efforts continue to deliver positive results, which improve our well economics and should promote continuing success in today's commodity price environment.'

    'Based on the strength of our 2015 operating performance, we are reducing our 2016 upstream capital spending guidance to a range of $200 million to $250 million, a $50 million reduction from our previous estimates. Our 2016 upstream capital budget is expected to maintain production roughly equal to that of 2015.'
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    Iraq wants foreign oil firms to cut development spending, oil minister says

    Iraq wants foreign oil companies to cut spending as the nation seeks to narrow a budget gap caused by lower crude prices, oil minister Adel Abdul Mahdi said in a statement on Tuesday.

    "The ministry is discussing reducing financial spending by foreign companies," he told a meeting of the oil fields' joint management committees in Baghdad.

    Iraq, OPEC's second-largest producer, has service agreements with companies including BP, Shell, Eni, Exxon Mobil and Lukoil to boost output at its ageing fields.
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    China's 2015 natural gas output growth slowest in at least 10 years

    China's 2015 natural gas production rose by 2.9 percent from the previous year - the slowest growth in at least 10 years - official data showed on Tuesday, amid ample supply and weak domestic demand for the cleaner-burning fuel.

    Production reached 127.1 billion cubic metres (bcm) in 2015, the National Bureau of Statistics said. In 2014, production was roughly 123.5 bcm, up about 7 percent, Reuters calculations derived from the official data on Tuesday shows.

    The statistics bureau typically revises its data on a monthly basis and the percentage change for 2015 output indicates that the previously provided 2014 figure will be revised.

    In 2013, natural gas production rose by 11.5 percent from the previous year to 115.4 bcm, the NBS said. The 2015 output growth was the slowest since Reuters began collecting the data in 2005.

    Chinese gas consumption has been hit by slowing domestic economic growth and by state policies that kept prices high for most of the year, even as the global oil prices that underpin long-term gas supply contracts slumped to less than half their 2014 peaks.

    Chinese gas consumption grew 3.7 percent in the first 11 months of 2015, according to the latest data from China's National Development and Reform Commission (NDRC). For full-year 2014, gas usage climbed 5.6 percent and 12.9 percent in full-year 2013.

    "Gas production growth is constrained by demand," said Zhu Chen of SIA Energy in Beijing, and "also impacted by the contracted piped gas and LNG imports."

    Excess contracted LNG supplies from Qatar and Papua New Guinea as well as piped gas imports from Central Asia have left China with surplus fuel that it has tried to sell off abroad after domestic demand slowed.

    China's economic growth in 2015 was the slowest in 25 years, data also showed on Tuesday, while oil demand grew 2.5 percent.

    Chinese regulators cut wholesale gas prices by about 25 percent in November, the second reduction of the year, to boost domestic demand after previously raising prices to spur domestic production.

    China's supply of natural gas in the first eleven months outstripped demand by anywhere from 4.2 bcm to 8.4 bcm according to Reuters calculations using NBS and NDRC data respectively.

    Gas imports grew 4.7 percent in the first eleven months to 54.4 bcm, data from the NDRC showed in December. LNG imports, which includes spot purchases, fell 1.6 percent over the same period, according to Customs data from last month.

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    CNOOC Limited announces 2016 business strategy and development plan

    The Company's net production target for 2016 is in the range of 470-485 million barrels of oil equivalent (BOE), of which approximately 66% and 34% are produced in China and overseas respectively. The net production targets set for 2017 and 2018 are around 484 and 502 million BOE respectively. The estimated net production for 2015 was approximately 495 million BOE.

    There will be 4 new projects coming on stream, including the Kenli 10-4, Panyu 11-5, Weizhou 6-9/6-10 oilfield comprehensive adjustment and Enping 18-1. Currently, nearly 20 projects are under construction.

    Within the year, we plan to drill around 115 exploration wells and acquire approximately 10 thousand kilometers of 2-Dimensional (2D) seismic data as well as approximately 14 thousand square kilometers of 3-Dimensional (3D) seismic data.

    The Company's total capital expenditure for 2016 will be no more than RMB60.0 billion. Of that amount, the capital expenditures for exploration, development and production will account for around 19%,64% and 13% respectively. The Company expects to achieve the whole-year targets by cost control and efficiency enhancement despite the lower capital expenditure.

    Mr. Zhong Hua, CFO of the Company, commented:

    'In response to the continued challenge posed by low oil prices, we will maintain prudent financial policy and further strengthen cost-control measures in order to make steady progress in the overall business, including exploration, development and production.'

    Mr. Li Fanrong, CEO of the Company, commented:

    'Faced with an increasingly complicated operating environment in 2016, the Company will fully utilize market mechanisms and combine innovations in technology and management in order to reduce costs and enhance efficiency. In addition, the Company will ensure an appropriate balance between short-term returns and long-term growth to promote a steady and healthy development.'

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    IEA says oil market to remain oversupplied until late 2016

    Unseasonably warm weather and rising supply will keep the crude oil market oversupplied until at least late 2016, the International Energy Agency said in its monthly report on Tuesday.

    Warm winter weather around the world cut global oil demand growth to a one-year low of 1 million barrels per day in the fourth quarter of 2015, down from a near five-year high of 2.1 million bpd in the third quarter.

    The IEA left its estimate of growth in global demand for 2016 unchanged from its previous monthly report at around 1.2 million bpd.

    Brent crude futures LCOc1 have fallen to their lowest level since late 2003, tumbling below $30 a barrel, after OPEC said in December it would not cut output to arrest the price slide despite global oversupply.

    "We conclude that the oil market faces the prospect of a third successive year when supply will exceed demand by 1 million bpd and there will be enormous strain on the ability of the oil system to absorb it efficiently," the IEA said.

    With the world economy slowing, the IEA said it had cut its forecast for 2016 OPEC crude oil demand by 300,000 bpd to 31.7 million bpd.

    Iran has said it will raise output by an initial 500,000 bpd now that international sanctions have been lifted, but the IEA said it believes the increase will be of a more modest 300,000 bpd by the end of the first quarter of 2016.

    The IEA is sticking with its forecast for a decline of around 600,000 bpd in non-OPEC output, which it said had been surprisingly resilient in the face of tumbling crude oil prices.
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    Chevron has pencilled in another gas supply deal for its Gorgon LNG project

    The US oil and gas giant has signed a non-binding Heads of Agreement with China’s ENN Energy to receive 0.5 million metric tonnes of LNG a year for 10 years, with deliveries starting in 2018, or the first half of 2019.

    Chevron Midstream and Development executive vice president Mike Wirth said it was one more step in the development of the company’s Australian gas business and its global LNG portfolio.

    “As first LNG production from the Gorgon project draws near, we welcome ENN as a new customer,” Chevron Australia managing director Roy Krzywosinski said.

    “This deal shows the competitiveness of LNG supply from Chevron’s Australian projects.”

    The new deal follows the recently announced non-binding HoA with China Huadian Green Energy Co.

    ENN Energy is one of the biggest natural gas distribution companies in China.
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    Concho shakes up Permian holdings

    Concho Resources announced Monday three deals that will rearrange the company’s acreage in the Permian Basin through a swap, an acquisition and a sale.

    Combined, the transactions will bring down the Midland-based producers’ net debt without affecting its 2016 capital budget or production outlook, executives said in an announcement describing the deal.

    In the first part of the deal, Concho said it would buy roughly 12,000 net acres near the company’s North Harpoon prospect in Ward and Reeves counties. Concho will pay an unnamed private operator a combination of cash, stock and joint-venture interest in the acreage.

    The second deal is an exchange with Clayton Williams Energy that will consolidate 21,000 net acres where Concho doesn’t operate drilling into a concentrated position adjacent to company’s Big Chief prospect in Reeves County, Texas.

    The third deal will have Concho sell about 14,000 net acres in Loving County to Silver Hill Energy Partners II for $290 million in cash. Silver Hill is a closely held oil and gas company backed by private equity group Kayne Anderson Capital Advisors, which has raised $4.5 billion in capital.

    The assets Concho is selling produced about 2,500 barrels of oil equivalent per day in the third quarter from a total of 5 million barrels of oil equivalent in proved reserves, according to the announcement. Concho said the sale will free it from about $100 million in drilling costs through 2016.

    “The combined effect of these transactions not only strengthens our portfolio, but also frees up capital to develop higher returning properties while improving our leverage metrics,” said Tim Leach, Chairman and CEO of Concho in a prepared statement.
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    China's preliminary Dec implied oil demand down 1.3 pct on yr

    China's implied oil demand fell 1.3 percent in December from a year earlier to 10.46 million barrels per day (bpd), according to Reuters' calculations based on preliminary government data.

    Preliminary oil demand for full-year 2015 was 10.32 million barrels per day, up 2.5 percent from a year ago.

    Preliminary implied oil demand is the sum of domestic refinery throughput and net imports of refined products, on a bpd basis.

    Refinery throughput

    China's refinery throughput rose 2.7 percent in December from a year earlier to 45.38 million tonnes, or a record 10.79 million barrels per day (bpd), data from the National Bureau of Statistics showed on Tuesday.

    The daily run rate is up 1.0 percent compared with 10.69 million bpd in November, the previous record.

    Refinery throughput for full-year 2015 reached 522 million tonnes, or 10.44 million bpd, up 3.8 percent over the previous year.


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    Amazing how some still see falling rig count as important

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    Saudi Oil Exports Climb to Seven-Month High as Refineries Return

    Saudi Arabia, the world’s largest crude exporter, shipped the most oil in seven months in November in a sign that overseas refineries were getting prepared to put plants back on line after seasonal maintenance.

    Saudi shipments rose to 7.72 million barrels a day, the highest since April, from 7.364 million in October, according to data on the website of the Joint Organisations Data Initiative based in Riyadh. JODI is an industry group supervised by the Riyadh-based International Energy Forum.

    “This is exactly what they’ve been doing for the last year and a bit, whenever there is demand for their crude they will export,” Amrita Sen, chief oil market analyst at Energy Aspects Ltd. in London, said by phone.

    Refineries are usually taken off line for repairs in September and October. Refined products exports from Saudi Arabia rose in November, to 1.18 million barrels a day from 1.09 million, according to JODI.

    “You would expect to see refinery buying in November ahead of their return from maintenance in December,” Sen said. “You are seeing more oil going into Europe.”

    Poland’s PKN Orlen bought three cargoes of Saudi crude, the company said this month. “The Mediterranean we think is going to be the new battle ground among Saudi, Iran and Iraq, which is why Saudi is focusing on Europe ahead of Iran’s return,” Sen said.

    The Organization of Petroleum Exporting Countries couldn’t agree on production limits at its Dec. 4 meeting amid Iran’s plans to boost exports following the end of international sanctions on its economy. Brent crude prices dropped 10 percent in November.

    The global oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, the International Energy Agency said last month.

    The oversupply is probably 2 million barrels a day, even before more supply from Iran, Louis Besland, head of the Europe, Middle East and Africa oil and gas practice at AlixPartners management consultants, said by phone from Dubai. “This imbalance has been mainly created by the North American shale oil and gas in the past four or five years. That’s why Saudi Arabia believed from the beginning it’s not up to them to cut back.”

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    OPEC sees oil market rebalancing in 2016, but Iran to counter non-OPEC decline

    OPEC forecast on Monday that oil supply from non-member countries will post a larger-than-expected decline this year due to the collapse in prices, boosting the need for crude from the producer group.

    Supply outside the Organization of the Petroleum Exporting Countries (OPEC) would decline by 660,000 barrels per day (bpd) in 2016, led by the United States, OPEC said in a report. Last month, OPEC predicted a drop of 380,000 bpd.

    "The analysis indicates that 2016 will be a supply-driven market. It will also be the year when the rebalancing process starts," OPEC said.

    "Non-OPEC marginal barrel production in the next six months will be sensitive to sustained low oil prices."

    A drop in non-OPEC supply would reduce a supply glut which has prompted oil prices to collapse to below $28 a barrel, the lowest since 2003. OPEC's 2014 strategy shift to defend market share and not prices helped deepen the decline.

    The price drop has started to slow the development of relatively expensive supply sources such as U.S. shale oil and forced companies to delay or cancel billions of dollars worth of projects, putting some future supplies at risk.

    U.S. output will average 13.50 million bpd this year, the report said, down 380,000 bpd from 2015 and the largest drop outside OPEC. Output is also vulnerable in places such as the North Sea, Latin America and Canada, OPEC said.

    But OPEC's report makes no mention of the supply impact of the lifting of Western sanctions on member-country Iran, which on Monday said it was increasing output by 500,000 bpd - which would fill most of the hole left by non-OPEC members.

    The United Arab Emirates' energy minister, in the first comment by a Gulf OPEC member about Iran since most sanctions were lifted on Tehran, said anyone increasing output during the current oversupply would worsen the situation.

    For now, OPEC said it pumped less oil in December, reducing the excess in the market. Production including returning OPEC member Indonesia fell by 210,000 bpd to 32.18 million bpd in December, the report said, citing secondary sources.

    The report points to a 530,000-bpd supply surplus this year if the group keeps pumping at December's rate, down from 860,000 bpd implied in last month's report.

    OPEC left its 2016 global oil demand growth forecast little changed, predicting global demand would rise by 1.26 million bpd, marking a slowdown from 1.54 million bpd in 2015.
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    Israeli pair eye 'big gas find'

    An Israeli exploration consortium may have uncovered a further major gas deposit based on a new resource estimate for a pair of finds off the Mediterranean country (Daniel East and West), according to a report.
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    Suncor to buy Canadian Oil Sands in sweetened deal

    Canadian oil and gas producer Suncor Energy Inc said on Monday it had reached an agreement to buy Canadian Oil Sands Ltd after raising its all-stock offer, valuing the deal at about C$4.24 billion ($2.93 billion) excluding debt.

    The deal came days after Suncor's hostile bid for the company fell short of support from Canadian Oil Sands shareholders.

    Alberta oil sands producers have been struggling with tumbling global crude oil prices, which slid to their lowest levels since 2003 on Monday over worries of a global supply glut.

    Suncor will now offer Canadian Oil Sands shareholders 0.28 of a Suncor share for each Canadian Oil Sands share they hold, more than the initial bid of 0.25 shares offered in October.

    The raised offer values Canadian Oil Sands at C$8.74 per share, which represents a premium of nearly 17 percent over the closing price of both stocks on the Toronto Stock Exchange on Friday.

    Suncor made a bid for Canadian Oil Sands in October and later extended the offer until Jan. 8, promising shareholders improved operating efficiencies and a higher dividend.

    In response to the hostile bid, Canadian Oil Sands adopted a shareholder rights plan that acted as a poison pill, and urged investors to reject what it called a substantially undervalued Suncor bid.

    Seymour Schulich, a major Canadian Oil Sands investor, urged his fellow shareholders on Jan. 5 to reject the bid, saying Suncor was offering "an unacceptable price for an irreplaceable asset."

    Suncor Chief Executive Steve Williams said on Monday the company was "pleased to have the support of the COS Board of Directors and shareholders, including Seymour Schulich, and have been advised of their intent to tender their shares."

    Including Canadian Oil Sands' estimated debt of C$2.4 billion, the new deal is valued at about C$6.6 billion, the companies said in a statement on Monday.

    Canadian Oil Sands has a 36.7 percent stake in Syncrude, the oil-sands mining consortium in northern Alberta that is Canada's largest single source of crude oil.

    Suncor currently owns 12 percent of Syncrude, a stake that would rise to 49 percent with the takeover.
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    Iran issues order to boost oil production by 500,000 bpd -Shana

    Iran has issued an order to increase crude oil production by 500,000 barrels a day, the deputy oil minister was quoted as saying on Monday, implementing its policy to boost production as soon as sanctions were lifted.

    Oil prices hit their lowest since 2003 on Monday as the market braced for additional Iranian exports, but later turned positive. Benchmark Brent crude was trading at around $29.25 at 1220 GMT.

    "Iran is able to increase its oil production by 500,000 barrels a day after the lifting of sanctions, and the order to increase production was issued today," Deputy Oil Minister Rokneddin Javadi, who also heads the National Iranian Oil Company, was quoted as saying by Iran's Shana news agency.

    The United States and European Union on Saturday revoked sanctions that had cut Iran's oil exports by about 2 million barrels per day (bpd) since their pre-sanctions 2011 peak to little more than 1 million bpd.

    The following day, Iran said it was ready to increase its exports by half a million barrels per day, pouring more supply into a market glut that has routed global crude prices. Tehran has pledged to boost production further in the coming months.

    Nevertheless, analysts say Iran may struggle to rapidly boost its production because its infrastructure, harmed by years of inactivity, needs foreign investment that will take time to arrive.

    On Sunday, the head of Italy's Eni SpA said Iran would need to attract $150 billion to become a major producer, and that "is not something that can be done in a second".
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    Shell, BP dividends.


    Image titleExxon has cut total shareholder payments 50% since the peak.
    Shell -10%, BP, 50%.


    Image titleShell has MORE rigs contracted at LONGER duration than Exxon. BP has one rig out at 1yr.

    Shell has debt: $50bn. Worst bond is 284bp over libor.  
    Exxon has debt $32bn. Worst bond is 185bps over libor.
    BP has debt $30bn. Worst bond is 214bps over libor.

    Contractual liabilities:

    Image titleShell claims this outsize figure is due to the LNG business, but comparison with other big LNG operators leaves uncomfortable questions. 
    Image titleImage title
    BP's disclosure is superb. We'll pick of the comparable capex commitments and score them as $35bn, but other analysts may be harsher.

    Exxon contractual obligations + debt =$86bn or 26% of mcap.
    Shell contractual obligations +debt= $530bn or  420% of mcap.
    BP contractual obligations +debt $65bn or 73% of mcap

    Corrected for working capital changes:
    Exxon operating ($39bn) exceeds capex ($29bn) by almost precisely the dividend ($11bn)
    Shell operating ($15) is less than capex ($17) and the dividend ($10bn) has no funding.
    BP operating ($17) is less than capex ($19), and the dividend ($7bn) has no funding.
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    Statoil Trims Costs on Giant Sverdrup Field Amid Oil Collapse

    Statoil ASA and partners have cut costs to develop the giant Norwegian Johan Sverdrup oilfield by more than 10 percent as a devaluation sweeps through the offshore industry of western Europe’s largest crude producer amid a collapse in prices.

    Total investments on the North Sea field are now seen at 160 billion kroner ($18 billion) to 190 billion kroner, down from an earlier estimate of 170 billion kroner to 220 billion kroner, Det Norske Oljeselskap ASA, one of the field’s owners, said Monday. The estimate for the first phase was cut to 108.5 billion kroner from 123 billion kroner in nominal terms.

    “The development costs of the field are expected to decrease further,” the company said in a statement.

    The Sverdrup field, which holds 1.7 billion to 3 billion barrels of oil and is due to start producing in 2019, is Norway’s biggest offshore development in decades. The development is going ahead as oil companies are delaying and canceling projects to counter a deepening slump in crude prices. Benchmark Brent is now trading below $30 a barrel compared with about $115 in June 2014.

    The owners of the field, which also include Lundin Petroleum AB, are taking advantage of of lower rates from suppliers squeezed by spending cuts. The Sverdrup project represents a lifeline as investments in Norway are set to drop for a third consecutive year and won’t rise again until 2019, according to the Norwegian Petroleum Directorate.

    About 60 percent of capital expenditure on Sverdrup’s first phase are in kroner, a currency that has slumped against the dollar as oil fell, Det Norske said, citing estimates from Statoil.

    Statoil spokespeople didn’t immediately reply to an e-mail seeking comment on the new estimates.

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    Permian, Eagle Ford combine for 10 shut down rigs

    Just one oil rig went dark this week, slowing the pace of oil patch losses that have been mounting in recent weeks as crude prices remain stuck in dismal territory.

    The number of rigs drilling for oil in the United States has now fallen to 515, down more than two-thirds from its peak of 1,609 in October 2014 during the heydays of the domestic drilling renaissance.

    Drillers idled another 13 rigs hunting for gas, bringing the total number down to 135, according to weekly data released by oil field services firm Baker Hughes.

    The oil-soaked Permian Basin in West Texas, which had remained a favorite among U.S. exploration and production companies despite the prolonged crude slump, showed continued signs of weakness this week, with producers sidelining seven more rigs. Another sweet spot shale play, the Eagle Ford in South Texas, also saw a retreat, with the rig count tumbling by three. Losses were also seen in some gas-rich shale plays, including the Barnett, the DJ Niobrara, the Utica and the Williston.

    Texas, the nation’s number one drilling destination, posted the steepest drop this week, losing 7 more rigs and bringing the state’s total rig count to 301. That’s down 61 percent from the same time last year. Colorado, Louisiana, New Mexico, North Dakota, Ohio and Wyoming also lost rigs.

    The modest rig count declines fueled traders’ concerns that the world remains oversupplied with oil at a time when demand growth appears to be slowing. Fears of Iranian oil hitting the market spurred a dramatic sell-off in oil that pushed oil below $30 early Friday morning, and that decline continued following the rig count release.

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    LNG throughput increases at Port of Rotterdam

    The Port of Rotterdam has reported a 91.3% increase in LNG throughout in 2015. In total, the port received 2.3 million t of LNG.

    The sharp increase has been attributed to falling LNG prices in the Far East. These prices are now comparable to those in Europe, which has increased the trade and shipping volume of gas in the region.

    In total, goods throughput in Rotterdam increased by a total of 4.9% to 466.4 million t in 2015. The growth was attributed almost entirely to the increased throughput of crude oil and oil products.

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    Iran Back.

    On Saturday, Iran marked what President Hassan Rouhani called a “golden page” in the country’s history when the IAEA ruled that Tehran had stuck to its commitments under last year’s nuclear accord.

    Moments after the ruling was handed down, the US and the EU each lifted nuclear-related financial and economic sanctions on the “pariah state,” much to the chagrin of Israel and Tehran’s regional rivals who view the West’s rapprochement with the Iranians with deep suspicion.

    "Everybody is happy except the Zionists, the warmongers who are fuelling sectarian war among the Islamic nation, and the hardliners in the U.S. congress,” Rouhani said, referring directly to Israel, the Saudis, and GOP lawmakers in the US.

    In addition to the never-ending feud with the Israelis, Tehran is embroiled in a worsening conflict with Riyadh triggered by Saudi Arabia’s execution of prominent Shiite cleric Nimr al-Nimr and subsequent attacks on the Saudi embassy and consulate in Iran. The argument has raised the specter of an all-out conflict between the Sunni and Shiite powers and stoked sectarian discord across the region.

    With sanctions lifted, Iran will now have access to some $100 billion in frozen funds and will be able to increase its oil revenue exponentially even as prices remain suppressed.

    It’s easy to see why the Saudis and other Gulf Sunni monarchies are nervous. Iran plans to immediately boost output by 500,000 b/d with an additional 500,000 b/d coming online by year end. “The oil ministry, by ordering companies to boost production and oil terminals to be ready, kicked off today the plan to increase Iran’s crude exports by 500,000 barrels,” the official Islamic Republic News Agency reported on Sunday, citing Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs.

    Iran could haul in more than five times as much cash from oil sales by year-end as the lifting of economic sanctions frees the OPEC member to boost crude exports and attract foreign investment needed to rebuild its energy industry,” Bloomberg reports, adding that “the lifting of sanctions means Iran can immediately boost oil revenue to about $2.35 billion a month, based on the country’s estimated current output of 2.7 million barrels a day and oil at $29 a barrel.”

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    Cnooc's Nexen Stops Long Lake Oil Sands Work After Fatal Blast

    Cnooc Ltd.’s Nexen Energy unit is halting work at its Long Lake oil sands operations in Canada after an explosion killed a worker and injured another.

    The Nexen 72,000 barrel-a-day upgrader has been shut and pumping stopped on oil sands production wells, Vice President Ron Bailey said Saturday at a press conference in Calgary. The blast occurred Friday in the upgrader’s hydrocracker unit while it was undergoing maintenance.

    The shutdown adds to the strain on Nexen from plunging oil prices and a pipeline leak that caused an oil spill in July. The Alberta Energy Regulatory ordered the company to shut operations for part of September after that incident.

    Oil closed below $30 a barrel Friday for the first time since 2003, bringing bigger losses to oil sands producers. The industry may burn through about C$12 billion ($8.4 billion) of cash a year as revenue fail to cover costs, analysts at Calgary-based investment bank Peters & Co. wrote in a report this past week.
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    Suncor, Canadian Oil in talks aimed at clinching friendly deal-source

    Suncor Energy Inc, which recently extended its hostile bid for Canadian Oil Sands Ltd , is now in talks with its target and a friendly deal could be clinched as early as Monday, according to a source familiar with the matter.

    Suncor, Canada's largest oil producer, is contemplating improving the exchange ratio around the all-stock offer in an attempt to sweeten the deal, said the source, who asked not to be named as the talks are private.

    The two Canadian companies have been working on a revised bid since Friday, the Wall Street Journal reported earlier on Sunday, citing a source, who said talks were still ongoing.

    Suncor is currently offering Canadian Oil Sands shareholders 0.25 of a Suncor share for each Canadian Oil Sands share they hold.

    The offer, launched in early October, initially valued the company at about C$4.3 billion ($2.96 billion). The recent oil price rout has hurt the value of Suncor's shares, so the bid currently values Canadian Oil Sands at C$3.8 billion.

    Canadian Oil Sands has a 36.7 percent stake in Syncrude, the oil-sands mining consortium in northern Alberta that is Canada's largest single source of crude oil.

    Suncor extended its bid for Canadian Oil Sands earlier this month after its target's poison pill expired with it failing to find a white knight.

    At the beginning of last week Suncor had received more than 40 percent of the votes in favor of its bid for Canadian Oil Sands, a source familiar with the situation told Reuters. It was however, still short of the two-thirds majority it required in order to clinch a deal.
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    Russia rules out coordinated oil output cuts

    The Russian Energy Minister Alexander Novak has said coordinated oil production cuts with OPEC to help support falling oil prices would be unlikely.

    The politician said he felt it was unlikely all countries within OPEC would be able to agree on how to prop up prices.

    The comments come after some countries called on Russia to cut its own output.

    Novak said: “From our point of view, it is unlikely that all the countries within OPEC can agree on production cuts, let alone those countries which are not in the OPEC coalition.

    “Such consultations have been underway for the past year and a half since oil prices started to fall in mid-2014.

    “(But) we see that in 2015 countries like Saudi Arabia in OPEC have increased total production by 1.5 million barrels per day.”

    Novak said the critical oil price level for domestic oil producers was $5-$15 per barrel, which amounted to the cost of production.
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    Gazprom Loss Lower Than Forecast on Higher Sales, Cost Cuts

    Gazprom PJSC’s third-quarter loss was lower than expected as rising export sales and lower costs offset foreign-currency losses.

    The world’s biggest natural gas producer reported a net loss of 2 billion rubles ($26.1 million), compared with a profit of 105.7 billion rubles a year earlier. That was better than the average estimate of a loss of 17.6 billion rubles from 10 analysts surveyed by Bloomberg News. Earnings before interest, taxes, depreciation and amortization rose 3 percent year-on-year to 491 billion rubles, beating the estimate by 7 percent.

    “Gazprom pleased the street with better than expected results,” said Maxim Moshkov, an energy analyst at UBS Group AG in Moscow, also highlighting a 10 percent cut in operational costs in rubles, “which saved the company’s bottom line.”

    Russia’s falling currency supported Gazprom’s ruble-denominated revenue, helping to offset export prices that fell to near the lowest in a decade. Most of the company’s costs are in rubles while most of the profit is from abroad, with a majority of its gas-export contracts linked to oil. Brent slumped 35 percent last year.

    Gazprom shares fell 0.7 percent to 129.98 rubles in Moscow at 1:05 p.m. after rising as much as 1.2 percent earlier.

    Currency Loss

    The quarterly loss was the first since the fourth quarter of 2014 as it revalued its dollar and euro-denominated loans and borrowings. Gazprom reported a foreign currency loss of 400 billion rubles as the Russian currency fell 16 percent against the dollar in the third quarter.

    While revenue from gas supplies to its key European marketdropped more than 25 percent last year to about $38 billion, full-year sales may hit a record in ruble terms. The third-quarter revenue increased 14 percent to 1.29 trillion rubles, according to the report. Gazprom’s export gains were higher than expected, Moshkov said.

    Brent has extended declines to 20 percent this year and is trading at $29.76 a barrel, which means Gazprom’s gas prices in Europe will fall further. The company’s third-quarter results reflect oil price that was $55 to $60 a barrel, so the “key question is what happens with Gazprom’s profitability at $30,” said Renaissance Capital analyst Ildar Davletshin.

    ‘Tougher’ 2016

    There’s still not much certainty with commodities prices in 2016 although it’s clear that this year would be “tougher” for Gazprom than the previous, Moshkov said.

    The state-controlled company had positive free cash flow of 29.4 billion rubles in the third quarter, after a negative result in the previous three-month period. It may be between of $4 billion to $5 billion for the full year, according to Moshkov’s estimate.

    Gazprom still plans to keep dividends at no less than 7.2 rubles per share, the payout in 2014 and 2015, despite the market situation, deputy head Andrey Kruglov said last month.

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    Brazil's Petrobras cancels plan to sell local-market bonds

    Brazil's state-led oil company Petroleo Brasileiro SA said on Friday it had canceled plans to sell as much as 3 billion reais ($744 million) of local-market bonds after being unable to sell the debt at rates acceptable to both the company and investors.

    Petrobras, as the company is commonly known, had interrupted its plan to sell the debt in October in the hope that market conditions would improve.
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    Russia's Lukoil leaving projects in Ivory Coast - Interfax

    Russia's second-largest oil producer Lukoil is leaving projects in Ivory Coast, Interfax news agency reported on Friday, citing a source.

    Lukoil has been operating in the Gulf of Guinea offshore Ivory Coast since 2006 and is operator of the offshore exploration projects at the CI-401, CI-205 and CI-504 blocks, according to website of its subsidiary
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    Alternative Energy

    New 7 MW wind turbine certified

    Siemens Energy has been awarded final Type Certificate for its new 7-MW offshore wind turbine by DNV GL.

    The certification, confirming the safety and reliability of the SWT-7.0-154 turbine, enables Siemens to bring its latest model to market ahead of schedule.

    "Conscious of the current state of the industry it was vital we deliver this project on schedule. We understand our customers’ time pressures and the demand to continuously bring the latest turbine innovations to the market," said Steffen Haupt of DNV.

    The new Siemens turbine delivers almost 10 per cent more energy output than its 6-MW predecessor under offshore wind conditions, according to the announcement.

    First order for the 7-MW turbine in October with 47 units has gone to the Walney Extension Eastproject in the Irish Sea of Danish utility Dong Energy A/S. The deal is part of a frame agreement concluded between Dong Energy and Siemens in 2012.
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    China's solar capacity overtakes Germany in 2015, industry data show

    China is likely to have surpassed Germany in the fourth quarter as the country with the most solar capacity, despite missing its target for 2015, industry data showed on Thursday.

    China's installed photovoltaic solar capacity stood at 43 gigawatts (GW) by the end of the year, up about 15 gigawatts from 2014, the China Photovoltaic Industry Association (CPIA) said, according to the official Xinhua news agency.

    This compares with a figure of roughly 40 GW for Germany, according to data from that country's Federal Network Agency and Fraunhofer ISE.

    Germany's installed solar capacity stood at 38.24 GW at the end of 2014, up 8 percent, the Federal Network Agency has said, while installed capacity added in 2015 was roughly 1.3 GW, according to Fraunhofer ISE.

    China had been on track to surpass Germany.

    Data from China's National Energy Administration (NEA) shows installations were up 60 percent in 2014, and up 35 percent in the first nine months of 2015, to 37.45 GW.

    The NEA set an aggressive 2015 target of 23.1 GW for solar farms, but did not issue a target for the "distributed solar" category, which it defines as installations smaller than 20 megawatts, after installing just a quarter of its 2014 target.

    "Overall, China managed to exceed its 35 GW set in the framework of the twelfth five-year plan, clearly demonstrating the political commitment," said Frank Haugwitz, director of Asia Europe Clean Energy Advisory Co, citing the previous targets China had set for the period from 2011 to 2015.

    The NEA has yet to release final fourth-quarter and full-year 2015 figures.

    Solar makes up roughly 2.85 percent of China's installed capacity, Reuters calculations using official data show.

    China will add 15 GW of solar capacity in 2016, the NEA chief said in December.

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    India energy minister says solar power now cheaper than coal

    The latest auction of solar energy capacity in India has achieved a new record low price of 4.34 rupees/kWh, prompting the country’s energy minister Piyush Goyal to say that solar tariffs are now cheaper than coal-fired generation.

    The results of a reverse auction tender of 420MW of solar capacity conducted by the Rajasthan government revealed this week that Finnish group Fortum Energy bid the lowest price of 4.34 rupees/kWh for a 70MW solar PV plant.

    It is the lowest price obtained so far in India, which aims to install more than 100GW of solar by 2022, and was hailed by Goyal as a sign that solar power is now cheaper than coal power.

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    China faces persistent challenge tackling false power plant emissions data

    A significant proportion of coal and gas-fired power plants in China are deliberately falsifying their emissions data, despite concerted efforts by the government to clamp down on the practice.

    Reuters reports that Beijing is struggling to reduce the pollution plaguing its cities and part of the problem has been isolated as widespread misreporting of harmful gas emissions by Chinese electricity firms.

    Although said to be a minority, the offenders are, according to the news agency report, motivated to distort the figures due to ‘crippling overcapacity and slowing demand growth’.

    As a result government threats of heavy fines or forced closures have failed to deter. Coal emission violations cost power producers $98m in lost subsidies and fines last year.

    The environment ministry said last month, "a minority of firms were still manipulating emissions control equipment and falsifying data in an attempt to avoid supervision".

    An unnamed source told Reuters that power companies that also provided heating for local communities could overstate the amount of coal used for heat generation, which is not subject to direct monitoring, and understate the amount used for power.

    In its latest bid to curb pollution, China's cabinet in December ordered all coal-fired power firms to reduce pollutants like sulphur dioxide by 60 percent by 2020, saying it would close inefficient plants and promote advanced low-emissions technology through subsidies.

    As an incentive, it offered increased payments to generators that upgrade facilities, with total subsidies estimated to be worth $6.4bn a year.

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    SMA Solar launches new inverter with an eye on Tesla's Powerwall

    SMA Solar, Germany's largest solar company, on Monday said it would start selling an inverter designed for home storage systems, aiming to tap a market expected to thrive following the launch of Tesla's Powerwall battery.

    "Within a year, the cumulated number of battery-storage systems installed in Germany so far has more than doubled to over 30,000, thanks to the decline in prices," SMA Solar Chief Executive Pierre-Pascal Urbon said in a statement.

    The company will start selling "Sunny Boy Storage" to wholesalers from March, it said, adding the product was made "especially for high-voltage batteries like the Tesla Powerwall".

    Tesla, best known for its electric cars, sparked global interest in the idea of self-powered homes in April, when it said it would offer lithium-ion batteries for households next year, called Powerwalls.

    SMA Solar, the world's largest maker of solar inverters, will start selling the new system in Germany, which it said will then be rolled out to other markets, including Italy, Britain, Australia and the United States.

    The company expects the German home storage market to grow by 20,000 systems, or nearly double, this year, while putting the global market potential for electrical storage at an annual 0.5-1.2 billion euros ($0.55-1.2 billion) over the medium term.
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    World biggest solar power plant to be set up in Isfahan

    World's biggest solar power plant with the capacity of 1,000 megawatts will be set up in Sagzi in Isfahan with the contribution of German experts.

    Addressing the closing ceremony of the International Investment Opportunities Summit in Creative City of Isfahan late on Thursday, Ashton Flooring, representative of German Company, said that Germany boasts of big experience in producing clean energies and is interested to present the technology to the entire world.

    Describing the sun as divine valuable gift bestowed on mankind, he said that the great source of energy is available to the mankind for free.

    Despite Iran's access to fossil fuels, it has supported the law for clean energies and is seeking to take advantage of clean energies, he said.

    Referring to Isfahan province's suitable climatic situation, the German expert said that the province has the best conditions for establishing solar power plant.

    Solar power plants are environment-friendly, he said, noting that one kilowatt sunlight produces 2,000 kilowatts of clean energy and prevents emission of 1,200 kilograms of dioxide carbon, he said.

    The two-day International Investment Opportunities Summit in Creative City of Isfahan was attended by 40 economic delegations from Kuwait, UAE, Turkey, South Korea, Spain, Georgia, Switzerland, Germany, Iraq, Oman, Austria, China, Afghanistan, Poland, Canada, Russia and Greece as well as two political delegations from Spain and Austria.
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    Potash Corp to suspend operations at a Canadian mine

    Potash Corp of Saskatchewan said on Tuesday it would suspend operations "indefinitely" at its Picadilly mine in the Canadian province of New Brunswick, resulting in the loss of 420 to 430 jobs.

    As demand for the crop nutrient has fallen worldwide, the world's biggest fertilizer company by capacity has in recent months closed its Penobsquis potash mine in New Brunswick and suspended production at three mines in Saskatchewan.

    Potash Corp, which had more than 5,000 employees worldwide at the end of 2014, said it would retain 35 employees at Picadilly to keep the operation in "care-and-maintenance" mode. About 100 affected employees could be relocated to Saskatchewan.

    Potash prices have fallen sharply over the past year, under pressure from bloated capacity, soft grain prices and weak currencies in major consumers such as Brazil and India.

    Potash Corp said it expected to recognize severance and transition costs of about $35 million in the first quarter as a result of suspending operations at Picadilly.

    The suspension would help Potash Corp to reduce its full-year cost of goods sold by $40 million to $50 million and would eliminate capital expenditures of about $50 million in 2016 and $135 million in 2017-2018, the company said.

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    Muga boosts Highfield's position on cost curve

    Potash developer Highfield Resources has been tapped as the likely highest margin potash producer globally, with its Muga project, in Spain, expected to be the lowest-cost potash producer. 

    The ASX-listed company on Tuesday revealed results from an independent report by Argus FMB on behalf of the Europena project finance banking syndicate, which was based on the average potash prices achieved in 2015. “The Argus FMB report provides independent, third-party validation that Muga is likely to position Highfield as the highest margin potash producer globally,” said Highfield MD Anthony Hall.

    A 2015 optimised definitive feasibility study estimated that the Muga project could deliver more than one-million tonnes a year of granular potash, over a mine-life of 47 years. 

    The project was estimated to have a net present value of $1.46-billion, with a Phase 1 capital expenditure of €267-million. “We continue to believe we have the most compelling potash project globally, and this is the first of our portfolio of five projects that all appear to exhibit similar characteristics,” Hall said.
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    Precious Metals

    Canada Revenue Agency goes after Silver Wheaton again

    Canada Revenue Agency is set to begin a fresh audit of Silver Wheaton’s international transactions for the period between 2011 and 2013, the Vancouver-based miner said Wednesday.

    Earlier in July 2015, the CRA sought to tax the company's streaming income earned by its foreign units and said its taxable income should be increased by about C$715 million ($488.66 million) for the years 2005 to 2010.

    If the announced reassessment happens, said the silver streaming company, it will further increase its estimated taxes payable in Canada by about $310 million for this period.

    “We believe that we have complied with Canadian tax law and feel that the court process, rather than the CRA appeals process, will provide the most expeditious avenue for the resolution of this matter," Randy Smallwood, President and CEO of Silver Wheaton said in a statement.

    The tax dispute is unlikely to be resolved before 2017, Phil Russo, an analyst at Raymond James Financial Inc. in Toronto, said Wednesday in an e-mailed note.

    “We suspect the stock will come under further downside pressure on this news. Longer term investors who can tolerate the taxation dispute should consider current levels given the fundamentals, while overshadowed today, remain strong,” Russo wrote.

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    Eldorado Gold wins appeal over Greek mining ban

    Greece's top administrative court has annulled the government's decision last year to revoke Eldorado Gold's mining licence, according to court documents published on Wednesday.

    The Canadian mining company had appealed to Greece's top court to overturn the ban on its plans to develop gold mines in a forested area of northern Greece, in a case widely seen as a test of the leftist government's approach to foreign investment.

    The majority of the court's judges ruled in favour of Eldorado in November, but a final ruling was pending.

    Eldorado has put in about $700 million since 2012 and planned to invest another $1 billion to develop two mines at Skouries and Olympias sites in Halkidiki.

    But Greece's government revoked its permit in August, saying the tests for a so-called flash-melting method the company planned to use to ensure there would be no environmental damage did not take place on the spot, but rather outside Greece.

    Tensions between the two sides came to a head last week, when Eldorado said Greece had been delaying the necessary permits and announced it would suspend construction at the Skouries project, putting more than 600 jobs at risk.

    It warned it would do the same at its Olympias mine, risking another 500 jobs in northern Greece, if it didn't secure necessary permits by the end of March.

    Greece's energy minister has asked the firm to reverse its decision and safeguard jobs as a condition for the two parties to continue talks.
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    De Beers to cut diamond prices in first sale of the year

    De Beers cut diamond prices again in its first sale of the year as the world’s biggest producer seeks to counter a slowdown in demand, according to three people familiar with the process.

    The Anglo American unit reduced prices by as much as 7%, said the people, who asked not to be identified as the information isn’t public. De Beers plans to offer about $450 million of diamonds for sale, one of the people said. A spokesman for the company declined to comment.

    Slower diamond jewellery sales in China, the biggest buyer after the US, and a credit crunch in the industry has sapped demand. That’s led to a buildup of diamonds held by cutters and traders, and forced the biggest producers to cut output and lower prices. Prices for the gems sank 18% last year, according to data from UK-based WWW International Diamond Consultants.

    De Beers cut its production target three times last year in an effort to support prices, aiming to mine 29 million carats in 2015 after it initially sought to produce as many as 34 million carats. This year, the company plans to mine between 26 million carats and 28 million carats.

    While rough diamond prices may decline a further 5% this year, they could stabilize as soon as the second quarter as polished diamond prices rise and shortages for certain products materialize, Panmure Gordon said last week. RBC Capital Markets said Monday they were “cautious” about rough prices in 2016.

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    India's gold bonds seen luring investors in search of safe haven

    The second tranche of India's sovereign gold bonds, whose sale began on Monday, is likely to draw good response from investors, as they are priced below market rates for the metal and sharemarket turmoil spurs investors to diversify holdings.

    India plans to sell 150 billion rupees ($2.22 billion) in gold bonds in the fiscal year ending on March 31, as it seeks to wean investors off physical gold and contain the outflow of foreign exchange spent on imports.

    The price of gold has risen 4 percent so far in 2016, while India's benchmark has fallen nearly 7 percent.

    "Given the correction in the stock market, interest is shifting in favour of gold," said Harish Galipelli, head of commodities and currencies at Inditrade Derivatives and Commodities.

    "Investors are looking for safe-haven assets. This tranche will receive better response than the first tranche."

    The Reserve Bank of India has fixed the issue price of the bonds, wich will be sold until Friday, at 26,000 rupees per 10 grams, below the current market rate of nearly 26,050 rupees.

    The bonds, linked to the price of bullion, carry an annual interest of 2.75 percent and allow consumers to invest in 'paper' gold rather than physical gold.

    The first tranche debuted last November to lukewarm response, as it was priced nearly 5 percent above the market. At the time, the stock market also promised better returns, with the price of gold falling in anticipation of a U.S. rate hike.

    "Given that currently risk appetite is weak and bank interest rates are also falling, demand for gold bonds in the second tranche might be better," said Siddhartha Sanyal, an India economist at Barclays.

    A cut in policy rates by the Reserve Bank of India and robust growth in bank deposits, compared with credit in the last year, have prompted banks to cut deposit rates by more than 100 basis points.

    "However, it is a gradual process of publicity and it will take some time for the product to become popular," Sanyal added.

    The gold bonds are among measures India has adopted to damp ravenous appetite for gold imports, after a currency crisis in 2013 proved to be the country's worst since 1990.

    The rupee currency hit a record low in 2013 and the current account deficit stood at an all-time high of 4.8 percent of GDP, led by gold imports of more than $39 billion.

    That compares with the 2014 figure of $31 billion and a 2015 figure of $35 billion.
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    Base Metals

    Jiangxi Copper revenue down 3% as copper drops 27.5%

    Jiangxi Copper Company Limited, one of China's largest metal producers, reported a sales revenue of 201 billion yuan ($30.6 billion)in 2015, down 3 percent year on year, a company executive said Wednesday.

    Even this reduced revenue is quite an achievement, since the price of copper dropped by around 27.5 percent in 2015, said Long Ziping, general manager of the company.

    The company paid 4.1 billion yuan as taxes in 2015, down 46 percent, but no explanation for the drastic decline was given.

    The company will look for international resource program for acquisition and boost its overseas sales in 2016, Long said.

    Ten leading Chinese copper producers, including Jiangxi Copper, announced in December that they will reduce refined copper output in 2016 by 350,000 tons, about 5 percent of China's annual production to reduce overcapacity in the struggling nonferrous metal industry.

    Jiangxi Copper, listed both in Hong Kong and Shanghai, was ranked 354 on the Fortune Global 500 in 2015.
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    Someone Is Trying To Corner The Copper Market

    It may not be as sexy as gold and silver, but sometimes even doctor copper needs a little squeeze and corner love as well, and according to Bloomberg, that is precisely what someone is trying to do.

    One company whose identity is unknown, is "hoarding as much as half the copper available in warehouses tracked by the London Metal Exchange."

    By taking control of half the available copper, the trader can help drive up the fees associated with rolling forward a short position, making it tougher for speculators to keep their bearish, explains Bloomberg.

    Indeed, as shown in the chart below, this week the borrowing cost jumped to the highest in three years, almost as if someone is desperately trying to punish the shorts in a strategy very comparable to what Shkreli did with KBIO, when he bought up 70% of the outstanding stock and then made removed his shares from the borrowable pool, forcing a massive short squeeze.

     Image title

    Meanwhile, market participants are quietly moving to the sidelines ahead of what may be some serious copper price swings:

    "A big trader is probably trying to squeeze the market," said Gianclaudio Torlizzi, the managing director of T-Commodity srl, a Milan-based consultancy.“It’s an indication the supply side in copper is tightening."

    Bloomberg adds that yesterday was the third Wednesday of the month, when many traders settle their commitments. To renew a short position, traders have to buy back metal while selling it forward. The tom-next spread, a measure of how much the process costs over one day, jumped as high as $30 a metric ton on Tuesday, the highest since May 2012.

    The declining amounts of physical copper mean that liquidity in the metal is evaporating, resulting in violent, sharp price swings. The amount of metal available in warehouses has dropped more than 40 percent since August, making it costly to roll shorts.

    So who is trying to corner the plunging in price metal? According to Bloomberg, the suspect who controls a large portion of the copper is an unidentified company. "Two firms held 40 to 49 percent of copper inventories and short-dated positions, according to Jan. 19 exchange data that shows holdings as a proportion of available stockpiles. While the LME provides data on the approximate size of large positions, it doesn’t disclose who is behind them."

    One wonders if perhaps the question is not which company is behind the cornering, but rather which country.

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    Aluminium stockpiling fund gives glimpse of China metals reforms

    China's plans to set up funds to manage coal and steel capacity closures and stockpiling schemes offer nervous markets some clarity on the likely future make-up of the country's sprawling and predominantly state-run metals and mining industries.

    As the world's largest producer of aluminium, steel and other metals, and the biggestconsumer of copper and iron ore, China is crucial to global metals markets which have slumped in the past year as Chinese industrial demand growth slowed.

    China's slowdown has hit revenue at global miners such as BHP Billiton and Rio Tinto , and the market is keen to know what China plans for its own state-run mining and metals giants - many of which have kept producing even as prices drop below the cost of production.

    After weeks of talks between government officials and leading metals producers, Beijing looks set to take a direct approach to managing capacity cuts and layoffs in coal and steel. It will provide smaller-scale financing deals to groups of producers of non-ferrous metals, such as aluminium, for stockpiling and capacity cutback initiatives.

    On Thursday, state media reported that Beijing will allocate 30 billion yuan ($4.56 billion) over the next three years to support the closure of small and inefficient coal mines, and re-deploy some 1 million workers. Similar measures are expected to be unveiled for the steel sector. Both industries have huge over-capacity.

    Last week, six big aluminium producers - Aluminum Corp of China (Chinalco) , State Power Investment Corp, Yunnan Aluminium, Jiugang Group, Jinjiang Group and Weiqiao Aluminium & Electricity - agreed to set up a new company to handle a proposed stockpiling scheme and to coordinate and monitor production levels across the group, said two people with direct knowledge of the matter.

    Similar group-based initiatives are being considered by zinc and copper producers, but these are at a less advanced stage.

    With demand weakened by the economic downturn, a metals glut has dragged prices to multi-year lows, causing widespread losses.


    The aluminium stockpiling programme is part of a bigger plan proposed late last year by smelters and the state-controlled China Nonferrous Metals Industry Association.

    The producers have been in talks for several weeks with state-owned China Development Bank (CDB) for loans, and the establishment of the new joint company was a necessary step to access funding, the two knowledgeable people said.

    "(We) have invited the CDB to support (the funding)," said one of the two individuals, adding the bank funding would be used to stockpile nonferrous metals, and its scale would depend on smelters' needs. He said aluminium stockpiling could start before the Lunar New Year holiday in February, when demand was weak.

    The CDB did not respond to requests for comment.

    Local media and postings on Chinese chatrooms say loans could total around 30 billion yuan and mature in three years. About a third would be used to stockpile aluminium, with another third used to buy nickel.

    Traders warned that commercial stockpiling was unlikely to support prices over the longer term, with demand still weak, and stronger prices could tempt some to re-start idled capacity, adding to the supply glut. Nearly 5 million tonnes of aluminium capacity was idled last year, according to the industry body.

    "Stockpiling may support prices for 1-2 months. After that, we have to see demand and production cuts," said a trader at a state-owned investment firm.

    Traders are also concerned the stocks could be hedged in futures markets, which could be a drag on prices. The aluminium producers have not discussed whether or not to hedge the stocks, the second knowledgeable individual said, and today's low prices should discourage hedging.

    The CDB loans could also help cover the cost of closing capacity at cash-strapped state-owned aluminium smelters, said a smelter executive briefed on the stockpiling programme.

    Though severe over-capacity has been identified as a major problem across a range of industries, loss-making firms are reluctant to exit, saying they cannot afford to settle debts and staff redundancy payments.

    "Some firms want to get out ... but an exit route has not been opened up. Some local governments continue to urge steel firms to produce in the interests of local economic development and social stability," Zhang Guangning, outgoing chairman of the China Iron and Steel Association, said at a meeting last week.

    Shenwan Hongyuan Securities estimates the funds required to make a real dent in coal and steel capacity could be as much as 200 billion yuan ($30.4 billion).

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    China State Grid cuts 2016 investment plan on phasing of projects

    The State Grid Corporation of China (SGCC) cut its 2016 investment budget because the timing of its power transmission projects means less capital is required than last year, its chairman said on Thursday.

    The investment cut by SGCC, China's dominant state power grid builder and operator and a major consumer of copper and aluminium, has added to concerns over dwindling Chinese demand, but Chairman Liu Zhenya said it was just a timing issue.

    "(We) do not intend to cut investment, it is just what (our) projects need," Liu told reporters during a news conference in Hong Kong.

    SGCC's investments in China will rise to 2.3 trillion yuan ($349.68 billion) over the 2016-2020 period, Liu said, up from the 1.8 trillion yuan invested over the last five years.

    For 2016, however, investment will fall to 439 billion yuan from 452.1 billion yuan last year.

    Liu said the company's annual investment plans were linked to the progress of its projects. Normally, lower levels of spending are needed during the early stages of a project.

    SGCC's lower 2016 spending comes at a time global investors are worried about China after the world's second largest economy grew at its weakest pace in a quarter of a century last year.

    The State Grid would continue to seek investment projects overseas, its chairman said, saying that while he saw the European market as mature Africa was full of opportunities, without elaborating.

    SGCC is seeking partners to develop a global power transmission network, which could cut costs and ease pollution, said Liu, who is also chairman of the power industry body, the China Electricity Council.

    He said the construction of any future global grid would need help from governments and enterprises.

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    Iluka Resources reports positive cashflow

    Mineral sands producer Iluka achieved positive free cash-flow for the year to Dec, lifting FY2015 zircon, rutile, synthetic rutile production by 29% to 690,000t (FY2014: 535,000t).

    Z/R/SR sales rose by 5.6% to 651,000t and revenue by 17% to $A740M, reflecting currency translation benefits, and unit costs of goods sold improved 10% to $780/t.

    Iluka says its full-year results release next month will show a net cash position, from net debt of $59M in Dec 2014.
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    Alcoa delays curtailment of Intalco smelter until end of second quarter

    Alcoa Inc said it will delay the curtailment of its Intalco Works smelter in Ferndale, Washington until the end of the second quarter of 2016.

    The metals company said in November it planned to idle the 260,000 tonne-per-year smelter by the end of the first quarter.

    "Recent changes in energy and raw material costs have made it more cost effective in the near term to keep the smelter operating to provide molten metal to the plant's casthouse," the company said.

    Alcoa has been curtailing smelting capacity as the industry endures tumbling prices amid rising trade tensions with China. The company said this month it would close a plant in Evansville, Indiana, which would bring U.S. aluminum output to its lowest level in more than 65 years.

    Alcoa said it expects to remove about 25 percent operating smelting capacity and about 20 percent of operating refining capacity by mid-2016.

    Many aluminum producers have cut loss-making capacity or shut down completely over the past year as London Metal Exchange prices and physical premiums have tumbled amid rising exports of semi-fabricated products from China and high energy costs.
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    Indonesian minister rejects Freeport price in a setback to talks

    Freeport McMoRan Inc is asking the government to pay too much for a stake in its Indonesian unit, a key cabinet minister said on Tuesday, dealing a potential blow to already fragile talks over the firm's future in the mineral-rich nation.

    Freeport's long-held desire to continue mining in Indonesia beyond 2021 has been beset by controversy, including cabinet infighting, resignations and a major political scandal that led to the resignation of the parliamentary speaker.

    The U.S. mining giant wants to invest $18 billion to expand its operations at one of the world's largest copper mines in Papua, but is seeking government assurances first that it will get a contract extension.

    "The last couple of months have been a total disaster for Freeport," said a source with direct knowledge of the situation who asked not to be identified because of the sensitivity of the situation.

    "I'm very negative about the outlook for Freeport's contract renegotiations."

    As a first step to contract extension talks, Freeport must divest 10.46 percent stake in its Indonesian unit to increase the government's share to a total of 20 percent.

    After months of delays, the company valued the stake at $1.7 billion.

    "What is definite is that $1.7 (billion) is too expensive," State-owned Enterprises (SOE) Minister Rini Soemarno told reporters. It was not clear if that was an official government rejection, or the minister's personal opinion.

    "We are still interested. SOE companies should have big mines, because these mines belong to Indonesia."

    Soemarno has said that one of two Indonesian government-owned companies, miner Aneka Tambang or aluminium producer PT Inalum, should buy the Freeport stake.

    It was not clear if Freeport will need to revise its price, or if the government will propose one.

    Talks between the two sides are also entering uncharted territory following the resignation of key company negotiators.

    Freeport's Jakarta-friendly co-founder James "Jim Bob" Moffett resigned as the company's chairman last month, after the miner added two new directors under pressure from billionaire investor Carl Icahn.

    Although Moffett will still advise Freeport on its Indonesia operations, he was increasingly seen as a relic of the past sources said, and his departure is also now seen as a blow to the contract talks.

    Any further delays in contract talks, now widely expected, could lead to a gradual reduction in copper output as open-pit mining depletes. That could help support global copper benchmark prices, but at the same time dent government revenues in Southeast Asia's largest economy.

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    RTZ's vs BHP: corrected numbers.

    BHP has cut shareholder payouts by 50%
    Image title
    Rio has cut shareholder payments by 60%, but they funded in a prior year, which slightly ruins the intent.
    Image title

    #2Image titleImage title
    RTZ capex commitments are $33bn.
    BHP capex commitments are $4.8bn, to which we should add $19bn for the Oil and Gas division.

    BHP $32bn. Worst bond is 309bp over Libor.
    RTZ $23bn. Worst bond is  409bp over libor.

    RTZ: debt + capex= $56or 2x mcap.
    BHP: debt+ capex= $56, add $5bn for Samarco, $61bn or 1.6x mcap.


    Rio's operating cash flow (ex working cap) was $11bn in the yr to June 2015, capex was $6bn, leaving $5bn to cover a $4bn dividend. 
    BHP's operating cash flow (ex working cap) was $19bn in the yr to June 2015, capex was $13bn, leaving $6bn to cover a $6.5bn dividend.
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    MMG says ships first copper from Peru's Las Bambas mine to China

    China-backed miner MMG Ltd said on Monday it has made a first shipment of 10,000 tonnes of copper concentrate from its Las Bambas mine in Peru to China.

    MMG, backed by China Minmetals Corp and run from Australia, is aiming to become a mid-tier base metals producer, having bought the Las Bambas copper project from commodity giant Glencore.

    The mine is expected to churn out some 450,000 tonnes of copper a year.
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    Freeport says Indonesian unit head resigned for personal reasons

    The chief executive of Freeport-McMoRan's Indonesian unit, Maroef Sjamsuddin, has resigned for personal reasons, a spokesman at the mining company's head office in the United States said on Monday.

    A process to find a replacement has been started, Freeport spokesman Eric Kinneberg said in an email.
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    NALCO revives $2 billion Iran smelter plan as sanctions end

    National Aluminium Company NALCO will soon send an official team to Iran to explore setting up a smelter complex worth about $2 billion, its boss said, as world powers lift sanctions on Iran that had made negotiations difficult.

    NALCO Chairman Tapan Kumar Chand told Reuters on Monday that the ending of sanctions on Iran in return for the country's curbs on its nuclear programme could help the company finally move ahead with its long-held goal to set up a smelter there to make use of cheap gas resources.

    "It's a major bottleneck which has been cleared," Chand said. "As far as Iran is concerned they have already informed us that they are ready to receive the team."

    Cash-rich NALCO will also visit Oman and Qatar in the next two months to work out the best place to set up a 500,000-tonnes-per-year smelter and an associated power plant in the Middle East.

    Balvinder Kumar, the secretary of the mines ministry that controls NALCO, said the company's interest was at a preliminary stage though it should invest aggressively to expand wherever possible.


    NALCO is trying to push back on a finance ministry request to buy back 25 percent of its shares from the government, part of Prime Minister Narendra Modi's asset sales plan which looks set to fall well short of its goal this fiscal year.

    The company has agreed to repurchase 10 percent but says it also needs money for expansion - including the Middle East project - and to diversify into sectors such as nuclear energy.

    NALCO is a rare Indian aluminium company managing to make money despite a sharp drop in the metal's prices and rising imports from China that have badly hurt private competitors such as Vedanta Ltd (VDAN.NS) and Hindalco (HALC.NS).

    One factor is its easy access to raw materials such as bauxite, an aluminium ore. As a result, NALCO enjoys total liquid reserves of about 120 billion rupees ($1.77 billion), around half of that in cash, Kumar said.

    The finance ministry, which has managed to raise less then a fifth of the roughly $10 billion it had projected in divestments for 2015-2016, now wants NALCO to shell out about 32.5 billion rupees ($481 million) to buy back shares out of the 89 percent holding the government has in the company.

    "We're working on the 10 percent but a call on the rest will be taken by the board," Chairman Chand said, adding the buyback demand comes amid the fall in aluminium prices, eroding profitability and the need to have funds to grow.

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    Where should BHP and RTZ's dividends be?

    BHP has cut shareholder payouts by 50%
    Image title
    Rio has cut shareholder payments by 60%, but they funded in a prior year, which slightly ruins the intent.
    Image title

    #2Image title
    RTZ capex commitments are $78bn.Image title
    BHP capex commitments are $4.8bn, to which we should add $19bn for the Oil and Gas division.

    BHP $32bn. Worst bond is 309bp over Libor.
    RTZ $23bn. Worst bond is  409bp over libor.

    RTZ: debt + capex= $101 or 3.3x mcap.
    BHP: debt+ capex= $56, add $5bn for Samarco, $61bn or 1.6x mcap.


    Rio's operating cash flow (ex working cap) was $11bn in the yr to June 2015, capex was $6bn, leaving $5bn to cover a $4bn dividend. 
    BHP's operating cash flow (ex working cap) was $19bn in the yr to June 2015, capex was $13bn, leaving $6bn to cover a $6.5bn dividend.

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    Australia's Queensland Nickel calls in administrators

    Australia's Queensland Nickel (QNI) appointed voluntary administrators on Monday, just days after the company owned by mining magnate and politician Clive Palmer announced a restructuring after nickel prices plunged to decade lows.

    QNI and the administrators, FTI Consulting, said they intended to run the business as usual, while FTI reviews the future of the company.

    "We will undertake an urgent assessment of the financial position and ongoing viability of the company and its business operations," FTI Consulting Australia leader John Park said in a statement.

    FTI said it would update creditors at a meeting expected in late January.

    QNI last week cut more than 200 workers, saying it was forced to do so as the Queensland state government had refused to shore up the business.

    Palmer, who bought the refinery from BHP Billiton in 2009, said QNI had sought "minimal" assistance from the state, asking it to act as guarantor for a A$35 million ($24 million) bank loan to avert closure.

    "I believe QNI has the ability to continue its operations and trade out of administration," QNI managing director Clive Mensink said in a statement on Monday.

    The company has a production capacity of 35,000 tonnes a year.

    Nickel producers are under pressure following a more than 40 percent slump in nickel prices last year to their lowest since 2003, with stockpiles having hit record highs largely due to a downturn in stainless steel demand.
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    Will the Transition to Renewable Energy Be Paved in Copper?

    We've just completed a record-breaking year for renewable technology of all kinds. No matter where you look – be it on television or in newspapers, your neighbor’s roof or along a rural countryside – the presence of wind turbines, solar energy panels andenergy storage systems is growing weekly. In August 2015, U.S. President Barack Obama lauded climate change as “one of the most important issues not just of our time, but of any time,” and cited renewable energy as a solution. Soon after in early September, Elon Musk, CEO of SpaceX and Tesla Motors, named sustainable energy this century’s most pressing issue.

    More and more, sustainable energy systems are being installed throughout the country, driven by diminishing costs and government incentives. The U.S. is now leading the world in wind energy production as advances in technology have made it more affordable than ever, according to a recent U.S. Department of Energy report. Meanwhile, energy storage systems saw a six-fold increase in deployment in 2015, and the latest solar energy reports show that solar PV panel installations exceeded more than 20 GW of capacity in the first two quarters of 2015.

    While innovations and the ambitions of leaders like Obama and Musk have helped to drive the growing renewable energy market, there is also a little-known source fueling virtually all of these technologies – copper. From wind turbines and solar panels to electric vehicles and efficient motors, copper is essential to renewable energy systems and the infrastructure that powers them. Its superior electrical and thermal conductivity, performance and efficiency keeps these systems running reliably and connects them to the grid. In fact, copper itself is a sustainable material. Its recycling rate is higher than that of any other metal, and each year nearly as much copper is recovered from recycled material as is derived from newly mined ore.

    As the world continues to transition to new energy technologies, copper will be increasingly trusted. These systems require more copper than traditional energy sources. PV solar power systems contain approximately 5.5 tons per MW of copper, while grid energy storage installations rely on between 3 tons and 4 tons per MW. A single wind farm can contain between 4 million and 15 million pounds of copper. The use of copper wiring, tubing, busbar, cable, bushings, bearings and myriad electrical and mechanical parts keeps these systems operating longer and at higher efficiencies.

    Copper’s use in the renewable energy market will continue to expand as these technologies become more widely used. The market has already seen a trend in the rise of companies and commercial buildings installing green energy systems. These sectors value sustainability and are looking to lower their energy costs by utilizing them.

    As of mid-2014, there were 4,531 MW of commercial solar PV installed on 41,803 business, non-profit and government locations throughout the U.S. More than 23 percent of the wind power contracts signed in 2014 were with corporate buyers and other non-utility groups. These figures are expected to continue to rise as new technology makes these commercial installations even more affordable.

    Homeowners make up another upward trend in the sustainable energy market, as more and more roofs have solar PV panels mounted on them. New innovations and government incentives mean this trend will only grow larger as we move into 2016. In August, Obama announced a new series of executive actions and private sector commitments that would make renewable energy more accessible and affordable for homeowners. This push would allow homeowners to install these systems without any upfront cost. They could then pay back the cost over time through property taxes.

    New digital tools are also making it easier than ever for homeowners to educate themselves about renewable energy and begin to implement it. A recent Google Maps service called Project Sunroof enables homeowners to see how much solar power their roof can generate and how much money they could save by installing solar panels. It is now easier than ever for anyone to incorporate renewables into their energy plan.

    This growing number of commercial wind, solar and energy storage installations will continue to expand the market for renewable technologies. As these trends grow more prevalent, copper will remain an irreplaceable component in delivering reliable, sustainable energy globally. The world’s oldest metal has been integral to new technology from the copper era in 6,000 BC, to the middle ages and industrial revolution. As global market trends push the world into a new renewables boom, copper will maintain its ability to fuel modern, more efficient tools.

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    Steel, Iron Ore and Coal

    Brazil court orders closure of Vale's Tubarão iron ore port

    A Brazilian federal court on Thursday ordered the suspension of activities at Vale SA's Port of Tubarão until pollution concerns are fixed, halting the world's largest iron ore exporter's ability to ship more than a third of its output.

    The ruling by the court in Vitoria, Brazil was made as part of a police investigation at the giant man-made port. It comes as Vale comes under increasing pressure over its environmental record after a dam burst at a Brazilian mine run by its Samarco joint venture in October, killing at least 17 people.

    The court order paralyzed imports and exports at one of the world's most important iron ore terminals. Its docks loaded 82.5 million tonnes of iron ore destined for steelmakersaround the world in the first nine months of 2015, Vale said.

    Vale's preferred shares, the company's most traded class of stock, reversed early gains of nearly 5 percent to fall more than 1.3 percent at the close of trading.

    In addition to iron ore, Tubarão handles coal imports and steel exports for the Brazilian unit of ArcelorMittal SA, the world's largest steelmaker. ArcelorMittal said in a statement that Vale is responsible for port operations and that the closure will not have an immediate impact on its operations.

    Police have said activities at Vale's iron ore dock and coal dock have resulted in iron ore and coal dust polluting the surrounding water and air and contributing to pollution in other areas, including nearby beaches.

    Judge Marcus Vinicius Figueiredo de Oliveira Costa said in his ruling the suspension would remain in effect until Vale and ArcelorMittal fix the pollution problems.

    The judge said that failure to obey the closure order would result in a daily fine equal to 2/30ths of Vale and ArcelorMittal's monthly revenue.

    ArcelorMittal said the operation of the port was Vale's responsibility. It also handles coal imports for other steelmakers in Brazil's interior, who receive the coal by rail.

    Vale said in a statement that it will take all judicial measures necessary to guarantee the re-opening of the port. It said the closure will have serious economic impact on Espirito Santo state, where Tubarão is located, and on Minas Gerais, the state where iron ore exported at Tubarão is mined.

    Vale already faces a 20 billion real ($4.89 billion) lawsuit brought by Brazil's federal government over the October breach of an iron ore tailings dam at Samarco Mineração SA [SAMNE.UL], Vale's 50-50 joint iron ore venture with Australia's BHP Billiton Ltd.

    The closure could further crimp revenue at Vale struggling with a nearly 40 percent decline in the price of iron ore in the last year to 40.50 a tonne, one of the lowest prices in the last decade.

    A court spokeswoman said the order does not affect state-run oil company Petroleo Brasileiro SA's fuels terminal at the site. Some areas of Espirito Santo have recently run out of fuel because of Petrobras logistics problems.

    Petrobras confirmed that its terminal was operating normally and is not affected by the ruling.

    Vale has had a long and torturous relationship with the government and environmentalists in Vitoria. Since it opened in 1966, many have complained of dust and other air pollutants coming from the port, which also houses a steel mill, iron ore pellet plants and giant iron ore storage patios.

    Vale said in a statement that it has spent 800 million reais ($193 million) between 2007 and 2014 improving environmental control systems at the port an amount that will rise to 1 billion reais by 2020.

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    The coal miner “on everybody’s list” as the next bankruptcy victim

    Plummeting coal prices have pushed almost half the debt issued by U.S. coal companies into default, and for miners and their investors there’s no end in sight.

    Patriot Coal Corp., Walter Energy Inc. and Alpha Natural Resources Inc. have all filed for bankruptcy in the past year. Now that Arch Coal Inc., the second largest coal miner in the U.S., has joined their ranks, investors are wondering if the biggest, Peabody Energy Corp., could be next.

    “Lots of people are wondering: What’s the next shoe to drop? Who might be the next company? Peabody’s on everybody’s list,” said Spencer Cutter, a Bloomberg Intelligence analyst.

    Coal producers are suffering through a historic rout. Over the past five years, the industry has lost 94 percent of its market value, from $68.6 billion to $4.02 billion.

    In addition, Fitch Ratings said in a Jan. 11 report that Arch’s bankruptcy pushed the sector’s default rate to “an unprecedented peak” of 43 percent. So investors are now raising questions about the viability of other miners, such as Consol Energy Inc., Foresight Energy LP, Cloud Peak Energy Inc. and Murray Energy Corp.

    “This once mighty industry is destined to gradually shrink in importance, and virtually disappear as an investable sector,” said Margie Patel, a portfolio manager with Wells Fargo Asset Management in Boston, which manages $351 billion.
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    Mt Gibson boosts cash reserves

    Junior miner Mount Gibson Iron has managed to increase its cash reserves even as falling prices continued to put the future of its mines under a cloud.

    The Perth-based miner yesterday said it had increased its iron ore sales and lifted its cash reserves by $15 million to $345m in a difficult environment during the December quarter.

    The cash balance compares to Mount Gibson’s current market capitalisation of about $196m.

    Despite the result, Mount Gibson chief executive Jim Beyer admitted the company was struggling to generate cash in the current iron ore price environment.

    “I think it’s very marginal,” Mr Beyer told analysts during a conference call yesterday.

    “We continue at Koolan Island to get some benefits of the mining that was done back in the September quarter but there’s no doubt it’s a pretty challenging period for us at the moment.”

    Mount Gibson’s all-in December quarter cash costs averaged $47 a tonne compared with $52 a tonne in the preceding quarter. The benchmark iron ore price is about $US42 a tonne, although Mount Gibson sells its ore at a discount to that price.

    Mr Beyer estimated it would cost about $30m to close Koolan Island in the Kimberley and almost $8m to close Extension Hill in the Mid-West.

    The company is continuing to review its activities amid a weak outlook for iron ore prices.

    “We continue to evaluate potential new resource acquisition opportunities outside of iron ore,” Mr Beyer said.

    Mount Gibson has cut staff and implemented new rosters to reduce costs over recent months.

    Westoz executive director Philip Rees described the quarterly result as “solid”, with the increase in cash the main highlight.

    “This is a very relevant outcome given Mount Gibson’s current market capitalisation of $196m is pricing in significant cash erosion,” he said.

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    China to allocate $4.6 bln to shut 4,300 coal mines -Xinhua

    China will allocate 30 billion yuan ($4.56 billion) in funds over the next three years to support the closure of small and inefficient coal mines and redeploy around 1 million workers, state media reported on Thursday.

    The Chinese government is determined to reduce the share of coal in its overall energy mix as part of efforts to cut smog and greenhouse gas emissions, but it also looking to secure a soft landing for a sector that employs around 6 million people.

    Total raw coal output fell 3.5 percent to 3.68 billion tonnes last year, according to officialdata, the second annual decline in a row. Prices fell by about a third during the year, causing heavy losses in the industry.

    The Economic Information Daily, a newspaper run by official news agency Xinhua, said that the National Development and Reform Commission, China's state planning agency, is currently soliciting opinions from the industry ahead of the release of a plan to tackle chronic overcapacity in the coal sector.

    It said China will aim to close 4,300 mines and cut annual production capacity by 700 million tonnes over the next three years.

    The central government will also ban new mine approvals for the next three years, but the move is unlikely to make much of a dent in a production capacity surplus said to amount to more than 2 billion tonnes a year, over half the country's total output.

    Citing the China National Coal Association, the report said China still had around 11,000 coal mines in operation by the end of 2015, with a total capacity of 5.7 billion tonnes.

    Analysts at Shenwan Hongyuan Securities estimate that the funds required to tackle overcapacity in the coal and steel sectors could reach 200 billion yuan, 70 percent of which would be needed for coal.

    According to the National Energy Administration, coal consumption amounted to 64.4 percent of China's total energy mix in 2015, down 1.7 percentage points compared to the previous year. China aims to cut the rate to 62.6 percent this year.
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    Shanxi to ban mining of high-sulphur or high-ash coal seams

    Shanxi province, a major coal production base in northern China, will ban the mining of coal seams with high sulfur or high ash, to further improve commercial coal quality and thus reduce dust pollution, said the provincial Coal Industry Bureau in a notice released on January 15.

    Coal seams for mining must meet the quality standards as below: the sulfur content of coal should be less than 1.5% for lignite and below 3% for other coal varieties, while the ash content should be below 30% for lignite and 40% for other varieties.

    Coal mines in the province should make sure the raw coal washing ratio exceeds 70%, which means that at least 70% of raw coal will be washed for use.

    All newly-built coal mines should have corresponding coal selecting and washing facilities.

    The existing coal mines are required to accelerate building and upgrading of washing facilities and raise raw coal washing ratio, in order to ensure quality and alleviate pollution.

    Facilities for dust prevention and reduction should be available in coal storage yards and transfer sites of coal enterprises.

    Open-cast mines adopt special measures of dust prevention and reduction at working sites.

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    BHP Billiton on track to meet 40 mln T coking coal target

    UK-Australian resources firm BHP Billiton is on track to meet its 40 million tonnes coking coal production guidance for the 2015-16 fiscal year that ends June 30, despite a 6% fall in output in October-December from a year earlier, Argus reported on January 20.

    BHP Billiton's coking coal production was 10.49 million tonnes in October-December, in line with the 10.45 million tonnes produced during July-September. The company needs to produce 19.07 million tonnes in January-June in order to meet its annual target of 40 million tonnes.

    Production in the latest quarter was supported by record output at the Blackwater, Daunia, Caval Ridge and South Walker Creek mines in the Bowen basin region of Queensland in Australia. But this was offset by a four-week suspension of operations at Broadmeadow after the longwall got stuck underground, and the completion of longwall mining at the Crinum mine.

    About 80% of BHP Billiton's hard coking coal production comes from its 50:50 BHP Mitsubishi Alliance (BMA) joint venture with Japanese trading firm Mitsubishi. BMA is the world's largest supplier of seaborne coking coal.

    BHP Billiton's share of production from the venture rose to 8.21 million tonnes in October-December from 8.09 million tonnes in July-September. All of BMA's mines are in the Bowen basin.

    Most of the remainder of BHP Billiton's hard coking coal production comes from its 80% stake in the BHP Billiton Mitsui Coal (BMC) joint venture with Japanese trading company Mitsui, which holds the remaining 20%. BHP Billiton's share of production from this venture fell to 2.19 million tonnes in October-December from 2.34 million tonnes in the previous quarter.

    Hard coking coal sales were 7.64 million tonnes in October-December, up from 7.02 million tonnes during July-September, while semi-soft coking coal sales fell to 2.7 million tonnes from 3.25 million tonnes over the period, based on a breakdown of sales by product from the combined BMA and BMC mines.

    Output from the 1 Mtpa Haju coking coal mine in Kalimantan, Indonesia started in the July-September quarter. The mine produced 15,000 tonnes in the period, rising to 87,000 tonnes in October-December.
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    Yankuang to slash 20,000 jobs in 3 years

    Yankuang Group, a state-owned coal producer in East China's Shandong province, will cut 20,000 jobs in three years to reduce labor cost, local media reported on January 19.

    The group vowed to cut at least 6,500 jobs through retirement and job transferring in 2016, helping cut labor cost of 800 million yuan ($122 million).

    The group planned to transfer 2,000 staff to external and new projects and 4,000 workers for internal job transfer, cutting cost by 240 and 40 million yuan; and arrange retirement for 2,570 labors, which could cut cost by 210 million yuan.

    Besides persisting market slackness, company insiders said the move was also due to increased equipment investment and technological updating.

    More than 95% of the coal enterprises in China fell into losses amid falling prices in 2015. Impacted by the slump in coal prices, Yankuang realized revenue of 61.24 billion yuan in the first three quarters of the year, down 28.79% year on year, with net loss at 146 million yuan.

    Analysts said China could see a loss of 3 million jobs, if those oversupplied industries cut output by 30%, resulting in potential unemployment of 1 million people even if after reemployment, based on experience in 1998.

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    Indonesia 2015 coal production down 14pct on year

    Indonesian saw its coal production fall 14% on year to 392 million tonnes in 2015, as mining firms reduced their output in the wake of weak prices and pathetic demand, according to latest data from the Indonesian Coal Mining Association.

    The volume was significantly below the initial target of 460 million tonnes set at the start of 2015 by Indonesia's minerals authority, and also fell well short of a revised target of 425 million tonnes.

    Indonesia’s coal exports fell 23% from a year ago to 295 million tonnes last year because of lower demand from several key markets, notably China and India. And exports could fall by at least another 15% to below 250 million tonnes in 2016, the association chairman Pandu Sjahir said.

    One of the key reasons for the decline in exports last year was China's increased import tariffs and stricter coal quality regulations. Chinese coalimports fell to 204 million tonnes last year, a 30% slump from 2014.

    Deliveries to India – historically another key destination for Indonesian coal – also fell because of rising domestic production and weaker-than-expected utilization by coal-fired power plants. India's receipts of imported coal during April-December fell by 15% compared with a year earlier to 132.3 million tonnes, coal secretary Anil Swarup said earlier this month.

    In addition, slower-than-expected demand growth from Indonesian power generation firms has compounded weaker demand from China and India.

    Jakarta is adding new generation capacity, which could soak up some of the coal oversupply that has helped push coal prices to their lowest levels in years. But capacity additions are not happening as quickly as hoped because of delays to power plant projects, some of which have been hit by land acquisition disputes, licensing delays and funding problems.

    Indonesia's benchmark thermal coal reference price, i.e. HBA, a monthly rate set by the Energy Ministry, fell 0.58% to a new record low of $53.2/t FOB in January 2016 from $53.51 in December 2015.

    But Indonesian coal demand could increase by around 22% from last year to as much as 110 million tonnes in 2016 as new capacity is brought on line, Sjahir said.

    The Indonesian government said last week it is aiming to invest $16.38 billion in 2016 to support plans to boost the national electrification ratio to just over 90% by the end of the year, up from 88% in 2015, by bringing new generation capacity on line and improving the transmission network.
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    Baosteel’s net profit slumps 83% in 2015

    BAOSHAN Iron and Steel Co, China’s largest listed steelmaker, saw a 83 percent plunge in its 2015 net profit, reflecting a general slowing in the industrial sector.

    State-owned Baosteel attributed the plunge to sluggish demand, steel price declines — which outpaced a fall in the price of raw materials — and higher foreign exchange losses, according to preliminary figures submitted yesterday to the Shanghai Stock Exchange.

    The company’s net profit was 961 million yuan (US$146 million) in 2015, down 83.4 percent from a year earlier, it said. Business revenue fell 12.6 percent year on year to 164.1 billion yuan.

    Baosteel’s financial report came hours after China released its economic data for 2015, which showed the economy grew 6.9 percent last year, its slowest pace in a quarter of a century. Industrial production growth slowed to 6.1 percent last year from previous double-digit rates.

    The moderation is a by-product of efforts to steer the Chinese economy away from a manufacturing and credit-fueled growth model to one based more on innovation, the service sector and consumer spending.

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    Germany warns against rushed exit from coal power

    Germany on Tuesday warned against a hasty exit from coal-fired power generation, concerned that such a move could pile more pressure on producers still wrestling with the planned shutdown of nuclear plants by 2022.

    Calls for the German government to set a timeline for phasing out coal-generated electricity have grown following the climate protection deal struck in Paris last month.

    "When we're talking about the future of coal I would advise being less ideological about it and to focus more on climate goals and the economic consequences," Economy Minister Sigmar Gabriel said at an industry conference on Tuesday.

    Gabriel said coal should not be tackled in similar "seismic waves", referring to Germany's decision to abandon nuclear power after the Fukushima nuclear disaster in 2011 in a move that has been described as too fast.

    "We need to be aware of what is needed to have a stable energy supply," he said, adding he wanted to invite all relevant parties to a roundtable this year about the future of coal.

    Gabriel's comments chime with those made by Germany's largest power producer RWE on Tuesday, when it rejected new calls to phase out coal-fired power generation.

    "The whole debate (about exiting coal) is unnecessary," RWE Chief Operating Officer Rolf Martin Schmitz told Reuters on the sidelines of the industry event.

    Coal accounted for 60 percent of RWE's power production in 2014, while the share at rival E.ON was 27 percent.

    The utilities have stressed that steps taken in 2015 to move domestic brown coal plants into a reserve scheme later this decade, as well as dismal power generation profits, were sufficient to see the gradual end of coal burning.

    Some 2.7 gigawatts of power generation from brown coal, equivalent to the output from five power plants, will be closed but retained as reserve power in case of emergency, parties in the coalition government agreed last year.

    The government wants 80 percent of German power provided by renewables by 2050. In 2015, the share was 30 percent, data from industry group BDEW shows. However, brown coal and imported hard coal still accounted for 42 percent together.

    "RWE has a clear plan (for coal) until 2050. We are able to provide sufficient power at decent prices until then," Schmitz said.

    Coal-fired power production employs not just tens of thousands of people, but is needed to provide round-the-clock power to Europe's biggest economy as it cannot solely rely on volatile green power, the utilities argue.

    Gabriel said it was irresponsible to talk about a coal exit without offering those working in coal-producing regions, such as Lusatia in eastern Germany, alternative job prospects.

    "Whoever wants to talks about an exit in Lusatia, must at the same time enter into a realistic discussion about sustainable jobs that earn a decent wage," he said.

    The first priority for reducing carbon emissions should be to make sure that Europe's Emissions Trading System works properly, he said.
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    15 more coal mines to start production by March 31: Coal Secy Anil Swarup

    The move comes against the backdrop of the government mobilising over Rs 3 lakh crore in three tranches of coal auctions last year.

    As many as 15 more coal mines that were auctioned last year would begin production by March 31, taking the number of total producing mines to 23, government said on Monday.

    The move comes against the backdrop of the government mobilising over Rs 3 lakh crore in three tranches of coal auctions last year.

    "Fifteen more mines that we had auctioned last year will start coal production by March 31," Coal Secretary Anil Swarup told PTI.

    Swarup said eight of the mines have already come in production.

    The government had last year auctioned 31 coal mines in three tranches and made an allotment of 42 coal blocks to central or state government companies.

    However, the government had to annul the process for the fourth round of coal block auctions, scheduled for this month on account of poor response from bidders in sectors like steel as well as depressed commodity prices and adverse market conditions.

    Now, the government plans to initiate fourth round of auction as and when market condition improves.

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    Rio Tinto to ship more iron ore in 2016 despite price rout

    Global miner Rio Tinto plans to increase iron ore production and shipments in 2016, defying a collapse in prices as it takes advantage of its position as the world's lowest cost producer.

    The world no.2 iron ore producer reported an 11 percent rise in annual iron ore shipments on Tuesday, roughly in line with its guidance of 340 million tonnes, and said it expected to produce and ship 350 million tonnes in 2016, including its mine co-owners' volumes.

    Rio's strong output, low costs and sharp cuts in capital spending are expected to help it maintain or raise its dividend at least for the next 12 months, in stark contrast to its rivals, even with commodities prices mired at multi-year lows.

    "We will continue to focus on disciplined management of costs and capital to maximise cash flow generation throughout 2016," Rio Tinto Chief Executive Sam Walsh said in a statement.

    The company has frozen all staff pay in 2016 and is slashing travel spending, stepping up a three-year cost-cutting effort to ride out a prolonged commodities slump. Walsh warned staff last week the outlook was "very sobering."

    Iron ore shipments in the fourth quarter rose 10 percent on a year earlier to 91.3 million tonnes, including its co-owners' volumes, and again outpaced quarterly production as Rio Tinto ran down stockpiles.

    Rio Tinto confirmed analysts' view that it would have to step up output in 2016 to keep up shipments.

    It said it expects to produce and ship around 350 million tonnes of iron ore, including co-owners' volumes, implying a 7 percent increase in production and 4 percent rise in shipments.

    Rio Tinto expects its share of mined copper production to rise to between 575,000 and 625,000 tonnes in 2016 from 504,000 tonnes last year, boosted by higher output from the Kennecott mine in the United States and an expected share of output from Freeport McMoRan's Grasberg mine in Indonesia.

    Mined copper output fell 13 percent to 111,000 tonnes in the fourth quarter of 2015, well below a Goldman Sachs forecast of 140,000 tonnes, mainly as there was less metal per tonne of rock dug at the Escondida mine in Chile, co-owned by BHP Billiton .

    Like its peers, Rio Tinto stepped up metallurgical coal production to offset sliding prices in 2015, however it flagged that volumes would be flat in 2016. The company is trying to sell its coal operations in Australia's Hunter Valley.

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    China steel and coal production falls in 2015


    China's crude steel output fell 2.3 percent to 803.8 million tonnes in 2015 from the previous year, government data showed on Tuesday, the first drop in more than three decades as the economy of the world's top producer slows.

    Production also declined 5.2 percent to 64.37 million tonnes in December from the year before, according to the numbers from the National Bureau of Statistics, dented by faltering demand.

    China's government is pushing to erode overcapacity in the steel industry, as the country aims to shift economic growth towards more consumption rather than heavy investment. The nation's massive steel sector is said to have a surplus capacity of about 300 million tonnes.

    China's crude steel output is expected to decline for a second straight year in 2016 on continued weakness in demand, according to a government study.

    "We would expect output to fall further this year, as the government is aiming to solve overcapacity and step up structural reform in supply," said Yu Yang, an analyst with Shenyin & Wanguo Futures in Shanghai.

    Steel prices tumbled over 35 percent in 2015, which has already forced many Chinese mills to slash output or shut permanently, with little indication of a strong rebound in steel demand.


    Output in December alone, normally a peak month for coal use as temperatures plunge, fell 0.3 percent compared to the same month a year earlier, according to data from the National Bureau of Statistics.

    China's coal industry is struggling with a huge supply glut that has sapped prices and forced many mines to shut.

    Key coal-consuming industries like steel and power also experienced declines in 2015, with crude steel production falling 2.3 percent over the year and power generation dipping 0.2 percent.

    Cement production, another important coal consuming sector, also fell 4.9 percent in 2015, following a downturn in construction activity.

    Beijing has urged coal producers to control output and it has also banned new project approvals, but the move is unlikely to have any immediate impact on the market, which has seen prices fall by a third since the beginning of last year.

    Senior officials at the China National Coal Association have said that despite the currenteconomic downturn, overall coal demand will increase over the long-term before peaking in the middle of the next decade.

    But Carlos Fernandez Alvarez, coal analyst at the International Energy Agency, said at a meeting in Beijing last week that coal consumption in China had already peaked.

    Environmental groups have urged the Chinese government to include an explicit 2020 coal consumption cap in its latest five-year plan, due to be published later this year.

    The Natural Resources Defense Council, a U.S.-based group, has urged China to set the cap at 4 billion tonnes and to cut the figure to 3.5 billion tonnes by 2030.

    The production of coking coal, used in steelmaking, also fell 6.5 percent over 2015 to 447.78 million tonnes, NBS data showed.

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    Hebei Steel plants told to relocate

    A steel plant has been ordered to move out of Shijiazhuang, capital of North China's Hebei province, within the next two years to cut pollution in one of the nation's 10 most-polluted cities.

    It is one of at least four such plants ordered to move from downtown areas in the nation's premier steelmaking province.

    The Shijiazhuang Iron and Steel Co has also been told to reduce its production to help lessen China's overcapacity problem, and modernize its operations to become cleaner and more efficient, officials said.

    The company, a subsidiary of China's largest steelmaker, Hebei Iron and Steel Group, must finish the move from the Chang'an district of Shijiazhuang to Jingxing county by the end of 2017, according to a government announcement.

    The new location is about 70 kilometers from its old site near the center of Shijiazhuang.

    "The plant's relocation will decrease the smoke and dust in the city's air and thereby help improve downtown's air quality greatly," a government official surnamed Guo said.

    The company, founded in 1957, has been emitting sulfur dioxide, smoke, dust and nitrogen oxide for nearly 60 years.

    The steelmaking capacity of the plant is 2.6 million tons a year, making up 5.2 percent of the group' production capability, according to the company's official website.

    When the relocation is complete, its capacity will be reduced to 2 million tons.

    "Relocation is not just transferring of capacity and pollution. Companies like mine are required to upgrade their production process and greatly reduce pollutants after the relocation," said Wang Liping, chairman of Shijiazhuang Iron and Steel. "It's like a process of purification."

    The relocation will cut the company's emissions of sulfur dioxide by 73 percent, and that of smoke and dust by 23 percent, Wang said.

    Other plants to be moved are those of Bohai Steel Group in Tangshan and Jinan Steel Group and Taihang Steel Group in Handan. They will be moved from city centers to coastal zones or special industrial zones far from downtowns by 2017.

    For the three companies, a total of 16.2 million tons of steel capacity will be moved.

    Preparations for plant relocations started in 2014, right after the State Council designated Hebei as a key province in the structural readjustment of the iron and steel industry.

    Hebei is the nation's top iron and steelmaking province, accounting for about a quarter of the nation's total steel production.

    In 2014, as the province launched a restructuring program, steel production there reached 185 million tons. It has ranked first in the country for 14 straight years, according to Zhang Qingwei, governor of the province.

    Relocation of steel plants is one of the major aspects of the program.

    By 2017, the province is expected to cut its steelmaking capacity by 60 million tons, in accordance with goals set in 2014.

    By the end of last year, the province had cut its steelmaking capacity by 41.1 million tons, according to the province's government work report released last week.

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    Over 1,000 coal mines in China to be shut down

    China will shut down more than 1,000 coal mines in Guizhou, Yunnan, Heilongjiang and Jiangxi provinces as parts of efforts to trim production capacity, a top work safety watchdog said on Friday.

    Huang Yuzhi, deputy director of State Administration of Work Safety, the country's top safety regulator, said that China reached its target by controlling the total number of coal mines within 10,000m and will continue its efforts to reduce outdated capacity this year.

    "More than 1,300 coal mines were closed last year, and small coal mines with a scale of annual production of less than 300,000 tons that had major accidents will be gradually closed this year, as well as those mines that are operating illegally," Huang said.

    The total number of coal mines in China stands at 9,624.

    China, the world's largest energy consumer, plans to stop approving new coal mines for the next three years.
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    China steel firms suffered $8 bln in losses in Jan-Nov 2015

    China's major steel firms lost 53.1 billion yuan ($8.07 billion) from January to November last year, as prices fell because of overcapacity and slumping demand, the China Iron and Steel Association (CISA) said on Monday.

    China's steel sector, responsible for around half of global output, has been one of the biggest casualties of the country's economic slowdown, with prices now at multi-decade lows as a result of a massive supply glut.

    China's total annual crude steel capacity is now 1.2 billion tonnes, CISA's chairman Zhang Guangning said in a speech at the association's annual conference last week that was posted on the group's website ( Monday.

    With about a third of the country's total capacity now standing idle, Zhang said China has still not established a mechanism that would allow loss-making steel enterprises to exit the market.

    "Some enterprises want to exit, but an exit route has not been opened up.. and some local governments continue to urge steel firms to produce in the interests of local economic development and social stability," said Zhang, who is also chairman of the state-owned Anshan Iron and Steel Group.

    He said CISA member firms saw their total earnings decline 19.3 percent over the 11 months, with more than half making losses, he said.

    The association consists of around 100 medium- and large-sized steel mills covering nearly 80 percent of national output.

    Steel consumption in China peaked in 2013, while output in the world's biggest producer peaked the following year, Zhang said.

    "The period of high market demand growth has already passed into history, and from now on... overall demand will slowly decline," he said.

    Crude steel output in China fell 2.2 percent to 738.4 million tonnes
    in the first 11 months of 2015, but apparent steel demand fell 5.5 percent to 645 million tonnes over the 11-month period, Zhang said.

    Exports have offered a lifeline for Chinese steelmakers, with falling domestic prices allowing them to undercut overseas producers, leading to a surge in trade disputes.

    Zhang said there were 36 anti-dumping investigations into Chinese steelmakers last year, double the 2014 number.

    A composite price index of eight steel products compiled by CISA was at 56.37 in early January, compared to the 1994 baseline of 100.

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    U.S. halts new coal leases on federal land in wide-ranging review

    U.S. halts new coal leases on federal land in wide-ranging review

    U.S. Interior Secretary Sally Jewell on Friday ordered a pause on issuing new coal leases on federal land in another step by the Obama administration to control climate change in the first major review of the country's coal program in three decades.

    The pause could last three years, Jewell said, while officials determine how to protect taxpayers' stake in coal sales from public lands and how burning coal could worsen climate change.

    Federal land accounts for over 40 percent of U.S. coal production.

    The review is the latest move by the administration to combat climate change using executive authority rather than wait for Congressional action.

    Republican lawmakers were quick to criticize the reform effort, accusing the administration of "ravaging" coal country.

    "Congress will continue to fight back against the president’s ruthless pursuit of destroying people’s low-cost energy sources in order to cement his own climate legacy," said House Speaker Paul Ryan.

    President Barack Obama, in his annual State of the Union address on Tuesday, hinted at Friday's announcement, saying he would "change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers and our planet."

    Jewell said the review will examine concerns flagged by the Government Accountability Office and the Interior Department’s Inspector General, as well as members of Congress and the public.

    "We have an obligation to current and future generations to ensure the federal coal program delivers a fair return to American taxpayers and takes into account its impacts on climate change,” she said.

    Jewell said the Interior Department will also adopt measures to boost transparency of federal coal leasing.

    Measures include creating a public database to show the carbon emitted from fossil fuels developed on public lands, posting online pending requests to lease coal or reduce government royalties, as well as capturing methane emissions from mines.

    Jewell said the pause will not apply to existing coal production and that the government will allow mining of metallurgical coal used in making steel, as well as emergency leases if more reserves are needed for power generation.

    "We have plenty of coal," Jewell said, adding that reserves already under lease are enough to sustain current levels of production from federal land for 20 years.
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    Hebei to reduce steel capacity by 18 mln T in 2016

    Hebei to reduce steel capacity by 18 mln T in 2016

    Hebei province, one major coal producer in central China, plans to reduce 18 million tonnes of steel capacity in 2016, including 10 million tonnes of iron-making capacity and 8 million tonnes of steel-making capacity, said the provincial governor Zhangqingwei in his government work report on January 8.

    The province aimed to cap its steel production capacity at 200 million tonnes by 2020.

    In 2016, the government will help a hundred enterprises to realize informatization and industrialization, speed up restructuring and relocation of Jinan Steel Group and Tangshan Guofeng Iron & Steel Company, and expand development space for the industry to the fields of communication, transportation, water conservancy, etc..

    Hebei has made breakthrough in reducing excess capacity during the past five years, cutting production capacity of 33.91 million tonnes in iron-making and 41.06 million tonnes in steel-making industries.

    Meanwhile, Hebei aims to decrease 5 million tonnes of coal consumption in 2016 by further prompting energy saving and emission reduction campaign combined with the promotion of clean energy and coal-burning pollution management.
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