Mark Latham Commodity Equity Intelligence Service

Friday 12th August 2016
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    Oil and Gas


    Caterpillar sees more soft demand from energy, transport sectors

    Caterpillar Inc expects no significant demand growth for its energy and transportation products for the rest of 2016 as oil prices stay weak, a senior executive said on Thursday.

    "Oil prices, drill rig counts and our customers' fleet utilization rates continue to remain low," Jim Umpleby, Caterpillar's energy and transportation group president, told analysts in an industry conference webcast. "Based on these factors we don't see a significant increase in demand for our products for the remainder of 2016."

    Caterpillar, the world's largest manufacturer of heavy equipment, is restructuring its businesses as demand has slowed for construction, mining, and energy and transportation products since 2012. It has slashed 13,900 jobs worldwide since mid-2015, and said last month it planned more job cuts.

    Caterpillar in July posted a 16 percent drop in total sales to $10.34 billion for the second quarter. Energy and transportation sales fell 20 percent to $3.750 billion as oil prices dropped.

    "While sales were down in almost all of our end markets, almost 80 percent of the decline was in oil and gas and transportation," Umpleby said.

    Brent crude futures LCOc1, the global oil price benchmark, traded at an average of $45 a barrel during the second quarter, down from an average $62 a barrel a year earlier and $107.23 in the second quarter in 2012.

    The most significant impact of the oil price decline is on the sale of reciprocating engines used for gas gathering, drilling, well servicing and production, Umpleby said.

    "If we look at the percentage drop, it is so significant, that there isn't that much room to fall, frankly," he said, referring to the engine sales.

    Demand for energy and transportation products is not expected to recover this year, Umpleby said. He added that recovery would only come when oil prices rise and stabilize and customers work through a backlog of equipment.

    In China, Caterpillar expects industry sales of excavators to be "about flat, maybe up a percent to 2 percent," Amy Campbell, Caterpillar's investor relations director, said in the webcast.

    "Total excavator sales in China are off maybe 80 percent from the peak but appeared to have maybe at least leveled out in 2016 versus 2015," Campbell said.
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    China's economic activity slows in July as reforms begin to bite

    "Although economic activity isn't very good, due to the need to continue to get rid of overcapacity, there's not a lot of room to ease," said Qu.

    The fixed-asset investment retreat was led by a 22.9 percent decline in mining, suggesting the government's goal of cutting production in older industrial sectors is working.

    Real estate investment growth slowed to 5.3 percent but remains elevated.

    The decelerating growth rate comes amid fears the country is accumulating too much debt at the local level.

    Growth in investment by state firms cooled to 21.8 percent in Jan-July, from 23.5 percent in Jan-June.

    Meanwhile, private investment grew 2.1 percent, compared with 2.8 percent in the first half, as investors remain wary about the growth outlook amid painful reforms in the state owned enterprise sector. Private investment accounts for about 60 percent of overall investment in China.

    Factory output rose 6.0 percent in July from a year earlier, below the 6.1 percent analysts had expected and consumption softened with retail sales growth easing to 10.2 percent after a rise of 10.6 percent the prior month.
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    Noble Group swings to second-quarter net loss, restructuring gathers pace

    Struggling Noble Group reported a second-quarter loss and said it will cut debt further as the commodities trader closed some of its low-return businesses to weather a brutal commodities downturn and regain investor confidence.

    "We continue to rationalize our businesses in order to focus on liquidity and to reallocate capital to the franchise businesses that offer strong immediate returns," the Singapore-listed company said in a statement on Thursday, adding that it expects to complete this restructuring by the end of the year.

    Revenue at the Hong Kong-based company fell 32 percent to $12.5 billion in the quarter ended June and it swung to a net loss of $54.9 million from a profit of $62.6 million a year ago.

    The quarterly results are the first after CEO Yusuf Alireza quit unexpectedly two months ago. In June, the company unveiled a $500 million cash call after finalizing a multi-billion dollar credit facility and said founder and Chairman Richard Elman would step down within 12 months.

    Noble's troubles started 18 months ago when its accounts were questioned by Iceberg Research, sparking a collapse in its share price and ratings agency downgrades, forcing a sale of its assets to allay financing worries and weather the commodities downturn.

    Noble said the sale process of its retail energy unit in North America was progressing well and is targeted to close in the next few months.
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    Glencore’s Coal, Copper Zinc Output Decline ferrochrome up

    Glencore Plc’s production of copper, coal and zinc fell in the second quarter after the commodities trader closed mines in response to a rout in prices that’s eroded profits.

    Zinc output slid 33 percent to 249,400 metric tons in the second quarter from a year earlier, the Baar, Switzerland-based company said in a statement on Thursday. Copper production declined 3 percent to 368,000 tons and coal output dropped 12 percent to 29.1 million tons.

    A slump in metal, coal and iron-ore prices has forced miners around the world to shutter unprofitable operations. Billionaire Chief Executive Officer Ivan Glasenberg has engineered a turnaround plan at Glencore by selling assets, reining in spending and cutting costs to help cut its debt which stood at about $30 billion at the start of last year. The stock has more than doubled in London this year after ending 2015 as the second-worst performer in the FTSE 100 Index.

    Glencore on Thursday guided higher 2016 ferrochrome and nickel production – the only two of its wide range of commodities that it expects to produce at levels higher than in 2015.

    Nickel output gained 18 percent to 29,500 tons in the period while lead production rose 6 percent 74,300 tons.

    The company increased its full-year estimate for copper output by about 20,000 tons to about 1.4 million tons due to a strong performance from its Collahuasi mine. It trimmed its coal prediction by 5 million tons to about 125 million tons. Its oil-production forecast was lowered by 200,000 barrels to about 8 million barrels after reducing output in Chad because of reduced prices.

    Glencore has previously said it will reduce copper output by about 7.5 percent this year and cut zinc supply by a quarter as it adopted a “disciplined approach” during periods of low prices.
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    China July PPI down 1.7pct on year

    China's Producer Price Index (PPI), which measures inflation at wholesale level, dropped 1.7% year on year but up 0.2% month on month in July, showed the latest data released by the National Bureau of Statistics (NBS) on August 9.

    It indicated that China's producer deflation eased to its slowest decline in nearly two years in July, a positive sign of improving conditions of the world's second largest economy.

    In July, prices of coal mining and washing industry fell 5.3% on year but up 0.6% on month; prices of oil and natural gas mining industry slid 15.9% on year but up 1.8% on month.

    Besides, prices of ferrous metal industry dropped 3.7% from the previous year but up 0.4% from June, data said.

    During the first seven months this year, China's PPI dropped 3.6% on average from the previous year.

    Of this, the average price of coal mining and washing industry fell 12.9% on year; while the price of oil and natural gas mining industry decreased 27.2% on year; price of ferrous metal industry dropped 10.4% from the previous year, data showed.

    The data came along with the release of the Consumer Price Index (CPI), which climbed 1.8% from the year prior and rose 0.2% on month in July.
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    UK Economy: Post brexit meltdown?

    Sharp Brexit slowdown in services sector signals recession, economists say.

    London and South East economy hit hardest by Brexit.

    Carney’s 'shot in the arm’ to ensure economy thrives in the 'new reality'

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    Egypt announces sharp rises in electricity prices as it aims to phase out subsidies

    Egypt will increase electricity prices by up to 40 percent for households as part of its plan to repair its finances by eliminating power subsidies entirely over the next few years, the government said on Monday.

    The latest price hikes range from 25 to 40 percent depending on consumption levels and will be applied retroactively from last month, the electricity ministry said in a statement.

    Cairo, which is in the midst of talks with the International Monetary Fund (IMF) to secure a $12 billion three-year loan programme, is trying to cut its budget deficit through a number of reforms. They include tax increases and a plan to wean the population off a decades-old subsidy regime that has often benefited the highest-earning households.

    Egypt began a five-year programme of price increases in 2014 to gradually eliminate domestic electricity subsidies.

    However, Electricity Minister Mohamed Shaker told a news conference on Monday that this year the government had raised prices more steeply than originally proposed, whilst reducing the burden on poorer households, because dwindling local production had forced the country to import more gas for power generation in recent years. A devaluation in the Egyptian pound had also made those imports more expensive, he said.

    The IMF has in the past urged Egypt to phase out its costly subsidies.

    Overconsumption of cheap electricity has in recent years exacerbated energy shortages and led to frequent power cuts in summer months.

    To ease the electricity shortages, Egypt signed an $8.9 billion deal with Siemens in June 2015 for three combined-cycle power plants with a capacity of 4,800 megawatts each as well as 12 wind farms.

    Some of the plants, which together are expected to boost electricity generation by 50 percent, are expected to go online in December this year and reach full capacity in May 2018.
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    China drafts new rules to curb mining pollution

    China plans to raise environmental standards in its highly-polluting mining sector, according to a policy draft circulated by the Ministry of Environmental Protection.

    Amid rising concerns about the state of its environment, China has declared war on polluters and has drawn up new laws, standards and punishments aimed at forcing firms and local governments to toe the line.

    The mining sector has been a crucial part of China's rapid economic expansion in the last three decades, but poor regulation and weak enforcement of standards has contaminated much of the country's soil and left parts of its land and water supplies unfit for human use, threatening public health.

    According to draft rules published on the website of the Ministry of Environmental Protection (MEP) ( late last week, miners will be forced to treat more than 85 percent of their wastewater, and they must put systems in place to achieve the "comprehensive utilization" of tailings and other solid waste.

    Firms will also be forced to implement measures to remediate land and minimize emissions while mines are still in operation, rather than treating soil and water long after it has been contaminated.

    Mining firms will also be pressured to implement measures to protect or even relocate valuable ecosystems. Producers of toxic heavy metals like lead or cadmium also need to make use of biological or chemical technologies to remediate contaminated soil.

    The new rules will cover metals such as tin, copper, lead and rare earths, as well as minerals like calcium carbonate, though they do not apply to the coal industry, which has separate guidelines.

    Other government bodies and state-owned mining firms like Jiangxi Copper and Yunnan Tin have been invited to submit their opinions on the draft rules before Aug. 25.

    As much as 16 percent of China's soil exceeds state pollution limits, according to environment ministry data published in 2015, and farming on 3.3 million hectares (8.15 million acres) of contaminated land across the country has been banned indefinitely.

    China published an action plan to treat soil pollution earlier this year, saying that it aimed to bring the problem under control by 2020.

    However, the cost of making China's contaminated land fit for crops or livestock could reach around 5 trillion yuan ($750 billion), according to Reuters calculations.
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    Negative Yielding Bonds at $12tn

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    Trump would freeze new federal regulations, revive Keystone -speech

    Trump would freeze new federal regulations, revive Keystone -speech

    Aug 8 Republican presidential candidate Donald Trump would impose a temporary moratorium on new federal regulations and revive Transcanada's Keystone pipeline project, according to an outline of an economic speech Monday obtained by Reuters.

    Trump's proposals include measures to simplify taxes for everyone and dramatically reduce the income tax and to "remove bureaucrats who only know how to kill jobs; replace them with experts who know how to create jobs," according to the outline.
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    Vedanta Resources aims to close merger with Cairn India in early 2017

    Mining and energy group  Vedanta Resources expects to complete its merger with Cairn India early next year, a move that would boost the firm's financial strength, Vedanta's CEO said on Friday.

    Vedanta is among the resource firms hit by a collapse in commodity prices and it is also facing legal action and activist protests over its operations in Zambia.

    In a speech to a London shareholders' meeting, CEO Tom Albanese said the rationale for the merger was compelling, which was why Vedanta announced improved terms in July.

    "The merger ... will contribute significantly to our overallfinancial strength, not least through a potential re-rating, which will lower our overall cost of capital," Albanese said, according to a copy of his speech.

    "We expect to close the transaction in the first quarter of 2017."

    The deal, which will give Vedanta access to oil and gasexplorer Cairn India's $3.5-billion cash pile, has faced opposition from some big minority shareholders, including British-based Cairn Energy, but Albanese said he did not foresee obstacles.

    Vedanta's debt to EBITDA ratio is 5.7 for 2016 compared with the level of around three analysts view as comfortable.

    Albanese told Reuters after the meeting that Vedanta had repaid close to $1.2-billion of bonds in the first quarter and had no further Vedanta Resources debt maturing until 2018.

    "We are committed to deleveraging the balance sheet," he said, citing a share price rally - the stock has almost doubled since the end of last year - as proof of market confidence.

    Albanese also predicted the commodity price slump has ended.

    "My own personal view is that for the first time in more than five years, most commodities will end this calendar year higher than they began the year," he said in his speech.

    To Reuters, he declined to comment on a case involving Vedanta's copper mining in Zambia because it is being litigated.

    Protesters, under the banner of the activist organisation Foil Vedanta, demonstrated at the shareholder meeting, chanting "shame, shame" and "looters, polluters" as executives walked in.

    In May, a high court judge decided that a claim could proceed in the English courts on behalf of 1 826 Zambian villagers seeking compensation following what they say is damage to their health and land caused by Konkola Copper Mines. Vedanta, which has a majority stake in Konkola, has appealed that decision and said Zambia is the appropriate jurisdiction. It expects to know the outcome of the appeal next year.
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    China's July exports, imports fall more than expected

    China's exports and imports fell more than expected in July in a rocky start to the third quarter, suggesting global demand remains weak in the aftermath of Britain's decision to leave the EU.

    Exports fell 4.4 percent from a year earlier, the General Administration of Customs said on Monday, while adding that it expects pressure on exports is likely to ease at the beginning of the fourth quarter.

    Imports fell 12.5 percent from a year earlier, the biggest decline since February, suggesting domestic demand remains sluggish despite a flurry of measures to stimulate growth.

    That resulted in a trade surplus of $52.31 billion in July, versus a $47.6 billion forecast and June's $48.11 billion.

    Economists polled by Reuters had expected trade to remain weak but show some signs of moderating.

    July exports had been expected to fall 3.0 percent, compared with a 4.8 percent decline in June, while imports were seen falling 7.0 percent, following June's drop of 8.4 percent.

    China's exports underwhelmed despite still-strong shipments of steel and oil products. China has come under fire from major trading partners accusing the country of dumping its excess industrial capacity in global markets.
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    China Southern Power Grid Jan-Jul power sales up 2.8pct on yr

    China Southern Power Grid, a state-owned company transmits and distributes electricity to China's five southern provinces, reported total power sales of 505.3 TWh over January-July, a year-on-year rise of 2.8%, compared with an increase of 1.9% a year ago, showed the latest data from the National Development & Reform Commission (NDRC).

    Of this, power consumption of Hainan and Guangdong rose 7% and 4.8% on year, compared with increases of 5.7% and 4% over January-June; Guangxi followed with power use climbing 1.2% on year.

    Yunnan and Guizhou posted declines of 2% and 0.9% in its power consumption in the first seven months, compared with drops of 1.6% and 1.6% in the first half of the year.

    In July, electricity sales of the company stood at 88.4 TWh, up 6.7% from the year-ago level.

    Hainan, Guangxi, Guangdong and Guizhou all saw climbing power use, with rises being 12.6%, 9.1%, 8.3% and 2.4%, respectively.

    Power consumption of Yunnan dropped 3.9% on year in July.
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    China's regions show big economic divergence as rustbelt suffers, cities prosper

    China's regional economies showed a marked divergence in performance in the first half of 2016, with provinces reliant on steel making and mining reporting weak or no growth but some larger cities thriving.

    The recently released provincial growth figures highlight growing imbalances in China as the government tries to restructure the economy from a dependence on heavy industry and exports to one that is powered more by domestic consumption.

    The northeastern steel-making province of Liaoning reported its economy shrank by 1 percent in the first half of 2016 from the same period the previous year, the only province in China to report a contraction.

    That was in sharp contrast to nationwide growth of 6.7 percent.

    Liaoning is one of the last of the country's 31 provinces to announce gross domestic product (GDP) data, which typically are published weeks after the national readings. Figures have yet to be released by highly industrialized Heilongjiang.

    Weighed down by the bloated steel industry, Liaoning province saw first-half fixed asset investment and real estate development investment shrink 58.1 percent and 31.5 percent, respectively, from a year earlier, an official from the province's bureau of statistics told Reuters.

    Provincial revenues slumped 18.6 percent.

    Industrial powerhouse Shanxi fared only slightly better, posting the lowest growth rate in the country. Its economy grew 3.4 percent in the first half, well below the province's annual target of 6 percent.

    The Shanxi bureau of statistics said that the coal-intensive province's efforts to reduce overcapacity have had "initial effects", saying first-half coal output dropped 14.4 percent.

    And conditions could get worse before they get better, with officials vowing to step up efforts to cut capacity in the second half of the year.

    "As overcapacity reductions will intensify in the second half of the year, we still see significant downside risk in the traditional manufacturing sector," economists at ANZ said in a research note this week.

    "While overall (economic) growth is projected to slow in the second half, we expect further divergence between the old and new economy," they added, noting the government may ramp up spending and tax and structural reforms in provinces which are most reliant on traditional heavy industries.

    Growth in more diversified urban areas generally was far stronger.

    The southwestern metropolis of Chongqing reported growth of 10.6 percent, the best in the country apart from the western region of Tibet.

    Chongqing posted double-digit growth in fixed asset investment and retail sales at 12.5 and 12.9 percent, respectively.

    Private investment grew 9.5 percent, making up more than half of total investment and diverging with national trends which have shown private investment growth shrinking to record lows.

    With a population of more than 30 million people, the municipality is one of central China's key transport hubs and has booming electronics, automobile and manufacturing sectors.

    Beijing and Shanghai grew 6.7 percent in the first half.

    China’s economy grew by a slightly more-than-expected 6.7 percent in the April-June quarter, aided by infrastructure spending, a housing boom and record bank lending, but cooling private investment is clouding the outlook and leaving growth more reliant on government spending and ever-rising debt.
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    Global debt to GNP outpaces economic activity.

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    Oil and Gas

    Rosneft announces second quarter and first half 2016 operating results

    Average daily hydrocarbon production 5.22 mmboe, a 0.2% increase compared to Q1 2016, with oil production growth by 0.5% to 4.11 mmbpd

     Development drilling grew by 48% in H1 2016 in accordance with the business plan

     Gas production was up by 7% to 33.23 bcm against to H1 2015 due to new capacity additions

     Refining throughput optimization with light product yield improvement to 55.8% in H1 2016


    Q2 2016 showed the upward trend in hydrocarbon production (0.2% growth vs. Q1 2016), despite the seasonal decline in gas consumption. Production level reached 5.21 mmboed in H1 2016, increasing by 0.7% vs. H1 2015.

    In 2Q 2016, the Company continued to intensify development drilling, having increased this indicator by 16% compared to Q1 2016 to 2.4 mn m. The footage of development drilling increased by 48% t? 4.5 million meters in H1 2016. In June 2016, a new record in daily drilling footage was set at all producing assets of the Company: 40,339 m, translating into record 1,010,684 m drilled throughout the month. New wells commissioning rose by more than 50% compared to H1 2015 to reach 1.2 thousand wells with the share of horizontal wells remaining at about 30% in accordance with the targets established for the year. The share of in-house services in the total drilling footage consistently exceeds 50%.

    Liquid hydrocarbon production in Q2 2016 increased by 0.5% vs. Q1 2016 up to 4.11 mmbpd. The key brownfield asset Yuganskneftegaz has shown an upward production trend (+1.5% vs. Q1 of 2016). There were also further improvements at the fields of RN-Severnaya Neft (+3.3%) and on the Sakhalin-1 project (+3.1%).

    In 2Q 2016, RN-Uvatneftegaz set a new record in the commercial drilling rate in mainland Russia. The 2,639 m deep well was drilled in 6.5 days. The previous record in commercial drilling rate that was also set at Uvat project in November 2015 was exceeded by 242 m/rig per month (+2%).

    In 2Q 2016, six new horizontal wells targeting BV8 (1-3) were commissioned at the Samotlor field with an average start-up flow rate of over 300 ktpd.

    The Company continues preparation for the commissioning of the Phase 1 of the Suzun field development scheduled for September 2016. In Q2 2016, construction approached the final stage, and pre-commissioning and start-up operations entered the active phase at all infrastructure facilities involved in the trial start-up process: 1st Start Up Complex of Oil Treatment Facility with capacity of 4.5 mmtpa and the pipeline from Suzun OTF to Vankor OTF, and infrastructure setup at 6 well pads.Preparation of the site for construction of a new 150 ?Wt gas-turbine power station Polyarnaya at the Vankor field was started in April 2016. A new power station will be using the existing infrastructure to satisfy the growing demand for electric power at the Vankor cluster fields - Suzun, ??gul and Lodochnoye fields, which are currently at different stages of development. Three 110 KV substations and 170 km of 110 KV electric power transmission lines will be built for this purpose.

    Gas production amounted to 33.23 bcm in H1 2016 , which is 6.9% higher than in H1 2015. Growth in gas production was driven by the launch and trial run of the 2nd stage of Novo-Urengoy gas and condensate treatment facility (Rospan) in Q4 2015 and the commissioning of a gas treatment unit at Barsukovskoe field (RN-Purneftegaz) in December 2015, and by development of the Northern Chaivo (RN-Shelf Dalny Vostok) in the Sakhalin shelf.

    Associated petroleum gas (APG) utilization level increased to 90% in H1 2016, compared to 87% in H1 2015.

    In H1 2016, over 2,400 km of onshore 2D seismic surveys, and over 4,800 of onshore 3D seismic surveys were acquired, exceeding the results of H1 2015 by 17% and 10% respectively. A total of 11 exploration and appraisal wells were tested with a success rate of 91%. 42 new deposits and 4 new fields were discovered with ABC1 + C2 reserves of about 35 mmtoe.

    In H1 2016, 2D and 3D seismic acquisition operations started at Albanovsky and Vostochno-Pribrezhny license blocks in the Barents Sea and the Sea of Okhotsk. Preparation is underway for the full-scale exploration in the license blocks of the Laptev Sea, East Siberia Sea, Chukchee Sea, Kara Sea, Barents Sea and the Black Sea, that will include 2D and 3D seismic surveys, airborne gravity and magnetic surveys, geochemical surveys, and site investigation surveys.

    Jointly with its strategic partner Statoil, the Company started drilling two exploration wells in Magadan-1 and Lisyanskiy areas of the Sea of Okhotsk under the carry financing arrangement. Modern drilling equipment prepared in a special way and upgraded, was employed for this purpose.

    In April 2016, Rosneft commenced the drilling of an extended-reach horizontal development well at Lebedyanskoye oil and gas condensate field in the continental shelf of the Sea of Okotsk. The well with the measured depth of over 5, 000 m was constructed and completed in July 2016 with the start-up flow rate over 400 kbpd. A total of three horizontal production wells with the length of 5, 000 to 7, 000 m are to be drilled within the project scope.

    Drilling operations carried out in the shelf of Vietnam from Hakuryu-5 semi-submersible drilling rig were completed in Q2 2016. Drilling operator is RN-Vietnam. PLDD well discovered Wild Orchid gas condensate field at Block 06.1. Volume of reserves and commercial attractiveness of the discovery are to be confirmed. There is a potential synergy, given the proximity of Lan Tay platform which is also operated by RN-Vietnam.

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    Petrobras Swings to Profit on Rising Crude Output, Exports

    A recovery in oil output and exports helped Petrobras reverse three quarters of straight losses as the Brazilian producer emerges from two years of graft investigations and falling crude prices.

    The rising production and shipments helped compensate for falling fuel demand amid Brazil’s ongoing recession, the company said in a filing Thursday. Petroleo Brasileiro SA, as the Rio de Janeiro-based producer is formally known, also reduced spending on offshore well interventions.

    "Petrobras is one of the very few companies in the world that has succeeded at increasing output even amid the oil downturn," Luana Siegfried, an equity research associate at Raymond James, said by phone from Houston.

    Petrobras is trying to emerge from the combination of a domestic recession, persistently low oil prices and a sweeping corruption scandal that has triggered a series of write-offs and a class-action lawsuit in the U.S. The company is pursuing spending cuts and is negotiating discounts with oil rig suppliers to help reduce debt.

    “Petrobras is becoming more predictable,” Chief Financial Officer Ivan Monteiro told reporters in Rio.

    Pedro Parente, who took over as chief executive officer on June 2, has made progress on a $15.1 billion divestment program designed to reduce the largest debt load in the industry. The producer’s debt surged during the commodities boom because the company was selling imported fuel at a loss to help the government control inflation, and invested heavily in unprofitable refineries. Reducing debt through partnerships and asset sales is one of the company’s biggest challenges, Parente said on Aug. 3.

    The producer reported a second-quarter profit of 370 million reais ($118 million), compared with 531 million reais a year earlier, according to the filing. The state-controlled oil company posted 20.3 billion reais in adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda. That was in line with the 21 billion-real average of four analyst estimates compiled by Bloomberg.

    Petrobras booked a 1.2 billion-real impairment after reviewing its Comperj refinery project. A voluntary dismissal program cost another 1.2 billion reais during the quarter, and the company also accounted for some licenses it returned to the oil regulator. Those charges were the reasons why the producer’s net income missed some forecasts, Monteiro said.

    "These three non recurrent items explain the difference between what analysts expected and the company’s results," Monteiro said.

    Potential buyers have expressed growing interest in assets Petrobras plans to sell, including the propane unit Liquigas Distribuidora SA and BR Distribuidora, a fuel distribution unit, Monteiro said. The company continues to hold talks with Brookfield Asset Management Inc. to sell a stake in the Nova Transportadora do Sudeste SA pipeline network, he said.

    Petrobras is sticking to its divestment target and has already agreed to sell almost $4.6 billion assets in Argentina, Chile and Brazil, including a majority stake in the Carcara offshore oil field to Statoil ASA for $2.5 billion. The company plans to release a new strategic plan in September.
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    Wood Group, trade unions suspend strikes on Shell's North Sea platforms

    Wood Group and trade unions Unite and RMT have agreed to suspend strikes announced on Tuesday and restart the process to resolve a dispute over pay cuts and working conditions for Wood Group workers employed on Shell's North Sea oil and gas platforms.

    The trade unions said they had planned strikes by workers of Wood Group, an energy services company, on Curlew, Brent Alpha, Brent Bravo, Nelson, Gannet, Shearwater, Brent Charlie platforms starting Aug. 15 through Sept. 3.

    A Shell spokesman said the company encourages Wood Group's employees and management to continue their discussions in an effort to reach agreement.

    Hundreds of maintenance workers on North Sea platforms had started a 48-hour strike over a pay dispute but field production or maintenance schedules were not affected, Shell said on Aug. 4.

    As many as 120,000 oil workers are expected to have lost their jobs by the end of this year in an industry-wide clampdown on costs as weak oil prices have reduced profits.
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    Heatwaves and low prices tighten U.S. gas market

    Unusually hot weather coupled with cheap fuel prices caused U.S. power producers to burn a record volume of gas last month to meet soaring demand for electricity for airconditioning.

    April and May were cooler than normal across the continental United States, depressing airconditioning demand, but June and July were both much hotter than usual ( and

    The result is that power producers’ gas consumption has surged during June and July and the volume of gas put into storage has been much lower than usual for the time of year (

    The particularly intense heatwave during the second half of July sent daily gas burn surging to a record and resulted in a highly unusual summer-time drawdown in gas stocks in the week ending on July 29.

    Over the last week, temperatures have been close to normal. But another heatwave is starting and is expected to persist through the rest of the week, driving up gas consumption again (

    According to the U.S. Energy Information Administration, U.S. power producers generated 4,950 gigawatt-hours from gas-fired units in July, an increase of 9 percent from the previous record set in July 2015.

    Power plants consumed an estimated 36.8 billion cubic feet of gas per day in July, up 8 percent compared with the same month in 2015 (“Short-Term Energy Outlook”, EIA, Aug 2016).

    The record gas burn reflects a combination of a structural shift (coal-fired power stations are being phased out in favor of cleaner burning gas units), weather (temperatures were well above normal in June and July) and fuel prices (gas is currently competitive with other sources of generation).

    Gas-fired generation has been increasing since the late 1980s because gas units are quicker and cheaper to build, offer more operational flexibility, and have fewer environmental problems.

    Gas-fired plants accounted for almost 33 percent of all utility-scale power production in 2015, up from 28 percent in 2014 and 20 percent in 2006, according to the Energy Information Administration.

    Because of their greater operational flexibility, gas-fired plants are used to meet marginal electricity demand in summer when consumption peaks as temperatures rise and airconditioners crank up.

    In most years, electricity consumption peaks in July or August, when temperatures are normally highest, and July and August are also the months when power producers burn most gas.

    Power producers’ gas combustion is therefore closely tied to average temperatures and July 2016 was one of the hottest on record (

    Low fuel prices accelerated the shift toward gas during the first half of 2016.

    For much of the first half of the year, gas prices were among the lowest for more than a decade, encouraging maximum gas use.

    Low gas prices have also caused gas production to plateau after strong growth in 2014/15 ("U.S. gas prices must rise to rebalance the market", Reuters, Jul 15).

    Record gas combustion by power producers has helped draw down the large volume of natural gas stocks which built up during 2015 and the first few months of 2016.

    Gas stockpiles remain at a record level for the time of year but have been building more slowly than usual and the year-on-year surplus has been shrinking consistently since April.

    Gas stocks are now just 378 billion cubic feet (13 percent) higher than at the corresponding point in 2015, down from a surplus of 1,014 billion cubic feet (69 percent) in March
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    SailingStone Capital Buys 11% of Range Stock, Gets Board Seat

    Investment firm SailingStone Capital Partners recently purchased enough stock that the firm now owns 11% of Range Resources.

    That’s more than enough to exert great power and control. And so they have. That 11% stake in the company has “encouraged” (forced?) Range to grant SailingStone a seat on the board of directors.

    We were, at first, concerned. Is this yet another corporate raider out to force a company (Range) to layoff employees and sell assets in a bid to force the stock price higher so they can dump it and make a big profit? We don’t think so.

    We find no evidence that SailingStone is anything other than an investor with a lot of money who likes what they see in Range.
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    WellDog Launches Shale SweetSpotter After Successful Marcellus Test

    WellDog (what a great name!) announced on Monday the launch of a new service called Shale SweetSpotter (another great name!).

    Clever marketing folks at WellDog, we’ll grant them that. Shale SweetSpotter is “the first commercial reservoir-evaluation analysis technology specific to unconventional natural gas.” In English please!

    “We’ve just developed a way to tell drillers where oil and gas is locked away in shale layers in the acreage they’ve leased.”

    Apparently it’s pretty darned good. WellDog partnered up with Shell to test their service in the Marcellus and the field trials were declared “successful”…
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    Iraq agrees deals with BP and Shell to restart shelved projects, report says

    Iraq and a group of major oil companies includingBP and Royal Dutch Shell have agreed to resume production of several development projects in the country that had been mothballed due to low oil prices, reports revealed on Thursday.

    Iraq oil officials have come to agreements with BP, Shell and Russia's Lukoil to restart investing in oil field developments that are expected to see crude production increase next year, Reuters reported.

    The Iraqi officials suggested the country's crude output should increase by 250,000-350,000 barrels per day (bpd) in 2017 from the current 4.6m bpd, adding to existing oversupply concerns.

    On Thursday oil prices were on the slide again, while the market continued to digest the US Energy Information Administration revised its outlook for US crude production higher.

    West Texas Intermediate crude was 0.4% lower to $41.54 per barrel and Brent was at $43.99.

    Oil prices have recently entered what analysts atRBC Capital Markets called "a sort of bear trap", as despite daily global supply nearing the point where its overhang turns to a deficit, "a deluge of bearish headlines has kept the market on its heels".

    2016 has seen the 'fragile five' sovereign producers - Iraq, Algeria, Nigeria, Libya, and Venezuela - struggle, while traders worry that Nigeria and Libya will soon add to the oversupply.

    RBC believes the most significant bearish risks are overdone or have already been largely priced in.

    "We maintain our conviction that oil prices will grind higher through the balance of this year and into next (even if choppy in the near term), barring a significant deterioration in the 'macroverse'," analysts wrote on Wednesday.

    "In our view, investors should remain cognizant of the distress remaining across much of OPEC (namely Nigeria and Libya) and should side-step the numerous bear traps lurking in the market."

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    Time to Pay Attention to What Oil Dudes Call ‘Other’: Chart

    Image title 

    The U.S. Energy Information Administration reported another overall expansion in oil stockpiles in the week to Aug. 5. The culprit: Crude oil? Gasoline? Diesel? Not this time: all the big growth was in the category called ‘other’. While total oil and product inventories grew by 2.5 million barrels, those in the ‘other’ grouping -- stuff like vacuum gasoil, natural gas liquids and blending components -- expanded by 3.6 million barrels to a record.

    Attached Files
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    Militants blow up Nigeria pipeline, Chevron protest goes on

    Militants blew up another crude pipeline in Nigeria's Niger Delta, a youth and protest leader said on Thursday.

    Protesters also continued to block the entrance to a Chevron oil depot in the restive southern region for a third day.

    On Wednesday, a previously unknown group called Delta Greenland Justice Mandate said it had attacked a crude pipeline belonging to state oil firm NNPC and local firm Shoreline Natural Resources in Urhobo in Delta state.

    "It is true but I don't have details yet," said Collins Edema, a youth leader. He said the pipeline was on fire, but Reuters was unable to confirm this and it was not immediately possible to get more details.

    He also said protesters, mostly unemployed youths, were continuing a demonstration started on Tuesday at the gate of a Chevron oil depot to demand jobs and housing, claiming the facility had destroyed their settlement.

    "Our protest is going on peacefully today on Thursday. Our community workers inside the tank farm have joined the protest as we speak," Edema said.

    "Nobody is going in and out of the facility since we've started but Chevron has airlifted their senior staff from there," he said, a claim Reuters could not verify.

    Chevron confirmed a protest had taken place but did not say whether oil production had been affected.

    Edema said the protesters might shut down Chevron's crude flow in Abiteye, Jones Creek and other operations in the area if the company does not agree to their demands.

    Communities in Nigeria's southern swampland often complain about oil pollution and houses being moved to make way for drilling. They also say they live in poverty despite sitting on much of Nigeria's oil wealth. The Niger Delta region has been hit by a wave of militant attacks on oil and gas pipelines, reducing Nigeria's crude output by 700,000 barrels a day, according to state oil company NNPC. The militants, which are splintered in many groups, say they want a greater share of Nigeria's oil wealth - which accounts for around 70 percent of national income - to be passed on to communities in the impoverished region and for areas blighted by oil spills to be cleaned up.
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    Canada's Crescent Point posts smaller loss as costs fall

    Crescent Point Energy Corp reported a smaller quarterly loss as Canadian oil and gas producer cut costs.

    Oil and gas producers, faced with prolonged weakness in crude prices, have been slashing dividend, curbing capital spending and scaling back drilling activity.

    Crescent said on Thursday its cost reduction initiatives helped lower "transportation and hauling, chemical, labor and service costs, as well as logistics around maintenance."

    Operating costs totaled C$331 million ($254 million) in the first half of 2016, about C$40 million lower than its estimate.

    Crescent said it expected average operating expenses to be about C$11.40 per barrel of oil equivalent (boe) for 2016, about 85 Canadian cents lower than the original estimate.

    Crescent maintained its full-year capital budget of C$950 million and production forecast of 165,000 barrels of oil equivalent per day (boepd). It said it would revisit the numbers in the second half of the year.

    The company has hedged 45 percent of its oil production for the rest of the year and 29 percent for the first half of 2017, taking advantage of recent rise in oil prices.

    U.S. benchmark oil prices have shot up nearly 60 percent since they touched a 12-year low of $26 in February.

    The Calgary-based company's net loss narrowed to C$226.1 million, or 45 Canadian cents per share, in the second quarter ended June 30 from C$240.5 million, or 53 Canadian cents per share, a year earlier.

    Production rose 10.3 percent to 167,218 boepd.

    However, funds flow, a measure of the company's ability to fund new drilling, fell by nearly a quarter to C$404.4 million due to lower oil prices.
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    Oil Shorts at decade high.

    Hedge funds have gone all-in on lower oil prices, counting on seasonal weakness to play out again this year.

    Money managers increased wagers on declining crude prices to a record as futures dropped to the lowest in more than three months. U.S. crude inventories climbed for a second week as imports arrived at the fastest pace since 2012. The supply gain comes on the cusp of seasonal refinery maintenance that will curb crude demand. Futures have declined in each of the past five Septembers.

    "We’re are entering a period of seasonal maintenance, which should put some downward pressure on prices," said Scott Roberts, co-head of high yield investments and manager of $2.7 billion at Invesco Advisers Inc. in Atlanta. 

    Hedge funds increased their short position in West Texas Intermediate crude to 218,623 futures and options combined during the week ended Aug. 2, the highest in data going back to 2006, according to the Commodity Futures Trading Commission. 

    WTI closed 22 percent below its June peak on Aug. 1, meeting the common definition of a bear market. It dropped 7.9 percent to $39.51 a barrel in the report week. Prices climbed 2.9 percent to close at $43.02 on Monday.

    U.S. crude supplies rose to 522.5 million barrels as of July 29, the highest seasonal level in decades, Energy Information Administration data show. Imports climbed to 8.74 million barrels a day, the most since October 2012.

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    Diesel oil leaks from grounded rig’s fuel tanks

    Two fuel tanks on the grounded semi-submersible rig Transocean Winner have been breached and it remains unclear how much oil has leaked into the environment.

    To remind, the Transocean Winner drilling rig ran aground near a beach in the Isle of Lewis in the UK after having been struck by severe storms early this week. Following the incident, the coast guardwarned people not to attempt to visit the area.

    A damage assessment team from Smit Salvage and Transocean has been on board the oil rig to carry out a series of initial inspections.

    According to a statement by the Maritime and Coastguard Agency (MCA) on Wednesday, the damage assessment team spent three and a half hours checking the condition of the Transocean Winner looking at its structural integrity.

    The rig remains in the original position and was reported to be carrying 280 metric tons of diesel oil on board in total split between a number of separate tanks. During the inspection, the MCA said that the salvors discovered that two of the fuel tanks appear to have been breached. However, it is unclear at this time how much oil from those tanks has been released to the environment.

    “Weather conditions have made it impossible for the team to continue the assessment today,” the Maritime and Coastguard Agency (MCA) said on Wednesday.

    Additional salvors and technical experts from Transocean and also equipment continues to arrive to the incident area to support the operation the MCA said and added that a temporary exclusion zone of 300metres to keep boats away remains in force.

    The tug Union Bear remains in the vicinity along with the ETV Herakles to support the operation.

    The MCA concluded that Hugh Shaw, the Secretary of State’s representative for maritime and salvage continues to monitor the operations and is maintaining touch with all the key stakeholders, including Transocean, Smit Salvage, the Scottish Environment Group and Western Isles Council.
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    Japan's Tepco steps up LPG procurement to meet summer power demand

    Japan's Tepco Fuel & Power is stepping up LPG procurement for thermal power generation to meet peak summer power demand over July-August, sources familiar with the matter said this week.

    Tepco Fuel & Power, a unit of Tokyo Electric Power Company Holdings, bought a few LPG cargoes in July, marking the first procurement of the fuel in fiscal 2016-2017 (April-March), sources said.

    Traders said the utility was likely to have bought two to three cargoes of LPG for delivery in July, with a propane/butane mix of either 60:40 or 50:50.

    For August, Tepco Fuel & Power had bought a half cargo of 21,000 mt of propane so far, a trader said.

    This could not be confirmed with the company, however, and price details were not available.

    It was unclear if the utility will buy any more cargoes for August.

    The company also hiked its consumption of crude oil and fuel oil for thermal power generation in July as a result of higher summer temperatures, sources said.

    "Tepco buys LPG during the summer because LPG prices [are] traditionally low during this time," a market source said.

    The price of physical propane on a CFR Singapore-Japan basis fell to a record low of $271.50/mt on July 29, S&P Global Platts data showed.

    This was the lowest level since October 2006, when Platts first started assessing propane prices.

    The price has since rebounded slightly to be assessed at $282.50/mt Monday on the back of an uptick in the crude complex.

    Despite demand from Japan for power generation, the LPG market is still largely bearish amid ample supply from the US and the Middle East, including an increase in exports from Iran.

    Demand from petrochemical producers has been largely lackluster amid high inventories in North Asia and some steam cracker scheduled to carry out maintenance.

    Tepco Fuel & Power typically uses fuel oil and LPG for thermal power generation to meet power demand during peak hours.

    It typically makes prompt purchases of LPG from domestic suppliers when demand for power generation rises.

    Its increased LPG buying follows a spike in fuel oil demand for thermal power generation, which surged by 22% from a year ago to 670,000 kiloliters (135,941 b/d) in July mainly due to the hot weather and glitches at coal- and gas-fired power plants, as estimated by Japan's largest refiner JX Nippon Oil & Energy.

    A trader said earlier that Japan's fuel oil demand in July was three times more than what was expected for the month.
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    OPEC Says Weak Oil Demand Is Here to Stay

    Weakness in global oil markets, which has dragged prices to a three-month low, may persist as demand slows seasonally and fuel inventories remain abundant, OPEC predicted.

    There are “lingering concerns” that U.S. and European refiners may reduce processing rates as profits fade amid a continuing “overhang” of crude and refined fuels, the Organization of Petroleum Exporting Countries said in its monthly report. Gasoline consumption will taper off in the U.S. with the end of the summer-vacation driving season, it said.

    “With the end of the driving season in the third quarter, gasoline demand could see a seasonal downward correction,” the organization’s Vienna-based research department said. High inventories of heating oil and diesel fuel around the world mean “the supply side could also continue exerting pressure,” it said.

    Oil’s recovery from the 12-year lows reached in January sputtered out in early June amid plentiful stockpiles, faltering demand growth and signs that U.S. explorers could resume drilling. OPEC, which is sticking with a strategy to maximize its market share and let prices sag, said Monday it will hold informal talks on the sidelines of a conference in Algiers next month.

    Weaker Margins

    Brent futures traded at $44.92 a barrel on the ICE Futures Europe exchange at 12:09 p.m. in London, having sunk to $41.51 on Aug. 2, the lowest intraday price since April 18.

    “Refining margins have been weakening during the last month due to high product inventories, which were caused by the lower-than-expected increase in demand,” according to the report.

    The re-balancing of world markets will resume towards the end of the year, according to OPEC. Consumption will pick up in the Northern Hemisphere as winter approaches, reversing some of the discount on oil prices for immediate delivery and whittling away the excess in inventories, OPEC forecast.

    Production from OPEC’s members increased by 46,400 barrels a day to 33.106 million a day in July, according to external sources compiled by OPEC. That’s in line with the level the group expects will be needed in the third quarter. OPEC included Gabon, which became its 14th member on July 1, in both June and July production totals.

    Production from Saudi Arabia, the group’s biggest member, was mostly stable at 10.477 million barrels a day in July, according to the external sources. The report also includes production data reported directly by member countries, which showed Saudi output rising by 123,000 barrels a day to 10.673 million a day. Iraq’s direct submission showed its output rising by 57,000 barrels a day last month to 4.606 million a day.

    OPEC kept estimates for global supply and demand this year and next mostly unchanged from last month’s report.
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    Refiners on track to spend record on U.S. clean fuel standards

    Major refiners like Valero Energy Corp are on track to pay record amounts this year for credits to comply with U.S. renewable fuel rules, corporate filings show, a trend that hurts profits and has some looking to export more to avoid the cost.

    Refiners and fuel importers are required to meet a U.S. biofuel quota of roughly 10 percent through blending products like ethanol into gasoline and diesel. If they fall short, they can buy credits generated by companies in compliance. But the cost of the credits, known as Renewable Identification Numbers (RINs), has jumped.

    The rising costs have hurt a sector already struggling with huge global fuel stockpiles. The S&P 1500 index of refining and marketing companies has fallen 18 percent so far in 2016, compared with a 6.5 percent gain for the broader market.

    In the first half of 2016, a collection of 10 refinery owners including Marathon Petroleum Corp, spent at least $1.1 billion buying RINs, a Reuters review of their filings showed. This puts them on track to surpass the annual record of $1.3 billion the same group spent in 2013.

    Refinery executives sharply criticized the regulations during recent earnings calls, saying the burden helped bring about the weakest profits in five years.

    "RINs continue to be an egregious tax on our business and have become our single largest operating expense, exceeding labor, maintenance and energy costs," CVR Refining Chief Executive Jack Lipinski said last month.

    Marathon Chief Executive Gary Heminger said on a call last month that demand for RINs are going to outpace supply and the company wanted to see renewable fuel standards eased.

    Refiners without blending or retail outlets, such as Delta Air Lines and CVR, have to buy a greater percentage of RINs because they don't create their own. Delta is part of a refiner group challenging fuel standards through the courts.

    Supporters of the existing policy, including the influential corn lobby, said the regulations have produced the desired effect: more renewable fuels in the nation's gasoline and diesel. They noted refiners can avoid the cost of RINs by investing in blending operations.

    "Companies that refuse to blend more renewable fuel will end up paying a premium to other market participants, including speculators, but this is a choice," said Emily Skor, CEO of Growth Energy, which represents ethanol producers.

    Renewable fuel credits averaged about 78 cents apiece in the second quarter, about 25 percent above the same period a year ago, according to Oil Price Information Service data analyzed by Reuters.

    Prices for the credits have rallied on more ambitious targets from U.S. regulators on the volumes of ethanol required to be blended with gasoline, traders and industry sources said.

    The price of credits has fuel makers like PBF Energy Inc and Valero looking to increase exports, which are not subject to the regulations, as a way to escape the costs.

    PBF Chief Executive Thomas Nimbley said on an earnings call last month that it was "very important" that they expand their refined product export operations, citing RINs as a driver.

    Refiners are also lobbying to shift the responsibility of compliance from their industry to blenders and distributors who mix gasoline with ethanol for delivery to filling stations.
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    Chesapeake to sell Barnett land, renegotiate Williams contract

    Chesapeake Energy Corp said on Wednesday that it would sell its Barnett shale acreage in Texas to private equity-backed Saddle Barnett Resources LLC and had renegotiated an expensive pipeline contract with Williams Partners LP , steps that should save more than $1.9 billion in future liabilities.

    Wall Street cheered the news, and shares of Chesapeake rose 5.6 percent to $5.07 in after-hours trading.

    As part of the deals, Chesapeake said it would convey to Saddle, owned by private equity firm First Reserve, its roughly 215,000 acres in the Barnett, which also includes about 2,800 operated wells.

    Chesapeake also exited transportation contracts with Williams, saving $1.9 billion over the life of the contracts. Chesapeake is paying Williams more than $334 million to cancel the contract, with First Reserve set to pay an additional, undisclosed amount.

    The new contract with Saddle eliminates the expensive methodology that the Chesapeake contract was based upon, and instead will use spot natural gas prices to determine transportation costs.

    Because of the expensive contract, Chesapeake had found it expensive to drill in the Barnett in recent years.

    Both transactions should save Chesapeake at least $250 million in gathering, processing and transportation costs this year and $465 million next year, the company said.

    Chesapeake also renegotiated gas transportation contracts for other mid-continental shale plays with rates 36 percent lower starting July 2016.

    The company also cut its average daily production rate to 611,000-638,000 barrels from 625,000- 650,000 barrels.
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    The #1 Efficiency Gains in Energy Come From…Sand?

    It’s clear from comments on Q2 conference calls in the last week that North American producers ARE getting more efficient—lowering costs—in producing tight oil, or shale oil.  And they don’t think they’ve hit their limits yet.

    The high tech reason for these improvements? Simple sand.  It is stunning to me how much more sand is getting used in tight oil and gas wells.

    Here’s a chart from US Silica (SLCA-NYSE) on what it takes to frack a single well now:

    Image titleAnd here is another visual from energy boutique brokerage firm Tudor Pickering & Holt on where they think frac sand use is going next year in the Permian basin of SW Texas:

    Image titleThey have a near identical chart for the western Delaware basin of the Permian.

    Cimarex (XEC-NYSE) said on their Q2 call on Thursday Aug. 4 that they increased their sand or “proppant” use by 92% to 2400 pounds every linear foot of a 10,000 foot horizontal in a Lower Wolfcamp formation well in Culberson County and increased production 36%.  Here’s a slide that shows how much more sand they use now just over the last 18 months:

    Image titleHere’s what Devon Energy (DVN-NYSE) said in their Q2 call last week:

    “John P. Herrlin – SG Americas Securities LLC
    …with the STACK and also the Woodford, you’re putting in a lot more sand. Do you have any sense of what you think the economic limit is for how much profit you can put in?

    Tony D. Vaughn – Chief Operating Officer

    I can give you a little bit of a feel. I’ll remind us of the experience that we had in, I believe it was mid-2014 when we started increasing the sand loads in our Delaware completions and we really ran up to – from about 600 pounds per lateral foot in early 2014 up to about 3,000 pounds per lateral foot through 2015…We think we can get the most commercial returns in the current business environment done at about 1,500 to 2,000

    “..And then if you move over into the Anadarko Basin, we’re using a slick water job in our Woodford type work, and we continue to increase our proppant loads there. So we’re up to about 2,000 pounds per lateral foot. And after drilling and completing over 800 wells, this last large pad that we brought on had the best results that we’ve ever had in the Cana-Woodford play.

    “As we think about the STACK play right now… we are increasing our sand loads there up to about 2,600 to 2,750 pounds per lateral foot and enjoying increasing success there.” (Courtesy of

    Chesapeake (CHK-NYSE)—never a company to do things in a small way—has the biggest frack I’ve heard of so far.  They put more than 30 million pounds into a Haynesville shale—and the CEO Robert Lawlor said on the Friday Aug. 5 conference call that more sand is so good, he calls drilling now “proppant-geddon’:

    The results have been very impressive, with the restricted initial rate of 38 MMcf/d and a flowing pressure of approximately 7,500 psi,” Lawler said. “We call this new era in completion technology, ‘proppant-geddon.’

    “We’ve not yet reached the point of diminishing returns in the Haynesville, and we plan additional tests up to 50 million pounds in the back half of the year.”

    No wonder the stock of US Silica has gone from $16-$40 this year—and stayed there.

    There’s a couple points here for investors.  Data on how much oil and gas producers are getting per 1000 feet is not easy to come by.  But several presentations are now showing over 3bcf/1000 feet for natural gas—that’s very impressive.

    And I am reading regularly that stretching laterals from 1.5 – 2.0 miles only costs an extra 20%, to get 50% more production.

    The point is—economies of scale are absolutely creating lower costs per barrel.  And producers would not be increasing sand use 40% if that wasn’t happening.

    Second, not only is an incredible amount of sand being used now, the mix in sand is changing.  The Market at first used mostly coarse sand, but is now using a finer mesh.  And because margins are being squeezed everywhere, producers are finding this method cheaper.

    “All the operators are using the slick water completion method,” says Rasool Mohammad, CEO of Select Sands (SNS-TSXv), which is developing a sand deposit in Oklahoma.  “This is cheaper than the cross gel which uses expensive frack fluids. And the slick water primarily uses finer grade sands, 40-70 and 100 mesh.”

    Mohammad—who is actually selling sand to industrial users outside of energy—says the coarse sand actually does do a better job in the long run, but right now cheaper costs are the most important factor for producers.

    That cost cutting is causing the industry—and that means producers, specialty frac sand suppliers like US Silica and the big service companies like Halliburton & Schlumberger etc.—to start looking at regional sand deposits in the southern US.  Traditionally, very high quality white sand, mostly from Wisconsin, has been used.

    But transport costs can be high, and companies like US Silica are now buying brown sand deposits closer to Texas, where it looks like the Permian will be the most active light oil basin in North America.

    Mohammad’s sand has all the technical and logistical wants by the majors, and he is hopeful to land his first energy sales contract this fall.

    The Market is convinced there will be no more price concessions by sand suppliers, and Mohammad believes there may even be a shortage of the finer sand like the one in his deposit by Q1 2017.  The industry has built and relied on the white coarser sand for the last 7 years of the Shale Revolution; this finer part of the market has been ignored and now is suddenly in high demand.

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    Summary of Weekly Petroleum Data for the Week Ending August 5, 2016

    U.S. crude oil refinery inputs averaged 16.6 million barrels per day during the week ending August 5, 2016, 255,000 barrels per day less than the previous week’s average. Refineries operated at 92.2% of their operable capacity last week. Gasoline production increased last week, averaging 10.1 million barrels per day. Distillate fuel production decreased last week, averaging over 4.7 million barrels per day.

    U.S. crude oil imports averaged 8.4 million barrels per day last week, down by 334,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 8.4 million barrels per day, 11.5% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 930,000 barrels per day. Distillate fuel imports averaged 184,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.1 million barrels from the previous week. At 523.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.8 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 2.0 million barrels last week but are near the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.0 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 2.5 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.8 million barrels per day, up by 1.9% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.8 million barrels per day, up by 1.7% from the same period last year. Distillate fuel product supplied averaged over 3.8 million barrels per day over the last four weeks, up by 2.4% from the same period last year. Jet fuel product supplied is up 4.8% compared to the same four-week period last year.

    Cushing inventories up 1.2 mln bbl
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    US oil production in small fall

                                                   Last Week   Week Before  Last Year

    Domestic Production '000.......... 8,445             8,460           9,395    
    Alaska .........................................  425                427              471
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    Japan's Jera plans 42 percent cut in long-term LNG contracts by 2030

    Japan's Jera Co, the world's biggest importer of liquefied natural gas (LNG), is planning to cut the amount of gas it buys under long-term contracts by 42 percent by 2030 from current levels, the company's president told Reuters.

    The company now buys 34.5 million tonnes per annum (mtpa) of LNG under contracts for 10 years or longer. By 2030, that will drop to about 20 million mtpa, President Yuji Kakimi said.

    Jera will take this step to prepare for the liberalization of the Japanese electric market that has clouded the outlook for LNG purchases by the country's utilities, said Kakimi. Future LNG consumption may also be limited by nuclear power plant restarts and the installation of renewable generation such as solar power.

    The company's cuts in long-term purchase puts question marks over planned large-scale, multi-billion dollar LNG production projects, which rely on long-term contracts to gain financing. Asian LNG markets are also suffering through a 72 percent slump in prices since February 2014.

    Jera, a joint venture between Tokyo Electric Power and Chubu Electric Power, takes in 40 mtpa of LNG.

    The company's long-term contracts start expiring in 2018 and more than 10 mtpa will conclude by the early 2020s. Kakimi said the company has no plan to sign new pacts for the foreseeable future.

    To offset the decline as the long-term contracts expire, Jera will sign long-term agreements for about 5 mtpa of LNG to stay at the 20 mtpa level, he said.

    Japan's retail electricity reform that started in April, which ended regional monopolies, has thrown future power sales into doubt and forces utilities to reduce long-term contracts to cover the minimum essential requirements, he said.

    "The power generators cannot have fuel for 20 years without having long-term power sales contracts," he said. "The long-term portion will decline rapidly with the progress of liberalization like in Europe."

    Japan, the world's biggest LNG buyer, will see imports decline to 62 million tonnes in 2030, from a record 88.5 million tonnes in 2014 because of a shift to nuclear power as plants restart and more renewable energy is added to the grid, the country's government has forecast.

    Jera, which buys about half of Japan's LNG imports, sees its annual LNG trading volume, or the amount it consumes plus resale cargoes, in 2030 to be closer to the low end of its projected 30 to 40 mtpa range, Kakimi said.

    He said that Jera would be burning about 28 mtpa of LNG a year by 2030, based on the government projections of 62 million tonnes of imports.

    Jera's trading volumes would rise toward 40 mtpa if its joint venture companies' nuclear plants did not resume operations as projected, he said.

    At 40 mtpa of trading volumes, long-term contracts would remain unchanged at about 20 mtpa, with medium- and short-term contracts at 10 mtpa, and the remaining 10 mtpa as spot volumes, he said.

    "There is an absolute amount of electricity that we would like to produce using LNG and 20 million tonnes is the essential volumes that we are sure of," he said.
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    Gazprom First-Quarter Net Falls 5.2% Amid Gas-Price Decline

    Gazprom PJSC, the world’s biggest natural gas producer, said first-quarter profit decreased 5.2 percent as expenses climbed amid lower prices for the fuel.

    Net income fell to 362 billion rubles ($5.6 billion) from 382 billion rubles in the first quarter of last year, the Moscow-based company said in a statement. That compares with an estimated 363 billion rubles, according to a Bloomberg survey of analysts. Revenue rose 5.4 percent to 1.74 trillion rubles.

    Gazprom is struggling as oil’s slump weighs on export prices for its gas, which are linked to crude under some contracts. The company’s average June export price was the lowest since 2007, according to Bloomberg calculations based on Russian customs data. Gazprom may lower its production to a record this year as demand slows in Russia and Ukraine, according to Russian government estimates in July.

    “The drop in export prices will continue,” Kirill Tachennikov, an oil and gas analyst at BCS Financial Group, said by e-mail. “Given that the contract price was close to spot, Gazprom’s market share remained almost the same and is unlikely to change significantly going forward.”

    Average prices to Europe and Turkey fell 34 percent compared with the same period the previous year to $187.50 per thousand cubic meters, Gazprom said. The state-controlled company has responded by boosting exports to its most lucrative market. Volumes jumped 49 percent to 58.1 billion cubic meters, pushing gross sales to 815 billion rubles, according to the company.

    ‘Challenging’ Times

    Even with the first-quarter increase in exports, dollar-denominated revenue from the region may drop this year to the lowest since 2005 as most contracts are linked to oil with a time lag of as much as nine months.

    The Russian producer, which supplies about 30 percent of Europe’s gas, faces “challenging” times until at least 2018 amid weak export prices, slated spending on pipelines to China and the European Union and increased domestic competition, S&P Global Ratings said last month.

    Operating expenses jumped 24 percent in the first quarter, driven by a change in gas-purchase costs relating to the completion of an asset swap with BASF SE’s Wintershall unit that gave the Russian gas producer control over European trading and storage units, the company said.

    Earnings before interest, taxes, depreciation and amortization dropped to 444 billion rubles as prices declined, Kirill Tachennikov, an oil and gas analyst at BCS Financial Group, said by e-mail. That compares with 583 billion rubles a year earlier.

    Cash Flow

    Free cash flow in the first quarter amounted to 237 billion rubles compared to 252 billion rubles in January to March last year, according to calculations based on Gazprom’s financial reports. The positive free cash flow was mainly the result of an almost 240 billion-ruble reduction in working capital, according to Tachennikov.

    The company sees its free cash flow positive this year, deputy head Andrey Kruglov said in June, declining to elaborate on the outlook.
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    Shell’s Nigerian unit declares force majeure on gas supplies to NLNG

    According to Reuters, Shell Petroleum Development Company of Nigeria Ltd (SPDC) has declared force majeure on the supply of gas to the Nigeria LNG (NLNG) export plant. The company is the Nigerian unit of Royal Dutch Shell, and is a joint venture (JV) with the state oil company, Nigerian National Petroleum Corp. (NNPC).

    Reportedly, a spokesman for the company said that force majeure was declared was due to a leak on the Eastern Gas Gathering System (EGGS-1) pipeline. The company uses this pipeline to deliver the majority of its gas to the NLNG facility, which is located on Bonny Island.

    The facility is able to produce 22 million tpy of LNG, and was developed 16 years ago. It is owned by NNPC, Shell, Eni and Total, with long-term supply contracts with a number of companies, including Enel, Shell, Engie SA and Galp. In addition to this, it sells cargoes on the spot market. Nonetheless, Reuters claims that this latest development may impact exports, with the SPDC spokesman stating that the pipeline has been shut down for a joint investigation into the cause of the leak.
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    Iran Expects $25 Billion Oil Contracts Signed Within Two Years

    Iran expects foreign oil companies to sign deals valued at $25 billion over the next one to two years under the terms of a new contract model approved last week, the managing director of the National Iranian Oil Co. said.

    The state energy producer plans to tender contracts over a period of six months to a year to develop several oil and gas fields, the oil ministry’s news service Shana reported Tuesday, citing Ali Kardor. NIOC has identified 34 foreign companies as suitable bidders, he said. NIOC is also seeking investments under existing models, he said.

    Iran approved the new contract model on Aug. 3 in a push to bring foreign investment and technology to rebuild its energy industry, the largest sector of the economy. The government hopes foreign companies will invest as much as $50 billion a year in Iran’s oil industry. Major European oil companies such as Italy’s Eni SpA and France’s Total SA have expressed an interest in developing Iran’s oil and gas fields.

    NIOC has identified 12 to 13 fields as a priority for the first round of investment, Kardor said, without naming the fields. Oil Minister Bijan Namdar Zanganeh last week said Iran’s priorities would be jointly owned oil and gas fields, and producing assets where recovery rates could be improved.

    International oil companies must form a joint venture with an Iranian partner under the new contract model. The government has approved eight Iranian exploration and production firms as eligible partners, and Kardor said this number was likely to increase.

    Iran has already succeeded in meeting its pledge to regain market share it lost due to the sanctions over its nuclear program. Iran boosted crude output to 3.85 million barrels a day, Fars news agency reported Wednesday, citing comments made by Zanganeh at parliament. That would be the highest since December 2008, according to data compiled by Bloomberg.
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    Saudi-Iran Oil Rivalry Heats Up as OPEC Seeks to Stabilize Price

    Saudi Arabia and Iran are showing no let up in their market share war, just days after OPEC announced an informal meting to discuss ways to stabilize falling prices.

    The Organization of Petroleum Exporting Countries announced on Monday it will hold informal talks on the sidelines of a conference in the Algerian capital next month. Saudi Arabia, the world’s largest crude exporter, told OPEC that it boosted oil output to a record 10.67 million barrels a day in July, two people with knowledge of the data said. Iran’s output is up to 3.85 million barrels a day, Fars news agency reported, citing Oil Minister Bijan Namdar Zanganeh. That’s the highest since 2008, data compiled by Bloomberg show.

    “It only gives one signal to the markets that the Saudis are not here to scale back, especially in the face of Iranians bringing more oil to the market,” Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg television interview. “I doubt there’s going to be any concrete agreement despite there being talks.”

    Saudi Arabia typically pumps more oil in the summer to meet higher domestic energy demand from air conditioning. The kingdom is also engaged in a battle for market share with rival Iran and has cut prices to its customers in Asia, the biggest market for both exporters. Kuwait on Wednesday also cut its pricing to Asia, widening the discount to $2.65 a barrel for September from $1.70 a barrel in August.

    OPEC’s smaller producers, which have driven calls to cap the group’s output, can only look on as prices tumbled more than 50 percent since mid 2014. The last effort to freeze output in April, which also included non-OPEC producer Russia, collapsed after Saudi Arabia demanded that Iran be part of the deal. Iran still opposes any limits on its production, with the country seeking to reclaim its pre-sanctions share of OPEC’s total output before contributing to any production freeze, according to an OPEC delegate who asked not to be identified.

    OPEC nations aren’t pushing to revive the aborted April proposal, two delegates from the group said last week, and analysts don’texpect any deal to be reached.

    “These planned OPEC discussions may be viewed by some as a cheap possibility to try and stabilize the market,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “It’s more likely to be a way of further destroying the market’s confidence in OPEC, as the organization cries wolf once again.”
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    Saudi Arabia Said to Report Record Oil Output on Summer Demand

    Saudi Arabia told OPEC that it pumped a record 10.67 million barrels of oil a day in July to meet a summer surge in domestic demand, an increase that will do nothing to endear OPEC’s leading exporter to other members seeking output limits to shore up prices.

    The figures were submitted to the Organization of Petroleum Exporting Countries, according to two people with knowledge of the data, asking not to be identified because the information wasn’t made public. The output beat the previous all-time production high of 10.56 million barrels a day in June 2015, according to OPEC submissions. OPEC’s monthly report is scheduled to be released Wednesday.

    Oil extended its decline, dropping as much as 1.6 percent to $42.08 a barrel in New York trading.

    OPEC will hold informal talks ata conference in Algiers next month, as members constantly discuss ways to stabilize the market, Mohammed Al Sada, Qatar’s energy minister and holder of OPEC’s rotating presidency, said Monday. Russia, Saudi Arabia and other major oil exporters met in Doha in April in a bid to stabilize markets by putting caps on output. The effort collapsed after Saudi Arabia demanded that rival Iran be a part of the deal. At the time, Iran had ruled out any limits on its output as it ramped up production after the lifting of international sanctions.

    “It’s not surprising to see Saudi output at record,” said Anas al-Hajji, an independent analyst and former chief economist at NGP Energy Capital Management LLC in Houston. “The Saudis didn’t want to cut back on exports and they needed to produce more to meet local summer demand. Also, the Saudis are processing more crude this year at refineries as they want to grow in products market.”

    Power Demand

    Power demand in the Middle East peaks in the hottest months of July and August, when Saudis turn up their air-conditioners to cool homes and offices. Saudi Arabia was planning to boost crude production to 10.5 million barrels a day for the 2016 summer, a person with knowledge of Saudi output policy said in April.

    Gasoline shipments from Saudi Arabia, the world’s biggest crude exporter, grew to 213,000 barrels a day on average between January and May, up by 76 percent from the same period a year ago, according to data from Joint Organisations Data Initiative compiled by Bloomberg.

    Saudi Arabia’s increased crude output comes as Russia and Iran are boosting shipments to top demand markets such as India and China. Iran boosted crude output to 3.85 million barrels a day and plans to keep boosting production to 4.6 million barrels in five years, Fars news agency reported Wednesday, citing comments made by Oil Minister Bijan Namdar Zanganeh at parliament.

    Any talk about a new oil production freeze pact is very premature and a mere wishful talking up of market sentiment” while Russia, Saudi Arabia and Iran keep boosting output, said Mohamed Ramady, London-based independent analyst and former professor of economics at King Fahd University of Petroleum and Minerals.

    After years of dominating crude sales to the Chinese market, Saudi Arabia is being challenged by Russia for supplying China, the world’s biggest energy consuming nation. The Asian country’s monthly imports from the Middle Eastern kingdom have been exceeded by purchases from Russia seven times since May 2015, customs data compiled by Bloomberg show.
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    Western nations urge calm at Libyan oil port

    Western countries including the United States, France and Britain said in a joint statement on Wednesday they were concerned by mounting tension around the Zueitina oil terminal in Libya.

    Washington, Paris, London and the governments of Germany, Spain and Italy urged a return to government control of all oil and gas installations and called on all parties "to abstain from any act of hostility and avoid all actions that could damage or disrupt energy infrastructure".

    Zueitina is one of three eastern oil ports blockaded by Libya's Petroleum Facilities Guard (PFG). The PFG has signed a deal to reopen the ports with the U.N.-backed Government of National Accord (GNA) in Tripoli, but forces loyal to a separate government based in eastern Libya have threatened to block a resumption of exports.

    Libya's National Oil Corporation (NOC) said on Sunday that it was concerned by reports of "imminent conflict" in the vicinity of Zueitina between the PFG and the Libyan National Army (LNA), which is loyal to the eastern government.

    In a statement released by the French foreign ministry, the six Western powers expressed their support for efforts by the GNA to "find a peaceful solution to the disruptions affecting energy exports in Libya".

    "The Government of National Accord must work with the National Oil Corporation to relaunch oil production in order to rebuild Libya's economy."

    Fighting, political disputes and militant attacks have reduced Libya's oil production to a fraction of the 1.6 million barrels per day the OPEC member was producing before the 2011 uprising against Muammar Gaddafi.

    "Restarting oil exports is crucial for generating revenues needed to provide for the essential needs of the Libyan people, notably electricity, healthcare and infrastructure," the statement by Western countries said.
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    Thailand's PTT Global Q2 profit down 45 pct, hit by shutdowns

    Thailand's PTT Global Q2 profit down 45 pct, hit by shutdowns

    PTT Global Chemical Pcl , Thailand's largest petrochemical maker, posted a 45 percent drop in quarterly net profit on Wednesday due to a 2-month scheduled shutdown of its refinery and an unplanned stoppage of an olefins cracker.

    Net profit was 4.92 billion baht ($141.46 million) for the April-June period, slightly lower than the average 5.13 billion baht forecast of eight analysts surveyed by Reuters.

    But profit rose 5 percent from the previous quarter mainly because of an inventory gain of 2.2 billion baht after a rise in benchmark Dubai crude prices, PTTGC said in a statement.

    Its refinery run rate dropped to 35 percent from 100 percent a year earlier, while gross refining margin fell 25 percent on year to $4.05 a barrel, the company said.

    PTTGC is the flagship petrochemical business of PTT Pcl , Thailand's largest energy firm. Its operations are expected to improve in the second half because no maintenance shutdown will weigh down earnings, analysts said.

    On Monday, Thai Oil Pcl, the refinery flagship of PTT, reported a better-than-expected 24 percent rise in quarterly net profit due to strong performance of the refinery unit and an inventory gain after an increase in global crude oil prices.

    Thai Oil's 275,000-barrel-per-day (bpd) refinery ran at 109 percent in the second quarter, up 2 percent from a year earlier.

    Another oil refiner, Bangchak Petroleum, posted second-quarter net profit of 2.4 billion baht, down 13 percent on year but up 51 percent from the previous quarter thanks to a higher crude run and gross refining margin.
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    Art Berman: Permian breakeven is $61.

    Permian Basin Break-Even Price is $61: The Best of a Bad Lot

    Posted in The Petroleum Truth Report on June 19, 2016

    The break-even price for Permian basin tight oil plays is about $61 per barrel (Table 1). That puts Permian plays among the lowest cost significant supply sources in the world. Although that is good news for U.S. tight oil plays, there is a dark side to the story.

    Just because tight oil is low-cost compared to other expensive sources of oil doesn’t mean that it is cheap. Nor is it commercial at current oil prices.

    The disturbing truth is that the real cost of oil production has doubled since the 1990s. That is very bad news for the global economy. Those who believe that technology is always the answer need to think about that.

    Through that lens, Permian basin tight oil plays are the best of a bad, expensive lot.

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    EIA sees US gas output increase in late 2016, 2017; Q3 estimate lower

    Natural gas price increases and growing LNG exports should give a boost to natural gas marketed production in late 2016 and 2017, the US Energy Information Administration said Tuesday, even as it scaled back third-quarter production estimates.

    EIA's August Short-Term Energy Outlook said natural gas marketed production in May averaged 78.1 Bcf/d, down 2 Bcf/d from a record daily average production set in February, The agency lowered by 0.28 Bcf/d to 79.22 Bcf/d its natural gas marketed production estimate for the US in Q3 2016. Yet it forecast production should pick up in late 2016, and rise 0.6% in 2016 and 2.9% in 2017.

    In recent weeks, it said slightly tapering production and high use of natural gas for power generation contributed to gas injections falling short of average levels.

    "Natural gas inventories were drawn down in the last week in July for the first time in 10 years during the June-August period, when gas stocks normally increase," EIA Administrator Adam Sieminski. EIA said working gas inventories were 3.288 Tcf as of July 29, 6 Bcf below the previous week's levels.

    Nonetheless, with inventories at record levels because of last winter's warm weather, the winter season may still start over with record high gas in storage, EIA said. It forecast inventories at 4.042 Tcf at the end of October.

    Gas pipeline exports to Mexico are likely to rise by 0.7 Bcf/d in 2016 and 0.1 Bcf/d in 2017, it said, noting Mexico's power sector demand and flat production has led to growing demand this year.

    The agency saw LNG gross exports rising 0.5 Bcf/d on average in 2016, and it projected LNG exports would hit 1.3 Bcf/d in 2017. With the rise in gross exports, EIA expects the US to make the shift from being a net importer of natural gas of 2.6 Bcf/d in 2015 to having a small amount of net exports in Q2 2017.

    EIA lowered its gas consumption estimate in Q3 2016 by 0.19 Bcf/d to 68.85 Bcf/d, even as it anticipated increased demand for the year, mostly tied to power sector use.

    Demand for full-year 2016 is expected to average 76.3 Bcf/d, while full-year 2017 demand is estimated at 77.2 Bcf/d, compared with 75.3 Bcf/d in 2015, EIA said.

    "Despite the recent rise in natural gas prices, hot weather across the country is leading power plants to pull more natural gas from storage this summer, with the amount of electricity generated by natural gas to meet cooling demand reaching a record high in July," said Sieminski.

    Power sector use of gas is forecast to rise by 4.8% in 2016 before dropping by 1.7% in 2017, as rising gas prices push up the use of coal for electricity, EIA said. In 2016, EIA projects gas will supply 34.3% of power generation, while coal would make up a 30.3% share in 2016. But in 2017, the share powered by gas would fall to 33.3% while coal would rise 31.1%.

    Industrial sector demand for gas is projected rise by 2.5% in 2016 and by 1.1% in 2017, according to EIA.

    The agency raised its forecast for Q4 Henry Hub natural gas spot prices to $2.73/MMBtu, 13 cents above its July estimate, and it projected that prices would gradually rise through the forecast period and average $2.41/MMBtu in 2016 and $2.95/MMBtu in 2017.

    Prices averaged $2.82/MMBtu in July, up 24 cents from June levels, as warmer-than-normal weather pushed up power sector demand, it said.

    "Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for November 2016 contracts at $2.12/MMBtu and $4.28/MMBtu, respectively," EIA said.
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    Japan’s spot LNG arrival price up in July

    The average price of spot LNG cargoes delivered into Japan in July rose 33 percent from June, according to the data from the Ministry of Economy, Trade and Industry (METI).

    The average price of LNG cargoes delivered into Japan in July reached $6 per mmBtu on DES basis, as compared to $4.5 per mmBtu in June, the data showed.

    This represents a rise for the second straight month and it is the highest price since March this year.

    The average price of spot LNG cargoes contracted in July was at $5.80 per mmBtu, the highest since February this year.

    METI did not publish an average price of spot cargoes contracted in June as there were less than two trades.

    Only spot LNG cargoes are taken into account in this assessments, excluding short, medium and long-term contract cargoes, as well as those linked to a particular price index.
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    Venezuela, China join efforts to produce oil

    State-run oil companies of Venezuela and China are joining hands to boost oil output from the Orinoco oil belt in southeastern Venezuela, which boasts one of the world's largest oil reserves.

    The Venezuelan government is seeking to export up to 1 million barrels of oil a day to China. Venezuela's PDVSA and China National Petroleum Corporation (CNPC) are working together on an expansion plan to raise the export from the current 600,000 barrels per day (bpd), turning the South American country into a reliable oil exporter.

    "We want to ensure a steady supply regardless of oil prices," Venezuela's Oil Minister Eulogio del Pino told Chinese media after a recent visit to the oil belt.

    The expansion plan involves improving infrastructure for the joint venture Sinovensa running in the oil belt between the two countries, in the hope of raising its oil output to 275,000 bpd from the current level of some 170,000 bpd.

    The two state-run oil companies are also planned to improve Venezuela's capacity for oil processing, by building a new dehydration and desalination plant and doubling the capacity of the Jose Processing Plant, based in the state of Anzoategui, to at least 330,000 bpd of extra-heavy crude oil in 2017.

    "We also have approved loans of $5 billion from the China Development Bank for other sides," including inputs in other joint ventures, said del Pino.

    Meanwhile, China and Venezuela are trying to make the transportation of crude oil from the Orinoco oil belt to China faster and more efficient.

    "Currently, a super oil tanker leaves Venezuela every three days for China and it takes 45 days to reach China. We will be able to shorten the voyage by traveling via the newly expanded Panama Canal," said del Pino.

    To this end, a new terminal for oil tankers will be built this year on the Araya peninsula in the state of Sucre.

    Furthermore, the southern Chinese city of Jieyang in Guangdong province is building an oil refinery aimed at processing up to 400,000 bpd of oil coming from Venezuela.
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    Low oil prices drive up China's crude oil imports

    China's crude oil imports hit a record high in the first half of 2016 despite an economic slowdown, and analysts largely attributed the surge to low prices, not strategic maneuvering.

    The country imported 186.5 million tonnes of crude oil in the first half of the year, 23.15 million tonnes more than the same period last year, although imports in June slowed to 30.62 million tonnes from a peak of 32 million tonnes per month in March, April and May.

    "Enterprises increased crude oil imports in the first half year as they believe global oil prices have bottomed out," said Zhu Fang, deputy head of the information and market department of China Petroleum and Chemical Industry Federation.

    The oil import jump was also strengthened by policy decisions, as China's top economic planner set a floor for domestic retail fuel prices in January, said Zhu.

    At the beginning of the year, the National Development and Reform Commission (NDRC) declared that domestic retail prices should not be cut if global oil prices fell below 40 US dollars a barrel.

    The NDRC said the move was to buffer the negative effects of volatile fluctuations in international oil prices. Previously, it set a ceiling that domestic retail fuel prices would not rise if international oil prices rose above 130 US dollars per barrel.

    China also approved more private firms to work in the oil refinery business, which also increased oil imports, said an industry insider at PetroChina, China's biggest oil producer.

    So far, 15 enterprises have gained approval on crude oil imports, with their aggregate quota exceeding 60 million tonnes, according to the NDRC.

    NDRC official Zhao Gongzheng echoed Zhu's opinion, saying that it was the market, including low oil prices, that was causing the growth of crude oil imports.

    Zhao dismissed foreign media claims that China was taking advantage of low oil prices to build up its strategic petroleum reserves (SPR).

    "China's SPR has limited influence, so far, on global oil prices in light of its reserve ability and capacity," said Zhao, adding that it is a long process for China to expand its SPR.
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    Permian Oil Drillers Dominate Rival U.S. Crude Explorers: Chart

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    Oil producers focused on the most-prolific U.S. oil field are outperforming more wide-ranging peers this year as the Permian -- a multi-layered stack of crude-soaked rocks beneath West Texas and New Mexico -- still turns a profit amid depressed oil markets. A bidding war has broken out among Permian explorers, driving up prices for drilling rights. In the latest deal, SM Energy Co. spent $980 million on Monday to buy access to almost 25,000 acres in the region, joining Diamondback Energy Inc., Callon Petroleum Co. and QEP Resources Inc. in expanding Permian portfolios.

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    EIA sees smaller drop in U.S. 2016 crude output as drilling picks up

    The U.S. Energy Information Administration said on Tuesday that it expects a smaller decline in U.S. crude oil production in 2016 than it forecast a month ago as an uptick in drilling will lead to more output later this year.

    The agency said 2016 crude production will fall by 700,000 barrels per day (bpd) to 8.73 million bpd, according to the EIA's short term energy outlook. Previously, it forecast a drop of 820,000 bpd to 8.61 million bpd.

    The decline in crude output comes amid a two-year rout in global oil markets on the back of lackluster demand and oversupply, effectively slashing benchmark prices by as much as 70 percent.

    "After a steep drop over the past year in U.S. oil production, a recent uptick in the number of rigs drilling for oil is expected to contribute to more steady monthly oil output starting this fall," EIA Administrator Adam Sieminski said in a statement.

    Last week, U.S. drillers added oil rigs for a sixth consecutive week, according to a Baker Hughes report, as producers continued boosting spending on expectations for higher prices in the future. The rig count rose by 44 during July, the biggest monthly increase since April 2014.

    The EIA, however, expected a slightly bigger drop in crude production in 2017 - a decline of 420,000 bpd to 8.31 million bpd, compared with last month's forecast for a drop of 410,000 bpd to 8.2 million bpd.

    The EIA also left its 2016 U.S. oil demand growth forecast unchanged at 160,000 bpd. It lowered its 2017 U.S. oil demand growth forecast to 100,000 bpd from 120,000 bpd previously.

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    Why Iran’s Oil Exports To India May See a Steep Dive

    A 49 percent stake buy by Russia’s Rosneft in Indian Essar Oil will see the Indian company reduce its purchases of Iranian crude oil, according to Essar Oil’s chief executive, as quoted by Bloomberg.

    Essar Oil, India’s major refiner, is the biggest single importer of Iranian crude into the country at the moment. This, however, may be about to change, as Rosneft will want to take the lion’s share of supplies to Essar’s facilities.

    The deal was announced last month to be nearing completion, with the closing date set for October. As part of its, Rosneft will supply 10 million tons of crude annually to the Vadinar refinery, India’s second-largest, which constitutes half of its annual processing capacity. The supply agreement has a 10-year term.

    Recently Essar Oil said it will spend around US$179 million (at current exchange rates) on raising the profit margin of Vadinar by US$1.50 a barrel. The money will be spent on upgrades over the next two to three years.

    According to Bloomberg, Essar Oil purchased a daily average of 148,000 bpd from Iran over the first half if 2016, which constituted 40 percent of India’s total crude oil purchases from Iran. The amount also accounted for a third of the supplies directed to Vadinar. Iran’s overall oil exports to India shot up 63 percent in January-June, after the lifting of Western sanctions related to Tehran’s nuclear program.

    In separate news, Rosneft’s chief Igor Sechin said that the company will “work with Iran in all directions”, responding to questions about what particular projects in Iran Rosneft is interested in.

    The questions followed an announcement from President Putin that the Caspian region is a priority area for Russian oil and gas, and that Moscow was ready to discuss with Tehran a joint utilization of existing pipeline infrastructure for the transportation of Caspian hydrocarbons.
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    Rumour: US Methanol Building 5 Methanol Plants in WV

    Methanol plants convert natural gas into methanol, used as a chemical feedstock (or raw material) to create other things, like gasoline, antifreeze and more. More commonly you may call it a gas-to-liquids (GTL) plant.

    Methanol plants have the capacity to create a big demand for natural gas and sop up some of the oversupply we have in the Marcellus/Utica. In May we told you about Primus Green Energy’s plan to build a 160 metric tons per day (MT/day) methanol plant for Tauber Oil somewhere in the Marcellus.

    We have more exciting news. US Methanol, according to their website, is working on two Marcellus methanol plants, coming to West Virginia. One plant, called Liberty One, will produce 175,000 metrics tons per annum, or about 480 MT/day. Liberty Two will produce 150,000 MT/annum, or a about 410 MT/day.

    Here’s the really really exciting news. We’ve stumbled across a rumour that U.S. Methanol is actually planning to build five methanol plants total. According to the rumor, we know where the first two plants already announced (Liberty One and Two) will be built–AND we know which driller they’ve contracted with to supply the natgas for those plants.
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    Sabine Pass Train 2 completion nears

    The Trains are in various stages of operation, construction, and development.

    Construction on Trains 1 and 2 began in August 2012, and as of June 30, 2016, the overall project completion percentage for Trains 1 and 2 was approximately 99.4%, which is ahead of the contractual schedule. Train 1 achieved substantial completion in May 2016. Each Train is expected to achieve substantial completion upon the completion of construction, commissioning and the satisfaction of certain tests. The commissioning process on Train 2 has commenced, and based on the current construction schedule Cheniere Partners expects substantial completion of Train 2 to be achieved in late September 2016.

    Construction on Trains 3 and 4 began in May 2013, and as of June 30, 2016, the overall project completion percentage for Trains 3 and 4 was approximately 87.4%, which is ahead of the contractual schedule. Based on the current construction schedule, Cheniere Partners expects Trains 3 and 4 to reach substantial completion in 2017.

    Construction on Train 5 began in June 2015, and as of June 30, 2016, the overall project completion percentage for Train 5 was approximately 38.3%, which is ahead of the contractual schedule. Engineering, procurement, subcontract work and Bechtel direct hire construction were approximately 77.0%, 58.0%, 37.8% and 2.0% complete, respectively. Based on the current construction schedule, Cheniere Partners expects Train 5 to reach substantial completion in 2019.

    Train 6 is currently under development, with all necessary regulatory approvals in place. Cheniere Partners expects to make a final investment decision and commence construction on Train 6 upon, among other things, entering into an engineering, procurement, and construction contract, entering into acceptable commercial arrangements and obtaining adequate financing.
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    Statoil submits Plan for Development and Operation of Utgard discovery in the North Sea

    Statoil and its partners have submitted the Plan for Development and Operation (PDO) and the Field Development Plan (FDP) for the Utgard gas and condensate discovery in the North Sea to Norwegian and UK authorities.

    Recoverable reserves are estimated at 56.4 million barrels of oil equivalent, whereas capital expenditures are projected at about NOK 3.5 billion.

    Discovered in 1982 Utgard (formerly Alfa Sentral) is located 21 kilometres from the Sleipner field. The discovery has been considered for development on several occasions in the past.

    'I am very pleased that we now can realise a commercial development of Utgard. This clearly demonstrates the effects of the improvement work that has taken place in the oil and gas industry in recent years,' says Torger Rød, Statoil's senior vice president for project development.

    Utgard straddles the UK-Norway median line, the majority of the reserves being located on the Norwegian side.

    'Utgard is the first Statoil development in many years producing resources across the median line, and we are pleased to have found good solutions that address considerations for good resource management on both sides. Good and efficient cooperation across the board, both in relation to partners and government authorities, has made this development possible,' Rød says.

    The Utgard development will include two wells in a standard subsea concept, with one drilling target on each side of the median line. All installations and infrastructure being located in the Norwegian sector, the UK well will be drilled from the subsea template on the Norwegian continental shelf. The distance from the subsea template to the median line is 450 metres.

    Gas and condensate will be piped through a new pipeline to the Sleipner field for processing and further transportation to the market. The Utgard gas has a high CO2 content, and will benefit from carbon cleaning and storage at Sleipner. Reuse of existing infrastructure is essential to the development of the Utgard discovery.

    The Utgard wells are scheduled to come on stream at the end of 2019 In the plateau phase the field will produce approximately some 7,000 Sm3 per day of oil equivalent.

    'Utgard provides new production which will be essential to further developing the Sleipner area, supporting the company's ambitious targets for future activity and value creation,' Rød says.
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    Surprise Natural Gas Drawdown Signals Higher Prices Ahead

    The U.S. electric power sector burned through a record amount of natural gas in recent weeks, a sign of the shifting power generation mix and also a signal that natural gas supplies could get tighter than many analysts had previously expected.

    The EIA reported a surprise drawdown in natural gas inventories for the week ending on August 3. The reduction of 6 billion cubic feet (Bcf) was the first summertime drawdown since 2006. Natural gas spot prices shot up following the data release on August 4, although they fell back again shortly after.

    Natural gas consumption patterns are much more seasonal than for oil. Demand tends to spike in the winter due to heating needs, and then drops substantially in the intervening months, particularly in the spring and fall. Between March/April and October/November, natural gas inventories build up as people need less heating, and that stockpiled gas is then used in the next winter.

    So it comes as a surprise that after a record buildup in inventories this past winter, the summer has seen a much lower-than-expected buildup in storage. And last week's drawdown, the first in over a decade during summertime, says quite a bit about the shifting energy landscape. The EIA says this is the result of two factors: higher consumption from electric power plants, and a drop off in production.

    The U.S. is and has been in the midst of an epochal transition from coal-fired electricity to natural gas and renewables, a switch that will take many more years to play out. But the effects are already showing up in the power generation mix. Utilities have rushed to build more natural gas power plants over the past decade, and now with so many online, demand for gas has climbed to new levels.

    Just a few weeks ago, on July 21, the U.S. burned through 40.9 billion cubic feet, the highest volume on record, according to the EIA. And in late July, the power burn exceeded 40 Bcf/d three times due to a hot weather. Nine of the ten highest power burn days on record took place last month, with the other one occurring in July 2015. Average consumption of 36.1 Bcf/d in July of this year was 2.7 Bcf/d higher than a year earlier, and 1.5 Bcf/d higher than the previous high reached in July 2012.

    The high rates of consumption from the electric power sector are contributing to tepid growth in inventories this summer. This comes on the heels of a massive buildup in inventories last winter, and heading into summer the expectation was that huge storage levels would keep natural gas prices at rock bottom levels, perhaps for years. But that doesn't look like it will come to pass.

    While high demand is keeping natural gas from being diverted into storage in large amounts, the other main reason that natural gas inventories are not building up as much as previously thought is because of a supply-side issue: natural gas production is actually falling after years of steady increases. Natural gas prices have traded below $3 per million Btu since the beginning of 2015. U.S. gas drillers continued to ratchet up production through 2015, however, creating this past winter's inventory glut. But the resulting downturn in prices has now made drilling unprofitable in many areas. On top of that, the oil price crash has ground oil drilling to a halt, which means that the natural gas produced in association with oil has also come to a standstill. The upshot is that natural gas production is now falling in the United States. The Marcellus Shale, the most prolific shale gas basin in the country, saw production peak in February at 18.5 Bcf/d. Since then output has declined 3 percent. In August, the EIA expects gas production from the Marcellus to fall by another 26 million cubic feet per day.

    Of course, this stuff is cyclical. The first summer drawdown in inventories in a decade means that natural gas markets are now tighter than many analysts thought only a few months ago. Falling production and rising demand could lead to steeper drawdowns in inventories this coming winter. The effect of that will be to push up spot prices, which could induce more drilling once again.
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    Indonesia Weighs Iran’s Proposal for $8.4 Billion Oil Refinery

    Indonesia will study a proposal from Iran to build an oil refinery, along with bids from other countries, as it seeks to boost refining capacity to catch up with rising consumption.

    Iran proposed a plant with processing capacity of more than 100,000 barrels a day and pledged to provide the crude, IGN Wiratmaja Puja, director-general of oil and gas at the Energy and Mineral Resources Ministry, said in Jakarta on Tuesday. The project’s value is estimated at $8.4 billion and would be built over four or five years in Java, Iran’s state run news agency Mehr reported, citing Hassan Khosrojerdi, head of the joint Iran-Indonesia refinery’s board of directors.

    Indonesia, already the only OPEC member that’s a net oil buyer, may need to import half of its annual fuel needs even after increasing its refining capacity by 500,000 barrels a day in the next seven years, according to BMI Research. Iran is seeking to boost crude exports after international sanctions on its economy were eased in January.

    A feasibility study on the refinery’s economic justification is being conducted, a spokesman for Iran’s oil ministry said. The National Iranian Oil Co. has not signed any deals on the project, he said. Indonesia has made no decision on Iran’s proposal because it’s still preliminary, Puja said.

    Bontang Refinery

    Indonesia has also received proposals from China, Kuwait and Russia, Puja said. The ministry hasn’t come to any decisions on the bids. The government plans to offer the Bontang refinery in East Kalimantan to investors before other projects, he said.

    Indonesia’s refining capacity may grow 2 percent by 2025 while consumption surges 31 percent in the same period, according to BMI. The country, which reactivated its membership in the Organization of Petroleum Exporting Countries this year, produced 740,000 barrels a day of crude in July, according to data compiled by Bloomberg.
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    Sinopec studying BP's terms for SECCO JV exit plan

    State-owned China Petroleum & Chemical Corp (Sinopec) is currently discussing the conditions put forward by British oil and gas major BP plc for its planned exit from their SECCO petrochemicals joint venture, a Sinopec spokesman told Reuters on Tuesday.

    Reuters earlier reported that BP has hired an investment bank to find buyers for its 50 percent stake in SECCO, a deal that could fetch up to $3 billion.

    The Sinopec spokesman said the company had not made a decision on whether to buy BP's stake.
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    OPEC bullish on oil demand in H2 2016, says current price slide 'temporary'

    OPEC on Monday sounded an optimistic tone about the oil market, saying that higher demand is expected in the third and fourth quarters.

    The comments, from Qatar energy minister Mohammed bin Saleh Al-Sada, who serves as OPEC president, are likely to quell any expectations of a production freeze deal in the near future.

    The recent decline in oil prices "is only temporary," and the result of weaker refinery margins, inventory overhang and the UK's recent vote to leave the EU, Sada said, according to an OPEC news release.

    With major oil consuming countries seeing their economies improve and winter approaching in the Northern Hemisphere, oil demand will rise in the next two quarters, he continued.

    "This expectation of higher crude oil demand in [the] third and fourth quarters of 2016, coupled with decrease in availability is leading the analysts to conclude that the current bear market is only temporary and oil prices would increase during the later part of 2016," OPEC stated.

    OPEC member countries are scheduled to meet informally on the sidelines of the International Energy Forum in Algeria from September 26-28.

    The Wall Street Journal on Friday had reported that a production freeze deal could be mooted at that meeting, citing unnamed OPEC delegates, but several analysts are doubtful that such a pact could be agreed.

    "Can't help but be sceptical on the resumption of this merry-go-round again after the January-April go around," Wood Mackenzie analyst Ann-Louise Hittle said in a tweet.

    Another analyst, who spoke on condition of anonymity, said: "As things stand, we wouldn't expect OPEC to substantially change course unless there is a significant deterioration in global prices."

    The last time a production freeze agreement was on the table, several OPEC members met in Doha in April along with a handful of major non-OPEC producers, notably Russia. A deal to keep output at January levels fell apart at the 11th hour with Saudi Arabia insisting that Iran -- which did not attend-- participate in any production agreement.

    Iran has said it would not participate until its production reaches pre-sanctions levels. That could be achieved later this year, though analysts have said Iran could see difficulties in maintaining that level of output, given the lack of investment over the past few years.

    OPEC, for its part, said it continues to monitor developments closely, and is in constant deliberations with all member states on ways and means to help restore stability and order to the oil market.

    The producer group's next official meeting is November 30.
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    Oil’s ‘hottest ZIP codes’ see bids soar on SM deal

    SM Energy Co.’s $980 million purchase of drilling rights in the biggest U.S. crude field indicates producers are willing to pay a premium for access to one of the few spots where oil exploration still turns a profit.

    SM, which extracts oil and natural gas from the Rocky Mountains to the Gulf Coast, agreed to pay the equivalent of $39,543 an acre for drilling rights across 24,783 acres in the Permian Basin, almost doubling the Denver-based company’s holdings in the region, according to a statement on Monday. SM plans to deploy a rig as soon as October to drill the acquired acreage, which Chief Executive Officer Jay Ottoson called “top tier.”

    After decades of neglect by international oil producers, the Permian Basin that lies beneath West Texas and New Mexico has seen a rejuvenation in the past eight years as intensive drilling and fracking techniques honed in other oil- and gas-producing regions were brought to bear on the Permian’s multi-layered stack of crude-soaked rocks. As low energy prices made other areas unprofitable to drill, explorers as diverse as Apache Corp., Cimarex Energy Co. and Occidental Petroleum Corp. have been touting plans to expand Permian investments.

    The Permian’s got “the hottest ZIP codes in the industry,” Concho Resources Inc. CEO Tim Leach told analysts on an Aug. 3 call. The Midland, Texas-based company focuses solely on the Permian and announced more drilling plans last week.

    Higher Price

    SM jumped 7.4 percent to $31.46 at 11:15 a.m. in New York trading, after earlier reaching $31.68, the highest intraday price in two months. The shares have risen 60 percent this year.

    SM’s agreement “demonstrates continued high acreage values” in the Permian and “validates” recent acquisitions in the region by Diamondback Energy and Callon Petroleum, Jeff Grampp, an analyst at Northland Securities, said in a note to clients. It’s also a positive development for other Permian drillers such as Earthstone Energy, Parsley Energy and RSP Permian, he said.

    The per-acre price SM is paying exceeds the $25,000 to $35,000 range that acreage in the Permian’s Midland Basin section had been fetching as recently as May, according to estimates by Mike Wichterich, president of Three Rivers Operating Co., a private equity-backed explorer. QEP Resources forked over about $60,000 an acre to unnamed sellers for a tranche of Permian drilling rights in June, a signal that deal values in the region are at “an all-time high,” Eli Kantor, an analyst at Iberia Capital Partners said in a July 26 note to clients.

    Acquisition “deal values remain high and incrementally trending up, which bodes well for operators with established acreage positions,” Northland’s Grampp wrote.

    SM is acquiring the Permian drilling rights through an outright purchase of Riverstone Holdings LLC’s Rock Oil Holdings LLC, the London-based private equity giant said in a separate statement. Denver-based Rock Oil was created in 2014 and has been amassing drilling rights ever since, Riverstone said.

    Patty Errico, an SM spokeswoman, didn’t immediately return a telephone message seeking comment.

    Permian Basin

    The Permian Basin, an active oil-producing region for almost a century, fell out of fashion as major explorers abandoned onshore U.S. drilling to search in deep waters and overseas. Smaller domestic companies revitalized the region by adapting sideways drilling and high-pressure hydraulic fracturing to open up layers of rock that had been previously been shunned as too dense or expensive to be worth exploiting.

    U.S. drillers spent last week’s earnings conference calls talking up their acreage in the Permian and Oklahoma’s Scoop and Stack regions, areas where companies say they can still make a profit despite depressed oil prices.

    The Permian generated Apache Corp.’s highest profit margins in North America — about $17 per barrel, more than double the return of other regions, CEO John Christmann told analysts on Aug. 4. The Houston company’s only active drilling rigs were in the Permian last quarter and its only other wells to start producing oil were in the Scoop, he said.
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    Pemex Has Imported Exactly Zero Barrels of U.S. Crude Oil

    Ten months after Mexico won special dispensation to import U.S. crude oil, it has yet to take in a single barrel.

    Petroleos Mexicanos successfully petitioned the U.S. Commerce Department in October for permission to swap its own heavy oil for the lighter crude produced in shale formations. The effort was part of the state-owned oil company’s plan to increase fuel quality at its refineries, and came months before the government removed all prohibitions on U.S. oil exports.

    But the oil hasn’t come, according to the latest reports from the U.S. Census Bureau and Mexico’s Energy Ministry. Pemex says it doesn’t make economic sense to bring in U.S. crude at current prices. Even if the potential for profits improves, though, the question remains whether Mexico’s infrastructure would be able to handle the imports and if its ailing refineries would be able to take it. Roberto Montes, Pemex’s operational manager for refining, said in an interview last year that the necessary infrastructure wasn’t in place to import U.S. crude by large tankers.

    The aim to produce better-quality gasoline and diesel by blending Mexican heavy crude with U.S. light oil has run into a snag at a time when Pemex’s refineries are struggling with continued operating losses, reduced investment and frequent outages. Mexico, which for years requested supplies from the U.S., has had to cut 162 billion pesos ($8.7 billion) from Pemex’s budget in the past two years to weather an oil market rout, compromising the efficiency of units that would process the imported crude.

    “It wouldn’t surprise me if the refineries were not in a condition to receive the shipments,” John Padilla, Managing Director of IPD Latin America, said in a phone interview. “The company is in a full-blown liquidity crisis, which means less and less money can be dedicated to refining and crude processing."

    Refining Woes

    When Pemex received a license from the U.S. last October to import as much as 75,000 barrels a day in exchange for heavy Mexican crude, the state-owned producer said it would begin welcoming U.S. light oil to lower the sulfur content of its fuel. But Mexico’s six refineries are running at about 60 percent of capacity and had 35 unscheduled stoppages in the first quarter, prompting the country to boost fuel imports. The units have amassed annual losses of more than 100 billion pesos as refining fell last year to the lowest since at least 1990.

    Pemex said it would reevaluate the purchases if potential margins improved, and that the company already has the proper infrastructure in place. The imports have been postponed because they would no longer be as profitable, the company said in an e-mailed response to questions. The producer is continuing to use its own light crude to mix with heavier oil, according to the statement.

    ‘Economic Attractiveness’

    At the time of the approval of the U.S.-Mexico crude swap, replacing some local Maya oil with imported West Texas Intermediate would provide good returns, but the broader lifting of U.S. crude trade restrictions in December elevated WTI prices and diminished the potential profits from imports, Pemex said.

    "Due to the reduction of its economic attractiveness, it was decided to postpone crude imports until the economic and operating conditions merit reconsideration,” Pemex said.

    The import of U.S. light crude was deemed "very positive for our crude oil processing operations" and said to "generate additional value for the company," Pemex Treasurer Rodolfo Campos said on the day of the announcement.

    Since lifting the international trade limits on Dec. 18, the U.S. shipped its crude to 16 countries through May, including Colombia, Nicaragua, Panama and Peru in Latin America, according to 2016 data from the U.S. Census Bureau. WTI futures have gained more than $8, or about 24 percent, since then and is hovering around $43 a barrel.
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    Williams Cos, Williams Partners to sell Canadian operations

    Pipeline company Williams Cos Inc and its master limited partnership agreed on Monday to sell their Canadian natural gas liquids midstream businesses to Inter Pipeline Ltd for total cash proceeds of C$1.35 billion ($1.03 billion).

    This is the first major deal by Williams Cos since Energy Transfer Equity walked away from its more than $20 billion takeover of the company in June.

    Williams Partners LP will get a net consideration of about $817 million, while Williams Cos will get about $209 million after a waiver of $150 million of incentive distribution rights in the quarter.

    Both companies said they planned to use the proceeds to reduce borrowings on credit facilities.

    The assets include two liquids extraction plants located near Fort McMurray, Alberta; a fractionator near Redwater, Alberta and a pipeline system that connects these facilities.

    Fort McMurray in northern Alberta, the heart of Canada's oil sands region, was affected by an uncontrollable wildfire in May.

    The Canadian unit had attracted at least seven bidders, including Enbridge Inc, and pension funds, such as Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan, Reuters reported last month, citing sources.

    Inter Pipeline said it would also assume responsibility for the potential construction of a C$1.85 billion propane dehydrogenation facility in Alberta.

    The deal, which is expected to immediately add to funds from operations per share, is estimated to reduce Inter Pipeline's annual cash taxes by about $70 million in 2017 through 2019.

    Inter Pipeline said it expected to fund the deal by proceeds from the issuance of 22.43 million subscription receipts, new term debt and available capacity on its credit facility.
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    Venezuela says OPEC, non-OPEC countries may meet in 'coming weeks'

    A meeting between OPEC and non-OPEC countries may take place "in the coming weeks," Venezuelan Oil Minister Eulogio del Pino said on Monday, as the crisis-stricken South American nation seeks to prop up weak oil markets.

    "We are actively promoting a meeting of producers, which we estimate could take place in the coming weeks, so that OPEC and non-OPEC countries can sit down to see what the scenario for the winter looks like," Del Pino told state television.

    President Nicolas Maduro last week said his government was working to convene a meeting between of OPEC and non-OPEC countries to stabilize prices.

    Russia, the world's largest oil producer, said on Monday it does not see any ground for new talks on freezing oil output but said it was open to negotiations.

    Since the plunge in oil prices in 2014, Venezuela has repeatedly tried to broker deals to freeze production and reduce a supply glut, with limited success. OPEC members and other producers including Russia did not manage to reach an agreement on freezing supply at a meeting held in Doha in April.

    OPEC members are scheduled to meet informally in September.

    Venezuela, which receives almost all of its foreign exchange from oil, is struggling with the world's highest inflation, a severe recession and chronic shortages of food and medicine. Maduro says his government is the victim of an "economic war" led by political adversaries with the support of Washington.
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    Sanchez Energy announces second quarter 2016 results

    Sanchez Energy Corporation, today announced operating and financial results for the second quarter 2016.

    Highlights include:

    Sanchez Energy plans to increase its 2016 upstream capital spending by up to $50 million, to a range of between $250 million to $300 million, which positions the Company to be able to deliver total production growth of between 5% and 8% in 2017;
    Total production of 5.1 million barrels of oil equivalent ('MMBoe') during the second quarter 2016, up approximately 4% over the second quarter 2015;
    Average production of approximately 55,900 barrels of oil equivalent per day ('Boe/d'), which exceeded the high end of the Company's guidance of 48,000 to 52,000 Boe/d for the second quarter 2016 by over 7%;
    Sanchez Energy's development focus remains on Catarina, where the Company has met its 50 well annual drilling commitment for the period July 2015 through June 2016 and has banked 20 wells toward the 50 well annual drilling commitment for the period July 2016 through June 2017;
    South-Central Catarina wells continue to exceed expectations, with the 30-day initial production rates of most recent wells, including the best well drilled to date at Catarina, averaging 1,600 to 1,900 Boe/d;
    Average drilling and completion costs during the second quarter 2016 at Catarina and Cotulla were $3.3 million per well, with the Company's best wells coming in below $3.0 million per well in both areas;
    Revenues of approximately $111 million (exclusive of hedge settlements) were up approximately 39% when compared to the first quarter 2016 due to improvements in realized commodity prices during the second quarter 2016;
    Commodity price realization during the second quarter 2016 includes natural gas liquids ('NGL') realization of $14.47 per barrel, up from $8.91 per barrel in the first quarter 2016, after total production was impacted by 2,000 to 3,000 barrels per day ('Bbls/d') as a result of significant ethane rejection;
    Inclusive of hedge settlements, revenues totaled approximately $146 million during the second quarter 2016;
    Adjusted EBITDA (a non-GAAP financial measure) of approximately $79.6 million, up approximately 23% when compared to the first quarter 2016;
    Total liquidity of approximately $624 million as of June 30, 2016, which consisted of $324 million in cash and cash equivalents and an undrawn bank credit facility with an elected commitment amount of $300 million; and
    The planned increase in capital spending is expected to be largely offset by the Company's July 2016 sale of its interest in Carnero Gathering, LLC ('Carnero Gathering'), a joint venture that is 50% owned by Targa Resources Corp. ('Targa'), to Sanchez Production Partners LP (NYSE MKT:SPP) ('SPP') for approximately $44 million in total consideration (the 'Carnero Gathering Transaction').

    MANAGEMENT COMMENTS'We are encouraged by our strong operating and financial results in the first half of 2016,' said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy. 'As previously reported, we achieved excellent production results in the second quarter 2016, exceeding the high end of our guidance by over 7%. Process improvements and efficiency gains continue to drive our operating performance, with several wells coming in below $3.0 million. This combination of strong production and lower costs has allowed us to achieve positive returns on our capital program, which provides us with a key competitive advantage in responding to current industry conditions.'

    'Our development focus remains on Catarina and further delineation of the South-Central region of the lease as results in this region, including the exceptional results from the E33 Pad that we reported in July 2016, continue to meet or exceed our expectations. The E33 Pad consisted of four wells that had average 30-day initial production rates that ranged from 1,600 to 1,900 Boe/d, representing some of the most productive results drilled at Catarina to date. We continue to test northern extensions in South-Central Catarina and remain impressed with this area of the lease. As of June 30, 2016, we successfully completed our 50 well annual drilling commitment at Catarina for the period July 2015 through June 2016 and banked 20 wells toward the 50 well annual drilling commitment for the period July 2016 through June 2017.'
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    Argentina’s Enarsa purchases eight LNG cargoes

    Enarsa – the Argentinian state-run energy company – has purchased eight LNG cargoes as part of its latest tender.

    The cargoes have been purchased from companies including Petrobras, Gas Natural, BP, Royal Dutch Shell and Trafigura. Reuters claims that the cargoes will be delivered in September and October 2016.

    Shell and Trafigura will reportedly both provide two cargoes each.
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    Sempra: FID on Cameron LNG expansion project could be postponed

    San Diego-based energy company and LNG operator Sempra Energy said that a final investment decision on the proposed Cameron LNG expansion project could be delayed beyond the first half of 2017.

    Sempra and its partners in the Cameron LNG export project are currently building the first three liquefaction trains with a nameplate capacity of 13.9 million tonnes per annum (Mtpa) in Hackberry, Louisiana.

    The Cameron expansion project, which would include up to two additional liquefaction trains raising the project’s capacity to 24.92 Mtpa, has received approvals from both the U.S. FERC and the Department of Energy.

    However, the final investment decision could be postponed as one the partners “indicated to Sempra Energy and the other partners that it currently does not want to invest additional capital in Cameron LNG JV with respect to the expansion,” Sempra said in a 10-Q filing with the U.S. Securities and Exchange Commission.

    Cameron LNG is a joint venture owned by affiliates of Sempra Energy, Engie, Mitsui & Co. and Japan LNG Investment, a joint venture formed by affiliates of Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha.

    “As a result, alternatives are being developed and negotiated with all partners to allocate the required equity, commitments and guarantees to the remaining three partners that are supportive of the development of the expansion and to secure the consent of all of the partners to allow the expansion to proceed,” Sempra said.

    These activities have contributed to delays in developing firm pricing information and securing customer commitments, Sempra said, adding that failure to obtain the unanimous consent of all Cameron LNG partners to move forward on the expansion project or to obtain the necessary customer commitments could further delay this project.

    Sempra expects the first three trains of the LNG export project to achieve commercial operation in 2018, and have the first year of full operations in 2019.

    The total cost of the facility, including the cost of the original import facility, is estimated to be approximately $10 billion.
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    SM Energy Announces Permian Basin Acquisition

    SM Energy Company today announced that it has entered into a definitive purchase agreement to acquire 24,783 net acres in Howard County, West Texas, expanding the Company’s Midland Basin footprint to approximately 46,750 net acres. The acquired acreage position is largely contiguous and includes approximately 4,900 Boe per day net production (with two new wells coming on-line August 2016) and 6 MMBoe of proved developed producing reserves. The purchase price is $980 million and the seller is Rock Oil Holdings LLC.

    “Continued portfolio management, concentrating capital allocation to highest return programs and operating at peer leading performance levels will allow us to generate higher company-wide margins, cash flow growth and value creation for our shareholders going forward.”

    President and Chief Executive Officer Jay Ottoson comments: “We are demonstrated leaders in operational performance in the Midland Basin, and we have been looking for some time to expand our asset base, in the right location under the right terms. This is a negotiated transaction for assets in Howard County, a region of the Midland Basin that is emerging as a top tier area for well performance.

    “Our operational expertise in the region can be immediately applied to the acquisition assets. We expect that the implementation of pad drilling, reservoir modeling, zipper frac’s, and leading edge completion technologies will add value from the start. We anticipate running one rig in the area in the fourth quarter of 2016 and two rigs throughout 2017. As a result, we are increasing our estimate of total capital spend for 2016 by approximately $15-20 million.

    “Continued portfolio management, concentrating capital allocation to highest return programs and operating at peer leading performance levels will allow us to generate higher company-wide margins, cash flow growth and value creation for our shareholders going forward.”

    The transaction is expected to close on October 4, 2016, with an effective date of September 1, 2016 and will be subject to customary purchase price adjustments. The closing of the transaction is subject to the satisfaction of customary closing conditions, and there can be no assurance that the transaction will close on the expected closing date or at all.

    As provided above, average production represents the July 2016 average, on a 3-stream basis, and proved developed producing reserves are estimated by SM Energy and have not been verified by a third party.

    Jefferies served as lead financial advisor to Rock Oil LLC. Petrie Partners also acted as a financial advisor to Rock Oil.
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    Ending $4 Billion U.S. Oil Subsidy Seen Having Minimal Impact

    Eliminating $4 billion of petroleum subsidies in the U.S. would have only a minor affect on oil production and demand and boost the country’s influence in advocating global climate change action, according to a report for the Council on Foreign Relations.

    Withdrawing oil-drilling subsidies could cut domestic production by 5 percent by 2030, which could increase international oil prices by just 1 percent, Gilbert Metcalf, a professor of economics at Tufts University, said in the report. Local natural gas prices could rise as much as 10 percent, while both production and consumption would probably fall as much as 4 percent, according to the report.

    The viability of the three main oil and gas subsidies in the U.S. has been debated for years. Environmental groups argue that eliminating state support would not only increase government revenue but also push the country toward mitigating climate change. The industry says any changes would lead to large declines in domestic production and cut many jobs. The oil price crash over the last two years has made the U.S. oil industry more vulnerable, enhancing its argument for keeping the subsidies.

    Metcalf concluded that “U.S. energy security would neither increase nor decrease substantially” if the three subsidies were repealed. The effect on oil consumption would be “even less noticeable,” implying “emissions of greenhouse gases that cause climate change would not change substantially,” he said.
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    BP Suit Over Supply Deal Spurs Claim of Oil-Market Rigging

    A firm owned by two Wall Street commodity market veterans has accused oil giant BP PLC of manipulating the crude market on a single day in 2014 to get a better price on a deal it was negotiating with them.

    The company, controlled by Kaushik Amin and Neal Shear, pioneers of Wall Street’s foray into commodity markets, claims BP rigged market prices on a day it was using to value a two-year crude-supply agreement, costing the firm $33 million. BP denies the allegations. The pair’s investment partnership, SilverRange Capital Partners LLC, lodged the charges through a subsidiary called NARL Refining Limited Partnership as part of a legal fight over the contract between BP and a refinery it owns in Canada.

    The price-rigging allegations, which surfaced in documents filed in New York federal court, haven’t been reported previously.

    SilverRange hasn’t yet produced evidence to support its claim that BP rigged the market. BP has previously been sanctioned in the U.S. for natural gas and propane-market manipulation. Pinning price movements in global markets on a single player will be a tough task for them, an analyst said.

    "There have been very few manipulation cases proved," said Rosa M. Abrantes-Metz, a New York University professor and market-manipulation expert who has testified in enforcement cases, including the natural gas case against BP. "The requirements are high, they’re difficult to establish.”

    BP Denial

    The claims by Amin’s and Shear’s firm "are completely without merit and have been made solely as a tactical move" in the dispute, BP said in a prepared statement. The company said it couldn’t comment further because of confidentiality rules covering the private arbitration proceeding in which the claim was originally raised. The claims were entered into public court records as part of the New York lawsuit.

    There are hundreds of traders involved in the roughly $275 billion market for the world’s two main crude contracts, making it too big to manipulate over long periods. But larger dealers can influence it at the margins, causing incremental moves by putting on significant positions when trading is thin.

    Earlier Troubles

    It’s not the first time BP’s energy-trading unit has been accused of market manipulation. Last month, BP was fined $20 million by U.S. pipeline regulators for gaming the Texas natural gas market in 2008. BP has said it plans to appeal. In 2007, the company agreed to pay $303 million to the U.S. Justice Department and the U.S. Commodity Futures Trading Commission to resolve an investigation into propane market manipulation. The company neither admitted nor denied the allegations.

    That same year, a BP trader paid $400,000 to settle CFTC civil charges that he tried to manipulate gasoline futures. He neither admitted nor denied the claims.

    Now, Amin’s and Shear’s firm is raising similar complaints in the arbitration. BP launched the arbitration case against SilverRange last year, claiming the refinery failed to produce the required amount of fuels under the contract. SilverRange sued in New York federal court in January, accusing BP of supplying inferior crude that caused damage to refining equipment.

    A judge has already denied SilverRange’s effort to force BP to continue supplying crude to the refinery, as SilverRange sought. The lawsuit has been suspended while the dispute, including the manipulation claim, remains in arbitration. SilverRange could demand that BP produce its trading records, internal communications and other evidence in an effort to back up its claim.

    Lead Traders

    Shear built the commodity franchise at Morgan Stanley, long considered one of the top-tier firms in the market, while Amin did so at Lehman Bros. Their Wall Street careers were damaged in the financial crisis. Shear, who had risen to a more senior role overseeing trading at Morgan Stanley, was demoted in 2007 following its $3.7 billion loss on mortgage securities, and left the firm soon after. Amin was cited in the Lehman bankruptcy examiner’s report as being a key figure in the use of the so-called Repo 105 accounting maneuver that the examiner said helped the firm conceal its deteriorating finances.

    After a handful of other ventures, including a stint at UBS Securities LLC where they first worked together, the two teamed up in 2013 to pursue direct ownership of energy facilities such as refineries and delivery terminals.

    Supply Deal

    They bought the Come by Chance refinery in Newfoundland and Labrador in 2014 after negotiating a two-year agreement with BP, under which the oil company would sell them crude and then buy the finished fuels. The price tag on the supply deal was tied to the closing prices of the U.S. and global Brent crude benchmarks on Aug. 1, 2014.

    As that day approached, the gap between the two benchmarks reached its highest level in a month, which benefited SilverRange, according to court records. But on Aug. 1, a Friday, it lurched in the other direction, contracting 7.5 percent over the course of the trading session, with global Brent prices dropping more sharply than their U.S. counterparts.

    According to SilverRange’s court filing, much of the move came in the final half hour of trading before the market closed for the weekend. Traders sometimes use such tactics at day’s end to drive the market in their favor, in a strategy known as "banging the close."

    SilverRange asserts the ripple sliced 50 cents-a-barrel off the value of their deal, or $32.9 million over the life of the contract.

    "BP appears to have engaged in manipulation of the crude oil markets" to force prices down and reduce their cost in the deal, the firm claimed in a court filing.

    Weak Demand

    At the time, traders and analysts attributed the market’s move to evidence of weakening demand amid the start of a burgeoning supply glut that would ultimately prompt a two-year collapse.

    But executives at SilverRange were immediately suspicious and called BP that day to ask if their trading was behind the move, according to the court records. BP assured them, according to one SilverRange filing, that "it was not responsible for the movement and reaffirmed that it would be a good partner in the relationship."

    Evidence of market manipulation has to document intent and show that the price change was directly caused by the tactic. Both private litigation and regulatory enforcement actions have often fallen short. In the CFTC’s most high-profile oil-market-manipulation case in recent years, the agency wound up settling with the defendants for $13 million -- much less than the $50 million they allegedly reaped from the scheme.

    Class Action

    A class-action lawsuit claiming BP, Royal Dutch Shell PLC, trading house Trafigura Beheer BV and others conspired to manipulate global oil benchmarks has dragged on in New York federal court for three years, through three different versions of the lawsuit and with some co-defendants being dismissed from the case. The companies deny wrongdoing.

    BP was among companies raided in 2013 and subpoenaed by European Union antitrust officials investigating rigging in the crude oil markets, but the probe ended without charges being filed.

    The case is NARL Refining Ltd. Partnership v. BP Products North America Inc., 16-cv-00404, U.S. District Court, Southern District of New York (Manhattan).

    Attached Files
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    Britons will decide how to spend $1.3 bln shale gas fund

    Britons living near "fracking" developments will be able to decide how a 1 billion pound ($1.3 billion) shale gas wealth fund should be spent, either by accepting direct personal payments or supporting projects such as railways or flood defences, the government said on Monday.

    Prime Minister Theresa May announced on Sunday that some tax proceeds from new shale gas developments could go directly into local residents' pockets, showing her support for the nascent industry that she hopes can ease Britain's growing reliance on imported gas.

    In a consultation published on Monday outlining how the shale wealth fund should be run, the government said payments to individual communities, where residents could decide what to do with the money, should not exceed 10 million pounds over the 25-year lifespan of the fund.

    Residents would be given the choice of receiving payments directly or picking a project that would help their community.

    "Local communities should be the first to benefit from the Shale Wealth Fund, and they should get to decide how a proportion of the funding is used," the government said in its consultation document.

    Britain is estimated to have plenty of shale gas resources in place, enough to cover the country's annual gas needs for hundreds of years.

    But shale gas extraction -- so called fracking -- has been slow because of local residents' and green campaigners' concerns over environmental impact and the fall in energy prices.

    In the U.S., where abundant shale gas production has started to turn the country into an exporter, landowners have directly benefited from the shale gas boom because they have rights to mineral resources.

    Payouts to communities from the wealth fund will come on top of shale gas operator payments of 100,000 pounds per exploration well and a one percent share of shale gas site revenues.

    INEOS, which controls Britain's largest shale gas sites, has pledged to increase the percentage of its revenue it would pay to communities to 6 percent. It said these payments could add up to 2.5 billion pounds.

    Shale gas developers welcomed the government's proposal.

    "The onshore oil and gas industry in the UK continues to believe that local people should share in the success of our industry and be rewarded for hosting sites on behalf of others in the country," said Ken Cronin, chief executive of the UK Onshore Oil and Gas body.

    Environmental campaigners said cash sweeteners would not convince Britons about shale gas.

    "You can't put a price on the quality of the air you breathe, the water you drink, and the beauty of our countryside," said Doug Parr, Greenpeace UK's chief scientist.
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    ExxonMobil buys stake in Eni’s Mozambique LNG development

    Italian oil and gas company Eni has reportedly sold a multi-billion dollar stake in its planned Mozambique LNG development to U.S.-based energy giant ExxonMobil. The deal is completed but it will not be announced for several months due to ExxonMobil’s request.

    According to the report, the deal could give ExxonMobil its desired operating stake in the onshore LNG export plant while Eni would retain control over Mozambique’s Area 4 gas fields feeding it.

    The gas reserves already discovered by Eni in Area 4 in the offshore Rovuma basin are large enough to feed a giant land-based LNG export plant. Eni, that is the operator of the Area 4 with a 50 percent stake, has discovered about 85 trillion cubic feet of gas in the offshore block.

    The Coral field will remain outside the scope of the deal with ExxonMobil, and Eni has earmarked LNG from the Phase I development of Coral to the UK-based energy giant BP, the report said.

    LNG World News has contacted Eni regarding the stake sale. An Eni spokesperson declined to comment.

    To remind, the Mozambique government in February approved the plan of development for Eni’sCoral FLNG project. The approval relates to the first phase of development of 5 trillion cubic feet of gas in the Coral discovery, located in the Area 4 permit.

    The plan of development, the very first one to be approved in the Rovuma Basin, foresees the drilling and completion of 6 subsea wells and the construction and installation of a floating LNG facility, with the capacity of around 3.4 MTPA.
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    Russia Sees No Need for Oil Freeze Talks Currently, Novak Says

    Russia sees no need for renewing discussion of an oil-output freeze at current crude prices, while leaving open the possibility for the future, Energy Minister Alexander Novak told journalists in Moscow Monday.

    “A basis for this has yet to develop, considering prices are still at more or less normal levels,” Novak said. “If prices will fall then that necessity will most likely arise.”

    Russia, Saudi Arabia and other major oil exporters met in Doha in April in a bid to stabilize global markets by putting caps on output. The effort collapsed as Saudi Arabia demanded that rival Iran join the pact. At the time, Iran had ruled out any limits as it ramped up production after the lifting of international sanctions.

    The Russian energy minister did not exclude the possibility that he could meet with his Saudi counterpart, Khalid Al-Falih, in Algiers next month.

    Members of the Organization of Petroleum Exporting Countries intend to talk about oil markets and potential cooperation with other producing nations at the International Energy Forum in Algiers in September, but there are no specific plans to renew the freeze, according to two delegates from the group who asked not to be identified.
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    Sound Energy boosted by Morocco gas discovery

    An Aim-listed oil and gas explorer will today claim that its prospects could be “transformed” after making a “material” discovery with a well in Morocco.

    Sound Energy, which is a member of London’s junior market, will confirm that the gas encountered by its TE-6 onshore well in the Tendrara licence in the north east of the country is a “significant” discovery and is flowing at “a highly commercial rate” of 17.5m standard cubic feet per day.  

    The company will now press on with its second well in the licence area and is planning a third for later in the year.

    “I am absolutely delighted to confirm a material commercial gas discovery at Tendrara,” said James Parsons, Sound’s chief executive who has previously spent 12 years working for oil major Royal Dutch Shell.

    He claimed that Tendrara together with the adjacent Meridja permit area, in which Sound also has a stake, “have the potential to be a material hydrocarbon province on a regional scale and therefore to transform both Sound Energy and the Moroccan gas industry”.

    Confirmation of Sound’s find at the Tendrara licence, in which it owns a 27.5pc stake, has been highly-anticipated by investors, with the explorer’s shares almost trebling in the last month to 59¾p, valuing the company at about £315m. The company will say today that the flow rate of TE-6 is “significantly above initial expectations”.  

    Sound’s partners on Tendrara include the American oilfield services giant Schlumberger and Morocco’s Oil & Gas Investment Fund. The explorer also has assets in Italy.
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    Libya Starts Work at Biggest Oil Port to Increase Output

    Libya has started maintenance work at Es Sider port, the nation’s largest oil export terminal, as part of plans to increase output from Africa’s biggest holder of crude reserves.

    Exports should resume in a month once official orders are received to reopen the port, Galal Mohamed, head of operations at Waha Oil Co. , said in a phone interview Sunday from Libya’s eastern city of Ras Lanuf. Es Sider, operated by Waha Oil, has been closed since December 2014 when armed groups attacked the port. The state National Oil Corp. has engineers and other workers at the port to evaluate damages and decide when to resume exports, NOC’s Ibrahim Al-Awami said by phone.

    “We haven’t received official orders to reopen the port and resume exports, but there were intensive meetings with the National Oil Corp. officials last week to discuss this,” Mohamed said. Six of the port’s 19 storage tanks are damaged from fighting over the last two years, he said.

    Libya is seeking to boost crude production after rival leaders agreed last month to unify the state NOC under a single management. The bulk of the country’s oil infrastructure is either damaged or straddles disputed territory as armed factions fought for control of producing fields. The nation pumped 300,000 barrels a day of oil in July, compared with as much as 1.78 million a day in 2008, three years before a revolt led to the overthrow of the regime of Moammar al Qaddafi, according to data compiled by Bloomberg.

    Oil Ports

    Waha Oil will be able to produce 75,000 barrels a day in the first six months after resuming operations, Mohamed said. Waha fields stopped producing in 2014 after the Es Sider oil port was halted. Es Sider has export capacity of 340,000 barrels a day.

    Libya’s unity government announced July 28 an agreement to pay salaries to Petroleum Facilities Guard members in exchange for reopening the ports of Es Sider, Ras Lanuf and Zueitina. The NOC said the resumption of exports from the ports and the release of budget money to the company would help boost production by more than 900,000 barrels a day by the end of the year.

    NOC is working to overcome “difficulties and technical problems in the entire oil fields,” it said in a statement on its website Sunday.
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    Western Europe’s Biggest Oil Producer Has a Surprise for Markets

    For Norway, the collapse in crude prices has a silver lining: output has exceeded expectations every month for the past two years.

    That’s likely to continue as oil companies boost efficiency and pump at full pace as revenue dwindles, according to the head of Petoro AS, the state-owned oil company that owns more than a quarter of the petroleum output in Western Europe’s biggest producer.

    “Improvement efforts and the focus on profitability have led to very high regularity,” Chief Executive Officer Grethe Moen said in a phone interview on Friday from Stavanger, Norway’s oil hub. “There’s no sign this won’t last, at least thus far.”

    Companies, led by state-controlled Statoil ASA, which operates about 70 percent of the fields, have slashed investments and sought to increase efficiency to combat a rout that has left oil prices 60 percent lower than two years ago. But even as spending on future production dwindles, current output has risen thanks to more efficient operations and past investments that have just started delivering barrels.

    Crude production in the Scandinavian nation has exceeded the Norwegian Petroleum Directorate’s forecasts each month since July 2014, while gas output has missed expectations in only three months over that time. The amount of oil pumped in the first six months of 2016 was 2.8 percent higher than expected, the NPD said in July.

    If oil production continued to exceed at the same pace for the remainder of the year, it would rise to 91.5 million cubic meters from 90.8 million cubic meters in 2015, Bloomberg calculations based on NPD figures show. That would defy a forecast drop and mean output unexpectedly rose for a second year. It would also be a third consecutive annual increase, after output halved from a peak in 2000 .

    Gas output has beaten forecasts by 12 percent this year, on pace to surpass last year’s record 117.2 billion cubic meters.

    That’s balm for the government, which is this year being forced to dip into its $880 billion wealth fund for the first time to make up for budget shortfalls. Direct income from its oil and gas fields, the cash it gets from Petoro, fell to a 13-year low in the second quarter.

    For now, it’s hard to know how much of the companies’ cuts are actually lasting improvements, the Petoro CEO said. Savings need to be found in areas where they don’t only hurt the supply companies, which have been put under tremendous pressure to reduce the prices they charge for services and equipment from engineering and drilling to catering and platform construction.

    “You also need to talk about real efficiency improvements,” Moen said. “It’s important to have a sustainable supplier industry in Norway, which can both deliver efficient products and develop the new technology that allows us to take the next step forward.”

    Referring to the merger of Det Norske Oljeselskap ASA and BP Plc’s Norwegian unit, Moen said it wouldn’t be “unnatural” that the market downturn also led to a change in the industry structure through more transactions.

    “What’s important to us is that we have a diversity of companies that have the ability to implement projects,” she said.
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    China fuel exports hit record in July, crude imports up 1.2 pct

    China fuel exports hit record in July, crude imports up 1.2 pct

    China's fuel exports rose to a record in July as easing demand growth and a surplus in refined oil products pushed refiners to increase shipments to overseas buyers.

    The refined fuel exports surged 52.3 percent from a year ago to a monthly record 4.57 million tonnes, data from the General Administration of Customs showed on Monday.

    China imported 2.08 million tonnes of oil products in July, down 13 percent from last year, leaving net exports at 2.49 million tonnes, or 562,258 barrels per day (bpd).

    China's exports of fuel products have risen sharply this year, up around 46 percent for the January-July period, reflecting this year's swelling refinery throughput at private oil processors and adding to worries that refining margins might come under persistent pressure.

    "Growth in China's fuel exports will be strong throughout the third quarter," a Beijing-based trader said. "Refiners are starting to tighten crude runs as well as increase exports to balance the surplus in the domestic market."

    The domestic oil product surplus and rising crude stockpiles are dragging on growth in crude oil imports, which rose just 1.2 percent from a year ago to 31.07 million tonnes in July, or about 7.32 million bpd, the customs data showed.

    On a daily basis the volume was the lowest since January, and down from June's 7.45 million bpd. It was the second month that annual growth in crude imports had eased.

    Thomson Reuters' Research had estimated July's crude imports

    China's private or independent refiners, known as teapots, have been a main driver of crude imports, ramping up refinery runs despite the oil product glut and accounting for over half of incremental crude oil purchases in the first half of 2016.

    International trading houses as well as major oil exporting countries are eyeing this new group of crude buyers, who are rushing to fulfil their import quota before the year end.

    The National Iranian Oil Company (NIOC) sold a 2 million-barrel cargo to teapots in July, following rare shipments to the independents from Saudi Arabia and Kuwait.

    For the first seven months of the year, China imported 217.6 million tonnes of crude oil, or 7.46 million bpd, up 12 percent.
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    The oil rig count keeps growing in Texas

    Companies added more drilling rigs to the Texas oilfields as the total U.S. rig count continues to grow.

    The number of rigs actively seeking oil grew by seven this past week, and all of them in Texas’ Permian Basin or Eagle Ford shale. The overall rig count only grew by one, because the amount of rigs drilling for natural gas fell.

    The total rig count is now at 464 rigs, up from an all-time low of 404 rigs in May, according to data from the Baker Hughes oil field services firm. Of the total tally, 381 of them are primarily drilling for oil.

    The resilient Permian Basin in West Texas added five rigs in the past week, while the Eagle Ford tacked on four additional rigs. However, northern Texas’ Barnett shale lost a rig, as did Colorado’s DJ-Niobrara region.

    Despite this week’s jump, the oil rig count is down 76 percent from its peak of 1,609 in October 2014 before oil prices began plummeting.

    Apart from the Permian, other additions included three more rigs in Texas’ Barnett shale, two in the Eagle Ford, and one in the Granite Wash in the Texas Panhandle

    After dipping below $40 a barrel early this week, the price of crude oil has since rebounded to nearly $41.50 a barrel. The price of U.S. oil hit a low $26.21 on Feb. 11.
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    Iran oil storage

    The amount of Iranian oil on floating storage has decreased by

    2.0 M Barrels

    As the Navarz leaves the fleet

    The Current Amount Of Oil Stored

    46.6 M Barrels

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    Crew Energy announces second quarter 2016 results

    Crew Energy Inc. is pleased to announce our operating and financial results for the three and six month periods ended June 30, 2016, and an update on the Company's continued progress developing our world-class Montney assets in northeast British Columbia.


    Achieved production of 21,950 boe per day, 24% higher than the same period in 2015, and 8% lower than the previous quarter, reflecting reduced capital spending, lower activity levels and the continued shut-in of uneconomic production during the second quarter;

    Generated funds from operations of $16.0 million ($0.11 per diluted share), 37% higher than the first quarter of 2016, primarily attributable to materially lower cash costs and improved oil and liquids pricing;

    Lowered total cash costs per boe by 28% over the same period in 2015, highlighted by a 31% reduction in operating costs per boe, a 42% reduction in general & administrative expenses per boe, and a 62% reduction in royalties per boe year over year;

    Successfully lowered operating costs to $6.04 per boe, 6% lower than the previous quarter, with operating costs at Septimus and West Septimus ('Greater Septimus') falling 9% from first quarter 2016 to average $4.02 per boe;

    Completed our second quarter capital program investing $15.1 million in the quarter with approximately 84% allocated to drilling, completions, equipping and tie-in, including approximately $7.6 million that was directed to completing wells at Greater Septimus;

    Continued to enhance drilling and completion techniques at Greater Septimus, achieving record low well costs between $3 and $3.5 million to drill, complete, equip and tie-in;

    Improved completion design in three wells at West Septimus which materially improved flow test rates that averaged 11 mmcf per day over a five to eighteen day flow test period at an average flowing casing pressure of 1,120 psi;

    Successfully completed a well at Septimus in a new Lower 'B' Upper Montney Stratigraphic interval that achieved a production rate of 8.7 mmcf per day at an average flowing casing pressure of 1,730 psi at the end of a five day test period; and

    Maintained ongoing financial flexibility and a strong balance sheet with quarter-end net debt that was $3.1 million lower than the previous quarter at $242.7 million, including $150 million of senior notes (including deferred financing costs) and $97.2 million of bank debt or 41% drawn on the Company's $235 million credit facility
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    Iran eyes European gas exports through German trader

    The National Iranian Gas Co. (NIGC) is in talks with a “well-credited” unnamed German company concerning gas trading, a deal that could pave the way for exports and gas shipments to Western Europe, Kallanish Energy understands.

    According to Iranian state news agency Shana, NIGC’s director of international affairs, Azizollah Ramezani, said “talks are underway for Turkmen gas swap with Azerbaijan through a private company.”

    The official added Iran aims to increase its global gas trade and is currently negotiating with Oman, Kuwait and the UAE. The Iranian ambition to expand its global share will cover liquefied natural gas (LNG) markets in Turkey, Armenia, Azerbaijan, Afghanistan, eastern and western Europe, India, China and Southeast Asia, he said.

    Major international firms such as Gazprom, Siemens, SK Telecom and Kogas have already signed contracts with NIGC, covering cooperation in natural gas, LNG, financing, natural gas storage among others, Ramezani revealed.
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    China-Bound VLCCs Surge to 3-Month High

    China-Bound VLCCs Surge to 3-Month High: BBG. Last gasp to fill the SPR?

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    Total commences production at Bolivian gas field

    Total has released a statement claiming that it has started production at the Incahuasi gas and condensate field in Bolivia. The development is the company’s first in Bolivia, and has a production capacity of 50 000 boe/d. The field is located over 5600 m beneath the Andean foothills, and 250 km from Santa Cruz de la Sierra, Bolivia. The development is operated by Total (50%), alongside partners Gazprom (20%), Tecpetrol (20%) and YPFB Chaco (10%).

    The President of Total Exploration & Production, Arnaud Breuillac, said: “Incahuasi is one of the largest gas and condensate fields brought on stream in Bolivia. Incahuasi’s production will contribute to Bolivia’s gas exports to Argentina and Brazil as well as domestic consumption.

    “Delivered within budget, Incahuasi is the fourth start-up this year and as a low-cost project with a long production plateau, it will contribute to the Group’s production growth in 2016 and beyond.”

    The first phase of the field development will involve three wells, a gas treatment plant and 100 km of associated export pipelines. The second phase is currently being considered, and would involve an additional three wells.
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    Baker Hughes announces July 2016 rig counts

    Baker Hughes Incorporated announced today that the international rig count for July 2016 was 938, up 11 from the 927 counted in June 2016, and down 180 from the 1,118 counted in July 2015. The international offshore rig count for July 2016 was 226, up 3 from the 223 counted in June 2016, and down 38 from the 264 counted in July 2015.

    The average U.S. rig count for July 2016 was 449, up 32 from the 417 counted in June 2016, and down 417 from the 866 counted in July 2015. The average Canadian rig count for June 2016 was 94, up 31 from the 63 counted in June 2016, and down 89 from the 183 counted in July 2015.

    The worldwide rig count for July 2016 was 1,481, up 74 from the 1,407 counted in June 2016, and down 686 from the 2,167 counted in July 2015.
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    Oil Refiners Cry Foul as ‘RINsanity’ Returns Amid Margin Squeeze

    While oil is mired in a bear market, prices in an obscure corner of the fuel world are only going higher.

    Renewable fuel credits surged 32 percent in the past two months, even as oil slumped. This year, U.S. refiners from CVR Refining LP to Valero Energy Corp. will pay $1.8 billion for the credits, known as RINs, adding to the pain of the lowest summer profit margins in five years. The market has gotten so frothy that fuel makers are looking to increase exports to avoid the cost and ethanol lobbyists are calling for an investigation into potential price manipulation.

    "RINs continue to be an egregious tax on our business and have become our single largest operating expense, exceeding labor, maintenance and energy costs," Jack Lipinski, chief executive officer of CVR Refining, said last week in the company’s second-quarter earnings call. "As a matter of fact, RINs are double our labor cost."

    A Renewable Identification Number, or RIN, is created along with each gallon of ethanol or biodiesel that’s produced. Refiners and importers need to meet a biofuel quota set by the government, either through blending fuel with ethanol or buying RINs. Companies that don’t operate retail gasoline stations are feeling a growing financial burden from the rising costs, as they are unable to generate the credits by blending biofuels with the petroleum-based fuels they produce.

    Prices for 2016 ethanol credits rose to 97.75 cents July 13, according to data from Progressive Fuels Ltd. compiled by Bloomberg, and were pegged at 91.25 cents Wednesday. The credits last rose this high in 2013, when government quotas for using biofuels such as ethanol were increasing faster than gasoline demand, leaving fuel makers with an obligation they couldn’t meet by blending ethanol into gasoline. This year, similar fears of a credit shortage are driving prices higher.

    The 2016-vintage credits are forecast to average 95 cents each this quarter, the highest quarterly cost on record, according to Tudor Pickering Holt & Co. The prior high was set in the third quarter of 2013 at 85 cents, during the summer of RINsanity.

    "It’s called RINsanity the sequel," said Andy Lipow, president of Houston-based Lipow Oil Associates LLC. "The reason that it’s the same as 2013 is because we see an ever-increasing amount of renewable fuels being mandated into a pool that, for a variety of reasons, cannot be accommodated."

    Program Complaints

    On Thursday, the American Fuel and Petrochemical Manufacturers trade group petitioned the Environmental Protection Agency to shift the responsibility of program compliance with distributors who blend gasoline with ethanol for delivery to filling stations, not with refiners who make the petroleum-based fuels. The appeal comes six months after Valero, the country’s largest independent refiner, sued the agency that enforces Renewable Fuel Standard program. Valero and the others believe the blending program needs restructuring to even the playing field.

    "The simple fact is that RINs were intended to be a certificate of compliance under the RFS, not a method of extracting value or creating winners and losers based on asset configuration in the value chain," George Damiris, HollyFrontier Corp.’s chief executive officer, said on the company’s second-quarter earnings call.

    This week the biofuel industry’s top lobbyist, the Renewable Fuels Association, urged Timothy Massad, the U.S. Commodity Futures Trading Commission Chairman, to investigate potential manipulation in the RIN market.

    "While various theories have been advanced, the real reasons for this dramatic increase in RIN prices remain unclear. Basic market fundamentals suggest RIN prices should have remained stable — or fallen — following the proposal’s release," Bob Dinneen, president of the Renewable Fuels Association wrote.

    Goldman Sachs analyst Neil Mehta downgraded PBF Energy Inc. to neutral in late June, citing higher RIN costs. "We view higher RINs prices as a headwind for merchant refiners without large retail/wholesale businesses," Mehta wrote in a June 29 note.

    More Exports

    Merchant refiners like PBF and Valero may find some relief from rising RIN costs by exporting the fuels that would otherwise come with an obligation to buy the credits. And just as exports provide relief from RINs, some importers of gasoline and diesel will bear a bigger burden.

    "Since fuel importers incur a liability to hold RINs for the gasoline they send to the U.S., the rising price of the credits is a potential stumbling block for importers," Robert Campbell, head of refined products research at Energy Aspects, wrote last month. Campbell also noted that prices fell sharply after 2013’s surge.

    "Pricing in the RINs market is notoriously opaque and volatile, and we would not be surprised if prices were to fall back suddenly," he said.

    PBF has been taking steps to increase its export capabilities in refineries acquired from Exxon Mobil Corp. Gasoline export cargoes began to depart from Chalmette, Louisiana, in the first quarter after PBF made repairs to the marine facilities that Exxon left in "disrepair." The newly-acquired Torrance, California, refinery near Los Angeles may also provide fresh outlets for PBF’s gasoline.

    "Very, very importantly, we want to get into the export market," Thomas Nimbley, PBF’s chief executive officer, said on the company’s second-quarter earnings call. We see the benefits "both from a RINs perspective and an overall netback standpoint," he said.
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    Trafigura extends credit to China teapots to boost crude sales -sources

    Trafigura has extended the credit period for two independent Chinese refiners to buy crude, marking a more aggressive push by the global commodity trader to
    feed the growing appetite of so-called "teapot" refiners to import oil, sources said.

    Trafigura has sold at least 3 million barrels of Latin American crude, worth around $125 million at current benchmark prices, to teapots Shouguang Luqing Petrochemical Co Ltd and Huifeng Petrochemical Group, according to three trading sourcesm with knowledge of the transactions.  

    Delivered in May and June, Trafigura allowed the buyers to pay for the cargoes 90 days after loading, said these sources.  

    Normally suppliers offer a tighter 30 to 60 days to make payment.

    Teapots, which have boosted their imports after Beijing granted them import permits, are hungry to secure financing but the rush to purchase by the relatively inexperienced buyers has increased trading risks with cases when deals have soured.
    One trader with knowledge of the recent Trafigura deals said that these type of deals should suit the Swiss trading house given its extensive operations but other suppliers might not be prepared to conduct similar trades.

    "We will look very closely at how these deals unfold," another source, a senior oil banker, said. A Trafigura spokeswoman declined to comment when asked to
    confirm these deals.
    Under a "third-party processing" agreement, the Chinese counterparts committed to supply Trafigura with refined fuel,mostly gasoline, allowing the transactions to enjoy taxexemptions for the crude inflows and refined fuel exports, according to Chinese customs rules.

    Under one of the deals, Trafigura sold 1 million barrels of Venezuelan Merey crude to Shouguang Luqing, a 60,000-barrel-per-day refinery in eastern Shandong province, and received a commitment for 50,000 tonnes of gasoline, according
    to a Luqing procurement manager.

    Trafigura also sold to Huifeng Petrochemical, a 116,000-bpd teapot refiner, 1 million barrels of Colombian Vasconia crude and 1 million barrels of Argentinian Escalante, under the same terms, according a Huifeng official.

    Trafigura has emerged as one of the world's leading oil trading companies. It was the first to sell Iranian oil to teapots, selling part of a 2-million-barrel cargo on the Olympic Target tanker to at least two refiners.

    The first teapot crude import licences were only granted last year and they have become a key driver behind the 14 percent rise in China's oil imports and its bulging fuel surplus.

    Chinaoil, trading arm of China's state-run PetroChina, in July clinched a similar deal with Huifeng to supply 200,000 barrels of crude on credit and offtaking 10,000 tonnes of gasoline, said a trader with direct knowledge of the matter.
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    Alternative Energy

    Europe Aims to Close Loophole on Wood Energy

    European officials are moving to close a loophole that promotes the burning of wood for electricity by an industry that’s felling American trees, and a new report they commissioned has laid bare the urgent need for reform.

    European Union climate rules treat woody biomass energy as if it’s as clean as solar or wind energy, despite it releasing more heat-trapping carbon dioxide for every megawatt of electricity produced than coal. Producing wood pellets for fuel can also foster climate-changing deforestation.

    The European Commission, which advises European Union lawmakers, last week identified myriad environmental hazards from the transatlantic wood energy trade in a 361-page report.

    The loophole in Europe’s climate policies is a veritable accounting error that has led to national energy subsidies that are financing a burgeoning industry. The subsidies are paying for wood pellet fuel to be produced at newly built mills in the American South, where trees are plentiful and forest protections are minimal.

    Without reducing climate pollution, the industry is helping European countries meet European Union rules on carbon emissions, if only on paper.

    Dozens of Southern mills produced an estimated 5 million tons of wood pellets that were exported to Europe last year, with production growing by a third on average each year since 2012. Producing each ton of dried wood pellets requires roughly twice that amount of freshly cut wood.

    “The U.S. is the main exporter of wood pellets to the EU,” said Daniel Calleja Crespo, who directs the European Commission’s environmental department, which commissioned consultants to produce the report. “The growth of the industrial pellet industry has raised concerns about possible negative environmental impacts — direct and indirect.”

    The report was commissioned to help guide a European Union effort to update climate and energy policies after 2020, when a new global treaty on climate is expected to take effect.

    Under the Paris Agreement, which is a climate pact that was finalized during U.N. negotiations in France in December, the European Union pledged to reduce its climate pollution by 40 percent in 2030, compared with 1990 levels.

    While the findings were characterized as “exploratory” in the new report, due in part “to the short time period over which the wood pellet industry has emerged in the U.S,” the researchers identified a number of “policy risks” from the transatlantic wood energy trade. Those included “biodiversity loss, deforestation and forest degradation” in the U.S., and “not meeting” reductions in greenhouse gas pollution at power plants in Europe.

    Environmental groups who have been rallying to protect America’s forests and the climate from industrial wood energy use in Europe lauded the report as an important step forward.

    Adam Macon, a campaigner with the North Carolina-based nonprofit Dogwood Alliance, which works to protect Southern forests, called the report the “clearest acknowledgement” yet from European officials about the environmental impacts of their growing reliance on wood energy.

    “The report broadly confirms the growing understanding that industrial scale bioenergy and subsequent wood pellet production is bad for the forests, climate, and communities,” Macon said. “Any increase in wood pellet production is going to have much more negative consequences than any sort of potential benefits.”
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    Interserve to exit energy-from-waste business after 70 mln stg charge

    Interserve Plc, a British support services and construction company, said it would exit its energy-from-waste business, after it took a 70 million pound ($91 million) charge in the first half from cost overruns and delays in a contract in Glasgow.

    Shares in the company were up 16 percent at 375.93 pence at 0913 GMT on the London Stock Exchange.

    Interserve also said its outlook for the full year remained unchanged despite the increased political and macro-economic uncertainty following Britain's vote to leave the EU.

    The company, whose activities range from providing care services for people in their own homes to building repairs at Britain's Sandhurst military academy, said the energy-from-waste business has six contracts signed between 2012 and 2015, with total whole-life revenue of 430 million pounds ($561 million).

    "Every pound of revenue is valuable of course, but we are interested in the revenue that we generate profit from, not the revenue that we generate losses from," Chief Executive Adrian Ringrose told Reuters.

    "I think exiting that part of our business will be a very beneficial thing to do," he added.

    Interserve said it expects to complete these contracts during 2017 and the impact of these contracts on its income statement would be contained within the previously announced charge.

    Ringrose said there was "limited" forward market opportunity in industrial projects in the next few years, adding that the company would not have earned a "great deal of work" from the sector in any event.

    The outsourcing company also reported a 2.1 percent rise in headline operating profit to 62.9 million pounds in the six months ended June 30.

    "It is a little too soon to tell how Brexit is going to play through, but certainly we can see why it might generate opportunities much as it might generate risk," Ringrose said.

    Ringrose said the formation of a new department of state in the UK to negotiate and implement Brexit offered Interserve opportunities.

    "We are in the business of servicing the government and its properties, the civil servants that work in it," he added.

    The weakness in the sterling would also help Interserve, which earns a third of its revenue from outside the UK, Ringrose said.

    Ringrose also said Interserve would benefit from the fact that it offers services that customers need, rather than those that are "entirely discretionary".

    "We keep the lights on, we keep people safe, we keep people warm. Clients need to keep spending money on the sort of services we deliver," he said.
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    Italy's Enel to accelerate hydroelectric projects in Brazil

    Enel Green Power, controlled by Italy's Enel, plans to accelerate by one year the beginning of operations at three hydroelectric projects requiring investments of 1 billion reais ($316 million) in Brazil's Mato Grosso state, the company told Reuters on Tuesday.
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    SunPower expects to post a loss in 2016, cuts revenue forecast

    SunPower Corp, the No. 2 U.S. solar panel maker, said on Tuesday it now expects to report a loss in 2016 and cut its adjusted revenue forecast, sending its shares plummeting as much as 31 percent in after-hours trading.

    SunPower also said it would cut about 1,200 jobs, or about 15 percent of its workforce, as its realigns its power plant business and manufacturing operations.

    The company, majority owned by French energy giant Total SA (TOTF.PA), said it now expects to post a loss of $25 million to$175 million. It had earlier forecast to at least break even or a profit of up to $50 million.

    SunPower cut its full-year revenue forecast to $3 billion to$3.2 billion from $3.2 billion to $3.4 billion and said it expects to deploy fewer projects and modules in terms of gigawatts.

    The company develops and sells large-scale solar projects and provides related services in its power plant business. Revenue in the business tumbled 12.6 percent to $144.9 million in the second quarter.

    The business was hit after U.S. lawmakers late last year extended federal tax credits, which boost residential and commercial solar installations, beyond 2016. That reduced customers' urgency to complete new projects this year, SunPower said.

    Prices of power purchase agreements have also trended lower due to increasing competition, especially from Chinese solar companies. The prices may not drop any lower but may not trend higher either, Chief Executive Tom Werner told Reuters.

    "I'd be surprised if it went any lower ... I don't think there will be a significant uptick but I think it will rationalize and stabilize over few quarters," said Werner.

    He also said that he would reduce his cash salary and bonus to $1 for the rest of 2016.

    The company expects the realignment and job cuts to result in restructuring charges of $30 million to $45 million, mostly in the current quarter.

    SunPower also said it will reduced its remaining minority stake in a solar project in California to 8point3 Energy Partners LP (CAFD.O), a joint venture between SunPower and First Solar (FSLR.O).

    SunPower's quarterly net loss attributable to shareholders was $70 million, or 51 cents per share, compared with a profit of $6.5 million, or 4 cents per share, a year earlier.

    Excluding items, it lost 22 cents per share. Adjusted revenue rose 6.7 percent to $401.8 million.

    Analysts had expected a loss of 24 cents per share and revenue of $345.08 million, according to Thomson Reuters I/B/E/S.
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    Wave and tidal energy taking “enormous strides” towards commercialisation

    There remains much to be positive about in both wave and tidal energy in Scotland.

    Both industries have taken enormous strides forward in the last 12 months, and we are now closer to commercialisation than ever before.

    Turning first to the tidal industry; progress on the MeyGen project – the world’s largest tidal stream development – continues apace in the Pentland Firth.

    At the time of writing, the first turbine to be installed at the site had just left the factory and was making its way to Nigg Energy Park, the project’s base for turbine assembly.

    The work at Global Energy’s Nigg base is just one of a series of contracts secured by the Scottish supply chain from the MeyGen project.

    Home-grown companies such as Thurso’s JGC Engineering, John Gunn and Sons and Leask Marine have also benefited from this world-leading development, variously working on cable installation and providing the steel structures for the underwater turbines.

    In Shetland, Scottish Renewables member Nova Innovation has already successfully deployed and operated two grid-connected tidal turbines, and is in the process of deploying another of the world’s first tidal arrays in the seas off the islands.

    Not content to stop at tidal turbines, the business is also developing energy storage solutions. Nova’s batteries enable tidal and other renewable technologies to be deployed on weak grids and generate off-grid, and are designed to optimise the technical and financial performance of the technologies with which they work.

    In Orkney, the 200MW Brims Tidal Array is a joint venture between OpenHydro and SSE which will be built off the south coast of the island of Hoy, in some of the strongest tides in the UK.

    That project submitted an application for consent earlier this summer (June), marking a significant milestone for another commercial-scale tidal stream development in Scottish waters.

    Having moved their operational base from the Isle of Wight to Orkney, Sustainable Marine Energy announced its plans to deploy a 240kW second-generation PLAT-O platform at the European Marine Energy Centre, with production also taking place in Scotland.

    SME’s existing investors have been joined by the German Tidal Turbine Manufacturer SCHOTTEL HYDRO, with Scottish Enterprise increasing its investment to provide the funding required to take the development of PLAT-O through the next phase, as well as proving the commercial viability of community-scale arrays.

    In wave energy, Wave Energy Scotland is now already advancing towards its third round of developments. The organisation is already supporting 17 power take-off projects and eight novel wave energy converters, with a further four projects underway in related research fields.

    Beneficiaries of that funding include AWS Ocean Energy, who’ll use almost £285,000 to improve the performance of the Archimedes Waveswing; and Checkmate Seaenergy, whose Anaconda device uses water pressure to generate electricity.

    Scottish Renewables member Albatern received almost £260,000 from Wave Energy Scotland to continue development of its WaveNET array system, and has big plans for the already-proven design.

    The first WaveNET array was deployed off the Isle of Muck with Marine Harvest (Scotland) in 2014. The array was made of three 7.5kW Squid wave energy converters, and provided power to Marine Harvest’s Am Maol salmon farming site.

    Today the company is working on scaling-up the size of the Squid – to around 75kW per unit – meaning it would be possible to deploy arrays of 10MW and above.

    Those plans received a boost in April (2016) when it was announced the project would receive Scottish Government WATERS funding of £1.8 million.

    These developments aside, however, the industry is also facing challenges.

    Along with many other renewable energy technologies, questions remain around funding regimes, particularly around the details of forthcoming allocation rounds which provide access to the Contracts for Difference mechanism.

    And with so much positive support from Europe, June’s Brexit vote clearly provides another challenge to an industry already wrestling with policy and funding issues at a UK level.

    This issue – and many others – will be debated at Scottish Renewables’ annual Marine Conference in Inverness on September 13.

    Building on the success of the International Conference on Ocean Energy, which saw thousands of delegates from all over the world visit Edinburgh for the sector’s most important international conference in February (2016), our event will debate the opportunities and challenges currently facing the wave and tidal industries while exploring the cutting edge initiatives in Scotland that are propelling the industry forward.

    Among other topics, we will examine Wave Energy Scotland’s work to accelerate the development of wave energy technology, and what issues they will tackle moving forward, as well as how tidal developers are mitigating construction risks as we build the first tidal arrays.

    Speakers will include Artemis Intelligent Power’s Jamie Taylor, who will discuss how Wave Energy Scotland is streamlining the sector’s technical development, and Andrew Scott, CEO of Orkney-based Scotrenewables Tidal Power, who’ll talk about Optimising Tidal Technology to deliver best returns.

    Delegates will also hear from industry leaders on their priorities for the year ahead, as well as enjoying networking at an informal dinner.

    Students from the University of the Highlands and the Islands’ Marine Energy Research Innovation and Knowledge Accelerator project will host a breakfast before the programme proper kicks off.
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    Forecasts for more solar and wind supply curb spot

    European prompt power prices fell on Tuesday on forecasts of higher solar and wind power output in Germany, more nuclear reactor capacity in France, and lower demand.

    "We're truly in the middle of the annual holidays while nuclear supply is up day-on-day," one trader said.

    German baseload power for Wednesday delivery was 1.95 euros lower at 27.25 euros ($30.21) per megawatt-hour (MWh) while the equivalent French contract was 1.7 euros lower at 27.4 euros.

    Weather patterns that drive output at wind and solar plants are currently very changeable, although broker Marex Spectron said in a note it was short-term bullish.

    Cold air was forecast to be arriving in the region during the next few days, cutting average temperatures quite significantly, which "could increase demand," it said.

    Thomson Reuters data showed that solar power output in Germany will likely rise to 7.2 gigawatts (GW) on Wednesday compared with 4.8 GW recorded on Tuesday.

    Wind supply would gain 1.1 GW to stand at 6.7 GW on Wednesday.

    Demand was forecast to fall by 0.2 GW in Germany and by 1 GW in France, the data showed.

    In the French nuclear sector, availability went up by 4.9 percentage points to 68.5 percent of the total.

    Forward power prices were boosted by firmer levels in the coal and gas forward markets.

    German baseload power for delivery next year, gained 55 cents to 27 euros/MWh.

    The equivalent French contract, which is less liquid, rose by 35 cents to 32.45 euros/MWh.

    Crude oil prices fell on continued worries of a global supply glut and profit-taking, which outweighed upward momentum from a possible meeting of oil producers to discuss supply.

    European coal for 2017 delivery jumped 4.6 percent to $59.4 a tonne, having recently lost sight of the $60 level.

    Front-year EU carbon allowances shed 2 percent to 4.85 euros a tonne.

    In eastern European power, the Czech year-ahead position rose 25 cents to 27.45 euros, while the day ahead lost 1.5 euros to 28.75 euros.
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    Apple approved to enter power market

    Apple has won permission from federal regulators to sell excess electricity that is generated by three of its major solar projects.

    The Federal Energy Regulatory Commission, or FERC, on Thursday approved an application from Apple’s energy subsidiary to sell electricity in six regional power markets around the country at market rates.

    The move into outright selling of energy follows on from the company’s efforts in recent years to supply its data centers with renewable power. One example of that is the $850m spent last year on a 130 MW solar farm near San Francisco.

    Apple also owns 20 MW of generation in the Nevada Power Company service area and 50 MW in the Salt River Project service area in Arizona, according to the FERC order. All of Apple’s data centers are now powered by renewables.

    In granting approval, the commission determined the company did not raise the risk of being able to unfairly hike up power prices.

    The iPhone maker is among a group of companies investing in energy projects in a bid to tackle global warming and cut electric bills. Google, Microsoft Corp. and Inc. are backing wind turbines and solar farms to power their operations and lower their carbon footprint.
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    Affordable solar schemes light way to energy for all in Zimbabwe

    Innovative ways to pay for solar power systems could make clean energy affordable for many of Zimbabwe's 1.5 million households that lack electricity, campaigners say.

    Zimbabwe produces only around 60 percent of the electricity it needs when demand is highest, and relies on costly imports to make up some of the shortage, particularly when drought hits hydropower facilities, as happened this year.

    That means solar panels and other clean energy sources not connected to the southern African nation's power grid are likely the cheapest and fastest way to bring electricity to those without it, say sustainable energy experts.

    “Only focusing on grid extension and increasing generation capacity will not allow us to attain energy access for all by 2030,” said Chiedza Maizaiwana, manager of the Power for All Zimbabwe Campaign.

    To meet the internationally agreed goal, so-called “decentralised” renewable energy is “a critically needed solution”, she told the Thomson Reuters Foundation.

    “It is imperative that we create the opportunity for families and businesses to access (these) services rapidly and affordably,” she said.

    Getting connected to the grid in a rural area can cost thousands of dollars, a huge obstacle when many people earn between $20 and $100 a month, said Ngaatendwe Murimba, a program officer for Ruzivo Trust, a non-governmental organization (NGO) working to improve rural energy access.

    But families without electricity do pay for energy, buying firewood or charcoal – which drive deforestation – batteries, or polluting fuels such as paraffin.

    A 2012 study by SNV, a Dutch anti-poverty NGO, found that a rural household in Zimbabwe spends on average $26 a month on lighting, communication and entertainment, including $8 to $15 on kerosene and candles alone.

    A home solar system that can produce enough power to run lights, a radio and a television costs about $500, said Honour Mutambara, a renewable energy manager with SNV in Zimbabwe.

    That’s one reason only a fifth of households in Zimbabwe use solar energy, he said.


    Simba Mangwende, a renewable energy director with the Ministry of Energy and Power Development, told a workshop in June the market for decentralised renewable energy is “abundant but it is being curtailed by deprivation of cheap sources of finance”.

    Zimbabwe lacks clear-cut policies and targets for renewable energy, and is still developing a feed-in tariff, deemed key to attracting investor participation in the sector.

    If families are to afford clean energy in the short term, innovative business models are needed, such as pay-as-you-go or rent-to-buy solar systems, experts say.

    Jonathan Njerere, head of programs in Zimbabwe for charity Oxfam, said that in Gutu district, 230 km east of Harare, his organization and others had helped set up a community-owned, self-financing solar energy scheme.

    It has enabled more than 270 farmers to irrigate about 16 hectares (39.5 acres) of crops.

    Oxfam gave the community solar equipment for irrigation and an initial batch of solar lanterns, which were sold to members. The proceeds were pooled in a savings and lending scheme, allowing others to join and buy solar products for home and business use.

    Community funds are used to purchase solar equipment for sale to the public through energy kiosks, and the revenue is kept for repairs and relief in natural disasters.

    Njerere said the program, assisted by 2 million euros ($2.22 million) from the European Union, had helped chicken farms, fisheries, tailors and shopkeepers acquire hire-purchase solar panels, so they can work in the evening as well as during the day.

    Other entrepreneurs use the solar panels to sell mobile phone charging services for $0.20 a time.


    Jeffreti Chara operates his sewing business with a $700 home solar system bought on credit from the community scheme, which powers a sewing machine and lights his three-bedroom house.

    He paid $50 upfront, and is now paying $20 each month, covering $290 of the loan so far.

    “Production has improved dramatically since I started using a solar-powered machine, boosting my income from around $50 to $90 a month,” said Chara, who mostly sews uniforms.

    “Solar energy has improved my family’s quality of life such that there is not much difference between us and people in the urban areas,” he added.

    Servious Murikitiko, an energy kiosk chairperson, said the solar scheme had brought clean, affordable energy to the community, allowing children to read at night and schools to introduce computer lessons, while providing entertainment and extra income to homes and businesses.

    Households purchase what they can afford, he added, with some paying just $4 a month to acquire solar lanterns.

    More than 32,000 people have benefited from solar power across the district.


    SNV’s Mutambara estimates Zimbabwe's potential market for solar lanterns at $33.7 million and that for solar home systems at $235 million.

    But few lenders and solar companies have tried their luck in rural areas due to a perception of limited customers, as well as high transaction costs and risk, he said.

    Providing subsidized solar equipment would hugely improve uptake, Ruzivo Trust’s Murimba said.

    Communities are asking for free installation of solar systems, zero taxes on solar equipment, and government-accredited dealers who can provide them with quality solar equipment and technical support, he added.

    One local company had to discontinue a popular package including a mobile phone and a $45 solar lamp. It sold some 400,000 lights to around a third of the country’s households, but they were poor quality, and many developed problems with no mechanism for repair or return.

    In Harare, vegetable vendor Regina Meki, 40, uses a solar lamp she bought on credit to hawk her wares well into the night.

    Under a payment plan offered by a local solar company, she pays $1 a day for the $50 rented lamp, which has helped boost her monthly earnings from $70 to $120.

    “Solar energy has brought nothing but happiness to me, increasing my income. Besides payment for the equipment was easy on the pocket,” she said.
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    Nevada high court ruling delays solar net metering vote: analyst

    Nevada voters will not have a chance to voice their opinion on the state's phaseout of solar retail net metering until 2018, as a result of Thursday's state Supreme Court decision, an industry observer said Friday.

    In a unanimous decision, the seven-member court supported a lower court's decision to issue an injunction against the referendum being on the November ballot, but for a different reason than the lower court's rationale, which was that the No Solar Tax PAC's petition improperly sought to ask voters to vote on an initiative, rather than a referendum.

    Under Nevada law, an initiative is an attempt to enact new law by a direct vote of the people, but such an initiative must first be offered for the state Legislature to act. If the Legislature takes no action on the proposal, voters may petition for the placement of an initiative on the ballot for a vote.

    In contrast, a referendum is used to allow voters a voice in existing law -- either affirming or rejecting -- and the advocates of the solar net metering ballot proposal said they sought to have voters reject certain portions of existing law, but the state district court disagreed with No Solar Tax PAC's argument, thus favoring the referendum's opponents, a utility-backed group known as Citizens for Solar Energy and Fairness.

    But the referendum/initiative issue was not the basis of the Supreme Court's affirmation of the lower court's injunction against the proposal being on the ballot. Rather, the Supreme Court affirmed the lower court ruling because the petition's description was "not only inaccurate and misleading, but also argumentative."

    Timothy Fox, an alternative energy research analyst at ClearView Energy Partners, said his firm expected the court's ruling to invalidate the proposed referendum.

    "This decision postpones (but does not prohibit) a subsequent election-year initiative in 2018 that could reinstate retail rate net metering in Nevada," Fox said in an email Friday. "The Nevada constitution provides solar advocates the opportunity to start over and file a proposed initiative that would be considered by the legislature before it could go to the voters during the 2018 election."

    Thursday's Supreme Court order noted that under state law, "petitions for referendum must 'set forth, in not more than 200 words, a description of the effect of the initiative or referendum if the initiative or referendum is approved by the voters.'"

    "This court reviews descriptions of effect to determine whether the description identifies the petition's purpose and how that purpose is to be achieved, in a manner that is 'straightforward, succinct, and nonargumentative,'" it said.

    The retail net metering referendum petition's description of effect inaccurately described the referendum as merely affecting the state rules on rates and charges, but the referendum would have removed the Public Utilities Commission of Nevada's "power to set net metering rates altogether, a consequence that is not mentioned," the order said.

    The description also states that the referendum is designed "to preserve the net metering program 'as the program has historically been implemented,'" which the order states is untrue. Before the end of retail rate net metering, Nevada has had a cap on net metering, but the referendum was not designed to restore the cap.

    "Finally, the description is argumentative, using terms that are not in the statutory language, such as 'green energy,' and asserting that the PUCN-set rates and charges are 'unaffordable and cost-prohibitive,' while the rejection of the referred language would allow the program to continue at a rate that is 'reasonable,'" the order said.

    Fox said that ClearView Energy Partners is "seeing a trend in which solar advocates are 'pivoting to the people' to have important electric rate design decisions influenced -- if not decided -- in the court of public opinion."

    "Solar supporters may be disappointed by yesterday's court decision, but we think these efforts may continue in Nevada and elsewhere," Fox said.

    But other events may mitigate the action already taken by Nevada's PUC, Fox noted.

    Some Nevada lawmakers have said they did not expect the change in net metering to affect those who already have rooftop solar panels, and ClearView expects Governor Brian Sandoval's energy task force to allow existing solar customers to maintain their retail rate net metering arrangements, Fox said.

    "Similarly, Nevada's main utility NV Energy on July 28 filed applications to allow solar customers as of the end of 2015 to be grandfathered in under the net metering program," Fox said.
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    Tesla says Gigafactory costs may exceed expectations

    Tesla Motors Inc said the cost of building and operating the Gigafactory could exceed the company's current expectations.

    The Gigafactory may also take longer than anticipated to come online, the electric carmaker said in a filing on Friday.

    Tesla, which is buying solar panel installer SolarCity Corp for $2.6 billion in shares, unveiled the massive battery factory, the Gigafactory, in Nevada last week.
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    China to UK: 'golden' ties at crucial juncture over nuclear delay

    China has cautioned Britain against closing the door to Chinese money and said relations were at a crucial juncture after Prime Minister Theresa May delayed signing off on a $24 billion nuclear power project.

    In China's sternest warning to date over May's surprise decision to review the building of Britain's first nuclear plant in decades, Beijing's ambassador to London said that Britain could face power shortages unless May approved the Franco-Chinese deal.

    "The China-UK relationship is at a crucial historical juncture. Mutual trust should be treasured even more," Liu Xiaoming wrote in the Financial Times.

    "I hope the UK will keep its door open to China and that the British government will continue to support Hinkley Point — and come to a decision as soon as possible so that the project can proceed smoothly."

    The comments signal deep frustration in Beijing at May's move to delay, her most striking corporate intervention since winning power in the political turmoil which followed Britain's June 23 referendum to leave the European Union.

    Her decision indicates a much more cautious view of Chinese investment and a willingness to take a tough line with EU allies such as French President Francois Hollande.

    Cast as the jewel illustrating a new "Golden Era" of relations between China and Britain, the Hinkley financing deal was signed in Downing Street during a state visit to Britain by President Xi Jinping last year.


    Under plans drawn up by former Prime Minister David Cameron, French utility EDF and China General Nuclear Power Corp would fund the cost of building two Areva European Pressurized Water Reactors at the Hinkley C nuclear plant in Somerset, in southern England.


    › Britain defends decision to review $24 billion nuclear plant

    Britain has committed to pay a minimum price for the power generated by the plant for 35 years, though critics said London had agreed to pay far too much.

    Hinkley is seen as the front runner to closer ties with China on nuclear issues, paving the way for tens of billions of dollars of investment and another two nuclear power plants with Chinese involvement.

    Cameron raised some eyebrows with allies by pitching Britain as the pre-eminent gateway to the West for investment from China and made London the biggest international trading center for offshore yuan outside China.

    Britain is currently discussing an agreement for landmark financial services links, including a London-Shanghai stock connection.

    In the comment published in the Financial Times on Tuesday, China's ambassador said Hinkley was not "some whimsical idea or rushed decision" and pointedly said that Chinese investment had flowed because both countries "respected and trusted each other".

    "If Britain’s openness is a condition for bilateral co-operation, then mutual trust is the very foundation on which this is built," said Liu.

    Once Britain exits from the EU, London would need to clinch a new trade deal with China, whose $11.3 trillion economy is currently more than four times as big as Britain's at $2.4 trillion.

    Liu said Chinese companies had invested more in the United Kingdom than in Germany, France and Italy combined over the past five years.


    Since May won the top job, Britain has repeatedly said that it values its relationship with China and that it was natural for the incoming government to want to look at the plans in detail.

    "This decision is about a huge infrastructure project and it's right that the new government carefully considers it," a government spokesman said.

    "We co-operate with China on a broad range of areas from the global economy to international issues and we will continue to seek a strong relationship with China."

    But Nick Timothy, May's influential joint chief of staff, also said last year that security experts were worried the state-owned Chinese group would have access to computer systems that could allow it to shut down Britain's energy production.

    "Rational concerns about national security are being swept to one side because of the desperate desire for Chinese trade and investment," Timothy wrote in October 2015 in a column for a conservative news and comment website.

    China was buying British silence on human rights, Timothy said, and stated that British security services thought China's spies were working against UK interests.

    "No amount of trade and investment should justify allowing a hostile state easy access to the country’s critical national infrastructure," he said.

    A final decision on Hinkley is due in September.
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    EU regulators to investigate Dow, DuPont $130 billion merger

    EU antitrust regulators have opened a full investigation into Dow Chemical and DuPont's proposed $130 billion merger, saying the deal may reduce competition in crop protection, seeds and some petrochemicals.

    The European Commission said the deal, which would create the world's largest integrated crop protection and seeds company, may also hurt innovation.

    "The livelihood of farmers depends on access to seeds and crop protection at competitive prices. We need to make sure that the proposed merger does not lead to higher prices or less innovation for these products," European Competition Commissioner Margrethe Vestager said in a statement on Thursday.

    The EU competition enforcer said concessions offered by the companies last month were insufficient to allay its concerns. Neither the Commission nor the companies provided details on the offer. The regulator delayed its final decision on the deal to Dec. 20.

    Dow Chemical and DuPont said they would work constructively with the Commission to address its concerns and that they still expected the deal to close by the end of 2016.

    Both companies are major suppliers of herbicides, insecticides, leading producers of gene editing technology as well as strong suppliers of specialty polyolefins which are widely used in packaging and adhesive applications.

    The sector has seen a consolidation surge in recent months as companies bulk up to better compete with rivals.
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    U.S. weather forecaster maintains forecast for La Nina in fall or winter

    A U.S. government weather forecaster on Thursday reduced its outlook that La Nina conditions would develop in next few months but said it still expected the weather phenomenon to occur this fall or winter.

    The National Weather Service's Climate Prediction Center said in its monthly forecast that La Nina was "slightly favored" to develop through October. That was a small change from July, when it stated the conditions were "favored" to occur.

    The agency maintained its forecast of a 55 percent to 60 percent chance that La Nina would develop during the fall and winter of 2016/17.

    La Nina, which tends to occur unpredictably every two to seven years, is characterized by unusually cold temperatures in the equatorial Pacific Ocean.

    The agency's predictions follow a damaging El Nino weather period. While typically less harsh than El Nino, severe La Nina occurrences have been linked to floods and droughts that can roil commodity markets.

    Colombian coffee farmers are already bracing for torrential rains associated with La Nina that can damage crops, and cooler temperatures across the United States could boost demand for heating oil.

    Slightly below-average sea surface temperatures across the eastern equatorial Pacific Ocean were observed during the past month, the government forecaster said, adding the event would likely be weak if it occurred.

    The agency's expectations for a La Nina have dropped substantially since June, when it said there was a 75 percent of one developing this fall and winter.
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    Israeli chemicals maker ICL beats Q2 profit forecasts thanks to specialty products

    Israel Chemicals, one of the three major suppliers of potash to China, India and Europe, reported a better than expected second-quarter profit on Wednesday and predicted further gains from its specialty products units.

    Growth in its essential minerals division, which includes its main businesses like potash, a crop nutrient, and phosphates, was marginal however and that would probably continue due to strong competition, Chief Executive Stefan Borgas said.

    Israel's biggest chemicals producer earned 10 cents per diluted share, excluding one-off items, down from 13 cents per diluted share in the same quarter a year ago, but higher than the 6 cents per share forecast by Thomson Reuters I/B/E/S.

    Revenue jumped 15 percent to $1.4 billion, in part due to a stoppage a year earlier when workers went out strike, and beat a $1.26 billion forecast.

    ICL, which has exclusive permits in Israel to extract minerals from the Dead Sea, said quarterly results benefited from a diversification away from core businesses into specialty products, like advanced additives and specialty fertilizers.

    Sales at the specialty solutions business grew 15 percent in the quarter.

    "This is a sustainable growth rate for the upcoming quarters as well," Borgas said on a conference call with analysts.

    ICL, a subsidiary of Israel Corp, said it would pay a quarterly dividend of $60 million, or 5 cents per share.

    The company in recent weeks has signed potash supply contracts with Chinese and Indian customers and said it was continuing to negotiate with additional customers in India.

    "ICL's potash business in the second half of the year will experience higher sales quantities but lower average prices," it said.

    Given falling potash and commodities prices it will accelerate the transition from extracting and producing potash to producing polysulphate at its mine in Britain. The steps, ICL said, are expected to reduce the mine's annual potash production, freeing up production capacity for manufacturing polysulphate.

    ICL had planned to end potash production in Britain in 2018 but Borgas said the plan would now come into effect as much as 12 months ahead of schedule.
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    Tata Chemicals sells urea business to focus on other fertilisers

    Aug 10 India's Tata Chemicals, the Tata group's flagship chemical and fertilisers company, is selling its urea business to Norway's Yara International to focus on other fertilisers and consumer products like pulses and spices.

    Tata said it had agreed the sale of its urea business, which is in the northern state of Uttar Pradesh, to Yara, one of the world's largest fertiliser producers, for 26.7 billion rupees ($400 million).

    The Uttar Pradesh business contributed 13 percent of Tata Chemicals' total sales revenue last fiscal year. The company will now focus on fertilisers such as soda ash and expand its consumer-related business that includes salt, spices and pulses.

    "In many of these businesses if you don't have scale, it becomes unsustainable in the long run. We are trying to scale the consumer business and that is the company's broad strategy," Tata Chemicals' Managing Director Ramakrishnan Mukundan told a press conference on Wednesday.

    About eight companies produce urea in India but analysts say the sector is hampered by regulated returns and delayed subsidy disbursements from the government, which has led to consolidation in the sector.

    The operations being acquired by Yara produce 0.7 million tonnes of ammonia and 1.2 million tonnes of urea annually and had revenues of $350 million and operating profit of $35 million for the fiscal year through March 2016, Yara said in a statement earlier in the day.

    The deal also includes Tata Chemicals' distribution network in Uttar Pradesh.

    Indian merchant bankers Kotak Investment Banking and JM Financial advised Tata Chemicals on the deal.
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    Farm tech investment drops off after record year

    Investor backing for agriculture technology startups cooled in the first half of 2016 after record global investment last year, according to industry data released on Monday.

    Funding from venture capitalists and others totaled $1.8 billion through the first six months of the year, down 20 percent from a year earlier, while the number of deals rose 7 percent to 307, ag investment platform AgFunder said.

    The pullback was in line with the broader venture capital market, it said.

    The decline also comes as weak grain prices put pressure on farmers' incomes and corporate profits.

    Investment slipped in the drones and robotics and food e-commerce categories, while soil and crop technology experienced an uptick.

    The dip in ag-tech financing follows 2015's record-high $4.6 billion investment, according to Ag Funder. The industry wants to use sophisticated tools such as seed traits, drones and weather sensors to drive yields and profits higher.

    "It's an area we're keenly interested in," said Matt Bell, principal of Cultivian Sandbox Ventures, whose investments include Harvest Automation, a company that makes mobile robots for tree nurseries.

    Near Kitscoty, Alberta, farmers may do double-takes later this year as Brian Headon's self-driving tractor plows his corn fields with the driver's seat empty.

    Headon will spend C$250,000 retrofitting his tractor with a motor system made by Autonomous Tractor Corp (ATC) that will allow it to drive by itself, using a global positioning system.

    "To not even have an operator in there almost makes me more comfortable," said Headon, who is also a Western Canada distributor for ATC. "Because I've taken away the human aspect."

    The need for safeguards is an obstacle to widespread adoption of self-driving tractors, said Matt Rushing, vice president of product management at AGCO Corp.

    "As we start to take the operators off these machines, you're going to have questions about, 'Can the machines go rogue?'" Rushing said.

    California-based Blue River Technology expects "smarter" machines to catch on steadily.

    Farmers use its "See & Spray" technology on 10 percent of U.S. lettuce fields, said Ben Chostner, vice president of business development at Blue River, whose investors include Monsanto Co and Syngenta AG.

    The box-shaped robot, pulled behind a conventional tractor, pinpoints weeds to douse with a lethal chemical.

    "People have been dreaming of Jetsons-like futures since the '50s," Chostner said. "The technology is really starting to emerge."

    Attached Files
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    Centrex advances Oxley to prefeasibility stage

    ASX-listed junior Centrex Metals is advancing its Oxley project, in Western Australia, to the prefeasibility study (PFS) stage, after receiving positive results from a scoping study on a start-up potassium nitrate fertiliser (NOP) operation.

    The scoping study, prepared by Amec Foster Wheeler, shows that the start-up operation has the economic potential to be globally competitive, with upside for large-scale expansion, the company reported in a statement on Monday.

    The start-up NOP operation is based on an inferred mineral resource of 38-million tonnes at 10% potassium oxide (K2O), from a total of 155-million tonnes at 8.3% (K2O). Theresources to date cover only 3 km of the overall 32 km striking area that forms the basis of the project.

    Centrex will now proceed to a PFS, which will not only consider a start-up NOP operation, but also second stage expansion in to the bulk potassium fertiliser market.

    The PFS is expected to be complete by the end of 2017. The company will also start with preliminary engineering studies.
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    Precious Metals

    Silver Wheaton lifts FY gold outlook 15% following record Q2 output

    The world’s largest precious metals streaming firm Silver Wheaton said Wednesday it expected to produce 15% more gold this year than previously expected, as production is being boosted by strong performance from its key asset,Vale’s Salobo mine, on which it had just picked up a further gold stream.

    For 2016, Silver Wheaton’s estimated attributable goldproduction would be 305 000 oz, up from 265 000 oz previously forecast. The estimated average yearly attributablegold output over the next five years (including 2016), was likely to be about 330 000 oz/y of gold, up from 260 000 oz, the Vancouver-based company advised.

    The company also expected slightly lower silver output this year at 32-million ounces, down from 32.8-million ounces previously, weighed down by lower-than-expected output from Primero Mining’s San Dimas mine and Goldcorp’s Peñasquito mine. This would be partially offset by Glencore’s Antamina mine, which was expected to be above previous guidance. Over the next five years (including 2016), the silver outlook remained unchanged at 31-million ounces a year.

    Silver Wheaton reported record attributable silver sales volumes for the six months ended June 30 of 14.7-million ounces, an increase of 31% when compared with the first half of 2015. Gold sales also hit record volumes at 136 000 oz for the first half, up 52% year-on-year.

    On a silver equivalent basis, the attributable sales volume for the six months ended June 30 was 25-million ounces, representing an increase of 40% year-on-year, representing yet another company record.

    Revenue for the three and six months came in at $212-million and $400-million, respectively, up 29% and 36% each.

    Net earnings rose 12% during the second quarter to $60-million, or $0.14 a share, while it fell 2% during the first half to $101-million, or $0.24 a share.

    Operating cash flows for the three and six months were $134-million, or $0.31 a share, and $248-million, or $0.59 a share, respectively, representing an increase of 23% and 25% over the respective periods of 2015.

    The board had declared a dividend in the amount of $0.05 a common share according to the company’s stated dividend policy being equal to 20% of the average of the previous four quarters' operating cash flow.

    Attached Files
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    Asia gold demand to fall 15-20 pct in 2016 on price rise-Scotiabank

    Gold consumption in China and India, the world's top two buyers, is set to drop 15 to 20 percent in 2016 after lower investment demand and jewellery sales, an official at a leading importing bank said.

    Lower demand from the two countries, which account for more than half of the global market, could limit a rally in global prices which are trading near a two-year high.

    "Indian demand would be 15 to 20 percent lower in 2016 than the previous year. Higher prices, weak investment demand contributed in reducing consumption," Sunil Kashyap, managing director, Global Banking and Markets at Scotiabank, told Reuters on Wednesday.

    "India is not unusual. This is a general trend across Asia, even in China."

    Gold prices have jumped nearly 28 percent so far in 2016 to $1,352 per ounce, deterring traditional jewellery buyers.

    "Unless the price comes below $1,300 per ounce we do not expect demand to pick up," Kashyap said.

    Chinese demand for gold totalled 981.5 tonnes last year, followed by India on 864.3 tonnes, according to data compiled by the World Gold Council.

    In India, local gold prices jumped to 32,455 rupees ($487.21) per 10 grams in July, the highest in nearly three years, prompting consumers to sell their old jewellery.

    As a result, total scrap supplies in India could jump to 120 tonnes to 180 tonnes in 2016, Kashyap said, with 10 to 15 tonnes coming onto the market each month.

    In 2015 scrap supplies totalled 80.2 tonnes, according to the WGC data.

    Weak demand and scrap supplies are helping India in reducing imports, which in July fell by 79.3 percent from a year ago to 20 tonnes, the lowest level since March, GFMS data showed.
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    Cullinan mine yields 138.57 ct diamond

    LSE-listed Petra Diamonds has recovered a 138.57 ct Type IIa, D-colour diamond at itsCullinan mine, in South Africa.
    The high-clarity diamond will be offered for sale as part of the company’s next sales process later this month.

    The company had earlier this year sold a 121.26 ct white diamond recovered from the same mine to a joint venture between Dubai-based diamond trading company Nemesis International and Golden Yellow Diamonds for $6-million.
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    Marathon Gold Deposit Grows Larger With New Drill Results

    Marathon Deposit Grows Larger With New Drill Results: 2.11 g/t Au (Cut) Over 68.3 Meters (TT) and 1.33 g/t Over 48.8 Meters (TT)

    Marathon Gold Corporation  is pleased to announce continued positive results from its latest drilling at the Marathon Deposit, Valentine Gold Camp. New drill holes MA-16-107 and MA-16-11 have both intercepted very wide intervals of good-grade gold mineralization for up to 80 meters down-dip of previous drilling on the Marathon Deposit. These new drill holes further confirm the continuity of the 50-100 meter wide (TT) mineralized corridor of the Marathon Deposit that is currently open along strike and extends to depth for more than 250 meters. Previously reported drill holes MA-16-101 and extended drill holes MA-15-032, MA-15-039 and MA-15-047 also intersected similar wide intervals of higher grade gold at depth. Shallower drilling intercepted significant mineralization up to 250 meters southwest of the current Marathon resource pit shell and in the hanging wall of the deposit.

    Highlights (true thickness):

    Drill holes MA-16-107 and MA-16-111 intercepted very wide intervals of good grade gold mineralization up to 80 meters down-dip of previously drilling in the Marathon Deposit. Best intercepts included 2.11 g/t Au (cut) over 68.3 meters with 10.64 g/t (cut) over 3.3 meters, 4.29 g/t over 2.0 meters, 12.92 g/t Au (cut) over 2.0 meters, 5.19 g/t Au over 2.0 meters, 6.56 g/t Au over 2.6 meters and 8.84 g/t Au over 2.6 meters in MA-16-107, and 1.33 g/t Au over 48.8 meters with 5.23 g/t Au over 1.3 meters, 10.03 g/t Au over 0.7 meters and 4.62 g/t Au over 3.9 meters in MA-16-111.
    The recently drilled deeper drill holes through the central portion of the Marathon Deposit (i.e.: MA-16-101, MA-16-107, MA-16-111 and extended drill holes MA-15-032, MA-15-039 and MA-16-047) now define a more than 200 meters long subvertical mineralized corridor up to 50 to 100 meters wide that extends to depth beyond 250 meters. The mineralized corridor of the Marathon Deposit remains open along strike and to depth.
    Significant near-surface mineralization was also encountered in step-out drill hole MA-16-106 with 2.44 g/t Au over 3.5 meters and in hanging wall drill hole MA-16-109 with 6.74 g/t Au over 1.8 meters, 1.05 g/t Au over 2.4 meters and 1.01 g/t Au over 1.8 meters.
    The total strike length of the alteration and mineralized corridor, including the spring 2015 Marathon Deposit resource pit shell, now extends for at least 1.6 kilometers (Figure 1). The highest priority drilling at the Marathon Deposit continues to focus on expanding the open pit resource shell to the southwest along strike of the current Marathon Deposit resource pit shell as well as northwest into the hanging wall of the deposit.
    Metallurgical work is continuing on schedule with encouraging preliminary results both in the floatation and the column testing for heap leach viability at both the Leprechaun and Marathon Deposits.
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    Hindustan Zinc to double silver output to catch solar wave

    Hindustan Zinc Ltd, a subsidiary of billionaire Anil Agarwal's mining conglomerate Vedanta Ltd, aims to double silver output in five years due to rising prices and increased demand from solar panel makers.

    The group plans to produce 500 tonnes of silver this fiscal year and double that to 1,000 tonnes by fiscal 2022, Chief Executive Sunil Duggal told Reuters on Tuesday.

    Due to an increased demand from investors, who look at gold and silver as safe investments, international silver prices have risen 42 percent to $19.70 an ounce since the start of the year.

    Silver has also been boosted by increased demand from solar panel manufacturing and Hindustan Zinc, India's biggest producer of lead, zinc and silver, has increased its focus on the commodity to cash in on an expected increase in Indian demand, especially for industrial use, Duggal said.

    Indian Prime Minister Narendra Modi's government has set a target of producing 100 gigawatts (GW) of solar power by 2022 and is incentivising companies to produce solar panels.

    "There are opportunities opening up for silver demand in India and a major among them is solar panel manufacturing. We want to increase our output to 1000 tonnes to meet a substantial part of the demand," he said.

    Analysts say about 40 tonnes of silver is required to produce panels that would generate 1 GW of solar power.

    Duggal said the company plans to ramp up output from its mines in the western state of Rajasthan and boost silver recoveries from its zinc and lead smelters.

    "So far we do not recover any silver from zinc. We are investing 1.5 billion Indian rupees ($22.4 million) to increase recovery of silver form our smelters," he added.

    The company aims to increase its overall silver recovery from mines and smelters from 60 percent now to 65 percent by March 2017 and 85-90 percent by March 2022.
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    Franco-Nevada hits new production, revenue records; boldly beats expectations

    Precious metals streaming firm Franco-Nevada Corp has doubled net income for the quarter ended June 30, hitting new gold-equivalent ounce (GEO) output and revenue records.

    The Toronto-based firm reported a 75% year-on-year surge in adjusted earnings to $40-million, or $0.22 a share, beating Wall street analyst forecasts of earning $0.19 a share.

    Revenue rose 38% year-on-year to $150.9-million, resulting in adjusted earnings before interest, taxes, depreciation and amortisation to rise 45% to $118.9-million.

    "Franco-Nevada's diversified portfolio continues to perform very well. With record GEO and revenue results, we are now expecting to be close to the top end of our previously provided guidance ranges for 2016. Even more exciting for the future, we are seeing renewed activity and good news at many of our non-producing advanced and exploration assets. In addition, our investment opportunity pipeline remains very full,” CEO David Harquail stated Monday.

    Gold equivalent output rose 36% in the second quarter to 112 787 oz, boosted by new gold and silver stream acquisitions and oil and gas. According to Franco-Nevada, revenue was sourced 94% from precious metals (72% gold, 16% silver and 6% platinum-group metals) and 84% from the Americas (14% US, 19% Canada and 51% Latin America.

    During the period, the company provided $37.7-million of funding to First Quantum Minerals’ Cobre Panama projectduring the quarter. It now expected its portion of total funding to range between $120-million and $140-million this year, down slightly from previous estimates of $130-million to $150-million.

    Franco-Nevada ended the quarter with $225.8-million in cash at and no debt.
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    AuRico Metals Reports 2016 Second Quarter Results

    AuRico Metals Inc. today reported its financial results for the quarter ended June 30, 2016.  The Company also announced increased guidance on royalty revenue and an expanded exploration program at Kemess East.  For complete details of the Financial Statements and associated Management's Discussion and Analysis for the quarter ended June 30, 2016, please see the Company's filings on SEDAR ( or the Company's website ( All amounts are in US dollars unless otherwise indicated.

    Recent Highlights

    On August 2, 2016, the Company announced a C$10.0 million bought deal equity financing whereby the Company will issue 10,000,000 common shares at C$1.00 per share.  The Company has granted the underwriters an over-allotment option to purchase up to an additional 1,500,000 common shares under the same terms;

    On August 8, 2016, the Company announced that Alamos Gold Inc. ("Alamos") has exercised its participation right with respect to the bought deal announced above.  As a result, the Company will issue up to an additional 1,273,000 common shares through a private placement at C$1.00 per share;

    During Q2 2016, recognized royalty revenue of $2.0 million, comprised of $0.9 million from the Fosterville royalty, $0.8 million from the Young-Davidson royalty, and $0.3 million from the Hemlo, Eagle River and Stawell royalties;

    On July 29, 2016, Newmarket Gold Inc. ("Newmarket") announced that it has increased guidance at Fosterville to 130,000 to 140,000 ounces for 2016, up from previous guidance of 110,000 to 120,000 ounces;

    On July 27, 2016, Barrick Gold Corporation ("Barrick") announced that it has increased guidance at Hemlo to 215,000 to 230,000 ounces for 2016, up from previous guidance of 200,000 to 220,000 ounces;

    The Company has increased its royalty revenue guidance to between $7.7 million to $8.1 million from its original guidance of $6.6 million to $7.1 million;

    The Company has expanded its Kemess East exploration program to $4.4 million this year with a focus on further expanding and infilling the previously announced resource.  The increased program has been funded by CEE ("Canadian Exploration Expenses") flow-through financings for $2.7 million completed subsequent to June 30th;

    On May 12, 2016, the Company announced that the Company's application for an Environmental Assessment ("EA") Certificate for the Kemess Underground Project entered the 180-day review period; and

    On May 6, 2016, the Company announced that it had filed the National Instrument 43-101 technical report for the Kemess Underground Project and the Kemess East Resource Estimate.

    Commenting on the results, Chris Richter, President and CEO stated, "We are pleased to report a fourth consecutive quarter of higher royalty revenue and to be increasing our annual royalty revenue guidance.  At Kemess we are advancing through the EA review process and are keen to accelerate permitting efforts over the remainder of the year.  We are particularly excited about our expanded exploration program at Kemess East and look forward to the results from three drills currently in operation."
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    Richmont Mines Reports Strong Second Quarter Financial Results; On Track to Meet or Exceed Guidance Estimates

    Richmont Mines Inc. announces operating and financial results for the three and six months ended June 30, 2016, driven by solid results from the Island Gold Mine. The Corporation will host a conference call and webcast on Monday, August 8, 2016 , beginning at 8:30 a.m. Eastern Time (details below). (All amounts are in Canadian dollars, unless otherwise indicated.)

    Second Quarter Highlights

    Company-wide production was 23,320 ounces for the quarter, an 11% decrease over Q2 2015, primarily due to the depletion of the Monique stockpile earlier this year. The Island Gold Mine produced 18,617 ounces of gold in the second quarter, a 24% increase over Q2 2015, driven by record underground and mill productivity of 911 tonnes per day and 878 tonnes per day, respectively, as well as a positive reconciliation (mined vs. reserves) of 19%.
    Gold sold during the quarter was 24,888 ounces, a decrease of 10% over Q2 2015, at an average realized price of $1,628 (US$1,263) per ounce.
    Revenues for the quarter were $40.6 million ( US$31.5 million ), consistent with Q2 2015.
    Company-wide cash costs1 for the quarter were $903 per ounce ( US$701 per ounce), a decrease of 7% over Q2 2015 and below current guidance estimates. Cash costs for the Island Gold Mine were $766 per ounce ( US$595 per ounce), a 20% decrease over Q2 2015 and significantly below current guidance estimates.
    Company-wide All-in-Sustaining Costs1 ("AISC") for the quarter were $1,330 per ounce ( US$1,032 per ounce), in-line with Q2 2015 and within current guidance estimates. AISC for the Island Gold Mine were $1,038 per ounce ( US$806 per ounce), a 21% decrease over Q2 2015 and significantly below current guidance estimates.
    Earnings were $2.7 million , 8% lower than Q2 2015, or $0.04 per share ( US$2.1 million , or US$0.03 per share).
    Operating cash flow (after changes in non-cash working capital) of $14.9 million ( US$11.5 million ), or $0.25 per share ( US$0.19 per share), both in-line with Q2 2015.
    Richmont ended the quarter with an increased cash balance of $95.5 million ( US$73.4 million ), which includes net proceeds of $29.1 million ( US$22.7 million ) related to a bought-deal prospectus financing completed on June 7, 2016 and $3.0 million of net free cash flow1.
    Based on the success of the Phase 1 exploration program at the Island Gold Mine, the Corporation launched an aggressive 18 to 24 month Phase 2 drilling program of up to 142,000 metres, with an estimated 39,000 metres to be completed in the second half of 2016.
    Based on the strong operational and cost performance in the first six months of the year, Richmont expects to meet, or exceed, the high end of production guidance and the low end of cash cost and AISC guidance. The Corporation will determine whether a revision to 2016 guidance estimates is warranted following the completion of a scheduled 3-week electrical upgrade at the Island Gold mill and the commencement of stope mining in the Q Zone of the Beaufor Mine, both expected in August. It is anticipated that any update to guidance estimates would be released by mid-September.

    "Positive grade and tonne reconciliations, as well as record mining and milling productivities at the Island Gold Mine have driven better than expected production and cost performance in the first half of the year. For the remainder of the year, we expect Island Gold to continue its strong performance as well as see improved performance from the Beaufor Mine as stope mining from the higher grade Q Zone commences." stated Renaud Adams , CEO. He continued, "Our solid cash position and cash flow generation is expected to fully fund both our accelerated development activities and the Phase 2 exploration program that are currently underway at the Island Gold Mine, both of which could position this core asset for significant production growth and mine life extension."
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    Osisko reports 133% cash flow increase in Q2, sees record revenues, gold ounces earned

    Osisko reports 133% cash flow increase in Q2, sees record revenues, gold ounces earned

    Precious metals royalty company Osisko Gold Royalties has seen a 133% year-on-year increase in cash flows from operating activities, reporting $15-million in cash flow achieved in the three months to June 30, on the back of record revenues and gold ounces earned.

    The TSX- and NYSE-listed company reported revenues of $15.8-million in the period under review, a 54% increase compared with the second quarter in 2015; it also earned 9 488 gold ounces, a 38% increase year-on-year.

    Osisko attributed this revenue increase, which extends to the first half of the year, to higher in-kind royalties earned and sold. Gold royalties earned from the Canadian Malartic mine, acquired in 2014 by Yamana Gold and Agnico Eagle, increased by 492 oz, or 4%, as sales increased by 514 oz.

    The company also earned and sold 3 655 oz of gold from Goldcorp’s Québec-based Éléonore mine, compared with nil earned and sold in the first six months of 2015. In addition, Osisko received and sold 651 oz of gold from its Island Gold mine’s net smelter return (NSR) royalty and 221 oz of goldfrom its Vezza NSR royalty.

    The average selling price of gold per ounce in Canadian dollars was also higher in the first half of 2016 at $1 633, compared with $1 483 in the first half of 2015.

    Meanwhile, Osisko’s net earnings for the second quarter amounted to $15.7-million, or $0.15 per basic share, while cash and cash equivalents as at June 30 were $424.5-million.

    Further, the company saw a significant increase in the closing share price in the first half of 2016, from $13.67 to $16.89, compared with a decrease in the first half of 2015, from $16.36 to $15.72. This generated a higher share-based compensation expense on the deferred share units and the restricted share units.

    The company’s half-year operating income amounted to $11.9-million, compared with $7.1-million achieved in the corresponding period of 2015. This could be attributed to higher revenues generated from the sale of gold and silver, lower business development expenses and higher cost recoveries from associates, partially offset by the depletion of royalty interests and higher general and administrative expenses.

    The increase in general and administrative expenses is mainly due to a higher share-based compensation expense. The lower business development expenses are due to the $2.2-million in fees incurred in 2015 for the acquisition ofVirginia, partially offset by a higher share-based compensation expense. Total share-based compensation for the first half of 2016 amounted to $4.8-million compared to $2.4-million in the corresponding period of 2015.

    "During the past two years, we have successfully establishedOsisko Gold Royalties as the fourth-largest precious metals royalty company with flagship royalties on two of Canada's largest and most modern gold operations,” said Osisko chairperson and CEO Sean Roosen, commenting on the results.

    He added that, through the implementation of the company’s incubator model, Osisko had been able to establish future growth opportunities with emerging precious metals miningcompanies.

    The company in April entered into a 1% NSR royalty agreement with Arizona Mining on the Hermosa silverproject, in Tucson, Arizona, for a cash consideration of $10-million.

    It also entered into a $10-million financing agreement withFalco Resources in May for a future stream financing or a 1% NSR royalty on the Horne 5 project, located in Rouyn-Noranda, Québec and, most recently, Osisko began trading on the New York Stock Exchange on July 6.

    “We are also very encouraged by the results of the explorationprogrammes on properties in which Osisko Gold Royaltieshas royalty interests. We will continue to pursue value-enhancing opportunities to support our growing dividend distribution policy," said Roosen.

    The company expects to continue its explorationprogrammes in the James Bay area for about $10.3-million in 2016 ($8.3-million net of estimated exploration tax credits), of which about $3.8-million will be financed by Québecinstitutions and other partners.

    As at June 30, the company had spent $3.2-million onexploration and evaluation activities.

    Osisko noted that its 2016 outlook on royalties was based on publicly available forecasts, in particular forecasts for theCanadian Malartic mine, published by Yamana and Agnico Eagle, forecasts for the Éléonore mine, published by Goldcorp, and forecasts for the Island Gold mine, from Richmont Mines.

    The company advised that attributable royalty production for 2016 was still estimated at 28 000 oz to 29 000 oz of gold for the Canadian Malartic mine, between 5 500 oz and 6 200 oz of gold for the Éléonore mine, and between 1 000 oz and 2 000 oz from other royalties.


    On the back of its second-quarter results, Osisko declared a third-quarter dividend of C$0.04 a share.

    "We are pleased to announce our eighth consecutive quarterly dividend, which demonstrates the strength of our high-quality income-producing royalties,” said Roosen, adding that, with this dividend, Osisko will have returned approximately C$26.6-million to its shareholders.

    “We will seek to responsibly increase this dividend as we continue to expand our cash flows from our portfolio of royalties and investments," he said.
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    Base Metals

    Glencore can't find buyer to pay up for Lomas Bayas

    Mining and commodities giant Glencore is not selling its Lomas Bayas copper mine, after offers for the property in Chile’s Atacama desert came in below expectations according to media reports.

    Reuters reports the mine was expected to fetch about $500 million, but "according to people familiar with the situation" Glencore is ditching disposal plans for the moment partly because even after three rounds of bidding it couldn't get the right price.

    Potential bidders were said to include former Barrick Gold CEO Aaron Regent's company Magris Resources, Chilean energy firm Copec and various private equity firms.

    In October last year, the Swiss firm confirmed it had received a number of unsolicited expressions of interest for the Lomas Bayas open-pit operation and also its Cobar mine in Australia’s New South Wales.

    Glencore is in the midst of a program of asset sales, share offerings and other money raising efforts including by-product forward sales to reduce its  debt load.

    Lomas Bayas — acquired by Glencore as part of its 2013 takeover of Xstrata —produced some 35,000 tonnes in the half-year to end June 2016 according to Glencore production results released today. Cobar produced 24,800 tonnes over the same period.

    Glencore said its own sourced copper production of 703,000 tonnes was 4% down on H1 2015, due to the previously announced curtailments at its Zambian operations which was partly offset by generally higher grades in South America.
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    Ivanhoe says Congo copper find may be Africa’s most significant

    Results from drilling at a copper deposit in the Democratic Republic of Congo being explored by Ivanhoe Mines Ltd. show what may prove to be the most significant discovery of the metal in Africa, the company said.

    The find at Kakula, in the southern portion of Ivanhoe’s Kamoa project, is “enormous,” Ivanhoe Mines DRC MDLouis Watum said at a conference in the capital, Kinshasa. Discussions are under way to decide on how the “unbelievable” discovery might affect the development strategy for the project, he said.

    “Earlier discoveries already have established Kamoa as the world’s largest, undeveloped, high-grade copper discovery,” CEO Robert Friedland said in a separate statement. Kakula “could prove to be Africa’s most significant copper discovery,” he said.
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    Philippines suspends two more mines in environmental clampdown

    The Philippine government has suspended operations at two more mines due to environmental violations in an ongoing audit of the country's mining sector, officials said on Thursday.

    The move raises the number of suspended mines to 10 - eight of them nickel ore producers - since the Southeast Asian nation launched a review of all mines on July 8.

    The closures and the threat of more mines getting hit in the world's top nickel ore supplier lifted prices of the metal to a one-year high of $11,030 a tonne on Wednesday. 

    The latest suspended mines are operated by Emir Mineral Resources Corp, which produced 150,000 tonnes of nickel ore last year, and Mt. Sinai Mineral Exploration Corp, which extracted 50,000 tonnes of chromite, Environment and Natural Resources Secretary Leo Jasareno told a media briefing.

    Both mines are privately owned and located in the central Samar province, primarily supplying China.

    The audit found that operations at the Emir Mineral and Mt. Sinai mines have caused silt build-up in coastal waters and deforestation, said Jasareno.

    "All suspension orders are indefinite," he said.

    Excluding Emir Mineral, Jasareno said the seven suspended nickel mines accounted for about 8 percent of the Philippines' output of the metal last year.

    The Philippines is the top nickel ore supplier to China, shipping 34 million tonnes in 2015.


    Separately, Environment and Natural Resources Secretary Regina Lopez said the $5.9 billion Tampakan gold-copper project in the southern island of Mindanao should not have been given a clearance that would allow it to proceed.

    "That project should never have been given an ECC (environmental compliance certificate)," Lopez said.

    Tampakan is the Philippines' biggest stalled mining venture and a cancellation of its environmental permit - granted in 2013 - could further delay it or end it completely.

    Commodities giant Glencore Plc quit the project last year following the delays that have hampered its development since the province where it is located banned open-pit mining in 2010.

    The planned mine would cover an area the size of 700 football fields in what otherwise would be agricultural land, said Lopez.

    "You can't have mining in the food basket of Mindanao," she said.

    The government will give Sagittarius Mines Inc, which runs Tampakan, a week to explain why its environmental permit should not be revoked, said Lopez.

    Sagittarius Mines officials did not immediately respond to a request for comment.

    Lopez said her agency has also asked top domestic coal miner Semirara Mining & Power Corp to explain environmental violations including siltation of nearby waters and air pollution.

    But it would be hard to just shut Semirara's operations, she said, because that might lead to power outages given the Philippines' heavy reliance on coal-fired generators.

    Semirara said in a stock exchange filing that it has yet to receive any order from the mining agency, but that it has been compliant with all relevant laws.
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    Indonesian ministry recommends renewing Freeport export permit

    Bambang Gatot, the ministry's director general of coal and minerals, did not explain why the recommendation was for a shorter period.

    "The export volume (in the recommendation) is 1.4-million tonnes, as they requested .. but they might not be able to sell that much," Gatot told reporters, adding that all shipments are subject to a 5% export tax.

    A Freeport spokesman said he had not yet been informed of the ministry's recommendation.

    Freeport, which produces about 220 000 t/d of copper ore, still has to take the recommendation to Indonesia's trade ministry to get the permit.

    Typically once the trade ministry receives a recommendation from the mining ministry, the renewal of an export permit would be a formality.

    Freeport's previous permit expired on Monday.

    Last February, shipments from Freeport's giant Grasbergcopper mine were halted for nearly two weeks before the government approved the now expired permit.

    The Indonesian government announced in early 2014 that allcopper concentrate shipments would be banned from January 2017, as part of efforts to transform the nation from being a supplier of raw materials into a producer of finished goods.
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    Aluminium pricefixing claims rejected by U.S. appeals court

    A U.S. appeals court on Tuesday upheld the dismissal of nationwide antitrust litigation accusing banks and commodity companies of conspiring to drive up aluminium prices by reducing supply, forcing them to overpay.

    By a 3-0 vote, the 2nd U.S. Circuit Court of Appeals in Manhattan said so-called commercial end users and consumer end users lacked standing to sue because their alleged antitrust injuries were too far removed from the alleged misconduct.

    The plaintiffs had accused Goldman Sachs Group Inc, JPMorgan Chase & Co, the mining company Glencore Plc, and various commodity trading, metals mining and metals warehousing companies of having colluded from 2009 to 2012 to rig prices by hoarding inventory.

    This allegedly caused big delays to fill orders, leading to higher storage costs at warehouses in the Detroit area and elsewhere, which in turn inflated aluminium prices and the cost of producing cabinets, flashlights, strollers and other goods.

    Regulators in the United States and Europe have also examined aluminium price-fixing allegations.

    Lawyers for the plaintiffs and the defendants did not immediate respond to requests for comment.

    Circuit Judge Dennis Jacobs said the plaintiffs "did not (and could not) suffer antitrust injury" because they neither participated in a market affected by anticompetitive conduct, nor showed that their injuries were "inextricably intertwined" with injuries that the defendants intended to inflict.

    Jacobs said the plaintiffs did not claim to store aluminium or buy aluminium stored with the defendants, or trade aluminium futures contracts with the defendants, or allege that aluminium they bought underlay the defendants' futures trades.

    "The injury Consumers and Commercials claim was suffered down the distribution chain of a separate market, and was a purely incidental byproduct of the alleged scheme," he wrote.

    Claims alleging violations of state consumer protection and unfair trade laws were also dismissed.

    The decision upheld August 2014 rulings by U.S. District Judge Katherine Forrest in Manhattan.

    She allowed so-called "first-level" metals purchasers to pursue their own antitrust claims in a separate ruling the following March.

    The case is In re: Aluminum Warehousing Antitrust Litigation, 2nd U.S. Circuit Court of Appeals, Nos. 14-3574 and 14-3581.

    Attached Files
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    China's end-July bonded copper inventories surge 3.4% to 600,000 mt

    Refined copper inventories at China's bonded warehouses totaled 600,000 mt at the end of July, up 3.4% from a month earlier, amid higher copper imports in the past seven months, brokerage Huatai Futures said in a commodity report Tuesday.

    China imported 3.09 million mt of refined copper and copper products in the first seven months of this year, up 19.5% year on year, figures from the General Administration of Customs showed.

    The current slack traditional copper buying season in mainland China results in continued weak demand in the domestic spot market, state-owned metals consultancy Beijing Antaike said in its copper sector report Tuesday.

    Spot copper supply was ample Tuesday, with suppliers active but forced to cut premiums to boost sales, the agency said.

    Bonded cargoes are used as collateral for seeking funds from financial institutions for financing needs, according to Huatai Futures.

    Bonded copper is copper that has been approved by customs to enter China, without paying tax, and is stored, processed and re-exported, according to the General Administration of Customs.

    Bonded warehouses in China are located in Shanghai, East China, as well as Guangdong Province in southern China.
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    China’s July copper imports down 16% m-o-m

    China’s imports of unwrought copper and copper-fabricated products fell 16% month-on-month in July, although they were up 3% year-on-year, according to preliminary Chinese customs data released on Monday August 8.

    In July, China imported 360,000 tonnes of copper and copper-fabricated products, compared with 430,000 tonnes in June and 348,270 tonnes in July last year. The country imported 3.09 million tonnes of copper and copper-fabricated products during the first seven months of this year, up 19.5%
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    Goldman warns ‘supply storm’ to engulf global copper market

    A storm’s about to hit the global copper market, according to Goldman Sachs Group Inc., which forecasts that the price may slump to $4 000 a metric ton over 12 months as mine supply picks up, producers enjoy lower costs and demand growth softens.

    “Company guidance and our estimates suggest that copper is entering the eye of the supply storm,” analysts including Max Layton and Yubin Fu wrote in an e-mailed report received on Friday. A drop to $4 000 would be a 17% slump from Thursday’s close on the London Metal Exchange.

    Copper has lagged gains seen in other raw materials so far this year, especially zinc and nickel, which have benefited from forecasts for global shortages. For copper, there’s been solid growth in global mine supply in the first half and that trend is expected to pick up in the coming quarters, according to Goldman.

    “This ‘wall of supply’ is expected to translate into highercopper smelter and refinery charges and ultimately, higher refined-copper production, set against softening demand growth,” Layton and Fu wrote. The metal is seen at $4 500 a ton in three months and $4 200 in six, they said, reiterating targets.

    Pipes and Wires

    Copper for delivery in three months – which last traded below $4 000 a ton in 2009 – was at $4 833 on the LME at 11:04 a.m. in Singapore, heading for a weekly loss. The metalused in pipes and wires has risen 2.7% this year, while zinc has surged 40% and nickel has advanced 20%.

    In July, Barclays Plc said supply may exceed demand every year through to 2020. The month before, Stephen Higgins, who heads Freeport-McMoRan Sales Company Inc., a division of the largest publicly traded copper miner, said more production has come on stream at a time demand growth in China has slowed.

    For Goldman, the main expansion in mine supply through to the first quarter of 2017 is expected to come from theGrasberg mine in Indonesia, Escondida in Chile and Sentinel in Zambia, according to the report. Growth from Cerro Verde and Las Bambas in Peru may also contribute, it said.

    To gauge the outlook for supply, Goldman tracks 20 companies that account for about 60% of worldwide production, according to the report. These 20 raised output 5% on-year in the first half of 2016, and are expected to increase that to as much as 15% in the coming quarters, it said.
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    Steel, Iron Ore and Coal

    China daily steel output drops, offers some respite to glut woes

    China's average daily crude steel output fell in July from a record, government data showed on Friday, providing some respite to overseas rivals angered by a torrent of cheap steel from Chinese mills in the past year.

    The decline partly reflects China's efforts to address a chronic glut. Some analysts predict output may shrink further in the months ahead as more mills shut in a sector undergoing its most significant - and painful - restructuring in two decades.

    The pullback was also due to softer domestic demand, particularly around July as construction typically drops during the summer lull.

    Economic activity broadly slowed in July, with crude oil production sliding to its weakest level since October 2011 on a daily basis and coal output extending its slump.

    In the months ahead, further capacity cuts, mostly via stricter environmental controls, could continue to shrink China's steel output, said Richard Lu, analyst at CRU consultancy in Beijing.

    "Market participants are all expecting the government will take stronger measures to close capacity for the rest of the year," Lu said.

    Daily steel output averaged 2.15 million tonnes last month after a surprise increase to an all-time high of 2.32 million tonnes in June, according to Reuters calculations based on data released by China's National Bureau of Statistics.

    The decline was in line with a 5.9 percent drop in Chinese steel exports in July, though shipments remain elevated and total shipments in January-to-July were up from a year earlier.

    China has pledged to cut its steel capacity by around 45 million tonnes this year and by 140 million tonnes by 2020. Yet capacity reductions amounted to just 47 percent of China's annual target by end-July, suggesting tougher measures ahead.

    Some local governments have resisted Beijing's call for cuts in order to protect jobs and their economies.

    A speculation-induced spike in steel prices this year has also encouraged some Chinese producers to boost output for export to counter slower domestic demand. That has led to accusations from rival producers that China is selling into export markets at below cost, which the country has denied.

    On Friday, the most-traded rebar, used in construction, rose 0.27 percent to 2,578 yuan ($389) a tonne on the Shanghai Futures Exchange after the output data. The contract hit 2,639 yuan on Wednesday, its highest since April 26.

    For July, China's steel production rose 2.6 percent from a year earlier to 66.81 million tonnes, bringing output in the first seven months of the year to 466.52 million tonnes, down 0.5 percent.

    Output of steel products rose 4.9 pct to 95.94 million tonnes last month, and was up 1.9 pct over January-July to 657.05 million tonnes.
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    Eskom strike averted

    The deadlock in the Eskom wage negotiations has been broken following a 14-hour marathon wage negotiation process, averting a potentially costly strike for the already ailing SA economy.

    Eskom spokesperson Khulu Phasiwe said in a Facebook post on Friday that after the "14-hour marathon wage negotiation process that was brokered by the CCMA until the early hours of this morning, both NUM and Solidarity have signed a wage increase of between 8.5% and 10%, with the lowest paid workers getting a 10% pay rise for the this year".

    In the second year, all workers will receive a pay rise of 8%, he wrote.

    He said Numsa has not signed the deal yet, but they have, in principle, accepted the settlement offer.

    The National Union of Mineworkers (NUM) is also in the process of mobilising all its members to return to work, Phasiwe wrote.

    The breakthrough comes after the Commission for Conciliation, Mediation and Arbitration (CCMA) stepped in on Wednesday to defuse the wage dispute between Eskomand the NUM, National Union of Metalworkers of South Africa (Numsa) and Solidarity.

    This follows as Eskom on Tuesday obtained a court interdict against striking NUM members. NUM national spokespersonLivhuwani Mammburu, told Fin24 the union was not aware of the interdict when it called a national strike, following its national shop steward council meeting on Tuesday.

    Before Friday's breakthrough, NUM already revised down its demand of a 12% wage increase to 10% for the lowest paid workers and 8.5% for the highest paid workers, said Mammburu. The housing allowance has also been revised down from R5 000 to R3 000.

    Numsa was demanding a 12% wage increase across the board and a housing allowance of R4 000. But the union was open to negotiations,  Vuyo Bikitsha, electricity sector coordinator for Numsa, told Fin24. The union did not embark on strike action.

    The utility also said on Thursday its operations had not been affected by the strike as 45 000 of its 47 000 workers had not downed tools.

    NUM has 15 000 members at Eskom.

    The stoppage at Eskom coincides with a strike over wages by around 15 000 workers in the petrochemical industry that has been going on since last week but has so far not caused any significant fuel shortages.
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    China moves to spur slow coal overcapacity cut

    China's National Development and Reform Commission (NDRC) ordered local governments to speed up measures to cut excess coal production capacity as progress was slow.

    "Local governments should strive to fulfill their targets by the end of November, while central and provincial state-owned coal producers should complete in the early part of that month," Lian Weiliang, deputy head of the top economic planner, said when addressing an internal meeting on August 11.

    Lian's remarks followed data that during the first seven months China had only achieved about 95 million tonnes, or 38% of its annual coal-production reduction goal, which is around 250 million tonnes.

    Some 21 provinces have cut excessive capacity, but the authority said the progress was lagging behind the official schedule by the end of July.

    According to Lian, there has been no practical progress in Inner Mongolia, Fujian, Guangxi, Ningxia and Xinjiang, while Jiangxi, Sichuan and Yunnan have finished less than 10%.

    Authorities must strengthen enforcement, Lian said, adding that punitive measures including forced shutdowns can be taken on factories that dawdle.

    The authority said it would also push for government spending to help ease the pain for cash-strapped coal companies, under mounting pressure to reallocate their laid-off workers.

    China said in February it expected to lay off 1.8 million workers in the coal and steel industries, or about 15% of the workforce.

    The government is supporting banks to convert the coal company's non-performing loans to other assets backed securities, said the NDRC, after the coal province Shanxi allowed offers of the country's first credit default swaps (CDS) last week.

    China is the world's largest producer and consumer of coal and steel. The two industries have long been plagued by overcapacity and have felt the pinch even more in the past two years as the economy cooled and demand has fallen.

    The government has made reducing excess capacity a top priority, with plans to cut steel and coal capacity by about 10% -- as much as half a billion tonnes of coal and 150 million tonnes of steel -- in the next few years.
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    A R17bn investment in the Waterberg

    In what may be the biggest new coal mine developed in the world in 2016, ASX- and JSE-listed Resource Generation (ResGen) announced on Monday  – through its project vehicle Ledjadja Coal – it had reached a commercial agreement to secure a funding package of R5.53 billion to continue the development of the Boikarabelo coal mine in Limpopo’s Waterberg region.

    The company has already invested R2 billion in the project and was arranging financing terms last year when a group of controlling shareholders, led by Altius Investment Holdings, had a disagreement with management that led to their ouster.

    Rob Lowe, the chief executive of Altius, has now assumed the role of CEO of Resource Generation. “According to our base case financial model, no further equity will be required. So the R5.53 billion will comprise various forms of debt,” says Lowe. The senior portion will be provided by Rand Merchant Bank and Noble Group; while the mezzanine layer and preference share structure will be jointly provided by the Public Investment Corporation (PIC) and the Industrial Development Corporation (IDC). The first draw-down will be from cash at the company’s disposal. The Noble Group, who are 13.7% shareholders in the company, will also provide a cost-overrun facility.

    The funding package will comprise both US dollar- and rand-denominated loans. “The split will be roughly two-thirds rand, one-third US dollar. This is because there are substantial components of the wash plant that will be bought in dollars, and with over 60% of the company’s expected revenues being received in hard currency, we thought it was a natural hedge to borrow in dollars,” says Lowe.

    The company is targeting credit approval and financial close by the end of October this year and anticipates completing construction by September 2018. The first production is expected in the fourth quarter of 2018. “We expect to ramp-up to full capacity in the fourth quarter, such that we will meet the run-of-mine target rate of 12 million tonnes per annum,” says Lowe. This should provide six million tonnes of saleable coal a year, comprising 3.6 million tonnes of export coal and 2.4 million tonnes of domestic coal. “But we have full optionality in our wash plant and logistics, so if there is no appetite for domestic coal, we can move all of it for export,” says Lowe.

    While discussions with Eskom are ongoing for the domestic coal, Noble Group have a 35-year marketing agreement to handle the export component. The company already has contracts in place to supply end users (power stations) on the Indian sub-continent.

    Regarding logistics for export and domestic coal, a rail line will be constructed from the mouth of the mine to connect with the Lephalale-Witbank main line. This will allow ResGen to supply power stations in the Witbank area via rail, with export coal moving onward to Richards Bay. The primary port facility will be RBTG (Grindrod) which is in the process of being upgraded to the point where it can accommodate all of Boikarabelo’s saleable production, if needs be.

    In parallel with the mine, ResGen is also mulling its options on the proposed coal IPP, which could cost in the region of R8-10 billion, depending on which configuration is pursued. “The IPP is being fast-tracked in parallel with the mine, but they are not interdependent,” says Lowe. The company has approvals in place (environmental, land, and water) to build a 300 Mega Watt (MW) coal-fired power station. But the results of a recent feasibility study indicate the company might be better served building a larger plant – in the region of 450–600 MW. “We are committed for the 300 MW, but the question is whether we will be able to increase that to 450-600 MW in time for the Department of Energy’s second IPP window which is scheduled to open in 2017,” says Lowe.

    The IPP will be developed by ResGen using other shareholders – the contractor (who would also become a shareholder) will most likely be Japanese or South Korean. The company is investigating power offtake agreements with Eskom and third parties.

    A potential R10 billion investment in the construction of the IPP along with the R7.5 billion invested in the mine would certainly transform the Waterberg from an economic development point of view. The mine is located 50 kilometres west of Lephalale and is bordered to the north by the Limpopo. ResGen anticipates 3 000 temporary jobs will be created during construction, with 685 permanent jobs in Phase 1 of the mine that follows. The investment will add an estimated R250 million to the local economy.

    “I think it’s a really good news story. There have been lots of people that have been sceptical, and we have been able to show everyone that the Waterberg can become a serious new source of coal and energy, so we are very excited,” says Lowe. He also believes the project is a demonstration of what can happen when there is co-operation between the public and private sectors. “The PIC, IDC and Transnet Freight Rail have all been incredible, as have the Departments of Economic Development and Mineral Resources.”
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    Shenhua H1 net profits slide 19pct on year

    China Shenhua Energy Co., Ltd, the listed arm of coal giant Shenhua Group, realized net profit of 9.83 billion yuan ($1.48 billion) in the first half of the year, sliding 18.6% year on year, announced the company on August 10.
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    NSW to pay BHP $170 mln to repurchase coal exploration permit

    New South Wales agreed to pay BHP Billiton A$220 million ($170 million) to buy back a coal exploration licence that extends under prime farmland in the state's eastern Liverpool Plains, the government said on Thursday.

    "After careful consideration, the NSW Government has determined that coal mining under these highly fertile black soil plains... poses too great a risk for the future of this food-bowl and the underground water sources that support it," Premier Mike Baird said in a release.

    The agreement relates to a commercial exploration licence in the state's northeast, at Caroona, for underground coal mining covering approximately 344 square kilometres. BHP bought the licence for A$100 million in 2006.

    "While we believe that Caroona would have been developed responsibly, we accept the Government's decision and appreciate its willingness to work with us to agree an acceptable financial outcome for the cancellation of our exploration licence," BHP Billiton Minerals Australia President Mike Henry said in a statement.

    Baird also indicated that negotiations with China Shenhua Energy Co Ltd, whose Watermark coal mining title extends into the area, had also begun.

    China Shenhua did not immediately respond to an emailed request for comment.

    Shenhua bought a licence to develop the A$1 billion Watermark thermal and semi-soft coking coal project seven years ago, but development was delayed following lengthy assessments and modifications to plans in response to concerns raised by farmers.
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    China cuts coal production capacity by over 95Mt

    China has cut its coalproduction capacity by more than 95-million tonnes by the end of July, the National Development and Reform Commission said on Thursday.

    The cuts represented about 38 percent of this year's capacity reduction target of 250-million tonnes, it said.
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    China makes headway in steel capacity cut, NDRC

    Efforts to reduce China's steel production overcapacity are forging ahead according to plan, the Xinhua News Agency reported, citing the National Development and Reform Commission (NDRC).

    In a medium-term roundup of the drive on August 10, the top economic planner said that the central government has rolled out general guidelines and the NDRC has also strengthened guidance of local governments and major steel producers in drawing their own capacity cut plans.

    The State Council guidelines, issued on February 4, dictated that steel production capacity must be reduced by 100 million tonnes to 150 million tonnes over the next five years, with some 45 million tonnes cut in 2016.

    The People's Daily cited Xia Nong, head of the NDRC industry department, as saying that the resolute measures have proven effective, and the drive will pick up speed in the second half of this year to achieve the goal.

    Inspection teams will be dispatched to local governments to oversee their work starting from mid-August, the report said.

    Crude steel output posted a year-on-year decline of 1.1% in the first six months of 2016, and operational conditions of the steel sector reported improvement.

    In fact, China's crude steel production capacity utilization rate, 71.2% in 2015, was higher than the global average of 69.7%, showed data from the World Steel Association.

    In the first half of 2016, China reduced steel capacity by 13 million tonnes, about 30% of the planned cuts for the whole year, a figure in line with expectations, according to Feng Fei, vice minister of industry and information technology.

    The campaign apparently gathered momentum in July, when another 17% of the target was finished.

    In the first half this year, work focused on breaking down tasks, so that they could be allocated to provincial-level regions, and the formulation of supportive measures for steel capacity cuts, Feng said.

    In the second half, capacity cuts and supportive measures will gain speed, he said.

    Still, warming steel prices had watchdogs on alert for resurgence in production capacity as crude steel output soared to 69.47 million tonnes in June, setting a record of average daily yield of some 2.32 million tonnes.

    A price rebound means balky local officials, some of whom decided to defer capacity cut tasks, while the generation of job opportunities for hundreds of thousands of laid-off employees and the massive debts of steel enterprises suggests a tough battle ahead for overcapacity cut.

    Although four provinces have already met their annual goals, eight reported lukewarm progresses while 10 have not taken any substantive measures, according to an inter-ministerial meeting held on August 4.
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    Vale denies iron ore streaming financing deal in the works

    Vale SA, the world's largest producer of iron ore, denied it plans to raise cash from the sale of future iron ore output through a so-called streaming financing transaction.

    Rio de Janeiro-based Vale told the securities industry watchdog in a filing that the information regarding the streaming financing deal was "not true." Reuters reported on Aug. 3 that Vale expected to raise up to $10 billion from the sale of about 3 percent of future iron ore output to undisclosed Chinese companies.
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    Bankrupt coal miner Peabody's lenders approve business plan

    Peabody Energy Corp said on Wednesday its five-year business plan had been approved by its debtor-in-possession lenders, the first step towards emerging from Chapter 11 bankruptcy.

    Peabody, the biggest U.S. coal miner, filed for bankruptcy protection in April after a sharp drop in coal prices left it unable to service its $10.1 billion debt, much of it incurred for to expand in Australia.

    The bankruptcy ranks among the largest in the commodities sector since energy and metal prices began to fall in 2014.

    The St. Louis-based company said it was aiming for total annual sales of 194 million to 197 million tons between 2018 and 2021, up from an expected 168 million tons in 2016. Revenue over the period is expected to be $4.4 billion to 4.6 billion.

    Peabody said it would review its assets in Australia to run a "smaller but more profitable" basis.

    The company said in May it would sell its interest in undeveloped assets in Queensland for A$104 million (now $80.6 million) to Sydney-based Pembroke Resources, backed by private equity firm Denham Capital.
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    U.S. Steel Canada rejects latest offer from Essar consortium

    U.S. Steel Canada on Wednesday rejected a buyout offer from Ontario Steel Investment Ltd, a group that includes shareholders of Essar Global, saying it was not considering further proposals by Essar, which had been eliminated from the sale process.

    The offer, made on Tuesday, included the assumption of C$954 million ($734 million) in liabilities under U.S. Steel Canada's pension plan and a commitment to provide C$25 million toward post-employment benefits for U.S. Steel Canada's staff.

    U.S. Steel Canada, which has been in creditor protection since 2014, said Essar was rejected as a potential buyer of the business earlier this year following discussions with stakeholders including the Ontario government.

    It cited a failure by Essar, the Indian energy and resources conglomerate, to provide evidence of its financial ability to own and operate the company and an inability to gain the support of all stakeholders including the provincial government.

    The United Steelworkers (USW) union has criticized U.S. Steel Canada's decision and Essar later re-entered the bidding process through the Ontario Steel investment vehicle.

    U.S. Steel Canada, which employs nearly 2,000 workers in Ontario and has the capability to produce 2.6 million tons of steel annually, is a former unit of United States Steel Corp
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    Coal exports via Vostochny Port rise 2.6pct over Jan-Jul

    JSC Vostochny Port, a Russia-based terminal operator, reported 13.5 million tonnes of coal export handling over January-July this year, an increase of 2.6% than the first half of 2015, Port News reported on August 10, citing the company.

    In July, coal throughput at Vostochny Port jumped by 15% to 2.23 million tonnes. The average daily unloading rate at the Vostochny Port's dedicated coal terminal reached 761 rail cars, hitting the record high.

    JSC Vostochny Port, together with JSC Rosterminalugol at the Port of Ust-Luga, will be concentrated in a single management structure, Moscow headquartered Port Management Company Ltd. (UPK), the company said in a press release.

    The total throughput of the two terminals by the year 2015 results exceeded of 40 million tonnes, more than a third of the Russian coal exports.

    JSC Vostochny Port is the major stevedoring company of Russia specializing in handling of export coal. The company's assets include the Specialized Coal Terminal, the only in the Primorsky Terrioty dedicated terminal utilizing conveyer equipment as well as the railcar unloading station. Automation at the facility reaches 98.9%. The coal terminal's annual capacity reaches 14.2 million tonnes.

    The second facility is the Universal Handling Terminal of annual capacity of 3 million tonnes, which specializes in clamshell coal handling. The Company receives largely coal mined in Kuzbass region. The commodity exports account for 98.5% of total cargo volumes of the terminal operator. Less than 1.5% is coal shipped by coasting dry bulk carriers, and just 0.01% accounts for other cargoes.

    In 2015 cargo throughput at Vostochny port totaled 22.8 million tonnes, a fifth of the total coal exports from Russia's seaports and about 32% of the coal handled at the ports in the country's Far East basin.

    Vostochny Port presently is implementing a large-scale investment project (since 2012) on the construction of Coal Handling Complex Phase 3, including the construction of a federal railway infrastructure. The facility P3 completion and launching is scheduled for 2017, with annual coal throughput capacity of 39 million tonnes.
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    Daqin July coal transport down 26.7pct on year

    Daqin line, China's leading coal-dedicated rail line, transported 25.21 million tonnes of coal in July this year, up 5.04% on month but down 26.65% on year – the 23th consecutive year-on-year drop, said a statement released by Daqin Railway Co., Ltd on August 10.

    In July, Daqin's daily coal transport averaged 0.81 million tonnes, edging up 1.25% on month.

    Daqin rail line realized coal transport of 182.95 million tonnes in the first seven months, falling 23.83% year on year.

    The operation of Zhunchi (Zhunger-Shenchi) railway boosted coal transport of Shuohuang (Shuozhou, Shanxi-Huanghua port, Hebei) railway, which squeezed the transport by Daqin line.

    During the first half of the year, the volume of coal transported by Daqin line was only 10-20 million tonnes higher than that of Shuohuang line, said industry insiders, without giving specific figures.
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    Activists demand Formosa Plastics Group shut steel unit in Vietnam

    About 100 activists protested in front of Formosa Plastics Group's headquarters in Taipei on Wednesday demanding it shut its steel project in Vietnam and urged Hanoi to prosecute the Taiwanese firm for environmental damage.

    "Formosa: out of Vietnam", "We want the truth", chatted the protesters, most of whom were Vietnamese.

    The Vietnamese government said in June that the $10.6 billion steel project allowed toxic waste to enter the sea in one of Vietnam's biggest environmental disasters.

    Formosa, one of the communist country's biggest investors, has pledged $500 million in damages and admitted its steel plant caused massive fish deaths along a 200 km (124 mile) stretch of coastline in April..

    "The secretive 'settlement' announced by the Hanoi government and Formosa on June 30 underscores the lack of transparency in the handling of the environmental disaster," said activist Duy Hoang.

    "Formosa is not the only party in this incident. The Vietnamese authorities need to demonstrate greater transparency and release its investigative report," he said.

    The disaster unleashed months of public anger on social media and on the streets of big Vietnamese cities.

    Vietnamese environmental authorities said in July that they were working with local officials in the Ha Tinh province to investigate dry waste, belonging to the steel unit, that was found dumped on a residential farm.

    Formosa is one of Taiwan's biggest conglomerates. Its listed units included Formosa Plastics Corp and Formosa Chemicals & Fiber Corp.
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    Iron-ore giants reject proposed A$7.2bn iron-ore mining tax hike

    The world’s two largest mining companies rejected a proposed A$7.2-billion ($5.5-billion) tax increase on their Western Australian iron-ore operations, saying it’s likely to put jobs and competitiveness at risk.

    Brendon Grylls announced the tax proposal after being appointed the new leader of the state’s Nationals party on Tuesday. The plan to raise the production rental cost on  Rio Tinto and rival BHP Billiton to A$5 a metric ton from 25 Australian cents would be a pillar of the Nationals campaign for the 2017 state election, according to a statement.

    “The Nationals WA believe that the state and taxpayers have facilitated a huge expansion of the iron-ore industry at great cost to our state budget and the big miners are not paying their fair share,” Grylls said in the statement. “These two miners have made almost $140-billion since 2010, and Western Australia has facilitated that.”

    The Nationals are the smaller party in the ruling coalition in the state under Premier Colin Barnett of the larger Liberal party. Grylls has met with Barnett to discuss the policy, according to the statement. The hike would add A$7.2-billion to the state’s budget across its forward estimates and bring it back into surplus, the party said.

    The proposal isn’t “supported by business and was unlikely to proceed given it would need the support of the Nationals’ alliance partners,” Chamber of Commerce and Industry of Western Australia’s CEO Deidre Willmott said Tuesday in a statement.

    Royalty income, Western Australia’s third-largest source of revenue after taxes and federal government grants, is forecast to decline 8% to about A$3.8-billion this fiscal year, mainly as a result of lower iron-ore prices, the state government said in May.

    “There are no grounds for a new mining tax in Western Australia and it should not be adopted as Nationals policy,”London-based Rio said in an e-mailed statement. “An ill-conceived tax grab will place these local jobs and the growth of Rio Tinto’s iron-ore business at risk.”

    Rio and BHP, together the second- and third-largest iron ore exporters in the world, have expanded aggressively in Western Australia, spending billions on new mines, ports and rail operations to tap surging demand from China. After climbing to a record of almost $200 a ton in 2011, the price of the steel making raw material plunged to near $60 a ton thanks to a deepening glut as producers expanded.

    “We do not understand why a proposal that is so discriminatory and uneconomic would be targeted at two companies,” BHP said in an e-mailed statement. Producers are operating in “an international market and we have to be able to compete or will lose market share,” the Melbourne-based producer said. Australia is the top iron ore exporter, ahead of Brazil.

    Rio produced a total of 310-million tons of iron-ore in the state last year and paid about $3.3 billion in taxes and royalties in Australia, including $1.2-billion to Western Australia’s state government, according to filings. The exporter employs about 12 000 people in the state, with the majority at its giant mining complex in the north western Pilbara region. The jobs rely on a “stable and competitive taxation environment,” Rio said.

    BHP, with mining operations, two port facilities and about 1 000 km of railroad in the Pilbara, had output of 257-million tons, including products for joint-venture partners, from the state in the 12 months to June 30. The producer has paid about A$65-billion in taxes and royalties in Australia over the past 10 years, including A$10.6-billion in royalties to the Western Australian government, BHP said in the statement.
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    China July coke exports surge 50.7pct on year

    China exported 1.1 million tonnes of coke and semi-coke in July, surging 50.7% from the year prior and up 44.7% from June, showed data released by the General Administration of Customs (GAC) on August 8.

    The value of coke exports stood at 982.41 million yuan ($147.6 million) in the month, falling 17.8% from the previous year. That translated to an average price of 893.15 yuan/t, up 132.69 yuan/t from June.

    Over January-July, the country's exports of coke and semi-coke increased 10.8% on year to 5.85 million tonnes, with value over the period dropping 17.8% on year to 5.5 billion yuan.
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    Ontario Steel bids for U.S. Steel Canada

    Ontario Steel Investment Ltd, a group that includes shareholders of Essar Global, said on Tuesday that it had submitted an offer for the purchase of U.S. Steel Canada, which has been in creditor protection since 2014.

    The offer includes the assumption of C$954 million ($725 million) in liabilities under U.S. Steel Canada's pension plan and a commitment to provide C$25 million toward post-employment benefits for U.S. Steel Canada's past and present staff.ns in Hamilton and Nanticoke, Ontario.

    Ontario Steel said it remained in active discussions with the USW regarding its offer and looked forward to continuing discussions with the province of Ontario.

    U.S. Steel Canada is a former unit of United States Steel Corp

    The United Steelworkers (USW) union had criticized U.S. Steel for its decision to eliminate Essar Global as a potential buyer of U.S. Steel Canada's operatiof 18 months of discussions with all of the key stakeholders to find the best outcome for the business," it said.
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    Iron ore price soars past $61 per tonne to fresh 3-month high

    Iron ore prices built on Friday’s gain hitting almost $62 per tonne Monday, a fresh three-month high, after figures released by the Pilbara Ports Authority showed a significant increase of shipments from Australia in July through Port Hedland, the world’s largest iron ore loading terminal.

    Iron ore has spent much of this year defying analysts’ predictions for a sustained slump triggered by oversupply. Beijing’s stimulus plans, restocking by Chinese steel mills and historically low port stockpiles have supported prices.

    The import price for 62% iron content fines at the port of Qingdao added nearly a dollar to $61.56 a tonne, data from The Metal Bulletin Index shows, taking the commodity’s monthly price average to $61.28.

    Today’s price rally coincides with the release of Port Hedland’s export figures, which rose 9.6% last month to 38.72 million tonnes, compared with 35.3 million tonnes shipped in July last year.

    While the numbers were lower than the record high of 41.81 million tonnes reached in June, most of it went to China, which accounted for 32.52 million tonnes of iron ore shipments from the port last month, up from 29.48 million tonnes in the same month last year.

    Shipments to South Korea fell 12% year-on-year to 2.54 million tonnes last month, while those to Japan totalled 1.88 million tonnes, marginally lower than the 1.9 million tonnes shipped a year earlier.

    Iron ore’s resilience in recent months has defied many analysts’ forecasts, as Beijing’s stimulus plans, restocking by Chinese steel mills and historically low port stockpiles have supported prices.

    Major miners had rushed to cut costs in recent years as the steel-making ingredient tumbled into an extended bear market, with low prices that pushed high-cost companies out of the market.

    New supply from Roy Hill in Australia, Anglo American’s Minas Rio and Vale’s S11D in Brazil, however, is now expected to outpace demand for some time.
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    Coal miners in N China gets resource charge extension to ease financial strains

    Authorities in the northern province of Shanxi postponed resource exploitation charges for mining firms during the first half (H1) this year, to alleviate the financial strain on firms saddled with overcapacity.

    The province's land and resources department allowed 504 coal-mining firms and four other mining firms to delay paying their prospecting and mining charges for the first six months, totaling 16.1 billion yuan (2.42 billion U.S. dollars).

    Coal mining must tackle overcapacity as part of the government's wider structural reforms.

    The State Council, China's cabinet, said earlier this year that it aimed to cut 500 million tonnes of coal production capacity over the next three to five years.

    Coal production in Shanxi has dropped by more than 60 million tonnes year on year during H1.

    China's banking regulator has also asked banks to continue to support mining and steel firms' "reasonable funding needs" to ensure that they have the necessary financial support to press ahead with capacity reduction and structural reforms.
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    Shanxi coal loans are 400 bln yuan ($60 bln)

    China’s coal-rich Shanxi province has extended the maturity on over 400 billion yuan ($60 billion) in loans for seven of its largest coal miners in a move to easing pressure on coal miners, state media reported.

    The Shanxi branch of the China Banking Regulatory Commission will allow the province’s seven biggest coal companies to restructure short-term debt into medium and long-term loans, the state-run Xinhua news agency reported.

    The move comes after the deputy provincial government led the seven coal miners on a road show to Beijing this summer in an attempt to convince investors to subscribe to their bonds.

    These seven key state-owned coal enterprises included Shanxi Coking Coal Group, Datong Coal Mine Group, Yangquan Coal Industry Group, Jincheng Anthracite Group, Shanxi Coal Imp.& Exp. Group, Lu'an Group and Jinneng Group.

    At the end of last year, Shanxi’s seven largest coal groups had 1.189 trillion in debt, almost as much as the province’s 2015 GDP of 1.28 trillion yuan, according to Everbright Securities.

    Datong Coal Mine Group saw its debt rank the first at 219.21 billion yuan, followed by Shanxi Coking Coal Group and Jinneng Group with liabilities at 205.58 billion and 108.86 billion yuan, respectively.

    Some 21% of all bank lending in Shanxi has gone to the province’s seven top coal companies, Zhang Anshun, the head of the province’s CBRC, was quoted as saying by Xinhua.

    Also, average asset-liability ratio in these companies climbed to 82.51% in 2015, up from 81.16% in 2014. Among them, Yangquan Coal Industry Group ranked the first at 85.84%, followed by Shanxi Coal Imp.& Exp. Group and Datong Coal Mine Group with ratio at 84.97% and 84.95%.

    Under heavy debt, all these enterprises posted losses in 2015, totaling 5.585 billion yuan. Datong Coal Mine Group witnessed the largest loss of 1.085 billion yuan, compared with Shanxi Coking Coal’s least loss of 465 million yuan.

    Official figures put China’s bad debt at 4.6 trillion yuan as of end-March, or 1.75% of total commercial banking debt in the system. Analysts say the real ratio could be as high as 15%.

    The central government last year launched a 4 trillion yuan-and-counting programme that pushed banks to swap debt from many local government businesses for longer-maturity bonds.

    This year, Beijing announced a plan in which banks would trade corporate debt for equity in companies.

    Corporate debt is a concern across China but the situation is particularly desperate in Shanxi. A four-year slump in coal prices has left miners in the red and private companies unable to repay high-interest-rate shadow-banking loans that date back to a boom in coal prices a decade ago.
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    Favourable response to CIL’s forward auction sales

    State-controlled Coal India Limited (CIL) has received a “highly favourable response” to its forward e-auction programme, which it hopes will attract sales of at least 120-million tonnes ofcoal in the current financial year.

    According to a CIL official, the response to its forward e-auction, against a backdrop of oversupply, is a “good” indication of the miner’s ability to maintain production, while efficiently managing its stockpiles, which were estimated at 53-million tons at the end of last month.

    The company plans to continue to offer an estimated 60-million tons for sale on e-auction over the next six months topower and non-power bulk consumers, potentially increasing to 120-million tons for the full financial year, the official added.

    In the latest round of forward e-auction exclusively for thepower sector, which started early this month, CIL was able to secure bookings of around 18-million tons. This is said to be a significant achievement for the coal miner considering that data from the Central Electricity Authority shows thataggregate coal stocks with all thermal power plants in the country stand at 31-million tons, or the equivalent of about 23 days consumption, which is one of the highest stocks in the last eight months.

    In another past forward auction held in April, the entire four-million tonnes on offer was booked by thermal power plants which had lost captive coal mines following a Supreme Court order, or where the plants’ existing fuel supply agreement with CIL expired in July 2016.

    In a further drive to auction volumes, CIL has decided to offer blended coal, a mix of high and low gross calorific value (GCV) fuel, as an appropriate import substitution for imported coal-based coastal thermal power plants.

    With the government putting in place restrictions and directing thermal power plants to progressively reduce coalimports, auction sales of blended coal will cater for the coastal thermal power plants, which are largely designed to use a mix of high GCV fuel as feedstock along with high-ash content coal to achieve a lower electricity generating cost of production.

    Despite a 42-million-ton stockpile, the Coal Ministry has set a production target for CIL of 598.62-million tons for 2016/17, up from 538.75-million tons achieved in 2015/16.
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    Dalrymple Bay's coal exports down 16pct on month in July

    Coal exports from Australia's Dalrymple Bay Coal Terminal (DBCT) reached 5.40 million tonnes in July, fell 16% from June, sources said.

    Dalrymple Bay is located within Hay Point port in central Queensland. The facility operating at an annualized rate of 63.75 Mtpa during the month, which is 21.25 Mtpa lower than its 85 Mtpa nameplate capacity.

    In the first seven months this year, the terminal was seen operating at an annualized rate of 66.81 Mtpa.

    Anglo American, BHP Billiton, Glencore, Peabody Energy and Rio Tinto are the coal producers that ship product through DBCT.

    For fiscal year 2015-16 ended June 30, DBCT exported 67.35 million tonnes of coal, the source said, down 5.6% from the year-ago level.

    In this period, shipments to China totalled 13.94 million tonnes, Japan received 14.70 million tonnes and exports to South Korea were 11.22 million tonnes, statistics from the port showed.

    All of DBCT's capacity is currently contracted to coal producers located in the Bowen Basin coalfields in Queensland, according to DBCT management.

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    Shanxi coking coal output drops 17pct in H1

    Shanxi province produced 206.09 million tonnes of coking coal in the first half of the year, dropping 19.2% from a year ago, showed data from China Coal Resource.

    The January-June output accounted for 38.8% of China's total coking coal production over the same period, which was reported at 531.11 million tonnes, down 12.1% year on year.

    In June, the province produced 36.45 million tonnes of coking coal, down 26.4% on year but up 11% on month, data showed.

    The output of the province's washed coking coal declined 16.8% on year to 80.32 million tonnes over January-June. That accounted for 37.9% of the national total washed coking coal output, which stood at 212.07 million tonnes, down 11.3% from the year prior.

    In June, Shanxi produced 13.66 million tonnes of washed coking coal, sliding 28% on year but up 2.6% on month.

    China's consumption of coking coal was on the decline, mainly attributed to the dropping coke productions.

    A total 258.87 million tonnes of coking coal was consumed in the first half of the year, down 2.6% on year, with consumption in June rising 2.3% on year and up 0.3% on month to 46.29 million tonnes.

    China's coke output dropped 4.4% on year to 215.77 million tonnes over January-June, with June output edging up 0.5% on year to 38.54 million tonnes.

    China's coking coal prices were climbing as coal production cuts continued amid 276-workday reform and steel and coke prices were hovering higher. Meanwhile, persistent low coke stocks amid disrupted deliveries previously and frequent environmental checks recently also helped the market to gain upward strengths.

    By August 5, Fenwei CCI Met Index assessed low-sulfur primary coking coal in Liulin of Shanxi at 658 yuan/t, a rise of 138 yuan/t since this year.

    Attached Files
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    U.S. locks in hot-rolled steel dumping duties on seven countries

    The U.S. Commerce Department on Friday set final anti-dumping duties on hot-rolled flat steel from Japan, South Korea, Turkey, Britain, Brazil, the Netherlands and Australia on Friday, locking in import taxes of 3.7 percent to about 34.3 percent for five years.

    The ruling, which could still be overturned by the U.S. International Trade Commission, is the latest in a series of U.S. actions aimed at fighting a glut of steel imports as China's economy slows and demand remains weak elsewhere.

    The department also imposed final anti-subsidy duties of 3.9 to 11.3 percent against most steelmakers in Brazil, Turkey and South Korea, but slapped 57 percent anti-subsidy duties on top Korean steelmaker POSCO and Daewoo International Corp.

    The final duty rates follow preliminary determinations in January and March.

    The highest anti-dumping taxes of 34.3 percent were imposed against Brazil's Usiminas, with all other Brazilian producers facing 33.1 percent margins and just over 11 percent anti-subsidy duties.

    The Brazlian government has threatened to challenge the U.S. duties before the World Trade Organization.

    Britain's Tata Steel UK saw its U.S. anti-dumping margin reduced from nearly 50 percent in the preliminary finding to about 33 percent, while Tata Steel's Netherlands operations faces final dumping duties of 3.73 percent.

    Used in automotive applications, construction, tubing and heavy machinery, hot-rolled steel imports from the seven countries more than doubled to nearly $2 billion last year, with the largest share, about $650 million, coming from South Korea.

    The International Trade Commission is due to decide by late September whether the imports from these countries were unfairly traded and had caused injury to domestic producers.

    At a hearing on the issue on Thursday before the commission, American steel executives argued that Chinese mills were overproducing steel of all types, causing a global supply glut that has prompted steelmakers elsewhere sell hot-rolled product below cost into the United States, the only market with significant demand. This caused prices to plunge and several U.S. steel mills to be idled last year.

    "Globally, demand for steel is very anemic. There is every incentive in the world for foreign producers to ship product --dump product -- into the United States," said Richard Blume, general manager of U.S. steelmaker Nucor Corp "Basically, they are exporting their unemployment to the U.S."

    South Korean steel producers argued in briefs in the case that imports were not to blame for the hot-rolled price drop in the United States.

    Instead, they said the lower prices were due to falling demand for oil drilling pipe, lower raw material costs, and shipping bottlenecks that caused West Coast industries to turn to Asian suppliers.
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    China Shanxi province-owned large coal miners can extend debt maturities - Xinhu

    China Shanxi province-owned large coal miners can extend debt maturities - Xinhu

    Seven large Shanxi province-owned coal miners will be permitted to extend the maturities of some existing debt, the official Xinhua news agency reported Sunday, citing a document released by the Shanxi branch of China's banking regulator.

    The document directs Shanxi banking sector institutions to help the firms convert short term liquidity loans into medium and long-term loans, Xinhua reported.

    The Shanxi office of the China Banking Regulatory Commission could not be reached for comment.

    China's coal industry, the largest in the world, has been punished by a brutal collapse in coal prices since late 2014. Despite a moderate recovery in recent months, Chinese benchmark thermal coal prices remain around 30 percent lower than in 2014.

    China's legacy coal and steel regions have also been struggling to refinance themselves through conventional lenders, resulting in widening bond defaults in provinces like Shanxi and Liaoning. A recent Reuters analysis of central bank data found sharply rebounding dependence on expensive "shadow bank" finance in China's rust belt as traditional lenders retrenched.
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    China July iron ore imports hit 2016 high, steel exports ease-customs

    Chinese iron ore imports rose 8.3 percent in July from the previous month to hit its second-highest on record, customs data showed on Monday, as underlying demand for the raw material in the world's top buyer remained strong.

    Shipment climbed to 88.4 million tonnes in July, the highest since December and up 2.7 percent from a year ago, data from the General Administration of Customs showed.

    For January to July, imports rose 8.1 percent from the same period the year before to 582.05 million tonnes.

    "I'm not really surprised because a lot of overseas suppliers wanted to increase their shipments to take advantage of the price recovery," said Helen Lau, an analyst with Argonaut Securities in Hong Kong.

    "Imports should stay around these levels in the next few months unless the price increases to $65 to $70 which should encourage domestic output."

    A 30 percent surge in steel prices since late May has driven Chinese steel mills to maintain high production and restock on the raw material, despite surging inventories at home. Spot iron ore prices .IO62-CNI=SI have risen 27 percent since June.

    The rapid growth in imports has driven stockpiles at main Chinese ports CUS-STKTOT-IORE to 108.06 million tonnes as of Aug. 5, the highest since September 2014, data from industry website showed. Inventories have been above 100 million tonnes since July.

    China's steel exports in July dropped 5.9 percent from June to 10.3 million tonnes, the data showed. But exports remain high as steel mills keep shipping out products, despite complaints of dumping from other regions including the United States and Europe.

    Total exports for the first seven months of 2016 rose 8.5 percent to 67.41 million tonnes from a year ago.
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    Exxaro advises of higher H1 operating profit, attributable earnings

    Diversified miner Exxaro Resources expects its consolidated net operating profit for the six months ended June 30, to be between R175-million and R359-million, or between 10% and 20%, higher than that reported in the first half of 2015.

    The increase is owing to higher coal sales volumes, albeit at lower average realised selling prices.

    Attributable earnings are expected to be between R14-million and R123-million, or between 1% and 11%, higher than the comparative period, primarily as a result of the higher net operating profit contribution from the coal business, but partially offset by lower equity-accounted earnings from investments.

    Attributable earnings a share are, therefore, expected to be between 333c and 363c apiece.

    Headline earnings a share are, however, expected to be between 284c and 310c, or between 2% and 6% lower than that reported in the prior comparable period.

    Exxaro will release its interim results on August 18.
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