Mark Latham Commodity Equity Intelligence Service

Friday 3rd March 2017
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    Oil and Gas

    Steel, Iron Ore and Coal


    N Korea: China frowns at the monkey.

    SEOUL—South Korea fears Beijing is widening its offensive against Seoul’s planned missile-defense system to include corporate boycotts, as a report of Chinese retaliation sent shares of South Korean retailers lower.

    The Friday report, by South Korea’s semiofficial Yonhap News Agency, which cited unnamed sources, said Beijing had urged travel agencies to stop selling tour packages to South Korea.

    The developments heightened fears here that China is orchestrating an escalating campaign to punish South Korea for its advancing plan to deploy the U.S.-built Terminal High-Altitude Area Defense, or Thaad, to help defend against North Korea.

    Earlier this week, South Korea’s Lotte Group, one of the country’s biggest conglomerates, approved a land swap that will allow a Lotte golf course in South Korea to be used to deploy the antimissile system.

    Then on Thursday, the website for Lotte’s duty-free shopping website was crippled for a few hours by a denial-of-service attack, a company spokeswoman said. She declined to comment on any motive or a perpetrator.

    That same day, an online retailer that’s part of Ruixiang Group said it wouldn’t sell Korean goods and would destroy all Korean Lotte products. Weilong Foodstuffs Co., a snack manufacturer, said it would no longer sell its products in Lotte supermarkets. The chief executive officer Jumei International Holding Ltd., a Chinese online beauty product retailer, also declined to sell Lotte products.

    “In the future, even if you beat us to death we won’t sell them,” said the CEO, Chen Ou.

    On Friday, an editorial in the Communist Party flagship newspaper the People’s Daily criticized South Korea, calling Thaad a “Pandora’s box.”

    “China firmly opposes South Korea’s deployment of ‘Thaad,’ and in the future will resolutely take steps necessary to protect its security interests, and all consequences must be borne by the U.S. and South Korea,” the editorial said.

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    Business conditions sharply higher in Norway's oil region: survey

    Business conditions in Norway's western oil-producing regions rose sharply in the first quarter, hitting a three-year high as demand for goods and services improved, a survey showed on Friday.

    The price of crude oil, Norway's key export, fell sharply from mid-2014 to early 2016 but has since staged a partial recovery, while non-oil exporters are boosted by a weak crown currency.

    First compiled in 2012, the West Coast Current Conditions Index rose by 3.4 points to 65.7 points, the highest level seen since the first quarter of 2014, said polling institute Respons Analyse and bank Sparebanken Vest.

    The six-month outlook meanwhile rose 1.1 points to 60.5 points, the strongest since early 2015. And despite some idle capacity, the outlook for investments hit a four-year high as more and more companies seek to grow, the survey showed.

    "After several quarters of rising demand, firms now signal an increased desire to invest, which may in turn have a positive impact on economic growth. The upturn is solidifying," it said.

    Rising demand was particularly evident at medium-sized exporters, the survey added, and the most significant improvements came in the Rogaland county, home to many large Norwegian oil firms, including top player Statoil.

    The survey covered 700 firms based in the regions of Rogaland, Hordaland, Sogn og Fjordane and Moere og Romsdal. Readings above 50 indicate expansion, while a reading below that level signals contraction.
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    Mining royalties Glencore said were for Congo went to Israeli billionaire

    Tens of millions of dollars in royalties and signing bonuses that Glencore told an independent transparency board it had paid to Congo's state mining company actually went to a business controlled by Israeli billionaire Dan Gertler, advocacy group Global Witness said in a report on Friday.

    Glencore-controlled Kamoto Copper Co (KCC) told the Extractive Industries Transparency Initiative (EITI) in 2013 and 2014, in publicly-available disclosures, the payments were made to Gecamines, the state company.

    EITI audits payments by mining companies to governments annually, an initiative the companies sign up to voluntarily.

    Glencore acknowledged in a statement to Reuters that KCC paid the royalties and signing bonuses in 2013 and 2014 to Africa Horizons Investment Ltd (AHIL), a wholly owned subsidiary of Gertler's Fleurette Group, rather than Gecamines. But Glencore said this was what Gecamines instructed it to do. Glencore said the payments to AHIL "discharged KCC's obligation to make these payments to Gecamines."

    Glencore said KCC made the payments to AHIL "in accordance with the payment instruction from Gecamines and the subsequent tri-partite royalties agreement between KCC, Gecamines and AHIL". Reuters was not able to review the documents providing these instructions. The chairman of the Gecamines board and its interim director-general could not be reached for comment about the payment of royalties and signing bonuses. Fleurette confirmed that it received the payments. Glencore has said in the past that it adheres to strict anti-corruption standards.

    Some Campaign groups including Global Witness have accused Gertler of exploiting his friendship with Congo President Joseph Kabila to ink sweetheart deals with the state that have cost the Congolese treasury millions.

    Gertler and Kabila have both denied that. Gertler has long denied any improper conduct and says his investments have contributed to Congo's economic development.

    AHIL has been receiving Gecamines' 2.5 percent royalty stream since at least 2013, though this was only made public last November in a separate report by Global Witness. Fleurette has said AHIL bought the royalty right from Gecamines, although it has not disclosed for how much.

    Reuters could not determine how AHIL acquired the rights to the signing bonuses. Fleurette did not respond to a Reuters question about the signing bonuses but said in a statement that Gecamines stood to benefit from having sold the royalty stream, which Fleurette has said proved less lucrative for AHIL than anticipated.

    According to EITI reports and KCC's 2014 financial statement, reviewed by Reuters, KCC paid more than $70 million in signing bonuses and royalties to AHIL in 2013 and 2014.

    Last month, Glencore bought Fleurette Group's 31 percent stake in the Mutanda copper mine in southeastern Congo and its smaller stake in KCC for a total of $960 million.

    A Fleurette spokesman told Reuters after the sale that the company had retained its royalty streams in Mutanda and KCC.

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    China's top political advisory body starts annual session

    China's top political advisory body started its annual session Friday in Beijing, ushering in a political high season that will continue with the opening of the country's top legislature Sunday.

    Yu Zhengsheng, chairman of the Chinese People's Political Consultative Conference National Committee, delivered a work report to more than 2,000 political advisors who gathered to discuss major political, economic and social issues in the world's most populous nation and second-largest economy.

    Top Communist Party of China and state leaders Xi Jinping, Li Keqiang, Zhang Dejiang, Liu Yunshan, Wang Qishan and Zhang Gaoli attended the opening meeting at the Great Hall of the People.
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    Ineos Styrolution announces EU March polystyrene price hikes above styrene monomer monthly rise

    Global Styrenics producer Ineos Styrolution has announced polystyrene price increases for March which are larger than the increase in the styrene monomer contract price, according to an announcement on its website.

    GPPS and HIPS nominations have increased Eur110/mt and Eur120/mt respectively over February, the company said.

    The March styrene contract price was fully settled at Eur1,650/mt, increasing Eur90/mt from February, indicating that GPPS and HIPS monthly increases are Eur20-30/mt larger than styrene.

    Styrolution added that "Ineos Styrolution's customers buying a mix of GPPS and HIPS, the surcharge for HIPS is plus Eur100/mt."
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    Flush with cash, global miners promise prudence, dividends

    For the first time in four years, the world's biggest miners are awash in cash, riding a wave of cost cuts and a recovery in raw material prices from coal to zinc last year.

    But instead of using their newfound bounty to unveil lavish growth plans, as they did in 2012 just as metals prices started plummeting, the cash is going to more sober uses this time: paying dividends and slashing debt.

    Spending on growth projects ranks third in priority, delegates and companies said at a mining industry conference in Florida this week. That raised the prospect of limited mine production increases that could support commodity prices especially for copper and zinc.

    "Companies who said they are going to spend more on capital (projects) or do not have a clear dividend policy, they've all been penalised (in the stock market)," said Charl Malan, senior analyst at New York-based fund management firm Van Eck Associates.

    The world's four biggest diversified miners, including BHP Billiton and Rio Tinto, last year raked in more than $20-billion in free cash flow before dividends and share buybacks, said Clarksons Platou analyst Jeremy Sussman. That left them with about $30-billion in cash and cash equivalents.

    They were helped by deep cost cuts and a rally in metals such as steelmaking coal that tripled while zinc surged 60%.

    Those miners were able to reduce gross debt - racked up during the last big cycle of mergers and acquisitions and new mine projects - by more than $20-billion in 2016, Sussman said.

    Memories of ill-timed acquisitions and a mine build spending spree just as metal prices peaked in 2011, are still fresh in the minds of miners and their shareholders.


    Teck Resources shares slumped 10% on February 15 even as the company reported better-than-expected earnings. Shareholders were disappointed by a lack of clarity on its dividend policy.

    Chief Executive Officer Donald Lindsay tried to clear things up this week at the Florida conference, saying that while debt reduction is the top priority, targets will be met soon, likely by the end of June.

    "Thereafter the dividend is going to be front and center for the board," he said in a presentation at the conference.

    In recent earnings reports, BHP and Rio both rewarded shareholders with bigger-than-expected dividend payouts while Glencore said it was in a good position to pay a special dividend.

    For Chilean copper miner, Antofagasta, excess cash will first go to sustain existing operations, then to dividends and lastly to growth, CEO Iván Arriagada told Reuters on the sidelines of the conference. The miner is focused on expanding two of its existing operations rather than big, new projects, he added.

    Still, some commodity prices, notably for uranium and fertiliser, remain stubbornly low, forcing some big producers to cut production and dividends.

    "Today we're not investing even one dime in any kind of new production," Cameco Corp CEO Tim Gitzel said at the conference. Uranium spot prices touched 13-year lows late last year, and further production cuts even at low-cost mines are possible, he said.

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    Fed hike. Animal Spirits.

    Image title

    Americans are feeling great about the future of the U.S. economy.

    Stock markets are at all-time highs. Consumer confidence has shot up. Business owners are feeling more and more optimistic.

    But none of President Trump's policies have actually been put in place yet, nor is that rising confidence reflected yet in the economic numbers since the U.S. election.

    Donald Trump has unleashed animal spirits – but beware stock market optimism

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    Shanxi Jan power output down 3.57pct on year

    Shanxi Jan power output down 3.57pct on year

    Northern China's Shanxi province saw its power output slide 3.57% year on year to 21.11 TWh in January, showed data from Shanxi Supervision Office of the National Energy Administration.

    Thermal power output stood at 19.24 TWh or 91% of the total in January, a year-on-year decline of 4.2%.

    The province used 16.08 TWh of power in January, up 3.57% from a year ago, data showed.

    By end-January, Shanxi had an installed power generation capacity of 76.46 GW, 82.55% of which or 63.12 GW was thermal power capacity.
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    China Feb official manufacturing PMI rises to 51.6

    The official Purchasing Managers' Index (PMI) rose to a three-month high of 51.6 in February, compared with the previous month's 51.3, showed data from the National Bureau of Statistic (NBS) on March 1.

    That was the seventh consecutive month above the 50-point mark that separates growth from contraction, and up 2.6 percentage points from February last year, the NBS data showed.

    That indicated that activity in China's manufacturing sector expanded in February as industrial firms continued to benefit from higher sales prices and a recovery in demand fuelled by a construction boom.
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    China Said to Order Steel, Aluminium Curbs to Fight Pollution

    China has ordered curbs on steel and aluminium output in as many as 28 northern cities during the winter heating season as it steps up its fight against pollution, according to people with knowledge of the matter.

    The cuts include halving steel capacity in four major cities, including top producer Tangshan in Hebei province, according to the people, who asked not to be identified because the matter is confidential. The other cities are Shijiazhuang and Handan in Hebei, and Anyang in the neighboring province of Henan.

    The plan calls for cuts in aluminum capacity of more than 30 percent across 28 cities, and by about 30 percent for alumina capacity, according to the people, who cited an order issued late last month by authorities including the Ministry of Environmental Protection and the National Development and Reform Commission.

    The plan doesn’t specify which heating season -- which typically runs from November to March -- will be affected by the curbs, nor a figure for the total capacity involved. A draft of the order circulated in January.

    ‘Huge Losses’

    “The cities mentioned in Hebei have 70 to 80 percent of the province’s total capacity,” Yu Chen, an analyst with consultancy Mysteel Research, said by phone from Shanghai. “A 50 percent cut will lead to huge production losses, which may lead to short-term tightness in steel supply,” he said.

    “It won’t have an immediate impact, though, given the current heating season is ending soon,” said Yu. “The full impact will also depend on the detailed measures taken by local governments to implement the order.” Steel reinforcement bar in Shanghai rose 2.1 percent to 3,542 yuan a ton.

    “These measures, if well executed, could bring potential upside risk to aluminum, alumina and steel prices in China,” analysts led by Jack Shang at Citigroup Inc. said in an emailed note. They could lead to a 5 percent loss in the nation’s total aluminum production, 9 percent in alumina and 3 percent in steel, the analysts said, assuming a four-month halt.

    China is the world’s top producer and consumer of the metals. U.S. aluminum producer Alcoa Corp.’s chief executive officer said earlier that China’s aluminum curtailments could be a “game changer” for the market if implemented. Aluminum in Shanghai added 3 percent, the biggest gain since Nov. 10, to 14,180 yuan a ton.

    Calls to the environmental ministry’s news department weren’t answered. The NDRC, China’s top economic planning agency, didn’t respond to a fax seeking comment. Air pollution peaks in winter due to coal-fired heating.

    The plan follows a directive last week in which China ordered steel mills in northern Hebei province and Tianjin municipality to curb output to ensure air quality during the annual parliament meeting in Beijing this month.

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    China's total energy consumption up 1.4 pct in 2016

    China's total energy consumption grew 1.4% to 4.36 billion tonnes of standard coal in 2016, Reuters reported on February 28, citing preliminary calculations published by the National Bureau of Statistics (NBS).

    Total energy production was down 4.2% compared to the previous year at 3.46 billion tonnes of coal equivalent, the NBS said in its annual statistical bulletin.

    The share of coal in China's total energy consumption mix stood at 62% over 2016, compared with 64% in 2015.

    Environmental group Greenpeace said the data indicated that China's total carbon dioxide emissions were steady in 2016, driven largely by a 1.3% decline in coal consumption over the year.

    China appeared virtually certain to overachieve its 2020 climate targets, "if the rapid shift to clean energy and away from over-reliance on polluting industries continues", the report cited Greenpeace as said

    Greenpeace expected a further 1% drop in carbon dioxide emissions in 2017, according to the report.

    China has introduced targets and standards to improve industrial energy efficiency in a bid to cut pollution and reduce carbon dioxide emissions. The country's economic slowdown has also had an impact on overall consumption.

    The government far exceeded its targets to eliminate 250 million tonnes of coal and 45 million tonnes of steel capacity last year.
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    Bringing Blockchain Technology to the Grid

    Blockchain technology—the technology underpinning the Bitcoin virtual currency—is being discussed as one of the most potentially disruptive technologies since the Internet. Blockchains are a combination of information technology, cryptography, and governance principles that enables transactions to occur without the need for a third party to establish trust between transacting parties.

    To put it another way, in today’s transactions a number of human processes and institutions—such as banks, lawyers, regulators, brokers, and utilities—are paid to establish trust. Blockchain technology replaces these institutions, making it possible to conduct transactions without a third-party intermediary.

    At Rocky Mountain Institute, we believe that blockchain technology has the potential to play a significant, potentially game-changing role in the global electricity system’s transition to a more secure, resilient, cost-effective, and low-carbon grid.

    Blockchain Technology and the Electric Grid

    In the face of aggressive growth in distributed energy resources (DERs)—such as rooftop solar, demand response, and electric vehicles—governments, utilities, and other stakeholders from across the globe are experimenting with new ways to better regulate and manage the electricity grid. These experiments currently face four main issues regardless of their geography:  

    Controlling demand is difficult: Customers are concerned about privacy and sometimes loathe to share data—let alone allow third parties to control DERs that they own.
    Tracking flows of energy is imperfect: Energy markets and markets for the attributes of energy (e.g., renewable energy credits) can be expensive to run, can be subject to double spending, and can usually be accessed only via intermediaries.  
    Not everyone can participate in the grid’s evolution: In developed economies, only large, sophisticated businesses are able to enter into off-site power purchase agreements for renewables. In emerging economies, access to capital is a major barrier to accessing DERs and renewable energy, even if these technologies are capable of generating cost savings.
    Putting customers and DERs first is challenging: The entire grid was originally designed from the top down, making it challenging to put customers and DERs first.

    Although it is not yet 100 percent clear how, blockchain technology may be capable of solving these challenges:  

    Blockchains provide privacy, enhance cybersecurity, and are a low-cost way of managing DER-focused transactions at the edge of the distribution grid.
    Blockchains provide a more transparent and, at the same time, a more secure way of tracking energy flows than the status quo.
    Blockchains enable small-scale and low-credit customers to participate in business models focused on DERs and renewable energy.
    Blockchains are a key enabler of balancing and managing the grid from the bottom up versus today’s top-down approach.

    To unlock this value and help accelerate blockchain technology development in the electricity sector, RMI and Grid Singularity—an Austria-based blockchain technology developer—formed the Energy Web Foundation (EWF).

    EWF is a nonprofit foundation with one high-level goal: to unleash the potential of blockchain technology in the energy sector. To achieve this goal, EWF focuses on defining blockchain use cases, building a blockchain platform for the energy sector, incubating an ecosystem of stakeholders, and educating the public.

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    BHP says `bloody awful' trade pledges threaten Trump's pump

    The head of the world’s biggest mining company intensified his warnings that US trade protectionism under President Donald Trump would threaten global growth and the fight against poverty.

    While applauding efforts by the administration to boost US growth and infrastructure spending, BHP Billiton Chief Executive Officer Andrew Mackenzie said the consequences of restricting free trade would be “pretty bloody awful.”

    BHP, which is also the largest overseas investor in US shale, “is very anxious about the possibility that instead of that good leadership, we could have bad leadership from the US on global free trade," the Scottish-born executive said in an interview with Bloomberg TV at a conference in FloridaMonday.

    Global long-term growth is about 3% but needs to be 4% to get more people out of poverty, he said. “And that won’t happen under a protectionist regime and protectionist leadership in the US”

    Mackenzie and chairperson Jacques Nasser met Trump in New York last month, before his inauguration, to discuss the resources sector. Melbourne-based BHP is a partner in Arizona’s Resolution copper project with Rio Tinto Group, which has urged the new administration to accelerate approvals.

    BHP was little changed at A$25 in Sydney trading Tuesday, and has advanced about 61% in the past 12 months.


    Mackenzie’s concerns echo those from leaders of the world’s biggest banks, which have warned investors of Trump’s potential to roil markets and slow global trade. Standard Chartered Plc Chief Executive Officer Bill Winters, the former head of JPMorgan Chase & Co.’s investment bank, said last week that he’s mapping out scenarios “if things get very messy and we get into the trade-war zone.”

    So far, many investors appear unruffled, driving equity gauges including the Dow Jones Industrial Average to record highs. Stocks have risen as corporate results and European growth figures boosted optimism that the Trump administration will only bolster already-strengthening economies.

    Trump’s administration does bring benefits for businessconfidence with its policies on tax and with pledges to boost infrastructure spending and economic growth in US, Mackenzie said.

    Improved demand prospects have helped to fuel a rally in commodity prices which, in the case of copper, has been supported by supply disruptions in Chile and Indonesia. The red metal is up 28% in the past six months.

    After years of cutbacks to cope with low prices, the industry is trying to figure out what to do with the windfall, Mackenzie said, and how much should go back to shareholders versus being reinvested to secure future production.

    “My sense is that people will be quite reluctant to invest given what’s gone on,” he said. Even so, BHP would make acquisitions for the right kind of ore bodies he said, but “they’re very hard to come by.”

    The only deal the company has been able to do of late “for value” was a stake in the Trion offshore oil project, he said. Trion’s development costs may exceed $10-billion with first production expected between 2023 and 2025, Macquarie Group analysts wrote December 6. Mackenzie will travel to Mexico to sign the Trion deal on Friday. Asked if BHP will be able to cut the cost of the project or speed up development, he said “we’re certainly going to try.”

    Investors remain wary of the prospect of a wave of major deal-making among top miners, after the spree at the start of this decade that led to humbling writedowns and the ouster of a slew of key executives. BHP spent $20-billion expanding into US shale assets and was later forced to write down the value of the assets as prices slumped.

    Under Mackenzie’s predecessor, BHP launched an unsuccessful hostile takeover offer for Potash Corp. of Saskatchewan and previously had failed in an attempted takeover of Rio Tinto Group and a separate plan for an iron-ore joint venture with its rival.

    On the possibility he’d revisit a large corporate merger, Mackenzie said: “To be honest, I do think about that a bit, but I think that’s very, very low down our list of priorities.”

    BHP can achieve its goals with its existing ore bodies and successful exploration, he added.

    In the meantime, the company may continue to divest smaller marginal assets, he said, while declining to comment on which ones, or whether any active processes are under way.

    "Our portfolio is close to perfection,” he said.

    BHP – which focused its portfolio on key commodities with the 2015 demerger of other assets into South32 – is prioritizing copper, oil and potentially potash for investments or acquisitions, even as iron-ore and coal account for almost two-thirds of profits. The copper and petroleum divisions will account for about three-quarters of capital expenditure over the next five years, according to Macquarie forecasts.

    A reduction in capex is “broadly” a sign of the direction the company is headed but it will continue to produce coal and iron ore into the next decade, Mackenzie stressed.

    “Ten years from now, who knows, but I don’t think you will see a huge shift from where we are today and we may, by then, have chosen to add potash,” he said.

    BHP’s Jansen potash project in Saskatchewan may begin first production from as soon as about 2023, people with knowledge of the plans said in August.

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    Overloaded cement conveyor catches fire

    Overloaded conveyor belt catches fire at LafargeHolcim cement plant
    An overloaded conveyor belt at the LafargeHolcim cement plant near Hagerstown, Md., started a two-alarm fire that burned for more than an hour beginning at 11:26 p.m. on Monday night, ...
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    China steps up air pollution inspections

    China's environmental inspectors named and shamed more cities for poor air quality control as the fight against smog continues, Xinhua reported.

    Inspections of 18 cities in north China's Beijing-Tianjin-Hebei region and nearby areas used unannounced checks at night and undercover methods, the Ministry of Environmental Protection (MEP) said.

    Handan city of Hebei Province continues to illegally operate coal-fired boilers though officials had ordered them closed. After the inspections, the boilers were dismantled.

    A cement producer in Beijing used more electricity than usual in December, when it should have suspended production. Two other cement firms were wrongly exempted from production suspensions.

    The MEP criticized several cities in Hebei, Shanxi and Henan for not doing enough in curbing the use of "scattered coal" -- coal burned by households or small factories for heating and is much dirtier than that used by thermal plants, which have the equipment to reduce emissions.

    China is intensifying efforts to fight pollution and environmental degradation after decades of growth left the country saddled with problems such as smog and contaminated soil.
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    Aggressive cuts to Obama-era green rules to start soon: EPA head

    U.S. President Donald Trump's administration will begin rolling back Obama-era environmental regulations in an "aggressive way" as soon as next week, the head of the Environmental Protection Agency said on Saturday - adding he understood why some Americans want to see his agency eliminated completely.

    "I think there are some regulations that in the near-term need to be rolled back in a very aggressive way. And I think maybe next week you may be hearing about some of those," EPA Administrator Scott Pruitt told the Conservative Political Action summit in Washington DC.

    Pruitt added the EPA's focus on combating climate change under former President Barack Obama had cost jobs and prevented economic growth, leading many Americans to want to see the EPA eliminated completely.

    "I think its justified," he said. "I think people across this country look at the EPA much like they look at the IRS. I hope to be able to change that."

    Pruitt was confirmed as EPA head last week. His appointment triggered an uproar among Democratic lawmakers and environmental advocates worried that he will gut the agency and re-open the doors to heavy industrial pollution. He sued the EPA more than a dozen times as his states' top attorney and has repeatedly cast doubt on the science of climate change.

    But his rise to the head of the EPA has also cheered many Republicans and business interests that expect him to cut back red tape they believe has hampered the economy.

    Scott Pruitt, administrator of the Environmental Protection Agency (EPA), speaks to employees of the Agency in Washington, U.S., February 21, 2017. REUTERS/Joshua Roberts

    Trump campaigned on a promise to slash regulation to revive the oil and gas drilling and coal mining industries.


    Pruitt mentioned three rules ushered in by Obama that could meet the chopping block early on: the Waters of the U.S. rule outlining waterways that have federal protections; the Clean Power Plan requiring states to cut carbon emissions; and the U.S. Methane rule limiting emissions from oil and gas installations on federal land.

    A Trump official told Reuters late Friday that the president was expected to sign a measure as early as Tuesday aimed at rescinding the Waters of the U.S. rule.

    Pruitt said in his comments to the CPAC summit that rule had "made puddles and dry creek beds across this country subject to the jurisdiction of Washington DC. That's going to change."

    He also suggested longer-term structural changes were in store at the EPA.

    "Long-term, asking the question on how that agency partners with the states and how that affects the budget and how it effects the structure is something to work on very diligently," Pruitt said.

    Like Trump, he said cutting regulation could be done in a way that does not harm water or air quality.

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    Bitcoin hits record high above $1,200 on talk of ETF approval

    Digital currency bitcoin jumped to a record high above $1,200 on Friday, as investors speculated the first bitcoin exchange-traded fund (ETF) to be issued in the United States is set to receive regulatory approval.

    Traditional financial players have largely shunned the web-based "crytpocurrency," viewing it as too volatile, complicated and risky, and doubting its inherent value.

    But bitcoin, invented in 2008, performed better than any other currency in every year since 2010 apart from 2014, when it was the worst-performing currency, and has added almost a quarter to its value so far this year.

    It soared to as high as $1,200 per bitcoin in early Asian trading on Europe's Bitstamp exchange, before easing to about $1,190.

    That put the total value of all bitcoins in circulation — or the digital currency's "market cap", as it is known — at close to $20 billion, around the same size as Iceland's economy.

    Some analysts say regulatory approval of a bitcoin ETF would make the currency relatively attractive to the often more cautious institutional investor market.

    But despite potentially high returns, low correlations with other currencies and assets, falling volatility and increasing liquidity, there is scant evidence so far that most major players are considering investing in the digital currency.

    "Bitcoin is just not liquid enough for us to even think about," said Paul Lambert, fund manager and head of currency investment at Insight, in London.

    "We manage billions and billions of dollars we'd need to be able to go into that market and trade in hundreds of millions of dollars at a time, and my sense is it's not like that."

    Three ETFs that track the value of bitcoin have been filed with the U.S. Securities and Exchange Commission for approval.

    The Securities and Exchange Commission will decide by March 11 whether to approve one filed almost four years ago by investors Cameron and Tyler Winklevoss. If approved, it would be the first bitcoin ETF issued and regulated by a U.S. entity.
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    China group to curb private bond sales by developers, steelmakers

    China's securities industry association plans to revise rules on private bond sales to restrict issuance of them by property developers, steelmakers and coal producers, two sources with direct knowledge of the plan told Reuters on Friday.

    Under the revised rules, getting drafted by the Securities Association of China, property developers who speculate on land prices, hoard land or properties, or drive up home prices will be banned from issuing bonds via private placement, the sources said.

    In addition, steelmakers and coal producers who defy Beijing's reform measures to cut excessive capacity will also be barred from selling bonds, according to sources, who declined to be identified.

    China has been pushing what it calls "supply-side" reforms, urging companies in sectors such as steel, coal and real estate to slash overcapacity and improve quality.
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    German construction sector achieves strongest revenues since 2000

    The German construction sector achieved its highest revenues since 2000 last year and new orders were at their strongest level since 1996, data showed on Friday, in a further sign of the strength of this sector of Europe's largest economy.

    Low interest rates, a strong labour market and a lack of other lucrative investments have created a construction boom, especially in home building, in recent years.

    Revenues for firms with at least 20 employees rose by 7.4 percent to almost 72 billion euros ($76.27 billion), the sixth consecutive increase, data from the Federal Statistics Office showed.

    Construction industry associations expect sales to rise by 5 percent this year to hit the highest level since 1995.

    In 2016 construction firms received 67.8 billion euros' worth of orders - 14.6 percent more orders in nominal terms than in the previous year and the strongest level in 20 years.

    Data published on Thursday showed rising construction helped the German economy quadruple its growth rate to 0.4 percent in the fourth quarter of 2016.

    The Bundesbank has said it expects the German economy to remain on a strong footing in the coming months thanks to high industrial and construction activity.
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    Oil and Gas

    Stage Completions brings Blackbird Energy completions to just 3 days

    Technological innovation has been a major driver of the oil and gas revolution from the very beginning. New ideas led to horizontal drilling and completions, and when the price of oil fell from more than $100 per barrel to less than $30, companies turned to technology again for a solution.

    Over the course of EnerCom Dallas, technological innovation was a constant theme. Even though some of the pressure has come off the oil and gas industry with prices climbing above $50 per barrel, many companies remained focused on making operations even more efficient.

    One of the technologies presented at EnerCom Dallas was privately-held Stage Completion’s SC Bowhead II, a collet-activated fracturing sleeve system designed for cased hole and open hole applications. The Stage system is helping to increase stimulated rock volume, increasing EURs and improving capital efficiencies, Stage management said during their presentation.

     Image title

    Stage completion has been rolling out its completion technology throughout North America and internationally. In Canada, the company has been used in multiple Blackbird Energy (ticker: BBI) wells, with impressive results. BBI’s most recent 3-28 Montney well consisted of 56 stages with 2,765 tons of proppant for $2.3 million in just 54 hours exclusive of maintenance. Blackbird also owns a 10% stake in Stage Completion.

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    U.S. EPA withdraws request for methane information from oil, gas companies

    The U.S. Environmental Protection Agency on Thursday withdrew a requirement for the oil and gas industry to provide information on methane emitted from its operations, one of what will be several moves to undo the Obama administration's climate change regulations.

    In November, two days after Donald Trump was elected president, the EPA issued a request for information from companies needed to help it determine how to reduce methane and other emissions from existing sources. That information request was the agency's first step as it sought to regulate methane emissions from the oil and gas sector.
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    Diesels lose appeal in weaker German car market

    Sales of new cars in Germany fell last month for the first time since October, with diesel models worst hit as authorities debate tighter regulation to help tackle pollution.

    Car sales in Europe's largest vehicle market fell 2.6 percent in February to 243,602 vehicles, motor vehicle authority KBA said on Thursday.

    Adjusted for one less selling day, car sales would have risen by about 2 percent last month, according to analysts. However, that represents a slowdown from a jump of more than 10 percent in January.

    "February dealt a blow to the German new car market," Peter Fuss, a senior partner and automotive specialist in Ernst & Young's German practice, said, adding rising inflation and higher energy costs were deterring buyers.

    Diesel models' share of new car sales plunged 11 percent in February to 43 percent, reflecting similar drops in France and Spain, and may shrink further in months ahead, Fuss said.

    Buyers are shunning diesel car purchases as Germany discusses driving bans and because of increases in car selling prices expected on the back of manufacturers' efforts to improve emissions-control technology, Fuss said.

    Stuttgart, home to premium carmakers Mercedes-Benz (DAIGn.DE) and Porsche (VOWG_p.DE), has said it will next year ban diesel cars which do not comply with latest emissions limits from the city on days when pollution is heavy.

    Diesel emissions are in focus following the disclosure in September 2015 of the Volkswagen scandal involving cheating software in as many as 11 million cars worldwide which made them appear cleaner during routine testing.

    Other key European markets showed a mixed picture in February with new car sales up 6.2 percent in Italy, down 2.9 percent in France and flat in Spain.

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    Saudi Aramco Offers Crude Discounts in Every Region

    Saudi Arabian Oil Co. has lowered prices for almost all of its crude grades for April delivery.

    The world’s largest oil exporter, known as Saudi Aramco, said on Thursday that it had reduced super light and extra light crude prices for its customers in the Far East, its largest market, by 50 cents and 75 cents, respectively.

    Light and medium grades are down by 30 cents a barrel, while heavy is unchanged compared with March.

    Discounting its crude grades should lead to a rise in orders, especially in the Far East.

    In the U.S., extra light, light, medium and heavy grades have been cut by 10 cents to 30 cents a barrel.

    Northwest European customers also received discounts between 45 cents and 60 cents a barrel.

    Mediterranean countries are the only customers that will have a price increase, with heavy grades increasing by 15 cents a barrel.

    Other grades were either cut or unchanged.

    The price-setting process is typically a technical move with little impact on the broader market.

    However, in the past two years, amid a steep drop in global crude prices, the settings have been closely followed by market watchers looking for clues as to the intended direction of Saudi oil policy.

    The Organization of the Petroleum Exporting Countries cut production by over 1 million barrels a day, to roughly 32.3 million barrels a day, in January and February, representing a compliance rate of roughly 94%, according to most estimates.

    Saudi Arabia has been credited as the primary driver of the cuts and reduced output by an additional 80,000 barrels a day in January to give other countries time to rein in their own production.

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    Iraqi Kirkuk Oil Exports at Risk as Kurds Seize Pump Station

    Iraqi oil shipments of about 105,000 barrels a day were halted briefly on Thursday after Kurdish troops seized control of a pumping station in disputed Kirkuk province and demanded that crude shipments to the country’s central government be stopped.

    Oil from Kirkuk stopped flowing into a Kurdish-built export pipeline to Turkey after fighters loyal to the Patriotic Union of Kurdistan political party took control of the province’s main pumping station, Najat Hussein, a member of Kirkuk’s oil, energy and industry committee, said by phone. The shipments resumed several hours later, he said.

    The PUK, one of two parties in the Kurdistan Regional Government, has controlled much of Kirkuk since sending forces to protect oil facilities there after Islamic State militants captured swathes of northern Iraq in 2014. Kirkuk lies outside the KRG-run Kurdish region and is a potential flashpoint between Kurds and Iraqi Arabs. The KRG struck a deal with the federal government in Baghdad last August to share revenue from Kirkuk oil exported through the Kurdish-operated pipeline.

    By seizing the station that controls oil flowing into the export pipeline, the PUK was trying to pressure the federal government to allocate money to Kirkuk from sales of the province’s oil, Hussein said. The PUK will cut exports again if no agreement is reached within one week, he said.  

    “Today’s storming of the North Oil Co. in Kirkuk was provocative and irresponsible local behavior,” Safeen Dizayee, a KRG spokesman, told the Kurdish Rudaw news agency late Thursday. “It was not necessary to take this irresponsible step.”

    Iraq, the second-biggest member of the Organization of Petroleum Exporting Countries, pumps most if its crude at fields in the south and exports it by sea from the southern port of Basra. Total exports increased to 3.85 million barrels a day last month, about 39,000 barrels a day more than in January, according to port-agent reports and ship-tracking data compiled by Bloomberg.
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    Canadian Natural Resources Limited Announces 2016 Fourth Quarter and Year End Results

    Commenting on 2016 results, Steve Laut, President of Canadian Natural stated, “Throughout 2016 Canadian Natural continued to execute on our defined strategy with another strong operational year. In 2016 we were able to keep our capital program intact, complete the Phase 2B expansion at Horizon, continue to lower our cost structures, operate our properties in a safe and effective manner and increase returns to shareholders.

    2016 was a milestone year for Canadian Natural with the continued transition to a long life low-decline asset base with the strong execution and operational results of Horizon Phase 2B. In the fourth quarter of 2016 the Company achieved record SCO production of 178,000 bbl/d and record low operating costs of $22.53 were realized as cost efficiencies continue to be a focus. Production levels at Horizon continue to be in excess of our 182,000 bbl/d nameplate capacity with December, January and February production averaging approximately 184,000 bbl/d, 195,000 bbl/d and 202,600 bbl/d respectively. Strong production combined with record low operating costs is delivering substantial cash flow generation and as a result our balance sheet is strengthening quickly. This will allow for greater returns to shareholders, as demonstrated by today’s 10% dividend increase, economic development of our asset base and potential for opportunistic acquisitions.

    2017 will be equally as transformational as Canadian Natural targets to deliver 6% production growth with a $3.9 billion capital program. With approximately $1.05 billion of Horizon Phase 3 expansion capital remaining to be spent in 2017 as a part of this capital program, an additional 80,000 bbl/d of SCO will be added at Horizon. Phase 3 is targeted to start-up in the fourth quarter of 2017 and will further strengthen the Company’s long term sustainability in any commodity price cycle.”

    Canadian Natural’s Chief Financial Officer, Corey Bieber, continued, “In 2016 Canadian Natural demonstrated the strength and resilience of the Company’s operations and assets. While navigating a US$43/bbl average WTI price in 2016, the Company’s net ending debt was largely unchanged compared with 2015 levels, all the while growing proved reserves 4%, increasing dividends, maintaining entry to exit production levels and investing approximately $1.9 billion in the Horizon expansion. A significant achievement in a low commodity price environment. In the fourth quarter of 2016, the Company generated approximately $1.0 billion in free cash flow after capital and dividend requirements. As a result, liquidity and key balance sheet metrics of the corporation strengthened in 2016.

    In the first quarter of 2017 the balance sheet will continue to strengthen as cash flow is targeted to exceed capital expenditures by approximately $230 million per month. In recognition of this financial strength and the strong operational performance at Horizon, our Board of Directors today approved a 10% increase to our quarterly dividend from $0.25 per share to $0.275 per share, for the seventeenth consecutive year. Also, as a result of this financial strength and operational performance, the Board of Directors, subject to regulatory approval, authorized the Company to apply for a normal course issuer bid to purchase up to 2.5% of the Company’s common shares.

    With increased long life low-decline, high value SCO production from Horizon Phase 2B in 2016 and Phase 3 targeted for a fourth quarter start-up, Canadian Natural’s business becomes even more robust and sustainable, allowing for increased capital flexibility going forward.”

    ($ millions, except per common share amounts)Dec 31

                            2016 Dec 31 2016 Sep 30   2015 Dec 31  year 2016 Dec 31
    Net earnings (loss)  $566$            (326)           $131$                (204)$
    Per common share $0.51            $(0.29)          $0.12               $(0.19)
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    Gail India awards tender for April LNG shipment - trade sources

    Gail India has awarded a tender for a liquefied natural gas (LNG) shipment delivering in April at a price of around $6 per million British thermal units (mmBtu), traders said.

    Estimates of the transaction price by traders ranged from slightly below to slightly above that level.

    The supplier could not be immediately identified.
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    Gazprom natural gas sales in Europe, Turkey slide by 34 million cu m/d in Feb

    Russian natural gas flows to Europe and Turkey in February averaged 582 million cu m/d, down 34 million cu m/d from the January average, Gazprom data released late Wednesday showed.

    Flows of Russian gas to Europe dipped in February, given lower demand and a less attractive oil-indexed price versus the European hubs.

    Gazprom was also unable to use the higher capacity in the OPAL line last month due to ongoing legal action, having boosted supplies via Nord Stream/OPAL in January.

    Its gas deliveries via the Ukraine route also slid in the last week of February, triggering a warning from Ukraine's Naftogaz about record low pressure in the system.

    According to Gazprom data, total sales in Europe and Turkey (but not the countries of the former Soviet Union) were 16.3 Bcm, or an average of 582 million cu m/d.

    That is down from the January total of 19.1 Bcm, or an average of 616 million cu m/d.

    The total for the first two months of 2017 was 35.4 Bcm, still up 21% from the same period last year.

    "In absolute terms, the increase amounted to 6.1 Bcm, which is comparable with the annual volume of deliveries to Austria," Gazprom said.

    Nonetheless, the fall in February will have been noted, and comes as Russian oil-indexed gas prices and the day-ahead price at European hubs converge.

    The oil-indexed range is still slightly cheaper than the TTF hub, but the two have been converging in recent weeks and the TTF price is set to fall well into the oil-indexed price range in the near future, according to Platts analysis.

    Gazprom said its supplies to Germany rose 23.8% year on year in the first two months of 2017, while supplies were also up year on year in France (38.2%), Slovakia (11.5%) and Greece (20.6%).

    "Our European customers are steadily increasing imports," CEO Alexei Miller said.

    Last year, Gazprom hit an all-time high sales level of 179.3 Bcm and Gazprom officials have said that the company could exceed that level in 2017.
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    Russia's ESPO crude oil premiums hit multi-month lows as April exports set higher

    Price differentials for ESPO Blend crude extended losses to multi-month lows on Wednesday, as bigger exports volume set for April added further downside pressure to the Far East Russian grade that was already strained by rival Abu Dhabi supplies offered from a nearby region.

    S&P Global Platts assessed the second-month ESPO Blend crude at a premium of $2.50/b to the Platts front-month Dubai crude assessments Wednesday, the lowest cash differential since September 27, 2016 when it stood at a $2.35/b premium.

    Among some of the latest spot deals that took place in Far East Russia, Surgutneftegaz was said to have sold four cargoes of ESPO curde for loading over April 14-18, April 19-23, April 22-26 and April 26-30 to an oil major, a Chinese company, an unidentified trading house and a North Asian refiner, respectively, at premiums of $2.60-$2.90/b to Platts front-month Dubai crude assessments on a FOB basis.

    Furthermore, trade sources said Swiss trading house Tenergy could have sold a cargo of the medium sweet Russian grade for loading in late April at a premium of around $2.52/b, while Trafigura was said to have sold late last week a cargo, for loading in the first half of April, at a premium below $2.50/b to Platts Dubai.

    In comparison, most March-loading ESPO cargoes received premiums of around $3.30-$3.60/b in the previous trading cycle.

    "[ESPO sellers] were already struggling to cope with [rival] Murban [crude barrels offered from South Korean storage units] ... the bigger [April export] program is just a nail in the coffin," said a Singapore-based crude trader.

    Platts reported last week that Abu Dhabi National Oil Co. was offering via private tenders at least 2 million-4 million barrels of light sour Murban crude for April loading from Yeosu, South Korea.

    Regional traders said Murban crude offered from South Korea may have lured some Asian customers away from the Far East Russian market in the past few weeks.

    Trade sources said several Japanese end-users, who were initially planning to pick up some April ESPO cargoes, were expressing their interest in the Yeosu-loading Murban barrels.

    Furthermore, market talk indicated that an unidentified Thailand-based buyer could have bought some of the light sour crude offered from South Korea, but full details couldn't immediately be verified.


    A total of 2.706 million mt of Russian ESPO Blend crude is scheduled for export in April, up 7.2% from March, according to the latest monthly loading program seen by Platts.

    The April loading program, which runs from March 31 to April 30, will comprise a total of 27 cargoes, 26 of which are 100,000 mt each and a single cargo of 106,000 mt.

    In comparison, Russia is set to export 2.525 million mt of ESPO crude in March, comprising 20 stems of 100,000 mt each and five of 105,000 mt each.

    The April loading rate will average at around 639,838 b/d, up from 544,360 b/d scheduled for March. The March loading program runs from February 27 to April 1.

    The April program showed state-owned Rosneft holding nine cargoes, Russia's Surgutneftegaz with eight, and six cargoes for Swiss-based Tenergy. As for the rest of the equity holders, Gazpromneft has two cargoes and Lukoil holds one cargo for April.

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    Tellurian’s Driftwood LNG granted FTA export permit

    Tellurian said its Driftwood LNG project received the permit from the United States Department of Energy to export liquefied natural gas to free trade agreement nations.

    The company has also applied for a non-FTA export permit and expects to file its application to the Federal Energy Regulatory Commission (FERC) application later this quarter.

    Tellurian was formed in February 2016, by Charif Souki, former founder and CEO of LNG export player Cheniere Energy and Martin Houston, former COO of BG Group, now owned by Shell.

    At the beginning of February, Tellurian Investments merged with Magellan Petroleum, an independent oil and gas exploration and production company, under a name Tellurian.

    The company proposed to build a 26 million tons per year LNG export facility near Lake Charles, Louisiana in the US Gulf Coast.

    Tellurian expects to begin construction of Driftwood LNG in 2018 and deliver first LNG in 2022, with full operations in 2025.

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    Sinopec to spend $29 billion upgrading four refining bases

    China's Sinopec group, parent of Sinopec Corp, will invest 200 billion yuan ($29.05 billion) to upgrade four refining bases between 2016 and 2020 to produce higher-quality fuels, the company said in an emailed statement on Thursday.

    Sinopec's upgrades come as China, the world's second-biggest oil consumer, is embracing more stringent fuel standards in its battle against pollution and suffering an overall glut in refining capacity.

    After the upgrades, the total refining capacity of the four refining sites will reach 130 million tonnes per year, or 2.6 million barrels per day (bpd), while ethylene capacity will reach 9 million tonnes per year (tpy), Sinopec said.

    The sites are in the cities of Shanghai, Nanjing and Zhenhai on the east coast and Maoming-Zhanjiang in southern Guangdong province.

    After the expansions, the bases will make up 45 percent of Sinopec's total refining capacity and 65 percent of its ethylene capacity.

    "It's a strategic move that fits the global industrial trend for clustered and scaled growth and helps transform China's petrochemical products to medium and high quality," the company chairman Wang Yupu was cited as saying in the statement.

    Between the four bases, Sinopec will be able to optimize the product structure and reduce logistics cost.

    Sinopec, Asia's largest refiner, started construction in December of a greenfield oil refinery and petrochemical complex in Zhanjiang that includes a 200,000 bpd refinery and an 800,000 tpy ethylene complex.

    The refinery will mainly produce gasoline and diesel that meets the "national six" specifications, up from the previous Euro V guidelines that cap sulfur content at 10 parts per million (ppm), said Sinopec in the statement.

    The new plant will be geared toward producing gasoline and aviation fuel at the expense of diesel, the firm said.

    After the upgrades, Sinopec estimates the four sites will generate revenue of 800 billion yuan by 2020, based on $54 a barrel crude oil prices.
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    Russia's Novak says talk of global oil output cuts extension premature

    It is too soon to say if a global deal on oil output cuts will be extended later this year, but the current agreement envisages such a possibility, Russian Energy Minister Alexander Novak told Reuters in an interview.

    The Organization of the Petroleum Exporting Countries and non-OPEC producers, led by Russia, in December reached their first deal since 2001 to jointly curtail oil output, by around 1.8 million barrels per day (bpd).

    The deal is effective until the end of June. OPEC sources told Reuters last month that the group could extend the pact with non-members or even apply deeper cuts from July if global crude inventories fail to drop to a targeted level.

    OPEC's next meeting is planned for May 25.

    "It is premature to talk of what we will discuss in April-May. The technical possibility of the deal extension is envisaged by the agreements," Novak said in an interview cleared for publication on Thursday.

    Officials in the 13-member OPEC, including Saudi Energy Minister Khalid al-Falih, have said global oil stocks need to fall near to their five-year average for the group to say markets are becoming balanced.

    Novak said further action would depend on the size of stocks and how output in other producers, notably in the United States, China and Norway, which did not join the pact, would affect the global balance of supply and demand.

    End-December stocks of crude, natural gas liquids and oil products in OPEC member countries had fallen below 3 billion barrels, but were still 286 million barrels above the five-year average, the International Energy Agency said last month. Stocks also continued to build in China and volumes of oil stored at sea increased.

    Novak said Moscow was unlikely to cut more than it had already pledged if other non-OPEC producers failed to comply with their own promises.

    "Each country is responsible for its production. In particular, oil companies in Russia voluntarily defined their output plans for 2017 and we can only bear responsibility for our own figures," he said.

    Azerbaijan, Bahrain, Bolivia, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan are the other non-OPEC producers party to the deal.

    Novak said oil production in the United States may rise by between 400,000 bpd and 500,000 bpd this year. That is slightly above a previous forecast of a 300,000 to 400,000 bpd increase.

    Russia itself has pledged to cut output by 300,000 bpd in the first half of the year via a gradual strategy that would see output cut by 200,000 bpd in the first quarter.

    So far, Russia's cuts have amounted to around 100,000 bpd.

    If the output cut deal is not extended, overall Russian oil output for 2017 might rise to 548 million to 551 million tonnes (11.01-11.07 million bpd) from 547.5 million tonnes last year, said Novak.

    He forecast an average Brent oil price for 2017 of $55-60 per barrel and said the price of Russia's flagship Urals blend would likely be $2-$3 per barrel below that.

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    High local demand, policy changes hit China transport fuel exports

    China's exports of transport fuels plunged in January on the back of high domestic demand, a clampdown on overseas sales by independent refiners and port delays, but are are expected to bounce back in February because of stronger refinery operating rates.

    Exports of gasoline and gasoil in January dropped 37% and 46%, respectively, from December to 599,339 mt and 964,962 mt, according to data from the General Administration of Customs. But some refineries reported that actual export volumes were higher than the levels reflected in customs data.

    "Given that January export levels for both gasoil and gasoline fell to levels that were lower than we expected, we expect outflows to rebound in February, particularly as refinery runs stayed strong during the month. Gasoil demand in particular was subdued in February," said Song Yen Ling, senior analyst at S&P Global Platts' China Oil Analytics.

    "We expect 330,000 b/d (1.24 million mt) of exports for gasoil in February and about 250,000 b/d (823,000 mt) for gasoline," Song added.

    China exported 956,607 mt of gasoline in December when outflows from independent refineries peaked at around 184,000 mt as they rushed to use up their 2016 export quotas.

    But in 2017, independent refiners have not exported any cargoes so far as Beijing has withdrawn its permission and has only allocated product export quotas to refineries under Sinopec, PetroChina, CNOOC and Sinochem.

    In addition, the month-on-month drop in gasoline exports was due to the decision by some refiners to keep more barrels at home in order to meet the relatively strong domestic demand ahead of the seven-day Chinese New Year holidays at the end of January.

    PetroChina Guangxi canceled all its gasoline exports in January because of local demand, although it had initially planned to send out a total of 108,000 mt in the month.

    "Normally, demand for gasoline is strong in the holiday season as people tend to drive a lot on short journeys, boosting consumption of gasoline," said a Beijing-based analyst.


    While gasoline exports fell because of buoyant domestic demand, it was a different story for gasoil. Outflows of gasoil fell despite weak demand at home because of a combination of factors.

    Only 23,000 mt of the month-on-month fall in exports could be attributed to the lack of quotas for independent refineries.

    Platts survey also suggested that 10 key exporting refineries lifted their exports in January by 2.9% from December, but customs data showed a 45.9% decrease in exports, falling from a historical high level of 1.78 million mt in December.

    The increase in planned exports included PetroChina Guangxi's plan to ship out round 78,000 mt of gasoil in January, resuming exports after restarting operations in early December following a full maintenance. The refiner actually carried out the plan and exported the volume through the Nanning customs in January, a refinery source said on Tuesday. But the figure released by the GAC stood at only 149 mt instead, meaning the shipments were not reflected.

    This could be the same with local customs units at other places, such as Huangpu and Shenzhen for Sinopec's Guangzhou Petrochemical and CNOOC's Huizhou Petrochemical.

    The data showed that gasoil exports through these local customs authorities in South China were 27,966 mt, which amounted to an MR-size cargo lower than the total export plan of 68,000 mt by the two refineries.

    "Usually, the import and export data around the Chinese New Year period is quite difficult to match," said another analyst.

    Moreover, market participants said barrels exported under the new general traded route were not recorded on time.

    PetroChina's Dalian refinery exported 33,000 mt of gasoline and 40,000 mt of gasoil under the trade route, but the volume did not get reflected in the customs data. The customs department might need more time to figure out how to register those volumes, a source said.

    In January, Dalian Refinery also had plans to export gasoline and gasoil under the general trading route. It is again not clear whether that data got reflected. Customs data only showed 96,809 mt of gasoline exported under the general trade route last month.

    The holiday period also hit port operations. "The logistics for transporting cargoes from refineries to ports were hit as more workers took leave ahead of the holiday season. As a result, some cargoes could not be exported on time," said a port source.

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    Samson Resources emerges from bankruptcy

    The Oklahoma-based Samson Resources Corporation has emerged from bankruptcy and discharged its $4 billion in debt, the company announced on Wednesday.

    The company has restructured, and has transferred nearly all of its remaining assets and subsidiaries to a new company, Samson Resources II, LLC. Samson Resources, an oil and gas production and exploration company that works in East Texas, declared bankruptcy in September 2015. The new company will also be based in Tulsa.

    Samson was part a waive of oil and gas companies that declared bankruptcy in the wake of plunging oil prices in 2015. KKR & Co. had taken Samson private for $7.2 billion in 2011.
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    Tankers: Sharp rise in Iran's crude oil shipments to Europe

    Iran is making rapid forays into the European crude oil market and selling its parcels to countries such as France, Italy, Greece and Spain, UK-based global shipping consultancy, VesselsValue said Wednesday.

    "Following the removal of sanctions, new players have emerged in the mix," VesselsValue said in a report. Iran's crude oil shipments have been delivered to destinations ranging from Malaysia and Singapore in Asia to Syria in Africa, it said.

    In 2016, the number of voyages delivering crude from Iran to France are estimated at 21, while Italy, Greece and Spain took 15, 14 and 13 shipments respectively, it said. This includes shipments in VLCC, Suezmaxes and Aframaxes.

    In July 2012, the European Union had banned the import of Iranian crude by its member countries and also the provisions of EU-linked insurance which included protection and indemnity cover for any shipments of Iranian crude, regardless of destination. The sanctions were relaxed in January last year.

    There has also been a significant change in the geographical mix of owners whose ships were used to lift Iranian cargoes of crude.

    Prior to the lifting of sanctions, the National Iranian Tanker Company, or NITC was the largest provider of tonnage to load cargoes from Iran, besides Irano Hind, Idemitsu Tanker, JX Ocean and KLine. The Iranian ships were provided local insurance cover but there were always concerns over the possibility of any potential liability in event of maritime accidents in waters of importing countries which were permitted to purchase crude from Tehran.

    During the period of sanctions, India permitted Iranian ships to call at Indian ports based on Tehran's local insurance cover, China used ships of domestic companies while the Japanese government provided insurance cover only for VLCCs. South Korea and Taiwan also took deliveries of cargoes purchased on a CFR basis.

    Now, "the group of shipowners lifting crude from Iran has changed dramatically to include those from Greece and Belgium," VesselsValue said.

    "The influx of owners from Greece has significantly increased the number of Suezmaxes plying on the ex-Iran voyages to 81 last year, compared with 15 in 2015," the report said.

    While NITC continues to be the market leader in terms of the number of ships deployed for loading crude from Iran, other companies with ships loading from the country include Dynacom, Delta Tankers, Euronav, Polembros, COSCO, Avin International, Olympic Shipping and Management, New Shipping and Thenamaris, it said.

    Last month, two Iranian VLCCs, the Huge and the Snow delivered a mix of the country's heavy and light crude grades to Shell at Rotterdam, according to trade sources and S&P Global Platts trade flow software cFlow.

    In late January, Iran's oil minister Bijan Zanganeh said that the country was producing 3.9 million b/d crude and was set to reach its 4 million b/d target by the end of the Iranian year on March 20. This will mark the return of Iran's output to levels last seen before 2012, when international sanctions were imposed on the country.

    A Platts survey released February 6 estimated Iranian production at 3.72 million b/d in January, up 30,000 b/d from December. While cuts in crude production have been initiated under an OPEC-led agreement, Iran is allowed to boost its output to 3.797 million b/d. If this fructifies, Iran's output would exceed its OPEC quota by more than 100,000 b/d.

    This is expected to translated into more crude shipments from Iran. According to VesselsValue, the seaborne exports of Iranian crude is rising significantly. The number of crude laden shipments from Iran increased to 563 last year, up from 66 in 2012 and 277 in 2015, their data showed.

    Notwithstanding these gains, the growth prospects of Iranian crude exports remains uncertain. US primary sanctions against Iran are still in place and the Implementation Day or January 16 last year marked the lifting mostly of the trade and financial restrictions imposed by the European Union. In case of the US, only secondary sanctions were eased.

    Shipping companies with direct links to the US stock exchanges and banks already desist their ships from calling at Iranian ports. Last month, US slapped a series of new sanctions against Iran following a ballistic missile launch by the Persian Gulf nation.

    "Iran's crude export program could be curtailed even more if there are any further provocations from" them, VesselsValue said.
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    Day One of EnerCom Dallas: a Very Positive Mood and a Full House

    EnerCom Dallas 2017 investment conference opened to a full house.

    The presentation room at the Tower Club in Dallas was overflowing Wednesday morning by the time WPX Energy Chairman and CEO Rick Muncrief took the microphone a 8:00 a.m. and laid out his company’s stark turnaround.

    In his presentation Muncrief discussed how WPX used $6.5 billion in A&D activity to convert the company from a natural gas-focused operator to a Delaware basin-focused oil/liquids producer tightly focused on only three assets—Delaware, Williston and San Juan basins. “We built a brand new company.”

    The room was jammed for presentations by Range Resources
    Chairman and CEO Jeff Ventura, Earthstone Energy
    President and CEO Frank Lodzinski and Core Laboratories
     Chairman and CEO David Demshur.

    Completions are in the Stone Age

    Demshur talked about the results his company has produced in the past few months along the road of developing and field testing some new technologies designed to boost recovery from oil and gas reservoirs, a project the company started during the downturn.

    Demshur said Core’s scientists in the lab have been able to increase recovery rates from 9% to 15%. Demshur talked in detail about Core Lab’s goal of altering the decline curve by injecting associated gases into reservoirs. “To do this we had to invent some technology.”

    Core’s CFO Dick Bergmark echoed Demshur’s comments about the company’s unique focus on reservoir optimization. “We don’t generate revenue when you’re drilling; it’s when you’re doing completions.”

    In the Core Lab breakout session an investor asked, “Who’s your number one competitor?”

    Demshur responded: “Inertia.”

    Switching from defensive mode to offensive mode

    Whiting Petroleum’s Senior VP of Planning Pete Hagist was another presenter who discussed how evolving completion design has served a major oil company with much improved return rates. Hagist gave credit to his company’s use of diverting agents to distribute the sand up and down the wellbore. He said Whiting was tracking some individual well’s EURs toward 1.5 MMBOE with the bigger sand loading, compared to an average of 900 MBOE.

    After a detailed discussion of factors that are boosting capital efficiency for the leading Bakken oil producer, such as cutting drilling time, enhanced completion design, improvements in technology, and “eliminating a whole string of casing,” Hagist said his company “is switching from being in defensive mode of the past couple of years to offensive mode.”

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    Russian oil production cutting drive stalled in February

    Russia's oil output was unchanged in February from January at 11.11 million barrels per day (bpd), signalling a pause in Moscow's efforts to curb
    production as part of a global deal, Energy Ministry data showed on Thursday.
    The Organization of the Petroleum Exporting Countries (OPEC) and other large oil producers led by Russia, agreed to reduce their total oil output by almost 1.8 million bpd in the first half of this year in order to support weak prices of oil, their key source of revenues.

    Of that, Russia pledged to cut 300,000 bpd, while reaching that mark gradually with 200,000 bpd of reduction in the first quarter. This is compared to output of more than 11.2 million bpd in October, taken as the baseline for the global deal on oil production cuts.

    In January, Russia cut output by around 100,000 bpd month-on-month, its first reduction since August. In tonnes, oil output reached 42.434 million in February versus 46.992 million in January. According to Reuters calculations, Russia's cut from the October level reached 100,000 bpd in February, resulting in a compliance of just 33 percent.            

    By contrast OPEC compliance is 94 percent, due to a steep reduction by Saudi Arabia. Reuters uses a barrels/tonnes ratio of 7.33.

    Russian oil pipeline exports in February declined to 4.311 million bpd from 4.409 million bpd in the first month of the year.
    Russian gas production was at 58.53 billion cubic metres (bcm) last month, or 2.09 bcm a day, versus 66.11 bcm in January.

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    Adjusted for productivity gains, U.S. rig counts are only 10% off of the 2014 peak.

    Adjusted for productivity gains, U.S. rig counts are only 10% off of the 2014 peak.

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    Summary of Weekly Petroleum Data for the Week Ending February 24, 2017

    Summary of Weekly Petroleum Data for the Week Ending February 24, 2017

    U.S. crude oil refinery inputs averaged about 15.7 million barrels per day during the week ending February 24, 2017, 393,000 barrels per day more than the previous week’s average. Refineries operated at 86.0% of their operable capacity last week. Gasoline production increased last week, averaging about 9.5 million barrels per day. Distillate fuel production increased last week, averaging about 4.8 million barrels per day.

    U.S. crude oil imports averaged 7.6 million barrels per day last week, up by 303,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.2 million barrels per day, 5.1% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 457,000 barrels per day. Distillate fuel imports averaged 210,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.5 million barrels from the previous week. At 520.2 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 0.5 million barrels last week, but are above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.9 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 0.5 million barrels last week but are in the upper half of the average range. Total commercial petroleum inventories increased by 0.3 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.8 million barrels per day, up by 0.9% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 8.7 million barrels per day, down by 6.2% from the same period last year. Distillate fuel product supplied averaged about 4.0 million barrels per day over the last four weeks, up by 15.7% from the same period last year. Jet fuel product supplied is down 4.7% compared to the same four-week period last year.

    Cushing up 500,000 bbls
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    Solid increase is US lower 48 oil production

                                                    Week     Last Week     Last Year

    Domestic Production '000........ 9,032            9,001          9,077
    Alaska .............................................. 517                518             509
    Lower 48 ..................................... 8,515            8,483          8,568

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    ExxonMobil’s Integration, Diverse Portfolio of Investments to Drive Growth

    ExxonMobil’s Integration, Diverse Portfolio of Investments to Drive Growth

    Exxon Mobil Corporation is positioned to succeed in any price environment by maximizing the competitive advantages of its integrated businesses and by investing in projects that generate high-value products across the commodity cycle, Chairman and Chief Executive Officer Darren W. Woods said Wednesday.

    “Our job is to compete and succeed in any market, regardless of conditions or price,” Woods said during a presentation at the company’s annual analyst meeting at the New York Stock Exchange. “To do this, we must produce and deliver the highest-value products at the lowest-possible cost through the most-attractive channels in all operating environments.”

    ExxonMobil anticipates capital spending of $22 billion in 2017, an increase of 16 percent from 2016. Capital and exploration expenses through the end of the decade will average $25 billion annually.

    More than one quarter of the planned spending this year will be made in high-value, short-cycle opportunities, including in the Permian and Bakken basins. Short-cycle investments are those expected to generate positive cash flow in less than three years after initial investment. The company has an inventory of more than 5,500 wells in the Permian and the Bakken with a rate of return greater than 10 percent at $40 a barrel, with nearly one-third generating significantly higher returns. Total annual net production growth from these basins through 2025 could be as high as 750,000 oil-equivalent barrels per day at a compound annual growth rate of about 20 percent.

    At the same time, the company will advance longer-term projects focused on growing higher-value production in locations including Canada, Guyana and the United Arab Emirates. In Guyana, for example, two wells last year confirmed a world-class discovery with recoverable resources in excess of 1 billion oil-equivalent barrels. Guyana startup is expected by 2020, less than five years after the initial discovery well – a rare occurrence in the industry in terms of development time.

    ExxonMobil expects the startup of five major upstream projects in 2017 and 2018, which will contribute an additional 340,000 oil-equivalent barrels per day of working-interest production capacity. Odoptu Stage 2 in Far East Russia and the Hebron project in Eastern Canada are expected to start up by year-end. Other projects planned for startup in the period are the Upper Zakum expansion in the United Arab Emirates, Barzan in Qatar and Kaombo in Angola. Since 2012, the company has started up 27 projects, adding 1.2 million oil-equivalent barrels per day of installed capacity. The company has an upstream portfolio of nearly 100 projects that are in various stages of planning, concept selection and construction.

    These investments will support upstream volumes that are projected to be in the range of 4 million to 4.4 million oil-equivalent barrels per day through 2020.

    In the downstream, the company is investing across the value chain to continue building on the strength of its portfolio of refining and other advantaged manufacturing assets. At its Rotterdam refinery, for example, the company is reconfiguring a hydrocracker unit to manufacture higher-value products, including premium lube base stocks and ultra-low sulfur diesel, by upgrading lower-value vacuum gas oil.

    The chemical segment is investing to capture advantaged feed stocks and produce high-performance products in the U.S. Gulf Coast region and at its Singapore complex in Asia.

    “Our integrated investments along the Gulf Coast will capture the full value of the unconventional resource molecule, from the wellhead to market,” Woods said.

    During the meeting, ExxonMobil reviewed the following performance highlights.

    ExxonMobil has increased its dividend for 34 consecutive years through 2016, with an annual increase of almost 9 percent per year over the past 10 years, exceeding the S&P 500 and industry competitors during the same period.
    ExxonMobil was the only major integrated oil company to significantly increase its dividend last year by 3.5 percent.
    ExxonMobil recently completed its acquisition of InterOil to expand its acreage in Papua New Guinea and doubled its resource base in the Permian basin through another purchase.
    Since the Exxon and Mobil merger in 1999, the company has returned nearly $370 billion to shareholders in the form of dividends and share repurchases, more than the individual market values for nearly all of the S&P 500 companies.
    The company’s return on average capital employed over the past decade averaged 5 percentage points above its nearest competitor.
    ExxonMobil generated more than $26 billion of cash flow from operations and asset sales in 2016 including $4.3 billion from asset sales.

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    Eni plans to boost LNG portfolio

    Italy’s Eni intends to turn its gas and power business into the company’s global gas and LNG marketing arm and boost its LNG portfolio, according to Eni’s new strategy revealed on Wednesday.

    Eni noted that the gas and power business is expected to reach breakeven this year and positive later on “as it benefits from the alignment of gas supply contracts to market conditions and a reduction in logistics costs.”

    The company expects the unit to report earnings before interest and tax in excess of €600 million (Approx: US$632 million) from 2019 onwards.

    Eni further noted that, under its new strategy, it intends to focus on the return of equity gas and transform its retail business into a unit.

    In the upstream sector, Eni expects its hydrocarbon production to grow by 3 percent from 2017 through 2020 period, through ramp-up and start-up of new projects and further project optimization.

    Under its development plan, Eni expects to deliver new discoveries of 2-3 billion boe, almost two times the discoveries of the previous plan, by drilling around 120 wells in more than 20 countries.

    The company expects the average breakeven price of new projects to be approximately $30/bbl.
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    Marathon Petroleum sells assets to its MLP for $2 billion

    Marathon Petroleum Corp said on Wednesday it sold some terminal, pipeline and storage assets to MPLX Inc, the master limited partnership that it spun off in 2012, for $2.02 billion.

    Ohio-based Marathon has said it would speed up asset sales to MPLX and consider a separation of its Speedway retail business in response to pressure from activist hedge fund Elliott Management to boost its stock price.

    "This drop-down of additional high-quality logistics assets to MPLX represents the first of several drops expected to occur in 2017, and is an important part of our plan to unlock the value of our midstream business for investors," Marathon Chief Executive Gary Heminger said in a statement.

    The assets being sold include 62 product terminals with about 24 million barrels of storage capacity, 604 miles of pipeline and 73 tanks with 7.8 million barrels of storage capacity.

    Marathon will receive $504 million in MPLX stock and $1.51 billion in cash for the assets.
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    Kinder Morgan sells 49 percent stake in LNG export project

    Houston’s Kinder Morgan said Tuesday it will sell a 49 percent stake in its liquefied natural gas export project in Georgia for $555 million to the EIG Global Energy Partners private equity firm.

    Kinder Morgan started construction on its nearly $2 billion Elba Island LNG export project in November and Chief Executive Steve Kean has long indicated he was seeking a financial partner to help bear the cost burden.

    Royal Dutch Shell originally owned a 49 percent share, but pulled out almost two years ago. Shell is still helping fund the project through a 20-year contract to purchase the exported LNG.

    Elba Island, which is near Savannah, Georgia, is one of the smallest LNG export projects in the works, but it’s also moving along faster than many others because Kinder Morgan already had an LNG terminal in place. The project is expected to begin exporting LNG in late 2018 and be fully completed in early 2019. The plan is to export up to 2.5 million metric tons of LNG a year.

    EIG has U.S. offices in Houston and Washington, D.C. The deal includes an up-front cash payment of $385 million, along with additional payments totalling $170 million.
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    Trump gives overview of policy, but no specifics on energy goals

    In an address to a joint session of Congress Tuesday night, President Donald Trump did not utter the word energy, or delve deeply into energy policy debates. But Trump touched on areas of interest to the sector, including efforts to turn back regulation, advancement of a trillion dollar infrastructure plan and speeding development of oil and natural gas pipelines.

    In his speech, Trump did not directly discuss energy and never said the words oil nor natural gas, and made only a brief mention of the elimination of a coal mining regulation, which he said "threatens the future and livelihoods of our great coal miners."

    On energy and energy-related policy, Trump mainly spoke of his efforts over his first five weeks in office, including two memos he said "cleared the way" to build the Keystone XL and Dakota Access pipelines, and another memo calling for the Commerce Department to develop a plan within 180 days requiring all pipelines within US borders to be made with US materials, including iron and steel.

    Trump Tuesday called that forthcoming plan "a new directive that new American pipelines be made with American steel."

    Trump talked about his administration's efforts to repeal federal regulations and pushed for reform of US trade policy.

    "We must create a level playing field for American companies and workers," Trump said. "I believe strongly in free trade but it also has to be fair trade."

    Trump also mentioned a $1 trillion infrastructure plan he wants Congress to approve, which he said will be based on "Buy American and Hire American" principles.

    "To launch our national rebuilding, I will be asking the Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States -- financed through both public and private capital - creating millions of new jobs," he said.

    Recounting some of the executive orders he has issued to begin culling federal regulations, he said: "We have undertaken a historic effort to massively reduce job crushing regulations."

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    API sees rise in US crude and gasoline inventories

    U.S. stockpiles rose 2.5 million barrels in the week to Feb. 24, according to a report from trade group the American Petroleum Institute. Gasoline stockpiles rose unexpectedly and distillate stockpiles fell more than expected, the API said. Crude declined slightly on the report.
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    OPEC compliance with oil curbs rises to 94 percent in February: Reuters survey

    OPEC has cut its oil output for a second month in February, a Reuters survey found on Tuesday, allowing the exporter group to boost already strong compliance with agreed supply curbs on the back of a steep reduction by Saudi Arabia.

    The Organization of the Petroleum Exporting Countries is cutting its output by about 1.2 million barrels per day (bpd) from Jan. 1 - the first such deal since 2008 to get rid of a glut. Non-OPEC countries pledged to cut about half as much.

    Previous OPEC cuts have been mired in mass cheating by its members, making strong compliance by OPEC this time a positive surprise for the market, with prices trading above $55 per barrel -- up from $35 a year ago.

    Top exporter Saudi Arabia and its Gulf allies are hoping the cuts will help oil rise a bit further to around $60, five sources from OPEC countries and the oil industry said, to boost exporters' income and industry investment.

    "If compliance is high by OPEC and non-OPEC, then I think prices will reach $60," said an OPEC delegate. "If it was higher it would be better, but $60 is fine."

    In January, OPEC delivered 82 percent of the promised cuts, according to a Reuters survey and over 90 percent according to OPEC's own report.

    The International Energy Agency has said it was impressed with OPEC's compliance, calling it a record level.

    In February, supply from the 11 OPEC members with production targets under the deal has averaged 29.87 million bpd, down from a revised figure of 29.96 million bpd in January and 31.17 million bpd in December, according to the Reuters survey.

    Compared with the levels the countries agreed to make the reductions from, in most cases their October output, this means the OPEC members have cut output by 1.098 million bpd of the pledged 1.164 million bpd, equating to 94 percent compliance.

    The Reuters survey showed Saudi Arabia's output fell slightly in February from an already deep reduction in January taking the total curb achieved to 744,000 bpd, well above the target cut of 486,000 bpd.

    Thus, Saudi Arabia continued to compensate for the weaker adherence of other members, including Algeria, Iraq, Venezuela and even its key ally the United Arab Emirates, which cut output by 33,000 bpd -- well below the target reduction of 139,000 bpd.

    Iraq trimmed exports from its southern ports in February, boosting its compliance, the survey found, and shipping schedules suggest exports may fall more in March.

    UAE officials and industry sources say the UAE will move closer to its OPEC target in coming months, improving average compliance during the six-month duration of the supply cut rather than focusing on month-by-month performance.

    Iran's production was up slightly in February versus January even though the country is effectively excluded from output cuts. Nigeria, which is also excluded from cuts, raised output while Libya was flat month-on-month.

    OPEC announced a production target of 32.5 million bpd at its Nov. 30 meeting, which was based on low figures for Libya and Nigeria and included Indonesia, which has since left the group.

    The increases in February mean OPEC output has averaged 32.19 million bpd, about 440,000 bpd above its supply target adjusted to remove Indonesia.

    The Reuters survey is based on shipping data provided by external sources, Thomson Reuters flows data, and information provided by sources at oil companies, OPEC and consulting firms.
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    Genscape reported build at Cushing

    Genscape reported build of >800k bbls of crude at Cushing,

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    Eni posts Q4 profit

    Italian oil and gas company Eni on Wednesday reported a fourth-quarter profit as oil and gas prices rose.

    Eni reported an adjusted net profit of 459 million euros ($484 million) for the fourth quarter as compared to an adjusted net loss of 301 million euros in the same period a year ago.

    This is the Italian company’s first quarterly profit in the last 18 months.

    In the quarter under review, Eni generated 3.2 billion euros in cash, up from 1.3 billion in the previous quarter.

    “The 2016 results mark the successful conclusion of a radical transformation process,” Eni’s Chief Executive Claudio Descalzi said.

    “Over the past three years, Eni has restructured to withstand one of the most complex environments in the history of the oil industry, while strengthening its growth prospects and preserving a robust balance sheet,” Descalzi added.

    Descalzi said that the company plans to propose at the next annual general meeting the distribution of a cash dividend of €0.8 per share in 2016.

    “Looking to the future, we are able to reaffirm our progressive remuneration policy, in line with the expected improvement of commodity prices and our own financial performance,” he concluded.
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    OPEC Exports Rebound in February

    As the trading range of WTI and Brent remains narrow - and narrowing - the pressure is building for a breakout, like a kettle boiling on a stove. Hedge funds are confident it is going to pop to the upside, boosting bullish bets to a record. Meanwhile, producers have been taking the opportunity to hedge their future production - signalling their conviction that the next price move is to the downside (as well as signalling they are risk averse).  

    Although fundamentals remain on the back foot, with US inventories at a record and the globe still dealing with a flood of OPEC exports ahead of last month's production cut, the expectation of a tightening market is convincing the bulls this market is going higher. With our ClipperData indicating that OPEC has ramped up exports in the last month to pre-agreement levels, the bullish case is less compelling.

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    Saudi Product Exports

    We highlighted last week that one of our key themes here at ClipperData for the first half of this year is the de-stocking of product inventories, given they are at such an elevated level. Another theme we are keeping a keen eye on is that of refinery output from OPEC kingpin, Saudi Arabia.

    This is because we suspect that Saudi is looking to supplement lost revenues from the OPEC production cut by exporting more products. This theory is endorsed by Saudi Arabia's refinery output, which reached 2.96 million barrels per day in December, the highest since records began in 2002:

    We can see in our ClipperData that as Saudi refinery output increases, so do product exports. Export loadings so far this month of gasoline and distillates are up to 1.5 million barrels per day, tracking above year-ago levels, and seemingly on course to make a new record in the coming months.

    Exports going forward may not only be aided by higher refinery output, but also by higher prices. It was suggested yesterday that Saudi is considering a 30 percent increase to retail gasoline prices, starting in the second half of the year. This effort to encourage more mindful consumption would likely quell gasoline demand growth going forward, leaving more to be pushed out onto the global market.

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    Shell takes FID for Kaikias deepwater project. Opts for subsea tie-back to Ursa

    Royal Dutch Shell and Japanese Mitsui Oil Exploration have each taken the final investment decision to execute phase one of the Kaikias deepwater project in the U.S. Gulf of Mexico.

    The project is done through Shell’s subsidiary, Shell Offshore, and Mitsui’s wholly owned subsidiary, MOEX North America LLC .

    Shell is the operator and has an 80% working interest. MOEX NA, which owns the remaining 20% working interest, bought its stake from Shell last December.

    According to Shell’s statement on Tuesday, Kaikias is an attractive near-field opportunity with a competitive go-forward break-even price below $40 per barrel. It will produce oil and gas through a subsea tie-back to the nearby Shell-operated Ursa production hub.

    “Kaikias is an example of a competitive and capital efficient deep-water project using infrastructure already in place,” said Andy Brown, Upstream Director of Royal Dutch Shell.

    “The team has done a great job to reduce the total cost by around 50% by simplifying the design and using lessons learned from previous subsea developments.”

    The project will be developed in two phases with phase one expected to start production in 2019. The first phase of development includes three wells which are designed to produce up to 40,000 barrels of oil equivalent per day (boe/d) at peak rates.

    Kaikias is located in the prolific Mars-Ursa basin approximately 210 kilometers (130 miles) from the Louisiana coast and is estimated to contain more than 100 million barrels of oil equivalent recoverable resources.
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    Cheniere’s Sabine Pass LNG Train 3 produces commissioning cargo

    Cheniere’s produced the commissioning cargo from the third LNG train at its Sabine Pass liquefaction and export project in Louisiana.

    Commenting on the company’s financial results, president and CEO Jack Fusco said the third liquefaction train at the Sabine Pass facility produced its commissioning cargo in January.

    Commissioning activities began in September 2016, with the third liquefaction train receiving gas from the Transco pipeline in January.

    The company is developing up to six trains at the Sabine Pass terminal with each train expected to have a nominal production capacity of approximately 4.5 million tons per annum of LNG.

    The first two trains have already been completed and commissioned with the facility shipping 24 cargoes during the fourth quarter of last year.

    The overall project completion percentage for trains 3 and 4 was approximately 95.5 percent, which is ahead of the contractual schedule.

    Based on the current construction schedule, Cheniere expects to reach substantial completion for train 3 in the first quarter of 2017 and train 4 in the second half of 2017.

    Cheniere added that the construction of its second LNG export project near Corpus Christi, Texas, has reached 49.2 percent completion, ahead of contractual schedule.

    The facility will have three liquefaction trains with a nominal capacity of 4. mtpa of LNG each. The completion of the two trains is expected in 2019.

    Cheniere Energy posted a fourth-quarter 2016 net income of US$109.7 million, from a net loss of $291.1 million in the corresponding quarter in 2015.

    The loss for the full year 2016 was at $610 million, narrowing from a net loss of $975.1 for the previous year.

    Speaking of the fourth quarter results, Cheniere’s President and CEO Jack Fusco said the financial results have been driven by nearly a full quarter of LNG production from the first two trains at Sabine Pass liquefaction and export project in Louisiana.

    “Transition and execution will remain central themes for Cheniere in 2017, as we expect Trains 3 and 4 at Sabine Pass to begin commercial operations
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    BP strategy update: ‘time to get back to growth’, says CEO

    BP is focusing “squarely on the future” with plans for growth based on $55 dollar oil, according to chief executive Bob Dudley.

    The head of the supermajor said it had been on a “long and hard road” in recent years with the fallout from the 2010 Deepwater Horizon disaster and the two year slump in global oil prices.

    But having weathered the storm, Dudley said it is now time for “evolution not revolution”.

    The CEO and his management team are setting out strategic plans to the year 2021, with plans for business growth based on oil remaining at current prices of around $55 a barrel.

    Management teams are to travel to London, Edinburgh, New York, Dallas, Houston, Paris and Frankfurt to update investors personally on the fine details of the strategy this week.

    Dudley said: “In six years we have fundamentally reshaped and built a very different BP. We are now stronger and more focused – fully competitive and fit for a fast-changing future.

    “We have proven financial discipline, clear plans in action and have built a distinctive portfolio which gives us a strong platform for growth, now and into the future.

    “Striking a balance between short and long-term value, our recent acquisitions and agreements have strengthened this even further.

    “We can see growth ahead right across the group. While always maintaining our discipline on costs and capital, BP is now getting back to growth – today, over the medium term and over the very long term.”

    BP’s five year strategy forecasts that both upstream and downstream businesses will grow.

    In the upstream, growth is expected to come from a continuing series of major higher-margin project start-ups.

    The downstream expects to deliver strong marketing-led growth.

    This will be “underpinned by BP’s continued focus on safe and reliable operations, increasing efficiency, simplification and modernisation”, said the firm.

    Production ramping up from new upstream projects is also expected to deliver an improvement in BP’s operating cash flow through the second half of 2017.

    BP intends to maintain its existing “financial frame” throughout the five years to 2021.

    Organic capital expenditure, which excludes acquisitions, is to be kept within a range of $15-17 billion a year.

    Brian Gilvary, BP chief financial officer, said: “Last year we delivered our targeted $7 billion reduction in cash costs a year early, and capital spending was $8.6 billion lower than its peak in 2013 – without damaging our growth pipeline.

    “We will continue that tight focus on costs and capital discipline and seek further improvements throughout the Group.

    “We expect this combination of continued cost discipline with the growing cash flow from our core businesses – and the recent portfolio additions – will steadily drive down the cash balance point of the business.

    “Over the next five years we expect this to fall to around $35-40 a barrel for the Group overall.”

    BP said it expects to increase returns over the next five years assuming a stable oil price.
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    Iraq's Kurdistan negotiates $3 billion oil pre-payment deals

    Iraq's Kurdistan has agreed new deals to borrow $3 billion from trading houses and Russian state oil firm Rosneft that will be guaranteed by future oil sales to strengthen its fiscal position as the semi-autonomous region fights Islamic State.

    Kurdistan's natural sources minister Ashti Hawrami told Reuters the new deals had been concluded in recent weeks. The region also negotiated grace periods of between 3 and 5 years for repaying the debt.

    Trading houses have been pre-financing Kurdish oil exports for the past two years after the government in Erbil decided to start independent oil exports via Turkey's Mediterranean terminals. Rosneft said last week it would join them. .

    Kurdistan says it needs to export oil independently as Baghdad has not paid Erbil its budget share just as the region needs money to fight Islamic State and host Syrian refugees.

    Baghdad has said it would sue buyers of Kurdish oil, arguing that the central government was the only legal exporter. The new Baghdad government has softened its stance, however, as it cooperated with Erbil against Islamic State in Mosul.

    "This helps our economic independence although it is important to understand that this cannot be achieved just by oil revenues and higher oil prices. We also need to press on with our economic reforms," Hawrami said in an interview in London.

    "We have learnt a lot from the oil price shock, the costs of fighting ISIS, and the burden of some 1.8 million refugees coming to our territory... Reform is a must – we have a lot of debts to deal with."

    He declined to name the trading houses but market sources have previously identified Vitol, Petraco, Glencore (GLEN.L) and Trafigura as buyers of Kurdish barrels. Last week, Glencore confirmed it had concluded deals for Kurdish oil. The other trading houses do not comment on their dealings with Kurdistan and Rosneft did not give any details on the size of the deal.

    Hawrami said the deals would serve as a hedge against an oil price slide for several years. Previous deals with trading houses have usually lasted 6-12 months.

    "It is also positive for the traders as they don't have to renegotiate their contracts every six months," said Hawrami.

    "It strengthens our fiscal situation. It means we can pay more regularly to the international oil companies working in Kurdistan and we can invest some money in expanding our oil infrastructure," he said.

    Kurdistan's finances suffered badly during the oil price slump of 2015-2016 and it has accumulated several months of arrears to producers such as Genel (GENL.L), DNO (DNO.OL) and Gulf Keystone (GKP.L) due to tight revenues and supply glitches.

    "This year we want to avoid repeating this. I'm confident we will do better. We know the producers’ needs and plans. We are prioritizing not to fall behind again," Hawrami said.


    Hawrami said the arrival of Rosneft in addition to trading houses to the marketing of Kurdish barrels was good news for the region as it gave Erbil its first big end-user and opened up new markets - Rosneft has refineries in Germany and India.

    "We hope Rosneft’s deal will become a ground breaker for other majors," he said adding Rosneft was also looking at exploration blocks in Kurdistan.

    He also said relations with Baghdad were improving.

    "We didn't hear any negative comments from them after the deal with Rosneft. They know we are selling our oil. And actually if we help each other rather than hindering progress, we can both achieve better prices as buyers will not be able to seek unreasonable discounts."

    He also said the fact that Erbil was now selling some barrels for Baghdad from the northern Kirkuk field was evidence of improving relations.

    "In reality, Baghdad has given us some share of oil to export. So we have an arrangement that we both honor. We have real cooperation and we hope to build on that," he said.


    Kurdistan's existing pipelines can handle just over 650,000 barrels per day of exports and more investments are needed to bring that capacity to 1 million bpd, including upgrading of pumping stations, said Hawrami.

    He said pipeline capacity should be expanded by the year-end but production would not start rising until next year.

    "We have to be mindful about supply and demand. You tell me what the oil price is going to be and I will tell you when we could reach 1 million bpd of output. Investments have dried up in the last two years because of the oil price crash and attacks by ISIS," he said.

    Kurdistan is planning to offer some 20 blocks of land for exploration to investors. The region took some blocks back from investors after discovering they did little exploration, said Hawrami without naming the companies.

    Some operators relinquished blocks as they were disappointed with what they found, including U.S. oil giant Exxon Mobil (XOM.N) which has given back three blocks out of six over the past year.

    Hawrami said he did not see this as a set back.

    "Exxon has concluded that they will continue working on 3 blocks while on another three the potential reserves were simply not big enough for them. Those blocks could suit other firms. We are now looking to farm them out," he said.

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    Ukraine's Naftogaz warns of natural gas transit risk on 'record low' pressure

    Russian gas flows to Europe via Ukraine have been put "at risk" by a sudden drop in pressure at a major entry point from Russia into the Ukrainian system, Ukraine's state-owned Naftogaz Ukrayiny said Tuesday.

    In a statement, Naftogaz said there had been a "significant" drop in pressure in the Russian gas transmission system at the Sudzha gas metering station.

    This, it said, "puts at risk the stability of gas supply in the European direction."

    A spokesman for Gazprom said Tuesday the company saw "no risk" of disruption to its transit supplies to Europe in terms of the allegations made in the Naftogaz statement.

    Instead, it said, "the risk to supplies lays with low stocks of gas in Ukraine's underground storage facilities."

    Gazprom has repeatedly raised concerns that Ukraine has not pumped enough gas into its storage facilities to meet demand through the end of the winter, putting at risk transit to Europe.

    Naftogaz said the pressure at Sudzha had fallen to a "record low" of 49.7 atmosphere (atm) compared with the 60 atm stipulated in the gas transit contract between the two parties signed in 2009.

    Naftogaz also said Gazprom was "consistently" exceeding the maximum fluctuation limit for daily gas withdrawal at exit points from the Ukrainian system, which is set at 4.5% for the Uzhhorod point, according to the transit contract.

    "In some days of February, the fluctuations were twice higher than the limit," Naftogaz said.

    "Furthermore, in certain periods of this month, the quality of Russian gas supplied to Ukraine's gas system for transit deviated from the contract conditions."

    Despite this, Naftogaz said it was maintaining "secure gas supply to the EU."

    "All orders of Russian gas importers are currently being fulfilled in full and on time," it said.

    Naftogaz said it and the European Commission were concerned about the alleged failure by Gazprom to fulfil its contractual obligations.

    "Explanations and remedy of the violations in performance are expected from Gazprom for the sake of secure gas supply to European consumers," it said.

    Gazprom and Naftogaz are currently embroiled in a major arbitration dispute, with claims from both sides adding up to more than $70 billion over prices, supply obligations and transit terms from the 2009 contract.
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    China to issue non-state crude oil import licenses to 5 refiners

    China will issue non-state crude oil import licenses to five refiners, including China National Chemical Corp and four independent refiners, the country's commerce ministry said on Tuesday.

    The four independent refiners are Shandong Shenchi Group, Shandong Jincheng Petrochemical Group, Shandong Qingyuan Group and Hebei Xinhai Group, the Ministry of Commerce said on its website.
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    Hoegh LNG eyes Australian FSRU project

    Norway’s Höegh LNG is looking at the possibility to provide a floating regasification unit (FSRU) to an LNG import development in Australia, according to Chief Executive Sveinung Støhle.

    During the company’s fourth-quarter results conference call, Støhle said that “we are in the initial stages on this project and we firmly believe that an FSRU will be realized, and maybe even more than one.”

    According to Støhle, project start-up for this project could be expected in 2019.

    The CEO did not reveal any other details on the import development.

    Australia’s second-largest power and gas retailer, AGL Energy said earlier this month it was progressing with its plans to build an LNG import terminal in the southeastern part of Australia to help deal with a potential gas supply shortage in the region.

    AGL is developing an import facility despite the fact that Australia is on its way to becoming the world’s largest exporter of the chilled fuel. The country has currently seven operating LNG export developments and three more under construction.

    AGL expects to make a final investment decision on the LNG import project by June 2018.

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    RSP Permian, Inc. Announces Fourth Quarter and Year-End 2016 Financial and Operating Results,

    RSP Permian, Inc. today reported financial and operating results for the quarter and year ended December 31, 2016, year-end 2016 proved reserves, 2017 guidance and 2018 and 2019 production outlook.  In addition, the Company filed its Annual Report on Form 10-K for the year ended December 31, 2016 with the Securities and Exchange Commission (the “SEC”) and posted an updated presentation on its website at

    Highlights for the Fourth Quarter and Full Year 2016:

    4Q16 production increased 48% to 35.8 MBoe/d (71% oil, 88% liquids), compared to 4Q15
    Full year 2016 production increased 39% to 29.2 MBoe/d (73% oil, 89% liquids), compared to 2015
    4Q16 net income of $1.4 million, or $0.01 per diluted share. Adjusted net income, which does not include certain items, was $13.4 million, or $0.10 per diluted share
    4Q16 adjusted EBITDAX increased 22% to $90.5 million compared to 4Q15
    4Q16 cash operating expenses of $9.11/Boe, 23% below 2015 average of $11.85
    4Q16 development capital expenditures of $95.5 million
    Full year 2016 development capital expenditures of $294.2 million
    Entry into the Delaware Basin with previously announced $2.4 billion acquisition of Silver Hill Energy Partners, LLC (“SHEP I”) and pending acquisition of Silver Hill E&P II, LLC (“SHEP II”), expected to close March 1, 2017
    Maintained strong year-end liquidity position and balance sheet, pro forma closing of SHEP II with $109 million of cash and no borrowings outstanding under revolving credit facility

    Amended and restated credit facility, extending maturity date to December 2021, increasing borrowing base to $1.1 billion upon closing SHEP II, and increasing lender’s commitments to $2.5 billion

    Pro forma proved reserves increased by 78% to 283 MMBoe(1) (70% oil, 88% liquids) over 2015
    Achieved low drill-bit finding and development cost of $4.05/Boe with an 848% reserve replacement ratio and a 684% organic reserve replacement ratio(2)

    Recent Midland Basin Well Results

    Mask 1004/1005 two-well pad in Midland County: Two 9,500′ lateral wells, targeting the Lower Spraberry and Wolfcamp B formations, flowed naturally producing almost 200,000 Boe before being put on electric submersible pump (“ESP”) and establishing peak 30-day average rate of 2,932 Boe/d (73% oil)
    Spanish Trail 344 two-well pad and Spanish Trail 341 two-well pad: Four 6,500′ lateral wells, with two wells each targeting the Wolfcamp A and Wolfcamp B formations, established a peak 30-day average rate of 6,212 Boe/d (79% oil) and produced in excess of 250,000 Boe in less than 60 days

    2017 Guidance and 2018 and 2019 Production Outlook

    Average net daily production range of 53.0 – 57.0 MBoe/d in 2017, an 82% – 95% increase over 2016
    Development capital expenditure range of $625 – $700 million (drilling, completion, infrastructure and other) with drilling and completion of $575 – $625 million and infrastructure and other of $50 – $75 million
    30%+ annual production growth profile in 2018 and 2019 with cash flow neutrality beginning in 2018 at $55 oil
    Expanded hedge profile covering 55% of 2017E oil production and 64% of 2017E natural gas volumes at the midpoint. Entered into basis swaps to protect Midland–Cushing differentials and began layering in 2018 oil hedges
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    Painted Pony Announces 4.9 TCFE of Proved Plus Probable Reserves, 102% Increase

    Painted Pony Announces 4.9 TCFE of Proved Plus Probable Reserves, 102% Increase

    Painted Pony Petroleum Ltd. is pleased to announce strong finding and development (“F&D“) costs, the third consecutive year of per Mcfe cash cost reductions, a 95% increase to funds flow from operations for 2016, further decreases in per-well capital expenses, and record-high production volumes during the fourth quarter of 2016.

    2016 Reserve Highlights:

    Increased Total Proved (“1P“) reserves by 31% to 2.7 Tcfe at year end 2016 from 2.0 Tcfe at year end 2015;
    Increased Proved Developed Producing (“PDP“) reserves by 102% to 484 Bcfe
    (80.7 MMboe) from 240 Bcfe (40.0 MMboe);
    Increased Proved Plus Probable (“2P“) reserves 7% to more than 4.9 Tcfe at year-end 2016 from 4.6 Tcfe at year-end 2015;
    Generated a finding, development and acquisition (“FD&A“) PDP recycle ratio of 2.0 times and a 1P recycle ratio of 2.6 times, inclusive of changes in future development capital (“FDC“);
    Reduced 2P FDC by approximately $300 million or 9% to $2.9 billion at year-end 2016 from $3.2 billion at year-end 2015 as a result of improved well cost structure;
    Realized reductions in 2P FDC exceeded capital spent in 2016, which resulted in negative 2P FD&A and 2P F&D costs;

    Increased PDP before tax net present values at December 31, 2016 discounted at 10% (“NPV10“) by 119% to $7.04/share in 2016 from $3.23/share in 2015;
    Replaced 579% of 2016 production volumes through PDP reserve additions of 295 Bcfe (49.2 MMboe);
    Achieved a 1P NPV10 value/share increase of 65% to $22.92/share at year-end 2016 from $13.92/share at year-end 2015;

    2016 Fourth Quarter and Full Year Production Highlights

    Increased fourth quarter 2016 average daily production volumes by 144% to 220.2 MMcfe/d (36,695 boe/d) over fourth quarter 2015 average daily production volumes of 90.3 Mcfe/d (15,043 boe/d);
    Averaged annual daily production volumes of 139.2 MMcfe/d (23,204 boe/d) during 2016 and a 49% increase over 2015 annual average daily production of 93.6 MMcfe/d (15,604 boe/d);
    Natural gas liquids (“NGL“) production volumes increased 416% to 3,177 bbls/d during the fourth quarter of 2016 compared to 616 bbls/d during the fourth quarter of 2015;

    2016 Fourth Quarter and Full Year Financial Highlights

    Increased funds flow from operations during the fourth quarter of 2016 by a factor of 10 times to $26.5 million ($0.26/share) compared to $2.6 million ($0.03/ share) during the fourth quarter of 2015;
    Realized commodity price discount to AECO daily spot price was reduced to 6% during 2016 compared to a 22% discount to AECO daily spot price during 2015;
    Reduced annual cash operating costs (royalties, operating expenses and transportation costs) by $0.32/Mcfe (24%) to $1.04/Mcfe in 2016 from $1.36/Mcfe in 2015, and;
    Realized pre-tax income, of $8.0 million during the fourth quarter of 2016, before unrealized non-cash hedging losses.

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    EOG Resources narrows losses as oil prices rise and efficiency improves

    On Monday, Houston-based oil and gas company EOG Resources said it narrowed its losses during the fourth quarter of 2016 as oil prices rose and operations improved.

    EOG’s revenues rose by 30 percent in the last three months to years, climbing to $2.4 billion from $1.8 billion in the same period in 2014. The company’s losses shrunk to $142.4 million, or $0.25 per share, compared to a $284.3 million loss, or $0.52 per share in fourth quarter of 2015.

    For all of 2016, EOG lost $1.1 billion, or $1.98 a share, in 2016, compared to a loss of $4.5 billion, or $8.29 per share, in 2015. Revenues for the full year in 2016 were $7.65 billion, as compared to $8.7 billion in 2015.

    The company attributed its improved performance to higher crude oil and natural gas prices and more efficient operations. For instance, the EOG produced nearly the same volumes of oil and gas in 2015 and 2016 but cut exploration expenses by 42 percent, the company said in a news release.
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    Exxon's Post-Tillerson Fortunes Closer to Home as New CEO Pivots

    Exxon Mobil Corp. is pinning its fortunes closer to home as new CEO Darren Woods veers from the oil titan’s longtime focus on Asian and African riches.

    After a two-year pricing rout erased 19 percent of Exxon’s untapped crude by making it unprofitable to extract, Woods faces a tough task in sustaining the company’s output. Woods’s ability to replenish the portfolio will rely heavily on regions the driller long avoided: the U.S. Great Plains and Latin America.

    Woods’s first public appearance since becoming chief executive officer is Wednesday, when analysts will press him for operational details at Exxon’s yearly strategy session. Findings off South America’s Guyana coast and in the shale fields of Oklahoma, Texas and New Mexico could help him restore profits, recover from a $1 billion stillborn venture in the Russian Arctic, and replace aging supply sources in West Africa and Indonesia.

    “Not a lot is known about him beyond his work history,” said Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis who has a “hold” rating on Exxon’s shares. “People are going to want to hear what he plans to do about cash flow over the next few years, what kind of oil price they need, and the outlook for production.”

    A Kansas-born electrical engineer by training, Woods, who is 52, joined Exxon as an analyst in 1992 and rose through the ranks on the refining and chemicals side of the business. He succeeded Rex Tillerson, who now serves as President Donald Trump’s secretary of state, as CEO and chairman on Jan. 1.

    His leadership comes at a time when the largest U.S. oil producer is facing tough challenges in recovering from a market collapse that erased more than $154 billion in Exxon’s discounted future cash flows as fields that prospered during the oil bull market became money losers.

    Reserves Reduction

    At the same time, Woods removed the equivalent of 3.3 billion barrels of untapped crude from the books last week in the biggest reserves reduction since the company’s $88 billion takeover of Mobil Corp. in 1999. The huge African and Asian prospects acquired in that deal have mostly been exhausted, and the Irving, Texas-based company has been drifting back to the west ever since.

    Exxon disputes the usefulness of discounted future cash flows, which it is required to file annually under U.S. Securities and Exchange Commission rules. And the company said the reduction in reserves is only a short-term setback since those barrels can be reclaimed as prices rise, and remain available to be pumped from the ground.

    But as reserves and future cash flows evaporate, so has Exxon’s long-held reputation as the industry’s most efficient cash generator. The explorer’s return on capital plummeted to less than a nickel on the dollar last year from 36 percent as recently as 2008, according to data compiled by Bloomberg. The writing was on the wall in April when S&P Global Inc. stripped Exxon of the platinum credit rating it had held since the Great Depression.

    ‘Greatest Challenge’

    “In our view, the company’s greatest business challenge is replacing its ongoing production,” the credit-rating company said at the time.

    To that end, Exxon has fast-tracked development of the 1.5 billion-barrel Liza discovery 120 miles (193 kilometers) off Guyana’s shores. The company plans to formally greenlight the investment by the end of this year. Guyana President David Granger last month said it may begin pumping crude as soon as 2019. That would be breakneck speed for an industry that often takes as long as a decade to bring deepwater finds online.

    As impressive as the Guyana discovery is, it won’t be enough on its own to rejuvenate Exxon’s portfolio, said Pavel Molchanov of Raymond James Financial Inc., one of just seven analysts who rate Exxon’s stock the equivalent of a “sell."

    “It’s a good-sized deepwater project but nothing extraordinary,” Molchanov said. “If this was in Angola, the Gulf of Mexico or Norway, people wouldn’t be talking about it. It’s interesting only because Guyana is a brand-new frontier” oil region.

    Permian Footprint

    On its home turf, Exxon agreed last month to shell out as much as $6.6 billion in an acquisition that will more than double the company’s footprint in the Permian Basin, the most-prolific U.S. oil field.

    In its biggest transaction in 6 1/2 years, Exxon agreed to spend $5.6 billion in shares, plus a series of contingent cash payments totaling as much as $1 billion over the next 15 years, on rights to Permian’s Delaware region. After acquiring the assets from the Bass family -- legendary Texas wildcatters -- Exxon plans to deploy 15 drilling rigs to expedite development.

    When the transaction closes, Exxon’s Permian resource base will reach the equivalent of 6 billion barrels of crude, an asset that’s worth $324 billion at current oil prices. Wells drilled in the acquired area will generate “attractive returns” even if crude drops back down to $40 a barrel, Exxon said when the deal was announced on Jan. 17. West Texas Intermediate crude, the U.S. benchmark, has averaged about $50 for the past six months.

    The three Bass tracts Exxon is buying will provide at least 20 years of drilling, according to the company.

    Interoil Acquisition

    To be sure, Woods hasn’t entirely abandoned the quest for bonanzas on the other side of the world. Just last week, Exxon completed a takeover of Papua New Guinea natural gas driller InterOil Corp. that may cost the U.S. company as much as $3.9 billion. The deal, launched six months before Woods’ ascension, will provide Exxon with additional sources of natural gas for a liquefaction and export facility it opened in the South Pacific nation in 2014.

    “The challenge for Exxon is its size,” Youngberg said. “To make an acquisition that is any way material, they have to pursue something pretty big. And things of that size are hard to come by.”
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    Hyundai Oilbank buys South Korea's first U.S. Southern Green Canyon crude

    South Korean refiner Hyundai Oilbank has purchased a cargo of U.S. Southern Green Canyon crude oil, the country's first import of the grade, three trade sources said on Tuesday.

    The country's smallest refiner by capacity has bought 1 million barrels of the U.S. heavy crude from a major oil company to arrive in May, according to the sources, who asked not to be identified as they were not authorized to speak with media.

    A Hyundai Oilbank spokesman declined to comment on the issue.

    The purchase comes as crude shipments to Asia from places such as the United States have jumped due to low shipping costs and as production cuts by the Organization of the Petroleum Exporting Countries (OPEC) drive up prices for Middle Eastern oil.

    A source told Reuters in January that Japan's TonenGeneral Sekiyu KK had bought a 500,000-barrel Southern Green Canyon cargo. Green Canyon is an area of the Gulf of Mexico.

    South Korea's top refiner SK Energy [SKENGG.UL] said this month that it had bought 1 million barrels of Russian Urals crude for the first time in 10 years.
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    Giant Leap in Iran's Gas Condensate Exports

    Giant Leap in Iran's Gas Condensate Exports

    The National Iranian Oil Company exported 24 million barrels of gas condensates in January to Asian and European buyers -- the outbound volume being over and above the average figures seen during the past several months.

    Since the easing of international economic sanctions in January last year, Iran's gas condensates exports have risen nearly four times, reaching a daily average of 550,000 barrels from just around 150,000 barrels per day in 2012 when trade and financial restrictions were in place, Shana reported.

    According to Ali Kardor, NIOC managing director, gas condensates output was around 300,000 bpd in 2013, but production capacity has since shot up by 50%, exceeding 600,000 barrels per day. Combined exports of crude oil and condensates have also climbed to 2.8 million bpd, said the official.

    Condensates are in the twilight zone between crude oil and natural gas. They possess characteristics of both oil and gas, and have values and market drivers both similar to, and distinctly separate from, oil and gas.

    Underscoring that the main buyers of Iranian gas condensates in Asia are its traditional oil customers, namely China, India, South Korea, Turkey, Taiwan and Japan, he noted, 'BP received its first gas condensates cargo from NIOC last year under single-shipment contracts and negotiations are underway for NIOC to sign long-term contracts with Shell.'

    In related news, Iran had stored up 10 million barrels of condensates in China as part of efforts to expand its presence in the world's second-largest energy market, but the entire inventory has been sold, the Oil Ministry said earlier in the week.

    Tehran turned to leasing oil storage tanks in China during the sanctions, making the country an export base for its petroleum products in the Far East as financial and trade restrictions had significantly curtailed Iranian oil trade and shipment.

    'With each barrel at $40, export of 50 million barrels of condensates generates $2 billion in revenues, Kardor was quoted as saying by Shana on Saturday.

    Condensate output is slated to reach 1 million barrels a day upon the launch of all phases of South Pars, the giant gas field shared by Iran and Qatar, the NIOC chief added.

    But Tehran has said it wants to reduce the outbound shipments of condensates and instead use the fossil fuel for manufacturing goods with higher value added.

    Condensate exports are set to decrease sharply upon the launch of several oil processing plants, including the Siraf and the Persian Gulf Star Refinery, the latter said to be the largest refinery project in the Middle East.

    Export of petroleum products has also risen to record levels in the first 10 months of the current fiscal year as 450,000 barrels of oil derivatives such as naphtha, diesel, bitumen and sulfur, were exported in large volumes to Southeast Asian clients from Mahshahr, Asalouyeh, Lavan and Bandar Abbas ports in southern Iran.

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    Total in talks to buy Iranian LNG project: sources

    Total is in talks to buy a multi-billion dollar stake in Iran's partly-built liquefied natural gas (LNG) export facility, Iran LNG, seeking to unlock vast gas reserves.

    The French oil major -- the first of its peers to strike deals in Iran after sanctions -- seeks entry into Iran LNG at a discount to the pre-sanctions price in exchange for reviving the stalled project, two sources with knowledge of the matter said. A third source confirmed Total was in the running for a stake, alongside several other oil majors, but any deal was still some way off.

    Total declined to comment. Iran's National Gas Export Co. (NIGEC), a central stakeholder in the project, did not respond to requests for comment by email and phone.

    "Iran is trying to revamp its oil and gas projects and the abandoned LNG plant is one of them," the third source added.

    Iran shares the world's biggest gas field with Qatar, which has used the reserves to build over a dozen giant liquefaction plants to chill gas into a liquid for export on ships -- a move Iran is keen to replicate.

    The Iranian part of the field, known as South Pars, contains over 14 trillion cubic metres of gas, according to the Pars Oil and Gas Company website.

    Iran aims to grow gas output to 1 trillion cubic metres by 2018, up from 160.5 billion cubic metres in 2012, before the latest sanctions took effect.

    But it currently has no ability to freeze its gas into LNG for tanker exports.

    However, Total aims to commit $2 billion to develop the 11th phase of the South Pars field this summer - supplies from which could be used to feed Iran LNG - though that investment hinges on the renewal of U.S. sanctions waivers.

    Any deal for a stake in Iran LNG would also likely face similar hurdles.

    An Iranian industry source with ties to Iran LNG said Total moved several employees to the firm's offices in Tehran last year as part of the discussions.

    Work on the 10.8 million-tonnes-per-annum (mtpa) plant hit a wall in 2012 when sanctions stopped Iran from bringing in specialist liquefaction technology from German contractor Linde (LING.DE).

    The Munich-headquartered firm declined to say when it would ship the parts to Iran. At issue are reimbursements demanded by Linde for the cost of storing Iran LNG's liquefaction train, or production line, during the sanction years, industry sources said.

    "Equipment was finished for the first production line (or train) of 5.4 mtpa, and about half finished for the second one," a second Iranian gas industry source said.

    With $2.3 billion invested so far, Iran LNG is more than half-built with two storage tanks, a jetty and power plant, sources said -- but total costs to bring the plant on-stream may be as high as $10 billion.

    NIGEC, which owns 49 percent of the joint venture, and Iran Oil Pension Fund, which holds the rest, have expressed willingness to sell down their stakes to attract a Western partner.

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    Sonatrach to revise down length of long-term natural gas contracts

    Algeria's state-owned Sonatrach is to revise down the duration of its long-term natural gas contracts at the request of "many customers," Sonatrach CEO Amine Mazouzi said on Saturday, underlining the company's commitment to safeguarding market share through customer-focused flexibility.

    Sonatrach -- which supplies pipeline gas to southern Europe on term contracts and LNG to a worldwide customer base -- has been deliberate in its attempts to satisfy new customer requirements in the wake of a rapidly changing global gas market.

    Last year, it agreed to alter the terms of its long-term gas supply deal with Italy's Eni for the period October 2016-September 2017, which Eni CEO Claudio Descalzi described as a "very important achievement."

    Speaking on Saturday in Hassi Messaoud at a ceremony to mark the anniversary of Algeria's move to nationalize its hydrocarbon sector, Mazouzi said Sonatrach's flexible contractual approach was intended not only to retain its traditional markets in Europe, but also to win new customers.

    "Sonatrach has the ability to adapt to the market, whose main driver is of course prices. We are going to have two strategies for both the long-term market and the spot," Mazouzi said, as reported by the government daily newspaper El Moudjahid.

    "For the long-term market, contracts that were previously over a period of 25 years will be reviewed and reduced to 10-15 years," he said.

    "Our strategy in this area is to reinforce our position in our traditional market -- the countries around the Mediterranean -- but also to conquer new markets."

    Mazouzi said Sonatrach was targeting LNG sales to new customers, and at the beginning of February took ownership of a new LNG carrier through its shipping subsidiary Hyproc.

    "This month we have just purchased a new LNG carrier for export operations to more distant countries," Mazouzi said.

    The vessel, called Tessala, has a capacity of 112,867 cu m of LNG and arrived at Arzew in early February.

    Prior to the acquisition, Sonatrach had eight LNG carriers to supply LNG from its two plants at Arzew and Skikda.


    While LNG supplies have been steady in the past two years, Algeria's gas supplies via pipeline to Europe are riding high.

    Pipeline flows to Spain via two subsea pipelines and the TransMed line to Italy hit a five-year high in February, with deliveries to Italy and Spain averaging 120 million cu m/d since the start of the month, according to data from Platts Analytics' Eclipse Energy.

    Algerian pipeline gas exports have been strong since the end of 2015 thanks mostly to a significant jump in supplies to Italy.

    This was despite considerable doubt among industry commentators that Algeria would be able to raise gas exports given slow upstream developments and rampant domestic demand growth.

    Flows to Italy in particular have soared -- last year they almost trebled to 18 Bcm from just 7 Bcm in 2015, according to Platts Analytics.

    The high exports to Italy have continued into 2017, which is likely to be down to higher nominations by buyers, attributed to the fact that oil-indexed gas supply contracts remain in the money compared with European hubs.

    Algerian pipeline exports have averaged 116 million cu m/d since the start of the year, the highest since February 2012.

    Gas demand in southern Europe was boosted at the start of the year by an unusually cold winter, with temperatures well below seasonal norms, but Algerian supplies have continued at the high levels despite a return to more normal temperatures.

    Flows to Italy have reached a four-year high since the start of 2017, regularly exceeding 70 million cu m/d, triggered also by the favorable renegotiation of the long-term supply contract between Sonatrach and Eni.

    The last time Algerian pipeline flows to Italy were above 70 million cu m/d was back in February 2013.

    Algeria expects to export a total of some 39 Bcm by pipeline to Italy and Spain in 2017, with an additional 17 Bcm of gas equivalent to be supplied by LNG, Sonatrach officials have said.

    A total export level of 56 Bcm would bring Algeria closer to matching its all-time export record of some 62 Bcm in 2005.

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    Gabon's oil sector braces for change as Total, Shell look to divest

    Gabon's oil sector is likely to see more deals taking place this year after oil major Total agreed to sell its stake in some oil fields and infrastructure to Perenco, while Shell is currently looking to dispose of its onshore assets in the country.

    Total and Shell dominate the central African country's oil sector and this is expected to have a major impact on the country as it seeks to repeal the decline of its oil production.

    Total has agreed to sell interests in its mature oil fields in Gabon to Anglo-French company Perenco, which translates to a divestment of 13,000 b/d of oil output, the oil major said Monday.

    The $350 million deal includes the sale of stakes and the transfer of operatorship in various mature assets in Gabon to Perenco, which is already active in the country, including the sale of the Rabi-Coucal-Cap Lopez pipeline network.

    Total said this deal has come about in an environment where "reducing the breakeven of our operations is a top priority" due to oil price volatility.

    "This agreement demonstrates our ability to capture value through the disposal of mature assets while benefiting from the synergies generated by the transfer of operatorship," said Arnaud Breuillac, president of Total Exploration & Production.

    Total is currently the operator of the Capo Lopez terminal, from which the key export grades of Rabi Light and Mandji are exported.

    Total Gabon's equity share of operated and non-operated oil production averaged 47,400 b/d in 2016, from 47,300 b/d the previous year.

    The company's revenues amounted to $745 million in 2016, down 11% from $842 million in 2015, mainly due to the lower average selling price for Total Gabon's crude oil grades, partially offset by the 6% increase in volumes sold over the period due to the lifting schedule.


    Shell also indicated recently that it is in ongoing talks related to the divestment of the company's assets there, which could affect oil output in the country.

    Shell's production in Gabon is around 55,000 b/d of oil equivalent. It also operates the Gamba terminal from which a further 20,000 boe/d from other producers is exported.

    Production reached a peak of 365,000 b/d in 1996 but has since steadily declined, mainly due to maturing fields and also because of a lack of any significant oil projects over the past decade.

    Gabonese crude attracts a fairly broad and eclectic customer base, including refiners in Trinidad & Tobago, France, Malaysia and Australia.

    Gabon rejoined OPEC in July after a gap of more than 20 years, and its current production is around 200,000 b/d, according to S&P Global Platts estimates.

    Under the current OPEC output agreement, Gabon is expected to cut production by 9,000 b/d to 193,000 b/d during the first six months of this year.

    Gabon, like its West African neighbors, has been hit hard by falling crude prices, with oil accounting for about half of government revenues and 80% of national exports.

    Last year, Gabon postponed its 11th offshore oil licensing round due to reduced interest as oil companies have shelved and delayed billions of dollars in upstream spending since the oil price slump.

    The high cost of deepwater developments in the current environment has put a dampener on such projects, especially in the West African region.
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    Iraq plans offshore oil and gas exploration to boost reserves

    Iraq is planning to start offshore oil and gas exploration to boost the OPEC nation's reserves, Oil Minister Jabar al-Luaibi said in a statement on Monday.

    Luaibi said he “gave guidance to the Oil Exploration Company about the importance of exploring territorial waters to assess the hydrocarbons reserves and to boost Iraq’s capacity".

    Iraq last week announced an increase in its oil reserves to 153 billion barrels from a previous estimate of 143 billion barrels. Iraq has boosted output rapidly in recent years with the help of foreign oil companies to become OPEC's second-largest producer behind Saudi Arabia. It agreed at the end of November to take part in an OPEC agreement to cut global supply to help to lift oil prices.
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    Russia says in talks over Iranian oil purchases

    Russia has been in talks of buying oil from Iran, Energy Minister Alexander Novak said on Monday, confirming earlier reports.

    At the sidelines of a economic forum in the Black Sea resort of Sochi, Novak told reportes he expected the deal to be reached "within weeks." The purchases will be carried out via Promsirieimport, a trading unit of Russia's Energy Ministry, he said.

    Last week, Iranian Students' News Agency (ISNA) reported that Iran will begin selling 100,000 bpd of to Russia within the next 15 days and receive payment half in cash and half in goods and services.
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    Houston’s Hi-Crush Partners buying Permian Basin Sand Co.

    Houston-based Hi-Crush Partners will buy the Permian Basin Sand Co. for $275 million to beef up its sand reserves to service rapidly growing drilling activity in West Texas.

    Hi-Crush is one of the biggest oilfield services business in providing sand to the hydraulic fracturing, or fracking process. Massive amounts of sand are pumped into the wells to help fracture the shale rock and release hydrocarbons.

    Virtually sold out of sand in the first quarter of this year because of increased activity, Hi-Crush is acquiring Permian Basin Sand’s 1,226-acre sand reserve with more than 55 million tons of sand.

    “Location is critical, and nobody will be closer or better positioned to efficiently serve the Permian Basin,” Hi-Crush CEO Robert Rasmus said in a prepared statement.

    Most of Hi-Crush’s existing sand reserves are focused on Northern White sand from Wisconsin. Rasmus said the Permian deal helps to diversify its mix. The deal is expected to close by the end of March.

    The deal is seven-year-old Hi-Crush’s largest acquisition thus far.
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    U.S. drillers add oil rigs for sixth week in a row: Baker Hughes

    U.S. drillers added oil rigs for a sixth consecutive week, extending a nine-month recovery as shale producers ramp up spending to take advantage of a recovery in oil prices.

    Drillers added five oil rigs in the week to Feb. 24, bringing the total count up to 602, the most rigs since October 2015, energy services firm Baker Hughes Inc said on Friday.

    During the same week a year ago, there were 400 active oil rigs.

    Since crude prices first topped $50 a barrel in May after recovering from 13-year lows last February, drillers have added a total of 286 oil rigs in 35 of the past 39 weeks, the biggest recovery in rigs since a global oil glut crushed the market over two years starting in mid 2014.

    The oil rig count plunged from a record 1,609 in October 2014 to a six-year low of 316 in May as U.S. crude collapsed from over $107 a barrel in June 2014 to near $26 in February 2016.

    On Friday, U.S. crude futures were up about 1 percent on the week but lower on the day at around $54 a barrel on Friday, amid the market's concerns over whether a surge in U.S. production will dampen efforts by the Organization of the Petroleum Exporting Countries (OPEC) and other producers to drain a global oil glut. [O/R]

    Production increases in the United States, predominantly from onshore shale plays, could potentially limit further increases in oil prices during 2017/18.

    Futures for the balance of 2017 were trading around $54.75 a barrel, while calendar 2018 was fetching less than $54.40.

    U.S. producers have signaled higher capital spending and further production growth, perhaps beyond what many analysts expect, Citi Research said in an investor note this week.

    "The global crude stock draws expected would be partially offset by the out-performance of U.S. production, which might upset calculations of core OPEC countries in lifting prices," Citi said.
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    Petrobras settles four more lawsuits with investors in the U.S

    Petrobras settles four more lawsuits with investors in the U.S

    Brazil's state-run oil company Petróleo Brasileiro SA, or Petrobras, said on Friday its board has approved settlements with investors in four more lawsuits in a U.S. federal court in New York.

    In a securities filing, Petrobras said the new settlements would raise total provisions for the lawsuits to $372 million in the fourth quarter, $8 million above the quarter ended in September. The company is settling with New York City Employees Retirement System, Transamerica Income Shares, Internationale Kapitalanlagegesellschaft mbH and Lord Abbett Investment Trust.
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    Algeria's Sonatrach in talks to begin offshore drilling - source

    Algeria's Sonatrach wants to start offshore oil drilling and has begun discussions with U.S. operators Exxon Mobil Corp and Anadarko as well as Italy's Eni, a source at the state energy company told Reuters on Sunday.

    The North African OPEC member nation has struggled to attract oil investment in recent years because of tough terms that have made foreign companies wary.

    Sonatrach last year began a more flexible approach to bilateral talks with foreign partners.

    Low oil prices have also pressured Sonatrach, prompting it to focus on developing production at more mature fields in the southern Sahara and bringing online delayed gas projects. Offshore drilling could offer another area for growth.

    "Seismic operations carried out by Sonatrach have shown an interesting potential in the areas including Bejaia and Oran," said the source, who asked not to be identified. Bejaia is an eastern port and Oran is a port city in western Algeria.

    Algeria needs the know-how and expertise of major international firms to launch offshore drilling, the source said.

    "Foreign partners, including Anadarko, Exxon Mobil and Eni were invited by Sonatrach to provide technical assistance given the experience they acquired in the Gulf of Mexico and deep water in Mozambique," the Sonatrach source said.

    "The offshore is complementary to our operations in the south. It will also contribute to boosting our output," the source said.

    The source did not give any information on the timing or scale of any offshore projects.

    Such details, including when the drilling will start, are expected to be announced soon by Sonatrach's leadership, the source said.

    Algeria's earnings from oil and gas fell to $27.5 billion in 2016 from $35.7 billion in 2015 and more than $60 billion in 2014.

    Algeria's oil output was previously estimated at 1.1 million barrels per day (bpd) but it has cut production by 50,000 bpd under an agreement between OPEC and non-OPEC producers aimed at raising crude prices.
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    Apache says Alpine High discovery, despite skeptics, has even greater potential

    A vulture soars over an Apache Corporation flare and drilling rig north of the Davis Mountains Friday, Sept. 16, 2016 in Balmorhea, TX. The company recently announced the discovery of an estimated 15 billion ... more

    The Alpine High oil and gas field, touted by Houston-based Apache Corp. as a major find, has greater potential than the company initially reported despite disappointing early production results, CEO John Christmann IV assured shareholders Thursday.

    Apache announced the discovery on the West Texas oil and gas field in September, estimating it holds the equivalent of 15 billion barrels of oil and gas. But production results released earlier this month disappointed analysts and investors, many of whom have been skeptical of Apache's find, because other companies had drilled in the area near Balmorhea without much success.

    In a call with analysts following the release of Apache's fourth-quarter earnings, Christmann attributed the lower-than-expected output to a lack of equipment and pipelines in the remote area, which has limited hydraulic fracturing operations and the amount of oil and gas that can be extracted. But Christmann promised that, with the completion of a pipeline in July, the company's enthusiasm for Alpine High would be justified.

    "We are very pleased with where we are, and the scope and scale of this field has increased since we first disclosed it," Christmann said.

    But some analysts say they remain cautious. It's still too early to know if Apache's expectations for the field will bear out, said Hassan Eltorie, a principal energy analyst for IHS Markit. Eltorie said that Christmann seemed to suggest that there would be more-thorough exploration to come.

    "We never reacted with optimism," Eltorie said of Apache's discovery. "We still reserve judgment, as there is more to be done."

    The discovery of Alpine High was a highlight last year for a company recovering from major losses during the oil downturn. Apache Corp. on Thursday said it narrowed its losses in the fourth quarter, ending a year that was significantly better than 2015.

    The Houston exploration and production company said it aggressively cut costs while meeting production targets, shrinking its loss for the three months ending in December to $182 million from $4 billion in the same period a year earlier.

    For all of 2016, Apache reported a loss of $1.4 billion compared with $10.4 billion in 2015. Revenues in the fourth quarter slipped 2 percent to $1.45 billion from $1.48 billion in the same period in 2015. Annual revenues declined more than 20 percent to $5.4 billion from $6.9 billion in 2015.

    Apache said it earned an average of $47.39 per barrel of oil in the last three months of 2016, compared to $39.79 in the same period a year earlier. Christmann called 2016 "an important step in Apache's transformation."

    "We are poised for excellent long-term, organic growth through 2018 and beyond, which will be driven primarily by our high-quality acreage positions in the Delaware and Midland basins," he said in a statement.

    The majority of Apache's investments in 2017 will focus on the Permian Basin, with $500 million over the next two years going to developing Alpine High, where Apache will have to build the pipelines it will need to transport gas, he said.
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    Funds prepare $2 billion oil market play as supply tightens

    Passive investment funds are poised to shift an estimated $2 billion from far-term to near-term crude futures over the next week, anticipating an energy market rally as a historic OPEC output cut slashes supply.

    The switch may foreshadow the end of a global oil glut that built up during a two-year price war.

    On Friday - for the first time in six years - a rule in one of the most popular commodity market indices was triggered, requiring funds tracking the index to sell Brent crude futures contracts for December LCOZ7 and to buy contracts for June LCOM7.

    The S&P GSCI Enhanced Commodity Index rule aims to ensure that investors are positioned to cash in when oil market fundamentals change - in this case, when supply becomes so tight that the current price of oil becomes higher than the price of oil for delivery many months or years into the future. That structure is called backwardation.

    When markets are oversupplied, the opposite is true: It is cheaper to buy crude now than to buy it for delivery later. That structure is called contango.

    An S&P bulletin late Friday confirmed the rule had been triggered for Brent contracts. It stipulates that the funds must bring their money forward if the second and third month contract settles at a difference of less than 0.5 percent on the third to the last day of any given trading month.

    On Friday, the Brent May contract LCOK7 price settled at $56.31 a barrel, while the June LCOM7 price settled at $56.55 a barrel. That would make the difference about 0.4 percent.

    The threshold was not breached for West Texas Intermediate crude.

    Investors will need to start the shift on March 1 and complete it over the next five business days, moving 20 percent of their money each day. Two traders with knowledge of the indices told Reuters that they estimated that rule impacts between 35,000 and 45,000 Brent contracts.

    Each contract represents 1,000 barrels. So if those predictions prove true, about 40 million barrels - worth about $2 billion - will change hands.

    "This is just another reason to be very bullish" about oil prices, said one trader involved with the deals, who spoke on condition of anonymity.


    When the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed in November to cut output, they wanted to stem a flood of supply that had left the contango so deep that traders found it profitable to buy crude and store it for sale later.

    That dynamic pushed worldwide inventories to record levels and helped drive oil prices to multi-year lows.

    OPEC's output cut, however, has tightened supply and narrowed contango, prompting traders from the United States to Asia to start selling oil from more expensive storage facilities because the contango is no longer enough for them to make a profit by holding oil.

    If contango narrows further, tens of millions more barrels could flood out of storage.

    That could put downward pressure on prices in the short term, but the move to unleash stored oil is viewed by analysts as a first step toward rebalancing global markets after a period of oversupply.

    The fast flow of capital into front-month contracts will make it uneconomical for traders to store physical barrels, said Michael Tran, director of energy strategy at RBC Capital Markets.

    "The unintended consequence" of the trading shift, he added, "is helping OPEC in its objective to draw barrels from storage."

    It's not clear exactly how much money is managed by firms that benchmark off the indices, but exchange-traded funds linked to them, such as the iShares S&P GSCI Commodity-Indexed Trust (GSG), have more than $1.1 billion in assets, according to ETF Securities LLC.


    Since the OPEC output cut, the spread between the front month and second month Brent contracts LCOc1-LCOc2 has tightened to as little as 5 cents from 79 cents. June and December contracts LCOM7-Z7 traded near parity on Friday.

    To make money by holding crude, the spread between oil prices for future months needs to be wide enough to cover the cost of leasing tank space and borrowing the money to buy the fuel to fill it.

    For the last two years, U.S. traders have rushed to that opportunity as those price spreads widened. Now, they may be forced to rush out of it.

    "When there's a shortage, there's no value to storage. So, there's a premium put on having the oil right now," said Jodie Gunzberg, global head of commodities and real assets at S&P Dow Jones Indices. "That's where you want to be sitting up front in the near contract."

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    Chevron suspends production at Gorgon Train Two

    Chevron has temporarily suspended production of LNG at its Gorgon Train Two production line in Australia.

    "Train Two production has been temporarily suspended to undertake minor maintenance," commented a spokesman.

    The Gorgon project continues to load LNG cargoes as production at Train One continues.

    "Train Three construction is complete and we are well into start-up and commissioning activities," Chevron said.
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    Total OPEC crude oil loading's so far in February

    Total OPEC crude oil loading's so far in February are above October's level, with Libya and Nigeria rebounding, non-compliance from others.

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    Cabot Oil & Gas Corporation Announces Fourth Quarter and Full-Year 2016 Results,

    Cabot Oil & Gas Corporation today reported financial and operating results for the fourth quarter and full-year ended December 31, 2016.


    Equivalent production growth of four percent year-over-year
    Proved reserves growth of five percent year-over-year including proved developed reserves growth of 16 percent
    Total company all-sources finding and development costs of $0.37 per thousand cubic feet equivalent (Mcfe) and Marcellus-only all-sources finding and development costs of $0.26 per thousand cubic feet (Mcf)
    Generated positive free cash flow (cash flow from operating activities less capital expenditures) for the full-year
    Improved operating expenses per unit by eight percent and cash operating expenses per unit by 11 percent year-over-year
    Reduced outstanding debt by $497 million and ended the year with approximately $2.2 billion of liquidity
    Increased Marcellus estimated ultimate recovery (EUR) per 1,000 feet of lateral to 4.4 billion cubic feet (Bcf)

    “Our 2016 performance demonstrates Cabot’s ability to deliver strong operational and financial results despite lower commodity prices for the majority of the year,” said Dan O. Dinges, Chairman, President and Chief Executive Officer. “The Company delivered production and reserves growth while spending within operating cash flow during a year in which we realized record-low natural gas prices, highlighting Cabot’s world-class asset base and the consistent execution by our employees.” Dinges added, “Based on our current outlook for 2017, we anticipate another year of production and reserves growth while generating positive free cash flow.”

    Equivalent production was 627.1 billion cubic feet equivalent (Bcfe) in 2016, consisting of 600.4 Bcf of natural gas, 4,013.1 thousand barrels (Mbbls) of crude oil and condensate, and 441.2 Mbbls of natural gas liquids (NGLs).

    Year-End 2016 Proved Reserves

    Cabot reported year-end proved reserves of 8.6 trillion cubic feet equivalent (Tcfe), an increase of five percent over year-end 2015. Specific highlights from the Company’s year-end reserve report include:

    Total company all-sources finding and development costs of $0.37 per Mcfe
    Marcellus-only all-sources finding and development costs of $0.26 per Mcf
    Total company all-sources reserve replacement of 168 percent
    Marcellus-only all-sources reserve replacement of 183 percent

    “Despite our lowest level of capital spending since 2004, Cabot grew proved reserves and proved developed reserves by five percent and 16 percent, respectively, at record-low finding and development costs,” explained Dinges. “We expect a return to double-digit reserve growth in 2017 as the Company increases its capital spending in anticipation of new takeaway capacity out of the Marcellus Shale.”
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    Fosmax LNG mulls small-scale loading service

    Fosmax LNG issued a call for expressions of interest for small-scale LNG services at its Fos Cavaou LNG terminal on the Mediterranean coast, 50 km west of Marseille.

    In the Mediterranean, there are notable growth opportunities for developing LNG as a maritime fuel, LNG terminal operator Fosmax, a unit of Engie’s Elengy, said, adding that this is a result of regulations and increased environmental concern.

    The company is considering making a short/medium-term investment to modify its existing facilities and to be able to load the majority of existing or planned small-scale LNG vessels at the Fos Cavaou LNG terminal.

    Currently, the Fos Cavaou LNG terminal can receive vessels with a minimum capacity of 15,000-cbm of liquefied natural gas, however, small-scale vessels that are currently in operation or under construction have a capacity between 5,000-cbm and 7,500-cbm.

    Prior to sanctioning the investment, Fosmax LNG launched a call for expressions of interest to the market to discuss the technical side of the project with interested parties and to ascertain the needs and expectations relating to the small scale LNG vessel loading service.

    “Depending on the results of this call for expressions of interest, Fosmax LNG may initiate a binding reservation phase by mid-2017 if necessary and contemplate making the aforementioned investments,” Fosmax LNG said.

    Under the scope of planned modifications, Fosmax LNG would adjust the loading/unloading arm work envelope, modify the configuration of the mooring hooks at the terminal’s jetty as well as change how vessels are accessed. In addition, the company intends to build in redundancy for equipment mobilized for vessel loading operations.

    Fosmax LNG further added that the service will allow one slot per week and plans to have up to 50 slots per year.

    The small-scale LNG vessel loading service is scheduled to start commercial operation at the Fos Cavaou terminal in early 2019.

    The company is added that expressions of interest can be submitted until March 30, 2017.
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    Core Laboratories is Pushing the Unconventional Decline Curve

    Core Laboratories is introducing technology to boost IRR and EUR for unconventional recovery

    Many conventional technologies have been developed in the pursuit of increasing the overall amount of hydrocarbons that can be produced from any given well.

    Among the most commonly used is Enhanced Oil Recovery (EOR), in which an injection well is used to pump gases like Natural Gas, CO2, Nitrogen or a combination of gases into a reservoir to move crude oil to a producing well. Core has determined that the EOR techniques most effective in unconventional reservoirs will differ greatly from EOR methods used in conventional reservoirs worldwide.  The injection of miscible gases and the application of gas-adsorption techniques developed at in situ reservoir pressures and temperatures have proven far superior to the pressurized physical movement of hydrocarbons using flood fronts typically employed in conventional fields.

    Core Laboratories is looking to change that though with a new technology that allows operators to increase their ultimate recoveries in unconventional plays through EOR. Core Lab has developed cutting-edge laboratory technologies and protocols to evaluate the complex properties of unconventional reservoirs.

    These collaborative efforts have resulted in the deployment of one of the most technologically advanced flow-studies instrumentation with ultra-low volume measurement capabilities at full reservoir pressure and temperature conditions.  An example of the technology recently created by Core Lab scientists is High Frequency Nuclear Magnetic Resonance (NMR).

    “NMR technology started off in the food sciences and medical imaging,” Core Laboratories Vice President of Corporate Development and Investor Relations Gwen Schreffler explained to Oil & Gas 360®. “The food scientists need to differentiate amounts between oil and water in seed products such as a kernel of corn. That was interesting to us because we want to know how much oil and water are in a reservoir.”

    By setting up laboratory conditions that mirror those found in an unconventional reservoir, Core Lab is able to use high-frequency NMR to identify what is believed to be immovable heavy hydrocarbon and lighter hydrocarbon left behind in the reservoir.   Once the hydrocarbons are identified, the appropriate combination of in situ light hydrocarbon gases are determined using proprietary reservoir condition testing.  Cycling of in situ light hydrocarbon gases and the absorption and capture of longer-chained hydrocarbons in unconventional reservoirs are leading to significant improvements in oil-recovery factors.

    On average, unconventional reservoirs currently yield a recovery factor of approximately 9%.  Light hydrocarbon gas cycling and adsorption efficiencies have yielded recoveries greater than the 9% average under laboratory-based, reservoir-condition testing parameters.  Increased recovery factors from unconventional tight-oil reservoirs significantly raises client ROIC, FCF, and the net present value of their producing assets.

    “The average recovery in an unconventional well is approximately 9%, so helping our clients achieve a greater ROIC, FCF and the net present value of their producing asset by using unconventional EOR science to increase their incremental and ultimate recovery rates,” explained Schreffler.

    No one technology will ever be a be-all, end-all solution for improving well results, said Schreffler, but Core remains focused on technologies which increase the incremental and ultimate recovery for its clients, which, Schreffler said, is why Core continues to be the most successful innovative oilfield services technology company.
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    Bizarre Oil Flows a New Menace for OPEC in Its Prized Market

    West Canadian Select is among rare oil cargoes coming to Asia
    Rising Mideast crude costs have made rival supply attractive

    OPEC pumped at will the past two years to defend its turf against rivals. Its recent volte-face has left it contending with additional threats in the world’s biggest oil market.

    Crude that’s rarely or never-before seen coming to Asia is now sailing from all over the globe to the region, with the door to the market seemingly held open by its traditional suppliers from the Middle East. Would a South Korean buyer like a taste of Russian Urals oil it hasn’t touched in a decade? Sure. What about some West Canadian Select for China? Yes, please. Brazilian Lula with some American shale to the trading hub of Singapore? Of course.

    These and several other unusual shipments signal the price the Organization of Petroleum Exporting Countries is paying to reach its goal of eroding a glut that caused the worst price crash in a generation. While Goldman Sachs Group Inc. sees the group succeeding in shrinking inventories, OPEC’s top members aren’t relaxing. As their output curbs have made Middle East crudes costlier and rival supply attractive, they are attempting to play defense by shielding their most prized customers from the reductions.

    “Asian refiners have the choice to buy crudes from North America, the North Sea, the Caspian as well as North and West Africa,” said Ehsan Ul-Haq, an analyst at KBC Advanced Technologies. “Refiners will certainly look at arbitrage economics but with all key benchmarks showing a narrow spread with each other, there are numerous possibilities to meet their requirements.”

    Saudi Arabia, the world’s biggest crude exporter and OPEC’s top producer, agreed to supply buyers in Asia all the oil they asked for March. Iraq and Kuwait did too. This was after nations such as Japan and South Korea were largely spared from cuts in the previous two months as well. The burden of output reductions is primarily being borne by other regions such as Europe and the Americas.

    “So far, the market share lost in Asia by OPEC Middle Eastern producers is still modest, but this is a key market for them,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London. “So there will be limits as to how much they will give up.”

    Arbitrage Cargoes

    The latest strategy for defending their share of the Asian oil market isn’t without chinks in the armor. With most of the output cuts coming from Middle East producers, some buyers have been tempted to purchase rival supply they’ve shunned previously as European, African and American benchmarks have weakened against the Dubai marker. These include Canada’s Hibernia as well as Southern Green Canyon from the U.S.

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    “Right now, these very-long haul arbitrages are opportunistic plays on freight and benchmark crude differentials to replace barrels lost to OPEC production restraint,” Tchilinguirian said. “They cannot be viewed as regular feature of the market. Do not forget, Asian customers place a high value on the security of supply, and the longer the voyage the more delay risks in the timely arrival of barrels to the refinery.”

    Stronger Dubai

    During the previous OPEC strategy of boosting production, the flow of rival shipments to Asia was hindered because Middle East crude costs weren’t high enough to make a large number of buyers turn elsewhere. But that tactic also meant global oil prices were mired in a downturn that was eating into the revenue of nations such as Saudi Arabia and Kuwait.

    OPEC and 11 other nations’ agreement to trim output took effect on Jan. 1, with an aim to reduce output by about 1.8 million barrels a day during the first six months of 2017. The group has achieved a record 90 percent initial compliance with the accord, according to the Paris-based International Energy Agency.

    Speculation that the producers’ actions will curb a glut has generally lifted oil prices worldwide, with crude trading higher than $50 a barrel this year.

    Still, some crudes have been boosted more than others. The premium of Brent, the benchmark for more than half the world’s oil, against Middle East marker Dubai crude was at $1.58 a barrel on Thursday, after shrinking to the smallest since September 2015 last month. U.S. West Texas Intermediate fell below Dubai in December for the first time since at least May.

    “OPEC’s moves on production cuts will keep Brent-Dubai in a narrow range in the short term and we will continue to see such bizarre trade flows,” said Sri Paravaikkarasu, head of East of Suez oil at industry consultant FGE in Singapore.

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    USGC gasoline differentials hover at nearly five-month highs

    Gulf Coast conventional gasoline and CBOB found multimonth highs at midweek and maintained those highs Thursday at the end of a shipping cycle and on the back of a Gulf Coast area refinery outage.

    Gulf Coast sources said Thursday that Chevron's 360,000 Pascagoula, Mississippi, refinery recently took down a fluid catalytic cracking unit for what appeared to be unplanned work. Market talk surrounding the incident was a primary driver behind the strength in gasoline prices at midweek.

    US Energy Information Administration data released Thursday further supported high differentials. Gulf Coast refinery runs fell in the week ended February 17 to 84.2%, the lowest utilization rate in nearly 13 months. Gasoline production and stocks weakened as well, with production reaching a 10-month low of 1.963 million b/d, and stocks seeing an eight-week low of 81.702 million barrels.

    With the end of winter-grade gasoline trade approaching, market sources have pointed to an ongoing selloff of 11.5 RVP barrels in recent weeks. Assessments for summer-grade 9 RVP barrels will begin with Colonial Pipeline's 16th shipping cycle.
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    Chevron starts work on Gorgon second development phase

    US-based energy giant Chevron said work has begun on further development at the Gorgon LNG project on Barrow Island offshore Western Australia.

    “Future development phases at the Chevron-operated Gorgon project have always been anticipated to maintain gas supply,” Chevron spokesman told LNG World News in an emailed statement.

    The work will initially include additional wells and subsea infrastructure at the Gorgon and Jansz-Io fields.

    “Front-end engineering design activities have commenced,” on the Gorgon stage two development with the aim to provide certainty for when the project partners consider a final investment decision.

    The statement further adds that Chevron’s priority remains on the completion and operation of the Gorgon foundation project.

    It is also worth mentioning that the company recently secured the right to explore an area off the Western Australian coast for the next six years in a gas-rich part of the Northern Carnarvon Basin very close to the Gorgon gas project.

    At the end of January, Chevron said the construction on Gorgon LNG Train 3 was completed and the company is currently commissioning the last unit and expects first LNG early in the second quarter of this year.

    Once in full production, the three-train plant on Barrow Island is expected to have a capacity of 15.6 million mt/year.

    The Gorgon LNG project is operated by Chevron that owns a 47.3 percent stake, while other shareholders are ExxonMobil (25 percent), Shell (25 percent), Osaka Gas (1.25 percent), Tokyo Gas (1 percent) and Chubu Electric Power (0.417 percent).
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    ExxonMobil enters FLNG game

    Norway’s Sevan Marine has entered into a long term framework agreement with ExxonMobil for the provision of services and use of Sevan Marine’s cylindrical hull technology.

    Sevan Marine has worked with ExxonMobil since 2015, when the company was awarded a feasibility study to explore the use of Sevan Marine’s cylindrical hull for an FLNG development.

    Sevan Marine is currently working on a follow up study focusing on the hull and marine aspects of Sevan Marine’s cylindrical design. The total value of the framework agreement is subject to the calling off of individual orders.

    The Norwegian company said it expects the first order for this agreement, involving the continuation of engineering and FLNG design work, to be called off later in February.

    “We are delighted to have secured this long term frame agreement with ExxonMobil. It is a further milestone in the development of Sevan Marine, its cylindrical hull design and its engineering capabilities. We look forward to continuing to support ExxonMobil in the years to come,” says Reese McNeel, CEO of Sevan Marine ASA.

    He continues:”Sevan Marine has received substantially increased interest in its unique design from several oil companies over the last months and the company believes this is a reflection of a changing market place, increased willingness of large oil companies to consider different technologies and Sevan Marine’s own business development efforts.”

    Classification body ABS in 2014 granted approval in principle (AIP) for the Sevan cylindrical floating LNG (FLNG) production unit concept for offshore production, storage and transfer of LNG, LPG and condensate.

    Sevan’s FLNG concept is based on the existing circular and geostationary Sevan FPSO design, which is being used in the Norwegian Sea, Central UK North Sea, Barents sea and offshore Brazil.
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    Alternative Energy

    EU regulators to approve Siemens, Gamesa wind deal - sources

    EU antitrust regulators are set to approve a plan by German engineering company Siemens (SIEGn.DE) and Spain's Gamesa (GAM.MC) to create the world's biggest wind turbine maker, two people familiar with the matter said on Thursday.

    The European Commission had not asked for concessions, the people said.

    The deal will combine Siemens' strength in offshore windpower and Gamesa's strong presence in emerging markets. The wind industry has seen a wave of consolidation in recent months as companies seek to rein in costs and remain competitive.
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    Glencore in pole position to benefit from growing cobalt demand

    Heightened ownership of the Mutanda and Katanga mines in the Democratic Republic of Congo (DRC) puts cobalt in a strong potential earnings position for Glencore, the world’s dominant supplier of the metal that is attracting attention because of its growing use in electric vehicles (EVs).

    In an equity research document on Glencore, Barclays mining analysts Ian Rossouw, Amos Fletcher and James Hutchison point out that the cobalt price has already risen by 50% in the year to date to $22/lb and suggest much scope for it to rise further owing to its increasing use in lithium ion batteries for EVs, laptops, personal computers, smartphones, polyester and tyres.

    Glencore CEO Ivan Glasenberg singled out cobalt as having strong potential during a media conference last week, following the presentation of an excellent set of results by the London-, Hong Kong- and Johannesburg-listed company.

    He made the point that while demand for cobalt is growing, no new copper mines are coming on board that have the cobalt byproducts.

    It is a market of 100 000 t with 50 000 t produced in the DRC.

    Barclays analysts note that Glencore currently produces 32 000 t of cobalt a year, up from 28 000 t in 2016.

    They see cobalt production from Glencore potentially rising to the 50 000 t to 60 000 t level once Katanga is at full production.

    Right now, cobalt accounts for $1.5-billion of the company’s revenue at the spot price, with every 10% price rise adding $150-million to its earnings.

    The cobalt market is expected to remain in deficit for the foreseeable future.

    Before his death just over a year ago, veteran metals research commentator Dr RE (Robbie) Robinson told MiningWeekly Online in a video interview that South African mines could recover more cobalt if they changed their blasting methods in hard-rock narrow-reef gold and platinum mines.

    He urged at the time that, with the world suddenly taking new cognisance of cobalt because of its use in electric cars and microchips, hard-rock, narrow-reef miners should wasteno time in moving to selected blast mining (SBM), which he said also facilitated mine mechanisation in confined stopes that would simultaneously boost overall precious metal recoveries significantly.

    “If you can selectively separate the reef part of the underground ore reserve and throw the waste rock aside, the cobalt concentration, once that ore reaches the surface, is very much higher and becomes easier to recover,” Robinsontold Mining Weekly Online at the time.

    “If you adopt a zero waste, nontoxic philosophy on wasteresidues, it’s easy enough to recover all that cobalt, while also recovering uranium and quite a number of other elements that have potential value.

    “We should be doing this, and it should be started just as soon as we possibly can,” the one-time National Institute for Metallurgy, now Mintek, director advocated.

    With American companies focusing special research into cobalt recovery as a strategic metal, Robinson urged South African mining companies to do better with its squandered cobalt endowment.

    US company Applied Materials, a provider of equipment, services and software used for manufacturingsemiconductors, sees cobalt as a superior metalencapsulation film, the first important change in materials for microchip wiring in 15 years.

    The US technical media wrote of the change that the news was in the word "cobalt" and in the word "wiring", with the headline of another article proclaiming that, “cobalt is the key to future chips”.

    By adopting the hydrometallurgical approach to platinumprocessing, cobalt is said to be recoverable as a high-purity cobalt metal.

    Every narrow-reef gold mine has some cobalt in it, but it ends up as one of the toxic elements in acid mine drainage (AMD), which is currently also seldom out of the headlines.

    Currently, South Africa’s approach to dealing with AMD is to precipitate it with lime and to put it on a waste dump and as the waste dump gradually weathers and leaches away, the toxic cobalt gets into the streams.

    Robinson contended that this need not be so because there processes are available that, in a relatively easy way, can recover that cobalt and produce it as a cobalt oxide, which can be dissolved, electrolysed and made into metal.

    Cobalt arises primarily from the Zambian/DRC copperbelt and as a by-product of the Bushveld platinum mines in South Africa.

    The Chamber of Mines of South Africa says on its website that cobalt is found as a minor element in the base-metal sulphides of the Merensky reef of the Bushveld Igneous Complex (BIC), from which platinum-group metals are extracted, and also in a number of the BICs chromite layers – but makes no mention at all of its presence in gold-bearingreef.

    Also used in many other diverse industrial and military applications, the US remains the world’s largest consumer of cobalt, but does not mine cobalt, apart from negligible quantities of by-product cobalt produced as intermediate products from some mining operations.

    Other countries, including Australia, have woken to the cobalt opportunity, with a study into ASX-listed Broken Hill Prospecting’s New South Wales cobalt deposits pinpointing a new commercial opportunity that could deliver revenues of up to A$381.5-million a year, over a 20-year period.

    In South Africa, it was Robinson’s contention that SBM could be satisfactorily carried out using shock tubes and delayed detonators and had the potential to resuscitate areas where gold mining has ceased.

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    Japan accelerates wind power development as govt support pays off: study

    Japan accelerates wind power development as govt support pays off: study

    With a month to go this fiscal year, Japan's installation of new wind power capacity in 2016-17 is set to come in almost double that of the previous 12 months, propelled by higher tariffs guaranteed by Tokyo and a rising number of offshore wind farms.

    Japan is set to add 300 megawatts of wind capacity - enough to power more than 100,000 average homes - in the 12 months through March, Japan's Wind Power Association said in a study released late last month. Some 157 megawatts of wind power were installed in the previous year.

    The agency didn't estimate how much has been invested in the new turbines, but the figures underline the pace of wind power's development in Japan since the Fukushima nuclear disaster in 2011 triggered a drive to develop new energy sources.

    The country relied on nuclear power for 30 percent of its electricity supply before a massive earthquake and tsunami wrecked the Fukushima-Daiichi plant and brought the shutdown of reactors across Japan.

    "The projects that started environmental assessments at the end of last year exceeded 10 gigawatts," the association said in the study. "If these projects go smoothly, it is possible that achieving the 10 gigawatt capacity is quite possible in the early 2020s."

    A capacity of 10 gigawatts would be triple the nearly 3.4 gigawatts that the wind power association estimates will be installed in Japan by end-March.

    While that 3.4 gigawatts represent just 1.5 percent of the country's overall installed capacity - and solar power accounts for more than 90 percent of Japan's renewable capacity - the wind industry is betting on strong growth to continue.

    The association projects wind power capacity is set to rise more than tenfold to 36.2 gigawatts by 2030, depending on environmental assessments and acceptable grid capacity.

    A major factor behind this year's surge came last May, when the government relaxed rules for building turbines offshore in the country's harbors and ports.

    Wind operators also still benefit for comparatively higher prices for their power under a feed-in-tariff scheme introduced in 2012, where certain renewable suppliers get guaranteed rates based on source of input.

    But Tokyo's Ministry of Economy, Trade and Industry (METI) will cut the feed-in-tariff for large wind power projects to 21 yen per 1 kWh from Oct. 1 in the business year starting in April from 22 yen now, taking into account a decline in costs over time. The rate for offshore wind power was kept at 36 yen.

    Wind operators in Japan have long complained about the country's requirement for environmental impact studies that can take as long as five years to complete, as well as other impediments to investment.

    To accelerate renewable schemes, METI and the Environment Ministry have now teamed up with the aim of halving the time it takes for environmental assessments for wind and geothermal projects.

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    Lynas narrows H1 losses

    Australian rare earths miner Lynas has narrowed its loss during the half-year ended December, on the back of increased revenues.

    The ASX-listed Lynas this week reported that gross loss for the period had decreased from the A$19.3-million reported at the end of 2015, to A$2.9-million, on the back of increased revenues, which were up from A$93.2-million to A$114.6-million.

    Earnings before interest and tax decreased by A$20.9-million compared with the previous corresponding period, in part due to an increase in sales, Lynas reported.

    Mineral sands production for the first half of 2017 reached 2 506 t, which was up from the 1 905 t produced in the same period last year, with total ready-for-sale production of rare earth oxide reached 7 579 t, compared with the 6 337 t in the previous corresponding period.
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    Codelco's lithium assets lure big sector companies: CEO

    International and domestic companies have expressed interest in partnering with Codelco, the world's biggest copper producer, to develop its lithium assets, the Chilean state-owned company's chief executive said on Tuesday.

    In a wide-ranging interview, CEO Nelson Pizarro said Codelco was sticking to a shrunken capital expenditure program to revive and expand its copper assets unveiled last year amid weak copper prices, despite a rebound in prices by nearly a third since November.

    Pizarro also said he expected "more difficult" labor negotiations at Codelco's flagship El Teniente mine early next year as workers' demands for higher wages and benefits clashed with the company's need to invest in its aging mines.

    Codelco is due to make its decision by the end of March on a partner to help it develop its lithium assets, Pizarro said on the sidelines of the BMO mining and metals conference. Companies had until Feb. 3 to state their interest.

    Lithium, a small but irreplaceable component of rechargeable batteries used in electric cars and mobile phones, is one of the hottest commodities with prices more than doubling in the past 18 months. Most of the world's lithium is produced in Australia and Chile.

    "The big players in the industry are interested," Pizarro said.

    He declined to say whether Chile's SQM, one of the world's biggest lithium producers, was in the running.


    Despite an unexpected rebound in copper prices late last year, Codelco was sticking to its reduced $18 billion capital spending program through 2020 to rejuvenate and expand its aging copper mines, cut from an initial $25 billion when prices slid.

    "It doesn't change," Pizarro said of the $18 billion plan, adding that the previous, costlier capital program had been "almost impossible" to carry out due to the management time it required. The new plan has staggered investments rather than carrying them out simultaneously, delaying some projects.

    Pizarro said Codelco's aim was to maintain production at around 1.7 million tonnes a year despite declining grades and to keep reducing cash costs, which have fallen by 23 percent to an estimated $1.26 a pound over the past three years.

    Pizarro said he expected copper prices to average around $2.40-$2.50 a pound this year. Copper was last trading at $2.71 a pound.

    Chile's government last year asked Codelco to study the lithium production potential of its Maricunga and Pedernales salt flats.

    Codelco was nationalized in the 1970s and returns all its profits to the state, providing a key source of income to the Chilean government. It is funded by a combination of government financing and debt issuance.

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    India's wind power tariffs hit new low in push for renewables

    Indian wind power tariffs fell to a record low in a government-run auction on Friday, weeks after solar power rates too hit an all-time low, as the country looks to cut chronic electricity shortages in one of the world's biggest clean energy programmes.

    India, the world's third-biggest greenhouse gas emitter, has set a target of raising its renewable energy generation to 175 gigawatt by 2022, around five times current usage, to supply power to its 1.3 billion people and fight climate change.

    The government push, personally monitored by Prime Minister Narendra Modi, has prompted companies to bid aggressively for solar and wind projects, pushing tariffs low enough to challenge power generated by fossil fuels such as coal over the long term.

    In an auction conducted by state-controlled Solar Energy Corporation of India (SECI) for various wind projects totalling 1 gigawatt, five companies separately quoted a tariff of 3.46 rupees ($0.0519) per unit to win the projects.

    "After solar cost reduction below 3 rupees/unit, wind power cost down to 3.46 rupees/unit through transparent auction," India's coal, power and renewable energy minister, Piyush Goyal, said in a tweet on Friday.

    Mytrah Energy , part of London-based Mytrah Group, Ostro Kutch Wind, backed by British private equity firm Actis, and Indian company Inox Wind Infrastructure won contracts for 250 megawatts (MW) each.

    Green Infra Wind Energy, majority-owned by Singapore-based Sembcorp Industries Ltd, won a contract for 249.90 MW and Adani Green Energy, part of Indian billionaire Gautam Adani's infrastructure group, was awarded a 50 MW project, according to a senior SECI official and a bid document seen by Reuters.

    "The auctions have been hard fought and have led to tighter pricing than one would have foreseen even a few months earlier," said Vikram Kailas, chief executive of Mytrah Energy.

    The other companies were not immediately available for comment.

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    Cameco may cut uranium output further, as prices stay low – CEO

    Canada’s Cameco, the world’s second-biggest uranium producer, said on Tuesday it may not be finished cutting production as prices remain low after a major customer cancelled a supply contract.

    Spot prices of uranium, used to fuel nuclear reactors, dipped to a 13-year low late last year and have rebounded only modestly in 2017. They have stayed stubbornly weak since a 2011 tsunami in Japan led to the shutdown of all the country’s nuclear reactors.

    This month, Tokyo Electric Power Company Holdings(Tepco), the operator of the wrecked Fukushima nuclear plant, said it was scrapping its uranium supply contract with Cameco.

    "2017 could make us look at changes to our inventory position, our production profile and our purchasing activity; all of those effects of the Tepco situation," Cameco CEO Tim Gitzel said at an investor conference in Florida.

    Cameco “won’t be very compromising” in its legal position against Tepco, Gitzel said.

    The Saskatoon, Saskatchewan based company said in January it would cut 120 jobs at three uranium mines in 2017. It reported lower-than-expected quarterly profit this month.

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    Thousands of soy trucks stranded on swamped Amazon highway in Brazil

    About 3,000 trucks carrying soy beans are backed up on a major road to port through the Amazon region that has become impassible due to swamps caused by heavy rainfall, highway police said on Wednesday.

    Trucks have become bogged down on an unpaved section of the BR-163 highway in southern Pará state, running up loses of $400,000 a day for grain traders moving soy from Mato Grosso to northern ports, the main lobby for Brazil's soy business said.

    Some vehicles have been pulled through with the help of heavy earthmoving equipment, but the bulk of the trucks cannot advance, according to the highway police in Santarém in Pará.

    "Things are still critical. Work on the road has improved the situation somewhat, but the rain really complicates the work," highway police officer Bruno Bittencourt told Reuters.

    Weather permitting, the national highway department DNIT expects to free the traffic flow of loaded trucks heading north on BR-163 by Friday with the help of Army engineers.

    Southbound traffic heading for Mato Grosso has been moving forward since Tuesday on the swamped 37 km (23 mile) section, the DNIT said in a statement.

    Thomson Reuters' Agriculture Weather Dashboard, however, forecast continued heavy rainfall in the area for the next two weeks.

    The BR-163 highway, which the government says will be fully paved in Para state by next year, is a vital route for shipping out Mato Grosso soy through port terminals on the Tapajós River in Itaituba, in the Miritituba district.

    Major grain companies Cargill, Bunge and Hidrovias do Brasil have terminals that load barges on the river for transshipment in ports down river near Belém.

    But no soy has arrived in Miritituba since Feb. 18, according to Daniel Furlan Amaral, manager of Abiove, the lobby for companies that export and process soy in Brazil.
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    Hundreds of North American bee species face extinction: study

    More than 700 of the 4,000 native bee species in North America and Hawaii are believed to be inching toward extinction due to increased pesticide use leading to habitat loss, a scientific study showed on Wednesday.

    The Center for Biological Diversity's report concluded that of the 1,437 native bee species for which there was sufficient data to evaluate, about 749 of them were declining. Some 347 of the species, which play a vital role in plant pollination, are imperiled and at risk of extinction, the study found.

    "It's a quiet but staggering crisis unfolding right under our noses that illuminates the unacceptably high cost of our careless addiction to pesticides and monoculture farming," its author, Kelsey Kopec, said in a statement.

    Habitat loss, along with heavy pesticide use, climate change and increasing urbanization are the main causes for declining bee populations, the study found.

    Experts from the center reviewed the status of 316 bee species and then conducted reviews of all available information to determine the status of a further 1,121 species. The center said the species which lacked sufficient data were also presumed to be at risk of extinction.

    Among the native species that are severely threatened are the Gulf Coast solitary bee, the macropis cuckoo bee and the sunflower leafcutting bee, which is now rarely seen.

    Last month, the rusty patched bumble bee was listed by federal authorities as endangered, becoming the first wild bee in the continental United States to gain such protection.

    Bees provide valuable services: the pollination furnished by various insects in the United States, mostly by bees, has been valued at an estimated $3 billion each year.

    The center's Kopec noted that almost 90 percent of wild plants are dependent on insect pollination.

    "If we don't act to save these remarkable creatures, our world will be a less colorful and more lonesome place," she said.
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    El Niño may be fast-tracking to arrive by summer

    The path to another round of El Niño in 2017 appears to be shortening, as tropical Pacific Ocean waters have been warming at a substantial rate.

    Weather forecasters have been eyeing for a couple of months a possible return this year of El Niño, which normally comes around every two to seven years and last occurred in 2015/16.

    The El Niño-Southern Oscillation is one of the most widely followed long-term indicators of climate, as both its warm and cool phases can trigger varying effects on weather patterns globally.

    El Niño, which is associated with warmer-than-normal sea surface temperatures (SSTs) along the equatorial Pacific, is known to bring volatile weather to some parts of the world and is closely watched by agricultural and energy markets. Some notable impacts include droughts in Southeast Asia and heavy rains and erosion along the Pacific coasts of North and South America.

    La Niña, the cool phase of ENSO, just concluded its six-month run last month. In the last several weeks, remnants of the colder waters have been all but eliminated.

    In the week centered on Feb. 22, the SST anomaly was positive 2.3 degrees Celsius in the Niño 1+2 region, the easternmost of the four Niño regions, directly off the coast of Peru. Warming in this region sometimes precedes the onset of El Niño).

    To put this into perspective, since weekly record-keeping began in 1990, the only other instances that featured warmer SST anomalies in this region occurred during the mega-El Niños of 2015/16 and 1997/98, as well as the moderate-to-strong El Niño in early 1992.

    The week centered on Jan. 25, 2017, also recorded a 2-degree anomaly, so the latest value is not necessarily an outlier. But if this trend eventually translates into a full-on El Niño later in the year, the outcome would be unprecedented.

    A record-breaking El Niño surfaced in mid-2015 and lasted through early 2016, after which SSTs dropped off and gave way to the relatively weaker La Niña event to cap off the year.

    But following the previous occurrences of strong El Niño – 1997/98, 1982/83, 1972/73 – the warm cycle did not appear again until three or four years later. So the possible return of El Niño this year would present a unique situation against which there is not much comparable data.


    This month for the first time, El Niño is the most favored scenario over neutral or La Niña conditions starting in July or August, according to the International Research Institute and the U.S. Climate Prediction Center. The probability for El Niño between August and October stands at 51 percent, while the chance of neutral is at 38 percent.

    But some models are calling for El Niño’s arrival a bit earlier based on the progression of the SSTs in recent weeks.

    Monday’s run of the CFS version 2 model, maintained by the U.S. National Centers for Environmental Prediction, shows steady El Niño conditions – SST anomalies of at least 0.5 degree Celsius – for most of the Northern Hemispheric spring and then a moderate to strong event in place by the summer).

    The projections of the CFSv2 should be considered with caution, however, as the models are run each day with a shifting 10-day period of initial model conditions, meaning the output can be highly dependent on a small segment of time. However, other models have been increasingly leaning toward both El Niño and its earlier onset.

    The latest chart of international ENSO forecast models compiled by IRI and CPC has shifted in a warmer direction compared with the previous update, and several models suggest that El Niño could be comfortably in place as early as May.

    The forecast trends are starting to show a divergence between the statistical and dynamical models, the latter of which is based on the actual atmospheric and oceanic state rather than historical tendencies.

    Since the dynamical models are now mostly calling for El Niño by the start of Northern Hemispheric summer, this gives confidence that environmental conditions are indeed turning favourable for the quicker return of the warm cycle.
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    Precious Metals

    Jubilee gets go-ahead for Tjate project

    Dual-listed Jubilee Platinum has been awarded a mining right for its 63%-owned, 22.3-million-ounce Tjate platinum-group metals project, in the eastern limb of the Bushveld complex.

    Describing it as a significant milestone for the company, CEO Leon Coetzer noted that the mining right confirmed the potential value of the project. “The timing of the mining right coincides with the continued global recovery supporting the anticipated improvement in the platinum markets,” he said.

    The company is now also required to issue 4.96-million ordinary shares at 1p apiece to its black economic-empowered shareholder New Plats, as part of an agreement signed in 2009.
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    De Beers seeks to bolster defenses against impostor diamonds

    Diamond specialists De Beers has rolled out a new machine to prove the authenticity of diamonds to ward off the threat of synthetic stones masquerading as real ones.

    At an event in Hong Kong, the International Institute of Diamond Grading & Research (IIDGR), part of the De Beers diamond group that parent Anglo American has said is central to its operations, launched new equipment that can screen thousands of tiny diamonds, known as melee, and determine whether they are genuine.

    It says it expects over the next two years to sell around 500 of the machines at $45,000 each.

    The devices, which screen diamonds 10 times faster than the previous model, are sold to jewelers across the world as De Beers seeks to set industry-wide standards and prevent anyone passing off a laboratory-grown stone as natural.

    It could in theory be easy to conceal small synthetic stones in a melee.

    Jonathan Kendall, president of IIDGR, said synthetic stones were still only a small percentage of global diamond production, but De Beers needed to be ahead of any reputational threat.

    "We are making sure we cover any future issue that may arise," Kendall told Reuters by phone. "Confidence is everything in the diamond sector."

    The rough diamond market, in which De Beers is the biggest player by value, fell sharply in 2015 in line with a wider commodity price collapse, but recovered in 2016.

    On Tuesday, De Beers said its latest sale of rough stones achieved $545 million, down from $617 million the same time a year ago.
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    India's Feb gold imports surge on pent-up demand-GFMS

    India's February gold imports surged to 50 tonnes, up more than 82 percent from a year ago, on pent-up jeweller demand and as retail consumers ramped up purchasesfor weddings, provisional data from consultancy GFMS  showed on Wednesday.

    The rise in imports by the world's second-biggest consumer of the precious metal will support global prices that are trading near their highest level in 3-1/2 months, but could widen the South Asian country's trade deficit.

    "Pent-up demand on the ease of the cash crunch and wedding related demand lifted imports in February," said Sudheesh Nambiath, a senior analyst at GFMS, a division of Thomson Reuters.

    In November, Prime Minister Narendra Modi scrapped 500- and 1,000-rupee banknotes, notes that were 86 percent of the value of cash in circulation, as part of a crackdown on corruption, tax evasion and militant financing.

    India's gold imports had fallen to 27.4 tonnes in February 2016 as buyers postponed purchases in anticipation of a reduction in the import duty in the budget at the time.

    This February, retail demand improved due to the wedding season and as cash supplies became normal, said Bachhraj Bamalwa, a jeweller based in the eastern Indian city of Kolkata.

    But imports in March could fall as a recent rally in prices has started deterring buyers.

    "Consumers are struggling to adjust with higher prices. They are postponing purchases expecting a correction in prices," said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler based in Kolkata.

    In the local market, gold futures were trading at 29,380 rupees ($439) per 10 grams on Wednesday, up more than 9 percent since falling to 26,862 rupees in December 2016, its lowest in 10 months.

    India's gold imports in 2016 had fallen nearly 44 percent versus 2015 to 510.4 tonnes, the lowest level in 13 years.

    "Last year was an unusual year. This year consumption and imports will rise as jewellery demand has been recovering," said Bamalwa.
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    De Beers raked in $545m in latest sales cycle

    Diamond giant De Beers raked in $545-million in its second rough diamond sales cycle for this year.

    “We continued to see good demand across our product range in the second sales cycle, which was in line with expectations at this time of year. Sentiment remains positive heading into the Hong Kong International Jewellery Show this week – an important barometer of trade confidence,” CEO Bruce Cleaver said on Tuesday.

    Sales were, however, lower than the $729-million achieved in the first sales cycle of this year, as well as the $617-million achieved in the second sales cycle of 2016.
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    China closing 150 gold mines

    China's official news agency Xinhua is reporting that the country is set increase annual gold output to 500 tonnes by the end of the decade from around 450 tonnes currently.

    China overtook South Africa as the number one miner of the metal in 2007. China's Ministry of Industry and Information Technology (MIIT) expects gold output to grow by an average 3% annually through 2020.

    Last year output rose less than 1% to 453.5 tonnes according to the ministry:

    [The MIIT] aims to consolidate and upgrade the industry by reducing the number of gold miners to around 450 from more than 600, and shutting down 40 tonnes of outdated production capacity by the end of 2020.

    Last year, global gold demand increased 2% to 4,309 tonnes, the highest since 2013, but the improvement was mainly on the back of investment purchases in the West as physical demand from top consumers China and India fell data from the World Gold Council showed.
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    Fresnillo's FY profit jumps six fold on higher output, prices

    Precious metal miner Fresnillo Plc reported a more than six-fold jump in its profit for the year, boosted by higher production and metal prices and a weak Mexican Peso.

    The company, which mines silver and gold from six mines in Mexico, reported profit of $425.0 million for the year ended Dec. 31, compared with $69.4 million reported a year earlier. Total revenue rose 31.9 percent to $1.91 billion.

    Silver production was up 7.1 percent to 50.3 million ounces, while gold production for the year was up 22.8 percent to 935,513 ounces. Capital expenditure for the year was $434.1 million, 8.6 percent lower than 2015 and below guidance.
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    Hedge funds up bullish gold price bets most since Trump win

    Gold made headway for the sixth day in a row in heavy trade on Monday as the metal continues to make up lost ground following Donald Trump's victory, the dollar weakens and interest rates in the US trend lower again.

    Gold for delivery in April, the most active contract on the Comex market in New York with nearly 16m ounces traded by lunchtime, hit a high of $1,264.90, bringing its year-to-date gains to nearly 10%. Gold is now at it's the highest since November 11, erasing much of its losses since the US presidential election.

    Gold bears had been making big bets that Trump's plans for fiscal stimulus, including a $500 billion infrastructure spending program, will lead to strong US economic expansion, higher interest rates and a more robust dollar.

    A number of prominent hedge fund managers and billionaires running family offices moved aggressively out of gold and into stocks.

    That pattern seems to be reversing with hedge funds or so-called managed money investors in gold futures and options add to their exposure to the yellow metal by a fifth  last week according to trader positioning data supplied by the government.

    Overall bullish positioning or net longs held by derivatives traders jumped to 8.2 million ounces, it was the biggest increase in bullish bets since the start of November. That's still well below July's all-time record of nearly 29 million ounces when gold was hitting its 2016 peak, but does mark a change in sentiment.

    Gold helped to drag May silver contracts higher which were priced at $18.54 in New York, up close to 1% from Thursday's close. Silver has enjoyed nine straight week of gains for, the metal's best weekly run of gains in more than a decade. Year to date silver is up 14.7% and compared to lows hit January 2016, the metal has recovered 35% of its value.

    Large scale speculators in silver have been  bullish on the price for a long time with CFTC data indicating that traders added to long positions and cut shorts – bets that silver can be bought back cheaper in future – for eight weeks in a row . Net bullish positioning has now reached the equivalent of close to 377 million ounces, a 21-week high
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    Sibanye on steriods

    Sibanye on steriods

    Last year was indeed a year of a step change for Sibanye. Macroeconomic conditions that prevailed for the first part of the year, together with the foundation provided by operational improvements, allowed the company to capitalise on the “perfect storm” presented by the surging rand gold price.

    The rand gold price over 2016

    This saw the gold division increasing operating profit by 60% to a record R10.2 billion. This was made possible by a doubling of the margin to 23%, with all-in sustaining costs (AISC) coming in at R450 152 per kilogram, and production remaining stable at 47 034 kilograms, or 1.5 million ounces.

    Costs were well contained at R1 941 per tonne, an increase of 4% year-on-year. Guidance for the year remains unchanged at between 47 000–48 000 kilograms with AISC of R470 000–R480 000 per kilogram. Total capital expenditure for the gold division will come in at R4 billion.

    While appreciative of the hard work and good fortune that came the way of the company during the year, Sibanye CEO Neal Froneman sounded a word of caution to investors thinking the feat may not be repeated this year. “[Expect] radically different earnings out of the gold sector this year,” he told analysts at the results presentation.  

    The balance of the R300 million operating profit was contributed by the still relatively new platinum division to help the company set a new record operating profit of R10.5 billion. Sibanye announced Rustenburg has turned the corner (as Amplats said it had), generating a small profit of R74 million for November and December.

    Listen to Neal Froneman’s plans for the Platinum division and the timing of the rights offer for the Stillwater acquisition here.

    The end result was headline earnings of R2.5 billion, some 269% higher than the previous year. Removing once-off expenses, Sibanye’s normalised earnings per share came to R3.97. A declaration of a final dividend of 60 cents per share (R1.45 over the full year) now places the company on a higher dividend yield (5.1%) than all of its peers. This is partly why Froneman lamented the fact that Sibanye’s share price should be higher (and thus reflective of a lower dividend yield). He has previously attributed the policy uncertainty in South Africa as a major factor contributing to the discount inherent in the share price.
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    Base Metals

    Philippines may consider ban on exports of unprocessed minerals - official

    The Philippines may consider banning exports of unprocessed minerals in an effort to promote value addition in the mining sector, a senior environment official said on Friday.

    The Philippines is the world's top nickel ore supplier, shipping nearly all of its output to China. Previous governments have supported calls to spur domestic processing of raw minerals but earlier efforts in Congress to enact appropriate laws have failed to take off.

    "It's one of the things we're considering for any mine that we think should remain operating," Environment and Natural Resources Undersecretary Maria Paz Luna told reporters. "In the long term that will help our economy because that will increase the value of the products."

    "It is one of the options that has to be considered not only by the DENR (Department of Environment and Natural Resources) but by the entire government," she said.

    Luna spoke after a meeting with other officials of the government's Mining Industry Coordinating Council tasked to conduct a second review of 28 mines ordered closed or suspended by the environment ministry.

    The Philippines became the world's top nickel ore exporter after Indonesia banned exports of unprocessed ore in 2014.

    Congressman Erlpe John Amante in August revived his proposal to ban ore exports after three to five years and force miners to invest in local processing plants.

    The Southeast Asian nation has four mineral processing plants, two for gold and two for nickel.

    The second review will initially cover 23 mines ordered shut by the environment ministry to protect watersheds and another five that were suspended.

    Finance Secretary Carlos Dominguez said the three-month review, announced in February, would continue even if the appointment of Environment Secretary Regina Lopez who ordered the mine closures is not confirmed by Congress.
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    Aurubis to expand from copper into other non-ferrous metals

    Aurubis AG, Europe's biggest copper smelter, plans to expand into production of other non-ferrous metals, new CEO Juergen Schachler said on Thursday.

    He did not name specific metals, but told the group's annual shareholders' meeting that Aurubis should become a "multi metals producer."

    He also said the group's new corporate strategy, dubbed Vision 2025, could involve buying suitable non-ferrous metal production companies. But the strategy will not include an expansion into mining, said Schachler, who took over in July 2016.

    Aurubis' last acquisition was in 2011 when it took over the rolled copper operations of the Luvata group.

    Aurubis should concentrate on its core expertise of metal production, metal recycling and metal product production, Schachler said in a speech to shareholders.

    The group is already involved in gold, silver, nickel and selenium production and these sectors could also be built up, said Schachler. Traces of such metals are contained in copper concentrates (ore) and scrap.

    "We can and will expand this in the framework of our metallurgy expertise," Schachler told shareholders. "We will take a more consistent route away from copper towards becoming a multi metals producer and we will establish ourselves a wider basis."

    He said the group would seek both "internal and external growth," which "can include the expansion of existing capacity or also acquisitions, when these in terms of content and geography make sense and fit."

    But it made "no sense" to become a mining company, he said. "This is not part of our metallurgical expertise and we will not do this," he said.

    The group would concentrate on metal smelting and product output. He gave no indication of which geographical areas could be assessed for expansion.

    Alongside major copper smelters in Hamburg and Luenen in Germany, Aurubis also has copper and copper product activities including in Bulgaria, Belgium, Italy, the Netherlands, Finland, and the United States.
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    LME stocks raid opens new chapter in zinc bull narrative

    The next chapter of zinc's bull market story has just opened with a mass raid on metal sitting in London Metal Exchange (LME) warehouses.

    More than 100,000 tonnes of exchange stocks have been canceled in the space of a couple of weeks, meaning the metal is no longer available for trading purposes and can be physically loaded out of warehouses.

    The remaining "open" tonnage, as it's termed on the LME, has now fallen to 203,350 tonnes, the lowest since December 2008.

    This can be seen as another sign that tightness in the zinc raw materials market is starting to feed through into the refined metal part of the supply chain.

    That's good news for the many zinc bulls out there, who have already seen the price of London zinc rise from under $1,600 per tonne to $2,860 over the last year.

    There are two key questions that need to be answered, though, if the price is to rise further.

    Is this slump in available LME stocks for real or just another false signal emanating from the smoke-and-mirrors financing trade?

    And when will this evolving bull story start affecting China, the world's biggest producer and consumer of zinc?


    Most of the cancellation activity has taken place at New Orleans. This should come as no big surprise since the U.S. port has long held the lion's share of LME zinc stocks.

    Total LME-registered inventory in New Orleans currently stands at 340,400 tonnes, or 89 percent of the global total, of which just over half is now sitting in the canceled metal "departure lounge". <0#MZNSTX-LOC>

    This, however, is not the first time New Orleans has seen mass cancellations of zinc.

    Back in 2013 the ratio of canceled tonnage to open tonnage in the port spiked to over 65 percent but subsequent drawdowns proved a false signal as large amounts of the metal miraculously reappeared in the system over the ensuing months.

    The zinc was essentially on a merry-go-round between exchange and non-exchange storage, with stocks financiers looking to lower their costs by moving the metal to cheaper non-LME registered sheds.

    There are two big differences between now and then, though.

    First, there were more than 800,000 tonnes of zinc in LME warehouses at the start of 2013. Today the figure is half that.

    Second, and more importantly, the market structure is very different.

    The front part of the LME zinc curve was in persistent contango over the course of 2013 with three-month metal trading at a premium of about $30-40 per tonne over LME cash prices.

    That's the sort of market structure that stocks financiers love since the return from the contango covers their costs, which are largely related to storing the metal during the financing term.
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    Escondida strike turns violent as protesters battle police

    A three-week-long strike at Chile's Escondida, the world's biggest copper mine, turned ugly on Wednesday when a group of striking workers blocked a highway, provoking confrontations with the police.

    Escondida's approximately 2,500 unionized workers began a strike on Feb. 9 after contract talks with mine owner BHP Billiton failed, boosting global copper prices on expectations of tighter supply.

    Early Wednesday morning, around 800 workers carried out a protest on the main road that connects the regional city of Antofagasta with the mine, the union said.

    A Reuters witness said the protesters blockaded the road, burned tyres and threw rocks and sticks at the police, who responded with tear gas. By late morning, the protesters had dispersed.

    The union said a "strong police contingent" acted against the protesters and left three workers injured, adding that union leaders had calmed the situation.

    Escondida criticized the violence and said: "We reiterate the need to keep this process within the bounds of legality."

    The events reflect the increasing bitterness and division between the two sides, as the pressure to secure a deal on both ratchets up, but whose positions still appear to be far apart after three weeks of strike.

    Key differences include disagreement over the level of benefits new workers should receive, and planned changes to shift patterns and benefits.

    The union complained earlier this week that BHP had failed to make back payments to workers, while the company said that it would make the payments once the strike had ended, in accordance with Chilean law.

    A local judge ruled on Tuesday that a deferred payment from 2016 should go out to workers, and BHP said on Wednesday that it disagreed with the ruling but would comply.

    The union is keen to prevent workers from losing enthusiasm as the strike drags on, especially as after 30 days, individual miners have the right to break from the union agreement and accept the company offer.

    The company has waived the right to replace workers before 30 days, sacrificing output in an attempt to ease tensions and potentially weaken the union position.

    A government-led attempt at mediation failed last week. Although both sides say they are open to talks, there has been little concrete sign of a resumption of dialogue in the near future.

    Escondida, which produced around 5 percent of global copper output last year, is majority-controlled by BHP. Rio Tinto and Japanese companies including Mitsubishi Corp hold minority interests.
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    Copper king vows to resist rushing projects as prices surge

    Copper king vows to resist rushing projects as prices surge

    The world’s biggest copper producer has some good news for bulls: it won’t be tempted into speeding up projects as prices rally.

    What’s more, Codelco chairperson Oscar Landerretche says a series of natural obstacles facing the industry will also prevent other miners from piling in.

    “It’s going to be very difficult for the industry to respond even if it wanted to,” Landerretche said Tuesday in an interview at the BMO Capital Markets mining conference in Florida. “It’s becoming very, very hard to do new projects.”

    Existing mine reserves are deteriorating while the industry has yet to experience its own “shale gas moment,” in which technology unlocks supply previously deemed unfeasible, Landerretche said. Meanwhile, the global regulatory environment has become tougher.

    At the same conference, BHP Billiton CEO Andrew Mackenzie said copper tightness could be exacerbated by a reluctance to invest after years of low prices. That sentiment was echoed by Swedish-Canadian commodities entrepreneur Lukas Lundin, who called the industry “gun shy.”

    Supply constraints, coupled with healthy demand -- which he sees increasing 3.5% this year compared with a 2% projection six months ago – should support prices of $2.60 to $2.70 a pound this year, he said. Longer-term, the Santiago-based miner sees copper closer to $3 as the market moves into a deficit, starting with a 100 000 to 200 000 metric ton shortfall in 2018.


    For most of his time at state-owned Codelco, Landerretche has had to deal with conditions that were less than ideal. The Massachusetts Institute of Technology-trained economist was appointed to Codelco’s board by President Michelle Bachelet in 2014, the second of three years when prices fell.

    Landerretche and Chief Executive Officer Nelson Pizarro have overseen cost and budget cuts to cope with a slump in metal prices at a time when the state producer was engaged in a record investment program to overhaul its aging deposits after years of under-investment. A multiyear investment plan has been whittled back to $18 billion from $25 billion.

    In the past six months, copper futures have risen more than 30% and they traded at $2.7580 a pound on Wednesday. A strike at BHP’s Escondida in Chile and a dispute at Freeport-McMoRan Inc.’s Grasberg mine in Indonesia have been restricting shipments at a time when increased infrastructure spending in China and US President Donald Trump’s spending pledges boost the demand outlook.


    Now that prices are rising, Codelco still plans to keep to its current course by advancing a series of initiatives aimed at replacing depleting orebodies, Landerretche said. Over the next 20 years, production should be flat at 1.6-million to 1.7-million tons a year, he said. Before trimming its project budgets, the company had projected getting to 2 million tons.

    “The balancing act has to do with realizing the investments that the company needs to do to continue to be a leader in copper production,” he said. “But we want to do it without increasing our debt.”

    Along with cost reductions, the board under Landerretche has worked to ease what had been one of the heaviest debt burdens in the industry. Codelco’s debt now sits at about $14.3 billion, and his intention is to have it stable at that level when his term ends in May 2018.

    Codelco would only increase it if the Chilean government failed to fulfill its recapitalization promises, copper prices fell significantly below $3 a pound, or efforts to reduce costs failed, Landerretche said.

    Projections are for copper to move up, not down. At the BMO conference, executives including Mackenzie and Lundin opened the door to the market posting a small deficit this year, its first in six years.

    Prices of the metal, often seen as a guide to the world economy’s health, may climb above $8 000 a ton before the end of the decade amid rising demand, waning output and a lack of investment in new operations, Citigroup forecasts, from about $6 000 now. BHP sees a deficit emerging in the 2020s, and David Lilley, co-founder of RK Capital Management, this week threw his weight behind bets on a growing shortage.

    Last month, Landerretche was the victim of a letter bomb at his residence in Santiago, escaping with minor injuries. The incident – responsibility for which was claimed by a little known group of environmental extremists – shook a country where attacks on executives or politicians are rare, and where the murder rate is the second-lowest in the Americas, after Canada.

    The attack is still under investigation but it increasingly looks to have been caused by a sophisticated operation, Landerretche said, adding that he believes it is highly improbable it was the work of amateur environmentalists. A logical motive would seem to be Codelco’s efforts to improve corporate governance, Landerretche said. “We have implemented an enormous amount of reforms to assure our citizens that Codelco is not captured by special interests.”

    As part of efforts to reduce debt, Landerretche also spearheaded the latest push to repeal a law requiring Codelco to give 10% of its sales to the military. Asked if the mail bomb could have been in response to that, he declined to speculate, but said Codelco will continue the process of ensuring it represents the best interests of the Chilean people by resisting pressure from special interests.

    “When I’m talking about special interests, I mean all sorts,” he said. “We’re talking about businessmen that have contracts with us, we’re talking about labour leaders, we’re talking about communities, we’re talking about institutions that believe they own the company.

    Attached Files
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    Chile's January copper output slips 3% on year to 452,035 mt

    Chile produced 452,035 mt of copper in January, down 2.6% from the same month of last year, government figures showed Tuesday.

    The monthly figure also marked a fall of 12.6% from December last year.

    Chile is the world's largest producer of copper, although mine output was impaired last year by a series of accidents, strikes and stoppages. Production fell 3.5% year on year in 2016 to 5.642 million mt.

    The recent figure does not reflect the impact of a strike which has halted production at the BHP Billiton-controlled Escondida mine, the world's largest copper operation.

    Around 2,500 unionized workers began the indefinite strike on February 9. Despite government efforts, the two sides have yet to begin talks to diffuse the conflict.

    Attached Files
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    Freeport sees 'no return to business as usual' at Grasberg mine: document

    Freeport sees 'no return to business as usual' at Grasberg mine: document

    Freeport-McMoRan's Indonesian unit sees "no returning to business as usual", an internal company memo said, as the miner cut output and laid off workers at its giant Grasberg copper mine in a battle with Jakarta over mining rights that has paralyzed its operations.

    Freeport's Indonesian unit has shelved plans to invest $1 billion a year in long-term underground expansion at the world's second-biggest copper mine, the company said in a memo to all staff on Feb. 28, citing a stoppage to Grasberg exports since mid-January resulting from changes to Indonesian mining rules.

    Copper ore output from the Grasberg mine in Papua will be cut to 95,000 tonnes a day in 2017 from 140,000 tonnes previously estimated, it said in the document reviewed by Reuters.

    "This is not the direction we want to go, as these investments are needed to build our future business and would provide continued economic growth in Papua and thousands of job opportunities for decades, beyond the completion of the Grasberg open pit," it said.

    Copper concentrate production at Grasberg has been stopped since Feb. 11, and ore output is currently limited to stockpiling for future processing. A transition from open pit to underground mining at Grasberg may now be postponed to beyond late 2018.

    Freeport, the world's biggest publicly listed copper producer, warned last week it could take the Indonesian government to arbitration and seek damages over the dispute.

    The company's chief executive, Richard Adkerson, said on Monday that regulations Indonesia issued on Jan. 12 requiring Freeport to forfeit its long-term mining rights before resuming exports, were "in effect a form of expropriation".

    Asked about the memo, a Freeport Indonesia spokesman said Grasberg's "operation and production is reduced to adjust to Smelting Gresik capacity".

    Operations at Freeport's sole domestic buyer of copper concentrate, PT Smelting in Gresik, East Java, resumed briefly on Wednesday after a six-week halt that has limited Grasberg's output options. Operations stopped again due to a technical glitch.


    In the memo, Freeport said that over the past month it has revised its operating plans, slowed its underground expansion and announced "drastic reductions" to manpower levels in efforts to cut costs.

    "These are painful but necessary measures the company needs to survive while it works with the government to achieve a mutually acceptable solution to resume exporting copper concentrate," it said.

    "The outcome of our negotiations with the government will not change this. There is no returning to 'business as usual,'"it said. The changes represented "a fundamental shift" in how Freeport operates, it said.

    Production of copper concentrate has yet to resume at Grasberg as a result of the export stoppage, a company source with direct knowledge of the matter told Reuters.

    Indonesia's director general of coal and minerals, Bambang Gatot, declined to comment on the changes in output. The government often met Freeport to discuss its mining rights "but there has been no conclusion yet," Gatot said.

    Indonesian President Joko Widodo said on Thursday that the government was seeking a solution to the Freeport issues that benefited both parties.

    Freeport CEO Adkerson said on Monday that he hoped and believed the dispute will be resolved, "but we have to plan for it not being resolved, and we're doing that."

    "This is not a sweetheart contract for Freeport,"
    he said, referring to $16.5 billion in taxes, royalties and dividends Indonesia has received from Freeport since it signed its mining contract in 1991, while the company has taken $10.8 billion.

    "We're all going to win together, or we're all going to lose together, and I believe that's going to be the dynamics that bring us to the table and reach a mutual agreement," he said.

    Freeport estimated in January that Grasberg would account for 1.3 billion pounds (589,670.081 tonnes) of its global copper sales of 4.1 billion pounds in 2017, assuming exports resumed in February. The export stoppage was expected to reduce Grasberg's copper output by around 70 million pounds per month.

    Freeport's export stoppage, coupled with a strike at BHP Billiton's Escondida mine in Chile - the world's biggest copper mine - pushed copper prices to 20-month highs of $6,204 a tonne on the London Metal Exchange in February.

    Attached Files
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    Peru to cut red tape in bid to spur mining exploration

    Peru will introduce new rules this week that will aim to turn around the Andean country's three-year slump in mining investment by eliminating permit requirements for exploration projects, the energyand mines minister told Reuters on Monday.

    Ahead of a visit to Toronto for the annual Prospectors & Developers Association of Canada (PDAC) convention, Gonzalo Tamayo said the recent rally in some metal priceshas not spurred enough interest in exploration activity to ensure a robust pipeline of future mines.

    "We want to reactivate exploration," Tamayo said in a brief interview. "The level of claims isn't growing at the rhythm we'd like. It has to be faster."

    Tamayo said the government was evaluating changing current rules so that exploration projects do not have to submit the same detailed environmental and archeological studies as proposed mines.

    Instead, companies prospecting for new mineral deposits would only have to submit affidavits about the potential impacts of their plans that could be subject to supervision later.

    "Exploration is less invasive," said Tamayo.

    Safety regulations might also be revised to eliminate unnecessary and costly training sessions, but without raising the risk of accidents, Tamayo added.

    Peru surpassed China as the world's second-biggest copperproducer last year thanks to surging output from MMG's new Las Bambas mine and Freeport-McMoRan's expanded Cerro Verde mine.

    But years of weak mineral prices have dried up interest in building new, large-scale mines in Peru, which is also a leading zinc and gold producer. Mining investments dropped by double digits annually between 2014 and 2016, and the central bank said it expected a 1.1% contraction in 2017.

    Tamayo declined to estimate how much time or money junior miners might save on securing permits under the forthcoming rules, which he said would not apply to projectsthat have already been submitted for approval.

    Tamayo acknowledged that President Pedro Pablo Kuczynski's six-month-old government is not the first to vow to slash red tape but said it was committed to doing all it could to make it easier for mining companies to work in Peruin coming years.

    The government is also in the process of creating a new office in the cabinet to prevent social conflicts that have derailed mining projects in Peru in the past.
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    Russia proposes creating aluminium OPEC: Trade Minister

    Russia is proposing the creation of an OPEC-like organisation for the global aluminium industry, TASS news agency quoted Russian Industry and Trade Minister Denis Manturov as saying on Monday.

    Russia's Rusal was overtaken by China's Hongqiao as the world's biggest aluminium producer several years ago, as Rusal cut back its production capacity due to a fall in prices.

    Manturov told reporters about the idea of an aluminium-making group on the sidelines of an economic conference in Russia's Black Sea resort of Sochi.

    OPEC, the Organization of the Petroleum Exporting Countries, unites some of the world's largest oil producers. Its members, together with non-OPEC oil producers such as Russia, agreed to reduce oil production and support global prices in 2016.

    "It is currently at the stage of a proposal," Manturov told reporters.

    "At the first stage" of creating such an organization for aluminium, participation of officials such as industry ministers "would be enough".

    "What is more important is that all governments, which are the main producers and exporters of primary aluminium, agree on principles of single policy in the area of standards and technology," the minister said.

    Rusal, controlled by Russian tycoon Oleg Deripaska, was not available for immediate comment. Shareholders include trading giant Glencore and Russian businessmen Viktor Vekselberg and Mikhail Prokhorov.

    Rusal's 2016 production rose one percent year-on-year to 3.685 million tonnes and is expected remain stable in 2017.
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    Escondida deal beginning to look distant

    Escondida deal beginning to look distant

    In a television interview with BHP CEO Andrew Mackenzie said talks had resumed with the main union representing 2,500 workers at Escondida, the world's largest copper operation by a wide margin adding that the miners are "extremely well paid".

    But he was contradicted by a spokesman of the union who said last Monday's government mediated talks were the last time the parties had been around a table. While this type of brinkmanship is not uncommon in wage negotiations it could indicate that the strike may take longer to resolve.

    “Copper traders are voting with their feet that a resolution to the strike isn’t close as the red metal finishes near highs despite mixed messages from BHP and union leaders,” Tai Wong, director of commodity products trading at BMO Capital Markets, told Bloomberg in an e-mail.

    "Copper traders are voting with their feet that a resolution to the strike isn’t close"

    BHP, which operates and majority owns the mine with fellow Melbourne diversified giant Rio Tinto, declared force majeure at the mine on February 10. The previous labour deal was signed four years ago when copper was trading around $3.40 a pound.

    In its financial results released last week BHP expected full-year production at Escondida of 1.07 million tonnes, which gives the mine a nearly 5% shares of global primary copper production. BHP also cut full year guidance by 40,000 tonnes to 1.62m tonnes.
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    Copper mining hit by heavy rain in northern Chile

    Heavy rains and flooding across Chile have slowed mining activity in the copper-rich north of the country, the government said Monday, with the northern region of Antofagasta the worst affected.

    "Mines operations in areas affected by the weather conditions are operating partially. All the mining companies in the region have activated contingency plans," the ministry said.

    Mines in the Antofagasta region, which include Codelco's Chuquicamata, Ministro Hales and Radomiro Tomic mines, Freeport McMoRan's El Abra operation and the BHP Billiton-controlled Escondida pit, produced a total of 3.1 million mt of copper in 2015, representing 54% of Chile's total output.

    Production at the Escondida mine has been halted since February 9 when workers began a strike over pay.

    Major mines in central Chile, including Codelco's Andina and El Teniente divisions and Anglo American's Los Bronces, are operating normally although some roads and other transport infrastructure have been closed.

    The railroad that carries concentrates from Andina to the Port of Ventanas has been suspended while preventative measures have been taken the open pit at El Teniente.
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    Shareholders tell miner Freeport to get tough with Indonesia

    Shareholders are pressuring miner Freeport-McMoRan Inc to stand up to the Indonesian government over changes the Southeast Asian country wants to make in the U.S. miner's contract, Freeport's chief executive officer said on Monday.

    Rio Tinto Plc, which is a partner in Freeport's massive Grasberg copper and gold mine in Indonesia, is also supportive of Freeport's tougher approach toward Jakarta, CEO Richard Adkerson said.

    In some of his strongest language yet on the issue, Adkerson said the new regulations sought by Indonesia were "in effect a form of expropriation of our assets and we are resisting it aggressively."

    "Many of our shareholders feel that we have been too nice. Now we are in the position of standing up for our rights under the contract,"
    Adkerson told a mining conference of institutional investors in Hollywood, Florida.

    He said Freeport had held talks with large shareholders but did not name them. Freeport's third-biggest shareholder is activist investor Carl Icahn, who holds around 7 percent of its shares. Icahn has been appointed a special adviser to U.S. President Donald Trump.

    Freeport, the world's biggest publicly listed copper producer, warned last week it could take the Indonesian government to arbitration and seek damages over a contractual dispute that has halted operations and exports at Grasberg, the world's second-biggest copper mine.

    The dispute, which centers around the sanctity of Freeport's 30-year mining contract, comes as the Indonesian government seeks to squeeze more revenue out of the mining industry by shaking up regulations over foreign ownership and ore processing.

    The two sides have 120 days to settle their differences before heading to arbitration. "The polite approach that we have had in the past, if we go to arbitration, is going to be replaced with tough lawyers," Adkerson said.

    He added that he hoped the dispute could be resolved cooperatively although the Indonesian government has so far "responded aggressively through ministers."

    Freeport's inability to export copper since mid-January, coupled with a strike at BHP Billiton's Escondida in Chile, the world's biggest copper mine, has pushed copper prices to 20-month highs of $6,204 a tonne on the London Metal Exchange this month.

    In the face of the export halt, Freeport last week said it was proceeding with its plan to reduce production at Grasberg by about 60 percent, make significant cuts to its workforce and suspend investments in the province of Papua.

    Attached Files
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    MMG narrows losses in 2016

    Metals miner MMG has warned shareholders of a likely net loss of some $100-million for the 2016 financial year.

    This compares with a net loss of more than $1-billion for 2015.

    MMG said on Monday that the expected loss in 2016 represented a substantial improvement in the underlying operating conditions in the second-half of the year, with commodity prices increasing, the addition of Las Bambas to the operating portfolio and record production levels for the company.

    Factors contributing to the loss include end-of-year inventory and deferred tax asset writedowns of some $116-million after tax.
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    China's Jan copper concentrate imports from Peru rise 27% on year to 398,568 mt

    China imported 398,568 mt of copper concentrate from Peru in January, up 27% year on year, latest data released over the weekend by the General Administration of Customs showed.

    Peru edged out Chile as China's top source of imported copper concentrate in January.

    Imports from Chile stood at 318,618 mt in January, up 1% year on year. China's other top eight suppliers in January were Mongolia with 110,867 mt, the US 67,011 mt, Mexico 50,440 mt, Australia 48,852 mt, Kazakhstan 37,852 mt, Spain 26,699 mt, Indonesia 25,942 mt and Laos 21,120 mt.

    Imports from the top 10 countries totaled 1.11 million mt, comprising 88.6% of China's total copper concentrate imports of 1.25 million mt for January.

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    Platts metals reports will help you monitor global events and quickly spot opportunities or potential pitfalls, and help you make better, well-informed business decisions.

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    No end in sight to strike at Noranda zinc plant in Quebec

    A strike at Noranda Income Fund's zinc processing plant in Quebec stretched into a 13th day on Friday, with no talks scheduled between management and the United Steelworkers of America union.

    Noranda's zinc processing facility in Salaberry-de-Valleyfield is the second-largest in North America and largest in eastern North America, where the bulk of zinc customers are located. It is managed by a subsidiary of Glencore Canada Corporation.

    The plant's 371 unionized workers went on strike after the two sides could not agree on proposed changes to the pension plan in the collective agreement.

    There have been no talks during the strike and none are currently scheduled, said Manon Castonguay, president of Steelworkers Local 6486.

    It was unclear whether the strike has severely impacted production at the facility. The union said output was likely very low.

    Noranda could not be immediately reached for comment. It had previously said it would provide a production update on March 1 when it releases its fourth-quarter results.

    Zinc prices have nearly doubled since January 2016 due to a shortage tied to mine closures and shutdowns. The price of zinc was 1 percent higher at $2,817 a tonne on Friday.

    The union said Noranda has failed to demonstrate that is experiencing any financial troubles and has refused to explore other cost-cutting measures.

    Noranda said on Feb. 13 that the Fund would be paying market prices starting May 3, replacing the previous fixed rate, a change that will substantially impact its results.
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    At least three dead, 19 missing as floods hit central Chile

    At least three people are dead and 19 others missing after heavy rains struck Chile over the weekend during the country's usually dry summer months, causing mudslides and water outages in the South American nation, officials said on Sunday.

    The rains, which caused rivers to overflow their banks in mountain valleys near Chile's capital, Santiago, had isolated 373 people, the Onemi emergency service said late on Sunday.

    The drinking-water supply for over a million households in Santiago had been affected, and Aguas Andinas, the company that provides water to the capital, said rains were making repairs difficult.

    "Emergency teams are working on the ground to connect with isolated persons and re-establish the water supply wherever possible," Chilean President Michelle Bachelet wrote on Twitter.

    In the O'Higgins region, south of Santiago, a 12-year-old girl was killed when a landslide swept away the car in which she was traveling.

    In the San Jose de Maipo valley, directly above the city, emergency crews had to clear the roads of debris before residents could evacuate to lower, less mountainous ground.

    It was the second major flooding event to hit central Chile in the past year. Last April, heavy rains battered the San Jose de Maipo valley, killing one and shutting production at some of the largest copper mines in the world.

    Mining giants Antofagasta, state-owned Codelco [COBRE.UL], and Anglo American have sizeable deposits in the zone affected by this weekend's rains.
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    Steel, Iron Ore and Coal

    Hebei to shut 9.41 Mtpa coal capacity in 2017

    Hebei province, a leading coal producing base in northern China, planned to close 13 coal mines in 2017, slashing 9.41 million tonnes per annum (Mtpa) of coal production capacity, said the provincial Development and Reform Commission in a notice released on March 2.

    Chengde city will shut 0.15 Mtpa of coal capacity this year by closing one mine; Zhangjiakou city will shut seven coal mines, slashing 1.78 Mtpa of capacity; Tangshan city is expected to close two coal mines, cutting 1.5 Mtpa of capacity.

    Xingtai will close three mines this year, reducing 4.23 Mtpa of capacity, while Handan will shut two coal mines, cutting 1.75 Mtpa of capacity.

    The province will strive to reduce 75.63 Mtpa of surplus coal capacity by closing 141 coal mines over 2016-2020. By 2020, the number of its coal mines is expected to be 60 or less, with coal capacity at 50 Mtpa or so.
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    Coal India set to end fiscal with Rs 6,000 crore

    Five profit-making subsidiaries of Coal India will hand over about Rs 6,000 crore to their parent company through a mix of share buybacks and dividends by the end of March, the Economic Times reported, citing a senior Coal India executive.

    This is the first time Central Coalfields, South Eastern Coalfields, Western Coalfields, Mahanadi Coalfields and Northern Coalfields will be purchasing their own shares.

    For the third quarter of 2016-17, Coal India declared a net loss of Rs 39 crore on a standalone basis, mainly because its subsidiaries had not paid any dividend to the company and it had to pay Rs 3,650 crore for buying back its own shares from the government and other shareholders.

    "Once the share buybacks are executed and dividend paid, the coal monopoly will bounce back into black and be in a position of announce dividends for its shareholders too," the executive, who did not wish to be named, said.

    As part of the government's directive, the board of South Eastern Coalfields on February 27 decided to buy back 4.18% of its shares numbering 1.5 lakh of face value Rs 1,000 each from its parent, at Rs 79,777 per share, totalling Rs 1,200 crore.

    Last week, the board of Northern Coalfields, had decided to hand over Coal India Rs 1,244 crore through a 4.3% buyback program. Northern Coalfields would be buying back about 75,000 shares of face value Rs 1,000 at Rs1.63 lakh per share, another Coal India executive added.
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    Back from the dead? Chinese iron ore miners plot return as prices surge

    Rocketing iron ore prices may prompt Chinese producers to reopen mines shuttered years ago in a sector downturn, potentially tightening the market for marginal foreign suppliers to the world's biggest importing country, industry executives say.

    A revival could help Chinese steel mills cut raw material import costs, boosting margins amid rising steel prices. If more domestic ore is produced, mills could also use that as leverage to push for better deals on seaborne imports from top suppliers like Vale, Rio Tinto and BHP Billiton , traders say.

    A booming Chinese steel market pushed iron ore .IO62-CNO=MB to $94.86 a tonne last month, its strongest since August 2014. With Beijing expected to boost infrastructure spending, the raw material looks set to rally further, making domestic production more viable.

    "Quite a few Chinese iron ore miners are planning to come back and reopen their mines," said Pan Guocheng, head of medium-sized miner China Hanking Holdings Ltd. While low prices led to closure of more than a third of China's iron ore capacity since 2013, Pan expects nearly half of those mines to restart - if the price stays above $80 for another six months.

    Hanking is now considering restarting one of three mines it closed when times were leaner. "If the price will stay high," said Pan, "we are going to seriously re-evaluate if that mine should be reopened."

    A wave of mine reopenings won't present any immediate threat to Vale, Rio Tinto and BHP Billiton, giants that supply top-grade material that's an essential element of the input mix used in steel mill blast furnaces.

    What's more, Beijing's tighter environmental rules could make life difficult for returning mines, analysts have warned.


    Raw Chinese iron ore only has iron content of about 20 percent, compared to more than 60 percent mined by Vale, Rio and BHP. But processed Chinese ore can go up to 66 percent.

    Some mills prefer to use the best grades of Chinese iron ore they can find, rather than lower grade material from overseas.

    "We are looking to get more local iron ore but we cannot find a lot of it now,"
    said an official from a steel mill in southeastern China, speaking on condition of anonymity because he was not authorised to speak to media. "I think they're just preparing to restart."

    Hanking's Pan said China's best grade ores are competitive with lower grade material from Australia, like those shipped by Fortescue Metals Group.

    But inland Chinese mills buy Fortescue's ore to blend with domestic high-grade ore, Fortescue Chief Executive Nev Power said. "Demand...remains strong and we are making very strong margins at the prevailing market price," Power told Reuters by email.

    Nonetheless, traders are betting that if more domestic high-grade iron ore is produced, Chinese mills could use it as bargaining chip with foreign suppliers.

    "Mills may use it as leverage - if imported price is too high they will shift to domestic ore," said one Shanghai-based trader who declined to be identified.

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    Yancoal fresh loss casts doubts on planned acquisition of Rio’s mines

    Yancoal Australia, the subsidiary of China’s Yanzhou Coal Mining that is trying to buy Rio Tinto’s thermal coal assets in Australia’s Hunter Valley, has posted another annual loss this week, reporting net debt of almost $3.7 billion (A$4.8bn).

    Industry observers believe Yancoal may hit a snag when trying to complete a $2bn equity issue to finance the acquisition of Rio’s mines.

    The loss came despite thermal coal prices climbed 130% between February and October last year, and even though Yancoal received an $84.7 million income tax benefit.

    Such tax credit helped a $311.8 million loss before tax trim down to $227.1 million.

    The company, which has not reported a profit since the 2012 calendar year, is said to be waiting for approval from the Foreign Investment Review Board to formally launch a $2 billion equity issue that would allow it to finance the agreed purchase of Rio’s mines.

    “Renewed global demand buoyed by improved coal prices will continue to strengthen Yancoal’s performance, as we pursue our future growth initiatives and strategic acquisitions in the best interest of our shareholders,” Yancoal chief executive Reinhold Schmidt said in a statement.

    But according to The Australian, the company — which already operates nine mines employing about 2,000 people across the country — may hit a snag when trying to complete the raising:

    “While most Chinese-backed acquisitions in Australia have been bankrolled out of China, Yancoal enters the Coal & Allied deal already carrying a heavy debt burden from prior acquisitions.

    “Raising money for the deal from Australian and other investors will significantly increase the free float in Yancoal, which is thinly traded on the ASX, while also placating Chinese authorities that are cracking down on extending funding to big acquisitions outside China."

    Should the deal fall apart, Yancoal will be able to walk away from it without a severe financial penalty, as Rio Tinto set the termination fee at just $23.5 million.
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    Lu'an Group cuts washed coal prices in March

    Effective March 1, Changzhi-based Lu'an Group, a major coking coal producer in Shanxi, cut prices for rail-delivered washed coal by 60 yuan/t ($8.7/t) and offered discounts for large-volume buyers, market sources confirmed.

    The group is now offering washed coal from Zhangcun mine at 980 yuan/t to buyers with purchase volume above 10,000 tonnes and 970 yuan/t to buyers with purchase volume above 20,000 tonnes, free-on-rail basis with VAT.

    If offered coal from Gaohe and Wangzhuang mines at 1,000 yuan/t and material from Sima mine at 1,070 yuan/t, free-on-rail basis with VAT.

    The decline was largely due to strong bargaining from coke makers, who were facing losses amid falling coke prices.

    But most Shanxi miners were optimistic about the coking coal market, as demand from steel and coke market may rebound after the parliamentary sessions in mid- or late March.
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    Indian state ports' Jan coal imports drop 13.09pct on year

    India's 12 major government-owned ports imported 11.6 million tonnes of coal in January, rising 3.48% from last December but falling 13.09% year on year, the seventh straight decline on yearly basis, according to latest data released by the Indian Ports Association (IPA).

    Coking coal shipments received by the 12 ports in January were 3.74 million tonnes, dropping 9.66% from a year ago but up 2.49% from the month prior, the data showed.

    Thermal coal imports at the ports dropped 14.63% from a year ago but gained 3.96% from December to 7.86 million tonnes in January.

    Paradip port on the east coast handled the highest volume of thermal coal in the month at 2.32 million tonnes, dropping 20.41% from a year ago.

    Haldia port handled the highest coking coal shipments at 1.08 million tonnes, rising 11.35% from a year earlier.

    The 12 ports are Kolkata, Paradip, Visakhapatnam, Ennore, Chennai, VO Chidambaranar (Tuticorin), Cochin, New Mangalore, Mormugao, Mumbai, Jawaharlal Nehru Port Trust (JNPT) and Kandla.

    Cochin, JNPT and Chennai ports did not import any coal cargoes in January.

    In the first ten months of this fiscal year (April –January), thermal coal imports at India's 12 ports dropped 10.02% year on year to 78.4 million tonnes, and their coking coal imports slid 6.67% from the year prior to 39.99 million tonnes over the same period.
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    China Feb steel sector PMI at 55.0

    The Purchasing Managers Index (PMI) for China's steel industry was 55.0 in February, compared to 49.7 in January, showed data from the Steel Logistics Professional Committee (CSLPC).

    In February, the steel industry output sub-index was 50.4, up 1.8 from January.

    In February, the sales volume sub-index was 57.8, rising 16.8 month on month, reflecting improving sales activity.

    Meanwhile, the order sub-index was 57.0 in February, rising 16.2 from 40.8 in January.

    China's steel market has improved since the Spring Festival, with downstream orders increasing. High prices helped steel makers to actively boost output for better profit.
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    China to reallocate 500,000 coal and steel workers in 2017

    China to reallocate 500,000 coal and steel workers in 2017

    China needs to reallocate half a million steel and coal workers in 2017 due to capacity cuts in these industries, as the world's second-largest economy tries to combat excess in the bloated industries, Reuters reported, citing China's labor minister.

    "This year we will continue to cut capacity in coal and steel," Yin Weimin, the head of China's Ministry of Human Resources and Social Security, told reporters.

    "We will need to reallocate jobs to 500,000 workers," he said, including assigning workers different jobs within the same or a different company, early retirement or encouraging them to become entrepreneurs.

    China will introduce a policy this year to encourage the development of new industries, for example internet-related industries, that will create new jobs, he said.

    China reallocated jobs to 726,000 coal and steel workers in 2016 "without any major problems", he said, adding that China's overall employment outlook in 2017 is expected to remain relatively stable, despite the government facing immense pressure to create jobs.

    China's central government allocated more than 100 billion yuan ($14.54 billion) last year to help laid-off coal and steel workers and spent more than 30 billion yuan from the fund last year, Yin said.

    China created 13.14 million urban jobs in 2016, Yin said, but did not specify whether this was a gross or net figure of the number of people at work.

    China's urban registered unemployment rate will remain at around 4.5% in 2017, Yin told reporters, but many analysts believe this figure is an unreliable indicator of nationwide employment conditions.

    China's official unemployment rate has been around 4% for years, despite the rapid slowdown in the economy from double-digit growth to 6.7% in 2016, its slowest pace in 26 years.

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    Russia's Evraz meets forecasts with 7 pct rise in 2016 core earnings

    Russia's No.2 steelmaker Evraz said on Wednesday its core earnings rose 7 percent in 2016, benefiting from a rebound in steel prices and an improving domestic economy.

    The company's earnings before interest, taxation, depreciation and amortisation (EBITDA) totalled $1.54 billion, up from $1.44 billion the previous year, it said in a statement.

    Analysts in a Reuters poll had forecast that Evraz, part-owned by Chelsea soccer club owner Roman Abramovich, would report full-year 2016 EBITDA of $1.5 billion.

    Russian steelmakers have suffered over the past two years as world steel prices plumbed 11-year lows and the country's economic crisis sapped domestic demand.

    But they expect a stronger 2017 as Russia's economy improves, buoyed by higher oil prices, and by loftier steel prices supporting profits.

    "Overall, thanks to favourable market conditions and numerous improvement initiatives, we delivered fairly strong financial results," Chief Executive Alexander Frolov said.

    Evraz narrowed its net loss to $188 million, versus a loss of $719 million in 2015, it said. Revenue slipped 12 percent to $7.7 billion.

    The company's net debt to EBITDA ratio fell to 3.1, it said in a presentation for investors. Analysts at VTB Capital have said Evraz could reduce the ratio to below two in the first half of 2017, its lowest since 2008, creating room for dividend payments.

    "We are confident enough that the (net) debt/EBITDA ratio will be less than three, but nevertheless, I think it is too early to speak about dividends right now," Frolov told a conference call with reporters.

    Frolov said the company was "cautiously optimistic" about market conditions in 2017 and hoped efficiency measures would help it boost free cash flow and reduce its debt burden. Evraz's 2017 steel production was seen flat, he added.

    Efforts to raise money by some of Evraz's competitors further point to increased confidence in the sector.

    Russia's biggest steel producer, NLMK, said in December it could issue Eurobonds this year and TMK, the country's largest maker of steel pipes for the oil and gas industry, sold a 13 percent stake through a secondary public offering in February.

    Banking sources have previously told Reuters Evraz is also considering a convertible bond issue this year.

    "At the moment, we are flexible enough and considering all possible options for debt refinancing," Chief Financial Officer Nikolai Ivanov said.

    "The market is currently extremely good, the recent issues we have seen ... were quite impressive. The market is very good and we have our finger on the pulse."
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    China Dec rail coal transport up 5.5pct on year

    China's rail coal transport increased 5.5% from the previous year and up 5.1% on the month to 184 million tonnes in December last year, showed the latest data from the China Coal Transport and Distribution Association.

    Of this, 129 million tonnes or 70.1% of the total were railed to power plants, a year-on-year decline of 4.8% and flat from the month before, data showed.

    In 2016, China's railways transported a total 1.9 billion tonne of coal, falling 4.7% year on year, with thermal coal transport at 1.34 billion tonnes or 70.5% of the total, down 2.8%.

    Coal-dedicated Daqin line transported 351.25 million tonnes of coal during the same period, down 11.5% on the year, with December volume up 16.7% on the year and up 2.2% from November to 38.41 million tonnes.
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    BC Iron moves into potash

    Junior iron-ore company BC Iron has entered into a joint venture (JV) agreement with fellow-listed Kalium Lakes over the Carnegie potash project, in Western Australia.

    Under the terms of the agreement, BC Iron could earn a 50% interest in the Carnegie project by predominantly sole-funding exploration and development expenditure across several stages, up to the completion of a feasibility study.

    In the initial scoping study, BC Iron can earn a 30% interest in the project by sole funding the first A$1.5-million expenditure. To earn a further 10% interest, BC Iron would be required to fund prefeasibility studies, requiring a further capital investment of A$3.5-million.

    During the feasibility study phase, BC Iron could elect to earn a further 10% interest in the Carnegie project by sole-funding a further A$5.5-million.

    “Through this agreement with Kalium, BC Iron has gained exposure to a highly prospective project in an agricultural commodity with attractive long-term dynamics,” said BC IronMD Alwyn Vorster.

    “Becoming involved in an agricultural commodity has been a clearly articulated objective of BC Iron, and this JV agreement with an expert potash company in Kalium provides us with the required exposure at low risk. This move into potash, added to the pending conclusion of a scoping study on BC Iron’s Mardie Salt project, positions BC Iron well in agricultural and other commodities leveraged to a growing global population.”

    The Carnegie project comprises one granted exploration license and two exploration licence applications covering some 1 700 km2. The project is thought to be highly prospective for hosting a large sub-surface brine deposit, which could be developed into a solar evaporation and processing operation that produces sulphate of potash.

    Further strengthening the cooperation agreement, BC Iron has also given Kalium the right to acquire a 50% interest in the Mardie project, at certain development stages.

    BC Iron was hoping to develop a three-million tonne a year solar evaporation salt operation at Mardie.

    BC Iron in October of last year sold its 75% stake in the Nullagine iron-ore project to JV partner Fortescue Metals for A$1, as the a restart of the mine remained unlikely.
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    Fortescue denies making a bid for Wesfarmers’ Curragh assets

    Iron-ore major Fortescue Metals has refuted claims that it is bidding for ASX-listed Wesfarmers' Curragh coal assets, in Queensland.

    Wesfarmers in November 2016 announced that it was evaluating “strategic options” for both of its coal assets in Queensland and New South Wales, with the miner reportedly placing a price tag of A$2-billion on the assets.

    Media reports suggested that Fortescue had made a play for the 8.5-million-tonne-a-year metallurgical and 3.5-million-tonne-a-year thermal coal operations.

    However, the miner on Monday said the reports were incorrect.

    We are focused on debt repayment and capital flexibility, investment in the long-term sustainability of our core iron-ore assets, creating low-cost future growth options and delivery of returns to our shareholders,” the company said in a statement.

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    China's Feb stainless steel output regains momentum after Lunar New Year

    China's stainless steel production has regained momentum in February after Lunar New Year holidays trimmed output in January, Yujing Liu, analyst at Chinese consultancy Antaike, said Tuesday.

    China's stainless steel production was expected to rebound to 2.2 million mt in February from 2.1 million mt in January due to strong stainless steel prices, Liu said. December production was 2.2 million mt, Liu added.

    January output dipped due to plants closing for Lunar New Year holidays.

    Chinese stainless steelmakers Baowu Steel and Taiyuan Iron & Steel this week rolled over March ferrochrome purchase prices from February at Yuan 9,500/mt ($1.05/lb) and Yuan 9,300/mt, respectively.

    Monthly Chinese mill purchase prices had been falling since December. February-March prices are down 12% from Yuan 10,400-10,800/mt in December.

    Ferrochrome suppliers agreed positive momentum has returned and said March stainless steel output in China may exceed that of February.

    Most Chinese major mills were producing at near full capacity in February and raw material orders for March-April deliveries started to pick up from last week, sources said.

    "Chinese stainless steel customers were calling for supplies much earlier than we expected; they said February production was higher than they initially expected," said one ferrochrome supplier source.

    Official production data from the China Special Steel Enterprise Association or CSSC shows China produced 24.9 million mt of stainless steel in 2016, up 15.7% year on year.

    Output totaled 5.2 million mt in the first quarter, 6.5 million mt in Q2, 6.3 million mt in Q3 and 6.8 million mt in Q4.

    The organisation does not break down production data by month.
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    China Jan coking coal imports surge 85.5pct YoY

    China imported 6.23 million tonnes of coking coal in January, surging 85.5% year on year and up 6.3% from last December, the second straight rise on monthly basis, showed the latest data from the General Administration of Customs (GAC).

    Value of the imports totaled $1.04 billion in January, rising 365.5% from the preceding year and up 27% month on month.

    Major suppliers of the steelmaking material included Australia and Mongolia in January. China imported 2.82 million tonnes of Australian coking coal in the month, increasing 67.6% from the year-ago level and up 36.3% from December.

    Tangshan and Cangzhou in China's Hebei province logged sharpest increase of coking coal imports from Australia in January, as some steel mills that had been conducting maintenances for long started to resume production, and many steel makers replenished stocks before the Spring Festival holidays amid bullish outlook toward the future market.

    In January, Hebei province imported 914,000 tonnes of coking coal from Australia, soaring 248.9% from the month prior; Liaoning province in eastern China also saw a marked increase in coking coal imports from the country.

    By January 23, coking coal stocks at survey steel mills stood at 6.62 million tonnes, up 14.7% from early January.

    China imported 2.58 million tonnes of coking coal from Mongolia in the month, surging 154.4% year on year but down 16.6% month on month. The decline was mainly due to a reduction of 17.6% from last December in Inner Mongolia coking coal imports to 2.47 million tonnes in the same month.

    China's imports of Canadian rose 40.4% from the month prior to 410,000 tonnes in January, while imports from Russia increased 15.1% month on month to 320,000 tonnes. China imported 110,000 tonnes of coking coal from the U.S., against none in last December.

    China exported 140,000 tonnes of coking coal in January, down 8.8% year on year, and the value increased 81% from a year ago to $25.46 million.

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    China voices disquiet over new EU anti-dumping move on steel

    China expressed concerns on Tuesday over what it said was increasing protectionism after European Union regulators imposed new duties on steel imports from the world's biggest producer.

    The European Commission is seeking to protect EU steelmakers while avoiding tensions with Beijing, which it sees as a possible ally against protectionism and climate change.

    It imposed definitive anti-dumping duties of between 65.1 percent and 73.7 percent on imports of heavy plate non-alloy or other alloy steel from China on Tuesday, confirming provisional tariffs set in October.

    This prompted a statement from China's Commerce Ministry calling on Europe to treat Chinese companies "fairly and impartially", adding it was ready to strengthen communication with the EU to tackle issues in the industry.

    The companies named in the Commission's ruling included Nanjing Iron & Steel Co Ltd, Minmetals Yingkou Medium Plate Co Ltd, Wuyang Iron and Steel Co Ltd and Wuyang New Heavy & Wide Steel Plate Co Ltd.

    The EU executive said it acted after an investigation found Chinese companies to be heavily dumping their products on the EU market by selling them at well below half of the price on the producers' home market.

    "The Commission has responded forcefully and quickly to unfair competition, while at the same time ensuring that the rights of all interested parties have been protected," the Commission said in a statement.

    Eurofer, which represents the European steel sector, said the Commission had found clear evidence of dumping.

    "Tens of thousands of steel jobs have been lost in Europe over the past few years, and dumping, particularly demonstrably from China, has been one of the causes," it said in a statement.

    The EU has strengthened its policy against what it considers unfair competition for its steel industry, and said its new approach had allowed it to decide on trade sanctions more quickly than in the past.

    It said on Tuesday it has 41 anti-dumping and anti-subsidy measures in place, 18 of which are on products from China.

    Also on Tuesday, Europe's second highest court backed anti-dumping and anti-subsidy duties imposed by the EU nearly four years ago on imports of Chinese solar panels.
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    China's key steel mills daily output gains 3.56pct in early Feb

    Daily crude steel output of China's key steel mills gained 3.56% from ten days ago to 1.72 million tonnes over February 1-10, according to data released by the China Iron and Steel Association (CISA).

    The country's total crude steel output was estimated at 2.25 million tonnes each day on average during the same period, climbing 12.5% from ten days ago, the CISA said.

    By January 10, stocks of steel products at key steel mills stood at 14.41 million tonnes, up 1.82% from ten days ago, the CISA data showed.

    Steel products stocks in the country had been trending up since February this year, signaling strengthened market sentiment.

    In mid-February, rebar price increased 6.2% from ten days ago to 3,562.6 yuan/t; wire price climbed 5.1% from ten days ago to 3,638.1 yuan/t, showed data from the National Bureau of Statistics.

    Steel prices robustly rebounded after the Chinese Spring Festival holidays, attributed mainly to improved demand spurred by the loose credit policy and lower-than-expected inventories as most steel mills had not yet resumed production.

    However, industry insiders dismissed the rebound as unsustainable, as increased profit may lure more steel makers to resume production, which will lead to surplus supply and downward prices again.
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    Teck bullish on coal, but not enough to add production capacity

    Teck Resources Ltd. is bullish on steel-making-coal prices, but not enough to enhance production capacity, Bloomberg reported on February 28, citing the head of Canada's largest diversified miner.

     Teck Chief Executive Officer Donald Lindsay said on February 27 there's a clear change in direction in coal prices in the past 10 days, with a surge in forward prices for metallurgical material.
    The possibility that China could reinstate coal output restrictions at the end of March and its decision to stop importing coal from North Korea are supportive of prices, Lindsay said.
    While the Vancouver-based company has additional metallurgical-coal capacity that it could bring into production very quickly, it has no plans to do so until the steel business in India appears to "be really taking off," he said.
    Any new protectionist policies under the U.S. administration are unlikely to affect the company very much because 95% of Teck's coal sales go to Asia and Europe, Lindsay said. "Teck is watching Chinese policy much more closely than U.S. President Donald Trump's policies."
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    China's February iron ore imports stay strong

    If you did nothing more than look at China's imports of iron ore, you would be satisfied that the robust rally in the price of steel-making ingredient is entirely justified.

    February's imports of iron ore look set to continue the recent strength, with vessel-tracking and port data pointing to imports of around 88.78 million tonnes.

    The data compiled by Thomson Reuters Supply Chain and Commodity Forecasts doesn't align exactly with Chinese customs numbers given discrepancies of when cargoes are booked as having arrived for customs purposes and differences in volumes onboard vessels.

    However, the vessel-tracking data tends to err on the conservative side, with its estimate of 2016 imports some 3.5 percent lower than the official figure of 1.024 billion tonnes.

    If the February customs arrivals are in line with the vessel-tracking data, it suggests an acceleration in the pace of imports on a daily basis from January, which were the second highest on record on a monthly count.

    Daily imports in January averaged 2.97 million tonnes, and if February's imports are around the ship-tracking estimate, they will be about 3.17 million tonnes.

    Overall, the robust imports by China, which buys about two-thirds of global sea-borne iron ore, appear to justify much of the strong price gains over the past 14 months, even if there does seem to be some froth in the DCE futures, which is perhaps unsurprisingly given their appeal to Chinese day traders.

    Inventories of iron ore at 46 major ports hit a record high of 129.35 million tonnes last week, according to consultancy SteelHome.

    This is up 15.4 million tonnes since the start of the year and inventories are now 63 percent higher than they were in June 2015, when the uptrend started.

    Rising inventories would be fine if they were a reflection of increased demand for steel, but it is likely that China's steel production is close to a peak for now.

    The World Steel Association estimates that January output was 67.2 million tonnes, the same as in December.

    China's steel production was 808 million tonnes in 2016, up 1.2 percent over the prior year, the association said on Jan. 25.

    This was a strong performance in the context of expectations that steel output would actually decline as excess capacity was shuttered, but infrastructure stimulus spending and increased property construction helped keep steel mills producing.

    Will this continue in 2017? While it's likely the Chinese authorities want economic growth to continue at around 6-6.5 percent per annum, the chances of strongly rising steel demand this year are uncertain.

    Rather it appears the authorities want to continue to rationalize steel capacity and target illegal factories in a bid to cut pollution from burning coal in steel blast furnaces.

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    China iron-ore, steel resume rally amid steel curbs, demand pickup

    Iron-ore and steel futures in China jumped more than 4% on Monday, resuming their rally, amid planned curbs in steel production in key areas and a pickup in seasonal demand.

    Rebar prices pushed to a fresh three-year high and iron-ore neared a record peak, as both commodities benefited from China's efforts to tackle a steel glut and boost infrastructure spending.

    The most-active rebar on the Shanghai Futures Exchange was up 4.7% at 3 610 yuan ($525) a tonne at 0320 GMT after rising as far as 3 648 yuan earlier, its strongest since February 2014. The construction steel product has gained about 24% this year.

    iron-ore on the Dalian Commodity Exchange was up 4.4% at 722.50 yuan per tonne. The steelmaking raw material has risen 30% this year, having touched a record high of 741.50 yuan last week.

    Steel producers in the Hebei-Beijing-Tianjin area have been asked to shift their peak-load production to reduce pollution ahead of the start of China's National People's Congress on Friday, said Helen Lau, analyst at Argonaut Securities.

    Steel inventory held by Chinese traders fell to 16.29-million tonnes as of Feb. 24 from 16.39 million tonnes in the prior week, the first decline since last November, due to seasonal demand recovery, she said.

    "Looking ahead over short and mid-term, China's steelmarket will remain tight on the back of production regulation and seasonal demand recovery. We expect to see more upside in steel prices in both spot and futures markets," Lau said in a note.

    The revival in futures could push spot iron-ore prices back toward $100/t, after retreating last week as some traders cast doubt on the sustainability of this year's rally amid ample stocks of the raw material in China.

    Iron-ore for delivery to China's Qingdao port .IO62-CNO=MB slipped 0.9% to $90.50 a tonne on Friday, according to Metal Bulletin. The spot benchmark hit a 30-month peak of $94.86 last Tuesday.

    Stockpiles of imported iron-ore at 46 major Chinese ports continued to rise, hitting 129.35 million tonnes, the highest since 2004 when SteelHome consultancy began tracking the data.

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    Fortescue, Apollo said to bid for Wesfarmers coal assets

    Fortescue Metals Group and Apollo Global Management are among bidders for Wesfarmers’s Australian coal operations, according to people with knowledge of the matter.

    Apollo submitted an indicative offer for Wesfarmers’s stakes in the Curragh and Bengalla mines by a deadline around the end of last month, the people said, asking not to be identified because the information is private. Fortescue bid for Curragh, which produces mostly metallurgical coal, according to the people. The suitors are now studying detailed information on the assets, which could fetch as much as A$2-billion ($1.5-billion) combined, the people said.

    Wesfarmers, the Australian retail-to-fertilizer conglomerate, started a sale process for the mines after prices for coking coal soared last year. Any purchase by Fortescue, the world’s fourth-biggest iron ore exporter, would further the company’s goal of expanding into other commodities to diversify its revenue sources.

    Representatives for Apollo, Fortescue and Wesfarmers declined to comment.

    Wesfarmers fully owns the Curragh mine in Queensland’s Bowen Basin, an asset that can produce about 8.5-million metric tons of metallurgical coal and 3.5-million tons of thermal coal a year, according to the Wesfarmers website. The company also holds 40% of the Bengalla thermal coalmine, which is located in New South Wales state’s Hunter Valley and can suppl y as much as 10.7-million tons a year.

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    Australian Newcastle's PWCS coal vessel queue at six-week high of nine ships

    The vessel queue at the Port Waratah Coal Services terminals at the Port of Newcastle, Australia, was the longest reported in the Hunter Valley Coal Chain Coordinator's weekly report Sunday for six weeks, but it remained short in comparison to last year's queues.

    The queue grew from two ships to nine week on week, which is the second longest queue reported for 2017 to date. The longest queue was 11 ships on January 16.

    For the first nine weeks of the year, there has been an average of six vessels queuing at PWCS, which compares to an average of 22 ships in the last nine weeks of 2016, data from HVCCC shows.

    HVCCC forecasts that the queue will be 12 ships at the end of February and five at the end of March.

    Inbound receivals to PWCS were 1.66 million mt of coal for the week ended Sunday, which is down from 3.22 million mt the previous week, HVCCC said. Port Waratah coal stocks finished the week at 1 million mt, down 456,000 mt week on week, it said.

    Coal stocks at the Port Kembla Coal Terminal were down slightly week on week while throughput increased.

    PKCT had 396,512 mt stockpiled Sunday, down from 417,460 mt a week earlier, while out loadings rose from 166,096 mt to 212,489 mt, data from the operator said.

    There was one ship assembled at the terminal on Sunday and one queuing, compared to one assembled and zero queuing the previous week.

    At the Dalrymple Bay Coal Terminal, there were two ships loading Monday and 11 at anchor, down from two queuing and 18 at anchor the week prior, DBCT Management said.

    The RG Tanna Coal Terminal at the Port of Gladstone had four ships at berth and four at anchor Monday, which compares against two at berth and six at anchor a week earlier, the Gladstone Ports Corporation said.

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    Anglo American's Australian Drayton South coal project rejected

    Anglo American's Australian Drayton South coal project located in the Upper Hunter Valley of New South Wales has once again been rejected by the state's planning commission, Platts reported, citing the Planning Assessment Commission.

    The project, which was to extract 74.9 million tonne of run-of-mine coal over a 15-year period at a rate of around 6.4 million tonne per year, was not in the public interest, PAC said.

    Anglo American had hoped to extend operations from the neighboring Drayton mine to Drayton South, but it had to close the Drayton mine in September 2016 as it was mined out and the company was facing difficulties in gaining the extension approval.

    Anglo American has recently divested its Australian coal operations, which including its Dartbrook project to Australian Pacific Coal, its Callide thermal coal mine in Queensland to Batchfire Resources, and its Foxleigh mine, also in Queensland, to Middlemount South.
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    Changes to U.S. coal mining royalties blocked

    President Trump has promised to remove any Obama-era roadblocks to energy projects such as the Keystone XL pipeline. He also has vowed to lift restrictions on mining coal and drilling for oil and natural gas.

    The Trump administration has made another pro-coal decision, this time relating to how Washington calculates royalties on coal mined from federal and Indian lands.

    iPolitics reported on the weekend that the Interior Department has put on hold changes to the value of coal extracted from public lands, meaning current rules governing the industry will remain in place pending court decisions. The Obama administration had sought to change the rules – saying they were improperly calculated – and argued that the changes were to ensure that taxpayers were given a fair share of coal sales to Asia and other export markets.

    Trump's decision is likely to be controversial. IPolitics quotes a Montana rancher saying “This announcement is a gift to coal companies trying to avoid paying their fair share,” but some Western U.S. politicians are on board with it. Rob Bishop of Utah, chairman of the House Natural Resources Committee, told the online news site the rule changes would increase electricity rates for consumers by forcing utilities to pay more for coal. “The Trump administration made the right decision to suspend this illogical and legally dubious rule,” he said.
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    US coal train loadings increase from all major basins: railroads

    Weekly US coal train loading volumes strengthened week on week across all major basins, Surface Transportation Board filings show.

    Data filed by the four major US railroads -- CSX, Union Pacific, BSNF and Norfolk Southern -- for the week ending February 17 shows nationwide coal loadings averaged 105.2 trains/day, up from 102.9 the prior week.

    Powder River Basin loadings increased in the latest reports to 63.8 trains/d from 63 the previous week, falling just short of tying year-high average of 63.9 in mid-January.

    Central Appalachian coal loading volumes were up to 14.7 trains/d from 14.2 the previous week, while Northern Appalachian grew to 12 trains/d from 11.5.

    Illinois Basin loadings increased to a year-high 8.3 trains/d from 7.5. IB loadings were last higher in early September last year.

    Utica Basin coal train loadings were flat at 4 trains/d, and loadings from outside the primary basins slipped to 2.4 trains/d from 2.7.

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    Japan Jan thermal coal imports hit a new high

    Japan imported 10.7 million tonnes of thermal coal (including bituminous and sub-bituminous coals) in January, increasing 10.1% year on year and up 13.13% month on month, hitting a new high since July 2015, the latest customs data showed.

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    In January, Japan imported 9.48 million tonnes of bituminous coal, rising 10.15% on the year and 10.18% on the month.

    Australia remained the largest supplier to Japan with 8.06 million tonnes of the material, up 5.53% from the year-ago level and 17.83% from the previous month.

    This was followed by Indonesia at 0.66 million tonnes, more than tripling from a year prior and up 46.3% from December.

    The country's bituminous imports from Russia stood at 0.37 million tonnes, falling 28.59% compared to the same month a year prior and down 64.54% from December.

    Meanwhile, Japan imported 1.22 tonnes of sub-bituminous coal in January, gaining 9.69% on the year and 42.98% on the month.

    Indonesia, the top supplier of this material, shipped 1.04 million tonnes to Japan in January, more than doubling from the month prior and up 36.92 from a year ago, the highest since July 2015.

    Australia followed with 0.14 million tonnes, rising 161.24% from the month-ago level and up 67.13 from the same month in 2016.

    Total value of Japan's bituminous coal imports in January reached 109.47 billion yen ($977.02 million), increasing 19.96% from the previous month. That translated to an average imported price of 11,548.6 yen/t, rising 8.88% from December.

    The value of its sub-bituminous coal imports surged 62.12% on the month to 9.62 billion yen in January. That translated to an average imported price of 7,495.19 yen/t, up 13.38% from December.

    Additionally, Japan imported 466,200 tonnes of anthracite coal in January, sliding 38.14% from a year ago but up 21.34% from December.

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    Jiangxi to close 94pct of its coal mines this year

    Central China's Jiangxi province may close 94% of its coal mines this year, local media reported, citing a meeting held by the provincial coal bureau on February 24.

    Last year, Jiangxi shut a total 232 coal mines. It plans to further eliminate coal mines with annual capacity below 90,000 tonnes.

    "That means the province will close around 94% of its coal mines and no longer take coal as one of its key industries," the report said.

    At present, the province has 265 coal mines, with 249 mines or 94% with capacity below 90,000 tonnes per annum.

    In 2016, Jiangxi produced over 7 million tonnes of coal, covering only 10% of the province's demand.

    Menghua railway, linking coal-rich western Inner Mongolia to Jiangxi, is expected to operate in 2019. By then, it will provide more than 40 million tonnes of coal per year to Jiangxi.

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    Vale intensifies CEO search as Ferreira to quit, sources say

    Vale intensifies CEO search as Ferreira to quit, sources say

    Vale has stepped up the search for a new CEO as Murilo Ferreira announced his departure, signalling efforts by some top shareholders to shield the world's No 1 iron producer from political interference, three people with direct knowledge of the situation said on Friday.

    Earlier in the day, Rio de Janeiro-based Vale said Ferreira will step down as CEO when his term expires on May 26. In a securities filing, Vale did not name a potential replacement for Ferreira or detail how a transition will happen.

    Some of Vale's controlling shareholders lean towards picking one of Ferreira's lieutenants to spearhead Vale's transition into a company with dispersed share ownership, the people said. External candidates with previous experience at Vale are also under consideration, the people added.

    Potential candidates include CFO Luciano Siani; ferrous metals director Peter Poppinga; and Clovis Torres, Ferreira's right hand man and currently Vale's executive VP for human resources.

    Nelson Silva, a former Vale executive who is now chief strategy officer at state-controlled oil firm Petróleo Brasileiro is on the list, the people said. Other outsiders include former Vale executives Jose Carlos Martins and Tito Martins, one of the people added.

    The choice of Vale's top commander is crucial to ensuring the success of a plan that will phase out a 20-year controlling shareholder pact and merge Vale's different classes of stock into a single one.

    During a conference call to discuss the announcement, Ferreira gave no hint about who would succeed him.

    "As far as I am concerned, I have no successor, I haven't been informed who that person will be, and, to be sincere, I have no idea who it might be," Ferreira said.

    Some top shareholders had proposed that Ferreira stay in the job for another year, Reuters had reported in January. The initiative was scrapped by Ferreira, who might have asked to step aside as his age was getting closer to the company's limit, one of the people said.

    "We have a vision that we must have an age limit of 65 years, and that for us is very important," Ferreira said on the call. "The queue has to go on."


    Losses in Vale's preferred shares were wiped out as the list of candidates eased concern that Ferreira's seat may be filled by a government crony. Common shares were sliding 0.9% to 32.39 reais.

    A more dispersed shareholder structure is key to enhancing transparency and stifling interference from politicians, who for years have pressed Vale to invest in noncore projects.

    State pension funds led by Previ Caixa de Previdência , Bradespar, Mitsui & Co and an investment arm of state development lender BNDES are all members of Valepar, the investment holding company that controls Vale. Neither Valenor any of the shareholders had a comment on the situation.

    Vale was partly privatised in 1997, although the government continues to wield influence over it through BNDES's investment arm and the pension funds.

    Still, an unnamed government official familiar with President Michel Temer's thinking said Vale will look for a "top-notch, non-political manager," in a process similar to the recruitment of Pedro Parente as CEO of the oil giantknown as Petrobras.


    Bradespar would agree to a change of leadership outside Vale's current management only if potential picks go through a selection process conducted by an executive recruitment firm, one of the people added.

    That came after media reports earlier this month suggested members of Temer's PMDB party and Senator Aecio Neves of the PSDB party from the mineral-rich Minas Gerais state, where Vale is based, were vying to influence the selection of the new chief executive.

    In the filing, Vale thanked Ferreira for his achievement, listing his efforts to focus on core activities, undertaking the company's biggest investment project ever and reducing debt.

    "With his experience, dedication and respect ... Murilo leaves a legacy for all future generations of executives and employees at Vale," it said.

    Ferreira took the reins at Vale in 2011, in the midst of a high profile political clash between the company and the leftist government of Dilma Rousseff.

    Rousseff pressed for the ouster of Roger Agnelli, Ferreira's predecessor, after accusing Vale of not doing enough, in terms of local investment or job creation, to help Brazil's economy battle the global financial crisis.

    Ferreira tried to steer the company clear of government interference or scandal as Vale battled to complete a new mega mine in the Amazon known as S11D just as iron-oreprices collapsed. That combination led Vale to report a record net loss of $12.13-billion in 2015.

    However, last year, Vale's fortunes improved sharply as the new mine began to ramp up and iron-ore prices rose.

    Had Ferreira stayed, investors would have known that the next two years would have meant continuity of his strategy, said Rodolfo de Angele, a senior analyst with JPMorgan Securities.

    "One comfort investors have is that current shareholders seem to be pretty much aligned with the idea of a company with lower growth rates but with more discipline and sizable dividends," de Angele said.
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    China SOEs cut 34.97 Mtpa coal capacity in 2016

    China's state-owned enterprises cut surplus capacity in coal and steel industries by 34.97 Mtpa and 10.19 Mtpa last year, respectively, a senior official said on February 23.

    In order to improve operational efficiency and enhance the profitability of state assets, China closed 2,730 legal-person companies in SOEs last year, said Xiao Yaqing, director of the State-Owned Assets Supervision and Administration Commission (SASAC).

    The move helped reduce losses by 4.39 billion yuan ($636.2 million) last year, and cut management cost by 4.91 billion yuan, said Xiao.

    China also rectified 398 zombie enterprises and unprofitable enterprises in 2016.  

    Cutting overcapacity is high on the central government's reform agenda as excess capacity in sectors such as steel and coal have weighed on the country's overall economic performance.
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    Mongolian coal miners bet on One Belt, One Road to feed demand

    Coal miners operating in Mongolia are hoping on China's massive 'One Belt, One Road' program to improve access to existing markets in China and Russia and enter new ones as far afield as Eastern Europe, CNBC reported on February 24, citing David Paull, managing director of ASX-listed Aspire Mining Ltd.

    Although Chinese demand for coking coal, or metallurgical coal has recovered, infrastructure restraints in Mongolia, particularly a lack of rail capacity continues to cause 'bottlenecks' and delays in getting product to markets, said Paull on February 21.
    In the longer term, China's efforts to re-invent the Silk Road trading route for the modern era, connecting Asia to the Middle East and Europe will shift the balance.
    "One Belt, One Road and investment in Mongolian rail will provide capacity allowing greater penetration of the Chinese and Russian markets and eventually Eastern Europe," Paull said.
    Despite the longer-term demand of new growth markets, Mongolian-focused miners like Aspire remain cautious.
    "The coking coal market certainly has stabilized," Paull said. "The capital markets were completely closed to us during the commodity price collapse in 2014."
    In the near term, China's ban on North Korean coal imports is boosting demand for Mongolian coking coal, said Thomas Hugger, founder and CEO of Asia Frontier Capital. "Naturally, Mongolia should be the main beneficiary of this."
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    American steelmakers ready to supply pipeline projects: US Steel's Longhi

    American steelmakers are prepared to supply the steel pipe needed for domestic pipeline projects, US Steel CEO Mario Longhi said Thursday following a meeting with President Donald Trump at the White House.

    "We've been making pipe in this country since the early stages of the past century in this country and the industry is certainly capable of producing it here," Longhi told CNBC.

    Longhi was among a number of CEOs from US-based companies to participate in a working session and meet with Trump Thursday for a listening session on creating jobs in the manufacturing industry.

    In his first week in office, Trump signed a series of executive memorandums to revive the Keystone XL and Dakota Access pipeline projects and has directed the US Commerce Department to make sure all future pipelines built in the US are constructed out of steel melted and finished in the US. Since the announcement, concerns have been raised that US producers may not have the capabilities to furnish the type of pipe needed on pipeline projects, but when pressed, Longhi said it's a non-issue for US steelmakers.

    "The capability is there for us to make everything that is needed," he said, adding that includes pipes for extraction production and transmission. One of the biggest problems facing US steel producers in recent years, particularly in the pipe and tube markets, has been the high level of imports coming into the US, Longhi said.
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    China to facilitate SOEs reforms this year

    China will prioritize and accelerate the restructuring of steel, coal and power businesses in its major state-owned enterprises, in order to improve operational efficiency and enhance the profitability of state assets, the top state-owned assets regulator said on February 22.

    Eager to crack hard nuts such as overcapacity, low commodity prices and financial losses, the State-Owned Assets Supervision and Administration Commission (SASAC) will deepen the reform of SOEs from these three priority sectors via business reshuffles, reorganization and mixed ownership reforms.

    In addition to steel, coal and power, other sectors, including petroleum, gas, railways, telecommunications, civil aviation and military-related industries, will also be given priority to conduct mixed ownership reforms, said Xiao Yaqing, minister of the SASAC.

    The government will invest more in optimizing management and operations to help unprofitable SOEs and reduce the number of "zombie companies" this year, Xiao added.

    "Zombie companies" are economically inviable businesses, usually in industries with severe overcapacity, which only survive due to financing from the government and banks.

    "Affected by lower coal prices and the saturated global steel market, the steel, coal and power sectors are confronted with more overcapacity problems and comparatively accommodate more 'zombie companies'. This is the fundamental reason why these three areas have to be addressed first," said Ding Rijia, a professor at the China University of Mining and Technology in Beijing.

    The central government reorganized 22 central SOEs over the past three years, including China Ocean Shipping (Group) Co and China Shipping Group, CNR Corp and CSR Corp.

    So far, China has set up more than 200 funds worth more than 600 billion yuan ($87.36 billion) to support SOEs and private companies.

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    Shanxi continues to halt coal mining rights approvals and transfers

    North China's coal-rich Shanxi will continue to halt coal mining rights approvals and transfers in 2017 as it seeks to reduce overcapacity in the struggling industry, Xinhua News Agency reported, citing a local official.

    The province will strictly limit increases in newly added coal output, said Xu Dachun, head of the provincial Department of Land and Resources.

    Shanxi, where mining rights approvals and transfers were suspended for the first time in 2016, cut 23.25 Mtpa of coal production capacity last year.

    In addition, Shanxi will further step up mergers and acquisitions of existing mines to form large mining groups. It aims to limit the number of its mines to 900 in 2020, with each having an average production capacity of 1.8 Mtpa, the official said.

    Coal output in Shanxi hit 832 million tonnes in 2016, a decline of 14.7% from the figure in 2015.

    Shanxi accounts for a quarter of China's coal reserves with more than 260 billion tonnes.

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