Mark Latham Commodity Equity Intelligence Service

Wednesday 21st September 2016
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    China's energy guzzlers Aug power use edges up on year

    Power consumption of China's four energy-intensive industries edged up 0.4% on year to 153.1 TWh in August, accounting for 27.2% of the nation's total power consumption, the China Electricity Council (CEC) said on September 18.

    Of this, the chemical industry consumed 35.7 TWh of electricity, and the ferrous metallurgy industry consumed 43.1 TWh, dropping 2.9% and 1.6% on year, respectively; while power consumption of building materials industry and non-ferrous metallurgy industry stood at 29.5 TWh and 44.7 TWh, separately, rising 3.8% and 2.8% compared to the same month last year.

    In the first eight months of the year, the four energy guzzlers consumed 1136.1 TWh of electricity in total, or 29.2% of the country's total power consumption, declining 2.2% from the year-ago level, compared to a 2.1% drop a year prior.

    The ferrous metallurgy industry consumed 312.0 TWh of electricity during January to August, falling 7.4% year on year, compared to the drop of 6.9% from the previous year; while the non-ferrous metallurgy industry used 332.9 TWh of electricity, down 2.7% year on year, against a 9.7% fall from the year prior.

    The chemical industry consumed 287.8 TWh of electricity over the same period, up 2.5% year on year, a flat growth rate from a year ago; while power consumption of building materials industry increasing 0.6% year on year to 203.4 TWh, compared to a 6.4% decline a year ago.
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    Coal's cost advantage over LNG slipping, but not yet enough

    Thermal coal has been one of the commodity success stories this year, but there is a risk that it becomes a victim of its own success by eating into its advantage over liquefied natural gas (LNG) in generating electricity.

    The benchmark Australian thermal coal price, the Newcastle Index, rose to $70.76 a tonne in the week to Sept. 16, its highest in 18 months and taking its gain since the start of the year to almost 40 percent.

    In contrast, the price of spot LNG in Asia LNG-AS was $5.60 per million British thermal units (mmBtu) on Sept. 16, down almost 19 percent from the end of last year.

    The two fuels are at different stages in their price cycle, with thermal coal likely to snap five years of losses in 2016, while LNG is on track to notch up a third consecutive down year.

    The difference is mainly because the market for coal used in power stations has finally started to balance, with the prior years of oversupply coming to an end as mines shut down or cut back output and demand gains in Asian markets, with China proving a standout so far this year.

    LNG is still some way from this point, with more supply expected to reach the market this year and for the next few years, coupled with question marks over whether demand growth will rise sufficiently to absorb the new production.

    Nine liquefaction trains are expected to start up in 2016, adding 35 million tonnes of LNG to the market, ANZ Banking Group said in a research note published on Sept. 13.

    The additional capacity is largely from new plants in the United States and Australia, which is poised to become the world's largest producer of the super-chilled fuel as it completes eight new projects that have been under construction.

    Between 2016 and 2020, global LNG capacity is expected to rise by about 50 percent to around 370 million tonnes a year.

    This surge in supply will challenge even the most optimistic demand forecasts, meaning that the LNG price is likely to have to decline further to make the fuel more tempting to buyers.

    Global flows data compiled by Thomson Reuters Supply Chain and Commodity Forecasts using vessel-tracking show that the LNG market is growing, but nowhere near fast enough.

    In the January-to-August period this year, the ship data showed cargoes totalling 186.6 million tonnes being delivered.

    This was 7.7 percent higher than the 173.2 million tonnes for the same period in 2015, and 10.7 percent above the 168.5 million in the first eight months of 2014.
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    Oil and Gas

    Crude Spikes After API Reports Massive Crude Draw

    The American Petroleum Institute reported a 7.5 million barrel draw in U.S. crude oil supplies on Tuesday, instead of the build that many expected.

    American crude inventories were slated to increase by 2.3 million barrels over the past week, according to a survey by Reuters, and 2.8 million barrels were expected to be added according to S&P Global Platts. Zero Hedge’s sources had anticipated an even bigger 3.25 million barrel build.

    Gasoline supplies declined by 2.5 million barrels, surpassing forecasts of a 1.4 million barrel draw. Zero Hedge attributed the draw to the250,000-gallon leak in Helena, Alabama, which caused severe gasoline supply shortages along the East Coast. The pipeline’s holding company completed construction on a bypass line on Tuesday and told shippers to expect supplies starting tomorrow.

    Distillate inventories rose by 1.4 million barrels, marking six weeks of consecutive increases.

    Last week, EIA reported that U.S. crude oil inventories fell 600,000 barrels, after the biggest inventory draw of the century in the week prior, which was a 14.5 million barrel draw.

    Tuesday’s API report will either be validated or discredited by the U.S. Energy Information Administration's official crude supplies report Wednesday morning.

    Brent futures were down 0.30 percent or 14 cents at $45.80 a barrel one hour before the API report was released. Similarly, West Texas Intermediate futures were down by half a percent or 23 cents at $45.63 a barrel. Nearly 50 minutes after reporting, WTI was trading up 1.3% at $44.43 and Brent up 0.39% at $46.13. Gasoline was down 2.96% at 1.3788.

    Zero Hedge noted that barrel prices are expected to remain “rangebound” until the Organization of Petroleum Exporting Countries’ unofficial meeting in Algiers next week, which many are hoping will end with some sort of agreement to curb OPEC’s crude oil production.
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    Libya's AGOCO raises output to 210,000 bpd as two fields restart - spokesman

    Libya's Arabian Gulf Oil Company (AGOCO) said on Tuesday its output had risen to 210,000 barrels per day (bpd) after production resumed at the Nafoura and Hamada fields.

    "We will maintain production at this level and we are capable of increasing it, though we are suffering from a financial crisis at the moment," AGOCO spokesman Omran al-Zwai told Reuters.
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    India’s Oil Imports Touch Highest on Record as Demand Booms

    India’s crude oil imports peaked in August as refineries stepped up purchases to meet record domestic fuel consumption.

    Indian refiners imported 18.81 million metric tons (about 4.45 million barrels a day) of crude oil during the month, a 9.1 percent increase over last year, according to the oil ministry’s Petroleum Planning & Analysis Cell. That is the highest level in data on thePPAC’s website going back to April 2009.

    The South Asian nation of 1.3 billion people, which meets over 80 percent of its crude oil requirements through imports, has emerged as a bright spot for global oil demand as the the fastest economic expansion among major economies spurs increased use of trucks, cars and motorbikes. The International Energy Agency expects India to be the fastest-growing crude consumer in the world through 2040.

    “India’s domestic fuel demand has been rising at a scorching pace,” according to Tushar Tarun Bansal, director at Singapore-based Ivy Global Energy. “To meet this strong growth, India’s refinery runs have been on an uptrend, leading to higher imports.”

    The nation’s gasoline consumption reached a record in August, surging 25 percent from a year earlier, while demand for diesel rose 13 percent, the fastest pace since March. Virendra Chauhan, an oil analyst at Singapore-based consulting firm Energy Aspects Ltd., expects India’s oil demand to grow by 0.4 million barrels a day this year and by 0.2-0.3 million barrels a day next year.

    Indian refiners are racing to add capacity, spending billions of dollars amid rising fuel consumption. State-run Indian Oil Corp., the country’s biggest refiner, aims to increase its capacity by 30 percent, or about 2 million barrels per day, over the next six years by expanding its existing refineries across the country.

    The country’s 23 refineries have a total capacity of 230 million tons a year, while total fuel demand was 183.5 million tons during the financial year that ended March 31, according to the oil ministry.

    “There has been strong demand -- gasoline growth is unprecedented and diesel growth will rise after monsoon,” Sanjiv Singh, director of refineries at Indian Oil, said.
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    Oil Majors Must Count on M&A to Replenish Reserves, WoodMac Says

     Major oil producers will rely on acquisitions for about half their reserve replacement in the future after cutting exploration budgets to weather the crude-price collapse, according to Wood Mackenzie Ltd.

    Big oil companies are no longer trying to replace all their production through conventional exploration, the energy consulting company said in a report published Tuesday.

    "Now their reserves replacement will also require inorganic, brownfield or shale investments," Andrew Latham, vice president of exploration research at Edinburgh-based WoodMac, said in an interview. "Exploration has become incremental."

    Investors often use the reserve-replacement ratio -- the proportion of oil and gas production offset by new resources -- to value companies since it forms the basis for future output. Among seven oil majors, only three added more oil than they pumped last year. Exploration spending dropped by half from a year earlier to $7 billion, according to WoodMac, whichsees the industry slashing $1 trillion from exploration and development until the end of the decade.

    Acquisitions Push

    “The need for M&A in exploration is likely to be here for a considerable time," Latham said. The focus “will be on assets rather than on taking over companies.”

    Woodside Petroleum Ltd. is among those snapping up exploration assets. The Australian company agreed to buy ConocoPhillips’ interests off Senegal for $350 million in July. The purchase included the deep-water SNE discovery, which operator Cairn Energy Plc estimates has 473 million barrels in resources.

    Exxon Mobil Corp. was also said to be intalks with Anadarko Petroleum Corp. for a stake in a natural-gas discovery off Mozambique, and in advanced discussions with Eni SpA over a stake in another prospect in the same area.

    Lower oil prices have taken a toll on majors’ reserves, with some of them -- such as Royal Dutch Shell Plc -- forced to write down as much as 200 million barrels. Shell had the worst reserve-replacement ratio last year at minus 20 percent, the lowest in 12 years, it said in February.

    The companies are also disposing of costly assets as oil prices below $50 a barrel curb revenue. The Hague-based Shell aims to raise $30 billion from asset sales in three years following its $54 billion acquisition of BG Group in 2015. Among the assets it may sell are aging North Sea fields.

    Attached Files
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    How upstream exploration economics are recovering

    Oil and gas exploration economics were broken, even while oil prices were above US$100. Our new research shows that the upstream exploration sector is poised to emerge from the current slump leaner, more efficient and more profitable. Here we look at how they're changing their approach, and what that means for the future.

    The oil price downturn has been a catalyst for the industry to fix exploration economics. Rising costs, reducing returns combined with high-risk exploration strategies meant that the sector could not continue to operate in the same manner.

    Where does the industry go from here?

    Our research shows that the majors have started to look at exploration differently, and they've cut investment more drastically than other sectors. As the industry readjusts, there are now fewer wells being drilled. It's not that there's less oil to find – they're simply investing in less-risky operations. A lot of recent discoveries were not getting commercialised. And the economics of exploration were already broken back in 2014, when oil was at $100 per barrel.

    One of the positive findings that we have seen from the majors changing the way they approach exploration is improved returns even at lower prices.

    Image title

    Focussing on high-yield options

    Dr Andrew Latham, Vice President of exploration research at Wood Mackenzie says: "The new economics of exploration mean that rather than pursuing high-cost, high-risk exploration strategies – elephant hunting in the Arctic, for example – the majors have become more conscious of costs. Smaller budgets have required them to choose only their best prospects for drilling, including more wells close to existing fields. The industry now has in prospect a different – and potentially more profitable – future."

    We've identified five ways that explorers can recover:

    1. Focussed investment
    Reduced exploration investment has forced only the best-quality prospects to be drilled.

    2. Focus on returns and value over volume
    A shift towards lower-cost locations, more emphasis on tax shelters against existing production, more focus on near-term opportunities and generally less above and below ground risk.

    3. Redirecting investment
    Focussing on areas where government support and fiscal terms are most appropriate.

    4. Reduce costs
    Ongoing efforts to reduce the costs of developing discoveries through project re-design, standardisation and innovation.

    5. Lower-cost renewals
    Longer-term acreage inventory renewals at a low cost.

    Lower costs and more targeted investment

    To achieve these aims, the majors have started to change the way they operate. They've cut conventional exploration spend by 53% in 2015 vs 2014. But the number of exploration wells completed fell by just 11% compared to the average of the previous four years. The average spend per well is back down to levels not seen since 2008. They've also refocused exploration on proven basins, nearer to existing production infrastructure, and reduced activity in high-risk frontiers.

    Conventional versus unconventional spend

    Image title

    As the majors trim spend and refocus, they will discover smaller conventional volumes. This will lead to them relying more on other renewal options – unconventionals, discovered resource opportunities, enhanced recovery and M&A. We estimate that only 50% of production will be replaced by conventional exploration. This means that unconventionals are now attracting over 15% of exploration spend and have outperformed returns from conventional exploration since 2013. The end result will be a leaner, more fit-for-purpose sector, and will see the majors and the rest of the industry returning exploration to profitability at US$60 oil price.

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    Petrobras Reduces its Five-Year Investment Plan

    Brazilian state-run oil company Petróleo Brasileiro SA,or Petrobras, cut its investment budget for the coming years and plans to raise more cash from the sale of assets, amid efforts to reduce its huge debt.

    Petrobras on Tuesday said it would invest $74.1 billion in the 2017-21 period, down from $98.4 billion projected for the 2015-19 period, which was announced in January.

    Meanwhile, the company said it would seek to accelerate the sale of assets to reduce its debt.

    For 2017 and 2018, Petrobras is planning to sell a total of $19.5 billion in assets. By comparison, for 2015-16 period, the company had planned to sell a total of $15.1 billion in assets.

    With less investments and more assets sales planned, Petrobras said it seeks to reduce its net debt to Ebitda ratio to 2.5 times in 2018, from 5.3 times at the end of 2015.

    Petrobras ended the second quarter with a total debt of $123.92 billion.
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    Painted Pony Petroleum announces 30,000 boe/d production milestone

    Painted Pony Petroleum Ltd. is pleased to announce 180 MMcfe/d (30,000 boe/d) of production volumes were averaged over the previous five days, based on field estimates. The Corporation's production increase represents both absolute and per share production growth of greater than 80% over second quarter 2016 average daily production volumes of 99.8 MMcfe/d (16,634 boe/d).

    Painted Pony's production volumes at the Townsend Facilty averaged in excess of 100 MMcfe/d (16,670 boe/d) based on field estimates over the previous five days.

    As per previous guidance, Painted Pony anticipates increasing production volumes by an incremental 50 MMcfe/d (8,330 boe/d) to the Townsend Facility in early October 2016. Painted Pony expects total daily production volumes for the third quarter of 2016 to average approximately 138 MMcfe/d (23,000 boe/d) and 2016 exit production volumes to be approximately 240 MMcfe/d (40,000 boe/d).

    The recent increase in production volumes is consistent with Painted Pony's strategic 5-year plan and represents a significant milestone in the growth of the Corporation. Painted Pony continues to focus on growing production per share while working to lower capital and operating costs.

    Asset Swap Update

    Painted Pony anticipates closing the previously announced (press release dated July 27, 2016) asset swap with an industry partner on or about September 26, 2016.
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    China August diesel exports up 47.6 pct on yr -customs

    China's diesel exports rose 47.6 percent in August over the same year-ago level to 1.07 million tonnes, data from the Chinese customs showed on Wednesday.

    Gasoline exports were up 44 percent on year to 670,000 tonnes while kerosene exports rose 16.8 percent to 1.13 million tonnes, the data showed.
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    New fields to boost Algerian gas output in 2017

    Algeria is on track for more than 9 billion cubic meters a year additional gas output next year when three delayed projects in its south west come online, a source at state energy company Sonatrach said.

    The third largest gas supplier to the Europe Union, Algeria has struggled in recent years to increase production of crude and natural gas because of low foreign investment to boost output at maturing fields and work new production.

    For a year, European Union officials and energy firms have been pushing Algeria to adapt to more competitive markets, especially with the fall in crude prices, to attract the investment needed to pump more gas north again.

    Three projects

    Among the projects are Touat Gas set for February 2017 with an estimated output of 12.8 million cubic meters per day, Timimoun in March 2017 with 4.6 million cubic meters per day, and Reggane will provide 8 million cubic meters per day in June.

    “The three projects will come online on time, the outcome will reinforce our position as a reliable gas exporter to Europe. No delays, the projects will be delivered in 2017,” the Sonatrach source told Reuters.

    “Further in the south, we have found a huge potential of gas around the fields of Akabli and Tidikelt, in addition to Alrar’s project in the east that will deliver gas and oil,” the source said.

    Dent in exports

    A drop in European gas demand dented Algerian exports that were squeezed by slowing production at mature fields, low investment and s rapidly increasing domestic need for gas to generate power.

    Still, Sonatrach has invested to stabilize and increase production at its large, mature fields and expects to bring five new gas fields online in the south of the country despite delays from state bureaucracy.

    Gas output is expected to reach 141.3 bcm in 2017, 143.9 bcm in 2018, 150 bcm in 2019 and 165 bcm in 2020, according to a Sonatrach document.

    In another advance, Algeria’s Tiguentourine gas plant resumed full production for the first time since a militant attack in 2013, after its third train came back online. The plant, operated with BP and Statoil with a full capacity of 9 billion cubic meters a year.

    At its huge, mature Hassi R'mel field, Sonatrach has engaged in boosting operations to help bolster production.

    Sonatrach is also due to recuperate by the end of 2017 important volumes of gas that have been injected in the past decades in Hassi Messaoud and its region.

    Algeria is expected to export 50 billion cubic meters in 2016 to Europe, an increase of 15 per cent in comparison with 2015, according to Sonatrach.

    Algeria is seen as a natural partner for the European Union as it looks to diversify energy supplies after the Ukraine conflict exposed the risks of relying too much on the bloc’s top gas supplier, Russia.

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    China August LNG imports rise 60.1 pct on year -customs

    China's imports of liquefied natural gas grew 60.1 percent in August over the same month last year to 2.26 million tonnes, data from Chinese customs showed on Wednesday.

    August imports of kerosene gained 21.3 percent on year to 320,000 tonnes, the data showed.
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    A $24 Billion China Refinery Sees a Great Future in Plastics

    A new $24 billion Chinese refinery that’ll use as much crude oil as some of Asia’s biggest plants is set to take on rivals by helping make plastic bottles rather than fuel for cars.

    Rongsheng Petrochemical Co. has cleared more than 10,000 acres of land in Zhoushan island to build a 400,000 barrel-per-day facility by 2018, and will double that capacity by 2020, said Shou Bochun, a general manager at the trading arm of the privately owned company. Once the plant in eastern China reaches it expanded size by the end of the decade, it would rank among the top refineries in Asia, rivaling those of India’s Reliance Industries Ltd. and South Korea’s SK Innovation Co.

    Hangzhou-based Rongsheng plans to consume all of the plant’s output of naphtha, a key ingredient in the manufacture of petrochemicals, while minimizing production of diesel and fuels, Shou said. At maximum capacity, the refinery will be able to produce 10.4 million metric tons a year of aromatics including paraxylene and 2.8 million tons of ethylene, both of which are used to make plastics, according to a proposal posted on the website of the Zhoushan government.

    The company’s ambition underlines China’s increasing appetite for petrochemicals, used to make everything from sportwear to soda bottles. That will also help drive oil demand in the world’s second-biggest consumer amid a global glut and weak prices. Chinese petrochemical makers will need 90 percent more crude oil in 2030 than last year, while diesel demand growth is entering “a 10-year plateau”, according to Li Zhenguang, a senior analyst at China Petroleum & Chemical Corp., known as Sinopec.

    “It is chemicals really that is driving China’s oil-demand growth,” said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong. “Going forward, gasoline and chemicals will be very important when it comes to driving crude oil demand in China.”

    The nation’s oil consumption will rise to 700 million tons in 2030, or 14 million barrels a day, from 540 million tons in 2015, according to Li at Sinopec, which is China’s biggest refiner. He estimated the petrochemical sector will account for 19 percent of the country’s crude demand by the end of the next decade from 13 percent last year, which suggests consumption by the industry will almost double to 133 million tons.

    China imported 11.6 million tons of paraxylene last year from countries including South Korea, Japan, Taiwan and India, up 17 percent from a year earlier and compared with 3.5 million in 2010, customs data show. That’s about half of its requirements for the product, according to Shou.

    Polyester T-shirts

    The Zhoushan project by Rongsheng, a polyester fabric producer, may add a blow to other Asian refiners competing for the fast-growing Chinese petrochemical market amid a supply glut in the region. The Asian nation’s factories are forecast to make about 25 million tons of synthetic fibers this year, according to Salmon Aidan Lee, a Singapore-based consultant at Wood Mackenzie Ltd. That’s enough to produce 208 billion T-shirts.

    “Not only will this private petrochemical plant take market share away from PetroChina and Sinopec, but it will also take away market share from South Korean refiners and other regional competition,” said Nomura’s Kwan.

    Apart from Rongsheng’s 51 percent, privately owned Tongkun Group Co. and state-owned Juhua Group each control 20 percent of the project. Zhoushan Marine Comprehensive Development and Investment holds the remainder. The companies will fund the plant, estimated to cost about 160 billion yuan ($24 billion), by raising debt and selling equity, said Shou.
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    Oil service workers go on strike in Norway

    Over 300 oil service workers in Norway went on a strike on Wednesday morning after mediation between the Norwegian Oil and Gas Association and the Norwegian Union of Industri Energi failed.

    To remind, mediation over the collective oil service agreement between the employers’ organization in Norway and the workers’ union took place on Tuesday. The negotiations ended almost four hours past the original, midnight deadline but the agreement has not been reached.

    The strike affects the following companies, Schlumberger Norge, Baker Hughes Norge, Halliburton Norge, Oceaneering, and Oceaneering Asset Integrity.

    The walkout primarily affects environmental treatment of drilling waste, and could call a halt to some drilling operations, but it does not immediately affect oil and gas production on the NCS.

    Industri Energi’s negotiator Ommund Stokka said the employers’ association did not show any willingness to meet the union’s demands. The union believes that by accepting the employers’ proposal, the gap between the operator / drilling / catering and oil service staff would increase dramatically.

    The employers’ organization, on the other hand, said the union’s demands were unreasonably high. Karl Eirik Schjøtt-Pedersen, CEO of Norwegian Oil and Gas Association, said it was irresponsible to strike for a wage increase in a year when 40,000 people lost their jobs in the oil industry and while companies are still considering further downsizing.

    The union secretary Einar Johannessen stated that at the beginning only a limited number of workers will participate but, if necessary, the strike will escalate unless the deal is reached.

    Jan Hodneland, a chief negotiator at the Norwegian Oil and Gas Association, noted the strike is not showing solidarity to those who have lost their jobs.
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    Encana Sells $1 Billion of Shares as It Eyes Permian Expansion

    Encana Corp., the Canadian oil and natural gas producer, is selling about $1 billion of shares to fund drilling in Texas next year and repay debt.

    The company agreed to sell 107 million shares at $9.35 apiece through underwriters led by units of Credit Suisse Group AG and JPMorgan Chase & Co., Calgary-based Encana said in a statement on Monday after the close of regular trading on North American markets. An additional 16.05 million shares can also be purchased, as part of the deal.

    Encana joins producers including Crescent Point Energy Corp. in selling shares in recent weeks to fund drilling as U.S. crude is up 65 percent from its February low. Most of the company’s investment next year will be targeted toward increasing output in the Permian Basin in West Texas, the largest U.S. oil field.

    One of Canada’s largest gas producers, Encana has increasingly focused its attention on boosting oil and petroleum liquids production from shales including the Permian, where it established a position with the 2014 purchase of Athlon Energy for $7.1 billion. The company said it aims to double the number of wells on stream in the Permian in 2017, compared to this year.

    Shares of the producer, which were halted in Toronto after the announcement, are up 85 percent this year. Encana’s U.S.-listed stock dropped in after-hours trading and was down 4.8 percent to $9.39 as of 7:59 p.m. in New York.
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    Cheniere Shuts Down LNG Terminal for Repairs

    Gas deliveries from Cheniere Energy, the operator of the Sabine Pass LNG export terminal, dropped on Monday and Tuesday, signaling they may now be shutting down for repairs to fix gas flares that had not performed as expected, according to reports.

    Cheniere had said earlier this month that the planned shutdown would begin “later this month” and would last four weeks, but no specific date had been given.

    Even while the repairs are going on, LNG from the terminal could continue being shipped to various export destinations, Argus Media notes, because it also includes a number of storage tanks capable of holding a combined 17 billion cu ft of gas, and according to Argus, they are full to capacity at the moment. These 17 bcf of gas can be divided into four or five export cargos, with the typical average load of an LNG tanker ranging between 3 and 3.5 bcf.

    The terminal received a daily average of 1.18 bcf in the first two weeks of September, but on Monday it only received 20.8 million cubic feet, and the same amount was scheduled for delivery on Tuesday. This indicates that the two operating liquefaction trains at Sabine Pass have been shut down in preparation for the repairs. The terminal is planned to have a total of five trains, each with a daily capacity of 694 million cubic feet of LNG.

    At the end of last month, the first cargo of LNG from Sabine Pass reached China, media reported at the time. This was the first cargo of U.S. LNG to be exported to Asia. The continent is the most attractive market for LNG producers worldwide because of ample demand. This demand, however, has slackened recently, as more and more LNG projects came on stream, pushing prices down.

    The Sabine Pass project is worth US$20 billion and is one of several such projects being built around the U.S. in a bid to make better use of the abundance of natural gas extracted across the country’s shale plays. So far, however, U.S. LNG has faced stiff competition abroad, more specifically in Europe and Asia, where LNG exporters with a presence are prepared to cut their prices in order to preserve their market share – something not so easily achievable for U.S. exporters.
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    Alternative Energy

    South Korea in $27bn renewables spree

    South Korea will invest $27bn in renewables and from next year begin to retire 10 coal-fired power plants.

    The dramatic statement of intent on sustainability was revealed this morning by the country’s Second Vice-Minister of Energy, Taehee Woo.

    Delivering the opening speech at Asia Power Week in Seoul, he said that South Korea had set an ambitious target to cut its greenhouse gas emissions by 37 per cent by 2030, and added that energy storage, windpower and solar would all play a key role.

    Woo said that “the power industry is undergoing profound transformation”.

    “The traditional power business model cannot maintain its competitiveness”, he said. “The grid has to become smarter.”

    He said another key strand of Korea’s emissions-reduction would involve retrofitting its existing plants with supercritical technology.

    The retrofitting theme was taken up by Heung-Gweon Park of Doosan who said that retrofitting “could be the stepping stone” for Asia’s decarbonisation.

    “I understand that extending the life of a coal plant does not sound very attractive,” he said, but added that all coal plants in South Korea will be supercritical by the end of the next decade.

    And after stating that developed countries such as those in Europe had “relatively well-managed the transition to renewables”, he warned that “such a drastic transition in Asia could prove to be an unbearable shock”.

    At a press conference later in the morning, GE Power president Steve Bolze also stressed the importance of overhauling South Korea’s existing plants for the country to meet its greenhouse gas reduction target.

    But Bolze went to on say that GE would also be installing its most cutting-edge technology in the next generation of Korea’s combined-cycle plants.

    He referenced GE’s new plant for EDF at Bouchain in France, which this year entered the Guinness Book of Records for the most efficient gas turbine, and said: “We have a project in Korea that will be at the same performance – if not higher.”

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    Chinese solar firms defy growing competition in Middle East

    China's solar technology producers manage to secure market shares across the Middle East, despite growing competition in the region, state media Xinhua reported, citing an industry exhibition opening in Dubai on September 19.

    At the three-day annual Intersolar Middle East exhibition, dozens of companies from China showcase their latest innovations like solar panels or solar power transmitting technology.

    "In 2015, a price war in the region started and we are exhibiting for the first time at the Intersolar Middle East in order to reach out to new clients," Anne Zheng, sales manager from Zhejiang Longchi Technology, was cited as saying.

    Jimmy Wang, vice general manager with Cixi City Rixing Electronics, was cited as confirming that pressure on sales prices increased.

    "We managed in recent years to spread our wings across the Middle East as we found new clients even in remote markets like Syria, Afghanistan or Yemen. Dubai is the perfect distribution hub for the region and we also reach out to Africa and India," he was also quoted as saying.

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    Brazil's Petrobras says to exit biofuels production

    Brazil's Petrobras says to exit biofuels production

    Brazil's state-controlled oil company Petróleo Brasileiro SA said on Tuesday it will exit the biofuels sector, as the heavily indebted company seeks to prioritize investment in crude oil and gas production.

    Petrobras, as the company is known, said biofuels would be one sector it plans to unload as part of sweeping asset sales plan. The company reaffirmed a $15.1 billion in asset sales for the 2015-2016 period and fetch an additional $19.5 billion through divestments and partnerships between 2017 and 2018.

    Petrobras has a significant portfolio in biofuels. No specifics were provided on what years the sales were planned for.

    Its largest asset is a 45.9 percent stake in Guarani Tereos Açúcar e Energia Brasil, which owns seven mills with a combined production capacity of 1.7 million tonnes of sugar and 900 million liters (237.8 million U.S. gallons) of ethanol per year.

    Petrobras also owns 49 percent of Boa Vista mill in Goias state, a joint venture with Brazilian sugar and ethanol company Sao Martinho, and a 40 percent stake in the Bambui mill in the Sao Paulo state.

    Reuters reported last year that Petrobras was trying to sell its stake in Guarani Tereos, but talks hit a snag regarding price.

    Other media reports said Petrobras was also trying to sell stakes in the other mills, but the company never confirmed this.

    Petrobras also fully owns three biodiesel plants in Minas Gerais, Bahia and Ceara states and has a 50 percent stake in local biodiesel producer BSBIOS, which manages two large plants in the states of Parana and Rio Grande do Sul.

    Sugar and ethanol prices have recovered strongly since Petrobras since the media began reporting the company planned to leave the biofuels sector early last year. Raw sugar prices hit the highest level since 2012 on Monday in New York, lifted by expectations of at least two years of a global supply deficit.
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    China nuclear developers must seek public consent: draft rules

    China's nuclear developers must seek the consent of local stakeholders before going ahead with new projects, according to draft rules published by the country's cabinet on Monday.

    Developers will need to assess the impact a nuclear project will have on social stability and solicit public opinion through hearings or announcements, the Legislative Affairs Office of the State Council said.

    China is in the middle of a rapid nuclear reactor building program and aims to have 58 gigawatts (GW) of capacity in full commercial operation by the end of 2020, up from 30.7 GW at the end of July.

    But despite a strong safety record at existing plants, the government has struggled to convince the public about the safety of nuclear power.

    Protests in the eastern coastal city of Lianyungang last month led to the cancellation of a proposed $15 billion nuclear waste processing plant.

    "Japan's Fukushima accident once again created doubt about the safety of nuclear power among the public, and also caused feelings of fear and opposition to occur from time to time," the Legislative Affairs Office said in a statement.

    It said the new draft rules would improve information disclosure and allow the public to participate more actively in the construction and supervision of nuclear projects.

    The Legislative Affairs Office has made the draft guidelines available to the public and will accept suggestions until Oct. 19, it said in a notice posted on its website (

    A team of experts from the International Atomic Energy Agency said this month that China's "unparalleled" nuclear expansion would pose challenges for its regulators, and more work needed to be done in areas such as waste management and the handling of ageing reactors.

    Attached Files
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    Precious Metals

    Newmont's aggressive expansion plans

    Newmont Mining is on an aggressive investment (and divestment) program which could see it catapult the company to the top of gold production stakes.

    In a presentation at the Gold Forum in the city, Denver-based Newmont outlined projects that will add around 1 million ounces of gold to its portfolio and do so as soon as the middle of next year.

    The company sports one of the stronger balance sheets in the sector having embarked on a debt reduction program earlier than its rivals.

    Newmont sold its Indonesian operations for $1.3 billion at the end of June. The company says it's reinvesting the proceeds in the Merian mine in South America, the Cripple Creek & Victor gold mine in Colorado it bought last year and at Long Canyon, a Nevada oxide deposit it acquired in 2011.

    By doing so the company is doubling average mine life and pushing done all-in costs by$100 an ounce.

    With the release of its second quarter results Newmont also said unapproved projects "represent upside of between 200,000 and 300,000 ounces of gold production beginning in 2018."
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    NUM joins AMCU in declaring platinum wage talks dispute

    Wage talks in the platinum sector look set to drag on into a third month after the National Union of Mineworkers (NUM) today announced a dispute with Anglo American Platinum (Amplats).

    The NUM joins rival the Association of Mineworkers & Construction Union (AMCU) which earlier this month declared a deadlock with Amplats as well as with Impala Platinum (Implats) and Lonmin.

    Wage talks officially opened on July 12 when AMCU met with representatives from Implats. The union was asking for a R12,500/month basic wage for entry level employees.

    The NUM said it had declared a wage dispute after talks with Amplats deadlocked. It is demanding an increase of 14.5% against an offer of 6.75% from Amplats.

    “The NUM view the offer by Anglo Platinum as an insult to thousands of helpless employees and the union has also observed the attitude by the company vehemently refusing to close the apartheid wage gap,” the union said in a statement.

    It said it remained “unshakeable” on its demands and criticised Amplats for alleged “dirty tactics”. A deadlock and dispute are the first steps towards strike action.

    AMCU led a five-and-a-half month strike in 2014 which cost the platinum sector about R20bn in lost wages. However, analysts believe there is less chance of a prolonged strike this time around.

    Producer price inflation is about 6%.

    Roger Baxter, CEO of the Chamber of Mines, said at a presentation today that cost increases over the last five years in the mining sector was out of hand.

    “There has been a 13% increase in the cost of diesel, 11% in reinforcing steel, and 11% in wages versus PPI of 6% so our inflation basket has been increasing at a much quicker pace than our competitors,” he said.

    “We need more effective problem-solving between business, government and labour. We have a hole in the canoe and we’re in the rapids. The waterfall that’s ahead of us is a ratings downgrade,” he added.

    Asked if AMCU members had the appetite for a lengthy strike in the event of not agreeing a wage deal, Mathunjwa said in July that: “We will give them [platinum companies] a strike if they demand it”.
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    World’s top diamond producer Alrosa doesn’t like synthetics

    Russia’s Alrosa, the world's top diamond producer by output, is concerned about the increasing threat than cheaper man-made gems entering the supply chain represent to those who mine the real thing.

    Speaking to clients and partners at the September Hong Kong Jewellery & Gem fair, the company said it is becoming imperative for the industry to find effective ways to defend the market from illegal substitutions by synthetic gems that are passed off as real diamonds.

    While the diamond industry needs to protect itself from attempts to sell synthetic diamonds as natural ones, Alrosa doesn't want to start a battle between the two sides.

    “The basis [for protecting the diamond industry] is the disclosure of the information about diamond production and further movement of rough and polished diamonds to end consumers,” Galina Platonova, adviser to Alrosa’s President, told the audience.

    A critical aspect of this protection, she said, is to secure that consumers prefer natural diamond jewellery to mock alternatives, and to develop and manufacture devices to easily identify natural and synthetic polished diamonds.

    In recent years, diamond miners have seen the rise of man-made gems entering the supply chain with some producers accusing those synthetic stones of weighing in their reduced sales of late.

    Technological leaps have allowed companies to make larger numbers of gem-quality stones inexpensively, with traders able to attempt to pass them off as mined, or natural, diamonds.

    To avoid that increasing problem, Alrosa also said that is developing a series of programs aimed to highlight the value of Russian polished diamonds and to promote ALROSA’s brand.

    Attached Files
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    Base Metals

    Philippines to suspend over ten more mines in environmental crackdown: minister

    The Philippines will suspend more than 10 additional mines in an ongoing environmental crackdown on the sector but the announcement of who will be shut has been moved to Sept. 26, the minister in charge of mining said on Wednesday.

    Environment and Natural Resources Secretary Regina Lopez said more than 10 mines will "definitely" be suspended "because of the many violations."

    Other details, including the identities of those to be suspended, will be announced on Sept. 26, she said.
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    Steel, Iron Ore and Coal

    China's major coal producers start raising output -media

    Major Chinese coal producers have started raising production, the China Securities Journal reported on Wednesday, potentially unleashing 11 million tonnes of new supply each month onto the market and derailing the meteoric rally in Asian prices.

    The move followed a meeting earlier this month to draw up a draft proposal that would allow miner to raise daily output by 500,000 tonnes if prices hit 500 yuan ($74.94) per tonne for two weeks. China's coal production this year may drop to between 3.15 to 3.35 billion tonnes, down by 6 to 12 percent from a year ago, said two coal analysts, who declined to be named because they are not authorized to speak to the media.

    The China steel industrial association sent a request to increase the coking coal supply to the National Development and Reform Commission (NDRC) on Sept. 4, according to a document seen by Reuters.

    "Some smaller mines have furtively added production since August, the agreement is a big push. We see the (coal) shortage at 1 million tonnes a day, double the increases (set at the meeting)", said one of the coal analysts.

    Major coal producers, including Shenhua Group Corp , Inner Mongolia Yitai Coal Corp and Huadian Coal Industrial Group were allowed to raise production as the latest coal price increased to 537 yuan per tonnes, up from 515 yuan two weeks ago, the Securities Journal said, citing an unnamed official.

    China's biggest coal producer Shenhua Group has been given the green light to increase output by 2.79 million tonnes a month from 14 mines, said the paper.

    The companies involved did not respond to requests for comment.

    Traders said that the moves, which partially reverse government efforts to cut excess capacity, would likely end, or at least interrupt, a sharp thermal coal price rally which has seen Asian benchmark Australian physical prices soar by almost 50 percent this year.

    "China gives, and China takes. First, they push up prices by capping mining output, now they will pull down prices by raising output," said one coal trader with a merchant house.

    Australia's Macquarie bank this week sharply raised its thermal coal price forecasts through to 2018 as a result of China's capacity cuts announced in April.
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    Banks in Shanxi boost funding to coal firms by 23pct

    Banking institutions in northern China's Shanxi province have underwritten or bought 38 billion yuan in corporate bonds from coal companies so far in 2016 versus last year, bringing total funding for the sector to 206.5 billion yuan ($31 billion), the Shanxi branch of China's banking regulator said in a press release on September 20.

    It aims to boost funding to coal firms in the province via underwriting or purchases of corporate bonds by 23% since the start of the year, according to the statement.

    Heavy industries such as coal and steel have languished in China due to an industry downturn, and the companies are under pressure from the central government to cut excess capacity by shutting down mines and plants.

    While banks have grown wary of lending to the two sectors, the China Banking Regulatory Commission (CBRC), the country's banking regulator, has given lenders some latitude to manage their lending.

    The industry ministry has also said China would provide 100 billion yuan this year to help handle layoffs. Shanxi has awarded 947.78 million yuan to six major coal enterprises this year for shutting down surplus capacity, according to a statement previously released by Shanxi Finance Bureau.

    The capacity cuts in coal industry do not have a great impact on the province's banks, said Wang Zhigang, vice president of the provincial banking regulator on September 20.
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    India's Adani buys Australian port operator from Glencore

    A unit of India's Adani Enterprises Ltd will buy the company that operates Australia's Abbot Point Coal Terminal from Glencore Plc for A$19.25 million dollars ($14.52 million), ending a legal wrangle over control of the port.

    The statement from Adani and Glencore said Adani Ports and Special Economic Zone would purchase the port operator, Abbot Point BulkCoal Pty Ltd, pending regulatory approvals.

    Adani Enterprises, India's biggest private sector coal trader, acquired the Abbot Point Coal Terminal port from the Queensland government in 2011, considering it a key part of its plan to ship coal from Australia to India and for other exports.

    However, Glencore retained control of the actual operations of the port through its ownership of Abbot Point BulkCoal, sparking a legal dispute between the global miner and Adani that effectively will now end as the Indian company will assume full control of the port.

    Adani Australia CEO Jeyakumar Janakaraj called the deal "a key milestone in our well advanced plans for Abbot Point," according to the joint statement by the two companies.
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    SDIC aims to shut 1.353 GW coal-fired capacity over 2016-2020

    State Power Investment Corporation (SDIC), a giant energy company in China, aims to close 1.353 GW coal-fired power capacity involving 23 generating units during the 13th Five-Year Plan period (2016-2020), in response to the government-led supply-side reform and de-capacity drive, president Wang Binghua told media recently.

    The company also resolves to eliminate 2.4 Mtpa coal capacity this year, and altogether 4.8 Mtpa coal capacity from 2016-2020 through closure of eight mines in Guizhou with 3.3 Mtpa capacity and two mines in Xinjiang with 1.5 Mtpa capacity, he said.

    SDIC is the only conglomerate in China owning coal, coal-fired power, wind power, nuclear power and new energy businesses.
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    China Baosteel's takeover of Wuhan to create world's No. 2 steelmaker

    China's Baosteel Iron and Steel will acquire its smaller debt-laden rival, Wuhan Iron and Steel, in a deal that will create the world's second-largest steel producer as part of Beijing's push to overhaul the stricken industry.

    In a statement on Tuesday offering the first details of the long-anticipated deal, Wuhan said Baosteel will issue new shares to its shareholders to absorb the company. The proposal, which had previously been touted as a merger, is still subject to government approval.

    Based on 2015 capacity, the two companies will produce about 60 million tonnes a year, leapfrogging Hebei Iron and Steel into the top spot among China's steelmakers.

    First announced in June, the plan to combine the two state-owned enterprises is part of the Chinese government's push to consolidate its vast, fragmented steel industry to remove excess capacity.

    How the final agreement looks may offer a blueprint for other similar proposals announced in recent months, including a merger of Anshan Steel and Benxi Steel.

    "This is part of the government’s efforts to push through supply-side reform and will have a model effect for the new round of mergers and acquisitions," said Hu Yanping, an analyst with industry website

    Luxembourg-based ArcelorMittal SA is the world's biggest steelmaker by capacity.

    While China wants to boost efficiency in its steel industry, Baosteel faces the tough task of integrating its loss-making competitor.

    "Baosteel is a profitable company and Wuhan is heavily indebted and just needs someone to save it," said Richard Lu, an analyst at CRU consultancy in Beijing.
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