Mark Latham Commodity Equity Intelligence Service

Friday 12th May 2017
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    U.S. Inks Trade Deal With China Promoting Natural Gas

    The U.S. and China reached agreement to promote shipments of American natural gas that Commerce Secretary Wilbur Ross said was part of a broader effort to begin reshaping the trade relationship between the world’s two largest economies.

    The agreement covers 10 areas where negotiators from the two sides have reached consensus, including agricultural trade and market access for financial services. By mid-July, U.S. beef producers will have broader access to Chinese markets, while America will move forward on allowing the import of cooked poultry from China, according to a joint statement announcing the deal.

    The statement didn’t appear to change access for Chinese companies to U.S. natural gas exports, but welcomed China to receive shipments and engage in long-term supply contracts with American suppliers. Ross said officials from Dow Chemical Co. gave assurances that increasing exports of natural gas wouldn’t harm the U.S. industry or consumers if sales remained less than 30 percent of total output.

    “This will let China diversify, somewhat, their sources of supply and will provide a huge export market for American LNG producers,” Ross told reporters at a White House briefing on Thursday, using an acronym for liquefied natural gas.

    The agreements, which grew out of a 100-day action plan announced during an April meeting between President Donald Trump and Chinese counterpart Xi Jinping, and appeared to build on or repeat some commitments that China has already made. Still, they represented the first negotiated pact on trade for Trump, who campaigned on promises to get tough on China on trade before softening his tone as he’s sought cooperation on North Korea.

    ‘Gas Exports

    While Trump made the revival of America’s coal industry a hallmark of his campaign, his administration seems to be acknowledging the potential jobs bonanza offered by the two dozen applications under review to build LNG export terminals. Ross said a deal for coal exports to China wasn’t likely, given the far shipping distances. Gary Cohn, director of the National Economic Council, has voiced support for an LNG terminal in the U.S. Northwest that would ship gas to Asia.

    China imports of U.S. liquefied natural gas picked up last year after Cheniere Energy Inc. launched the first in a wave of new plants designed to liquefy and export abundant U.S. shale gas. American supplies accounted for almost 7 percent of China’s total imports in March, customs data shows. Chinese companies already have long-term contracts with non-U.S. suppliers for more LNG than domestic demand requires through at least 2023, according to Bloomberg New Energy Finance.

    The Trump administration has given the go-ahead for a handful of proposed U.S. LNG ventures to ship their fuel to countries without free-trade agreements, such as China. Those projects need to secure long-term supply agreements to underpin their financing before construction can begin.
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    China launches emergency probe on banks to check risky lending: sources

    China's banking regulator this week launched emergency risk assessments of lenders' new business practices, sources told Reuters, as Beijing deepens its crackdown on shadow banking.

    Guo Shuqing, the newly-installed chairman of the China Banking Regulatory Commission (CBRC), has vowed to clean up "chaos" in the country's banking system. In cooperation with the central bank and other financial regulators, efforts have been stepped up to clamp down against shadow finance ahead of a key Communist Party congress in the second half of this year.

    The CBRC's latest investigation will probe how lenders are using proceeds from negotiable certificates of deposit (NCDs), as well as their bond investments and outsourced investment businesses, two sources with direct knowledge of the plan said.

    The watchdog is also looking into possible violations of lending and investing rules, for example, by banks that invest in stocks via wealth management schemes or lend to their own shareholders, they said.

    China's shadow banking sector has exploded over the past few years, reaching an estimated 64.5 trillion yuan ($9.4 trillion) in 2016, according to Moody's, as banks use trust firms, brokerages and fund houses to channel deposits into risky investments, skirting lending and capital rules.

    More recently, smaller lenders have been aggressively raising money via NCDs, and then using the proceeds to make higher-yield, risky investments.

    The newly-launched assessments come after the CBRC sent a flurry of new policy directives last month aimed at eradicating regulatory arbitrage and other risky practices.

    Earlier this month, the Group of 20 economies' financial risk monitoring agency criticized Beijing for being slow in providing key financial data from China, leading to the delay in a report on the risks the world faces from shadow banking.

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    Odebrecht witness says Argentine spy chief received bribes: source

    A witness in Brazil's "Operation Car Wash" corruption scandal involving construction companies told Argentine prosecutors on Thursday that President Mauricio Macri's spy chief received bribes, a judicial source present at the hearing told Reuters.

    Former Odebrecht SA official Leonardo Meirelles' testimony comes as the company, which has admitted to paying bribes in 12 mostly Latin American countries, is striving to improve its image in various countries in which it operates by offering to cooperate with judicial investigations.

    According to the source, Meirelles told Argentine prosecutors via video conference that either Odebrecht or OAS Empreendimentos SA [OAS.UL], another Brazilian builder, had made several payments to Gustavo Arribas, head of Argentina's Federal Intelligence Agency, and the Brazilian justice system has the transaction receipts.

    "Meirelles confirmed the transfers, which he said numbered 10 or more, for a total amount of $850,000," the source said. "The transfers amount to the payment of bribes."

    Arribas has previously denied taking bribes or having any link to Odebrecht. The payments were alleged to have occurred in 2013 when he was in the private sector and a close friend of Macri, who was then mayor of Buenos Aires. Macri named him to his current position in 2015.

    Earlier corruption charges against Arribas were dismissed, but the source said prosecutors will ask to re-open the case due to the new evidence.
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    Sweeping Saudi spending cuts reduce budget deficit by 71%

    Saudi Arabia's budget deficit fell by 71 percent in the first quarter of this year, the finance minister said on Thursday, after the kingdom made sweeping spending cuts.

    The deficit dropped to 26 billion riyals ($6.93 billion) in the first three months following the cuts made as a result of the dramatic drop in oil revenues, Mohammed al-Jadaan said.

    "This is a very encouraging figure and clearly reflects our aim to achieve a balanced budget in 2020," he said.

    Saudi Arabia's budget deficit was initially projected at $53 billion for this year.

    This is the first budget report released by the kingdom, which earlier this month said it would begin issuing quarterly reports to boost transparency.

    Riyadh has moved to diversify its traditionally oil-dependent economy following the sharp fall in crude prices in 2014.

    Last year, it announced a "Vision 2030" plan aimed at developing its industrial and investment base and boosting small- and medium-sized businesses in a bid to create more jobs for Saudis and reduce reliance on oil revenue.

    In September, it froze salaries and reduced benefits for civil servants - who comprise the bulk of the workforce - as part of a package of austerity measures.

    King Salman restored those benefits in a royal decree last month.

    In October, the kingdom raised $17.5 billion in its first international bond offering.

    Saudi Arabia is also preparing to sell just under five percent of energy giant Aramco next year. In April, it cut taxes on oil companies in a bid to attract buyers.
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    Noble Group predicts of $130m loss in Q1

    Commodity trader Noble Group has warned that it will record a net loss of around $130 million for the first quarter after 'dislocation' in coal markets, Financial Times reported on May 9.

    The dislocation had caused "the decoupling of prices of key indices, liquidity dropping significantly and the breaking down of correlation." said the company, but it did not give further details.

    "The group has taken measures to re-align its portfolio to mitigate against both the continuation and repeat of such adverse events," Noble said.
    The news will be a blow to shareholders who recently supported a 10-to-1 share consolidation.
    After falling by almost 80% between early 2015 and the start of this year, shares in Noble have dropped another 24% in 2017.

    Shares in commodities trader fell as much as 16.2% on May 11 ahead of the company's afternoon release of its first quarter results.
    Singapore-listed stock in the company had pared losses to be down 15.8% at S$1.09 in morning trade, near their lowest level for the year to date.
    Noble has faced difficulties during the commodity slump, including attacks on its accounting and the need to pay down debts.
    Noble has defended its accounting and said it is working towards a recovery. It raised $750 million from the sale of junk bonds in March.
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    Ambition to meet reality as China gathers world for Silk Road summit

    When leaders of 28 nations gather in Beijing next week for a summit to map out China's ambitious new Silk Road project, one question is likely to be on attendees' minds - what exactly is the Belt and Road Initiative?

    Proposed in 2013 by President Xi Jinping to promote a vision of expanding links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment, the project is broad on ambition but still short on specifics.

    China has earmarked $40 billion for a special fund for the scheme, on top of the $100 billion capitalization for the China-led Asian Infrastructure Investment Bank (AIIB), many of whose projects will likely be part of the initiative.

    But with a confusing name, that officially refers to the Silk Road Economic Belt and the 21st-century Maritime Silk Road, added to myriad economic and security risks, clouds hang over the plan.

    Despite aggressive promotion of the May 14-15 summit in China, including media carrying positive comments from Western leaders, some diplomats are suspicious about China's aims.

    "There's a lot of scepticism about China's plans. Yes it is the kind of infrastructure that sounds attractive for parts of Europe, but we all know this is about China gaining influence," said a senior European Union diplomat.

    One diplomatic source familiar with discussions on the forum's communique said: "The forum is downright glorification of Xi Jinping and One Belt, One Road", using the straight Chinese translation of the project's title.

    However, with Donald Trump in the White House pursuing an "America First" agenda, more countries may be pushing for inclusion in China's grand scheme.

    "Countries have actually been pressuring China to get an invite rather than the other way around," said a senior Asian diplomat, referring to the summit.

    China says that between 2014 and 2016, its businesses signed projects worth $304.9 billion in Belt and Road countries. Some of the projects could be in development for years.
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    Companies to join forces for energy blockchain project

    Energy companies from nine countries have joined a new non-profit organization that aims to accelerate commercial deployment of blockchain technology in the energy sector.

    The non-profit Energy Web Foundation (EWF) is a joint initiative of US-based sustainability consultancy the Rocky Mountain Institute (RMI) and Austrian blockchain developer Grid Singularity. Companies that have joined the EWF include Centrica, Elia, Engie, Royal Dutch Shell, Sempra Energy, Tokyo Electric Power Co (Tepco), SP Group, Statoil, Stedin and Technical Works Ludwigshafen (TWL).

    Blockchain technology is a secure digital mechanism that enables transactions through peer-to-peer networks. Through a distributed database of ‘blocks’, or timestamped transaction records, a blockchain can operate autonomously and initiate transactions automatically.

    EWF says it has identified nearly 200 potential use cases for blockchain technology in the energy sector and, after securing $2.5m in an initial funding round, the group plans to develop a commercial version of a blockchain software platform within two years.

    Blockchain technology can allow energy devices such as HVAC systems, water heaters, electric vehicles, batteries and photovoltaic systems to transact with each other at the distribution edge while supporting utilities and grid operators in integrating more utility-scale variable renewable energy capacity at much lower cost, EWF said.  

    The group also said the technology can mitigate cybersecurity risks.

    Herve Touati, president of the EWF and a managing director at RMI, told Power Engineering International that blockchain represents a decentralized means of optimizing grids for the integration of growing numbers of renewable energy installations.

    “We could do this with a centralized unit but this is unsafe for cybersecurity,” he said. With blockchain, “the architecture makes it extraordinarily difficult” for hackers to gain control of connected devices.

    Touati said the EWF’s software will be open-source and that his group is “calling everybody in the industry to come and join us, and if people are interested in starting to develop applications they should contact us.”

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    Liberals win tight poll in Canada's British Columbia, lose majority

    The ruling Liberal Party squeaked to victory in British Columbia elections, but it lost its majority after 16 years in power as the left-leaning New Democrats picked up seats, preliminary results showed.

    The Liberals will now form the Western Canadian province's first minority government in 65 years, and uncertainty over whether the parties will form coalitions left the future of big oil and gas projects in the region unclear.

    John Horgan, the leader of the New Democratic Party (NDP), had vowed to stop Kinder Morgan Inc's C$7.4 billion ($5.4 billion) Trans Mountain oil pipeline expansion if elected. Horgan has also expressed reservations about a $27 billion liquefied natural gas terminal that Malaysia's Petronas wants to build.

    Going into the vote, the Liberals were neck-and-neck in the polls with the opposition NDP, whose campaign promise to make life more affordable in a province that is home to Canada's most expensive real estate appeared to have resonated with voters.

    With the vote count not complete, the Liberals, which are not linked to Canadian Prime Minister Justin Trudeau's federal Liberal Party, had won 43 seats in the 87-seat provincial legislature. The NDP had 41 and the Green Party three. Forty-four seats was needed for a majority.

    "A majority of British Columbians voted for a new government and I believe that is what they deserve," NDP leader Horgan told jubilant supporters to chants of "NDP, NDP".

    The Green Party tripled its seats from the last election, positioning the party to hold the balance of power in a minority government.

    Green Party leader Andrew Weaver has said he is open to working with other parties provided they agree to abolish corporate and union donations.

    Political fundraising was a thorny campaign issue in the province The New York Times has called the "Wild West of Canadian political cash" because of "unabashedly cozy relationships between private interests and government officials".

    "I will work with the other parties to do what needs to be done," provincial Premier and Liberal Party leader Christy Clark told supporters, saying she intended to continue as premier.

    The loss of its majority is a big blow for the Liberals, which had campaigned on a track record and promises of strong economic growth and job creation.

    British Columbia had the highest rate of economic growth among Canada's provinces in 2015 and is projected to have repeated that performance in 2016. The Liberals have also presided over five consecutive balanced budgets.

    The Liberals held 47 seats in the previous legislature, the NDP had 35, the Greens one and two were held by independents. Two seats were added after the 2013 election.

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    China plans international super electricity grid

    Global energy interconnection, the formation of a massive global electricity grid powered by renewable sources, will serve as a new engine for the Belt and Road Initiative, according to an expert.

    Wang Yimin, secretary-general of the Global Energy Interconnection Development and Cooperation Organisation, said electricity interconnection would enhance regional economic and trade cooperation, particularly as some areas along the trading routes are rich in clean energy.

    The non-governmental and non-profit international organisation has been striving to boost big-ticket projects to connect the electricity networks of China, Pakistan, Kazakhstan, Myanmar, Bangladesh and other countries, he told in a news conference.

    GEI would be a globally interconnected smart grid with ultra-high voltage grids as its backbone. It would also serve as a platform to develop, transmit and consume clean energy on a massive scale worldwide, according to Wang.

    To facilitate such efforts, GEIDCO is going to sign cooperation agreements or memorandums of cooperation with several international governments and international organisations to construct the system during the upcoming Belt and Road summit, said Wang.

    In 2015, China proposed to establish the GEI to help meet global power demand with clean and green alternatives. The initiative was proposed as severe energy challenges, such as resource scarcity, environmental pollution, and climate change pose a greater threat to the survival of humanity.

    GEI, as a Chinese solution to address these challenges, should be incorporated into the 2030 Agenda for Sustainable Development, said UN Secretary-General Antonio.

    The China-led organisation plans to put intercontinental grids in place in each continent by 2050, after setting up a countrywide super-grid by 2020.
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    China's commodity imports return to more normal levels

    The pullback in China's imports in April of crude oil and major bulk commodities, except coal, is more of a reminder that strong gains can't last forever than a warning that demand is waning in the world's biggest importer of natural resources.

    On the surface, the sharp falls in April imports of crude oil, iron ore and copper certainly appear to be a bearish signal, a warning that commodity-intensive sectors, such as construction and manufacturing, may be losing some momentum.

    However, there are some short-term factors that help explain the declines, and it's far too early to call an end to the trend of robust demand for commodities in the world's second-largest economy.

    Take crude oil first, where April imports dropped to 8.37 million barrels per day (bpd), down nearly 9 percent from a record 9.17 million bpd in March.

    But put that number into context and a different picture emerges.

    In the first four months of 2017, crude oil imports are up 12.5 percent from the same period last year to around 8.46 million bpd.

    This is also substantially higher than the 7.6 million bpd imports averaged for 2016, showing that China's appetite for crude has jumped substantially so far this year, notwithstanding the pullback in April.

    It's also worth noting the impact of domestic policy considerations in China, with many of the smaller, private refiners believed to have nearly exhausted their first-half crude import quotas.

    This will likely lead to a moderation in imports in the second quarter before a likely recovery in the second half.

    Lower quotas for exports of refined products will also likely result in moderating crude imports, and April's numbers show this dynamic at work.

    Exports of refined fuels fell 25.1 percent in April from March, dropping to 3.5 million tonnes, or about 930,000 bpd.


    Iron ore imports slumped 13.9 percent in April to 82.23 million tonnes, the lowest monthly total since October, again something that sounds bearish but isn't really once viewed in context.

    The last eight months have seen four months with imports above 90 million tonnes, including 95.6 million in March, which was the second-highest on record.

    April's imports were most likely hit by weather-related disruptions in the main exporting region of northwest Australia during March, when many of the cargoes would have been loading.

    Falls in iron ore prices will also serve to boost China's imports, as higher-quality but lower-cost ore from Australia and Brazil will displace domestic supplies.


    If you were looking for a bearish commodity story out of China, then copper is the answer.

    Imports of unwrought copper dropped 30.2 percent to 300,000 tonnes in April from March, and 33.2 percent from the year earlier month.

    Up to now, it had been possible to make the argument that China was replacing imports of refined metal with ores and concentrates, but they too slumped in April.

    Imports of ores and concentrates dropped 16.6 percent from March to 1.36 million tonnes, suggesting a lack of appetite among China's copper smelters for imported ore.

    Whether this is a signal of a broader slowdown in China's copper demand or whether it's merely a reflection of adequate domestic supplies and inventories is still uncertain.

    Nonetheless, copper is often viewed as the canary in the commodity coal mine, and a sustained downturn in China's imports would likely raise the market's level of concern.

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    Bitcoin Soars Over $1700 - 2017's Best-Performing Currency

    Bitcoin is now up for 16 of the last 18 days, soaring over 50% in the last month and up almost 90% in 2017 - making its the year's best performing currency.

    There appears to be no specitic catalyst for today's move as the surge in Japanese interest (as we detailed here) and news that Russia is considering, like Japan just did, to allow cryptocurrencies as a legal payment method are outweighing fears over 'hard forks', SEC rejections, and Chinese crackdowns.

    We summarized the ongoing bitcoin frenzy as follows last week: "just as the Chinese bubble frenzy in bitcoin is fading, it may be replaced with a new one, in which thousands of Mrs. Watanabe traders shift their attention away from the FX market and toward digital currencies" and added that "If the transition is seamless, there is no telling just how far this particular bubble can grow."

    Five days later and $250 dollar higher, we are observing first hand how accurate this prediction may have been, although like last week, we have no way of telling how long this particular mania phase will last.
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    Bitcoin demolishes Gold!

    Image titleImage title(Gold is the sad yellow line at the bottom of the chart.)
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    Mitsubishi, Mitsui swing back to profitability on surging metal prices

    Mitsubishi Corp and Mitsui & Co, Japan's biggest and second-biggest trading houses by assets, returned to profitability in the financial year ending in March, boosted by rising prices for coal and iron ore.

    Even after years of trying to diversify their operations into non-cyclical businesses, the results from Japan's "big five" trading houses have underlined their continued vulnerability to swings in commodities prices.

    Mitsubishi on Tuesday reported net profit of 440 billion yen ($3.88 billion) in the last financial year, against a loss of almost 150 billion yen a year earlier, while Mitsui posted a 306 billion yen profit, up from an 83 billion yen loss.

    "Higher prices and lower operation costs at our coking coal mines in Australia contributed to a rebound in our earnings," Mitsubishi's Chief Financial Officer (CFO) Kazuyuki Masu told a news conference.

    Also on Tuesday, Sumitomo Corp (8053.T) said profit for the financial year more than doubled to just over 170 billion yen, while Marubeni Corp (8002.T) reported a 150 percent gain in profit to 155 billion yen.

    Itochu Corp (8001.T), the least dependent among the big five trading houses on resources, last week reported record profit, driven by the rise in commodities prices.

    All of them forecast that profits for this financial year would improve, even as prices have come off in recent weeks.

    Like global miners, the Japanese traders are profiting from higher commodity prices after a renewed appetite in China for raw materials.

    In the year before, the five companies clocked up a total of about 1 trillion yen in write-offs due to a slump in valuations, with Mitsubishi and Mitsui announcing their first annual losses since they were founded after World War Two.

    Commodity prices, however, remain volatile.

    The price of coking coal - a steelmaking ingredient - more than tripled between March and late November 2016, then halved through March 2017. Iron ore prices have gained 48 percent in the past year to March, but have dropped recently as Chinese steel demand faltered.

    "Trading houses' earnings are still very correlated to commodities and their share prices have a high correlation with what's happening in China and the larger macro pictures," said Thanh Ha Pham, an equity analyst at Jefferies.

    "Earnings were helped by favourable metals and energy prices but looking at the share performance, there seems to be concerns about the future outlook," he said.

    Commodity prices have risen enough to spur greater investment in exploration, but traders remained cautious.

    "Our plan to freeze natural resource assets growth through the end of March 2019 will remain unchanged," Mitsubishi's Masu said.

    Sumitomo CFO Koichi Takahata said: "We are not yet in a stage to make aggressive investment in resources."
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    As China's battle with leverage begins to bite, risk bites back

    A Chinese government campaign to cut leverage in the banking system and limit some risky activities appears to be working, but it is also pushing borrowers back towards alternative funding sources that carry similar risks to the financial system.

    First-quarter official data shows banks cut the amount they lent to and borrowed from other financial institutions by 1.4 trillion yuan and 1.9 trillion yuan, respectively, to 21.7 trillion yuan and 30.3 trillion yuan. The growth in bank wealth management products (WMPs), a key component of shadow banking credit, slowed to 19 percent year-on-year, down 35 percentage points.

    Bankers said the slowdown came as the People's Bank of China (PBOC) tightened liquidity conditions, which pushed up the cost of borrowing, and included off-balance-sheet WMPs in its macro-prudential assessment of banks' risk levels for the first time.

    As deleveraging accelerates, rates rise in the interbank market, and lenders’ interest margins are taking a hit. The yuan's seven day repo rate CN7DRP=CFXS, an indicator of market interest rates, has risen to its highest level since early 2015, according to Thomson Reuters data.

    China's central leadership has identified curtailing financial risks as a top priority this year after overall leverage rose sharply, and financial regulators have been instructed to keep on top of the task.

    The China Banking Regulatory Commission (CBRC) has been targeting interbank activities and WMPs to determine whether banks are using those channels to disguise credit to loss-making "zombie firms" or businesses in restricted areas, such as real estate, according to an internal document dated March 28 and reviewed by Reuters.

    CBRC also required banks to undertake self-assessments to report if their interbank liabilities exceeded a third of total liabilities, the document showed.

    Lenders are under pressure to constrain the size of their interbank and WMPs business to avoid CBRC punishment, said an executive at a national bank's interbank department.

    It has stirred up a flurry of activity in banks eager to keep on the right side of the regulator, which handed out 190 million yuan in fines involving 485 investigations in the first quarter.

    "We are holding meetings, learning the spirit of the regulations, preparing materials for self-assessment and regulatory reviews," said a banker at a regional lender.


    Smaller banks tend to be more reliant on interbank activity and WMPs to grow their assets and profits, so they are likely to be most affected by the changes.

    Industrial Bank Co (601166.SS), a mid-tier bank with large exposure to shadow banking and known in China's financial community as "the king of the interbank", has already blamed "significantly increased" cost of interbank liabilities for a squeeze on its margins in the first quarter.

    The bank shrank its interbank investment by 115.6 billion yuan and interbank liabilities by nearly 170 billion yuan, it said.

    While such figures show government policies are changing behavior, not all the changes will be welcome.

    Central bank data shows that trust loans, entrusted loans and undiscounted banker's acceptances, which are common forms of shadow banking activity in China, jumped more than 2 trillion yuan in the first quarter, more than four times the year-earlier increase.

    "There are indications that regulatory measures to curb system-wide leverage show unintended consequences; specifically, in reviving 'core' shadow banking activities that had previously been constrained by regulation," said George Xu, Associate Analyst at Moody's Investors Service.

    Moody's said borrowers in sectors such as property, local government financing vehicles and industries struggling with overcapacity faced reduced access to traditional bank loans and were being driven to trust loans.

    Even as the crackdown began last year, a Reuters review of listed banks shows aggressive lenders like China Minsheng Bank (600016.SS)(1988.HK) and China Zheshang Bank (2016.HK) continued to pile up loan-like assets categorized as asset management plans and trust beneficiary rights.

    The CBRC has responded with a storm of at least eight new directives since late March.

    The regulatory changes could further tighten domestic liquidity in the next six to 12 months, said Chen Long, China economist at Gavekal Dragonomics. That also posed short-term risks for domestic stock and bond markets, he said.

    Shadow banking had grown so large after years of rampant growth, Chen said, that policymakers had to tread carefully in case over-strenuous attempts to rein it in caused a financial crisis.

    "They cannot not regulate it, but they also cannot come down too hard on it," he said.
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    China prohibits SOE finance of external trade.

    Xiao Yaqing, director of SASAC of the State Council: prohibits state-owned enterprises from carrying out financing trade

    2017-05-08 e graingold sinks
           The so-called financing trade, refers to the lack of sufficient credit for enterprises, can not obtain funds from the bank, through a third party, in the name of a third party and trade counterparts signed a trade contract, from third parties everywhere to obtain financing, business sales of goods and a certain Fees to third parties.        Financing trade risk is mainly manifested in: (a) implied great financial risk. (B) there is a large legal risk. (C) there is a risk of falsifying VAT invoices.

    The future will strictly control the blind investment, simply to expand the scale, especially financing trade, is strictly prohibited. At present, 102 central enterprises, the total debt ratio of 66.6% over the same period last year dropped 0.1 percentage points. Of which more than 80% of the debt rate of the central enterprises a total of 12, the debt ratio of more than 85% of the four, which 4, China Iron and Steel Group completed the restructuring, debt ratio reduced to 70%. "The overall debt ratio is relatively stable in terms of the real economy."

    Talking about how to reduce the debt ratio, Xiao Yaqing stressed that the first, to reduce the debt ratio is the fundamental business to increase efficiency, profitability is high, will gradually reduce the debt. Second, strict control of blind investment. In order to expand the scale, especially the financing of trade, is strictly prohibited; if in order to develop production, in order to create more benefits, such a debt is feasible. Third, the development of enterprises and the market must be combined with the big law.

    In terms of supervision, the SASAC will be in the system construction, implementation efforts, the risk of debt risk monitoring, and violations of accountability to strengthen. "Debt, reduce the debt is the central enterprises in the next period of time focus on the issue." Xiao Yaqing that "at present, both the central enterprises issued bonds, or bank lending scale, are more reasonable and normal level.

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    CPCA: China Apr Passenger Vehicles Sales Down 13.7% MoM to 1.6934M Units

    China Passenger Car Association (CPCA) reported that in April, China's broad-sense passenger vehicles sales were 1.6934 million units, showing 1.7% yearly decrease and 13.7% monthly decline.
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    China mulls 3 mega power firms in $855 billion reshuffle

    China is considering plans to create three power giants through mergers of eight coal-fired and nuclear generators with combined assets of almost 5.9 trillion yuan ($855 billion), Bloomberg reported.

    The proposal, which is only one option being considered as the government seeks to restructure the state-run power sector, hasn't been finalized and is subject to change, said people with knowledge of the plan. The mergers are proposed for the unlisted parent companies, not units traded in Hong Kong and Shanghai, the people said.

    The three planned power giants would be created through the following combinations:

    •China Huadian Corp. and China Guodian Corp., two of the biggest coal-fired power generators, may merge with China National Nuclear Corp., the second-biggest nuclear power operator in China. The combined company would have 297 GW of capacity and 2.04 trillion yuan in assets, according to data published on company and regulator websites, as well as annual reports.

    •China Datang Corp., one of the five biggest coal-fired generators, may merge with China General Nuclear Power Corp., the largest nuclear power operator, and Shenhua Group Corp., the country's biggest coal miner, as well as a major rail operator and power producer. The combined company would have 241 GW of capacity and 2.09 trillion yuan in assets.

    •China Huaneng Group, the country's biggest coal-fired power producer, may merge with State Power Investment Corp., a coal-fired power company that also owns State Nuclear Power Technology Corp., the unit building the country's Westinghouse-designed AP1000 third-generation nuclear reactors. The combined company would have about 262 GW of capacity and assets of 1.75 trillion yuan.

    ''Injecting nuclear power into traditional coal-fired power players could help stabilize their overall portfolio and give them incentives and tools to cut over-reliance on coal,'' said Shi Yan, a Shanghai-based utilities analyst at UOB Kay Hian Holdings Ltd. ''The newly created companies could become 'too big to fail' almost overnight, and how to effectively prevent them from becoming new market monopolies will be a hard task to deal with.''

    Overcapacity, Debt

    An industrywide regroup would build on the government's efforts to cut industrial overcapacity, accelerate the overhaul of the bloated state-owned sector and reduce the country's reliance on coal. Utilization at China's power generation facilities last year averaged 3,785 hours, the lowest since 1964, according to the National Energy Administration.

    Reforming the state-owned sector is also key to President Xi and Premier Li Keqiang's goal of rebalancing the $11 trillion economy away from an over-reliance on debt-fueled infrastructure investment and exports to one powered more by services and consumer spending. The country will deepen consolidation of state-owned enterprises this year, Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission said in March.

    ''The driver for this idea is probably not just overcapacity, but levels of debt in the parent companies,'' said Simon Powell, head of Asian utilities research at UBS Group AG in Hong Kong. ''By merging good cash flow companies with not-so-good, then perhaps the debt burden gets eased. Given that the proposed changes are at the parent company level and the listed companies remain as are for now, then not much changes for shareholders in the short term.''
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    Incitec Pivot profit rises 11 pct on cost cuts, outlook positive

    Explosives and fertiliser maker Incitec Pivot Ltd reported an 11 percent rise in half-year underlying profit on Tuesday as cost cuts offset weak commodity prices and said the outlook was positive, with a pick-up in U.S. coal output.

    The world no.2 maker of industrial explosives said net profit before one-offs rose to A$152.1 million ($112.3 million)for the six months to March from A$137.1 million a year earlier. That was roughly in line with a forecast of A$154 million from one analyst, according to Thomson Reuters I/B/E/S.

    Earnings before interest and tax grew 23 percent on record earnings from explosives and a contribution from Incitec's new ammonia plant in the United States, with cost savings of A$64 million offsetting low fertiliser prices.

    With the Waggaman plant in Lousiana up and running, the United States made up more than half of the group's earnings.

    "Continued growth in the quarry & construction sector, together with coal sector market share gains, are expected to benefit Americas earnings in the second half," Incitec Pivot said.
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    Booker on the latest Arctic scare:

    Inevitably, when even satellite temperatures were showing 2016 as “the hottest year on record”, we were going to be told last winter that the Arctic ice was at its lowest extent ever. Sure enough, before Christmas, a report from the US National Oceanic and Atmospheric Administration was greeted with such headlines as “Hottest Arctic on record triggers massive ice melt”. In March we had the BBC trumpeting another study that blamed vanishing Arctic ice as the cause of weather which led to the worst-ever smog in Beijing, warning that it “could even threaten the Beijing Winter Olympics in 2022”.

    But last week we were brought back to earth by the Danish Meteorological Institute (DMI), as charted by our friend Paul Homewood on his blog Notalotofpeopleknowthat, with the news that ever since December temperatures in the Arctic have consistently been lower than minus 20 C. In April the extent of Arctic sea ice was back to where it was in April 13 years ago. Furthermore, whereas in 2008 most of the ice was extremely thin, this year most has been at least two metres thick. The Greenland ice cap last winter increased in volume faster than at any time for years.

    As for those record temperatures brought in 2016 by an exceptionally strong El Niño, the satellites now show that in recent months global temperatures have plummeted by more that 0.6 degrees: just as happened 17 years ago after a similarly strong El Niño had also made 1998 the “hottest year on record”.

    This means the global temperature trend has now shown no further warming for 19 years. But the BBC won’t be telling us any of this. And we are still stuck with that insanely damaging Climate Change Act, which in this election will scarcely get a mention.
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    Nine capacity cut champs to be rewarded in China

    Beijing will offer rewards to nine provinces that exceeded their capacity cut targets in 2016, financed by a portion of the 100 billion yuan ($14.5 billion) subsidy allotted to help address overcapacity, China Daily reported, citing Xu Hongcai, assistant finance minister.

    Rewards for good performance will facilitate overall progress in cutting overcapacity this year, but less-developed areas that face greater difficulties with economic restructuring also need more financial help, experts said.

    Local governments and enterprises in Zhejiang, Jiangxi, Guangdong and Fujian provinces will receive money for going beyond capacity cut targets in the steel sector. Chongqing, and Shanxi, Shandong, Henan and Shaanxi provinces will receive grants for cuts in the coal sector, Xu said.

    "The final amount given to each province will be revealed after the central government verifies the performance of each province last year," Xu said. "We will make sure that the allocation of money is transparent."

    The total amount of the rewards would amount to a maximum of 20% of 100 billion yuan in special funds established in 2016, Xu said. The remaining 80% would be allotted to all regions to help with capacity cuts, he said.

    Xu did not provide details on when the amounts will be announced or how the money will be spent.
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    US floods, river closures delay corn, metals barges; little oil impact

    Flooding in the US Midwest involving key waterways is having mixed impacts on commodities markets thus far, with some already facing delivery delays due to river closures and more potentially to come as the high water moves steadily downriver, while in others operations remain normal.

    High water on the Mississippi River has prompted two closures on the upper channel from Cairo, Illinois, and further north. And flooding already occurring in St. Louis was expected to continue to expand along the Mississippi River throughout the month.

    Other rivers are also affected, including the Illinois River, such that the Chicago Board of Trade has declared force majeure for corn and soybean shipping hubs due to flooding on that waterway, according to a Thursday notice.

    Some metals shipments via barge are seeing or are expected to see impacts from the flooding, while the movement of crude oil, petroleum products and petrochemicals appeared largely unaffected thus far, according to sources across commodity markets.

    Yet flooding and river-terminal closures have not necessarily impacted prices of affected commodities yet, according to sources, who also noted that flooding is a regular event, happening every few years.

    For instance, corn market sources said that while the terminal closures will have some impact on physical deliveries, they are unlikely to affect prices as the market has largely already priced them in.

    Flooding did delay scrap transactions in the St. Louis market that were still not completely finalized by late Friday. St. Louis is upriver on the Mississippi from major scrap-consuming electric-arc furnaces in the Southeast.

    "We will definitely see some shipment delays due to flooding and navigation restrictions," a scrap supplier said. "Shippers using spot rates will get squeezed on freight rates for a period of time."

    And a ferroalloys supplier who uses warehouses in Chicago said he was facing delays of barges to that city and cannot get arrival dates.

    "We've been supplying a customer in the Midwest from Pittsburgh, but I can't do that for much longer," the supplier said. The Midwest customer would normally be supplied from Chicago.

    An overseas ferroalloys producer who supplies the US said he had not had a problem yet, but was "watching it closely."

    He expected the high waters and river closures would eventually have an impact, and said he had sold a truckload of ferrosilicon to a trader on Friday at 82 cents/lb, cash, in-warehouse Chicago, prompt release, up from prices of 78-80 cents earlier this week.

    Traffic is restricted due to high water levels on the upper Mississippi River, with closures from mile markers 33 to 109.9, beginning near Cairo, Illinois, and working north to just south of Chester, Illinois, and at mile marker 535 in Clinton, Iowa, due to a bridge closure, according to Petty Officer Third Class Lora Ratliff of the Eighth US Coast Guard District.

    "Beyond those closures there are no restrictions I am aware of," she said.

    CRUDE, PRODUCTS MARKETS UNHAMPERED The movement of crude oil and petroleum products has seen little impact by the flooding, according to tanker market participants.

    "There are some delays [on the barge market] associated with the flooding, but it has not had any affect on rates so far," a Jones Act shipowner said.

    The flooding has occurred in an area where only barges have been affected, because tankers do not travel that far upriver, he said. The shipowner saw all traffic moving normally on the US Gulf Coast.

    Under the Jones Act, vessels transporting goods between US ports must be US-flagged and -built, and US majority-owned.

    There were no known issues affecting dirty tanker activity on the Mississippi River, according to a non-Jones Act shipowner.

    "First I've heard of such a thing," he said about high water levels on the river. A ship from his fleet had recently called at New Orleans without any problems.

    Participants in petrochemicals markets were likewise sanguine, as closures have yet to affect prices or logistics, and sources in key markets such as aromatics downplayed any concerns over potential impacts.

    Spot benzene prices on a Lower Mississippi River delivery basis maintained their usual 2-cent/gal premium to US Gulf Coast indications to close the week. Toluene and mixed xylene markets were up nominally from Thursday's assessments, but sources attributed the increase to a rebound in the energy complex.

    Chlor-alkali market participants said there were no issues related to flooding along the Mississippi River. The liquid caustic soda market has been talked tight in recent months, with any impact on barge activity more likely tied to supply shortages brought on by extended turnarounds and increased export activity rather than logistical constraints, sources have said.

    US methanol pricing saw gains of 1.5 cents/lb ($33/mt) on the day that resulted from production issues along the US Gulf Coast region, source said. Any impact on barge business was expected to be minimal, as anyone that far up the river would likely be serviced by northern suppliers.

    Pittsburgh-based phthalic anhydride maker Koppers, which has production in Stickney, Illinois, was not experiencing any logistical issues or delays for domestic deliveries, a company source said. The Mississippi River is an important waterway for US commerce, including the movement of crude oil, petroleum products, coal, agricultural products and metals.

    Petroleum movements by barge and tanker between the Midwest and the US Gulf Coast averaged 115,000 b/d in 2016, and 56,000 b/d in the opposite direction, according to Energy Information Administration data.

    The Mississippi River also is a key transport mode for coal being delivered to export terminals in New Orleans, according to the EIA.

    One producer of Illinois Basin thermal coal, Knight Hawk Coal, idled its Lone Eagle loading dock on the Mississippi River near Chester, Illinois, on Monday evening due to halts to barge traffic, S&P Global Platts reported previously. At that time, it expected it could lose six to seven days of shipping on the river.

    Navigation channel depth on the Mississippi River is maintained at 45 feet from Baton Rouge south and at 9 feet from Baton Rouge up, according to the US Army Corps of Engineers.
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    China Apr Export in USD Terms +8% YoY; Imports +11.9%

    China Apr Export in USD Terms +8% YoY; Imports +11.9%
    The General Administration of Customs (GAC) announced that in USD terms, China exports rose 8% yearly in April, lower than the estimates of 11.3%. Imports gained 11.9% yearly, also below the consensus of rising 18%. During the month, total value of imports and exports added 9.7% yearly to US$321.96 billion. Trade surplus was RMB 38.05 billion, against forecast of US$35.2 billion .

    For the first four months of 2017, in USD terms, China's exports lifted 8.1% yearly while imports climbed 20.8% yearly. Trade surplus was US$103.337 billion.
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    Oil and Gas

    WildHorse Ups Eagle Ford Stake with $625 Million Purchase from Anadarko, KKR

    $625 million Eagle Ford acreage acquisition makes WildHorse the second largest Eagle Ford player—for one fifth the price of Permian acreage

    WildHorse Resource Development (ticker: WRD) today announced the purchase of 111,000 net acres in the Eagle Ford from Anadarko Petroleum (ticker: APC) and Kohlberg Kravis Roberts & Co (ticker: KKR).

    In total WildHorse will pay $625 million for these properties. The deal is to be paid with $556 million cash to Anadarko and 6.3 million shares of WRD common stock to KKR.

    Values the oil and wet gas focused acreage at $5,600/acre

    The properties acquired are very close to existing WildHorse acreage, in the northern section of the Eagle Ford. Most acreage is in the oil window, but the southeast portion produces wet gas and condensate. In total, the properties are currently producing 7.6 MBOEPD, with proved developed producing reserves of 22.9 MMBOE. The $625 million purchase price equates to $5,600/acre, or $3,300/acre after adjusting for production.

    This is far below the $30,000/acre or more often seen in recent Permian basin deals.

    Most recent in series of transactions

    This acquisition is the most recent in a series of purchases the company has made, establishing itself as a major player in the northern Eagle Ford. WildHorse’s acquisitions since 2015 have left the company with 385,000 net acres in the area, second only to EOG in Eagle Ford holdings. Pro forma to the acquisition, WildHorse produced 19.1 MBOEPD from its Eagle Ford properties, with 88% liquids.

    Third generation frac design in the Eagle Ford yielding 55%+ IRRs

    WildHorse has a new completion design that the company can use to develop its new acreage, its third generation of frac designs. Wells using this design typically outperform the company’s 91 BOE/ft. type curve, with recently drilled wells significantly outperforming. The company reports that its third generation wells yield IRRs of 55% or more, with the best wells approaching 140%. This new frac generation will be put to good use, as the acquisition adds 711 net locations where the 91 BOE/ft. type curve applies.

    Carlyle to own 24% of the pro forma company

    WildHorse will fund the cash portion of the acquisition through its credit facility and preferred stock. A total of $121 million will be provided by the company’s revolving credit facility, while the remaining $435 million will be funded by the Carlyle Group. In return the Carlyle Group, which currently has no ownership in WildHorse, will receive Series A Perpetual Convertible Preferred Stock. This preferred stock will pay a dividend rate of 6% per year, payable in kind, and may be converted to common stock in one year. Assuming full conversion, this gives the Carlyle group 23.8% ownership of the pro forma company. The transaction is expected to close around June 30.

    WildHorse also reported first quarter results today, showing net earnings of $20.3 million, or $0.22 per share. First quarter highlights include:

    Increased average daily production by 18% to 17.6 MBoe/d for the first quarter 2017 compared to 14.9 MBoe/d for the first quarter 2016
    Increased Net Income to $20.3 million for the first quarter 2017 compared to a Net Loss of $14.2 million for the first quarter 2016. Increased Adjusted Net Income(1) to $0.1 million for the first quarter 2017 compared to a Net Loss of $13.7 million for the first quarter 2016
    Increased Adjusted EBITDAX(1) by 95% to $34.6 million for the first quarter 2017 compared to $17.7 million for the first quarter 2016
    Issued $350 million in senior notes due 2025 at 6.875% in February 2017
    In early March 2017, WRD brought online its first Burleson North well and one of the strongest wells to date in the East Texas Eagle Ford, the Paul 134 #2H, with an IP-30(2) of 1,035 Boe/d (93% oil) on a 5,363’ lateral. When normalized for downtime and a 6,500’ lateral, the IP-30 is 1,321 Boe/d
    In late March 2017, WRD brought online the Altimore #1H with an IP-30(2) of 1,048 Boe/d (84% oil) on a 6,435’ lateral and the Jackson #1H with an IP-30(2) of 958 Boe/d (85% oil) on a 6,297’ lateral

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    Rosneft’s $12.9 Billion Essar Oil Deal Delayed Over Debt Issues

    Russian state oil firm Rosneft is struggling to close its $12.9 billion acquisition of India’s Essar Oil Ltd because six of Essar’s Indian creditors have yet to approve the deal, sources close to the talks said.

    The state-run banks and financial institutions that are delaying Rosneft’s biggest foreign acquisition hold about $500 million of Essar’s debt, five industry and banking sources told Reuters.

    Kremlin-controlled Rosneft, which sees the deal as vital to expanding in Asia’s fastest growing energy market, had aimed to close the deal at the end of 2016. Now a June target for completion may be in doubt.

    “Tensions between Rosneft and Essar are running high,” said one of the industry sources, who like others asked not to be named.

    The sources said the acquisition was still expected to go through, but one of them said Rosneft had written to Essar threatening to change the terms of the deal, including to pay a lower price, if the dispute over debt was protracted.

    “The completion of the transaction was conditional upon receiving requisite approvals and satisfaction of customary conditions. The parties are working towards obtaining the requisite approvals to complete the transaction,” an Essar spokesman said.

    “We are hopeful that the deal will be completed in the upcoming few weeks,” he added.

    Rosneft Chief Financial Officer Pavel Fedorov told a conference call on Wednesday that the purchase was now expected to be completed by the end of June.

    The six institutions holding up the transaction are IDBI Bank (IDBI.NS), Punjab National Bank (PNBK.NS), Syndicate Bank (SBNK.NS), Indian Overseas Bank (IOBK.NS), Life Insurance Corp of India and non-bank financier IFCI Ltd (IFCI.NS), the sources said.

    The six lenders gave no official comment when contacted by Reuters.

    Another industry source said Rosneft had wanted to finalize the deal in early June at the St Petersburg Economic Forum, where Indian Prime Minister Narendra Modi is due to meet Russian President Vladimir Putin. But he said those hopes have now faded.

    Rosneft won a bidding war to buy Essar against Saudi Aramco, its biggest competitor in the oil export market.

    The deal will give Rosneft a 49 percent stake, with a further 49 percent split between Swiss commodities trader Trafigura [TRAFGF.UL] and Russian fund United Capital Partners. The billionaire Ruia brothers will retain a 2 percent stake.

    Russia’s VTB bank is acting as advisor on the transaction. It declined to comment on the hold up.

    “The process of closing the deal is in its final stages and is expected to conclude soon,” a spokesman for Trafigura said, while UCP declined to comment.


    The deal is also valuable for Modi’s government, as it seeks to clear India’s $150 billion in bad debt.

    Essar Oil India owed about $5.5 billion to almost 30 Indian lenders. Apart from six, others have approved Essar’s transfer of ownership to Rosneft from its current owners Indian brothers Ravi and Shashi Ruia, banking sources said.

    The State Bank of India (SBI.NS), the country’s biggest lender, has given its no-objection to the deal, the sources said.

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    Here’s why OPEC might just let the deal on oil output cuts collapse

    Cartel’s ‘current strategy is not working,’ says ETF Securities’ Shah

    Oil traders largely expect the Organization of the Petroleum Exporting Countries to agree later this month to extend a production-cut agreement into the second half of 2017, but at least one analyst is very skeptical.

    After all, the “current strategy is not working,” Nitesh Shah, commodity strategist at ETF Securities, wrote in a blog post Thursday.

    He said that the most “credible options” for OPEC’s next move would be to either agree on a deeper cut or let the deal collapse. “The latter options seems the most likely outcome.”

    OPEC members and some major non-OPEC oil producers agreed to reduce their collective output by 1.8 million barrels a day under a six-month agreement that began on Jan. 1.That pact is set to expire in June and OPEC is expected to make a decision on whether to extend it when members meet in Vienna on May 25.

    Strong compliance with the cuts helped oil prices CLM7, +0.15%LCON7, +0.10% climb in February to their highest levels since the summer of 2015 but year-to-date, they have lost roughly 10%.

    “The efforts of OPEC members with assigned quotas are being undermined” by growth in supply from OPEC members who don’t have quotas, as well as non-OPEC members who are part of the deal but aren’t sticking to it, and “rapid growth in supply from other countries, most notably the U.S.,” said Shah.

    U.S. crude-oil production climbed to 9.31 million barrels a day for the week ended May 5, up from 8.77 million barrels a day at the end of 2016, according to data from the Energy Information Administration.

    Meanwhile, in a monthly report released Thursday, OPEC raised its forecast for 2017 oil-production growth from countries outside of OPEC by more than 60%.

    OPEC “repeating the same strategy for another six months will do little to shore up oil prices,” Shah said.

    “OPEC nations have given up market share and have barely reaped any price gains,” he said. “Given that consensus expectations are for a simple deal extension (i.e. that is what is currently priced-in), following the status quo is unlikely to be met with a positive price response.”

    If OPEC is “serious about getting the market to balance, it will have to cut deeper in order to ‘shock’ the market and drive prices higher,” said Shah.

    But it would be a difficult to reach an agreement on a “bolder move,” with the “smaller and more financially-constrained members reluctant to give up more volume,” he said.

    And if the cartel can’t reach an agreement for a deeper cut, the “default option,” said Shah, would be to do nothing and let the deal collapse.

    And that’s exactly what he believes will happen. The meeting this month is likely to “surprise on the downside with a lack of agreement,” he said.

    Under that scenario, WTI oil prices could fall close to $40 a barrel, which he sees as the “structural floor for oil prices, set by the break-even price of U.S. shale-oil production.”
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    Record Petrobras operating profit speeds debt reduction

    An aggressive turnaround helped Petroleo Brasileiro SA post a record operating profit in the first quarter and move ahead of schedule in reducing a debt burden that is the largest of any major oil firm.

    Petrobras, as the state-controlled company is known, reported net income of 4.449 billion reais ($1.42 billion), well above a consensus estimate of 3.773 billion reais, while improving cash flow and debt metrics. Petrobras lost a net 1.246 billion reais in the first quarter of 2016.

    Moves to increase output in some offshore fields, sell non-essential assets and keep expenses in check yielded the firm's best operating profit ever. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 19 percent to 25.254 billion reais, beating the consensus forecast by 1.38 billion reais.

    Chief Executive Pedro Parente said the strong result was driven by recurring factors such as cost controls, putting Petrobras ahead of a timetable to reduce net debt to 2.5 times annual EBITDA by the end of next year, from a ratio of 3.2 at the end of March.

    "If we get to 2.5 (times EBITDA) before the end of 2018, that doesn't mean we're going to stop (reducing debt)," Parente told journalists. "We want to keep cutting so we can lower our interest payments."

    A sharp drop in asset impairments also contributed to earnings as Petrobras moved on from a bribery scheme in which the book values of several projects were artificially inflated.

    Free cash flow, the money left for holders of bonds and shares after operating and financial expenses, rose 12 percent from the fourth quarter to 13.368 billion reais.

    "It was a strong beat across the board that brings about a tipping point for the case," said Pedro Albuquerque, who runs the Cosmos Capital hedge fund and has a position in Petrobras. "Parente still has room to keep cutting costs, so margins look sustainable."

    Parente said the sale of natural gas pipeline NTS, which generated 6.7 billion reais in the second quarter, also boosted the odds of paying dividends for the first time since 2014.

    To be sure, Parente still faces challenges such as oil prices near decade lows, a corruption scandal that highlighted governance flaws, and losses incurred over many years because of government-mandated fuel subsidies and money-losing investments.

    Net revenue slipped 3 percent from a year earlier to 68.365 billion reais, about 1 percent below the consensus estimate.
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    Mercuria warns of undue impact of derivatives on dated Brent oil price

    Mercuria warns of undue impact of derivatives on dated Brent oil price

    Trading in the North Sea crude oil physical market has seen a boost from a growing number of participants, but trader Mercuria warned on Thursday that more financial players meant derivatives could have an unduly large impact on the setting of the dated Brent benchmark price.

    Dated Brent, which governs around two-thirds of the world's oil trades, is set using prices of physical barrels of four streams of North Sea crude, Brent itself, Forties, Ekofisk and Oseberg (BFOE) and a series of derivative rates.

    Kurt Chapman, head of crude trading at Mercuria, a major player in both the physical and "paper" North Sea markets, said he welcomed the additional liquidity and vibrancy that a broader spectrum of market participants brought to the market, but said increased "financialisation" was not without consequence.

    "The liquidity is appreciated, but we need to make sure we retain the robustness of the process," he said.

    The pool of market players in the North Sea ranges from oil producers such as BP, Shell or Total, to traders such as Mercuria itself or Trafigura, as well as a range of more pure financial traders.

    Market participants bid and offer cargoes of 600,000 barrels each traded on a platform run by pricing agency S&P Global Platts, known as "the window", and the lowest-priced crude will then set the daily price of dated Brent.

    Mercuria is one of the world's largest traders of physical commodities. The company, which is based in Switzerland, traded 2.1 million barrels of oil equivalent per day in 2016.

    This compares with 7 million bpd of crude and products traded by rival Vitol last year.

    To manage price risk, traders use swaps such as contracts for difference (CFDs) to hedge cargoes, but not all participants in the North Sea derivatives market buy and sell physical barrels.

    "Right now if you look at the Brent benchmark, in the window, there are physical bid and offers on the screen, fine, it's still a physical BFOE product," he said, adding that some derivatives eventually resulted in physical delivery," Chapman said during a panel discussion at the annual S&P Global Platts Crude Conference.

    "The link between the two, the dated (price) and the BFOE (paper market) is actually a financial product, which are CFDs that are traded on the screen, more actively almost, by financial funds, 'curve shapers', or 'strippers', as we call them, who are trying to arbitrage opportunities between other financial products and they are setting a very significant portion of what ultimately becomes the dated Brent quotation."

    The North Sea market, which is essentially backed by just 1 million barrels per day of supply, can be volatile and at times, just a handful of players will control a proportionally large number of barrels that they may need to service their own refineries or provide to customers, which in turn can create a temporary liquidity vacuum.

    Financial players in the CFD market can accumulate large speculative positions that are never intended to result in physical delivery, but can have a knock-on effect on the price of a barrel of oil.
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    In Fight Against U.S. Shale Oil, OPEC Risks Lower for Longer

    When Khalid Al-Falih arrived at Davos in late January, the Saudi oil minister was exultant. The output cuts he’d painstakingly arranged with fellow OPEC states and Russia were working so well, he said, they could probably be phased out by June.

    Almost five months later, U.S. production is rising faster than anyone predicted and his plan has been shredded. In a series of phone calls and WhatsApp messages late last week, Al-Falih told his fellow ministers more was needed, according to people briefed on the talks, asking not to be named because the conversations are private.

    In their battle to revive the global oil market, OPEC and its allies are digging in for a long war of attrition against shale.

    "OPEC is now recognizing they need longer -- and potentially deeper -- production cuts than they have anticipated," said Jamie Webster, a senior director for oil at the Boston Consulting Group Inc. in New York.

    From the beginning, Saudi Arabia saw a quick one-off intervention: reduce production for a few months and speed up the recovery. The strategy had an option for a six-month extension, but Riyadh initially thought it wouldn’t be needed. U.S. shale, the plan assumed, wouldn’t recover fast enough.

    And yet, shale has defied the naysayers. By the time OPEC meets in Vienna on May 25, U.S. output will be approaching the 9.5 million barrels a day mark -- higher than in November 2014 when OPEC started a two-year price war. The rebound has been powered by turbocharged output in the Permian basin straddling Texas and New Mexico.

    Forced to adjust to lower prices, shale firms reshaped themselves into leaner operations that can thrive with oil just above $50 a barrel. Brent crude, the global benchmark, added 3 cents to $50.80 a barrel as of 1:04 p.m. in Singapore.

    Since OPEC agreed to cut output six months ago, U.S. shale production has risen by about 600,000 barrels a day, wiping out half of the cartel’s cut of 1.2 million barrels a day and turning the rapid victory Saudi Arabia foresaw is turning into a stalemate. Al-Falih said this week Saudi Arabia is now pushing to extend the cuts "into the second half of the year and possibly beyond."

    On Thursday, OPEC’s own monthly oil market report said that production from non-members would rise 64 percent faster than previously forecast this year, driven mainly by U.S. shale fields.

    So far, OPEC hasn’t been able to "cut supplies faster than shale oil can increase,"  said Olivier Jakob of consultant Petromatrix GmbH.

    To read a story on the revival of the U.S. shale industry, click here.

    Al-Falih and his OPEC allies have made some progress. U.S. crude stockpiles have started to drop and the amount of oil in floating storage is contracting. The International Energy Agency and banks including Goldman Sachs Group Inc. predict a further contraction in stockpiles in the second half of the year.

    Yet, the cartel faces big risks. The most prominent is that extending cuts lifts the oil price high enough for shale to hedge again, as it did earlier this year.

    "The dilemma now for OPEC and their key non-OPEC partners Russia and Oman is that cutting to support prices risks stoking the embers of a shale fire storm," said Adam Ritchie, director at Petro-Logistics in Geneva.

    Increasingly, the oil market believes the real battle between OPEC and Russia, on one side, and shale, on the other, will take place in 2018, when an increasing number of observers predict U.S. production will flood the market as it did in 2014.

    "Risks are emerging to 2018 balances," said Martijn Rats, oil analyst at Morgan Stanley in London. "The U.S. is set up for strong supply growth next year, that could exceed one million barrels per day.”

    U.S. shale producers used the price spike that OPEC triggered earlier this year to lock-in revenues for 2017, 2018 and, in some cases, even 2019. With their financial future relatively secure, they started deploying rigs. Since the count of active rigs in the U.S. reached a low last, producers have added an average seven units per week, the strongest recovery in 30 years.

    The rig spree, coupled with efficiency gains, is yielding strong production growth. In the first quarter, EOG Resources Inc. and Pioneer Natural Resources Co., two of the largest U.S. shale producers, announced year-on-year output jumps of 18 and 19 percent respectively. Smaller companies, including DiamondBack Energy Inc., Parsley Energy Inc. and RSP Permian Inc., achieved 60 percent to 80 percent increases. A lot more is coming.

    "Our break-even oil price is $20 a barrel," Frank Hopkins, Pioneer’s senior vice-president, told an industry conference in London this week. "Even in a $40 world, in a $50 world, we are making good returns.

    According to the U.S. Energy Information Administration, American crude production will surpass the 10 million barrel a day mark by late next year, breaching the record high set in 1970. The shale boom will propel non-OPEC output up 1.3 million barrels a day next year, effectively filling up almost all the expected growth in demand.

    "The supply and demand balance for 2018 looks very bad,” said Fared Mohamedi, chief economist at consultant The Rapidan Group in Washington. “That’s when the big fight is going to happen."

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    Turn So/So Shale Wells into High Performers with Refracking

    Turn So/So Shale Wells into High Performers with Refracking

    Hold that decline curve!

    Researchers at Los Alamos National Laboratory have done “extensive data mining” and analysis of 20,000 shale gas wells. In a paper published in the journal Applied Energy titled “The shale gas revolution: Barriers, sustainability, and emerging opportunities”,

    Los Alamos researchers say that refracking existing wells with new technology can transform those wells from “diminished producers” (so/so wells) into “high-performers” long after the wells had supposedly hit peak production.

    “We hypothesize that manipulating tail production could re-revolutionize shale gas extraction
    ,” said lead author of the study, Richard Middleton.

    Refracking eliminates the cost of drilling a new bore hole, and provides a smaller environmental footprint.

    Attached Files
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    OECD commercial oil stocks are falling

    OECD commercial oil stocks are falling but were still 3.01 billion barrels in March - 4.8 days of demand above 5-year average

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    Dutch TTF natural gas hub now the 'Henry Hub for Europe': Flame panel

    The Dutch TTF natural gas hub has now become the European benchmark for longer-term contracts, with its dominance over other European hubs only expected to increase in the future, a panel discussion at the Flame conference in Amsterdam said Thursday.

    "It is becoming a global link, a Henry Hub for Europe... TTF will lead the way," said Patrick Barouki, head of gas trading & origination at Uniper Global Commodities. "There have been occasions when the entire move on the TTF can be put down to forex movements," with the increasing link of European pricing to US LNG, which is priced in US dollars.

    "The TTF is the real market price. The NBP was the leader, TTF took over," said Didier Magne, head of Gas Europe at TrailStone. "TTF is the only place you can hedge the US LNG into Europe," Magne added, citing that liquidity on the further-out NBP seasons is poor compared to liquidity on the TTF Calendar Year contracts.

    "TTF has turned out to be the benchmark hub, especially on the curve," said Gottfried Steiner, CEO of Central European Gas Hub. "People are happy with the TTF, it is the most widely used price index."

    In a separate presentation, Thierry Bros -- senior research fellow at the Oxford Institute for Energy Studies -- said that "the TTF will become even more dominant compared to the UK," in the wake of Brexit, which he called a "great opportunity for the European gas industry due to more volatility in the price."


    Barouki said that the Spanish PVB hub was "quite exciting" with a "a large pick-up in liquidity over the past 12 months," on the back of within- day/day-ahead trading allied with new balancing rules.

    "The [French] TRS has been a hindrance," Barouki said, as well as expensive regasification costs, however, he said that "over the next years, Spain could develop a major role for Europe."

    "The further away you are geographically, the less influence TTF becomes," said Steiner, citing arbitrage opportunity for market participants in southern Europe given the high prices seen in Spain, France, and Italy this winter compared to northwest Europe.

    On a potential Ukrainian gas hub, Magne said that he was "very optimistic" and that "huge progress" had been made by the Ukrainian government to facilitate the development of a hub as the country tries to reduce reliance on Russian gas.

    However, the panel cited expensive entry costs as a hindrance and that market participants were not seeking access to underground gas storage capacity.

    "Entry costs are Eur0.70/MWh into Ukraine, three times normal entry costs," Magne said. "It kills any advantage, just going in and out costs more than the most expensive storage in TTF."

    Barouki said that the high entry costs make it "impossible to commercially use it."

    As for access to Ukraine's 31 Bcm of storage capacity, Magne said that "Europe is over-engineered already, you don't need the storage."

    Attached Files
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    China cuts retail gasoline, diesel prices - state planner

    China's state planner will lower gasoline retail prices by 250 yuan ($36.22) per tonne and diesel fuel by 235 yuan per tonne from Friday, the National Development and Reform Commission said in a statement on its website on Thursday.

    The decrease is the fourth and the biggest so far this year as crude oil prices continued to drift lower.
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    OPEC Raises 2017 Estimate for Supply Growth From Rivals by 64%

    OPEC boosted estimates for growth in rival supplies by 64 percent as the U.S. oil industry’s recovery accelerates, threatening the group’s attempts to clear a surplus.

    Production from outside the Organization of Petroleum Exporting Countries will increase by 950,000 barrels a day this year, OPEC said in a report, revising its forecast up by about 370,000. The projection is four times higher than in November, when the group announced a production cut to try and re-balance oversupplied world markets. Non-OPEC nations pump about 60 percent of the world’s oil.

    Oil prices sank to a five-month low below $44 a barrel in New York last week on concern that the cuts by OPEC and 11 partners, including Russia, aren’t clearing the glut and that more supply is coming from U.S. shale drillers. While OPEC has signaled it will probably extend the cutbacks into the second half, the increased production outlook for competitors may fuel speculation their strategy has backfired.

    “U.S. oil and gas companies have already stepped up activities in 2017 as they start to increase their spending amid a recovery in oil prices,” OPEC’s Vienna-based research department said in the report. “In addition to the growth in the U.S., higher oil production is expected in Canada and Brazil.”

    The report echoed comments from officials such as Saudi Arabian Energy Minister Khalid Al-Falih and his Russian counterpart Alexander Novak that prolonged action will likely be required when ministers gather on May 25.

    “Continued rebalancing in the oil market by year-end will require the collective efforts of all oil producers to increase market stability,” it said.

    The organization raised its outlook for U.S. production growth by 285,000 barrels a day to 820,000 a day. The number of drilling rigs operating in the country has more than doubled since May, data from Baker Hughes Inc. shows, as shale explorers emerge from a two-year rout buoyed by the initial price gains after OPEC announced its plan.

    Original Projection

    When OPEC introduced its 2017 forecast for non-OPEC supply last July, it had projected a contraction of 100,000 barrels a day.

    The report indicated that OPEC’s objective to reduce inventories to their five-year average remains some way off. While it noted that surplus oil held at sea diminished, stockpiles in the most industrialized nations increased from the fourth quarter by 31 million barrels to just over 3 billion. That’s 276 million above the five-year norm.

    OPEC members are still sticking with their pledge to reduce output, the report showed. Production from all 13 members slipped by 18,200 barrels a day to 31.73 million last month, with Saudi Arabia continuing to pump below its official target.

    Attached Files
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    Enbridge expects adjusted profit to rise on Spectra deal

    Enbridge Inc, Canada's largest pipeline company, forecast a big rise in adjusted earnings before interest and taxes this year, following its acquisition of smaller rival Spectra Energy Corp.

    Enbridge said last September it would buy Spectra, then valued at $28 billion, to create the largest energy infrastructure company in North America.

    The deal, which closed on Feb.27, highlighted the pressure on pipeline companies to merge as they grapple with over-capacity and sliding tariffs.

    Calgary, Alberta-based Enbridge, which reported a lower-than-expected profit on Thursday, said it expects adjusted profit before interest and taxes of C$7.2 billion ($5.25 billion) to C$7.6 billion in 2017, much higher than the C$4.7 billion it earned last year.

    However, the company said it expects available cash flow from operations to fall to C$3.60 to C$3.90 per share this year, from C$4.08 per share in 2016.

    Weak earnings from Enbridge's liquids pipeline business weighed on profit in the first quarter ended March 31.

    Adjusted earnings in the unit fell 10 percent to C$970 million in the quarter.

    Net earnings attributable to shareholders fell 47 percent to C$638 million, or 54 Canadian cents per share.

    Excluding a C$416 million derivative gain and other one-time items, adjusted profit was 57 Canadian cents. The analysts' average estimate was 62 Canadian cents, according to Thomson Reuters
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    Painted Pony Reports Increased Credit Facilities and First Quarter 2017 Financial and Operating Results

    Painted Pony Petroleum Ltd.  is pleased to announce increased credit facilities and first quarter 2017 financial and operating results.  The first quarter was notable for the announcement of the proposed strategic acquisition of UGR Blair Creek Ltd. through a share purchase agreement whereby Painted Pony agreed to acquire all of the issued and outstanding shares of UGR (“UGR Acquisition“), subject to shareholder approval on May 11, 2017 at the annual general and special meeting of Painted Pony shareholders.


    Entered into an agreement to increase credit facilities to $500 million conditional upon closing of the UGR acquisition, including available credit facilities of $400 million and a development line of $100 million, which becomes available in stages of $50 million by October 31, 2017 and $50 million by April 30, 2018, subject to borrowing base review at those dates;
    Announced the planned expansion of Painted Pony’s Montney assets through the proposed UGR Acquisition, which will add average daily production of 51 MMcfe/d (8,500 boe/d) based on field estimates, Proved plus Probable reserves of 2.0 Tcfe (325.1 MMboe), 108 net sections of land, and 105 MMcf/d of owned natural gas processing capacity;
    Generated net income for the first quarter of 2017 of $56.9 million compared to a net loss of $2.2 million in the first quarter of 2016, and income before taxes of $8.6 million, excluding the unrealized gain on commodity risk management contracts, compared to a $1.3 million loss before taxes during the first quarter of 2016;
    Increased production by 116% to 215.3 MMcfe/d (35,878 boe/d), in-line with previously released guidance, compared to 99.6 MMcfe/d (16,601 boe/d) during the first quarter of 2016;
    Increased liquids production by 270% to 3,149 bbls/d or 9% of total production volumes, compared to 852 bbls/d or 5% of total production volumes in the first quarter of 2016;
    Received an average natural gas price of $2.87/Mcf, which represented a 7% premium to the AECO daily spot price, compared to a 12% discount during the first quarter of 2016;
    Increased funds flow from operations by 226% to $24.8 million compared to $7.6 million during the first quarter of 2016;
    Reduced operating costs by 30% to $0.62/Mcfe compared to $0.88/Mcfe during the first quarter of 2016, and;
    Decreased general and administrative (“G&A“) expenses by 37% to $0.17/Mcfe compared to $0.27/Mcfe during the first quarter of 2016.


    On April 5, 2017 Painted Pony closed an equity financing whereby the Corporation issued a total of 19,820,000 common shares (the “Offering“) in the capital of the Company (“Common Shares“) at a price of $5.60 per Common Share for net proceeds of $106 million.


    Upon closing, the UGR Acquisition will be a strategic expansion of Painted Pony’s world-class Montney project in NEBC. The Corporation’s Montney land position will increase by 52% to 314 net sections (201,009 net acres at an average 94% working interest) in one of the most productive areas of the Montney in British Columbia. Several of Painted Pony’s most prolific Montney wells were drilled on the Daiber area lands that are either contiguous with UGR acreage or on lands held jointly with UGR. The UGR Acquisition includes 197 net Proved plus Probable drilling locations which will complement the Painted Pony inventory and are expected to drive near-term growth in the Corporation’s proved developed producing reserves.
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    BP fires up first gas fields in $12 billion Egypt project

    The BP Plc company logo sits on a sign outside the company’s headquarters in St. James’s Square in London, U.K., on Thursday, Feb. 28, 2013. BP Plc’s push to maximize profits and cut costs at the Macondo well was a “root cause” of the explosion that led to the 2010 Gulf of Mexico oil spill, a safety expert who studied the disaster said. Photographer: Chris Ratcliffe/Bloomberg

    BP has fired up two natural gas fields in the Mediterranean Sea near Egypt, the start of a $12 billion development expected to supply nearly a third of the African country’s gas in coming years.

    The British oil company began producing gas from the Taurus and Libra fields off the coast of Egypt eight months ahead of schedule, the company said Wednesday. Its fields are producing more than 700 million standard cubic feet of gas a day and 1,000 barrels of condensate, 20 percent more than anticipated.

    It’s the second of seven major projects the British oil company plans to turn on this year, part of an effort to lift its daily energy production by 800,000 barrels of oil equivalent by the end of the decade. In a statement, BP CEO Bob Dudley said these projects “demonstrate momentum and a return to growth across BP.”In Egypt, BP’s West Nile Delta development is expected to make up a quarter of the energy production it expects to bring online by 2020.

    Egypt’s growing population ballooned to 92 million late last year, pushing up energy demand in a country that only a few years ago suffered regular power blackouts because of a shortage of natural gas.

    By 2019, gas production from BP’s Egyptian fields could reach 1.5 billion cubic feet of gas a day, about 30 percent of the country’s current output, it said. The company began sending gas from the Taurus and Libra fields to Egypt’s national gas grid in late March, and it recently ramped up production to a stable level.

    Falling energy prices helped bring down the cost of supplies for the projects, BP said.

    “Thanks to a clear focus on efficiency and capturing market deflation, this complex project has been delivered with lower capital levels compared to project sanction,” said Hasham Mekawi, North African regional president at BP, in a statement.
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    Cimarex: Running 8 Rigs in the Permian, 6 in Mid-Continent

    Realized NGL prices more than doubled

    Cimarex Energy (ticker: XEC) reported first quarter earnings today, announcing net income of $131 million, or $1.38 per share. This result compares favorably to the $38.2 million income in Q4 2016 and the $231.5 million loss the company recorded in Q1 2016.

    Total production up 11% sequentially

    Total company production grew by 11% sequentially, more quickly than expected. Year-over-year realized commodity prices improved across the board, with oil prices increasing by 70% from $28.02. Natural gas prices increased by 57% to average $3.01/Mcf, and NGL prices more than doubled to $20.40/bbl, from $9.84/bbl received in Q1 2016.

    Overall, Cimarex expects to produce an average of about 1.11 Bcfe/d in 2017, an increase of 15% beyond 2016 production. After completing 26 wells in Q1, the company plans to complete a total of 73 in the rest of the year, with an additional 44 wells drilling or waiting on completion at the end of the year.

    Cimarex is currently running eight rigs in the Permian, where the company owns 225,000 net acres. Several tests of various facets of development are currently in progress in the company’s Delaware basin acreage. In northern Culberson County Cimarex is testing infill drilling in the lower Wolfcamp, evaluating six wells in the formation per section. While most wells are still in initial production, Cimarex reports that wells targeting both upper and lower landings in the zone are yielding good returns. Notably, wells in the upper landing zone currently have a higher oil yield.

    Increasing frac intensity has also produced good results, as tests in the upper Wolfcamp in Culberson County and the Avalon Bone Spring in Lea County have each produced significant improvements in returns.

    Extensive downspacing tests in Mid-Continent

    In the Mid-Continent the company owns significant acreage in the stacked plays of the Meramec and Woodford. The company is running six rigs in the area, and brought ten net wells online in Q1 2017.

    Cimarex reports that a total of 16 downspacing pilots are underway in the Meramec, and the company has interest or data in all but three. Cimarex itself is currently running the Leon Gundy pilot, where eight total wells are evaluating ten Meramec wells and nine Woodford wells per section. Farther south, where the Woodford dominates, Cimarex is testing 16 and 20 wells per section. The results of these tests will guide the company as it plans infill drilling on its extensive acreage.

    Q&A from XEC Q1 2017 conference call

    Q: Lea County, it seems like there’s been a lot of activity there lately or a lot, I guess, results coming out between yourselves, EOG had some nice wells. I know Devon’s doing some down-spacing in there. Can you just talk about, is this something different or I know you’ve been up there and you’re testing tighter spacing, but can you just talk a little more general about the area and what you’re seeing?

    XEC CEO Thomas E. Jorden: We’ve always loved Lea County. One of the reasons that we haven’t aggressively developed our acreage at the multiple levels is because it’s really quite good and we wanted to make sure that we got our spacing and our science right because you can’t always back up and get a do over. There have been some offset well results. We’ve extended our mapping, and the play has just extended. And we’re quite bullish on the outset, not only for the Wolfcamp, but a number of different zones.

    XEC SVP of Exploration John Lambuth: I would just say that you’ll see more of our activity moving into Lea County later this year. We have quite a bit of drilling we want to do up there. It’s not – like Tom said, we’ve always loved Lea County. It’s just over the last few years, with the pull back in our capital, most of our drilling has been to hold acreage that we needed to hold down in Culberson and Reeves. We are very fortunate that almost all of our position in Lea is a well-held HBP acreage, be it a previous drilling we’ve done mostly in the Bone Spring and other targets. So we’re just now starting to focus more energy to get in there and then taking advantage, as Tom said, of the fact that a lot of our competitors are “delineating” our acreage for us. So it looks very, very attractive and thus resulting in the updating we gave on the increase in the acreage there.
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    For Some, There's Never Been a Better Time to Buy Oil

    Oil is trading near $50 again, OPEC seems to be losing its ability to influence prices and a wave of new supply is hitting the market from Texas to Libya. For some, there’s never been a better time to buy.

    Despite last week’s selloff, the global oil market is rebalancing rapidly, said Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc. If the Organization of Petroleum Exporting Countries extends its cuts into the second half -- as the group has signaled -- demand will significantly exceed production, according to the IEA’s Head of Oil Industry and Markets Neil Atkinson.

    “Do I want to be long oil? The answer is absolutely yes because we are going into a deficit market,” Currie said at the S&P Global Platts Global Crude Summit in London on Wednesday. “With demand continuing to surprise to the upside,” the global supply deficit may be as wide as 2 million barrels a day by July, he said.

    Brent crude, the international benchmark, fell to a five month low of $46.64 a barrel last week amid doubts about the effectiveness of OPEC and Russia’s joint supply curbs. Subsequent signals from Saudi Arabia and Moscow that they could extend cuts into 2018 failed to trigger much of a price recovery. While the resurgence in U.S. shale oil continues to cause doubts about whether the three-year supply glut really is over, banks including Goldman and Citigroup Inc. say markets are nevertheless tightening and prices are poised to rise again.

    The bulls got some powerful backing on Wednesday from the most keenly watched data on the market -- the U.S. Department of Energy’s weekly report on crude stockpiles. The nation’s inventories fell by 5.2 million barrels last week, the biggest reduction this year. West Texas Intermediate crude rallied as much as 3.3 percent to $47.40 within minutes of the data release. It was trading 0.6 percent higher at $47.59 a barrel as of 12:43 p.m. in Singapore. Brent gained 0.6 percent to $50.50.

    Falling Stockpiles

    The decline in global fuel stockpiles will accelerate this quarter, Currie said. The volume of crude held in floating storage on tankers -- often a key indicator of a supply surplus -- is dropping like a brick, he said.

    The aim of OPEC’s supply deal was to shrink inventories, and by that measure it’s succeeding, said Bassam Fattouh, a director at the Oxford Institute for Energy Studies.

    OPEC and its allies looks set to prolong their agreement into the second half of the year, but not everyone is convinced they’ll maintain the near-full cuts compliance seen in recent months.

    For Russia, Iraq and Iran -- three of the largest producers involved in the agreement -- curbs in the first quarter were comparatively easy to implement, said David Fyfe, chief economist at oil trader Gunvor Group. The Middle Eastern producers were already close to their maximum production capacity, while Russia usually experiences a seasonal lull in the winter, he said.

    “They’ll likely agree to extend into the second half of 2017, but the risk is higher that they’ll leak extra barrels onto the market,” he said.

    Leaking Oil

    Two OPEC members exempt from reducing output because of internal strife are already doing just that. Libya’s crude production has risen to 800,000 barrels a day as fields restart, the most since 2014. Nigeria’s 200,000 barrel-a-day Forcados oil pipeline is ready to export again after being shut down almost continuously since February 2016.

    There’s little chance of OPEC cutting any deeper than they have already and demand growth this year will be lower than the IEA forecasts, said Fareed Mohamedi, chief economist of The Rapidan Group, a consultant based in Bethesda, Maryland. Prices could drop back as low as $30 a barrel by the first quarter of 2018, he said.

    Still, Fyfe said stockpiles will probably keep falling even with “a bit of slippage” in OPEC compliance.

    Goldman Sachs, which believes OPEC will extend and potentially deepen its cuts, sees West Texas Intermediate crude advancing to $55 and Brent climbing to $57 in the fourth quarter, said Currie.

    “It is starting to become clear that if the objective of the OPEC cuts was to flip the market from a surplus into a deficit, that is slowly beginning to happen," said the IEA’s Atkinson.

    Attached Files
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    U.S. customs agency withdraws Obama-proposed changes to Jones Act

    U.S. Customs and Border Protection has withdrawn an Obama-era proposal to modify a law that governs shipping, which would have revoked waivers that make it easier for oil and gas operators to skirt restrictions, according to an agency bulletin published Wednesday.

    For nearly 40 years the CBP has provided exemptions to the Jones Act, which mandates the use of U.S.-flagged vessels to transport merchandise between U.S. coasts. The exemptions have allowed oil and gas operators to use often cheaper, tax-free, or more readily available foreign flagged vessels.

    The CBP has weighed revoking these waivers after President Barack Obama's administration proposed to put them on the chopping block two days before President Donald Trump took office.

    The oil industry expressed relief about the CBP announcement. Oil and gas majors operating in the U.S. Gulf of Mexico had stepped up lobbying efforts over the last two months to urge the CBP not to remove the waivers.

    “By rescinding the proposal, CBP has decided not to impose potentially serious limitations to the industry’s ability to safely, effectively and economically operate," said Erik Milito, director of upstream and industry operations for the American Petroleum Institute.

    In the bulletin, CBP director Glen Vereb said that the agency received many comments in support of and opposing the proposed action and said it "should be reconsidered."
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    Exxon Mobil buys Singapore petrochemical plant, boosts output in Asia

    Exxon Mobil Corp said on Thursday it has reached an agreement to buy a refining and petrochemical plant owned by Jurong Aromatics in Singapore that will boost its output and meet demand in Asia.

    The company expects to complete the transaction in the second half of 2017, boosting its aromatics production in Singapore to more than 3.5 million tonnes per year (tpy), including 1.8 million tpy of paraxylene, a raw material for textiles and bottles.

    The plant will be integrated with Exxon Mobil's existing petroleum complex on Jurong Island, said Gan Seow Kee, chairman and managing director of ExxonMobil Asia Pacific Pte Ltd.

    Singapore houses Exxon Mobil's largest refining-petrochemical complex with a crude oil processing capacity of 592,000 barrels per day and two steam crackers.

    The Korea Herald reported in March that Exxon Mobil had outbid Lotte Chemical Corp (011170.KS) with a price of 2 trillion won or about $1.7 billion for the JAC plant.

    Exxon's spokeswoman said it is not the company's practice to discuss details of its commercial transactions.

    JAC's condensate splitter and petrochemical units - at a construction cost of $2.4 billion - started operations in Asia in 2014 to produce paraxylene to meet demand from textile and bottle manufacturers in China.

    JAC's debt mounted, though, as commodities went into freefall in the middle of that year, and it stopped operations at end-2014 to fix a technical issue. Its lender BNP Paribas appointed accounting firm Borelli Walsh as the receiver and manager of JAC.

    The JAC plant resumed operations in July 2016 under tolling agreements with BP and Glencore.
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    Pioneer Natural Resources CEO says his company breaks-even at $20

    Pioneer Natural Resources CEO says his company breaks-even at $20

    Pioneer Natural Resources CEO says his company breaks-even at $20 a barrel. "In a $40 world we make good returns".

    Pioneer Resources says it wants to quadruple output to 1m b/d by 2026, focusing on Permian

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    Carrizo O&G Puts Up ‘For Sale’ Sign on Marcellus/Utica Assets

    Carrizo Oil & Gas, a Houston-based driller, actively drills in the Eagle Ford Shale in South Texas, the Delaware Basin in West Texas, the Niobrara Formation in Colorado, and until mid-year in 2015, they did have an active drilling program in the Ohio Utica and Pennsylvania Marcellus.

    No more. They haven’t drilled in Appalachia since 3Q15. During the company’s fourth quarter/full year 2016 earnings call, it seemed to us that Carrizo signaled a potential sale of their Marcellus/Utica assets.

    Looks like we were right. Yesterday on an earnings call for 1Q17, Carrizo CEO S.P. “Chip” Johnson said, “We have elected to test the market for our Appalachian assets, as they do not currently compete for capital with our three core oily plays.

    Monetization of these assets would leave Carrizo with a core position in three high-return, oil-weighted plays and should enhance our long-term production growth profile.” Translation: We’ve now put the “for sale” sign out on our Marcellus/Utica assets.
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    Summary of Weekly Petroleum Data for the Week Ending May 5, 2017

    U.S. crude oil refinery inputs averaged about 16.8 million barrels per day during the week ending May 5, 2017, 418,000 barrels per day less than the previous week’s average. Refineries operated at 91.5% of their operable capacity last week. Gasoline production increased last week, averaging about 10.1 million barrels per day. Distillate fuel production decreased last week, averaging about 5.0 million barrels per day.

    U.S. crude oil imports averaged over 7.6 million barrels per day last week, down by 644,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.2 million barrels per day, 5.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 953,000 barrels per day. Distillate fuel imports averaged 115,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.2 million barrels from the previous week. At 522.5 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 0.2 million barrels last week, but are above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 1.6 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories increased by 2.0 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories decreased by 3.6 million barrels last week.

    Total products supplied over the last four-week period averaged 19.7 million barrels per day, down by 1.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.2 million barrels per day, down by 2.4% from the same period last year. Distillate fuel product supplied averaged about 4.1 million barrels per day over the last four weeks, down by 0.7% from the same period last year. Jet fuel product supplied is up 6.7% compared to the same four-week period last year.

    Cushing down 400,000 bbls
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    US lower 48 production up 16,000 bbls day

                                                       Last Week  Week Before     Year Ago

    Domestic Production '000......... 9,314            9,293            8,802
    Alaska .............................................. 531                526               487
    Lower 48 ..................................... 8,783             8,767            8,315
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    Malaysia Petronas eyes new LNG markets as Japan deals near end

    Malaysian state-owned oil and gas company Petronas is looking to divert LNG volumes from Japan to emerging floating storage and regasification unit markets as supply contracts with Japanese utilities are due to expire next year without an extension agreement in place, a company executive said Tuesday.

    "We are looking at all these emerging markets as a home for those volumes," vice president for LNG trading and marketing Ahmad Adly Alias said on the sidelines of the 19th Asia Oil and Gas Conference in Kuala Lumpur.

    Among the contracts nearing expiry is the 7.4 million mt deal, including FOB and DES volumes, between Malaysia LNG, which is majority-owned by Petronas, and Japanese utilities Jera and Tokyo Gas. This contract is due to expire in 2018.

    "Obviously, we would like to renew those contracts, but we have options," he said, adding that this was why Petronas was getting into the spot market.

    Petronas sold 30-40 cargoes through spot and strip deals in 2016, and expects its share of spot trade volumes to continue to rise as growing supply, new market participants, and increasing availability of ships boosts liquidity in global LNG markets.

    Executive adviser with Tokyo Gas Shigeru Muraki said on the sidelines of the conference that the Japanese utility was still considering an extension of its supply contract with Malaysia, worth 2.6 million mt/year, beyond 2018.

    "We value our long-term relationship with Malaysia, so our priority is to recontract," he said.

    But added the buyer would seek reduced volumes, more flexibility and price diversification if the contract was to be extended.

    "Of course we will compare with other sources, and also consider the diversification of supply sources and diversification of the price," Muraki added.

    "We need some evolution [in long-term LNG contracts]," he said.
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    Spring refinery maintenance in Europe, Russia drawing to a close

    Most European refinery maintenance so far this year took place in the first quarter, with Q2 seeing works diminishing ahead of the start of the driving season which typically boosts demand for products and margins.

    In Russia, maintenance accelerated somewhat in April, although remains lighter than last year.


    Some big maintenance is scheduled in Scandinavian countries later in the year, but Q2 works are mostly restricted to routine unit maintenance, taking place at Slagen, Gothenburg and Porvoo, as well as some longer albeit partial works at the Lysekil plant near Brofjorden.

    So far works have had limited impact, predominantly on bunker and low sulfur fuel oil supply.

    The UK's Grangemouth escaped unscathed from an ethylene gas leak at the nearby Grangemouth Kinneil Gas plant, and the Humber refinery restarted in early April after Q1 works.

    In the ARA hub, Total's Antwerp integrated refinery and petrochemical platform has been affected by works/upgrade since Q1, with impact on operations likely until the upgrade is commissioned later this year.

    In Germany, the maintenance season, having started early in the year, has been carried over into Q2 although to a somewhat lesser extent.

    Partial works are to be carried out in Leuna, with the only large-scale works planned at the Lingen plant from mid-April.

    In neighboring Austria, around half the facilities at Schwechat will be halted for about two months.

    In central Europe, Romania's Petromidia is carrying out a full shutdown in May while Slovnaft has partial maintenance between April and June.


    In early May, Total's Feyzin refinery in the south of France halted operations due to a strike action. The duration of the strike remains unknown. In Spain, after a heavy maintenance in Q1, works were rather marginal in Q2 with Repsol's Cartagena undergoing works on diesel units.

    Corunna concluded its maintenance in early April. Italy's ISAB has been carrying out works spreading over part of April and May and Taranto is offline for most of Q2 for planned works.

    In Israel, the Ashdod refinery is due to carry out major works throughout May.

    Algeria's Skikda is also carrying out works in Q2, although duration and extent of the works had been mired in uncertainty.


    Bunker traders especially have been concerned about fairly big maintenance in South Africa in Q2, with both Engen and Sapref carrying out work.


    The Moscow refinery has been slowly restarting after a lengthy maintenance and upgrade which started in January. Although restart has been underway throughout April, by early May the refinery was still not fully back to normal output, according to traders.

    Another refinery that encountered some hurdles on the way to restarting was the Perm plant where a fire during the restart of the VDU unit resulted in the unit's halt.

    Over the course of May, the Yaroslavl refinery should be gradually coming out of maintenance and by the end of the month both Astrakhan and Taneco are due back online.

    Meanwhile, Antipinsky carried out short routine works for a week in April.

    But maintenance is taking its toll in Siberia and the Far East, with Achinsk and Komsomolsk carrying out works with supply issues exacerbated by the prolonged maintenance of Khabarovsk.
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    Growing Permian production justifies Plains' crude line to Cushing: CEO

    Plains All American planned crude line -- to run from the Permian Basin in Texas to Cushing, Oklahoma -- will provide producers with yet another route to send their output, giving them the option of blending those light barrels to suit refinery demand, CEO Greg Armstrong said Tuesday.

    "Rising production [out of the Permian] needs to find an outlet and a pipeline to Cushing is not on everybody's radar," he said. "But it will be in two to three years."

    Also, a pipeline to Cushing will provide Permian producers with an option to "blend the lower gravity crude," Armstrong said.

    To support growing output in Oklahoma, Plains is also working towards expanding capacity on its STACK pipeline to 250,000 b/d from 100,000 b/d by the fourth quarter, COO Willie Chiang said on the same investor conference call. But that capacity could even go to 350,000 b/d through the installation of pumps, Chiang said, without giving any details if that expansion has been underpinned by shipper interest.

    The pipeline runs from the STACK area in Oklahoma to the storage hub in Cushing.

    Also in Oklahoma, the company remains on track to complete the Diamond Pipeline by the fourth quarter despite protests from stakeholders, Armstrong said.

    In the Permian, a combination of cost efficiencies and increasing drilling activities has resulted in a major surge in output there. According to Platts Analytics Bentek Energy, crude production is projected to grow from 2.43 million b/d in 2017 to 3.467 million b/d by 2022.


    While midstream players such as Buckeye Partners, Magellan, Enterprise and even Plains, have all proposed pipelines from the Permian to export facilities in Corpus Christi and the Houston Ship Channel, Armstrong said in a oil price environment of WTI $50/b to $60/b there will still be increased interest to move barrels out of that basin to other areas.

    "Rigs are becoming more efficient and we expect transport volumes to ramp up in the latter part of the year, particularly in the Permian," he said.

    Plains, which has about 4,000 miles of pipeline network in the basin, is seeing "tangible evidence" of pipeline utilization, with its open season for the Permian-to-Cushing pipeline launched on April 18 already attracting shipper interest, Armstrong said.

    The pipeline, with origin points in the Midland and Colorado City areas of the Permian, will transport crude to Plains' terminal in Cushing. It will have a nameplate capacity of 350,000 b/d, with start-up targeted in mid-2019.

    The Permian-to-Cushing pipeline has sufficient shipper interest of some 150,000 b/d of capacity, Chiang said.

    Besides oil, the Permian has also attracted attention for the amount of associated gas that is located there. Midstream operators, some backed by private equity firms, are pouring billions of dollars into new infrastructure there.

    Asked whether Plains sees a downside from the increased competition in the Permian, Armstrong said more capacity is a good thing because it is needed given the level of production.

    "Between Plains and Magellan and Enterprise, we're doing the most prudent thing we can, bringing on as much capacity as we can so we don't see a train wreck out there," the CEO said.

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    Libya's oil production above 800,000 bpd for first time since 2014: NOC

    Libya's oil production is running at above 800,000 barrels per day (bpd) for the first time since 2014, the National Oil Corporation (NOC) said on Wednesday, but a commercial dispute with German oil firm Wintershall [WINT.UL] has shut in a further 160,000 bpd.

    National output could reach between 1.1 million and 1.2 million bpd if political obstacles were removed, the NOC said in a statement.

    "We are able produce an average of 1.1 mln-1.2 mln (bpd) over the rest of this year, but for this to happen our oil must flow freely. A national effort is required," NOC Chairman Mustafa Sanalla said in the statement.

    Sanalla said the dispute with BASF's oil and gas company Wintershall was linked to a decree issued by the Presidency Council of the U.N.-backed government in Tripoli giving it the power to negotiate investment agreements with foreign companies.

    The NOC opposes the decree, Resolution 270, which Sanalla said had been "drafted with the assistance of Wintershall to benefit Wintershall".

    "This is a very serious matter," Sanalla said. "We would be producing almost 1 million (bpd) if it were not for Wintershall's refusal to implement terms it agreed to in 2010."

    Sanalla did not say what those terms were, but a Libyan oil industry source said the NOC was asking Wintershall to fulfill a commitment signed before the revolution in 2011 to switch to a production-sharing agreement, and that Wintershall was refusing to do so.

    "I have asked the Presidency Council to withdraw Resolution 270 for this reason and because it oversteps their authority. It has declined, and has instead sided with Wintershall against NOC."

    No one at Wintershall in Germany could immediately be reached for comment.

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    Russia boosts Urals oil flow to India as OPEC cuts output: traders

    Russia boosts Urals oil flow to India as OPEC cuts output: traders

    Russia has steeply raised Urals oil supplies to India, taking market share from OPEC countries that are cutting production as part of a global pact to prop up prices, traders said and shipping reports showed on Wednesday.

    Historically, Russian crude oil exports to India did not exceed 500,000 tonnes per year, but since the start of 2017 supplies have surpassed 1 million tonnes and are expected to rise further, according to the traders and reports.

    India's main crude suppliers, Saudi Arabia and Iraq, cut exports to India this year due to production curbs under the agreement between OPEC and other leading oil producers.

    Iran, also a major supplier to India, is decreasing shipments due to a row over a gas field.

    State oil giant Saudi Aramco will reduce oil deliveries to Asia by about 7 million barrels in June, including by 3 million barrels for India, as it consumes more crude domestically while its production remains curtailed by the OPEC pact.

    “Large Urals flows to India have been one of the main new trends for Russian oil exports this year, and it was clearly triggered by OPEC cuts amid rising demand,” said a trader at a trading desk of one oil major.

    A favourable Brent-Dubai spread, very thin since February, gives India access to a variety of Brent-linked grades, one of which is Urals.

    Indian Oil Corp bought at least 4 million barrels of Urals crude for June delivery in its spot tender from Litasco and Trafigura, traders said.

    Three cargoes of 1 million barrels each loading from Novorossiisk will be supplied by Litasco, while Trafigura will supply 1 million barrels of Urals, they added.

    Urals was also sent to India this year by Shell and Vitol, traders said. They added that Vitol was likely to ship 1 million barrels of Urals to India for June delivery as well.

    Indian refiners Reliance Industries and Essar Oil also bought Urals crude this year, according to traders and shipping reports.

    Russian oil supplies to India will likely increase further if and when state oil major Rosneft closes a $12 billion deal to buy India’s Essar plant.

    The active buying of Urals is due to attractive prices sellers can offer to India's refiners, which want to increase spot intake to improve their economic performance, but the trend is fragile, a trader with an Indian company said.

    "All the market factors support Urals arbitrage - reasonable freight, thin Brent-Dubai, OPEC cuts - but as soon as something changes, sellers won't be able to offer India's refiners competitive pricing," a trader on the Mediterranean market said.

    India's refiners are not yet ready to commit any term contracts for Urals supply, traders said.

    Whether OPEC continues its production cut in the second half of the year is a key factor that will influence Urals arbitrage to India, traders said.

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    Shell proposes adding Russian oil to Brent benchmark

    Royal Dutch Shell on Wednesday urged oil pricing agency S&P Global Platts to protect the dated Brent crude benchmark from declining North Sea supply by including other grades, such as Russian Urals, in its price-setting process.

    The suggestion marks a shift from two years ago when Shell said adding Urals would not be "worth the trouble".

    The benchmark, based on light North Sea crude grades, is used to price about two-thirds of the world's oil but a decline in North Sea output has led to concerns that physical volumes could become too thin and prone to large price swings.

    Platts announced it would add a fifth grade, Troll, to the benchmark slate from January 2018 but Shell says more must be added in the next two to three years and considers Russian medium sour Urals as a top candidate.

    The benchmark is now made up of Brent, Forties, Oseberg, and Ekofisk, known as BFOE.

    "A good benchmark need not only be representative of what the region produces ... If you had to pick one grade of crude, Urals is the one which northwest European refineries should be designed to run optimally," Mike Muller, vice president of crude trading and supply at Shell, told the Platts Crude Summit in London.

    Muller also suggested the price of dated Brent be derived from the average price of a basket of crudes, rather than by using the lowest priced of the four BFOE crudes on any given day. This would simplify the price-setting process, he said.

    Two years ago, Muller said European refineries were already free to buy Urals - a crude stream that dwarfs North Sea streams in volume - as a substitute to the North Sea Forties grades as they are similar in quality.

    Muller also called for the formation of a committee of independent experts to consult with Platts and the wider industry on future changes to the benchmark in order to ensure the views of all market players were represented.

    Shell is one of the world's largest crude traders and one of the most active players in both the North Sea and Urals markets.

    Shell’s North Sea production is set to drop by more than half to about 110,000 barrels per day after the sale of a large package of North Sea assets to private equity-backed Chrysaor last year. But Shell will market Chrysaor’s volumes for several more years.
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    Suncor plans to build new oil sands project in Canada

    Suncor Energy, Canada's largest oil and gas producer, is hoping to start building a new oil sands project later in Alberta this year, which would have an estimated production of up 160,000 barrels a day.

    The Lewis project would be located about 25 km northeast of Fort McMurray and could eventually produce up to 160,000 barrels a day.

    While the firm hasn’t officially sanctioned the Lewis project, located about 25 km northeast of Fort McMurray, it expects construction to begin in 2024, according to information posted in Suncor’s website.

    The Calgary-based company also said it would consider using new technologies, including vaporized solvents and electromagnetic heating to replace steam, to produce the heavy bitumen crude through wells at Lewis. This would allow the company to use reduced amounts of energy and water.

    The announcement comes as Canadians have been asked to weigh on another potential project, belonging to Teck Resources. Canada's largest diversified miner is proposing to build its Frontier mine about 110 kilometres north of Fort McMurray, in Alberta.

    Alberta’s oil sands hold the world’s third-largest crude reserves, but they are also among the most expensive operations due to their remote location and energy-intensive production methods.

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    Gazprom sees no increase in hub-based gas pricing in contracts: Burmistrova

    Russia's Gazprom has achieved a good balance between oil-indexed and hub-based gas pricing in its contracts with European buyers and has no intention in moving increasingly towards hub indexation in the future, the CEO of Gazprom Export said Tuesday.

    Speaking at the Flame conference in Amsterdam, Elena Burmistrova also slammed the concept of a price war between Russian pipeline gas and LNG in Europe, saying that some of the commentaries on the subject were "conspiracy theories."

    At present, the share of hub-based and hybrid gas contracts (a mix of hub-based and oil-indexed pricing) makes up just more than 50% of the volumes of gas sold by Gazprom in Europe, she said.

    "The rest are gas volumes with oil product indexation -- this is a great example of how our portfolio reflects the situation on the market," she said.

    Asked whether there would be a move toward more hub pricing in the future, Burmistrova was categorical.

    "In the short term, we are not going to do this. At the moment everyone is fully satisfied," she said.

    "We make a lot of effort to balance our contracts, and at the moment we have the right balance," she said.

    Burmistrova also made the point that despite oil indexation being unpopular while oil prices were high, consumers are now happier to have oil-based pricing given the lower oil price.

    "Oil indexation, which was previously heavily criticized, has now become more appealing than ever before due to the drop in oil prices," she said.

    She also continued Gazprom's long-standing argument that hub prices in Europe were still not a reliable pricing point.

    "I would say that we still don't feel that the hub prices are the most reliable instrument," she said.

    She said that with the exception of the Dutch TTF hub, many other market zones were not sufficiently developed to be used as an index for gas pricing.

    "I wouldn't use the word 'manipulate' because it is too strong a word, but I would say they can be used by the big players to form a current price," she said.


    Russia's share of the European gas market grew in 2016 to 34%, Burmistrova said, adding that it was Gazprom's ambition to retain a share of around one third in Europe.

    She said, however, that Gazprom was not looking to take more European market share, and dismissed the idea of using price to drive out rival suppliers.

    "Market share is not a goal in itself for us. We don't want to take the market and die by doing this," she said.

    "The European gas market is a territory of peaceful competition, not a war of 'all against all'. I'd like to cool the enthusiasm of the price war instigators: Gazprom never prioritizes volumes over prices or vice versa," she said.

    Burmistrova said that the popular concept in the media of a price war was misplaced, adding that the debate ranged from "pure conspiracy theories to well-rounded analytics."

    "Our strategic task is to keep a one-third share of European consumption and we will carry out the strategy in a peaceful way without a price war," she said.

    There has been an expectation that much of the new supplies of US LNG -- which began to flow to world markets in February 2016 -- would land on European shores.

    However, to date no US LNG cargoes have come to northwest Europe, with only a handful of cargoes arriving in Spain, Portugal and Italy.

    Gazprom, meanwhile, hit an all-time European export high of 178.3 Bcm last year.

    "This proves that Gazprom can compete with traditional pipeline suppliers, but also with LNG suppliers, including the ambitious LNG producers from the US," Burmistrova said.

    "US LNG didn't really affect the market for us."

    Asked how Gazprom would feel if its market share unintentionally exceeded one third because of increased European demand, she said Gazprom would theoretically be happy because it is a commercial company.

    "But I'm not sure the European Commission would be," she said.


    Gazprom in recent years has introduced more flexible selling mechanisms, with some commentators saying it is part of the Russian company's strategy to appease the Commission.

    Burmistrova said Gazprom was working on holding another gas auction in 2017 following three previous sales in 2015 and 2016.

    "We are working on it quite carefully," she said, adding that the auction process was designed to help expand the European gas market, "not to conquer it and not to divide it."

    Two of the previous three auctions were for delivery of gas into Germany, while the other was for delivery into the Baltic states.

    She said that by 2025, Europe would need an additional 50 Bcm of imported gas given the decline in indigenous European natural gas production, giving an opportunity for "every supplier."

    She pointed to the reliability of Gazprom's long-term contracts that give the company a competitive advantage.

    "Last winter we witnessed cases when prices on gas hubs -- in particular in southern Europe -- hit the psychological mark of $500 [/1,000 cu m)," she said.

    "At the same time, Gazprom's clients reliably received their volumes at prices below $200 [/1,000 cu m]. That is the benefit of the predictability of Gazprom's long-term contracts," she said.

    She said that last year, the share of oil-indexed or quasi oil-indexed contracts in Europe was more than 54% compared with the share of hub-based contracts at just over 42%.

    "Europe is still a hybrid market," she said.

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    Feds say new Permian pipelines “should accommodate” rising production

    New pipelines in the Permian Basin should have enough capacity to “accommodate” rising oil production in the Permian Basin, the U.S. Energy Information Administration said in a report Tuesday.

    A lack of infrastructure between West Texas and refineries along the Gulf Coast., had at one point caused the crude in Midland to sell at a $15 a barrel discount to crude moving through the pipeline hub in Cushing, Okla, the agency said.

    But that shortfall, ” is unlikely to be either as large or as persistent as it was following the rapid increase in Permian production from 2010 to 2014,” EIA said. “As crude oil production in the Permian Basin of western Texas and eastern New Mexico has increased, pipeline infrastructure has also increased to deliver this crude oil to demand centers on the U.S. Gulf Coast.”

    Since 2010, oil production in the Permian has more than doubled to more than 2 million barrels a day,
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    Eni confirms full-year targets after best quarter in two years

    Italian energy company Eni reported its best quarterly profits in two years on Wednesday buoyed by higher oil prices and production and confirmed its full-year targets.

    Adjusted net profit for the first quarter rose to 744 million euros ($810 million) from breakeven a year earlier and topped the 610 million expected by analysts.

    Like many of its peers, state-controlled Eni has benefited from higher crude prices after a two-year price downturn that rocked the industry.

    BP, ExxonMobil, Chevron and Total have all beaten analysts' profit forecasts for the quarter.

    CEO Claudio Descalzi confirmed Eni's targets for the year, and noted first-quarter cash generation of 2.6 billion euros was its strongest performance in seven quarters.

    "We expect that in 2017 organic cash generation, coupled with proceeds from disposals, will allow us to fully fund our capex and dividend requirements at an oil price well below the current level," Descalzi said.

    Eni, which in recent years has made major gas finds in Mozambique and Egypt, holds one of the best discovery track records in the industry.

    On Wednesday it confirmed production would grow by 5 percent this year to 1.84 million barrels of oil equivalent per day (boed) lifted by start-ups in Egypt and Kazakhstan.

    In the first quarter Eni produced 1.795 million boed, up 2.3 percent from a year earlier.
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    API Reports Biggest Crude Draw This Year

    The American Petroleum Institute (API) reported a hefty draw of 5.789 million barrels in United States crude oil inventories, compared to analyst expectations that markets would see a crude oil draw of 1.8 million barrels for the week ending May 5.

    Gasoline inventories rose by 3.169 million barrels, according to the API, against an expected draw of 700,000 barrels. Gasoline inventories continue to worry markets, as refiners continue to turn crude oil into gasoline above demand for the fuel.

    So while crude oil has experienced an overall drawdown over the last couple of weeks, it’s simply being converted to gasoline, and extra inventories are moving from one side of the refinery to the other. Gasoline inventories have continued to build for four weeks in a row, if the EIA confirms this week’s build tomorrow.

    According to the EIA, gasoline inventories have climbed almost 5.1 million barrels in the last three weeks ending April 28—if confirmed, the four-week build would be over 8 million barrels.
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    Higher U.S. crude output to cap oil prices through 2018: EIA

    Higher crude output from the United States should limit any upside to global oil prices through the end of 2018, the U.S. government said on Tuesday, ahead of a meeting of major oil producers later this month to discuss extending supply cuts.

    U.S. crude production is expected to rise by more than previously expected in 2017 to 9.31 million barrels per day from 8.87 million bpd in 2016, a 440,000 bpd increase, the U.S. Energy Information Administration said.

    It expects total output for 2018 to rise to nearly 10 million bpd, with most of that coming from the increase to the 2017 forecasts. Higher output in non-OPEC countries, particularly the United States, Canada and Brazil, has offset OPEC's deal reached last year to cut production and kept pressure on oil prices.

    The Organization of the Petroleum Exporting Countries and non-OPEC member countries will meet in Vienna on May 25 to discuss whether to continue output cuts of 1.8 million bpd in an effort to reduce a global crude glut and support prices.

    The OPEC deal reached in November helped lift prices but also breathed new life into U.S. producers, who have boosted drilling in shale regions and raised U.S. output to levels not seen since mid-2015.

    Last month the EIA forecast a 350,000 bpd year-over-year increase, according to its monthly short-term energy outlook.

    For 2018, the EIA's growth forecast is 650,000 bpd, down from its previous forecast of 680,000 bpd. Its forecast for total output in 2018 rose to 9.96 million bpd from 9.90 million bpd.

    "Also, we should start to see Dakota Access pipeline and other infrastructure improvements liberate more and more U.S. barrels. We have only just started to see the real rebound in shale," he said.

    Top oil exporter Saudi Arabia said on Monday that it would "do whatever it takes" to rebalance a market that has been dogged by oversupply for more than two years.

    The EIA forecast U.S. oil demand for 2017 to rise 290,000 bpd, up from its previous forecast for a 250,000 bpd increase. For 2018, oil demand is expected to increase by 300,000 bpd, down from a previously forecast rise of 340,000 bpd.
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    Saudi to cut June oil supply to Asia as local demand rises: source

    Saudi Aramco will reduce oil supplies to Asia by about 7 million barrels in June, a source said on Tuesday, as the oil giant cuts output as part of global supply pact and trims exports to meet rising domestic demand for power during hot summer months.

    An OPEC-led agreement to cut global oil supplies is currently due to end in June, although Saudi Arabia and other producers in the group of OPEC and non-OPEC states have indicated curbs could be extended to the end of 2017 or beyond.

    OPEC and other producers are expected to discuss an extension at a meeting on May 25.

    When OPEC announced the cuts, Saudi Arabia was quick to tell its customers in Europe and the United States that they would receive lower volumes but shielded most of Asia from the cuts.

    However, summer is a peak period for power demand in the desert kingdom, as citizens turn up air conditioners to keep homes and offices cool, pushing up domestic oil consumption.

    This year is likely to see an earlier spike in demand as the Muslim fasting month of Ramadan starts sooner, beginning in late May. The traditional big evening meals with family and friends to break the fast tend to create a surge in power demand.

    As a result, Asia will now also face heavier cuts from the world's top oil exporter in June.

    According to the June nomination plans, Aramco will cut supplies by 1 million barrels each to Southeast Asia, China and South Korea, a source, who has knowledge of the nominations but did not wish to be identified, told Reuters.

    A separate industry source said the action in June did not mean Saudi Arabia was preparing to deepen cuts to Asia in the rest of 2017.

    The kingdom will cut supplies by a little more than 3 million barrels for India and slightly less than 1 million barrels for Japan, the source with knowledge of the nominations said. In total, the cuts should be equivalent to about 233,000-234,000 barrels per day (bpd).

    Under the global supply pact, OPEC states, Russia and other major producers agreed to cut output by about 1.8 million bpd from Jan. 1 until June 30.

    Saudi Arabia accounts for about 40 percent of the cuts pledged by OPEC. It has reduced output by more than 500,000 bpd so its total production now runs slightly below 10 million bpd, mostly involving cuts in output of medium and heavy oil grades.

    Industry sources told Reuters in April that higher domestic demand for oil in the summer would weigh on exports especially if Saudi Arabia kept output at about 10 million bpd.

    Saudi Arabia usually burns about 700,000 bpd of oil for power generation to keep the nation cool in the hottest months from May to August.

    This summer, the kingdom is planning to raise energy prices and use more natural gas in power stations to reduce oil usage. Those measures are expected to cut consumption by about 200,000 bpd, industry sources said.
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    Shale Drillers Are Outspending the World With $84 Billion Spree

    U.S. shale explorers are boosting drilling budgets 10 times faster than the rest of the world to harvest fields that register fat profits even with the recent drop in oil prices.

    Flush with cash from a short-lived OPEC-led crude rally, North American drillers plan to lift their 2017 outlays by 32 percent to $84 billion, compared with just 3 percent for international projects, according to analysts at Barclays Plc. Much of the increase in spending is flowing into the Permian Basin, a sprawling, mile-thick accumulation of crude beneath Texas and New Mexico, where producers have been reaping double-digit returns even with oil commanding less than half what it did in 2014.

    That’s bad news for OPEC and its partners in a global campaign to crimp supplies and elevate prices. Wood Mackenzie Ltd. estimates that new spending will add 800,000 barrels of North American crude this year, equivalent to 44 percent of the reductions announced by the Saudi- and Russia-led group.

    “The specter of American supply is real,” Roy Martin, a Wood Mackenzie research analyst in Houston, said in a telephone interview. “The level of capital budget increases really surprised us.”

    Drilling budgets around the world collapsed in 2016 as the worst crude market collapse in a generation erased cash flows, forcing explorers to cancel expansion projects, cut jobs and sell oil and natural gas fields to raise cash. The pain also swept across the Organization of Petroleum Exporting Countries, which in November relented by agreeing with several non-OPEC nations to curb output by 1.8 million barrels a day.

    Oil prices that initially popped above $55 in the weeks after the cut was announced have since dipped to around $46, reflecting pessimism that the OPEC-led deal can withstand the onslaught of U.S. shale.

    So far, independent American explorers such as EOG Resources Inc. and Pioneer Natural Resources Co. are holding fast to their ambitious growth plans. Some recently finished wells in the Permian region yielded 70 percent returns at first-quarter prices, EOG Chief Executive Officer Bill Thomas told investors and analysts during a conference call on Tuesday.

    EOG, the second-largest U.S. explorer that doesn’t own refineries, plans to boost spending by 44 percent this year to between $3.7 billion and $4.1 billion. Pioneer is eyeing a 33 percent increase to $2.8 billion. The sub-group that includes North American shale drillers like EOG and Pioneer is collectively targeting $53 billion in spending this year, up from $35 billion in 2016, according to the Barclays analysts led by J. David Anderson.

    U.S. oil production is already swelling, even though output from the new wells being drilled won’t materialize above ground for months. The Energy Department’s statistics arm raised its full-year 2017 supply estimate to 9.31 million barrels a day on Tuesday, a 1 percent increase from the April forecast.

    Next year, U.S. fields will pump 9.96 million barrels a day, 0.6 percent more than the department estimated last month.

    To be sure, most of the biggest U.S. and European explorers -- an elite caucus of five companies known as the supermajors -- are pursuing a contrary path and cutting expenditures this year. As deepwater, oil-sands and other high cost, high risk investments soured during the slump, the supermajors were battered and had to regroup. But shale drillers, unburdened by such large-scale projects, have been better able to quickly respond to price changes.

    Holding Tight

    Royal Dutch Shell Plc, Chevron Corp., Total SA and BP Plc are reducing or holding flat on 2017 spending. Only Exxon Mobil Corp., the largest member of the group, is pushing up its budget, planning to spend $22 billion this year compared to $19.3 billion last year.

    West Texas Intermediate, the U.S. benchmark, lost 14 percent of its value since April 11 amid signals the global crude glut isn’t shrinking at the expected pace. The futures fell 1.3 percent to $45.82 at 1:15 p.m. on the New York Mercantile Exchange. The price hasn’t poked above the $50 mark since April 26.

    Shale drillers can afford to be sanguine despite oil’s recent tumble because they’ve cushioned themselves with hedges, Martin said. Hedges are financial instruments that lock in prices for future output and shield producers from volatile market movements.

    “There is some price malaise creeping in,” Martin said. “But the aristocracy of the U.S. independents have insulated themselves” through hedging.

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    Top Oil Trader Warns Shaky Demand Risks Thwarting OPEC's Aim

    Demand isn’t expanding as much as expected: Vitol’s Asia head
    Shale production is growing faster than forecast: Vitol’s Kho

    OPEC and its allies are seeking to pump less for longer in a quest for higher prices. The world’s biggest independent oil trader says their efforts could be in vain.

    Demand isn’t expanding as much as expected, and U.S. shale output is growing faster than forecast, according to Vitol Group. That’s increasing the burden on the world’s biggest producers, who need to stick to their pledges to cut supply just to keep prices from falling, said Kho Hui Meng, the head of the company’s Asian arm.

    Oil has given up all its gains since the Organization of Petroleum Exporting Countries and other producers signed a deal late last year to limit supply for six months from January. Prices have been hit by surging output in the U.S., which is not part of the agreement. Any recovery in crude will depend on sustained usage by nations such as China, India and the U.S. as much as OPEC’s efforts to control supply.

    “What we need is real demand growth, faster demand growth,” Kho, the president of Vitol Asia Pte., said in an interview in Kuala Lumpur. “Growth is there, but not fast enough.”

    While consumption was forecast to expand this year by about 1.3 million barrels a day, growth has been limited to about 800,000 barrels a day so far in 2017, he said, adding that U.S. output had grown 400,000-500,000 barrels a day more than expected. “If demand goes back to where it should, where it’s forecast, then it’ll help, but my gut feel tells me it is still a bit long,” he said.

    The International Energy Agency has trimmed its forecasts for global oil demand growth this year by about 100,000 barrels a day to 1.3 million a day as a result of weaker consumption in Organisation for Economic Co-operation and Development member countries and an abrupt slowdown in economic activity in India and Russia, according to a report last month. The Paris-based IEA cut its estimate for India’s 2017 oil-demand growth by 11 percent.

    There’s also concern that consumption may slow in China, the world’s second-biggest oil user. Independent refiners, which account for about a third of the nation’s capacity, have received lower crude import quotas compared with a year earlier, prompting speculation their purchases could slow.

    “The oil market is looking for growth but there’s no growth,” Vitol’s Kho said, adding that the refiners may only get approval for the same volume of imports as last year. And while U.S. gasoline consumption is expected to hit its seasonal summer peak soon, demand growth “is not there yet,” he said.

    The world’s biggest crude exporter is nevertheless bullish. Saudi Arabia expects 2017 global consumption to grow at a rate close to that of 2016, Energy Minister Khalid Al-Falih said on Monday. “We look for China’s oil demand growth to match last year’s, on the back of a robust transport sector, while India’s anticipated annual economic growth of more than seven percent will continue to drive healthy growth,” he said in Kuala Lumpur.

    While some fear a slowdown in Chinese oil demand, Sanford C. Bernstein & Co. doesn’t see any cause for concern. Growth in the nation’s car fleet will support gasoline demand, with increasing truck sales and air travel also helping fuel consumption, it said in a report dated May 9.

    Saudi Arabia and Russia, the world’s largest crude producers, signaled this week they could extend production cuts into 2018, doubling down on an effort to eliminate a surplus. It was the first time they said they would consider prolonging their output reductions for longer than the six-month extension that’s widely expected to be agreed at an OPEC meeting on May 25.

    Global oil inventories probably increased in the first quarter despite OPEC’s near-perfect implementation of production cuts aimed at clearing the surplus, the IEA said last month.

    Shale Boom

    “We’ve always talked about the call on OPEC, how much OPEC oil is needed to satisfy world demand,” said Nawaf Al-Sabah, chief executive officer of Kufpec, a unit of state-run Kuwait Petroleum Corp. “Now, in this new paradigm, it’s really becoming the call on shale. And the market is setting itself at the marginal cost of a shale barrel.”

    U.S. output has jumped for 11 weeks through the end of April to 9.29 million barrels a day, the most since August 2015, Energy Information Administration data show. American benchmark West Texas Intermediate is trading near $46 a barrel in New York, while global marker Brent crude is near $49 a barrel in London. Both are more than 50 percent below their peaks in 2014.

    “I am still watching the U.S. summer gasoline demand,” said Vitol’s Kho. “OPEC has said it will try and extend its output cuts beyond June. So if that happens, and the discipline is good, and if the U.S. lack of growth in demand changes into summer, then we may see oil go back to the low $50s, but the prevailing mood today is not.”

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    Carrizo Oil & Gas Announces First Quarter Results and Increases 2017 Production Guidance

    Carrizo Oil & Gas Announces First Quarter Results and Increases 2017 Production Guidance

    Carrizo Oil & Gas, Inc. today announced the Company’s financial results for the first quarter of 2017 and provided an operational update, which includes the following highlights:

    Crude oil production of 28,844 Bbls/d, 12% above the first quarter of 2016
    Total production of 46,367 Boe/d, 10% above the first quarter of 2016
    Net income of $40.0 million, or $0.61 per diluted share, and Net Cash Provided by Operating Activities of $76.4 million
    Adjusted Net Income of $12.1 million, or $0.18 per diluted share, and Adjusted EBITDA of $94.2 million
    Increasing 2017 crude oil production growth target to 26%Borrowing base recently increased to $900 million, with an elected commitment of $800 million

    Carrizo reported first quarter of 2017 net income of $40.0 million, or $0.61 per basic and diluted share compared to a net loss of $311.4 million, or $5.34 per basic and diluted share in the first quarter of 2016. The net income for the first quarter of 2017 and net loss for the first quarter of 2016 include certain items typically excluded from published estimates by the investment community. Adjusted net income, which excludes the impact of these items as described in the non-GAAP reconciliation tables included below, for the first quarter of 2017 was $12.1 million, or $0.18 per diluted share compared to $9.2 million, or $0.16 per diluted share in the first quarter of 2016.

    For the first quarter of 2017, Adjusted EBITDA was $94.2 million, an increase of 2% from the prior year quarter due to higher production volumes and commodity prices, partially offset by lower cash receipts for derivative settlements. Adjusted EBITDA and the reconciliation to net income (loss) are presented in the non-GAAP reconciliation tables included below.

    Production volumes during the first quarter of 2017 were 4,173 MBoe, or 46,367 Boe/d, an increase of 10% versus the first quarter of 2016. The year-over-year production growth was driven by continued performance from the Company’s Eagle Ford Shale and Delaware Basin drilling activity, the addition of production from the Sanchez property acquisition in late 2016, and an increase in Marcellus Shale production given improved netbacks. Oil production during the first quarter of 2017 averaged 28,844 Bbls/d, an increase of 12% versus the first quarter of 2016; natural gas and NGL production averaged 78,088 Mcf/d and 4,508 Bbls/d, respectively, during the first quarter of 2017. First quarter of 2017 production exceeded the high end of Company guidance due primarily to stronger-than-expected production from the Company’s Niobrara Formation and Delaware Basin assets.

    Drilling and completion capital expenditures for the first quarter of 2017 were $128.2 million. More than 85% of the first quarter drilling and completion spending was in the Eagle Ford Shale, with the balance weighted towards the Delaware Basin and Niobrara Formation. Land and seismic expenditures during the quarter were $14.5 million. As a result of the improvement in commodity prices earlier this year, Carrizo has seen a material increase in planned non-operated activity on its acreage in the Niobrara Formation and Delaware Basin. Given this, the Company has increased its planned non-operated budget by approximately $30 million. Carrizo expects to offset this incremental capital through efficiency gains realized since the beginning of the year as well as a slight reduction in planned completion activity in the Eagle Ford Shale during the year. As a result, the Company is maintaining its 2017 drilling and completion capital expenditure guidance of $530-$550 million. The Company is increasing its land and seismic capital expenditure guidance to $45 million for the year from $20 million previously.

    Based on the continued strong performance from the Company’s operated activity, Carrizo is increasing its 2017 oil production guidance to 32,400-32,700 Bbls/d from 31,400-31,900 Bbls/d previously. Using the midpoint of this range, the Company’s 2017 oil production growth guidance increases to 26% from 23% previously. For natural gas and NGLs, Carrizo is adjusting its 2017 guidance to 71-75 MMcf/d and 5,300-5,500 Bbls/d, respectively, from 69-73 MMcf/d and 5,600-5,900 Bbls/d, respectively. Carrizo continues to expect to deliver a three-year compound annual growth rate of more than 20% for its crude oil production. For the second quarter of 2017, Carrizo expects oil production to be 31,800-32,200 Bbls/d, and natural gas and NGL production to be 67-71 MMcf/d and 4,800-5,000 Bbls/d, respectively. A full summary of Carrizo’s guidance is provided in the attached tables.

    S.P. “Chip” Johnson, IV, Carrizo’s President and CEO, commented on the results, “We are off to a good start in 2017 with production exceeding our expectations. While sequential crude oil production growth in the first quarter was impacted by a large number of planned shut-ins, the underlying production from each of our key regions continues to perform well. As a result, we expect to see a double-digit sequential increase in our crude oil production in the current quarter and now expect to grow our crude oil production by approximately 26% in 2017. This is up from 23% previously without any increase to our planned drilling and completion capital expenditures for the year.
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    Trump Names Picks for U.S. Energy Agency Crippled Without Quorum

    President Donald Trump has chosen a longtime aide to Senate Majority Leader Mitch McConnell and a state utility regulator to serve on the Federal Energy Regulatory Commission, bringing the agency one step closer to regaining its power to rule on natural gas pipelines and utility mergers.

    Trump plans to nominate Neil Chatterjee, a senior energy adviser to McConnell who previously worked for the National Rural Electric Cooperative Association, and Robert Powelson, a member of the Pennsylvania Public Utility Commission, for terms expiring in 2021 and 2020, respectively, an emailed statement from the White House late Monday shows. Kevin McIntyre, co-head of Jones Day’s global energy practice, is said to be Trump’s pick to lead the agency.

    Federal lawmakers and industry groups including the Independent Petroleum Association of America and Interstate Natural Gas Association of America have been urging Trump to fill the three vacancies on the Federal Energy Regulatory Commission quickly. The agency lost the quorum it needs to make major decisions when former chairman Norman Bay resigned in February, leaving two Democrats to serve on the panel. His departure has threatened to stall a massive expansion of the U.S. gas pipeline network brought on by the shale boom.

    The confirmation process could take two to three months if expedited, cautioned Brandon Barnes, an analyst at Bloomberg Intelligence. The last time a commissioner was confirmed, Bay in 2014, it took six months.

    “It’s a very political process where there’s horse-trading, negotiating,” said Martin Edwards, head of government affairs for the Interstate Natural Gas Association of America. “It means delays in deploying project capital to build infrastructure.”

    More than $50 billion worth of project applications are pending before the commission, including an application for the $2 billion Nexus gas line in the Midwest, which is scheduled to start by year-end. Other issues awaiting agency action are a proposed rule on commercial battery storage, and a decision on the commission’s income tax allowance policy for pipelines run by master limited partnerships.


    As an adviser to McConnell, Chatterjee served as an architect of major energy and environmental policy in the Senate, helping to coordinate attacks against President Barack Obama’s Clean Power Plan that requires power plants to cut carbon dioxide-emissions.

    Powelson has been on the Pennsylvania Public Utility Commission since June 2008, and also served as its chairman, according to the commission’s website. He was elected president of the National Association of Regulatory Utility Commissioners, a Washington-based advocacy group, in November.

    The commission normally consists of five members who serve five-year terms. Cheryl LaFleur, a Democrat and former utility executive, has been on the commission since 2010. The only other commissioner right now is Colette Honorable, a Democrat who previously served as chair of the Arkansas Public Service Commission. Honorable’s term ends in June, and she has said she won’t pursue another one.
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    Bidding said to open soon for oil and gas exploration under India’s new OALP

    India is likely to offer 26 unexplored oil and gasfields to domestic and international exploration and production (E&P) majors to kick-start the government’s newly unveiled Open Acreage Licensing Policy (OALP).

    Prospective investors have been allowed access to geological data of these oil and gas fields and, although no official confirmation was available, sources say the bidding process will open in the next two months.

    Under the OALP, prospective bidders will be free to bid for any of the potential oil and gas fields, but the government has reserved the right to invite counter bids before awarding the field.

    Last month, the government formally approved the launch of OALP under which domestic and foreign E&P will be free to carve out areas from demarcated fields and choose where they would want to explore.

    An official familiar with the process pointed out that once an investor carved out a block and submitted an offer, it would trigger an invitation for counter bids, which would also be considered before the government awards the bid.

    The directorate general for hydrocarbons would provide prospective investors with access to the National Data Repository, which would enable the investor to make an informed decision on putting in bids for exploration and subsequent production, the official added.

    “In the new model, the government will not micro-manage, micro-monitor the producers. The government will only take a share of the revenue. It will be an open and regular affair,” Petroleum and Natural Gas Minister Dharmendra Pradhansaid in a recent media statement.

    Although officials were hesitant to divulge details, claiming that it was still “too early days of the new OALP”, industry sources say it is possible that the government will put on offer an estimated three-million square kilometers of unexplored sedimentary basin in the current financial year.

    The OALP will demand stricter prequalification requirements than the marginal and small oil and gas fields that government recently awarded. The OALP requires that an investor has at least a year’s experience in operating, as well as a record of holding an acreage as per specific technical parameters laid down under the policy.
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    Urals CIF Rotterdam crude oil grade at premium to Urals CIF Augusta for 1st time in over 2 years

    Urals CIF Rotterdam established a premium over Urals CIF Augusta after Monday's assessment as a change to fundamentals of the crude loading out of the Baltics and the Black Sea has moved the grades in opposite directions over the past month.

    The Urals CIF Rotterdam premium over Urals CIF Augusta stood at 3 cents/b Monday after trading at a discount to its Mediterranean counterpart since January 2015, S&P Global Platts data showed.

    The change in the spread comes as a result of Urals CIF Rotterdam climbing to 2.5-year high Thursday and only reverting marginally since, while Urals CIF Augusta hit a one-month low Monday.

    Over the past three weeks, the spread between the two grades weakened by $1.05/b, a magnitude not seen in the last two years.

    The flip in the spread is largely seen as a result of a fundamental supply structure of Urals exports on the back of pipeline maintenance feeding Urals to the port of Primorsk.

    The Sever pipeline network links Vtorovo-Yaroslavl-Kirishi-Primorsk and ships ultra low sulfur diesel from Russian refineries for export to Europe.

    A number of pumping stations along the route are due for launch in the second half of this year, and one of the measures Transneft, the pipeline operator, has taken is to upgrade some of the current crude pipelines so that they can also be used for diesel transportation.

    The second stage of the conversion project is due for completion in 2018.

    The result of the upgrading and maintenance work is that crude exports out of the Baltics were down by some 244,887 b/d month on month in May, while exports out of the Black Sea were at their highest of the year at 555,077 b/d.

    For the June program, some traders are expecting a further significant decrease in Baltic-loading crude exports, with one trader saying that "I would not be surprised to see a double-digit drop in Urals loadings out of Primorsk in June compared to May."

    Trading sources said that the crude intended to be exported via Primorsk and Ust-Luga will now be sent via pipeline to Novorossiisk for export via the Black Sea, as well as larger volumes being shipped to Belarus after Russia and Belarus settled their gas pricing disputes earlier this year.

    "Once the pipeline has been upgraded, volumes will be increasing again out of the Baltics, but there is an expectation in the market that supply fundamentals will change in the long run nevertheless as an overall larger amount of barrels exported from the Black Sea and less crude exported from the Baltics, compared to 2015 average values," a Urals trader said.

    Market participants currently expect the pipeline upgrade to be done in August, while others said it could take until the end of the year.

    However, the CIF Rotterdam premium above CIF Augusta is not widely expected to last for long.

    "Urals CIF Rotterdam have ticked up a lot in recent days and I am wary there is much room for further increases. On the contrary, Urals CIF Augusta, at the current price level, should be capturing some of the West Mediterranean business, [which usually takes Urals from the Baltics] and that could exert some bearish force on Urals NWE and bullish pressure on Urals Med," a refiner sourcing Urals crude said.

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    Malaysia's Petronas gets flexible on LNG contracts as supply builds

    Malaysia's state energy firm Petronas may try shorter-term LNG contracts and smaller cargo sizes to entice buyers, senior company officials said, at a time when it has major contracts coming up for renewal and the market is awash in supply.

    The liquefied natural gas (LNG) marketing drive at Petroliam Nasional Berhad, or Petronas, coincides with rising production after the start-up of Train 9 at its Bintulu export terminal and its first floating LNG unit. Malaysia is the world's third-largest LNG exporter.

    The global LNG market has become a buyers' market as growth in new supplies, mainly from Australia and the United States, exceeded demand and depressed prices. Asian spot LNG prices have dropped by more than 70 percent since 2014.

    "New demand creation is becoming a norm," Ahmad Adly Alias, vice president of Petronas' LNG Trading & Marketing said at the Asia Oil & Gas Conference on Tuesday.

    "We have recently restructured our organization to put a lot more focus on Middle East and South Asia... We've also set up a team to cover Southeast Asia," he said.

    The company's upstream chief executive officer Mohd Anuar Taib told Reuters on Monday that it sees significant potential demand growth in India, Pakistan, Bangladesh and some parts of Southeast Asia.

    In China, Petronas plans to work with a partner to sell smaller parcels to meet the demand of small buyers, Ahmad said.

    Petronas is also exploring LNG sales as a transportation fuel for trucks and ships, the officials said.


    Producers, who used to sell their cargoes on long-term contracts, now have to become more flexible on selling terms, including allowing customers to swap contracted supplies and sell more cargoes in the spot market.

    Petronas will soon start negotiating with customers in Japan, its biggest buyer, as some contracts are set to expire next year, with some even looking to reduce the volume of LNG they buy.

    Japan's biggest utility Tokyo Electric Power Company has a contract to buy up to 4.8 million tonnes per year (tpy) of LNG, while Tokyo Gas Co's contract is for up to 2.6 million tpy. They both expire in March 2018.

    "(Our) priority is to recontract in Malaysia but probably volume-wise it will be changed. And, how we can agree to new terms and conditions with better flexibility or pricing," said Shigeru Muraki, executive advisor at Tokyo Gas.

    "We will compare with other sources, we will consider the diversification of supply sources or diversification of pricings."

    Petronas' Ahmad said the company was currently working with long-term buyers to renew the contracts, but did not give details.

    In the interview Monday, upstream CEO Anuar said long-term contracts have "almost become a novelty." Petronas could do both short- and long-term contracts, he said.

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    Magnolia LNG receives FERC approval to commence site preparation

    LNG Limited has announced that its wholly owned subsidiary, Magnolia LNG LLC, has received Notice to Proceed (NTP) from the Federal Energy Regulatory Commission (FERC) to begin initial site preparation activities for the Magnolia LNG project.

    The project – based in the Port of Lake Charles, Louisiana, US – involves the construction and operation of up to four LNG production trains, each of which will have a capacity of 2 million tpy or more, utilising the OSMR® process technology. The project will also include two 160 000 m3 full containment storage tanks, ship, barge and truck loading facilities and loading infrastructure. The LSTK EPC contract includes all elements of the project required to bring the facility into full guaranteed production operations. Magnolia LNG is fully permitted – having received its FERC order and both FTA and non-FTA approval from the Department of Energy (DOE). A final investment decision (FID) and the initiation of construction is expected upon the execution of sufficient offtake agreements to support financing.

    The Chief Operating Officer at Magnolia, John Baguley, said: “We are appreciative to FERC for the issuance of the NTP on our request for authorisation to commence initial site preparation activities. FERC’s comprehensive review of our submittals and concurrence that we have complied with Conditions for these initial activities as required under the April 15, 2016 FERC Order demonstrate the project’s readiness.”

    The Managing Director and CEO of LNG Limited, Greg Vesey, added: “The FERC NTP for initial site preparation is a key milestone for the project and underscores our position as ‘Shovel Ready’. Nevertheless, the pacing item for our Final Investment Decision (FID) and initiation of construction for Magnolia remains the finalisation of our LNG offtake agreements, and our team remains fully engaged in advancing this activity.”
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    Japan reports successful gas output test from methane hydrate

    Japan's trade ministry on Monday reported success in producing gas last week by extracting methane gas from methane hydrate deposits offshore Japan's central coast.

    The tests being run at two different wells are the first since 2013, when Japan achieved the world's first-ever extraction of gas from offshore deposits of methane hydrate, a frozen gas known as "flammable ice".

    Japan's Ministry of Economy, Trade and Industry (METI) said the methane hydrate production tests will continue for a combined four to five weeks. Japan's first methane hydrate tests in 2013 ended abruptly after less than a week due to problems with sand flowing into the well.

    Japan, which imports nearly all of its energy sources, has been aiming to launch private sector commercial production of methane hydrates by between 2023 to 2027, but METI officials have said the goal will still be a challenge as many obstacles remain to be solved.

    Japan is the world's top importer of liquefied natural gas (LNG), and its need for domestic gas resources has become greater since the Fukushima nuclear crisis in 2011 shut down most of its nuclear power plants and sharply raised fossil fuel imports such as LNG and coal.

    Methane hydrate is formed from a mixture of methane and water under certain pressures and conditions. India, Canada, the United States and China are among the countries also looking at exploiting hydrate deposits as an alternative source of energy, the trade ministry said.

    A Japanese study has estimated that at least 40 trillion cubic feet (1.1 trillion cubic meters) of methane hydrates lie in the eastern Nankai Trough off the country's Pacific coast, equal to about 11 years of Japanese gas consumption.
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    Shell says Prelude FLNG to start production in 2018

    Shell’s giant Prelude FLNG facility will come on stream offshore Western Australia next year, Chief Financial Officer Jessica Uhl said.

    “Prelude remains on schedule… We’ve indicated that start-up was in 2018 and we remain confident in that timing,” Uhl told journalists on a conference call on May 4 after discussing the company’s first-quarter results.

    The Hague-based LNG giant Shell has never been clear on when it expects to start producing chilled gas from the giant floating facility to be located at the Prelude gas field off Australia.

    However, the company’s Chief Executive Ben van Beurden said at an event last year that Shell expects “real material cash from Prelude in 2018.”

    Shell’s Prelude FLNG facility is the largest of its kind with 488m in length and 74m in width.

    It is currently being built at Samsung Heavy Industries’ Geoje shipyard in South Korea, where an incident took place on May 1.

    Six people died and more than 20 were injured when a crane collapsed during the construction of an oil platform for French energy company Total.

    Uhl expressed condolences to everyone impacted by the “unfortunate incident”, adding that it did not have anything to do with Shell’s assets.

    The incident is expected not to have any effect on the construction of the Prelude FLNG.

    “The project itself is progressing well and the timeline for 2018 remains a good timeline,” she said.

    The Prelude FLNG facility is expected to stay moored at the Prelude gas field for 25 years. It is designed to produce 3.6 mtpa of LNG, 1.3 mtpa of condensate and 0.4 mtpa of LPG for export.
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    Indonesia's Pertamina to swap 0.7 mil mt of LNG from its US offtake

    Indonesian oil and gas major Pertamina is to sign an agreement with a portfolio seller by the end of 2017, for a swap of 0.7 million mt of LNG over five years from its contractual offtake commitment with US-based Cheniere, a senior official from Pertamina said Tuesday.

    Pertamina is already in negotiations with the portfolio seller, Djohardi Angga Kusumah, Pertamina's gas and power senior vice president, said at the 19th Asia Oil and Conference in Kuala Lumpur, Malaysia.

    The swap is to take place over the initial five years of Pertamina's contract with Cheniere, which expands over 20 years starting from 2018-2019, Kusumah added.

    The volume is nearly half of its contractual commitment with Cheniere for the offtake of 1.52 million mt/year, including 0.76 million mt that is to be supplied from the Corpus Christi LNG plant in the US Gulf.

    The agreement will be similar to another US LNG swaps deal Pertamina signed with France-based portfolio seller Total in February 2016, Kusumah said.

    Under the agreement with Total, the French company will purchase from 2020 onwards around 0.4 million mt/year of Pertamina's contracted LNG volumes from Corpus Christi LNG in Texas, where operations at both trains are expected to begin in 2019.

    In parallel, Total will supply from its global portfolio to Pertamina a volume growing over time from 0.4-1 million mt/year of LNG.
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    Libya Adds to OPEC's Burden as Output at Highest Since 2014

    Libya is pumping the most oil in more than two years as the OPEC member restores output amid progress in mending the nation’s political divisions. The increase adds pressure on the world’s biggest producers who just signaled they may extend production cuts amid a slump in oil.

    The North African country’s production has reached 796,000 barrels a day, Mustafa Sanalla, the chairman of state producer National Oil Corp., said Monday in a statement. Libya was producing about 700,000 barrels a day at the end of April, Jadalla Alaokali, an NOC board member, said at the time.

    A revival in Libyan output adds to the challenge that the Organization of Petroleum Exporting Countries and other major producers face after agreeing last year to pump less crude to stem a glut and shore up prices. In separate statements just hours apart on Monday, Saudi Arabia and Russia said publicly for the first time they would consider prolonging their output reductions for longer than the six-month extension OPEC is widely expected to agree to when the group meets on May 25. Libya was exempted from OPEC’s cuts because of its internal strife.

    Political divisions, clashes between armed groups and closures of fields have disrupted output in Libya as the country with Africa’s largest crude reserves struggles to revive its most vital industry. Libya’s feuding administrations agreed last week to unite state institutions and build a national army under civilian leadership after two days of talks in Abu Dhabi.

    Oil Recovery

    Libya’s largest oil field, Sharara, is currently pumping about 225,000 barrels a day, according to a person familiar on Monday. The person asked not to be identified because they lack authorization to speak to the media. Crude from Sharara started flowing to the Zawiya refinery following a three-week closure.

    El Feel, the oil field also known as Elephant, restarted last month as well, after having been halted since April 2015. The resumption of operations at Sharara and El Feel, both in western Libya, has helped lift total national output to the highest since October 2014, when the country pumped 850,000 barrels a day, data compiled by Bloomberg show.

    Fighting in early March caused two of Libya’s main oil terminals to close, forcing a number of fields to stop pumping. The ports, along the central coast, have since reopened. Libya pumped as much as 1.6 million barrels a day before an uprising in 2011 led to a plunge in output, and it’s currently one of the smallest producers in OPEC.

    Sharara has a capacity of 330,000 barrels a day and is operated by a joint venture between Libya’s NOC and Repsol SA, Total SA, OMV AG and Statoil ASA. El Feel, operated by a joint venture between the NOC and Eni SpA, can pump as much as 90,000 barrels a day.

    The NOC will sell about 600,000 barrels of Mellitah blend crude from El Feel in a tender to be announced after mid-May, a person familiar with the situation said. The Mellitah sale will be the first since the field halted in 2015, the person said, asking not to be identified because they lack authority to speak to media.

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    EOG banks first profit in nearly two years; pumps record oil

    EOG Resources collected its first profit in nearly two years in the first quarter, wringing money from a revived oil patch amid higher energy prices, the company said Monday.

    The Houston oil explorer pumped more oil than ever as it slashed the costs of bringing wells into production in Texas and North Dakota.

    The company banked a $28.5 million profit, or 5 cents a share, in the first quarter, compared to a $471.8 million loss, or 86 cents a share, in the same period last year. It was EOG’s first profit since the second quarter of 2015. Revenue rose to $2.6 billion from $1.4 billion.

    EOG lifted its oil production 18 percent to 315,700 barrels a day, thanks to technological breakthroughs and its shift to a strategy that focuses on pumping oil from only the most prolific fields.

    Essentially, the company invests only in fields that will yield a 30-percent return at $40 a barrel oil. It said it expanded this so-called premium inventory of oil by 27 percent to 6.5 billion barrels of oil equivalent in the first quarter, through techniques including extending the length of horizontally drilled wells.

    Over the past year, EOG said, it has cut the cost of turning on oil wells by 6 percent in the Eagle Ford Shale in South Texas, the Delaware Basin in West Texas and the Bakken Shale in North Dakota. Its lease and well expenses increased 4 percent because it sold off natural gas-rich, lower cost acreage.
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    Northern Oil and Gas: Enhanced Completions Generate 13 MBOEPD

    Northern anticipates more production growth in 2H 2017

    Northern Oil and Gas, Inc. (ticker: NOG) reported total production of 1.2 million BOE for the first quarter, averaging 13,299 BOEPD.

    Northern’s business model is as a non-operator franchise in the  Bakken and Three Forks plays in the Williston Basin of North Dakota and Montana.  Northern operates under a capital allocation model that calls for the company to acquire non-operated positions in high quality acreage about to be drilled, that provide for high internal rates of return on capital and to partner with leading E&P operators with a successful track record in the Williston Basin.

    Northern’s GAAP net income for the first quarter of 2017 was $16.9 million.  Adjusted net income for the quarter was a loss of $0.1 million.  Adjusted EBITDA for the quarter was $29.6 million, the company reported.

    Interim CEO and CFO Tom Stoelk said, “Increased well productivity is being aided by the enhanced completion designs, which is improving returns as we execute on our capital allocation focused business plan.  As the weather improves, an increase in completions is expected to drive production growth during the second half of 2017.”

    Northern leased approximately 151,672 net acres targeting the Williston Basin Bakken and Three Forks formations.  As of March 31, 2017, approximately 84% of Northern’s North Dakota acreage position, and approximately 82% of Northern’s total acreage position was developed, held by production or held by operations.

    Northern continues to expect 2017 total annual production to equal or modestly exceed 2016 total production.  Northern expects that it will add approximately 12 net wells to production during the year, based on a preliminary capital budget of $102.2 million (including acreage and development capital).  Net well additions will be weighted to the second half of 2017, which should result in sequential production growth in the third and fourth quarters. Management’s current expectations for 2017 operating metrics are as follows:

    Operating Expenses:
    Production Expenses (per Boe)$9.00 – $9.30
    Production Taxes (% of Oil & Gas Sales)10%
    General and Administration Expense (per Boe)$3.00 – $3.50
    Average Differential to NYMEX WTI $7.00 – $9.00

    At March 31, 2017, Northern had $134.0 million in outstanding borrowings under its revolving credit facility, a $10 million reduction from December 31, 2016.  In May 2017, Northern completed the semi-annual redetermination under its revolving credit facility with the borrowing base established at $325 million.  Based on this new borrowing base, Northern had available liquidity of $196.5 million as of March 31, 2017, composed of $5.5 million in cash and $191.0 million of revolving credit facility availability.
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    PDC Targets 42% Production Growth in 2017

    $750 Million CapEx split between Wattenberg and Delaware

    Wattenberg producer PDC Energy (ticker: PDCE) reported first quarter results on May 5, showing net income of $46.1 million, or $0.70 per diluted share. This significantly outperforms the $71.5 million net loss in Q1 2016 or the $55.6 million loss in Q4 2016.

    Average sale price up 73%

    First quarter production was 6.65 MMBOE, an increase of 45.5% over the 4.57 MMBOE PDC produced in Q1 2016. The commodity price recovery makes this increase even more meaningful, as PDC’s weighted average sale price increased 73% from $16.49/BOE in Q1 2016 to $28.53/BOE in Q1 2017. The company expects to continue to grow at a rapid pace, with total production growing from the current average of 73.9 MBOEPD to 105 MBOEPD by the end of the year.

    Next up: Delaware basin

    PDC will devote considerable spending to developing its newly acquired Delaware basin properties, spending $290 million out of a total budget of $750 million. The company now owns 62,500 net acres in the Delaware, where it is operating three rigs currently. In total, PDC expects to spud 31 wells in the Delaware this year, primarily in the Eastern portion of its acreage. While most of PDC’s wells in the Delaware have only been active for a short period, preliminary results show several wells outperforming the acquisition type curve.

    PDC owns 95,500 acres in the Wattenberg, and plans to spend $465 million developing this asset this year. The company will spud 139 wells in the play this year, with an average lateral length of 6,800’.the company’s extended reach lateral wells, wells with lateral lengths around 9,500’, are outperforming the 1.1 MMBOE type curve in recent development. PDC reports that these XRL wells cost $4.5 million and have significantly over 100% IRRs.

    Midstream capacity in the Wattenberg continues to increase for both oil and gas, with about 440 MMcf/d of expansions expected by mid-year 2019. Current planned construction of oil processing is expected to be more than sufficient through at least 2020.
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    Genscape: Cushing higher

    Genscape: Cushing +582k w/w.

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    Construction of subsea section of TurkStream natural gas link begins: Gazprom

    Construction of the offshore section of the TurkStream gas pipeline to send Russian gas to Turkey began on Sunday, project operator Gazprom said in a statement Monday.

    The project -- which will consist of two 15.75 Bcm/year pipelines -- is designed to offer a new transit route for Russian gas to Turkey and Europe, bypassing the traditional Ukraine transit corridor.

    One of the lines will serve the domestic Turkish market, while the other is planned to link in with other planned pipeline infrastructure to southern Europe.

    Both are expected to be operational by the end of 2019.

    "Today we have started the practical stage of the project -- the subsea laying of the gas pipeline," Gazprom CEO Alexei Miller said.

    "The project is implemented strictly according to plan and by the end of 2019 our Turkish and European consumers will receive a new reliable route for the import of Russian gas," he said.

    The laying of the pipeline is being carried out by Allseas, the contractor for both lines of the offshore link.
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    Iran's NIOC plans to boost crude oil output capacity about 80%, by 3 mil b/d: report

    Iran plans to raise its crude production capacity by 3 million b/d, oil ministry news agency Shana quoted a senior official as saying Monday.

    Speaking on the sidelines of a petroleum exhibition in Iran, National Iranian Oil Co.'s deputy head for engineering and development, Gholam-Reza Manouchehri, said the aim of boosting the country's output capacity by such a substantial amount would be to promote and stabilize its footing in OPEC and the global market, Shana reported.

    The agency did not mention any target date envisioned for the increase.

    It also reported Manouchehri as saying that NIOC for considering signing $80 billion of deals with domestic and international contractors within the next two years.

    Following the lifting of international nuclear sanctions on Iran in January 2016, NIOC has so far signed 24 memoranda of understanding with domestic and international companies seeking to join oil and gas development projects in the country, including a recent MOU with Philippine National Oil Co. for studies of Iran's Pazanan and Darkhowin oil fields, he said.

    Iran produced 3.77 million b/d of crude in April, the latest S&P Global Platts survey of OPEC production shows.

    Manouchehri made his remarks as Iranian president Hassan Rouhani campaigns for re-election in voting scheduled for May 19.

    The NIOC official was promoted in April 2016 to his current position, as head of what was then a newly formed division of the national oil company, in a surprise move by Iran's oil minister Bijan Zanganeh.
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    Russia's June exports of ESPO crude oil to dip 17% from May to 2.4 mil mt

    Russia's exports of the medium sweet ESPO crude blend in June are set to fall 17.2% from May to 2.4 million mt, according to the latest monthly loading program seen by S&P Global Platts.

    The June loading program runs from May 30 to June 30 and will comprise a total of 24 cargoes of 100,000 mt each, according to the program.

    In comparison, ESPO exports in May totaled 2.9 million mt, which comprised 29 cargoes of 100,000 mt each.

    The loading rate for ESPO exports will average around 547,500 b/d in June, down from 622,647 b/d scheduled for May.

    The June program showed state-owned Rosneft holding 10 cargoes, Russia's Surgutneftegaz with seven, Swiss-based Tenergy holds six cargoes and Lukoil a single cargo for June.

    Traders have attributed the shorter program for ESPO Blend crude in June to a field maintenance, although further details were unclear.

    The lower volumes has helped provide a bit of support for ESPO Blend crude premiums for June-loading cargoes, traders said.

    June-loading ESPO Blend crude cargoes have traded at premiums ranging between $1.25/b and $1.50/b to the Platts front-month Dubai crude assessments, slightly up from premiums of closer to $1/b towards the end of the trading cycle for May-loading cargoes.

    Surgutneftegaz was most recently heard to have sold its tender for five cargoes of ESPO Blend crude at premiums of $1.20-$1.35/b to the Platts front-month Dubai crude assessments on FOB basis.

    The cargoes, for loading over June 10-14, June 14-18 and June 23-27, were heard sold to JXTG, an unnamed trader, and ChemChina. Two cargoes, for loading over June 17-21 and June 19-23, were heard sold to Unipec.

    Platts last assessed the second-month ESPO Blend crude at a premium of $1.35/b to Dubai on Friday.

    Last week, Russia's energy minister Alexander Novak was quoted by local media as saying that the country has exceeded its obligation under the OPEC deal, having reduced production by 300,790 b/d.

    Under the deal, Russia committed to gradually reducing its production to reach 300,000 b/d in cuts by May and stay at that level till the deal's expiry.

    Russia is inclined to extend the OPEC/non-OPEC crude output cut deal beyond mid-year, which it sees necessary for the full recovery of the oil market, Novak said.

    OPEC, as a whole, committed to cutting production by 1.2 million b/d from October 2016's levels, with several major non-OPEC producers, led by Russia, agreeing to cut 558,000 b/d.

    The group will gather in Vienna on May 25 to decide on the potential extension of the output cuts.

    Attached Files
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    BP, Kosmos make major gas find off coast of Senegal

    BP and joint venture partner Kosmos Energy revealed a major gas discovery off Senegal on Monday, adding to other recent finds off the West African coast.

    Oil majors including BP and Total are investing in the waters of Senegal and Mauritania in the hope of repeating the recent exploration success of smaller players.

    "Yakaar-1...further confirms our belief that offshore Senegal and Mauritania is a world-class hydrocarbon basin," Bernard Looney, BP Upstream chief executive officer, said.

    New York-listed Kosmos in 2015 discovered a gas pool in the Tortue 1 exploration well, part of the Greater Tortue Complex spanning Senegal and Mauritania, which contained more than 15 trillion cubic feet of gas.

    Since then, BP has formulated plans to acquire a 30 percent interest in the two offshore blocks called Saint-Louis Profond that includes the Senegalese sector of the Tortue field and Cayar Profond. BP has also agreed to buy a stake of close to 60 percent in Kosmos' Mauritania exploration blocks.

    Gas from the Tortue field is due to begin flowing in 2021 and is set to be exported from a liquefied natural gas (LNG) facility. The two firms said on Thursday that the Yakaar-1 find contained sufficient reserves to warrant another LNG project.

    Kosmos spokesman Thomas Golembeski, declined to give further details on the nature or timing of the project, adding that further appraisal work was planned.

    Attached Files
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    Tokyo Gas invests in U.S. shale player Castleton Resources

    Tokyo Gas said that through its unit, Tokyo Gas America, it has purchased a 30 percent equity in Castleton Resources, a company focused on developing oil and gas assets in east Texas and Louisiana.

    Castleton Resources, a unit of Castleton Commodities International, focuses on developing the unconventional Haynesville assets.

    The company owns and operates over 160,000 net acres of leasehold in East Texas with access to the Cotton Valley and Haynesville shale and has a net production of 238 mmcfepd, Tokyo Gas said.

    Speaking of the acquisition, Craig Jarchow, president and CEO of Castleton Resources, said the company will remain “focused on optimizing and growing” its upstream and midstream assets in the region.

    Speaking to reporters, Tokyo Gas’ senior general manager of global business development, Isao Hosoya, said that, although the acquisition will allow Tokyo Gas to expand its business in the natural gas value chain, it does not plan to realise an LNG project through the joint venture, Reuters reports.
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    Hurricane Energy more than doubles recoverable oil estimate from North Sea field

    Hurricane Energy, which specialises in extracting oil from naturally fractured rock, said on Monday the amount of oil estimated to be recoverable from its Lancaster field in the North Sea is 162 percent higher than previously thought.

    The company said the latest independent analysis of reserves at the field showed 523 million barrels of oil could be recoverable, more than double the amount assessed in 2013.

    The total volume of oil in place at the field was put at 2.3 billion barrels, up 120 percent from the 2013 report, Hurricane said.

    "We believe this has the scale to attract interest from major oil companies," said analysts at RBC Capital Markets.

    North Sea oil and gas production levels have slumped from a peak around the turn of the century and a three-year oil market downturn has curbed exploration for new resources.

    However a series of small oil explorers deploying new techniques to retrieve hydrocarbons at lower costs and more efficiently, including Hurricane, have revived hopes that Britain's remaining 24 billion barrels can be retrieved.

    Hurricane said 37.3 million barrels of proven reserves (2P) at Lancaster were worth $525 million.

    "We expect to publish CPRs (Competent Person's Report) relating to Halifax and Lincoln later in 2017, which we are confident will be a material addition to our already significant resource base," Hurricane Chief Executive Robert Trice said.

    In March, Hurricane said its Halifax oil discovery, extending into its Lancaster field, was the largest undeveloped discovery on the UK Continental Shelf.
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    Difference between output and exports bedevils OPEC oil goals

    One of the factors behind the recent slump in crude oil prices may be the realisation among market participants that there is a difference between production cuts and export flows.

    While OPEC and its allies appear to have been relatively successful in implementing their planned output cuts of 1.8 million barrels per day (bpd), this has yet to show up in a meaningful way in the amount of crude oil being transported by ships.

    The seeming easy availability of crude despite the output cuts helped drive crude prices lower, with Brent dropping as low as $46.64 a barrel on May 5, just above the close of $46.38 on Nov. 29, the day before OPEC and its allies announced the deal to trim production and down about 20 percent since its recent peak in early January.

    The 11 members of the Organization of the Petroleum Exporting Countries that agreed last November to restrict output by 1.2 million bpd for the first six months of 2017 achieved 90 percent compliance in April, according to a Reuters survey.

    Output by the 11 countries was 29.92 million bpd in April, up fractionally from 29.9 million in March and only about 116,000 bpd above the agreed target.

    The non-OPEC countries that agreed to curb their output by a combined 600,000 bpd also largely claim to be compliant, with major producer Russia saying it has exceeded the 300,000 bpd it agreed to cut as part of the deal aimed at boosting oil prices.

    Top OPEC producer Saudi Arabia and Russia appear to be in favour of extending the agreement for another six months, a move that is likely to be confirmed when OPEC and its allies meet on May 25.

    Ultimately the output cut is supposed to tighten the oil market by reducing supplies and draining inventories.

    The problem is assessing how successful OPEC and the other producers are being in this endeavour.

    One method is to look at vessel-tracking data as an indicator of physical flows.

    While ship data doesn't capture oil moved by pipeline, it still represents more than half of the global market and is therefore a useful indicator.

    The broadest measure of the data captures all movement by tankers, including domestic voyages and ship-to-ship transfers, and provides a universal picture of the amount of crude moving around the world.

    In April this totalled 45.23 million bpd, down from March's 46.4 million bpd and February's 46.2 million bpd, but up from January's 44.3 million bpd, according to Thomson Reuters' Eikon vessel-tracking and port data.

    For the first four months of the year, the average was 45.5 million bpd, which was actually higher than the 45.1 million bpd in the last four months of 2016.

    While this wide measure of data does show that there is no shortage of oil being shipped around the globe, it doesn't say how much of this is new production being exported or inventories being drawn down.


    To gain a clearer picture of how much OPEC is actually exporting, the data can be filtered to show only vessels that have discharged their cargoes, are in the process of discharging, or are underway to their destination.

    On this basis, OPEC members exported 24.7 million bpd in April, down from 25.6 million bpd in March and 26.4 million bpd in February, and level with January's exports. This is only tanker exports, and doesn't count any pipeline movements.

    For the first four months of 2017, OPEC exports by tanker averaged 25.4 million bpd, down from 26.1 million bpd for the preceding four months.

    This represents a drop of 700,000 bpd, which is below the pledged output cut of 1.2 million bpd, suggesting that OPEC members may have been drawing down internal inventories in recent months.

    But it's also worth noting that the reduction in exports by OPEC doesn't appear to have resulted in less oil moving by tanker, meaning the shortfall has been made up by producers outside the agreement pumping more crude, or by inventories being drawn down.

    The question of inventories emerges as the key factor for the success of the deal between OPEC and its allies.

    If global crude flows by tanker were higher in the first four months of this year compared to the preceding four months because of producers outside the agreement pumping more, this is bearish for OPEC and shows the group has considerably more to do in order to boost the price.

    On the other hand, if global crude flows were being bolstered by inventories being drawn down as market participants feared the market was heading for backwardation, then this may be bullish over the medium to longer term for OPEC's aim of increasing the price.

    This makes inventory levels key to the outlook for prices, and this is an area with incomplete global data.

    While detailed information is available for many developed countries, data is patchy or non-existent for much of the developing world.

    But what is known is that U.S. crude inventories fell by a smaller than expected 930,000 barrels last week to 527.8 million barrels, but they are also 3 percent higher than a year ago.

    OPEC said on April 12 that inventories in OECD nations dropped in February, but were still 268 million barrels above the five-year average.

    This suggests that OPEC and its allies still have a long road to travel to drain inventories, and that the market may not re-balance as quickly as they would prefer

    Attached Files
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    Nigeria almost triples budget for Niger Delta amnesty: presidency

    Nigeria has almost tripled the budget for an amnesty program for militants in its oil-producing heartland, the presidency said on Saturday, a key factor in maintaining a tenuous peace in the Niger Delta and supporting crude production.

    An additional 30 billion naira ($98.47 million) would be released for the former militants and an extra 5 billion naira added at some later stage, the presidency said in a statement. Until 2016 the annual budget was 20 billion naira.

    Funding of former militants under the 2009 amnesty is key to maintaining the relative stability in the Delta and stopping attacks on oil facilities, as it was last year by militants who cut crude output by as much as a third.

    Under the amnesty program, each former militant is entitled to 65,000 naira a month plus job training. But in March a special adviser to Nigeria's president said the program was facing a cash crunch.

    "Currently the Amnesty Office has now paid up all ex-militants backlog of their stipends up to the end of 2016," the presidency said in a statement.

    Authorities had previously cut the budget for cash payments to militants to end corruption. They later resumed payments to keep pipeline attacks from crippling vital oil revenues.

    Last month, former militant leaders in the Niger Delta urged the government to pay out delayed amnesty stipends or face protests.

    The government has been holding talks with militants to end the attacks that cut Nigeria's output by 700,000 barrels a day (bpd) for several months last year, reducing total production at that time to about 1.2 million bpd. It has since rebounded.

    The presidency also said all promises made by Vice President Yemi Osinbajo on recent visits of the Niger Delta to boost development would be kept.

    The damage from attacks on Nigeria's oil industry has exacerbated a downturn in Africa's largest economy, which slipped into recession in 2016 for the first time in 25 years, largely due to low oil prices.

    Crude oil sales make up around two-thirds of government revenue.
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    ExxonMobil weighing further investment in Bass Strait

    Gas producer ExxonMobil has highlighted the opportunity for further investment in the Bass Strait, on the back of completing it’s A$5.5-billion Kipper Tuna Turrum development.

    ExxonMobil Australia over the weekend unveiled the completion of its Longford gas conditioning plant, which will process gas from the Kipper Tuna Turrum development, supplying some 1.6-trillion cubic feet of gas to eastern Australia.

    “The gas conditioning plant helps maintain current gas supply levels from Bass Strait, which has been producing for more than 40 years and providing energy to power the economy,” said ExxonMobil Australia chairperson Richard Owen.

    “This project is breathing new life into Bass Strait, and allowing us to continue what’s been a tremendous record of providing domestic gas to south eastern Australia,” Owen said.

    “We’re hoping this is just the start of being able to develop further resources in Bass Strait and essentially create Bass Strait 2.0. We recognise the significant amount of effort that has gone into the project, not just in terms of construction effort, but also the effort from technical, operations and maintenance side.  We have a tremendous workforce here who have done great job in completing a complex project.”
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    South Korea headed for LNG import boost after election

    Whatever the election result, South Korea is likely to see a boost in LNG imports at the expense of coal-fired and nuclear power generation capacity as major candidates' top pledges remain focused on addressing public concerns over worsening air pollution.

    Fine dust pollution has emerged as a key issue in the presidential election, set for May 9, to replace former President Park Geun-hye, who was impeached in March over a corruption scandal involving large family-run business conglomerates, or chaebol.

    All three main candidates have pledged to reduce coal-fired and nuclear power capacity to address the country's public health concerns, and instead increase gas-fired power production and renewable energy resources to offset the supply shortfall.

    The candidates' pledges come at a time when South Korea has been increasingly hit by higher concentrations of fine dust in the air.

    South Korea runs more than 50 coal-fired power plants that supply about 40% of the country's total electricity, followed by nuclear (30%), LNG (25%), oil (3%), and renewable sources such as hydropower, solar, wind and fuel cells (2%).

    Front-runner Moon Jae-In has unveiled the strongest measures among the major candidates, having promised to reverse the country's existing plans to build new coal-fired power plants and nuclear reactors, with the goal of reducing fine dust pollution by 30%.

    Following years of stagnant LNG demand growth, Platts Analytics forecasts South Korea's consumption to see steady growth from 2019 onwards, reaching 37.3 million mt by 2022, although still below the record 39 million mt imported in 2013.


    But the presidential candidates have stopped short of unveiling policies on the country's overseas oil and gas development, as their state expenditure plans are heavily focused on welfare programs and national defense in the wake of mounting nuclear threats from North Korea.

    In addition, state-run developers such as Korea National Oil Corp. and Kora Gas Corp., which have in the past led the country's upstream projects, are now under great pressure to reduce heavy debts after an asset shopping spree when oil prices were high.

    They are now seeking to divest some assets, but facing hurdles due to the slump in oil prices since late 2014.

    With public attention focused on welfare and North Korea, oil and gas development has been sidelined in the presidential election campaign, with analysts warning about the lack of a long-term energy policy and energy supply troubles.

    This is particularly important for South Korea, which has to import almost all its energy requirements from overseas. South Korea is the world's fifth-largest crude oil buyer and second-largest LNG buyer.

    "Consistent efforts for oil and gas asset acquisition are necessary for South Korea, which is vulnerable to price volatility," said Sonn Yang-Hoon, a prominent energy expert at Incheon University, west of Seoul.

    "A fundamental shift is underway in the global energy market following the oil price slump since 2014, which offers opportunities to import-dependent South Korea. Whoever becomes the next president is urged to use the changing market to boost its energy security," he said.

    Below are the candidates' key energy policies:


    The 64-year-old former human rights lawyer represents the progressive opposition Democratic Party, the biggest party, with 121 seats in the 300-seat National Assembly.
    Maintains a strong lead with a support rating of about 40%, according to recent public surveys.
    Says he will shut aged coal-fired power plants and scrap plans for nine coal-fired power plants where construction is less than 10% complete.
    Vows to close down the aged Wolsong-1 nuclear reactor and halt construction of two large nuclear reactors, Shin Kori 5 and 6.
    Vows to take measures to replace aged gasoil-powered vehicles, considered another cause of fine dust emissions, with electric vehicles and those powered by compressed natural gas and LPG, which could affect the country's demand for auto fuels.


    Former medical doctor and software mogul represents the People's Party. Latest public surveys peg his support rating at 20%.
    Has promised to scale back electricity production from coal-fired power plants and nuclear reactors and replace them with LNG and renewables.
    Aims to increase the ratio of renewables in the country's electricity mix from the current 1.1% to 20% by 2030 and use LNG as a bridge to clean renewables.


    Represents the Liberty Korea Party and has a support rating of 15%, according to recent public surveys.
    Vows to scrap plans for new coal-power plants and nuclear reactors.
    Promises to lower taxes on oil products by up to 50% as part of efforts to boost sagging domestic consumption. Lower taxes, which account for half of retail oil prices, could boost South Korea's oil demand, which has been on the decline due to rising domestic prices and slow economic growth.

    Attached Files
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    China Jan-April crude oil imports up 12.5 pct from year ago -customs

    May 8 China's crude oil imports during the January to April period this year gained 12.5 percent over a year earlier to 139 million tonnes, Chinese customs said on Monday.

    Natural gas imports during the same period were up 5.4 percent from a year ago to 20.11 million tonnes, the customs said.

    China’s April Crude Oil Imports -11.71% M/m to 34.39m Tons

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    Saudi Arabia Says Oil Cuts Could Extend Beyond End of 2017

    Saudi Arabia’s oil minister said he’s confident that an agreement by producers to curb crude output and shrink a market glut will be extended into the second half of the year and possibly beyond.

    While U.S. shale output growth and the shutdown of refineries for maintenance have slowed the impact of cuts by OPEC and its partners, producers are determined to reach their goal of reducing bloated stockpiles, Khalid Al-Falih said at the Asia Oil and Gas Conference in Kuala Lumpur on Monday. He said he’s confident the global oil market will soon rebalance and return to a “healthy state.”

    Surging U.S. production has raised concern the Organization of Petroleum Exporting Countries and partners are failing to reduce an oversupply and prop up prices. Oil has surrendered all its gains since their deal late last year to cut output and with OPEC meeting in Vienna later this month, several nations have said they’d support an extension of the 6-month agreement that began in January. This is the first time the Saudi minister has suggested it could be extended beyond 2017.

    “Based on the consultations I have had with participating members I am rather confident the agreement will be extended into the second half of the year and possibly beyond,” Al-Falih said. “The producer coalition is determined to do whatever it takes to achieve our target of bringing stock levels back to the five-year average.”

    West Texas Intermediate crude rose 1.2 percent to $46.76 a barrel by 12:20 p.m. Singapore time on the New York Mercantile Exchange. Brent, the benchmark for more than half the world’s oil, was up 1.3 percent to $49.73 a barrel on the London-based ICE Futures Europe exchange. Both are still more than 50 percent below their peaks in 2014, when the U.S. shale boom exacerbated a market glut and triggered the biggest price crash in a generation.

    Al-Falih said last month that OPEC and its partners have failed, after three months of limiting output, to achieve their target of reducing oil inventories below the five-year historical average. Group member United Arab Emirates said earlier in May that the producer group should extend the collective production cuts into the second half of the year when an expected upturn in demand will help to re-balance the crude market.

    Vienna Meeting

    Russia, which is not member of OPEC but is part of the deal, also thinks it will be necessary to extend the reduction deal, according to Energy Minister Alexander Novak. The producers agreed last year to curb output by as much as 1.8 million barrels a day starting January. OPEC will meet in Vienna on May 25 to decide whether to prolong the deal beyond June.

    While the producers curbed supply, production in the U.S., which is not part of the agreement, has risen to the highest level since August 2015 as drillers pump more from shale fields. But American crude inventories are showing some signs of shrinking, falling for the past four weeks from record levels at the end of March.

    Despite lingering headwinds, the oil market is improving from early last year when markets were at a low, Al-Falih said. Stockpiles at sea have declined and U.S. inventories will continue their downward trend, he said. Global demand, meanwhile, will probably be stable from the “healthy rate” seen last year, driven by China and India, the Saudi minister said, adding that Asia was the most important market.

    There’s about 20 million barrels a day of combined demand growth and natural oil-field output declines that need to be offset, Al-Falih said. “No matter how fast U.S. shale grows, it wont make a dent in that number,” he said.

    Attached Files
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    Weekly U.S. offshore rig count climbs to 19 units

    The number of offshore drilling rigs operating in the U.S. waters has climbed this week by two units when compared to the previous week, Baker Hughes reported in its U.S. weekly rig count report.

    BHI Rig Count: U.S. +7 to 877 rigs
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    U.S. Rig Count Climbs Sixteenth-Straight Week

    Drilling activity in the U.S. has increased yet again, with Baker Hughes weekly rig count reporting seven additional rigs this week. The total number of rigs active in the U.S. is now 877, more than double the 415 rigs that were operating this time last year.

    Oil-targeting rigs increased by six this week, totaling 703 rigs. Gas-targeting rigs added two to end the week with 173 active rigs. One “miscellaneous” rig came offline, leaving only one miscellaneous rig active in the U.S.

    Four directional and horizontal rigs came online this week, while one vertical rig shut down. Drilling offshore increased, with one “inland waters” and two offshore rigs coming online this week.

    Texas again saw the largest increase in rigs, with six added this week bringing its total to 443. Louisiana added four rigs, while Wyoming and Alaska each added two and Colorado and New Mexico each added one. Seven rigs shut down in Oklahoma, and North Dakota and West Virginia both had one rig go offline.

    Permian, minor basins add rigs

    Rigs moved away from major basins, with only the Permian and the Haynesville adding rigs. Seven additional rigs in the Permian and one more in the Haynesville were offset by four shutdowns in the Cana Woodford, three Marcellus rigs coming offline, and one less in the Ardmore Woodford, Arkoma Woodford, Mississippian and Williston. Ten rigs moved to basins not individually tracked by Baker Hughes.

    Canadian rigs continued to decrease, albeit at a slower pace than previous weeks. Three rigs shut down in Canada this week, leaving 82 active. Rigs in Canada have fallen by 77% from a high of 352 in February. This is the standard spring decrease, as seen every year. Historically, the spring drop usually begins to reverse in early May, so Canadian rigs may begin to recover soon.
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    Permian Thought Leaders Talk Turkey

    “It will get to a point where it’s actually artificial intelligence that’s drilling our wells for us, with us observing” – Tim Dove, CEO, Pioneer Natural Resources

    There are a lot of smart E&P companies rambling around West Texas, the place that has dominated the energy spotlight for the past year or two. Ask anybody who’s been looking at shale: it’s all about the Permian basin.

    The basin is booming. It’s crushing most of the others in production numbers, dollars being paid per acre to enter, ability to offer significant stacked pay and strong economics with oil in the $40s-$50. But fast growth comes with plenty of headaches. How are these operators viewing and solving problems they have in common as they step on the Permian accelerator?

    Analysts burned up the phone lines on this week’s Q1 earnings calls, asking a lot of questions that brought out sometimes startling viewpoints from some of the top E&P CEOs whose companies are smashing records in the too-hot-to-touch Permian.

    How will you source water in the Permian?

    Pioneer Natural Resources (ticker: PXD) President and CEO Tim Dove

    Q – Jeffrey L. Campbell: On water investment, while the cost savings certainly shouldn’t be ignored, isn’t it fair to see your water effort as necessary to secure supply for future growth? In other words, that it’s an important exercise in risk management?

    A – Timothy L. Dove: Well let me put it this way: Water is perhaps the most misunderstood and undervalued aspect of the impediments that the industry could face. As Joey said, when we are today sourcing 350,000 barrels a day, if nothing changes to how we do things, 10 years from now that’s 1.4 million barrels a day. Today we represent 8% of the Permian rig count. So when you start doing the math, you realize, oh my gosh, we’re in a difficult situation to be able to source that kind of water. Which means we’re going to have to go, as I mentioned, more towards the recycling of produced water that also comes back to us after the frac. And so that has to be in our thoughts long term. But I think being ahead of this is tantamount to substantial risk avoidance going forward. We are just not going to be put in a position where we have that kind of impediment that’s unsolvable. We’re solving it ourselves.

    WPX Energy (ticker: WPX) Sr. VP and Chief Operating Officer Clay Gaspar, Sr. VP Business Development Bryan Guderian

    Kashy Harrison: So, can you update us on just what the A&D market looks like right now in the Delaware for – specifically for acreage swaps to help you build a more contiguous acreage position in the region?

    A – Bryan K. Guderian: Sure. I think I’d just start out by saying the availability of acreage for transaction continues to surprise us. The buy-side resilience, I think, continues to surprise us as well. So, near-term, our focus is really what we would call kind of blocking and tackling. We have our footprint in place. We’re really nicely blocked up in Stateline and some of the nearby areas there. We have some other acreage that is a little bit more one-off, but we see really nice opportunities dealing with probably four or five different trading partners in and around Stateline, and in particular, the northern part of the Texas side of our position. And we’ve had some great success already dealing with those folks to block up and drill longer laterals.

    Kind of along those lines, we are also finding that there is still some additional acreage, generally smaller tracts, some expirations, still opportunity to bolt-on and add to those positions in small ways. The same is probably true up in New Mexico, although I would say that, given the Federal lands and some of the larger tracts that we deal with in New Mexico that has not been as much of a focus for us recently.

    Looking more broadly across the basin, there are a number of fairly sizeable deals that are in the market currently or that we expect to come to market. I’m going to say that they tend to be a little more fringy. There are a couple of deals over in the eastern side of the basin that we would anticipate being marketed this year. I won’t go into names because I don’t know the exact status of those, but likewise still I think some opportunities over on the west side of the basin and obviously we took advantage of one with our Taylor Ranch acquisition.

    And then, I would expect to continue seeing some private equity monetization. I think we all realize, we’re probably in the seventh or eighth inning of that process, but, again, the availability of acreage as much as we think we know about the basin, things continue to come to market, but more in small packages at this point.

    And I think back to sort of the theme of our story, we’re going to stick to our knitting. We really like the footprint that we have. And so, our primary objective is bolting on and adding efficiency to the position that we already have.

    Concho Resources (ticker: CXO) Chairman of the Board, Chief Executive Officer and President Tim Leach

    Concho Resources Permian basin acreage

    Q – Brian Singer: There have been a couple of acquisitions of assets that would seemingly show up on your maps in Lea and Eddy County. And as a company that’s been very, very active in consolidation, I wonder if you could just talk about your interest in consolidation and why maybe sometimes it does or doesn’t make sense for operators that have acreage in the region to be consolidated in that acreage versus new entrants?

    A – Timothy A. Leach: All right. Well, as we’ve highlighted, having big, blocky acreage positions with high ownership is very important to development. So I think you’ll see a lot of trading going on between the big operators to block up their acreage.

    When things come up for sale, we have a very high bar on since we have so much opportunity. Things that are contiguous to properties we already own, things that allow us to extend our lateral length are much more valuable to us than kind of scattershot acreage. And also, I’d say with the inventory we have today, it depends on what price you have to pay to get acreage and whether or not we’d be interested in it. So, we’re in a good position to evaluate does making acquisitions add value to our company. And we are very, very focused on these big, blocky, machine-like development projects we’re going to have in the future and making sure that we have all the blocky acreage we need for those things. So, I think we’re in good shape.

    As we’ve said in the past, we look at everything in the Permian Basin because it’s our backyard. And so, it’s not unusual for us to be in data rooms and things like that, but we’ve been very picky on what makes sense for us to buy.

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    Brimming U.S. oil storage tanks to feel OPEC cuts last

    The energy industry scrutinizes U.S. oil stockpile data every week for evidence that OPEC supply cuts are ending a global crude glut, but growing domestic output means the world's largest oil consumer may be the last place to feel the cuts.

    Stubbornly high U.S. inventory levels have shaken market confidence that a deal by the Organization of the Petroleum Exporting Countries (OPEC), Russia and other top producers to cut 1.8 million barrels per day (bpd) from supply will end the two-year glut.

    This week, benchmark Brent crude prices slipped below $50 a barrel. Brent has given up all the gains made since the supply cuts were agreed late last year. [O/R]

    U.S. inventories are a trusted barometer for the health of global oil markets because of the transparency of the data and their location in the country that consumes around a fifth of the world's oil.

    But U.S. crude inventories have only grown since the supply cuts took effect. The initial spike in oil prices after the deal reinforced already resurgent production from the U.S. shale industry.

    The rush back into the fields boosted U.S. shale output to an estimated 5.2 million bpd in May from 4.5 million at the end of 2016. The increase of 700,000 bpd in U.S. supply has replaced much of the output cuts delivered under the OPEC-led agreement.

    Offshore production in the Gulf of Mexico has also hit a record, bringing total U.S. output to 9.3 million barrels a day, its highest since August 2015.

    That has helped keep U.S. stockpiles full.

    "As long as U.S. producers are able to pump oil at a profit then the rebalancing in the U.S. is going to take time," said Mark Watkins, regional investment manager at U.S. Bank.

    "It's going to be an extended period of time still. I would look to at least the end of the year."

    In addition, producer countries that pumped a lot of their own oil into storage at home have recently been exporting from those tanks to consumer countries such as the United States.

    OPEC members typically do not disclose their stock levels. So even though the export of stored oil is part of the effort to draw down global inventories, it also has pushed previously invisible inventories into global storage data.

    Those OPEC shipments may now be easing. Thomson Reuters shipping data shows crude exports from the group dropped from March to April by about 50 million barrels to 741.2 million barrels.


    U.S. crude inventories hit records earlier this year, and remain up 10 percent since the OPEC-led supply cuts took effect on Jan. 1.

    U.S. crude stocks stand at 527.8 million barrels, nearly 30 percent higher than the average of the past five years, according to government data.

    Exports from the United States have been steadily rising and have also regularly reached records this year. If markets tighten elsewhere, U.S. exports will increase and this should drain domestic inventories more quickly.

    "What you're going to have to see is global supply across the world drop and U.S. crude ship out before you start to see a meaningful drop in U.S. inventories," said Watkins.

    "And that's something that's started a little bit, but it's pretty marginal."

    Despite the high domestic output, there are some signs that efforts to reduce the global glut may be having an impact in the United States.

    A recent four-week run of U.S. inventory draws has been larger than the 2011-2016 average for this time of year, said Credit Suisse in a note on Friday.


    More tangible impacts on inventories can be seen elsewhere, some analysts said; inventories simply need more time to return to average levels.

    There have been some signs of drawdowns in global inventories, particularly in floating storage, when oil is stored in a tanker anchored offshore. According to Clipperdata this type of storage has been falling near the refining hub of Singapore.

    Singapore "acts as such a parking lot for tankers and should we see Singapore floating storage be drawn down materially that would indicate that the market is tightening," said Matt Smith, director of commodity research at Clipperdata.

    Clipperdata estimates that 50 million barrels are floating off Singapore, down sharply from February's peak of 64 million barrels, which was the highest point in at least a year.

    "The lack of visible stock declines ... undermined oil market confidence and dragged markets lower," said oil consultants PIRA Energy in a note this week.

    "Market jitters are unwarranted; oil on the water is declining, OPEC output is declining and stocks are declining. Onshore stock declines are inevitable, but the exact timing is tricky."
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    Great Scott! Eclipse Drills New Longest Lateral in World – in Utica

    Great Scott! Eclipse Drills New Longest Lateral in World – in Utica

    Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA that drills mostly in Ohio, has done it again. Yesterday as part of Eclipse’s first quarter 2017 update, the company announced it has broken its own record for drilling the longest land-based lateral well in the world by drilling a Utica well with a lateral that’s 19,300 feet long (3.7 miles). Incredible!

    You may recall Eclipse was the previous holder of that record with their Purple Hayes well (18,500 feet long), drilled one year ago. Eclipse seems to have taken a chapter from Rice Energy by naming their wells with creative names. Purple Hayes, named after the landowner (Hayes). The new record-holder? Great Scott–presumably named after the landowner (Scott).

    Eclipse reports drilling its newest record setting “Super-Lateral” well, the Great Scott 3H, with a total measured depth of 27,400 feet and completable lateral extension of 19,300 feet in less than 17 days from the drill bit hitting the ground to total depth (called spud to TD) in the company’s Utica Shale condensate area.

    If you’re an MDN subscriber, you were already expecting this big news. Back in April MDN editor Jim Willis attended the Oil & Gas Investment Symposium in New York City and reported on Eclipse’s session. At the time Jim reported: “They [Eclipse] plan to drill 11 “super lateral” wells that exceed 15,000 feet long. Two wells they hope to drill will break the existing Purple Hayes record–by going to 19,000 feet!”.

    Just a month later and the company is already delivering on its promise. Even bigger news: Eclipse is currently drilling a second well of the same length next to Great Scott!
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    As prices fall, OPEC looks to Q3 for optimism

    The price swoon of the last few weeks has no doubt disappointed -- if not frustrated -- OPEC's 13 members, who have seen their efforts to cut production to support prices seemingly thwarted by stubbornly high inventories.

    But all along, OPEC officials have maintained that their goal with the production cut deal can not and should not be measured by how the market reacts day to day, or even week to week.

    Their eyes are focused on the third quarter, when OPEC's own analysis, as laid out in its most recent monthly oil market report, estimates global demand for OPEC crude will rise to 33.13 million b/d, some 1.3 million b/d above current levels.

    OPEC will issue its newest monthly oil market report next Thursday.

    "The good news is that the market is moving towards rebalancing," Saudi Aramco CEO Amin Nasser said at the International Oil Summit in Paris last week. "There has also been a rapid drawdown of floating storage in the first quarter of this year. This is being driven by improving fundamentals and the OPEC deal."

    Iranian deputy oil minister Roknaddin Javadi added: "I am very optimistic that good days for the oil and gas industry are ahead."

    The deal, signed late last year, calls on OPEC to cut 1.2 million b/d from its October levels, while 11 non-OPEC countries led by Russia agreed to cut 558,000 b/d in concert.

    To be sure, OPEC had intended its production cuts to have brought down global oil stocks to their five-year average by mid-year. That has not been the case, particularly in the US, where bloated gasoline stocks, in particular, has given the market jitters.

    US gasoline stocks were 19.5 million barrels above the five-year average at 241.2 million barrels the week that ended April 28, according to the US Energy Information Administration.

    Analysts with PIRA, a unit of S&P Global Platts, say the market's fretting over US inventory statistics may be overblown.

    "The lack of visible stock declines have undermined oil market confidence and dragged prices lower," PIRA said in a recent note. "Market jitters are unwarranted; oil on the water is declining, OPEC output is declining and surplus stocks are declining. Onshore stock declines are inevitable, though the exact timing is tricky."


    The production cut deal, as signed, was to last from January to June, although ministers have said they reserve the option to extend the deal if market conditions have not been to their satisfaction.

    OPEC appears to be moving towards an extension, with Saudi Energy Minister Khalid al-Falih recently saying there was a growing consensus that one was needed.

    But still unresolved are the particulars of any extension -- its length, the level of cuts, and whether Libya and Nigeria, which were given exemptions from the cuts, and Iran, which was allowed a slight rise in production, will continue to receive special dispensation.

    Falih has floated the idea of a three-month extension, instead of a six-month one, while Kuwaiti oil minister Essam al-Marzouq has said that if demand is healthy in the second half of the year, the production cuts may not need to be as deep.

    Iraqi officials, however, have indicated they are not on the same page, having insisted the deal concerns exports, not production, contrary to the text of the agreement posted on OPEC's website.

    "We are committed to the agreement with OPEC. Still, our internal demand is increasing, so our production can be increased without affecting our commitment," Naufel Alhasan, deputy chief of staff to Iraqi Prime Minister Haider al-Abadi, told Platts in Houston this week.

    OPEC, along with the 11 non-OPEC deal participants, will meet in Vienna on May 25 to review the deal and negotiate any extension.

    Given the resilience of US producers, who have ramped up output by some 600,000 b/d since the deal was signed, according to the EIA, OPEC may need to show the market a stronger hand with a more stringent extension, said Mohammed al-Sabban, a former advisor to the Saudi oil ministry.

    This may include sharper cuts or a requirement that Libya, Nigeria and Iran join in, he said.

    "The agreement extension should not be an automatic rollover, we may need to have deeper cuts," he told Platts. "The competition with American oil is going to be more severe in the coming months."

    Nigeria and Libya, which have seen their oil sectors hit hard by militancy over the past year, will seek a renewal of their exemptions, even with their prospects improving recently.

    Their combined production this year, while volatile, has averaged just 6,300 b/d more than October, the benchmark month that the production cut deal is measured from, according to the latest Platts OPEC survey.

    Iran, meanwhile, has yet to be asked to join in the output cuts as part of an extension, "to my knowledge," Javadi told Platts.


    On compliance, OPEC has performed very well.

    The Platts OPEC survey for April, released Thursday, found that the 10 members required to lower output under the deal achieved 105% of their cuts.

    As a whole, OPEC's total April output of 31.85 million b/d remains 80,000 b/d above the organization's stated ceiling of about 31.77 million b/d, not including Indonesia, which suspended its membership in November and is not counted in the Platts survey.

    That has exceeded the expectations of many OPEC watchers, given the organization's tattered history of adhering to previous production agreements. Nevertheless, the market has stopped rewarding OPEC for its high level of compliance, amid the US shale rebound. Analysts say an extension of the cuts is already priced into current market expectations, even with prices having given up all of their gains since the OPEC/non-OPEC deal was signed.

    ICE Brent futures were $48.57/b at 1015 GMT Friday, recovering from a sharp fall in earlier trading.

    Even as they remain resolute on their intermediate-term goal of drawing down inventories, OPEC is likely to be mindful of 2016's price volatility when the bloc's members were engaged in a brutal market share battle.

    "They'll have to extend [the deal], or the show's over," one Platts survey participant said. "The market will fall very quickly if they don't."
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    TransCanada's quarterly profit more than doubles

    TransCanada Corp's quarterly profit more than doubled, as Canada's No. 2 pipeline operator incurred lower charges.

    The company's net profit attributable to shareholders rose to C$643 million ($467 million), or 74 Canadian cents per share, in the first quarter ended March 31 from C$252 million, or 36 Canadian cents per share, a year earlier.

    The latest quarter included about C$48 million in charges, mainly related to the acquisition of Columbia Pipeline Group. The year-ago quarter included charges of about C$211 million, mainly related to the termination of Alberta power purchase agreements.

    Revenue rose 35.5 percent to C$3.39 billion.
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    Rosneft net income lower than expected, hit by stronger rouble

    Russia's largest oil producer Rosneft posted a worse than expected rise in first-quarter net income on Friday, hit by a stronger rouble despite higher output and crude prices.

    While the price of Russian Urals oil rose 28 percent year on year in rouble terms, Rosneft said that the currency's strength had a negative impact on its performance in the first three months of 2017.

    Though a stronger rouble helps to lower payments of debt denominated in foreign currencies, it also reduces revenue from exports.

    "The environment remains difficult. Continuing world commodity markets volatility, rouble appreciation -- all of this impacted the company's financial results," Rosneft's Chief Executive Igor Sechin said on Friday.

    Net income rose 8.3 percent year on year to 13 billion rubles ($221.4 million), against a consensus forecast of 22 billion rubles among analysts polled by Reuters. [nL8N1I65K4]

    Rosneft shares were down 0.6 percent at 308.10 rubles in early trade as Russian assets were pressured by a drop in oil prices amid a global supply glut.

    Rosneft also said that first-quarter free cash flow declined by 22.6 percent from a year ago to 89 billion rubles.

    The company said on Wednesday that its oil and gas condensate production rose by 13 percent in the first quarter to 4.62 million barrels per day.

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    Shell's realised natural gas price in Europe rises in Q1 to $5.08/Mcf

    Shell's realised natural gas price in Europe rises in Q1 to $5.08/Mcf

    Shell saw its average realised gas price in Europe in the first quarter of 2017 edge up to $5.08/Mcf ($4.94/MMBtu) compared with the previous quarter, the company said in its Q1 earnings statement Thursday.

    The gas price increase was triggered by increased demand on cold weather across Europe in January and the early part of February, which saw wholesale gas prices surge.

    Its European realised price was $4.94/Mcf in Q4 2016.

    However, Shell's realized European price in Q1 was still below the spot price average in Q1.

    According to Platts assessments, the Dutch TTF spot price averaged $5.77/MMBtu in Q1, up from $5.41/MMBtu in Q4 2016, while the UK NBP spot price averaged $6.00/MMBtu in Q1 compared with $5.62/MMBtu in Q4 2016.

    Shell's European gas price boost helped push its global average realized gas price to $4.29/Mcf in the last quarter, up from $4.03/Mcf in Q4 last year.

    Europe accounts for a significant chunk of Shell's gas production -- it averaged 3.43 Bcf/d in Q1 out of a total of 10.94 Bcf/d.


    But Shell warned that its gas output in the second quarter would be impacted by some 50,000 b/d of oil equivalent due to the production cap at the giant Groningen field due to the earthquake risk.

    CFO Jessica Uhl, speaking to reporters on a webcast later Thursday, said Shell -- which is part of the NAM operating venture with ExxonMobil -- would continue to engage with the Dutch authorities on the subject.

    "NAM is an important investment for Shell, and this is a very important issue for the country," Uhl said.

    "We are working closely to ensure the asset is operated appropriately and sustainably. We are continuing to engage in that conversation. That's the focus -- meeting the needs of the various stakeholders," she said.

    The Dutch government is making preparations to introduce a 10% cut in the production quota for gas from Groningen field from the start of the next gas year on October 1 following an increase in earthquakes in the area around Loppersum.

    If adopted, the move would see the production quota cut from the current level of 24 Bcm/year to 21.6 Bcm/year.

    In addition, a Dutch appeals court on April 20 ruled that NAM should face an investigation into whether it has been criminally negligent in causing earthquakes in the region.


    Shell, which became a much bigger player in gas with the acquisition last year of the UK's BG Group, is now also a leading LNG company.

    LNG liquefaction volumes were 8.18 million mt in Q1, up 16% year on year, but down from 8.57 million mt in the previous quarter.

    LNG sales in Q1 were 15.8 million mt, up by 29% year on year and by 3% quarter on quarter.

    "Compared with the first quarter 2016, LNG liquefaction volumes mainly reflected the start-up of Gorgon in Australia and the contribution of BG assets for an additional month," Shell said.

    "LNG sales volumes mainly reflected increased trading of third-party volumes and higher liquefaction volumes compared with the same quarter a year ago."

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    Profitable WPX Sees 3 Keys for Ramping Up in the Delaware

    Profitable WPX Sees 3 Keys for Ramping Up in the Delaware

    In today’s conference call, WPX discussed three main requirements for ramping up production.


    First and foremost is the local geology. However, WPX believes that it has mostly solved this question. While spacing and a few other nuances will require further investigation, the geology itself is well-established.

    “There is no question,” WPX COO Clay Gaspar commented, “especially where we’re at in the Delaware Basin is world-class rock and there is tons of opportunity.”

    Hedging providing confidence

    The second primary determining factor for development is commodity price. WPX responded to this factor with aggressive hedging to lock in economic prices. The company has about 72% of its expected 2017 oil production hedged at an average of $50.84/bbl and 76% of its gas production hedged at $3.02/MMBTU. With oil currently trading below $46/bbl, this hedge position is paying off for WPX.

    Clay Gaspar remarked that this position gives the company confidence. Mentioning the recent dip in oil prices, Gaspar noted, “I imagine there are a lot of our peers that are fully exposed that are really pulling their hair out, and I can tell you it’s very reassuring to have that confidence to be able to go to the team and say, yep, we’re still doing, [and] go to our key vendors and say, guys, we’re still plowing ahead, stay with us.”

    Permian needs takeaway capacity

    The massive increase in Permian activity has also created a situation that is usually restricted to the Marcellus. Permian midstream capacity must be able to grow and keep up with development, or Permian producers would be stuck with large differentials like those seen by Marcellus producers.

    Gaspar reported that the company has been working on several deals to deal with transportation before it becomes a problem. Most significant among these is a potential midstream joint venture. WPX is considering a JV to handle takeaway from its core Delaware Basin assets, which would ensure transport remained available. While the company declined to provide further details, an agreement is expected midyear.

    Multiple Permian acquisitions in Q1

    WPX has been very active in the Permian this year, with several major acquisitions. In January the company acquired Panther Energy and Carrier Energy, adding about 120,000 net acres for $775 million. More recently, the company purchased 17,900 acres in Culberson County for $38 million. This acquisition is exploratory in nature, and is farther west than the core of the Delaware Basin. With an acreage cost of about $2,000/acre, however, this is much less expensive than many Permian transactions in recent months.

    The company now owns about 135,000 net acres in the Delaware basin, and is producing a total of 90 MBOEPD from its Permian, Bakken and San Juan properties. WPX will spend about $620 million over the rest of the year to grow production by about 20%.

    WPX Energy reported first quarter earnings yesterday, showing net income of $88 million, or $0.22 per diluted share. This significantly exceeds the $175 million loss the company took in Q4 2016, or the $17 million loss in Q1 2016.
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    Australia's Origin Energy doubles stake in Beetaloo shale gas field

    Australia's top energy retailer, Origin Energy, said on Friday it doubled its stake in the Beetaloo Basin shale gas field in Australia's Northern Territory.

    The company said it increased its share in the undeveloped prospect to 70 percent, after purchasing a 35 percent share from Sasol Petroleum Australia Ltd. It did not disclose a purchase price and said the transaction is subject to "certain conditions," without elaborating.

    "It is not expected to impact on Origin's short-term focus on debt reduction as there are no immediate capital requirements in the Beetaloo," Origin said in a statement.

    In February, Origin said it estimates contingent resources in the field to be 6.6 trillion cubic feet. But its extraction depends on the Northern Territory government lifting a ban on hydraulic fracking. The government is reviewing the ban but has set no deadline for making a decision.

    Origin last week reported soaring gas revenues, thanks to a sharp rise in sales, as a supply crunch in Australia pushes prices higher.

    Falcon Oil and Gas Australia owns the remaining 30 percent of the joint-venture.
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    Marathon Oil's loss smaller than expected on higher crude prices

    U.S. shale exploration company Marathon Oil Corp reported a smaller-than-expected quarterly loss on Thursday, helped by higher crude prices.

    In the wake of rising crude prices, oil and gas producers have increased their capital spending to acquire shale-rich properties, especially in the Permian basin, and have put more rigs back to work.

    The company in March bought about 70,000 acres for $1.1 billion, and in a separate deal acquired 21,000 acres for $700 million, both in the top U.S. shale field, the Texas Permian basin.

    Average realized prices for crude oil and condensate in North America was $48.46 per barrel in the quarter ended March 31, up from $28.21 a year ago, the company said.

    Total production at Marathon Oil averaged 338,000 barrels of oil equivalent per day (boe/d) in the quarter, marginally below the 339,000 boe/d in the year-ago period.

    However, the company's net loss widened to $4.96 billion, or $5.84 per share, from $407 million, or 56 cents per share, a year earlier, due to an impairment charge related to the sale of its Canadian oil sands business.

    Marathon Oil sold its Canadian oil sands business to Royal Dutch Shell (RDSa.L) in March in a deal valued at $7.25 billion.

    Excluding one-time items, the company lost 7 cents per share, beating analysts' average estimate of a loss of 10 cents per share, according to Thomson Reuters I/B/E/S.

    Houston-based Marathon Oil's revenue rose 88 percent to $1.07 billion.
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    Alternative Energy

    Tesla starts taking orders for premium solar roofs

    Tesla Inc on Wednesday began taking orders for its solar roof tiles, a cornerstone of Elon Musk's strategy to sell a fossil-fuel-free lifestyle under the brand name of its luxury electric vehicles.

    Tesla said the product, which generates solar energy without the need for traditional rooftop panels, will be pricier than a conventional roof but will look better and ultimately pay for itself through reduced electricity costs.

    The solar roof tiles were unveiled in October as Musk sought to convince shareholders of the benefits of combining his electric vehicle maker with SolarCity, the solar installer run by his cousins.

    Tesla acquired SolarCity in November, and has been working to remake a money-losing company that was selling traditional solar systems into a premium energy brand. To date, other companies have had little market success with attempts to incorporate solar technology directly into roof tiles. It remains unclear whether the products will appeal to consumers as much as Tesla's electric vehicles do.

    To get in line for a solar roof, homeowners must put down a $1,000 deposit via Tesla's website. There, they can also calculate the estimated upfront cost of a solar roof.

    A 1700-square-foot roof in Southern California, with half the roof covered in "active" solar tiles, would cost about $34,300 after a federal tax credit, according to the calculator. Tesla estimates such a roof could generate $76,700 of electricity over 30 years.

    The company said its solar roofs would cost between 10 and 15 percent less than an ordinary new roof plus traditional solar panels.

    But Jim Petersen, chief executive of PetersenDean Inc, which installs about 30,000 new roofs plus solar a year, estimated that a 1700-square-foot roof with new solar panels, including the tax credit, would cost about $22,000, well below the Tesla website's estimate. Costs vary depending on roof type.

    Glass tiles will be available in the United States later this year, beginning with gray smooth glass and black textured glass versions, Tesla said. Slate and Tuscan styles will be introduced in 2018. Overseas markets will receive the products next year.

    Tesla said it expects the product to be popular in locations beyond where its SolarCity subsidiary currently operates, and plans to expand installation crews accordingly.

    Tesla will manufacture the tiles at its solar factory in Buffalo, New York. Production will start "very slowly," Musk told reporters on a conference call, adding he expects robust demand.

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    German Sun King's SolarWorld to file for insolvency

    Germany's SolarWorld, once Europe's biggest solar power equipment group, said on Wednesday it would file for insolvency, overwhelmed by Chinese rivals who had long been a thorn in the side of founder and CEO Frank Asbeck, once known as "the Sun King".

    SolarWorld was one of the few German solar power companies to survive a major crisis at the turn of the decade, caused by a glut in production of panels that led prices to fall and peers to collapse, including Q-Cells, Solon and Conergy.

    SolarWorld was forced to restructure and avoided insolvency thanks to a debt-for-equity swap and the support of Qatar, which took a 29 percent stake in the group four years ago through Qatar Solar S.P.C.

    A renewed wave of cheap Chinese exports, caused by reduced ambitions in China to expand solar power generation, was too much to bear for the group, which made its last net profit in 2014.

    "Due to the ongoing price erosion and the development of the business, the company no longer has a positive going concern prognosis, is therefore over-indebted and thus obliged to file for insolvency proceedings," SolarWorld said in a statement on Wednesday.

    SolarWorld, which earlier this year announced staff cuts after reporting increased losses, said it would immediately file for insolvency and that it was assessing whether affiliated companies would also have to do the same.

    Asbeck, 57, still holds a 20.85 percent in the group which he founded in 1998 and within 10 years had grown to be one of the world's three biggest solar power companies.

    Known as the Sun King for his success and brashness, Asbeck famously bid for German carmaker Opel in 2008 and was also later instrumental in drumming up support against what he saw as unfair Chinese competition.

    "SolarWorld has led the fight against illegal price dumping in the United States and Europe. This dumping has further intensified, however," Asbeck said in a statement on Wednesday. "This is a bitter step for SolarWorld, the management board and staff and also for the solar industry in Germany."

    Germany used to be the world's biggest market for solar panels, with demand driven by generous government support that provided business for panel makers around the world, including Asia and the United States.

    Through the group's U.S. unit Asbeck pushed for import tariffs on Chinese panels, arguing that low labor costs and local government support gave his Chinese rivals an unfair advantage.

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    Falling costs, new revenues fuel Britain's big battery boom

    Britain is emerging as a hotbed for utility-scale battery development, with two of Europe's three biggest projects under way there and several companies joining a race that could shake up the energy market.

    Rapid growth of solar and wind energy means power supplies depend increasingly on whether the wind is blowing or the sun shining. As a result, utilities are looking for new ways to store renewable energy for release into the grid when supplies are low.

    In the UK the challenge is especially acute because the buffer between supply and demand is tighter than in other European countries as old fossil fuel plants close, while Britain lacks Germany's supply lines to import power and maintain grid frequency - the change in direction of the electrical current - when local supplies drop.

    "(Renewables) intermittency means the frequency on the grid changes more quickly than before so we need faster technology which can react to that," said Cathy McClay, commercial head at the British National Grid system operator.

    Last year, National Grid held one of the world's first tenders to supply rapid grid balancing services on four-year contracts.

    "The National Grid tender required such a fast response it almost exclusively created a market for batteries, which isn't something we have seen elsewhere in Europe," said Andy Houston, senior analyst at UK-based consultancy Poyry.

    Swedish utility Vattenfall [VATN.UL] is developing battery projects in the Netherlands and Germany but chose Britain for its largest -- 22 megawatts (MW) -- at the Pen y Cymoedd wind farm in Wales after winning a National Grid contract.

    "Britain's National Grid tender is one of the best opportunities for batteries," said Sebastian Gerhard, Vattenfall’s head of battery projects.

    Vattenfall is using lithium ion batteries purchased from German car manufacturer BMW (BMWG.DE), the same as those used in its i3 electric cars, stacked together in portacabin-sized units. Vattenfall estimates the drive to create commercially viable electric cars has sent battery costs tumbling by around 40 percent since 2010.

    Energy trader Vitol [VITOLV.UL] is building two battery plants in Cumbria and Kent through subsidiary VPI Immingham after winning two National Grid contracts with joint venture partner Low Carbon, and aims to hook them up to the grid by the end of the year.

    The projects, part of a 250 million pound ($322 million) investment program, are partly an effort to build expertise in markets beyond Vitol’s gasoline distribution business.

    Global electric vehicle market:


    Vitol operates around 5,000 petrol stations globally, "so in the longer term electric vehicles could have a material impact on our business," said Simon Hale, director at VPI Immingham. "Building up our knowledge and experience of battery systems now will have a big benefit for us."

    British utility Centrica (CNA.L) is building a 49 MW battery project on the site of its former Roosecote power station in northwest England which was demolished in 2015, part of a 180 million pound investment in storage and flexible power plants in Britain.

    The site is unlikely to create many local jobs – the battery units are expected to be operated remotely – but Centrica said it will help the company build the knowledge it needs to sell battery units to customers.

    "The real prize for us is unlocking the customer market," said Mark Futyan, Centrica's merchant power director. "Some customers want battery solutions for resilience and security of supply. For others it's about being able to invest and make a return."

    The 49 MW project did not secure work under National Grid's enhanced frequency balancing tender but won a 15-year contract starting in 2020 in a government capacity auction that pays power generators to be available when demand is high.

    German energy storage firm Younicos will provide the batteries for the project, which when built will be one of Europe's largest and will be made up of more than 100,000 battery cells.

    Two others are believed by industry experts to vie with the Centrica site by scale in Europe: French utility EDF's (EDF.PA) subsidiary EDF Energy Renewables is building a 49 MW project in Britain after winning a National Grid tender, while Dutch utility Eneco [ENECO.UL] and Japanese multinational company Mitsubishi Corporation plan to build a 48 MW project in Germany.

    Large energy storage sites, if used alongside renewables, could also help to plug the country's looming electricity supply gap as aging nuclear and coal plants close in the 2020s.

    As part of Prime Minister Theresa May's industrial strategy, the government has asked Chief Scientific Officer Mark Walport to review whether a new institution should be set up to support battery technology and energy storage.

    If mass battery storage takes off it will be welcome relief for a government that has forced the closure of carbon-incentive coal power stations just as many nuclear power stations near the end of their life, raising concerns over future energy security.

    Large new traditional power stations have struggled to get off the ground due to heavy upfront costs. Britain’s relatively high industrial power prices are already an obstacle for British companies trying to compete with their continental neighbours. The department for Business, Energy and Industrial Strategy (BEIS) forecasts a total of 3 gigawatts of storage capacity could come on line in Britain by 2030, by when renewables could provide around 50 percent of Britain's electricity.

    Renewable power output has doubled to around 20 percent of the UK total over the past six years.

    "If we (Britain) could get to 50 percent renewables, with storage as back-up to provide flexible local power, we wouldn't need to build all the new generation capacity to meet peak demand," said Steve Shine, chairman of the board at clean tech firm and battery project developer Anesco.

    For now the goal of Vattenfall, Centrica and others appears to be proving the technical viability of mass battery storage, with profits taking a back seat. Anesco developed Britain's first commercial-scale battery unit in 2014 but did not win one of the National Grid contracts.

    "I don't think some of those projects will get built as the rate is too low," Shine said.

    He said the National Grid tender cleared at a much lower price than expected, and ended up being cheaper than the contracts National Grid usually awards for slower frequency balancing services.

    "I doubt they are making large returns on these initial projects but it is probably more of a strategic move in that the companies expect batteries to play a big role in the future and they want to get experience and not get left behind," said Poyry’s Houston.

    National Grid's McClay said seven of the eight projects that won the tenders have now passed their first milestones, with the final project expected to pass in the next two weeks.

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    SunPower Corp posts bigger quarterly loss

    U.S. solar company SunPower Corp reported a bigger loss on Tuesday, hurt in part by higher costs.

    The company, which is majority owned by France's Total SA , said its net loss attributable to shareholders widened to $134.5 million, or 97 cents per share, in the first quarter ended April 2, from $85.4 million, or 62 cents per share, a year earlier.

    Total revenue rose to $399.1 million from $384.9 million.
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    Vivint Solar reports quarterly profit on lower costs

    U.S. solar company Vivint Solar Inc reported a quarterly profit on Tuesday compared with a year-ago loss, helped by lower costs.

    The company, which largely caters to the residential solar market, reported net income attributable to shareholders of $13.3 million, or 11 cents per share, in the first quarter ended March 31, compared with a loss of $31.2 million, or 29 cents per share, a year earlier.

    The company recorded a one-time impairment charge of $36.6 million in the year-ago quarter. Excluding items, the company's loss narrowed to 50 cents per share from 65 cents.

    Total revenue rose to $53.1 million from $17.2 million.

    Vivint Solar carried out 6,581 installations during the quarter, down from 7,704 installations in the year-ago period.
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    TransAlta eyes 8,000 MW in North American wind/gas projects

    TransAlta has its eye on about 8,000 MW of renewable and natural gas projects in North America and expects to propose three shovel-ready wind farms totaling 350 MW into upcoming solicitations in Alberta and Saskatchewan, according to Dawn Farrell, TransAlta president and CEO.

    Potential investments include 500 MW in natural gas and renewable acquisitions in the US as well as expansions at existing renewable facilities, according to the company. The Calgary-based company owns about 220 MW of wind and solar generation in Massachusetts, Minnesota and Wyoming, as well as the 1,340-MW coal-fired Centralia plant in Washington.

    TransAlta has decided to retire or mothball 560 MW of coal-fired generation in Alberta and convert another 2,400 MW of coal in the province ahead of schedule to natural gas to take advantage of low natural gas prices and reduce capital costs, Farrell said during a Monday earnings call with analysts.

    The plans call for retiring Sundance Unit 1 and mothballing for two years Sundance Unit 2 on January 1. The power plant company expects to spend about C$300 million ($219 million) to convert Sundance units 3-6 and Keephills Unit 1 and Unit 2 in the 2012-2023 time frame, according to Farrell.

    The company plans to bid the capacity into an expected capacity auction that is being developed by Alberta's grid operator.

    The plants will likely run for 15 years after the conversion, initially as baseload plants, but as renewables come online in Alberta, more as peaking plants, Farrell said.

    About 6,000 MW is expected to be built in Alberta and Saskatchewan in the next 15 years, according to Farrell. TransAlta will offer three wind projects into solicitation the provinces will hold later this year at a cost of about $1.5 million, she said.

    TransAlta is in talks with the Alberta government about building the Brazeau pumped storage facility that could range from 600 MW to 900 MW, Farrell said. The project is expected to cost $1.3 billion to $1.8 billion.


    Average wholesale power prices in Alberta jumped 22% in the first quarter to C$22/MWh from C$18/MW a year ago, and prices in the Pacific Northwest increased 24% to $21/MWh from $17/MWh, according to TransAlta.

    For the rest of the year, TransAlta expects power prices in Alberta to be "slightly better" than 2016 because of higher natural gas prices and incremental carbon costs that increase the variable cost of generation.

    However, prices can vary based on supply and weather conditions.

    Prices in the Northwest will be lower in the second quarter due to a strong hydro season, TransAlta said, noting that third and fourth quarter wholesale prices are expected to be similar to last year.

    TransAlta's energy marketing segment lost C$4 million in operating income in the first quarter, compared with a $22 million gain a year ago. The company lowered the expected contribution from its energy marketing segment to C$60 million to C$70 million for the year, below the company's initial target of C$70 million to C$90 million. Power markets have "normalized" in the second quarter, Farrell said.

    At the end of the first quarter, TransAlta said it had hedged 86% of its capacity at average prices for its short-term physical and financial contracts at about C$45/MWh in Alberta and $45/MWh in the Pacific Northwest.

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    Origin stuns industry with record low price for 530MW wind farm

    Origin Energy has set a stunning new benchmark for renewable energy off-take deals in Australia – and sounded the alarm for energy incumbents – after committing to a long-term power purchase agreement of below $60/MWh for the 530MW Stockyard Hill Wind Farm in Victoria.

    Under the terms of the deal, Origin will sell Stockyard Hill Wind Farm – Australia’s largest wind development – to Chinese company and wind turbine manufacturer Goldwind for $110 million.

    At the same time it has agreed to buy all of the power generated by it, and the associated Renewable Energy Certificates, for less than $60/MWh, from the commencement of operations in 2019 to 2030.

    RenewEconomy understands that the strike price for the wind farm output is “well below” $60/MWh and closer to $50/MWh than $60/MWh.

    As such, it sets a new benchmark for renewable energy prices in Australia, and its impact should not be underestimated. It is, after all, around half of the wholesale price and comparable to what could be bought directly from a brown and coal fired generator.

    It compares with the AGL deal to pay just $65/MWh for the output of the Silverton wind farm in the first five years, which beat the previous low price of  $73/MWh price struck in the ACT wind auction for the Hornsdale wind farm, although that price was fixed for 20 years, with no inflation uplift.

    Origin Energy CEO Frank Calabria says it indicates just how fast Australia’s renewable energy transition is unfolding.

    “Through our deal with Goldwind, Origin has been able to add a substantial amount of new renewable energy to our portfolio at a market leading PPA price.

    “And, as Stockyard Hill is in Victoria, this will help to cover a large portion of the load of the recently retired Hazelwood Power Station,” Calabria said.

    “As Origin looks to a future where renewables will dominate Australia’s energy supply, we are in a very strong position to build one of the nation’s lowest cost renewables portfolios.”

    Origin has signed a slew of PPAs with wind and solar farms in recent months, including the 110MW Darling Downs solar farm – located adjacent to its large gas generator – which it sold to APA last week. It has also signed contracts for three other solar farms – including the 220MW Bungala solar farm in South Australia and has two more large contracts in the pipeline.

    Origin, like the other retailers, are expected to shoulder the bulk of the efforts to meet Australia’s renewable energy target of 33,000GWh by 2020, which roughly equates to around 23.5 per cent of total demand. Origin is indicating that it can go further, courtesy of the plugging cost of wind and solar.

    “By 2020, we expect that renewables will be more than 25 per cent of the energy in our generation mix, allowing us to deliver the cleaner energy our customers want,” Calabria said in a statement.

    “Last year, we announced our ambition to add up to 1,500MW of new renewables by 2020, and we are now just 300MW short of that target.”

    Last week, the Clean Energy Regulator said that despite fears to the contrary, the RET was likely to be met, given the huge rush of contracted projects in the last six months, particularly in solar. It says there may be enough commitments made by the end of the year to meet that target.

    Some doubt that, worrying about the retailers’ appetite beyond the current rush of projects, but Origin’s comments appear to allay those fears.

    While recent investment has been centred around large scale solar farms, whose costs have fallen dramatically in the last year, the Stockyard Hill deal shows there are still great deals to be found in wind energy, and wind energy costs are still falling.

    It also suggests that Origin will have to update this graph to the right that it released last week, which highlighted the plunging cost of wind and solar PPAs in Australia over the last few years.

    Note how Origin make it clear that renewables are the lowest cost new build generation today -it’s not coal, it’s not gas, and it’s certainly not nuclear.

    Indeed Origin, like AGL Energy, has now dismissed the idea that gas fired generation can play any significant role in the energy transition, with Calabria telling investors last week that only gas peaking plants will play a role, and that they will be “even peakier” than they have been, suggesting they will be used less and less as more wind and solar and more storage is installed.

    The Stockyard Hill deal, announced on Monday, remains subject to regulatory approvals and still hinges on Goldwind achieving financial close of the project.

    That financing shouldn’t be an issue, given that Goldwind is one of the biggest  wind turbine manufacturers in the world and is currently building the 175MW White Rock wind project in Barnaby Joyce’s electorate, and is building it without a contract and on a merchant basis.

    Environment Victoria’s mark Wakeham said it was clear that the finance industry had decided that renewable energy was the future, but warned that deployment would grind to a halt unless the Turnbull government extended the national renewable energy target and the Victorian government legislated the state renewable energy target.

    “To meet our national 2020 renewable energy target, all projects will need to be underway this year or next. After that, investment in renewable energy projects could fall off a cliff without longer-term targets.”

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    China installed 7.21GW of solar in Q1 2017, curtailment issues remain

    The country’s cumulative deployment stood at 84.63GW by the end of Q1. Credit: United PV

    China added 7.21GW of solar PV in the first quarter of the year, roughly 70MW more than in Q1 2016, according to figures from China’s National Energy Administration (NEA).

    Of this capacity, 4.78GW were utility-scale solar and 2.43GW were distributed PV installs.

    However, NEA noted continued grid constraints and curtailment of solar energy generation in several states particularly:

    Xinjiang 39%
    Gansu 19%
    Ningxia 10%

    The country’s cumulative deployment stood at 84.63GW by the end of Q1, of which 72GW is utility-scale. Last year, China added 34.24GW.

    Beijing-based Asia Europe Clean Energy Advisory (AECEA) released a chart showing that demand is likely to stay strong until a feed-in tariff (FiT) deadline is reached. After this levels of deployment levels remain relatively uncertain.

    Last year, FiT cuts were proposed for 2017 and then this year China even started trialling a green energy certificate trading scheme as it looked to reduce its exposure to FiT payments.

    China’s latest five-year plan endorses a proposed target of 110GW by 2020, which last year was reduced from 150GW, partly as a result of the prevailing curtailment issues at some sites in western provinces.

    See the recent Technical Paper from AECEA's Frank Haugwitz on ‘China’s 13th Five-Year Plan for solar – a look at 2017 and beyond’. Haugwitz unpicks the five-year plan and assesses the country’s chances of surpassing 100GW of capacity this year.

    China Q1 solar output surges 80pct on year
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    Wind turbine maker Vestas beats profit expectations, maintains guidance

    The world's biggest wind turbine maker Vestas posted better than expected first-quarter operating profit on Friday, citing higher sales and tight cost control while sticking to its full-year revenue and profit margin guidance.

    Deliveries were up nearly 30 percent year on year in the first quarter, with Chief Executive Anders Runevad pointing to a U.S. tax credit scheme that boosted orders last December.

    In what is normally a weak quarter for the Danish company, operating profit rose to 211 million euros ($232 million), beating the consensus of 183 million forecast in a Reuters poll of analysts.

    "This is really because the margins on delivered projects has been better than expected and they have managed to hold back on costs," said Sydbank anlayst Jacob Pedersen.

    The EBIT margin almost doubled to 11.2 percent from 5.8 percent in the first quarter of 2016.

    "We have a very low fixed capacity cost base that has a big impact on the EBIT margin," said Vestas finance chief Marika Fredriksson.

    The company jumped to the top of the U.S. wind market last year in terms of installed capacity, supplying 43 percent of the 8.2 gigawatts of capacity connected to the U.S. power grid.

    However, Vestas expects fewer orders from its biggest market this year as a five-year extension of the PTC tax credit scheme in late-2015 could ease pressure on potential U.S. customers to land projects quickly.

    "Last year a lot of PTC components came very late in the year. For natural reasons we see that the market takes a bit of a breather this year," Fredriksson said, adding that the company maintained its full-year guidance.

    Vestas is forecasting 2017 sales of 9.25 billion euros to 10.25 billion euros and an EBIT margin of 12-14 percent.

    "Given the solid start to the year and the higher than expected EBIT margin delivered in Q1, we see the low end of the guidance as conservative, leaving room for a positive revision later in the year," said Jyske Bank analyst Janne Kjaer.
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    De Beers pilots plan to store carbon dioxide in diamond-bearing rock

    Anglo American's diamond unit De Beers is piloting a project to capture carbon in the rock from which diamonds are extracted to offset harmful emissions, the company said. As planet-warming carbon emissions rise globally, many countries have adopted or proposed a form of tax on emissions and companies in the mining and manufacturing sector are concerned that this will hit their future profits.

    South Africa proposed a tax of 120 rand ($9) per tonne on carbon emissions in 2012 but postponed it on worries that it would hurt profits already eroded due to a global commodities slump and higher electricity tariffs. De Beers said it aimed to remove as much carbon as it emits within five to ten years, and will select one of its mines for the project due to start in 2019.

    "This project offers huge potential to completely offset the carbon emissions of De Beers’ diamond mining operations," project leader and geologist Evelyn Mervine said. De Beers wants to store carbon dioxide in the kimberlite rock once all the diamonds have been removed. The kimberlite turns into a solid compound when mixed with carbon dioxide.

    Mervine said the carbon dioxide can be locked away in the kimberlite "for thousands to millions of years."

    Currently, carbon dioxide can be stored deep underground. But environmental activists say there are uncertainties over the long-term implications of underground or submarine storage and there is still the risk CO2 might leak into the atmosphere. De Beers estimates it would cost $10 to $20 per tonne of carbon dioxide, which could reduce with new technology compared with carbonation plants, which cost around $50 to $100 per tonne of carbon dioxide.

    The project aims to accelerate the process and offset man-made emissions through different technologies including breaking up the rocks to increase the surface area and using special microbes, Mervine said.

    "This is likely to be one of the easiest and least costly methods of carbon dioxide disposal," Stuart Haszeldine, professor of carbon capture and storage at Edinburgh University said.

    However, Haszeldine said difficulties could include safeguarding against toxic effluent and ensuring that all of the kimberlite stored in vast tailings dams are able to react with the carbon dioxide.

    De Beers launched initial studies on the project in 2016 at its Voorspoed mine in South Africa's Free State province.

    If successful, De Beers plans to roll out the technology to its other operations.

    "This project could play a major role in changing the way not only the diamond industry, but also the broader mining industry addresses the challenge of reducing its carbon footprint," De Beers Chief Executive Bruce Cleaver said.
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    ChemChina gets around 82 percent of Syngenta in $43 billion deal

    ChemChina has won around 82 percent support from Syngenta shareholders for its $43 billion takeover of the Swiss pesticides and seeds group, China's biggest foreign acquisition to date, the two companies said on Wednesday.

    Definitive interim results of the tender showed around 82.2 percent of Syngenta shares and depository receipts had been offered, slightly above the level the partners had announced last week when ChemChina clinched the deal.

    An additional acceptance period starts on Thursday.

    The takeover announced in February 2016 was prompted by China's desire to use Syngenta's portfolio of top-tier chemicals and patent-protected seeds to improve domestic agricultural output.
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    Israel Chemicals first quarter revenue, profit up

    Fertiliser producer Israel Chemicals (ICL) reported on Wednesday higher quarterly net income and sales, buoyed by the company's speciality solutions division and growth in potash sales.

    ICL, which produces about a third of the world's bromine and is the sixth-largest potash producer, has sought to counter low commodities prices by diversifying into products such as advanced additives and speciality fertilisers.

    The company reported a modest sequential recovery in potash prices and year over year volumes.

    Revenue for the first quarter rose to $1.3 billion from $1.27 billion a year earlier and net income rose to $68 million from $66 million, in line with estimates.

    ICL, which has exclusive rights in Israel to mine minerals from the Dead Sea, also declared a quarterly dividend of $34 million.

    Starting last year, ICL's dividend payout ratio will comprise up to 50 percent of its adjusted annual net income, compared with a prior policy of up to 70 percent.

    Potash sales rose to 1 million tonnes from 917,00 tonnes a year earlier, even though production dropped to 1 million tonnes from 1.3 million tonnes.

    Chief Executive Asher Grinbaum said the company benefited in the first quarter from "the good performance of our speciality solutions business, particularly the bromine business, which was supported by the efficient pricing strategy and by reducing costs in the business unit."

    ICL, a subsidiary of conglomerate Israel Corp, also said it filed on Wednesday an "investment treaty claim" against the government of Ethiopia, where the company has recently closed a potash project.

    ICL said the Ethiopian government had imposed an "illegal tax assessment" against it and failed to provide it with infrastructure support.
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    K+S vows new Canadian mine will not undermine prices

    German potash miner K+S vowed it would not have to undercut rivals on price as it brings 2 million tonnes of new potash capacity to the North American market next year.

    Faced with the gradual depletion of its domestic reserves over the next 35 to 40 years, K+S built its new Bethune mine, previously known as Legacy, in western Canada even as many experts describe the North American market as oversupplied.

    "We will not undermine our price levels from the additional volumes that we will get out of Bethune," Chief Executive Norbert Steiner, who will hand over to finance chief Burkhard Lohr this week, told analysts during a call to discuss quarterly results.

    "Our customers have asked us to ship more than we were able to do, this is now the time where we can sell more to them... This will not be pushed into the market with, let’s say, brutality, we wanted to maintain decent price levels and so far we have never undercut price levels in the past and we will continue to act in this way," he added.

    He said while output capacity will be ramped up to 2 million tonnes per year in 2018, the company expects actual output to be in the 1.7 to 1.8 million tonne range.

    Market researchers expect 2018 demand for potash of 66 million tonnes amid global output capacity of 84.4 million tonnes.
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    Bayer to sell Liberty crop protection brands to get Monsanto deal passed

    Bayer  has agreed to sell its Liberty herbicide and LibertyLink-branded seeds businesses to win antitrust approval for its acquisition of Monsanto, it said on Monday.

    The divestment of the two global brands, a requirement imposed by South Africa's Competition Commission on Sunday, will account for the bulk of asset sales worth about $2.5 billion which need to be made to satisfy competition regulators looking at the $66 million Monsanto deal, sources close to the matter have said.

    "Bayer has agreed to these conditions and is evaluating how best to execute the imposed divestiture," the German group said in its statement.

    It would not comment on revenues, number of affected staff or the value of the assets.

    While South Africa is a relatively small market for the two global agricultural supplies giants, the move marks the first time for Bayer to acknowledge it has to sell the two related Liberty brands, which compete with Monsanto's Roundup weed killer and Roundup Ready seeds.

    The planned divestitures are also widely expected to be required by competition regulators in larger jurisdictions, such as the United States, where approval has been requested, and the European Union, where an application for approval has yet to be made.

    "Bayer will continue working with regulators globally with a view to receiving approval of the proposed transaction by the end of 2017," the company said, reaffirming an earlier goal.

    LibertyLink seeds, mainly used by soy, cotton and canola growers, are an important alternative to Roundup Ready seeds for farmers suffering from weeds that have developed resistance to the Roundup herbicide, also known as glyphosate.

    The spread of Roundup-resistant weeds in North America has been a major driver behind Liberty sales.

    Monsanto, for its part, has responded by combining Roundup with older weed killer dicamba to finish off the Roundup-resistant weeds, while selling farm crops that withstand the plant-killing effects of both compounds.

    As part of a global investment drive worth hundreds of millions of euros to double the global output capacity of Liberty since 2013, Bayer has built a production plant in Mobile, Alabama, to complement an existing facility in Frankfurt, Germany.
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    Precious Metals

    Driller says past quarter is 'most promising start to any fiscal year ever'

    Driller says past quarter is 'most  promising  start  to  any  fiscal  year  ever'

    West African based drilling company, Geodrill (TSE:GEO), says Q1 revenue increased by 20% and metres drilled were up by 7% compared to Q1 2016.

    Geodrill stock was up 1.18% to 2.15. It's 52-week range is $1.10 to $2.82.

    “Building on a highly successful 2016, this year has begun in earnest with significant multi‐rig contracts with top tier producers following a successful bidding season," says Dave Harper, President and CEO of Geodrill Limited.

    The company says it invested $1.8M into CAPEX. The company won new contracts with Ashanti Gold in Ghana and in Guimbi Gold SARL in Mali.

    "The first quarter has been very busy preparing and mobilizing additional rigs and equipment, investing significantly in safety and skills training to meet the increased activity. As a result, costs increased in the early part of the quarter, however costs and margins normalized by quarter end. This has been our most promising start to any fiscal year ever."

    Last year was not a good year for drillers overall. According to a report by SNL Metals and Mining, 2016 exploration budgets at the 1,580 companies covered by the study totalled $6.9 billion, the lowest in 11 years.
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    Precious metals streaming pioneer Silver Wheaton morphs into Wheaton Precious Metals

    Following its annual general meeting on Wednesday, shareholders elected to change the name of the pioneer of the precious metals streaming model, Silver Wheaton, to Wheaton Precious Metals.

    The change of name is effective immediately, and the company’s wholly owned subsidiary, Silver Wheaton(Caymans), where it takes delivery of precious metals in return for providing upfront capital, will change its name to Wheaton Precious Metals International.

    "Changing our name to Wheaton Precious Metals marks our evolution from a pure silver streaming company to a diversified precious metals streaming company. Since 2004, the company has focused on building the best portfolio of precious metals streams underpinned by low-cost miningoperations.

    “Starting in 2013, the opportunities have been more focused on gold, and thus, our portfolio is now relatively balanced between silver and gold. We are excited about this new identity, which better reflects our underlying operations and still respects our history," president and CEO Randy Smallwood said in a statement Wednesday.

    It is expected that the company will start trading under the symbol ‘WPM’ on the TSX and NYSE on May 16.
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    Petrol vehicle demand growth boosting palladium price

    Palladium reached its most expensive price in 15 years last week, rallying to within $100/oz of the price of platinum, with GFMS expecting it to overtake platinum.

    Speaking to Thomson Reuters' Jan Harvey, CPM GroupMD Jeffrey M Christian attributed palladium’s storming start to the year to its increased use in petrol-driven vehicles.

    Christian said that the diesel vehicle market, where platinum features strongly, is facing headwinds.

    The tailwinds are behind petrol cars, the primary type sold in the two largest markets of China and the US.

    Diesel’s loss of market share and ongoing substitution by palladium or selective catalytic reduction catalysts that convert nitrogen oxides into nitrogen, in place of platinum, have meant fabrication demand growth.

    Additionally, investors have caught on to this and shifted their buying away from platinum towards palladium.

    The palladium price had not risen too far, too fast and he expects higher palladium prices in the longer term after a calming in the middle of this year.

    A palladium spike as high as $865/oz would not surprise him, given the speculative interest being shown.
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    Franco-Nevada impresses with earnings surprise; lifts dividend

    Canadian gold royalties and streaming firm Franco-Nevada Corp has reported better-than-expected first-quarter earnings on the back of strong output in the period, prompting it to revise upwards its quarterly dividend for the tenth consecutive year since it went public in 2007.

    The Toronto-based company reported net earnings of $45.6-million, or $0.26 a share, which was a 52% increase when compared with the same period of 2016.

    Stripped of special items, Franco-Nevada reported headline earnings of $0.25 a share, beating average Wall Street analyst forecasts calling for adjusted earnings of $0.22 apiece.

    Attributable output came in at 132 000 gold equivalent ounces (GEOs), which represented a new record and a 23.4% increase year-over-year.

    Franco-Nevada noted the strong performance of its Guadalupe-Palmarejo contract, which generated $23.7-million in revenue.

    The company now has 339 assets – 107 producing, with 41 of the 107 tied to precious metals.

    Franco-Nevada reconfirmed its full-year guidance, which calls for 470 000 GEO to 500 000 GEO, with oil and gasrevenue totalling $35-million to $45-million.

    The company also announced a $0.01 increase to its quarterly cash dividend, which now stands at 0.23 a share per quarter.

    Franco-Nevada had $1.6-billion in available capital as of March 31, comprising $356-million in working capital, of which $283-million is in cash, $117-million is in marketable securities and $1.1-billion of available credit falls under its credit facilities. The company has also extended the term of its $1-billion credit facility by about 16 months to March 22, 2022.
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    Silver Wheaton lifts bottom line 49% as streaming volumes jump

    Canadian precious metals streaming firm Silver Wheaton has reported bumper profit for the first quarter ended March, as precious metals received in the period rose and prices increased.

    The Vancouver-based firm reported net earnings of $61-million, or $0.14 a share, compared with $41-million, or $0.10 a share, for the comparable period in 2016, representing an increase of 49%, or a 36% increase on a per share basis, the company reported after market close Tuesday. Earnings were in line with analyst forecasts, but revenue missed the average estimate calling for $214.16-million.

    Revenue for the period was 6% higher year-on-year at $198-million, of which 46% was attributable to the sale of silver, and 54% was attributable to the sale of gold.

    In the first quarter, Silver Wheaton's gold output and sales volumes climbed over 35% relative to the first quarter of 2016, putting the company on track to meet or exceed full-year gold production guidance.

    "For the third quarter in a row, revenue was roughly balanced between silver and gold, further supporting the proposed name change to Wheaton Precious Metals," president and CEO Randy Smallwood stated.

    First quarter silver production and silver sales were impacted by strike action at Primero Mining’s San Dimas mine, in Mexico.

    Attributable output in the quarter totalled 6.5-million ounces of silver and 84 900 oz of gold, compared with 7.5-million ounces of silver and 61 900 oz of gold a year earlier, with silver output having fallen 14% and gold production having increased 37%.

    On a silver-equivalent basis, attributable output was 12.5-million silver equivalent ounces (SEOs), flat when compared with that of a year earlier.

    SEO sales in the quarter were 11.4-million, 10% down when compared with 12.7-million SEOs a year earlier.

    The average realised price per silver ounce sold was 19% higher, at $17.45, in the first quarter and $1 208/oz of gold, representing an increase of 3%, compared with the first quarter of 2016.

    The board has declared a dividend in the amount of $0.07 per common share, in line with the company’s dividend policy whereby the quarterly dividend will be equal to 20% of the average of the operating cash flow of the previous four quarters.

    Silver Wheaton believes that the $115-million of cash and cash equivalents as at March 31, combined with the $900 000 available under the $2-billion revolving facility and ongoing operating cash flows positions the company well to fund all outstanding commitments and known contingencies, as well as providing flexibility to acquire further precious metal stream interests.

    Silver Wheaton has guided for 2017 output of 28-million silver ounces and 340 000 gold ounces. Over the next five years, the company expects attributable output to be about 29-million ounces of silver and 340 000 oz of gold a year. Excluded from the guidance, the company retains potential upside from any production from Barrick Gold’s Pascua-Lama project, straddling the Argentina/Chile border, or from Hudbay Minerals’ Rosemont project, in Arizona.
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    Barrick may face 'negligence' charges over latest spill at Veladero — report

    Barrick Gold could have prevented the third spill of cyanide solution in 18 months at its Veladero mine in Argentina had it replaced pipes as ordered by local authorities earlier, a judge said.

    According to El Economista (in Spanish), the Canadian gold miner missed deadlines on three orders from San Juan province authorities, where Veladero is located, including replacing the pipes that decoupled in March.

    Judge Pablo Oritja said those unfulfilled orders led to the ongoing investigation into the company's past negligence he’s overseeing, which may end with world's No.1 gold company paying a fine, restricting operations at Veladero, or both.

    Sanctions could include a fine and restrictions to operating Veladero.

    Cortija may also issue other charges if he determines the cyanide spill posed harm to people or the environment, the article says.

    That probe, along with the provincial government's review of Barrick's mine development plan, could thwart the miner’s plans of bringing Veladero back to normal operations by June.

    The probe may also interfere with Barrick’s sale of a 50% interest in Veladero to Shandong Gold Group, announced last month.

    Veladero resumed operations in October last year, after having been suspended for almost a month following a spill containing cyanide, the second such incident in just over a year.

    Earlier in the year, the Toronto-based miner had to pay a 145.7m pesos fine (about $9.8m at the time) over a previous cyanide spill at the same mine.

    When Barrick announced such fine, it said it had undertaken a plan to strengthen controls and safeguards at the mine, including increased water monitoring.

    Veladero, one of the largest gold mines in Argentina, produced 544,000 ounces last year. Proven and probable mineral reserves as of December 31, 2016, were 6.7 million ounces of gold, according to the company's website.
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    All London gold vaults to publish physical holdings from this summer: LBMA

    From this summer all London gold and silver vaults will publish physical inventory holdings, with platinum and palladium to follow at a later date, the London Bullion Market Association and London Precious Metals Clearing Ltd said in a joint statement Monday.

    The data will only include physical metal held within the London vaults and does not include physical precious metals holdings readily available at short notice in other secure overseas vaulting facilities, the statement said.

    Physical holdings of precious metals held in London vaults underpin the gross daily trading and net clearing in the city.

    London, for the time being, remains the world's largest gold trading hub, with $18.1 billion of metal cleared on average each day in March, according to the LBMA.

    "Publication of physical holdings represents a further step towards improved transparency of reporting for the London precious metals market, in line with the recommendations of the Fair and Effective Markets Review," the statement added.

    The next step forward will be trade reporting.

    "The collection of trade data will add transparency to the market and provide gross turnover for the Loco London market. Previously gross turnover had been calculated from one-off surveys or estimated from the clearing statistics," it added.

    Ruth Crowell, chief executive of the LBMA, said: "We are delighted that the Bank of England and the commercial vaults in London have agreed to support the publication of the vault holdings. This is an important step towards greater transparency and will provide further evidence as to the size and importance of the precious metals market in London."
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    Precipitous platinum price plunge putting entire industry at risk

    This week’s platinum price plunge to as low as $893/oz has put the entire platinumindustry at risk, making it essential that steady hands be placed on the tiller to ensure that a national patrimony is protected.

    While the entire industry has been accepting a lower-for-longer price environment, few will be able to sustain the latest price collapse.

    The expectation along many industry corridors has been that the price trend would more likely head upwards, and begin getting closer to the gold price’s $1 200/oz range.

    After all, platinum is rarer than gold, which fills umpteen central bank vaults and is mined in countries from Argentinato Zimbabwe.

    As long ago as February 2012, former Anglo American Platinum (Amplats) CEO Neville Nicolau was unequivocal about a platinum price $1 900/oz being essential to maintain long-term production.

    But instead, the cost-hit industry is $1 000/oz shy of that price level and deepl, labour-intensive mines are operating at dollar prices that not even a weak rand can sustain.

    Even before the latest decimation of the price, regular reference had been made to half of the industry being under water, and analysts warned in Business Times on Sunday that even industry consolidation through mergers and acquisitions was unlikely to save the day.

    While Amplats’ exceptional opencast Mogalakwena mine, in Limpopo, stands out as an operation likely to keep its head above water even at these low prices, “something will have to change dramatically”, the head of another opencast platinumoperation told Mining Weekly Online last month, well ahead of the latest devastating price crash.

    The Bank of America Merrill Lynch (BofAML) told the Prospectors and Developers Association of Canada (PDAC) convention, in Toronto, earlier this year that the platinumprice would rally if platinum producers cut supply by 300 000 oz to 400 000 oz.

    BofAML charged, at the well-attended PDAC, that the blame for the lack of supply discipline lay especially at South Africa’s door.

    “As an industry, we need to go for it. We must be bold about cutting supply. The price is telling us that we’re in oversupply and we’ve got to react,” Lonmin CEO Ben Magaracommented to Mining Weekly Online on the supply issue last month.

    But not enough has been done and the days of platinum and gold being joined at the hip are long gone.

    Embattled platinum, which is never consumed, needs ongoing marketing, with producers needing to invest in the promotion effort – and also to ensure that the metal does not continue to be demonised by the anti-diesel hype, Royal Bafokeng Platinum (RBPlat) CEO Steve Phiri told investors, unionists, analysts and journalists earlier this year.

    “You’ve got to market and market and market,” the RBPlat CEO added in a video interview with Mining Weekly Online straight afterwards.

    Phiri spoke of the International Platinum Association canvassing Eurozone authorities about the efficacy of platinum-catalysed diesel engines fitted with gadgets to halt nitrogen oxide (NOx) emissions to counteract the fallout from Volkswagen's diesel emissions scandal in the US.

    Anglo American did a great job promoting the platinum-using hydrogen fuel cell at Davos and mayors of the world’s biggest cities, led by the three times New York mayor Michael Bloomberg, have been pushing hard for the clean air around major cities that platinum can bring.

    The World Platinum Investment Council has been providing greater platinum investment opportunity, and there have been many calculations that point to a deficit of primary supply – and all the marketing efforts must continue and be intensified.

    But, in the meantime, the platinum price is stubbornly refusing to turn upwards, and was still down in the $910/oz doldrums at the time of going to press.
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    Base Metals

    Chinalco accident.

    Image title
    First reported as 1.6m mt as a red mud spill.
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    Workers at BHP's Cerro Colorado mine in Chile plan 24-hour walk-off

    Workers at BHP Billiton's Cerro Colorado copper mine in Chile will strike for 24 hours in the coming weeks to protest recent layoffs and the company's general attitude toward miners, the main union told Reuters on Wednesday.

    Earlier on Wednesday, workers briefly blocked the access road to the mine for the same reasons, and later met with the mine's manager.

    The recent protests come roughly a month and a half after a fractious 43-day strike at BHP's much larger Escondida copper mine in Chile, and just hours after BHP officially started a sale process for Cerro Colorado, one of its smaller operations in South America.

    BHP did not immediately respond to requests for comment.

    "We let them know that the mine is going to be shut for 24 hours in a rejection of the company's attitude ... It won't be very far in the future, within the coming weeks," union president Marcelo Franco told Reuters.

    "We think there's a clear anti-union message," he added.

    Among the workers' various complaints is that BHP is transporting workers to the mine earlier in the morning than previously agreed upon and failing to pay severance to employees.

    Cerro Colorado, which together with the Spence mine forms BHP's Pampa Norte division, produced 74,000 tonnes of copper in 2016.

    Banking sources have named Chile's Empresas Copec SA and Canadian companies such as Lundin Mining Corp as possible buyers for the deposit.
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    How would you like your aluminium? Green or black?

    Aluminium is one of the materials benefiting from the greening of the world's economy.

    Lightweight and durable, it has been making steady inroads into the transportation sector in particular and enjoys one of the strongest usage profiles of any industrial metal.

    But what promoters such as the Aluminium Association dub "the miracle metal" has a dirty little secret.

    To produce the stuff requires a lot of electricity and in many parts of the world that electricity is generated by coal, every environmentalist's bogey fossil fuel.

    Aluminium's split eco-personality, green in its applications, a lot darker in its production, has been exposed by China's inclusion of the metal in the list of industries targeted for smog-busting production cuts during the winter heating months.

    The resulting supply uncertainty has elevated aluminium to the best performer among the major industrial metals traded on the London Metal Exchange this year.

    But that might be just the start of the price implications.

    Some of the world's largest producers of aluminium are now starting to push environmental sustainability as a market differentiator.

    Consumers may soon have a choice of buying green, low-carbon aluminium or "black" metal with a higher carbon footprint, raising the prospect of a two-tier market structure.


    Norwegian producer Norsk Hydro aims to be carbon neutral from a life-cycle perspective by 2020, the company's head of strategy and analysis, Kathrine Fog, told CRU's World Aluminium Conference in London last week.

    There are plenty of levers to be pulled in achieving that aim, ranging from the production process to recycling, but the clue to Hydro's real green advantage is in the company's name.

    Its smelters use hydro-electric power to make aluminium, which translates into carbon emissions at one fifth the scale of those generated by coal-derived power, according to the company's website.

    So too do those of Russian giant Rusal. It has closed older inefficient plants and upgraded others to slash direct emissions, its head of research Denis Nushtaev said at the same conference.

    Rusal is aiming to achieve a target of seven tonnes of carbon dioxide to a tonne of aluminium by 2025, including both power and alumina inputs.

    Not to be outdone, Rio Tinto's vice president for aluminium sales and marketing, Tolga Egrilmezer, said his company is aiming for a four-to-one tonne CO2-aluminium ratio.

    All three companies are backers of the new Aluminium Stewardship Initiative (ASI), which is in the process of creating sustainability benchmarks for the aluminium supply chain from bauxite mining to recycling.

    And all three see "sustainability" as "a market driver", to quote Rio, as major users include carbon footprint and environmental performance in their buying criteria.

    The ASI's membership includes automotive heavyweights such as BMW, Audi and Jaguar Land Rover and consumer groups such as Coca-Cola, Nespresso and Apple.


    All aluminium smelters generate a combination of air and solid waste pollutants but it is the power source that is the real arbiter of the carbon profile.

    Which is a problem for China, now the world's largest single aluminium producer and one which relies heavily on coal as a core energy input.

    CRU's Rebecca Zhou told the conference that a massive 88 percent of all the country's production was powered by coal last year.

    Which is why, of course, Beijing policymakers have made aluminium a key target for curtailments in the region around the city over the next winter heating season, which runs from November to March.

    Smelters and alumina refineries will all be forced to curtail output by at least 30 percent and plants producing the carbon anode used in the smelting process by 50 percent.

    Attached Files
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    BHP starts process to sell its Cerro Colorado copper mine

    BHP Billiton said on Wednesday it has started a sales process to potentially divest its Cerro Colorado copper mine in Chile, one of its smaller operations in South America.

    "The evaluation is at an early stage, no final decisions have been made and there is no guarantee that a transaction will result," BHP said in a statement emailed to Reuters.

    Cerro Colorado is located in Chile's Tarapacá Region and yielded 77,000 tonnes of copper in fiscal 2016.

    BHP's flagship mine, Escondida, also in Chile, yields more than 10 times that amount annually.

    Banking sources have named Chile's Empresas Copec SA COP.SN, a conglomerate that has voiced interest in diversifying into copper, and Canadian companies such as Lundin Mining Corp (LUN.TO), as possible buyers.

    BHP has earmarked large long-life copper mining as a key growth sector in years to come as expansion work in its iron ore mining business in Australia slows down.
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    Philippines Q1 nickel ore output falls 51 pct on rains, crackdown

    Nickel ore output in the Philippines, the world's top supplier, fell 51 percent in the first quarter due to rains and the suspension of mine operations, government data showed on Wednesday.

    Of the country's 28 nickel mines, 21 reported zero output during the period, the Mines and Geosciences Bureau said. Unprocessed nickel ore shipped in the January to March period totalled 1.71 million dry metric tonnes (DMT) compared with 3.46 million DMT a year ago, the data showed. Most of the Philippines' output is shipped to China where it is used to make stainless steel.

    Most nickel mines are in the southern Philippines where monsoon rains and rough seas occur between October and March, making it difficult for miners to operate and load ships. Other mines are also under maintenance and care, the bureau said.

    At least eight nickel mines have been suspended since last year for environmental breaches under a crackdown launched by former Environment Secretary Regina Lopez. She was ousted last week by a panel of lawmakers that confirm appointments.

    President Rodrigo Duterte has named former military chief Roy Cimatu as Lopez's replacement, a move welcomed by miners but opposed by environmental groups who said Cimatu does not have a track record in environmental conservation.

    Cimatu told Reuters on Tuesday it was possible to strike a balance between allowing mining and protecting natural resources, and he wanted time to assess the mine closures ordered by his predecessor.

    In terms of other metals, the Philippines' gold output rose 5 percent to 6,167 kilograms, while copper concentrate production fell 22 percent at 72,194 DMT, the bureau said.
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    Red Kite says copper scrap supply has tightened

    Supply of copper scrap has tightened recently after growing in the first quarter, while disruptions at major mines earlier in 2017 are hitting availability of the metal, the co-founder of metals hedge fund RK Capital Management, said on Wednesday.

    Crimped supply of copper, used in everything from wiring to construction, would drag on prices that have eased this year after surging in 2016.

    "We are hearing that scrap availability has tightened up. Some of the disruptions to mine supply in the first quarter will be felt in metal supply now," David Lilley said at the LMEWeek Asia conference in Hong Kong.

    A strike at the world's biggest copper mine in Chile and a dispute over mining rights in Indonesia hit copper markets earlier in the year.

    Meanwhile, Lilley said that it was "hard to be optimistic" on the outlook for nickel prices given ample inventory throughout the supply chain and the resumption of exports from places such as the Philippines.

    At least eight nickel mines in the Philippines have been suspended since last year for environmental breaches under a crackdown launched by former environment secretary Regina Lopez. But she was ousted last week by a panel of lawmakers that confirm appointments.

    "At some stage, the price will do its job of rationing supply whether that is at $9,000 (per ton), $8,500 or $8,000, I'm not sure, somewhere in that range," said Lilley.

    International nickel prices stood around $9,225 per ton on Wednesday.

    RK Capital Management is often referred to as Red Kite.
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    Duterte's old soldier seeks middle path to settle Philippine mining malaise

    The new Philippines environment minister on Tuesday said he wants to balance conservation and mining interests, signaling intent to settle a bitter dispute that has been one of the biggest economic conundrums of Rodrigo Duterte's presidency.

    Former military chief Roy Cimatu takes over in the thick of a crisis for mining firms hit by a sweeping campaign of shutdowns and suspensions at the hands of predecessor Regina Lopez, a staunch environmentalist who was dismissed last week by lawmakers scrutinizing her appointment.

    The Philippines is the world's top nickel ore supplier and markets will be closely watching Cimatu's early moves in a post he had no idea he would be offered.

    He admitted his knowledge and experience of mining and the environment was limited, and he needed time to get familiar with the task in hand before deciding what comes next.

    "I will not take any action on things that I haven't seen or read or reviewed. I will look at them first," he told Reuters.

    Among those are 22 of 41 operating mines Lopez ordered closed in February, and her ban on open-pit mining.

    Her campaign won huge public support and the backing of the populist president, but that was not enough to see her spared by the Committee on Appointments.

    Green groups say that panel caved in to mining interests against the will of Filipinos, though several panel members rejected that, and said Lopez was blinded by her agenda and rode roughshod over regulations.

    Duterte has largely kept out of the mining controversy, which if not managed well risks upsetting elements of the rural poor who elected him, or unnerving investors key to his economic ambitions.

    His appointment of a retired soldier with scant knowledge of the role suggests he opted for someone he trusts to unravel arguably the biggest economic problem of his 10-month administration.

    Cimatu is "extraordinarily gifted for the task of balancing environmental concerns with mining operation concerns," said Duterte's spokesman, Ernesto Abella, adding that Duterte wanted Cimatu for his "objective point of view."


    Cimatu said it was possible to develop a mining industry while preserving the environment.

    "There are countries where mining contributes a lot to the economy and environmentalists are not screaming," he said.

    The 70-year-old former military comptroller is the latest addition to a Cabinet stacked with allies of Duterte from his university years or his two decades as mayor of Davao City.

    Cimatu was a regional brigade commander in the 1990s when Duterte was mayor and he played a key role in his 2016 presidential election campaign.

    He served as his liaison for issues involving the estimated 10 million overseas Filipino workers. Duterte had considered making the post a ministerial portfolio.

    When he was summoned to the presidential palace on Monday Cimatu thought it was to discuss support for Filipinos in South Korea amid tensions on the Peninsula.

    "All of a sudden I was pulled somewhere else, then soon after was appointed," he said.

    Cimatu said he admired the passion of Lopez and would seek her insight. Asked about speculation they might work together at the ministry, he said it was doubtful Lopez would want that.

    Lopez on Tuesday said she doubted she would even be asked.

    Cimatu's appointment has been opposed by environmentalists because of his inexperience, but miners are cautiously optimistic.

    Dante Bravo, president of nickel ore miner Global Ferronickel Holdings Inc, said Duterte may have picked Cimatu because he was a military man and could be "an effective enforcer" against environmental violations.

    Attached Files
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    Deal avoids strike at Collahuasi

    Miners in the 1,485-member union will receive no pay increase but each worker will get a one-time bonus

    The Collahuasi mine in Chile is the second largest copper mine in the world.

    A deal between workers and the companies that own the Collahuasi copper mine in northern Chile could mean labour peace at the often-picketed mine for the next three years.

    Under a labour agreement reached Friday, workers in the 1,485-member union will receive no pay increase but each worker will get a one-time bonus of 11 million pesos (US$16,400), along with an interest free loan, Reuters reported.

    The agreement starts in October, when the current contract expires, and will last until 2020. The mine, co-owned by Glencore and Anglo American, is the second largest copper mine in the world and one of Chile's largest, producing 506,500 tonnes of the red metal in 2016.

    The four-year deal reached in 2013 gave workers a 3.5% salary hike, a $31,900 bonus and a loan worth $6,000. Collahuasi miners staged a 24-hour walkout in 2015.

    Friday's agreement comes about six weeks after talks between striking workers at the Escondida copper mine in Chile and majority owner and operator BHP Billiton
    , ended March 23 with the parties failing to reach a deal and the main union choosing to return to work.

    The labour action at the world’s largest copper mine, which finished after 43 days, became the longest private-sector mining strike in Chile’s history.
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    Peru mine workers vote to approve June nationwide strike

    Peru mine workers vote to approve June nationwide strike

    Peruvian miners voted on Friday to approve a national strike in June to protest "anti-labor" government proposals, Ricardo Juarez, secretary general of the National Federation of Miners, Metallurgists and Steelworkers, told Reuters.

    Members of the federation, an umbrella group for hundreds of unions representing workers at some of the country's largest mines, had met in the country's capital, Lima, to vote on the measure. Peru is the world's second-largest producer of copper, zinc and silver, and the sixth-largest producer of gold.

    The strike is a protest "against the new labor rules that reduce workers' rights that the government is trying to impose," Juarez said.

    The group - whose members work at mines owned by companies including Barrick Gold Corp, BHP Billiton PLC and Newmont Mining Corp - will meet again in the first week of June to set a definitive date for the strike, Juarez said.

    The national strike would be the first under President Pedro Pablo Kuczynski, a former investment banker and free-markets proponent who has sought to attract investment since taking office last year. Representatives of Peru's Labor Ministry were not immediately available for comment.

    A nationwide strike two years ago had little impact on production as companies had contingency plans in place.

    Peru has boasted some of the highest growth rates in the region in recent years, but its economy remains dependent on mining, and conflicts between mining companies and organized labor, as well as indigenous communities, are common.

    Zenon Mujica, secretary general of the union representing workers at Freeport-McMoRan Inc's Cerro Verde copper mine - Peru's largest - said members had decided to adhere to the planned strike.

    Earlier on Friday, Mujica had said Cerro Verde workers were evaluating whether to strike after the union said the company had threatened punishment for a previous work stoppage. The workers' three-week strike in March hit output at the mine.

    Last week, workers at Southern Copper Corp's Toquepala and Cuajone mines and the Ilo refinery returned to work after a two-week strike, which the company said reduced production by just 1,418 tonnes. The two mines together produced 310,000 tonnes of copper last year, according to government data.
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    Surging copper stockpiles point to concerns over global demand

    Another surge in copper stockpiles tracked by the world’s top base-metals bourse is reigniting concerns about demand for the material that’s often viewed by investors as a bellwether for the global economy.

    A 40% jump in inventories monitored by the London MetalExchange in just three days comes amid concerns about China’s slowing industrial activity. Prices of copper, referred to as the metal with a Ph.D in economics, are trading near a four-month low.

    Financial markets in China, the top copper user, are feeling the pressure of tighter liquidity and rising money-market rates that have pushed down prices of iron ore to zinc. Investors are also waiting for US President Donald Trumpto push through electoral pledges, including boosting stimulus spending that helped push copper prices higher since late last year.

    “The optimism over Trump’s spending and China has been overblown,” Dan Smith, head of commodities research at Oxford Economics in London, said by phone.

    While copper futures were little changed on the LME Friday, they’re heading for the biggest weekly drop this year.

    Copper held in LME warehouses climbed more than 11% for a third day and is at the highest since October. A measure of stockpiles tracked by the LME, Comex and Shanghai Futures Exchange rose 13% this week.

    Still, analysts said the LME inflows could also be due to traders moving metal from China to other destinations to profit from a price gap between LME and Shanghai prices. The London bourse doesn’t have any storage facilities in China.

    “Some are saying it could be a reflection of weak demand in China, but equally it could simply be that stocks are being relocated from the Shanghai Futures Exchange to LondonMetal Exchange warehouses due to the arbitrage,” Robin Bhar, an analyst at Societe Generale SA in London, said by phone. “That would be my favored theory.”

    Recent history shows the LME’s incoming metal may be in strong demand. Three similarly large inflows since August were then withdrawn in the following months.

    “The pattern has been one of volatility, with stocks increasing sharply and then falling away,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone. “It’s a massive inflow, but whether we will see outflows in the next few weeks remains to be seen.”

    Attached Files
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    Taseko swings back into the black as higher copper, molybdenum prices lift Q1 earnings

    Base metals producer Taseko Mines has reported stronger-than-expected earnings for the first quarter ended March 31, as higher copper prices and a sharp recovery in the price for molybdenum dovetailed into higher sales volumes.

    The Vancouver-based company reported net income of C$16.5-million, or C$0.07 a share, for the quarter, compared with a net loss of C$1.5-million, or C$0.01 a share, for the same period in 2016. Taseko attributed the change in net earnings mainly to higher copper prices, higher copper sales volume, lower production costs, as well as revenue from the sale of molybdenum concentrate.

    Earnings from mining operations before depletion and amortisation were C$53.4-million for the three months, compared with a loss of C$300 000 for the same prior period in 2016. The increase in earnings from mining operations was a result of higher copper and molybdenum revenues and lower production costs.

    Removing special items, Taseko reported adjusted net earnings of C$0.07 a share, beating the average analyst forecast calling for earnings of C$0.05 a share.

    Revenues for the period increased by C$46.2-million, or 80%, year-on-year, compared with the same period in 2016, mainly owing to a 33% increase in copper sales volumes and higher realised copper prices. The increase in the US dollar realised price of copper was partially offset by the impact of the stronger Canadian dollar.

    Quarterly copper output at Gibraltar was 41.3-million pounds and molybdenum production was 900 000 lbs.

    Taseko said that the molybdenum circuit that was idled in the third quarter of 2015 and restarted in September last year contributed molybdenum revenue of C$7.4-million in the first quarter. The molybdenum plant continues to operate at design capacity, and molybdenum prices have recently increased to nearly $9/lb, from about $7.50/lb in the fourth quarter of 2016.

    Meanwhile, total operating costs were down another 10% in the first quarter to $1.33/lb, boosted by better-than-expected grade and strong molybdenum output and sales, combined with consistent site spending, which were the major contributors to the low cost per pound.

    A reduction in site operating costs was due to increased costs being allocated to capitalised stripping owing to the wastestripping activity in the Granite and Pollyanna pits at the flagship Gibraltar mine, in British Columbia.

    At March 31, 2017, Taseko had cash and equivalents of C$149.3-million - a C$60.3-million increase over December 31, because of the cash proceeds received from the recent silver stream transaction with Osisko Gold Royalties and positive cash flows from mining operations. The company advised that it is maintaining a strategy of retaining a significant cash balance to reflect the volatile and capital intensive nature of the copper mining business.
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    Steel, Iron Ore and Coal

    China says ready to work with EU on steel after latest duty ruling

    China's Commerce Ministry said it was willing to work with the European Union to resolve the problems facing the steel sector after the EU Commission said it would slap anti-dumping duties on Chinese seamless steel pipe.

    The ministry said the EU will impose duties of between 29.2 and 54.9 percent on the product. It was not clear if the EU had officially announced the move.

    "China is willing to strengthen communication with the European Union to appropriately deal with the problems facing the steel sector," it said in a statement.

    It also urged the European Union to treat Chinese firms fairly and abide by the World Trade Organisation's rules.
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    China suspends new coal-fired power plants in 29 provinces - report

    China will suspend approvals for new coal-fired power plants in 29 provinces to reduce overcapacity in the sector, the official China Securities Journal reported on Friday.

    The National Energy Administration (NEA) has put as many as 25 provinces on "red alert", meaning that new projects would create severe overcapacity or environmental risks, while another four regions were put on "orange alert," the newspaper said citing a NEA statement this week.

    The NEA said that utilisation rates at coal-fired power plants were falling as a result of slowing growth in power consumption, and it established the warning system to identify regions that need to curb overcapacity.

    Overcapacity has eaten into the margins of major coal-fired power producers, especially as regions come under pressure to meet state requirements to raise the share of renewable energy sources.

    China's government said in a work report in March that it would aim to close down, cancel or slow the construction of more than 50 gigawatts (GW) of thermal power capacity this year to tackle the problem.

    According to NEA data, average utilisation rates at China's predominantly coal-fired thermal power plants fell 4.6 percent to 4,165 hours last year. However, total thermal capacity, also including oil and gas-fired plants, still rose 5.3 percent to 1,054 GW over the period.

    The China Electricity Council, an industry lobby group, said last month that utilisation rates had dipped further in some regions in the first quarter of 2017, especially in the northeast and northwest, putting margins at power plants under further pressure.

    The NEA's new warning system also takes into account the resources and pollution levels of each region, with some coal-dependent provinces facing extreme water shortages or pressure to control smog, including the capital Beijing and the surrounding province of Hebei.

    Of China's 32 provinces and regions, only Tibet was not subject to a capacity warning while two were given "green" status.

    The newspaper said China's total coal-fired power generation capacity was likely to reach 1,300 GW by the end of 2020, much higher than the 1,100 GW target in China's 2016-2020 five-year plan. Total coal-fired capacity stood at 940 GW at the end of 2016.

    Environmental group Greenpeace warned last year that China was building another 200 GW of new coal-fired capacity despite the slowdown in demand growth and a pledge to raise the share of non-fossil fuels in the country's total energy mix.
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    Global steel industry at 'inflection point': worldsteel head

    The global steel industry has reached "an important inflection point" that requires steelmakers to consider new strategies to survive, World Steel Association Director General Edwin Basson said Thursday.

    Speaking during the Eurometal World Steel Distribution & SSC Summit in Dusseldorf, Basson said current global installed steel capacity -- at some 2.39 billion mt -- is already enough to meet supply requirements through 2035.

    Finished steel demand is likely to be around 1.535 billion mt in 2017, up only 1.3% from the previous year, and nearly 1.549 billion mt in 2018, an increase of 0.9% year on year, according to worldsteel. Strong steel demand growth in developing countries will offset stabilizing demand in developed economies, but it means mostly flat overall global demand for likely the next two decades or more, Basson said.

    Combine those factors with declining trends in steel use -- due in part to increased production of high-strength, lightweight steels and a sharper focus on reuse and recycling -- and the outcome is clear.

    "We believe that steel demand, in terms of volume, has reached an important inflection point," he said. "It will continue to grow, but the going to be much slower than it has been in the past two decades."

    Basson said a ton of steel remains in use for an average of 47 years in Europe, 44 in the US and less than 40 in China. The global average is around 45 years. With technological improvements resulting in less steel being required in many applications and yielding longer lifespans for the material, those averages are likely to increase, he said.

    "If it's only five years that we're extending the life of steel, it means that we're pushing that demand forward five years," Basson said. "As steelmakers and users of steel, we should begin to plan around this [knock-on effect]."

    In addition, as emerging economies have developed their own domestic steel industries and global overcapacity has pushed tons into the export market, trade case filings in the US and Europe, in particular, have increased in volume in recent years. Basson cautioned that such a strategy is unlikely to be sustainable.

    "Protectionism can help us in the short term... but it cannot in the long term provide stability in an industry that is driven by global forces," he said.

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    Russian steelmaker MMK's earnings more than double on higher steel prices

    MMK, one of Russia's largest steelmakers, said on Thursday its first-quarter core earnings more than doubled compared with a year ago due to higher steel prices.

    MMK, Russia's third-largest steel producer and rivals, including leading Russian steelmaker NLMK, have benefited this year from rising prices after two years in which steel prices hit multi-year lows and a Russian economic crisis hurt domestic demand.

    Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose to $452 million in the first three months of 2017 from $219 million a year ago, MMK said in a statement.

    MMK's net profit increased by 53.5 percent to $241 million, with revenue up 58.1 percent to $1.7 billion. Its sale prices rose 76.8 percent while shipping volumes for finished products were stable.

    Its shares were up 0.8 percent in Moscow, compared with a 0.2 percent fall in the broader MICEX index.

    Russian businessman Viktor Rashnikov owns 87 percent of MMK and may consider selling 2 percent of the company's shares, investment firm Aton said in a note in December.

    Asked in March if he was considering selling the stake, Rashnikov said that the market was unfavourable for MMK to sell shares from his point of view because "we had a (market) capitalisation of $8 billion, now it's $6.5 billion."

    Since then, MMK's market value has reached $6.7 billion, according to Thomson Reuters data.

    MMK also said in its statement it expected Russia's 2017 steel demand to be 1-2 percent higher than in 2016.

    The company also said it was is experiencing a slowdown in domestic demand due to high reserves accumulated by traders, but it expected these reserves to decline to normal level by June, with domestic demand returning to its usual seasonal levels.
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    Baosteel shares carbon steel sheet in June 2017 domestic futures sales price adjustment notice

    Google Chrome translation:

    The study decided that in June 2017 Baosteel shares domestic price of the plate in May on the basis of the price adjustment notice is as follows (the following are non-tax):

    First, thick plate ( Baoshan , Dongshan)

    Base price down 200 yuan / ton.

    Second, hot-rolled (Baoshan, Dongshan, Meishan)

    1. Baoshan: base price down 100 yuan /.

    2. Meishan, Dongshan: low carbon steel down 300 yuan / ton, the other down 180 yuan / ton.

    Third, pickling ( Baoshan , Dongshan , Meishan)

     1. Baoshan: base price remains unchanged.

     2. Meishan, Dongshan: base price down 150 yuan / ton, carbon and home appliances steel prices and then down 100 yuan / ton.

    Four, Pu cold ( Baoshan , Dongshan , Meishan)

    CQ grade soft steel and non-automotive varieties of steel base price down 260 yuan / ton, other varieties down 150 yuan / ton.

    Five, hot-dip galvanized ( Baoshan, Dongshan, Meishan)

    1, Baoshan, Dongshan: CQ grade soft steel, S series structural steel, BJD series products down 260 yuan / ton, the other down 150 yuan / ton.

    2, Meishan: base price down 260 yuan / ton.

    Six, electro-galvanized

    CQ grade soft steel down 260 yuan / ton, the other down 150 yuan / ton .

    Seven, galvanized ( Baoshan, Meishan)

    Base price down 160 yuan / ton.

    Eight, non-oriented electrical steel

    Base price fell 260 yuan / ton .

    Nine, orientation to the electrical steel

    Raised 350 yuan / ton .

    10, the above price adjustment notice effective from the date of promulgation.

    11, the interpretation of the price adjustment notice ownership Baoshan Iron and Steel Co., Ltd. Marketing Center.
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    South Korea’s new president likely to curb thermal coal imports

    The election of Moon Jae-In as the new President of South Korea has potentially significant ramifications for the rate of decline in global seaborne thermal coal market volumes.

    South Korea is Asia’s fourth-largest economy and the fourth largest importer of coal globally, accounting for over 10% of world thermal coal import demand.

    “South Korea is the second largest export destination for Australian thermal coal.

    As the only remaining growth market of significant size, it has long been identified by the coal industry as a source of its on-going viability. This election has the potential to snuff out that last beacon of growth,” said Tim Buckley, Director of Energy Finance Studies at the Institute for Energy Economics and Financial Analysis (IEEFA).

    Moon Jae-In election pledges

    Idling old coal-fired plants during April and May when fine dust levels tend to peak, and permanently close 10 aged coal-fired plants earlier than scheduled, while reassessing plans to construct nine new plants.
    Elevate the issue of ultra-fine dust with a view to halving dust levels.
    Increase the distribution of environmentally-friendly cars at the expense of old diesel vehicles.
    Scrap plans to build new nuclear plants, including No. 5 and No. 6 Shin-Kori reactors. Close the Wolsong No. 1 nuclear plant with immediate effect.
    Increase the use of renewable energy to 20% by 2030.

    In its March 2017 Resources and Energy Quarterly, the Office of the Chief Economist (OCE) stated: ‘by 2022, South Korea’s thermal coal imports are projected to reach 111 million tonnes, an annual average increase of 2.2% from 2016. Much like growth in imports in 2017, this average annual increase is likely to be underpinned by increased installed coal-fired power generation capacity and the South Korean Government’s push for a diversified electricity generation mix, ensuring security of energy supply.’

    China and India collectively purchase over 40% of global seaborne coal and IEEFA contests that permanent shifts in both those markets will see thermal imports reduced towards zero. If carried out, Moon Jae-In’s pledges will further dampen demand, with a negative implication for equilibrium pricing.

    This is particularly the case since they build on the introduction of a national Emissions Trading Scheme in 2015 and an increase in the coal tax by 25% to US$25-30/t, effective April 2017.

    IEEFA forecasts that should President Moon Jae-In follow through with his election promises, this will halve the long-term growth rate for South Korea’s thermal coal imports.

    It would also undermines the viability of NSW greenfield thermal coal developments including Korean-owned mine proposals in Bylong and at Wallarah II, and calls into question the strategic merit of other capacity expansions like Whitehaven’s Vickery and Shenhua’s much delayed Watermark mine developments, as well as the controversial and heavily subsidised Adani Carmichael proposal in Queensland.

    The cumulative effect of a change of energy policy in South Korea and other key coal import markets will be felt in other export markets such as Indonesia.

    “Notwithstanding the recently improved traded price of thermal coal, Indonesia’s major coal miners remain in financial distress and as such are extremely exposed to any sustained decrease in Asian import demand,” said Buckley.

    “Although Indonesia’s primary markets are China and India, any reduction in demand from the key North Asian markets will inevitably have flow-on implications across all markets in terms of pricing.”

    South Korea currently maintains more than 50 coal-fired power plants, producing around 40% of the country’s electricity, while nuclear provides 30%, LNG 25%, oil 3% and renewable sources to-date just 2%. Under the current power supply plan, 11 nuclear reactors were to be developed by 2029 as well as 20 proposed coal-fired power plants by 2022.

    “This policy shift in South Korea is a critical blow for exporters banking on renewed growth in demand for thermal coal,” said Buckley. “But it is entirely consistent with the technology driven energy market transformation taking place across the globe, and in Asia in particular.”

    Attached Files
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    Weekly US coal carload volumes dip to year-low mark: AAR

    Total US coal carload volumes have fallen for three straight weeks to a new year-low mark, Association of American Railroads data showed Wednesday.

    For the week ending May 6, the AAR reported 73,386 coal carloads traveled US railways, down from 75,662 carloads the previous week but up 17.7% from the year-ago week. Coal counts were last lower the final week of 2016 at 68,939 carloads.

    Despite recent declines as demand dips during the spring shoulder season, coal volumes year to date are up 17.7%, or about 234,000 carloads, compared to the first 18 weeks of 2016.

    Canadian railroads -- including the US operations of Canadian National, which serves several mines in the Illinois Basin, and Canadian Pacific -- originated 7,720 coal carloads, down 0.2% from the previous week but up 32.9% from the same week last year.

    Canadian coal volumes are up 4.2% year to date.

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    China coal mines forced to plant trees, seal facilities in new green rules

    China will force collieries to plant trees, boost efficiency, cut down noise and seal off facilities from the outside world as part of a new "green mining" plan aimed at curbing pollution, Reuters reported, citing a policy document published on May 10.

    In a comprehensive list of new rules covering coal, metals and chemicals, as well as oil and gas, the Ministry of Land and Resources said all newly built mines would be forced to meet green requirements immediately, while existing mines will also have to "upgrade" facilities.

    The documents, published in conjunction with the environment and finance ministries as well as China's securities and product quality watchdogs, said coal firms would be forced to construct "garden-style" mines with trees planted wherever possible in mining areas.

    "A completely closed management system covering the production, transportation and storage of coal will be implemented so that 'coal is extracted but not seen'," the document added.

    The ambitious plans contrast with past practice in China where high prices and soaring demand encouraged coal miners to build thousands of mines with little heed to safety or the surrounding environment.

    Regulators are now aiming to bring more order to the sector, which accounts for around two thirds of total primary energy use and three quarters of all power generation, curbing overcapacity and illegal production and tackling air and water pollution.

    China's smog-prone capital Beijing has already shut down all its coal-fired power stations, while the surrounding province of Hebei has promised to shut 51 million tonnes of annual coal production over the 2016-2020 period.

    The land ministry said raw coal washing rates would be raised to 100% at new mines, while waste water recovery rates would be brought above 85%.

    Coal mines would be forced to set up dedicated research and development platforms funded with no less than 1% of the mine's income in the previous year, and will have to address training for workers and work-related illnesses.

    The rules will also compel metallurgical miners to set up specialist storage sites for tailings to prevent them from contaminating local land and water supplies.
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    China to curb low-grade coal imports: state radio

    China will curb imports of low-grade coal, state radio reported late on Wednesday citing the government's cabinet, as part of efforts to rebalance supply and demand.

    The report also said China has cut 31.7 million tonnes of steel capacity and 68.97 million tonnes of coal capacity so far this year.

    The cuts to date meet 63 percent of this year's targeted steel reductions and 46 percent of planned coal reductions, the broadcast said.
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    China Iron Ore Prices Crash Through Key Support To 6-Month Lows

    After a few short days of respite - suggested by some as indicative that the worst is over - China commodities are crashing again tonight with Dalian Iron ore snapping below 460 to its lowest since before Trump's election...

    This has erased the entire post-Trump reflation trade hope...

    The commodity has sunk on concern mine supplies will go on rising just as China’s mills enter a weaker period for demand and policy makers in Asia’s top economy rein in leverage. Stockpiles at mainland ports are near a record after robust shipments from Australia and Brazil, with miner BHP Billiton Ltd. citing the inventories as among risk factors that may tug prices lower. Citigroup Inc. has said there may have been forced sales by some traders in China.

    With all the industrials now red post-Trump...

    As Citi warned over the weekend, "We suspect that a good number of physical traders that are financially leveraged up to five times have been forced to destock due to rising short-term borrowing costs and the recent sharp price corrections."

    Citigroup isn’t alone in saying that some traders may be compelled to sell holdings into a falling market as China tightens. Shanghai Cifco Futures Co. said this week signs are emerging that traders are dumping their holdings.
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    Key coal chain in Queensland, Australia, recovering well after cyclone, but delays remain

    Key coal chain in Queensland, Australia, recovering well after cyclone, but delays remain

    A major coal chain in North Queensland, Australia, that exports via the Dalrymple Bay Coal Terminal, is recovering well after being severely impacted by a tropical cyclone in late-March, but there are still lingering delays, Australian coal producer Stanmore Coal said Wednesday.

    The miner operates the Isaac Plains mine, which transports its coal to DBCT via the Goonyella rail system -- the worst hit by the cyclone out of the four systems on the Central Queensland Rail Network.

    Goonyella reopened April 26 to restricted conditions and reduced capacity, almost a month after the cyclone made landfall on March 28.

    "The rail network owner has done a good job re-starting safe railings along the network, with all speed restrictions lifted except for the Black Mountain region," Stanmore said, adding that Goonyella is expected to be fully ramped up by the second half of May.

    When approached for comment, rail operator Aurizon said: "The Goonyella system, and the Central Queensland Coal Network generally, is operating in accordance with normal operating procedures."

    Stanmore also said that there remains delays at DBCT due to the long queues which grew in the wake of the logistical issues caused by the cyclone.

    "Total [Stanmore] coal sales of approximately 180,000 mt is anticipated for the June quarter, as vessels arriving offshore in June are unlikely to load coal until July, given that port queues will be significantly longer as a result of increased demand following Cyclone Debbie," the company said.

    Coal vessel queues for DBCT grew to at least as long as 32 ships in the weeks following the cyclone's arrival, up from as short as 11 ships in the weeks prior. The queue stood at 27 vessels as of Wednesday, shipping data from DBCT Management showed.

    Stanmore said it had a record month for coal mined during April despite the cyclone's after-effects, with 205,000 mt o0f run-of-mine, and is on track to meet it fiscal 2016-2017 (July-June) guidance, which it lowered in late-April from 1.25 million mt to 1.15 million mt.

    "The ramp-up of infrastructure and rail interruptions following Cyclone Debbie will drive coal inventory levels higher and lower sales for the June quarter, with the majority of sales of carry-over tonnes expected over the September quarter," it said.

    Attached Files
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    Coking coal price talks resuming as cyclone's impact fades: sources

    Negotiations to set the quarterly price steel mills will pay mining companies for coking coal will resume in Tokyo this week after being put on hold when a cyclone in Australia cut off coal supplies, four sources said on Tuesday.

    The interruption pushed spot premium hard coking coal prices above the first quarter contract price as steelmakers were forced to seek out shipments from as far away as Canada and reduce stockpiles to dangerously low levels.

    Sources at Australian mining companies speaking on condition of anonymity said both sides were ready to pick up the talks as the four main coal lines operated by Aurizon Holdings Ltd gradually resume shipments, with the biggest line, Goonyella, returning on April 26.

    "The cyclone left everyone up in the air," an Australian mining executive close to the talks said. "No one wanted to negotiate from a position of uncertainty. That has now passed."

    The talks will set the quarterly benchmark price that steel mills will pay for coking coal, largely from Australia, which is the world's largest exporter of the steelmaking raw material.

    The two sides head back to table following annual settlements led by Glencore in Australia and Tohoku Electric Power in Japan for thermal coal used in power generation.

    Demand for sea-traded coal has been exacerbated by China's shift away from producing much of its own coal to fight pollution.

    In the first quarter of 2017, miners received $285 a tonne, the highest since 2011, up from $200 a tonne in the previous three-month period and just $81 a tonne in the first quarter of 2016.

    Before the latest disruption, Japan's steel mills had been discussing a price for the current quarter of around $150 a tonne.

    A source who deals with procurement at a Japanese steel mill said he was wary of a fast settlement, as both sides will need to agree on the outlook for Chinese steel market, the world's largest.

    Beijing beat its own targets for capacity reductions in 2016, eliminating 290 million tonnes of coal capacity and 65 million tonnes of steel capacity, according to Fitch ratings agency.
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    Indonesia Bumi produces 20.2 mln T of coal in Q1 2017

    Indonesia's biggest coal producer, Bumi Resources records coal production volume of 20.2 million tonnes during the first quarter of 2017, which is not much different from the output in the same period of 2016, the company reported on May 5.
    Mines of KPC and Arutmin contributed entire production and sales during the period. "Coal production is flat in relation to unusually high rainfall," Dileep Srivastava, Director and Corporate Secretary of BUMI expressed in a written statement.
    Meanwhile, coal sales volume was relatively stable at 21 million tonnes in the first quarter of 2017 compared to 21.4 million tonnes in the same period of the previous year.
    The combined strip ratio fell from 7.2% to 1.9% in January - March of 2017. "Arutmin's strip ratio rose to 4% compared to 2.5% as it produced more high quality coal," he said.
    Meanwhile, the production cash cost went up to $30.5/t compared to the first quarter of 2016 amounting to $27.2/t mainly related to the rise of coal production in Arutmin.
    Nevertheless, Dileep added, increase in production cost is able to be fully compensated by the increase of coal price by 35% compared to the corresponding period of 2016.
    The company targets to increase production volume 5% to 7% this year. The selling price of coal is also predicted to go up by 30% compared to last year's price.
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    China's largest polyolefins project to be fully operated in July

    The second production line of China's biggest coal-to-polyolefins processing project is expected to go into full operation in July in the Inner Mongolia autonomous region, with annual output worth 13 billion yuan ($1.89 billion).

    The Ordos-based Zhongtian Hechuang Energy Co Ltd is expected to produce 1.37 million tonnes of polyethylene and polypropylenes each year from 25 million tonnes of coal.

    Polyolefins-polyethylene, polypropylenes and some other polymers-account for more than half of total plastics consumption in the world.

    The demonstration project is a good example of industrial upgrading, realizing coal deep processing from extensive production.

    There will be more of such demonstration projects in the near future in Ordos and Baotou, two cities in the west of the Inner Mongolia autonomous region, thanks to its success in industrial transformation and rich mineral resources.

    Around 12 cities and economic areas including Ordos and Baotou were chosen to build demonstration areas, with all of them old industrial cities and resource-based cities, according to an April statement released by the National Development of Reform Commission and other four ministry-leval bodies.

    Supporting policies on industry, innovation, investment, finance and land for these demonstration areas were initially identified, the statement said.

    Cities in demonstration areas will be included in redevelopment pilots for inefficient urbanland. In the pilots, industrial and mining wasteland is encouraged to be reclaimed and reused.

    The statement called for Baotou and Ordos to develop industrial cooperation in adjacent cities and upgrade traditional industries such as coal, steel and rare earths.
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    Fortescue raises $1bn to repay debt

    Iron-ore miner Fortescue Metals was hoping to raise $1-billion through a bond offering of senior unsecured notes.

    The company said on Tuesday that proceeds from this issue would be used to repay existing debt.

    The miner in March this year announced a $1-billion repayment of its 2019 term loan, reducing its 2019 debt to less than $1-billion and generating annual savings of around $38-million.
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    Glencore puts Australian coking coal mine on block

    Glencore said on Tuesday it has begun a sale process for its Tahmoor coking coal mine ahead of plans to halt operations next year, adding to a growing number of collieries on the block in Australia.

    In August 2016, Glencore, which mainly mines thermal coal, said the mine in eastern Australia's Southern Highlands would not meet an internal investment criteria after 2018.

    The mine, which employs about 340 people, last year produced nearly 1.8 million tonnes of coking coal, used to make steel.

    The move comes as a number of coking coal mines in Australia go on the block.

    The sale of two Rio Tinto coking coal mines is attracting scores of interested buyers, while investors are also looking at mines for sale from companies including Anglo American, Wesfarmers and Peabody Energy .

    "We believe the asset has a number of development options for the future and presents a potential buyer with the opportunity to establish or increase a strategic position in the Australian coking coal industry," Glencore said in a statement emailed to Reuters.
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    S.Africa has "no choice" but to impose emergency steel tariff- trade minister

    South Africa had "no choice" but to impose emergency safeguard tariffs on imports of certain flat hot-rolled steel products to protect local industry, Minister of Trade and Industry, Rob Davies said on Monday.

    Africa's most industrial country is proposing to put on the safeguard duties from July, it said in a filing published by the World Trade Organization in April.

    The tariff would be in place for three years, and is proposed to fall from 12 percent in the first year to 10 percent in the second year and 8 percent in the third.

    "We'll indicate what the quantum is when those processes are complete," Davies told Reuters on the sidelines of a visit to a pharmaceutical company.

    "We got to defend to ensure that we maintain the primary steel manufacturing in South Africa. We got no choice actually, (if) we let it go then there will be a huge knock-on effect for the industry as a whole because we don't have the capacity to import anyway."

    Domestic steel producers have said China, which produces half the world's steel, has been dumping excess output locally as consumption at home wanes and these low-priced imports have resulted in low sales volumes for the domestic firms.

    Davies said the tariff would be imposed in a way that it also accommodates the downstream industry, where the main jobs are.
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    Glencore agrees $84.97/T thermal coal price with Japan utilities: sources

    Glencore agrees $84.97/T thermal coal price with Japan utilities: sources

    Glencore and Japanese power utilities have settled annual thermal coal contract prices at $84.97 a ton, down from $94.75 set in October, three sources said on Tuesday.

    Glencore reached the settlement with Japan's Tohoku Electric after negotiations restarted when an initial round of talks failed to reach agreement, an industry source with knowledge of the matter said.

    Australian Newcastle spot cargo prices last traded at $77.70. Thermal coal is used to generate electricity.

    Glencore is the world's biggest supplier of sea-traded thermal coal and usually sets pricing for the sector.
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    China iron ore extends losses as supply rises; steel rebounds

    Iron ore futures in China slipped on Monday, extending last week's losses as supply at the country's ports rose, nearly matching the 13-year high reached in March, underlining the slow demand for the steelmaking raw material.

    But a rebound in Chinese steel prices capped losses in iron ore, with other raw material coking coal steadying.

    The most-traded iron ore on the Dalian Commodity Exchange was off 0.4 percent at 465.50 yuan ($67) a tonne by 0236 GMT. It declined 8.2 percent last week, its biggest such decline since late December.

    The inventory of imported iron ore at 46 Chinese ports rose to 131.95 million tons on Friday, up 1.4 million tonnes from a week ago, according to SteelHome. The stockpiles hit 132.45 million tonnes in March, the most since SteelHome began tracking it in 2004. SH-TOT-IRONINV

    Rising supply and the weakness in steel prices, spurred by worries over softer consumption, have dragged down iron ore, said Commonwealth Bank of Australia analyst Vivek Dhar.

    "Chinese steel mills also refrained from buying iron ore on speculation that production cuts will be introduced later this week ahead of the One Belt One Road conference," said Dhar.

    Leaders from 28 countries will gather in Beijing on May 14 to 15 for talks on what China formally calls the "One Road, One Belt" plan that envisions expanding trade and energy links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment.

    China typically orders industrial plants to cut or limit production to help clear the skies ahead of a major event such as when it hosted the G20 Summit in Hangzhou last year.

    Iron ore prices may find support from a pickup in steel demand in China later in the year, said Dhar.

    "Chinese steel demand is likely to remain supported as policy makers look to ensure stable economic growth ahead of elections later in the year. In particular, policy makers have targeted infrastructure investment," he said.

    The most-active rebar on the Shanghai Futures Exchange was up 1.7 percent at 2,982 yuan per tonne, after dropping 4.4 percent last week. Coking coal on Dalian exchange was nearly flat at 1,032 yuan a tonne.

    Iron ore for delivery to China's Qingdao port .IO62-CNO=MB fell 5.3 percent to $61.73 a tonne on Friday, the lowest since October 2016, according to Metal Bulletin.

    The spot benchmark lost 10.3 percent last week, the most since May last year.
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    China's April steel exports at 6.49 mil mt, falls 14% from Mar, 29% on year

    China exported 6.49 million mt of steel in April, down 14% from March and down 29% year on year, preliminary data released Monday by the General Administration of Customs showed.

    Over January-April, steel exports totaled 27.21 million mt, down 26% year on year, the data showed.

    The decline in April exports was within market expectations, as April shipments were mostly booked in February and early March, when Chinese steel mills were opting to sell more in the domestic market, where prices at the time were yielding higher profits than exports.

    The April total was the second lowest in 2017 to date after February's 5.75 million mt.

    Meanwhile, China's steel imports totaled 1.08 million mt in April, down 17% from March and down 2% year on year.

    Over January-April, imports were up 8% year on year at 4.56 million mt.

    China's net steel exports in April stood at 5.41 million mt, down 14% on month and down 32% year on year.

    Over January-April, net steel exports stood at 22.65 million mt, down 31% year on year.
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    China's Apr coal imports up 31.81% on year to 24.78 million mt

    China imported 24.78 million mt of coal in April, including lignite, thermal and metallurgical material, up 12.18% from March and up 31.81% year on year, according to preliminary data released on Monday by the General Administration of Customs.

    China imported 22.09 million mt of coal in March this year. In April 2016, the country imported 18.80 million mt of coal.

    Total import during January-April rose 33.07% year on year to 89.49 million mt.

    The country exported 0.89 million mt of coal in April, up 71.15% year on year, the data showed.

    China exported 1.38 million mt of coal in March. In April 2016, the country exported 0.52 million mt of coal.

    Exports over January-April are up 1% year on year to 3.34 million mt, compared with 3.30 million mt in the same period in 2016.

    GAC did not give a breakdown of the April imports and exports, which would be available later this month.
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    U.S. agency finds harm from imported carbon and steel plate

    U.S. agency finds harm from imported carbon and steel plate

    U.S. trade officials on Friday said their anti-dumping and subsidy probe found carbon and alloy steel cut-to-length plate from eight foreign producers harms American manufacturers, locking in duties on the imports for five years.

    The U.S. International Trade Commission's finding applies to cut-to-length plate from Austria, Belgium, France, Germany, Italy, Japan, South Korea and Taiwan, it said in a statement on its website.

    In March, the U.S. Commerce Department said anti-dumping duties ranging from 3.62 percent to 148 percent would be imposed on products from the eight producers, while imports from South Korea would also face a countervailing duty of 4.31 percent.

    Cut-to-length steel is used in a wide range of applications, including buildings and bridgework; agricultural, construction and mining equipment; machine parts and tooling; ships, rail cars, tankers and barges; and large-diameter pipe.

    The findings followed an investigation prompted by a petition from Nucor Corp and U.S. subsidiaries of ArcelorMittal SA and SSAB AB.
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    Buyers ready to pounce on Rio Tinto coking coal mines -sources

    The sale of two Rio Tinto coking coal mines in Australia is attracting scores of interested buyers as private equity and public companies compete for a foothold in one of the year's hottest commodities, four sources familiar with the matter said on Friday.

    Rio Tinto is expected to soon begin an official sales process for the Hail Creek and Kestrel mines in coal-rich Queensland state, which is bringing "an unprecedented number of people to the table," said one source, whose company is interested in the assets.

    Analysts expect each mine to sell for more than $2 billion and complete Rio Tinto's exit from Australian coal mining after it agreed in January to sell its Coal & Allied thermal coal division to China's Yancoal for $2.45 billion.

    "There's a lot of interest in a limited number of opportunities in Australian coking coal and that's driving the frenzy for Hail Creek and Kestrel," the source said, speaking on condition of anonymity.

    Rio Tinto has not formally announced the sale, but has said it is exiting coal as its focuses on growth in iron ore, copper and its aluminium division. The company declined to comment on whether it was taking offers on the two Australian mines.

    Australian coking coal is sold mostly to steel mills in Asia. Prices jumped to half-decade highs late last year on pinched supplies in China and surged again last month after an Australian cyclone disrupted shipments, underscoring the strong demand for high quality coal.

    A private equity executive, who has previously bought Australian coal assets, said he expected to face "stiff competition" from other private equity groups for the Rio Tinto mines.

    Credit Suisse is advising Rio Tinto, a third source said. Credit Suisse declined to comment.

    Buyers are also looking at mines put up for sale by other companies, including conglomerate Wesfarmers, and Peabody Energy. Anglo American also said a year-and-a-half ago it would exit coal mining as part of a restructuring to pay off debt, but has yet to announce a formal sale since coal prices staged a recovery.

    Barry Tudor, a fomer mining chief executive and head of private equity group Pembroke Resources, said the recovery in prices had removed the urgency of a sale for some companies, with mine owners happy to run their operations for cash.

    Pembroke last year ago paid A$104 million for three mine tenements from Peabody and was looking for more mines to feed long-term demand from Asia.

    "We now have a mandate to specifically find more coking coal assets in Australia," said Tudor, although he declined to comment on whether Pembroke would look at the two Rio mines.

    Attached Files
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    Indonesia sets HBA thermal coal price for May up 64% on year at $83.81/mt

    Indonesia's Ministry of Energy and Mineral Resources has set its May thermal coal reference price, also known as Harga Batubara Acuan or HBA, at $83.81/mt, up 1.6% from April and a surge of 63.7% year on year. The ministry had set the price for April at $82.51/mt, and the May 2016 price at $51.20/mt.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg GAR assessment, 25% on the Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR), 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    In April, the daily Platts FOB Kalimantan 5,900 kcal/kg GAR coal assessment averaged $74.92/mt, down from $75.41/mt in March, while the daily 90-day Platts Newcastle FOB price for coal with a calorific value of 6,300 kcal/kg GAR averaged $84.64/mt, up from $80.55/mt in March.

    The HBA price for thermal coal is the basis for determining the prices of 75 Indonesian coal products and calculating the royalty producers have to pay for each metric ton of coal they sell.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash as received and 0.8% sulfur as received.
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