Mark Latham Commodity Equity Intelligence Service

Friday 9th October 2015
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    Oil and Gas


    Bank of England quizzing UK banks over commodities exposure - source

    The Bank of England has asked British banks to report their exposure to commodities and ensure they are mitigating risks effectively, a source familiar with the situation said on Thursday.

    Prices for oil and other commodities have fallen sharply in recent months, and earlier on Thursday the Financial Times reported the BoE move had been triggered by the sharp fall in the shares of commodities and mining company Glencore.

    "This is something being done in the course of normal supervision," the source said, adding that the request had been made by the Prudential Regulation Authority, the arm of the BoE in charge of day-to-day bank regulation.

    "It is not asking (banks) to take any particular action and it has not been prompted by any particular concern about the commodity sector. The PRA is making sure the firms understand the risks they are exposed to and mitigating them accordingly."

    Shares in Glencore dropped by 30 percent on Sept. 28, before recovering in subsequent days after the firm mooted sales of some of its units to reduce its $30 billion debt pile.

    Two of its rivals, the privately-held Vitol and Trafigura, earlier this week raised over $10 billion in finance, which they said showed bankers understood the sector better than bond or equity dealers.

    Copper, iron ore .IO62-CNI=SI and crude oil prices have tumbled by 16 to 25 percent in 2015, putting pressure on miners to turn a profit.
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    VW cheat software was switched on in Europe - Sueddeutsche Zeitung, headquarters raided

    Volkswagen's software used to cheat emissions tests was switched on in diesel vehicles in Europe, German daily Sueddeutsche Zeitung reported on Thursday, citing Volkswagen.

    The German carmaker admitted last month to cheating U.S. emissions tests and has since said about 11 million cars worldwide had the software installed. But the company has stopped short of saying whether the software was switched on in vehicles outside the United States.

    The paper cited Volkswagen as saying the carmaker now knows that the software recognises test procedures both in the United States and in Europe.

    Volkswagen was not immediately available to comment on the report.

    The biggest business crisis in Volkswagen's 78-year history has wiped around third off its share price, forced out its long-time chief executive and sent shockwaves through both the global car industry and the German establishment.

    German prosecutors have raided the headquarters of car maker Volkswagen and other sides on Thursday as part of an investigation into the company’s emissions scandal.

    "Today, in connection with the so-called emissions scandal, raids were carried out at Volkswagen in Wolfsburg and other locations," prosecutors from the state of Lower Saxony said in a statement.

    They said the raids aimed to secure documents and data carriers that could provide information about the exact conduct of company employees and their identities in the manipulation of exhaust emissions of diesel vehicles.

    - See more at:
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    Saudi Arabia Said to Order Spending Curbs Amid Oil Price Slump

    Saudi Arabia is ordering a series of cost-cutting measures as the slide in oil prices weighs on the kingdom’s budget, according to two people familiar with the matter.

    The finance ministry told government departments not to contract any new projects and to freeze appointments and promotions in the fourth quarter, the people said, asking not to be identified because the information isn’t public. It also banned buying vehicles or furniture, or agreeing any new property rentals and told officials to speed up the collection of revenue, they said.

    With income from oil accounting for about 90 percent of revenue in the Arab world’s largest economy, a drop of more than 40 percent in crude prices in the past 12 months has put pressure on the nation’s finances. While Saudi Arabia’s public debt is one of the lowest in the world, with a gross debt-to-GDP ratio of less than 2 percent in 2014, the kingdom’s net foreign assets fell for a seventh month to the lowest level in more than two years in August.

    Saudi Arabia is OPEC’s biggest oil exporter. Brent, a benchmark for more than half the world’s crude, was trading at $51.62 per barrel at 12:55 p.m. in London, down 10 percent this year.

    The finance ministry declined to comment. The government was working with advisers on a review of capital spending plans, people familiar with the matter said in August.

    The kingdom’s economic growth will likely slow to 3 percent this year from 3.6 percent in 2014, according to the median estimate of economists on Bloomberg. The budget deficit may widen to as much as 20 percent of gross domestic product, according to the International Monetary Fund.
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    Velocity of Money below 1930's levels

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    Brazil's president loses legal battle, faces impeachment threat

    Brazil's besieged President Dilma Rousseff lost a major battle on Wednesday when the federal audit court rejected her government's accounts from last year, paving the way for her opponents to try to impeach her.

    In a unanimous vote, the Federal Accounts Court, known as the TCU, ruled that Rousseff's government manipulated its accounts in 2014 to disguise a widening fiscal deficit as she campaigned for re-election.

    The ruling, the TCU's first against a Brazilian president in nearly 80 years, is not legally binding but it will be used by opposition lawmakers to argue for impeachment proceedings against the unpopular leftist leader in an increasingly hostile Congress.

    Rousseff's office said there were no legal grounds for the ruling and maintained in a statement that the audit court unduly penalized actions taken by her Workers' Party government to maintain social programs for Brazil's poor.

    Opposition leaders hugged and cheered when the ruling was announced in Congress, though it was not clear whether they have enough support to impeach the president despite a widening corruption scandal engulfing state-oil firm Petrobras and Brazil's deepest recession in 25 years.

    "This establishes that they doctored fiscal accounts, which is an administrative crime and President Rousseff should face an impeachment vote," said Carlos Sampaio, leader of the opposition PSDB party in the lower house.

    "It's the end for the Rousseff government," said Rubens Bueno, a congressman from the PPS party. He said the opposition has the votes to start proceedings in the lower house though perhaps not the two-thirds majority needed for an impeachment trial in the Senate.

    In a last-ditch bid to win time, the government had asked the Supreme Court to delay Wednesday's ruling, but it refused.

    Attorney General Luis Inacio Adams said the government would appeal again to the top court to overthrow the audit decision.

    Earlier on Wednesday, Rousseff's government failed to get enough support in Congress to back her efforts to rebalance Brazil's public accounts. Rousseff is also reeling from a ruling on Tuesday that cleared the way for a separate probe on alleged irregularities in her re-election campaign last year.

    Congress put off for a fourth time a session on whether to back or overturn her vetoes of two spending bills after her government was unable to obtain a quorum despite a cabinet reshuffle last week meant to bolster her support.

    "It's as if the government has ceased to exist," said congressman Pauderney Avelino of the opposition Democrats party.

    The congressional setback calls into question her ability to raise taxes to plug a widening budget gap that led the Standard & Poor's rating agency to strip Brazil of its investment-grade rating last month.

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    China's graft watchdog investigates former Sinopec chairman

    Chinese authorities have placed the governor of Fujian province, who is also the former chairman of China Petroleum and Chemical Corporation, under investigation on suspicion of "serious disciplinary violations", China's anti-graft watchdog has said.

    Su Shulin had been Fujian governor since 2011 and also served as deputy Communist Party chief in Fujian, the Central Commission for Discipline Inspection said in a statement late on Wednesday.

    Su was chairman of China Petroleum and Chemical Corporation, or Sinopec Corp, before his appointment in Fujian, one of China's wealthiest provinces on the coast across from Taiwan.

    The commission did not give details about Su's suspected 'disciplinary violations'. The accusation is used regularly as a euphemism for corruption.

    President Xi Jinping has carried out a sweeping campaign against corruption, waste and extravagance in official ranks since he assumed power three years ago.

    Su, 53, was also previously the vice president of CNPC, the parent of PetroChina , and was seen as a rising star within the party leadership because of his accomplishments and relatively young age.

    Several sources told respected financial magazine Caixin that Su's case was related to discoveries made about Sinopec by inspection teams from the government's audit office.

    It was not possible to reach Su for comment and it was not immediately clear if he has any legal representation.

    Xi has targeted the energy industry in his far-reaching campaign against graft. CNPC was a power base for disgraced former domestic security chief Zhou Yongkang, who was jailed for life for corruption in June.
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    Freeport: Icahn executives added to board

    U.S. mining and energy company Freeport-McMoRan Inc, bowing to pressure from its largest shareholder, said on Wednesday it added two new directors to its board under an agreement with activist investor Carl Icahn.

    Freeport shares jumped more than 12 percent after announcing that it has added Andrew Langham and Courtney Mather to its board. That increases the board to 11 members, with nine independent directors and two executive directors.

    Icahn, who owned 8.8 percent of Freeport as of Sept. 22, revealed his stake in the company in August and took aim at its spending, capital structure and executive compensation.

    In a statement on Wednesday, Icahn said he believes Freeport shareholders will benefit from the agreement, which restricts the company's ability to implement a poison pill plan.

    Under pressure from slumping commodity prices and Icahn, Phoenix-based Freeport said on Tuesday that it was looking at separating its oil and gas business from its mining operations and had cut its board from sixteen to nine members.

    The company said it could spin off the oil and gas business to shareholders, and was also considering joint ventures or an initial public offering for the business.
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    As A Shocking $100 Billion In Glencore Debt Emerges...

    One week ago, in a valiant attempt to defend the stock price of struggling commodity trading titan Glencore, one of the company's biggest cheerleaders, Sanford Bernstein's analyst Paul Gait (who has a GLEN price target of 450p) appeared on CNBC in what promptly devolved into a great example of just how confused equity analysts are when it comes to analyzing highly complex debt-laden balance sheets.

    CNBC's Brian Sullivan gets into a heat spat with Paul Gait over precisely how much debt Glencore really has, with one saying $45 billion the other claiming it is a whopping $100 billion.

    The reason for Gait's confusion is that he simplistically looked at the net debt reported on Glencore's books... just as Ivan Glasenberg intended.

    However, since Glencore - like Lehman - is first and foremost a trading operation, one also has to add in all the stated derivative exposure (something we did ten days ago), in addition to all the unfunded liabilities, off balance sheet debt, bank commitments and so forth, to get a true representation of just how big, or rather massive, Glencore's true risk is to its countless counterparties.

    Conveniently for the likes of equity analysts such as Gait and countless others who still have GLEN stock at a "buy" rating, Bank of America has done an extensive analysis breaking down Glencore's true gross exposure. Here is the punchline:

    We consider different approaches to Glencore’s debt. Credit agencies, such as S&P, start with “normal” net debt, i.e. gross debt less cash and then deduct some share (80% in the case of S&P of “RMIs” – Readily Marketable Inventories. These are considered to be “cash like” inventories (working capital) in the marketing business. At the last results, RMIs were about US$17.7 bn. Giving full credit for RMIs plus a pro-forma for the equity raise and interim dividend we derive a “Glencore Adjusted Net Debt” of c. US$28 bn.

    On the other hand, from discussions with our banks team, we believe the banks industry (and ultimately regulators) may look at the number i.e. gross lines available (even if undrawn) + letters of credit with no credit for inventories held. On this basis, we estimate gross exposure (bonds, revolver, secured lending, letters of credit) at c. $100 bn.With bonds at around $36 bn, this would still leave $64 bn to the banks’ account (assuming they don’t own bonds).

    Yet more:
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    Cargill 1st-qtr profit jumps 20 pct despite commodities slump

    Global commodities trader Cargill Inc effectively navigated tumbling commodities markets and volatile currencies to turn in a 20-percent gain in first-quarter profit, the privately held company said on Wednesday.

    The Minnesota-based company's grain and oilseed supply chain and energy businesses were standouts in the quarter ended Aug. 31, in stark contrast with several rival agribusinesses that have struggled in the commodities market downturn.

    Cargill reported net earnings of $512 million for the fiscal first quarter, compared with a profit of $425 million a year earlier. Revenue declined 17 percent to $27.5 billion from $33.3 billion.

    "Our team ably navigated the quarter's weather-driven agricultural commodity markets, as well as the effects of more volatile emerging markets, currency fluctuations and other macroeconomic uncertainty," CEO David MacLennan said in a release.

    Cargill's origination and processing unit, which buys, sells, stores and processes crops such as corn and soybeans, was its largest contributor in a quarter marked by falling prices and tepid global demand.

    Soybean processing profit strengthened amid bumper crops in North and South America, Cargill said.

    Rival agribusiness Louis Dreyfus Commodities BV last week said first-half profit fell by half due to falling commodity prices and faltering growth in major markets such as China and Brazil.

    Archer Daniels Midland Co and Bunge Ltd, which along with Cargill and Dreyfus are known as the "ABCD companies" that dominate global grain trading, report results in the coming weeks.

    Results were down in Cargill's animal nutrition and protein segment as high cattle and beef prices steered consumers to cheaper pork and poultry. The company sold its pork business to meat packer JBS SA this summer.

    Cargill's food ingredients segment also posted lower quarterly results, pressured by weak profits in sweeteners and starches, which slumped amid historically low sugar prices, the company said.

    Lower operating earnings after the closure of its hedge fund arm Black River Asset Management LLC this summer weighed on results in Cargill's industrial and financialservices segment, only partly offsetting stronger returns in energy trading.

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    Iraq leans toward Russia in war on Islamic State

    Iraq may request Russian air strikes against Islamic State on its soil soon and wants Moscow to have a bigger role than the United States in the war against the militant group, the head of parliament's defence and security committee said on Wednesday.

    "In the upcoming few days or weeks, I think Iraq will be forced to ask Russia to launch air strikes, and that depends on their success in Syria," Hakim al-Zamili, a leading Shi'ite politician, told Reuters in an interview.

    The comments were the clearest signal yet that Baghdad intends to lean on Russia in the war on Islamic State after U.S.-led coalition airstrikes produced limited results.

    Russian military action in Iraq would deepen U.S. fears that it is losing more strategic ground in the region as Russia weighs in behind President Bashar al-Assad with airstrikes in Syria and Iran holds deep sway in Iraq.

    Iraqi Prime Minister Haider al-Abadi has said he would welcome Russian airstrikes on Islamic State militants in Iraq and powerful Iranian-backed Shi'ite militias hope for a partnership with Russia to counter U.S. influence.

    "We are seeking to see Russia have a bigger role in Iraq. ... Yes, definitely a bigger role than the Americans," Zamili said.

    Shi'ite militias, long mistrustful of the United States, see Russia's intervention as an opportunity to turn the tables.

    Russia's drive for more clout in the Middle East includes a new security and intelligence-sharing agreement with Iran, Iraq and Syria with a command centre in Baghdad.

    "We believe that this centre will develop in the near future to be a joint operation command to lead the war against Daesh in Iraq," said Zamili, using a derogatory Arabic acronym for Islamic State, which is also known as ISIS or ISIL.

    Washington has been pressuring Abadi to rein in Shi'ite militias, angering fighters seen as a bulwark against the ultra-hardline Sunni Islamic State, the biggest security threat to oil producer Iraq since the fall of Saddam Hussein since 2003.

    "The Russian intervention came at the right time and right place and we think it will change all rules of the game not only in Syria but in Iraq also," said Muen al-Kadhimi, an aide to Hadi al-Amiri, the most powerful Shi'ite militia leader.

    "The government has been relying heavily on an untrustworthy ally, which is the United States, and this fault should be fixed."

    A new dynamic dominated by Russia would put pressure on Abadi, who depends heavily on U.S. support and is at odds with the militias and their Iranian backers.

    But with Islamic State showing no signs of weakening, the priority will be finding a formula for stability and the key players are embracing Russia.

    "There's a need to create a new coalition and force that is actually effective on the ground and performs the actual goal of fighting Daesh," said Mohammed Naji, another aide to Amiri.

    "There is a serious discussion and inquiry into requesting the Russian air forces to conduct air strikes against Daesh positions in Iraq."

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    Teck Announces Silver Streaming Agreement with Franco-Nevada

    Teck Resources Limited announced today that it and a subsidiary have entered into a long-term streaming agreement with a subsidiary of Franco-Nevada Corporation  linked to production at the Antamina mine. Teck holds a 22.5% interest in Compañía Minera Antamina S.A. ("CMA") which owns and operates Antamina.

    Franco-Nevada will make an upfront payment of US$610 million to Teck and will pay 5% of the spot price at the time of delivery for each ounce of silver delivered under the agreement. Teck will deliver silver to Franco-Nevada equivalent to 22.5% of payable silver sold by CMA, using a silver payability factor of 90%. After 86 million ounces of silver have been delivered under the agreement, the stream will be reduced by one third. Closing of the transaction is subject to completion of certain corporate matters and customary conditions and is expected to take place in the first half of October.
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    Even top juniors are running out of money

    The drying up of equity and debt markets coupled with new lows in cash reserves have pushed Canada’s junior mining industry to the brink says PwC’s annual report on the TSX Venture’s top 100 junior mining companies.

    According to report, now in its ninth year, juniors raised $514 million in equity financing in 2015, down 25% from last year, while debt financing fell 27% to $278 million over the same period.

    Many companies are assessing their cash burn out rate as a matter of months—yet another reason companies should start looking at new ideas for keeping afloat

    Despite attempts to reduce spending, cash reserves are dwindling to new lows as the top 100’s on-hand cash dropped on average from $10 million to $7 million. That's down nearly one third in a year and 70% below the peak in 2011.

    For explorers the fall has been dramatic and the top 100 juniors have seen cash balances declined by over 43%, but for those already operating  cash flows are just as severely strained with money in the bank dropping by more than half.

    The management consultants have a stark warning for the industry emphasizing that despite the prudent steps taken by companies the trends are clear and waiting it out is no longer a viable strategy:

    "Many of Canada’s junior miners will soon find themselves running out of cash, and those that wait too long to act may find themselves without options.

    "Many companies are assessing their cash burn out rate as a matter of months—yet another reason companies should start looking at new ideas for keeping afloat."

    According to the report overall revenue is down 28% from 2014, a drop of nearly $195 million, balanced slightly by an 18% reduction in overall net losses. Market capitalization dropped significantly from $7.9 billion to $4.8 billion as of June, 2015.

    “The challenges in the junior mining sector persist and the industry is really at a crossroads,” said Liam Fitzgerald, PwC’s Canadian Mining Leader.

    “Despite the downward trend we have seen some stories of true innovation this year – those junior miners who have moved from simply keeping the lights on to transforming their business have given us a glimpse into what could be a more optimistic future.”

    Full report  and read how Oban Mining, First Mining Finance, Premier Gold Mines, NovaCopper, Klondex, Jaguar Mining and Alloycorp defied the odds in today's market.
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    Time to buy?

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    Fed cancels tightening until late next year.

    DALIAN, Sept. 11 (Xinhua) -- We may be half a year from its release but a government plan that will set the course for China's economic and social development in the coming five years was a hot topic at the Summer Davos forum this week.

    The five-year plan, China's 13th, is considered strategically important as it is crucial to China's goal of realizing "a moderately prosperous society in all respects by the centennial anniversary of the founding of the CPC in 2021."

    China is also aiming to double its 2010 GDP and people's income by 2020. The quality of the next five-year-plan will, to a large extent, decide whether these grand goals are achievable.

    Drafting of the plan started in April last year. It will be discussed during a key policy meeting in October and made effective during the annual session of China's top legislature in March.

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    Miners at lows?Image title
    Energy at lows?

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    Risking backlash, India's Modi to push power price hikes

    India's prime minister is to tell states to raise electricity prices in return for access to a financial bailout package, a politically contentious move that risks a backlash from farmers and consumers long used to free or cheap power.

    Narendra Modi has made overhauling India's largely loss-making utilities, buckling under $66 billion of debts, a priority, convinced that if he can fix their finances he will recover his reputation as an economic reformer willing to take tough decisions.

    State-run electricity distributors are running out of cash and struggling to repay loans, squeezing banks' ability to spur credit growth and undermining Modi's campaign to attract more energy-hungry manufacturers to build new factories.

    Under a rescue package that could go to the cabinet for approval as early as this week, states will be told they must work with local regulators and utilities to raise tariffs that have been kept artificially low, a senior government source with direct knowledge of the plan told Reuters.

    In return for raising prices, the eight worst affected states will be allowed to absorb up to 75 percent of the debt on the distributors' books depending on their fiscal position, the source said, requesting anonymity because the plan is not yet public.

    After cabinet approval, states will need to strike agreements with distributors and the power ministry, the government source said. The source added that it will not be easy and that each deal will need to be tailored individually, with varying tariff rises and performance targets.

    In India, the price of power is a sensitive subject and generally decided by individual state regulators. New Delhi's past attempts at instigating reform, including a 2012 rescue plan under Modi's predecessor, have largely failed.

    Many Indians view free or cheap power as a right.

    Politicians appeal to key groups of voters like farmers or the poor by keeping prices low and ignoring theft, prompting scepticism about whether states will agree to any package that forces tariff hikes.

    "There are two things that states completely avoid: raising tariffs for farmers and privatisation. These are hugely political," said Debasish Mishra, a power expert at Deloitte. "The political parties know what sells and what will keep them in power."

    Recent attempts at raising tariffs have proven politically difficult. Rajasthan state, whose utilities owe $9 billion, this year postponed an attempt to hike prices after huge opposition from its powerful farming community.

    But Modi successfully overhauled the power sector as chief minister in Gujarat in the mid-2000s. He saw off opposition to metering farmers and clamping down on consumer theft, and the state now enjoys reliable power supplies that the majority pay for, with low levels of theft.

    By linking price rises to reduced debt, the government hopes to give utilities the financialspace to purchase more power and end blackouts, and to avoid future losses by ensuring they sell electricity at or above cost.
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    Banks keep faith in commodity traders as Vitol, Trafigura raise $10 bln

    Two of the world's commodity powerhouses, Vitol and Trafigura, have raised over $10 billion this week, despite rival Glencore's run-in with investors, which they say shows bankers understand the sector better than bond or equity dealers.

    As commodities prices tanked in late September, a series of research notes on Glencore unleashed a bear raid on stocks and bonds of publicly- and privately-held companies.

    But that has not stopped privately-owned Vitol, the world's largest oil trader, from closing a syndicated loan worth $8 billion this week.

    Rival Trafigura, whose founder Claude Dauphin lost his battle with cancer last week at the height of the turmoil engulfing Glencore, closed syndication on a $2.2 billion loan that was so much in demand by the banks, its size was increased from the originally-planned $1.6 billion back in July.

    "The successful loan syndication reflects the gap in understanding between banks and bond investors," Trafigura chief financial officer Christophe Salmon told Reuters.

    "Banks have better understanding of commodity trade finance business because most have been lending to the sector for 15-20 years," he said.

    Glencore was at the heart of the storm, losing as much as 30 percent of its value in a single day, as falling base metal and oil prices ignited concern about the sustainability of its business, given the size of the company's $30 billion debt pile relative to its dwindling revenues.

    Glencore's credit default swaps -- a form of insurance against a default -- are trading around 600 basis points, meaning that the market perceives Glencore's bonds to be riskier than those of Iraq, Angola or Nigeria.

    Trafigura, which is privately held, saw its bonds come under fire, which pushed the yield on its April 2018 notes to around 15 percent, from closer to 7 percent six weeks ago.

    The company believes its success in tapping the capital markets speaks for itself and the spike in its bond yields is just more proof that dealers do not understand its business the way that its bankers do.

    "Our bond prices are suffering due to the ripple effect from Glencore, which is a very different company with a majority of its revenue coming from its mining activity. There is concern in the overall commodity sector without making differentiation between producers, refiners and traders," the company said.

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    IMF Cuts Global Outlook as Commodity Slump Hits Emerging Markets

    A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund to cut its outlook for global growth this year to 3.1 percent from a July forecast of 3.3 percent. Next year the world economy will expand 3.6 percent, less than the 3.8 percent projected in July.

    “The ‘holy grail’ of robust and synchronized global expansion remains elusive,” IMF chief economist Maurice Obstfeld said in a statement Tuesday accompanying the Washington-based fund’s World Economic Outlook.

    Six years after the world emerged from a financial crisis and recession, the deteriorating picture showed a global recovery that’s uneven still from Australia to Germany. Brazil and Russia’s economies are contracting, Japan and the euro area are struggling to impress, and long-time growth engine China is decelerating. Meanwhile, the U.S. economy is nearly strong enough for central bankers to consider raising interest rates.

    The IMF advised emerging markets to be ready for the U.S. to tighten monetary policy, urged advanced economies to address “crisis legacies” and suggested nations consider the “compelling” case for public infrastructure investment at a time of very low long-term interest rates.

    Such calls for policy action will be on the agenda when global finance chiefs from the Group of 20 economies meet this week in Lima during the IMF’s annual meetings. They’ll also be addressing new risks that the IMF report says have risen, especially in emerging economies, many of which have seen their currencies depreciate sharply as the Fed prepares to lift rates andcommodities such as oil and copper slump.

    “In the near term, global growth will remain moderate and uneven, with higher downside risks than were apparent at our July update,” Obstfeld said.

    The fund left its outlook for China’s growth this year at 6.8 percent and 6.3 percent for next year. Still, the IMF said the “cross-border repercussions” of slowing Chinese growth “appear greater than previously envisaged.”

    Emerging growth expected to slow in 2015 for a fifth straight year. Russia’s economy will contract by a larger-than-expected 3.8 percent this year, before shrinking 0.6 percent in 2016, compared with the IMF’s July projection for 0.2 percent growth next year. The IMF sharply cut its outlook for Brazil, whose economy it now expects to shrink 3 percent this year and 1 percent next year.

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    Freeport: New Board Structure & Review of Its Oil & Gas Business

    Freeport-McMoRan Inc. announced today that it has reduced the size of its Board from sixteen to nine members and is undertaking a review of strategic alternatives for its oil and gas business, following constructive discussions with many of its largest shareholders.

    The reconstituted FCX Board is comprised of seven independent directors: In addition, the Company will no longer have an Office of the Chairman management structure.

    Gerald J. Ford, Lead Independent Director, said: “We have discussed as a Board our proper and most effective size and make-up, consistent with the needs of the business going forward. We have listened to and taken into account views and concerns from many of our largest shareholders. 

    FCX also announced that its Board has undertaken a strategic review of its oil and gas business (FM O&G) to evaluate alternative courses of action designed to enhance value to FCX shareholders and achieve self-funding of the oil and gas business from its cash flows and resources.

    FM O&G’s high quality asset base, substantial underutilized Deepwater Gulf of Mexico infrastructure, large inventory of low risk development opportunities and talented and experienced personnel and management team provide alternatives to generate value. The previously announced potential public offering of a minority interest in FCX’s oil and gas business remains an alternative for future consideration, the timing of which is subject to market conditions.

    Other alternatives currently under consideration include a spinoff of FCX’s oil and gas business to its shareholders, joint venture arrangements and further spending reductions. The oil and gas strategic review is being undertaken with an objective of improving FCX’s financial position and enhancing long-term value for its shareholders.

    In preparation of considering a separation of the oil and gas business, five directors have left the FCX Board and have been appointed to the FM O&G Board of Directors.

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    German manufacturing orders slump unexpectedly

    German manufacturing orders unexpectedly slumped in August, adding to a steeper-than-forecast decline in July, a sign that slower growth in China and recessions in other key developing markets are starting to leave their mark on Europe's largest economy.

    German manufacturing orders, adjusted for seasonal swings and calendar effects, dropped 1.8 per cent on the month as orders from outside the eurozone fell 3.7 per cent, the economics ministry said on Tuesday. Economists polled by The Wall Street Journal had forecast a 0.3 per cent monthly gain.

    Demand from within the eurozone increased by 2.5 per cent from July, but domestic orders fell by 2.6 per cent.

    The ministry said that August's sharp reduction was partly caused by "vacation effects", but lowered its manufacturing orders data for July to show a monthly drop of 2.2 per cent, compared with the 1.4 per cent fall previously reported.
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    Glencore CEO bets on copper production cuts as shares surge

    Glencore Chief Executive Ivan Glasenberg said steep output cuts by copper miners will help lift prices in the next 18 months, in some of his first public comments since fears about commodities demand and the company's debt battered the company's shares.

    Trader and miner Glencore's stock jumped as much as 72 percent in illiquid trade in Hong Kong and as much as 20 percent in London, partly on prospects the company will sell some assets to cut debt.

    The stock has recouped all of its losses from the past week, with several brokers saying a recent sell-off was overdone as the miner and trader had the ability to withstand the crunch on commodity prices.

    The price of copper, Glencore's largest earner, hit six-year lows below $5,000 a tonne in August due to a slowdown in China, one of the world's biggest consumers of metals and other raw materials. It was around $5,180 on Monday.

    "Supply will ultimately tighten... Fundamentals will prevail," Glasenberg told the FT African Summit on Monday.

    Glencore said in September it would suspend some copper production at Katanga Mining in Democratic Republic of Congo and at Mopani Copper Mines in Zambia for 18 months.

    "The governments understood what we are doing," Glasenberg said on Monday, adding that production would resume once the mines become competitive.

    The Swiss-based trader has pledged to cut its net debt to $20 billion from $30 billion, by selling assets, reducing capital expenditure, suspending dividend payments and raising $2.5 billion of new equity capital with a share sale.

    With the share sale completed, the market is now focussing on asset sales.

    Reuters reported on Friday that Glencore is in talks with a Saudi Arabian sovereign wealth fund and China's state-backed grain trader COFCO, along with Canadian pension funds, to sell a stake in its agricultural assets.

    The company has said it is on track to sell a stake in its agricultural business by early next year, according to Barclays.

    Separately, The Telegraph newspaper reported Glencore would listen to offers for a takeover of the entire company although its management did not believe there were any buyers willing to pay a fair value for the company. The company's share price has fallen more than 60 percent this year.
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    Volkswagen Emissions Investigation Zeroes In on Two Engineers

    Two top Volkswagen engineers who found they couldn’t deliver as promised a clean diesel engine for the U.S. market are at the center of a company probe into the installation of engine software designed to fool regulators, according to people familiar with the matter.

    The two men, Ulrich Hackenberg, Audi’s chief engineer, andWolfgang Hatz, developer of Porsche’s winning Le Mans racing engines, were among the engineers suspended in the investigation of the emissions cheating scandal that sank the company’s market value by 43% since Sept. 18 and triggered a world-wide recall to refit the engines to meet clear-air standards, these people said.

    Messrs. Hackenberg and Hatz, who didn’t respond to requests for comment, are viewed as two of the best and brightest engineers in German industry. They were put in charge of research and development at the Volkswagen group shortly after Martin Winterkorn became chief executive in January 2007. Mr. Winterkorn, who resigned over the scandal, couldn’t be reached for comment.

    The company has acknowledged that managers, struggling to meet U.S. sales targets, masked the emissions of new-car engines to sell so-called clean diesel technology to skeptical American consumers. The car maker said as many as 11 million vehicles carried a “defeat device,” software that reduces tailpipe emissions only when the car is being tested, not on the road.
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    Modi and Merkel vow trade talks and 2 billion green energy euros

    India and Germany pledged on Monday to revive efforts to reach an Indo-European free trade pact after talks fell apart this year, and struck deals to promote clean energy and make it easier to do business.

    Although Chancellor Angela Merkel and Prime Minister Narendra Modi made no mention in conversations with journalists of resuming talks on a free trade agreement between India and the European Union, it was perhaps the most significant "deliverable" of her trip to New Delhi.

    The leaders "committed themselves to bringing about the earliest possible resumption of talks", said a joint statement issued after their three-hour talks.

    Asia's third-largest economy has been relatively insulated from a slump in global trade, but Modi still needs to boost exports for his pitch to investors to "Make in India" to create skilled jobs for millions of young Indians.

    Germany, Europe's largest economy, is looking to expand its presence in India to compensate for a slowdown in China. Merkel's delegation was joined by bosses from household names like Siemens, Airbus, E.ON and Thyssenkrupp.

    The trade talks have been on ice since earlier this year when India walked out in a row over exports of generic drugs to the European Union.

    Germany, a world leader in renewable energy, will also provide more than 2 billion euros ($2.25 billion) in aid for solar projects and green energy corridors - or high-efficiency power grids - as part of a broader push for sustainable development.

    The assistance, part of a raft of agreements signed in New Delhi, dovetails with efforts to bind India into a global debate that will culminate in the COP21 climate change summit in December.
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    Glencore shares surge in HK on agriculture asset sale hopes

    Shares in beleaguered trader and miner Glencore Plc rocketed as much as 72 percent on Monday in Hong Kong on hopes it would be able to cut debt with a sale of a stake in its agricultural assets.

    Reuters reported on Friday that Glencore is in talks with a Saudi Arabian sovereign wealth fund and China's state-backed grain trader COFCO, along with Canadian pension funds, to sell a stake in the assets.

    Glencore wants to sell some assets as part of a wider plan to cut about a third of its $30 billion in net debt, including raising $2.5 billion through a share sale, suspending its dividend and cutting costs by trimming its copper output.

    However doubts grew last week that it would be able to pay down debt fast enough to withstand a prolonged slump in commodities prices. Its shares sank to a record low last week, down 87 percent from when it listed in 2011.

    On Monday the stock rebounded in Hong Kong to a one-month high of HK$18.36, then eased to trade up 40 percent at HK$15.00 in its biggest one day gain, partly helped by higher copper and oil prices.
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    More Than Half Of China's Commodity Companies Can't Pay The Interest On Their Debt

    Image titleEarlier today, Macquarie released a must-read report titled "Further deterioration in China’s corporate debt coverage", in which the Australian bank looks at the Chinese corporate debt bubble (a topic familiar to our readers since 2012) however not in terms of net leverage, or debt/free cash flow, but bottom-up, in terms of corporate interest coverage, or rather the inverse: the ratio of interest expense to operating profit. With good reason, Macquarie focuses on the number of companies with "uncovered debt", or those which can't even cover a full year of interest expense with profit.

    The report's centerprice chart is impressive. It looks at the bond prospectuses of 780 companies and finds that there is about CNY5 trillion in total debt, mostly spread among Mining, Smelting & Material and Infrastructure companies, which belongs to companies that have a Interest/EBIT ratio > 100%, or as western credit analysts would write it,have an EBIT/Interest < 1.0x.

    As Macquarie notes, looking at the entire universe of CNY22 trillion in corporate debt, the "percentage of EBIT-uncovered debt went up from 19.9% in 2013 to 23.6% last year, and the percentage of EBITDA-uncovered debt up from 5.3% to 7%. Therefore, there has been a further deterioration in financial soundness among our sample."

    To be sure, both the size (the gargantuan CNY22 trillion) and the deteriorating quality (the surge in "uncovered debt" companies) of cash flows, was generally known.

    What wasn't known were the specifics of just how severe this bubble deterioration was for the most critical for China, in the current deflationary bust, commodity sector.

    We now know, and the answer is truly terrifying.

    First, it shows the "debt-coverage" curve for commodity companies as of 2007. One will note that not only is there virtually no commodity sector debt to discuss, at not even CNY1 trillion in debt, but virtually every company could comfortably cover their interest expense with existing cash flow: only 4 companies - all in the cement sector - had "uncovered debt" 8 years ago.

    Image title

    And then in 2014, everything just falls apart. Quote Macquarie, "more than half of the cumulative debt in this sector was EBIT-uncovered in 2014, and all sub-sectors have their share in the uncovered part, particularly for base metals (the big gray bar on the right stands for Chalco), coal, and steel."

    Compared with the situation in 2013, while almost all sub-sectors did worse in 2014, but things appear to have worsened faster for coal companies as more red bars have moved beyond the 100% critical level for EBIT-coverage.

    It means that last year about CNY2 trillion in debt was in danger of imminent default.

    The situation since than has dramatically deteriorated.

    So are we now? Macquarie again: "Given the slumps in metal and coal prices so far this year, it’s quite likely the curve will have deteriorated further for commodity firms this year, with total debt getting better in the meantime."

    In other words, it is safe to assume that up to two-third of Chinese commodity companies are now at imminent danger of default, as they can't even generate the cash to pay down the interest on their debt, let alone fund repayments.

    We fully expect this to be the source of the next market freakout: when the punditry turns its attention away from macro China, which has more than enough problems to begin with, and starts to focus on the cash flow devastation in China at the micro, or corporate, level.

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    US recovery: what does recession look like?

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    LabourImage title
    Factory Orders.

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    TPP Close? Good news!

     ATLANTA—The U.S. and 11 countries around the Pacific were in the home stretch Sunday on talks to complete a sweeping trade agreement that would lower barriers to goods and services and set commercial rules of the road for two-fifths of the world economy.Image titleImage titleAccording to the New York Times, "the clearest winners of the Trans-Pacific Partnership agreement would be American agriculture, along with technology and pharmaceutical companies, insurers and many large manufacturers" who could expand exports to the other nations that have signed the treaty.

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    Oil and Gas

    Bears on Natural Gas at a record high.

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    ConocoPhillips files for renewal of Kenai LNG export licence

    ConocoPhillips filed an application with the United States Department of Energy for blanket authorization to export LNG from Kenai liquefied natural gas facility in Alaska.

    The company requested the blanket authorization to export a quantity of LNG in an amount up to the equivalent of 40 billion cubic feet of natural gas to free trade agreement and non-FTA countries, according to the company’s filing to the DOE.

    The authorization is requested for a two-year period, starting on February 19, 2016, after the current LNG export permit expires.

    ConocoPhillips was also authorized to export LNG to non-FTA countries in April, 2014 ending in April 2016, which it would relinquish once the new permits are granted.

    The Kenai LNG plant began operating in 1969 and has shipped 1,300 cargoes since then.
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    Wells Fargo trimming energy borrowing bases an average 15%, lender says

    A Wells Fargo energy lender says the bank has trimmed oil-company borrowing bases by an average 15 percent so far, after working through about a third of its financial arrangements with petroleum firms.

    Wells Fargo, the nation’s fourth-largest bank, is reevaluating its 250 financial deals with oil producers in a semi-annual review of the credit lines it extended to producers when crude prices were higher. The financial sector is widely expected this fall to rein in revolving corporate loans that are based on the value of oil properties, which have tanked alongside crude prices since the previous spring review.

    “In our tougher deals, we’re seeing a 30 to 40 percent drop and the better deals are flat to maybe even a little bit up,” said Rich Gould, head of energy credit and risk management at Wells Fargo during a panel hosted by Thompson & Knight in Houston on Thursday. “The smaller guys are obviously a bit capital constrained. Liquidity under their revolvers have diminished significantly. Directionally we would expect to see borrowing bases come down.”

    Some analysts estimate a 15 percent reduction in borrowing bases could cut $15 billion from capital available to U.S. oil producers.
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    China's deepest gas field to be put into operation

    China's deepest gas field in marine strata,Yuanba gas field in Sichuan Province, is to be put into operation by year end, energy giant Sinopec announced.

    It will produce 3.4 billion cubic meters of natural gas every year, supporting many regions along the middle and lower reaches of the Yangtze River, including Shanghai, Zhejiang, Jiangsu and Anhui, according to Sinopec.

    The field's deposits are as deep as 6,700 meters, and it has a total explored reserves of 219.4 billion cubic meters. It is one of the most difficult gas fields to construct due to the high risk.

    Sichuan is also home to China's second largest gas field Puguang.

    Sinopec started exploring the Yuanba area in 2007 and formally began development and construction of the gas field in 2011. Sinopec Group said in April that the Yuanba field will play a significant role in energy security.

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    Amid commodity crisis, LPG emerges as accidental bright-spot

    Liquefied Petroleum Gas, long a niche product used by the poor to cook and the rich to barbecue, has become a rare bright spot amid a broad commodities rout, riding on the wave of strong economic growth in India and parts of Southeast Asia.

    LPG is best known to consumers as propane or butane used in heating appliances and vehicles. But it is also used in the petrochemicals industry and the electricity sector, acting as a replacement for diesel in generators and power stations.

    While tumbling prices for oil, gas, coal and industrial metals have seen energy companies and miners slash capital expenditure, investment is flowing into the LPG sector to feed burgeoning demand from the world's poorer nations.

    The biggest growth market is India, with its 1.3 billion people and 8 percent economic growth expected this year, where millions of households are switching from kerosene or wood burners to LPG.

    "It cuts pollution and also replaces use of wood as well as animal dung used for cooking in rural India. In the last 5-6 years, the government has been consistently reducing the allocation of subsidized kerosene... Delhi is today kerosene-free."

    Energy consultancy IHS expects global LPG demand to rise from around 275 million tonnes this year to some 310 million tonnes by 2019, with the biggest growth seen in Asia. That compares with under 250 million tonnes in 2010.

    The World Bank says LPG helps reduce poverty, giving millions of households access to cooking heat and electricity for the first time.

    Just as important as the demand growth has been a change in LPG supply.

    Previously mostly produced in the Middle East, its rise over the last few years has come as a side-effect of the U.S. shale oil and gas exploration boom, of which LPG is a by-product.

    With LPG production from shale soaring since 2006, the United States has this year become the world's biggest exporter.

    Its soaring production has also made LPG much cheaper, a key ingredient for its success in developing countries, with U.S. propane prices PRO-USG down 70 percent since 2014.

    "The sea-change of U.S. LPG exports has been fantastic for us," said Theodore Young, chief financial officer of New York-based Dorian LPG, one of the world's biggest shippers of the fuel, which has ordered 19 new vessels to meet demand.

    "It's been massive growth of perhaps 4 million tonnes not a decade ago to some 20 million tonnes this year."

    LPG is also seeing industrial-scale growth. Malaysia is developing the huge Refinery and Petrochemical Integrated Development (RAPID) project in Johor, close to Singapore's oil hub.

    RAPID will have the capacity to store more than 2 million cubic metres of crude oil, refined products, petrochemicals and LPG and plans to start operations in 2019.

    One problem the LPG industry could face is a scale-back in subsidies it heavily relies on in many countries.
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    WTI Crude Surges Back Above $49 After OPEC Comments

    WTI Crude has recovered the losses following yesterday's DOE-reported inventory and production rise as it appears comments from OPEC Secretary-General Al-Badri told The IMF that demand will climb more this year than previously projected (coming on the heels of EIA's comments that oil companies worldwide will cut investments in oil exploration and production by a record 20 percent this year.) USD weakness is also helping drive algos to run stops in crude.

    Global oil demand will increase by 1.5 million barrels a day this year, El-Badri said in the statement to the IMF’s International Monetary and Financial Committee. There is a supply overhang of about 200 million barrels in the market, El-Badri said at a conference in London on Oct. 6.
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    Near-Term Financial Risks For US Independents Exaggerated [Wood Mackenzie]

    The high-growth business models of the US Independents are being tested by low oil prices and tougher access to capital. Two recent Wood Mackenzie reports conclude that concerns surrounding October reserves-based-lending (RBL) redeterminations have been exaggerated. Wood Mackenzie’s Corporate Service Insight, ‘US Independents: How strong, for how long?’ examines the financial health of the top 26 US Independents, and concludes that the larger producers - which, along with the Majors, account for the majority of upstream investment and production - have the required flexibility to tide them through the near term at the very least.

    Fraser McKay, Corporate Analysis Research Director for Wood Mackenzie explains: “Most companies in the peer group have rising absolute debt levels, and October’s RBL redeterminations have been latched onto as a potential catalyst for sector implosion. But at least two thirds of Lower 48 production is attributable to companies with no RBL exposure at all, or have no redeterminations until 2016."

    Of those larger producers with near-term debt redeterminations, Wood Mackenzie estimates most can accommodate a borrowing-base cut of over 50% before their situation becomes imminently critical. McKay adds: “We anticipate discomfort in the coming months and expect some more companies will inevitably fail, which is clearly a catastrophic event for lenders and equity holders. However, most of these companies will be small, with pre-existing structural portfolio issues. Even in the worst case scenario, the assets of these companies will be salvaged through restructuring or assets sales; creditors will keep wells producing as long as possible. The strategic actions and cash flow neutrality goals of the largest producers in the sector will have a far greater impact on capital spend and therefore supply."

    Concerns regarding the roll-off of hedging protection are warranted. For the top-26 Independents, Wood Mackenzie estimates cash flow from hedging will fall from US$9.1 billion in 2015 to US$2.2 billion in 2016. "The most financially-stretched operators may be forced to enter into unattractive hedges, just to guarantee debt repayment and satisfy lender conditions" McKay noted.

    In a separate analysis titled, ‘October Borrowing Base Redeterminations: Die Another Day’, Wood Mackenzie looks at the upcoming borrowing base redeterminations for 17 high yield operators, concluding that far fewer companies will struggle with liquidity after the October borrowing base redeterminations, contrary to current popular belief and speculation.

    Thomas Rinaldi, Institutional Investor Service Director at Wood Mackenzie explains: “The upshot is that nearly all operators we looked at have sufficient liquidity to absorb the anticipated decline in their borrowing base this October. That said, as we look forward the next twelve months, closer to one third of these companies will need to adjust their activity levels, capital structure or make asset sales, this assuming no change in the price deck applied by lenders. The handful of high yield operators without the required liquidity to make it through the next twelve months account for an insignificant amount of production.”

    Rinaldi continues: “Although development drilling consumes cash, few consider the added liquidity provided by the resulting added production. Banks basically lend on the net present value (NPV) of production so even if development well breakevens are below the bank price deck, the capex is partially offset by a larger base from which to borrow. When we take that added production and the related increase to the borrowing base into consideration, the time to liquidity crisis for many becomes much more manageable for most.”

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    Enbridge to invest $38bn in new oil and projects through 2019

    Canadian pipeline company Enbridge is planning to invest C$38bn ($29bn) in new oil and projects between 2015 and 2019.

    The company's latest investments plan includes crude oil pipeline expansions and extensions on its mainline in a bid to expand in the US Gulf Coast region.

    Enbridge also plans to expand its natural gas footprint, including opportunities in growing supply basins as well as Canadian midstream.

    The investments will include load growth, system renewal and storage in the area of gas distribution, in addition to new opportunities to explore natural gas for transportation and combined heat and power (CHP).

    Further, the company continues to seek new opportunities in power generation and transmission projects.

    According to the company, out of the total investment amount, $24bn is commercially secured, and in execution, even after $9bn worth of projects was put in into service last year.

    Enbridge president and CEO Al Monaco said: "What we mean by secured is that these projects are supported by (financial) commitments, and they're happening.

    "We've built an enviable track record of delivering projects on time, and on budget, in a challenging environment. This is our competitive advantage."

    Recently, Enbridge obtained approval from the National Energy Board in Canada to start supplying oil from Western Canada through its long-delayed Line 9 pipeline from Sarnia, Ontario, to Montreal.

    The 76cm pipeline runs parallel to Highway 401 in eastern Ontario and has a current capacity of about 240,000 barrels a day.
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    Frontera Increases Georgia Gas Resource Estimate More Than Tenfold

    Frontera Resources Corporation has increased the gas resource estimate of its operations in eastern Georgia more than tenfold, compared to previous estimates.

    In April this year, Frontera revealed that independent consulting firm Netherland, Sewell & Associates confirmed combined prospective natural gas resources of 12.9 trillion cubic feet of gas in place, with as much as 9.4 trillion cubic feet of recoverable prospective natural gas resources, at the Mtsare Khevi Gas Complex and Taribani Field Complex, which were both combined to form the South Kakheti Gas Complex. In addition to gas resources previously identified for subsets of this combined area, Frontera’s ongoing work recently concluded new estimation of as much as 135 trillion cubic feet of gas in place from reservoir targets found between 984 feet and 16,404 feet in depth. Following Frontera’s considerable resource upgrade, an independent assessment of the company’s new internal estimates is now underway.

    Steve C. Nicandros, chairman and CEO of Frontera, commented in a company statement:

    “Our ongoing investments in Georgia have continued to reveal the emergence of what we believe to be a world class gas play with the identification of the South Kakheti Gas Complex. Much like the recent evolution of similarly prolific gas plays in the United States that have transformed the USA’s energy independence trajectory, our results continue to indicate that Georgia has the natural gas resources to follow a similar path. We believe that our ongoing work will further serve to establish Georgia’s domestic energy independence in the years to come and also make it a strategic supplier of gas to Turkish and European consumption markets.”

    - See more at:

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    Libya's Oil Export Capacity Rises as Zueitina Port Reopens

    Libya’s crude export capacity increased as Zueitina, an oil port in the eastern region, resumed loadings after a five-month halt due to protests, a workers union said.

    Zueitina began Thursday loading 600,000 barrels of crude on theSea Faith tanker, the port’s workers union president, Ramadan Lefkaih, said by phone. The shipment, bound for Italy, is the first since May, when protesters seeking jobs at state-run National Oil Corp. shut the pipeline that supplies Zueitina with crude. The protesters agreed to reopen the export route after being promised jobs, Lefkaih said.

    Zueitina receives crude from fields including the NOC-operated Nafoora, Wintershall AG’s concession C96, also known as As-Sarah, and Amal, operated by Harouge Oil Operations. It has 2 million barrels in storage and its current supply rate from the fields stands at 30,000 barrels a day, said Lefkaih. It has an installed export capacity of 70,000 barrels a day, according to the oil ministry.

    Kassel, Germany-based Wintershall on Oct. 2 said it was pumping batches of stored crude from tanks in C96 to Zueitina as stable pumping depended on other producers using the same pipeline. C96 was exporting as much as 35,000 barrels a day through Zueitina before the pipeline closed on May 5.

    Libya, with Africa’s biggest oil reserves, pumped about 1.6 million barrels a day of crude before the 2011 rebellion that endedMuammar Qaddafi’s 42-year rule. Political infighting and workers protests curtailed production to 350,000 barrels a day in September, data compiled by Bloomberg show.

    The United Nations on Wednesday expressed hope that rival administrations established in 2014 in eastern and western Libya will be able to form a unity government on Thursday, a development that would eventually facilitate the resumption of exports from oil ports that remain closed, including Es Sider, the nation’s largest. UN-sponsored peace talks are under way in Skhirat, Morocco.
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    UK government passes energy policy power to new commission

    There is some confusion as to the role of the department of energy and climate change following a reorganisation announced by the UK’s chancellor for the exchequer George Osborne this week.

    The entire energy policy brief has been ceded by DECC to the new National Infrastructure Commission (NIC).

    With the energy portfolio has gone all the big issues on its agenda. These include the Hinkley Point C nuclear power station, indeed the entire future of the UK nuclear power programme.

    It is not entirely clear what DECC, headed by secretary of state Amber Rudd, will now hold responsibility for, following the announcement.

    Mr Osborne announced the NIC at the Conservative party conference on Monday describing it as "A Commission, set up in law, free from party arguments, which works out, calmly and dispassionately, what the country needs to build for its future, and holds any Government's feet to the fire if it fails to deliver ... Like how we are going to make sure Britain has the energy supplies it needs ...

    "I've asked the new National Infrastructure Commission to start its work today. And I am delighted that the former Labour Cabinet Minister and Transport Secretary Andrew Adonis has agreed to be the Commission's first Chair."

    As a result of the restructure it appears that DECC is largely a shell department with responsibility for climate change policy. The relationship between the NIC and DECC is not yet clear. Power Engineering International has asked for more detail on the newly defined roles for both offices but has not yet had a response.
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    Expanded Panama Canal to open by April 2016 - Mr Quijano

    Mr Jorge Quijano, Panama Canal administrator, has assured shipping leaders the expanded canal should be open for business by April next year.

    "It hasn't been easy" he said the Danish Maritime Forum in Copenhagen, referring to disputes with the project's contractors and engineering faults that led to leaks. The project is 95% complete.

    He said that when opened, the canal would not immediately handle the largest container vessels, that can be accommodated, 14,000 teu, but would build up to it, allowing pilots to acclimatise to the new conditions.

    Mr Quijano said that LNG shipments through the canal will be a segment that will show strong growth in the years ahead.

    He added that "Next year we'll see the first shipment going to Japan through the canal and he said there is also strengthening demand for LNG shipments from China and South Korea.”
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    Norway Says Tax Reform to Boost Marginal Oil Projects Amid Slump

    Norway’s proposed tax reform will benefit marginal oil projects such as increased-recovery plans at a time when producers are cutting costs and delaying investments amid a slump in commodity prices.

    The Conservative-led minority government’s proposal to cut the corporate tax to 25 percent from 27 percent while raising Norway’s special petroleum tax to 53 percent from 51 percent will help producers because the base for the corporate tax is wider than for the special tax, Petroleum and Energy Minister Tord Lien said in an interview in Oslo on Thursday.

    “Any improvement of the tax framework will stimulate higher activity, that’s the whole idea,” he said. “Especially for investments that aren’t that profitable, the measure in the budget will have an impact.”

    Norway is headed for the biggest drop in investments in its offshore industry in 15 years as oil companies including Statoil ASA, Total SA and Royal Dutch Shell Plc cut spending and close down production earlier than planned after crude prices more than halved from a June 2014 high.

    Lien declined to quantify the effect of the proposed changes appearing in yesterday’s budget. The impact will be “marginally positive” for oil companies, analyst Teodor Sveen Nilsen of Swedbank AB said yesterday.

    The Norwegian Oil and Gas Association, which represents producers, has called for incentives to support increased-recovery projects and expressed disappointment yesterday that the budget didn’t include any.

    “They have no reason to be disappointed,” Lien said.

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    Encana to Sell Colorado Oil and Gas Assets for $900 Million

    Encana Corp. agreed to sell oil and natural gas assets in Colorado to an entity 95-percent owned by Canada Pension Plan Investment Board for about $900 million.

    Encana will use the proceeds to strengthen its balance sheet after oil prices fell about 45 percent in the past year, according to a statement Thursday. The transaction includes Encana’s 51,000-acre DJ Basin, which produced an average of 52 million cubic feet per day of gas and 14,800 barrels a day of crude oil and natural gas liquids in the first half of 2015.

    The purchasing group is 5-percent owned by The Broe Group, an investment management company. The transaction is expected to close in the fourth quarter of 2015, with an effective date of April 1, 2015.
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    Eurasia Drilling Gets Buyout Offer From Management, Holders

    Eurasia Drilling Co., the Russian oil driller whose planned acquisition by Schlumberger Ltd. collapsed last month, said it received a buyout offer from management and shareholders.

    The investors, whom Eurasia didn’t identify, offered $10 a share and proposed to delist the stock from London, according to a regulatory filing on Thursday. The company’s board has formed a panel of non-executive independent directors to negotiate a deal.

    Schlumberger decided two weeks ago not to pursue its $1.7 billion proposal to buy a minority stake in Eurasia after Russian authorities delayed approval of the deal for almost eight months.

    “Following the failure of the proposed transaction with Schlumberger, certain management and core shareholders seek to undertake significant rationalization of the business that would best be achieved by taking the company private, so it can sustain itself through the expected prolonged and difficult market conditions,” Eurasia said in the statement.

    A buyout at $10 a share “would be a pretty good deal for the management and core shareholders,” Artem Konchin, an oil analyst at Otkritie Financial Corp., said by e-mail. Otkritie has a target price of $17 a share for Eurasia, compared with an average estimate of $15.85 from eight analysts surveyed by Bloomberg.

    Eurasia has formed a committee comprising independent directors Alexander Shokhin, Igor Belikov and the Earl of Clanwilliam to negotiate terms on behalf of the board with the assistance of adviser Renaissance Capital, according to the statement. RenCap’s research unit has a $17 target price on the company, Bloomberg data show. Xenon Capital Partners will advise the buyout group.

    The investors want to take Eurasia private because the company requires “maximum flexibility” as lower crude prices and “continued geopolitical risks” put pressure on its operations, according to the filing. Nicosia, Cyprus-based Eurasia has idled 20 percent of its drilling fleet, most of which was deployed at West Siberian fields, and reduced its workforce by 9.4 percent amid a slowdown in exploration.
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    China triples proven reserves at top shale gas project

    China has nearly tripled the size of proven reserves at its Fuling project, by far the country's largest shale gas find, according to an official from investor Sinopec Corp and an industry report.

    The Jiaoshiba block of the project, in the municipality of Chongqing in southwest China, has 273.8 billion cubic metres (bcm) of newly proven reserves, said the report carried, an industry portal run by top energy group CNPC.

    That would take total proven preserve certified by the Ministry of Land and Resources (MLR) at Fuling to 380.6 bcm, giving it the potential to have an annual production capacity of 10 bcm by the end of 2017, it said.

    China hopes to replicate the shale gas boom that has turned the United States into a net exporter, but more complex geology and small scale of development by only a handful state energy firms have resulted in only a few commercial discoveries.

    The latest reserve appraisal was conducted on the Jiaoye-4 and Jiaoye-5 wells, southwest of the previously evaluated Jiaoye-1 and Jiaoye-3 wells.

    By the end of August, a total of 142 wells at the Jiaoshiba block had tested high-yield industrial gas flows, the report said.

    A media official with Sinopec Corp, the investor in Fuling, confirmed the contents of the report.

    Sinopec told Reuters last month that the company was sticking by its investment pledge on shale gas despite it being more costly and technically more challenging than its conventional fields such as Puguang.
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    Canadian Oil Sands rejects Suncor bid; adopts poison pill

    Canadian Oil Sands calls Suncor's bid "opportunistic"and has adopted a poison pill defence.

    On Monday Suncor commenced an unsolicited offer for struggling Canadian Oil Sands (TSE:COS) for $4.3 billion. Canadian Oil Sands has been labouring under low oil prices while Suncor has weathered the downturn through its higher margin retail and downstream refining operations.

    Canadian Oil Sands adopted what it is calling ashareholder rights plan. Following the acquisition of 20 per cent or more of the outstanding shares by any person, each right held by a person other than the acquiring person would entitle the holder to purchase shares at a substantial discount.

    The move by Canadian Oil Sands is buying the company time.

    "The board will consider Suncor's unsolicited offer in both the current context and in light of the strong long-term potential of Canadian Oil Sands," says Donald Lowry, Chairman of the Board, in a news release.

    "Shareholders do not need to take any action or make any decision about the Suncor offer until the Board has had an opportunity to fully review the offer and to provide a recommendation based on careful analysis."
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    S Korea secures 23.5 mil mt in 2027 LNG term deals, 62% of expected demand

    South Korea has secured 2027 term contracts for 23.5 million mt or 62.3% of the 37.7 million mt it expects to need that year, state-run Korea Gas Corp. said Thursday.

    The country has secured 34 million mt for 2015, above the 33.9 million it needs for the year, according to a Kogas report submitted to the National Assembly.

    Kogas, which has a monopoly on domestic natural gas sales, expects South Korea's 2015 LNG consumption to be 34 million mt, down from an earlier outlook of 39.8 million due to weak power demand on relatively higher prices of LNG and rising nuclear power output.

    Kogas said its revised forecast was made on the basis on sluggish January-July domestic sales, which fell 8.8% year on year.

    Kogas planned to import 33.84 million mt in 2015, down 7.4% from 36.33 million mt imported in 2014, given weaker demand.

    "Short-term LNG shortage will be made up by short-term contracts to cover winter demand and spot purchasing if necessary, while long-term shortage would be partly filled by volumes from overseas projects in which Kogas is involved," the report said.

    Kogas imported 18.35 million mt of LNG over January-July, including 13.08 million mt or 71.3% from the Middle East and South Asia.

    It bought 7.32 million mt or 39.9% of its January-July imports from Qatar and 2.45 million mt or 13.4% from Oman, the report said.

    It imported 1.87 million mt from Malaysia, 1.44 million mt from Indonesia, 1.15 million mt from Russia and 790,000 mt from Australia in January-July. The other 3.33 million mt came from 10 minor suppliers, including Nigeria, Equatorial Guinea and Brunei.

    Of Kogas' total January-July imports, 15.11 million mt or 82.3% came under long- and mid-term contracts, 2.16 million mt or 11.8% was imported under short-term contracts, and 1.08 million mt or 5.9% came from spot buying.

    "Under its plans for long- and mid-term contracts, Kogas is seeking more volumes from Australia and North America so as to ease the dependence on Middle East and South Asian nations," the report said.

    "In particular, Kogas is pushing to bring in more volumes from projects in which Kogas holds stakes, such as LNG Canada."

    Kogas and its partners launched LNG Canada, a project to produce 12 million mt/year of LNG from two trains at Kitimat in the western province of British Columbia in May 2013.

    Kogas currently holds a 15% interest in Shell-led LNG Canada after selling a 5% stake to Shell in May last year as part of efforts to reduce its debt.

    "Kogas is still pushing to sell additional 5%, which will reduce its stake to 10%," a company official said.

    Kogas pushed for sell the 5% stake by the end of 2014 but failed amid the slump in energy prices in the second half of last year.

    Kogas, which imported 0.93 million mt from projects in which it holds stakes in 2014, aims to increase the volume to 2.42 million mt in 2017.

    The company currently has 15 contracts covering 24.12 million-31.44 million mt/year in imports for 2015-2019.

    The deals include 4.92 million mt/year from Qatari RasGas, 2.1 million mt/year from RasGas II and 1.5 million-2 million mt/year from RasGas III, 4.06 million mt/year from Oman's OLNG, and 2 million mt/year from Yemen's YLNG, among others.

    Kogas plans to import 2.8 million mt/year from the Sabine Pass terminal in Louisiana from 2017. It originally planned to buy 3.5 million mt/year from Sabine Pass, but Kogas signed a deal with Total in January 2014 to resell 700,000 mt/year in a bid to reduce import volumes to South Korea.

    Under the deal, Kogas will take 2.8 million mt/year while Total will get the remaining 700,000 mt/year. Kogas also has three mid-term contracts in which Kogas imports 2.73 million-3.88 million mt/year for 2015-2016, the report said.

    Besides Kogas, two more South Korean firms are importing LNG directly from overseas sources. Posco, the country's top steelmaker, has been importing 550,000 mt/year from the BP-led Tangguh LNG consortium in Indonesia since July 2005 under a 20-year contract. SK E&S, the country's top city gas provider and an affiliate of the country's top oil refiner SK Innovation, also has been importing 600,000 mt/year of LNG directly from Tangguh since 2005 under a 20-year contract.

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    Petrobras: A Fat Lady 'no show' at her own aria.

    Petroleo Brasileiro SA sat out an oil licensing round in Brazil for the first time ever as the beleaguered state-run oil giant struggles to reduce the industry’s biggest debt load.

    The country’s National Petroleum Agency sold only 37 of the 266 onshore and offshore blocks it offered Wednesday in the worst turnout in more than a decade. International majors operating in Brazil, including Statoil ASA, Royal Dutch Shell Plc and Total SA, didn’t submit any bids.

    The 17 companies that won licenses were mostly Brazilian oil startups and mid-sized explorers that bid for onshore tracts, including QGEP Participacoes SA and Parnaiba Gas Natural, both based in Rio de Janeiro. The six foreign winners include Santiago-based Geopark Ltd. and French utility Engie, formerly known asGDF Suez, which partnered with Parnaiba Gas Natural. QGEP was the only bidder for offshore areas, winning two blocks in the Sergipe-Alagoas basin.

    The auction took place amid a slump in crude prices and a national political crisis as Petrobras, the country’s dominant producer, grapples with cash constraints. While producers have traditionally preferred to join Petrobras as minority partners to limit risk, the company is balking at new financial commitments, according to Jotavio Gomes, an oil consultant and former  geophysicist at the state-run firm.

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    TransCanada launches binding Open Season for Cushing Marketlink

    TransCanada Corp. has launched an Open Season to obtain binding commitments from interested parties for transportation of crude oil on Cushing Marketlink from Cushing, Oklahoma to markets on the US Gulf Coast.

    Interested parties may submit binding bids for transportation capacity during the Open Season that will close on 6 November 2015 at Noon MST. The anticipated commencement date for crude oil transportation service is early 1Q16.
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    Summary of Weekly Petroleum Data for the Week Ending October 2, 2015

    U.S. crude oil refinery inputs averaged about 15.6 million barrels per day during the week ending October 2, 2015, 403,000 barrels per day less than the previous week’s average. Refineries operated at 87.5% of their operable capacity last week. Gasoline production decreased last week, averaging 9.3 million barrels per day. Distillate fuel production increased last week, averaging about 5.1 million barrels per day. 

    U.S. crude oil imports averaged about 7.1 million barrels per day last week, down by 486,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.2 million barrels per day, 3.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 543,000 barrels per day. Distillate fuel imports averaged 111,000 barrels per day last week. 

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.1 million barrels from the previous week. At 461.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.9 million barrels last week, and are above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 2.5 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.6 million barrels last week and are well above the upper limit of the average range. 

    Total commercial petroleum inventories increased by 2.3 million barrels last week. Total products supplied over the last four-week period averaged 19.3 million barrels per day, down by 0.3% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.0 million barrels per day, up by 4.0% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, up by 3.7% from the same period last year.  Jet fuel product supplied is up 6.9% compared to the same four-week period last year.

     Jet fuel product supplied is up 6.9% compared to the same four-week period last year.
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    RSP Permian, Inc. Prices Upsized Public Offering of Common Stock

    RSP Permian, Inc.  today announced that it has priced an underwritten public offering of 7,600,000 shares of its common stock at $25.50 per share.  The offering was upsized to 7,600,000 shares of common stock from the original offering size of 6,000,000 shares of common stock.  The Company has granted the underwriter a 30-day option to purchase up to 1,140,000 additional shares of the Company's common stock. Total gross proceeds (before the underwriter's discounts and commissions and estimated offering expenses) will be approximately $193.8 million to the Company.

    As separately announced, the Company has recently signed a letter of intent to potentially acquire undeveloped acreage and oil and gas producing properties located in the Midland Basin for an aggregate purchase price of approximately $137 million, subject to certain customary purchase price adjustments. The Company intends to use the net proceeds from this offering first to fund a portion of the purchase price of this possible acquisition, if consummated, and the balance for general corporate purposes, which may include funding our drilling and development program.

    RSP is an independent oil and natural gas company focused on the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin of West Texas. The vast majority of RSP's acreage is located on large, contiguous acreage blocks in the core of the Midland Basin, a sub-basin of the Permian Basin, primarily in the adjacent counties of Midland, Martin, Andrews, Dawson, Ector and Glasscock. The Company's common stock is traded on the NYSE under the ticker symbol "RSPP."

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    Cheniere Energy prepares Sabine Pass plant for LNG production

    Cheniere Energy has started the months long process of preparing its $18 billion Sabine Pass liquefied natural gas export terminal to crank out its first batch of super chilled gas for shipment overseas.

    The Houston-based company received permission from federal regulators to pipe natural gas into the sprawling plant on a remote stretch of coastline along the border between Texas and Louisiana as it starts priming the first production facilities for start-up.

    Last week, Sabine Pass LNG began bringing in small amounts of natural gas and burning some off, a process called flaring, providing early signs that the first phase of the project is nearing the finish line, according to energy research firm Genscape, which has been monitoring plant activity using a network of infrared monitors.

    Three years after construction began, the flurry of commissioning activity at the Sabine Pass plant has attracted much attention, placing Cheniere on track to complete the nation’s first large-scale terminal to ship LNG from the continental U.S.

    Thousands of welders, machinists and pipe fitters have been working for years to piece together the massive export terminal where natural gas will be piped in, chilled to minus 260 degrees to a liquid state, then shipped on specialized tankers to provide electricity to customers in India, England, Spain and Italy.
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    Total CEO Says Oil Chiefs to Meet Next Week on Climate, Carbon Pricing

    The chief executive of French oil major Total, Patrick Pouyanne, said executives of eight global oil companies would meet in Paris next week to discuss involvement in the climate change debate and proposals about carbon pricing.

    He did not name the companies.

    Earlier this year BG Group, BP, Eni, Royal Dutch Shell, Statoil and Total wrote to U.N. climate chief Christiana Figueres, urging governments around the world to introduce a pricing system for carbon emissions.

    Setting a price for each tonne of carbon that emitters produce is meant to encourage companies to adopt cleaner technologies and shift away from using fossil fuels, primarily coal.

    In a joint statement, the companies acknowledged the current trend in greenhouse gas emissions was too high to meet the United Nation's target of limiting global warming by no more than 2 degrees.

    The Oct. 16 meeting will be followed by a press conference, where the company heads are also expected to renew their call for a global carbon pricing mechanism, the chief executive of French oil major Total, Patrick Pouyanne, said on Wednesday at a conference in London.

    Pouyanne said the company leaders would present proposals to combat global warming ahead of the December Paris climate talks, where governments will set new goals for combating climate change.

    "We need to be on the offensive ... We need to be serious to bring answers and solutions to the table and not leave policy makers raising their fingers that they (oil companies) are the devils," Pouyanne said at the Oil and Money conference.

    "We are looking at areas of cooperation, for example in research and development, in CCS (carbon capture and storage) ... We all have some experience individually but it's one area where we could join efforts," Pouyanne added.

    The meeting will be part of the Oil and Gas Climate Initiative, a U.N.-backed scheme involving a number of major oil and gas companies.

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    Costs hike for Martin Linge

    Total costs have increased by a further Nkr8 billion ($970.4 million) on field projects under development off Norway, with Total’s stalled Martin Linge scheme showing the biggest year-on-year hike, according to figures released in Norway’s state Budget on Wednesday.
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    YPF Said to Cut Oil Price in First Step to Close Gap With Brent

    Argentina’s YPF SA has cut the price paid to producers of light crude in one of the first signs of closing a gap between high domestic and lower international prices, according to officials from two companies that sell their oil to YPF refineries.

    The country’s largest refiner is paying $75 a barrel for Medanito, a light crude produced in the Neuquen basin, down from $77 earlier this year, said the officials, who asked not to be named as domestic market prices aren’t public. While the government has set caps on local prices, state-owned YPF establishes a benchmark since it has the largest refining market share.

    As part of the country’s efforts to boost energy output, maintain investments and protect jobs, President Cristina Fernandez de Kirchner’s government has set a domestic oil price about 65 percent above international levels while also allowing costs at the pump for consumers to rise steadily to finance part of the difference. YPF, which was expropriated from Spain’s Repsol SA in 2012, declined to provide the exact price paid for Medanito and a heavier grade crude known as Escalante.

    “YPF, in accordance with the current agreement, is receiving an average $69 a barrel between Medanito and Escalante,” the company said in an e-mail.

    Brent, the benchmark for most global oil contracts, rose 5.4 percent to $51.92 a barrel in London on Tuesday, the highest settlement since Aug. 31.

    YPF’s American depositary receipts rose as much as 12 percent and closed 6.9 percent higher at $17.71 in New York.

    “Any move to remove distortions in the market is a positive,"Michael Roche, a strategist at Seaport Global Holdings LLC, said by e-mail.
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    Big-Oil Spending Cuts Lower Costs at Top India Explorer ONGC

    The worst commodity slump in a generation has a silver lining for India’s state-run energy explorer.

    Oil & Natural Gas Corp. predicts exploration costs will drop a fifth as fees for rigs and vessels moderate after businesses including BP Plc and Royal Dutch Shell Plc curbed outlays. That could mean a saving of 49 billion rupees ($749 million) on planned exploration spending of 245 billion rupees in the year through March 2016, Bloomberg calculations based on company estimates show.

    “This is the only saving grace in the low oil-price regime,” ONGC’s Director Offshore Tapas Kumar Sengupta, who gave the estimate of a 20 percent drop in expenses, said in an interview in New Delhi. “We’ve awarded contracts for about 20 vessels and received a record 150 bids. We’ve placed orders at about half the earlier rates.”

    The biggest explorer in Asia’s third-largest economy is betting that its highest capital expenditure in at least six years will pay off once oil prices revive. In contrast, the slump in Brent crude costs in the past year has led global majors such as BP and Royal Dutch Shell to cut billions of dollars from spending budgets.

    “One’s pain is another’s gain,” said Abhishek Kumar, senior energy and modeling analyst at Interfax Energy’s Global Gas Analytics in London. “ONGC should utilize these services on its ongoing projects as much as it can and capitalize on new projects once oil prices recover. This is a strategy common among government-run companies globally.”

    ONGC shares gained as much as 3 percent to 254.85 rupees and traded at 253 rupees as of 11 a.m. in Mumbai. The stock has dropped 38 percent in the past year, compared with a 2.5 percent increase in the S&P BSE Sensex. Brent crude, a global benchmark, has declined 43 percent over the period to about $52 per barrel.

    ONGC plans 362.5 billion rupees of capital expenditure in the 12 months that began April 1, and some two-thirds of that figure is earmarked for exploration, company filings and presentations show. Net income rose 14 percent to 54.6 billion rupees in the three months ended June 30.

    Indian Prime Minister Narendra Modi has made energy security a priority for a nation that imports the bulk of its oil. Production has declined in fields accounting for almost three-quarters of ONGC’s output, adding pressure on the company to find new reserves.  

    ONGC intends to spend 11 trillion rupees by 2030 to raise output. It’s seeking about 30 drilling vessels, including five deep-water rigs, Sengupta said in the Sept. 23 interview.

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    Oil prices up sharply after reports of tanking U.S. production

    Brent oil climbed to the highest level in a month amid speculation that falling crude production will ease the global supply glut.

    U.S. crude production dropped 120,000 barrels a day in September from the prior month, according to the U.S. Energy Department’s monthly Short-Term Energy Outlook. At an industry conference in London Tuesday, Royal Dutch Shell Plc Chief Executive Officer Ben Van Beurden said the first signs of recovery in the oil market are beginning to appear, although the company is still planning for a long period of low prices.

    Oil has held near $45 a barrel for more than four weeks after plunging to a six-year low in August amid speculation a global glut will be prolonged. U.S. crude stockpiles remain about 100 million barrels above the five-year average, while OPEC continues to pump above its collective quota.

    “The drop in production is starting to register with folks,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone. “We have the CEO of Shell and the OPEC Secretary General talking about the market starting to recover. Low prices have already led to a 500,000-barrel cut in U.S. production.”

    U.S. crude output is down 514,000 barrels a day from a four-decade high reached in June, Energy Information Administration data show.
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    Veresen confirms $860million dollar Canadian gas plant will go ahead

    Canadian energy firm Veresen has confirmed a new $860 million gas plant has been given the green light in British Columbia.

    The Cutbank Ridge Partnership (CRP), a partnership between Encana and Mitsubishi, has sanctioned the 400 million cubic feet per day Sunrise gas plant, to be located in the Montney region near Dawson Creek in north eastern British Columbia.

    The facility is expected to be in-service in late 2017. Veresen said it has invested approximately $130 million to date.

    Chief executive David Fitzpatrick, said: “This is the largest gas plant to be commissioned in western Canada in the last 30 years and we are excited to partner with CRP on this facility.”

    “Upon start-up of the Sunrise plant, Veresen Midstream’s footprint in the Montney will grow substantially, and we look forward to continuing to work with Encana and CRP, as well as other producers in the region, to unlock the value of this important resource play.”

    Veresen anticipates CRP will proceed to a final investment decision for the 200 mmcf/d Tower gas plant in late 2015.
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    Saudi Oil Minister Puts On Brave Face Amid Severe Headwinds

    As the EM world looks on helplessly while Saudi Arabia’s war with the US shale complex (and, by extension, with the Fed) serves to keep crude prices depressed putting enormous pressure on commodity currencies and accelerating emerging market outflows, the question is whether Riyadh’s SAMA piggy bank can outlast the various capital market lifelines available to America’s largely uneconomic shale drillers.

    It’s tempting to simply say “yes.” That is, with the next round of revolver raids due in days and with HY spreads blowing out amid jittery US markets, it seems unlikely that maligned US producers will be able to survive for much longer, and despite the fact that data out yesterday shows Riyadh’s FX reserves falling to a 32-month low, the Saudi war chest still amounts to nearly $700 billion,  giving the kingdom plenty of ammo. However, between maintaining subsidies, defending the riyal peg, and fighting two proxy wars, Saudi Arabia’s fiscal situation has deteriorated rapidly, forcing Riyadh to tap the bond market in an effort to help plug a hole that amounts to some 20% of GDP.

    Given the above, some have dared to suggest that in fact, the Saudis could lose this “war” just as they may be set to lose their status as regional power broker to Tehran thanks to Iran’s partnership with Moscow in the ongoing effort to shore up Assad in Syria and wrest control of Baghdad from the US.

    But don’t tell that to Saudi Arabia's Oil Minister Ali al-Naimi who says that despite all the uncertainty, the economics of oil exploration and production will prevail at the end of the day. Here’s Reuters, citing Economic Times:

    Saudi Arabia's Oil Minister Ali al-Naimi believes economic producers will prevail over higher-cost suppliers and OPEC's share of the market will rise, India's Economic Times newspaper reported on its website on Monday.

    In comments suggesting Saudi Arabia, the world's top oil exporter, is sticking to its policy of defending market share rather than supporting prices, Naimi told the paper the drop in oil prices was less of a problem than fluctuations.

    "The world needs a reliable, sustainable supply. Best way to do it is to make sure that demand and supply should be equal, so there will not be fluctuation of price. The biggest problem for everybody, producer and consumer today, is fluctuation — the ups and downs," he was quoted as saying.

    Referring to reports that the number of drilling rigs deployed by U.S. shale producers is falling, Naimi said: "Eventually, economic producers will continue to prevail," the paper reported.    

    Naimi disagreed with analysts who believe OPEC's market share would fall further, the paper reported. "On the contrary, OPEC's market share will be higher," he said.

    Maybe so, but make no mistake, this is a precarious time for the Saudis. If the US shale complex finally folds under the weight of its own debt, bad economics, and less forgiving capital markets allowing Riyadh to raise prices again having secured the future of the country's market share, and if Iran and Russia end up being content with preserving the regional balance of power and don't move to push the issue in Iraq and Yemen once they're done "saving" Syria, then the Saudis may well weather the storm.

    However, there are quite a few things that can go wrong here that would serve to destabilize the situation and if the rumours about a rebellion within the royal family are true, the slightest misstep could end up being catastrophic.
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    Nigeria Arrests Co-Chair of Atlantic Energy over Corruption

    Nigeria has arrested the co-chairman of local oil firm Atlantic Energy to question him over corruption and money laundering charges, an official at the Economic and Financial Crimes Commission said on Tuesday.

    The official, who asked not to be named, said prominent businessman Jide Omokore was being investigated in connection with a crackdown on corruption in the oil sector that has swept up former oil minister Diezani Alison-Madueke, who was arrested last week in London.

    Alison-Madueke was minister from 2010 until May 2015 under former president Goodluck Jonathan, who was defeated by Muhammadu Buhari at the polls in March.

    Buhari took office in May promising to root out corruption in Africa's most populous country, where few benefit from the OPEC member's enormous energy resources.

    Former central bank governor Lamido Sanusi was removed during Alison-Madueke's tenure after he raised concerns that tens of billions of dollars in oil revenues had not been remitted to state coffers by the government-run oil company NNPC between January 2012 and July 2013.

    She has denied any wrongdoing but was criticized by Sanusi for handing out contracts to Atlantic, a new company, shortly after becoming oil minister.

    The financial crimes unit has sealed one of her houses in Abuja as part of the probe, security sources have told Reuters.

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    Russia, Saudi Energy Ministers Discussed Oil Demand, Production, Shale

    Russia and Saudi Arabia discussed the situation on the oil market last week and agreed to continue consultations, exchanging views on demand, production and shale oil, Russian Energy Minister Alexander Novak told reporters on Tuesday.

    Even though the oil price has halved since last year on oversupply, Russia, the world's top oil producer, has refused to cooperate with OPEC, where Saudi Arabia is the leading producer.

    Both OPEC and Russia are instead increasing production in a move to defend market share.

    Novak did say on Saturday that Russia was ready to meet with OPEC and non-OPEC producers to discuss the market and his comments have supported prices, although analysts have warned that relations may suffer over the two sides' different positions on Syrian President Bashar al-Assad's future.

    Novak, who was in Turkey last week for a G20 energy ministers meeting, said he did not see a risk that relations between Russia and Saudi Arabia would worsen and said he had discussed global oil markets with Saudi Oil Minister Ali al-Naimi.

    "We discussed the situation on the market in Istanbul, held consultations, exchanged views on demand, production, the shale oil revolution, (and) agreed to continue consultations," Novak said.

    Novak added that a meeting of the Russia-Saudi Arabia intergovernmental commission was scheduled for the end of October or the beginning of November.

    OPEC's Secretary-General Abdullah al-Badri said on Tuesday that the oil exporter group should work together with producers outside OPEC to tackle the oil surplus in the global market.

    Novak's first deputy, Alexei Texler, said last week that Russia would stick to its plans not to cooperate with OPEC.

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    Gazprom to halve TurkStream pipeline capacity - CEO

    Gazprom has almost halved the planned capacity of its TurkStream gas pipeline project to 32 billion cubic metres (bcm) per year from an original capacity of 63 bcm, Gazprom Chief Executive Officer Alexei Miller said on Tuesday.

    The TurkStream pipeline is an alternative to Russia's South Stream pipeline project to bring gas to Europe without crossing Ukraine, which was dropped last year due to objections from the European Commision.

    Russia has long sought to circumnavigate Ukraine to pipe its gas to Europe because of pricing disagreements, which have led to disruptions in supplies to the European Union. Currently around 40 percent of Russian gas goes to Europe via Ukraine.

    Miller, addressing an industry conference on Tuesday, said that Gazprom now planned to supply up to 32 bcm via TurkStream because it also plans to expand Nord Stream gas pipeline, which runs on the bed of the Baltic Sea to Germany.

    "Speaking about designed capacity ... we can talk that it will be created at volumes of up to 32 bcm," Miller said, adding that the reduction in capacity was linked to Gazprom's plans related to Nord-Stream-2.

    Gazprom had originally planned to supply Europe with a total 63 bcm by 2020 via TurkStream, with the first line of 15.75 bcm designed for Turkey and the rest flowing to Greece onwards to Europe.

    Gazprom and a number of European energy companies have agreed to build stage 3 and 4 of Nord Stream, with capacity of 55 billion cubic metres per year, which should double the existing Nord Stream-1.

    Gazprom has earlier said it would have to postpone the launch of TurkStream as Russia and Turkey did not sign an intergovernmental deal, essential for construction to start.
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    UAE on track to meet 3.5 mil b/d production capacity target in 2017: energy minister

    The UAE is continuing to invest in its oil and gas development plans despite lower oil prices, and is on track to meet its 2017 production capacity aims, energy minister Suhail al-Mazrouei said Sunday.

    The Persian Gulf state will spend as much as $35 billion in an attempt to cut its dependence on natural gas for power generation.

    "We are continuing with our investments," Mazrouei said at an energy event in Abu Dhabi, state-run WAM news agency reported Sunday, adding that was no delay due to the fall in the price of crude oil.

    The sharp oil price decline that began in the second half of 2014 has prompted concern over upstream investments, but Mazrouei reiterated that the UAE remained on track to meet its medium-term production capacity target of 3.5 million b/d by late 2017 or early 2018, up from around 3 million b/d currently.

    Abu Dhabi is still in talks with international oil companies for stakes in its onshore concession, which covers the emirate's major onshore oil fields representing more than half its production.

    The new 40-year production sharing agreements offer access to fields with more than 100 billion barrels of oil still in place.

    But after several years of talks, Abu Dhabi has so far announced only three partners for the new concession -- Total, with a 10% working interest, Japan's Inpex (5%) and a joint venture of South Korea's KNOC and GS Energy (3%).

    Some 22% of the Abu Dhabi Company for Onshore Oil Operations, or Adco, concession is still up for grabs. A raft of other projects are also still awaiting approval.

    However, at the same time, Mazrouei said the government is investing in alternative power sources to minimize natural gas consumption and imports."We are investing $35 billion for that purpose," he said.

    The UAE hopes to reduce natural gas as a feedstock in power generation to 70% by 2021, down from 100% currently.

    Emirates LNG, a joint venture between Abu Dhabi's state-owned Mubadala Petroleum and International Petroleum Investment Co. is planning to build a 15 million mt/year LNG import terminal at Fujairah.

    Once completed, the facility, along with import facilities already installed at Dubai's Jebel Ali terminal, will take the UAE's total LNG import capacity to 18 million mt/year. The UAE also has the capacity to export 8 million mt/year of LNG.
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    Shell CEO Doing All to Safeguard Dividends Amid Low Oil Prices

    Royal Dutch Shell Plc is “pulling out all the stops to safeguard” its dividend in a world where oil prices remain “lower for longer,” Chief Executive Officer Ben Van Beurden said.

    Europe’s biggest oil company is also protecting its plan to buy back shares, Van Beurden said in e-mailed comments before a speech at an industry conference in London on Tuesday. Shell is also keeping its “investment program steady for the future,” he said.

    The halving of oil prices in the past year has forced Shell and its peers to cut costs, defer projects and hunker down for a prolonged period of low oil prices. Even with oil trading for about $50 a barrel, Shell’s Van Beurden and BP Plc boss Bob Dudley have made dividends their top priority. Shell has weathered market ups and downs for seven decades -- including oil at less than $10 in the 1980s and 1990s -- without cutting dividends.

    The company is “geared to generate cash flow from operations and free cash flow in 2017 and beyond,” Van Beurden said. “So Shell is planning for a longer period of low prices.”

    Shell’s debt-to-equity ratio gives it the flexibility to maintain dividend payouts even at lower oil prices, Van Beurden said. The Hague-based company expects to cut operating costs by about $4 billion, or 10 percent, this year and will reduce capital expenditure by 20 percent.

    Oil’s collapse drove Shell’s annual dividend yield to 8.1 percent on Sept. 28, the highest in more than at least 20 years. The measure was at 7.2 percent on Monday compared with 4.1 percent for the benchmark FTSE 100 Index.

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    Brazil's Petrobras cuts spending plan for 2nd time in 3 months

    State-led Petróleo Brasileiro SA , struggling with the biggest debt load among global oil firms, on Monday cut $11 billion from capital spending plans for this year and next as Brazil's currency and oil prices slump.

    Petrobras, as the company is commonly known, plans to cut 2015 investment by 11 percent to $25 billion from the previous $28 billion, according to a statement. Investment for 2016 will be cut 30 percent to $19 billion from $27 billion. Budgeted costs plus operating expenses excluding purchases of raw materials were also trimmed for this year and next.

    The company is being battered by a whirlwind of bad news. In the last year, oil prices dropped nearly 50 percent and Brazil's currency, the real, slipped by a third against the U.S. dollar, causing revenue to fall and debt to soar.

    Meanwhile, the downgrade of its debt rating to junk status has raised the cost of borrowing, and a giant corruption scandal has tarnished its reputation with investors.

    "The company's uncertain future is the consequence of terrible governance," said Fabio Fuzette of Antares Capital, a Sao Paulo investment fund. "Debt is so high that they've sacrificed capital investment to preserve cash."

    The cuts announced Wednesday are the second round of retrenching in three months for the Rio de Janeiro-based company, which recently prided itself on having the world's largest corporate-investment plan.

    Reuters reported last month that Petrobras could be forced to make new cuts to its five-year plan, announced in late June, as the burden of falling oil prices, risinginterest payments and a weak currency made the program obsolete.

    Hailed as a return to reality after years of missed output goals and a giant corruption scandal that led to $17 billion of writedowns in April, the June plan cut investment 41 percent to $130 billion from $221 billion for the 2015-2019 period

    Petrobras said on Wednesday that it still plans to sell up to $15.1 billion of assets by the end of 2016. Of that $700 million is expected to be raised this year.

    By the end of 2019, additional asset sales and other corporate reorganizations are expected to bring that total to $56 billion, an amount double the company's market value of $28 billion.

    "You can't look at numbers like that and think the people running this company are serious," Fuzette said.

    He warned investors against buying the company's stock, even after it has dropped 60 percent in the last year. Those who want to invest in the company, he added, should consider buying its debt instead because he believes the government could be forced to bail Petrobras out, paying off lenders at the expense of shareholders.

    Oil output goals were also kept unchanged for the 2015-2019 period, the statement said.

    "I really don't see how they can maintain their output goals while cutting spending," said Adriano Pires, head of the Brazilian Infrastructure Institute, a Rio de Janeiro energy research group and a long-time critic of Petrobras.

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    Saudi Aramco in talks to buy some of China's CNPC assets -sources

    Saudi Aramco, the world's biggest oil producer, is in talks with China National Petroleum Corp (CNPC) to buy some of the Chinese oil company's marketing, retail and refining assets, people familiar with the matter told Reuters.

    The deal value is currently estimated around $1 billion to $1.5 billion, although final valuations and assets are subject to change, they said.

    Saudi Aramco, which has been looking to buy more refining and retail operations as a way to sell more of its output, is in discussions to buy at least one of CNPC's refineries and some 300 retail outlets, one of the people said.

    Saudi Aramco declined to comment and CNPC officials were not available for comment. Sources declined to be identified as the discussions are confidential.

    It remains unclear when the deal will be finalised, the people said, adding that discussions started about five months ago.

    Saudi Aramco has hired Deutsche Bank to advise on the transaction, while CNPC is working with HSBC Plc and one other mainland bank on the deal, according to the sources. Deutsche Bank and HSBC declined to comment.

    CNPC's planned asset sale comes after China's state-controlled oil giant Sinopec Corp raised $17.5 billion last year by selling a 29.9 percent stake in its retail business, ahead of a potential IPO in 2016..

    Saudi Aramco has been keen to make inroads into more advanced chemicals to diversify away from its oil and basic petrochemicals businesses. Chief Executive Khalid al-Falih told a conference in January that it was "even more committed today to diversifying and investing in new sectors" despite the impact of oil price declines.

    In March, the state-owned oil giant signed a new $10 billion loan deal with 27 financialinstitutions, partly to finance the acquisition of a stake in Laxness, a German rubber firm with a market value of $4.7 billion, according to Thomson Reuters data.
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    Iraqi Kurds Boost Oil Sales in Drive for Financial Independence

    Iraq’s Kurdish region ramped up crude exports by 27 percent in September as the semi-autonomous enclave seeks greater financial independence amid a budget dispute with the federal government in Baghdad.

    The Kurdistan Regional Government exported 18.6 million barrels, or an average of 600,463 barrels a day, through the pipeline network to the Turkish port of Ceyhan, according to a statement on the KRG’s Ministry of Natural Resources website. In August, the KRG exported 14.7 million barrels of crude oil to the Mediterranean port.

    Fields operated by the KRG contributed 448,340 barrels a day to the region’s exports, while deposits managed by the central government’s North Oil Co. shipped 152,122 barrels a day, according to the statement. Kurdish oil exports increased in September even as shipments halted for two days because of sabotage and theft, it said.

    “In September, the KRG continued to increase its direct oil sales in Ceyhan to compensate the region for the budget shortfalls from the federal government in Baghdad,” the KRG said in its statement.

    Iraq’s minority Kurds, who historically have resisted control by governments in Baghdad, are independently developing oil reserves they say may total 45 billion barrels -- equivalent to almost a third of Iraq’s total deposits, according to BP Plc data. The KRG and the central government have traded accusations of breaches to a Dec. 2 agreement that provided for the Kurds to export their oil through the state oil company in return for cash from authorities in Baghdad.

    The central government denies that the Kurds supplied an agreed-upon 550,000 barrels a day and sent the KRG less cash as a result. The failure of the two sides to settle their differences over how to share revenue from oil sales exacerbates uncertainty about crude supplies from northern Iraq, one year since Kurdish troops occupied the region of Kirkuk and nearby oil fields to defend them against Islamic State militants.

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    BP's Record Oil Spill Settlement Rises to More Than $20 Billion

    The value of BP Plc’s settlement with the U.S. government and five Gulf states over the Deepwater Horizon oil spill will rise to $20.8 billion, an increase of $2 billion from an agreement reached in July, said the U.S. Department of Justice.

    The settlement is the largest in the department’s history and resolves the government’s civil claims under the Clean Water Act and Oil Pollution Act as well as economic damage claims from regional authorities, according to a statement Monday.

    “BP is receiving the punishment it deserves, while also providing critical compensation for the injuries it caused to the environment and the economy of the Gulf region,” U.S. Attorney General Loretta Lynch said in the statement.

    The London-based company will pay $700 million for injuries and losses not yet known related to spill and $350 million for the reimbursement of assessment costs, according to a consent decree filed at the U.S. District Court in New Orleans. The company will also pay $167.4 million to the U.S. for some non-reimbursed costs related to the spill and $82.6 million for lost royalties owed the U.S. on spilled oil.

    The settlement takes BP’s total budget for the spill to more than $54 billion, five years after an explosion at the Macondo well polluted the Gulf of Mexico and forced the company to shed more than third of its market value and assets to pay for the accident.
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    The US Shale Oil Industry Will Simply Vanish

    The year 2015 will be crucial and could be the beginning of the end of US Shale producers. However, it could be too strategically important for government. The collapse of shale industry means a return to energy-dependence on OPEC-states. As US Census Bureau data provides, since 2011 the share of crude petroleum and natural gas in total US Import have decreased every year, while total import has steadily grown up. Between years 2011 and 2014 general import of crude petroleum and natural gas fell by $84 billion. At the same time, the share of OPEC trade balance in total US trade balance decreased from 23% to less than 10% in 2014. The rescue of US shale industry or shale production could have strategic dimension.

    One of the possibilities is removing US crude export restrictions.Opening the global market for US shale oil could results in increased domestic production. Removal of restrictions would not have significant influence on global crude prices.

    Full details:
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    Tanker Rates Soar As China Hoards Saudi's

    The oil patch is full of conundra currently... crude price declines globally to near 2009 lows but supertanker day-rates (demand) soaring over $100,000 for the first time since 2008. However, today's news thatSaudi Arabia is slashing its price (to a $3.20 discount to the bechmark with the largest price cut since 2012) suggests in an effort to shore up tumbling reserves and capture more market share amid dwindling demand (and excess supply) - a price war has begun led by US ally Saudi Arabia... and China is hoarding crude at these low-low prices.

    Saudi Arabia cut pricing for November oil sales to Asia and the U.S. as the world’s largest crude exporter seeks to keep its barrels competitive with rival suppliers amid sluggish demand. As Bloomberg reports,

    Saudi Arabian Oil Co. reduced its official selling price for Medium grade crude to Asia next month to a discount of $3.20 a barrel below the regional benchmark, compared with a $1.30 discount for October sales, the company said Sunday in an e-mailed statement.

    But, the paradox is that 'demand' appears extremely high judging by the soaring rate for super-tankers...

    As Bloomberg reports, the world’s biggest crude oil tankers earned more than $100,000 a day for the first time since 2008, amid speculation that a surge in Chinese bookings is curbing the number that are left available for charter.

    Ships hauling 2 million barrel cargoes of Saudi Arabian crude to Japan, a benchmark route, earned $104,256 a day, a level last seen in July 2008, according to data on Friday from the Baltic Exchange in London. The rate was a 13 percent gain from Thursday.

    Bookings by Chinese oil companies surged this week to collect oil from regions including the Middle East and West Africa, the world’s biggest loading areas, according to George Los, a New York-based analyst at shipbroker Charles R. Weber Co. The Asian country imported 26.6 million metric tons of crude in August, 5.6 percent more than a year earlier, according to customs data.

    The bottom line appears to be that China is "buying low" and squeezing suppliers which is keeping prices suppressed even as demand appears to be soaring (from China's hoarding).

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    Suncor Energy commences offer to acquire Canadian Oil Sands Limited

    Suncor Energy Inc. today announced that it has formally commenced an unsolicited offer to Canadian Oil Sands Limited (TSX Symbol 'COS') shareholders to acquire all of the outstanding shares of COS for total consideration of approximately $4.3 billion. Under the terms of the Offer, each COS shareholder will receive consideration of 0.25 of a Suncor share per COS share. Including COS' estimated outstanding net debt of $2.3 billion as at June 30, 2015, the total transaction value is approximately $6.6 billion.

    'We believe this is a financially compelling opportunity for COS shareholders,' said Steve Williams, Suncor's president and chief executive officer. 'By accepting this Offer, COS shareholders will become investors in Canada's leading integrated energy company with 50 years of experience in oil sands operations and a track record of returning significant value to shareholders. We're offering a significant premium to COS' current market price and also providing exposure to a meaningful dividend increase. We're confident in the value this Offer provides to COS shareholders.'
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    SandRidge Energy, Inc. Announces Acquisition of Pinon Gathering Company

    SandRidge Energy, Inc. today announced that it has entered into an agreement to acquire the Piñon Gathering Company, LLC from EIG Global Energy Partners for $48 million cash and $78 million of its 8.75% Senior Secured Notes due 2020. The Piñon Gathering Company, LLC owns approximately 370 miles of gathering lines supporting the natural gas and CO2 production from the Company's Piñon field in West Texas. As a result of the transaction, the Company will eliminate minimum volume commitment payments of approximately $40 million per year, forecast to continue until 2021 and additional contractual fees thereafter, as well as secure a strategic asset supporting its West Texas natural gas production.

    James Bennett, President and CEO, commented, "We are pleased to announce the repurchase of our West Texas Piñon gas gathering infrastructure. By eliminating payments related to contractual volume commitments, this transaction will immediately increase annual EBITDA by approximately $40 million by lowering our overall lease operating and gathering expense. This transaction is also consistent with our stated goals of reducing existing contractual liabilities related to legacy operations."
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    Australia's liquids output set to rise to 413,000 b/d in 2017-2018

    Australia's liquids production is expected to increase to 413,000 b/d in the financial year ending June 2018, up from 328,000 b/d in 2014-2015, according to the latest forecast from the Office of the Chief Economist in the Department of Industry, Innovation and Science.

    Production for that year is expected to be supported by additional condensate output associated with the Prelude and Ichthys LNG projects, which are both scheduled to start up in 2017.

    The Inpex-operated Ichthys project is expected to produce more than 100,000 b/d of condensate from the third quarter of 2017, and Shell's Prelude is forecast to pump around 36,000 b/d when it starts up sometime that year.

    Australia's liquids production is expected to decline after 2017-2018, however, dropping to 368,000 b/d by the end of the decade, the Office of the Chief Economist said.
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    LNG Limited has drawn a blank as to why its shares have surged this morning.

    The company, which is focused on developing mid-sized LNG processing plants in the US, Canada and Australia, was queried by the ASX after its shares surged from an opening price of $1.48 to a high of $1.635 this morning.

    LNG told the exchange it had no explanation for the spike and was not aware of any price sensitive information that had not been released to the market.

    Shares in the company have been on the slide since peaking at $5 in April, mainly because of falling oil and gas prices and negativity towards the sector in general.

    In July, LNG announced it had secured the first offtake deal for its $1 billion Magnolia LNG project in Louisiana for a quarter of planned output.

    Perth-based LNGL said it had signed a binding agreement to provide liquefaction services to Meridian LNG for up to 2 million tonnes a year from the project in Louisiana.

    The company also has projects in Nova Scotia, Canada, and Gladstone in Queensland.

    LNG shares were up 22 cents, or 15.6 per cent, to $1.63 at the close after touching an intraday high of $1.645.
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    Exxon, Chevron Outlooks Cut to Negative by S&P in Oil Slump

    Exxon Mobil Corp. and Chevron Corp. were among several U.S. oil and natural gas producers that had their outlooks or ratings cut by Standard & Poor’s as the industry suffers from weak crude prices, hurting their cash flow and liquidity.

    S&P cut ratings for Chesapeake Energy Corp., Denbury Resources and Whiting Petroleum Corp., while giving Exxon and Chevron "negative" outlooks, the ratings agency said Friday in a statement. Exxon “has substantially more debt than during the last cyclical commodity price trough in 2009, while upstream production and costs are at similar levels,” S&P analysts Thomas Watters and Carin Dehne-Kiley said.

    Exxon is one of only three U.S. industrial issuers to have a triple-A bond rating, along with Johnson & Johnson and Microsoft Corp. The oil company has held that grade from S&P since at least 1985, according to data compiled by Bloomberg.

    The last U.S. company to lose the triple-A designation from S&P, as well as Moody’s Investors Service, was Automatic Data Processing Inc., which was stripped of the ratings after spinning off its auto-dealer services unit in April 2014.

    Chevron has been rated AA by S&P since at least July 1987, Bloomberg data show.

    “Most rating actions reflect lower credit-protection measures, negative cash flow, and uncertainty about liquidity over the next 12 months,” S&P said in the statement.
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    Woodside CEO says doesn't want to raise bid for Oil Search - AFR

    Woodside Petroleum's chief executive said the company does not want to raise its A$11.6 billion ($8.2 billion) offer for Oil Search Ltd because it would hurt his shareholders, the Australian Financial Review reported on Monday.

    Oil Search rejected the proposed all-share offer in September saying it grossly undervalued the company's low cost, high quality liquefied natural gas stake in Papua New Guinea and its gas exploration assets in the island nation.

    "Offering more is dilutive to our shareholders," the newspaper quoted Woodside CEO Peter Coleman saying in his first public comments since the proposal was rebuffed.

    "We are already at that balance point and we don't want to go any further," he was quoted saying in an interview.

    Analysts have said the company would have to offer between A$9 and A$10 a share, or at least A$13 billion, to win over Oil Search shareholders, led by the PNG government, Abu Dhabi's International Petroleum Investment Company and Capital Group.

    Coleman said the company did not want to include cash in any offer on top of its four-for-one share offer ratio as that could hurt shareholders if already weak gas prices fell further.

    "In this environment cash is king. You don't want to be using cash. If you pay cash you are locking in a particular price outcome," Coleman was quoted saying.

    He said his next step would be to "wait for Oil Search shareholders to start to say, 'Where's the deal'"

    "I'm a patient man. This is a once-in-a-cycle opportunity to do something quite special."

    Oil Search was not immediately available to comment on Coleman's remarks.
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    US rig count plunges 29 units to lowest total since May 2002

    In a shift reminiscent of the freefall that occurred earlier this year, the overall US drilling rig count plunged 29 units during the week ended Oct. 2 to a total of 809, the lowest since May 3, 2002, according to data from Baker Hughes Inc.

    The count has now fallen in 6 consecutive weeks, giving up 76 units during that time. The recent decline follows a small summer rebound in which the total climbed 28 units over a 9-week period from a nadir of 857 to a plateau of 885.

    Oil-directed rigs again made up a bulk of the downward shift, dropping 26 units to 614, down 977 year-over-year and 987 since a recent peak of 1,601 on Sept. 19, 2014. Oil-directed rigs have now fallen in 5 straight weeks, losing 61 units over that time.

    Gas-directed rigs dropped 2 units to 195, down 135 year-over-year.

    Land-based rigs dropped 24 units to 776, down 1,074 year-over-year. Rigs engaged in horizontal drilling fell 20 units to 609, down 732 year-over-year and 763 since a recent peak of 1,372 on Nov. 21, 2014. Directional drilling rigsdropped 3 units to 83.

    The US offshore count dropped 3 units, including 2 in the Gulf of Mexico, to a total of 30. Offshore rigs are now down 31 year-over-year. Rigs drilling in inland waters decreased 2 units to 3.

    The US Energy Information Administration noted last week that the gulf rig count has fallen more rapidly in recent years compared with the rest of the world .

    In Canada, meanwhile, its rig count rose for the first time in 7 weeks, adding 3 units to reach a total of 179, still down 251 year-over-year. The oil-directed count posted its first gain in 9 weeks, up 4 units to 70, down 179 year-over-year. Gas-directed rigs edged down a unit to 109.

    Texas, Oklahoma lead losses

    Oklahoma led the major oil-and gas-producing states with an 8-unit drop to 97, down 115 year-over-year and its lowest total since Dec. 31, 2009. The Cana Woodford decreased 3 units to 37 while the Ardmore was cut in half to 2.

    Texas fell 6 units to 357, down 538 year-over-year and its lowest total since Aug. 14, 2009. The Permian dropped 5 units to 245, down 311 year-over-year, while the Eagle Ford dropped 3 units to 82, down 128 year-over-year.

    Despite the shrinking rig count, production in Texas during August totaled 110.5 million bbl, up 12.3% year-over-year, and remains on schedule to break the annual record set more than 40 years ago, according from data obtained by the Texas Association of Energy Producers (TAEP) (OGJ Online, Oct. 1, 2015).
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    Russia ready to talk with producers

    Crude oil futures rose on Monday after Russia said it was ready to meet other producers to discuss the situation in the global oil market, where prices have more than halved from last year's highs due to a persistent supply glut.

    "As Russia requested talks, investors seem to expect a possible reduction in oil output to be agreed during rebalancing procedures, with global supply surplus being too burdensome," said Yoo-jin Kang, commodities analyst at NH Investment & Securities based in Seoul.

    Top oil producer Russia has been unwilling to cut output to support crude prices. Last November, it refused to cooperate with the Organization of the Petroleum Exporting Countries (OPEC) in order to defend its market share.

    Russian oil output hit a new post-Soviet monthly high of 10.74 million barrels per day in September, despite a drop in global crude prices to 6-1/2-year lows in August.

    But the country is now prepared to meet with OPEC and non-OPEC oil producers to discuss global oil markets if such a meeting is called, its energy minister said. He said a separate meeting between Russian and Saudi officials was being planned for the end of October.

    Given the weaker oil prices, global oil investments are on track to drop by 20 percent this year - their biggest decline in history, Fatih Birol, head of the International Energy Agency, has said.

    Saudi Arabia, however, is continuing with its investments in the oil and gas industry as well as solar energy, its oil minister said.

    On the geopolitical front, tensions have intensified with Russia saying its planes had struck 10 Islamic State targets in Syria.

    The oil market is now waiting for an indication on when the U.S. Federal Reserve will hikeinterest rates for further trading cues. The prospect of an imminent hike faded after Friday's weaker-than-expected U.S. employment data.
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    Saudi Arabia to keep up energy spending despite oil drop- Naimi

    Saudi Arabia is continuing with its investments in the oil and gas industry as well as solar energy despite the current drop in oil prices, the kingdom's oil minister was quoted as saying on Friday.

    Ali al-Naimi was speaking at the G20 Energy Ministers' meeting in Istanbul, according to state news agency SPA.

    "Since the 1970s this industry has been experiencing sharp fluctuations in prices - up and down - which have impacted investments in the field of oil and energy, and its continuity," Naimi said.

    "This volatile situation is not in the interest of the producing and consuming countries, and the G20 countries can contribute to the stability of the market."

    Oil fell on Friday, reversing earlier gains after U.S. non-farm payrolls data came in weaker than expected which clouded the demand outlook from the world's largest oil consumer.

    Oil prices have almost halved in the past year because of excess supply, although analysts see signs that OPEC's strategy of allowing prices to fall to put a squeeze on growth in high-cost production areas is having some impact.

    International oil companies have significantly lowered spending this year due to persistently low oil prices, cutting budgets and thousands of jobs.

    Global oil investments this year are expected to drop by 20 percent marking their biggest decline in history, Fatih Birol, head of the International Energy Agency, said on Friday.

    Naimi said Saudi Arabia's investments should continue in exploration, production, refining as well as other alternative sources such as solar energy, SPA reported. The world needs clean, continuous and available energy now and for future generations, he said.

    Naimi met with his U.S., Russian and Indonesian counterparts in Istanbul, where they discussed bilateral relations in the field of petroleum and protecting the environment, SPA reported.

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    Southwestern's Growth Slows, but Huge Inventory Remains

    Since discovering the Fayetteville Shale in 2003,  Southwestern Energy (SWN) has emerged as the dominant player in the region. It controls more than 880,000 net acres and accounts for almost half of the Fayetteville's production. Southwestern's inventory remains substantial, at about 5,000 net locations, or more than 10 years of drilling opportunities. In the near term, we expect a pullback in rigs as Southwestern focuses on its emerging plays, including the Marcellus. We forecast Fayetteville production to decline modestly over the next several years before returning to growth in 2018, with substantial free cash flow generation along the way.

    Through a series of acquisitions--including two transactions with Chesapeake and asset purchases from WPX and Statoil--Southwestern now controls more than 750,000 net acres in the Marcellus and Utica shales of Pennsylvania and West Virginia, making the company one of the region's largest leaseholders. Southwestern's acreage spans the dry and wet gas windows of the Marcellus and Utica and should help to diversify the firm's hydrocarbon mix in the years ahead; we forecast companywide liquids production increasing to 10% by 2019, up from essentially nothing in 2013. Southwestern's best Marcellus and Utica acreage is economically profitable at gas prices below $3 per thousand cubic feet, which implies that the Fayetteville has assumed the role of a marginal play in the company's portfolio. Ongoing drilling results should shed more light on the longer-term potential of this acreage, including the Upper Devonian formation. We forecast production across the Marcellus and Utica to increase to 3.2 billion cubic feet of equivalent per day by the end of 2019, with 71% from the dry gas northeast Pennsylvania Marcellus and the remainder from the company's liquids-rich and dry gas acreage across southwest Pennsylvania and West Virginia. Volumes should largely keep pace with firm transportation arrangements.

    Southwestern's New Ventures program is responsible for identifying growth opportunities. Among them are 304,000 net acres targeting the Lower Smackover Brown Dense and 376,000 net acres across Colorado targeting formations in the Sand Wash and D-J Basins. Testing continues across these exploratory projects.
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    Sanchez Energy Appoints Eduardo Sanchez as President of Sanchez Energy Corporation

    Sanchez Energy Corporation today announced it has appointed Eduardo Sanchez as President of Sanchez Energy effective October 1, 2015. Eduardo Sanchez will provide operations oversight and will direct the execution of the Company's business plans.

    Eduardo Sanchez has over 15 years of experience in the exploration and production industry and has served as President and Chief Executive Officer of Sanchez Resources, LLC, a privately held oil and gas exploration company since 2010.

    Prior to his work at Sanchez Resources, LLC, he worked at Commonwealth Associates, Inc. focusing on private equity and debt placements in small and mid-cap businesses including those in the energy sector. Mr. Sanchez serves on the board of Cristo Rey Jesuit and the Good Samaritan Foundation among other charitable causes in the Houston area.

    Mr. Sanchez received his Bachelor of Science in Business Administration degree from Babson College and his MBA from Columbia Business School.
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    Oil drillers bet choking wells will keep shale from going bust

    Encana Corp. wants to ensure the shale-oil boom keeps booming.

    The Canadian producer is among a growing number of companies that are restricting initial output—a process known as choking back—in basins from North Dakota to Texas. They’re conceding huge up-front gushers of crude in exchange for smaller production declines over time so that the wells ultimately generate more oil.

    The strategy sacrifices one of the biggest benefits from shale. The early gushers paid back investments fast, allowing companies to pour capital into new projects. Instead, Encana and others envision a future with a more stable flow from wells, so that they don’t always have to keep drilling simply to maintain output.

    “You’re losing a barrel today to get two or three barrels tomorrow,” said Allen Gilmer, CEO of consultant Drilling Info Inc. in Austin. “It’s not a zero-sum game.”

    Curbing initial production allows companies to maintain the pressure and integrity in their wells, which means output doesn’t fall as fast. Shifting to the technique can avoid steep declines, a phenomenon known in the oil world as the Red Queen, the character in Lewis Carroll’s “Through the Looking-Glass” who tells Alice, “It takes all the running you can do, to keep in the same place.”

    Choke management is among a number of strategies—including moving to richer parts of fields, completing wells with more sand and water, and refracing—that U.S. drillers have used to stave off a collapse in production. Output has fallen just 5% from its peak even though companies have shelved more than half their rigs amid a price slump.

    When Newfield Exploration Co. opened new wells in the Bakken formation in North Dakota, it found the pressure difference created flows so strong they would sweep along the sand meant to prop open cracks in the shale, said Danny Aguirre, the company’s head of investor relations. By using pressure control, Newfield gets more oil over the life of the well and can save money by not having to add as much artificial pressure, he said in an interview.

    “We choke wells back in the early time because we think it produces more production over the first 180 days and a bigger EUR,” Encana CEO Doug Suttles said last month at an investor conference in New York.

    The difference can be seen in Karnes County, Texas, the heart of the state’s Eagle Ford shale region. EOG Resources Inc. drilled there last fall, delivering an average 2,000 bopd in their first month. For its part, Encana wells produced about a third of the output in the equivalent period.

    EOG’s wells, though, declined 54% by the third month of production, while Encana’s dropped by 17%, according to analysis by Bloomberg Intelligence’s William Foiles and Andrew Cosgrove. Within nine months, Encana’s wells will be pumping faster than EOG’s and over five years they will have produced more, according to Bloomberg Intelligence modeling.

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    China gas boom falters, state giants grapple with wave of imports

    China's energy giants - after years spent scrambling to secure supplies for the world's third-biggest gas market - are being forced to sell a glut of the fuel to buyers in other countries as soaring demand grinds to a halt.

    Consumption has been hit by a cooling economy, but also state policies that ensure Chinese pay among the world's highest gas prices, threatening Beijing's targets of curbing pollution and emissions by using more of the clean-burning fuel.

    This will increase pressure on Chinese policy makers to speed up planned reforms of its oil and gas sector, as well as weigh on global gas prices.

    Chinese state oil firms agreed to a string of long-term liquefied natural gas (LNG) contracts with producers from Qatar to Papua New Guinea, as gas consumption jumped five-fold between 2004 and 2013, but that was before demand growth went from double-digits to less than 3 percent this year.

    Faced with a wave of new LNG imports, China's Sinopec Corp is in talks with global firms on selling part of the 7.6 million tonnes per year contracted from 2016 to 2036 at the Australia Pacific LNG (AP LNG) project, said an industry source.

    "Many oil majors have been making presentations to Sinopec about how to manage its perceived oversupply from AP LNG," said the source, who declined to be named due to the sensitivity of the issue.

    As a buyer and a quarter shareholder in AP LNG, Sinopec had leverage on diverting cargoes away from China, but would still need the consent of other shareholders, said the source.

    The company is likely to sell abroad only a chunk of the first few years of output, traders have said.

    Sinopec, which does not normally disclose operational matters, did not immediately respond to a request for comment.

    Facing similar headwinds, China National Offshore Oil Corporation, or CNOOC, recently concluded its first-ever tender to sell two surplus cargoes to buyers outside China and industry sources said it is holding private talks with counterparts about selling off more in 2016 and beyond.

    With the slowdown already forcing state firms to cut back domestic onshore production and delay developing new offshore fields, consultancy SIA Energy said it would take at least five years for state firms to digest the over-contracted volumes

    Experts put a large part of the blame for the slowdown in China's gas demand on the state's pricing policy, as well as supply and infrastructure bottlenecks.

    Oil giants PetroChina, CNOOC and Sinopec dominate domestic production and imports, and while the state sets a price ceiling they have little motivation to cut prices even when demand falls.

    Natural gas demand was 178.6 billion cubic metres last year, according to the National Development and Reform Commission, China's top economic planner.

    SIA Energy and Wood Mackenzie have cut their 2020 demand estimates to a range of 271-305 bcm, well below the 360-400 bcm forecast late last year by Chinese industry researchers.

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    Alternative Energy

    China raises solar installation target for 2015

    China has raised its solar power installation target for 2015 by 30 percent from its previous goal, state media reported, potentially adding to overcapacity as insufficient grid capacity remains a hurdle for the new plants to deliver power.

    Solar plants can in theory delivery returns of 10-15 percent under long-term power purchase contracts with state utilities but in practice face problems of subsidy collection and panel quality, making investors wary of the sector.

    China will add another 5.3 GW installed capacity of solar power stations this year, on top of an earlier national target of 17.8 GW, Xinhua reported, citing a notice from the National Energy Administration last week.

    The new stations will be added mostly in Inner Mongolia and Hebei in the north and Xinjiang in the west, the report said.

    The NEA required the project hosts to complete construction by end of this year and get connected to the grid by end of June next year, the report said.

    China's insufficient grid capacity and overcapacity has curtailed the sector's growth. Nearly a tenth of the solar power generated during the first half of this year was unable to be delivered, according to the NEA.

    China, the world's largest solar market, installed 7.73 GW capacity in the first six months of 2015, the NEA has said, which would be only a third of the new target, meaning companies would need to speed up construction significantly in the second half of the year.

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    Rare metals investment blow-up shows risks lurking in China's financial system

    The promise of risk-free, double-digit returns made the "Daily Golden Jewel" investment offered by an obscure commodities exchange in China hard to resist. Advertisements on Chinese state TV implied government backing.

    Now Beijing faces a political headache after the Fanya Metal Exchange in southwest China said it cannot pay investors their principal. Just as Beijing is scrambling to restore foreign investment confidence in its major markets following a tumultuous summer, its own citizens have hit the streets in protest, underlining the dangers that lurk in China's byzantine financial system.

    The exchange in rare metals has become the focus of wrath by Chinese investors who feel duped by an investment they thought was state backed - an assumption that is not rare in a country where the lines between private and public enterprise are often blurred.

    "We just hope the government can face up to this problem," said a 35-year-old man surnamed Wang, who said he had invested 500,000 yuan ($79,000) in the product. He was among about 150 protesters in front of the Shanghai office of China's banking regulator. Similar demonstrations have been held in recent weeks in Beijing and Shanghai.

    "President Xi and Premier Li said we should build our 'China Dream', but now even our basic rights, our property rights, can't be protected. How can we achieve the 'China Dream?'" said the man, referring to the leadership's slogan that adorns propoganda posters nationwide.

    Fanya did not return calls requesting comment.

    The exchange, regulated by the local government in Yunnan province, trades 14 minor and rare metals and offered a range of investment products based on the metal stored in its warehouses.

    The "Daily Golden Jewel" investment promised annualised returns as high as 13.7 percent and the right to withdraw funds at anytime. Fanya guaranteed the product, which was based on rising metal prices and interest earned on financing deals.

    But in July, the exchange said it had experienced liquidity problems since April after investors tried to withdraw their holdings. Demand for the metals has been falling this year and Fanya's warehouses are now bulging with stock. It holds more than 19,000 tonnes of bismuth - used in alloys, flame retardants, castings among others - enough to meet global annual consumption more than twice over according to 2012 figures.

    Fanya has said 80,000 investors are involved and the outstanding investment was 36 billion yuan ($5.7 billion).

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    Top Energy Companies Join Forces to Launch Utility-Scale Energy Storage System

    Executives with Boston-based Vionx Energy have announced an ecosystem of companies to launch and commercialize a storage technology poised to transform how modern grids are managed and optimized.

    The unique relationship brings together six global companies—United Technologies Corp. (UTC), Starwood Energy Group, Siemens, 3M, VantagePoint Capital Partners, and Jabil—to license, finance, manufacture and deploy the energy storage system.

    The company’s unique technology, a vanadium flow storage system, was developed and engineered by researchers at UTC and is designed to make grid-scale battery technologies practical, resilient and cost efficient.

    “With the support of an Advanced Research Projects Agency-Energy (ARPA-E*) award, UTRC has developed a differentiated flow battery that enables cost-effective and reliable energy storage solutions,” said Dr. David Parekh, vice president, Research, and director, United Technologies Research Center.

    Vionx will market, sell, and service the technology, which is targeted to utility-scale applications in transmission and distribution, microgrid and island markets. Unlike other grid storage solutions such as lithium ion or lead acid, Vionx’s storage design boasts an in-situ process that maintains full storage capacity over a 20-year period. The result is a safe, long-running, affordable and flexible grid storage solution that provides utilities with added infrastructure resiliency and defers aging asset replacement costs.

    “Recent changes to the energy system are creating completely new challenges for distribution grids,” said Dan Wishnick, Siemens Energy’s Sales and Business Development manager. “The modern grid requires robust energy storage solutions that can provide value to smart grid users, multiple hours a day, year after year. As the engineering, procurement and construction provider to Vionx Energy, we believe the company’s flow battery technology can and will provide valuable long-duration energy storage solutions for creating a balanced and resilient electrical grid. The collection of unique and prominent companies working with Vionx Energy is a testament to what Vionx’s technology can accomplish, and we’re excited to play a role in this new venture.”

    The group is backed by a variety of energy finance heavyweights including Starwood Energy and VantagePoint Capital Partners, among others.

    “The flow-battery system from Vionx reflects many years of concentrated design, testing and manufacturing expertise, as evidenced by the unique and highly qualified partners working with the company,” said Lee Burrows, managing director at VantagePoint Capital Partners, an early investor in Vionx Energy. “We are very pleased to be investors in Vionx and to witness the company emerging as an important leader in this critical and large-growth market.”

    Vionx Energy has recently delivered a large-scale storage system to the U.S. Army at Fort Devens in Massachusetts and is poised to announce additional projects in the coming weeks.

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    SunEdison expects to be cash positive through 2016

    Solar company SunEdison Inc said on Wednesday it was on track to be cash positive throughout next year, assuaging investor concerns about its liquidity and "yieldco" model.

    The company, which said two days ago that it would cut 15 percent of its workforce, has reported negative cash flow from operating activities for the past four years, according to Thomson Reuters data.

    SunEdison also said on Wednesday that it had terminated an agreement to buy renewable energy company Latin American Power.

    The Wall Street Journal first reported late on Tuesday that the company would end a $700 million agreement to buy Latin American Power, an owner of wind and hydropower projects in Chile and Peru.

    "SunEdison has got to a point where I don't expect to see an acquisition from them over the next several quarters," said S&P Capital IQ analyst Angelo Zino.

    Maryland Heights, Missouri-based SunEdison, which has spent more than $6 billion on acquisitions in less than a year, has been under pressure since mid-July after buying Vivint Solar Inc in a deal valued at $2.2 billion.

    Also, the company's "yieldco" model has been hit by falling oil prices as well as a flood of IPOs.

    SunEdison last July became the first solar company to spin off some of its power plants into yieldco, which earns money through long-term contracts with utilities.

    Terraform Global Inc, one of the company's yieldcos, had a weaker-than-expected market debut on July 31, triggering a fall in SunEdison's shares. Up to Tuesday's close, the stock had fallen nearly 63 percent since then.

    On Wednesday, SunEdison also cut its 2016 production forecast to 3.3-3.7 gigawatts from 4.2-4.5 GW.

    SunEdison said it was doing more third-party sales, compared with its base plan of 5-10 percent. This will help SunEdison enhance near-term cash flow generation, said Zino.

    SunEdison said it expected about 45 percent of its total volume to be sold to third parties in 2016.
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    Oil-Producing Solar Farm Nears Construction Start by Glasspoint

    GlassPoint Solar Inc will begin work on one of the world’s largest solar park this month, with completion planned for late 2017.

    The 1-gigawatt solar-thermal project will turn water into steam for injection into an oilfield in Oman. The process is known as enhanced oil recovery or EOR and involves heating the ground to improve the flow of heavy crude to the surface.

    The Fremont, California-based company is working with Petroleum Development Oman, a joint venture with Royal Dutch Shell Plc, Total SA and the government of Oman. The project is a landmark deal in terms of size but also because it also the first time that solar energy is used to produce oil at a commercial scale. Glasspoint previously did smaller pilot projects involving solar and oil.

    “The global oil industry uses about 9 million barrels of the fossil fuel per day to power the production process, the equivalent of Western Europe’s daily consumption,” Rod MacGregor, chief executive officer of GlassPoint, said in an interview in London.

    Many countries have already pumped their lightest, easiest to access oil and now are using EOR to reach the heavier varieties. Companies can spend as much as 60 percent of their operating costs on fuel for EOR, using five barrels to steam to make one barrel of oil, according to MacGregor.

    GlassPoint’s steam-making facility will largely be run on the sun’s energy by day and natural gas at night. Solar-powered steam is 10 percent cheaper than natural gas in California. In Oman, it’s about 28 percent cheaper compared to the export price for liquefied natural gas.

    “But you also have to factor in the opportunity cost, Oman could be selling that gas,” MacGregor said.

    A standard medium-sized oilfield would require 1 gigawatt to 3 gigawatts of solar thermal power to make the right amount of steam. Some of the larger ones would need up to 30 gigawatts, he said.

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    Panasonic announces 22.5% module-level efficiency solar panel

    Company claims new solar module prototype sets new world record for module-level efficiency based on mass-production technology. New HIT N330 high-powered module set to debut in U.K.

    Mere days after U.S. solar company SolarCity claimed to have produced the world’s most efficient rooftop PV module – achieving 22.04% module-level efficiency – Japan’s Panasonic has raised the bar even higher with today’s announcement that it has produced a 22.5% efficient solar module based on mass-production technology.

    The electronics giant revealed that its latest commercial-sized prototype panel has been produced using solar cells based on mass-production techniques, utilizing a 72-cell, 270-watt prototype that incorporates Panasonic’s enhanced technology that can be immediately scaled into volume production.

    The panel’s 22.5% conversion efficiency was verified by Japan’s National Institute of Advanced Industrial Science and Technology (AIST), and builds upon the 25.6% efficiency record the company set in 2014 at cell level.

    “The new panel efficiency record demonstrates once again Panasonic’s proven leadership in photovoltaics and our ongoing commitment to move the needle in advanced solar technology,” said Panasonic Eco Solutions Europe senior business developer Daniel Roca.

    Panasonic will also introduce its HIT N330 solar panels to the U.K. market next week. The high powered modules are mass produced with a conversion efficiency of 19.7% module-level efficiency, and a nominal power output of 330 watts, making them – Roca added – ideal for mature solar markets going big on self-consumption.
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    California's landmark renewable energy law to be signed on Wednesday

    In a milestone for reducing pollution and fossil fuel use, Gov. Jerry Brown will sign into law Wednesday a bill that requires 50 percent of California's electricity to come from renewable sources like solar and wind by 2030.

    With huge new solar farms sprouting in the desert every few months and Silicon Valley driving much of the clean energy investment, the state now receives 25 percent of its electricity from renewables. Brown's act to double that at a signing ceremony in Los Angeles, however, sets in motion a green energy transformation for California over the next 15 years on a scale larger than anything any state has ever attempted.

    "It's huge," said Kathryn Phillips, state director for Sierra Club California. "It tells banks and utilities, and the people who make solar panels and windmills, that there is going to be a market. If you are thinking, 'Should I invest in oil wells in Bakersfield or solar panels in Fresno,' the solar panels are now the better bet."

    But energy experts say that it won't be easy to reach the legislation's goals in a state with 38 million people and a $2 trillion economy.
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    Tesla's new SUV is way too expensive - Morgan Stanley

    Tesla's new Model X is great, but Morgan Stanley analysts say it's too pricey.

    After much anticipation, the electric car companyunveiled its new SUV last week, and said it already has a backlog of orders out to a year.

    In a note on Tuesday, Morgan Stanley's Adam Jonas wrote that as great as the car is, the $132,000 price tag – mentioned in media reports and quoted for early adopters – is just too expensive.

    "We had very high expectations for the technical capabilities of the vehicle and it appears Tesla has met these expectations. However, the Model X price appears to have an as much as $25k higher average transaction price (ATP) than the Model S and easily $10k to $15k higher than we had expected, based on early list pricing/specification options. Even allowing the Model X ATPs to decline over time through the introduction of lower-spec models leaves what we believe to be a higher-priced vehicle than we expected that may struggle to meet the volume expectations of the market and our forecasts."

    Jonas said the company would have to lower the Model X price to deliver more than 20,000 cars next year. They also lowered their delivery forecasts on the SUV by between 5,000 and 10,000 units from next year through 2018.
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    German consumers face billions of extra costs for new power lines

    The German government said on Monday the increased usage of underground cabling to avoid local protests against new power lines would cost up to eight billion euros.

    The grid expansion is an important pillar of Chancellor Angela Merkel's "Energiewende" or shift from nuclear power and fossil fuels towards renewable energy sources.

    The net operators say more power lines are needed to carry green energy from the breezy north to the country's industrial south where several nuclear power plants will be switched off.

    But since the federal network agency presented a master plan to build three high-voltage direct-current transmission lines, protest groups have formed across the country.

    The conflict escalated when Bavarian premier Horst Seehofer, head of Merkel's sister party the Christian Social Union (CSU), bowed to public concern and publicly revoked his support for the grid expansion.

    In July, Merkel's coalition settled the dispute by agreeing that net operators should modernise existing pylons and use underground cabling in as many areas as possible.

    This approach would lead to additional costs of three to eight billions euros, the economy ministry has now said, giving figures for the project for the first time.

    The costs for building and operating the electricity grid are normally passed on to consumers in Germany.

    At the same time, the agreed underground cabling could lower overall costs in the medium-term by reducing local protests and speeding up construction of the power lines, the ministry added.
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    SunEdison to cut 15 pct of its workforce

    U.S. solar company SunEdison Inc said it would cut about 15 percent of its global workforce as part of a restructuring plan to integrate the businesses it bought recently.

    The company had about 7,260 employees as of Dec. 31, 2014, according to a filing in March.

    The company will incur a related charge of $30 million to $40 million, which will be recorded in the third quarter of 2015 and through the first quarter of 2016.

    Most of these charges are expected to be paid by the end of the fourth quarter of 2016, SunEdison said in a regulatory filing on Monday.

    SunEdison's stock has been under pressure since mid-July as investors questioned the solar company's liquidity after its purchase of Vivint Solar Inc.

    TerraForm Power Inc, a unit of SunEdison, said in July it would buy 930 megawatt of wind power plants from Invenergy Wind LLC for $2 billion.
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    SolarCity claims it has created the world's most powerful solar panel

    SolarCity today said it has manufactured the world's most efficient rooftop solar panel.

    The photovoltaic panels have an efficiency exceeding 22%, the company said, 7 percentage points higher than the average rooftop panel efficiency rating of roughly 15%.

    "The new SolarCity panel generates more power per square foot and harvests more energy over a year than any other rooftop panel in production and will be the highest volume solar panel manufactured in the Western Hemisphere," the company stated in its news release.

    SolarCity said it will begin production of the new solar panels in small quantifies this month at its 100 MW (megawatt) pilot facility in Freemont, Calif. The company, however, eventually plans to begin mass production of the panels in its1 GW (gigawatt) facility in Buffalo, N.Y.

    According to SolarCity, the new panels were measured as having a 22.04% module-level efficiency by Renewable Energy Test Center, a third-party certification provider.

    The new panels produce 30% to 40% more power over the current models, but they cost the same to manufacture -- about .55 cents per watt, according to Bass. The panels, which are 1.61 meters or 1.81 meters in size, depending on the model, will have a capacity of 355 watts each.

    SolarCity's panel also performs better than other modules in high temperatures, which allows it to produce even more energy on an annual basis than other solar panels of comparable size, the company said.

    SolarCity expects to produce between 9,000 and 10,000 solar panels each day when the Buffalo facility reaches full capacity, which should be in early 2017, according to SolarCity spokesman Jonathan Bass.

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    Odisha gets its first 100pct solar-powered village

    October 2nd this year marked a life-changing transition for the 350 odd dwellers of Baripatha, a tribal village about 25 km southwest of Bhubaneswar. It made history by becoming the first village in the state to be powered entirely by solar energy.

    Many solar projects elsewhere in the country have floundered and failed but Baripatha is different. Its model is low-cost, low-maintenance and community-owned - elements that are missing in other solar-powered projects.

    Mr Joydeep Nayak, senior IPS officer, the prime mover behind this initiative, said that "This model can be replicated all over Odisha to provide power to its nearly 3,900 villages."

    The INR 7 lakh project, co-funded by ECCO Electronics and Jakson Group, has put individual solar units with two lamps in each of the village's 61 households, along with a central one-kilowatt unit that powers eight street lamps, and an LED television set and a TV set-top box for the community centre.

    Mr Sandip Ghosh, executive vice-president of Jakson, said that “By providing individual units to each household, these problems have been resolved. Till now, in all rural solar projects, central units would supply power to households. Often, the exposed cables would be tapped by some, while others would draw more than their shares. This would cause the central unit to overload and trip."

    Mr Vivek Bihani, CEO of ECCO, said that "The entire village has been involved in the planning and execution. Village mukia Narayan Hisa along with a local ITI diploma holder, Epil Kumar Singh, are responsible for the maintenance. The only maintenance required is regular cleaning of the solar panels and, in case of the central unit, ensuring that the water levels in the batteries are at the optimum mark. It is actually zero-maintenance."

    Two multipurpose LED lamps were handed over to each household on Friday by NALCO chairman and managing director Mr T K Chand and various state officials.

    Mr Bihani said that "They cost INR 2,650 and INR 1,750 each and villagers can get them on easy instalments through micro-finance."

    Nayak says NALCO and other companies are willing to subsidize these lamps as part of their CSR.

    The central solar unit has eight big panels that can be folded in just two minutes to protect them from cyclones and high-speed winds that hit Odisha frequently. This central unit can also operate a one-horsepower irrigation pump.
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    Turbine maker Nordex to buy Acciona's wind power business

    German wind turbine maker Nordex is buying Spanish firm Acciona's wind power business for 785 million euros ($882 million) in cash and shares to create a global player in the wind energy market, it said late on Sunday.

    "In combining their activities Nordex and Acciona Windpower will create a truly global company and in doing so reduce exposure to demand swings in individual markets," Nordex said in a statement.

    In early Monday trading, Nordex shares were up 7.4 percent at 26.8 euros per share while Acciona's were up 9.3 percent at 69.13 euros.

    Nordex said the two businesses were complementary, with Nordex strong in Europe and specialised in complex projects, while Acciona Windpower was focused on the Americas and emerging markets, primarily in large-scale wind farms.

    Nordex will pay Acciona 366.4 million euros in a one-off cash payment and the rest by issuing 16.1 million new Nordex shares, equivalent to 16.6 percent of its capital, at an issue price of 26 euros per share. Its shares closed at 24.955 euros on Friday.

    Meanwhile, Acciona is buying more existing shares in Nordex from Skion-Momentum, an investment vehicle belonging to the Quandt family, for 335 million euros, to take its total stake in the German firm to 29.9 percent.

    Skion-Momentum will retain a 5.7 percent stake in Hamburg-based Nordex.

    "Acciona Wind Power growth prospects were somewhat limited within Acciona. The deal allows Acciona to get a relevant stake in one of the largest wind turbine generation players worldwide, maintaining the exposure to the turbines business," BPI said in a note.

    The CEO of the German company Lars Bondo Krogsgaard said on Monday the company had agreed to a three year lock up period with Acciona, during which time the Spanish company has agreed not to raise its stake further in Nordex.

    Nordex said it expected to complete the purchase, including the capital increase, by the first quarter of 2016.

    The deal would bring Acciona synergies worth over 95 million euros as of 2019, and would strengthen research and development and product development capabilities, the Spanish company said in an presentation on Monday.

    Acciona also said that combining Nordex and its wind power business, which designs and manufactures turbines, would give the resulting company an estimated order backlog of about 2.8 gigawatts in 2015.

    Acciona said it would make an estimated 675 million euros in capital gains from the sale of Acciona Windpower. During a conference call on Monday, director of corporate development at the Spanish company Juan Muro Lara said the company had no further short-term plans for its energy business.
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    IEA sees renewables leading global power capacity growth with 700 GW added by 2020

    Global growth in renewable energy sources, which will see the addition of 700 GW of capacity over the next five years, will be driven by falling costs and strong expansion in emerging markets, but policy uncertainties could stall the momentum, the IEA said in a report released Friday.

    Renewable energy will represent the largest single source of power generation growth over the next five years, which holds great promise for affordably mitigating climate change and enhancing energy security, the IEA said in its Medium-Term Renewable Energy Market Report 2015.

    The IEA expects renewable capacity additions to account for almost two-thirds of net additions to global power capacity with wind and solar photovoltaic panels representing nearly half of the total global power capacity increase.

    Two-thirds of the renewable electricity expansion to 2020 will occur in developing countries, with China alone accounting for nearly 40% of total renewable power capacity growth, the report said.

    This will increase the share of renewable energy in global power generation to over 26% by 2020, up from 22% in 2013, the report said.

    The IEA said grid constraints, policy barriers, and macroeconomic conditions in emerging markets, coupled with scaling down thermal power plants in industrialized nations, which puts incumbent utilities under pressure, are some of the challenges to rapid growth in renewables sources globally.

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    U.S. keeps outlook for strong El Nino through N. Hemisphere winter

    A U.S. government weather forecaster on Thursday maintained its outlook for strong El Niño conditions as likely to continue through the Northern Hemisphere into 2016, potentially roiling global crops and commodities prices.

    The National Weather Service's Climate Prediction Center (CPC) again pegged the likelihood of El Niño conditions persisting through the winter at about 95 percent, peaking in late fall/early winter.

    It said its El Nino conditions would likely start gradually weakening next spring.

    El Niño is a warming of ocean surface temperatures in the eastern and central Pacific that occurs every few years, triggering heavy rains and floods in South America and scorching weather in Asia and as far away as east Africa.

    CPC's forecast was little-changed from its September outlook and in line with a growing consensus for a strong Niño that will weaken in 2016.

    Across the United States, "below-average temperatures and above-median precipitation" due to the conditions are likely to be seen during the upcoming months, CPC said in its report.
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    Canadian farmers follow miners, stream crops for cash

    Canadian canola farmers are tapping an alternative form of financing more often used by cash-hungry miners, turning a small Saskatchewan company into one of the country's biggest suppliers of the oilseed.

    Regina-based Input Capital Corp, which does not own a tractor or grain bin, now controls 75,000 tonnes of canola production through contracts with 78 farmers, up from just five in 2013.

    Input, which has a market capitalization of about C$200 million ($153.43 million), says it is the first company in the world to buy "streams" of farmers' future production. 

    While farmers have long used forward sales contracts to hedge the price they get for their crops, Input's model offers the advantage of upfront payment. Input aims to profit by paying a discounted price for the oilseed, used to make cooking oil and margarine.

    Streaming currently accounts for less than 1 percent of this year's harvest in the world's biggest canola producer. But as Input grows, it may claim a larger share of the farm credit business of Canada's major banks and other lenders.

    "There is a dearth of working capital available to farmers," said Input Chief Executive Doug Emsley. "Farmers need cash when they have crop in the bin, because they can't necessarily monetize it when they want to."

    Input's niche model has helped it attract investors including Sprott Asset Management.

    "They're first to market and they're making it more and more difficult for other financialinstitutions to provide an equal service," said Sprott portfolio manager Jason Stevens.

    But like crop prices themselves, Input's stock is volatile.

    Its shares on the TSX Venture Exchange hit an all-time high in April before crumpling to an eight-month low in August. The stock is up about 18 percent year to date.

    Another company is already hoping to follow Input's path - in Australia. Startup CommStream Capital Ltd is looking to sign farmers to multi-year contracts to supply half a dozen crops, including wheat, barley and canola.

    Australian farmers' debts currently hold them back from investing to improve productivity, said CommStream Chief Operating Officer Simon Skerrett.

    Churchbridge, Saskatchewan farmer Graham Sorgard signed a six-year contract to supply Input with 100,000 bushels of canola annually, about one-quarter of his production. The deal gave him C$3 million up front - 70 percent of the contract's value - enabling him to buy an egg farm and stock up on fertilizer.

    "I can see (crop-streaming) getting bigger," Sorgard said. "I think the sky's the limit."

    Even so, crop-streaming comes with all the risks associated with weather-dependent agriculture. Last year, a large farm that was flooded could not meet its supply obligation, so Input restructured its contract, noted National Bank analyst Greg Colman.
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    Monsanto reports quarterly loss, sets new share buyback

    Monsanto Co, one of the world's largest seed and agrichemical companies, said on Wednesday that it was slashing 2,600 jobs and restructuring operations to cut
    costs in a slumping commodity market that it expects to squeeze results well into 2016.

    Monsanto, which also reported a much wider quarterly loss, said that along with the layoffs, its global restructuring would include "streamlining and reprioritizing" some commercial and research and development work, including an exit from the sugar cane business.

    In its fiscal 2014 annual report, Monsanto said it had 22,400 regular employees and 4,600 temporary workers.

    The company said it expected to reap annual savings of $275 million to $300 million from the restructuring by the end of fiscal 2017, at a total cost of $850 million to $900 million. It is developing further plans to reduce operating spending by an additional $100 million, bringing total annual savings to as much as $400 million.

    Monsanto said it was pegging its earnings-per-share outlook for its new fiscal year, which began on Sept. 1, at $5.10 to $5.60. That is well below many analysts' expectations for more than $6.00.

    To try to shore up investor confidence, the company announced a $3 billion accelerated share repurchase program.

    Monsanto said its losses widened to $1.06 a share in the fourth quarter ended on Aug. 31 from 31 cents a year earlier.

    Sales of corn seeds and traits, Monsanto's key products, fell to $598 million from $630 million in the quarter. And sales at the company's agricultural productivity unit, which includes Roundup herbicide, dropped to $1.1 billion from $1.25 billion.

    For the year, net sales were down about 5 percent for the seeds and traits products and fell 7 percent for herbicides and other agricultural productivity products.

    Despite the bleak results, Monsanto Chairman Hugh Grant said in a statement that the company's fundamentals were strong. Monsanto will remain focused on execution of growth targets for its core seeds and traits business and be "disciplined" with its herbicide business, he said.

    The company said it would still meet its target of more than doubling fiscal 2014 earnings per share, excluding special items, by 2019.

    Shares of Monsanto were down 1.5 percent at $86.22 in early trading. The stock had fallen roughly 30 percent from a high set last February, and its growth strategy has under intense investor scrutiny after its attempted takeover of Swiss rival Syngenta AG failed.

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    Prolonged Australian dry spell threatens agricultural output

    A bout of hot, dry weather in Australia over the next three months is likely to exacerbate an expected downturn in agricultural output, with wheat and milk production most affected, analysts said on Wednesday.

    Nearly all of Australia's east coast is likely to record below average rainfall until the end of the year, the Australian Bureau of Meteorology (BOM) said, while much of country faces higher than average temperatures.

    The adverse outlook comes at a critical growing time for crops and follows recent hotter than average temperatures in the country's south and southeast, which have already curbed wheat yields for some farmers.

    "Having that heat so early is putting crops under stress and it is bad for yields. There is some production risk on the (official) wheat estimates," said Phin Ziebell, agribusiness economist, National Australia Bank.

    "Looking forward, the BOM is talking about pretty much no rain for southeast Australia ... it is bad news not just for grain growers but also graziers."

    Hotter, drier weather over the next three months could mean Australia's production of wheat, canola and milk in particular miss official estimates, analysts said.

    "There is little rainfall in prospect that will restore moisture across areas where that is still relevant," said Tobin Gorey, director of agricultural strategy, Commonwealth Bank of Australia.

    Production of beef, however, could exceed forecasts as farmers are forced to slaughter animals as pasture wilts and dams run dry.

    Lower wheat production in the world's fourth-largest exporter could support prices, which hit a near two-month peak on Tuesday on concerns over unfavourable weather in the Black Sea and Australia.

    Australia's chief commodity forecaster last month raised its forecast for wheat production to in excess of 25 million tonnes.

    However, much of the country has recently recorded unseasonably warm temperatures for the Spring season.

    South Australia, a large wheat exporting state, recorded its hottest early-October day in 70 years, putting stress on wheat crops in their yield-determining phase.

    Glencore dominates bulk grain handling in South Australia, while domestic bulk grain handler GrainCorp Ltd is the dominant handler in New South Wales and Queensland states.

    Lower Australian milk production could also undermine expansion plans by the country's largest milk processor, Murray Goulburn, which recently raised A$500 million ($360 million) to boost production of dairy beverages and cheese products for export to Asia.
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    Potash Corp withdraws offer for German peer K+S amid weakening China demand

    Potash Corp of Saskatchewan said it had withdrawn its 7.9 billion euro ($8.9 billion) offer for German potash producer K+S, citing a decline in global commodity and equity markets and a lack of engagement by K+S management.

    The acquisition would have given Potash Corp an opportunity to realize savings from selling potash within North America from its own Western Canada mines jointly with potash from K+S's Legacy mine, which is under construction in the region.

    But senior K+S executives dismissed Potash Corp's bid as too low and refused to negotiate. Since Potash Corp made its offer to K+S privately at the end of May, shares of K+S peers have dropped around 40 percent amid concerns over weakening demand from China, the world's largest consumer of potash.

    "In light of these (challenging) market conditions and a lack of engagement by K+S management, we have concluded that continued pursuit of a combination is no longer in the best interests of our shareholders," Potash Corp Chief Executive Jochen Tilk said in a statement early on Monday.

    Potash Corp had offered K+S 41 euros per share in cash. This reflected a 59 percent premium to the volume-weighted average of K+S's share price during the prior 12 months. K+S shares ended trading on Friday at 31.34 euros.

    Potash Corp had no problem financing the offer despite debt markets becoming pricier, according to people familiar with matter who asked not to be identified as the matter remained confidential. Potash Corp now plans to focus on its growth strategy, the people added.

    Tilk said on Sept. 16 that Potash was not actively discussing its takeover proposal with K+S but remained interested in a combination of the fertilizer producers that would aid North American potash sales and offer new access to Europe.

    K+S had voiced fears that Potash Corp could dismantle the company and eliminate jobs, and that its pledges to the contrary were too vague. Potash Corp argued that its proposal was not based on closing mines, curtailing production, selling K+S's salt business or cutting jobs.
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    Precious Metals

    Implats moves to raise R4bn

    Mining company Impala Platinum (Implats) on Tuesday announced its placing of new shares to raise up to R4-billion through a bookbuild offering run by UBS as acting underwriter. 

    This follows Mining Weekly Online’s report last month in which Implats CEO Terence Goodlace outlined the company’s revised action plan for sustainable profitability in a “lower for longer” metal price environment. The action plan takes in cuts in working costs and capital expenditure as well as an acceleration of the repositioning of the principal operations at the Impala mine, north of Rustenburg, on the western limb of the Bushveld Complex. 

    This includes the completion of the large 16 Shaft and 20 Shaft replacement projects within the Impala lease area at a cost of R3.9-billion over the next three years. These new shafts will replace production from the older shafts as they are mined out and closed and in so doing improve infrastructure use and smelter efficiency.

    Implats stated in a Johannesburg Stock Exchange News Service announcement that the share placing should allow it to operate profitably n both the short and long term.

    The company said that the placing, through an accelerated bookbuild process to qualifying investors only, did not constitute an offer to the public to buy shares. The share price will be decided at the close of the bookbuild. 

    The share sale move is backed 49% by Coronation Fund Managers, Royal Bafokeng Holdings and the State-owned Public Investment Corporation, with Allan Gray irrevocably committing 2.6% through client recommendation.
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    Sibanye to acquire Aquarius Platinum

    Neal Froneman has taken another step towards transforming Sibanye into a significant producer of Platinum Group Metals (PGM’s) with the announcement on the 6th of October to purchase the entire issued share capital of Aquarius Platinum. This could represent yet another step in Sibanye’s ambitions of becoming South Africa’s mining champion.

    The offer has been made at $0.195/share, which based on yesterday’s rand/dollar exchange rate translates to R2.66/share. The board of Aquarius has unanimously endorsed the offer.

    The transaction will allow Sibanye to consolidate the operations of Aquarius – which include the Kroondal and Mimosa mines – with those of the Rustenburg operations it recently acquired from Anglo American Platinum.

    As per the SENS announcement, ” Synergies have been quantified in the following areas:

    – Efficiency and cost savings derived from rationalisation of shared operational and overhead
    cost structures, best practice benchmarking between operations and economies of scale across
    the combined operations;
    – Optimisation of surface infrastructure; and
    – Removal of traditional lease boundaries, resulting in optimal use of existing underground
    infrastructure and improved operational planning.”

    The transaction will also provide an entry point for Sibanye into Zimbabwe, through Aquarius’ Mimosa mine. To year-end June, Aquarius produced 349 thousand ounces (Koz) of PGM’s.
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    Kinross working with U.S. investigators on Africa allegations

    Kinross Gold Corp. said it’s cooperating with U.S. authorities investigating allegations of improper payments government officials at its West Africa mining operations.

    In a statement Friday, the Toronto-based miner said it received subpoenas from the U.S. Securities and Exchange Commission as recently as July and similar requests for information from the Department of Justice in December.

    In August 2013, Kinross received information regarding allegations of improper payments and “certain internal control deficiencies” at its West Africa operations, it said.

    An internal investigation since then “hasn’t identified issues that Kinross believes would have a material adverse effect on the company’s financial position or business operations,” it said. “Kinross is committed to operating in accordance with the highest ethical standards and conducting business in an honest and transparent manner that is in compliance with the law.”

    The Canadian company has mines and projects in the U.S., Brazil, Chile, Ghana, Mauritania and Russia.
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    Goldcorp reports work stoppage at newest mine in Argentina

    A work stoppage led by a local labour union has been reported at Goldcorp's newest gold mine Cerro Negro, in Argentina. 

    The miner, the world’s largest gold producer by market capitalisation, advised that the work stoppage by miners represented by the Asociacion Obrera Minera Argentina, started on September 30. The company had now approached the Ministry of Labour for support at the federal level to request a conciliation period of 15 working days, during which time the parties would expect to negotiate and work towards a resolution. 

    Assuming the request was granted, the workers would be expected to resume work in short order, while the parties met, the company said. Goldcorp affirmed that it was committed to working cooperatively with employee representatives and government officials to resolve this dispute quickly.
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    Base Metals

    Copper mining's deepening costs crisis

    GFMS Thomson Reuter's closely watched annual base metals review and outlook contains some stark warnings for copper miners.

    The industry has made progress to reduce costs – since the first quarter of 2014 average cash costs have dropped by $303 a tonne according to GFMS calculations.

    Over the same period the price of copper is down by $998 a tonne. And since the end of the June quarter of 2015 (the scope of the report) copper is down another $1,000.

    It seems unlikely that the pace of cost reduction can improve much from the relatively modest pace of the last few quarters

    GFMS says at the August low of $4,888 a tonne (a six-year low visited again at the end of last month) 10% of the industry is losing money on a cash basis.

    But consider total costs (a better proxy for sustaining production levels at mines) and 47% of the industry is unprofitable at a 2009 copper price.Image title

    While costs have been reduced by 8% since the start of 2014, in Q2 2015 cash costs for the industry actually creeped up fractionally over the first quarter.

    The inability of copper miners to make deeper cutbacks was despite a 50% fall in the price of crude oil and a sharp depreciation of producer country currencies against the dollar (on average more than 15% says GFMS) over the period. The usual culprit when it comes to rising costs in copper mining – falling grades – were relatively stable.

    And the outlook is not all that rosy for the cost curve to lower much more:

    "While cash costs may benefit from the lag in the transmission of lower energy prices, it seems unlikely that the pace of cost reduction can improve much from the relatively modest pace of the last few quarters.

    "If copper prices continue to languish, additional cuts in sustaining capital are likely in the coming months, which will clearly impact the future production profile. We expect noise levels to increase in the coming months as the industry announces cuts to mine production and capital budgets, but how much of that translates into mine closures and/or a meaningful reduction in volumes remains to be seen."

    Attached Files
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    Alcoa profit misses as aluminum prices slide

    Alcoa Inc reported a smaller-than-expected quarterly profit, hurt by slumping prices for aluminum and other commodities and unfavorable foreign exchange rates.

    "The biggest challenges were commodities prices being under pressure and the wide currency swings," Klaus Kleinfeld, Alcoa's chief executive officer told Reuters.

    Alcoa's shares fell about 5 percent in extended trading.

    Alcoa said last month it will separate into two companies. One will provide "value added" materials such as airplane and car parts to manufacturers. The other, "upstream business" will consist of Alcoa's traditional aluminum smelting operations.

    One key question moving forward is how the two companies will divide debt and pension liabilities. Alcoa executives said during the conference call with analysts that the overall underfunded pension status is 78 percent and only the minimum payment is being made, so the unfunded status is not being significantly reduced.

    Alcoa's third-quarter revenue slid to $5.6 billion, down 21 percent mainly due to closures of non-competitive facilities, Kleinfeld said. The decline in revenue was partially offset by a 10 percent increase from aerospace, automotive and acquisition growth, he said.

    "For us, when you look at the upstream side, our revenues are down, but some of it is absolutely part of the transformation and it is a good thing," he said.

    Net income attributable to Alcoa fell to $44 million, or 2 cents per share, in the third quarter ended Sept. 30 from $149 million, or 12 cents per share, a year earlier.

    Excluding special items, Alcoa earned 7 cents per share.

    Analysts on average had expected Alcoa to earn 13 cents per share on sales of $5.65 billion, according to Thomson Reuters I/B/E/S.

    Benchmark London Metal Exchange prices fell to six-year lows toward the end of September, a nearly 20 percent drop from a year earlier.

    The company believes global aluminum demand will grow by 6.5 percent in 2015 and will double during this decade, Kleinfeld said.

    Alcoa lowered its forecast for the 2015 global aluminum surplus to 551,000 tonnes from its second-quarter estimate for a 762,000-tonne surplus.

    It said it expects a aluminum market deficit in 2016, though it did not specify how much.

    "On the value-add side, China does not play such an important role for us. Most of our business is in North America, Europe and developed countries," Kleinfeld said.
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    Glencore cuts 4 percent of world zinc output, price jumps

    Commodities giant Glencore said on Friday it will cut 500,000 tonnes of zinc production, or around 4 percent of global supply, in its latest move to withstand weak commodities prices.

    Zinc prices, which have fallen 30 percent since May to five-year lows, rallied six percent on the news, which follows recent cuts in copper output and could signal metal prices are nearing the bottom of the cycle, analysts said.

    "Certainly for the markets they're dominant in, nickel and zinc in particular, it does raise the spectre of markets getting a bit more positive," said analyst Daniel Hynes of ANZ in Sydney.

    "As for whether it's enough impetus for a more sustainable rally in metals prices, we do need to see one or two others join this move."

    Glencore, the world's largest miner of zinc ore, said the cuts will shutter about a third of its annual output, mostly from mines in Australia, where 535 jobs will be lost, as well as operations in South America and Kazakhstan.

    The move follows an array of measures the company announced last month to help it slash its $30 billion in net debt by a third, including lower copper production, suspension of its dividends and a sale of new shares.

    Glencore said at current zinc prices it was better to keep its resources in the ground.

    "Glencore believes that current prices do not correctly value the scarcity of our zinc resources," it said in a statement to the Hong Kong stock exchange.

    The cuts will reduce the company's fourth quarter production by 100,000 tonnes. It had previously expected to produce between 1.52 million tonnes and 1.57 million tonnes of zinc this year.

    Mine supply of zinc was already set to shrink this year due to the closure of MMG's huge Century zinc mine in Australia, which also accounts for about four percent of global supply, and Ireland's Lisheen, owned by India's Vedanta.

    Prices of lead which is often mined with zinc also jumped by almost three percent.

    "Glencore remains positive about the medium and long term outlook for zinc, lead and silver, however we are taking a proactive approach to manage our production in response to current prices," it said.

    A Glencore spokesman in Australia declined to say how much the output cut would savein working capital or pay, nor how long it expected the cuts to last.

    LME zinc jumped more than 6 percent and was up 5.8 percent at $1,763 a tonne at 0320 GMT, its largest single day gain in more than five years.

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    Freeport says Indonesia promises approval to operate beyond 2021

    Energy and mining company Freeport-McMoRan Inc said the government of Indonesia has assured the company's local unit that it will approve the extension of operations beyond 2021.

    The government is working on economic stimulus measures, including revisions to mining regulations, Freeport said.

    Freeport mines copper, gold and silver in the Grasberg project in Indonesia, under a contract with the government.
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    ICSG revises down copper supply forecast, expects 2016 deficit

    Global copper supply will be in deficit next year, down from a previously anticipated surplus following a string of production cuts and mine disruptions, the International Copper Study Group (ICSG) said in its latest forecast.

    In a report published Tuesday, ICSG said there would be a 130,000 mt deficit in 2016 compared with a surplus of 230,000 mt it forecast in April.

    It also reduced its estimate for this year to a surplus of just 41,000 mt against one of 360,000 mt in its April outlook.

    "The revisions reflect substantial changes in market conditions since April 2015," ICSG said.

    "Although a downward revision has been made to global usage in view of lower than anticipated growth in China, larger downward adjustments have been made to production as a result of recent announcements of production cuts," it added.

    Several major copper producers have reduced mining output after a bearish year for the metal in which London Metal Exchange prices have fallen 16% year-to-date.

    Prices have been hit by a slowdown in China, which accounts for 40% of global demand, and production overcapacity.

    The ICSG said expected 2015 copper production would increase just 1% year-on-year, down from 7% growth in 2014.

    "[Refined production] growth of around 7% in China will be partially offset by a decline in production in Chile, Japan and the United States," it said.

    ICSG's revision follows similar moves across the industry, with Macquarie revising down 2016 supply of copper to a 272,000 mt deficit in its October 2015 Commodity Outlook.

    But there is still debate about what copper's aggregate supply balance will look like in the next year. "Low oil prices and declining commodity currencies are helping to lower production costs, enabling some producers to delay making cuts," said Sucden's Quarterly Metals report this month, forecasting a 230,000 mt surplus in 2016.

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    Alcoa wins $1.1 bln contract for Lockheed's F-35 fighter jets

    Alcoa Inc said it had got a contract to supply titanium to Lockheed Martin Corp's F-35 Lightning II aircraft.

    The contract has an estimated value of about $1.1 billion, the company said on Wednesday.

    Alcoa said it would supply titanium for airframe structures for all three variants of the F-35 fighter jets over nine years, from 2016 to 2024.

    Attached Files
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    Noble's US metal traders leave in latest senior exits – sources

    Noble Group's senior US metals traders Scott Evans and Jeff Romanek have left the company, four sources said on Tuesday, the latest in a string of high-profile departures as the Asian commodities trader battles weak metals and oil prices.

    The departures come as Asia's biggest commodity trader seeks to shore up its balance sheet and reduce its exposure to capital-intensive operations like trading copper, and returns to its historic roots in aluminium and alumina. Both traders were hired as part of the company's recent years-long push into copper, zinc, lead and nickel. 

    Evans joined 2-1/2 years ago from Goldman Sachs and Romanek followed from the Wall Street bank in April last year. A spokesperson for Noble declined to comment on the situation. The sources requested anonymity because they are not authorised to speak to the media. 

    Mining and metals accounted for 20% of the company's $34-billion revenue in the first half of the year. Their exits reflect internal ructions as the trader pursues options, including selling core businesses, to boost market confidence after a bruising accounting dispute. The moves also underscore challenging market conditions for merchants as prices of industrial raw materials languish at six-year lows. 

    Commodity traders carrying big inventory on behalf of customers have been hit by the unprecedented plunge this year in aluminium premiums, which are paid on top of the benchmark London Metal Exchange prices. In the second quarter, Noble's metals and mining segment swung to a loss before interest and tax of $50-million after an unprecedented drop in aluminium premiums. That compared with a profit of $102-million in the same period last year. 

    The group reported net profits of $62.6-million, compared with $65.8-million a year earlier. In its earnings report, it said the copper business performed strongly due to strong customer growth and volumes amid broader copper market weakness. Overall volumes in copper grew 30% year-on-year in the first half.
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    First Quantum Minerals Updates on Key Developments and Actions


    Terms of a replacement Cobre Panama precious metals stream agreement finalized; capital costs estimate lowered

    A revised precious metal stream agreement has been agreed with Franco-Nevada Corporation ("Franco-Nevada"). Under the revised agreement, it is expected that Franco-Nevada's initial contribution of between $330 million to $340 million will be paid to First Quantum during October. Additional details are contained in a separate joint news release.
    The estimated capital cost of the Company's flagship project, Cobre Panama, has been reviewed in detail and reappraised. It is now estimated the total project cost will be $5.95 billion, approximately 7% below previous estimates with potential for further improvements.
    Capital costs have been reduced due to better construction efficiency, continued optimization of detailed design and lower costs for equipment and bulk materials such as rebar and structural steel.
    Overall the project is approximately 35% complete and experience to date allows greater confidence in forecasting total project costs. The project remains on track for process commissioning and first concentrate production in late 2017.
    The port is now a fully operational and has received direct international shipments.
    Early priority is being given to the completion of the power station taking advantage of virtually all required materials being available on-site. Mechanical installation works are progressing well.
    Project costs incurred to date amount to $2.621 billion of which First Quantum's partner in the project, KPMC, has contributed $524 million. The remaining estimated costs to completion will be met by an additional contribution from KPMC of $666 million, $1 billion payable by Franco-Nevada under the precious metal streaming agreement and$1.663 billion by First Quantum.

    Zambian power stabilizing; Sentinel anticipates commercial-level production by end of 2015

    The Zambian power situation is stabilizing. Full power of 153MW is currently being provided to the Kansanshi mine and smelter and 55MW to the one power line currently connected to the Sentinel mine.
    Sentinel's ramp-up to date has been affected by the limited power supply. Despite this, good progress has been made. Construction of the second power line connecting Sentinel to Lusaka West is complete and scheduled to be energized shortly. Once the second power line is connected and energized, Sentinel will be entitled to its full power requirement of 160MW. This will allow for the mine to ramp-up towards commercial-level production expected by the end of 2015.
    ZESCO, the state-run power company, has requested the mining industry to use supplementary power for 30% of their requirements. Discussions are currently underway regarding the related tariffs for this supplementary power. The Company expects full production at both Kansanshi and Sentinel through the purchase and sharing of this power.
    It is expected that the country's generating capacity will improve following the rainy season starting in November. In addition, approximately 400MW of new power generation capacity is expected online in Zambia in 2016 from projects nearing completion (300MW thermal and 100MW hydro).

    Production and cost guidance for 2015 revised

    Copper production for 2015 is now expected to be between 385,000 and 410,000 tonnes excluding Sentinel pre-commercial commissioning production of between 30,000 and 50,000 tonnes.
    The C1 cost estimate is lowered to between $1.20 and $1.35 per pound.

    Management is employing a number of measures to enhance the Company's capital position and maintain financial stability

    With borrowings at elevated levels during a period of development project expenditure, the maintenance of available project funding, the strengthening of the Company's balance sheet and further cost reductions remain key priorities.
    Initiatives to strengthen and protect cash flow include:

    in addition to the reduction in capital for Cobre Panama, other planned capital programs across the Company have been reduced or re-phased by approximately $700 million,
    hedged approximately170,000 tonnes of copper production at an average price of $2.411 per pound ($5,316per tonne) over the balance of 2015 and well into 2016,
    reduced the work force by 644 and lowered salaries by up to 20% which, when combined with a detailed review of all other operating costs, has led to annual savings of approximately $420 million, and
    realized $215 million from the settlement of the ENRC Promissory Note with a further $85 million to be received in October.

    A commitment to reduce net debt by over $1 billion through a combination of asset sales and other strategic initiatives by the end of Q1 2016.
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    Cobalt’s Luck Could Come From Volkswagen, Glencore Troubles

    One side-story to the biggest headlines in corporate Europe,Glencore PLC and Volkswagen AG, is a minor metal called cobalt.

    Some analysts believe that the price of this metal, used in phones and car batteries, will rise when beleaguered commodity’s giant Glencorecloses down mines responsible for 5% of global supply as it seeks to cut costs. And some investors are betting that increased demand for electric cars in the wake of the Volkswagen emissions scandal will also boost cobalt.

    To be sure, cobalt prices have yet to jump, not least as warehoused stocks of the metal are currently high and could dampen the effects of extra demand or supply cuts. And some market players also question the impact that Volkswagen’s troubles will have on demand for electric cars.

    This small market, though, hovers in the shadows of giant metals like copper and aluminum and during a period of extreme volatility for this sector, cobalt’s story has been overshadowed.

    “We’re positive about cobalt for next year,” said Vivienne Lloyd, a base metals analyst at Macquarie. “A lot of people were jumping up and down making noise about copper, and cobalt was kind of the side-story.”

    The minor metal is currently trading at $28,000 a metric ton, down more than 40% from its 2010 peak of around $47,000 a ton. Like other metals, the price has fallen as more mines were created to cater for a big increase in demand that didn’t come.

    Cobalt has often moved on speculation over whether its largest exporter, the Democratic Republic of the Congo, will ban the export of ores, as its government has sometimes threatened to do. The metal has also been hit by economic weakness in its top refiner China.

    But more recently, the news seems better.

    Early last month, Glencore said that it will suspend activities at two large mines, in the DRC and in Zambia, removing an annual 5,000 tons of cobalt from a market of roughly 100,000 tons. The Swiss-based trading giant, which recently saw its share price whipsaw on concern over its debt levels, is the largest provider of cobalt, producing roughly 20% of global supply.

    On the demand side, the picture is also looking rosy for the metal, some analysts say.

    Fitch Ratings believes that the Volkswagen emissions row could now be a game-changer for the global car market. Volkswagen’s shares have fallen 40% to trade below €100 ($112.65) a share following revelations on September 18 that the company installed software in 11 million of its diesel-engine vehicles in a bid to cheat strict U.S. emissions tests. Officials in several countries have called for investigations into the scandal.
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    Pan Pacific sees copper prices back at $6,000 in FY16/17

    Japan's Pan Pacific Copper expects copper prices to rise to $6,000 a tonne over the next 18 months, driven by global production cuts and demand growth in Asia, although any upside will be limited in 2015, its president said on Monday.

    "Copper prices will continue to languish this year, hovering between the current level and $5,500 a tonne," President Yoshihiro Nishiyama told a news conference.

    Copper prices hit a six-year low of $4,855 a tonne in late August amid fears over a slowing economy in top buyer China. Prices have since recovered to around $5,160 a tonne but are well below recent peaks above $6,300 in May.

    Nishiyama said Japan's biggest copper smelter expected prices to recover from next year, led by a series of production cuts by miners including Glencore and Freeport-McMoRan , as well as solid demand in Southeast Asia and India.

    The company forecast an average price of $6,000/T in the year to end-March 2017 and $6,700/T in the following year.

    "We expect the market to hit the bottom this year or next year," Nishiyama said.

    Pan Pacific, which also mines copper, is ramping up output of its new Caserones copper mine in Chile. The mine achieved full produciton in September and aims to produce 150,000 tonnes of copper concentrates next year, Nishiyama said.

    Pan Pacific, 66 percent owned by JX Holdings and 34 percent by Mitsui Mining and Smelting, said it plans to cut its output of refined copper by 7.5 percent in October-March from a year earlier to 271,600 tonnes.

    The reduction is due to maintenance at its Saganoseki Smelter in November and a fire in September at its Tamano Smelter which forced it to halt operations for 40 days.

    Copper demand in Japan is expected to pick up in the January-March quarter, PPC director Takayasu Kashimura said.

    Pan Pacific will begin negotiations soon on copper processing fees and premiums for Chinese buyers to secure metal for 2016.

    Nishiyama said he did not expect a major fall in the fees from this year's $107 a tonne or 10.7 cents a pound due to a recovery in spot prices.

    Global miners pay treatment and refining charges (TC/RCs) to smelters to convert concentrate into refined metal. Higher fees are typically seen when concentrate supply rises or available smelter capacity thins.

    "As for China premiums, we believe we don't have to make a big cut from this year's $115 a tonne," Nishiyama said, citing recent spot premiums at $110-120.

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    Aurubis' European copper premiums down 16%, hit by slow demand

    Aurubis, the world's largest copper recycler, will reduce its refined copper premiums charged to buyers for 2016 to $92/mt, a drop of $18/mt from 2015, spokeswoman Michaela Hessling said in an email Friday.

    The premiums are paid as a differential to prices on the London Metal Exchange and represent a 16% drop, following a year hit by sluggish Chinese demand and overproduction in mines.

    The announcement comes 10 days before LME week, when Codelco, the largest global producer of copper, is expected to release its premiums.

    Most of Europe's copper supply comes through long-term contracts.

    "Europe is driven by these long-term contract premiums," said one trader. "They determine a lot of what happens in the spot market."
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    The ugly metal sisters

    lead and zinc, often called sister metals because they tend to be found in the same deposits and are as often as not mined in tandem.

    Zinc's "supercycle" price peak of $4,580 per tonne, basis three-month metal on the London Metal Exchange (LME), came in November 2006 while lead's peak of $3,890 followed a year later in October 2007.

    Neither made it back to those lofty heights in the Chinese infrastructure-fuelled boom that followed the Global Financial Crisis of 2008-2009.

    And since then the two sisters have done little more than trudge sideways in well-worn ranges until joining in this year's broader sell-off.

    Such an uninspiring price performance has left the two being dubbed the ugly sisters, to be played off against each other in one of the LME Street's favourite relative-value plays.

    That relative value trade has recently been turned on its head with lead re-establishing a premium over zinc for the first time since June of last year.

    The premium itself is still small and tentative. As of Thursday's closing evaluations zinc ($1,687.50) was once again just out in front of lead ($1,649.00).

    And the relationship looks set to remain confused and confusing since the turnaround has been driven by confused and confusing visible stock movements.

    Image title


    In large part the collapsing zinc premium over lead has reflected collapsing sentiment towards the galvanising metal relative to its battery-dependent sister.

    The new negativity has been caused by a rapid build in LME zinc stocks from 430,800 tonnes at the start of August to 617,325 tonnes in the middle of September.

    That was thanks to the "arrival" of 228,225 tonnes of zinc at LME warehouses in New Orleans, long the black hole for surplus zinc stocks.

    Suggestions that some of this metal may have been offloaded by Glencore as part of a broader debt-reduction strategy has reinforced the apparently bearish message that there is a lot of zinc inventory around.

    But in truth these "arrivals" are almost certainly not "arrivals" at all but rather metal that was moved earlier this year to off-exchange storage now coming back into LME-registered sheds.

    The zinc market is paying the collective price for taking at face value the steady drawdown in stocks in the first half of this year, driven by 286,500 tonnes of "departures" from New Orleans.

    Sentiment, in other words, is being driven by what is largely storage arbitrage, irrespective of whose metal it is.

    LME lead stocks, by contrast, seem to paint a more bullish picture. Over the same six-week period that zinc stocks ballooned lead stocks fell by around 50,000 tonnes and they are still sliding.

    Moreover, the ratio of cancelled lead stocks, meaning those that are earmarked for load-out, stands at 25.6 percent. The ratio in LME zinc stocks is just 10.4 percent.

    Alas, however, lead stock movements are no more "real" than those of zinc.

    Rather, they denote nothing more than the latest skirmishing in the ongoing LME warehouse wars, the fight for inventory between different warehouse operators.

    A mass raid on lead stocks earlier this year saw some relocated to South Korea and some to the Dutch port of Vlissingen with the apparent beneficiaries Metro and Worldwide Warehouse Solutions respectively.

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    Steel, Iron Ore and Coal

    China Sep steel sector PMI slid to 43.7

    The Purchasing Managers Index (PMI) for China’s steel industry slid 1.0 on month to 43.7 in September, in the wake of the second monthly rise in August, indicating a contraction trend in steel sector, showed the latest data from the China Federation of Logistics and Purchasing (CFLP).

    The index has stayed below the 50 mark for 17 straight months, signaling a persisting conflict between supply and demand in this sector.

    The output sub-index dropped 2.9 from August to 44.6 in September, the 13th consecutive month below the 50 mark.

    China’s steel products output may be hard to rise in October, mainly impacted by steel mills’ intensified will to cut production amid weak demand and continuous losses in the sector.

    The new order sub-index rebounded 0.8 from August to 40.7 in September, but the new export order index plunged 13.8 from August to 40.7 in the same month – the lowest level in recent five months, reflecting a potential decline of steel products export in the short run.

    The sub-index for steel products stocks decreased 0.5 to 49.3 in September, the third successive monthly drop. However, the decrease was much slower than last two months, said the CFLP.

    As of September 20, total stocks in key steel mills stood at 16 million tonnes, dipping 1.06% from ten days ago and up 3.56% from August, said the CFLP.

    Domestic steel prices may continue to drop in October amid flat demand and financial strain at steel mills. However, a rebound was expected in the wake of prolonged sluggishness, due to increased production cut of steel mills and favourable financial policies of the state.

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    Glencore, Tohoku set annual coal contract price down 12 pct

    Mining group Glencore Xstrata Plc and Japan's Tohoku Electric Power Co have settled an annual Australian thermal coal import contract 12% lower than a year earlier, sources said.

    The price set for the year beginning on October 1 was set at around $64.60, the sources said, reflecting a supply glut for thermal coal worldwide.

    Australia is by far the biggest supplier to Japan, accounting for about 76% of Japan's thermal coal imports in the first eight months of this year.

    The price set by Tohoku and Glencore will likely be followed by other Japanese utilities.

    Annual contracts starting in October account for about 20% of Australian thermal coal imports to Japan, covering about 22 million tonnes, according to the sources.

    Japan power companies consumed 5.82 million tonnes of coal in August, up 1.9% from a year earlier and marking the highest for any month, data from the Federation of Electric Power Companies of Japan showed last month.
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    Roy Hill mine will ship its first iron ore cargo on 21 October - Report

    Australia’s Roy Hill iron ore mine, majority owned by Ms Gina Rinehart’s Hancock Prospecting, looks set to deliver its maiden iron ore shipment before the end of the month according to one of the project’s key investors. Mr Matthew Hope, a research analyst at Credit Suisse, in a note to clients said “Roy Hill will ship its first iron ore cargo on 21 October, according to POSCO, a shareholder in the mine and recipient of the cargo at its south Korean mill.”

    He added “JV partners, POSCO, Marubeni and China Steel Corp will take 50% of the 55 million tonnes per annum output, the remainder is intended to be sold in China.”

    The project, commenced in mid-2011, has an initial mine life of 17 years according to the Roy Hill website.

    Contractor Samsung CT sent hundreds of workers to the Pilbara site earlier this year to help meet a deadline for making a first shipment in October.
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    Vedanta to export 5.5 million tonnes of iron ore from Goa in 2015-16

    Live Mint reported that Vedanta Resources Plc said that it would export 5.5 million tonnes of iron ore from its mines in Goa by March as the company restarts operations with the permission of the country’s apex court.

    Mr R Kishore Kumar, chief executive officer of Vedanta’s iron ore business “Mines in Goa will export about 20 million tonnes of iron ore in the fiscal year ending March 2016. Out of this, Vedanta will export about 5.5 million tonnes.”

    He added “If we are given a larger production capacity, we are in a position to become competitive.”

    Mr Kishore said that Vedanta is targeting a production cost of USD 20 a tonne.

    The Supreme Court has allowed Vedanta to mine only 5.5 million tonnes of iron ore, but the company is seeking a relaxation on the limit to become competitive in a global market that has witnessed a meltdown in price of the commodity used to make steel.
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    France urged to end coal projects in Turkey

    Environmental lobby groups on Wednesday urged French President Francois Hollande to force state-owned utility Engie to stop investing in coal projects in Turkey.

    Engie, in partnership with the Turkish company Mimag-Sanko, plans to build the Ada Yumurtalik 1,320-megawatt coal plant in the south of Turkey.

    Around 35 environmental groups, including WWF France, Greenpeace Turkey and Climate Action Network Europe, said the project threatens citrus fruit production in the area and new coal plants put the livelihoods of 500,000 people at risk.

    "We strongly urge you to act to cancel Engie's investment plans in the Ada coal power plant project in Iskenderun Bay, and to push Engie commit to end all its coal investments and activities," they said in a letter to the French president.

    Coal remains the world's top fuel for power generation but over the past year pressure on governments and companies worldwide has increased to pull out of coal on environmental grounds. U.S. bank Citi on Tuesday joined the retreat by tightening its policy on credit exposure to coal miners.

    Turkey plans to double its coal power capacity over the next four years to help it meet rising energy demand as its economy expands.

    The French state owns 84 percent of Engie and around 33 percent of utility EDF. Both companies are among the sponsors of United Nations climate talks which will be held in Paris from Nov. 30 to Dec. 11 with the aim of agreeing a global deal to curb emissions.

    The letter said it was the French government's responsibility as the host of the U.N. climate talks to ask those companies to redirect coal investments towards energy efficiency and renewable energy.

    France has pledged to eliminate coal export credits and scrapped credits used for coal technology made by Alstom last month.

    Utility companies have said it will take time to move completely away from the use of fossil fuels and some have urged governments to put a global price on carbon emissions so there is less incentive to burn highly polluting coal.
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    Kloeckner cuts Q3 outlook on weak steel prices

    German steel distributor Kloeckner & Co said on Tuesday it would not meet its third-quarter target, citing poor market conditions due to prices falling further and weak demand for steel and metal products.

    Third-quarter earnings before interest, tax, depreciation and amortization (EBITDA) excluding restructuring expenses will be around 30 million euros ($33.79 million), Kloeckner said in a statement.

    The company had earlier guided for EBITDA, excluding special items of between 45 million euros and 55 million euros. That outlook was based on the assumption of a slight recovery of prices and robust demand, Kloeckner said.

    Kloeckner shares were down 6.9 percent in after-hours trading. The shares closed 0.5 percent higher after the regular trading session.

    "Contrary to the general market expectation, steel prices continued to decline, mainly due to a further decrease in quotations for Chinese steel exports," the company said.

    "As a result, margins came under pressure and inventory write-downs became necessary."

    Kloeckner said that this situation was expected to continue in the fourth quarter and that as a result 2015 EBITDA excluding restructuring cost would remain "substantially" below last year's, though a positive cash flow is still expected.

    In 2016 EBITDA is expected to rise again, while net income should be "noticeably positive again," Kloeckner said.
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    Adani faces further delays over Australian coal mine permit

    A giant coal project under development in Australia by India's Adani Enterprises is facing further delays over environmental permitting, Australia's environment minister said on Tuesday.

    Australia had yet to receive assurances that endangered species would be protected if Adani is reissued with an environmental permit to construct its Carmichael coal mine, the minister, Greg Hunt, said.

    "The government is now waiting on the company, and I'll make a final assessment on its merits when that comes," Hunt told reporters on the sidelines of a climate investment conference.

    A court on August 5 temporarily blocked progress on the $7 billion project in the inland Galilee Basin following a claim Adani failed to take into account the welfare of the yakka skink and an ornamental snake.

    The Environment Department at the time said Hunt would reconsider his approval in six to eight weeks pending new submissions by Adani.

    Adani, which wants to ship 40 million tonnes of coal a year to India, has battled opposition from environmental groups since starting work on the project five years ago.

    The project has been repeatedly delayed by court actions by environmentalists, difficulties in obtaining finance and concern over the economics of the project, so much so that Adani recently halted engineering work.

    An Adani source close to the matter said the company remained commited to the project and was counting on the permit being reissued by late November.
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    For squeezed global steel sector, no quick fix in prospect

    The global steel industry faces an escalating crisis and any mill closures already in prospect look unlikely to be enough to restore profitability in the sector.

    Britain's second-largest steelmaker SSI UK went into liquidation last week, citing a slump in steel prices and record exports from China, which produces half the world's steel.

    Similar troubles are circling South Africa's second-largest steelmaker Evraz Highveld Steel and Vanadium, which is undergoing so-called business rescue proceedings, while Tata Steel and U.S. Steel Corp have curtailed capacity this year.

    Experts say measures taken so far are nowhere near enough.

    "The steel industry is in its worst recession in 10 years, potentially it's as bad as 1991-92," said VTB Capital's global head of commodities research Wiktor Bielski. "There's almost nobody who isn't hurting right now. Less than 50 percent of the global industry can make money at current prices."

    Consultants CRU said 700 million tonnes out of a total 2.3 billion tonnes of steelmaking capacity is "spare", with cuts of 400 to 500 million tonnes needed by 2020 to balance the market.

    Few believe such cuts will materialise, not least because an estimated 300 million tonnes of spare capacity sits in China, where trimming a sector that employs millions could spark unrest.

    "It is the rule of the market. If not China, it will be Indian, Russian or Turkish mills, the more competitive will outlive the high-cost producers in the developed economies," said a China Iron and Steel Association (CISA) officer.

    CISA expects China's steel exports will exceed 100 million tonnes this year, after surging 50 percent last year to 94 million. This flood of cheap Chinese steel has helped send global prices ST-CRU-IDX to their lowest in 11 years.

    "Global steel prices have fallen more than iron ore in the last few weeks. In southern Europe we see steel from China at around 300 euros per tonne, significantly below the cost of the most efficient (EU) producer," said Voestalpine Chief Executive Wolfgang Eder.

    Scarcely a month goes by without news of new protectionist measures, actions which many experts see as counter-productive in the long run because they reinforce overcapacity.

    "The best market is a market that is as free as possible from artificial restrictions within the rules of the World Trade Organisation," said Edwin Basson, director general of the World Steel Association.

    Yet protectionism is popular, and political and labour pressures to keep mills running are intense, not just in China, as ArcelorMittal learnt in 2012 when it faced threats of nationalisation on attempting to close blast furnaces in France.

    Attached Files
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    Chinese crude steel output in 8 months dip by 2% YoY

    Image Source: wikimediaXinhua reported that China's crude steel output continued to decline in August. According to the National Development and Reform Commission, Crude steel production dipped 3.5 percent year on year to 66.94 million tonnes in August, compared with a 1 percent increase in the same period last year

    In the first eight months of 2015, output fell 2 percent year on year, after the first seven months dropped 1.8 percent year on year, and the January-June period posted the first half-year drop in nearly 20 years, earlier figures showed.

    China's once sizzling steel industry has cooled as the economy shifts gear from double-digit growth to 7 percent expansion in the first half of this year, hurting industry profits and forcing factories to close.

    In the first half of the year, medium- and large-sized steel producers suffered losses of 21.7 billion yuan (3.4 billion U.S. dollars) in their main businesses, losing 16.8 billion yuan more than the same period of last year, according to data from the China Iron and Steel Association.
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    South African coal miners begin strike

    South African coal miners began a strike on Sunday after wage talks collapsed last week, disrupting the sector that produces the country's electricity and exports coal to Europe and Asia.

    The National Union of Mineworkers (NUM), which organised the strike, said last week that it would begin from 1800 local time (1600 GMT). About 30,000 workers could take part.

    "The strike has just started. As expected our workers have downed tools," NUM spokesman Livhuwani Mammburu told Reuters.

    Two smaller unions which mostly represent skilled workers and supervisors accepted the coal companies' offers last week. NUM's arch rival, the Association of Mineworkers and Construction Union (AMCU), has not accepted the offer but its membership levels are small.

    The Chamber of Mines, which represents Glencore, Anglo American Coal and Exxaro, said last week that the coal producers had raised their offer to increase wages by up to 8.5 percent for the lowest-paid workers, from 8 percent previously.

    South Africa's inflation rate is 4.6 percent.
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