Mark Latham Commodity Equity Intelligence Service

Tuesday 15th December 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    NRDC suspends Oil market linkage!

    Development and Reform Commission to suspend the adjustment of domestic oil prices] Development and Reform Commission said that with the rapid economic development, China's environmental situation is increasingly serious, some areas with ozone, haze pollution is characterized by complex pollution increasingly prominent, vehicle emissions is caused by air pollution One of the important reasons.
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    Private equity, pension funds eye more metal streaming deals


    Private equity and pension funds may provide the next wave of funding to the slumping mining sector through metal streaming deals as dedicated funding sources struggle to raise their own cash, industry sources said.

    With many miners unwilling to issue equity given their weakened shares amid falling commodity prices, streaming may help them avoid credit downgrades and fund new mines.

    About $4.5 billion worth of these deals, an alternative form of financing where miners are paid cash upfront for future output, have been inked this year, making 2015 a record year for metals streaming as miners slash debt five years into a commodities downturn. 

    But the bumper deal-making year has reduced the coffers of dedicated stream funders like Silver Wheaton Corp, which face their own challenges raising additional debt and equity.

    Private equity groups and institutional investors, who are already minor players in the market, say this dynamic is likely to drive up returns, creating an opportunity to expand their presence.

    "While the classical mineral royalty and streaming companies are tight on funds, you're going to see private equity and other investment type groups step up to the plate," said Douglas Silver, portfolio manager at Orion Resource Partners, a U.S.-based mining-focused private equity group.

    Silver declined to disclose how much Orion would put into streaming deals in 2016, but said it intends to do more than in 2015. Orion, along with its partners, pumped more than $200 million into streaming transactions in 2015, equal to about half of that done by private equity and fund managers, according to a Thomson Reuters analysis of publicly announced deals.

    Two sources at two North American-based institutional investors who declined to speak on the record as it is not fund policy to talk to the media, said they are interested in doing streaming deals if the price is right.

    At current metals prices, returns on streaming deals are a mere 3-4 percent. But returns have already risen to mid-single digits on deals currently being negotiated, said a source at one of the streaming companies who is involved in several transactions.

    Private equity groups and institutions are also able to bolt streaming onto a broader funding deal that could include debt and equity, resulting in a higher blended return.

    An example is the $325 million construction financing package Lydian Internationalsigned earlier this month for its Armenia-based Amulsar gold project. [nCCN46DW2t]

    Potential new market entrants include CPPIB, Canada's top pension fund manager, and smaller fund PSP Investments.

    Incumbents expected to increase their exposure include investment firm Blackstone Group LP, Quebec pension fund Caisse de depot et placement du Quebec, and private equity group Resource Capital Funds.

    CPPIB, PSP, the Caisse, Resource Capital and Blackstone declined to comment.

    To be sure, stream funders face risks including losing the money they front if a miner goes bankrupt as they typically would rank behind senior secured creditors such as banks or other project finance lenders.

    There is as much as $4 billion worth of potential streaming opportunities available, Silver Wheaton's Chief Executive Randy Smallwood said in an interview on Nov. 4. Global miner Glencore is among those weighing such deals. 

    The world's five primary streaming and royalty companies, including Silver Wheaton, Franco-Nevada and Royal Gold, only have the capacity to fund about $2.4 billion worth of deals over the next year, with more than half of that amount funded by credit, RBC Capital Markets analyst Dan Rollins said in a Nov. 10 research note.

    "Investors are becoming increasingly concerned with the use of debt to fund future stream acquisitions," BMO Capital Markets analyst Andrew Kaip said.

    http://www.reuters.com/article/us-mining-financing-streaming-idUSKBN0TY05220151215

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    Oil and Gas

    China may slow strategic oil reserve growth


    After more than doubling its strategic oil reserves since last year, China may apply the brakes to its buying spree as storage availability is expected to be limited, while a climate of depressed prices will reduce any urgency to snap up cargoes, market observers said Monday.

    The National Bureau of Statistics said Friday that China's SPR more than doubled its crude reserves to 26.1 million mt, or 191.31 million barrels by mid-2015, from 91.11 million barrels on November 20, 2014.

    The latest reported SPR stock were equivalent to around 29 days of China's crude imports, Platts calculations showed, based on the country's average imports of 6.63 million b/d over the first 11 months of the year, according to data from the General Administration of Customs.

    The government had earlier indicated it wanted to achieve 90 days of forward import cover by the end of 2020.

    "Although there is a long way to go to meet the target, the growth in strategic reserves that we saw in 2015 is unlikely to be repeated in 2016 due to the limited availability of crude storage capacity," said James Lu, senior analyst from Platts China Oil Analytics.

    This view was shared by Dong Xiucheng, an oil and gas expert at China University of Petroleum in Beijing, who said that although more SPR sites are expected to completed this year and next, it would take some time before they will be able to start accepting cargoes.

    One new site with 18.9 million barrels of capacity is expected to be completed in 2015, and two more sites with 62.9 million barrels capacity are expected to be ready next year, as estimated by Platts COA. An additional 31.45 million barrels of capacity would be ready in 2017.

    "The sites still need to be inspected and approved before turning fully operational. It takes time," said Dong.

    The government said it has been using several commercial crude oil tanks to store SPR crudes, indicating that there was a shortage of space.

    According to NBS' release, SPR stocks in mid-2015 were 11.41 million barrels higher than the total storage capacity of the eight completed SPR sites.

    In addition, the 18.9 million-barrel underground SPR site in Huangdao started to receive crude in June.

    All these imply that commercial tanks were used to occupy more than 11.41 million barrels.

    But availability of commercial tanks is also tight due to strong demand for stocking in China since oil prices are low, Lu added.

    In January-November, the country's crude stocks grew by 442,000 b/d, up 55% year on year, Platts calculation based on the last official data showed.

    BUYING STRATEGY ADJUSTMENT

    Furthermore, the country's SPR stock building may slow as oil prices are unlikely to rebound in the short term, observers said.

    "The strong growth by mid-2015 was mainly due to a more than 50% drop in crude oil price from the second half of last year. To take advantage of that, China bought heavily for SPR in anticipation that prices could rebound anytime," said Lu.

    However, oil prices are showing no sign of bottoming out soon, Lu said. "China will adjust its SPR buying strategy to a slow pace amid low and stable oil prices," he said.

    A senior economist from CNPC's Economics & Technology Research Institute agreed, adding that China was in no hurry to fill all tanks as it is easy to buy barrels in the international market at low prices.

    http://www.platts.com/latest-news/oil/singapore/china-may-apply-brakes-to-strategic-oil-reserve-27051432

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    India's fuel demand rose 6.4 pct y/y in November


    India's fuel demand rose 6.4 percent in November compared with the same month last year, driven by higher sales of gasoline as discounts and festive season buying boosted passenger vehicle sales.

    Consumption of fuel, a proxy for oil demand, totalled 14.8 million tonnes, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed.

    The rise in India's fuel demand is in contrast with sagging oil consumption in China, the world's second biggest economy.

    The International Energy Agency last month said India would be the most important driver of energy demand growth in the world in the years to come.

    India's federal government ended subsidies on diesel sales in October last year and since then frequent changes in retail prices have narrowed the pricing gap with gasoline.

    Consumption of gasoil or diesel, which makes up about 40 percent of refined fuels used in India, grew at its lowest in five months, rising 1.6 percent to 6.1 million tonnes.

    A temporary ban on diesel vehicles and plans to ration road use in the Indian capital is likely to hit consumption.

    Sales of gasoline, or petrol, were 17.2 percent higher from a year earlier at 1.77 million tonnes as passenger car sales in the month rose a little more than one-tenth.

    Cooking gas or liquefied petroleum gas (LPG) sales increased 2.8 percent to 1.62 million tonnes, while naphtha sales surged 39.7 percent to 1.05 million tonnes.

    Sales of bitumen, used for making roads, were 2.1 percent lower, while fuel oil use edged up 0.4 percent in November.

    http://www.reuters.com/article/india-fuel-demand-idUSL3N1434AO20151214#bIAghIwioh37xUTi.97

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    Never Mind $35, The World's Cheapest Oil Is Already Close to $20


    As oil crashes through $35 a barrel in New York, some producers are already living with the reality of much lower prices.

    A mix of Mexican crudes is already valued at less than $28, an 11-year low, according to data compiled by Bloomberg. Iraq is offering its heaviest variety of oil to buyers in Asia for about $25. In western Canada, some producers are selling for less than $22 a barrel.

    “More than one-third of the global oil production is not economical at these prices,” Ehsan Ul-Haq, senior consultant at KBC Advanced Technologies Plc, said by e-mail. “Canadian oil producers could have difficulty in covering their operational costs.”

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    EIA ups world total for recoverable shale oil


    The Energy Department said on Monday that billions more barrels had been added in 2015 to its estimate of recoverable shale oil around the world.

    The U.S. Energy Information Administration said that new estimate comes after reviews of shale oil and natural gas reserves in four more countries — the United Arab Emirates, Oman, Chad and Kazakhstan.

    The new reserves in those countries pushed up the worldwide total of shale oil that can be recovered using existing technology to 419 billion barrels, a 13 percent rise over the EIA’s previous estimate, or about 48 billion barrels. The review also resulted in a smaller increase in shale gas reserves to 7.5 trillion cubic feet, a 4 percent increase.

    The EIA report noted that most countries, including the most recent four added to the report, still can’t deploy the drilling technology capable of accessing shale oil reserves that has turned the United States into the world’s largest oil producer. Only the U.S., Canada, China and Argentina are current shale oil producers, and the U.S. owns more than 90 percent of that production.


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    U.S. natural gas futures fall to 13-year low on weak heating demand


    U.S. natural gas futures fell over 5 percent to a 13-year low on Monday on forecasts of continued unseasonably mild weather that is expected to keep heating demand low through late December.

    After falling for three days in a row, front-month gas futures on the New York Mercantile Exchange were down 9.2 cents to $1.898 per million British thermal units at 9:16 a.m. EST (1416 GMT).

    That kept the front-month on track to remain in oversold territory for a
    sixth day in a row, the longest streak since July 2014.

    Gas futures for the winter and all of 2016 have been depressed for most of
    this year, with production at record levels, storage at record highs and
    forecasts for a warmer-than-normal winter caused by the El Niño weather pattern.

    The premium of January 2017 futures over January 2016 and the
    premium of April 2016 over March 2016 both climbed to all-time
    highs.

    Speculators bet gas futures still have further to fall. Some of the most
    active American-style options on the NYMEX were the $1.50 April and February
    2016 and $1.75 January puts. Open interest in the contracts was near all-time
    highs.

    The calendar year 2016 strip fell to a new low of $2.23, which
    would be below the current year average of $2.65, making it the lowest annual
    price since 1998.

    On the IntercontinentalExchange, next-day gas for Monday at the Henry Hub
    GT-HH-IDX benchmark in Louisiana and the Southern California Border
    W-SOBOR-IDX both fell to the lowest since November 2001, while Chicago
    MC-CHICIT-IDX declined to a record low, according to data going back to 2007.

    Traders said the price rout showed the market was unfazed by the slowdown in
    U.S. gas production over the past several weeks and an increase in exports to
    Mexico to record levels.

    Thomson Reuters Analytics forecast U.S. gas production in the lower 48
    states would fall below year-ago levels for an 11th day in the last 12, with
    output expected to hit 73.0 billion cubic feet per day on Monday versus 73.6
    bcfd a year earlier. Output hit a record of 76.5 bcfd over the summer.

    Exports to Mexico, meanwhile, rose to a record high of 4.1 bcfd. The federal
    government expects the United States to become a net exporter of gas in 2017 as

    pipeline exports to Mexico rise and liquefied natural gas exports to Europe and
    Asia start up next year. Imports from Canada meanwhile are expected to decline
    as U.S. shale production grows.

    Read more at Reutershttp://www.reuters.com/article/usa-natgas-nymex-idUSL1N1430RJ20151214#WcDyHApVTiLvlGDH.99

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    Brazilian state threatens new oil tax over royalty dispute


    Brazil's state of Rio de Janeiro, home to the bulk of the country's oil production, threatened on Monday to impose a new tax on oil and natural gas in the state if the country's oil regulator ANP does not adjust its royalty calculation.

    The state, whose budget has been hurt by a nearly 40 percent decline in the price of Benchmark Brent crude oil in the last year, has been pressuring the regulator to change the way it determines the so-called oil reference price.

    If the calculation is not changed, the government plans to apply a 2.71 real (69.8-cent) per barrel tax on each barrel of oil or natural gas equivalent produced in fields located in state waters.

    That would raise about 1.8 billion reais ($464 million) in 2016, slightly more than the 1.6 billion reais it is losing because of the current calculation, state officials told Reuters on Monday.

    Rio de Janeiro produces 67 percent of Brazil's oil and 40 percent of its natural gas. Among the state's main producers are state-run oil company Petroleo Brasileiro SA, BG Group Plc, Royal Dutch Shell Plc.

    The state's financial crisis has reached the point where the government is intentionally delaying payments and universities and hospitals have seen their services reduced. Some public servants are still waiting to receive their full November salaries.

    Local organizers of the Rio de Janeiro 2016 Olympic Games have been forced to make cuts to their remaining budgets.

    Royalty payments are paid as a percentage of the reference price for each barrel of oil produced. The reference price has typically been far below the Brent price because the bulk of Brazilian crude has been low-grade, low-price heavy crude.

    According to Rio de Janeiro-state Governor Luiz Fernando Pezão, the calculation, first developed in the 1970s, fails to properly account for large amounts of higher-grade medium and light crude being produced from new subsalt fields south of Rio de Janeiro.

    "We have a request in with the ANP and Petrobras where we show that the price per barrel or oil or gas is wrong and out of date," Pezão told reporters on Monday. "Brazil is producing another type of oil."

    Royalties typically range from 10 percent to as much as 40 percent depending on the size, productivity and profitability of the field.

    http://www.reuters.com/article/brazil-oil-taxes-idUSL1N14404L20151215

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    Shell sees more job cuts as BG deal gets China green light


    Royal Dutch Shell expects to slash thousands more jobs to save costs if its takeover of BG Group goes through as planned early next year following a final green light from China.

    The acquisition, which was announced on April 8 and is biggest in the sector in a decade, has been cleared by China's Ministry of Commerce, Shell said on Monday, after earlier approvals from Australia, Brazil and the European Union.

    Shell and BG will now send a merger prospectus to their shareholders and hold special general meetings for votes on the deal. If approved, it will face a court hearing 10 days later and could be completed by early February.

    Some shareholders, however, have voiced concern over the merits of the acquisition following the sharp slide in oil prices. The fall in Shell's share price since April means the value of the deal has fallen to $53 billion from $70 billion.

    Shortly after announcing the green light from China, Shell issued a statement saying it expected to cut about 2,800 roles globally from the combined group.

    That would be nearly 3 percent of the group's combined workforce of about 100,000, or equivalent to more than half BG's roughly 5,000 employees.

    The Anglo-Dutch oil and gas company had already outlined steps to protect dividend payouts and cashflow following the merger, which include cost savings of $3.5 billion and $30 billion in asset disposals.

    The new job cuts are also in addition to previously announced plans to reduce Shell's headcount and contractor positions by 7,500 worldwide.

    A BG spokesman said the company would remain focused on its business plan until the deal is completed.

    INVESTOR CONCERNS

    The combination will transform Shell into the world's top liquefied natural gas (LNG) trader and a major offshore oil producer focused on Brazil's rapidly-developing sub-salt oil basin that would rival Exxon Mobil's position as the world's biggest international oil company.

    Shell has nevertheless had to battle a sharp slide in oil prices, which have fallen from $55 a barrel in April to below $40 a barrel, which some investors said undermined the deal.

    "The deal doesn't make financial sense at the current oil price. You have got to be pretty bullish on the current oil price to make this deal work." David Cumming, Head of Equities at Standard Life Investments, told BBC Radio on Monday.

    Analysts at Credit Suisse, however, said the deal still made strategic sense.

    "Yes, it is tough when one looks at spot oil prices ... We are in the camp of 'Yes', not just because of the strategic rationale longer term, but also because of Shell's CEO and Chairman, who we think are the right people at the helm in this environment," the bank said.

    Last month, sources told Reuters that the Chinese Ministry of Commerce had pressed Shell to sweeten long-term LNG supply contracts as the world's top energy consumer faces a large surfeit over the next five years.

    Read more at Reutershttp://www.reuters.com/article/us-china-shell-bg-idUSKBN0TX0LC20151214#rxSJDjRyjjpJuQ4U.99
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    ExxonMobil gets green light for Argentinian shale development


    The government of Neuquen, a southwestern province of Argentina, said Monday it has approved ExxonMobil's investment plan for developing shale resources in the Bajo el Choique and La Invernada blocks.

    The company will work with Gas y Petroleo del Neuquen (GyP), the province's state-owned oil company, on the project to invest an initial $229 million in the delineation of the blocks, the government said in a statement.

    This will consist of drilling five horizontal wells in the Vaca Muerta play with laterals of up to 2,500 meters (8,202 feet) and 25 frac stages.

    The companies will also build an oil separation and storage facility, a natural gas pipeline, among other infrastructure on the adjacent blocks, according to the province.

    After this pilot stage, the companies plan to invest an additional $13.8 billion in the mass development of the blocks by drilling 556 horizontal wells, the government said.

    Exxon has a 90% stake in the consortium, while GyP holds the rest.

    The companies have a 35-year concession for developing the blocks.

    Exxon has already invested $200 million in exploring the blocks through XTO Energy, a subsidiary that specializes in the drilling of unconventional oil and natural gas plays. Exxon transferred all of its unconventional assets in Argentina to XTO Energy at the start of 2015.

    Exxon has had good results so far in its exploratory drilling, finding shale oil and gas on the Bajo del Choique and La Invernada blocks.

    Argentina is betting on the development of Vaca Muerta to turn around a 20% decline in oil and gas production over the past decade that has slashed energy exports and pushed up imports. The country holds 27 billion barrels of shale oil resources and 802 Tcf of shale gas, far more than its proved conventional reserves of 2.5 million barrels of oil and 12 Tcf of gas, according to the US Energy Information Administration.

    http://www.platts.com/latest-news/natural-gas/buenosaires/exxonmobil-gets-green-light-for-argentinian-shale-21615937
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    Ecopetrol Targets Lower Oil Output in 2016 Amid Investment Cuts


    Colombia’s state-controlled Ecopetrol SA is targeting reduced production next year as the company slashes its investment budget amid falling oil prices.

    The combined business group is targeting output of 755,000 barrels of oil equivalent per day next year, down from a 2015 target of 760,000 barrels, Ecopetrol said in a statement Monday. The board approved an investment plan of $4.8 billion for 2016, down from $6.7 billion of planned investments detailed in a Septemberpresentation. The new figure represents a drop of approximately 40% from 2015 investment.

    Oil fell below $35 a barrel in New York Monday for the first time since 2009 as Iran reiterated its pledge to boost crude exports, bolstering speculation OPEC members will exacerbate the global oversupply. Drillers in Colombia including Ecopetrol and Pacific Exploration and Production Corp. have scrambled to cut costs and investments as revenues shrink.

    Ecopetrol’s investments will be focused on production, the evaluation of recent discoveries and the completion of Reficar refinery modernization works, the company said.

    http://www.bloomberg.com/news/articles/2015-12-14/ecopetrol-targets-lower-oil-output-in-2016-amid-investment-cuts

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    Polish LNG terminal receives first cargo


    Polskie LNG has announced that Qatargas has completed the delivery of the first LNG cargo to the LNG receiving terminal in Swinoujscie, Poland. Polish Oil & Gas (PGNiG) provided assistance as an intermediary in the delivery.

    The 210 000 m3 capacity Q-Flex vessel, Al-Nuaman, delivered the cargo, with another delivery scheduled for February 2016.

    Khalid Bin Khalifa Al-Thani, the Qatargas CEO, said: “We are extremely delighted at this historic milestone and hope that our support in commissioning of this newly constructed LNG receiving terminal will in turn help to fuel sustainable economic growth and development throughout Poland, Eastern Europe and across all nations along the Baltic Sea basin. The Swinoujscie LNG receiving terminal is a clear manifestation of Poland’s vision and commitment to ensure diversified, reliable and secure supplies of LNG and natural gas.

    “Poland represents a new market for Qatargas’ premium LNG and the delivery of LNG into Poland further demonstrates our commitment to provide Europe with a clean energy source, reliably and safely. This terminal will further expand LNG’s reach into Europe – first into Poland and thereafter as a gateway into the land-locked countries in central Europe as well as into the Baltic region. The Swinoujscie LNG Terminal becomes the 17th LNG terminal that Qatargas provides deliveries and marks another significant milestone in Qatargas’ history. Qatargas is extremely proud to be associated with the Swinoujscie LNG terminal and with Poland.”

    The President of Gaz-System and Polskie LNG, Jan Chadam, said: “[The] LNG receiving terminal, along with dynamically-developed internal transfer grid and inter-system connections, gives Poland a chance to enter the international gas market and exerts a positive effect on price competitiveness of the resource. The receiving terminal’s potential makes us an important player in the area of energy independence of the whole region. We provide fuel security for Poland and the possibility to diversify the deliveries to other European states, which, by connecting their transfer systems, will facilitate establishing a competitive gas market. Poland is entering a group of independent, safe and modern countries.”

    The Vice President of the PGNiG Management Board, Waldemar Wójcik, added: “LNG deliveries are one of the most important measures to diversify Poland’s gas supply sources and a crucial element of PGNiG’s strategy to diversify its supply portfolio. LNG imports will afford more flexibility in responding to market conditions, while improving Poland’s energy security. We are happy that LNG deliveries have started to arrive at the Swinoujscie terminal, hoping that the contract between PGNiG and Qatargas will mark the beginning of a long-term partnership between the two companies.”

    http://www.lngindustry.com/regasification/14122015/Polish-LNG-terminal-receives-first-cargo-1765/
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    Indonesia to have up to 60 uncommitted LNG cargoes in 2016


    Indonesia is expected to have as many as 55-60 of uncommitted LNG cargoes next year from the Tangguh and Bontang LNG plants, the head of upstream regulator SKK Migas' communications department, Elan Biantoro, said Monday.

    The available cargoes are likely to be offered on the spot market, Biantoro said. One cargo is typically 125,000 cu m.

    "Pertamina and BP will invite bids by tender on the spot market to get the best price. However, we will prioritize domestic needs, if they can't absorb it we will offer via tender," he said.

    The cargoes have become available because contracts have expired, according to Biantoro.

    Meanwhile Badak LNG, the operator of Bontang LNG plant, plans to produce 147 LNG cargoes in 2016, lower than this year's plan of 170 cargoes due to lower gas production, its president director Salis Aprilian said Monday.

    Bontang estimates gas supply of 1.466 Bcf/d from gas producers next year compared with 1.696 Bcf/d in 2015, Aprilian said.

    Bontang is supplied mostly from the Mahakam block in east Kalimantan, which is owned by Total and Inpex on a 50-50 basis.

    The block's contract will expire in 2017, and the government has appointed state-owned Pertamina to take a majority stake in the block, but Total and Inpex will still be allowed to have stakes.

    Indonesia has three LNG plants: Bontang in east Kalimantan, Tangguh in Papua and Donggi Senoro in central Sulawesi.

    The country closed down its Arun LNG plant in Aceh due to a fall in gas production and the expiry of LNG export contracts.

    http://linkis.com/www.platts.com/lates/xogLr

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    Tudor Pickering survey sees investors looking for $55 in 2016


    A survey of more than 200 investors by Tudor Pickering Holt & Co. indicated most investors expect oil futures prices will average $55/bbl during 2016.

    Ole Hansen, Saxo Bank head of commodity strategy, expects that oil prices will remain under pressure as Brent and light, sweet crude approach December 2008 financial crisis lows.

    “The carnage in oil markets is showing no signs of slowing,” Hansen said. “Negative fundamentals and negative momentum make it easy prey for short-sellers firmly in control. Increased oil exports from Iran and US (when for the first and if for the latter) are two of the drivers which today have sent both Brent and WTI closer to their December 2008 financial crisis lows.”

    Iran will increase production once sanctions are lifted next year and in the US oil groups and politicians are lobbying hard for the 40-year old export ban to be lifted.

    “Bloated US inventories, which are currently more than 110 million bbl above the 5-year average, have nowhere to go due to the ban that was put in place during the 1970s,” Hansen said. “If lifted, the US oil market would begin reconnecting with the global market, and the price discount to Brent crude, the current global benchmark, would disappear.”

    http://www.ogj.com/articles/2015/12/market-watch-nymex-brent-crude-oil-prices-continue-falling.html

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    China's CEFC to take control of unit of Kazakh state-run oil firm


    CEFC China Energy Company Ltd has agreed to acquire 51 percent of a unit of Kazakhstan's state oil and gas company which mainly owns refinery and fuel assets in Europe, the little-known private firm said in a statement.

    The agreement was part of a package of deals worth a total of $4 billion signed late on Monday in Beijing in sectors including oil and gas, telecommunications and nuclear power, with China looking to ramp up business with its resource-rich Central Asian neighbour.

    CEFC will take control of KMG International (KMGI), a fully-owned unit of Kazakh state oil and gas firm KazMunayGaz , according to the statement and two senior sources at CEFC. One of the sources valued KMGI at $500 million to $1 billion.

    KMGI officials said they were unable to immediately respond to requests for comment.

    Among KMGI's key assets are a 100,000 barrels per day refinery and a 400,000 tonnes per year fertilizer plant in Romania, along with nearly 1,000 petrol stations in Romania and other countries such as Spain and France, according to the CEFC source.

    CEFC, which has been branching into oil and gas after starting in the Chinese financial sector, plans to invest "billions" of dollars to expand the retail network to more than 3,000 gas stations, the source said.

    Part of the funding would come from China's $40 billion "Silk Road" infrastructure fund, the source added.

    "Kazakhstan is rich in oil and gas and has been China's friendly neighbor. The deal well fits the government's One Belt One Road plan," said the source, who declined to be named due to company policy.

    China is seeking to revive the old Silk Road with an ambitious plan to build railways, highways, oil and gas facilities, power grids and other links across Central, West and South Asian nations, under the so-called "One Belt, One Road" initiative.

    CEFC, with its main operations in Shanghai and Beijing, has been building up its oil trading team in Singapore, hiring nearly a dozen senior managers from state energy giants PetroChina and Sinopec, as well as former executives experienced in energy acquisitions.

    http://www.reuters.com/article/china-kazakhstan-idUST9N0NH05G20151215
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    Canada's Encana cuts 2016 dividend and capex


    Canadian oil and natural gas producer Encana Corp , responding to a sharp drop in oil prices, has slashed its dividend by about 79 percent and its 2016 capital budget by more than a quarter.

    Encana said it expects to spend $1.5-$1.7 billion in 2016, compared with $2.2 billion this year.

    Shares of Encana were down 4.8 percent at $5.75 in premarket trading on the New York Stock Exchange.

    The Calgary-based company, which cut its dividend for the first time since 2013, joins other oil and gas producers who have reduced or suspended dividend to shore up their finances amid a steep decline in oil prices.

    Canadian oil producer Canadian Oil Sands Ltd had slashed dividend, while Husky Energy Inc and Penn West Petroleum Ltd have suspended dividend this year.

    Oil prices were trading close to 11-year lows on Monday, on growing fears that the global oil glut would worsen in the coming months.

    Encana cut its annual dividend to 6 cents per share from 28 cents per share in 2015, and said it would discontinue its dividend reinvestment plan discount starting next year.

    The oil producer, which has accelerated its spending in the Permian basin in Texas, said it would direct about half of its capital budget for the next year to Permian.

    Encana said on Monday it expected to produce an average 340,000-370,000 barrels of oil equivalent per day (boepd) next year, down from 395,000-430,000 boepd it expects to produce in 2015.

    The company's four core assets are in Permian and Eagle Ford shale fields in Texas and Montney and Duvernay shale fields in western Canada.

    http://www.reuters.com/article/encana-spending-idUSL3N1433L120151214#4x938IMMQ4Ot6V6f.97

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    Alternative Energy

    Trina Solar receives proposal to be taken private


    Chinese solar panel maker Trina Solar Ltd said it received a go-private proposal from a group comprising its chief executive and Shanghai Xingsheng Equity Investment & Management Co, valuing the company at more than $980 million.

    Trina Solar said the group offered $11.60 per American Depositary share, a premium of about 21.5 percent to the stock's Friday close.

    The company's shares rose to $11.20 in premarket trading on Monday.

    Trina Solar said it received a preliminary non-binding proposal from Chief Executive Jifan Gao and Shanghai Xingsheng on Dec. 12.

    The company's valuation is based on total outstanding shares as of Sept. 30.

    Trina Solar said on Friday it had withdrawn from the European Union's price undertaking.

    The EU said earlier this month it will extend trade protections aimed at helping European solar power manufacturers compete against cheaper Chinese products, hurting Trina Solar's global expansion plans.

    http://www.reuters.com/article/trina-ma-shanghai-xingsheng-idUSL3N1433G920151214#lfkGtgIyJRkhdFyZ.97
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    Solar deal from Corning brings US corporations to 3GW for 2015


    Even before December arrived, 2015 had proven a record-breaking year for corporate purchasing of large-scale wind and solar energy. Less than a month ago, the YTD contracted capacity stood at 2.1 GW, far exceeding the 1.2 GW of 2014 that previously held the record. But these final weeks of 2015 have seen corporations announce additional major renewable energy deals that are pushing the year-end total far higher—and companies affiliated with the Business Renewables Center (BRC) continue to be at the heart of the story.

    Earlier this month, Google announced a staggering 842 MW of new wind and solar, including from BRC companies Invenergy, EDF Renewable Energy, and RES Americas. BRC company Bloomberg also announced 20 MW from EDP Renewables to offset energy use of its New York offices with electricity from an in-state wind farm.

    Now today, Fortune 500 member Corning Incorporated announces ~50 MW of solar from BRC company Duke Energy Renewables, inching the market tantalizingly close to—and potentially beyond—the symbolic 3 GW number.

    Beginning in Q1 2016, Corning will purchase about 62 percent of the expected output from an 80 MW solar farm in Conetoe, North Carolina. When completed at the end of this year, it will become the largest solar-generating facility east of the Mississippi River. The deal will give Corning an estimated 120,300 MWh per year of solar energy, enough to equal the annual power usage of roughly 10,000 U.S. homes.

    “Corning now belongs among a select group of companies that have taken action on renewable procurement through long-term contracts. These contracts directly enable project developers to build new solar and wind capacity,” says Hervé Touati, a managing director at RMI and head of the BRC. “Beyond pioneers from the ICT sector, we are seeing this year large corporations such as Corning—coming from a variety of industrial and services sectors—entering the market for the first time as fast followers. It is a strong indication that long-term renewable energy contracts are becoming increasingly relevant to all Fortune 500 companies, and will soon become the standard way of running business.”

    http://reneweconomy.com.au/2015/solar-deal-from-corning-brings-corporations-to-3-gw-for-2015
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    Base Metals

    Oyu Tolgoi Signs $4.4 Billion in Project Finance

    Oyu Tolgoi Signs $4.4 Billion in Project Finance

    Turquoise Hill Resources  today announced that Oyu Tolgoi LLC  has signed a $4.4 billion project finance facility, one of the largest in the mining industry. The facility is being provided by a syndicate of international financial institutions and export credit agencies representing the governments of Canada, the United States and Australia, along with 15 commercial banks. All figures are in US dollars.

    Jeff Tygesen, Turquoise Hill's Chief Executive Officer, said, "The signing of project finance is an unprecedented milestone for Turquoise Hill and Oyu Tolgoi as well as a historic vote of confidence in both the project and Mongolia. We look forward to working with the Mongolian Government and Rio Tinto to complete the remaining steps leading to the restart of underground development."

    http://www.marketwired.com/press-release/oyu-tolgoi-signs-44-billion-project-finance-marking-historic-milestone-toward-recommencement-nyse-trq-2081907.htm
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    Trafigura sees copper market in surplus by end-2016


    Commodity trading group Trafigura expects the copper market to be in balance during most of 2016 before a surplus emerges at the end of the year, it said on Monday.

    Worries about weak demand from top consumer China and excess supply have hit benchmark prices, which have slid about a quarter this year.

    "Copper industry fundamentals remain for now relatively healthy across the globe but have also been affected to some extent by the deceleration in China," Trafigura said in its annual report.

    Trafigura posted a 6.5 percent rise in annual net profit on Monday as it racked up record oil trading volumes, as well as an increase in metals.

    The group, which is the top trader in copper concentrates, said its traded volume of the material - partially processed copper ore - surged 29 percent to 3.1 million tonnes during its 2015 financial year to the end of September.

    Overall metals and minerals traded volumes rose 6 percent to 52.1 million tonnes.

    The trader said it concluded significant investments during the year which would support further volume growth, including taking a 30 percent stake in a new copper smelter owned by China's Jinchuan Group.

    During 2015, there was a major draw down in copper concentrate stocks, especially in China, bringing stocks back to normal levels towards the end of the year, Trafigura added.

    In zinc, Trafigura expects a supply shortfall to finally emerge by the end of 2016 after failing to materialise this year despite the closures of major mines.

    "From the point of view of concentrates demand, the Chinese market was healthy, with imports increasing year-on-year by between 50 and 60 percent and smelters increasing their capacity utilisation," it said.

    http://www.reuters.com/article/trafigura-results-copper-idUSL8N1431RB20151214

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    Steel, Iron Ore and Coal

    China Nov thermal power output up 13.7pct on mth


    Electricity output from China’s thermal power plants – mainly coal-fired – stood at 353.2 TWh in November, increasing 13.68% year on year but down 1.5% month on month, showed data from the National Bureau of Statistics (NBS) on December 14.

    The monthly rise in China’s thermal generation was mainly attributed to increased electricity demand for heating purposes in in southern China.

    By contrast, China’s hydropower output decreased 22.01% on month but up 3% on year to 77.6 TWh in November, indicating a smooth development of hydropower station across the country.

    Total electricity output in China reached 466 TWh in November, edging up 0.1% from a year ago and up 4.63% on month, the NBS data showed. That equated to daily output of 15.53 TWh on average, rising 0.1% on year and up 8.07% from October.

    Over January-November, China produced a total 5,125.7 TWh of electricity, edging up 0.1% year on year, with thermal power dropping 2.4% on year to 3,823.2 TWh while hydropower output increasing 3.6% to 925.9 TWh.

    Over January-November, the share of thermal power generation from the total power generation rose from 74.52% over January-October to 74.59%; while hydropower fell from 18.22% in the past ten months to 18.06%.

    http://en.sxcoal.com/0/136540/DataShow.html
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    Shenhua resumes coal export to Japan, first shipment at 67.48 kt


    China’s top coal miner Shenhua Group has resumed coal export to Japan, with first shipment of 67480 tonnes of coal shipped to Tohoku Electric Power on December 9, the group said on its website.

    The Shenhua coal was shipped from Tianjin port to the leading Japanese utility, Shenhua said, signaling its active exploration of market opportunities in a time of slack domestic market.

    This is the first time Shenhua has resumed coal export to Janpan in the past three years, after its export to Japan peaked around 10 million tonnes annually in 2000.

    Confirming the deal, trade sources said the deal was heard done at $62/t with VAT, FOB basis. This however, is yet to be confirmed by China coal Resource.

    The change in Shenhua’s sales strategy, mainly due to prolonged market weakness amid slowdown of Chinese economy, could help ease oversupply pressure in the domestic market, while intensifying competition in the Asia-Pacific market, with prices possibly going down further, industry insiders said.

    Shenhua has been actively tapping the international market. Shenhua would pay great attention to coal export to Japan, in the hope of restoring the target market and expanding export scale, said Han Jianguo, vice general manager of the group in mid-September.

    In late August, several key Japanese utilities including Tohoku Electric Power visited Shenhua and expressed interest in buying of Shenhua coal.

    One Japan-based trader said his company has decided to import coal from China and resell it to buyers in Japan and other countries, instead of selling coal from other countries to China.

    In August, Shenhua also sent representatives to South Korea to visit local traders and utilities for coal export, but a big bid-offer spread has led to no deals conclusion so far yet, two South Korea-based traders said in the month, adding future trades may seem feasible.

    Yet, Shenhua coal has to compete with low-priced Australian coal, offers for which are keeping declining.

    On December 11, the Fenwei CCI 5500 Import Index assessed imported 5,500 Kcal/kg NAR coal at $43.7/t, CFR south China ports, down $11.2/t from the start of this year.

    Presently, coal buyers in the Pacific Asia mainly come from Japan and South Korea, which prefer coal from Australia and Indonesia.

    Over January-October, China Shenhua Energy, the listed arm of Shenhua Group, exported 0.9 million tonnes coal, a year-on-year slump of 35.7%, it said in a statement on November 16.

    http://en.sxcoal.com/0/136542/DataShow.html
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    India’s coal imports may further decline this fiscal year: govt


    Coal imports by India will continue to decline this fiscal due to "unprecedented increase" in output of the fossil fuel by state-owned Coal India Ltd (CIL).

    "Imports will continue to come down (in the ongoing fiscal)," Coal Secretary Anil Swarup was cited by Press Trust of India (PTI) as saying.

    Mr Swarup had earlier said in a tweet that coal imports in November dropped to 11.6 million tonnes against 22.6 million tonnes in the same month of last year.

    "Consequent to a record production by Coal India, import of coal comes down for fifth successive month. Down by 8.9% during April-November," Mr Swarup tweeted.

    "Coal imports come down from 136.6 million tonnes in April-November (2014) to 119.9 in 2015. In value terms, down from Rs 68,822 cr to Rs 54,607 cr," he said in another tweet.

    CIL's production increased by 8.8% during the April-November period of the current fiscal year (2015-16) on a year-on-year basis.

    Production was up by almost 26 million tonnes during April-November 2015 compared to the same period previous fiscal year, a company official said.

    CIL produced 321.38 million tonnes of coal during April-November, 2015-16 as against 295.40 million tonnes in the year ago period.

    The state-owned firm, which accounts for over 80% of the domestic coal production, is eying to 1 billion tonnes production by 2020.

    Power and Coal Minister Piyush Goyal had said last month that coal shortages will be a thing of the past and India will not need to import dry fuel by 2017, except to meet requirements of power plants located near coastal areas.

    India had imported 212.103 million tonnes of coal worth over Rs 1 lakh crore last fiscal year.

    http://en.sxcoal.com/0/136585/DataShow.html

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    EU orders registration of China, Russia steel imports


    The European Commission has ordered that imports of a certain type of steel from China and Russia should be subject to registration, part of its ongoing investigation into alleged dumping of product by the two countries.

    It told customs authorities to register imports of cold-rolled flat steel from Dec. 13, meaning duties would apply for incoming product from then if the Commission concludes that it is being sold at unfairly low prices.

    The Commission launched an anti-dumping investigation into imports from China and Russia in May following a complaint from European steel association Eurofer.

    It could apply provisional measures by Feb. 14, 2016, and make definitive duties, which typically last for five years, by Aug. 13.

    The registration order, published in the European Union's official journal, follows a request from Eurofer on Nov. 12.

    Eurofer says the average dumping margin - the amount by which the normal market price exceeds the export price - is 28 percent for China and 15-20 percent for Russian producers.

    The steel group says the registration procedure is justified because importers are well aware of dumping and that, since the investigation was launched in May, imports have increased.

    Imports of Chinese cold-rolled flat steel have risen 33 percent and of Russian product by 45 percent in the period May-September this year, compared with the same period in 2014. Import prices fell by a further 5 percent from both countries, the Commission said. 

    Read more at Reutershttp://www.reuters.com/article/eu-steel-russia-china-idUSL8N1432MO20151214#w0DBKtRjshGqgOFT.99

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