Mark Latham Commodity Equity Intelligence Service

Friday 30th September 2016
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    German Cal 17 forward power prices at 2016 to date high on generation costs, tight supply

    European forward power prices continued their rally Thursday after posting some of the biggest single-day gains since the Fukushima nuclear crisis in the previous session on renewed concern about low nuclear availability in France coinciding with bullish coal and gas and carbon allowances.

    German baseload power for year-ahead delivery, the benchmark for European power, was heard trading at Eur30.50/MWh during the morning, but fell back to Eur29.80/MWh just before noon London time, still up some 70 euro cent from Wednesday's close, when the contract rose over 5%, Platts data shows.

    The contract has rebounded over 20% since a dip below Eur25/MWh on September 12 and is up almost 50% from record-lows of just over Eur20/MWh back in February.

    German year-ahead power prices have fallen continuously over recent years, more than halving from over Eur60/MWh in the wake of the Fukushima nuclear crisis and fell below Eur30/MWh last September for the first time in over 10 years before the slump in global commodity prices caused it to plunge to just Eur20/MWh in early 2016.

    The key driver of the recovery is coal prices, which have rebounded some 75% from their lows back in March, trading Thursday at $64.50/mt, a level not hit since late 2014 and up over $4 since the start of the week on tight supply in the Asian market.

    EUA carbon allowances, which dropped to a three-year low in the wake of the Brexit referendum, even falling below Eur4/mt at the start of September are ending the month over 25% higher, trading Thursday as high as Eur5.37/mt.


    However, power prices are also driven by tightening supply, with the French power market most impacted by very low nuclear availability amid additional inspections needed at 18 of the 58 French reactors.

    France's EDF last Wednesday announced extended outages and cut its nuclear production targets for the remainder of this year as well as 2017, giving French and neighboring power markets a strong boost with the system tightness especially visible during the winter months and quarters.

    Last week, the French year-ahead contract registered its biggest weekly gain since 2010, up by over Eur3.

    On Wednesday, however, the contract jumped another Eur3 or almost 9% to levels not seen in over a year with another Eur1 added Thursday morning and the contract trading at Eur39.30/MWh, up by 25% in less than three weeks.

    French year-ahead power reached a record-low at Eur25.60/MWh on March 15 and has risen over 53% since.

    Sources said the market has not experienced such a strong period of gains since the Fukushima crisis in 2011 not only lifted global commodity prices but also tightened supply with Germany shutting its oldest reactors immediately, removing some 7 GW from the market.

    Traders also point to the fact that record lows seen earlier this year were overdone amid a complete lack of risk priced into forward power contracts.

    The French nuclear issues are now seen as additional risk coinciding with tighter supply following coal plant closures and a rising price scenario for fuels and with the market still changing from generally being short, leading to such sharp gains as well as increasing volatility overall.

    GAS STILL BEARISH AHEAD OF WINTER The exception remains European gas prices which have recovered far more slowly than coal prices and Dutch TTF Cal 17 gas up barely 20% since reaching multi-year-lows in April, trading Thursday at Eur15.80/MWh.

    The decoupling of coal and gas prices this summer has already led to a reversal of generation margins in Germany with modern CCGT gas-fired power plants on-par with older coal-fired plants for the first time in over five years for the front-month.

    The onset of winter and higher gas prices are set to reverse the near-term trend, but the year-ahead German clean-dark spread is now trading at its highest in almost five years. Initially, the trend in favor of gas plants over coal plants had a bearish impact on emissions, with coal on average twice as carbon-intensive as gas, but the increased shortfall of emissions-free nuclear output across Europe may actually increase emissions from power generation in the CWE region this year boosting EUA prices ahead of the agreed introduction of the Market Stability Reserve from 2019.

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    Inner Mongolia outbound power transmission down 3.8% over Jan-Aug

    Inner Mongolia autonomous region, a major power generation base in China, transmitted 92.2 TWh of electricity to other areas in the first eight months this year, ranking first in China over the same period, according to data from the Inner Mongolia Development and Reform Commission.

    It was, however, 3.8% lower than the year-ago level, compare with a year-on-year decline of 5.7% over January-July, data showed.

    Of the total transmitted electricity, 56.12 TWh of electricity were sent to northern China over January-August, falling 5.8% on year; 180 GWh to Ningxia, down 24.5% from a year ago; 1.04 TWh to Shaanxi, down 39.4% on year.

    Meanwhile, the autonomous region transmitted 33.73 TWh of electricity to eastern China, rising 1.6% on year, while that was sent to the neighboring Mongolia stood at 740 GWh, up 3% on year.

    Inner Mongolia transmitted 400 GWh of electricity to Shanxi province, unchanged from a year ago.

    In 2015, the installed capacity of power generation in Inner Mongolia totaled 64.58 GW, which is expected to rank first in China to reach 100 GW over the 13th Five-Year period (2016-2020).

    As such, the outbound power transmission capacity of Inner Mongolia is likely to reach 62.3 GW, and 350 TWh of electricity will be transmitted outside the region annually.
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    China September factory activity expands marginally as orders edge up-Caixin PMI

    A worker verifies a product at a steel factory in Dalian, Liaoning province, China September 1, 2016. China Daily/via REUTERS

    China's factory activity expanded in September as domestic and export orders picked up but the improvement was marginal and manufacturers continued to shed jobs, a private business survey showed on Friday.

    The Caixin/Markit Manufacturing Purchasing Managers' index (PMI) rose to 50.1, in line with analysts' forecasts and slightly higher than August's no-change mark of 50.0, which separates expansion of activity from contraction on a monthly basis.

    The reading has bounced around the neutral 50 level for the best part of five years, pointing to stubbornly sluggish demand.

    Output expanded in September, but at the slowest pace in three months, the survey showed.

    Overall new orders also continued to show modest growth, with new orders edging into expansionary territory after nine months of contraction.

    Despite easing to its slowest for nine months, the rate of job shedding remained marked overall. Around 8 percent of companies surveyed reported lower headcounts, with a number of firms attributing the fall to cost-cutting.

    But companies were able to pass along higher input costs and raise selling prices of their goods by a sharper pace than in August, suggesting they were regaining pricing power.

    "The readings for the manufacturing PMI over the past three months seem to indicate that the economy has begun to stabilize," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in a note accompanying the PMI report.

    A construction boom fueled by government infrastructure spending and a housing market rally have helped to underpin growth in the world's second-largest economy in recent months, though small and mid-sized private firms like those which dominate the Caixin survey have continued to struggle.

    Profits earned by China's industrial firms grew the fastest in three years in August with rising sales, higher prices and reduced costs, official data showed on Tuesday.

    China's imports also unexpectedly rose in August for the first time in nearly two years, suggesting domestic demand may be picking up. Exports fell at a less than expected extent and showed signs of improvement, with demand from the United States, Japan and European Union all improving.

    But the Commerce Ministry warned on Thursday that downward pressure on China's trade is growing due to various destabilizing factors, and said weak global demand is "impossible" to reverse fundamentally this year, though January-August trade figures showed positive signs.

    Zhong also cautioned that an increasingly strained fiscal budget could pose a risk to sustainable growth.

    "Given that the growth rate of fiscal income has slowed recently while expenditures have swung, there is insufficient momentum to drive future economic growth, and there is a risk that industrial output may decline," Zhong said.

    China will release its official factory and service sector activity readings on Oct. 1.
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    Toyota drops diesel from new model, signals likely phase-out

    Toyota has decided to drop diesel engines from its new C-HR compact in the wake of Volkswagen's emissions scandal and will probably do the same for future model renewals, the carmaker's second-ranking global executive said on Thursday.

    The Japanese automaker decided "within the last six to 12 months" not to offer a diesel version of the car, unveiled at the Paris auto show, because demand for the powertrain technology is falling sharply, Executive Vice President Didier Leroy told Reuters in an interview.

    If faced with a renewal decision today for other models up to and including the larger Auris compact, a Toyota staple, "we would probably do the same thing", Leroy added.

    Toyota's decision is the latest example of how the so-called "dieselgate" scandal is forcing carmakers to rewrite strategic plans that will shape their futures for years to come.

    Reuters reported this month that Renault expects diesel engines to disappear from most of its European cars after the French automaker reviewed the costs of meeting tighter emissions standards following Volkswagen's scandal.

    While the scandal centred on the German carmaker's cheat software, it also focused public attention on an industry-wide disparity between nitrogen oxide (NOx) emissions on the road and those recorded in regulatory tests.

    Mass-market diesels that meet legal NOx limits in approval tests commonly emit at least five times as much in everyday use.

    Renault has said it complied strictly with regulations and that its cars were not equipped with emissions falsifying software.

    From 2019, vehicle approvals will depend on emissions performance during real driving. This is compelling manufacturers to install costlier emissions treatment systems.

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    The Islamic State Loses Control Of Iraqi Oil Fields

    The Islamic State will have to turn to other means to finance terror activities now that it no longer controls oil wells in Iraq.

    Iraq’s oil ministry announced that IS was driven out of Shirqat—an area near Kirkuk—by U.S. backed Iraqi forces last Thursday. In August, IS lost the Qayyara oilfield south of Mosul in a push by the government retake the city. While the Iraqi government has not captured the Najma oilfield, it is of no use to the Islamic State, because the group cannot access the fields due to government airstrikes.

    According to Asim Jihad, “Najma has yet to be liberated because some sites are in the conflict zone. The reality is that it is extremely difficult to extract and smuggle oil while our forces are advancing towards Mosul...," Provincial security official Muthana Jbara noted. Without the income provided by the oilfields, the Islamic State will have to finance it activities through other means, such as increasing fines and taxes in the areas which it still controls.

    The Islamic State has lost a great deal of the territory in Syria and Iraq, over which it proclaimed a caliphate in 2014. Despite the losses which came during offensives backed by the United States, IS still controls oil wells in Syria.

    As to the push to retake Mosul, A U.S. official said this week that United States is ready to provide more military personnel for the effort, stating: “In consultation with the government of Iraq, the U.S. is prepared to provide additional U.S. military personnel to train and advise the Iraqis as the planning for the Mosul campaign intensifies," Iraqi Prime Minister Haider al-Abadi, the country’s Prime Minister said ,“American President Barack Obama was consulted on a request from the Iraqi government for a final increase in the number of trainers and advisers under the umbrella of the international coalition in Iraq,”
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    Will Anglo stick to radical restructuring plans?

    The world's number five diversified mining company, Anglo American announced a "radical portfolio restructuring" at the end of last year. The company with roots going back more than a hundred years to South Africa's gold and diamond fields said it's reducing the number of mines it operates from 55 to as few as 16 to focus on diamonds, copper and platinum because of better long-term potential. Its nickel, coal and iron ore assets will be put up for sale.

    Nine months the mining world seems a very different place. And the divestment process has been slow. Anglo is only halfway towards its goal of getting rid of between $3 billion – $4 billion worth of assets this year towards its goal of bringing net debt below $10 billion.

    The company managed to sell a niobium and phosphate operation in Brazil for $1.5 billion, but attempts to rid itself of its South African coal mines are facing opposition from all corners including the company's top shareholder.

    Finding buyers for the Australian coking coal mines have also proved difficult particularly since that market there is a very different beast today than it was when Anglo first put the assets up for sale. And despite a pick-up in price there's been no news of buyers for its South African and Brazilian iron ore operations – the number four supplier to China of the steelmaking material.

    They have publicly committed to this restructuring programme but the pressure to do it from a balance-sheet perspective is not there any more

    Besides, the downsizing  may no longer be the right strategy for the Anglo with metallurgical coal prices skyrocketing, iron ore 50% above its December lows and a broad improvement in base metal prices (with the glaring exception of copper).

    On Wednesday Moody's Investor Service upgraded the credit rating of Anglo with a positive outlook to "reflect the company's strengthened leverage profile and our assessment that it shows greater operating resilience and is unlikely to reverse from the improved leverage position."

    The ratings firms said while it is taking into account recent modest uptick in the commodities prices it does not expect a significant upside in prices in the next 12-18 months:

    Taking into account our updated commodity price assumptions, we expect AAL's adjusted EBITDA to reach around $5 billion in 2016/2017, assuming no further divestments. Improved unit costs across the portfolio and relative weakness in production currencies, including the South African Rand and Brazilian Real, should continue to cushion AAL's profitability amid relatively weak pricing environment. In particular, accelerated cost reduction in the iron ore operations and ramping-up at Minas Rio, have significantly improved the overall resilience of the iron ore business.

    "You get a little bit of joy and you think that the world has changed"

    Anglo's share price reflects the company's much brighter prospects with the stock up three-fold in London (helped in part by the fall in the pound) for a market value of more than $17 billion.

    The recovery in Anglo's operating environment has some calling for CEO Mark Cutifani to abandon the radical restructuring. The Financial Times quotes Fraser Jamieson, analyst at JPMorgan, as saying that Anglo much healthier balance sheet and declining risks in the industry may necessitate a rethink:

    “When Anglo announced the [restructuring] plan it felt like [the company] could be a matter of weeks away from being forced into very punitive [asset] sales or having to raise equity.

    “Now […] they find themselves with a different problem — they have publicly committed to this restructuring programme but the pressure to do it from a balance-sheet perspective is not there any more.”

    Cutifani told the Financial Times  that he's sticking to plans for a new Anglo despite the rally in its key commodities:

    “That is the mistake we make in this industry. You get a little bit of joy and you think that the world has changed. We are not going to allow one or two good months change what we think is strategic.”

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    China's economy less healthy in third quarter than data suggest-private survey

    China's economy was less healthy in the third quarter than a recent spate of upbeat data suggest, with growth coming exclusively from manufacturing and property while the services and retail sectors faltered, a private survey showed.

    Manufacturing posted its fastest expansion nationally, with 53 percent of companies seeing revenue gains, up 3 percent from a year earlier, a quarterly survey of more than 3,100 firms by China Beige Book International (CBB) showed.

    While a government infrastructure building spree and housing boom have given a much needed boost to "old economy" firms from steel mills to cement makers, CBB noted foreign orders had also improved.

    But "new economy" sectors - services, transportation and retail - showed weakness both quarter-on-quarter and year-on-year, with cash flow and profits deteriorating, leaving the country on uneven footing.

    Services slowed and retail firms experienced one of their weakest performances in the history of the survey as e-commerce firms gobbled up more market share.

    "The chief problem in China economic analysis remains the unwillingness to look behind dubious headline data," authors Leland Miller and Derek Scissors wrote in a note accompanying the report.

    "High-profile indicators such as GDP and the PMIs this quarter will rubber stamp the government's recovery narrative, but only those with nothing on the line should accept this at face value."

    Official data for August raised hopes the economy was stabilising and perhaps even picking up, with industrial output, retail sales and property investment all quickening more than expected, while industrial profits grew at the strongest pace in three years.

    But while the property sector showed another quarter of strong growth, there are signs that China's real estate boom is starting to stutter, the CBB report said.

    Property sales revenue is uneven across the country, while companies' cash flow weakened, prompting a spree of new borrowing that will likely add to worries about rapidly rising debt levels. Moreover, more and more cities are tightening restrictions on home purchases as prices soar.

    In the services sector, growth weakened in every area aside from hospitality. Retailers with only brick- and- mortar stores saw no net revenue growth in the third quarter.

    "Struggling retail and a property bubble is not the kind of stability many are touting," the report said.

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    Lightning storms knock out power to entire Australian state

    Severe storms and thousands of lightning strikes knocked out power to the entire state of South Australia on Wednesday, energy authorities said.

    South Australia is the country's fifth most populous state, with 1.7 million people, and is a major wine producer and traditional manufacturing hub.

    "No upstream supply from the transmission network. State currently w/out power," state energy provider SA Power Networks said in a statement.

    The Bureau of Meteorology said a vigorous cold front was moving across the state with an intense low pressure system due on Thursday.

    "We'll have gale-force winds and large seas (across the south of the country); also heavy rain and thunderstorms, which will lead to renewed river rises," it said on its website.

    "Currently, though, we have gale force wind warnings for the coastal waters extending from Perth all the way across to Adelaide."

    SA Power Networks said repairs to its transmission network were expected to be completed later in the day.

    "There were more than 21,000 lightning strikes recorded over a 12-hour period from midday yesterday on the West Coast, and as a result it is likely some damage has occurred to our distribution network," it said.

    No power was flowing from the neighbouring state of Victoria into South Australia, said a spokesman for the Australian Energy Market Operator, which operates the power systems in southern and Eastern Australia.
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    Obama power plant rules face key test in U.S. court

    The centerpiece of President Barack Obama's climate change strategy, federal rules curbing greenhouse gas emissions mainly from coal-fired power plants, faces a key test on Tuesday when opponents try to convince a U.S. appeals court to throw out the regulations.

    Twenty-seven states led by coal-producer West Virginia and industry groups are challenging the Environmental Protection Agency's Clean Power Plan rules before 10 judges of the U.S. Court of Appeals for the District of Columbia Circuit.

    They argue that the EPA overstepped its regulatory authority under the federal Clean Air Act when the agency issued the rules, which the U.S. Supreme Court has put on hold while the case is litigated.

    During Tuesday's arguments, these opponents will face off in court against the EPA, 18 states, corporations including Apple Inc and Alphabet Inc's Google, and a number of cities that support the regulations.

    The Clean Power Plan was designed to lower carbon emissions from U.S. power plants by 2030 to 32 percent below 2005 levels, with each state assigned its own emission reduction target and tasked with designing its own plan to achieve that goal.

    Power plants are the largest source of U.S. carbon emissions. Nearly 1,500 coal- and gas-fired power plants together emit nearly two billion tons per year of carbon dioxide.

    The Clean Power Plan is the main tool for the United States to meet the emissions reduction target it pledged to reach at U.N. climate talks in Paris last December.

    "It's an invasion, in our estimation, of the state regulatory domain," Scott Pruitt, the Republican attorney general of Oklahoma, one of the states suing the EPA, said at a Washington event this month.

    Richard Revesz, director of the Institute for Policy Integrity at New York University's law school, said the suing states were exaggerating the regulatory reach of the EPA.

    "The Clean Power Plan, while certainly a very important rule, is not the boundary-breaking behemoth that the petitioners make it out to be," Revesz said.

    The Clean Power Plan, if it survives the legal challenge, could prompt a faster shift to renewable energy sources and accelerate the closure of the country's oldest coal plants.

    The fate of the Clean Power Plan was thrown into question on Feb. 9 when the Supreme Court made a surprise 5-4 decision to grant a request by the challengers to put the rule on hold while the appeals court considered the matter.

    The eventual appeals court ruling could decide the case, even if it goes to the Supreme Court. The Feb. 13 death of conservative Justice Antonin Scalia left the court ideologically split with four conservatives and four liberals. A 4-4 ruling by the high court would leave in place the appeals court ruling.


    The arguments will be heard by 10 judges rather than 11 because the court's chief judge, Merrick Garland, has recused himself from the case. Garland is Obama's nominee to replace Scalia. Of the 10 judges who will hear the case, six were appointed by Democratic presidents.

    A 5-5 ruling would leave the regulations in place.

    A ruling is unlikely before the end of the year and possibly not until after Obama leaves office on Jan. 20.

    The outcome of the Nov. 8 presidential election could be pivotal for the regulations. If Republican Donald Trump wins, the government could reverse the rules or decline to appeal to the Supreme Court should the appeals court strike them down. If Democrat Hillary Clinton is elected, the losing side in the appeals court ruling could be expected to take the case to the Supreme Court.

    If the case does reach the high court, it may not make it in time for the justices to hear it during the court term that begins next Monday and ends in June.
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    More than 1.9 mln homes lose power as Typhoon Megi hits Taiwan

    Bringing strong winds and heavy rain, typhoon Megi left more than 1.9 million homes without power in Taiwan, according to Taiwan Power Company on Tuesday.

    According to the company, around 1.5 million households were still cut off from the power grid as of 3:33 p.m. Tuesday.

    The typhoon made landfall at Hualien City in the east part of the island at about 2:00 p.m., carrying top wind speeds of 198 km per hour, according to the island's meteorological agency, which issued land and sea warnings for the storm system.

    The typhoon grounded flights and suspended train services on the island, in addition to forcing schools and businesses to close, according to local authorities.
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    DOJ Is Assessing Size Of Criminal Penalty It Can Levy On Volkswagen

    When two weeks ago the DOJ announced a far larger than expected $14 billion settlement demand from Deutsche Bank, one which if left unrevised would would leave Deutsche Bank short of billions in capital, has since triggered the latest episode of European bank selling and potential contagion, some wondered if there was an element of punitive retaliation aimed at Europe's "assault" on Apple's taxes. That question will surely grow louder when overnight Bloomberg reported that the DOJ is now assessing"how big a criminal fine it can extract from Volkswagen AG over emissions-cheating without putting the German carmaker out of business."

    The government and Volkswagen are trying to reach a settlement by January, Bloomberg reported, before a new U.S. administration comes into office and replaces the political appointees who have been overseeing the process. In criminal prosecutions, the Justice Department may assess the impact of a charge or settlement on a business’s viability, and the resulting effect on shareholders and employees. A prosecution’s potential collateral damage is one of the factors the department considers under principles for prosecuting businesses laid out in the “U.S. Attorney’s Manual.”

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    China September official factory gauge seen showing 2nd month of growth

    Activity in China's manufacturing sector likely expanded modestly for a second straight month in September, a Reuters poll showed, suggesting the economy is stabilizing thanks to government infrastructure spending and a property market boom.

    The official manufacturing Purchasing Managers' Index (PMI) is expected to be 50.4 for September, unchanged from August and above the neutral 50.0 mark separating growth from contraction on a monthly basis, according to the median forecast of 30 analysts polled by Reuters.

    Profits earned by China's industrial firms grew the fastest in three years in August with rising sales, higher prices and reduced costs, official data showed on Tuesday.

    That data indicated a construction boom helped to drive up demand while capacity cuts for sectors which had production gluts saw rising commodity prices because of reduced supply.

    But it also showed that profits remained uneven, as traditional heavy industries with excess capacity such as steel still struggled for growth.

    Analysts say the improved performance of industrial firms, rising land sales and some progress on starting public-private partnership infrastructure projects should help keep the growth outlook stable in the short- and medium-term.

    Factory activity in China has been hovering around the neutral 50 point mark this year with a mild recovery in the first quarter. The official PMI index unexpectedly rose to show expansion in August after slipping to signal contraction in July.

    But economists worry that growth propped up by the housing boom and government infrastructure spending is unlikely to be sustainable in the longer term.

    They warn that rising government infrastructure spending will further squeeze private investment growth, which accounts for 60 percent of overall investment and has shrunk to record lows this year.


    While property investment unexpectedly rose at a modest pace in August, showing investor confidence, sharply rising home prices have caused a severe overheating in bigger cities, leading more of them to impose stricter cooling measures to prevent asset-price bubbles. Many fear that the property market boom is peaking.

    On the other hand, as Beijing vows to quicken the pace of industrial capacity cuts after falling behind earlier in the year, the risks of more layoffs and debt defaults are rising.

    Debt has emerged as one of China's biggest challenges, with the total load rising to 250 percent of gross domestic product (GDP) last year, with corporate debt rising steeply to around 170 percent of GDP.

    China's central bank is unlikely to resort to more monetary easing soon, with policymakers already worried about possible property and bond market bubbles. Forcing more money into the system could boost already high debt levels and increase speculative activity.

    The official September manufacturing PMI data will be released on Oct. 1, along with the official non-manufacturing PMI.

    Services continued to expand robustly in August, albeit at a slower pace than in July.

    The Markit/Caixin PMI, a private gauge of manufacturing activity which focuses more on small and mid-sized firms, is due on Sept. 30. Analysts expect it to rise marginally to 50.1, from the previous month's reading of 50.0.
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    China August industrial profits rise nearly 20 percent, fastest in three years

    Profits earned by China's industrial firms in August grew at the fastest pace in three years helped by rising sales, higher prices and lower costs, pointing to strengthening economic activity.

    The world's second-largest economy has shown recent signs of stabilization, propped up by a housing boom and government spending, but growth has been patchy with companies in some sectors such as steel not faring as well due to excess capacity.

    Profits in August jumped 19.5 percent to 534.8 billion yuan ($80.2 billion), the National Bureau of Statistics (NBS) said on Tuesday, the fastest monthly rate since August 2013. Annual profit growth was 11 percent in July.

    Industrial profits in August have shown positive changes and government policies continue to produce effects, NBS official He Ping said in a statement accompanying the data.

    He said rapid growth in August was also boosted by a low base of comparison last year.

    China's traditional industries continue to struggle, particularly in sectors hobbled by overcapacity, He said.

    The profit data by sector, however, highlights the uneven stabilization.

    Manufacturing profits rose 14.1 percent from a year earlier while mining industry profits fell 70.9 percent.

    Total profits for the January-August period rose 8.4 percent from the same period a year earlier, compared with a 6.9 percent rise in the first seven months of this year.

    Chinese industrial firms' liabilities at the end of August were 4.6 percent higher than at the same point last year.

    The data covers large enterprises with annual revenues of more than 20 million yuan from their main operations.

    Bank of America Merrill Lynch highlighted risks to corporate earnings in a recent report on listed firms.

    "We think a housing bubble in top cities is a genuine risk, and stimulus may weaken due to a renewed focus on the supply-side reform; we expect earnings to come under significant pressure again reasonably soon," it said.

    The Asian Development Bank on Tuesday increased its growth forecast this year for China to 6.6 percent from 6.5 percent, and for 2017 to 6.4 percent from 6.3 percent, citing fiscal and monetary stimulus measures.
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    Big South African union backs Ramaphosa as next president

    Deputy President Cyril Ramaphosa's chances of becoming the next leader of South Africa got a boost on Monday when a powerful mining union backed him to succeed President Jacob Zuma.

    Debates over who should follow Zuma, either when his term ends in 2019 or before, are heating up after the ruling African National Congress (ANC) suffered its worst local election results last month, exposing party divisions.

    Ramaphosa, 63, would be the first choice for many investors because he is more likely to support pro-business policies than many in the traditionally left-leaning ANC.

    A decision has been taken "to support the candidacy of Cyril Ramaphosa for president" (of the ANC), the National Union of Mineworkers (NUM), one of South Africa's biggest unions, said in a statement.

    "It is not only NUM that is gunning for Cyril for president," General Secretary David Sipunzi added, without giving details. However, Sipunzi said NUM wanted Zuma to see out his second term which runs until 2019.

    NUM has around 200,000 members and plays an important role in galvanizing public support for the ANC at elections. Its endorsement of Ramaphosa could encourage other influential trade unions to join its campaign.

    The ANC rules in an alliance with the South African Communist Party and trade union group, COSATU, both of which will be influential in lobbying for Zuma's successor.

    COSATU, which played a key role in the fight against white-minority rule and says it represents 2 million workers, has yet to publicly back any candidate.

    "COSATU has not come up with an official position. We must speak to all the unions and come with a clear mandate," Matthew Parks, COSATU's Parliamentary Coordinator, told Reuters.

    "It is tradition that the deputy takes the position but it is an ANC decision. Unity is paramount, both inside the ANC and between the alliance partners," Parks added.

    Zuma is expected to stand down as ANC president at a party conference late next year, ahead of national elections in 2019 when his tenure as the country's leader will come to an end.

    The ANC has dominated since the end of apartheid in 1994 and is widely expected to retain control at the 2019 vote, making its next leader almost certain to succeed Zuma as president.


    Ramaphosa, a wealthy businessman and founding member of NUM, is likely to face strong competition if he does compete for the ANC leadership, including from Zuma's ex-wife, Nkosazana Dlamini-Zuma, who is currently head of the African Union.

    "It's the start of the campaign and it will gain momentum," said Gary van Staden, a political analyst at NKC Economics.

    "Other COSATU members should line up soon behind Cyril. His prospects are good."

    Dlamini-Zuma, 67, is a Zulu, the largest ethnic group in South Africa, and would likely have the support of Zuma's powerful voting block within the ANC were she to run.

    Ramaphosa comes from the minority Venda tribe.

    Around one in five South Africans are Zulu and politicians from Zuma's home Kwa-Zulu Natal province, a key ANC stronghold, have influence over top party decisions.

    Despite their separation, Zuma backed her for the AU job and gave her a position in his cabinet. Analysts say she would be unlikely to follow up on several high-profile corruption cases that have plagued his tenure.

    Zweli Mkhize, a Zulu and the current ANC Treasurer-General, has also been mentioned as a potential party leader.

    No ANC member has declared their intention to run for leadership.

    Zuma has faced calls to quit from several members of the ANC and prominent business leaders following losses in local elections in August and a string of graft scandals but the party's top echelons have backed him.

    Zuma's younger brother Michael became the latest to call for his resignation, urging him to quit or risk being killed, without elaborating on any death threats.
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    Caterpillar sees green shoots in mining, but sales far from picking up

    Caterpillar, the world's No.1 heavy machinery maker, injected some much-needed optimism in the global mining industry this weekend by saying it is finally seeing growing signs of improvement.

    The Peoria, Illinois-based company, which held a special press event before the upcoming MINExpo in Las Vegas, revealed it has had more discussions about potential sales in recent months than in the last two or three years. Those talks, however, have been quite “preliminary” and with no timeline set.

    “Whether those conversations will materialize, that remains to be seen,” said Denise Johnson, CAT’s Group President, Resource Industries.

    "We've had more discussions about potential sales in recent months than in the last two or three years. Whether those conversations will materialize in actual sale remains to be seen.” – Denise Johnson, CAT’s Group President, Resource Industries.

    She added that while there have been clear signs of improvement, from a sales point of view CAT has not seen any significant movements just yet.

    The company’s performance is often seen as a gauge of the health of the global economy, as its machines are huge, expensive, and used in different kinds of projects to which companies and governments are only likely to commit if they're confident in the economic outlook and their financial standing.

    The fact that CAT has been approached much more in the last few months about potential deals is a positive sign for the industry. But challenging conditions persist, warned CAT, which in recent months has repeatedlyaxed its full-year sales and profits forecast, not to mention plants closures and massive lay-offs.

    As part of those measures, the company recently announced its exit from the room and pillar business. And while CAT plans to keep servicing existing customers, it revealed the unit is currently up for sale.

    Johnson, who was selected by the National Mining Association (NMA) to chair MINExpo 2016, said that if the company finds a buyer it will look for ways to not abandon completely its former room and pillar customers.

    Denise Johnson, CAT’s Group President, Resource Industries.

    While CAT expects demand for mining equipment to pick up next year, it keeps investing in ways to improve current equipment performance.

    It has also increased the presence of CAT representatives at the mine site, whose mission is to help operator make the most out of their acquisitions.

    “CAT doesn’t measure the success of that representative by the amount of equipment he or she sells, but by the performing metrics of the mine itself, “ said Johnson. “Their success is measured in terms of their customers’ achievements and that is how they are rewarded.”

    CAT considers this a key investment in terms of after sales support, which includes working with the dealers.

    In the meantime, the company is going digital. The largest percentage of its research and development budget is currently being allocated to that area.

    The goal, though seems counterintuitive, is to reduce the amount of mining equipment needed at operations. That means that during a downturn, such as the one that has jut wrecked the industry, CAT would continue to thrive in terms of sale, just not of equipment, but technology that supports and maximize the returns and efficiency of mining operations.

    Precious metal miners to boost sales

    Caterpillar sees key opportunities in the precious metals sector, particularly gold, for the next 12 to 15 months, as miners restart projects that were placed in the back burner and expand current operations thanks to a continued price rally for the yellow metal.

    Currently CAT makes the most sales to the coal, copper and iron ore sectors, in that order. Gold, while still a small sector for the equipment maker, has now taken the forth place, said Johnson.

    “We believe in mining and it is an industry we will continue to serve,” said Tom Bluth, vice president, material handling and underground. “We know it is a cyclical business and it will come back.”

    Evidence of CAT commitment to mining can be seen at all the newest equipment and technology the firm will present at MINExpo 2016, which begins this Monday Sep. 26 and runs until Sep. 28 at Las Vegas Convention Centre, in Nevada.
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    China launches a $52.5 billion restructuring fund for state-owned firms

    A private equity fund worth 350 billion yuan ($52.5 billion) has been launched in China to help with the restructuring of state firms, a newspaper run by Xinhua news agency reported on Monday.

    The China State-owned Enterprises Restructuring Fund will be managed by the State-owned Assets Supervision and Administration Commission (SASAC), according to the Economic Information Daily.

    The report said 10 state-owned enterprises have established the fund to help with restructuring of state firms, including M&A deals, as part of government efforts to advance supply side reform.

    The 10 firms have provided initial registered capital of 131 billion yuan, the newspaper said.

    No detail was provided on the source of the rest of the equity fund.

    The 10 firms include China Mobile Ltd , China Railway Rolling Stock Corporation, China Petroleum & Chemical Corp and China Chengtong Holding Group Ltd., a restructuring platform supervised by SASAC that will lead the fund.

    China is embarking on a revamp of its massive but debt-ridden state sector, which has struggled under a system that requires firms to maximize economic gains while fulfilling government policy objectives.

    The government has vowed to create innovative and globally competitive enterprises through mergers, asset swaps and management reforms.
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    Saudi Arabia Is Forced To Raise Cash As Oil Prices Tank

    Saudi Arabia has seen better days, at least for its storied oil industry. From playing the part of the world’s swing oil producer for decades, ramping up or pulling back production as it saw fit – it has now lost much of its significance.

    Due to the U.S. shale oil boom that caught everybody in the Oil Patch off guard, including most in the U.S., global oil markets have been awash in supply, putting tremendous downward pressure on oil prices which are off at least 60% since mid-2014.

    During the summer of 2014, prices reached $115 per barrel but then started trending downward, reaching only $26 in January, bouncing back to the low $50s range briefly this year and are now hovering in the mid-$40s range.

    Saudi Arabia’s quandary, however, can’t be blamed just on massive U.S. oil output, but must also be placed at Riyadh’s door. The Kingdom made the infamous decision in November 2014 to abandon its role as swing oil producer and actually increase output, despite a glut and lower prices.

    In fact, Saudi Arabia has been producing crude at record highs; first, to keep prices low to drive more U.S. shale oil producers out of business, and secondly, to protect market share in Europe and Asia, including China’s massive oil market, against Russia (the world’s top oil producer who is producing crude at Soviet era highs) and against an upstart Iran who is trying to reach pre-sanction oil production levels.

    However, despite Saudi Arabia’s game plan to hurt other producers, it has actually hurt itself in unprecedented ways.

    Riyadh has been burning through foreign reserve holdings. The Kingdom’s foreign reserve holdings, likely in U.S. dollars, dropped 16%, from the same period in 2015, to $555 billion. This marks a drop of $6 billion from July, and their lowest level since February 2012. Holdings peaked in August 2014 at $737 billion before prices tanked in July that year.
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    Oil and Gas

    US LNG cargo lands in Turkey, first market with direct Russian competition

    A third cargo of US LNG has arrived on European shores, the Sestao Knutsen earlier this week unloading at the Turkish LNG import terminal at Aliaga.

    The tanker was one of the last to load at Cheniere Energy's Sabine Pass export facility in the Gulf of Mexico before the two-train plant was shut down for planned maintenance in mid-September.

    The arrival of US LNG into Turkey marks a step change in flows into Europe.

    The previous two cargoes were both delivered to the Iberian Peninsula -- the first in April to Portugal and the second this summer to Spain.

    Neither country is supplied with pipeline gas by Gazprom.

    But the start of US LNG exports to Turkey is arguably of more importance given that Russia supplies significant volumes of gas to the Turkish market.

    In the first half of 2016, Gazprom piped 12 Bcm of gas to Turkey, making it the Russian company's third biggest customer after Germany and Italy.

    Turkish relations with Russia deteriorated sharply at the end of last year with the downing by Ankara of a Russian fighter jet near the Syrian border.

    But following an apology for the incident by Turkish President Recep Tayyip Erdogan, ties were mended and the two sides began to work quickly on realizing the planned TurkStream gas pipeline from Russia to Turkey.

    US LNG exports to Europe remain a rarity -- of the now 31 cargoes loaded since exports began in February, it is only the third.

    But one other LNG tanker from Sabine Pass is currently in European waters -- outside the bunkering port of Kalamata in Greece.

    The Maran Gas Delphi arrived at Kalamata on Monday, but its next destination is as yet unclear.

    The majority of US LNG cargoes have gone to South America. But cargoes have also been shipped to China, India, the Middle East and recently to Mexico and the Dominican Republic.

    Delegates speaking at the S&P Global Platts European Gas Summit in Dusseldorf this week were not optimistic about the chances of US LNG making waves on the European market given the low cost Russian gas alternative.

    "It will not be a tsunami of US LNG [in Europe]", Vattenfall's Head of Continental Power Trading Frank van Doorn said.

    BP's Head of Russia & CIS Economics Vladimir Drebentsov added: "Russian gas production costs are very low, among the cheapest in the world. My thinking is that Gazprom will undercut US LNG -- letting the [US)] LNG set the price."

    Attached Files
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    Dallas Fed Reserve Provides Optimistic Local Energy Outlook

    Dallas Fed Reserve Provides Optimistic Local Energy Outlook

    The energy woes for one of the main oil producing areas of the United States may be a thing of the past, according to the latest quarterly report from the Dallas Federal Reserve.

    The survey encompasses upstream energy firms located or headquartered in the Eleventh Federal Reserve District, which includes Texas, southern New Mexico, and a portion of Louisiana. It includes the Barnett Shale, Eagle Ford, Haynesville Shale, and the Permian Basin.

    “Results suggest conditions were improving again in the third quarter,” Michael Plante, senior research economist and project manager for the latest Dallas Fed Energy Survey said in an interview the Midland Reporter-Telegram.

    Nearly 62 percent of the 149 respondents to the survey believe that the price of oil, which has plummeted since 2014, will increase a year from now. At least 90 percent feel the West Texas Intermediate price must surpass the US$55 per barrel mark.

    Most of those surveyed anticipate a notable increase in drilling activity, particularly in the second quarter of 2017.

    A plurality of 48 percent of respondents from the report published on September 26th is also optimist over the price of natural gas.

    Energy firms also reported a 25 percent spike in equipment utilization as well as a continued fall in the prices of services.

    Despite the bright indicators, other factors were not so positive.

    Production for oil and natural gas dropped for the third straight quarter, albeit a slower rate than previous periods. Jobs in the sector continued to be shed, while the employee indices for hours and wages plus benefits continued in the red.

    “Based on the survey itself, (respondents) are saying the worst is over. But one thing I would point out, the comments told us there is uncertainty about recent price weakness and continued oversupply,” Plante said.

    “The comments suggest people are still uncertain, but even if they’re uncertain, they think things will be better next year,” he added.

    Attached Files
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    Satellite Data Show China May Have Stored More Crude Than Estimated

    China, the world’s largest energy consumer, may have stored more oil than official estimates, according to an analysis of satellite images by Orbital Insight Inc.

    Oil in storage was about 600 million barrels as of May, according to the geospatial analytics startup based in Palo Alto, California. There were about 2,100 strategic and commercial petroleum reserve tanks capable of storing 900 million barrels as of the end of 2014, according to calculations derived from photos tracking the depth of shadows visible on top of the floating lids of the giant tanks. They don’t include underground caverns.

    The estimates exceed projections from forecasters including Energy Aspects Ltd., and help shed light on oil reserves that puzzle commodities traders worldwide. China’s record purchases this year have helped oil prices recover from the worst crash in a generation. The findings are also the latest example of how private technology firms are using big data and machine learning to better measure the second-largest economy, where some official data are incomplete and private gauges have vanished without explanation.

    "I’m not surprised," Michal Meidan, an analyst with London-based consultancy Energy Aspects, said of Orbital’s estimate, adding that her number is over 400 million including both strategic and commercial stocks. "There is more storage available in China than the market is willing to acknowledge. Any information around this is valuable. There seems to be quite a bit of flexibility between commercial strategic storage tanks, even though official statistics do not account for all of it.”

    Oil Storage

    China held 301 million barrels in seven national oil storage cities as of end-2015, with a combined capacity of 442 million barrels, according to Jason Lohn, Orbital’s head of core engineering. The company mapped tank locations that may differ from those the government has acknowledged in Dalian, Dushanzi, Huangdao, Lanzhou, Tianjin, Zhenhai and Zhoushan.

    Orbital’s figure is larger than China’s official estimates for strategic petroleum reserves and for commercial stocks, which are published each month by the official Xinhua News Agency’s China Oil, Gas & Petrochemicals newsletter, said Orbital Chief Executive Officer James Crawford. Nobody replied to a fax to China’s National Energy Administration Thursday seeking comment on Orbital’s estimates.

    In a rare release this month, China reported adding about 43 million barrels of crude to its strategic reserves between mid-2015 and early this year. Reserves totaled 31.97 million tons in early 2016, equivalent to about 234 million barrels, the National Bureau of Statistics said in a statement that was the first government update on reserves since December.

    Emergency Stockpiles

    Emergency stockpiles of the second-biggest oil user have been a source of speculation among analysts and traders, who rely on customs figures and infrequent construction updates to estimate how much of the country’s imports go into strategic inventories, and for how long they will continue to fill.

    China’s overall storage is about 60 percent full, “and it’s probably actually less than that because there’s probably a fair amount of new capacity since the end of 2014 that’s not yet included,” said Crawford, a former NASA scientist and Google engineer who founded the company. “It’s definitely higher than Chinese official estimates. There are some slightly higher numbers for SPR, and there are some folks who feel the Xinhua numbers may slightly understate the commercial.”

    Orbital has received funding from Google Ventures, Sequoia Capital, and Bloomberg Beta, the venture-capital unit of Bloomberg LP.

    Attached Files
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    Libya AGOCO says output at 290,000 bpd, aims for 350,000 by year end

    Libya's Arabian Gulf Oil Company (AGOCO) has increased production to 290,000 barrels per day, its chairman said on Thursday, and hopes to reach 350,000 bpd by the end of the year.

    AGOCO, a subsidiary of the National Oil Corporation (NOC) that operates mainly in eastern Libya, has boosted its output from about 150,000 bpd since military commander Khalifa Haftar took control of some of the country's main oil terminals from a rival force on Sept. 11-12.

    Following the takeover, the NOC opened three previously blockaded ports. On Thursday an official at one of the ports, Zueitina, said a tanker had entered to load 570,000 barrels of crude to take to Zawiya refinery in western Libya.

    Clashes, protests and political disputes slashed Libya's oil output to a fraction of former levels. The OPEC member was producing about 1.6 million bpd before the 2011 uprising that toppled long-time leader Muammar Gaddafi.

    NOC Chairman Mustafa Sanalla has said he hopes the opening of the ports can be a turning point. But major pipelines in western Libya are still blockaded and Libya remains politically and militarily divided.

    Ibrahim Alawami, head of the NOC's measurement department, said on Thursday national production was between 450,000 and 490,000 bpd and would rise to about 500,000 bpd by the end of the month.

    AGOCO Chairman Mohamed Shatwan told Reuters the company's production should reach 300,000 bpd in the coming days, barring any technical problems, adding a further 50,000 bpd by the end of 2016.

    "We have an ambitious plan under which it is possible after a period to reach 400,000 bpd," he added, saying it might take up to two years to achieve that goal.

    Damage to AGOCO's fields from militant attacks over the past two years was limited, he said.

    Of AGOCO's five major fields Bayda remains shut because of a technical problem at Ras Lanuf, and production at Nafoura is limited to 22,000 bpd, about half of its capacity, because maintenance work and parts are needed, said Shatwan. A storage tank in Messla field that was damaged in 2011 has remained unrepaired because of the evacuation of foreign workers.

    "We ask on this occasion that foreign companies return to work and carry out operations to check security, and if they do not return we will have to find another solution," he said.

    Of the ports seized by Hangar's forces, Zueitina had been closed since late last year, while Ras Lanuf and Es Sider ports had been shut since 2014. The first tankers docked at Ras Lanuf last week, but Es Sider, badly damaged in fighting, needs repairs before exports can resume.

    Exports have continued at a reduced level at Brega, the fourth port now under Haftar's control.

    Hariga terminal in the far east of Libya, which is operated by AGOCO, has kept working relatively smoothly. Shatwan said 56 or 57 tankers had loaded there so far this year, compared to 90 tankers during the whole of 2015.
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    Russia's Lukoil CEO says not ready to reduce oil output - RIA

    Lukoil, Russia's second biggest oil producer, is not ready to reduce its oil output but will join oil market stabilisation measures if Russia joins them, RIA news agency quoted Lukoil Chief Executive Vagit Alekperov as saying.

    TASS news agency also cited Alekperov as saying that all Russian oil producers could sign a protocol on stabilising oil production. It later clarified in Alekperov's quote that he was talking about the need to sign such a protocol in case Russia decides to join the process of output stabilisation.

    Oil producers' cartel OPEC agreed on Wednesday to limit its output to 32.5-33.0 million barrels per day (bpd) to prop up weak crude prices.
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    What’s in the Pacific NorthWest LNG conditions?

    Now that the federal government has approved Pacific NorthWest LNG, the controversial gas liquefaction facility on Lelu Island, the devil is in the details.

    On Sept. 27. the federal government imposed 190 conditions on the $11.4 billion plant, which would refine gas from Northeast B.C. for shipment to Asia.

    The conditions include rules for construction and operations around Flora Bank, a sensitive salmon habitat, as well as a cap on total emissions from the project.

    Federal conditions also create environmental monitoring committees “comprised of Indigenous peoples and federal and provincial representatives, for the first time ever,” Environment Minister Catherine McKenna said at a news conference in Richmond.  

    Some, including Northeast B.C. MP Bob Zimmer, said the conditions could be designed to make the project unfeasible—potentially avoiding a political headache for Justin Trudeau's Liberals.    

    While Pacific NorthWest can now move forward, Malaysian energy giant Petronas and its partners still need to review the project to see if it makes economic sense under the conditions.

    “Approving this project is one thing, building it is completely another,” Zimmer said in the House of Commons Sept. 28. “Why did the Liberals put potential poison pills in the approval with unnecessary conditions?”

    Many of the conditions aim to prevent impacts on fisheries. Among the concerns are that the project’s around-the-clock construction schedule could create 24-hour daylight conditions for nearby salmon populations.

    The 190 conditions include:

    -limiting underwater pile driving noise to 207 decibels to avoid impacts on fish
    -restrictions on lighting during construction, including a requirement to “place -reflective material on the underside of over-water infrastructure to reduce the light/dark contrast on marine waters.”  
    -fisheries assessments for Northern Abalone and other species, as well as followup monitoring  
    -specific emissions intensity guidelines on each LNG “train” to minimize impacts on air quality

    B.C. has also agreed to support the upcoming federal climate change plan, and has committed to raising its $30 a tonne tax on carbon concurrently with other provincial governments.

    Warren Brazier, an energy lawyer with Watson Goepel, said emissions will likely be the biggest hurdle for the project going forward.

    - See more at:
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    Tundra buys Saskatchewan system

    Canada’s Tundra Energy Marketing has struck a nearly C$1.1 billion (US$816.8 million) deal to buy a regional pipeline system from an affiliate of Enbridge Income Fund.
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    Chesapeake hit with DOJ subpoena

    US independent Chesapeake Energy has said it has entered "discussions" with the US Department of Justice after receiving a subpoena seeking information on the company's accounting practises.
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    Rice Energy Ramps Up Leasing Activity in Greene County, PA

    Earlier this week MDN brought you the dynamite news that Rice Energy is buying out Vantage Energy for $2.7 billion.

    The reason Rice bought Vantage was largely because of 85,000 acres of Marcellus leases in Greene County, PA. What we had overlooked was the fact that 27,000 of the 85,000 acres in Vantage’s Greene County portfolio was acreage they just bought from bankrupt Alpha Natural Resources.

    Rice had bid $200 million for that acreage, but Vantage came along and got it for $339.5 million.

    Now that Rice has locked up the Vantage acreage in addition to its own considerable holdings in Greene County, what’s left to do?

    Lease more unleased acreage in Greene. Rice says there is between 20,000-40,000 unleases acres in Greene and the company is full speed ahead trying to get that acreage signed up for themselves. Note to Greene landowners: expect a landman on your doorstep soon…
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    Nigerian militant group claims attack on oil pipeline in Niger Delta

    Attacks on Nigeria's energy facilities by groups calling for the Delta region to receive a greater share of the OPEC member's oil wealth have cut crude production, which stood at 2.1 million barrels per day at the start of the year, by a third.

    The Niger Delta Greenland Justice Mandate said it bombed the Unenurhie-Evwreni delivery line in Ughelli, Delta state, at around 01:00 a.m. (0000 GMT) on Thursday. The line is operated by NPDC, a subsidiary of NNPC.

    A military source said dynamite was used to blow up the pipeline. An NNPC spokesman could not immediately be reached for comment.

    It comes days after Niger Delta Avengers, which has claimed responsibility for most of the attacks on energy facilities in the region since the start of the year, said it carried out its first attack since declaring a break in hostilities in August to pursue talks with the government.

    The Avengers said on Saturday there had been no progress in meeting their demands.

    The Greenland Justice Mandate, which has never agreed to cease hostilities, said in a statement it had blown up the pipeline "to prove to the wicked and ungrateful multinational oil companies and their Nigerian military allies... that we own our lands".
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    Extraction Oil & Gas expects to raise as much as $600 mln in IPO

    Extraction Oil & Gas LLC said it expected to raise as much as $600 million in an initial public offering, valuing the Denver-based oil explorer and producer at about $2.6 billion.

    The company, based in Colorado's Denver-Julesburg basin and backed by private equity firm Yorktown Partners LLC, said it expected to price the offering of 33.3 million shares at between $15 and $18 each. (

    Private equity backers are looking to sell some or all of their investments in energy companies after oil prices rebounded slightly from 12-year lows hit early this year.

    Extraction Oil & Gas said it would list itself on the Nasdaq under the symbol "XOG" and would be called Extraction Oil & Gas Inc after it goes public.

    The company intends to use proceeds from the offering to pay back debt and for general corporate purposes.

    Credit Suisse Securities (USA) LLC, Barclays Capital Inc and Goldman Sachs & Co are among the underwriters to the offering.
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    Iraq's OPEC revolt shows Saudi-Iran oil deal fragility

    For years, debates in the OPEC conference room were dominated by clashes between top producer Saudi Arabia and arch-rival Iran.

    But as the two managed to find a rare compromise on Wednesday - with Riyadh softening its stance towards Tehran - a third OPEC superpower emerged.

    Iraq overtook Iran as the group's second-largest producer several years ago but kept its OPEC agenda fairly low-profile. On Wednesday, Baghdad finally made its presence felt.

    What it did, however, pleased neither Saudi Arabia nor Iran.

    Iraq's new oil minister Jabar Ali al-Luaibi told his Saudi and Iranian counterparts, Khalid al-Falih and Bijan Zanganeh, in a closed-door gathering in Algiers that "it was an OPEC meeting for all ministers", a source briefed on the talks said.

    Luaibi also said he didn't like the idea of re-establishing OPEC's output ceiling at 32.5 million barrels per day (bpd), according to sources in the Organization of the Petroleum Exporting Countries.

    Reviving a ceiling, abandoned a year ago because of a Saudi-Iranian clash, was seen by some members as crucial in helping OPEC manage a vastly oversupplied market and prop up prices that stand well below the budget needs of most producers.

    But Luaibi told the meeting the new ceiling was no good for Baghdad as OPEC had underestimated Iraq's production, which has soared in recent years.

    Confusion followed, according to sources, and after a debate OPEC chose to impose a ceiling in the range of 32.5-33.0 million bpd - a decision dismissed by many analysts as weak and non-binding. OPEC's current output stands at 33.24 million bpd.

    As ministers including Falih and Zanganeh emerged smiling from the room and praised OPEC's first output-limiting deal since 2008, Luaibi called a separate briefing to complain about OPEC's estimates of Iraqi output.

    "These figures do not represent our actual production," he told reporters. If by November estimates do not change, "then we say we cannot accept this, and we will ask for alternatives".

    Luaibi went even further and asked a reporter from Argus Media - whose data OPEC uses among other sources to compile estimates of countries' production - to disclose from where Argus' estimates were coming.

    "Your sources are not acceptable. And if there is deviation from the government, then Argus will not work in Iraq," Luaibi told the Argus reporter.


    Luaibi's revolt shows the fragility of the OPEC deal.

    Between now and November, when OPEC meets formally in Vienna, the group will have to overcome huge obstacles to agree a binding deal.

    Key among them will be to establish at least some semblance of country quotas to make sure members limit global oversupply, which has helped halve prices since 2014 to below $50 a barrel.

    Iran insists it wants to raise output to around 4 million bpd as it emerges from European sanctions. The Saudis have proposed that Iran freeze production at 3.7 million bpd.

    Riyadh is offering to cut its own production to 10.2 million bpd from 10.7 million but most analysts argue it will fall to such a level anyway as the summer heat eases, reducing the need for cooling.

    Iraq has seen spectacular gains in output in recent years and is asking oil majors to expand production further to above 5 million bpd from the current 4.7 million.

    "The deal is a bit of a farce," one OPEC source said.

    A source familiar with Iranian thinking said it was still positive that an agreement had been reached: "No one will offer anyone a free ride. Technical committees will work out details."

    For Michael Wittner, head of oil research at Societe Generale, the decision shows Saudi Arabia is turning its back on letting the market manage supply.

    "It remains to be seen how many real barrels will be removed from the market. To me, the significance is way beyond that: they all sat down in a room and made a decision."
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    KKR and Venado Form Partnership to Pursue Oil and Gas Investments in Eagle Ford Shale

    KKR and Venado Oil and Gas, LLC today announced a partnership to consolidate proven assets in the Eagle Ford Shale of South Texas. The partnership is principally funded by KKR’s Energy Income and Growth Fund I (“EIGF”).

    Venado is led by CEO Scott Garrick and a core team of individuals who have operated in the Eagle Ford since the play’s inception. Venado intends to apply its expertise to acquire and enhance Eagle Ford assets through a focus on operational efficiency, technical innovation and strong community relations.

    David Rockecharlie, Member and Head of Energy Real Assets (“ERA”) for KKR, stated, "We have known Scott for many years and believe he and his team have the experience and differentiated business approach necessary to acquire attractive Eagle Ford assets and enhance long-term value through superior technical and operational execution. KKR has a long history investing in the Eagle Ford, and we look forward to expanding our existing Eagle Ford asset position in partnership with Venado.”

    Scott Garrick, CEO of Venado, added, "We are excited to partner with KKR in the Eagle Ford, where we both see the opportunity to build a large scale, long-term business. Both Venado’s management and KKR have been active in the Eagle Ford since the early phase of development, and we share the same vision of the next phase of its evolution. This provides an ideal foundation for a strong partnership.”

    Venado’s business plan is a natural fit within KKR ERA’s asset-based investment strategy that provides flexible capital solutions to upstream operators. KKR has made more than ten investments in the Eagle Ford to date. KKR ERA manages a portfolio of oil and gas assets in numerous unconventional and conventional resource areas across the United States, including developments in the Eagle Ford, Bakken, Barnett, DJ, Haynesville, Marcellus, Permian and Utica.
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    Angola LNG resumes production

    The $10 billion Angola LNG project, led by U.S. energy giant Chevron, has resumed production following a planned two-month shutdown.

    “I can confirm that Angola LNG has resumed production and sales of LNG from its plant in Soyo,”  an Angola LNG spokeswoman told LNG World News on Thursday.

    The 5.2 million tons per year liquefaction plant was shut down in July as part of the restart and commissioning programme.

    To remind, the facility was closed for more than two years due to a major rupture on a flare line that occurred in April 2014.

    It restarted operations again in May with four cargoes shipped from the facility until the maintenance began in July.

    Angola LNG is a joint venture between Sonangol (22.8%), Chevron (36.4%), BP (13.6%), Eni (13.6%), and Total (13.6%).
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    Promising signs in Beetaloo test

    Preliminary results from Origin Energy’s Amungee NW-1H horizontal exploration well in Australia’s Northern Territory have been “encouraging” according to one of its joint venture partners.

    Falcon Oil & Gas Ltd.: Update on Hydraulic Stimulation of Amungee NW-1H

    Falcon Oil & Gas Ltd.  is pleased to provide the following technical update regarding the hydraulic stimulation of the horizontal Amungee NW-1H well in the Beetaloo Basin, Australia.

    Highlights of preliminary results from the Amungee NW-1H horizontal exploration well:

    -Completion of 11 hydraulic stimulation stages along the 1,000 meter horizontal section in the Middle Velkerri B shale zone
    -Stimulation treatments were successfully executed, with 95% of programmed proppant placed
    -Flow back of hydraulic fracture stimulation fluid to surface continues
    -Early stage gas flow rates through the 4.5" casing are encouraging
    -The rates regularly exceed 1 million standard cubic feet per day ("MMscf/d"), and consistently range between 0.4 - 0.6 MMscf/d
    -A workover rig is being mobilised to run production tubing and to commence an extended production test

    Philip O'Quigley CEO of Falcon commented on the results:

    "Preliminary results of the first horizontal exploration well in the Beetaloo are very encouraging. The planned testing programme utilising a production tubing string aims to evaluate the potential gas flow rate of the well.

    We look forward to updating the market when further results become available."

    This announcement has been reviewed by Dr. Gábor Bada, Falcon Oil & Gas Ltd's Head of Technical Operations. Dr. Bada obtained his geology degree at the Eötvös L. University in Budapest, Hungary and his PhD at the Vrije Aniversiteit Amsterdam, the Netherlands. He is a member of AAPG and EAGE.
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    Russia's Gazprom plans to launch third LNG train at Sakhalin-2 in 2021

    Russia's Gazprom plans to launch third LNG train at Sakhalin-2 in 2021

    Gazprom said on Thursday it plans to launch a third liquefied natural gas (LNG) production train at the Sakhalin-2 LNG plant in 2021, possibly fed by a newly drilled field, as Russian companies seek to boost their share of the global LNG market.

    Russia accounts for less than 5 percent of the global LNG market but new plants are being built or considered by Novatek, Gazprom and Rosneft.

    Located at Prigorodnoye on Sakhalin island, Sakhalin-2, Russia's sole LNG plant, operates two production lines with a combined capacity of 10 million tonnes of LNG per year. The third train should add another 5 million tonnes.

    An obstacle to expanding the plant, operated by Gazprom, Royal Dutch Shell, Japan's Mitsui and Mitsubishi, is the resource base.

    Shareholders are considering two options: buying gas from the Sakhalin-1 project led by ExxonMobil, developing new resources or a combination. Yet, Sakhalin-1, where the state oil firm Rosneft is also a shareholder, is aiming for its own LNG plant.

    Vsevolod Cherepanov, a Gazprom board member, said that the first exploitation well at the Yuzhno-Kirinskoye field, viewed as a source of fuel for Sakhalin-2 expansion, aimed to be drilled in 2017, with production to start in test mode in 2021 and in full operation in 2022.

    "The plateau of 21 billion cubic meters (bcm) a year is expected to be reached in ten years. We will start from 3 bcm," Cherepanov said. For the third train to operate, a total of 7-8 bcm of gas per year is needed, he added.

    "We also have Kirinskoye field with (expected) 5.5 bcm (a year)... (But) 50 percent of volumes is enough to launch the third train. We will increase volumes a year after that."

    Cherepanov said talks were ongoing with a Chinese company over a drilling platform for Yuzhno-Kirinskoye, but Gazprom may also drill on its own.

    In 2015, the United States restricted exports, re-exports and transfers of technology and equipment to the Yuzhno-Kirinskoye field, making it harder to develop.

    Gazprom executives have said they will find a way to bring the field on stream. The company said this month it had discovered a new gas deposit in the Sea of Okhotsk near Sakhalin island.

    Cherepanov said that based on preliminary information from one well, the field could contain over 40 bcm of gas, yet to be proved, but could not replace Yuzhno-Kirinskoye as a source for Sakhalin-2 expansion.


    On Thursday, a LNG tanker could be seen on its way from the facility in Prigorodnoye to Asia-Pacific markets. It takes 2-3 days to reach Japan or South Korea, major LNG consumers.

    Olivier Lazare, head of Royal Dutch Shell in Russia, said on Wednesday that shareholders at Sakhalin-2 had agreed on the strategy of marketing LNG from the planned third train. He declined to provide details.

    Two sources close to the project said that there were no commercial talks with buyers yet, though one source said shareholders has agreed on general principles for marketing.

    The proximity of Asian markets is behind the idea of Sakhalin-1 shareholders to build their own LNG facility, with initial capacity of 5 million tonnes a year and start after 2023.

    "In the current pricing environment, it (the LNG project) remains competitive but challenging," a source close to the planned plant, known as Far East LNG, said.

    Asian LNG spot prices are under $6 per mmBtu, down from more than $20 between 2010 and 2014, due to soaring output from Australia and the United States.

    Given low prices were putting on hold plans for LNG facilities, there could be a deficit on the market from 2023, according to Mark Gyetvay, chief financial officer with Novatek.

    "If we look at Russia increasing its supplies of LNG it is reasonable to assume that Sakhalin LNG can expand their project," Gyetvay told Reuters this month.

    Novatek plans to ship its first LNG cargoes from a new facility in Russia's Yamal peninsula next year and is considering building its second LNG facility, Arctic LNG-2.

    "It's ironic that nobody raises these types of questions for Australian LNG projects," Gyetvay said, when asked if the was room for new Russian projects on world markets.

    Attached Files
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    Law unfairly gave shale drillers 'special' treatment, Pa. Supreme Court rules

    The Pennsylvania Supreme Court has decided that Act 13, the state Legislature's 2012 attempt to accommodate the shale gas industry, is an unconstitutional "special law" that benefits specific groups or industries.

    The court, in a decision Wednesday, said Act 13's provisions limiting notification of spills and leaks to public water suppliers but not to private well owners, and its "physician gag order" restricting health-care professionals from getting information about drilling chemicals that could harm their patients, violate the state constitution's prohibition against special laws.

    The court also struck down the provision that allows companies involved in transporting, selling, or storing natural gas to seize privately owned subsurface property through eminent domain.

    And the decision prohibits the Public Utility Commission from reviewing local ordinances and withholding impact-fee payments from municipalities that limit shale gas drilling.

    "The decision is another historic vindication for the people's constitutional rights," said Jordan Yeager, lead counsel representing the Delaware Riverkeeper Network and Bucks County municipalities in the case. "The court has made a clear declaration that the Pennsylvania legislature cannot enact special laws that benefit the fossil fuel industry and injure the rest of us."

    Marcellus Shale Coalition president David Spigelmyer praised Act 13 as a "commonsense bipartisan law that modernized our oil and natural gas regulatory framework," and said he was disappointed with the court's ruling, "which will make investing and growing jobs in the commonwealth more - not less - difficult without realizing any environmental or public safety benefits."

    Neil Shader, a state Department of Environmental Protection spokesman, said the department's lawyers were reviewing the ruling to determine its impact. He said the eventual need to notify private well owners of drilling spills and leaks affecting their water supplies could have the biggest impact on department operations.
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    Libya’s Oil Output Nudges Higher as Wintershall Resumes Output

    Libya, struggling to revive its energy industry after five years of armed conflict, restarted production at an eastern oil field and was poised to export crude from the port of Zueitina for the first time since November.

    Germany’s Wintershall AG began pumping at Concession 96 in the As Sarah field on Sept. 16 and is producing 35,000 barrels a day, a company official said Wednesday in an e-mailed response to questions. Wintershall restarted production at the request of Libya’s National Oil Corp. and will send oil from the field to Zueitina for export, the official said.

    The tanker Ionic Anassa is due to arrive at Zueitina on Oct. 3, according to a signal from the ship. It would be the first vessel to load crude there since force majeure restrictions were lifted earlier this month.

    “Libya’s output is showing the first signs of a credible increase,” said Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland.

    Libya, with Africa’s largest crude reserves, produced 260,000 barrels a day last month, data compiled by Bloomberg show. It has gradually boosted output and is now pumping 485,000 barrels a day, National Oil Corp. Chairman Mustafa Sanalla said in an interview in Algiers on Wednesday as OPEC members prepared to meet in the Algerian capital. The country produced about 1.6 million barrels a day of oil before the 2011 uprising that ousted longtime leader Moammar Al Qaddafi, but output has withered as rival militias vied to control energy facilities.

    Three Ports

    The NOC removed force majeure at Zueitina and the export terminals of Es Sider and Ras Lanuf on Sept. 14, after reaching a deal with Khalifa Haftar, commander of the armed forces controlling the terminals. Force majeure, a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control, was declared after the ports came under attack. Ras Lanuf, Libya’s third-biggest oil port, resumed exports this month. Zueitina will ship two oil cargoes by the end of the month, and operations at the port are normal, the NOC’s Sanalla said.

    Renewed crude shipments from Zueitina would give an additional boost to Libya’s economy as rival administrations toil to form a unified national government. Islamic State militants exploited a power vacuum in Libya after the country split between two rival administrations in 2014.

    Wintershall is part of the world’s biggest chemicals company, BASF SE, which also operates in plastics, agriculture and natural gas.

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    Russia Smashes Post-Soviet Oil Supply Record as OPEC Weighs Curb

    Russia, the world’s largest energy exporter, is on course to pump a post-Soviet record amount of oil in September, adding as much as 400,000 barrels a day to the country’s production. The output surge comes as OPEC nations meet in Algeria, with discussions to curb a global surplus at the top of their agenda.

    Russian crude and condensate production is set to average 11.1 million barrels a day this month, compared with 10.7 million barrels a day in August, according to preliminary Energy Ministry data compiled by Bloomberg. That would surpass the 10.9 million barrels a day January production level, which officials consideredas a potential cap during failed talks among producer nations in April.

    Now they’re reviving those efforts. Russia and members of the Organization of Petroleum Exporting Countries are meeting this week in Algeria to discuss scenarios for potentially curbing production to help stabilize an over-supplied oil market. The talks may not produce a decision, in part due to the different views of regional rivals Saudi Arabia and Iran. The April discussions in Doha fell apart after Saudi Arabia insisted Iran join the effort to limit production instead of being allowed to return output to a level prior to the imposition of international sanctions, which were lifted in January.

    Russia would consider a range of freeze options, though it would prefer capping its output at the most recent levels, according to Energy Minister Alexander Novak.

    "We will look at different options and discuss them with OPEC", Novak told reporters late yesterday after bilateral meetings with Saudi Arabia, Iran and Venezuela. "Undoubtedly, September would be the month that objectively would suit us best.”

    Siberian Fields

    The increase in Russian crude output is being driven by the start of new fields in the country’s far north and the Caspian Sea region. Rosneft PJSC, along with Gazprom Neft, the oil unit of Gazprom PJSC, began commercial production from the East Messoyakha venture earlier this month. Rosneft plans to start the Suzun field, a separate project in Siberia, next month, according to Chief Executive Officer Igor Sechin. Lukoil PJSC’s Caspian Filanovsky deposit has started a second well, which is now in test production, and is on track to grow to a peak of 120,000 barrels a day next year, according to the company press service.

    Russia produced record annual average 11.4 million barrels a day in 1987, before the break-up of the Soviet Union, according to BP statistics. Bloomberg’s monthly estimate for September production is based on daily data from the Energy Ministry’s CDU-TEK for the first 27 days of the month, and then the average of the rate over the last week for the final three days.

    Russian production has every opportunity to continue growing, potentially adding another 2-3 percent over the next 12 months if the government doesn’t raise taxes on the industry, according to Artem Konchin, an oil analyst at Otkritie Capital in Moscow. Rosneft and Lukoil, the nation’s two largest producers, have shifted their guidance on output to positive territory as they start new fields and increase spending on core production in Siberia, he said in an e-mail.

    “If the freeze happens at current levels, then the bar is obviously higher,” Konchin said. “Technically, I’m not sure how that whole thing will be implemented -- no one is sure.”

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    Summary of Weekly Petroleum Data for the Week Ending September 23, 2016

    U.S. crude oil refinery inputs averaged over 16.3 million barrels per day during the week ending September 23, 2016, 253,000 barrels per day less than the previous week’s average. Refineries operated at 90.1% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.6 million barrels per day. Distillate fuel production decreased last week, averaging 4.7 million barrels per day.

    U.S. crude oil imports averaged over 7.8 million barrels per day last week, down by 474,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.8 million barrels per day, 6.5% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 778,000 barrels per day. Distillate fuel imports averaged 144,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.9 million barrels from the previous week. At 502.7 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 2.0 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 1.9 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.5 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories remained unchanged from last week.

    Total products supplied over the last four-week period averaged over 20.0 million barrels per day, up by 2.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 3.6% from the same period last year. Distillate fuel product supplied averaged over 3.5 million barrels per day over the last four weeks, down by 6.4% from the same period last year. Jet fuel product supplied is up 0.9% compared to the same four-week period last year.

    Cushing down 631,000

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    Small drop in US oil production

                                                                            Last week     Week before       Last year

    Domestic Production '000.................. 8,497               8,512                 9,096
    Alaska ............................................     454                  464                     469
    Lower 48 ........................................ 8,043               8,048                  8,627
    Exports ...........................................     507                  588                     526
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    SandRidge Energy, Inc. Provides Operations Update and Full Year 2016 Guidance

    SandRidge Energy, Inc. provided an update of its Mid-Continent and Colorado operations as well as full year 2016 capital expenditure/operational guidance and hedging. The Company will release third quarter 2016 earnings results on November 8th, with a related conference call on November 9th (details included below).

    Operations Update

    2016 High-graded Harvest of Mid-Continent Plus Initial Development in North Park Niobrara

    Running one drilling rig for most of 2016 in the Mid-Continent and one rig through August in the North ParkNiobrara, SandRidge is allocating capital across both of its active areas, generating cash flow stability while advancing drilling and completion innovations.

    SandRidge plans to invest $225 to $255 million of capital expenditures in 2016, with $56 million spent during the second quarter and $110 million during the first half of 2016, excluding acquisitions and abandonment liabilities. Full year total production is estimated to be between 18.9 -19.3 MMBoe, with 5.0 MMBoe produced during the second quarter and 10.5 MMBoe during the first half of 2016. Thirty seven horizontal laterals are planned to be spud during the year, with 26 in the Mid-Continent and 11 in North Park. These lateral counts include four extended laterals, one dual extended lateral, and two full section development projects in the Mid-Continent, and one extended lateral in North Park.

    In the Mid-Continent, encouraging development and testing of additional zones, notably the Chester overlying the Mississippian, has grown the existing multiyear drilling inventory, taking full advantage of existing leasehold and infrastructure. The Mid-Continent continues to benefit from improved reservoir characterization and primarily multilateral and extended lateral drilling is planned.

    Extended laterals and multilaterals are also envisioned as part of the North Park Niobrara development. The Company recently drilled and is currently completing a Niobrara extended lateral which is expected to be online in the fourth quarter of 2016. Optimized well spacing, multiple initiatives to further lower costs per lateral, and incremental productive zones are all targeted upsides.

    Mid-Continent Assets in Oklahoma and Kansas

    Drilled 18 laterals in 1H’16, bringing 26 laterals online
    Successful first dual extended lateral, the Dettle 1-29 20H, produced a 30-Day IP of 1,099 Boepd1 (60% oil) and was drilled and completed for approximately $1.7MM per lateral2 or $368/ completed ft
    1H’16 2016 Mississippian completed well costs averaged $1.9MM per lateral or $418/ completed ft, ~19% reduction from all of 2015
    Successful Chester drilling with most recent 7 laterals averaging a 30-Day IP of 487 Boepd (60% oil), expanding drilling inventory on existing leasehold footprint

    SandRidge has been actively developing the Mississippian and adjacent oil and gas reservoirs since 2010, drilling over 1,600 horizontal producing wells in Oklahoma and Kansas. While the Company has a combined 1.1 million acres in all of Oklahoma and Kansas, its current drilling activity is concentrated within its 462,000 acres of focus area leasehold in Oklahoma, 64% of which is held by production. The Company’s Mid-Continent assets averaged approximately 52,000 barrels of oil equivalent per day (25% oil, 24% NGLs, and 51% natural gas) during the second quarter of 2016.

    1) Calculated as the highest consecutive 30-Day average production rate during the early life of a well

    2) A “lateral” is defined as a single one-mile section lateral

    SandRidge pioneered the use of multilaterals in the Mississippian, where typically two to four laterals are drilled from a single vertical wellbore. This approach reduces the average drilling and completion cost per lateral, while further reducing expenses by utilizing shared surface facilities and artificial lift systems.

    During the first six months of 2016, the Company continued to develop its Mid-Continent asset by drilling 18 laterals and bringing 26 laterals online. The Company successfully completed its first ever dual extended lateral in the Mississippian formation, currently producing from 18,426 feet of completed lateral. The Dettle 2408 1-29 20H was drilled and completed for just under $1.7 million per lateral and produced a 30-Day IP of 1,099 Boepd (60% oil). Separately in the Chester, an extended lateral development project, the Earl 2414 1-11H 14H, yielded a 30-Day IP of 560 Boepd (62% oil) with a drilling and completing cost of $2.16 million per lateral.

    Niobrara Asset in North Park Basin, Jackson County, Colorado

    Drilled eight laterals in 1H’16, bringing five laterals online
    First SandRidge well, the Gregory 1-9H, produced an initial 30-Day IP of 550 Boepd (89% oil); online for over six months, the Gregory has produced a total of ~73 MBoe and averaged 346 Boepd the last 30 days
    Four additional 1H’16 wells produced an average 30-Day IP of 460 Boepd (91% oil)
    Successfully drilled and currently completing first extended lateral well (a two mile lateral), expected to be brought online in Q4’16
    Three additional wells brought online in 2H’16 are in various stages of evaluation, having been designed to test spacing, artificial lift methods, and stimulation concepts, including the use of slickwater frac fluids

    SandRidge acquired its oil rich Niobrara properties in December 2015 and began development in January 2016. The Niobrara is located at vertical depths between 5,500 and 9,000 feet with gross pay thickness of 450 feet to 480 feet. The Company holds 129,000 net acres in the Niobrara play, 55% of which is held by production or held by federal unit. This land position comprises a dominant footprint in the North Park Basin where the Niobrara shale is geologically similar to but thicker and oilier than that of the actively developedDenver–Julesburg or “DJ” Basin. The Company is preparing applications for two additional federal units and plans to shoot additional 3D seismic surveys in early 2017 to extend and complement the existing 54 square mile 3D survey.

    Initial development plans include 1,300 Niobrara drilling locations. The properties averaged approximately 1,200 barrels of oil per day during the second quarter of 2016, impacted by pad drilling and some planned shut-ins of existing producers while new wells were being drilled and completed on the same pad.

    At year end 2015, 16 Niobrara wells already delineated a large contiguous producing area, supporting 108 PUD locations at SEC prices. At the end of 2015, 28 million barrels of oil equivalent were booked as proven reserves (81% oil).

    During the first six months of 2016, the Company drilled eight horizontal laterals, bringing online five laterals. While horizontal drilling with single laterals has been the standard to date, a two mile extended lateral was successfully drilled in July 2016 and is currently being completed. In addition, other Niobrara benches will be appraised and optimal well spacing tests will be conducted in 2016 and 2017. Also in 2017, the Company will expand application of extended laterals.

    Multiple cost reduction and efficiency efforts have steadily reduced well costs in the early development of our Niobrara asset. Drilling optimization efforts include improving drilling mud and bit systems, presetting surface casing and drilling extended laterals. Numerous fracture stimulation enhancements are also underway. Efforts to optimize completions have included the refinement of water and sand volumes, number of frac stages, stage length, and cluster spacing. The Company now has line of sight to achieving drilling and completion costs below $4 million per lateral.

    2016 Operational Guidance

    The Company is providing an update to its previously disclosed 2016 capital budgeting guidance of $285 million, estimating that it will now spend $225 to $255 million for the full year. Additionally, the Company is initiating total 2016 production guidance of 18.9-19.3 MMBoe.
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    A world first for Chinese LNG marine platform builder

    The Chinese company Wison Offshore & Marine, the upstream arm of the Wison Group that focuses on services and capital investment in the oil and gas industry, today announced its natural gas floating liquefaction unit (FLNG) has successfully completed its performance test at the Wison yard in Nantong, China. This marks for the first time LNG has ever been produced onboard a floating facility.

    The company’s services cover the full life cycle of project delivery, from facility design and engineering, to project management, construction, commissioning and operations.

    "The performance test was carried out in the presence of classification societies, the client Exmar [for which Wison provided turnkey services] and all the relevant parties. During the 72-hour performance test, the excellent performance of the FLNG ensured all key design requirements and production capacities (guaranteed performance) were achieved for the unit’s operational effectiveness," Wison said.

    The FLNG project is being delivered by Wison under an engineering, procurement, construction, installation and commissioning (EPCIC) contract with Exmar. All systems on the FLNG have been commissioned and tested without leaving the shipyard by using LNG to supply gas without connection to a pipeline, Wison said. Conducting gas trials and performance testing in the shipyard shortened the time required for project completion.

    "Floating LNG production, storage and transportation facilities are emerging markets with large potential," said An Wenxin, the senior vice president of Wison Offshore & Marine. "The small-scale FLNG being delivered by Wison has design advantages with low-cost and compact features, providing the market with more economical and efficient solutions."
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    Vitol CEO says does not see tighter oil market before 2018

    The chief executive of Vitol, the world's largest oil trader, said on Wednesday he did not see the global oil market tightening before 2018.

    He also expressed scepticism over the significance of a potential OPEC deal on freezing production.

    "If you freeze production at a level that is clearly above demand ... is that bullish?" Ian Taylor asked a Bloomberg conference in London.

    Investors were closely watching an OPEC meeting in Algiers this week anticipating that the cartel would finally agree a plan to tackle a global crude surplus that sent oil prices tumbling in 2014. But so far, the talks have remained just that.

    Taylor said it would be difficult for the market to rebalance with underwhelming global economic growth meeting slightly better-than-expected production.

    He expects oil demand growth this year at 1.2 million-1.3 million barrels per day and that the liquefied natural gas market would remain long until 2022.
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    Devil's in the details of OPEC deal as Asia buyers remain cautious

    Asian crude oil buyers remained cautious, eyeing details of an OPEC deal after the oil-producers group agreed for the first time since 2008 to reduce output in an oversupplied market.

    Global oil prices held onto gains on Thursday after soaring 6 percent in the previous session as the Organization of the Petroleum Exporting Countries agreed on Wednesday to reduce output to a range of 32.5-33.0 million barrels per day.

    However, how much each country will produce is to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia.

    "We have to wait and see whether they will take real action and how long it would last," said Kim Woo-kyung, spokeswoman at SK Innovation, owner of South Korea's largest refiner.

    The size of the proposed cut is not significantly huge, she said, but added that the deal could support prices, increase the value of refiners' crude inventories and margins by pushing up oil product prices.

    OPEC's new target represents an implied cut of 0.5-1.0 million bpd, although the actual cut could easily be much smaller at 0-0.5 million bpd depending on whether Libya and Nigeria can recover from supply disruptions, Societe Generale's oil analyst Michael Wittner said.

    The OPEC deal is unlikely to affect Middle East crude supplies to term customers in Asia for next year, but may crimp additional volumes that producers have been offering throughout 2016, traders said.

    "They've been giving incremental volumes so maybe less for next year," said a trader with a North Asian refiner who declined to be named as he was not authorised to speak to media.

    Still, robust oil demand in Asia has absorbed much of the increase in OPEC production and may provide little impetus for OPEC producers to cut output unless demand drops.

    "It has historically taken a fall in oil demand to ensure quota compliance, as in that case, production is forced lower by a decline in refinery intake around the world. This is not the case today with resilient demand growth," Goldman Sachs analysts said.

    Asian refiners' crude demand has been good this year and are expected to hold steady unless there are major changes in refining margins or crude prices set by producers, the trader said.

    Higher oil prices could also encourage U.S. shale producers to increase output and fill in supply gaps left by OPEC, traders said.

    "An amply supplied market will continue to allow these importers to pick and choose from a broader array of suppliers, though given current refinery configurations the dependence on Middle Eastern crudes will continue," BMI Resarch analyst Peter Lee said.
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    How Actual Nuts and Bolts Are Bringing Down Oil Prices

    Last spring, Statoil ASA announced it had used the same oil well design and components to drill three reservoirs for the price of one.

    While the specs for Norwegian Sea drilling might provoke reactions akin to the oil field’s name—the Snorre—such standardized pipes and casings could hold the key to a pervasive mystery about today’s energy market: Why is everyone still drilling when prices are in the basement?

    Even as oil producers have planned $1 trillion worth of spending reductions between 2015-to-2020—cutting staff, delaying projects, and squeezing contractors—they’ve continued to green-light new wells from the Norwegian Sea to Brazil, and from Uganda to the Gulf of Mexico. Those initiatives mean oil production will continue to grow, adding to the supply glut and putting downward pressure on prices.

    It’s a development that has both baffled and frustrated the world’s biggest producers of crude, who have been waiting for lower prices to force a rollback of global production. They have largely blamed the resilience of the world’s oil drilling on U.S. shale producers, as well as efforts to maintain market share, but the Snorre and other projects like it suggest there may be another–much more boring–culprit at fault.

    That's because oil majors' urgent mission to slash costs includes standardizing the components used in drilling for oil–a development that has helped turn unprofitable wells into moneymakers, protected bottom lines, and allowed companies to keep pumping even in the face of crude prices that have more than halved over the past three years.

    “One might wonder how it is possible that with expenditures being cut dramatically in the upstream industry, output is still growing in many parts of the non-OPEC world while the costs of future projects are declining,” analysts at JBC Energy GmbH wrote earlier this year. “One of the key topics in this respect is industry standardization.”

    While oil traders have been pondering the prospect of a production freeze from OPEC, which has so far ramped up production to seize market share and force upstart shale players out of business, they’ve paid scant attention to cooperation already taking place across the industry.

    Earlier this year the heads of some of the world’s biggest oil majors, including Saudi Aramco, BP Plc, Repsol SpA, and Statoil, met behind closed doors to discuss a push to cut costs by standardizing the equipment used in exploration and production. Other joint projects are already under way, meaning everything from the ‘Christmas Tree’ collections of valves and spools used in oil wells, to light bulbs, and engineering contracts are now up for standardized treatment.

    It’s a sharp turnaround from the heady days of the mid-2000s when oil reached more than $145 per barrel. Back then, nascent standardization efforts were primarily aimed at speeding up lead times—the interval between the discovery of oil and when drilling commences—in order to make up for a shortage of engineers and other energy industry professionals.

    “People were rushing to get hydrocarbons into the market. If something wouldn’t work, you could just throw more money at it,” said Rod Christie, president and chief executive of Turbomachinery at GE Oil & Gas. “Today that’s not an option. Everything has to be more efficient.”

    Now, lead times and costs are again at the fore—but for very different reasons. With the price of oil dipping to $26.21 in February and currently hovering around $45 a barrel, attaining maximum production using the least amount of time and resources is crucial.

    “Time is money in this business,” said Kristin Nergaard Berg, DNVL Gas AS project manager for a joint industry effort to standardize sub-sea processing. “The earlier you start production, the better the net present value of your project is.”

    It’s a far cry from the way things used to be done, when drillers would often order costly custom fittings tailor-made for individual wells. Ordering standardized parts can allow the companies to pre-stock components and rapidly sign contracts, letting them ramp up production at a faster rate and cheaper cost—similar to the creation of the standardized railway gauges that helped spur a boom in train traffic.

    Nergaard Berg estimates that standardization of sub-sea forgings alone—the massive steel spools used in deepwater drilling—has resulted in a 30 percent reduction in project lead times. Christie, of GE Oil & Gas, also reckons that standardization can lower drilling expenses by an average of 30 percent.

    At Statoil, the three wells drilled at its Snorre B platform cost an average 170 million kroner ($21 million) compared with about 490 million kroner for previous projects, according to the Stavanger, Norway-based company. That means oil obtained by the platform, which began pumping some 80,000 barrels a day, costs an average of $10 a barrel.

    About 100 miles south of New Orleans, BP has more than halved the costs stemming from a massive floating oil platform known as Mad Dog. While the company is benefiting from a steep reduction in the cost of drilling services and commodities such as steel, a “large chunk of savings has been driven by simplification and standardization,” Goldman Sachs Group Inc. analysts said in research published this month.

    “Once FX variations have been factored in, we expect the majority of the projects to be more cost competitive vs. U.S. shale,” the analysts led by Henry Tarr said. “Factoring in the new cost deflation drives breakevens for deepwater the most.”

    Such standardization efforts are likely unleashing a wave of downward pressure on oil production costs, according to Goldman’s analysis. That’s helped keep expenses low and production high, forcing oil prices lower thanks to the stubborn glut in supply.

    “We expect the majority of the projects to be more cost competitive vs. U.S. shale,” the Goldman analysts said, with deepwater drilling to benefit the most from standardization.

    Overall, oil majors have taken a chainsaw to expenses, reducing spending for the 2015-to-2020 period by $1 trillion, according to estimates from consulting firm Wood Mackenzie Ltd.

    “The oil industry has often been criticized as being behind other industries in terms of the implementation of available technology,” said the analysts at JBC. “This is beginning to change.”

    Attached Files
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    Hundreds of workers laid off amid Norway strike action

    Hundreds of workers have been laid off in Norway amid strike action by Industri Energi.

    The staff made redundant are from Baker Hughes, Schlumberger and Halliburton.

    According to reports, the majority of the employees who have lost their jobs are from Baker Hughes.

    Strike action has been ongoing in Norway since last week.

    The companies involved are alleged to have claimed there is simply not enough work for staff as drilling operations have been halted because of the strike.

    Industri Energi said pressure was being put on the workers through job cuts to give up on strike action.

    Since the industrial action began there have been no discussions between the companies or unions.
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    Eni asks banks for billions to finance Mozambique gas project

    Italian oil firm Eni has approached banks for billions of dollars to finance a huge offshore gas development in Mozambique, a significant step in getting a long-delayed project off the ground, the company and sources said.

    Eni confirmed it met bankers in London last week about project financing to develop the Coral field, part of the huge reserves discovered six years ago in the Area 4 concession off the Mozambican coast.

    "It's running into billions of dollars," one source familiar with the financing told Reuters, adding banks were also looking for credit guarantees from foreign governments, including Britain and China.

    Banks are likely to respond within three to four weeks with terms of loans they are willing to provide, one of the last stages before Eni can make a final investment decision (FID) on the project, two sources close to the deal said.

    Eni said it hoped to announce a FID by the end of this year.

    Some lenders may be concerned about involvement in a project in Mozambique, given recent clashes between opposition guerrillas and government forces and financial scandals.

    The International Monetary Fund (IMF) is in Mozambique this week to try to restore trust between President Filipe Nyusi's government and international lenders after more than $2 billion in secret loans came to light this year.

    The IMF has suspended its own lending to the southeast African country, insisting on external scrutiny as a precursor to resuming financial aid.

    "The biggest challenge is Mozambique country risk," one of the sources said.

    Reserves discovered in Mozambique's Rovuma Basin in recent years amount to some 85 trillion cubic feet, one of the largest finds in a decade and enough to supply Germany, Britain, France and Italy for nearly two decades.

    The gas offers Mozambique an opportunity to transform itself from one of the world's poorest countries into a middle-income state and a major global liquefied natural gas (LNG) exporter.

    Negotiations with operators Eni and U.S. firm Anadarko have dragged on for years due to disputes over terms and concerns about falling energy prices.

    However, there have been several signs of significant progress in recent months.

    Eni has struck a deal with Samsung Heavy to provide a floating LNG platform to process the gas from the Coral field, which will be sold to BP.

    Eni has also wrapped up long-running talks to sell a multi-billion dollar stake in other fields in Area 4 to Exxon Mobil, sources told Reuters last month.

    In 2013, Eni sold 20 percent of its Area 4 licence to China's CNPC for $4.2 billion but since then oil and gas prices have come down by more than half.

    Anadarko's $24 billion onshore LNG project is expected to lag Eni's and its FID is unlikely this year.
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    Freeport’s $2bn Anadarko sale said to face lender snag

    Freeport-McMoRan’s bondholders are creating a potential obstacle for a $2-billion asset sale designed to inject cash into the debt-laden commodities producer, according to people with knowledge of the matter.

    Some of the creditors want more money and greater protection for  allowing the sale of oil and gas assets to Anadarko Petroleum – a proposal that requires changes to Freeport’s existing agreement with the lenders. Freeport, which wants to keep the debt on its own balance sheet even as the assets shift to the buyer, is seeking majority approval from five sets of bondholders who together own $2.3-billion of notes to complete the asset sale.

    Freeport has been struggling to lift earnings amid a two-year long commodities rout and had its credit ratings cut to  junk earlier this year as it grapples with more than $18-billion of debt. The company announced the sale of its Gulf of Mexicoassets to Anadarko this month in a move that would allow it to cut debt and clean up its balance sheet.

    The bondholders are demanding a bigger consent fee, a higher interest rate on the debt and additional protective covenants to approve the sale, according to a creditor letter to the company obtained by Bloomberg. Without that, they want the debt to move with the assets to Anadarko, which has a stronger credit profile than Freeport. The dissenting creditors together own $1.1-billion of the notes, according to the September 22 letter.


    Freeport CFO Kathleen Quirk said the company plans to push ahead with the sale of its assets to Anadarko even without the consent of the bondholders. If it can’t secure bondholder consent for the proposed deal, Freeport will instead strike a merger with its subsidiary Freeport-McMoRan Oil & Gas, the entity that issued the bonds. That deal would allow for the transaction with Anadarko to take place while keeping the debt on the Freeport balance sheet, she said.

    “There is no reason” for the company to offer better terms to bondholders, Quirk said. Freeport is offering the creditors holding about $2.3-billion of bonds 25 basis points, or about $2.50 for every $1 000 to obtain the covenant amendment approval.

    But law firm Paul, Weiss, which is representing a majority of bondholders in at least two of the series of notes, argues thatFreeport’s alternate plan isn’t allowed under the company’s current credit pact because it’s a “related transaction," according to the people with knowledge of the discussions.Paul, Weiss has said Freeport’s credit pact doesn’t allow it to directly or indirectly sell the assets unless the debt is assumed by the buyer, the people said, asking not to be identified because the matter is private.

    The bondholders also complained that the company neglected to inform them of all the facts they needed to make an informed decision on whether to approve the sale, the letter showed.

    Freeport has already had to extend a consent deadline and the next one is set to expire on Wednesday, according to company statements.
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    Oil Halts Loss Before OPEC Meets as Saudis Signal Future Deal

    Oil halted losses below $45 a barrel after Saudi Arabia signaled it may compromise with regional rival Iran on a future output agreement as both countries expect no deal when OPEC members meet Wednesday in Algiers.

    Futures rose 0.5 percent in New York after falling 2.7 percent Tuesday. A deal in November is possible, Saudi Arabian Oil Minister Khalid Al-Falih said at a briefing in the Algerian capital, adding that Iran, as well as Libya and Nigeria, should be allowed to “produce at the maximum levels that makes sense.” Global output will exceed demanduntil late 2017, according to Fatih Birol, executive director of the International Energy Agency.

    Oil has swung near $45 since last week amid speculation over whether the Organization of Petroleum Exporting Countries will agree on ways to stabilize the market. While Saudi Arabia has offered to pump less crude if Iran caps output, neither country expects an agreement this week. Freezing output was first proposed in February, but a meeting in April ended with no final accord. OPEC’s next formal meeting is in November in Vienna.

    “OPEC members are peddling their self interests, and while that’s the case, there can’t be a cooperative effort,” said Michael McCarthy, chief market strategist in Sydney at CMC Markets. “Oil is trapped between $40 and $50 a barrel, and at this stage, there doesn’t appear to be anything on the horizon to break prices out of that range.”

    West Texas Intermediate for November delivery was at $44.87 a barrel on the New York Mercantile Exchange, up 20 cents, at 8:01 a.m. in London. The contract lost $1.26 to $44.67 on Tuesday. Total volume traded was about 26 percent below the 100-day average. Prices have averaged about $44.80 this quarter.

    OPEC Meeting

    Brent for November settlement added 25 cents to $46.22 a barrel on the London-based ICE Futures Europe exchange. The contract dropped $1.38, or 2.9 percent, to $45.97 on Tuesday. The global benchmark crude traded at a premium of $1.36 to WTI.

    “It’s not our agenda to reach agreement in these two days,” Iran Oil Minister Bijan Namdar Zanganeh said on Tuesday. Al-Falih echoed the sentiment, saying the meeting on Wednesday will be used for consultation and that he doesn’t expect that an agreement will come out of it. Consensus may be reached at the informal meeting, but there will be no formal deal, Russian Energy Minister Alexander Novak said.

    Iraq is seeking to reduce the gap of the viewpoints between Iran and Saudi Arabia to reach a compromise formula in a way that serves the interests of oil producers and backs the stability of the market, Iraq’s Oil Minister Jabbar Al-Luaibi said in a text message.
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    Russia's Sakhalin oil output to rise by 8 pct in 2016 - regional govt

    Russia's Pacific island of Sakhalin is expected to increase oil production by 8 percent in 2016 from a year ago, a regional official said, which would add to the global glut the industry currently faces.

    Russia and the Organization of the Petroleum Exporting Countries are gathering in Algeria this week in a second attempt this year to cooperate on global oil markets to stabilise prices. Yet, the task looks hard as hopes are fading that Saudi Arabia and Iran would find a compromise, while production is growing in Russia.

    Vera Sherbina, head of Russia's regional government of Sakhalin, told a conference on Wednesday that oil and gas condensate production at the island, which comes mostly from offshore, will climb to 18.1 million tonnes, or about 362,000 barrels per day (bpd), this year, up from 16.7 million tonnes in 2015.

    The annual oil and gas conference at Sakhalin has gathered mid-tier officials from Russian and western oil and oilfield services companies to discuss the prospects of the region that accounts for around 3 percent of Russia's total output.

    Production of oil and gas at Sakhalin, which is also famous for being the home of one of Russia's largest oysters, comes mostly from two offshore projects - Sakhalin-1 led by ExxonMobil and Sakhalin-2 led by Russia's Gazprom.

    Sakhalin-1 shareholders also include Russia's Rosneft , Japan's Sodeco and India's ONGC. Apart from Gazprom, Sakhalin-2 shareholders include Royal Dutch Shell, Mitsui and Mitsubishi.

    "Our key task is to maintain production levels we have now," Sherbina told reporters. She did not provide an outlook for oil production for the island for the years to come.

    Sakhalin-2 also operates Russia's sole LNG plant, with Sakhalin-1 also looking at building its own LNG facility that could start production after 2023.


    Russian oil production is growing despite western sanctions and low oil prices, as previous investments come online. Output is expected to be as high as 547 million tonnes in 2016, or almost 11 million bpd, which would be a new record.

    Rosneft, Russia's biggest oil producer, is under sanctions over Moscow's role in the Ukraine crisis, with restrictions both on supporting the firm financially as well as getting access to exploration technology.

    In June, Rosneft said it started exploration drilling in the Sea of Okhotsk in Russia's Far East, northeast of Sakhalin, along with Norway's Statoil.

    Alexander Zharov, a department head at Rosneft, said that the sea depth at the drilling area was less than 150 metres, which is not covered by the sanctions. He said it was too preliminary to comment on the results.

    "Sakhalin remains one of a few places in the world where operations remain profitable even at oil prices of $50 per barrel," said a manager with western oilfield services company, who came to Sakhalin looking for new contracts but declined to give his name.
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    There's a chance that oil may never rebound

    Oil prices are hovering in the mid-$40s per barrel, and the hopes of a rebound have once again been delayed. The IEA’s September Oil Market Report predicts that the supply/demand equation might not come into balance until next year, suggesting another year of low oil prices. But what if oil prices never rebound?

    The question seems ridiculous, not only because the oil markets always go through booms and busts, but also because demand continues to rise. Supplies are also falling from high cost areas, ensuring that the supply overhang will eventually be erased. Moreover, the oil industry has made unprecedented cuts in spending on exploration and development. The IEA says the industry cut spending by more than $300 billion over the past two years and a separate estimate from Wood Mackenzie expects oil and gas producers to slash about $1 trillion from spending between 2015 and 2020. Such draconian measures are surely sowing the seeds of another supply crunch, guaranteeing a price spike in the years ahead.

    But the world is still oversupplied with oil, and the recent ramp up in production from OPEC could lead to low oil prices for a few years. Libya is set to bring back around 600,000 barrels per day (although those claims are questionable), and Nigeria has already returned somewhere between 200,000 and 300,000 barrels per day of interrupted supply. Production in the U.S. has also recently leveled off over the past month at 8.5 million barrels per day, after nearly 18 months of declines

    The IEA expects global supplies to exceed demand through next year, and inventories to continue to build through 2017. Crude oil and refined product inventories are only slightly down from record levels, and will take a few more years to get worked through.

    All of that is to say there is a good chance that ample supplies could ensure relatively low oil prices for several years, perhaps as long as towards the end of this decade.

    In the meantime, alternatives will continue to make inroads into the transportation sector. Batteries for electric vehicles (EVs) continue to achieve cost declines, having fallen by 35 percent in 2015 alone. Bloomberg New Energy Finance sees EVs becoming as affordable as gasoline-powered cars – on an unsubsidized basis – as soon as the early 2020s. That could erase about 2 million barrels per day of oil demand by 2023. Given that the global surplus in crude oil over the past two years was only a little more than 2 million barrels per day at its worst point, which was enough to cause a meltdown in oil prices, the displacement of 2 mb/d from EVs in six years is a big, big deal.

    By 2040, EVs could cost as little as $22,000 (in 2016 dollars), BNEF says. Electric vehicles could displace 13 million barrels per day of oil demand by then, enough to keep oil prices permanently low. It wouldn’t stop there, if EVs made that kind of progress, the takeover of the transportation sector would accelerate and oil would continue to lose market share.

    These, of course, are aggressive scenarios, BNEF concedes. But maybe not. If governments around the world crack down on oil drilling through new taxes and regulation, and also subsidize R&D and the adoption of EVs, all with an eye on climate change, the scenarios could prove to be more of a middle-of-the-road prediction. Major oil spills, or sudden natural disasters could spark a public backlash, demanding deeper reductions in carbon emissions. In other words, the uncertainty around the advancement of clean energy could be on the upside – unforeseen future public policy could very conceivably accelerate EV adoption faster than we can envision sitting here in 2016.

    Abundant oil supplies plus huge volumes of oil and refined products sitting in storage – a supply-side problem – could ensure oil price stay low in the near- to medium-term. But steady efficiency and the technological advancements in EVs – a demand-side problem – might mean oil demand ends up being much lower over the medium- to long-term than we currently expect. These scenarios are certainly not inevitable, but if they are even remotely accurate, oil prices could stay low more or less permanently.
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    Petronas to review Canadian LNG project after approval: CEO

    The President and Chief Executive of Malaysia's state-owned oil firm Petronas said on Wednesday that the company will review a liquefied natural gas plant project in northern British Columbia that was approved by the Canadian government.

    "The announcement was just made this morning. We need time to look at the conditions and then we will have a review of the project," Wan Zulkiflee Wan Ariffin told reporters at the sidelines of an event.

    The Canadian government on Tuesday approved the project, ending a three-year wait for a decision and drawing condemnation from environmentalists.

    Approval comes with 190 conditions including capping direct emissions
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    DTE Energy spending $1.3B for natural gas assets in 2 states

    DTE Energy Co. plans to spend $1.3 billion for natural gas assets in Pennsylvania and West Virginia.

    The Detroit-based company announced Monday that an agreement calls for DTE to purchase all of Appalachia Gathering System in Pennsylvania and West Virginia and 40 percent of Stonewall Gas Gathering in West Virginia from energy company M3 Midstream.

    In addition, DTE plans to purchase 15 percent of Stonewall Gas Gathering from Vega Energy Partners.

    The assets will become part of DTE’s non-utility Gas Storage and Pipeline business, which owns and manages a network of natural gas gathering, transmission and storage facilities serving the Midwest, Northeast and Ontario markets. The deals are expected to be completed this year.
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    $900M Utica Gas-Fired Electric Plant Coming to Harrison County, OH

    Several news sources are reporting that EmberClear has committed to fund and build a new $900 million, 1,000-megawatt electric generating plant in Harrison County, OH.

    The new plant will be fed by Utica Shale gas. Officials in the county have been working on a deal to lure the plant to the county since December of last year and stress it is a “long-term project” and “not a slam-dunk” because of extensive regulatory hurdles.

    If the project happens, it will generate 500 temporary construction jobs and 30 permanent jobs and use a huge amount of natural gas to power it (good for drillers!).

    MDN did some checking and found one potential cloud over the deal. EmberClear was, until July, a Canadian-based company. But it went bankrupt and after emerging from bankruptcy it changed its name to Ember Partners, now based in Houston, TX. Apparently the bankruptcy hasn’t slowed them down–but it does raise a question about the financial stability of the company and its ability to fund a big-money project like the Harrison Power Project.

    However, these projects are typically funded by one or several investors and not by the company that builds and operates the facility…
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    Cabot Hits Major Milestones In The Marcellus

    The following is a memo sent to all Cabot employees by Dan Dinges, Chairman, President and Chief Executive Officer, which highlights the last 18 months of milestones in Cabot’s Marcellus operations.

    TO: All Employees
    FROM: Dan O. Dinges
    DATE: September 26, 2016
    RE: Marcellus – Game Changer for COG Shareholders, Employees and Communities

    Today marks a major milestone in the history of this company: 10 years ago today, we began drilling our first well in the Marcellus, the Teel 1.

    In the last 18 months we have achieved three additionally impressive milestones in the Marcellus. In April 2015 the 500th well was drilled and just last month the 10,000th frac stage was completed. At the end of last month our cumulative Marcellus production hit 2.5 trillion cubic feet of natural gas – a stunning amount of production by just one company over the past decade.
    Make no mistake; these operational records would have been unachievable if not for the dedication, innovation, and knowledge of the Cabot team across the country. I have said time and again that Cabot has access to a world class asset in the Marcellus – but the reality is, without the right employees with the right skill sets employed in each and every one of our departments, we would not achieve this level of success.

    The last 24 months have been challenging. We have all seen firsthand the effects of a down market on our industry and the communities where we live and work. But we have all found ways to increase our efficiencies to not just maintain Cabot, but to keep the company positioned to take advantage of the eventual return to better pricing.

    Ten years ago we began operations in what is now one of the largest shale gas fields using the knowledge of our employees gained from their experiences around the country and around the world. That experience and work has led us to: 2.5 TCF, 500 wells, and 10,000 frac stages. As many of you are aware, we have new infrastructure scheduled for completion during the next couple of years. Upon commissioning this infrastructure we will be working to more than double our current production levels towards 4 BCF per day in the Marcellus.

    Knowing all we have learned and pioneered during the last decade, the prospect of what we will accomplish and the value we will create for shareholders in the years to come is exciting.
    I offer my sincere congratulations on these accomplishments to each and every one of you. As we transition to move rigs back into our areas of operation, keep in mind every creative idea you have as an employee of Cabot moves us closer to the next big milestone.

    Dan O. Dinges
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    IEA’s Birol Warns Oil Supply Will Exceed Demand Until Late 2017

    Global oil output will exceed demand until late 2017, the head of the International Energy Agency said before major producing nations gather for talks.

    "We don’t see the oil market re-balancing until late 2017" provided there’s no “major intervention,” IEA Executive Director Fatih Birol said Tuesday in an interview with Bloomberg Television in Algiers.

    The Paris-based agency is extending its bearish view after saying Sept. 13 that oil supply will outpace demand “at least through the first half of next year.” OPEC members will hold informal discussions in the Algerian capital on Wednesday as they seek to buoy prices following two years of decline amid brimming global stockpiles.

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    Oil-demand growth has been weaker than expected, Birol said. The IEA this month cut its forecast for consumption growth in 2016 and 2017, citing a "marked slowdown" in India and China. The agency, which advises industrialized countries on energy policy, projected demand growth of 1.3 million barrels a day in 2016, down from 1.6 million a day in 2015. Its prediction slips to 1.2 million a day next year.
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    Two Years Into Oil Slump, U.S. Shale Firms Are Ready to Pump More

    When oil prices began to plunge two years ago due to a global glut of crude, experts predicted U.S. shale producers would be the losers of the resulting shakeout.

    But the American companies that revolutionized the oil and gas business with hydraulic fracturing and horizontal drilling are surviving the carnage largely unbowed.

    Though the collapse in prices caused a wave of bankruptcies, total U.S. oil production has only fallen by about 535,000 barrels a day so far this year compared with 2015, when it averaged 9.4 million barrels, according to the latest federal data.

    As the oil markets ponder where production will resume when prices pick back up, one clear answer has emerged: America. Goldman Sachs forecasts the U.S. will be pumping an additional 600,000 to 700,000 barrels of oil a day by the end of next year—making up for every drop lost in the bust.

    Few predicted that in the fall of 2014, when Saudi Arabia signaled that it wouldn’t curb its output to put a floor under crude prices. Oil pundits concluded that a brutal culling would force higher-cost players known as marginal producers—a group that includes shale drillers—out of the market.

    But the greatest consequence of the Saudi decision and subsequent price drop is that it has delayed costly oil megaprojects, from deep-water platforms off Angola to oil-sands mines in Canada.

    “The U.S. isn’t the marginal barrel but the most flexible,” said R.T. Dukes, an analyst at Wood Mackenzie. “We’ll be the fastest to snap back.”

    More than 100 North American energy producers have declared bankruptcy during this downturn, but even companies working through chapter 11 keep pumping oil and gas. Many exit bankruptcy stronger thanks to a balance sheet that has been wiped clean.SandRidge Energy Inc., which filed in May, will exit next month after erasing nearly $3.7 billion in debt.

    Many shale operators are still struggling at current prices, drilling at a loss and tapping Wall Street for new infusions of cash. But the strongest producers, including EOG Resources Inc. and Continental Resources Inc., soon will be able to generate enough money to pay for new investments and dividends—as well as boost production—even at low prices, analysts say.

    U.S. production began inching up in July, shortly after oil prices rebounded to $50-a-barrel territory. Producers quickly put 100 rigs back to work this summer.

    The ramp-up spooked the market, sending oil prices plunging 20% back toward $40. They have recently rebounded back to about $46.

    The gyrations will continue for months as shale producers go back to work, said Eric Lee, an analyst at Citibank, who predicts crude will stabilize around $60 a barrel in late 2017.

    Though oil storage tanks around the world are brimming, new sources will be needed soon because older oil fields decline by 5% a year and global demand continues to rise 1.2% a year. Demand will break through the 100 million barrel-a-day mark by 2020, according to the International Energy Agency.

    The looming gap between supply and demand is one reason the easy money that fueled the American drilling boom hasn’t dried up, saidLewis Hart, senior vice president of corporate advisory and banking for Brown Brothers Harriman in New York.

    Even as banks and other traditional lenders tighten their purse strings, alternative sources of money are cropping up, from private-equity funds to distressed-debt specialists.

    “The very existence of that capital means prices are likely to be lower for longer, because it compounds the supply problem,” Mr. Hart said.

    Jesse Thompson, an economist with the Federal Reserve Bank of Dallas, said this oil bust is different from the downturn that crippled American producers in the 1980s.

    Back then, Saudi Arabia initially shut down production as it tried to put a floor under prices, then changed course and began selling crude into an already glutted market. By 1986, the world’s oil supply capacity was 20% higher than demand, Mr. Thompson said. He estimates that today, the world is oversupplied by about 1%.

    A big reason U.S. oil production has been so resilient is that U.S. producers found ways to cut costs and enhance efficiencies during the lean years. Those innovations are now poised to propel the industry’s resurrection.

    In May,  Halliburton Co. helped tap the longest shale well on record—26,641 feet deep and another 18,544 feet long—for Eclipse ResourcesCorp. in Ohio, 130 miles south of Cleveland.

    That well was fracked—the process of injecting water, chemicals and sand to coax out oil and gas—an extraordinary 124 times. Typical shale wells are fracked between 30 and 40 times, up from just nine fracks in 2011 at the start of the oil boom, according to Drillinginfo, a data provider for the energy industry.

    To put that engineering feat in Manhattan perspective, that is equivalent to burrowing down to the depth of 15 World Trade Centers at One World Trade Center, turning 90 degrees and drilling underground 3.5 miles to Grand Central station. Eclipse saved 30% by supersizing the well, said Chief Operating Officer  Tom Liberatore.

    The industry’s cost-cutting has been painful for many. Nearly 160,000 energy employees have been laid off around the country, according to the latest tally by Graves & Co.

    Even so, plenty of companies that didn’t accumulate debt or spend beyond their means during the boom years have the resources to take advantage of financial fallout from the downturn.

    Albert Huddleston, founder and managing partner of Aethon Energy, said the Dallas-based producer spent more than $600 million on distressed oil-and-gas properties from Wyoming to Louisiana since prices started to fall in 2014.

    “Can you kill off shale? The answer is no,” he said.

    Attached Files
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    Greka Drilling announces 2016 half-year report

    Greka Drilling Limited, the largest independent and specialised unconventional gas driller in China, is pleased to announce its results for the six months ended 30 June 2016.


    Revenue of US$2.6 million (H1 2015: US$11.9 million)
    US$8.1 million of cash as at 30 June 2016 including restricted cash (US$2.4 million as at 31 December 2015)
    US$3.8 million bank loans as at 30 June 2016 (US$5.9 million as at 31 December 2015)
    Loss of US$5.5 million (H1 2015: loss of US$4.8 million)
    Secured US$5 million in loan financing from Guaranty Finance Investors LLC


    In line with our guidance in February this year, activity levels have been very limited in the first half of 2016. GDL has drilled 10 wells (3 in China and 7 wells in India) in the first 6 months compared to 28 wells in the same period last year
    Of the wells drilled there was:

    1 Vertical well in China with a total depth ('TD') of 789 metres and completed in 13 days (spud to completion)
    7 Directional wells in India which averaged 12 days, a 42% improvement on the average of 20 days in the same period in 2015. The fastest Directional well was drilled to TD 1,036 metres in 9.3 days
    2 Horizontal wells in China with the fastest being drilled to TD of 1,658 metres in 28 days (spud to completion)

    In total there were 12,458.31 metres drilled (4,128.31 metres in China and 8,330 metres in India) compared to 26,367 metres in H1 2015
    The 8,330 metres drilled in India compares with a total of 9,920 metres in India for the FY 2015



    Essar Oil Limited:

    Expected to drill 30 wells with 2 rigs deployed under the current contract
    Potential for deployment of a third rig under the current contract

    In advanced talks with new potential clients for deployment of three rigs in 2017


    Green Dragon Gas has begun mobilising for a programme of up to 8 wells
    Bids to conclude multi-well programme prior to year-end

    Randeep S. Grewal, Chairman and Chief Executive of Greka Drilling, commented:

    'We have previously advised that we expected this year to be very challenging while the oil and gas operators realign their portfolios to the new oil price environment. Unconventional drilling, the Company's niche, has been largely suspended by most of the operators. During this period, we continued to take steps to reduce costs, improve our drilling efficiency and diversify our services and customer base. Indeed, this year we expect to have an equal client base between China and India.

    Attached Files
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    Saudi Aramco Sees Oil Demand 'Steady' as Supply Growth Slows

    Slower growth in oil supply is helping the crude market to re-balance, and prices are set to increase over time, according to the head of the world’s biggest producer.  

    As investments in new oil and natural gas capacity have been being canceled or deferred worldwide, supply is rising more slowly, especially production of U.S. shale oil, Saudi Arabian Oil Co. Chief Executive Officer Amin Nasser said Monday. Global demand is “on a steady, if moderate course,” he said in a speech at a conference in Dubai.

    “Despite volatility, the market is heading toward re-balance, and prices are likely to strengthen with time,” Nasser said. “However, market volatility could remain with us for the near future.”

    Oil-producing nations have been considering limiting output to counter a global glut that has cut crude prices by more than half from their 2014 peak. Saudi Arabia and other OPEC members are meeting in Algeria this week and may consider freezing production in an effort to shore up prices. Brent crude, the global benchmark, has averaged about $43 a barrel so far this year and was 73 cents higher at $46.62 at 1:27 p.m. in London.

    Unfettered Output

    Crude gained about 11 percent in August on speculation that the Organization of Petroleum Exporting Countries will reach an output deal in Algiers. The group’s discussions are a sign OPEC may be reconsidering a Saudi-led policy adopted in 2014 allowing members to raise output to protect market share from higher-cost producers, including U.S. shale drillers.

    OPEC’s production rose to a record 33.69 million barrels a day in August, just under a third of global demand, data compiled by Bloomberg show. Saudi Arabia, the group’s biggest producer, pumped a record 10.69 million barrels a day last month, the data show.

    “While the oil market has recovered from its most severe period, it’s still weak,” Nasser said.

    Mature Fields

    Improvements in energy efficiency have tempered consumption growth, but an expanding world population and rising living standards in developing countries will support long-term demand, he said. Oil’s central role as a source of fuel for heavy transportation and feedstock for petrochemicals will remain solid, Nasser said.

    “The oil and gas resources we have available, as well as new discoveries, are more challenging and more expensive to develop. At the same time, the present oil and gas fields are becoming increasingly mature and complex to operate.”

    Saudi Arabian Oil Co., known as Saudi Aramco is exploring more intensively to augment its “resources” to 900 billion barrels from 800 billion barrels over the next decade, Nasser told reporters. Its budget over the next five years will be “much more” than $100 billion, and the company seeks to increase oil-recovery rates at its fields to 70 percent from 50 percent, he said, without specifying timing.

    Rig Count

    Aramco is also adding drilling rigs to explore onshore and offshore for oil and gas, Nasser said. Saudi Arabia had 124 rigs operating in August compared with 101 in May 2014, according to Baker Hughes Inc.

    The oil industry needs new investment in exploration and production to meet future demand, according to Schlumberger Ltd. and  Total SA.

    “We are setting ourselves up for a supply crunch one or two years down the road” as non-OPEC supply declines along with cuts in investment, Schlumberger CEO Paal Kibsgaard said at the conference. Total foresees a supply shortfall of 5 million to 10 million barrels a day by 2020, Arnaud Breuillac, the Paris-based company’s president of exploration and production, told reporters in Dubai.

    Attached Files
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    Plans proceeding for Colombia's second LNG regasification facility: minister

    Colombia is moving forward with plans to build a second 400 MMcf/d LNG regasification plant to be located near its Pacific coast to assure adequate gas supplies, mining and energy minister German Arce has said.

    Speaking Friday to business leaders in the southwestern city of Cali, Arce said such a plant was necessary to assure "reliability of supply" in western Colombia. The country is self-sufficient in gas, but with reserves in decline it may have to begin imports as soon as next year.

    Colombia's first LNG regasification plant is under construction near Cartagena on the Caribbean Coast and will be operational by year-end. The $800 million facility will process up to 348 MMcf/d of gas, destined mainly to fuel thermo-electric power plants serving northern and central Colombia.

    Colombia consumes about 1 Bcf/d of gas, all supplied from its rapidly depleting fields. Promising offshore fields being developed by state-controlled Ecopetrol and partners Anadarko and Repsol are not expected to enter production until 2022 at the earliest, assuming they prove commercially viable.

    Arce did not give a target date for a construction of such a plant. But the ministry's planning agency, known by its Spanish initials UPME, has said that such a facility should be operational no later than 2024. However, thermo-electric power plant owners in the region want such a plant to be on line by 2020 at the latest, regulators have told S&P Global Platts.

    Regulators have told Platts the second regas plant is likely to be built in or near Buenaventura, Colombia's largest Pacific Coast port city.

    The regas plant near Cartagena is expected to import LNG from Trinidad and Tobago and the US. The Pacific plant may seek LNG from Peru or Asian LNG producers, sources have said.

    How fast demand for imported LNG grows will depend in part on climate and rainfall levels. Normally, Colombia generates 70% of its electricity at hydro power facilities, but droughts caused by the El Nino weather phenomenon over the last year forced the country's electricity grid at times to use as much thermo-electric power as hydro.

    Also boosting gas demand is the growing popularity of so-called hybrid cars and buses that use a mixture of gas and gasoline for fuel. The government is promoting such power sources as environmentally friendly.
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    Iran Now Has the Edge in the Fight Over Oil Prices With Saudi Arabia - No freeze

    Suddenly the tables have been turned on Saudi Arabia.

    The biggest oil exporter has swapped its traditional role as price dove with regional foe Iran, for years OPEC price hawk. The government in Riyadh is now offering a deal -- including its first output cut in eight years -- to boost prices; Tehran is dragging its feet. At the center of the reversal is their contrasting thresholds for enduring economic pain.

    "Both countries are coming from different positions," said Jason Tuvey, Middle East economist at consulting firm Capital Economics. "Iran has been under sanctions until recently, so it’s getting an economic boost as investment returns and oil output rises. Meanwhile, Saudi Arabia is facing steep fiscal cuts."

    The contrast between the two countries is stark. Iran, never as dependent on oil revenue as its neighbor, has seen prospects boosted by rapprochement with the west. In Saudi Arabia, tentative moves toward economic reform haven’t prevented two years of weak prices causing financial havoc: it’s burning through foreign exchange reserves, government contractors have gone unpaid and civil servants will get no bonus this year.

    Diverging Economies

    Saudi Arabia will suffer a fiscal deficit equal to 13.5 percent of gross domestic product this year, compared with one of less than 2.5 percent of GDP for Iran, the International Monetary Fund estimates. The IMF says the Saudis need oil close to $67 a barrel to square the books. For Iran, it’s lower, at $61.50. Brent crude, the global benchmark, was down 0.4 percent at $47.18 a barrel as of 1:18 p.m. in Hong Kong.

    When it comes to economic growth, Saudi Arabia is slowing sharply to 1 percent while Iran is accelerating toward 4 percent. The current account -- a broad measure of a country’s economic relationship with the world -- tells the same story. Saudi Arabia faces a double-digit deficit this year; Iran’s is nearly balanced following economic reforms in 2012 and 2013 to weather the impact of international sanctions over its nuclear program.

    While Iranian President Hassan Rouhani faces elections next May and is under pressure over the country’s economic performance since sanctions were lifted, it’s already been through the austerity that’s only starting in Saudi Arabia, according to Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. "Iran has already been through so much pain, incrementally they aren’t really worse off," she said.


    Saudi Arabia led OPEC in November 2014 to defend market share, notably against U.S. shale oil producers, at the expense of high oil prices. A month after the policy shift, Ali Al-Naimi, then Saudi oil minister, told the trade journal Middle East Economic Survey that "sooner or later" rivals would run into financial difficulties. The kingdom had "the ability to hold out" for a long time, he said.

    Nearly two years later -- and under different oil minister -- Riyadh is now signaling it may be ready for a U-turn.

    Saudi Arabia has told other OPEC members it’s willing to reduce production to January levels, according to Algerian Energy Minister Noureddine Boutarfa. That effectively would mean a cut of 500,000 barrels a day. Iran, meanwhile, is refusing to freeze its production at the current level of 3.6 million barrels a day, aiming instead to lift output to about 4 million barrels a day, the level before sanctions halved exports.

    When the oil slump started, few would have anticipated that Saudi Arabia would be seeking a deal to boost prices and Iran would resist it. Beyond the economy, other factors are at play, including regional politics. Both countries are on opposite sides of the Syrian and Yemeni civil wars. Then there’s pride -- Iran wants to return to pre-sanctions production.

    Spending Petrodollars

    For the last two years, as oil prices plunged from more than $100 a barrel to a 12-year low of less than $30 a barrel in January, the Saudis have drawn on their huge currency reserves to cushion the impact. It spent $115 billion last year and between January and July this year it used up another $52 billion.

    For analysis on the sale of Saudi Aramco, click here

    Worried about a looming insolvency if the kingdom continued to spend way above its oil income, Riyadh sought to staunch the financial bleeding.

    Subsidies, long a political taboo, are being cut, as are the salaries of government ministers by 20 percent. Infrastructure projects have been delayed, and a value-added tax is mooted for 2018. If Saudis have continued spending as they did last year, Mohammed Al-Sheikh, a financial adviser to the crown, told Bloomberg in April the country would have gone “completely broke” by early 2017.

    On the other side of the Persian Gulf, there isn’t the same sense of crisis.

    "Tehran would love to have higher oil prices, but Iran is the OPEC country that had to do fewer budget sacrifices due to cheap oil," said Olivier Jakob, an analyst at Petromatrix GmbH in Zug, Switzerland. "They feel they have a strong hand.”

    Iran Says It Won't Freeze Output at Current Level

    Oil extended declines as Iran said it’s unwilling to freeze output at current levels and wants to raise production to 4 million barrels a day, damping expectations for OPEC to reach a deal to stabilize markets when the group meets Wednesday in Algiers.

    It’s “not on our agenda” to reach agreement at the OPEC talks in Algiers, Iranian Oil Minister Bijan Namdar Zanganeh told reporters in the Algerian capital. Iran, which produced about 3.6 million barrels a day last month, is seeking a 12-13 percent share of OPEC’s market, he added.

    The U.A.E. supports a deal to freeze output if other nations agree, but production cuts are not up for discussion, Oil Minister Suhail Al Mazrouei said.

    Attached Files
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    Rice Energy to buy Vantage for about $2.7 bln as M&A picks up

    Oil and gas producer Rice Energy Inc said on Monday it will buy Vantage Energy for about $2.7 billion, in what has become the most active month for acquisitions in the energy sector since oil prices sank two years ago.

    Rice Energy shares slid 4.2 percent to $26 in after market trading after it said it would pay about $1.02 billion in cash, issue about 39.1 mln shares worth about $980 million and assume about $700 million in debt.

    The deal follows others this month by EOG Resources Inc , which is buying privately-held Yates Petroleum Corp for $2.5 billion, and Enbridge of Canada's plans to buy pipeline company Spectra Energy Corp of Houston in an all-stock deal valued at about $28 billion.

    Rice would buy assets including about 85,000 net core Marcellus acres in Pennsylvania, with rights to deeper Utica Shale on about 52,000 net acres and 37,000 net acres in the Barnett Shale. Net production from these assets was 399 million cubic feet equivalent per day in the second quarter.

    Rice Energy said it would sell some of the acquired core midstream assets, including 30 miles of dry gas gathering and compression assets, to Rice Midstream Partners LP for $600 million.

    Rice Energy also raised its 2016 capital budget forecast to $735 million from $660 million due to the acquisition, which is expected to close in the fourth quarter.

    Evercore advised Rice Energy while Latham & Watkins LLP served as its legal counsel.
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    Genscape Cushing draw

    Genscape Cushing draw of -276,114bbl for week ending 9/23

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    Sale of South African Oil Reserves ‘Careless,’ Regulator Says

    South Africa’s Strategic Fuel Fund failed to notify the National Treasury of a sale of crude oil reserves and to properly safeguard the assets, the nation’s Auditor-General said in a report to lawmakers.

    “The accounting authority did not exercise reasonable care to ensure the safeguarding of assets of the public entity,” the Auditor-General wrote in the report tabled on Sept. 23, referring to the management of the fund. The SFF also “did not inform the National Treasury of the sale of its 10 million barrels of strategic crude oil reserves, as required by the Public Finance Management Act,” it said.

    The SFF, a unit of the Central Energy Fund whose primary shareholder is the Department of Energy, sold 10 million barrels of oil in December, when Brent crude oil prices were at an eight-year low, for $280 million as part of a rotation of stocks. The department said in July it will review all contracts related to strategic reserve rotation and storage.

    The fund’s former acting chief executive officer, Sibusiso Gamede, resigned in July before the Department of Energy announced the contract review. This was after the department objected to an offer by the SFF for the assets of Chevron Corp. in the country. The department also launched a probe into that purchase attempt.

    The sale of the oil assets generated 3.9 billion rand ($285 million), according to the Auditor-General’s report. It was originally claimed that the revenue from the transaction was 5 billion rand, Johannesburg-based Business Day reported on Monday.

    The media desks of the Auditor-General and the SFF wouldn’t immediately respond to e-mailed questions.
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    Bulgaria looks to attract Cyprus gas imports for its planned gas hub

    Bulgaria would hope to attract natural gas from Cyprus if its planned gas hub at the Black Sea, to transport gas from Russia and the Caspian Sea to southern and central Europe, goes ahead, it said on Monday.

    Bulgaria will launch a feasibility study next year on building a 1.5 billion euro ($1.7 bln) hub at the Black Sea port of Varna that would use gas pipeline links it is already building with neighbouring Greece, Serbia, Romania and Turkey, and eventually also an undersea pipeline from Russia.

    Cypriot gas supplies can flow through the pipeline that Bulgaria is building with Greece and Bulgarian Energy Minister Temenuzhka Petkova said Sofia is ready to boost its capacity if needed, after meeting her Cypriot counterpart Yiorgios Lakkotrypis in Nicosia.

    "Natural gas from Cyprus is one of the options to feed the natural gas hub," the energy ministry quoted Petkova as saying.

    Sofia has yet to attract Russia to the idea of its gas hub, which has the support of the European Commission. The European Bank for Reconstruction and Development is also ready to support the plan.

    Cyprus, where U.S. energy firm Noble discovered an estimated 4.5 trillion cubic feet of natural gas in one prospect in late 2011, is considering Bulgaria as a country en route to shipping Mediterranean gas to Europe, the energy ministry quoted Lakkotrypis as saying.

    "We intend to deliver natural gas to Bulgaria through the gas interconnector with Greece or the LNG terminal near (the northern Greek city of) Alexandroupolis," Lakkotrypis said.

    He said he would like to examine in detail the Bulgarian government's plan to build a gas hub.

    Bulgaria plans to have the gas pipeline with Greece operational at the end of 2018. Sofia also plans to take a stake in the planned LNG terminal at Alexandroupolis in Greece, which will be linked to the pipeline.
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    Israel's Leviathan natgas partners sign $10 bln export deal with Jordan

    Backers of Israel's massive Leviathan natural gas field signed a $10 billion deal on Monday to supply 1.6 trillion feet (tcf) of gas to Jordan's National Electric Power Company.

    "Subject to regulatory approvals from Israel and Jordan, sales ...are anticipated to commence at field startup," said Texas-based Noble Energy, the project's operator.

    Talks on the contract began more than two years ago.

    The 15-year deal for Leviathan, which holds an estimated 22 tcf of gas, should help the U.S.-Israeli group secure funds to bring it online.

    Production is expected to begin around 2019 or 2020.

    The Leviathan group has also been in talks to export much larger quantities of gas to companies in Egypt.

    Shares in the Israeli partners - which include Ratio Oil , Delek Group and its subsidiaries Avner Oil and Delek Drilling - were halted by the Tel Aviv Stock Exchange for more than a half hour.

    Leviathan, discovered in the eastern Mediterranean in 2010, is one of the world's largest offshore gas discoveries of the past decade.

    Last year, Israel approved plans for a 15.5 kilometre (9.6 mile) pipeline near the Dead Sea to export gas to Jordan.
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    TransCanada's Columbia Pipeline offers to buy Columbia Pipeline Partners

    TransCanada Corp said on Monday its unit, Columbia Pipeline Group, offered to buy Columbia Pipeline Partners LP for about $848 million in cash.

    The $15.75 per common unit offer represents a premium of 11.3 percent to Columbia Pipeline Partners' 30-day average closing price as of Sept. 23, TransCanada said.

    A committee of independent directors of Columbia Pipeline Partners' board will be formed to consider the offer as the general partner of Columbia Pipeline Partners is an indirect unit of Columbia Pipeline Group, TransCanada said.

    TransCanada, which completed its $10.3 billion takeover of Columbia Pipeline Group in July, had said it was reviewing strategic alternatives for master limited partnership (MLP) holdings, including Columbia Pipeline Partners LP.

    Columbia Pipeline Partners LP is a Delaware MLP with interests in three regulated U.S. natural gas pipelines, as well as storage and related midstream assets.

    TransCanada, Canada's second-largest pipeline company, has retained Morgan Stanley as its financial adviser and Vinson & Elkins as legal adviser.
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    Project Forward in talks with Shell

    Project Forward in talks with Shell

    Project Forward has announced that it has combined with Shell to discuss and investigate the options of supplying LNG-powered vessels. They will also assess the bunker requirements for globally-trading bulk carriers, tankers and container vessels.

    Led by Arista Shipping and including the resources of ABS, Deltamarin, Gaztransport & Technigaz (GTT) and Wärtsilä, Project Forward has developed a technically feasible and commercially viable design for ocean going, deep sea vessels powered by LNG fuel. The design is equally suitable for bulk carriers and tankers.

    Arista Shipping Principal, Alexander P Panagopulos, said: “Merchant shipping is under increased pressure of tight regulations on emissions from a range of sources and this will continue in future […] LNG is a cleaner burning marine fuel for shipping which can help ship owners and operators to reduce emissions of CO2, sulfur, particulates and nitrogen oxides.”

    The design of Project Forward ensures a long sailing range on LNG, which can be adjusted to fit specific needs of each owner or trade pattern. As a result, it could be sufficient for LNG-fuelled vessels to bunker LNG at major ports only. Arista Shipping feels the establishment of bunkering locations needs to be concentrated in these major ports and the development accelerated in order to meet this emerging and rapidly expanding demand.

    Together, the Project Forward partners are working towards one common goal; making the launch of a first bulk carrier vessel with the innovative Project Forward design feasible within the next few years.
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    What's the SCOOP on the STACK?

    There are more than just earthquakes buzzing in Oklahoma. The South Central Oklahoma Oil Province and Sooner Trend Anadarko Basin Canadian and Kingfisher counties (SCOOP and STACK) are becoming some of the most highly sought after shale assets in North America. Along with the Permian, the newly developed acreage in Oklahoma seems to provide some of the best economics of the North American oil plays.

    Extensions of the Cana Woodford, the SCOOP and STACK have turned interest in Oklahoma away from pure natural gas towards liquids potential. Operators including Devon, Newfield and Marathon have focused efforts on drilling the liquids rich plays since the downturn in natural gas prices in 2008. According to Devon, certain STACK assets reward operators with 20-30%+ IRR, second highest behind prolific core Permian plays. Operators have also noted that the STACK has little to no produced water. This along with high yields from horizontal redevelopment and modern stimulations have created a buzz around the basin's future potential.

    During 2015, the STACK became one of the few unconventional formations in North America to see a year over year increase in rig count. However, increased operator interest in Oklahoma has coincided with renewed speculation that fracking may be connected to the 5.6 magnitude earthquake that recently shook the state. While the precise connection between fracking and earthquakes remains unproven, specialists believe that the injection of wastewater from disposal wells could increase the likelihood of earthquakes in the area. The environmental concern surrounding the SCOOP and STACK could yet play an important role in the basins success.

    With one of the lowest breakevens of the North American shale plays - some areas reportedly economical under $40/ bbl. WTI - the question surrounding potential environmental legislation remains. Whether or not operators are able to overcome these concerns will play an important role in US production over the next decade.
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    Labour vows fracking ban if it wins general election

    A future Labour government would ban fracking, shadow energy secretary Barry Gardiner is to say.

    Mr Gardiner will tell the Labour Party conference there would be an "outright ban" on the process, which involves gas being extracted from shale rock.

    Labour would back "clean technologies for the future", he will say.

    The government says fracking could provide the UK with greater energy security and create jobs, but opponents argue it is bad for the environment.

    Environmentalists say shale gas projects will make the UK's climate change targets impossible to achieve.

    Gary Smith, the GMB union's Scotland secretary, said ruling out fracking was "madness", saying the UK would be dependent on gas for decades.

    "We will have to confront the fact that we will be buying gas from hangmen, henchmen and head-choppers. We don't think that's ethical. We have world-class regulators and world-leading standards in terms of monitoring. Ruling it out now is madness," he told the Press Association.
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    Gazprom looks to expand LNG output in Russian Far East

    Russian state-run gas major Gazprom plans to build a new liquefied natural gas platform at its Sakhalin-2 development project with an eye on boosting exports to Japan, Deputy Chairman Alexander Medvedev said in Moscow.

    The platform, which may receive final approval next year with the goal of starting production in 2022, could boost Japanese and Russian efforts to strengthen economic ties under an eight-point plan presented by Tokyo.

    Gazprom works with Royal Dutch Shell and Japanese trading houses Mitsui & Co. and Mitsubishi Corp. on the Sakhalin-2 oil and gas project, with LNG production beginning in 2009 mainly for export to Japan.

    Sakhalin-2's LNG business "has been one of our most successful projects in the last 10 to 15 years," Medvedev said. "If there's enough demand in Japan, we will make the expansion of this business a top priority, creating a pillar for future cooperation between Russia and Japan."

    The project's two existing LNG platforms, which combined produce about 10 million tons a year, are both operating at nearly full capacity. Gazprom plans to obtain the natural gas needed to boost LNG output from fields off the coastal island of Sakhalin, including the Sakhalin-3 project. But Gazprom also is negotiating the possible purchase of natural gas from Sakhalin-1, which the Russian company considers to be the best option.

    The Sakhalin-1 project's stakeholders include U.S. giant Exxon Mobil, Russian state-run Rosneft and Japanese public-private consortium Sakhalin Oil and Gas Development, or Sodeco. Sakhalin-1, which Gazprom is not involved in, has yet to deliver on planned exports to China and the construction of its own LNG plant.

    Medvedev also said Gazprom will revisit the possibility of building a gas pipeline from Sakhalin to Japan in cooperation with the country. Previous plans for the pipeline were scrapped over economic calculations and environmental concerns, such as the potential impact on the fishing industry.

    "We've received strong, repeated requests" from Japanese business and political leaders to reconsider the pipeline, Medvedev said.

    Gazprom also had planned to build a new LNG plant in Vladivostok to serve as the export hub to Japan.

    "We have shelved the idea for a while as we observe the development of gas fields and domestic demand," Medvedev said. "We haven't scrapped the plan, but we will prioritize expanding Sakhalin-2 in order to utilize the gas reserves there more efficiently."
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    East Africa Oil Pipelines a Boon to Private Investors, AfDB Says

    Oil pipelines planned in Kenya and Uganda to ferry crude from fields to port present opportunities for private financiers keen to gain a foothold in East Africa’s energy industry, the African Development Bank says.

    “Nobody has ever, ever lost money financing pipelines,” Gabriel Negatu, the Abidjan-based lender’s regional director for East Africa, said in an interview in Kenya’s capital, Nairobi, on Sept. 23. If there is oil flowing, “it’s generally viable,” he said.

    East African countries are in a race to start exploiting crude oil reserves estimated at 1.7 billion recoverable barrels in Uganda and 750 million barrels in neighboring Kenya. Both nations are planning to start construction on pipelines by 2018, even as oil prices are stuck at less than half the level of three years ago, straining finances of producers across the continent.

    While global oil prices are “depressed a little bit,” that shouldn’t hold sway over potential investors seeking to finance pipelines in the two countries, Negatu said. Current global price levels are “not a permanent situation,” he said.

    “Prices should stabilize around at $60 per barrel next year, barring the unforeseen,” Negatu said. “At that point I think the industry will adjust to that reality and figure out how to become viable and profitable.”

    Kenya expects production by Tullow Oil Plc to start in mid-2017, with the government initially hauling crude by road and rail to a refinery at the port city of Mombasa. East Africa’s largest economy plans to start building an 865-kilometer (538-mile) pipeline linking fields in its northern region to a port at Lamu on the Indian Ocean coast by 2018, the government has said.

    Ongoing Exploration

    The AfDB is confident that results from exploration in northern Kenya and the possibility of South Sudan routing crude exports via Kenyan ports “will support the pipeline and even other downstream facilities,” Negatu said.

    Work on Uganda’s pipeline, which will run from the western region of Hoima to the Tanzanian port of Tanga, is expected to begin in 2018. France’s Total SA, China National Offshore Oil Corp. and London-based Tullow are developing oil fields in Uganda’s Lake Albert basin. The three companies have been awarded production licenses by the Ugandan government that will run for 25 years.

    The AfDB will support the pipelines “with whatever means available,” Negatu said. “If there are two different pipelines, we will talk to both sides and find ways to make resources available.”

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    Oil prices rebound after Algeria says all options open at OPEC meeting

    Oil prices rebound after Algeria says all options open at OPEC meeting

    Crude prices rebounded on Monday after Algeria's energy minister said the day before that all options were possible for an oil output cut or freeze at this week's informal meeting of OPEC producers.

    That came after prices tumbled 4 percent on Friday amid signs Saudi Arabia and Iran were making little progress in achieving preliminary agreement to freeze production.

    Members of the Organization of the Petroleum Exporting Countries will meet on the sidelines of the International Energy Forum in Algeria from Sept. 26-28, where they will discuss a possible output-limiting deal.

    "We will not come out of the meeting empty-handed," Algerian energy minister Noureddine Bouterfa said in Algiers on Sunday.

    A weaker U.S. dollar also supported oil prices.

    "The fact countries like Algeria are still talking about a deal means it's still on the table regardless of others' views about what might be happening," said Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance.

    "I expect Algeria and Venezuela to keep pushing for a deal - it's imperative for them to keep the price up," Barratt said.

    Signals have been mixed so far on whether a deal on cutting or freezing production is possible.

    Sources told Reuters on Friday that Saudi Arabia did not expect a decision to be made in Algeria, while Saudi Arabia had also offered to reduce production if Iran caps its own output this year, an offer to which Tehran had yet to respond.

    "Our base case is that OPEC will meet on Sept. 28 without a formal statement. A nonbinding commitment to stabilize oil markets is possible, but it would likely lack teeth," Morgan Stanley said in a note on Monday.

    "Rather, we expect OPEC to note how this meeting lays the foundation for a more constructive and formal discussion at the official November OPEC meeting," the bank added.
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    Niger Delta Avengers claim first attack in energy hub since ceasefire

    Nigerian militant group the Niger Delta Avengers said on Saturday it had carried out its first attack in the country's southern energy hub since it declared in August it was halting hostilities to pursue talks with the government.

    The militants, who said they attacked the Bonny crude export line on Friday night, have in previous months launched assaults which have cut crude production, which was 2.1 million barrels per day at the start of the year, by around a third.

    In a statement on its website the group said it "brought down oil production activities at the Bonny 48 inches crude oil export line" through its "strike team". Reuters was unable to immediately independently verify the details.

    The Avengers, who want a greater share of the OPEC member's wealth to go to the Niger Delta where most crude is produced, said the attack was a "wake up call" for the government, which it accused of intimidating youths in the region since the ceasefire began.

    "While we were promised that the concerns of the Niger Delta will be addressed once a truce is declared, the activities of the government and her agents are not assuring enough, there has been no progress," the group said.

    However, the statement added that the organization was "still in favor of dialogue and negotiations". Earlier this month the Avengers told Reuters there had been no contact with the government since the group agreed to cease hostilities.
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    Federal Reserve proposes new limits on Wall Street energy bets

    The Federal Reserve on Friday outlined a plan to limit Wall Street bets on the energy sector by forcing companies like Goldman Sachs and Morgan Stanley to hold more capital against such investments.

    Under current law, Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) may invest in energy storage and transportation in ways that other banks cannot, but the U.S. central bank's new plan would make such bets more costly.

    Banks would have to hold more capital against energy and commodity investments under the plan. The Fed also contemplated other limits like banning Wall Street control of power plants and prohibiting bank holding companies from owning copper.

    At this stage the plan is only a proposal that is subject to comment and change. The Fed has opened a three-month window for comment.

    The Fed, which regulates the banking and financial services sector, said the new measures would help shield banks and the broader financial system from a costly mishap like the 2010 Deepwater Horizon oil spill in the Gulf of Mexico.

    Under the plan, Fed officials said, banks would have to hold roughly $1 in capital for every $1 of energy infrastructure they owned.

    In the Fed’s calculus of bank safety, that amounts to a 1,250 percent capital charge - the regulator's highest tariff for the riskiest investments.

    Wall Street would have to offer roughly $4 billion in fresh capital to satisfy the proposal.


    Firms on Wall Street have already been scaling back their ownership of refinery, shipping and storage facilities in the face of scrutiny from regulators who have asked what benefit comes from banks in the raw material market.

    Morgan Stanley has decreased the value of physical commodity assets on its balance sheet to $321 million in 2015 from $9.7 billion in 2011.

    Goldman Sachs has shed much of its energy infrastructure, too, but the bank is still a major trader of fossil fuels.

    J. Aron, Goldman's commodities arm, traded more natural gas than both Chevron  and ExxonMobil in the second quarter of this year, according to Natural Gas Intelligence, a trade publication.

    The energy trader moved 5.42 billion cubic feet of physical gas in the United States during the period, more than 73 percent of the volume it did during the same time in 2011, according to data.

    Morgan Stanley and Goldman declined to comment on the Fed's proposal.

    Between 2007 and 2009, commodities trading for banks like Morgan Stanley and Goldman accounted for as much as a fifth of their overall annual revenues.

    Although Goldman has scaled back its ownership of physical commodities, it has remained committed to trading.

    The bank during the second quarter of 2016 earned more from that business than any of its Wall Street peers, according to data provider Coalition.

    Tougher regulations conceived since the 2008 financial crisis, though, have push much of that trading business to specialists like Glencore Plc, Vitol Group and Mercuria Energy Group.

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    U.S. oil rig count set for biggest quarterly rise in 2 years -Baker Hughes

    Sept 23 U.S. drillers this week added oil rigs for a 12th week in the past 13 and were on track to add the most
    rigs in a quarter since crude prices plummeted two years ago,although the momentum has slowed as prices hold below $50 a

    Drillers added two oil rigs in the week to Sept. 23,bringing the total rig count up to 418, the most since February
    but still below the 641 rigs seen a year ago, energy services firm Baker Hughes Inc said on Friday. 

    The oil rig count plunged from a record high of 1,609 inOctober 2014 to a low of 316 in May after crude prices collapsed
    in the biggest price rout in a generation due to a global oil glut. That decline continued through the first half of this yearwhen drillers cut 206 rigs.

    So far this quarter, however, drillers have added or at least not removed any oil rigs for 13 weeks in a row, the
    longest streak of not cutting rigs since 2011.

    With just one week to go in the quarter, oil rig additions over the past three months were on track to be the most since
    the first quarter of 2014 when drillers added 105 rigs. To date,the count has increased by 88 rigs so far this quarter.

    Continued growth in the rig count in the short-term,however, could be at risk if the small, independent drillers,
    which accounted for about two-thirds of rig additions since May,pull back if prices remain low.

    As their cash flows ramped with oil moving from itsFebruary bottom to over $50, they redeployed their cash flows in
    the form of rigs," analysts at Evercore ISI, a U.S. investment banking advisory, said about the small, independent drillers.

    "With WTI (West Texas Intermediate crude) now oscillating inthe mid-$40s, and cash flows declining again due to the lower
    oil price, we wouldn't be surprised to see this group of operators let some rigs go," Evercore said.

    U.S. WTI futures were below $45 per barrel on Fridaybut were on track for a 5-percent hike for the week ahead of
    next week's meeting in Algeria where the world's biggest producers are expected to discuss a deal to curb the global oil

    Looking forward, analysts said they still expect the rigcount to rise in 2017 and 2018 over 2016, but not by as much as
    a few weeks ago as future oil price forecasts hold in the $50 to$60 a barrel range.

    Futures for calendar 2017 were trading around $48 a barrel, while calendar 2018 was about $51.

    "Based on a lower assumed price deck of about $50-60 for thenext two years, we are moderating our exploration and production
    capital spending and activity growth assumptions," analysts at Simmons & Co, energy specialists at U.S. investment bank Piper
    Jaffray, said in a note.

    Simmons reduced its average total oil and natural gas rig count forecasts to 495 from 498 in 2016, to 647 from 704 in 2017
    and to 857 from 981 in 2018.

    The combined number of oil and gas rigs active so far thisyear has averaged 480 rigs, according to Baker Hughes data. That
    compares with an average rig count of 978 in 2015.

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    Exxon Mobil Reportedly Considers Sale Of More Than $1 Bln In Norway Assets

    Exxon Mobil Corp. is considering a sale of some of the oil fields it operates in Norway'sNorth Sea in a deal that could fetch more than $1 billion, according to reports citing people familiar with the matter.

    Exxon isn't running a formal process, though it has had discussions with potential buyers, the reports said.

    The reports indicated Exxon was planning to sell Ringhorne, Balder and Sigyn, while Jotun is closing down soon.

    Read more:
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    Interview: Gazprom's 2016 natural gas export hike led by buyers, not 'dumping'

    Platts spoke this week with Gazprom Export's Valery Nemov about Russian gas supplies to Europe and current European gas market conditions. Read the interview below and also hear more from Valery Nemov at Platts' European Gas Summit in Dusseldorf on September 27-28.

    * Hub indexation 'broadly' used in Gazprom contracts: Nemov
    * But oil indexation 'still alive'
    * Take-or-pay levels also changing in revised agreements

    The significant increase in Russian gas supplies to Europe so far in 2016 is a result of higher demand from buyers, and is not due to Gazprom "dumping" gas on the European market, a senior official from Gazprom Export said Friday.

    In a wide-ranging interview with S&P Global Platts, Valery Nemov, Gazprom Export's deputy head of contract structuring and price formation, also said that oil indexation remained key to gas pricing.

    Gazprom's gas exports to Europe -- including Turkey and the ex-Soviet Union states -- rose by 14% to 85 Bcm in the first half of 2016 compared with the same period last year.

    Some industry spectators have questioned whether the sharp increase was demand-driven or whether Gazprom has been flooding the European market with cheap gas as part of a market defense strategy ahead of the startup of US LNG exports.

    "We have observed a remarkable increase in our supplies to Europe in the first half," Nemov said.

    "Gazprom has not been dumping these volumes. Our contracts are mostly designed in a way that the nomination right comes from the buyer. So the increase in supplies means that demand has increased, as it reflects buyers' willingness to take Russian gas," he s

    Nemov also said Russian gas supplies to Europe were "cost-effective" compared with the cost of shipping US LNG to Europe at current prices.

    "In the 'sunk-cost' concept US LNG deliveries are possible, but the scheme in the current price environment turns out to be a loss-making one for some party -- a tolling contract holder or a liquefaction capacity investor," he said. "So which deliveries are more viable in longer term? The answer is quite obvious."

    And in the short term, the level of gas price in Europe has fallen to a point that it is almost prohibitive for new LNG suppliers.

    "Prices in Europe are currently so low that they hardly cover semi-variable costs of LNG supplies from new projects," he said.


    Nemov also said that Gazprom increasingly used hub pricing in its long-term contracts with customers in Europe.

    "In recent years we have revised many of our long-term contracts. Hub indexation is currently broadly used in our contract portfolio, predominantly in Western Europe," he said.

    He added that with this came more flexibility around take-or-pay obligations for buyers.

    "Generally, the transition to broader use of hub indexation comes together with changing take-or-pay levels," he said.

    Gazprom has said in the past year or so that it is open to providing more flexibility around gas supplies to Europe, but Nemov said that a supplier also needs an incentive to provide more flexible terms.

    "To have more flexibility within existing contracts and more hub indexation at the same time is a fantastic desire. But you can't have your cake and eat it too," Nemov said. "Flexibility stemming from long-term contracts should have its own fair price as it is the supplier that is responsible for providing flexible volumes." Nemov also said that oil indexation was here to stay.

    "Oil indexation is still alive and oil prices serve as a benchmark for gas forward prices," he said, adding that in long-term investment planning it was usual to look at the correlation between oil and gas prices when forecasting.

    Nemov also said that the only participants in the liberalized European gas market that are truly interested in outright prices are the producers as they are unbundled from the supply to end-users.

    The midstream -- the importers of gas -- are more concerned with the margin they get from buying and selling gas.

    "Their revenues do not correlate with the absolute level of price anymore," he said.

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    Brookfield-led group to buy stake in Petrobras natgas pipeline

    Brazil's state-run oil company Petroleo Brasileiro SA agreed to sell 90 percent of its natural gas pipeline unit for $5.2 billion to a group of investors led by Canada's Brookfield Asset Management Inc , the companies said on Friday.

    The Brookfield-led group agreed to pay $4.34 billion upon closing the deal and the remaining $850 million in five years, they said. The consortium includes sovereign wealth funds CIC Capital Corp of China and GIC Private Ltd. of Singapore.

    Reuters had reported on Sept. 6 details of the accord that the investor group struck with Petrobras, as the oil company is known.

    The deal, which is still subject to approval by shareholders and Brazilian regulators, is the largest yet in a plan by the oil company to sell $15.1 billion of assets in 2015 and 2016 and raise another $19.5 billion through divestments and partnerships between 2017 and 2018.

    Under the accord, Brookfield Infrastructure Partners Ltd will invest at least 20 percent of value of the deal, while Brookfield Asset Management has an initial investment of about 30 percent.

    The Petrobras pipeline unit, Nova Transportadora do Sudeste SA, transports natural gas in south-central Brazil, providing Rio de Janeiro, São Paulo and Minas Gerais with natural gas coming from Bolivia and Brazil's offshore oil and gas fields.
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    Russian finance minister wants to raise tax on oil, gas firms

    Russian finance minister Anton Siluanov said on Friday he wanted to increase taxes on the oil and gas industry by around 50 billion roubles ($787 million) a year.

    Russia is the world's biggest oil producer and its output has been rising to record highs despite low crude prices. The trend, supported by a weaker rouble, has caught the attention of the treasury, which needs revenues to cover a budget deficit.

    The current oil tax regime envisages a gradual increase in mineral extraction tax (MET) and export duties on heavy oil refining products, offset by a reduction in duties on exports of oil and high-grade refined products.

    This year, however, the MET was increased as planned, but there was no corresponding reduction in oil export duty, angering the industry. Russia's oil taxes are already among the highest in the world.

    Speaking on the sidelines of the Moscow Finance Forum, Siluanov told reporters the finance ministry would propose increasing taxes on the oil and gas industry by about 50 billion roubles a year via tools such as MET.

    "We are working with the energy ministry on how this should be spread out, which sectors (oil or gas) we will take this money from," he said, without giving further details.

    Siluanov also said the ministry planned to reach the same level of taxation for the gas sector as for the oil industry, in a step-by-step process.

    "First of all, we are talking about Gazprom," he said.
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    So Much For The Saudi "Proposal" - Iran Refuses To Cap Output, Clashes With Saudis Over Freeze

    After oil spiked earlier on an anonymously-sourced Reuters "report" that Saudi Arabia has offered to cut production in exchange for an Iran production freeze, a proposal which was promptly shut down by third party observes, moments ago WSJ reporter Summari Said effectively killed this particular attempt to spike the price of oil when she reported - also citing sources - that Saudis and Iranians have clshed over output freeze levels, and that Iran has refused to cap output.

    This is what she tweeted in its entirety:

    Saudis, Iranians Clash Over Output Freeze Level--Sources
    Saudis Want to Use Secondary Sources for Output Freeze Levels--Sources
    Iran Wants to Use Govt Projections for Freeze Levels--Sources
    Disagreements in Vienna Go Unresolved Ahead of Algiers Meeting-- Sources
    Iraq Won't Cap Output Until It Reaches 4.75M B/D to 5M B/D--Statement
    Iraq Output Cap Implies Boost of 150,000B/D to 400,000 B/D Vs August

    Oil has recouped some of its gain, but is still well above the intraday lows. We expect many more such headline headfakes in the coming days and especially early next week during the Algiers OPEC meeting.
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    Schlumberger strike agreement on seismic with Petronas

    Schlumberger said it has signed an agreement to license a significant part of the WesternGeco Campeche seismic survey in the southern Gulf of Mexico with Petronas.

    The Western Geco Campeche deepwater survey is located in the southern Gulf of Mexico.

    More than 800,000km of newly imaged subsurface data has been acquired in the last 12 months.

    The project follows the Mexican government’s opening of licensing rounds to non-government companies for the first time.

    Maurice Nessim, president of WesternGeco, Schlumberger, said: “We are pleased to have the opportunity to expand our collaboration with PETRONAS in Mexican waters of the Gulf of Mexico,’ ‘The great potential of the area and complexity of the geology in the Campeche basin requires high-quality wide-azimuth acquisition to image the subsalt effectively.

    “We will leverage our extensive US Gulf of Mexico experience to deliver enhanced subsalt imaging and additional exploration solutions to our clients.”
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    Iran unlikely to agree to oil freeze, pre-sanctions output still aim: source

    Iran would be unlikely to agree to freeze its crude output at current levels as part of any deal among OPEC and other major oil producers, an Iranian official told S&P Global Platts on Friday.

    Reuters reported earlier that Saudi Arabia has told Iran it would be willing to reduce its output if Iran agreed to freeze its production at current levels of around 3.6 million b/d, citing unnamed sources.

    The Iranian official, who spoke on condition of anonymity, as oil minister Bijan Zanganeh has final say over policy decisions, declined to confirm whether Iran had received any such proposal from Saudi Arabia.

    But he said Iran continues to insist on regaining its pre-sanctions output levels before agreeing to any restrictions on its output.

    "I think it's unlikely that Iran will even consider 3.6 million b/d," the official said. "It is very, very unlikely that Iran agrees to this figure or negotiates it." He added: "As far as the oil ministry's principal policy is concerned, we have always stressed that we want our pre-sanctions level of 4.2 million b/d back."

    Representatives from the two countries have been meeting in Vienna the past few days ahead of next week's International Energy Forum in Algiers, where OPEC is scheduled to informally meet and possibly discuss an output freeze, according to media reports.

    Saudi Arabia pumped a record 10.66 million b/d in August, according to the latest Platts OPEC production survey. Many observers expect the kingdom's output to decline in the coming months anyway, as the peak summer air conditioning season ends, reducing its domestic crude burn.

    Iran produced 3.63 million b/d in August for the third straight month, according to the Platts survey, as recovery from sanctions imposed on its oil sector by western powers over its nuclear program appears to be plateauing.

    A previous agreement in April among major OPEC and non-OPEC producers at a summit in Doha to freeze output at January levels fell apart over Saudi Arabia's insistence that Iran be a party to the deal.

    Iran did not participate in the Doha talks but is scheduled to attend the Algiers meeting.

    The meeting comes as the market continues to languish from a global supply overhang that has persisted far longer than many producer nations had anticipated.

    Saudi Arabia, which in recent years has declined to act as the world's swing producer to balance the market, has said that it would only participate in coordinated output action if there were unanimous agreement among all key producers.

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    Alternative Energy

    Lynas warns on debt in low-price environment

    The high level of debt on Lynas’s balance sheet continues to be a challenge in the low-price environment, the lossmaking rare earths miner said on Thursday.

    The company raised caution about its ability to meet itsfinancial obligations and stated that it would require either amendments to the terms of its loan facilities or alternative sources of funding. Lynas said it was in negotiations with its lender groups regarding amendments.

    “In this low price environment, the Lynas business has been approximately break-even on a free cash-flow basis for several quarters, and accordingly, the high level of debt on the Lynas balance sheet remains a challenge. Throughout thefinancial year, our lenders have continued to support the businesses.”

    Lynas flagged price volatility, production levels, foreign currency exchange rates and the regulatory environment as risks to its ability to continue as a going concern.

    The miner, however, reported that it was implementing strategies to mitigate the effect of the low-market pricing, including continuing to focus on opportunities to further reduce operating costs.

    Lynas is operating the Mt Weld mine, in Australia, and theLynas Advanced Materials Plant, in Malaysia. The group achieved sales revenue of A$196.1-million in the 2016financial year, reflecting increased production volumes and strong relationships with customers in Japan and China.

    The miner narrowed its loss from A$118.6-million to A$94.1-million in the year ended June 30.
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    Renault says new Zoe has longest range of any mainstream electric car

    Renault has unveiled a new electric car that it claims will overcome psychological barriers among drivers who fear running out of power between charges.

    Launched on Thursday ahead of the Paris motor show, the latest Zoe model will have the longest range of any mainstream electric vehicle, the French carmaker said.

    Comparisons will inevitably be drawn with US-headquartered Tesla, whose models match the Zoe’s 250-mile (400km) battery, but Renault said it was competing for a different market. Most mainstream electric cars, such as those by BMW and Nissan, have a range of 100-150 miles.

    “We are breaking psychological barriers with the range ... 300km [186 miles, the car’s expected range in suburban environments] is a real threshold in the mind of the people,” said Eric Feunteun, vice-president of Renault’s electric vehicle programme.

    “We are offering the same range as Tesla for a totally different price. I don’t consider Tesla as an issue; Tesla is a good thing because they create a good image for electric vehicles and because people like to have choices.”

    Electric cars could be charged at Shell service stations from 2017

    The car’s battery, made in partnership with LG, has nearly twice the capacity, employs different chemistry and weighs twice as much as the battery in the original Zoe, which had a range of 149 miles.

    “This is a real breakthrough,” said Feunteun. “It’s quite simple to understand but not simple to do – to put twice as much energy in the same box.”

    He said that although some countries, such as the UK, were reducing their subsidies for the greener cars, pressures like the Paris climate agreement meant more governments were still pouring more money into supporting them.

    “At this stage in 2016 the incentives are growing in Europe. Germany has started, part of Belgium started. We have not yet reached the highest point of incentives,” Feunteun added.

    There are now around 1.26m electric cars worldwide, up from 6,000 in 2009. Feunteun said growth had been robust because of customer satisfaction with the vehicles and because technological advances were happening faster than expected.

    “But the reality is today that, for energy companies, electric cars are an opportunity, to help the grid store electricity and regulate it. With the growth of unstable [intermittent] sources of energy like wind and solar, you need some buffer behind it, and those electric cars can be those buffers.”

    The new Zoe will be delivered to UK drivers in November and is expected to sell for around £17,000 from Saturday after a £4,500 government grant.

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    Eni agrees renewables energy deal with Egypt

    * Italian oil major Eni has agreed a common strategy with Egypt to build renewable energy projects in the country, the company said on Thursday.

    * The first project will be a solar plant in Sinai with a maximum output of 50 megawatts. Construction is expected to be sanctioned next week and completed by the end of 2017.

    * The project is part of Eni's push into green energy, with the aim of bringing 420 megawatts of mostly solar power generation online by 2022.

    * Eni, the owner of the massive Zohr gas field expected to start production next year, currently produces about 210,000 barrels of oil equivalent per day in Egypt.

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    Division over cost competitiveness of renewables

    The Institute of Directors annual conference in London this week heard differences of opinion on when renewable energy was likely to make parity with fossil fuels in terms of cost competitiveness.

    Anglo-Swiss mining giant Glencore’s chairman Tony Hayward said he didn’t see renewables capable of meeting the feat by mid-century, much later than energy organisations have forecasted.

    According to Mining Weekly the company maintains such reasoning valid in terms of ongoing investment in coal and forecast global demand will grow by 7 per cent by 2030, driven by emerging economies and industrial demand.

    "The investment we put in the ground today will come out in ten years. The same applies to the world's oil and gas companies - their investments will come out in 20 years," Hayward said, going on to add that renewables won't achieve cost parity with fossil fuels until 2051.

    "In 15 years' time, if someone really does achieve a technological breakthrough akin to a mobile phone, an iPhone, that will change the energy picture going forward," he said.

    Other energy company chiefs speaking at the event did not share the former BP boss's opinion.

    Wilfrid Petrie, UK and Ireland chief executive at French gas and power group Engie, said he thought it would be as early as in five years' time, whereas David Brooks, MD of supply at UK renewable energy supplier Good Energy, said it could happen by 2020, adding that wind was already at cost parity with fossil fuels.

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    Apple bets the house on electric, shared and autonomous vehicles

    Have you come across the term “share mobility” yet? If you haven’t already, you are about to. It refers to the new concept of electric, autonomous and shared vehicles – and it will be huge” So huge in fact that some analysts put the value of the market at $US2.6 trillion, by 2030.

    The concept of electric, autonomous and shared vehicles is likely to have a major impact on the global transport industry – cars and the massive fuel industry – and in the way we run our lives. There may be no more individual ownership of vehicles, humans might even be banned from driving. And it is also presenting either massive headaches, or massive opportunities for the big corporates, and there are signs that they are investing heavily.

    This graph from a Morgan Stanley report on software giant Apple is a case in point. It shows that Apple has spent more on R&D into car and related services in the past few years than it did on the Apple Watch, iPad and iPhone combined. And it still doesn’t have any products to show for its efforts.

    Even more astonishingly, Apple is outspending the major car manufacturers at a rate of 20:1. The near $US5 billion it has spent in the last three years compares to the average spend of $US192 million at the top 14 auto makers. It even outranks Tesla by a factor of more than 10:1.

    So what market is it addressing?

    According to Morgan Stanley, it is a $2.6 trillion market that will emerge by 2030. It bases that calculation on  26 per cent of the 20 trillion miles driven in 2030 are through “shared vehicles” and that this will be worth around US50c/mile.

    To give that market size some context, this compares to the roughly $800 billion market Apple addresses with its iPhone, iPad and associated products today.

    Morgan Stanley notes that “shared mobility” is the intersection of three disruptive forces – electric, autonomous, and shared vehicles, the need for improved “digital experience in vehicles, and faster technology cycles, which now average 1-2 years, at most, compared to auto design cycles of 5-7 years.

    “With Apple outspending the major auto (manufacturers) on this opportunity, we believe Apple could gain at least 16 per cent of the shared mobility market, similar to the company’s share in smartphones today,” Morgan Stanley writes.

    “This translates to over $400 billion of revenue and $16 earnings per share for Apple in 2030 – more than the rest of Apple generates today ($234 billion/$9.22 EPS in FY15). Which may explain why Apple is betting the house on new car technology.
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    Caught On Tape: Hackers Take Control Of A Moving Tesla From Miles Away

    Caught On Tape: Hackers Take Control Of A Moving Tesla From Miles Away

    Tesla can't seem to catch a break this year with multiple accidentsblamed on the company's autopilot feature, earnings misses and huge cash burns on lower than expected deliveries that have resulted in the company hitting its bank "funding limit", and a controversial proposed merger with SolarCity.  Fortunately, none of this has really mattered to shareholders who keep supporting the stock near its all time highs.

    As such, we suspect that Chinese hackers posting the first-ever evidence on youtube that they can hack into moving Teslas and control the vehicles from miles away won't be of much concern to shareholders either.

    Nevertheless, we present the following startling footage of Tesla Model S vehicles being remotely controlled by hackers who demonstrate the ability to manipulate everything from overriding the internal displays to opening locked doors and slamming on the brakes while the car is moving.  Seems pretty safe, right?

    The following footage shows a hacker slamming on the brakes of this Model S from 12 miles away.

    See the video at :
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    Canada's Ontario says to scale back renewable energy purchases

    Ontario will scale back its purchase of renewable power in a move expected to result in savings of up to $C3.8 billion ($2.86 billion) from a 2013 forecast, the provincial government said on Tuesday.

    It's not clear consumers will benefit directly, though the province's Energy Minister Glenn Thibeault told a news conference a residential household can expect to save C$2.45 a month on electricity bills.

    The government said it will immediately suspend the second round of its Large Renewable Procurement process and the Energy-from-Waste Standard Offer Program, halting procurement of over 1,000 megawatts of solar, wind, hydroelectric, bioenergy and energy from waste projects.

    Ontario's Liberal government has pledged to lower electricity costs for residents as it sought to provide balm for an issue that has become an irritant with voters.

    Rising energy bills have hurt the popularity of the Liberals, who lost a by-election earlier this month to the Conservatives for a long-held Toronto seat.

    Thibeault said the Sept. 1 planning outlook of the province's Independent Electricity System Operator determined Ontario already has an ample supply of electricity for the next decade.

    "Given this strong energy position, it only makes sense that ... we take a careful look at procurements and make common-sense adjustments," Thibeault said.
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    Europe ‘far from being leader in renewables without ambitious policies’

    Europe needs more ambitious policies that give clear stable signals to investors if it wants to play a leading role on renewables.

    It should also raise its target of generating green energy to at least 30% by 2030, a report from industry body WindEurope stated.

    According to the group, new wind installations were down 9% in the first half of 2016 year-on-year.

    It added the upcoming revision of the EU’s Renewable Directive will be the main policy instrument to support what the region does on renewables and to raise investor confidence if the more ambitious target was adopted.

    It also called for continued innovation to reduce costs and support the integration of these technologies in the energy system.

    WindEurope also said the electricity market needs further reform to make them fit for more renewables and boost investment.

    It added legislation on energy market design is also critical for the successful deployment of wind power and other green sources and to create a level playing field for players.

    Giles Dickson, CEO of WindEurope said: “Wind energy is no longer a nice-to-have add-on in the power mix. It’s a mainstream and essential part of electricity supply, now able to meet up to 12% of Europe’s power needs. It has also become a mature and significant industry in its own right, now providing 330,000 jobs and billions of euros of European exports.

    “Government policy on energy across Europe is less clear and ambitious than it was. Only seven out of 28 EU Member States have targets and policies in place for renewables beyond 2020. We have dysfunctional electricity markets. The transition to auctions has been less smooth than it should have been. And we’re lacking long term signals for investment.”
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    Chinese solar power project developers offer record low tariff price -media

    Chinese solar power developers have made their lowest bids so far in a tender to build a one gigawatt solar power base in Inner Mongolia, aiming to accelerate a transition to renewals, China Business News said on Friday.

    Fifty solar PV manufacturers and generators have bid as low as 0.52 yuan ($0.0780) per kilowatt hour in the tender backed by the government in northern Inner Mongolia, the newspaper said.

    The price offered by a subsidiary to China Huadian Gorp is close to the upper end of China's coal-fired thermal power price in some regions.

    However, it is much higher than solar costs in countries such as the United Arab Emirates.

    "Policy incentives have been given to such government-backed projects which are not available to other commercial utilities, which take higher financial losses through transmission curtailment and subsidy default," said a bidder who declined to be named because he is not authorised to speak to media.

    China has delayed payments to solar power operators for more than a year as overseas appetite for its manufactured goods wanes.

    But on Friday the Ministry of Finance approved renewable power projects for subsidies delayed since 2015, according to an official statement published on its website.

    Subsidies are given to power suppliers and to some manufacturers who act as subcontractors on solar projects.

    China installed 20 gigawatts (GW) of solar power capacity in the first half of 2016, which took the new commercial solar power capacity above its 2016 target at 18.1 GW.

    The government said it would halt approvals to new projects in western regions such as Gansu and Xinjiang where solar projects are concentrated.

    To make solar power cheaper and increase domestic demand, China has pushed use of the best available equipment.

    Many such programmes are located in coal mining provinces looking to shift to renewables.

    In China's top coal producing Shanxi province, solar module producer GCL New Energy (GLC) pushed its price down to 0.61 yuan per kilowatt hour in another tender a month ago.

    "Such a low bidding price fell below the widely accepted offers mostly at 0.7-0.75 yuan," said Qin Haiyan, director with the solar and wind simulation agent, the China General Certification.

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    Eni io build Algerian solar plant

    Italy’s Eni said September 23 it has reached a strategic agreement with Algerian state producer Sonatrach to develop renewable energy projects in Algeria, the first being a 10 megawatt photovoltaic plant on their joint Bir Rebaa North (BRN) oil and gas field near the Tunisia/Libya borders. Eni said the goal is to start work building the 10 MW plant before end-2016.

    In June, Eni CEO Claudio Descalzi and Sonatrach chief Amine Mazouzi agreed in June to cooperate on renewables, during meetings in which Eni’s upstream licences in the country were extended. Eni says its long-term strategy is to integrate its core and renewable businesses.

    Descalzi said: "In the early 1970s, Eni was the first foreign company to sign an agreement with the Algerian state, for the construction of the Transmed gas pipeline, and, in 1987, the first oil & gas company to sign an upstream contract in Algeria. Today Eni is the first oil & gas company to reach a strategic agreement in the field of solar energy in Algeria, a country with an important potential". Eni, Shell and Total have spoken this year of their plan to invest in renewable energy, alongside infrastructure for gas-fired power, in developing countries where they are already oil and gas producers.

    Sonatrach and Sonelgaz have also discussed borrowing to fund new investments, including renewables, from the African Development Bank among others.
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    Namibia’s new uranium mine to triple country’s output by 2017

    Namibia’s uranium output is expected to triple by 2017, becoming the world’s third largest producer of the commodity, as the massive Husab mine begins production next month.

    According to Swakop Uranium, the company that owns the $2-billion project, the mine will produce up to 15-million tonnes of uranium a year.

    Namibia is the world’s sixth biggest uranium producer, behind Kazakhstan, Canada, Australia, Niger and Russia. But the new mine could help it climb to the third place.

    Output will be gradually increased to reach the installed capacity of 50-million tonnes of ore a year, Swakop's chief executive Zheng Keping told The Namibian.

    According to the country's central bank, production of uranium will increase 63% this 2016 and 90% in 2017, consolidating Namibia as one of the top producers of the commodity.

    Currently, the African nation is the world’s sixth biggest uranium miner, behind Kazakhstan, Canada, Australia, Niger and Russia.

    Cameco Corp, Canada’s biggest uranium producer, has been signalled in the past as potential buyer for offtake output from the Husab mine, which is considered the third largest uranium-only deposit in the world, with measured and indicated reserves of about 140,000 tonnes.

    Uranium mineralization was first discovered in the Namibia’s Rössing Mountains, Namib Desert, in 1928 by Capt. G. Peter Louw. Uranium exploration official started in 1960s with Rio Tinto obtaining exploration rights for the Rössing deposit in 1966. It started production in 1976.

    The Rössing mine is currently Namibia’s longest running and one of the world’s largest open pit uranium mines.

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    Report Says 28 Nuclear Plants Operate At Risk Of Failure

    A report commissioned by Greenpeace France has found that 28 nuclear reactors, including 18 EDF plants in France and one in the UK’s Sizewell, are operating at risk of failure due to carbon anomalies, environmental affairs magazineEcologist reports.

    Consultancy firm LargeAssociates carried out the review after French regulators had found flaws in a reactor vessel at the EPR reactor currently under construction at Flamanville. The key parts for the reactor construction have been provided by the French nuclear engineering group Areva.

    Last week, France’s nuclear safety watchdog, ASN, publishedthe list of the irregularities for which Areva had notified it so far, concerning items manufactured by Areva’s Creusot Forge plant for French civil nuclear activities. After an anomaly was detected in the Flamanville EPR reactor vessel at the end of 2014, ASN asked Areva to carry out a quality review at its Creusot Forge plant.

    “To date, Areva NP has identified 87 irregularities concerning EDF reactors in operation, 20 affecting equipment intended for the Flamanville EPR reactor, one affecting a steam generator intended for but not yet installed in the reactor 5 of Gravelines NPP and 4 affecting transport packagings for radioactive substances,” the French nuclear safety regulator said.

    In the report commissioned by Greenpeace, the authors at LargeAssociates say:

    “The same Creusot manufacturing route used for the already installed but yet to be commissioned FA3 RPV, was also used for and, hence, the same flaws are very likely to arise in the two Taishan, China EPR NPPs presently nearing commissioning, and future orders such as Hinkley Point C EPR.”

    This is potentially very bad news for Hinkley Point, which received two weeks ago the approval of the UK government after much controversy and long delays.
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    Finnish client takes new legal action against Areva over nuclear project

    Finnish utility Teollisuuden Voima (TVO) has started fresh legal action against French nuclear group Areva to avoid further delays at its Olkiluoto 3 nuclear reactor in Finland, company spokesman said.

    The project, almost a decade behind its original schedule, is nearly complete, but TVO wants assurances that a restructuring of plant supplier Areva won't cause further delays and that the plant would be ready to begin production in 2018 as planned.

    "We have asked for this several times but have not received the necessary assurances," he said by phone, adding that TVO is now seeking assurances through a case filed in Nanterre Commercial Court, in France.

    TVO and Areva are already claiming billions of euros from one another at the International Chamber of Commerce's arbitration court because of delays and cost overruns on the project which was originally due to start operation in 2009.

    In the restructuring of the French nuclear power industry, Areva is due to sell its nuclear reactor unit to another state-owned utility EDF, but Olkiluoto 3 is planned to be handed to another legal entity.

    That has made TVO concerned that the French would in the coming years prioritise other projects, such as Flamaville in France and Hinkley Point in Britain.

    Areva on Wednesday said that the restructuring would not harm the Finnish project.

    "Our group will provide all necessary answers," a spokeswoman told Reuters in an email, confirming they had received the court order on Tuesday.

    "Areva is fully mobilised to complete the project as soon as possible and according to the updated schedule."

    Finnish media earlier this week said that TVO had also approached the European Commission which has opened an investigation to determine whether the French financing for the restructuring complied with state aid rules.

    When Olkiluoto 3 project was launched, its cost was estimated at 3.2 billion euros ($3.6 billion), but in 2012 Areva estimated the overall cost would end up closer to 8.5 billion euros.

    The EPR reactor is set to become Finland's fifth and largest, and cover about 10 percent of the country's power supply.

    TVO's owners include Finnish utility Fortum and paper companies UPM and Stora Enso.

    Attached Files
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    Salamanca will have' incredibly good' margins says Berkeley's Schumann

    Things are falling into place for Berkeley Energia’s Salamanca uranium project in Spain with the latest news the appointment of heavyweight engineering firm Amec Foster Wheeler to design the mine.

    It follows quickly on from last week’s offtake agreement that will guarantee a price of US$41 per pound of uranium produced.

    As operating costs are estimated at US$15 per lb, it should mean an ‘incredibly good margin’ says Hugo Schumann, corporate manager.

    Next steps will be finalising the US$100mmln funding to build the mine alongside more offtake and marketing deals where the publication of the definitive feasibility study has generated a stack of interest, he says.
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    No end to uranium price plunge

    While thermal coal has embarked on an astounding surge, natural gas has recovered and oil has rallied more than 70% from 13-year low struck in January, uranium is languishing at decade lows.

    U3O8 is down nearly 30% in 2016 with the UxC broker average price sliding to $24.40 a pound on Thursday. Current levels are the cheapest spot uranium has been since April 2005. The long term price, where most uranium business is conducted, has fallen to unprecedented levels below $40 a pound.

    Uranium's weakness persists despite strong fundamentals with only reactors already being built – mostly in China – expected to increase the global need for uranium by a fifth from today's levels.

    Last week's go-ahead for a $24 billion nuclear power station at Hinkley Point –  Europe's biggest energy project and the UK's first nuclear project in a generation – should also go a long way in restoring confidence in the market.

    But in the short term there seems no relief in sight for the battered industry.

    "We expected Japan to move more quickly with restarting their reactors but it didn’t happen. Material that would have been delivered to Japan is now coming onto the market and keeping the price down"

    Jonathan Hinze, executive vice president at UxC, quoted by Bloomberg paints a picture of the spot price environment where there is simply too much material available to utilities and little prospect of demand improvement, at least in the short term:

    "Some producers and other sellers need to move material for cash flow purposes, and thus, we have seen some pretty aggressive selling in the past few weeks. These market conditions are unlikely to change in the near future."

    In an interview with MINEX Asia in June, Tim Gitzel, President and CEO of Cameco, the world's number one listed uranium producer representing nearly a fifth of global production summed upped the depressing environment for uranium this way:

    "We haven’t seen prices this low for many years. There’s not very much activity on the market, small amounts of material, often changing hands among traders. There is a sense among utilities that there is a lot of uranium around and so there is no urgency to be buying. Utilities are well covered for the next few years so the prices are staying low for now. We expected Japan to move more quickly with restarting their reactors but it didn’t happen. Material that would have been delivered to Japan is now coming onto the market and keeping the price down."
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    Louis Dreyfus profit weathers "erratic" commodities markets

    Agricultural trading group Louis Dreyfus Company B.V. managed to eke out a small increase in net profit in the first half of 2016 despite "erratic" market conditions and a tough economic backdrop taking their toll on sales.

    Louis Dreyfus, one of the traditional big four agricultural commodity traders, has been grappling with a period of ample supply, lower prices and slower economic growth that have cut margins, while also going through a leadership shake-up under main shareholder Margarita Louis-Dreyfus.

    The company said on Thursday that net income was $135 million compared with $130 million in the first half of 2015, while operating profit for its business segments fell to $546 million from $638 million as net sales dropped to $23.5 billion from $26.4 billion.

    Unexpected capital inflows in commodities in the second quarter added to the difficult trading conditions, it added.

    "Posting reasonable results during such periods and a context of continued oversupply illustrates our ability to adjust to changing conditions," Chief Executive Officer Gonzalo Ramirez Martiarena said in an interim results report.

    Louis Dreyfus is the "D" of the so-called ABCD quartet of trading giants, alongside Archer Daniels Midland, Bunge and Cargill, that collect, process and export crops around the world.

    The unfavourable landscape for commodity traders has led companies to restructure some activities.

    Louis Dreyfus said its shipped volumes increased 1 percent compared with the year-earlier period, supported by grain and oilseed exports from South America at its Value Chain segment and metals flows at its Merchandising segment.

    Capital expenditure was $132 million, close to the $135 million level in the first half of 2015.

    Dreyfus in March reported a plunge in net profit for 2015 and confirmed it was seeking partners to help some of its businesses expand, starting with its fertiliser division.

    It did not give any update on partnerships in its first-half report.

    Among its rivals, ADM said last month it was pulling back in ethanol and exploring sales of corn dry mills that produce the biofuel as weak ethanol results contributed to lower quarterly profits.
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    Heavy rains expected to curb Australia wheat output

    Australian wheat output will likely fall short of official estimates of near record volumes as heavy rains exacerbate recent damage to crops in the east of the world's fourth largest exporter, farmers and analysts said on Tuesday.

    The country's east coast is expected to receive as much as 100 millimetres of rain later this week and to see wetter-than-average conditions until November, according to forecasts from the Bureau of Meteorology.

    That would add to crop losses after near record rains earlier in September, farmers said, with damage across New South Wales, but most notably in the central west region of the state.

    "We are starting to see some crop losses after it has been too wet for too long," said Dan Cooper, a farmer in Caragabal, 460 kilometres west of Sydney.

    "We have been pretty lucky, but we have probably lost 5 percent of our wheat crops."

    Australia's east coast produces the country's high protein wheat, meaning output losses would limit the country's exportable supplies of the more desirable grain.

    Lower wheat production from Australia could support global benchmark prices,, which earlier this month hit a 10-year low due to ample global supply.

    Australia's chief commodity forecast earlier this month raised its 2016 forecast for wheat output by more than 14 percent to 28.1 million tonnes, which would be the second highest level on record.

    "There is a risk to production estimates," said Phin Ziebell, agricultural economist at National Australia Bank.

    "The headline number may be affected but perhaps the bigger issue is quality downgrades to feed wheat. Australia is already a bit priced out of international trade and if we see quality downgrades, it is going to be very tough to find a market for those supplies."
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    U.S. farmer lawsuits over Syngenta GMO corn granted class status

    A U.S. district court judge in Kansas this week said lawsuits brought by U.S. farmers against seed company Syngenta AG over sales of biotech corn seeds not approved for import by China can proceed as a class action, according to a court filing.

    Farmers from the largest U.S. corn-producing states sued the seed maker in 2014 after grain shipments containing traces of Syngenta's Agrisure Viptera corn were rejected by China, which had not approved the variety for import before it was launched.

    Farmers who did not plant Viptera corn claimed they suffered losses when the rejections that began in November 2013 disrupted trade and dragged down corn prices. Plaintiffs' attorneys estimate hundreds of thousands of corn growers lost $5 billion to $7 billion in current and future profits.

    Judge John Lungstrum certified a nationwide class and statewide classes in Arkansas, Illinois, Iowa, Kansas, Missouri, Nebraska, Ohio and South Dakota.

    "The Court's ruling will make it easier and less expensive for farmers to pursue their claims against Syngenta," said Scott Powell of Hare Wynn Newell & Newton, one of the attorneys appointed by the Court to represent the class.

    Syngenta has said it is not responsible for the losses and that it launched Viptera corn in full compliance with all regulatory and legal requirements. The Swiss company is a major agricultural seed producer and the world's largest crop chemical maker.

    The company said it may appeal the District Court's decision.

    "Syngenta respectfully disagrees with this ruling, particularly given the widely varying ways in which farmers grow and sell corn in different markets across the U.S.," Syngenta spokesman Paul Minehart said.

    The multi-district litigation case is No. 14-md-2591-JWL.
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    ChemChina seeks EU okay for Syngenta deal, decision due October 28

    China National Chemical Corp has sought antitrust approval for its $43 billion bid for Swiss pesticides and seeds group Syngenta from the European Union and a decision is expected by Oct. 28.

    State-owned ChemChina filed its request on Sept. 23, the European Commission's website showed on Monday.

    The EU competition enforcer can either clear the deal, with or without concessions, or it can open a full investigation if it has serious concerns that ChemChina's takeover of the world's largest pesticides maker could harm customers and rivals.

    ChemChina cleared one of the biggest hurdles last month when a U.S. national security panel approved what would be the largest foreign acquisition by a Chinese company.
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    Agricultural merger mania fuels fears among small seed sellers

    The U.S. Justice Department is looking into concerns that global consolidation among major seed and agricultural chemical companies may squeeze supplies of the building blocks for widely used genetically modified seeds, a farm group told Reuters.

    The department has asked the American Soybean Association for details about how small and independent seed companies license seed traits from developers, said Steve Censky, chief executive of the association.

    The federal inquiries started after Dow Chemical said in December that it would seek to merge with DuPont in a $130 billion deal. In recent months, department officials have also asked how farmers select seeds, Censky said.

    Such questions are common in antitrust reviews, as regulators try to decide whether to approve, reject or place conditions on a merger.

    The Justice Department did not respond to a request for comment.

    Smaller companies need to license corn and soybean traits, which can protect against insects and other threats, because they cannot afford the more than $100 million it costs to develop them.

    Major seed makers often license traits and other genetic material to smaller dealers that have close relationships with farmers and can help place products on more acres.

    Independent seed sellers said the proposed Dow-Dupont merger could hurt them if the companies decide to hike licensing fees or to keep their best traits for themselves. They have similar concerns about subsequent announcements that Bayer AG would seek to buy Monsanto Co and that Chinese state-owned China National Chemical Corp [CNNCC.UL] aimed to acquire Syngenta AG. All three deals are still pending.

    "It's the big question that everybody is looking at right now," said Todd Martin, CEO of the Independent Professional Seed Association, about the future of licensing. "Anything that does not support the expansion of the licensing market, we are against."

    The association has asked Dow and DuPont to expand licensing as part of their merger. The soybean association, which represents more than 20,000 U.S. farmers, told the Justice Department that trait licensing by major companies needs to be preserved, Censky said.


    Unlike Dow, Monsanto, Bayer and Syngenta, DuPont has not been active in licensing traits.

    That has raised concerns among small seed companies that a combined Dow-DuPont could pull back on licensing the technology, a prospect Martin said would be "incredibly negative" for independent sellers.

    Independent companies supply about 20 percent of corn and soybeans seeds in North America, giving farmers choices as they work to boost harvests in a downturn. Without licensing, the number of brands of corn seed would probably drop to less than a dozen from about 200 currently, Martin said.

    Dow told Reuters it has not made decisions on trait licensing because its deal with DuPont has not been finalized. Monsanto said it was "too soon to have any of those answers" about whether its $66 billion acquisition by Bayer would affect licensing.

    Syngenta said its $43 billion acquisition by ChemChina will not change its licensing conditions.

    DuPont and ChemChina did not immediately respond to requests for comment.

    Trait licensing was on the agenda at a U.S. Senate Judiciary Committee hearing on Tuesday, where executives of top companies defended their planned mergers and acquisitions. Bayer CropSciences's CEO told senators it had "no plans to discontinue" trait licensing.

    But Senator Charles Grassley, a Republican from Iowa and the committee chair, was one of several lawmakers who worried the deals would slow innovation in seeds and pest control.

    Sonny Beck, CEO of Beck's Hybrids, the largest family-owned U.S. seed company, told Reuters the company pays to license nearly all its traits from larger companies, including Dow and Monsanto.

    "If they say, 'we're going to keep it all for ourselves,'" he said, "that would hurt us."
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    Precious Metals

    Platinum mines finally taking drastic action – PwC report

    Profit margins on South African platinum mines dropped to 8.5% in 2016 from 9% in 2015 remaining at levels too low to be sustainable according to the latest report highlighting trends in the SA mining industry and produced annually by accounting firm PwC.

    By comparison, profit margins on the country’s gold mines rose to 26% from 24% over the same period as the gold producers benefitted from prior decisions taken to chop capital expenditure and close loss-making shafts.

    According to PwC energy and mining assurance partner Andries Rossouw a “realistic” margin level for the mining companies was above 30% and he added, “ a 9% margin is not sufficient to cover tax and borrowings, let alone capital expenditure.

    “It leaves the industry in a position where they cannot even incur sustaining capital expenditure at the moment. They need to fund it in different ways and that’s why you saw the number of equity raisings in the platinum sector over the past two years. They had to go back to the market to fund their operations. There was no other way.”

    Asked why the platinum mines had not reacted as rapidly as the gold mines to the grim market conditions Rossouw replied, “ they are taking those hard decisions now but most mining companies get caught in a balancing act between keeping a shaft open – because they think prices will go up in the future and it will cost more to re-open that shaft – and closing it down.

    “ We have reached a point now where everything is being closed down because they cannot sustain it going forward.”

    Rossouw pointed out the bulk of impairments made in the SA industry during 2016 were in the platinum sector which accounted for R47 billion of the total impairment charges of R60bn taken. In total, the SA mining industry has made impairments of R134bn over the past three years.

    According to the SA Mine report, in the platinum sector “a large portion of the cost base created before 2008 was not removed from the industry once prices had crashed. Although input costs grew at a rate closer to CPI they did not decrease proportionately.”

    The report said platinum has now been trading below average for 7.5 years and previous down cycles did not exceed nine years. PwC pointed out that, based on supplier-based real price averages, platinum is due for a recovery in rand terms.

    The report – which covered 27 of the 31 most important SA mining companies – found that the mining industry overall made a R46bn net loss for 2016 which was the first aggregated net loss since the start of the survey eight years ago. The survey also reported SA mining companies chopped dividends to R8bn in 2016 from R22bn in 2015.

    Rossouw said mining companies had now all realised that they could not just hope for prices to recover. He commented, “they have realised they have to do something themselves and they have taken the hardline actions in most commodities that the gold companies have done cutting their cloth to suit the low price environment. I think that’s a real positive coming out of this year’s performance.”
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    Protesters block access to Mexican mine owned by Goldcorp

    Protesters in northern Mexico said they have blocked access to the Penasquito mining complex operated by Goldcorp, threatening to interrupt production at the country's biggest gold deposit.

    The protesters, which include landowners and truck drivers, began their blockade on Monday and are demanding payment for environmental damages, jobs, and water for their communities, Felipe Pinedo, one of the protest leaders, said on Wednesday.

    In late August, Reuters reported on a long-running leak of contaminated water which had not been disclosed to the public.

    A source close to the company told Reuters that the blockade was illegal and risked interrupting production at the mine, which was operating below capacity.

    "If the blockade is not lifted immediately, the company will not have material by Saturday," he said.

    Last year the Penasquito mine produced 860 300 oz of gold, a quarter of Goldcorp 's total production.

    Attached Files
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    Impala Platinum refinery workers in SA strike over pay

    Members of a union representing more than half the worker’s at Impala Platinum Holdings’s refinery in South Africa started a strike on Tuesday after talks over pay and benefits broke down.

    About 500 people who are members of the National Union of Mineworkers didn’t report for duty after five rounds of talks with the world’s second-biggest platinum producer broke down, the organisation said in an e-mailed statement.

    The refinery, about 35 kilometers (22 miles) east of Johannesburg, employs about 900 people, NUM Deputy Branch Secretary Mpho Mere said by phone. About 85% of employees reported for duty today and operations are normal, according to Impala spokesman Johan Theron. South Africa is the world’s biggest producer of platinum.

    “We declared a dispute because we’re still far, far apart,” he said. In some wage categories at the refinery, the NUM is seeking a 9.5% increase, with the company offering 7.5%, Mere said. South Africa’s inflation rate was 5.9% in August.

    Impala declined 5% to R64.65 by 12:43pm in Johannesburg. The stock has still doubled in 2016.

    Other Demands

    Impala also is not close to meeting demands for higher housing, shift and standby allowances, and wants employees to use its in-house medical-insurance plan, which the union says undermines freedom of choice.

    “We continue to engage and seek ways of trying to close the gap” in negotiations, Theron said.

    The refinery raised production from mine-to-market operations by 11 percent to 628 600 ounces in the year ended June 30 from 12 months earlier, while refined output from third-party purchases and tolls climbed 32% to 182 900 ounces, it said in a September 1 statement.
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    Gold miner Petropavlovsk turns first profit since 2012

    Russia-based gold miner Petropavlovsk has posted its first profit since 2012, as it looks to move on from a torrid few years.

    Petropavlovsk reported a pre-tax profit of $4.8m in the six months to June, against a loss of $26m for the same period a year ago. Revenue slipped 14.5pc to $254m as gold production fell after poor weather in the Amur region of Russia where it mines.

    The company nearly went bust in 2015 but now expects to close a refinancing deal with its creditors next month that will extend its debt repayment schedule to 2022. Petropavlovsk borrowed heavily earlier this decade to fund expansion, only to be hit by a downturn in gold prices. In the first half of the year it slashed $12.4m from its debt pile, bringing it down to $598m.

    Chairman Peter Hambro, a City veteran, said: “It’s been a long struggle, but even a small profit is better than what we had in the past.

    “We’ve made huge progress with the banks and we’ve been given the financial flexibility we need. The banks really understand what it is we’re doing.”

    Earlier this year Petropavlovsk announced a brace of deals – including the acquisition of a neighbouring miner – that would help it “bulk up” on gold production. These deals are progressing, Mr Hambro said, but they had been awaiting the outcome of its talks with creditors.

    Petropavlovsk, which has four mines in the far east of Russia, achieved a breakthrough in the first half when it began mining underground at its Pioneer pit, which promises higher-grade gold. “Underground mining adds higher grade and reduces the amount of waste material we have to move,” Mr Hambro said. “As a result our waste costs have hugely shrunk.”

    The miner’s costs fell across all its mines in the first half, thanks to efficiencies and to a fall in the value of the rouble, the currency in which it prices its operations and pays its staff.

    Gold has risen 24pc this year, and has stayed broadly flat in the last few months at around $1,320 an ounce. Mr Hambro said he saw “no reason why it should go any lower”. “I’m a great believer in gold in times of turmoil. There is less and less exploration for gold around the world and demand continues to grow.”
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    Base Metals

    China aluminium officials at U.S. trade hearing urge dialogue in face of criticism

    A Chinese industry group making a rare appearance at a U.S. government hearing sought on Thursday to counter arguments that excess aluminium capacity in China threatened American and global producers and processors of the metal.

    Appearing at the end of a day of submissions at the U.S. International Trade Commission, the officials argued that China's aluminium industry had been a major contributor to the global economy.

    "We believe we can effectively address the global aluminium industry's challenges through dialogue and cooperation," officials from the China Nonferrous Metals Industry Association said in a submission.

    The hearing, part of an investigation requested by the House of Representatives Ways and Means Committee, heard from U.S., Canadian, European and Russian groups and companies involved in smelting, extruding and recycling. They argued that China's excess capacity was led by government policy and had caused lower prices worldwide.

    The Chinese trade group officials said their industry's development had been driven by domestic demand that was expected to grow as the metal was used in new applications such as railroad cars and overpasses. They added that Beijing had eliminated some inefficient capacity and was reducing investment in the sector.

    The arguments appeared in the face of a push by some U.S. industry members for Washington to impose countervailing or anti-dumping duties on some Chinese producers.

    The U.S. Department of Commerce is investigating China Zhongwang after the U.S. Aluminum Extruders Council alleged the company evaded U.S. import tariffs on aluminum extrusions.

    Extrusion is the process of shaping aluminum by forcing it to flow through an opening in a mould to make products for use in industries ranging from electronics to aerospace.

    U.S. industry and labor groups at the hearing also complained about the heavy use of coal to generate electricity to power most of China's smelters, a practice that appeared to be at odds with Beijing's promises to reduce greenhouse gas emissions.

    They also accused China of using third-country markets, including Mexico and Vietnam, and mislabeling primary aluminum as semi-fabricated metal, in an effort to evade high tariffs.

    The ITC, which has no power to enact trade sanctions, will eventually issue a report to the House panel.
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    BHP, Oz Minerals cut copper output after Australia power outage

    A power outage in South Australia has halted more than 300,000 tonnes of annual copper production capacity and knocked out the Australian state's only lead smelter, producers said on Thursday.

    A massive blackout in South Australia on Wednesday forced BHP Billiton to suspend production at its Olympic Dam copper mine to divert back-up power to maintain essential operations at the remote site.

    A BHP spokesman did not say when operations would resume at the mine, which produced 203,000 tonnes of copper in fiscal 2016, or about 13 percent of company-wide output.

    The outage also brought Oz Minerals' Prominent Hill mine, which is forecast to produce up to 125,000 tonnes of copper in concentrate this year, to a halt, a spokesman said.

    He also could not say when operations would restart.

    "Production has been put on hold until further notice," the spokesman said.

    Nyrstar NV said its 185,000-tonnes-per-year Port Pirie lead smelter will be out of action for up to two weeks.

    London lead futures climbed to the highest since May last year over supply concerns.

    A back-up diesel generator at the smelter kept the furnace going for several hours when power was cut to the entire state yesterday.

    But repairs to a blast furnace, damaged when power was lost and slag solidified, could result in the company losing "three to five million euros".

    "It is expected that the blast furnace will be down for approximately 10 to 14 days for repairs," Nyrstar said.

    Severe storms and thousands of lightning strikes knocked out power to the entire state of South Australia on Wednesday.

    A BHP spokesman said back-up generators were providing power to critical infrastructure but a full restart of operations will only occur when full power is restored.

    It was too early to determine if BHP would seek legal protection from supply obligations under a declaration of force majeure, he said.

    The blackout happened after strong winds destroyed major power lines north of the state capital Adelaide and lightning struck a power plant, causing a surge across the grid. The network and link to neighbouring Victoria state shut down to prevent damage to infrastructure, causing a state-wide outage.
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    Lundin poised for mega Congo copper deal

    Lundin poised for mega Congo copper deal

    In May Freeport-McMoRan Copper & Gold (NYSE:FCX) announced the sale of its Tenke Fungurume copper mine in the Democratic Republic of the Congo to China Molybdenum (CMOC) for up to $2.65 billion, a crucial part of the Phoenix-based company's debt reduction program.

    But exiting the DRC is proving to be as complicated as operating a mine in the troubled central African country.

    Central to the deal is a right of first offer owned by Toronto's Lundin Mining which through a Bermuda-based company indirectly owns 24% of Tenke, a high-grade mine that last year produced 203,965 tonnes of copper and just over 16,000 tonnes of cobalt.

    Last week Freeport, which controls 56% of Tenke, extended Lundin's ROFO for the second time to September 29 suggesting a larger deal involving CMOC and the Democratic Republic of Congo's state-owned Gecamines (20% direct owner) may be in the works. Gecamines, which opposes the Freeport-CMOC deal is also said to be putting together its own bid with partners.

    If Lundin manages to secure the same terms as the Freeport-CMOC agreement its stake could be worth in the region of $1.2 billion, but the extension suggests a new deal could be negotiated that could see Lundin become a major shareholder (and perhaps operator) together with Gecamines and CMOC.

    In Q2 Lundin wrote down the value of its interest in Tenke by $772 million which could indicate that the company's going to play hardball when it comes to negotiating a price

    Lundin, which this year is forecast to produce around 250,000 tonnes of copper including its share of Tenke, has been on the acquisition path and in March made a deal to acquire the promising Timok copper project in Serbia owned by Freeport and Canada's Reservoir Minerals.

    At the time Lundin CEO Paul Conibear said that Timok, would "fill Lundin's copper pipeline", but a few months later the deal fell through, ironically through a ROFO exercised by Reservoir Minerals which now owns 100% of Timok after a takeover by Nevsun Resources.

    In July Conibear told Bloomberg that after losing the eastern European property, Lundin would like to be active in M&A but was holding back due to a lack of quality targets.

    Tenke did not make it into that conversation, but Lukas Lundin  in a wide-ranging interview at the end of August said "the best opportunities are in base metals" and he's keen to see Lundin Mining of which the family owns about 13%, "resume its acquisition spree.":A contemplated expansion of Tenke would likely boost production capacity towards  500,000 tonnes and catapult Lundin towards the top tier of copper producers

    "China Molybdenum would likely be “OK” as a partner “but it’s a different culture and they’re not very experienced miners so I’m sure it’s going to be more work for us,” Lundin said.

    Apart from suggesting Lundin Mining could be appointed operator of the mine over the Chinese, the Swedish billionaire added that “bigger is better,” when asked what size asset he’s hunting for.

    For its part Gecamines expressed their displeasure with the Freeport-CMOC deal since its announcement in May and is pressuring parties to come to an alternative arrangement going so far as to say it could block the deal:The transaction “will remain in a deadlock, unless Lundin and Freeport respect Gecamines’ and the state’s rights

    “Any simultaneous withdrawal by Lundin and Freeport in favor of CMOC or other buyers will be problematic and would in fact actually reinforce the suspicion of fraud to Gecamines’ and the state’s rights," Yuma said. The transaction “will remain in a deadlock, unless Lundin and Freeport respect Gecamines’ and the state’s rights,” he said.

    Even in its current form Tenke is a prized asset notwithstanding its location in one of the more difficult mining jurisdictions in the world. But a contemplated expansion of the mine would likely boost copper cathode production capacity towards 500,000 tonnes per year and catapult Lundin towards the top tier of producers.
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    China's MMG in deal to sell long-idle Australian nickel mine

    China's MMG Ltd on Wednesday said it will sell its long-idle Avebury nickel mine in Australia to a private exploration company for A$25 million ($19.19 million).

    The sale, which MMG expects to finalise by the year-end, requires Australia-based Dundas Mining to pay a deposit of A$1.5 million. According to MMG, the sale agreement will be completed only when the full payment is done.

    The deal comes amid concerns over global supply of the metal after the Philippines said 20 more mines may be suspended for environmental violations, threatening supply from the world's top nickel ore exporter. MMG, which has been trying to sell the 7,000-tonnes-per-year mine in Tasmania state since 2009, said the sale offers the best hope of operations restarting.

    "Following an internal review, MMG initiated an expression of interest process for the asset and believes that this transaction provides the best opportunity to restart the mine," MMG said.

    MMG put the mine on the block after acquiring it in a takeover of Oz Minerals in 2009.

    It halted operations shortly afterwards as the cost of mining nickel exceeded the going price at the London Metal Exchange. This week, the LME three-month nickel price traded for around $10,600 a tonne , roughly the same price as in 2009.

    Plans to sell the mine in 2014 to another Australian private firm for A$40 million collapsed before the deal got finalised.

    MMG is the Hong Kong-listed arm of state-owned China Minmetals Corp.
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    Teck submits regulatory application for $5bn Quebrada Blanca Phase 2

    Canadian diversified miner Teck Resources is moving ahead with the $4.5-billion to $5-billion second-phase development of its Quebrada Blanca (QB) copper mine, in Northern Chile.

    Vancouver-headquartered Teck said Monday it has submitted the Social and Environmental Impact Assessment (SEIA) for the project to the Region of Tarapacá Environmental Authority.

    "QB Phase 2 is a long-life asset that will operate through multiple price cycles and generate significant value for many years. Our regulatory submission outlines the significant economic and social benefits that this project would generate for the region, as well as extensive proposed environmental mitigation measures, including the first large-scale use of desalinated seawater for mining in Chile's Tarapacá Region,” stated president and CEO Don Lindsay.

    Teck expects the proposed QB Phase 2 project to add another 25 years to the life of the existing mine as a large-scale concentrate-producing operation. It expects to publish an updated feasibility study, including capital and operating cost estimates for the project, in the first quarter of 2017.

    It said a development decision will be reliant upon regulatory approvals and market conditions, among other considerations. Such a decision is not likely before mid-2018, Teck stated.

    The new capital cost estimate will include a 140 000 t/d concentrator and related facilities; a new port facility and desalination plant; and concentrate and desalinated waterpipelines. QB Phase 2 is expected to have an annual production capacity of more than 250 000 t of copper and 8 000 t of molybdenum in concentrate for the first ten years of mine life.

    Quebrada Blanca produced 39 100 t of copper in 2015.
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    Philippine halts 20 more mines, 55.5 pct of nickel output - undersecretary

    The Philippines has suspended 20 more mines for environmental violations, most of them nickel, a government official said on Tuesday, bringing to 30 the number of mines shuttered.

    The suspended mines account for 55.5 percent of nickel ore output in the Philippines based on last year's production, Environment and Natural Resources Undersecretary Leo Jasareno told a news briefing.

    The Philippines is the world's top nickel ore supplier.

    Among those suspended include Oceanagold Corp, the top gold producer in the Southeast Asian nation.
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    Chinalco mining surges by record after parent offers buyout

    Chinalco Mining Corporation International advanced the most on record after owner Aluminum Corporation of China, or Chinalco, offered a premium of about one third to take the Hong Kong-listed unit private. Shares in CMC, which mines copper in Peru, remained below the takeout price.

    CMC jumped as much as 28% to HK$1.34 and closed at HK$1.31. A unit of state-owned Chinalco, China’s biggest aluminum producer, offered HK$1.39 a share, a 32% premium to CMC’s close on September 14 and 34% more than its average price over the last 30 trading days, according to a statement from the two companies late Friday. CMC was listed in Hong Hong at HK$1.75 in January 2013 and trading was halted on September 15 pending the takeover announcement.

    “Investors may be expecting the offer to be rejected because it’s not very close to” CMC’s value at its initial public offering, said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia.

    CMC’s stock has since been hit by falling copper prices, which are down about 40% since its listing, and difficulties at its Toromocho project in Peru. The move to privatise CMC will make it easier for Chinalco to raise funds for Toromocho, which started operations in December 2013. The mine has had its revenue squeezed by weaker prices, inefficientoperations and sporadic worker strikes.

    “This has had a negative impact on the trading prices of CMC shares, and has also decreased the ability of CMC to raise equity funding for operations,” according to the statement.

    CMC approved a $1.32-billion expansion of Toromocho in June 2013 to improve efficiency. However, “a substantial part of such future capital expenditure remains unfunded,” the companies said.

    By privatising CMC, Chinalco will be able to exercise “greater flexibility in reorganising the capital structure of CMC and in increasing funding to CMC,” according to the statement. The proposal would “also provide current shareholders with a reasonable exit of their investment in CMC that is attractive in light of current market conditions,” the companies said.
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    Metal Tiger’s Botswana copper project moves towards the big leagues

    Significant tonnages are being revealed at the T3 copper project, only six months after its discovery. There's significant amounts of copper in the ground at T3

    In double-quick time the T3 copper prospect in north eastern Botswana has gone from grass roots exploration to real development opportunity.

    The T3 deposit was only discovered in March but already its owners - joint venture partners MOD Resources (ASX:MOD) and Metal TigerPLC (LON:MTR) - have been able to prove up a resource of 350,000 tonnes of copper, more than half of it in the indicated category.

    What’s more, there is a high grade core of 8.6 mln tonnes of ore grading 2.16% copper and 30.6 grams silver per tonne.

    And there could be more to come. The resource remains open down dip and along strike, and the drill rigs are currently turning with a view to adding more resource before too long.

    Meanwhile, an open pit mining scoping study is due in December. Already there are clear indications of the thinking of the partners.

    “If the deposit is mined the central core of high-grade vein hosted mineralisation may provide an opportunity for early payback of capital,” Metal Tiger said in an update to market.

    “The high silver content should provide significant concentrate credits.”

    That will be music to the ears of mining investors with shorter-term horizons. But in the long-term what may turn out to be more interesting will be the results of the current drilling.

    At 350,000 tonnes, T3 is already making some impact on the global scale. At one end, long-standing London copper miner, Atalaya Mining, is now fully operational on a smaller reserve and resource base.

    But on the other hand, the largest undeveloped copper project in the world, which is widely thought to be the Udokan copper project in the Zabaikal region of Russia, boasts 16 mln tonnes of copper in contained reserves alone, never mind the resource.

    How far MOD and Metal Tiger can move T3 away from comparisons to the smaller Atalaya resource and up towards the size of Udokan remains to be seen.

    It’s worth noting that the combined reserves and resources of BCL, the state copper mining company at Botswana, are nearer in scale to T3, than to Udokan.

    That’s no surprise given the shared geological setting, but it does mean that when it comes to development, T3 could end up as a big hitter in the Botswana copper mining scene.

    However, further north, in the famous Copper Belt, the mines move into another league.

    The KOV mine, held by Katanga has produced over 2 mln tonnes of copper over many decades of production, while the Tenke Fungurume mine held jointly by Lundin and Freeport (NYSE:FCX), holds a contained copper resource base of 3.8 mln tonnes.

    Freeport has just inked a deal to sell its 80% stake in Tenke Fungurume to a Chinese company for US$2.65 bn in cash.

    It’s quite some world to be moving into.

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    Ivanhoe announces more high-grade copper results from Kakula discovery

    The 2016 drilling campaign at Ivanhoe Mines’ Kakula discovery, in the Democratic Republic of Congo, is continuing to demonstrate that it is substantially richer, thicker and more consistent than other mineralisation at the the Kamoa project.

    The Kamoa project is a joint venture between Ivanhoe Minesand Chinese miner Zijin Mining.

    “Given the consistent and thick intercepts at shallow depths of very high-grade copper mineralisation, Kakula is quickly becoming a key focus in our planning for the development of the Kamoa project,” CEO Lars-Eric Johansson said in a statement on Friday.

    The company noted that Kakula’s copper mineralisation was consistently bottom-loaded and chalcocite dominant.

    The consistent, bottom-loaded nature of Kakula mineralisation supports the creation of selective mineralised zones at cut-offs of between 1.0% and 3.0% copper, and potentially higher.

    The Kakula copper mineralisation displays vertical mineral zonation from chalcopyrite to bornite to chalcocite, with the highest copper grades associated with the siltstone unit consistently characterised by chalcocite-dominant mineralisation.

    Chalcocite is high-tenor mineral that is opaque and dark-gray to black with a metallic lustre. Owing to its very high percentage of contained copper by weight and its capacity to produce a clean, high-grade concentrate, chalcocite is considered to be the most valuablecopper mineral.

    The Kakula discovery remains open along a northwesterly-southeasterly strike, while high-grade copper mineralisation has been outlined along a corridor that now is at least 3.5 km in length.

    The high-grade copper zone is less than 300 m below surfacein the central section and gently dips to the southeast and northwest.

    Initial metallurgical test results received in July from a sample of drill core from the Kakula discovery zone showedcopper recoveries of 86% and produced a copper concentrate with an extremely high grade of 53% copper.

    The July results also indicated that material from Kamoa's Kakula and Kansoko zones could be processed through the same concentrator plant, which would yield significant operational and economic efficiencies.
    Earlier metallurgical test work had indicated that the Kamoa concentrates contain arsenic levels of 0.02%, which are extremely low by world standards.

    Given this critical competitive marketing advantage, Kamoa's concentrates are expected to attract a significant premium from copper concentrate traders for use in blending with concentrates from other mines.

    The Kamoa concentrates will help to enable high-arsenic concentrates from mines in Chile and elsewhere to meet the limit of 0.5% arsenic imposed by Chinese smelters to meet China's new environmental restrictions.
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    China's largest lead and zinc mine discovered in Xinjiang - Xinhua

    China's largest lead and zinc mine has been discovered in the country's far-western region of Xinjiang, the official Xinhua news agency reported on Sunday.

    The mine is located in Hotan county and has almost 19 million tonnes of lead and zinc reserves, Xinhua said, citing a statement from the Xinjiang Bureau of Geology and Mineral Resources.

    Lead and zinc have been discovered in 27 provinces and regions in China, concentrated in southwestern Yunnan province, northwestern Gansu and Inner Mongolia, Xinhua said.

    Lead and zinc are used in electronics, machinery, chemicals, light industry and pharmaceuticals, among other industries, Xinhua added.
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    Steel, Iron Ore and Coal

    Tangshan cuts 5.39 Mtpa steel capacity, finishing 75% target

    Tangshan, China's top steelmaking city in Hebei province, has cut 5.39 million tonnes per annum (Mtpa) of steel-making capacity so far this year, accounting for 74.6% of the city's de-capacity target for the year, local media reported.

    The city slashed 1.13 Mtpa of steel-making capacity and 0.52 Mtpa of iron-making by demolishing one blast furnace and two converters on September 29.

    The move was in line with the national policy of cutting surplus steel capacity to bring the steel industry back onto the track of heathy and sustainable development.

    Hebei province had pledged in July to cut iron and steel making capacity of 17.26 Mtpa and 14.22 Mtpa respectively by end-2016.

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    Mitsui to acquire coal mine interest in Mozambique

    Mitsui & Co. agreed with resource group Vale to purchase stakes in a Mozambique coal mine and associated rail and port facilities for about $770 million, Nikkei Asia reported on September 30.

    Mitsui will acquire a 15% stake in the coal mine and a 35% interest in the rail and port project from the Brazilian company. In December 2014, the Japanese trading house decided to buy into the coal mine and the railway and port infrastructure, planning to pay around $940 million at the time.

    The coal mine investments were initially estimated at approximately $630 million. However, Mitsui will pay only $255 million, reflecting such factors as a 30% drop in the price of coking coal in 2015. Meanwhile, the outlay on the infrastructure portion of the deal rose slightly from $310 million originally as construction delays pushed up costs.

    The mine's high-quality coal for steelmaking will be transported by rail to the Nacala port some 900 kilometers away for export to such countries as Japan. The railway and port will serve as key infrastructure for exports of not only coal but also domestically produced grains, and for imports of various resources.

    The mine's coal output, some 5 million tonnes in 2015, will grow to 18 million tonnes by 2018, which will increase procurement options for Japanese steelmakers relying mostly on Australian coal.
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    UK coal power falls to record low

    Coal-fired power stations produced the lowest share of UK electricity on record in the second quarter of 2016 following the closures of several plants.

    Coal accounted for just under 6pc of electricity generation in the three months to June, down from more than 20pc in the same period of 2015, the latest Government figures show.

    Gas increased from just under 30pc to more than 45pc in the same period, representing "a large switch in generation from coal to gas, which will have reduced carbon dioxide emissions", according to the latest statistical bulletin.

    The figures highlight the dramatic decline of the fuel that was the dominant source of electricity in the UK as recently as 2013.

    The combination of European environmental rules, the UK carbon tax and the fall in gas prices have together seen coal rapidly fall from the generation mix as some plants close and others are not profitable to run for large parts of the year.

    "Coal fired generation fell by 71pc from 15.9 terawatt-hours (TWh) in 2015 Q2 to 4.6 TWh in 2016 Q2, due to reduced capacity caused by the closure of Ferrybridge C and Longannet and the conversion of a unit at Drax from coal to biomass during the previous year," the Government said.

    The share of coal generation seen in the second quarter was by far the lowest since the records began in 1998, and likely for far longer.

    In May, Britain experienced its first periods of zero coal generation since the era of centralised electricity generation began in the 19th century.

    The share of power from renewable sources in the second quarter of this year actually fell slightly, to just under 25pc - despite more wind, solar and biomass energy being installed - due to lower wind speeds and less rain.

    UK fracking group UKOOG seized on the figures as evidence that "gas is cutting emissions in Britain right now".

    “Coal-fired electricity generation is at a record low level, but this is only possible thanks to gas filling the gap," Ken Cronin, the group's chief executive said.

    The Government has said it plans to end all unabated coal generation in the UK by 2025 and is due to consult on specific plans soon.

    But critics warn the early closure of coal could lead to power shortages if replacements are not built in time.

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    China Aug rail coal transport drops, outlook positive

    China's railways posted a year-on-year drop of 3.7% in coal shipment to 155 million tonnes in August, showed the latest data from the National Development and Reform Commission (NDRC).

    Over January-August, China's railways transported a total 1.21 billion tonnes of coal, falling 10.4% year on year.

    Coal-dedicated Daqin line transported 212 million tonnes of coal during the same period, down 22.5% on year, with August volume down 13.6% on year to 29.07 million tonnes, squeezed by the operation of Zhunchi (Zhunger-Shenchi) railway which boosted coal transport of Shuohuang (Shuozhou, Shanxi-Huanghua port, Hebei) railway this year.

    Total cargo shipment by railways, however, edged up 1% from a year ago to 279 million tonnes in August, the first growth since December 2013, showed data from the National Bureau of Statistics.

    Coal delivery by railways is expected to improve, as more shippers may turn to railways due to a stricter truck overloading policy implemented since September 21.

    Under the new policy, the cost to truck coal from coal-rich Shaanxi province to northern ports would increase by 30%-35%, or 40-50 yuan/t, said a local mining source.

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    Extreme pollution forces China to shut down hundreds of coal, steel operations

    China is stepping up its war on pollution by forcing hundreds of coal and steel companies to close or slash output in light of their transgressions to environmental and safety regulations.

    The country’s state planner said that after inspecting more than 4,600 coal mines it decided to revoke safety certificates for 28 of them and shut another 286 operations for not complying with environmental and safety regulations.

    The National Development and Reform Commission (NDRC) also ordered two steel firms to close permanently, 29 companies to suspend output and another 23 to reduce production, it said in the statement.

    After inspecting more than 4,600 coal mines, China's state planner revoked safety certificates for 28 of them and shut another 286 operations for not complying with environmental and safety regulations.

    China will also set up a no-coal zone in cities around Beijing in 2017 to try reducing the capital's hazardous smog levels. As an additional measure, the government will ban factories and households in 18 districts and towns of the Hebei province from both burning coal and building new power generators powered by petroleum coke, Xinhua News Agency reported.

    A study by Chinese and American researchers published last month blamed burning coal as the cause of premature death for about 366,000 people in 2013.

    According to the paper, produced by Tsinghua University in Beijing, one of China’s top research universities, in collaboration with Boston-based Health Effects Institute, coal is responsible for 40% of the deadly fine particulate matter known as PM 2.5 in China’s air.

    The study attributed 155,000 deaths in 2013 related to ambient PM 2.5 to industrial coal burning, and 86,500 deaths to coal burning at power plants.

    But coal consumption in China has decreased since then. In December, Beijing said it would not approve any new coal mines over the next three years and that it would shut more than 1,000 coal mines in 2016, taking out 60 million metric tons of unneeded capacity. A month later, the world’s largest coal consumer announced it would invest $4.6 billion to close another 4,300 coal mines.

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    China raises thermal coal futures trading fees

    The Zhengzhou Commodity Exchange will start collecting transaction fees for thermal coal futures contracts that were opened and closed in the same day, effective September 28, the bourse said on September 27 in a statement on its website, without giving further details.

    Investors piled into Chinese commodities exchanges in the first half of the year, driving up prices and stoking fears of a bubble, on bets that economic stimulus and industrial reforms would lead to shortages of everything from cotton to iron ore.

    The authorities quelled the frenzy, with bourses raising transaction fees and required margins. While volumes for most contracts haven't recovered, coal trading has ballooned in recent weeks on speculation that mining cutbacks are leading to shortages.

    Front-month thermal coal futures on the Zhengzhou exchange jumped to 532.40 yuan/t on September 22, a shade below a two-year high of 532.60 yuan/t reached earlier in the month. The January contract fell 0.1% to 527 yuan in overnight trading. A record 1.217 million thermal coal contracts changed hands with a total turnover of almost 64 billion yuan ($9.6 billion), bourse data show. Chinese exchanges count both the buy and sell side of a futures contract.

    Coal prices in China have risen this year as the government's efforts to cut overcapacity and promote less-polluting fuels slowed mining.

    Output fell more than 10% in the first eight months of the year, causing imports to rise to the highest since 2014 and forcing policy makers to coordinate higher production from biggest miners.
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    China punishes coal, steel companies for violating pollution, safety rules

    China's state planner has punished hundreds of coal and steel companies by forcing them to close or cut output for violating environmental and safety regulations, the latest effort to crack down on the country's heavily polluting industries.

    The National Development and Reform Commission (NDRC) forced two steel companies to shut completely, 29 firms to halt production and another 23 to curb output, it said in a statement on Thursday. The closures and curbs followed a nationwide inspection of more than 1,000 steel makers in the world's top producer.

    Among more than 4,600 coal mines inspected, the NDRC has revoked safety certificates for 28 coal mines and forced another 286 coal mines to halt production, it added.

    The planner did not identify or name the companies, or give details on how the companies broke the rules and how long the penalties will be in place.

    Beyond the safety and environment rules, the NDRC also listed other infractions such as violations of energy consumption rules or quality standards.

    The statement reflects the government's continued push to force ageing mills and mines to comply with tough new pollution rules by meeting emission standards and installing appropriate monitoring equipment.

    China's unwieldy coal and steel industries are considered two of the biggest sources of pollution in the country.

    The government is targeting coal output cuts of 500 million tonnes in the next three to five years.
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    Chinese miners raise coking coal prices ahead of holidays

    Large Chinese miners have recently announced to hike coking coal prices further ahead of National Day holidays over October 1-7, as restocking demand from coke and steel producers remained robust amid tight supply.

    In Shanxi, Changzhi-based Lu'an Group adjusted up prices of lean meager coal from its Wuyang mine and lean coal from its Sima mine transported via railways each by another 60 yuan/t to 760 yuan/t and 790 yuan/t with VAT, separately, effective September 24.

    That was the second increase this month after an increase of the same scale on September 15.

    Last week, Shanxi Coking Coal Group, the country's top producer of the material, further raised rail-delivered washed coking coal prices by 50-95 yuan/t, effective September 21, after a price hike of 30-95 yuan/t on September 1.

    Meanwhile, eastern China-based Shandong Energy Group lifted up prices of coking coal by 50 yuan/t, with that of gas coal and 1/3 coking coal at 760 yuan/t and 790 yuan/t, on ex-washplant basis, respectively, effective September 28.

    The miner also increased ex-washplant price of thermal coal by 30 yuan/t to 530 yuan/t.
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    Scottish investment hopes rise as mothballed steel plant reopens

    Scotland's last major steelworks reopened under the ownership of industrialist Sanjeev Gupta on Wednesday, heralded by Nicola Sturgeon's government as proof that the country can draw investment and protect industry in difficult times.

    Liberty Steel bought the 144-year-old Dalzell plant in Motherwell and its sister works at Clydebridge in Glasgow in April from Tata Steel (TISC.NS) for a symbolic sum, with the Scottish government underpinning the process.

    Tata mothballed the plants at the end of 2015 due to the impact of cheap Chinese imports, causing the loss of 270 jobs and sparking fears for the area's economy after the closure of a nearby plant in Ravenscraig in 1992.

    Fresh from watching molten slabs of steel roll out of the furnace, Sturgeon described the revival of the steel plate mill as "a very positive signal that the steel and engineering industries still have a future in Scotland".

    "It is a difficult market, but we now have a company in the ownership of Dalzell that has a vision of what they want to achieve," she told Sky News.

    Britain's ability to compete in the global steel market was thrown into the spotlight earlier this year when Tata Steel put its entire British operations up for sale.

    Several groups including Liberty have expressed an interest in those assets, which include the Port Talbot steel plant in Wales, but Tata is currently exploring options for a joint venture with Germany's Thyssenkrupp.

    Gupta said on Wednesday he was now also looking to open an electric arc furnace in Scotland.

    "The most compelling place to build an electric arc furnace is the Midlands (in England) because it's a big generator of scrap and a big consumer of steel," he told Reuters. "But we are looking to do it in Scotland also, mainly because of the Scottish government, their enthusiasm.

    "It's been a great experience working here."

    In a nod to Gupta's Indian heritage, a steel pellet sculpture of Ganesha, Hindu god of beginnings, had been erected for the opening.

    Sturgeon, who has said she may seek another independence referendum for Scotland, told a business conference in London on Tuesday that her country was consistently outperforming every part of the UK except London when it came to attracting inward investment.

    Steel plate is used in industries like construction, shipbuilding, automotive, mining and energy sectors.

    Dalzell is also looking to make plates for the manufacture of wind turbines and in the longer term could seek to supply projects like Hinkley Point, the new nuclear plant due to be built in southwest England.

    Liberty has spent five months preparing to reactivate Dalzell's furnace and rolling mill to produce 150,000 tonnes of steel plate a year.

    It has hired around 120 staff, mostly former employees, and hopes to increase output to 500,000 tonnes eventually, employing 200 people within 18 months.

    Gupta said the Clydebridge works would come back on stream "in due course as market conditions allowed". Britain currently consumes 700,000 tonnes per year of plate steel, increasing at around three percent annually.
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    China probes senior Hebei Iron & Steel executive for suspected graft

    The deputy general manager of Hebei Iron and Steel, China's largest steel company by output, is being investigated by the ruling Communist Party for suspected corruption, the party's anti-graft watchdog said on Wednesday.

    Wang Hongren is suspected of "serious discipline breaches", the Central Commission for Discipline Inspection said in a brief statement, using its usual euphemism for graft but providing no other details.

    Dozens of senior officials and executives have been caught up in a sweeping campaign against corruption launched by President Xi Jinping since he assumed power almost four years ago.

    It was not possible to reach Wang for comment and unclear if he has been allowed to retain a lawyer.

    The company declined to comment.

    Wang, 58, was formally a deputy general manager at another steel maker in the northern province of Hebei, Handan Steel Group, according to his official biography.
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    India seeks to stop thermal coal imports by 2017, but private power utilities may not comply

    The Indian government is working on a plan to completely stop thermal coal imports by state-run power utilities by next year, sources said Tuesday.

    While central government owned power utilities like NTPC Ltd. have been asked not to import any coal now, power utilities owned by state governments are being pursued to follow suit, a source at Central Electricity Authority said Tuesday.

    He added that the existing contracts would have to be fulfilled but no new contracts will be signed. Next year, there will be almost negligible coal imports by government-owned power companies, he said.

    NTPC, which is the country's largest electricity generator imported around 736,000 mt of thermal coal over April-August, down from 5.7 million mt imported in the same period last year, according to CEA data.

    NTPC has not placed any new orders this year and was currently getting the coal, which was contracted last year, an NTPC official said.

    In view of the surplus coal available with state-run coal producer Coal India Ltd., the government was also holding talks with private power utilities to make them shun imported coal and consume domestic coal instead, said sources.

    CIL's production over April-August was 194.81 million mt as against the targeted 213.61 million mt, up 1.3% year on year, while offtake was 211.38 million mt as against the target of 240.95 million mt.

    According to the CEA source, the main concern with private power producers was that of the grade slipping, but recent third party sampling by the Central Institute of Mining and Fuel Research has ensured that end-users get quality coal.

    He, however, added that if it was economically viable for private players then they would go for Indian coal, otherwise they would continue to use imported coal.

    A south India-based power producer source said that the government could not force them to use domestic coal, though his company had been buying domestic coal since March this year.

    Currently, domestic coal was cheaper as imported coal prices have gone up. His company buys 5,500 kcal/kg NAR South African coal, which is now being sold at around $65/mt CIF levels, up from around $50/mt CIF levels around two months ago, he said, adding that he will keep buying domestic coal for at least another six months.

    Another south India-based end-user source at a power plant said that for coastal power plants imported coal will always be economical so they will not buy domestic coal.
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    NDRC calls 4th meeting in a month to ensure winter thermal coal supply

    China's top economic planner held a coal industry meeting on September 27 to discuss measures to secure an abundant supply for the coming winter season amid recent price rally.

    This is the fourth time in a month the National Development and Reform Commission (NDRC) arranged such kind of meeting in Beijing, as the country is in urgent need to curb rapid price rise, a prominent problem in the nation's coal sector.

    Some advanced coal mines would continue to be allowed to boost output within 276-330 working days, after 74 mines were allowed to do so to add 0.5 million tonnes of thermal coal output each day.

    As China is about to enter the winter season of peak coal demand, utilities will gradually start building up stocks. But the domestic supply remains tight at mines and leading transfer ports, which drives prices to further pick up.

    The unbalance in supply and demand needs the government's efforts to adjust, insiders said.

    China has seen a notable decrease in raw coal output and stocks since early this year when a de-capacity drive was initiated in the sector.

    Official data showed raw coal output fell 10.2% on year to 2.18 billion tonnes over January-August this year, pulling down social stocks to 460 million tonnes by the end of August, a year-on-year decline of 12.2%.
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    China's Dongbei Special Steel makes revival plan after defaults: newspaper

    Dongbei Special Steel Group, the struggling Chinese steelmaker, has ironed out a business revival plan, aiming to return to profit and slash leverage ratio in three years' time, the Economic Observer reported on Wednesday, citing unidentified sources.

    According to the plan, made at an internal meeting on Sept. 20, Dongbei Special Steel aims to make a profit of 300 million yuan ($44.98 million) in 2018 on total revenue of 35 billion yuan, while reducing debt-to-assets ratio to below 60 percent, the newspaper said, without giving comparative figures.

    Dongbei Special Steel, owned by the Liaoning provincial government in China's northeast rust belt, said on Monday it had defaulted on a one-year bond, marking the firm's ninth default this year. 

    Calls to the company's media department for comment were not answered.

    Earlier on Wednesday, a Chinese bond supervisory body said the unlisted steelmaker will be penalized for failing to release financial data on time.

    Dongbei Special Steel is seeking government support for its debt restructuring plans, and will improve its operation, as part of efforts to turn the company into a special steel maker with global competitiveness by 2020, the article said.
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    China's govt tells mines to raise thermal coal output again -sources

    China's state planner has told 74 major coal mines to increase thermal coal output by another 500,000 tonnes per day to ease supply shortages to the nation's utilities ahead of the winter, according to two sources briefed on a meeting on Monday.

    The National Development and Reform Commission (NDRC) did not immediately respond to requests for comment.

    The move comes just days after the government partially reversed sweeping capacity cuts enforced earlier this year that have triggered a frenzied price rally and depleted domestic stockpiles this year.
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    China's small miners to follow Shenhua to increase output

    Some small and medium-sized coal miners may resume production after 14 coal mines of Shenhua Group been allowed to increase output by combined 2.79 million tonnes a month from September, part of the central government's effort to curb rapid price rises in domestic market, said analysts.

    The sentiment is likely to be further bolstered by the decision of the National Development and Reform Commission to permit some coal firms with advanced mines to boost production.

    Improved profitability amid rising coal prices undoubtedly encourage more miners to get back into operation, industry insider said.

    Doubts also came whether the move in boosting coal production goes against the national policy of cutting capacity. Yet, analysts believed that production increase is just allowed in some mines, which will bring little influence as the 276-workday regulation remains in effect.

    In the first half of this year, China Shenhua Energy realized net profit of 9.83 billion yuan ($1.48 billion), sliding 18.6% on year; its operating revenue dropped 12.5% on year to 78.72 billion yuan over the same period.
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    Shanghai Jan-Aug coal imports nearly double

    Imports of coal and lignite through Shanghai customs stood at 8.74 million tonnes in the first eight months of the year, jumping 92.7% year on year, the latest local customs data showed.

    Of this, 57% (4.98 million tonnes) was imported by state-owned enterprises, rising 67% from a year ago; 37.2% (3.25 million tonnes) by private enterprises, rising 130% on year; and the remainder was imported by foreign-invested enterprises, jumping 360% from the year prior.

    Total value of the imports rose 42.4% from the year-ago level to 2.55 billion yuan ($382.33 million), translating to the average price of 291.7 yuan/t, down 26.1% year on year, data showed.

    Shanghai's monthly coal imports have been rising since January this year, except July, but the average price fell for eight consecutive months. The August imports jumped 170% on year and up 55.6% on month to 1.59 million tonnes, with average price down 5.8% on year to 340.1 yuan/t.

    Shanghai's coal imports from ASEAN countries reached 5.78 million tonnes in the first eight months, up 130% year on year and accounting for 66.1% of its total imports. Among this, coal imports from Indonesia rose 120% on year to 5.39 million tonnes.

    Over January-August period, Australia exported 1.51 million tonnes of coal to Shanghai, up 28.6% on year; and coal imports from Russia rose 250% to 849,000 tonnes.

    During the same period, Shanghai's lignite imports stood at 5.47 million tonnes or 62.6% of the total, up 130% on year, with average price down 16.7% to 204.2 yuan/t, data showed.

    Meanwhile, coking coal imports via Shanghai customs increased 5.1% on year to 1.81 million tonnes, accounting for 20.7% of the total, with import price averaging at 548 yuan/t, down 10.4% from the year-ago level.
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    Rio Tinto launches debt reduction program

    Major minor Rio Tinto on Monday announced a bond buyback plan for up to $3-billion, saying it was taking advantage of its healthy cash situation to further reduce debt.

    Under the plan Rio Tinto has issued a redemption notice for approximately $1.5-billion of its 2017 and 2018 US dollar-denominated notes.

    It said it commenced cash tender offers to purchase up to approximately $1.5-billion of its 2019, 2020, 2021 and 2022 US dollar-denominated notes.
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    Stunning coking coal rally wreaks havoc in steel, iron ore

    The rise in the price of coking coal is upending the economics of the iron ore and steel markets with the Australian export benchmark price climbing 164% so far this year.

    Metallurgical coal was exchanging hands at $206.40 on Monday according to data provided by Steel Index as it consolidates at higher levels following weeks of panic buying not seen since 2011, when floods in key export region in Queensland sent the price surging to $335 a tonne (albeit not for long).

    The rally was triggered by Beijing’s decision to limit coal mines' operating days to 276 or fewer a year from 330 before as it seeks to restructure the industry. Safety closures and weather related supply curbs in China and Australia only added fuel to the fire.

    In a new research note Adrian Lunt of the Singapore Exchange says margins for steelmakers in China, which forges almost as much steel as the rest of the world combined have come under pressure again and the tight conditions may continue:

    "The recent spike in coking coal prices has sent spot steelmaker margins plummeting back to around their lows last seen in Q4 2015. And unless coking coal prices reverse course soon, this is likely to weigh on steelmaker earnings through the course of Q4 2016, particularly as restocking needs have provided some support to iron ore prices

    "With Chinese steel output remaining strong and demand sentiment relatively robust (with continued support from both real estate and infrastructure in particular), steelmaker margin pressures appear likely to persist over the coming months."

    While the price of iron ore has also recovered this year – up 31.5% year to date holding above $55 a tonne on Monday – the iron ore/coking coal ratio is now at its lowest level this century according the SGX calculations.

    Analysts from Macquarie recently warned that speculation as much as fundamental factors are driving the price with a mere half-a-million tonnes (out of a seaborne trade of 200 million tonnes a year) responsible for the August-September surge to above $200.

    Most producers, with the exception of BHP Billiton which set up globalCOAL a few years back, do not receive the spot price but the ruling quarterly contract price which is still in double digits.

    In an earlier report The Steel Index noted that  speculation that the upcoming quarterly contract negotiations for the October – December 2016 period "may be rather combative" and that according to market participants, Japanese steelmakers will undoubtedly face levels “at least above US$120/t” in the final quarter of 2016.
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    China's coal industry Jan-Aug profit up 15pct on year

    China's coal mining and washing industry profits rose 15% from last year to 22.48 billion yuan ($3.37 billion) over January-August, compared with 14.55 billion yuan over January-July, according to data released by the National Bureau of Statistics (NBS) on September 27.

    During the same period, the coal mining and washing industry realized revenue of 1.39 trillion yuan, dropping 10.2% from a year ago, a slower decline compared with a fall of 11.9% in the first seven months, data showed.

    Total profit of the country's entire mining industry declined 70.9% on year to 53.47 billion yuan from January to August, with total revenue at 3.04 trillion yuan, a decrease of 9.4% from the year-ago level.

    Meanwhile, profit in ferrous and non-ferrous metal mining industry stood at 22.35 billion and 27.95 billion yuan, falling 18% and up 3.8% on year, respectively.
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    South Korea Aug met coal imports rise 22pct on year

    South Korea imported 2.71 million tonnes of metallurgical coal in August, including coking coal and PCI coal, rising 21.97% on year and 3.24% on month, according to the latest customs data.

    The country imported 2.12 million tonnes of coking coal in August, up 11.57% from a year ago and 6.43% from July.

    Of this, 1.04 million tonnes were shipped from Australia, increasing 9.27% on year and up 11.92% on month.

    This was followed by Canada with an export of 494,100 tonnes, rising 11.21% from the same month in 2015 and up 31.2% from July; Russia with 256,000 tonnes, gaining 29.5% from a year ago but down 39.31% from July; and the USA with 198,900 tonnes, dropping 20.31% on year but up 44.65% on month.

    In August, South Korea imported 598,500 tonnes of PCI coal, rising 81.97% compared with the year-ago level but falling 6.64% on month.

    Australia remained the largest PCI coal supplier to South Korea in August at 402,900 tonnes, a surge of 133.97% on year, followed by Russia at 129,200 tonnes, climbing 25.32% from the previous year, and the at 66,400 tonnes, soaring 201.82% from the year-ago level.
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    Brazil's CSN, CBSteel discussing ore deal, sources say

    Cia Siderúrgica Nacional SA is considering selling part of its stake in Congonhas Minérios SA, Brazil's No. 2 iron ore producer, to China Brazil Xinnenghuan International Investment Co, two people familiar with the deal said on Monday.

    According to the people, the Chinese mill known as CBSteel is interested in buying about 25 percent of Congonhas directly from CSN. They said CSN, as Brazil's No. 2 listed flat steelmaker is known, would remain in control of the unit, adding that talks are advancing slowly and may not necessarily result in a deal.

    The first person, who asked for anonymity since the talks are private, said any deal valuing Congonhas north of $20 billion is more likely to succeed. The transaction also hinges on CSN being able to secure long-term supplying contracts from CBSteel, the same person noted.

    CSN, which owns about 88 percent of Congonhas, declined to comment. Efforts to contact CBSteel's media representatives in Brazil were unsuccessful.

    Shares of CSN reversed early losses and gained 0.3 percent to 8.76 reais in mid-afternoon trading, underscoring optimism among investors that a Congonhas Minérios deal would help CSN accelerate cutting the largest debt burden among Brazilian steelmakers, currently at about 26 billion reais ($8 billion).

    The stock has more than doubled this year, partly on hopes Chief Executive Officer Benjamin Steinbruch will push forward with asset sales to cut debt. The six Asian companies that own a combined 12 percent of Congonhas would keep their stakes unaltered if a deal between CSN and CBSteel takes place, the people said.

    On Aug. 19, O Globo newspaper reported intentions by CBSteel to buy 30 percent of the unit.

    Congonhas Minérios was created at the end of 2014, through the merger of CSN's fully owned Casa de Pedra mine and Namisa - an ore production joint venture with the Asian companies. Casa de Pedra has one of Brazil's best-quality iron ore reserves.

    According to bankers and analysts, CSN agreed to combine both assets to avoid paying $3 billion in penalties to the partners for missing Namisa's expansion goals. The Asian consortium includes Japan's Itochu Corp, Nisshin Steel Co Ltd, JFE Steel Corp and Kobe Steel Ltd as well as Korea's Posco Ltd and Taiwan's China Steel Corp.
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    Brazil miner Samarco misses payment on bond, trustee bank says

    Brazilian mining company Samarco Mineração SA, which suspended operations in November after a fatal dam disaster, did not make an interest payment on a $500 million bond that was due on Monday, according to the Bank of New York Mellon, the trustee.

    "We did not receive any money or information today from Samarco," a spokesman for the bank told Reuters in a statement on Monday.
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    Ferrochrome price in sharp rise

    The European benchmark ferrochrome price for the fourth quarter of 2016 has been settled at 110c a pound, 12.2% up on the 98c-a-pound price of the third quarter.

    Johannesburg Stock Exchange-listed Merafe Resources said last month that it expected to benefit from renewed positive ferrochrome demand trends, as well as from only four of seven South African ferrochrome producers currently being in production.

    Merafe – headed by CEO Zanele Matlala – generates income primarily from the Glencore–Merafe Chrome Venture.

    In reporting its results for the six months ended June 30, Merafe indicated higher demand prospects for ferrochrome on the likelihood of global stainless steel production growing 2.6% this year and by 3.1% in 2017.

    CRU senior ferrochrome consultant Mark Beveridge, who is responsible for CRU’s ferrochrome market outlook, ferrochrome cost service and chrome monitor publications, describes the recovery of the South African chrome industry over the last four months as being “dramatic”.

    Beveridge, who joined CRU in 2012 from the International Chromium Development Association where he was in-house market analyst, points out that chrome ore prices have rebounded substantially on strong second-quarter Chinese demand.

    “A combination of stimulus-linked demand for ferrochrome in China and a relative absence of chrome inventory led to a scrabble for South African ore,” he wrote in a document forwarded to Creamer Media’s Mining Weekly Online.

    The recovery in chrome prices also coincides with what the research group believes to be significant moves to consolidate the South African industry.

    CRU believes such consolidation should pave the way for the creation of a stronger South African chrome sector that is able to regulate the supply of both ore and alloy better than has been possible in recent years, while also ensuring South Africa's overall charge chrome output increases in future.
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    Yancoal, Glencore in talks on Rio Tinto coal portfolio

    The contest for Rio Tinto's coal portfolio is believed to be hotting up between Yancoal and Glencore, with discussions between the two prospective bidders said to be in an advanced stage, The Australian reported on September 26.

    Deutsche is handling the sale on behalf of Rio, and while it is understood that no one party is in exclusive due diligence on the portfolio, bilateral talks are happening between both suitors.

    Glencore is self-advised, while Yancoal has previously called upon the services of JPMorgan, although it is unclear as to whether the bank is involved.

    The large-scale and high-quality portfolio may carry a price tag that may be worth of $1 billion.

    It includes Rio's Hunter Valley and Mount Thorley Warkworth operations in NSW and its Hail Creek and Kestrel mines in Queensland.
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    China's Dongbei Special Steel defaults ninth time in 2016, restructuring looms

    Dongbei Special Steel Group Co Ltd said on Monday it had defaulted on a one-year bond, the latest in a string of missed payments this year by the unlisted Chinese steelmaker.

    It marks Dongbei's ninth default of 2016.

    Owned by the Liaoning provincial government in China's northeast rust belt, Dongbei announced on the website of China's interbank bond market operator that it had failed to pay 744 million yuan of principle and interest on a one-year bond.

    It had warned earlier in September it was uncertain if it could make payment. 

    Its original default in March helped ignite a selloff in Chinese corporate debt. In recent months, bond prices have rallied, prompting central bank intervention seen by dealers as a sign it is concerned about bond market leverage. [nL3N1BC2YC]

    Dongbei said on Sept 5 it was delaying the disclosure of its interim financial information as it was in the midst of a debt restructuring plan.

    Citing a source familiar with the matter, Reuters IFR reported earlier on Monday that the Liaoning government had decided to file for a court-ordered restructuring after creditors rejected an initial proposal to swap debt for equity. [nL3N1C21K8]

    Many of China's corporate debt problems can be found in the northeast, the home of the country's steel industry and a region heavily dependent on the big industry that fuelled China's economic expansion. Now Beijing is pushing to shut surplus capacity and reform inefficient state enterprises.

    In May, a Reuters analysis of central bank data showed that Chinese rust-belt provinces, including Liaoning, had sharply raised their dependence on high-cost "shadow finance" in early 2016, as traditional lenders pulled back.

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    Indonesian diesel demand picks up as coal miners churn out more

    Consumption of diesel by Indonesian miners has picked up for the first time in four years as coal producers in the country ramped up output to meet Chinese demand, offering a glimmer of hope to Asian traders grappling with multi-year low fuel margins.

    Once Asia's top buyer of diesel, Indonesia's imports of the fuel slowed to a fraction of what it used to be with a plunge in coal prices over the past four years curbing mining activities. But this year, thermal coal prices have rallied amid a supply squeeze in top consumer China.

    "Coal prices are getting higher so the miners are trying to speed up production", boosting demand for the fuel needed to power mining machinery, said a trader, who supplies diesel to mining companies in Indonesia.

    Monthly diesel use in Indonesia's mining sector rose by at least 5 to 10 percent over July-September, traders said.

    Benchmark Australian thermal coal prices rose to $74.30 a tonne in the week to Sept. 23, the highest in 28 months and up almost 47 percent this year. Prices in the Southeast Asian country have been rising since May.

    Indonesia - the world's biggest thermal coal exporter - shipped out 3.71 million tonnes to China in August, up 55.8 percent from a year ago.

    "It has also been a wet summer so the water level is very good in the rivers in Kalimantan, which makes it easier and faster for ships to flow in and unload cargoes," said the trader, who did not want to be named.

    Demand for diesel could rise further next year, a second trader supplying diesel to mines said, as thermal coal miners overcome logistical and debt constraints.

    The rise in the use of diesel by Indonesia's mining sector should help support Asian fuel margins that are currently languishing near six-year lows.

    AKR Corporindo, one of the largest suppliers of diesel to miners in Indonesia, imports about 800,000 to 1 million barrels a month, while oil major BP Plc brings in about 275,000 to 330,000 barrels a month, the first trader said.

    It is difficult to track the exact volumes of diesel imported into Indonesia as there are nearly 200 small companies with a license to import the fuel, he added.

    However, the traders cautioned that Indonesia's total diesel imports would still remain lower than in previous years with a hike in domestic retail prices and a higher local biodiesel mandate keeping a lid on demand. Diesel is used both in the industrial and transport sectors of Indonesia.

    State energy firm PT Pertamina has imported 600,000 barrels of diesel so far this year, according to a company official, compared to its peak of about 4 to 4.5 million barrels a month before 2012.
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    Iron giants to add 200Mt of supplies through 2020

    The world’s two largest iron-ore exporters Australia and Brazil will each add about 100-million metric tons of supply through the end of the decade, boosting a global glut and hurting prices in a slump that will then force marginal miners to cut output, according to Citigroup.

    Shipments from Australia will expand to 934-million tons in 2020 from 835-million this year, while Brazilian cargoes rise to 480-million tons from 37- million, the bank said in a report. That’ll lift the surplus to 56-million tons in 2018 from 20-million this year, before price-induced curtailments help bring the global market back toward a balance, Citigroup estimates.

    While iron-ore has rallied in 2016, confounding predictions for renewed losses, investors are now refocusing on prospects for rising output from the top suppliers. With Brazil’s Vale SAset to start a four-year rampup of its S11D project, banks fromMorgan Stanley to Citigroup, as well as BHP Billiton have said the additional output will probably contribute to weaker prices.


    The expansion of ore supply is on track, with restarted capacity a swing factor, Citigroup analysts including EdMorse wrote in the report received on Monday. “We expectiron-ore prices to find some support in the next one to two months, but should face strong headwinds thereafter through 2017.”

    The raw material with 62% content delivered to Qingdaoclimbed 0.8% to $56.79 a dry ton on Friday, according to Metal Bulletin. Prices are still 3.7% lower in September, heading for their first back-to-back monthly decline since November 2015. Citigroup reiterated its outlook for ore dropping to $45 next year and $38 in 2018.

    The global surplus will probably start to shrink after 2018, dropping from 56-million that year to just 8-million tons in 2019, the bank forecast. It estimated price-induced curtailments would be about 150-million tons in 2018 and more than twice that figure in 2020.

    Prices may soften toward year-end as supply increases,Virginia Wilson, BHP’s general manager of iron-oremarketing, said at a conference last week. Among newprojects is Vale’s S11D, which will have the capacity to produce 90 million tons a year. Inaugural cargoes are expected in January, Vale’s executive manager for shipping and iron-ore marketing Luiz Meriz told the gathering.

    SGX AsiaClear futures point to lower prices, with the contract for October trading at $55.67 a ton, January’s at $50.51 and next September’s below $45. Miners’ shares were mixed  inSydney on Monday, with BHP little changed, Rio Tinto Group0.7% higher and Fortescue Metals Group lower. The trio areAustralia’s top shippers.
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    Adani to start work on Australian Carmichael coal mine in 2017

    Indian Adani Group is planning to begin construction work on its giant Carmichael thermal coal project in the Galilee Basin in Australia's Queensland next year, and gradually ramp up production to 60 million mt/year, a company spokesman said Friday.

    The project -- which is approaching its seventh year of the environmental approvals process -- has been forced to delay its start-up and change its development ramp-up profile due to a raft of legal challenges, including an appeal against it to the Federal Court by the Australian Conservation Foundation as recently as this week, the spokesman said.

    "While the original first stage has been split into two slightly smaller sequential phases to allow for this longer ramp-up, the development is still for a 40 million mt/year and then, in the longer term, a 60 million mt/year project," he said.

    Production from the mine is expected to increase from 25 million mt/year during the initial startup to 40 million mt/year around five to seven years into the mine's life, with the growth to 60 million mt/year to be determined from there, the spokesman told S&P Global Platts.

    "Not only has this legal interdiction been costly to taxpayers and for those in regional communities looking for work, but the additional cost of approvals and delays has to be accommodated in the project development plan," he said.

    And the plan to begin construction next year will only happen upon resolution of outstanding approvals and court proceedings.

    Director of energy finance studies at the Institute for Energy Economics and Financial Analysis Tim Buckley, said Thursday that even "downsized and delayed", the Carmichael coal proposal remains unbankable.

    "The Galilee Basin is stranded 400 km inland from the coast without any industrial grade power, road, water, aviation or rail infrastructure in place," IEEFA said.

    "Adani Enterprises argues their coal proposal is de-risked by the existence of its sister company Adani Power willing to provide long dated offtake agreements for its largely yet-to-be-built import coal-fired power plants in western India," it said.

    "IEEFA would note Adani Power is in financial distress with net debts of over $7.3 billion against a market capitalization of just $1.4 billion," it added.

    The Adani spokesman said that the company's commitment to the project is evidenced through its agreement to purchase the Abbot Point Coal Terminal operator Abbot Point BulkCoal from Glencore on Tuesday this week.

    Adani is the terminal owner and plans to link the Carmichael mine to it via 388 km of rail way line.

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    Essar Power loses coal mine for failing to clear payment

    The coal ministry of India has issued a termination notice to Essar Power – one leading private power producer -- ending the contract for development of the Tokisud North coalmine in Jharkhand for not making the upfront payment for the block.

    As per coal block auction norms, Essar Power will be barred from bidding in coal block auctions for a year. The ministry is also considering stern action against the company, including disqualifying it from Coal India 0.32 % supplies, a senior government official said.

    The move is in line with coal minister Piyush Goyal's stand to prevent private companies from derailing the auction process or reneging on contracts. Essar Power said it has approached the coal ministry to clear the dues. The company said it has invested Rs 450 crore ($67.5 million) on development by way of cash payments and performance guarantees and has made all the necessary efforts to commence mining at the coal block.

    "The termination notice will come into effect from October 6. The firm's Rs 261-crore bank guarantee will also be forfeited," a government official said.

    A decision on the allocation of Tokisud mine will be taken in due course, he said. The mine is the most expensive block of those bid out to the power sector. The company had won the producing coal block in an aggressive bid of Rs 1,110 per tonne. Scrapping the coal block will have an adverse impact on Essar Power's 1.2 GW Mahan power plant in Madhya Pradesh that has been shut for several years. Mahan's Unit I had begun operations in April 2013 but had to suspend them because of coal wasn't available.

    The mining licence for an attached Mahan coal block was cancelled by the Supreme Court in October 2014.
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    China rejects steel mills' plea for coking coal output hike: sources

    China's state planner rejected a request on Friday by the nation's steel makers for coal mines to ramp up coking coal output to help ease supply tightness that has triggered a frenzied price rally, sources said.

    At a hastily-called meeting on Friday in Beijing, the National Development and Reform Commission (NDRC) also gave the greenlight for 74 major miners to increase output of thermal coal, two sources familiar with the meeting said.

    Coking coal is a key ingredient in steel making.

    The NDRC did not respond to calls for comment.

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