Mark Latham Commodity Equity Intelligence Service

Friday 19th February 2016
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    Oil and Gas


    US Distillate demand turns sharply negative.

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    3D Printed Dress..responds to your body?

    Francis Bitonti, who did 3D design work on the Adrenalin Dress, told Wired UK that 3D printing is becoming critical to creating new fashion wear. To stay innovative, the fashion world requires deeper thinking about tools, materials and manufacturing.Image titleAyse Ildeniz, vice president of Intel’s New Devices Group who has established partnerships with fashion leaders like Opening Ceremony, Fossil Group, Luxottica Group, TAG Heuer, and the Council of Fashion Designers of America (CFDA), told Wareable that new technologies are “empowering and inspiring the fashion industry by elevating the utility of clothing and accessories with intelligent capabilities.” Biomimicry Dress By partnering with Milk Studios, MADE Fashion Week, WMG-IMG and other innovators in the fashion world, Ildeniz was able to help make all the right connections that led to McCharen’s latest wearable tech designs.  

    These two animated garments were designed with the Intel Curie Module — a button-sized computer hardware that can power wearables — and sensors that detect body heat, perspiration and respiration, all things indicative of adrenaline.

    Changes in these human biometrics trigger shape-shifting movements, bringing extra comfort or flare to the wearer.

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    Hagens Berman Files National Lawsuit Against Mercedes over pollution

    An owner of a Mercedes BlueTEC diesel automobile today filed a class-action lawsuit against Mercedes stating the automaker knowingly programmed its Clean Diesel vehicles to emit illegal, dangerous levels of nitrogen oxide (NOx) at levels 65 times higher than those permitted by the EPA when operating in temperatures below 50 degrees Fahrenheit, according to consumer-rights law firmHagens Berman.

    Nat'l Lawsuit Filed vs #Mercedes Stating BlueTEC Diesels Pollute at Illegal Levels

    The suit, filed Feb. 18, 2016, in the U.S. District Court for the Northern District of Illinois, accuses Mercedes of deceiving consumers with false representations of its BlueTEC vehicles, which it marketed as “the world’s cleanest and most advanced diesel” with “ultra-low emissions, high fuel economy and responsive performance” that emits “up to 30% lower greenhouse-gas emissions than gasoline.” According to the complaint, on-road testing confirmed that Mercedes’ so-called Clean Diesel cars produced average on-road NOx emissions that are 19 times higher than the U.S. standard, with some instantaneous readings as high as 65 times more than the U.S. limit.

    “Mercedes labeled its BlueTEC vehicles as ‘earth friendly,’ selling consumers the false notion that these diesel cars were less harmful to the environment, but Mercedes never divulged to consumers that BlueTEC diesels pollute at illegal levels when driven at lower temperatures and that its ‘champion of the environment’ mantra was a sham,” said Steve Berman, managing partner of Hagens Berman. “It appears that Mercedes has been caught in a similar scheme as Volkswagen and programmed these BlueTEC vehicles to pollute, all the while reaping profits from those who have fallen victim to its aggressive and deceptive eco-conscious branding.”

    The suit seeks relief for those who purchased the affected vehicles, including injunctive relief in the form of a recall or free replacement program and restitution including either recovery of the purchase price or overpayment or diminution in value due to Mercedes’ misleading statements and omissions regarding the emission levels of its Clean Diesel BlueTEC vehicles.
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    The Oil Bears are spitting blood, and missing the point!

    For all the euphoria about the proposed OPEC oil production freeze deal, the reality is that nothing has been actually decided. As readers will recall, the only "decisions" agreed to between the Saudi and Russian oil ministers were to cap production at already record high levels of output, however contingent on everyone else voluntarily joining said production cap.

    Then yesterday, as part of its own meeting, Iran made it clear that while it supports efforts to push the price of oil higher, it would certainly not limit its output at current levels, and instead requires an explicit loophole granting it a production limit from the pre-sanctions period. This put OPEC in a bind: if it grants Iran special treatment, then who else will have a similar request.

    The answer was revealed just hours later when Iraq earlier today stopped short of saying it would curb production of oil to prop up sagging prices, saying negotiations are still ongoing between members of the Organization of the Petroleum Exporting Countries.

    According to the WSJ, Iraq oil minister Adel Abdul Mahdi said his country supports any decision that will serve producers, prop up prices and achieve balance in the crude markets. However, just like Iran he didn’t explicitly say whether Iraq would curb its own output but said any rapprochement between all sides to restrict crude output is a step in the right direction.

    As the WSJ summarizes, his comments "came a day after Iran’s oil minister didn’t commit to limiting production, throwing into question the future of a plan brokered by Saudi Arabia and Russia this week for major oil producing countries to limit their output to last month’s levels."

    “The deterioration of the oil prices has directly impacted the global economy and the historical responsibly of the producers requires great speed in finding positive solutions that will help prices return to the normal [levels],” Mr. Abdul Mahdi said in a statement.

    In other words, more of the same.

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    RWE scraps dividend as power sector crisis intensifies

    RWE will pay no 2015 dividend on its common stock for the first time in at least 23 years, as Germany's No.2 utility struggles to hold on to cash following major writedowns on power stations at home and abroad.

    Shares in the group slumped more than 12 percent to a four-month low, poised for their biggest ever one-day drop. "Scrapping the dividend is a devastating signal, you couldn't send a worse one," a trader said.

    German utilities have been burdened by the country's decision to close nuclear plants and a plunge in wholesale power prices, compounded by a big expansion in renewables. RWE has also struggled with problems at its British business npower, blamed on billing glitches and a loss of customers.

    As a result, RWE took a 2.1 billion euro ($2.3 billion) impairment charge on plants in Germany and Britain, causing a net loss of about 200 million euros for 2015. The group was also hit by a 900 million euro writedown in deferred taxes.

    "We know that we might disappoint many shareholders with today's (dividend) decision," RWE Chief Executive Peter Terium said in a statement on Wednesday. "However, it is necessary in order to strengthen our company."

    Analysts had expected a dividend of 0.61 euros per common share, according to Thomson Reuters data. For preferred shares, which account for only about 6 percent of RWE's stock, the group will pay a dividend of 0.13 euros per share.

    In response to the crisis, RWE late last year said it would split off and separately list its healthy renewables, networks and retail businesses in the course of the year, hoping to escape a crisis that has eroded profitability at its bread-and-butter power plants.

    RWE also said on Wednesday it had reached its 2015 targets, posting underlying net income of 1.1 billion euros and operating profit of 3.8 billion euros, though it cautioned both were expected to decline this year to between 500 million and 700 million euros, and to between 2.8 billion and 3.1 billion, respectively.
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    Germany rejects EU plan for levy on industry for green energy

    Germany's economy ministry rejected as unacceptable European Commission plans for an additional levy for industrial firms generating their own power to help pay for renewable energy, according to a paper seen by Reuters which is to be sent to Brussels.

    In unusually dramatic language, the ministry said the plans could cost German industry 760 million euros per year even if the plans were only implemented in part and "would lead to massive inadvertent structural disruption and further de-industrialisation" in Europe's biggest economy.

    The German economy ministry declined to comment on the paper seen by Reuters.
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    Glencore refinances revolving credit facility

    Diversified miner Glencore has signed a new revolving credit facility (RCF) to refinance and replace its existing $8.45-billion facility. In an initial presyndication phase, Glencore received commitments from 37 banks for $8.4-billion, $3-billion above existing commitment levels. 

    Given the high oversubscription level, the miner has scaled back and signed in $7.7-billion of such commitments and will now broaden the refinancing through general syndication to some 30 additional banks in the second quarter of this year. 

    Similar to the current facility being replaced in May, the new RCF remains unsecured, containing a 12-month extension option and 12-month borrower’s term-out option, thereby extending the final maturity to May 2018. Active bookrunners on the deal were ABN AMRO, Bank of Tokyo Mitsubishi, HSBC, ING and Santander.
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    China sends missiles to contested South China Sea island: Taiwan

    China has deployed an advanced surface-to-air missile system to one of the disputed islands it controls in the South China Sea, Taiwan and U.S. officials said, ratcheting up tensions even as U.S. President Barack Obama urged restraint in the region.

    Taiwan defense ministry spokesman Major General David Lo told Reuters the missile batteries had been set up on Woody Island. The island is part of the Paracels chain, under Chinese control for more than 40 year but also claimed by Taiwan and Vietnam.

    "Interested parties should work together to maintain peace and stability in the South China Sea region and refrain from taking any unilateral measures that would increase tensions," Lo said on Wednesday.

    A U.S. defense official also confirmed the "apparent deployment" of the missiles, first reported by Fox News.

    Images from civilian satellite company ImageSat International show two batteries of eight surface-to-air missile launchers as well as a radar system, according to Fox News.

    News of the missile deployment came as Obama and leaders of the Association of Southeast Asian Nations concluded a summit in California, where they discussed the need to ease tensions in the region but did not include specific mention of China's assertive pursuit of its claims in the South China Sea.

    China claims most of the South China Sea, through which more than $5 trillion in global trade passes every year, and has been building runways and other infrastructure on artificial islands to bolster its claims.

    "We discussed the need for tangible steps in the South China Sea to lower tensions including a halt to further reclamation, new construction and militarization of disputed areas," Obama told a news conference.
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    India and China Have Most Deaths From Pollution

    More than half of the 5.5 million deaths related to air pollution in 2013 happened in India and China, according to a new study.

    About 1.4 million people in the South Asian nation and 1.6 million in its northern neighbor died of illnesses related to air pollution in 2013, researchers at the University of British Columbia in Canada said.

    The Indian and Chinese fatalities accounted for 55% of such deaths worldwide, the study said.

    Researchers studied risk factors for death and disease around the world and found that air pollution, both indoors and outdoors, was one of the leading contributors to global fatalities.

    The inhalation of emissions from power plants, vehicles, the burning of crop stubble before replanting, and wood or open fires in homes are some of the leading causes of deaths from air pollution, the report said.

    The number of premature deaths linked to air pollution worldwide will increase over the next two decades unless more aggressive targets are set to curb it, researchers studying India and China’s air said at a meeting Friday in Washington D.C.

    A major contributor of poor air quality in India is linked to the burning of wood and cow dung for cooking and keeping warm, particularly in the winter months. These methods are popular among India’s rural and urban poor, who don’t have access to electricity or cleaner fuels.

    Household air pollution from cooking with wood “is primarily a problem in rural areas of developing countries of the world,” said Michael Brauer, a professor at the University of British Columbia’s School of Population and Public Health, in Canada.

    Over the past few months, levels of tiny insidious particles, known as PM 2.5, in the Indian capital New Delhi have often exceeded amounts deemed safe by the United Nations World Health Organization.

    Taking their lead from Beijing, Indian authorities in January experimented with restricting cars on roads for two weeks in New Delhi to reduce emission levels. Delhi Chief Minister Arvind Kejriwal said Thursday the city would revive the restrictions for 15 days, starting April 15.

    Scientists said vehicle emissions contribute only 20% to 40% of pollution in Delhi, saying other sources of the particulate matter include the burning of dung, rubbish and leaves and the use of diesel backup generators, which kick in when Delhi’s patchy electricity supply cuts out, as well as emissions from small-scale industries such as brick kilns.

    A federal environmental court in New Delhi said Feb. 4 it wanted officials to improve air quality by asking authorities to reduce the number of traditional cremations that use wood to burn bodies, a widespread practice in majority Hindu India.

    In China, outdoor air pollution from burning coal was found to be the biggest contributor to poor air quality, causing an estimated 366,000 deaths in the country in 2013. Scientists predict 1.3 million premature deaths will take place in China by 2030 if coal combustion remains unchecked.

    “One of the unique things about air pollution is you cannot run, you cannot hide from it. We know that if you improve air quality everybody benefits, so from a health perspective reducing levels of air pollution is actually an incredibly efficient way to improve the health of the entire population,” Mr. Brauer said.
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    Rolling Thunder: The Military Forces Gather Around Syria.

    JEDDAH: Armed forces from Arab, Islamic and friendly countries started arriving in Saudi Arabia on Sunday for “North Thunder,” a military exercise to be held and commanded by the Kingdom
    The maneuver will be held at the King Khaled Military City (KKMC) in Hafr Al-Batin with participation of 20 countries and the GCC-formed Peninsula Shield forces as well.
    The participating countries are Saudi Arabia, UAE, Jordan, Bahrain, Senegal, Sudan, Kuwait, Maldives, Morocco, Pakistan, Chad, Tunisia, Comoro Islands, Djibouti, Oman, Qatar, Malaysia, Egypt, Mauritania, and Mauritius.
    North Thunder is the biggest military exercise of its kind in terms of the number of participating countries and military equipment, including fighter jets of different models, reflecting the quantitative and qualitative weapons the forces have.
    The exercise will also witness participation of a wide range of artillery, tanks, infantry, air defense systems, and naval forces in a simulation to reflect the highest level of preparedness of the 20 participating countries.
    North Thunder sends a clear message that the Kingdom, its sister, brotherly and friendly countries joining the maneuver are standing together in the face of all challenges to preserve peace and stability in the region and the world at large.

    Feb 14th, Jeddah.

    Saudi Arabia will head into an unprecedented meeting in Brussels next week of defense ministers allied to defeat the Islamic State group with a new offer: to deploy ground troops to war-torn Syria, if the coalition agrees.

    A spokesman for the Saudi military first confirmed the pledge to The Associated Press Thursday afternoon, declining to offer specifics on how many troops it would provide or what kind of mission they would conduct.

    "We are determined to fight and defeat Daesh," said Saudi Brig. Gen. Ahmed Asiri, using the preferred name in the region for the terrorist network, also known as ISIS or ISIL. His remarks follow reports that Turkey is also considering a ground invasion into neighboring Syria.

    ~Feb 16th, Brussels.

    Moscow has already positioned extra air defence systems into northern Syria in the wake of losing its jet last November. It has also introduced extra fighter jets and bombers, and slightly increased its ground troops.

    It has also announced military exercises in the Caspian Sea and the Black Sea. In both instances its forces were put on full combat readiness.  Most reporting of the exercises say they are linked to the situation in Ukraine, and while this is plausible, it is also possible they are in fact linked to the Syrian/Turkey situation.

    Taken as a whole, the picture appears to be one of Russia signalling to Turkey, and therefore to NATO, including the USA, that it is in the driving seat. It is saying that is  pre-positioning  the equipment necessary to escalate if necessary and thus warning others not to get involved.

    For several months now eminent foreign policy analysts have been writing that Russia is looking for an exit strategy in Syria. The evidence suggests otherwise.

    ~Feb 15th, CapX UK. 

    In an unprecedented step the NATO allies are sending their Standing NATO Maritime Group 2 (SNMG2) to the Aegean area to help national and EU authorities stem the flow of illegal immigrants pouring out of Syria and other conflict areas: a first in civil-military operational collaboration between NATO and the European Union.

    "Europe faces its biggest migration crisis since the Second World War and our alliance is responding to the changed security environment," NATO Secretary General Jens Stoltenberg told journalists after the decision by allied defence ministers at their 11 February meeting in Brussels.

    The move came in response to a 9 February request from Germany, Greece, and Turkey for help in stemming Europe's overwhelming illegal migrant flows and the human trafficking networks that facilitate them.

    ~Feb 14th, Janes Defence Journal. 

    5. Little hope for Syrian peace. The major diplomatic development at Munich was the “cessation of hostilities” agreed to by the United States and Russia. It inspired significant pessimism at the conference. Participants pointed out under the terms of the deal, Russia and Assad were permitted to continue their bombing campaign for an additional week; after that they could bomb any factions they designated as al Nusra or the Islamic State. It was unclear what, if any, consequences Russia might face for violating the agreement, or if such transgressions would merely result in pursuit of another deal.

    It is clear that time is now on the side of the Assad–Russia–Iran coalition. As their offensives batter the moderate opposition, and given American reluctance to intervene to shift the balance of forces, there is a diminishing possibility that a diplomatic effort will yield an outcome favorable to the United States and its partners. The current trends demonstrate that the parties America would most like to see prevail are under the most pressure, and are growing weaker by the day. Hence the rush to seek a diplomatic agreement as soon as possible, before Assad and Russia lock in additional gains.

    Feb 16th, Munich.

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    China Created A Record Half A Trillion Dollars Of Debt In January

    Yes, you read that right. Amid a tumbling stock market, plunging trade data, weakening Yuan, and soaring volatility, China's aggregate debt (so-called total social financing) rose a stunning CNY3.42 trillion (or an even more insane-sounding $520 billion) in January alone.

    In fact, since October, China has added over 1 trillion dollars of credit... and has nothing but margin calls, ghost-er cities, and over-supplied commodity-warehouses to show for it... oh and even-record-er debt-to-GDP ratio.

    This is what the unprecedented addition of half-a-trillion dollars in one month looks like - Hyman Minsky called, he wants his chart back.

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    The new Anglo American

    The company announced long awaited plans to restructure its portfolio and address it debt.

    The company will materially streamline its portfolio to 16 assets and three business units – they are diamonds (De Beers), copper and Platinum Group Metals (PGM’s) – Anglo American Platinum.

    “This unique combination of assets, enhanced by our commercial marketing expertise, will have the advantage of benefiting from the ongoing shift away from infrastructure investment towards consumer-driven demand, positioning Anglo American for these expanding markets. We will manage our other assets, in bulk commodities and other minerals, for cash generation or disposal over time.”

    The disposals will targeting $3-4bn for disposals in 2016. Net debt is expected to be less than $10bn by the end of the year assuming current commodity prices and exchange rates.

    Nickel, niobium and phosphates, and Moranbah and Grosvenor metallurgical coal disposal processes are under way.

    Anglo exits iron ore: “Bulk commodities and other minerals to be managed for cash generation or disposal.” The company will continue to reconfigure the Sishen mine, but will consider options to exit at the right time.

    “At the Minas-Rio iron ore operation in Brazil, work has been prioritised to optimise the operation for the current iron ore price environment to ensure that it is cash flow positive in 2016 and subsequent years. Work is also progressing to secure the
    required licences that underpin the full ramp-up over time that will also ensure the long term sustainability of Minas-Rio for all its stakeholders. All such work is expected to be completed over the next three years, at which time options for the
    asset will be assessed.”

    “We have processes in place in nickel, Minas Rio is non-core but we are committed to building and completing the project – we are not announcing the sale process today,” says Mark Cutifani.
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    China's steady commodity imports are remarkable

    China's imports of major commodities presented a "steady-as-she-goes" picture in January, which doesn't sound that exciting but should go some way to hosing down some of the more alarmist fears over the state of the world's second-biggest economy.

    China's crude oil imports did drop to 6.29 million barrels per day in January, a decline of 20 percent from December and 4.6 percent on the same month in 2015.

    But seen in the context of December being the record high for crude imports and the Chinese New Year holidays being 11 days earlier this year than in 2015, it becomes clear that the crude imports are within the realms of reasonable variation.

    It's also worth noting that exports of refined fuels fell in January to 679,000 bpd from December's record 975,500 bpd, meaning less crude was needed for oil product exports.

    Iron ore imports were weaker in January from the prior month, dropping 14.6 percent to 82.19 million tonnes.

    However, as for crude oil, December 2015 had been a record month for iron ore imports, and January's figure was still 4.6 percent above that for the same month a year earlier.

    There was most likely an element of stockbuilding ahead of the early February Chinese New Year holidays, as witnessed by a gain of some 2 million tonnes in port inventories over the month.

    But it also seems clear that despite the much-publicised woes of China's steel sector, which is battling both excess capacity and weak demand, iron ore imports are very far from collapsing.

    It would be surprising if they managed to improve on last year's record 952.8 million tonnes, given expectations of lower steel output in China in 2016.

    Copper continued the January pattern of a drop in imports from elevated levels in December, but still solid when compared with the same month in 2015.

    January's imports were 437,000 tonnes, up 5.3 percent on the same month a year ago, but down 17 percent from December.

    January's commodity imports were generally unremarkable, which is remarkable given the turmoil that was taking place in financial markets at the time.
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    Moody's downgrades Anglo American's debt to "junk"

    Global miner Anglo American Plc's debt was downgraded further into "junk" territory by Moody's Investor Service, which cited a deterioration in commodities market conditions and a "longer and more uncertain deleveraging period".

    Moody's downgraded the company to (P)Ba3 from (P)Baa3, and said the outlook on the ratings was negative.

    Moody's said it does not expect Anglo American to generate enough operating cash flows to deliver substantial organic debt reduction in the next two years.

    The company is expected to report full-year results on Tuesday.
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    3D Printed buildings??

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     A company called Zhuoda Group has developed a very unique form of 3D printing buildings, so unique that not only have they applied for over 22 patents for the technology, but they also are reluctant to divulge the exact process. Unlike other forms of 3D printing of large structures, which use a cement base for construction, Zhuoda does not. In fact, the material that they use is being called a “secret”, although they have many parties interested in purchasing it.

    The buildings that they are fabricating are strong enough to withstand 9.0 magnitude earthquakes, stand up to harsh weather, and provide for superior insulation. Better yet, the material that these houses are constructed with also generates negative ions on a permanent basis, a feature that many Chinese will be quite happy with. On top this, the buildings are also fireproof, waterproof, and virtually corrosion-proof.

    The city-state of Singapore has invested S$150 million (roughly $100 million) into the Singapore Centre for 3D Printing at Nanyang Technological University to test out 3D printing concrete blocks on a large scale. According to 3DPrint, the school is looking into building new printers to create the blocks. “In the area of housing there are quite big challenges,” Chua Chee Kai, the center’s director, told 3DPrint. “There is no assistance of 3D printers and no availability of printable concrete. We have to develop all this from scratch.”

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    Indonesia export, import slump deepens; central bank may cut rates

    Indonesia posted a small trade surplus in January, confounding expectations for a third monthly deficit, due largely to a slump in imports from persistently weak domestic consumption.

    Sliding prices for oil, gas and other commodities have led to a sharp drop in export earnings for Southeast Asia's largest economy, and deteriorating global demand could push the central bank to cut rates again this week, some economists said.

    Exports plunged 20.72 percent in January to $10.50 billion, the weakest shipment by value since September 2009 and the 16th straight month of decline. Economists surveyed had expected a 15.40 percent drop.

    Imports fell 17.15 percent, sharper than economists' estimates of 8.14 percent, data from the statistics bureau showed. Imports of raw material and capital goods were all down, the bureau said, but imports of consumer goods rose.

    Weaker than forecast exports and imports led to a $50.6 million surplus in January. A Reuters poll of analysts had expected a $360 million deficit for the month, following a revised $161 million deficit in December.

    "It's a disappointing import number," said Gundy Cahyadi, DBS' economist in Singapore.

    "For GDP growth to return to 5 percent this year, the economy needs stronger domestic demand, particularly investment. And the monthly import numbers are a good proxy for the strength in domestic demand," he added.

    Indonesia's trade balance moved back into surplus in 2015, after three years of deficits, largely due to a fall in imports as consumption and investment stayed weak.

    The government is targeting 5.3 percent GDP growth this year after the economy grew at its slowest since the 2009 financial crisis last year.

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    China Exports Crash Most In 6 Months Despite "Devalued" Yuan

    Despite the weakening of the Yuan, China exports collapses 6.6% YoY in January (massively missing the 3.6% increase expected). Imports continued their 15 month series of collapses with a 14.4% plunge (again drastically worse than the 1.8% increase expected). This pushed the trade balance to a record surplus CNY406bn.

    In Yuan terms it's ugly... Both imports and exporets were worse than the lowest forecast of all professional economists...

    The last time Chinese trade data was this bad was in August. China devalued three days later
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    Peter Pan Is Dead - Japanese Economy Stalls For 6th Time In 6 Years

    We just cannot wait for the next time either Abe or Kuroda utter the following string of words "[stimulus - insert any combination of equity buying, bond buying, money printing, and NIRP] is having the desired effect." For the sixth time in the last 6 years, GDP growth has once again turned negative and while the BoJ balance sheet continues to balloon, so the nation's economy (as measure by GDP) is now shrinking as Peter Pan policy is officially dead.

    With 3 of the top 4 forecasters already suggesting Japanese GDP growth would be worse than the median estimate of -0.2% growth, fairy-tales were all they had left... Nearly a year ago, Bank of Japan governor Haruhiko Kuroda described the unlikely inspiration behind Japan’s unprecedented monetary stimulus: Peter Pan.

    I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it’.

    Yes, what we need is a positive attitude and conviction. Indeed, each time central banks have been confronted with a wide range of problems, they have overcome the problems by conceiving new solutions.

    And now, Pan is dead... this is the 6th negative GDP growth period since 2010... printing a 0.4% QoQ drop against the -0.2% growth expectation...

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    Saudi Stocks Slammed As War Worries Trump Dead-Crude-Bounce

    Oil's late week surge provided much buying excitement as Mid-East equity markets opened with flashing green numbers across every screen. However, by the close, it was a sea of red with Kuwait, Egypt, Amman, and Iraq all lower and Saudi's Tadawul All Share Index tumbling almost 4% from the opening highs as war worries dragged The Kingdom's stock market back near 5-year lows.

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    Argentina scraps mining export taxes as part of free market push

    Argentina's new president has revoked the 5 percent tax that the previous administration collected on mining exports, state news agency Telam reported on Friday, as part of the country's two-month old push toward open markets.

    "Today end the taxes on mining exports," Mauricio Macri, inaugurated in December after winning office on a free-markets platform, said in a ceremony announcing the measure.

    "We are going to work with the governors to develop new mining projects, always putting environmental protection first," Macri said.

    His predecessor, Cristina Fernandez, expanded the state's role in Latin America's No. 3 economy. Her trade and currency controls were thrown out by Macri during his first month in office as he tries to spur production and exports while confronting double-digit inflation.

    Macri said the decision to ditch mining export taxes "is in line with generating the stability, confidence and predictability that will attract investors."

    Argentina produces aluminum, lead, copper, zinc, silver and gold.
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    Iran will defend Syria’s airspace if Damascus requests

    A senior Iranian air force commander says Iran is prepared to defend Syria’s airspace if Damascus calls for it.

    Brigadier General Farzad Esmaili, the commander of Iran’s Khatam al-Anbiya Air Defense Base, made the remarks during an interview with the Tasnim news agency on Sunday.

    After praising the government and people of the Arab country for their five-year battle against foreign-backed Takfiri terrorism, he stressed that any military presence in Syria without the approval of Damascus would end in nothing but "defeat.”  

    The remarks were made in the wake of reports that Turkey and Saudi Arabia were preparing to launch joint military operations on Syrian soil.

    Instead of contemplating a ground presence in Syria, Esmaili noted, Riyadh should consider stopping atrocities in Yemen where over 8,200 people have been killed and some 16,000 more injured since March 26, 2015.

    Meanwhile, Saudi Arabia has confirmed deployment of warplanes to the Incirlik Air Base in southern Turkey, claiming that the move was in line with the so-called fight against Daesh.

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    21 countries in Thunder of the North drill in Saudi Arabia

    International war games to raise combat readiness, boost coordination

    Saudi media said that the war manoeuvres, code namedcode named Northern Thunder, would be held in the northern region of the kingdom and that several countries would join.

    Brigadier Ahmad Asiri, the spokesperson for the Arab Coalition fighting to restore the rule of the internationally recognised government in Yemen, said that 21 countries would be participating in the Northern Thunder drill.

    “There will be 21 Arab and Muslim countries taking part in huge drills,” Assiri told London-based newspaper Al Sharq Al Awsat. “It will serve to boost fighting capabilities, exchange information, benefit from experiences and expertise and enhance coordination between the participating countries. There will be joint military command centres,” he said.

    Assiri added that “when participating countries feel that there are coordinated and interdependent efforts, the results of the exercise will be positive. We have models based on real experience of being in the Arab coalition in Yemen where operations are running excellently and positively,” he was quoted by the daily as saying.

    Asiri said that Saudi Arabia worked within military coalitions and that it was ready for a land war whenever the international coalition wants to launch ground operations.

    Saudi Arabia has a strong desire to defeat terror groups, he said, adding that no country in the region was targeted by the Daesh terror group like the Saudi kingdom where it attacked mosques, security men and the northern border.

    Several Arab ambassadors said that the participation of their countries in the “Northern Thunder” will focus on the ground troops and will boost combat readiness and coordination.

    “The initiative of the Custodian of the Two Holy Mosques to launch the Northern Thunder drills is one of his numerous initiatives to preserve security and stability in the region,” Jamal Al Shamayla, the Jordan ambassador to Saudi Arabia, said. “Jordan, led by His Majesty King Abdallah, will always and forever be with Saudi Arabia, led by King Salman Bin Abdul Aziz, through consultations and coordination towards all issues of common interest. Jordan is absolutely keen on Arab security, particularly during these times dominated by chaos resulting from terrorism,” he said.

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    Turkey, Saudis threaten ground troops in Syria

    Hopes of securing a temporary truce in the Syria crisis within a week dimmed over the weekend as Syrian government forces tightened the noose around rebel-held parts of Aleppo, Turkey continued shelling Kurds and Syrian troops inside Syria, and Russia's foreign minister put the chances of a quick deal at less than 50 percent. His comments and strong words from U.S. Secretary of State John Kerry underscored deep U.S.-Russian disagreements over Syria.

    Further complicating the picture, Turkey's foreign minister said his country and Saudi Arabia may launch ground operations against the Islamic State of Iraq and Syria (ISIS) in Syria, Turkish media reported Saturday.

    Diplomats from countries with interests in Syria's five-year civil war - including the United States, Russia, Turkey, Iran and Saudi Arabia - agreed Friday to work toward a temporary "cessation of hostilities" within a week. They also agreed to "accelerate and expand" deliveries of humanitarian aid to besieged Syrian communities beginning this week.

    However, the ongoing posturing by all sides involved and the ever-persistent bloody fighting in the country itself threaten to make the diplomatic effort for naught.

    Officials involved in truce talks have acknowledged from the start that the test would be turning commitments on paper into reality on the ground - and it wasn't clear whether deep differences regarding the truce and which groups would be eligible for it could be overcome.

    The truce deal in Munich came as Syrian government forces, aided by a Russian bombing campaign, are trying to encircle rebels in Aleppo, the country's largest city, and cut off their supply route to Turkey.

    Turkey's foreign minister, Mevlut Cavusoglu, was quoted in the Yeni Safak newspaper Saturday as saying that "Turkey and Saudi Arabia may launch an operation from the land" against ISIS, which holds a swathe of Syrian territory.

    Saudi Arabia is "ready to send both jets and troops" to Turkey's Incirlik air base, Cavusoglu was quoted as saying, and a ground operation is possible if there is "an extensive results-oriented strategy" in the fight against the Islamic extremists. Incirlik is now being used by the U.S.-led coalition in the campaign against IS.

    Turkish television channels NTV and CNN Turk also carried remarks by Cavusoglu suggesting that Turkey and Saudi Arabia see eye-to-eye on the need for ground operations in Syria.

    A senior commander warned the Saudis Sunday against getting more directly involved, reports Agence France Presse.

    "We definitely won't let the situation in Syria to go forward the way rebel countries want... We will take necessary actions in due time," deputy chief of staff Brigadier General Masoud Jazayeri told Iran's Arabic-language Al-Aalam television.

    Riyadh said on Saturday it had deployed warplanes to Turkey's Incirlik airbase in order to "intensify" its operations against the Islamic State group in Syria.

    Iran is a close ally of Syrian President Bashar Assad and has sent weapons, money and military advisers to Syria to help bolster his forces. Tehran denies it has sent combat troops, but several Iranian soldiers, including senior officers, have been killed on Syrian battlefields.

    Shiite Iran and Sunni Saudi Arabia have been engaged in a growing hostile struggle for regional influence in recent years, with their interests coming into conflict in Yemen, Syria, and elsewhere.

    There was a dangerous rise in tensions between Iran and Saudi Arabia in recent weeks following the kingdom's execution of a Shiite cleric and attacks on Saudi diplomatic posts in the Islamic Republic.

    The exection of the cleric, Nimr al-Nimr, inflamed a 1,400-year-old conflict between Sunni and Shiite Muslims.

    Analysts have feared the dispute could boil over into the proxy wars between the two Mideast rivals.

    Meanwhile, opposition activists say Turkey has shelled positions held by the main Kurdish militia in northern Syria for a second day Sunday.

    The Syrian Observatory for Human Rights activist group says two fighters from the Syrian Democratic Forces - a coalition of Kurdish and Arab fighters - have been killed and seven others wounded in the shelling.

    There was no immediate confirmation by the group, which is dominated by Kurdish fighters from the People's Protection Units known as the YPG.

    The group has been on the march in the northern province of Aleppo near the Turkish border in recent days. That has alarmed Turkey, which considers the group to be an affiliate of the Kurdish PKK movement which it considers to be a terrorist organization.

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    Oil and Gas

    Ultra Petroleum posts $3.2 billion loss as potential bankruptcy looms

    Houston-based Ultra Petroleum Corp. is trying to avoid filing for bankruptcy after reporting a net loss of $3.2 billion for the quarter on Thursday.

    The natural gas producer is mired in $3.39 billion in debt after expanding its asset base in Wyoming in 2014.

    Ultra Chairman, President and CEO Mike Watford said he is trying to restructure the company’s debt — “so far unsuccessfully” — in order to avoid filing in bankruptcy court, but he admitted Ultra needs external assistance.

    “All of our debt is unsecured,” Watford said. “We’re in a unique position. It’s not all that pleasant. We need some help from the creditors to get across the finish line.

    He said Ultra submitted a restructuring plan to its three main creditors in January, but he is still awaiting replies. “We would’ve anticipated a response weeks ago,” he said.

    While a compromise is still possible, it likely would’ve occurred by now, said Michael Scialla, analyst at Stifel, Nicolaus & Company.

    “I think it looks like bankruptcy is almost inevitable,” Scialla said. “It’s been a pretty long downward slide for them.”

    Ultra was one of the premier energy stocks during the height of the shale gas boom in 2008 before the recession. The company traded for nearly $100 a share at the time. They stock sold for $50 a share in 2011, nearly $30 in 2014 and fell below $1 for the first time on Feb. 11. The selloff continued Thursday, driving the stock down to 39 cents a share, a decrease of 26 cents on the day.

    Ultra “fell in love” with the Pinedale shale play in Wyoming, Scialla said, which remains strong, although other shale plays have surpassed it. As recently as 2014, Ultra paid $925 million and gave 155,000 acres in the Marcellus Shale to Royal Dutch Shell in exchange for Shell’s natural gas field operations in Pinedale.

    “They didn’t diversify quickly, used too much debt and got backed into a corner,” Scialla said. “It’s a sad story.”

    The company recently hired Kirkland & Ellis as legal advisers and Rothschild and Petrie Partners as financial advisers. Such hires are harbingers of major restructuring efforts, said Pearce Hammond, of Simmons & Company International, in an analyst note.

    “This illustrates the intractable balance sheet problems the company faces,” Hammond wrote, arguing that Ultra has a “very dire outlook” overall.

    Watford said Thursday that putting assets up for sale wouldn’t do enough good. He said the hope is to survive the current trough of low natural gas prices and start profiting again next winter.

    This year’s relatively warm winter likely was the “last nail in the coffin” for Ultra with reduced natural gas demand, Scialla said.

    Watford said Ultra is reducing its capital spending in 2016 by nearly 50 percent from $500 million down to $260 million.

    Nearly all of Ultra’s $3.2 billion loss came from a $3.1 billion write down on the reduced value of its assets. While the impairment is a non-cash charge, it demonstrates the company’s reduced profitability. As such, Ultra’s adjusted net loss was $39 million.

    In the final quarter of 2014, Ultra reported a $210 million profit. Ultra employed about 125 people as recently as 2014.

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    Ousted Cheniere CEO Souki resigns from board

    Former Cheniere Energy CEO Charif Souki, who was replaced in December following disagreements with billionaire activist investor Carl Icahn, has resigned from the company’s board.

    Souki notified the board of the Houston-based natural gas terminal operator that he was leaving, effective immediately, the company said in a filing to the U.S. Securities and Exchange Commission released Thursday. Within days of his being replaced as CEO, Souki said he would keep his seat on the board until he had a chance to review the company’s new strategy.

    “It’s just time to move on,” Souki said by phone on Thursday. “The ski season is almost over. It’s time for me to do something else.”

    Souki said in December that he was ousted over his plan to speed the growth of Cheniere’s liquefied natural gas projects, a strategy opposed by Icahn, the company’s largest investor. His departure came just weeks before Cheniere was scheduled to export the first-ever cargo of U.S. shale gas. The company has since delayed that shipment to late February or next month.
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    Santos Vows Cost Cuts After $2.8 Billion Charge on Oil Crash

    Santos Ltd.’s new Chief Executive Officer Kevin Gallagher promised to cut costs further after the oil price crash led to a wider net loss and A$3.9 billion ($2.8 billion) in writedowns.

    The full-year net loss was A$2.7 billion, compared with a loss of A$935 million a year earlier, Adelaide-based Santos said Friday. Profit, excluding one-time items, fell 91 percent to A$50 million, from A$533 million the previous year. The mean estimate of 14 analysts surveyed by Bloomberg was A$87 million.

    Santos, Australia’s third-largest oil and gas producer, has joined companies including Origin Energy Ltd. in seeking to shore up its balance sheet after the slide in crude prices. The oil producer, which unveiled a A$3.5 billion program to cut its debt in November, said it doesn’t need to sell assets and that the steps it has already taken will provide a buffer.

    “We have to do better in the future,” Gallagher told analysts on an earnings call. “It is therefore imperative that we continue to take costs out of our business. Hence my absolute focus and my first priority over the next few months will be to look closely at our operations. I will be scrutinizing our portfolio of assets.”

    ‘Deck Clearing’

    Santos, which lost almost half its value in Sydney trading last year, was down 3.7 percent at A$3.41 as of 1:14 p.m. in Sydney on Friday, paring an earlier loss of as much as 8.8 percent. Competitor Woodside Petroleum Ltd. on Wednesday reported a 99 percent decline in full-year profit after writedowns.

    Pre-tax writedowns for Santos included A$565 million from its Gladstone liquefied natural gas project in Queensland and A$2.1 billion for its Cooper Basin gas assets in central Australia. The company also cut its proved and probable reserves by 24 percent, and its spending forecast for 2016 by 34 percent to A$1.1 billion.

    “The extent of reserve downgrades and impairments are of major concern,” and may show the start of a “deck-clearing” phase from the new CEO, Goldman Sachs Group Inc. analyst Mark Wiseman wrote in a note.
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    Saudi Arabia 'not prepared' to cut oil production: AFP

    Saudi Arabia is "not prepared" to cut oil production, Agence France-Presse reported, quoting the Saudi foreign minister Adel al-Jubeir.

    "If other producers want to limit or agree to a freeze in terms of additional production that may have an impact on the market but Saudi Arabia is not prepared to cut production," al-Jubeir told AFP in an interview.

    "The oil issue will be determined by supply and demand and by market forces. The kingdom of Saudi Arabia will protect its market share and we have said so."

    Oil prices rose more than 14 percent over the last three days after a plan by Saudi Arabia and Russia, endorsed without commitment by Iran on Wednesday, to freeze oil output at January's highs.

    The Saudi-Russian production freeze plan, also joined by Qatar and Venezuela, is the first such deal in 15 years between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members.
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    Marathon Oil to focus diminished budget on Eagle Ford

    Marathon Oil Corp. detailed Thursday a diminished drilling plan, as the company continues to pull back on its spending amid cheap crude oil.

    The Houston-based independent driller said it would spend $1.4 billion drilling and exploring for oil in 2016, a 52 percent reduction from 2014 and a 75 percent reduction from 2014.

    On a conference call with investors Thursday, Marathon said about 42 percent percent of that budget will go to the Eagle Ford. Another 14 percent will be spent drilling to Oklahoma shale and 13 percent in the Bakken.

    Marathon said it planned to reduce its Eagle Ford rig count to five in the first quarter of 2016. The company said it will run two rigs in Oklahoma. In the Bakken, the company will work with a “half rig year” and a part time frac crew.

    A handful of international projects will continue, Marathon said. The company will invest $41 million in its Canadian oil sands holdings, while targeting more savings in the future. Its Kurdistan assets will get $72 million. The Equatorial Guinea project will need $76 million, and it’s expected to start producing in mid-2016. In the Gulf of Mexico, Marathon will spend $68 million.

    In addition to cutting its budget, Marathon said it’s planning to raise funds by selling off non-core assets. The company targeted between $750 million and $1 billion in asset sales this year.

    Combined, executives expect the cuts to begin to eat into Marathon’s production. The company said its 2016 production will decline between 6 percent and 8 percent after adjusting for asset sales.
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    Summary of Weekly Petroleum Data for the Week Ending February 12, 2016

    U.S. crude oil refinery inputs averaged over 15.8 million barrels per day during the week ending February 12, 2016, 338,000 barrels per day more than the previous week’s average. Refineries operated at 88.3% of their operable capacity last week. Gasoline production increased last week, averaging 9.7 million barrels per day. Distillate fuel production increased last week, averaging about 4.7 million barrels per day.

    U.S. crude oil imports averaged over 7.9 million barrels per day last week, up by 795,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.7 million barrels per day, 5.8% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 565,000 barrels per day. Distillate fuel imports averaged 232,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.1 million barrels from the previous week. At 504.1 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 3.0 million barrels last week, and are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 1.4 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 4.3 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 3.4 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.8 million barrels per day, down by 0.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 8.9 million barrels per day, up by 3.0% from the same period last year. Distillate fuel product supplied averaged over 3.5 million barrels per day over the last four weeks, down by 15.6% from the same period last year. Jet fuel product supplied is up 11.0% compared to the same four-week period last year.

    PADD II +2.25 mmb yet Cushing only +36,000. Is it full?

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    US Domestic oil production fall accelerates

                                               Last Week    Week Before    Last Year

    Domestic Production '000..... 9,135             9,186              9,280
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    Venezuela raises gas prices 6,200%

    Venezuela raises gas prices 6,200%

    Venezuela just raised gas prices for the first time in about two decades.

    Prices will now increase more than 60 times — to 6 bolivars a liter up from 9.7 centavos, a 6,200% increase according to Bloomberg's Javier Blas.

    Using the weakest exchange rate of 202.94 bolivars per dollar, Venezuela's announced increase translates to about $0.11 a gallon, according to Bloomberg.

    Even with this price hike, however, Venezuela still has the lowest gas prices in the world!

    Venezuela's government has long subsidized the country's fuel, allowing the people to have the cheapest gas in the world. Back in 1989, an increase in food and gasoline prices led to nationwide protests, which eventually led to the late President Hugo Chavez's rise. Venezuela last raised gas prices in 1996.

    Venezuela also devalued its currency on Wednesday, cutting the value 37% and taking its primary exchange rate to 10 bolivars a dollar from 6.3.

    "The devaluation will ease the drain on government coffers by giving state oil company Petroleos de Venezuela SA more bolivars for each dollar of oil revenue, while higher gasoline prices will reduce expenditure on subsidies," wrote Bloomberg's Andrew Rosati and Pietro Pitts.

    "At the same time, the devaluation will probably force the government to raise the cost of staple foods such as rice and bread that most of the country now depends on to eat," they added.
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    Russian oil output under 'freeze pact' could rise 1.9% on year

    A preliminary agreement between Russia and three OPEC countries on a possible crude production freeze at January levels implies Russian output could grow by between 1.7% and 1.9% year on year, deputy energy minister Kirill Molodtsov said Thursday.

    "As of mid-January, there was an annual increase of around 1.7% to 1.9% on the year in daily crude production," Molodtsov told reporters.

    In an effort to stabilize global markets, non-OPEC Russian and OPEC members Saudi Arabia, Venezuela and Qatar agreed in Doha on Tuesday to freeze their output at January levels, if other major oil producers also join the initiative.

    Molodtsov said it is hard to say at the moment whether Russia's crude production would continue to grow at the same pace through the year.

    "There are three options: [output] can grow, it can remain stable, or we can regulate the production volume," he said

    His comments are in sharp contrast to previous statements by various officials that regulating Russian crude output at will is impossible due to geology and climatic conditions. The government also cannot dictate what companies, especially private ones, do, officials have said.

    The state does however have the option of raising taxes, which would make some resources uneconomic to develop in a low oil price environment.

    With oil prices at multi-year lows, a fresh hike in taxes is becoming more likely as the government looks for ways to boost its coffers, which have been hammered by the oil price collapse.

    The government is considering options to squeeze additional funds from the sector, on the heels of the latest tax hikes approved in late 2015, although no decisions have been taken so far.

    Even if there are no changes to the current tax burden, various forecasts have predicted that crude production in Russia could start falling this year, as oil producers have started to cut investment in response to low oil prices and Western sanctions that have pressured company finances.

    Still, there are a number of greenfields ready for launch this year that should mitigate natural declines in West Siberia, Molodtsov said.

    The Doha production freeze pact comes at a time when both Saudi Arabia and Russia have been pumping record amounts of oil. Russia's crude production has hit fresh record highs for the past four months, averaging 10.88 million b/d in January.

    The deal is contingent on Iran, Iraq, Oman, Kazakhstan, Azerbaijan, Mexico and other producers within and outside OPEC joining in.

    Iran, however, appeared to have rejected a request to join in the proposed oil output freeze the day after the idea was announced, according to comments by Iranian oil minister Bijan Zanganeh after a meeting with his counterparts from Iran, Qatar, Iraq and Venezuela in Tehran.

    The proposed freeze, if agreed, is expected to trigger a stock drawdown and lend support to prices, a senior OPEC delegate said Tuesday.
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    Pakistan Industry expects Qatar LNG supply at USD 6 per mmbtu

    The Nation reported that appreciating the landmark deal of liquified natural gas (LNG) with Qatar, the business community observed that it would help the government overcome energy shortfall in the country by at least by 20 percent.

    All Pakistan Textile Mills Association Punjab chairman Mr Amir Fayyaz welcomed the government agreement with Qatar on RLNG import, asking the government to implement the plan of supplying this cheaper gas to the industry at price of $5.5 per mmbtu at least.

    Mr Amir Fayyaz said that “We are expecting provision of RLNG at $6 per mmbtu to the industry to make us competitive in the region.”

    Terming the deal as a game changer for the local industry, he said that with the supply of 3.75 million tons of LNG to the energy-starved country the supply-demand gap, which is standing at approximately 2-4 BCFD (billion cubic feet per day), will decrease.

    Some energy expert have also accused the government of signing dubious agreements for import of Liquefied Natural Gas from Qatar, questioning the levy of over Rs100 billion additional tax on gas consumers to meet the cost of pipeline for transportation of LNG from Qatar to Pakistan.

    Raising the question over transparency in the deal, they asked as to why no international tenders were called and why a long-term agreement was signed with Qatar. APBF founding president, who also deals in LPG import business, questioned the decision to construct the proposed pipeline from Qatar for a foreign company with the money of public. Moreover, the transportation problem within the country has not been resolved. The LNG transportation will require pipeline from Karachi to upcountry which will take a long time. And if it is transported through SSGC pipelines the province can raise objection and demand the share, resulting into hike in gas cost.

    He said that under the agreement with Qatar, three LNG-carrying ships would reach Pakistan every month which will be started within 2016 and the number of vessels would increase to five after 2017.

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    Russia will only sell control of Bashneft if paid premium - source

    The Russian state could sell only around 25 percent in mid-size oil company Bashneft if the likely buyer fails to offer a significant premium to the market price, a senior Russian government source said.

    The source, who spoke on condition of anonymity, said options under consideration were to sell 25 percent of Bashneft, 50 percent, or 75 percent.

    "We need to see how much money we can get for the premium which goes along with having control or full control, what premium we can suggest to the investors, whether they are ready to pay us significantly more than the market," the source said.

    "If they pay us significantly more than the market, then that will probably persuade us somehow. If the investor under these conditions is not prepared to give a premium, then probably we will lean towards giving a small share."

    The source said that state-controlled oil giant Rosneft was not among the potential buyers of the Bashneft stake. Lukoil, Russia's second-largest oil produce, has said it is interested in acquiring a controlling stake.
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    Iran sees oil freeze pact as not enough to help market: Iranian sources

    Iran believes a global agreement to freeze oil output will not be enough to help prop up prices as the world is producing too much crude, Iranian oil sources told Reuters.

    Iranian Oil Minister Bijan Zanganeh and his counterparts from Qatar, Iraq and Venezuela held talks in Tehran on Wednesday aimed at persuading Iran to join a global pact to restrain output, agreed this week by OPEC leader Saudi Arabia and non-OPEC member Russia, the world's two largest oil exporters.

    Zanganeh chose his words very carefully after the meeting saying Iran, OPEC's third largest producer, supported the initiative as a first step to rebalance the markets and help prices recover from their lowest in over a decade.

    But during talks Iran stuck to its standard line that Tehran needs to regain market share it lost during years of sanctions while adding that regardless of what Iran does, the world was already awash with unwanted oil.

    "The problem in the oil market is the glut. There is a need to do something to bring down these extra barrels. The freeze for those people that have been producing to the maximum does not help the market," one Iranian oil source familiar with discussions told Reuters.

    A second Iranian source said the global pact idea should be discussed further when "countries that have increased their output - mainly Saudi Arabia - drop their production and Iran reaches pre-sanction levels of production".
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    North Dakota oil production falls to 1.15 million B/D: state

    North Dakota oil production fell to just over 1.15 million b/d in December, down 75,203 b/d from a year earlier when state production hit an all-time high, state Department of Mineral Resources data showed Wednesday.

    December production fell by 29,507 b/d from November, as prices for North Dakota sweet crude and the number of drilling permits continued to freefall.

    Lynn Helms, the state's top oil and gas regulator, called the December data "the first real production decline" the state has seen as producers curtail drilling efforts amid the ongoing price collapse.

    While production did decline late last year, those dips were often blamed on flaring restrictions, gas capture goals and new oil conditioning rules. December's drop, it appears, was strictly a function of price, Helms said.

    "This looks like it's a real number, based on real activity," he said.

    Based on the breakeven prices released by the state Wednesday, only two North Dakota counties, Dunn and McLean, remain economic to drill amid current prices. Dunn, where the state estimates breakeven prices average $22/b, had seven active rigs Wednesday, while McLean, where breakevens average $25/b, had just one.

    McKenzie County, which leads the state with 20 active rigs, has an average breakeven of $31/b. The statewide breakeven average is $40/b.

    Platts on Tuesday assessed Bakken ex-Clearbook at $30.70/b, down from $49.34/b at the same time a year earlier.

    The state uses a combination of WTI spot prices, calculating Bakken at roughly 85% of the WTI price, and pricing from Flint Hills Resources. On Tuesday, Flint Hills estimated North Dakota's sweet crude price at $16.50/b, its lowest price since February 2002.

    The statewide rig count held steady at 64 from November to December, but has since dropped significantly to an average of 52 in January, then slid further to land at 40 on Wednesday. The all-time high was 218 in May 2012.
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    Japan LNG imports down 14.1 pct in January

    Japan’s imports of liquefied natural gas reached 7.24 million mt in January, a drop of 14.1 percent as compared to the same month a year before.

    The world’s largest buyer of chilled gas paid 349,845 million yen (US$3.7 billion) for imports in January, down 55.4 percent as compared to 2015, preliminary data from Japan’s Ministry of Finance showed on Thursday.

    Japan imported 85.05 million mt of LNG in 2015, a drop of 3.9 percent as compared to the year before. This was the first drop in Japan’s annual LNG imports since the devastating earthquake and tsunami in March 2011 which caused Japan to shut down its nuclear industry. As of February this year, Japan has restarted three nuclear reactors.

    Japan paid $46.66 billion for LNG imports last year as global oil and gas prices fell, down 29.5 percent from $66.67 billion the country paid for imports in 2014.

    LNG use by Japan’s ten independent regional electric power companies dropped 4 percent in January to 4.99 million mt.

    According to the data from the Federation of Electric Power Companies of Japan (FEPC), January purchases by the ten utilities were at 4.62 million mt of LNG, down 12.8 percent from 2015.

    Total electricity generated and purchased across the ten companies in January declined by 3.2 percent to 81.08 billion kWh, due to “decreased heating demands caused by relatively higher temperatures” in January than the previous year, FEPC said.

    Japan’s price of spot liquefied natural gas contracted in January averaged $7.1 per mmBtu on DES basis, down 30 cents from the previous month.

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    Enbridge delays two pipelines, cuts 2016 CapEx

    Regulatory delays of two of Enbridge Energy Partners pipelines will help the company cut its 2016 capital budget by about 20 percent, executives said Wednesday.

    The Houston-based pipeline company, whose parent Enbridge is based in Alberta, said the Sandpiper Pipeline and Line 3 Replacement project will likely be pushed back until 2019. The later in-service date means Enbridge can defer some of costs required to build the lines.

    Several other midstream companies have also trimmed their 2016 spending. Cheap oil helped make accessing capital markets more difficult, and pipeline companies have had to carefully balance spending on new pipelines, dividends and maintaining healthy debt levels.

    Enbridge said it expects to spend about $900 million on new pipelines, expansion projects and maintenance in 2016, down about 20 percent from the $1.14 billion spent in 2015.

    The Sandpiper and Line 3 Replacement projects are still a significant portion of that investment. Both are projected to cost a total of $2.6 billion over several years.

    In 2015, Enbridge budgeted a $195 million investment in the Sandpiper and $65 million for the Line 3 Replacement. In 2016, Enbridge said it expects to hold the respective costs to $85 million and $185 million, with some of the investment shifted into later years.

    Enbridge Energy Partners also said it was willing to allow Alberta-based parent company Enbridge Inc. to fund a larger share of the Line 3 Replacement Project in exchange for a greater interest in the completed pipeline. In the $900 million 2016 budget that Enbridge showed investors Wednesday, Enbridge Inc. had taken on an additional $350 million of the project, though executives stressed that number was preliminary.

    The Sandpiper Pipeline is a joint venture between Enbridge Energy Partners and Marathon Petroleum that would carry light oil from North Dakota’s Bakken to an existing Wisconsin pipeline hub, where the crude could connect to other markets. The Line 3 Replacement project will re-lay a 1960s pipeline running from Edmonton, Alberta to Superior, Wisconsin, allowing Enbridge to boost its capacity to nearly double capacity to 760,000 barrels per day.

    The Sandpiper Pipeline was originally expected to be up and running by 2017, and the Line 3 Replacement was originally slated for 2018. Both lines are now expected to be operating in 2019.

    In an announcement accompanying their 2015 fourth-quarter earnings, Enbridge executives said the delays were due to decisions by the Minnesota Public Utilities Commission, which regulates pipelines.

    “The process set out in the orders is likely to delay the planned start of construction, which would cause a shift in the in-service dates to early 2019 and increase costs for the Line 3 Replacement and Sandpiper projects,” executives said in a statement.

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    Shale Faces March Madness as $1.2 Billion in Interest Comes Due

    The U.S. shale industry must come up with $1.2 billion in interest payments by the end of March as $30-a-barrel oil makes it harder for companies to scrape up the cash needed to stay current on their debts.

    Almost half of the interest is owed by companies with junk-rated credit, according to data compiled by Bloomberg on 61 companies in the Bloomberg Intelligence index of North American independent oil and gas producers. Energy XXI Ltd. said in a filing Tuesday that it missed an $8.8 million interest payment. The following day, SandRidge Energy Inc. announced that didn’t make a $21.7 million interest payment.

    "You’ve seen two of these happen in two days, and I wouldn’t be surprised to see more in the next month as these payments come due," said Jason Wangler, an energy analyst at Wunderlich Securities Inc. in Houston.

    Energy XXI may not be able to meet its commitments in the next 12 months, raising "substantial doubt regarding the Company’s ability to continue as a going concern," according to a company filing with the U.S. Securities and Exchange Commission. A company representative didn’t return a phone call and e-mail seeking comment.

    SandRidge "has sufficient liquidity to make these interest payments, but has elected to use the 30-day grace period in connection with its ongoing discussions with stakeholders," the company said in a statement released Wednesday.

    "Today’s actions will preserve liquidity and flexibility as we continue to engage in constructive dialogue with our stakeholders," James Bennett, SandRidge president and chief executive officer, said in the statement.

    Oil has tumbled more than 70 percent since a June 2014 peak of $107 a barrel. While prices were high, many drillers spent more money than they earned, plugging the shortfall with debt.

    That debt has become increasingly burdensome as prices collapsed. Since the start of 2015, 48 North American oil and gas producers have declared bankruptcy, owing more than $17 billion, according to law firm Haynes & Boone. Deloitte LLP said this week that bankruptcies in the oil and gas industry could surpass levels seen in the Great Recession.

    The industry is facing $9.8 billion in interest payments through the end of this year, according to data compiled by Bloomberg.

    SandRidge, which drew down its full $500 million credit line on Jan. 22 and hired legal and financial advisers, has another payment of about $28 million due March 15, the data show. Chaparral Energy Inc., which likewise tapped its entire credit line and hired advisers this month, owes $17 million next month. A representative for Chaparral did not return a phone call and e-mail seeking comment.

    "If you can’t make it through the year at current strip prices, then why pay the coupon?" said Subash Chandra, a managing director with Guggenheim Securities in New York. "If you can’t make it out of this year, and asset sales aren’t going anywhere and no one wants your equity, then there just aren’t that many avenues to fix the problem."

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    Marathon Oil slashes capex 50 percent, posts quarterly loss

    Marathon Oil Corp, a U.S. shale exploration company, on Wednesday slashed its 2016 spending by 50 percent and reported a quarterly loss as the company's results were hurt by a steep decline in crude oil prices.

    Crude oil prices CLc1 have tumbled about 70 percent from mid-2014 highs above $100 a barrel. Current prices around $30 a barrel are not high enough for exploration and production companies to invest in many new shale wells, so most have slashed spending.

    Marathon said it plans to spend $1.4 billion this year, a reduction of more than 50 percent from 2015.

    "Through this cycle of sustained low oil prices and market volatility, Marathon Oil will continue to focus on balance sheet protection and operational flexibility," said Lee Tillman, Marathon's chief executive officer.

    Marathon, based in Houston, posted a fourth-quarter net loss of $793 million, or $1.17 per share, compared with a profit of $926 million, or 1.37 cents per share, in the year-ago period.

    Excluding items such as asset impairments, Marathon had a loss of 48 cents per share. Analysts on average had expected a loss of 48 cents per share, according to Thomson Reuters I/B/E/S.

    Adjusting for divestitures, Marathon's oil and gas output is expected to fall 6 to 8 percent this year. In the fourth quarter, output averaged 432,000 barrels oil equivalent per day, about flat compared with the 2015 third quarter.

    To raise cash in the downturn, Marathon also said it expects to sell $750 million to $1 billion in oil and gas properties it no longer considers central to its operations.

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    Williams shares rise as hedge funds pile in, ETE offer spread narrows

    William Cos Inc's shares extended their surge on Wednesday, having jumped by nearly a fifth this week, narrowing the spread of the takeover offer by rival pipeline company Energy Transfer Equity LP.

    The current value of Energy Transfer's bid is about 15 percent higher than Williams' share price as of Tuesday's close. As recently as Friday, the spread was about 23 percent.

    Williams also released its fourth-quarter results, which saw a loss of 94 cents per share, missing analyst expectations of a gain of 22 cents a share.

    Williams shares jumped after fourth-quarter filings by investors showed that several hedge funds had jumped into the stock, including Jana Partners.

    The spread between William's stock price and the ETE offer had been even wider in previous weeks, and was about 27 percent as recently as Feb. 8, indicating that investors expect the deal to fall through.

    Williams' shareholders, disappointed by the deal's lack of a hefty premium and worried about the combined company's debt levels, gave the Energy Transfer offer a poor reception the day it was announced on Sept. 28, pushing its shares down 12 percent.

    Oil prices have since fallen further, weakening the investment case for pipeline companies such as Williams and Energy Transfer, which need to increase cash flows to fund payouts to investors.

    Energy Transfer's share price has dropped about 74 percent since the offer was announced, signaling the market's disapproval of the deal. Williams' stock has slid 64 percent.

    The total value of the cash-and-stock deal had fallen to $12.94 billion as of Tuesday close, from $33 billion in September, when the companies reached a deal, ending a pursuit stretching back to January 2015.

    Investment bankers who spoke to Reuters said the deal would help Williams shoulder its exposure to pipeline contracts with heavily indebted Chesapeake Energy Corp (CHK.N). A repricing of those contracts could shave $200 million to $400 million off Williams' earnings before interest, taxes and depreciation, or EBITDA, according to analysts at Credit Suisse.

    Williams' fourth-quarter EBITDA rose 25 percent to $1.07 billion, the company said on Wednesday. The company has said the ETE deal will enhance its growth prospects and that the board unanimously supports the closure of the transaction.

    Williams shares were up 4.5 percent to $15.69 on Wednesday, while Energy Transfer shares were up about 7.6 percent at $6.52, on a day Brent crude jumped more than 7 percent.
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    Devon slashes capex for 2016 by 75%, plans to trim workforce by 20%

    Devon Energy Corp., Oklahoma City, plans capital expenditures in 2016 of $1.17-1.45 billion, down from $5.26 billion in 2015. That includes the firm’s exploration and production capital investment for 2016, which is estimated to range $900 million-1.1 billion, also a 75% decrease from that of 2015.

    The expansive cuts come with a 20% reduction of its employee headcount—or 1,000 employees not including an additional 600 that may be impacted by divestitures—bringing its total workforce reduction over the past 12 months to more than 25%.

    The firm reported a 2015 net loss of $14.5 billion, compared with earnings of $1.6 billion a year earlier. During the fourth quarter, it posted a net loss of $4.5 billion, compared with a loss of $408 million in 2014.

    Devon this week reported the appointment of Tony Vaughn as chief operating officer, where he moves over from executive vice-president of exploration and production (OGJ Online, Feb. 17, 2016). The move is part of a management shuffle that includes the retirement of Darryl Smette, executive vice-president of marketing, facilities, pipeline, and supply chain.

    As part of the company’s reshuffling over the past year, Devon in December agreed to acquire 80,000 net acres in the Anadarko basin STACK play from Felix Energy LLC for $1.9 billion, and 253,000 net acres in the Powder River basin for $600 million (OGJ Online, Dec. 7, 2015). Both deals are now complete.

    At the time the deals were made, Devon said that it’s targeting $2-3 billion in midstream and upstream divestitures in 2016. The company says it’s currently negotiating a sale for its 50% interest in the Access pipeline, which services Devon’s thermal heavy oil operations in Canada. A sale is expected to be announced in the first half.

    Devon’s upstream divestitures will include up to 80,000 boe/d of production from properties in the Midland basin, East Texas, and Midcontinent region. Assets within those regions include 15,000 net undeveloped acres in Martin County, Tex., the southern Midland Wolfcamp, Carthage, Granite Wash, and the Mississippi-Lime.

    The firm expects companywide production in 2016 of 597,000-634,000 boe/d, including 249,000-264,000 b/d of oil, 117,000-127,000 b/d of natural gas liquids, and 1.39-1.46 MMcfd of natural gas.

    That’s compares with companywide production of 680,000 b/d in 2015 and 673,000 b/d in 2014, including oil output of 275,000 b/d in 2015 and 214,000 b/d in 2014, NGL output of 136,000 b/d in 2015 and 139,000 b/d in 2014, and gas output of 1.61 MMcfd in 2015 and 1.92 MMcfd in 2014.

    Devon’s estimated proved reserves of oil, natural gas, and NGLs were 2.2 billion boe at Dec. 31, 2015, with proved developed reserves accounting for 83% of the total.

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    Iran supports Saudi-Russia plan, but doesn’t commit to production freeze

    Iran supported an accord by Saudi Arabia and Russia to steady global oil markets by capping their supply, without saying whether it would curb its own production.

    Iran backs any measures to stabilize global oil markets including the plan outlined by the world’s two largest crude producers Tuesday to cap output at January levels, Iranian Oil Minister Bijan Namdar Zanganehsaid after talks with fellow OPEC members Qatar, Iraq and Venezuela, according to a report from Oil Ministry news service Shana.

    While the deal hinges on the cooperation of Iran, Zanganeh didn’t say whether the Persian nation would deviate from plans to restore exports after international sanctions were removed last month.

    “If Iran’s not part of the deal, it isn’t worth much,” said Eugen Weinberg, head of commodity markets strategy at Commerzbank in Frankfurt. “After fighting to end sanctions for years and finally being free of them, why Iran would choose to put sanctions on themselves by freezing their production?”

    More than a year since the Organization of Petroleum Exporting Countries decided not to cut production to boost prices, oil remains about 70 percent below its 2014 peak. Supply still exceeds demand and record global oil stockpiles continue to swell, potentially pushing prices below $20 a barrel before the rout is over, Goldman Sachs said last week.

    Oil extended gains following the end of the meeting. Brent crude, the international benchmark, rose 5.7 percent to $34.03 a barrel on the London-based ICE Futures Europe exchange at 3:46 p.m. local time.

    By merely capping supply rather than cutting it, the deal wouldn’t succeed in tackling the global oil glut, Goldman Sachs and BNP Paribas said.

    Iran, which was the second-biggest producer in OPEC before sanctions were intensified in 2012, is seeking to boost output by 1 million barrels a day and regain market share. The nation should increase production by 500,000 barrels a day by March 20, the end of the Iranian calendar year, Shana reported on Wednesday, citing Roknoddin Javadi, managing director of National Iranian Oil Co.
    “Any agreement will still be contingent on Iran being able to increase market share or increase production from current levels,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London.

    The Doha accord was likely a token gesture from Saudi Arabia to Venezuela, which faces “deep financial pain” from oil’s slump and has lobbied hard for any agreement that will support prices, Tchilinguirian said. Unless producers agree to cut their output, the global oversupply will persist, according to BNP.

    “Saudi Arabia is paying lip service to Venezuela’s efforts after they pushed so intensively,” said Tchilinguirian. “Does this change the supply-demand situation? No. By freezing at the high-water mark, you’re entrenching the surplus.”

    WTI Crude Soars To $31 - Erases All "Production Freeze" Disappointment Losses

    So let's get this straight. Russia and OPEC 'agree' to consider (not actually act upon) "freezing" production levels (at current record high levels) and the market plunges amid disappointment over no cuts. And today WTI spikes and erases all those losses as Iran supports the "freeze" plan but will not cut its own production plans...

    What is really diving all this craziness is that it is OPEX in Crude futures today and there are major pins around $31, $30, and $29.

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    Militants Blow Up Colombian Pipeline, Disrupt Up To 85.000 Bpd

    Militants from the National Liberation Army (ELN) blew up a section of Colombia’s Transandino pipeline overnight Monday, killing two policemen right before the incident.

    The Transandino pipeline, owned and operated by Colombia’s state-run Ecopetrol, transports around 85,000 barrels of oil daily to the Pacific Tumaco port.

    The explosion took place in Colombia’s western Narino Department, according to local and international media reports.

    Just hours before the explosion, ELN militants killed two policemen in Narino.

    The ELN is the second-largest rebel group in Colombia after FARC (Revolutionary Armed Forces of Colombia) both groups are on U.S. and E.U. terrorist organization lists, and in some cases they have been known to cooperate.

    The pipeline bombing comes as sentiments were high that government talks with both groups would lead to a truce of some sort in the first half of this year.

    Last week, ELN implemented a 72-hour lockdown in the area, targeting a halt to transportation and commerce in an apparent bid to pressure the government over the slow pace of informal peace talks, Reuters reported.

    The infrastructure sabotage comes at a particularly bad time for Ecopetrol, which has begun closing oil wells as production costs overtake crude prices, according to a Bloomberg report.

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    Russia's regulator says approval for Lukoil to buy Bashneft stake is likely

    The head of Russia's anti-monopoly agency, Igor Artemyev, said it is highly likely that the agency would approve the possible purchase of a stake in oil company Bashneft by Lukoil, Russia's Interfax news agency reported on Wednesday.
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    Pioneer Energy Services Reports Fourth Quarter 2015 Results

    Pioneer Energy Services today reported financial and operating results for the year and quarter ended December 31, 2015. Notable items for the fourth quarter include:

    Sold four SCR drilling rigs for aggregate gross proceeds of $17.3 million and classified four additional rigs as held-for-sale at year-end.
    Amended revolving credit facility, which reduced borrowing capacity while providing more flexible covenants through maturity in 2019.
    Completed construction of the final 1,500-horsepower AC new-build drilling rig.
    Well servicing rig utilization was 55% with average pricing of $562 per hour.
    Drilling utilization was 54% based on an average fleet of 37 rigs.

    Consolidated Financial Results

    Revenues for the fourth quarter of 2015 were $104.5 million, down 3% from revenues of $107.5 million in the third quarter of 2015 ("the prior quarter") and down 63% from revenues of $283.1 million in the fourth quarter of 2014 ("the year-earlier quarter"). The decline from the year-earlier quarter was due to reduced activity and pricing as a result of lower demand for our services due to lower oil and gas prices.

    Net loss for the fourth quarter of 2015 was $48.3 million, or $0.75 per share, compared with net loss of $17.5 million, or $0.27 per share, in the prior quarter and net loss of $47.6 million, or $0.75 per share, in the year-earlier quarter. Excluding the after-tax impact of impairment charges and loss on extinguishment of debt, our Adjusted Net Loss(1) for the fourth quarter was $16.1 million and Adjusted EPS(2) was a loss of $0.25 per share, as compared to Adjusted Net Loss of $15.8 million, or $0.24 per share, in the prior quarter. During the fourth quarter, we recognized impairment charges of $49.5 million, primarily for the reduction of carrying values of assets related to our coiled tubing operations, as well as five domestic SCR drilling rigs. Our Adjusted Net Income for the year-earlier quarter was $2.9 million or $0.04 per diluted share.

    Fourth quarter Adjusted EBITDA(3) was $20.0 million, including a gain on disposal of assets of $1.7 million. This was up 6% from $18.8 million in the prior quarter, which included a loss on disposal of assets of $0.6 million, and down 70% from $66.0 million in the year-earlier quarter.

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    Chinese Oil Output Succumbs to Glut Saudis Seek to Cap

    As the world’s biggest oil producers show they’re willing to cap output to revive prices, there are increasing signs OPEC’s strategy of driving higher-cost suppliers out of the market by keeping taps open is bearing fruit.

    A unit of China Petrochemical Corp. on Wednesday said it will shut its least profitable fields because of the price slump. That’s after Cnooc. Ltd., the country’s biggest offshore crude explorer, announced plans to cut output and capital spending this year. The nation’s production may slip 3-5 percent from last year’s record 4.3 million barrels a day, Nomura Holdings Inc. and Sanford C. Bernstein & Co. say, in what would be the first drop in seven years.

    “Sinopec has been maintaining output in its aging oil fields by over-investing and this is no longer possible in the current oil price environment,” said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein, who estimates the company needs oil to stay above $50 a barrel to break even. “We expect Sinopec’s domestic oil production to drop 5 percent to 10 percent this year as it shuts down aging high-cost oil fields.”

    PT Pertamina, the state-run energy company of OPEC member Indonesia, this month cut its 2016 output target by 9 percent as it reduces drilling activity amid low oil prices. U.S. production is forecast to drop by 580,000 barrels a day, or about 6 percent, from the first quarter to the fourth, according to data from the Energy Information Administration as of Feb. 9.

    Sinopec Shengli Oilfield Co. will shut the Xiaoying, Yihezhuang, Taoerhe and Qiaozhuang fields to save as much as 130 million yuan ($19.9 million) in operating costs, the company said in astatement on its Weibo account.

    The four oilfields are among the least profitable among 70 run by Sinopec Shengli, according to the statement. Sinopec Shengli first produced oil in 1961 and has since become one of China’s major producers. Its output since inception is 1.13 billion tons of crude and 57.2 billion cubic meters of natural gas.

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    Noble Energy posts loss, hurt by $2.2 bln in charges

    U.S. oil and gas producer Noble Energy Inc reported a quarterly loss, compared with a year-earlier profit, hurt by $2.2 billion in charges including asset writedowns.

    The company, like its peers, has been hit by a more-than 70 percent fall in oil prices since mid-2014.

    Noble said on Wednesday it expected sales volumes to decline in the current quarter due to downtime at its Alba field compression project offshore Equatorial Guinea.

    The company forecast first-quarter production available for sale of 395,000-405,000 barrels of oil equivalent per day (boe/d), down from 422,000 boe/d in the fourth quarter.

    Noble, which also operates in U.S. shale fields and offshore Gulf of Mexico, Israel and West Africa, bought Rosetta Resources in a $2 billion deal last year, adding to production.

    The company reported a net loss of $2.03 billion, or $4.73 per share, for the fourth quarter ended Dec. 31, compared with net income of $402 million, or $1.05 per share, a year earlier.
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    Gazprom taking comprehensive cost optimization measures

    The Gazprom Board of Directors took notice of the information about the cost optimization (reduction) trends across Gazprom Group in 2016.

    It was highlighted that Gazprom pursued the consistent policy of improving the cost management practices, reducing operating costs and maximizing the value for money ratio. In an unstable economic environment this work is highly relevant, therefore Gazprom is using all possible means and exploring new opportunities for further cost optimization.

    The cost optimization strategy is focused around several key areas: generation of the Investment Program and the Budget, development and execution of the cost reduction program, implementation of cost optimization plans by types of activity and procurement of goods, works, and services.

    At the budgeting stage, Gazprom optimizes a number of expenditure items by using a standard setting approach, determining specific cost parameters and finding the best deals on the market. The costs are ranked according to the level of significance for performing the current activities and unconditionally fulfilling all the obligations. In respect of the Investment Program preparation, the projects are divided by the degree of priority for achieving the Company's strategic goals and meeting peak demand during the autumn-winter period.

    Moreover, the Company annually approves the Cost Optimization (Reduction) Program which defines additional cost reduction provisions for specific areas of the operating, investment and financial activities.

    This approach enables Gazprom to respond to adverse changes in the economic conditions and ensures sufficient flexibility in implementing all major projects of the Company.

    Gazprom also carries out a comprehensive action plan to optimize costs in individual lines of business. It contains a list of practical measures for reducing the current investment, managerial and other costs. The most important ones are cutting down the expenses on the supply of goods, execution of works and rendering of services for Gazprom Group, as well as regulating prices for purchased materials and equipment.

    A significant economic effect is achieved through planning and centralized procurement. In its procurement strategy Gazprom follows a number of fundamental principles, such as meeting the Company's demand for goods (works, services) having the required price, quality and reliability parameters, achieving value-for-money for goods (works and services) and ensuring the transparency of purchases.

    Stringent control is maintained at every stage of competitive procedures - from the confirmation of the need to make a purchase and the control of its initial (maximum) price to the decision making about the final cost of procured goods (works and services). The procurement results are taken into account later when Gazprom Group companies draw up and adjust their budgets, while the performance of the signed contracts is thoroughly monitored.

    Gazprom seeks to further improve its cost optimization measures with due account for the best practices in this area.
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    Midwest gasoline prices jump as much as 13 cents/gal pn refinery cuts

    Refinery cuts continued to push up US Midwest gasoline prices Tuesday, with the Chicago market climbing 13 cents/gal.

    Chicago CBOB was assessed at NYMEX March RBOB futures minus 8 cents/gal, up from Friday's assessment at minus 21 cents/gal. Platts did not assess US markets on Monday due to a national holiday.

    Although federal Energy Information Administration data showed Midwest gasoline inventories reached a nearly 23-year high during the week that ended February 5, market sources said differentials climbed on refinery maintenance and reduced rates.

    Valero's Memphis, Tennessee, refinery (195,000 b/d), PBF's plant at Toledo, Ohio (160,000 b/d) and Monroe's Trainer, Pennsylvania, facility (185,000 b/d) all started to pull back production last week due to higher stocks and bad economics, according to various sources.

    "Sellers have backed away," a Midwest refined products broker said. "They're not keen on selling into a market where turnarounds and rate cuts are popping up like mad."

    The assessment for Group 3 suboctane gasoline with 13.5 RVP (V grade) rose Tuesday to NYMEX March RBOB futures minus 8.50 cents/gal, 3.75 cents/gal higher than Friday's assessment.

    By contrast, prices in the US Gulf Coast have fallen, likely due to high stocks in the Midwest and Atlantic Coast, brokers said Tuesday.

    Platts assessed Gulf Coast RBOB at a 25-point premium to CBOB, its tightest spread in more than a week and 1.50 cents/gal lower than the last assessment. CBOB was assessed at NYMEX March RBOB minus 10.50 cents/gal, down 2.5 cents/gal.

    "With [the Midwest] stupid cheap...maybe you are seeing barrels come down from there (virtually or actually)," a Gulf Coast trader said. "If so, that would back up RBOB in the GC, making it seem as if demand is lower."
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    DOE has overwhelming evidence to approve LNG exports

    For years, the Department of Energy has been studying the potential economic effects of U.S. liquefied natural gas (LNG) exports.

    In 2012, DOE commissioned a study that concluded the U.S. economy would experience net gains from exporting a portion of our nation’s abundant supplies of natural gas.

    More recently, as I noted earlier this month, DOE released the findings of another study it commissioned which examined the impact of even higher export volumes of natural gas. This newer report modeled the macroeconomic impacts of global demand for U.S. LNG exports rising from 12 billion to 20 billion cubic feet per day over various scenarios projected out to 2040. It reaffirmed the conclusions of the 2012 report and found that more exports would produce more benefits.

    In comments we submitted last week to DOE, we wrote that “overwhelming evidence [exists] to support expeditious approval of pending LNG export applications.”

    Our submission also highlighted comments by Lawrence Summers, the former U.S. Treasury Secretary and former director of the National Economic Council, in a 2014 speech on energy exports. Mr. Summers concluded:

    The question of whether the United States should have a substantially more permissive policy with respect … to the export of natural gas is easy. The answer is affirmative. The merits are as clear as the merits with respect to any significant public policy issue that I have ever encountered.

    Another credible study has been added to the established body of evidence that we should remove all restrictions on LNG exports. It is long past time to elevate U.S. LNG exports and their benefits from theory to reality.
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    Meet the team behind this new energy co.'s $910 million acquisition

    It turns out the management team behind Houston-based Terra Energy Partners LLC, which just bought assets from Tulsa, Oklahoma-based WPX Energy Inc. for $910 million, have a common bond — they all used to work for Houston-based Occidental Petroleum Corp.

    • Michael Land became the CEO of Terra Energy Partners in April 2015, according to his LinkedIn profile. Before that, he spent more than 10 years moving up the ladder at Oxy, most recently serving as president of the Permian and mid-Continent business units.

    Before leading the young Houston-based energy company Terra Energy Partners LLC, CEO… more

    • The Terra leader with the longest Occidental tenure is COO Keith Brown, who joined Terra in May 2015 after serving as an asset development manager at Oxy for more than 37 years, according to his LinkedIn profile and bio on the Terra company website.

    • Suzanne Smith, Terra's vice president of human resources, previously worked in human resources at Oxy since 2004.

    • Terra Vice President of Land Tiffany Pollock came on board after serving as land manager at Oxy for three years.

    • Adam Kirk is Terra's controller. Before joining the company in May, he worked in Oxy's accounting department since 2006, eventually serving as director of revenue and regulatory accounting before joining Terra. He worked at Oxy for 15 years.

    • Standing out from the crowd that came directly from Oxy is B.J. Reynolds, Terra's vice president of operations. Reynolds came to Terra from Sanchez Energy Corp., where he oversaw strategy and execution of a growth plan for Sanchez's Catarina asset, which Sanchez acquired from Shell Exploration and Production Company Inc. But the Occidental tie also applies to Reynolds in his time before Sanchez. Reynolds held various roles in engineering, operations and asset development at Oxy.

    • Before becoming Terra's vice president of asset development, Carol Callaway served 15 years as a manager of asset development at Oxy, according to her LinkedIn profile. However, her company bio says she has 35 years of experience in oil and gas with Oxy.

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    Woodside Profit Wiped Out as CEO Coleman Doubts Oil Recovery

    Woodside Petroleum Ltd. reported a 99 percent decline in full-year profit, its worst result in 13 years, and cast doubt on any recovery this year from the energy price crash that forced it to write down the value of its assets.

    Net income at Australia’s second-largest oil and natural gas producer sank to $26 million from $2.41 billion a year earlier, Perth-based Woodside said on Wednesday. Net income excluding one-time items dropped to $1.13 billion, compared with the $1.03 billion median estimate of 12 analysts surveyed by Bloomberg.

    Woodside is among energy companies struggling after the collapse in oil prices due to global oversupply. Brent in 2015 averaged $53.60 a barrel, slumping more than 45 percent from the prior year, and prices last month slid to the lowest level in more than 12 years. Woodside is skeptical oil will recover this year and is planning for a $35 price through 2017, according to Chief Executive Officer Peter Coleman.

    “While there are signs that there may be a strengthening toward the second half of this year, I’d be very wary of that,” Coleman told reporters on a conference call. “I really don’t think the price has anything at the moment underneath it that would suggest you are going to see a firming in the short to medium term.”

    Woodside’s proposed Browse liquefied natural gas project in Australia requires further cost reductions and doesn’t have any firm sales, the company said. The oil and gas producer said last year it intends to make an investment decision on the venture with partners including Royal Dutch Shell Plc in the second half of 2016.

    Woodside may not make a decision on Browse until the first half of next year, Citigroup Inc. analysts in Sydney including Dale Koenders wrote in a report Wednesday. At current oil prices, Browse is “highly unlikely” to make significant progress toward approval, Mark Wiseman, a Sydney-based analyst at Goldman Sachs Group Inc., wrote in a separate note.

    With a relatively strong balance sheet and new projects across the industry in doubt, Woodside may seek acquisitions afterabandoning its pursuit of Oil Search Ltd. at the end of last year, Morgans Financial Ltd. said last month.

    Woodside isn’t looking at “larger opportunities” to acquire assets, seeing a significant spread between buyer and seller expectations, Coleman told analysts on a separate call.
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    Oklahoma calls for more disposal wells to shut after quake

    Oklahoma's oil and gas regulator released a wide-ranging plan on Tuesday to scale back use of wastewater injection wells in western Oklahoma, just days after a 5.1 magnitude quake rocked the state.

    Seven counties are affected by the plan, which is the largest push yet in western Oklahoma to curb seismic activity linked to wells to dispose of saltwater, a natural byproduct of oil and gas work.

    Saltwater disposal needs have grown in tandem with the growth in horizontal drilling and hydraulic fracturing, or fracking, in recent years.

    The plan by the Oklahoma Corporation Commission includes a voluntary order that covers 245 disposal wells over a 5,200-square mile (13,468-sq km) area. More than 40 percent of injected volumes will be cut back.

    Tim Baker, director of the commission's Oil and Gas Conservation Division, said the directive had been in the works since October due to a need for a larger, regional response. The counties covered include some that have not yet experienced an increase in earthquakes.

    "This plan is aimed not only at taking further action in response to past activity, but also to get out ahead of it and hopefully prevent new areas from being involved," Baker said in a statement.

    The plan will be phased in over four stages in the next two months, as sudden stoppages could actually create more seismic events, Baker said.

    The disposal wells into the Arbuckle formation are operated by 36 companies, including Sandridge and Chesapeake Energy.

    Oklahoma was struck by a magnitude 5.1 earthquake on Saturday morning, the third-strongest quake ever recorded in the state, which has experienced a surge in seismic activity in recent years, the U.S. Geological Survey reported.

    Concerns about the increase in earthquakes in Oklahoma led to Governor Mary Fallin to use $1.4 million from the state's emergency fund for earthquake research.

    Baker said that money, as well as a grant from the Oklahoma Energy Resources Board and the Groundwater Protection Council, will help fund additional equipment and staff at the Corporation Commission.

    Oklahoma, which has been shutting in some wastewater wells since August, has about 3,500 disposal wells.

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    Awkward! Hydraulic Fracturing Opponent Funds Study Finding It Doesn’t Contaminate Water

    Hydraulic fracturing’s safety record is so good that not even a study funded by an anti-hydraulic fracturing foundation could find evidencethat it contaminates drinking water.

    The technology, which breaks up shale rock thousands of feet below the earth to release trapped oil and natural gas, has driven down energy prices and transformed America’s energy economy.

    In 2012, the University of Cincinnati started testing Ohio wells to see if hydraulic fracturing was causing water contamination. The project was partly funded by a $20,000 grant from the Deer Creek Foundation.

    The Deal Creek Foundation is no fan of hydraulic fracturing. In 2014 it gave $25,000 to the Media Alliance in Oakland, Calif., to help fund a documentary on the “rise of ‘extreme’ oil and gas extraction - fracking, tar sands development, and oil drilling in the Arctic.” In 2009, thefoundation gave $20,000 to the Northern Plains Resource Council, a Montana activist group that falsely claims, “Fracking damages water, land and wildlife.”

    Earlier this month, Professor Amy Townsend-Small, the head of the project, announced her team’s findings to the Carroll County Concerned Citizens, a group of local anti-fracturing activists, The (New Philadelphia) Times-Reporter reports [emphasis mine]:

    “The good news is that our study did not document that fracking was directly linked to water contamination,” said Dr. Amy Townsend-Small of the University of Cincinnati, who presented the findings Thursday at a meeting of Carroll Concerned Citizens.

    Then things got interesting, noted Mike Chadsey with the Ohio Oil and Gas Association:

    It was shortly after Dr. Townsend-Small released that statement that a pin drop on the carpet would have been overheard. The silence was so obvious that even the leader of the group Mr. Paul Feezel said: “You all are very quiet tonight.”

    Then things got really interesting. Back to The Times-Reporter story:

    An audience member asked if the university was going to publicize the results of the study, noting that had the findings been unfavorable to drilling, that would have been national news.

    “I’m really sad to say this but some of our funders, the groups that had given us funding in the past, were a little disappointed in our results,” Townsend-Small said.

    Why? Townsend-Small continued:

    They feel that fracking is scary and so they were hoping our data could point to a reason to ban it.

    The funders quietly slipped away, hoping news of the study’s results remained confined to a local newspaper.

    The University of Cincinnati researchers’ findings match what other experts have found: Hydraulic fracturing, when done properly, is safe for the environment:

    A Yale University-led study didn’t find evidence that hydraulic fracturing natural gas wells contaminates ground water.
    An Energy Department laboratory found that neither natural gas nor hydraulic fracturing fluid traveled upward through the rock in wells tested in Pennsylvania.
    In 2014, Interior Secretary (and former petroleum engineer) Sally Jewell told lawmakers, “I do believe [hydraulic fracturing] can be done safely and responsibly, and has been in many cases.”
    Even EPA has looked at the science and concluded that hydraulic fracturing has not had “widespread, systemic impacts on drinking water.”

    Not even well-heeled opponents of hydraulic fracturing can base their opposition to the technology on science.

    It may have been an awkward moment for fracturing opponents, but it was good news for supporters of safe, effective American energy development.

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    One Third Of US Energy Companies Could Go Bankrupt Deloitte Warns

    At 1600bps, the extra yield investors are demanding to take on US energy credit risk has never been higher. However, if a new report from Deloitte proves true, this is far from enough as they forecast roughly a third of oil producers are at high risk of slipping into bankruptcy this year as low commodity prices crimp their access to cash and ability to cut debt.

    Record high US Energy credit risk...

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    The report, as Reuters reports, based on a review of more than 500 publicly traded oil and natural gas exploration and production companies across the globe, highlights the deep unease permeating the energy sector as crude prices sit near their lowest levels in more than a decade, eroding margins, forcing budget cuts and thousands of layoffs.

    The roughly 175 companies at risk of bankruptcy have more than $150 billion in debt, with the slipping value of secondary stock offerings and asset sales further hindering their ability to generate cash, Deloitte said in the report, released Tuesday.

    "These companies have kicked the can down the road as long as they can and now they're in danger of kicking the bucket," said William Snyder, head of corporate restructuring at Deloitte, in an interview. "It's all about liquidity."

    Some oil producers are also choosing to liquidate hedges for a quick infusion of cash, a risky bet.

    "2016 is the year of hard decisions, where it will all come to a head," John England, vice chairman of Deloitte, said in an interview.

    For now, however, there is a corner of the market that offers perhaps a smidge of saefty...

    Of the 53 U.S. energy companies that filed for bankruptcy last quarter, only 14 were service providers, a trend that is expected to continue in the short term, Deloitte found.

    "Service providers tend to be more of a people business with less capital deployed, so it's easier for them to financially flex," Snyder said.

    However, Snyder concludes...

    "Eventually, though, they've got to run out of gas, too."

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    Rousseff 'to relax' pre-salt rules

    Brazil’s President Dilma Rousseff is ready to allow foreign operators more space in the pre-salt province by easing rules that oblige Petrobras to take a dominant position in production sharing contracts, according to O Globo newspaper.
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    BP announces start-up of gas fields in Algeria

    BP has announced the start-up of a gas project in Algeria.

    In Salah Gas is a joint venture between the oil giant which has a 33.15% stake and Sonatrach and Statoil which own 35% and 31.85% respectively.

    Their Southern Fields project is the latest stage in the development of seven gas fields in central Algeria.

    It includes the development of four dry gas fields which will maintain planned production at nine billion cubic metres per year.

    The joint venture started production from three fields in the north of the region in 2004.

    Production is expected to ramp up to 14.1 million cubic metres per day as two new wells will be online in the next two months.
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    Petrobras Equity Value Is Zero Due to Debt, BTG Pactual Says

    Petrobras’s stock is worthless and a growing group of investors believe Brazil’s state-controlled oil company will convert debt into equity in a move that will benefit bondholders over shareholders, BTG Pactual said in a research report.

    Brazil’s three state-controlled banks, Banco do Brasil, Caixa Economica and development bank BNDES, hold an estimated 87 billion reais ($22 billion) in Petrobras debt, and it’s a “genuine possibility” that these securities will eventually get converted into equity and dilute the value of existing shares, BTG analysts led by Antonio Junqueira said in a note to clients dated Feb 15.

    “Such an event is everything equity holders don’t want and bondholders do want to see,” the analysts said. “In the current commodity environment, and despite its quasi-monopoly on the country’s refining, Petrobras has no equity value.”

    Petroleo Brasileiro SA, as the Rio de Janeiro-based producer is known, didn’t immediately respond to an e-mail requesting comment.

    Petrobras’s debt has exploded fourfold in the past five years after the company borrowed heavily to expand production in deep waters of the Atlantic Ocean and subsidized fuel imports during the commodities boom as part of a government policy to contain inflation. The combination of the oil price crash and a widespread corruption scandal has hindered the company’s ability to reduce leverage. As a result, Petrobras is selling assets and slashing spending.
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    Energy XXI to delay interest payment due Tuesday

    Feb 16 Oil and natural gas producer Energy XXI Ltd said it chose not to make an interest payment due on Tuesday, to continue talks with its debtholders related to alternatives to improve its capital structure.

    The company, which has a grace period of 30 days to make the payment, said it has retained PJT Partners LP and Vinson & Elkins LLP to advise its board in reviewing its debt.

    Crude prices have slumped nearly 70 percent since June 2014, forcing oil and gas producers to restructure debt or seek bankruptcy protection.

    Houston-based Energy XXI had $3.62 billion in long-term debt, excluding current maturities as of Dec. 31.

    Net loss attributable to the company's shareholders widened to $1.31 billion in the fourth quarter, from $278.8 million a year earlier.
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    Thai PTT to delay LNG purchase from Shell, BP due to weak demand

    Top Thai energy firm PTT Pcl is looking to delay its plans for long-term liquefied natural gas (LNG) purchases from Royal Dutch Shell and BP given the availability of cheaper spot supplies, a senior company executive said.

    Energy prices have tumbled in the past year due to a global oil glut. Spot gas prices have as a result dropped below prices for cargoes on long-term deals, prompting buyers, such as India's Petronet, to renegotiate contract terms or take more gas from the spot market.

    Thailand's PTT wants to buy LNG in the spot market, where prices of $6-7 per million British thermal unit are cheaper than long-term contracts, Noppadol Pinsupa, senior executive vice president for PTT's gas business unit, told reporters.

    PTT is now in talks with BP and Shell to delay the official signing of LNG supply deals, which are being reviewed by the Thai authorities, Noppadol said on Tuesday.

    BP and Shell did not immediately respond to emails seeking comments on the news.

    Last year, PTT won approval from the Thai energy regulator to buy a total 2 million tonnes of LNG annually from Shell Eastern Trading (PTE) and BP Singapore PTE under long-term contracts. The deals, if finalised, would have come into effect from April 2016 with imports of 0.5 million tonnes from Shell Eastern and 0.317 million tonnes from BP.

    Weaker-than-expected domestic demand, however, means Thailand will now need only 2.7 million tonnes of LNG imports this year, Noppadol said, versus a prior estimate for 5 million tonnes and up slightly from 2.6 million tonnes in 2015.

    PTT already has a 20-year contract to buy 2 million tonnes LNG annually from Qatar that came into effect last year.

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    EU takes on national interests in quest to break reliance on Russian gas

    Brussels made a push on Tuesday for new powers to vet EU energy deals, taking on national governments in its drive to create a single EU energy market and curb reliance on Russian gas.

    Under the European Commission's proposal, bilateral gas deals between any of the EU's 28 member states and third countries such as Russia would require its prior approval.

    The EU executive also wants access to gas contracts, currently sealed by commercial secrecy, that account for more than 40 percent of annual gas needs in a member state or are "key to security of supply".

    Both moves are likely to raise the hackles of big EU states.

    "To prevent gas supplies crises, national policies are not enough," European Climate and Energy Commissioner Miguel Arias Canete told reporters.

    The Baltic and southeastern European nations are among the most dependent on Russian gas - paying around 16 percent more for it in 2016 than others in the bloc, according to the EU.

    Germany, however, imports the highest volumes, for which it gets preferential prices from Russia's top natural gas producer Gazprom.

    Germany - already at loggerheads with Poland, Italy and other states over plans to expand the Nord Stream pipeline to pump more Russian gas to Germany, bypassing Ukraine - has and will likely continue to oppose greater oversight of its energy deals.

    The EU executive says it needs the new rules because while one third of 124 intergovernmental agreements in Europe fail to comply with EU law, contesting them has proved challenging.

    It was a lesson learned when Brussels ruled that Gazprom's planned South Stream pipeline under the Black Sea contravened EU competition law but faced a legal headache to untangle a web of deals Russia had cut with eastern European states.

    Under the new proposal, the Commission would be able to take member states to court and slap them with fines, if they signed bilateral accords found to be in breach of EU law.

    Concern in Europe over energy reliance on Russia since pricing spats between Moscow and Kiev disrupted gas supplies has grown in the wake of Russia's seizure of the Crimea region from Ukraine in March 2014.

    The EU has succeeded in increasing renewables and the use of reverse-flow pipelines to allow gas to course east as well as west, maximising available supplies. But some countries are still 100 percent dependent on Russian gas.
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    Iran may be offered special terms in oil output deal - sources

    Iran may be offered special terms in oil output deal - sources

    OPEC member Iran could be offered special terms under a global deal to freeze oil production levels, two sources familiar with the matter said on Tuesday.

    "Iran has its own model and the meeting is taking place in Iran. Iran is returning to the market and needs to be given a special chance but it also needs to make some calculations," said one of the sources, who were not from Iran.

    Top oil exporters Russia and Saudi Arabia agreed on Tuesday to freeze output levels but said the deal was contingent on other producers joining in - a major sticking point with Iran absent from the talks and determined to raise production.

    Venezuela's Oil Minister Eulogio Del Pino said more talks would take place with Iran and Iraq on Wednesday in Tehran.

    Iran will not give up its appropriate share of the global oil market, the Iranian oil minister was quoted by his ministry's news agency as saying on Tuesday.

    He was commenting on the meeting of oil ministers of Saudi Arabia, Russia, Venezuela and Qatar in Doha earlier in the day, which agreed to freeze output at January levels provided other producers did so too.

    "What is important is that first, the market is facing a surplus, and second, that Iran will not overlook its share," Bijan Zanganeh was quoted as saying by Shana.
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    Saudis, Russia agree oil output freeze, talks with Iran to follow

    Top global oil exporters including Russia and Saudi Arabia agreed on Tuesday to freeze output to tackle a global glut but said the deal was contingent on other producers, with Iran absent from the meeting and planning to ramp up shipments.

    The Saudi, Russian, Qatari and Venezuelan oil ministers visited Doha for a previously undisclosed meeting - their highest-level discussion in months on joint action to help prices recover from their lowest in more than a decade.

    The Saudi minister, Ali al-Naimi, said freezing production at January levels was an adequate measure and new steps to stabilise the market could be considered in the next few months.

    He said he hoped other producers would adopt the proposal, while Venezuela's Oil Minister Eulogio Del Pino said more talks would take place with Iran and Iraq on Wednesday.

    Iran has pledged to raise supply steeply in the month to come as it looks to regain market share lost after years of international sanctions, which were lifted in January.

    The Doha meeting came after more than 18 months of declining oil prices, knocking crude below $30 a barrel for the first time in over a decade.

    The slump has been longer and deeper than anyone predicted, and the mood may be shifting among producers that have been determined to defend market share rather than prices.

    Within the Organization of the Petroleum Exporting Countries is a growing consensus that a decision must be reached on how to prop up prices, Nigerian Oil Minister Emmanuel Ibe Kachikwu told Reuters late last week.
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    Sweet crude flows from Gatwick Airport oilfield

    First ever crude oil has flowed at encouraging levels from the Horse Hill discovery well being drilled in the Weald Basin near Gatwick Airport.

    The AIM-listed companies with stakes in the PEDL137 onshore exploration licence, namely UK Oil & Gas Investments (UKOG), Alba Mineral Resources, Doriemus, Solo Oil, Stellar Resources and Evocutis, all reported that light, sweet oil had flowed naturally to the surface from an 80-foot zone within the Lower Kimmeridge limestone interval at a depth of approximately 900 metres below ground level.

    After flowing at its own pressure and then being choked back, the well flowed at a steady early oil rate of more than 463 barrels per day (bpd) over more than seven hours and will be continued on Tuesday, before the second and third phases of the Horse Hill-1 well are moved to the shallower Upper Kimmeridge limestone and Portland sandstone zones.

    The companies said the flow rates were far higher than even their most optimistic expectations.

    Stephen Sanderson, executive chairman of UKOG, which has a 20.16% stake in the PEDL137 licence and a 30% direct interest in the Horse Hill Developments Ltd joint venture, said the flow of oil was a "very significant event" for the company and for oil and gas activity in the Weald basin of southern England.

    He added: "The flow test, the first ever in the Lower Kimmeridge limestone within the Weald basin, provides proof that significant quantities of moveable oil exist within the Kimmeridge section of the well and can be brought to surface at excellent flow rates. In this case from a vertical well with minimal stimulation."

    Sanderson added that the planned future use of a horizontal well and "appropriate conventional reservoir stimulation techniques" could increase flow rates even further.

    HHDL, a special purpose company that owns a 65% participating interest and operatorship of PEDL137 and the adjacent PEDL246 licence, will soon begin the regulatory permit process to attempt to demonstrate commercial levels of production.

    Of the rest of the PEDL137 licence ownership, stakes range from Alba's 9.75%, then Doriemus, Solo Oil, Stellar Resources all owns 6.5% each, while Evocutis owns a 1.3% interest.

    - See more at:
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    Aberdeen Oil execs using watches, jewellery and cars as collateral

    Cash-strapped oil executives are using expensive watches, jewellery and even cars as collateral for short-term loans as the “posh pawn” market takes off in Aberdeen.

    Business is so good in the north-east just now that one Scottish company specialising in high-end secured loans plans to set up shop in Europe’s energy capital.

    Neil Mitchinson, director of Edinburgh Asset Finance (EAF) said he was seeing growing demand for his services from clients in and around the Granite City.

    He added: “We got a luxury 4×4 from Aberdeen only last week.

    “The owner … had a short-term cash flow need but understandably wanted to remain anonymous.”

    Mr Mitchinson has a warehouse in Edinburgh full of Ferraris, Range Rovers, Porsches and other expensive cars which are being held as security for financial quick fixes.

    He said the oil and gas industry downturn was driving an increasing number of people from the north-east “from riggers to people working at senior management level” to cash in on their valuables.

    Among the first items to be sacrificed are expensive watches made by the likes of Rolex, Breitling, Cartier, Panerai and Patek Philippe.

    Mr Mitchinson said high rollers in Aberdeen were mostly pragmatic about their need to realise cash in a hurry through upmarket pawn, borrowing against items which they can live without for a little while.

    “It is no secret that the local economy up there is going through a bad spell,” he said, adding he was currently looking for suitable office space in the Granite City.

    Mr Mitchinson said his business – authorised and regulated by the Financial Conduct Authority – was a world away from the high street pawnbrokers and payday loan companies which charge exorbitant interest rates.

    EAF offers seven month loans from £1,000 to £250,000, with interest rates typically ranging from 3% to 7%.

    Cash has been secured by items including original oil paintings and other high-end works of art, fancy cars and even a shooting estate.

    “These are things people treasure and they want them back,” Mr Mitchinson said, adding his customers nearly always returned to retrieve their goods.”

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    Ocean Rig gets another two rig contract terminations

    Ocean Rig UDW, a global provider of offshore deepwater drilling services, announced on Tuesday that one of its drilling contracts has been terminated.

    Specifically, Total E&P Congo on February 11, 2016 has given notification to terminate for convenience the long-term contract of the 7th generation ultra-deepwater drillship Ocean Rig Apollo.

    As per the contract Ocean Rig says it is entitled to a termination fee that varies from 50% to 95% of the operating daily rate that will be payable over the balance of the contract.

    The Ocean Rig Apollo will demobilize from Congo in due course and is available for alternative employment. In connection with the termination of the drilling contract of the Ocean Rig Apollo, the company has notified the agent under the respective loan agreement and is currently in discussions with its lenders about the consequences of such termination, Ocean Rig said on Tuesday.

    Ocean Rig Apollo was built in 2015 in South Korea by Samsung Heavy Industries. The three-year contract between Ocean Rig and Total for this drillship was inked back in 2013.

    In addition, Ocean Rig confirmed that Premier Oil on February 12, 2016 terminated the contract for the ultra-deepwater semi-submersible drilling rig the Eirik Raude operating in the Falkland Islands. Ocean Rig has accepted Premier Oil’s termination for convenience and is entitled to a termination fee of up to $62.9 million.

    In case Premier Oil contests the payment of such fee, Ocean rig says the company intends to start arbitration proceedings without any further notice. The Eirik Raude will demobilize from the Falkland Islands in due course and is available for alternative employment.

    George Economou, Chairman and CEO commented: “It is really regrettable that two of our clients have decided to terminate drilling contracts for convenience. This is a reminder of the extremely challenging times facing the offshore drilling industry and oil companies taking unprecedented action to reduce their capital expenditures. The prospects for the industry remain bleak and we currently see limited prospects of a recovery before 2018 at the earliest.”
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    Gas leak halted Peru LNG exports

    Peruvian exports of liquefied natural gas, usually nearly 1 million cubic meters per month, have stopped entirely since mid-January when a key pipeline was ruptured, according to reports.

    The Andean country will likely resume its usual half dozen shipments of between 130,000 and 170,000 cubic meters per month in coming days, Reuters quoted an unnamed source as saying.

    The source, who spoke to Reuters on condition of anonymity, said the pipeline leak first stopped exports. Maintenance work at a liquefaction plant later delayed shipments after the pipeline was repaired, the source was quoted as saying.

    Peru is one of Latin America's biggest LNG exporters and mostly ships LNG to Manzanillo, Mexico.

    Its last shipment went to Spain on 16 January, just before Transportadora de Gas del Peru (TgP) reported a new leak in its 560-kilometre natural gas liquids pipeline, data from state energy regulator Perupetro showed.

    Representatives of Shell, the company that exports the LNG, and Peru LNG, the consortium that operates the liquefaction plant, could not immediately comment. Peru LNG is controlled by Hunt Oil with Shell, SK Corporation and Marubeni holding minority stakes.

    Last year a leak in the same pipeline forced the government to import liquefied petroleum gas, a fuel made from natural gas and used widely in homes and cars.
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    Hoegh LNG halts FLNG business, focuses on FSRUs

    Höegh LNG on Tuesday informed it has made a decision to put all FLNG activities on hold and focus its resources and capital into the FSRU business.

    According to Höegh LNG’s statement, the FSRU business is where the company sees the highest return on invested capital and the most promising market prospects.

    The decision comes due to the oversupplied LNG market and a drop in energy and financial markets which have jeopardized investment in new LNG production facilities, including FLNG.

    Höegh LNG said it will complete its obligations towards existing customers but will not engage in any new FLNG developments.

    However, the company said FSRU market conditions are still encouraging due to new LNG supply growth and increased activity in the segment, both from the producers as well as LNG importers and downstream gas consumers.

    Sveinung J.S. Støhle, Höegh LNG’s president and CEO said, “given the overall market outlook for LNG and the current state of the financial markets, we believe focusing solely on FSRUs is financially and commercially the best strategy for Höegh LNG.”
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    Calgary Condos Post Biggest Decline Since Financial Crisis

    Demand for new condominiums in Canada’s oil patch sank the most last year since 2008, according to data from Altus Group Ltd. Sales of condos in Calgary fell 38 percent to about 3,000 units from 4,805 units the prior year, according to the Toronto-based real estate consulting and advisory firm. That’s the biggest year-over-year drop since the financial crisis in 2008, when transactions fell 72 percent to 1,103 units.

    The drop-off doesn’t bode well for 2016. Calgary, the biggest city in the oil-producing province of Alberta, ended 2015 with one of the highest inventories of unsold condos, at 3,356 suites in the fourth quarter, according to Altus.

    Demand has dropped with the price of oil, which has slumped about 40 percent in the past 12 months and fueled more than40,000 job cuts across the country.
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    Oil stages late gains as Saudi, Russia, Venezuela to meet

    Oil prices rose nearly 2 percent on Monday on news that ministers from Saudi Arabia, Russia, Qatar and Venezuela would hold a previously unpublicised meeting in Doha this week, adding to speculation of a global output deal.

    Benchmark Brent crude gained more than 60 cents in after-hours trading.

    Russian Energy Minister Alexander Novak will attend the meeting on Tuesday in what would be the largest producer gathering since OPEC's last formal session in early December, sources familiar with the matter told Reuters on Monday.

    After settling at $33.39 a barrel earlier in the day, barely changed from Friday, Brent rose to more than $34 a barrel by 2:30 p.m. EST (1930 GMT). That adds to Friday's 11 percent surge, the biggest one-day jump in over seven years.

    Venezuelan Oil Minister Eulogio Del Pino made no comment on his arrival to the Gulf state of Qatar on Monday, a witness said. Del Pino has been visiting major oil producers to rally support for the idea of "freezing" production at current levels to stem spiralling prices, sources have said.

    The meeting is the latest sign of renewed efforts by OPEC members to try to tackle - possibly together with non-OPEC producers - one of the worst oil gluts in history, which has pushed prices to the lowest in more than a decade.

    On Monday, Russia's representative to OPEC said it was in talks on coordinated output cuts with individual OPEC members, mainly Venezuela, but not with the organisation itself, news agency Interfax quoted him as saying.

    "The fact that the market has reacted so strongly certainly indicates that these comments are being taken seriously," analysts at Frankfurt-based Commerzbank wrote.

    Iran is exporting 1.3 million barrels per day of crude, and will be pumping 1.5 million bpd by the start of the next Iranian year on March 20, a vice president was quoted as saying on Saturday.

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    Russia says better Iran-Saudi Arabia ties would help oil prices: RIA

    Russia wants to see improved relations between Iran and Saudi Arabia at a time when joint action is needed to influence global oil prices, the RIA news agency on Monday quoted Zamir Kabulov, a senior official at Russia's Foreign Ministry, as saying.

    Russia, one of the world's top oil producers, has repeatedly refused to cooperate with the Organization of the Petroleum Exporting Countries in recent years despite the falling price of oil, the lifeblood of its economy.

    Any hope of sealing a global output deal has so far foundered on Iran's position. Tehran is boosting production to try to regain market share after sanctions were lifted, paving the way for it to re-enter the market after a long absence.

    The prospect of cooperation between Iran and leading producer Saudi Arabia is further complicated by the fact that the two countries are geopolitical foes who support different sides in conflicts in both Syria and Yemen.

    "We all need stability on the oil market and a return to normal (crude) prices," RIA quoted Kabulov as saying.

    "And these are the key nations, especially Saudi Arabia and Iran, which is striving to return to the oil market, anticipating the removal of sanctions."

    Some OPEC countries are trying to achieve a consensus among the group, while some non-members back an oil production freeze, sources familiar with the discussions said last week, a possible attempt to tackle the global glut without cutting supply.

    Top exporter Saudi Arabia might be warming to the idea, though it was too early to say whether it would give its blessing because any deal would mainly depend on a commitment by Iran‎ to curb its plan to boost exports, the sources said.

    Even as officials on both sides discussed the possibility, Russia and OPEC continued to pump oil at some of the highest levels in recent times last month, suggesting both were locked in a fierce struggle for market share.

    Benchmark Brent crude LCOc1 has fallen around 70 percent since mid-2014.

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    Shell CEO expects Brazil output to quadruple by 2020

    Royal Dutch Shell , Europe's largest oil company, expects to make robust investments in Brazil's offshore, hoping to quadruple oil and gas output there by the end of the decade, its chief executive officer said on Monday.

    CEO Ben Van Beurden spoke in Brazil shortly after Shell's $52 billion takeover of rival BG Group Plc, approved in late January, took effect.

    He said Brazil will be a key area for the Anglo-Dutch company as it focuses its expanded operations in liquefied natural gas (LNG) and deepwater oil production.

    "We believe in the strong fundamentals of Brazil and the fundamentals of its geology," Van Beurden told reporters in Rio de Janeiro. "We will be looking at a substantial part of our production from Brazil."

    By adding BG's large Brazilian offshore assets, Shell's local output rose sixfold to about 240,000 barrels of oil and natural gas equivalent a day (boepd), or 13 percent of its total of 1.8 million boepd.

    A quadrupling of its Brazilian output would boost production to nearly 1 million boepd by 2020. Shell is already Brazil's No. 2 producer after state-led Petroleo Brasileiro SA, or Petrobras.

    In December, Shell and BG had 7.6 percent of Brazil's total output of just over 3 million barrels a day.

    The BG takeover also makes Shell the world's largest trader of LNG. While it sells LNG to Petrobras for the Brazilian market, Van Beurden and his Brazilian deputy, Andre Araujo, declined to say if they want to buy Petrobras' natural gas assets, some of which are for sale.

    Brazil's importance to Shell is expected to increase as it moves ahead with giant subsalt projects such as Libra, which it is developing with Petrobras, France's Total SA, China's CNOOC, and CNPC.

    Subsalt refers to large hydrocarbon resources trapped deep beneath the seabed by a layer of mineral salts. Libra may hold as much as 12 billion barrels of recoverable oil, according to Brazil's government.

    Shell faces serious challenges in Brazil. Oil prices have plunged since the BG deal was announced a year ago. Petrobras, Shell's principal partner in the country, is in seriousfinancial and legal difficulty after the price drop and a massive price-fixing, bribery and kickback scandal.

    Van Beurden, though, said subsalt areas should be able to break even at oil prices forecast for this year, without saying what those prices might be.
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    Dry Ships: cancelled Petrobras contract

    DryShips Inc. (NASDAQ:DRYS) announced today that Petrobras has given notice of termination on the contract for the platform supply vessel ("PSV") Vega Crusader effective March 6. The contract would have expired on January 8, 2017; the early termination represents a loss in contracted EBITDA of ~$2.2M.

    Further updates: "Given the prolonged market downturn in the drybulk segment and the continued depressed outlook on freight rates, the company is presently engaged in discussions with its lenders for the restructuring of its debt facilities. While discussions are ongoing, the company may elect to suspend principal repayments to preserve cash liquidity."

    "The sale of the Fakarava, Rangiroa and Negonego to entities controlled by our Chairman and CEO Mr. George Economou has failed. In addition, we have reached a settlement agreement with the charterer of these vessels for an upfront lump sum payment and the conversion of the daily rates to index-linked time charters.

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    Paragon Offshore Files for Chapter 11 Bankruptcy

    Offshore drilling rig operator Paragon Offshore PLC filed for chapter 11 bankruptcy Sunday, with an agreed turnaround plan that will reduce its debts by about $1.1 billion.

    A casualty of plummeting oil prices, Paragon announced on Fridaythat it intended to file for bankruptcy protection, to implement a restructuring strategy supported by unsecured bondholders and senior lenders.

    Sinking oil prices have slowed drilling and production activities, taking a toll on companies like Paragon, which are competing for increasingly scarce business. Mexico’s Petróleos Mexicanos and Brazilian state oil company Petróleo Brasileiro SA, or Petrobras, which have been big customers for Paragon, have moved to cut back their contracts.

    Sunday’s bankruptcy filing in the U.S. Bankruptcy Court in Wilmington, Del., was part of an agreement reached with leading creditors on a debt-slashing plan that Paragon hopes will see it through the industry slump.

    Under Paragon’s chapter 11 plan, bondholders are being offered cash and a share of equity in the reorganized company. Paragon’s also proposing to pay cash to cut down its revolving loan and stretch out the timeline to pay it off. Equity holders will keep a 65% stake in the reorganized Paragon, under the plan.

    Paragon’s chapter 11 restructuring grew out of months of talks with lenders about how to deal with a $2.6 billion debt load as business dropped off amid the decline in the oil industry.
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    Sembcorp Marine Posts First Loss Since 2003 on Brazil Impact

    Sembcorp Marine Ltd., the world’s second-largest builder of oil rigs, posted its first quarterly loss in at least 12 years after it took a one-time charge and the plunging oil prices pushed customers to delay or cancel orders for offshore drilling projects.

    The net loss in the fourth quarter totaled S$537 million ($384 million), the Singapore-based company said in a statement Monday. The company took impairment and provisions of S$609 million for projects of its client Sete Brasil Participacoes SA and others, according to the statement.

    It’s the first quarterly loss since the company started reporting data in 2003, according to Sembcorp Marine’s website.

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    US rig count tumbles again

    The number of rigs drilling for oil plummeted again this week, falling by 28, the second-straight week of deep losses in the oil patch, according to Baker Hughes.

    The release on Friday marks the eighth week in a row that producers pulled rigs back from the oil field. The rig count has now fallen in 22 out of the last 24 weeks, often by double digits.

    The total rig count, which when including natural gas rig fell by 30, now stands at 541.

    In the first month-and-a-half of 2016 alone, drillers have shut down 97 oil rigs. Nearly 60 of those rigs have fallen in just the last two weeks.

    Faltering oil field activity has followed the recent plunge in oil prices. The high for West Texas Intermediate, the U.S. benchmark crude, was $36.76 on Jan. 4, already decade low. Since then, crude has fallen as low as $26.21 on Feb. 11. Following the rig count announcement, WTI jumped back up by more than $3 to $29.34 at 12:18 p.m. on Friday.

    With the most still left to lose, Texas has seen the biggest drop in rigs over the last three weeks. On Friday, data showed the state saw an additional 13 rigs taken out of production, eight in the Permian Basin, bringing the total draw back in Texas rigs this year to 73. The state now has 245 rigs left, the lowest mark for Texas this century.

    Oklahoma and New Mexico lost four rigs each. North Dakota saw three shut down.
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    S.Korea's Jan Iran crude oil imports triple from year before

    South Korea's imports of Iranian crude oil tripled in January from a year earlier with the United States lifting sanctions on Tehran, but shipments remain far below pre-sanction levels, customs data showed on Monday.

    The world's fifth-largest crude importer brought 859,223 tonnes of Iranian crude oil last month, or 203,165 barrels per day (bpd), three times higher than 273,626 tonnes imported a year earlier, the data showed.

    That marks the highest imports for January since 2012 when South Korea shipped in 975,967 tonnes, the data showed. The country, along with other major Iranian crude buyers, had to slash Iranian crude imports from mid-2012.

    The Islamic Republic on Jan. 17 emerged from years of economic isolation as world powers lifted sanctions after confirming that Tehran had curbed its nuclear programme.

    Iran is exporting 1.3 million bpd of crude oil, and will be pumping 1.5 million bpd by the start of the next Iranian year on March 20, a vice-president Eshaq Jahangiri was quoted as saying on Saturday.

    Under sanctions, South Korea and other major Iranian crude buyers were required to ship in no more crude than levels imported in 2014.

    Seoul bought 5.7 million tonnes, or 114,595 bpd, of crude from Tehran last year, down 8 percent year-on-year, according to the customs data and Reuters calculations last month.

    Overall, South Korea imported 10.84 million tonnes of crude in January, or 2.56 million bpd. That was 4.6-percent lower than the 11.37 million tonnes imported a year earlier, according to the customs data.

    Final data for last month's crude oil imports will be released by state-run Korea National Oil Corp later this month.

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    Oklahoma hit by its third-strongest earthquake ever: USGS

    Oklahoma was struck by a magnitude 5.1 earthquake on Saturday morning, the third-strongest quake ever recorded in the state, which has experienced a surge in seismic activity in recent years, the U.S. Geological Survey reported.

    The quake at 11:07 a.m. local time (1707 GMT) was followed by several aftershocks in the next 90 minutes, including one with a magnitude of 3.9, the USGS said. The first quake was felt from Kansas City, Missouri, to Dallas, Texas, but no damages or injuries were reported.

    Oil fields have boomed in Oklahoma over the past decade thanks to advances in hydraulic fracturing and horizontal drilling, and seismologists have said the state's frequent earthquakes may be linked to disposal wells that inject saltwater, a natural byproduct of oil and gas work, into deep underground caverns.

    Earthquakes in Oklahoma in January led to calls for the governor to make changes to oil and gas drilling regulations.

    Saturday's quake was centered about 95 miles (153 km) northwest of Oklahoma City, and at an estimated depth of 4 miles (7 km), the USGS said.

    The epicenter is near the East Campbell Gas Field and about 75 miles (121 km) west of Cushing, Oklahoma, which is one of the largest oil storage hubs in the world and is known as the Pipeline Crossroads of the World.

    Only two previous earthquakes in Oklahoma were stronger than Saturday's: a magnitude 5.6 quake in 2011 and a 5.5 magnitude quake in 1952, said Robert Williams, a geophysicist with USGS.

    USGS initially said that Saturday's quake was probably the second-biggest in the state's history but then revised it after reviewing records.

    The USGS said it was not known if Saturday's quake was related to oil and gas production activities.

    The state has been recording about two-and-a-half earthquakes a day of a magnitude 3 or greater, a rate 600 times greater than observed before 2008, the Oklahoma Geological Survey said in a report last year.
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    China crude oil imports fall in January from record high

    China's crude oil imports fell 20 percent in January from record high volumes the previous month to their lowest level since October, official customs data showed on Monday.

    January crude oil imports were also down 4.6 percent on a year earlier at 26.69 million tonnes, or 6.29 million barrels per day.

    China's imports reached a record 7.81 million bpd in December to close out 2015 with an average 6.71 million bpd - a figure well above China's still growing demand for oil.

    China took advantage of low global oil prices last year to add up to 185 million barrels to its reserves, Reuters calculations show, while oil demand - refinery throughput plus net imports of oil products - grew 3.1 percent.

    In January, fuel exports rose 45.2 percent to 3.01 million tonnes, or 679,700 bpd, after hitting a record 975,500 bpd in December, as China continued to export more diesel amid weakening demand for the industrial fuel.

    Diesel exports in the first quarter of 2016 may high a record high for that period, flooding Asia with supply at a time when profit margins are close to six-year lows, industry sources have said.

    Net fuel exports were 350,000 tonnes in January.
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    Noble Group's LNG traders leaving to join Glencore – sources

    Three liquefied natural gas (LNG) traders at Asia's biggest commodity trade house, Noble Group Ltd, including two co-heads of the team, are leaving to join rival trader Glencore, sources familiar with the matter told Reuters.

    Noble and Glencore declined to comment. The sources said that Noble will continue to trade LNG, having restarted its London-based trading desk in 2014. Noble will still have about five people involved in the LNG business.

    The departures come after a tough period at Noble. The company's shares have shed more than two-thirds of their value in the past year, after Iceberg Research alleged the company inflated its assets by billions of dollars by inaccurately representing the value of its contracts.

    A slump in commodity markets also hit the firm. Noble has rejected the accusations of accounting irregularities.

    Last month, Noble's executives said the company was taking measures to bolster its balance sheet. It has slashed capital expenditure on areas such as its non-ferrous metals business and sold its stake in its agribusiness unit.

    LNG, however, has been an attractive area for commodity traders, as a wave of export projects planned over the past decade come to fruition, boosting supply and creating trading opportunities.

    One of Noble's biggest LNG ventures has been its two-year supply deal into the burgeoning Egyptian market after the country launched two import terminals last year, enabling it to quickly become a significant buyer of the fuel.

    Switzerland-headquartered Glencore noted last year that LNG offered growth opportunities for the trade house.

    Two trade sources separately told Reuters that two LNG traders from Glencore had recently departed from the company. Glencore declined to comment on the departures.
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    Saipem counting the cost of going solo in low oil price world

    A plunge in oil prices and little sign of recovery anytime soon have left Italian oil contractor Saipem ill-prepared to cope with life independent from former parent Eni, even after a 3.5 billion euro ($4 billion) fundraising.

    The much-needed money is essentially in the bank, as the share sale to existing investors is underwritten by a financial consortium and core investors Eni and state fund FSI.

    Saipem said on Thursday shareholders had signed up to 87.8 percent of the offering, worth 3.073 billion euros, leaving the underwriters including the consortium of Goldman Sachs, JP Morgan taking potentially unwanted stock.

    However, some analysts had feared worse. "We think a 12.2 percent unsubscribed ratio can be considered a success," said Guglielmo Opipari of broker ICBPI.

    Saipem shares on Friday opened higher, but then fell back to hit a new near 20-year low.

    Some analysts say the plunge in the stock is a sign that, even with new funds, investors are sceptical it can thrive on its own in a struggling oil industry.

    "Saipem was separated from Eni before its time... it's unprepared for independence," said Bernstein oil analyst Nicholas Green, who has an underperform rating on Saipem shares.

    The future looked brighter when state-controlled Eni set in motion plans to cut loose Saipem in July 2014, with oil prices trading at around $110 per barrel.

    Now they are close to 12-year lows under $30 a barrel, hit last month when Eni finally sold part of its 43 percent stake in Saipem to get 6.7 billion euros of gross debt off its own balance sheet and sever its ties.

    As well as leaving Saipem to raise funds from its investors, that deal left it to negotiatebank loans to handle its new debt pile, using its own Baa3/BBB- credit rating and not Eni's A rating.

    With crude prices showing little sign of recovery amid a glut of supply and weakening demand, analysts are concerned oil producers will cut back further on investments, hitting firms such as Saipem that run drilling rigs and lay pipelines.

    On Wednesday, credit ratings agency Moody's followed rival S&P in saying it could downgrade Saipem's debt to "junk," citing the risk of project cancellations and delays in an ailing sector.

    A Milan banker said any downgrade could make it tougher for Saipem, which has already announced several profit warnings and hefty cost cuts, to win new business.

    In its share sale prospectus, Saipem said it might have to review forecasts set last October - which included a market recovery in 2017 - if oil prices remained under pressure.

    "Saipem is saving costs. It may have to save more," said Barclays analysts, with an underweight rating on Saipem shares.

    There is also concern over a set of pending legal claims proceedings, stemming in part from a corruption probe in Algeria.

    Barclays estimates net outstanding claims against Saipem are around 700 million euros.

    Saipem, meanwhile, has said it has had made 62 million euros of provisions against potential future litigation payments of 126.4 million euros. Under accounting rules, companies do not have to provision for claims they cannot reliably quantify.
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    Here Is The ETF Liquidation That Sent Shockwaves Through The Crude Oil Market

    A week ago we exposed the real reason for the "crazy volatility" in crude oil markets, and specifically the driver of the immense rally (despite weak data) in crude - a massive liquidation of the triple-inverse ETF DWTI. Today we have another mysterious, even larger spike in crude oil prices (for no good reason other than 'old' misunderstood rumors about OPEC production cuts). The driver, it would appear, is another liquidation as the ETF trades at a huge discount to NAV. The last time this happened, it didn't last.

    We saw the same actin last week (and the delayed data exposed the liquidtaion)... it's happening again...

    And DWTI is trading at a dramatic discount to NAV - which suggests - given the day lag (There is a day's lag between when redemptions and creations are ordered and when they show up in share figures) that buying pressure hits today...
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    As U.S. refinery cuts quicken, crude market faces next threat

    For the past six years, U.S. refiners from Texas to Philadelphia have bought every barrel of crude they can lay their hands on to cash in on a golden era of healthy margins.

    Now, at least five refiners - including two of the country's largest - have voluntarily cut output of gasoline and distillate in the most widespread cuts since the global financial crisis, moves that may deepen crude's prolonged rout as storage tanks at Cushing, Oklahoma, the main U.S. oil hub, near capacity.

    Independent refiners including Valero Energy Corp, PBF Energy INC, Philadelphia Energy Solutions and Monroe Energy, a unit of Delta Air Lines Inc, are curbing output, capitulating to record stockpiles and sluggish winter demand that have hurt profits. Even large oil companies like Exxon Mobil Corp have slashed runs.

    While seasonal run cuts for work are common, reductions for purely economic reasons are rare.

    If the closures gather pace and refineries curb their purchases of crude further, it will heap further pressure on prices, removing one of the last remaining pillars of support for drillers and integrated producers.

    "This is going to put back pressure on crude, but you had an ongoing imbalance between supply and demand," said Gary Ross, executive chairman of industry consultancy PIRA.

    While gasoline profit margins may rebound by summer as the U.S. vacation driving season arrives, the run cuts will put pressure on crude stockpiles. Ross expects refineries to run at lower rates through March and April as refiners try to unload winter-grade gasoline.

    The cuts also suggest the outlook for demand for gasoline and diesel may deteriorate before it gets better.

    "No one really knows what demand will do this year," said Dennis Cassidy, managing director and co-head of the oil, gas and chemicals practice at AlixPartners, a global consulting firm. "That's what consensus sentiment is right now, that demand will surprise to the downside."

    Over the past year, U.S. refining margins, the estimated profit from turning oil into gasoline and diesel, have halved and are near their lowest level in five years. Refineries in the Midwest are losing cash at current prices as prices at the pump slide below $1 and oversupply continues to punish prices.

    The latest round of cuts may be distinct in the pressure it places on the storage hub at Cushing, where tanks are close to full, leaving little wiggle room for surplus crude to find a home.

    Based on recent weekly inventory data, Cushing could run out of space as early as next month. Data shows planned maintenance this spring by refineries will be slower than expected, but economic run-cuts will likely offset the effects.

    It is a marked shift in fortunes for refiners, who process crude into products like gasoline, diesel and jet fuel and were the early beneficiaries of the oil price rout.

    Because refiners need to sell off stockpiles of so-called winter-grade gasoline before they begin producing large volumes of gasoline with a chemical make-up that is more resistant to evaporation in the summer, the price of gasoline typically tumbles in March.

    Tom Nimbley, chief executive of PBF, said the oversupply situation could be alleviated as refiners shift their production from gasoline to distillate fuels like diesel and jet fuel.

    Still, traders say they are concerned about the outlook for refined products, and are hesitant to maintain their long positions for the summer months on the "crack spread," an approximation of refiner's profit.

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    Cenovus Energy to sell up to $5 billion in securities amid oil slump

    Canadian oil producer Cenovus Energy Inc said it may sell up to $5 billion of stock, debt or other securities, a day after it announced a dividend cut, as the company shores up its balance sheet amid a slump in oil prices.

    The company filed with the U.S. Securities and Exchange Commission for a mixed shelf offering after the company also said on Thursday it would cut its 2016 budget and lay off more employees. (

    In a mixed shelf offering a company may sell securities in one or more separate offerings without filing a prospectus for each one. The filing does not necessarily mean that the securities will be sold immediately, if at all.

    U.S. oil producers including Oasis Petroleum Inc (OAS.N) and Pioneer Natural Resources Co (PXD.N) have also launched stock offerings, indicating that some oil producers can tap the capital markets even as highly indebted ones struggle to survive.

    Cenovus cut its dividend by 69 percent on Thursday and said it would further reduce its workforce, on top of last year's 24 percent reduction.

    These measures come months after the company sold its oil and gas royalty properties to Ontario Teachers' Pension Plan for about C$3.3 billion, to strengthen its balance sheet.

    Cenovus had total debt of C$6.53 billion ($4.70 billion) as of Dec. 31. The company has a market value of C$11.62 billion.
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    Alternative Energy

    Saft profit dives as lithium-ion battery take-up disappoints

    Saft's 2015 net profit plunged 72 percent as a slower than expected switch to lithium-ion batteries forced the French battery maker to take a writedown on its factories.

    Saft said many of its industrial and utility customers were sticking with lead batteries longer than it had expected and that lead still accounted for more than 80 percent of the battery market.

    "Energy storage was the disappointment of 2015," Saft chief executive Ghislain Lescuyer said on an earnings call.

    He said the adoption of lithium-ion batteries by its clients is proceeding more slowly than the firm had expected and that it therefore reduced the accounting value of its Jacksonville, United States, and Nersac, France, lithium-ion battery plants.

    The two plants' combined 2015 losses rose to 21.3 million euros ($24 million), from 13.1 million in 2014 and Lescuyer said it would probably take another two or three years before they became profitable.

    Lithium-ion batteries perform better than lead-based batteries, but the aviation, automotive and other industries are switching more slowly than anticipated to the new technology.

    Lescuyer said U.S.-based Tesla Motors - which last year unveiled a move into battery systems for homes, companies and utilities - is not in the same market segment as Saft, as it is more focused on the consumer market.

    Saft specialises in high-tech nickel- and lithium-based batteries for the defence and space industries. Lescuyer said a price war on the lithium-ion market also hurt its business.

    "It is clear that big, low-cost Asian players have bought market share," he said.

    In 2013, Boeing's global 787 fleet was grounded for months after two lithium-ion batteries burned out in separate incidents, which caused some planemakers to switch back to nickel-cadmium batteries.

    Saft saw 2015 core earnings rise 6.2 percent to 110.4 million euros as revenue rose 1.9 percent to 759.4 million.

    Net earnings dropped to 13.6 million euros due to 35.9 million euros of impairments on its lithium-ion assets and costs related to its restructuring plan announced in November.

    Saft gave no 2016 earnings guidance because of what it said is a volatile and uncertain economic environment, but confirmed medium-term objectives for revenue over 900 million euros and a margin of at least 16 percent by 2019.

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    MHI Vestas to provide turbines to Belgium's largest wind farm

    MHI Vestas, a joint venture between Vestas and Japan's Mitsubishi Heavy Industries , said on Thursday it would likely supply turbines to Belgium's largest wind farm project.

    The company, which is now selling the largest and most powerful wind turbines in the world, said it had been selected as a preferred supplier for the 370 megawatt (MW) project in the Belgian North Sea.

    That amounts to about 46 of its V164-8.0 MW turbines.

    The project is run by Norther N.V., a 50-50 joint venture between The Netherland's Eneco and Belgium's Elicio.

    "When commissioned in 2019 the Norther project will be Belgium's largest wind power plant," MHI Vestas said in a statement.

    The wind farm would be based about 22 kilometres (14 miles) off the coast of Zeebrugge. With 370 MW of power generation, MHI Vestas said the consumption of 370,000 households would be met.

    MHI Vestas makes wind turbines for the growing offshore market, which is dominated by Siemens' wind turbine unit. The Danish-Japanese joint venture has been established to combat that domination.
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    SunEdison to sell plant in Malaysia, close Texas facility

    SunEdison Inc said it would sell a facility in Malaysia that produces silicon wafers and close a polysilicon manufacturing plant in Texas, blaming Chinese tariffs on polysilicon manufactured in the United States.

    As a result of these actions, the company said it expected to record $266 million in impairment charges and $171 million in other restructuring charges in the fourth quarter ended Dec.31.

    The Texas closure would affect 180 jobs, the company said on Thursday.
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    Trash to gas

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    Brazil Reaches 9 Gigawatts of Wind Power Installed Capacity

    Brazil has reached 9 gigawatts of wind energy installed capacity with the addition of 268 megawatts to the grid this year.

    In January, eight wind parks started operations in Brazil’s northeast, the wind power association known as Abeeolica said in an e-mailed statement on Monday. In February, three more projects were completed.

    Projects adding more than 10 gigawatts are under construction to be connected to the grid in about four years, according to Abeeolica. More than 15 billion reais ($3.75 billion) were invested in the industry in Brazil in the last two years.

    Brazil trails only China on the ranking of 55 top emerging countries for clean-energy investments, as the government steps up efforts to diversify power supplies, according to Bloomberg New Energy Finance’s Climatescope.
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    Statoil launches USD 200m new energy investment fund

    Statoil today launches a new venture capital fund dedicated to investing in attractive and ambitious growth companies in renewable energy, supporting its strategy of growth in new energy solutions.

    The new fund, Statoil Energy Ventures, will invest up to USD 200 million (around NOK 1.7 billion) over a period of four to seven years.

    'We are pleased to announce Statoil Energy Ventures: One of the world's largest corporate venture funds dedicated to renewable energy. The transition to a low carbon society creates business opportunities, and Statoil aims to drive profitable growth within this space. Through the new fund, we look forward to investing in attractive and ambitious companies and contribute to shaping the future of energy,' says Irene Rummelhoff, Statoil's executive vice president for New Energy Solutions.

    The fund is established as part of Statoil's new business area New Energy Solutions, reflecting the company's aspirations to gradually complement its oil and gas portfolio with profitable renewable energy and low-carbon solutions. The investments are included in Statoil's overall investment outlook as presented on 4 February.

    'Statoil Energy Ventures aims to be an attractive partner for growth companies. We offer a strong financial muscle and are ready to invest in three strategic areas: Supporting our current operations in renewables, positioning in renewable growth opportunities, and exploring new high impact technologies and business models. We look forward to engaging with ambitious entrepreneurs as an active investor and to build great companies,' says Gareth Burns, vice president in Statoil and managing director of Statoil Energy Ventures.

    Potential investment themes include offshore and onshore wind, solar energy, energy storage, transportation, energy efficiency and smart grids.

    The team initially consists of six investment professionals operating with a global mandate, initially based out of Statoil's offices in London and Oslo.

    The fund will take direct positions primarily as a minority shareholder in growth companies, preferably as a co-investor with other venture firms. Investment in selected fund will also be considered to gain a wider footprint.

    The Statoil Energy Ventures team, focusing on growth-phase investments in renewable energy, will operate alongside Statoil's existing venture entity, Statoil Technology Invest (STI), which focuses on early-phase investments in upstream oil and gas.

    Statoil has a strong track record of successful technology implementations and financial return through exits. STI has since 2000 invested around USD 135 million, achieving a multiple of invested capital on realized deals of 2.5.
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    Solar tower in desert promotes Israel's renewable energy drive

    In a vast expanse of open desert in southern Israel a 787-foot tower (240 metres) is taking shape that its builders hope will help make solar energy much more cost effective.

    The tower, being built by Israel-based Megalim Solar Power, whose shareholders include General Electric, will be taller than other solar towers, enabling it to generate up to 121 megawatts of power.

    Due to be completed late next year at a cost of 3 billion shekels ($773 million), the facility will provide around 1 percent of Israel's electricity under an agreement with the Israeli government, which aims for 10 percent of the country's energy needs to be provided by renewables by 2020.

    Most solar power in the world is generated by photovoltaic (PV) panels, which can be installed anywhere from a roof to a backyard. In contrast, towers that use concentrated solar power, known as CSP, require a lot of land and are only cost-efficient in large-scale projects.

    For that reason they have seen limited deployment, and mainly in the United States and Europe.

    Megalim's tower in the Negev desert, which stands out for miles around, is surrounded by 50,000 computer-controlled mirrors, to project the sun's rays. They are bigger than in previous projects and controlled over a dedicated Wifi network, rather than with expensive cables used in the past, Megalim says.

    The tower is privately funded but when completed the Israeli government has guaranteed to buy the power from it at an above-market price.

    That means it will be effectively subsidised, but Megalim says it is working to furtherreduce costs. Shareholders including power tower pioneer Brightsource Energy as well as General Electric, which will provide the turbine, want to build more such towers around the world.

    "We're making strides in efficiency, we're making strides in compressing the time of construction," said Megalim's Chief Executive Eran Gartner. "We're going down a learning curve that will help us to offer solar energy at the most competitive rates."

    To narrow the gap with PV panels, which make up 95 percent of the solar market, the U.S.-based Solar Energy Industries Association says CSP needs to reduce hardware costs and to twin its output with an energy storage element that will allow electricity production at night.

    Megalim's tower in Israel will generate heat of up to 540 degrees Celsius (1,000 Fahrenheit), producing steam to drive a turbine. It will not be able to store energy but has overcome another problem that beset solar towers - whether or not power towers were killing large numbers of birds.

    When Brightsource built a three-tower facility in Ivanpah, California in 2013 with local partners, some experts said heat from its mirrors would incinerate tens of thousands of birds each year. A public outcry about the issue was in part responsible for Brightsource cancelling plans to build another tower complex in California.

    An official report, based on findings by biologists and teams of dogs that combed the Ivanpah facility, documenting and categorizing every bird death, has since shown the impact to be low.

    Brightsource has come up with new techniques to minimize the damage, said Joe Desmond, Brightsource's senior vice president of government affairs and communications.

    It sprays vaporized grape skin extract, a mild irritant, and emits sounds of natural predators near the tower to keep birds away, he said. It has also developed algorithms to lessen the convergence of rays from mirrors on standby, so the air does not get as hot.

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    Uranium in South Africa’s Karoo may be ten times estimate

    Peninsula Energy, an Australian listed uranium explorer and producer, said deposits of the nuclear fuel buried in South Africa’s semi arid Karoo region may be ten times greater than the 57 million-pound resource it has already found.

    Peninsula is building upon exploration work done by Esso Minerals in the 1970s, which indicated resources of 450 million pounds to 600 million pounds, chief executive officer John Simpson said in an interview in Cape Town on February 10. About 200 million pounds of uranium are consumed globally each year, he said.

    “Potentially, it’s a very significant mineral deposit,” he said. “We’ve gone through scoping and prefeasibility studies. That has been very positive. We think we can produce uranium from here even under the current environment.”

    Spot uranium prices have fallen about 49% to $34.15 a pound since the Fukushima nuclear disaster in March 2011 as some governments shied away from building new reactors. Contract prices, which account for 95% of trading in the fuel, are about $45 a pound, according to Peninsula, which already produces uranium in Wyoming.

    The company’s prefeasibility study indicated that three million pounds of uranium could be mined each year in the Karoo at costs in the low $30s a pound, Simpson said. Perth-based Peninsula’s aim is to begin mining in 2019 or 2020. The resource has a uranium content of about 1 100 parts per million, considered “low-grade ore” by the World Nuclear Association.
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    Charges filed over illegal waste disposal at K+S

    German prosecutors have filed charges over suspected illegal waste disposal at potash miner K+S, a judge said on Thursday.

    "We have received the indictment, and it will probably be delivered to the accused soon," Bernhard Landwehr, judge at the regional court in Meiningen, southeast of K+S's headquarters in the German city of Kassel, told Reuters.

    He declined to say whom the indictment named as defendants.

    The charges stem from accusations made against K+S by a small town near Meiningen, called Gerstungen, which said the company illegally disposed of saltwater between 1999 and 2007.

    K+S has said it had approval from state mining authorities for the waste water disposal during the time in question and that K+S was fully cooperating with the investigators.

    "We are still convinced that the approvals granted at the time are valid and consider the accusations to be baseless. An ongoing assessment by an external law firm has backed that in recent months," a spokesman for K+S said on Thursday.

    Prosecutors in September searched offices at K+S for evidence in the case. Police said at the time that some K+S subsidiaries and employees as well as the state's mining authority were subject to the probe.

    German magazine WirtschaftsWoche reported on Wednesday that the investigation was nearly complete.

    The court will now examine whether there is enough evidence for the matter to go to trial. Any sentence in the case could range from a fine to a prison sentence of up to five years, the judge said.

    The saltwater emerges from the production of fertiliser from potash ore that K+S extracts from mines. The group has for years been embroiled in a dispute with environmental groups and local municipalities about the waste water discharge into the Werra river and into porous layers of rock.

    Shares in K+S turned negative on the news, trading 2 percent lower at 18.86 euros by 1258 GMT, underperforming the German blue-chip index, which was up 1.7 percent.
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    CF Industries profit misses estimates as prices weaken

    U.S. nitrogen fertilizer producer CF Industries Holdings Inc reported a lower-than-expected quarterly profit, hurt by weakening prices and higher costs.

    Fertilizer prices have plunged amid soft grain prices and excessive global production.

    The average selling price for ammonia fell about 18 percent to $458 per ton in the fourth quarter ended Dec. 31, while the price of UAN (urea ammonium nitrate) fell 12.5 percent to $230 per ton, the company said.

    Net earnings attributable to stockholders fell to $26.5 million, or 11 cents per share, in the quarter ended Dec. 31 from $238.3 million, or 96 cents per share, a year earlier.

    Net sales fell 8.3 percent to $1.12 billion.

    Excluding items, CF earned 76 cents per share. Analysts on average were expecting 82 cents, according to Thomson Reuters I/B/E/S.

    The company said in August that it will buy OCI NV's (OCI.AS) North American and European plants for $6 billion, making CF the world's largest publicly traded nitrogen company.

    CF said it expected 2016 corn planting to cover about 90.5 million acres, a 2.5 million acre increase from 2015.

    Total operating costs and expenses jumped 50 percent to $88.3 million in the quarter.

    The Deerfield, Illinois-based company's shares were up about 1.8 percent in extended trading.
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    India halts potash imports as droughts hit crop plantings

    India has halted its potash imports for the year to end-March and delayed negotiations for next year's purchases until at least June, as droughts have dented demand in one of the world's biggest fertilizer consumers, government officials said.

    The decision, which has not been previously reported, is India's first pause in potash imports in years and will be tough on suppliers already reeling from weak demand as China and Brazil also trim their buying.

    Major suppliers to India include Uralkali, Potash Corp of Saskatchewan, Agrium Inc, Mosaic, K+S, Arab PotashCo and Israel Chemicals.

    Spot prices of potash, a crop nutrient, are at 8-year lows of around $230 a tonne, down by more than a quarter from a year ago.

    "Demand is weak due to the drought," said P.S. Gahlaut, managing director of state-run Indian Potash Ltd, the country's biggest importer. Gahlaut said India had 1 million tonnes of potash inventory despite cutting back on imports.

    India's move to halt its potash imports underscores the country's changing position in global commodities markets because of a deepening crisis in its farm sector.

    Successive droughts have slowed plantings of crops including rice, wheat, sugarcane, corn, cotton, soybean and rapeseed, and cut the need for fertilizer. But this is also turning India into a net buyer for commodities for the first time in years.

    The agriculture sector, which employs some two-thirds of India's 1.25 billion population, poses a risk to Prime Minister Narendra Modi's economic growth ambitions.

    The suspension of imports means India will buy less potash this year than it had planned.

    Last May, Indian fertilizer producers including Rashtriya Chemicals and Fertilizers Ltd (RCF), IFFCO and Chambal Fertilisers and Chemicals agreed to import a total of 4.5 million tonnes of potash, with an option to increase that to 5.2 million tonnes.

    So far this fiscal year, they have shipped in only 3 million tonnes, and will not be buying any more, industry officials said. An official at state-run RCF said the government has also taken the rare step of restricting movement of imported fertilizers in an effort to cut down on imports.

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    Mosaic expects potash prices to fall more than a fifth in Q1 2016

    The US-based fertiliser major gave a sombre outlook for prices of both potash and phosphate this year, but said that the current tough market could present it with opportunities to make acquisitions, which would strengthen its business model in the future.

    US fertiliser producer,  The Mosaic Co., has said that phosphate prices could fall by as much as 14.6% to $350/tonne by the end of March while potash prices are liable to slump by up to 21% to $200-230/tonne.

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    Precious Metals

    Asia shuns gold on higher prices; India discounts hit record high

    Asian physical gold demand slowed this week as consumers opted to wait out the metal's biggest rally in years, with discounts in key consumer India hitting a record high as some investors cashed-out holdings.

    Gold has rallied 13.7 percent this year amid a tumble in global stocks that stoked demand for the safe-haven metal. But physical buyers have so far shied away from making big purchases as they wait to see if the rally will last.

    "Buyers are closely watching the wild movement in gold prices in the last one month. They are making enquiries but conversion ratio is low," said Tanya Rastogi, a director at Lala Jugal Kishore Jewellers in Lucknow, India.

    In India, the world's second biggest consumer, discounts surged to a record high of $50 an ounce to the global spot benchmark this week, widening from the $35 discount offered last week, dealers said.

    Indian consumers were also waiting to see if the government will cut the gold import duty from a record 10 percent in the annual budget to be presented on Feb. 29.

    There was also little buying interest in other Asian markets.

    "Demand has been slow across the region for the past few days. It's almost dead," said a Singapore-based dealer at an international bank. "A lot of people are looking to sell at these levels."

    India and top consumer China bought record amounts of gold in 2013, when the price dropped by 28 percent after a 12-year rally, believing that the decline was a one-off and that prices would rise again.

    But gold dropped for two more years before rising in early 2016, leaving investors to take a more cautious outlook on prices.

    "The spike in prices is giving investors an opportunity to liquidate old stocks they bought at lower levels. Many investors are selling coins and bars," said a Mumbai-based dealer with a private bank.

    In China, demand was quiet following the Lunar New Year holiday last week, which marked the end of the peak buying season there.

    China has seen strong demand for gold investment products during the holiday, but for the momentum to continue bullion would have to maintain its price rally, a World Gold Council official said Thursday.

    Prices in China were largely on par with the global price, giving banks little incentive to import bullion.

    "We haven't seen much demand after the spring festival. The premiums are also not very good. So we haven't imported a lot recently," said a dealer with an importing bank.

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    Evolution Mining free cash flow bump allows dividend rethink

    Evolution Mining will review its dividend policy after strong cash generation in the first half. Photo: Bloomberg

    Evolution Mining shareholders look set to benefit from an 87 per cent increase in the gold miner's first half revenue, with the company reaffirming it will review its dividend policy at the end of June given its strong cash generation.

    Evolution, Australia's second largest gold producer, swung to a statutory net loss after tax of $15.5 million for the December, from a profit of $43.1 million a year earlier, despite an 87 per cent increase in sales revenue to $607.1 million.

    The decrease was due to acquisition and integration costs of $54 million and fair value accounting adjustments of $38.4 million incurred in the completion of its Cowal, Mungari and Phoenix project acquisitions, along with a subsequent $35.3 million goodwill write-off.

    However, the miner reported a 150 per cent increase in underlying profit to a record $107.9 million due to the Cowal and Mungari acquisitions, which bumped-up gold production volumes to 377,869 ounces for the half.

    Against the backdrop of a strong Australian-dollar gold price, the miner generated free cash flow from operations for the period of $203 million.

    Spot gold was trading at about $US1210 an ounce on Thursday.

    Evolution chief financial officer Lawrie Conway said the miner's momentum on margin expansion would continue to provide opportunities for the company to reduce debt and consider increasing shareholder returns.

    "We have many options available to us for the surplus cash such as further growth opportunities including increased discovery investment, accelerated debt reduction and returns to shareholders via dividends," he said.

    Mr Conway said Evolution would continue to prioritise debt reduction, after reducing gearing to 23 per cent from a peak of 32 per cent in July.

    RBC Capital Markets analyst Cameron Klutke said the company's result was generally in line with expectations and the reduction in gearing was a positive sign for the miner.

    "We continue to see reduction of the outstanding debt as a priority for the company," Mr Klutke said.

    Evolution's present dividend policy is to pay a half-yearly dividend equivalent to 2 per cent of the sales revenue recorded within the period.

    It will pay an interim unfranked dividend for the December half of 1¢ per share, which is equivalent to 2.3 per cent of sales revenue for the period.

    Mr Conway said any decision was based on debt reduction and continued strong cash flow generation, adding the company would look at a number of dividend policy options but currently favoured sticking with a revenue-based format.

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    Lower metal prices drive Newmont’s Q4 loss below forecasts

    The world’s largest gold miner by market capitalisation Newmont on Wednesday disappointed investors with narrower-than-expected fourth-quarter headline earnings of $20-million, or $0.04 a share – $0.08 a share below Wall Street analyst forecasts – as lower realised metals prices and the impact of divestitures impacted on the bottom line. 

    The Denver, Colorado-based company said a noncash reclamation charge, tax valuation allowance adjustments and a one-time payment related to previous period royalties and taxes from the revised Ghana Investment Agreement impacted on net income, which totalled a loss of $247-million, or $0.48 a share, in the fourth quarter ended December 31, compared with net income of $39-million, or $0.08 a share, for the comparable period of 2014. 

    Revenue fell 10% year-on-year to $1.8-billion in the fourth quarter, as a 9% slide in the average realised gold price and flat attributable gold sales offset higher production at Batu Hijau, in Indonesia, and the addition of Cripple Creek & Victor gold mine, in Colorado. 

    A 27% year-on-year slide in the average realised copper price to $1.86/lb offset an 18% increase in attributable sales at 40 t, as Batu Hijau continued to mine higher-grade Phase 6 ore. However, fourth-quarter copper sales volumes were impacted on by the export permit delay. Newmont received a six-month export permit on November 20, 2015, and revenue from about 27-million pounds of copper and 39 000 oz of gold shipped in December was expected to be recognised in the first quarter 2016. 

    Attributable gold output was 1% lower year-on-year at 1.25-million ounces in the fourth quarter, as higher output at Batu Hijau and the addition of Cripple Creek & Victor offset production declines at Yanacocha, in Peru, and Ahafo, in Ghana. Newmont advised that it had generated about $1.7-billion asset sales since 2013, while maintaining steady attributable gold production. All-in sustaining costs (AISC) totalled $999/oz for the three-month period, up 8% over the comparable period as a result of lower volumes at Yanacocha and the timing of sustaining capital expenditures. 

    Copper AISC was down 36% year-on-year at $1.51/lb in the fourth quarter, down from $2.39 in the comparable quarter. Newmont’s consolidated cash flow from continuing operations was $275-million in the period, down 51% when compared with $562-million a year earlier. 

    Free cash flow was negative $185-million in the fourth quarter, compared with $218-million in the previous year quarter. The company held $2.8-billion of consolidated cash on its balance sheet as at year-end 2015, up 16% from the previous year. 

    The company had $6.24-billion in debt on its balance sheet as at December 31. Newmont expected an AISC of below $1 000/oz this year and profitable production of at least 4.5-million to 5-million ounces a year through 2020. 

    Attributable gold output was expected to increase from between 4.8-million and 5.3-million ounces in 2016, to between 5.2-million and 5.7-million ounces in 2017. New production at Cripple Creek & Victor, Long Canyon Phase 1, in Nevada, Merian, in Suriname, and the Tanami expansion, in Australia, was expected to offset the impacts of maturing operations at Yanacocha and mine sequencing at Batu Hijau. 

    Attributable copper output was expected to be between 120 000 t and 160 000 t in 2016 and 2017 before decreasing to between 70 000 t and 110 000 t by 2018, owing to the depletion of higher-grade Phase 6 ore at Batu Hijau. 

    AISC was expected to improve from between $900/oz and $960/oz in 2016, to between $850/oz and $950/oz in 2017. AISC for 2018 was expected to remain below $1 000/oz, despite higher stripping at Boddington, in Australia, and lower output at Batu Hijau.

     Newmont also announced on Wednesday that it had added five-million ounces of reserves through exploration and four-million ounces more through the acquisition of Cripple Creek and Victor mine, more than offsetting a depletion of 6.5-million ounces.
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    Barrick Gold aims to cut at least $2 billion in debt this year

    Barrick Gold Corp, the world's largest gold producer, on Wednesday forecast 2016 gold production of 5.0-5.5 million ounces and a debt reduction target of at least $2 billion for the year.

    The company, which produced 6.12 million ounces in 2015, expects all-in sustaining costs of $775-$825 per ounce for the year, largely lower than $831 per ounce a year earlier.

    The Toronto, Ontario-based miner, which has one of the highest debt loads of any gold miner, has been selling its non-core assets in order to reduce debt. It said in January it had met its $3 billion debt-reduction target.

    Capital expenditures for 2016 were forecast at $1.35 billion-$1.65 billion, compared with 2015 capital expenditures of $1.51 billion.

    Gold XAU= GCv1 has been hit by a slowdown in China's growth, the world's top consumer, a global supply glut and a strong dollar .DXY.

    The company also reported higher-than-expected quarterly profits as sale of its non-core assets helped offset the dip in gold prices.

    Net loss attributable to Barrick was $2.62 billion, or $2.25 per share, in the quarter ended Dec. 31, compared with a loss of $2.85 billion, or $2.45 per share, a year earlier.

    Excluding items, it reported a profit of 8 cents per share, bigger than the average analysts' estimate of 6 cents per share, according to Thomson Reuters I/B/E/S.

    Revenue fell about 11 percent to $2.24 billion.
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    De Beers sees rebound in ‘fragile’ diamond market

    De Beers may have lost some of its sparkle but expects a rebound in the diamond market to boost its performance.

    Weakness in the rough diamond market weighed on the world’s largest diamond company in the financial year ended December 31 2015. A 36% decline in rough diamond sales pushed total revenue down 34% to $4.7bn. Despite an 8% decline in its rough price index for the year, the Anglo American subsidiary managed a 5% increase in average realised diamond prices to $207/carat (ct). A combination of cost-saving initiatives and favourable exchange rate movements saw consolidated unit costs improve to $104/ct from $111/ct. Still, underlying earnings before interest and tax (EBIT) more than halved from $1.36bn to $571m, but came in 5% higher than forecasts by JP Morgan analysts.

    At the same time, weaker than expected consumer demand coupled with a build-up of stocks and a cash-crunch among diamond traders put downward pressure on the polished diamond prices and the mid-stream industry.

    In response, it cut diamond production by 12% to 28.7m ct from an initial target of 32m ct. “We demonstrated, at that time, that production to demand is working. We saw the demand being a little bit shaky, we started to cut, we saw the perfect storm building up and we cut further and at the end it was the right response to the market,” Phillipe Mellier, CEO of De Beers said in a pre-recorded video.

    Despite tough trading conditions, the company said its Forevermark brand enjoyed double-digit sales growth. Forevermark, which recently relaunched De Beer’s famous “A Diamond is Forever” marketing campaign, increased its footprint by 14% and is now available in more than 1 700 outlets across 35 markets.

    In an attempt to boost holiday gift giving in its key US and Chinese markets, De Beers said it also invested in additional marketing campaigns. “We’re still in the middle of Chinese New Year and if holiday sales are robust, we should expect restocking bydiamantiers soon,” BMO Capital Markets’ Ed Sterck said from London.

    Sterck said initial indications point to a slightly improved diamond market. De Beers and Alrosa, which together make up around two-thirds of the diamond market, sold close to $1bn worth of diamonds in their first sales of the year. However, he expects diamond prices to remain flat from where they ended in 2015.

    De Beers, which expects to produce 26-28m carats in 2016, said it will adjust production in accordance with trading conditions. It also plans to deliver $200m in cash savings through a reduction in production costs, overheads, and capex. It has announced plans to cut 121 jobs at its South African operations and expects natural attrition to impact a further 68 positions across its workforce.

    Describing the market as fragile, Mellier said the company has worked to “close 2015 on the right note” and ensure that stocks were close to normal levels at the end of the year. “We are now in a position to start 2016 and look at 2016 as a new cycle with a rebound,” he said.

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    China dampens gold's rally as peak demand period wraps up

    Chinese investors sold into gold's rally after returning from a week-long holiday, a sign they do not expect prices to go much higher and cannot be counted on to support the market with post-Lunar New Year demand set to falter.

    A lack of buying interest going forward from top consumer China could cut short this year's rally in gold, one of the biggest in years, with the metal up nearly 14 percent since the beginning of 2016.

    Chinese selling helped push gold down more than 2 percent on Monday.

    "In China, people think that the rise of the gold price is driven by a safe-haven effect," said Shu Jiang, chief analyst at Shandong Gold Group in Shanghai, noting that usually such rallies are not long-lived.

    "People have reservations about such a rise."

    Consumers in China, along with those in No.2 buyer India, typically purchase gold in jewelry form, hunting for bargains when prices dip or if they are confident of a sustained rally.

    Bullion dealers across Asia said the Chinese were offering gold on Monday, looking to book profits with prices about $60 an ounce higher than they were before their week-long holiday.

    "They bought a lot of gold when prices were in $1,000s and $1,100s, so now they are selling," said a dealer in Hong Kong. "Below $1,200, they will be buyers again."

    Chinese imports rose late last year, with December imports reaching their highest since March 2013, as demand climbed amid slumping stock markets and a weakening currency.

    Late 2015 imports were also supported by anticipation of buying during the Lunar New Year holiday - also known as the Spring Festival - when gold is popular as a gift.

    During the Spring Festival break, gold and silver jewelry sales rose 22 percent from year-ago levels, China's ministry of commerce said over the weekend.

    Demand typically slows after the holiday.

    "The real challenge is now ... after the Spring Festival, how much the market could dry up," said Samson Li, senior analyst with GFMS, a metals consultancy owned by Thomson Reuters.

    Consumers who bought gold over the last few years had their fingers burnt as prices fell by more than a third between 2013 and 2015.

    Chinese gold demand could increase this year from 2015 only if the price rally continues or as long as prices don't make lower lows than those seen in 2015, Li said.

    In December, gold prices hit their lowest in nearly six years at $1,045.85 an ounce.

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    Base Metals

    China zinc refineries slash fees as supply shrinks -trade

    Chinese zinc refineries have agreed to take sharply lower fees for processing raw material into metal as a long awaited shortage rears its head following the closure of several giant mines, industry sources said this week.

    Zinc mine supply has been shrinking as several blockbuster mines such as Australia's Century and Ireland's Lisheen have dried up with no new major lodes in the pipeline, and as prices near six-year lows force miners to slash output.

    Spot treatment charges have slumped to $125-$130 a tonne this week from $180-$200 at the end of last year, three concentrate traders told Reuters. Treatment charges are fees that miners pay refiners to process their concentrate into metal, used by producers to galvanise steel.

    "You've had Century, that's done now, and Lisheen. China zinc mines have also shut due to the low prices, so there's a short-term gap in the market" said a trader in Asia.

    Goldman Sachs in a Feb. 9 note forecast zinc prices would jump 7 percent in three months to $1,800 a tonne due to mine depletion, with analysts polled by Reuters expecting zinc to be the top perfoming metal this year.

    London Metal Exchange zinc was trading up 1 percent at about $1,715 a tonne on Friday, having already climbed nearly 7 percent this year.

    Closures or output announced in recent months by major miners such as Glencore and smaller players such as Australia's CBH Resources and Horsehead in the United States have stoked the shortage.

    Mine supply cuts will weigh in at about 1 million tonnes this year in a roughly 14 million tonne market given the closures and after Glencore pledged in October to slash 500,000 tonnes of annual zinc production, equivalent to around 4 percent of global supply. It started those curbs with a 100,000-tonne cut in the fourth quarter.

    "I think the Chinese didn't believe that Glencore would actually cut ... now you see them scrambling for supply," the trader said.

    But China's zinc trade stocked up late last year. Zinc imports surged by 440 percent in December after shipments nearly quadrupled in November and almost tripled in October, as galvanisers hoovered up cheaper imports ahead of this year's expected shortfall.

    Yearly contract terms are expected to be hammered out at next week's International Zinc Association conference in Arizona. Traders said they expected sharply lower terms at $180-$200 a tonne, from around $245 last year. But they added that low TCs were not sustainable.

    "The view is that if things improve enough, at some stage Glencore will just flick the switch back on," the trader said.

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    Chilean labour reform threatens shake-up in copper industry

    Chilean copper miners who have grown reliant on cheap outsourced workers are bringing more of them in-house or bracing for salary hikes ahead of the expected passage of a pro-worker reform bill.

    The legislation, on track to be approved in March, is likely to raise labour costs and marks the latest blow to mining companies in the world's No.1 copper exporter already hit by flagging productivity and prices near six-and-a-half-year lows.

    The reform is set to boost the bargaining position of unions representing outside contractors, making strikes among outsourced workers more common and difficult to break, analysts and lawyers say.

    Labour activists argue the reform is needed to give workers more leverage in a country with loose collective bargaining rules, and they criticize contracting as a tool for companies to undercut bargaining rights and offer substandard pay.

    Companies counter that the reform will stunt growth, and say that outsourcing is vital for increasing efficiency and offering the flexibility needed to weather the volatile copper market.

    Now, however, those firms are making adjustments: some are bringing contracted workers in-house to better paid positions, so as to avoid potential labour disputes. Others are preparing to pay significantly more for the same outsourced services they have used on the cheap for decades.

    "There are a lot of studies being done (by mining companies), looking at how many workers can be brought in, at what mines, in which processes," said Felipe Saez, an advisor to heavy industry group Sofofa, which represents Chilean mining among other sectors.

    Outsourcing has increased in Chile over the past two decades. Seventy-four percent of workers at Chile's "large" copper miners, which account for well over 90 percent of output, were contracted out as of 2014, according to government statistics. That compares with 69 percent in 2013, and 66 percent in 2006.

    However, in 2015, following years of gains, the number of mining contractors in Chile fell by 12.5 percent, far outpacing total job losses among mine workers.

    That is largely due to companies getting fed up with already rising labor unrest among outsourced workers, analysts say. Last year, protesting contractors with state producer Codelco blockaded and closed a mine for three weeks.

    But the proposed reform, which allows unions from different contractors to join forces and lowers barriers to creating unions in small companies, among other measures, is fueling the trend, and making companies less likely to rehire outside when prices rebound.

    "Under the labour reform it would be better for (mining companies) to bring contractors with sensitive labour agreements in-house, and have those workers opt for the company's benefits, so they can better control the bargaining situation," said Fernando Villalobos, a leading Chilean labor lawyer and former advisor to the Labor Ministry.

    New in-house workers, however, are costly. Government data show that average per worker remuneration costs for contracted employees at copper mining companies were only 43 percent that of direct employees in 2014.

    It remains unclear how many workers mining companies are prepared to bring in.

    But if just 5 percent of the 163,827 total workers at Chile's large copper mines in 2014 were made direct employees, it would cost Chilean miners approximately $370 million a year. Though that is relatively small compared to total industry-wide costs of $25.8 billion in 2014, such numbers are significant for a sector that is now struggling to maintain razor-thin margins.

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    Eramet seeks cost cuts, shareholder deal to save nickel unit

    French mining group Eramet said it needs to accelerate cost savings and win financial support from its fellow shareholder in New Caledonian nickel subsidiary SLN if the business is to survive a slump in the global nickel market.

    Eramet reported a current operating loss of 207 million euros for 2015, reflecting a 261 million euro loss at its nickel division that has been battered by 12-year price lows linked to global oversupply and slowing Chinese demand.

    "We can't continue losing 20 million euros a month at SLN, otherwise the Eramet group will be put at risk," Chairman and Chief Executive Patrick Buffet said during a results presentation in Paris.

    The group was preparing measures for SLN to reduce its production cash costs to $4.5 a pound by the end of 2017 from $5.8 in 2015, which would represent a boost of around 140 million euros in operating profit from 2018, he said.

    The new cost plan, which would go beyond a continuing effort to cut group costs by 360 million euros over 2014-17, would be submitted to a board meeting in April, at which Eramet also wanted to obtain financial support from SLN's other major shareholder, the STCPI.

    The STCPI is a vehicle representing the provincial authorities in New Caledonia that owns 34 percent of SLN, alongside Eramet with 56 percent and Japan's Nisshin Steel with 10 percent.

    Eramet's group board approved on Wednesday 30 million euros in extra liquidity for SLN, on top of 120 million granted in December, to keep the nickel firm afloat until April, he said.

    France, which controls the Pacific territory of New Caledonia, said this month it would support the struggling nickel sector there, which also includes mining operations run by Glencore and Vale.

    Eramet's group losses last year also reflected falling prices for manganese, mainly used in carbon steel, although Eramet's relatively low costs at its mine in Gabon helped it post a small profit for the division, Buffet said.

    In response to weak manganese prices, Eramet would cut production of manganese ore and alloys in early 2016 through a four-week stoppage of output at its Gabonese mine, he said.

    Societe Generale analysts said in a note the operating loss at Eramet's nickel division was bigger than the 224 million euros it had anticipated, and that Eramet's drawdown of a 980 million euro credit facility last month was a concern.
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    Madagascar's Ambatovy mine says new tax rules halt nickel shipments

    The Madagascan arm of Sherritt International said on Thursday containers carrying nickel had been prevented from leaving the island's Toamasina port due to new regulations, and unless the situation changed the mine could only stay open for a week.

    The $7 billion Ambatovy mining project, 40 percent owned and operated by Sherritt, has been hit by record low nickel prices and management has been forced to lay off more than 1,000 of its workforce over the past year.

    Ambatovy said in a statement it was seeking a meeting with Madagascan President Hery Rajaonarimampianina to discuss new Advance Cargo Declaration (ACD) regulations, which levy a $100 fee on every shipping container, as it believes it should not be applied to Ambatovy.

    Ambatovy said that due to enforcement of the ACD regulation introduced by the transport ministry, it was also unable to ship spare parts and raw materials, limiting its cash flow.

    "The blocking of containers at the Port means that Ambatovy has no income and cash flows, already very low and affected by the nickel price, the lowest in history, is increasingly critical," Ambatovy said in a statement.

    "Ambatovy can only survive for a week in the current circumstances."

    Ambatovy, Madagascar's biggest foreign direct investment and one of the world's largest nickel and cobalt plants, added the implementation of ACD represented "additional and unexpected costs of several million dollars over the duration of the project"

    If the government does not instruct shipping companies to accept Ambatovy cargo without implementing ADC, Ambatovy said it "would be forced to take drastic measures before the end of next week". The company did not elaborate on its (threat?).

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    South32 considering buyout of Anglo American manganese unit

    South32 could be among the first to buy assets placed on the block this week by South Africa's Anglo American, with the Australian company saying it was interested in its manganese unit.

    The two companies share a manganese mining and smelting business located in Australia and South Africa, with Anglo American owning 40 percent of the division.

    RBC last year valued South32's stake in manganese at around $1.8 billion, though that was before the metal halved in price.

    "As a JV partner with a deep understanding of their value, we would be a buyer if the price is right," a South32 spokeswoman said in an emailed statement, confirming a report in the Sydney Morning Herald newspaper website.

    News of the interest from South32, the diversified minerals group spun out of BHP Billiton last year, comes as Anglo American turns to widespread divestment to shore up a heavily indebted balance sheet.

    South32 indicated negotiations had already started to acquire Anglo American's manganese business.

    "We have a good relationship with our joint venture partner and they've communicated their intentions," the statement said.

    Manganese can be found in drink cans to improve resistance to corrosion. Ahead of Anglo American unveiling plans this week to cut net debt in half, South32 had been mentioned as a potential buyer of Anglo American's niobium business.

    Anglo American on Feb. 16 detailed a drastic plan to hack and slash its sprawling empire of mining assets, paring it back to diamonds, copper and platinum.

    Any acquisition, though, would come at a tough time for manganese producers.

    Weak prices for the metal have already led South32 to suspend mining at its Hotazel mining division in South Africa This has removed around 700,000 tonnes of manganese ore production from the global supply chain.
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    Asia Alumina: Australia up $7/MT on week on opertunistic buying BUYS

    The Platts Australian alumina daily assessment at $215/mt FOB Wednesday was stable compared with a day ago, but has firmed $7/mt in the last week.

    The Australian market has been supported by dip buying, consumer restocking, refining cuts and growing supply concerns.

    Rising Chinese domestic alumina prices and a depressed freight market have also helped to prop up the FOB price of alumina.

    In CIF China terms, $220/mt has become the mainstream buyers' rate. Sellers' guidance generally started from $225/mt CIF. Consumers have voiced interest in March and April shipments, but sellers appear to be biding their time.

    Platts assessed the Handysize freight rate at $8.25/mt on Wednesday for a 30,000 mt shipment in March from Western Australia to China's Lianyungang port.

    The Platts China alumina daily assessment for Shanxi province rose Yuan 20/mt ($3.07/mt) from a day ago to Yuan 1,670/mt ex-works in cash, lifted by output cuts and recent consumer restocking.

    March offers in Shanxi have climbed to Yuan 1,700/mt while buyers were at Yuan 1,660-1,670/mt, sources said. Refiners were also targeting steep price increases in Henan and Shandong provinces.
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    Norsk Hydro swings to profit on strong dollar

    Norway's Norsk Hydro ASA NHY said Wednesday that it swung to a net profit on the year in the fourth quarter, partly because of the dollar's strength.

    The aluminum producer's fourth-quarter net profit was 478 million Norwegian kroner ($55.4 million), compared with a net loss of NOK370 million in the year-earlier period, partly due to the dollar's strength against the Norwegian krone and Brazilian real. Analysts had expected net profit of NOK435 million.

    Norsk Hydro said it would pay a dividend of NOK1 a share, unchanged from a year earlier.

    The company said it had formally decided to build a NOK4.3 billion pilot plant in Norway to test more efficient production methods

    Underlying earnings before interest and taxes, which strip out one-offs such as derivative effects and rationalization charges and are regarded as a key performance measure, dropped 46% on the year to NOK1.57 billion in the fourth quarter, but beat expectations.

    Fourth-quarter revenue fell to NOK20.37 billion from NOK21.66 billion a year earlier. Analysts expected revenue of NOK20.29 billion.

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    Work Stoppages Announced At Rio Tinto Alcan

    Work stoppages to begin next week at the smelter will bring aluminium exports to a stand-still, as workers try to gain leverage for wage increases.

    Vísir reports that the stoppages are to begin on February 24, and will continue indefinitely. The workers involved all belong to the trade union Hlíf, who oversee the export division of Rio Tinto Alcan in Iceland.

    With the start of these stoppages, no aluminium produced at the smelter will be offloaded, distributed, or shipped out to other countries, effectively rendering any aluminium production superfluous.

    As reported, workers at the smelter have been in negotiations with management since at least 2014, where they have been fighting for wage increases. It was forecast that the smelter would be shut down altogether last December, but workers were convinced to continue negotiations with management.

    These negotiations have not advanced; in fact, Rio Tinto CEO Sam Walsh recently issued a statement that employees would not be receiving any kind of pay raise this year – despite the company seeing profits in the billions last year.

    “We are actually going nowhere because there’s nothing to negotiate,” Guðmundur Ragnarsson, the chairperson of The Icelandic Union of Marine Engineers and Metal Technicians (VM), told reporters at the time. “We’ve been waiting to hear what the parent company intends to do in Iceland. So we’re at a stand-still.”

    With upper management unwilling to introduce wage increases, and workers unwilling to continue employment under their current salaries, how the conflict will be resolved still remains to be seen.
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    A new conflict brews at Peru's Las Bambas copper mine

    Families in Peru that were relocated to make way for MMG Ltd's huge Las Bambas copper project occupied their former lands inside the mine on Tuesday to press the company for compensation, the country's ombudsman and a local leader said.

    The protest in a remote highland region has not affected operations at the mine, said the community's vice president, Obispo Huamani, and Artemio Solano, the regional representative of Peru's ombudsman.

    The mine's vice president of corporate affairs, Domingo Drago, denied anyone had invaded company property.

    Las Bambas, which recently started production and cost $7.4 billion to build, is expected to become one of the world's biggest mines with annual output of about 400,000 tonnes.

    It is also expected to propel an economic recovery in Peru this year and help the Andean country become the world's second biggest copper supplier after Chile.

    Huamani said former residents of Fuerabamba would remain inside the mine until MMG fulfilled a series of commitments, including paying each family the remaining half of a 400,000 soles ($113,955) compensation pledge and providing teachers for new schools.

    Solano said the Melbourne, Australia-based company had agreed to fully compensate community members only once all families had relocated. But 15 families have refused to move to the new town of Nueva Fuerabamba that MMG built.

    Authorities who talked with protesters on Tuesday reported that 40 former residents were inside the mine and building shelters, Solano said.

    Three people were killed in protests against Las Bambas in September in a dispute with other communities that stemmed from a revision to the mine's environmental plan.

    The current conflict overlapped with a visit from President Ollanta Humala, who praised Las Bambas as a key motor of growth.

    Huamani said the Fuerabamba community was not opposed to the mine but would insist the company deliver more benefits.

    Peru is rife with disputes over mining, especially related to water. Two major projects have been derailed because of local rallies in recent years.

    But no project in Peru at this stage of development has ever been stopped by protests.

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    World’s first deep sea mining vehicles set for seabed

    With an estimated 70% of the world’s mineral deposits located under the ocean, subsea technology developed in the oil and gas sector could help open up the potential of submerged mining.

    UK subsea engineering company SMD is one firm that has committed to the sector with the launch of the world’s first deep sea mining vehicles for testing in the Middle East.

    The Tyneside firm was awarded a contract to design and build the massive underwater mining vehicles for Canadian listed company Nautilus Minerals in 2007. Eight years on, the machines are complete.

    As well as the three mining machines or Seafloor Production Tools (SPTs), SMD designed and manufactured the full spread equipment required to remotely operate, launch and recover the SPTs from the deck of the ship onto which they will be installed in 2017.

    SMD conducted rigorous commissioning and factory acceptance testing on the full spread of equipment in dry conditions on land at their production facility in Wallsend, North East England prior to shipping.

    The SPTs will now undergo extensive wet testing at the port facility in Oman which is designed to provide a submerged demonstration of the fully assembled SPTs, prior to commencement of the first mining operations in 2018.

    Subsea ore grades are much higher as the vast resources are untapped and have not necessarily been subjected to weathering or erosion. At shallow depths and in calm water environments, the subsea mining industry has already emerged.

    Tin, ilmenite and magnetite mining has been mined for many years. Recent developments have added alluvial diamonds and gold to the list albeit on a relatively small scale.

    Improvements in riser technology from the oil & gas industry and advances in cutting technology from the mining industry have now paved the way for the targeting of deeper reserves.

    SMD chief executive Andrew Hodgson commented: “Our engineers have taken proven technology which we have developed over 40 years, and adapted it for a new application to suit Nautilus’ needs, and we’re very proud of that.

    Nautilus chief executive Mike Johnston said the machines would be used on the firm’s Solwara 1 project, located at 1,600 depth in the Bismarck Sea of Papua New Guinea. The project aims to mine high-grade copper and gold deposits.
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    Mercedes unveils its first aluminium diesel four engine

    Mercedes has been releasing more details about the OM 654, its first all-aluminium four cylinder diesel engine. The new power unit will appear in the next E 220 d in the spring.

    “The new family of engines embodies over 80 years of Mercedes-Benz diesel know-how. The new premium diesels are more efficient and powerful, lighter and more compact – and they are designed to meet all future global emissions standards,” said Prof. Dr. Thomas Weber, member of the Daimler Board of Management with responsibility for Group Research and Head of Mercedes-Benz Cars Development. “In our opinion, the diesel engine is indispensable in trucks and cars if we want to further reduce the CO2 emissions from traffic.”

    In the two decades since 1995, the average consumption of the passenger car fleet where Mercedes is concerned has fallen by almost half from 9.2 l/100 km (230 g CO2 /km) to 5.0 l/100 km (125 g CO2/km). Already today, Mercedes-Benz Cars has 68 models that emit less than 120 g/km – and 108 models with the efficiency label A+ or A.

    The modular family of engines will be used across the entire range of Mercedes-Benz cars and vans. There are plans for several output variants as well as longitudinal and transverse installation in vehicles with front-, rear- and all-wheel drive.
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    Vedanta inks pact with Odisha to set up Aluminium Park in Jhasarguda

    Business Line reported that Vedanta has signed an agreement with the Odisha government to set up an aluminium park adjacent to its aluminium smelter at Jhasarguda. The company has a 1.6 million tonnes production capacity at the smelter. The proposed park, to come up on 240 acres, has the potential to attract investment of INR 1,000 crore and generate direct and indirect employment to about 17,000 people.

    Mr Abhijit Pati, CEO-Aluminium, Vedanta, told Business Line that “The company would be able to sell aluminium in molten form to manufactures within the park, rather than supplying it in ingots or sheets, thus saving huge costs for both Vedanta and the manufacturers. It would also make the production of aluminium products cost-efficient.”

    He told “Units within the park can start production at short notice and Vedanta, with adequate smelting capacity and 3,600 MW of power generation, can assure uninterrupted supply at very competitive prices.”

    He added “The Odisha government will provide the necessary infrastructure for setting up the industries with financial incentives. Both Vedanta and the Odisha government will hold global road shows to attract investment.”

    Mr Pati said the company is importing alumina to produce aluminium, as it is yet to get captive bauxite mine allocation. He said “We would produce about 0.5 million tonnes of aluminium this fiscal. The cost of production is higher as we have to pay import duty of 7.5 per cent on alumina and with the downturn in metal prices it becomes even more difficult.”
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    Freeport agrees $1bn mine stake sale with Sumitomo

    Freeport-McMoRan, the US copper producer that’s seeking to cut debt after the rout in commodities hammered prices, agreed to sell an additional 13% stake in its Morenci mine in Arizona to Sumitomo Metal Mining Company for $1 billion.

    The transaction will cut Freeport’s stake in the open-pit mine to 72% from 85%, while 28% will be owned by Sumitomo Metal, as well as the unit that’s jointly owned with Sumitomo Corporation, according to a statement on Monday. Freeport expects to record a gain of about $550 million on the deal, it said.

    Commodities producers including miners are cutting debt, trimming production and slashing spending as copper prices trade near a six-year low. Freeport, which is seeking to cut its debt by $5 billion to $10 billion, last month flagged it would consider deals involving core operations, which include Morenci. The rout in raw materials is putting pressure even on major operators, potentially spurring sales of top-tier mines, Rio Tinto Group’s chief executive officer Sam Walsh told Bloomberg Television last week.

    “This transaction represents an important initial step toward our objective to accelerate debt reduction and restore our balance sheet while retaining a portfolio of high-quality assets and resources,” Freeport chief executive officer Richard C Adkerson said in a statement on Monday.

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    Steel, Iron Ore and Coal

    India coal imports may drop to 155 mln T this fiscal year

    India's coal import may drop to 155-160 million tonne in the current fiscal from 185 million tonnes in 2014-15, Press Trust of India reported on February 18.

    The imports may decline further to about 150 million tonnes in the next fiscal.

    "India's import of thermal coal in FY16 will be around 155-160 million tonnes compared with around 185 million tonnes in FY15 because of low imports by power generation companies on increased availability of domestic coal," Viresh Oberoi CEO and MD Mjucntion services told PTI.

    Coal imports will continue to taper down in FY'17 as well and will fall to around 150 million tonnes primarily because of fall in imports by non-coastal-area based state power generation companies, Oberoi said, adding that imports by coastal power plants and other sectors are likely to increase a little.

    He cautioned however that the situation may change and there might be higher import of coal if plant load factor (PLF) of thermal power plants, which is hovering around 61% till December 2015, goes up.

    Coal India Ltd (CIL) may end up with a production of around 535-540 million tonnes of coal in 2015-16 and around 580-585 million tonnes in 2016-17 and the import figures might change a bit depending on actual production by the coal PSU, he said.

    "According to our compilation, India's thermal coal imports in January 2016 stood at 13 million tonnes as compared with 16.52 million tonnes imported in January 2015," he added.

    Country's coal imports fell for the seventh straight month in January in the current fiscal. India imported 212.103 million tonnes of dry fuel worth over Rs 1 lakh crore in the last fiscal.

    The coal imports in financial year 2014-15 were at 212.103 million tonnes, an increase of 27% over the previous year, the provisional coal statistics of 2014-15 released by the Coal Ministry had earlier said.

    The government is eyeing to achieve 1.5 billion tonnes of coal production by 2020. Of this one billion tonnes is expected from CIL.

    The government has set a production target of 550 million tonnes for Coal India.

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    China coal firm Up Energy seeks debt restructuring after bond default

    Coal mining company Up Energy Development said on Friday it is in talks with creditors to restructure its debt or at least ensure no action is taken by them against it following a default on its convertible bonds due in January.

    The default on the HK$976 million ($125.46 million) bond, whose grace period for payment expired on February 18, also triggered cross-default provisions on debt amounting to HK$3.459 billion, the company said in a notice to the Hong Kong stock exchange.

    "In light of the adverse operating environment of the industry, the board believes that it would be in the best interest of the company and its stakeholders to arrange for a restructuring of the company's outstanding indebtedness to ensure the sustainability of the company," it said.

    Up Energy shares slumped 15.7 percent on Friday.

    The company also plans an offer of shares to existing shareholders to boost liquidity. The details of such a sale are yet to be finalised, the company said.

    The Group has three coal mines in Fukang, Xinjiang region, China, according to Thomson Reuters data. While China is the world's top coal consumer, demand has been on the wane as economic growth slows and the country shifts away from fossil fuels to curb pollution. China aims to close 4,300 mines and re-employ a million workers in the coming three years.

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    Vale says 4th-Qtr iron ore output 88.4 mln tonnes

    Brazilian miner Vale SA produced record amounts of iron ore, nickel, copper, cobalt and gold as it battled a slump in global metals prices by boosting output in search of greater market share.

    Results, though, were below what some analysts expected even as they helped Vale, the world's third-largest mining company, meet some of its own output targets.

    Fourth-quarter iron ore production rose 2.4 percent year on year to 88.4 million tonnes, its largest ever fourth-quarter total, the company said on Thursday. Output was down 3 percent compared with the third quarter.

    Vale preferred shares, the company's most-traded class of stock fell 2.9 percent in afternoon trading on Thursday in Sao Paulo to 8.34 reais, its first decline in five days.

    "Production fell short of both our estimate and consensus and surprisingly was down 3 percent on a sequential basis," said Garrett Nelson and Jason Nguyen, metals and mining analysts with BB&T Capital Markets in Richmond, Virginia in a note to clients.

    As a result, Nelson and Nguyen cut their fourth-quarter outlook for Vale earnings before interest, taxes, depreciation and amortization, or EBITDA, a measure of cash flow from operations, by 3.5 percent to $1.39 billion. Vale releases fourth-quarter and full-year financial results on Feb. 25.

    The result pushed full-year 2015 output to 345.9 million tonnes, another record, helping to maintain Vale's place as the world's largest producer of the steelmaking ingredient. It did though beat Vale's target of 340 million tonnes for the year.

    Along with Australian rivals BHP Billiton Ltd and Rio Tinto Ltd, Vale has moved to ramp up output of iron ore in the face of a 28 percent drop in prices in the past year and 75 percent over five years.

    Vale and its rivals are betting on their lower costs and higher volumes pushing out smaller rivals and stabilizing prices even as demand slows in China, the world's largest steelmaker and iron ore buyer.

    Quarterly output was also below expectations of Citibank analysts Alexander Hacking and Thiago Ojea.

    Fourth-quarter output excluding Vale purchases from third parties was 85 million tonnes, 5 percent below the Citi analysts' estimate. The lower-than-expected result was caused by "greater than expected losses stemming from the Samarco dam tragedy and previously announced shutdowns of higher-cost mines," they said.

    Samarco, a 50-50 joint venture between Vale and BHP Billiton, suffered a deadly iron ore tailings dam breach in November that damaged Vale mine systems nearby and led to a Samarco shutdown. Samarco output was not included in Vale results.

    Record output is far less important to Vale's future than low iron ore prices, said Leonardo Correa, mining analyst at BTG Pactual SA in Sao Paulo. A 23 percent gain in the spot iron ore price since December seems unlikely to last, he added.

    "Iron ore seems toppish to us with a clear disconnect between pricing and fundamentals," Correa wrote in a note to clients. "We struggle to see how iron ore will sustain recent gains."

    He expects iron ore output to remain stable in 2016 and finish the year at between 340 million and 350 million tonnes.

    Rio de Janeiro-based Vale, the second-largest nickel producer, said that production of the metal used to make steel rust resistant rose 12.3 percent to 82,700 tonnes in the quarter. Annual output was 291 million tonnes, up 15.4 percent on 2014.

    Coal output fell by nearly a third in the quarter to 1.59 million tonnes. Output in 2015 was down 23 percent at 7.34 million tonnes.

    Copper production, meanwhile, rose 6.7 percent in the quarter to 112,500 tonnes, boosting annual output by 13.4 percent to 423,800 tonnes.

    Gold output in the fourth quarter rose 26 percent to 117,000 ounces and cobalt production was up 0.4 percent at 1.27 million tonnes.

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    Brazil expects Samarco dam-disaster deal by Friday

    The Brazilian government expects to reach agreement by Friday with Samarco Mineração SA to settle a 20 billion-real ($4.9 billion) lawsuit for damages related to a deadly November dam disaster, a spokesman for Brazil's attorney general said on Wednesday.

    Brazil has sued Samarco, a 50-50 iron ore mining joint venture between Brazil's Vale SA  and Australia's BHP Billiton Ltd , for 20 billion reais ($4.8 billion) after the dam, which held iron ore tailings, burst in Brazil's Minas Gerais state.

    The government considers the tragedy the worst environmental disaster in the country's history.
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    Indonesia’s Feb HBA thermal coal prices fall to $50.92/t

    Indonesia's January thermal coal reference price in February this year, also known as Harga Batubara Acuan (HBA), fell to $50.92/t FOB, hitting the tenth new low since 2015, said the Ministry of Energy and Mineral Resources on February 10.

    The February HBA price represents a drop of 4.29% from January and down 19.07% year on year.

    The decline in coal prices in February this year was mainly affected by the severe supply glut in coal market and sluggish global economy.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg gross as received assessment; 25% on 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.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash and 0.8% sulfur.

    The HBA for thermal coal is the basis for determining the prices of 73 Indonesian coal products and for calculating the royalties Indonesian producers have to pay for each metric ton of coal they sell locally or overseas.
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    Datang estimates a 10-bln drop in 2016 profits

    Datang China Corporation, one of the top five power producers in China, may see a decrease of 10 billion yuan ($1.53 billion) in profits in 2016, said the company’s general manager assistant Wangxin on February 16.

    The decline may largely attribute to Datang’s cut on average on-grid thermal power price by 0.033 yuan/KWh from January 1, 2016.

    That was in response to the National Development and Reform Commission’s announcement to lower on-grid thermal power tariffs by 0.03 yuan/KWh on average, effective January 1, 2016.

    Datang International Power Generation, the listed subsidiary of China Datang Corporation, generated 169.73 TWh of power in 2015, dropping 10.12% on year; in the same period, its on-grid power volume reached 160.83 TWh, down 9.97% from the year prior.

    The declines are mainly due to the decrease of utilization hours of Datang Power’s thermal power generating units amid a surplus power market.

    The utilization hours of thermal power generating units may further slip in the next few years, as China’s power capacity is surging up, while the industry is weakening amid a slowdown in China’s economy, which may post a growth rate of 6.5-7% during 2015-2020.

    In 2016, power consumption in China may edge up 1-2%, said the China Electricity Council in a report on February 2.

    However, the net profit of Datang Power in 2015 was 50-60% higher than that in 2014, according to its primary estimates.

    Obviously, the slump on coal prices contributed greatly to the cost saving of coal-fired power plants, which to some extent offset the effect from the electricity price cut.

    The Fenwei CCI 5500 Index for domestic 5,500 Kcal NAR coal traded at Qinhuangdao port was assessed at 371 yuan/t with VAT on February 16, FOB basis, up 1 yuan/t from a day ago.

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    China key steel mills daily output down 0.5pct in late-Jan

    Key steel mills in China saw their average daily crude Steel output post a 0.52% ten-day drop to 1.51 million tonnes in late-January, according to the latest data from the China Iron and Steel Association (CISA).

    It was the second straight ten-day fall and the lowest ten-day level since early-October in 2012.

    China’s daily crude steel output in January was estimated at 2.04 million tonnes, 1.8% lower than the actual output from last month.

    In early February, key steel mills generally kept a low productivity level during the Lunar New Year holidays, when steel market was largely closed.

    Hence, output from key steel mills may slip further in early February, analysts said.

    By end-January, stocks in key steel mills stood at 12.02 million tonnes, slipping 3.3% on month and falling 18.6% from the year-ago level.

    Given the strengthened steel prices and record-low steel stock before the Lunar New Year, a rebound in demand in late-February is expected, when most domestic enterprises increase spot purchasing after the holiday.

    But it won’t last long due to macro economy slowdown pressure and sustained weak demand, predicted the CFLP Steel Logistics Professional Committee.

    Additionally, the Central Bank of China lowered the proportion of down payment to boost real estate sales in early February. This move provided a chance for the new real estate projects which in the meantime may underpin steel prices to some extent.

    Domestic prices of the four major steel products edged down slightly in late-January, with rebar price averaging 1,900.3 yuan/t, down 0.2% from mid-January, showed data from the National Bureau of Statistics (NBS).
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    China Jan steel exports down 5.3pct on year

    China’s exports of steel products dropped 5.3% on year and down 8.6% on month to 9.74 million tonnes in January, showed the latest data from the General Administration of Customs (GAC) on February 15.

    Total value of the exports slumped 36% year on year and down 10.4% month on month to $4.38 billion with an average export price at $450/t, slumping 32.4% or $215.68/t on year and down 1.9% or $8.8/t on month.

    The marked yearly and monthly slumps on steel products exports were in line with estimation.

    In December last year, the relatively high export volume was partly due to enterprises’ efforts to meet their annual targets; and that in January 2015 fell on exporters’ applying for customs in advance, analysts said.

    China’s steel products exports may see a negative yearly growth in 2016, as international anti-dumping activities against China’s low-price steel products intensified.

    After the Lunar New Year, the European Union have initiated anti-dumping investigations against three Chinese steel products, including seamless pipe, medium plate and hot-rolled plate, which is to further hinder China’s steel exports in later period.

    Besides, foreseeable reduction in steel capacity and output in domestic market are also expected to exert a negative impact on steel exports, industry insiders said.

    China imported 0.93 million tonnes of steel products in January, shrinking 19.1% from the previous year and down 21.2% from the month before. The imports value stood at $975 million, down 30.9% on year and down 19.4% on month.

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    Iron ore price surges

    The price of iron ore soared on Monday with the Northern China 62% Fe import price including freight and insurance (CFR) adding 5.6% to $45.60 a tonne according to data from The Steelindex.

    The steelmaking raw material has gained 6.3% in value so far in 2016 hitting its highest level since mid-November. The price declined to a near decade low of $37 at the end of last year, but after today's advance it's firmly back in a bull market, generally defined as a more than 20% move from a low.

    The latest leg up came after Chinese iron ore imports continued to impress with January cargoes of 82.2 million tonnes, down from December's giant tally but up 4.6% on a year on year basis.

    Imports now represent nearly four-fifths of Chinese steelmakers' iron ore supply

    A decline from the record setting pace in December of over 96 million tonnes was expected due to seasonal factors and the slowdown ahead of Chinese new year holidays. Cargoes for the whole of 2015 also set a new record of 952.7 million tonnes, up 2.2% compared to 2014.

    Domestic Chinese producers which struggle with low grades and high production costs have been gradually pushed out of the market and replaced by imports. Imports now represent nearly four-fifths of Chinese steelmakers' iron ore supply.

    Many Chinese mines are also staying open only because of support from local governments pressured to keep jobs safe, but Beijing's stated policy of trimming overcapacity in its heavy industry means more mines will be closing.

    The country's miners produced some 350 million – 400 million tonnes a year on a 62% Fe-basis in 2014, although reliable stats are lacking (this figure is calculated working backwards from pig iron production). According to some estimates domestic output has now fallen below 200 million tonnes with further declines likely.

    Analysts are skeptical about the longevity of iron ore's rally and point to the fact that Chinese steel production (nearly half the global total) is set to decline further in 2016 after last year brought to halt three decades of unbroken growth.

    A supporting factor in the recent run-up in the price has been the temporary closure of Australia’s Port Hedland and Dampier ports due to adverse weather. The Pilbara ports represent nearly 30% of the global trade. At the same time the suspension of activities at Vale’s Port of Tubarão – responsible for roughly 8% of global shipments – also boosted prices.
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    Evraz mulls South African closing, placing 2,100 jobs at risk

    Evraz Highveld Steel & Vanadium Ltd. is poised to become the latest victim of a global steel supply glut that has eroded the margins of producers as China floods offshore markets with cheap exports. While Evraz Highveld was offered protection from creditors in 2015 as it sought a new owner, a deal failed to materialize after opposition from its parent and when the preferred buyer pulled out.

    The decision to consider winding down Evraz Highveld’s operations comes after the Department of Labor suspended the payment of a training allowance on behalf of some employees, the company said in a statement to the Johannesburg stock exchange on Monday.

    Closing the operations “would see the retrenchment of all employees,” Evraz Highveld said. The company will provide an update on Feb. 23, it said.

    About 2,187 staff would be affected by Evraz Highveld’s closing, trade union Solidarity said in an e-mailed statement.
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    Aurizon counts on cost cuts for growth as coal slump bites

    Aurizon Holdings, Australia's top coal rail hauler, reported a 23 percent slide in first-half core profit on Monday, hit by weaker coal volumes and the loss of some contracts, and warned it saw little growth ahead except from cost cuts.

    Oversupply, uncertain demand and weak prices have led Aurizon to shelve its two main growth projects - a coal rail line in the Galilee Basin in Queensland and the West Pilbara iron ore rail and port project in Western Australia.

    With no growth spending on the horizon, the company paid out all of its first-half core profit of A$237 million to shareholders, raising its interim dividend by 12 percent.

    Chief Executive Lance Hockridge declined to predict whether the West Pilbara project or the Galilee Basin rail line it had planned to build for India's GVK and billionaire Gina Rinehart's Hancock Prospecting was more likely to go ahead within the next 10 years.

    "The immediate to medium term prospects are so clouded - I wouldn't want to hazard a guess as between either of those," he told reporters.

    Underlying profit fell to A$237 million for the six months to December from A$308 million a year earlier, hurt by a 5 percent drop in tonnages and an 11 percent drop in revenue. The result was just below a Citi forecast of A$241 million.

    The drop included an A$18 million provision for debt owed by tycoon and politician Clive Palmer's Queensland Nickel refinery, which is in voluntary admninistration.

    Aurizon reported a net loss of A$108 million, hit by A$426 million impairments on the Galilee Basin coal rail project and the West Pilbara Iron Ore project.

    The company narrowed its forecast for coal volumes to between 204 million and 209 million tonnes for the year to June 2016, the second time it has trimmed the top end of its outlook this year.

    It expects to report full year earnings before interest and tax between A$845 million and A$885 million, which is in line with market forecasts, according to Thomson Reuters I/B/E/S.

    Aurizon said it would cut its forecast capital spending by up to A$200 million over the next 18 months and planned to cut at least A$380 million in operating costs by June 2018 to shore up its profit margins.

    Its shares fell 1.8 percent, continuing their underperformance against arch rival Asciano, which is the target of a heated takeover battle.
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    China Jan coal exports soar 164pct on year

    China exported a total 610,000 tonnes of coal in January 2016, soaring 164% on year and up 39% on month, showed data from the General Administration of Customs (GAC) on February 15.

    It was the second consecutive rise on both year-on-year and month-on month basis, thanks to the enhanced price competitiveness of domestic coal. However, coal exports still stayed at a lower-than-expected level.

    The value of the January exports was $44 million, increasing 71.7% from a year ago and up 10.1% from December last year. That translated to an average price of $72.14/t, falling $38.81 on year and down $18.89/t on month.

    The continuous decline in China’s coal exports since 2003 was mainly because the government cancelled the export tax rebates and started to levy tariffs in 2010.

    Though the export tariff was cut from 10% to 3% from January 1, 2015, the falling trend did not reverse that year.  

    In the whole year of 2015, coal exports of China stood at 5.33 million tonnes, down 7.1% from a year ago.
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    China Jan coal imports down 9.24pct on year

    China’s coal imports, including lignite, thermal and metallurgical coal, slid 13.7% on month and down 9.24% on year to 15.23 million tonnes in January 2016 -- the 18th consecutive year-on-year drop, showed data from the General Administration of Customs (GAC) on February 15.

    The decline was mainly due to the continuously flat domestic demand from downstream sectors.

    The value of January imports stood at $723 million, plunging 36.6% on year and down 18.6% on month. That translated to an average price of $47.5/t, $20.44 lower than the year prior and down $2.88/t from December last year.

    The GAC didn’t give a breakdown of the January imports, which could be available late this month.

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    China's Steel industry needs market exit mechanism to cut overcapacity

    A market exit mechanism must be put in place as the steel industry strives to cut excess capacity, China Iron and Steel Association said on February 12.

    "Though some enterprises have either cut or stopped production, the absence of an exit mechanism has prevented them from withdrawing from the market completely," the association said.

    "Some have become 'zombie enterprises' due to a lack of funding, but are still there."

    Some local governments still request those enterprises to maintain production to ensure social stability and local economic growth, the association said.

    China's iron and steel industry has hit a soft patch as the general economy and decades of building boom are slowing. The country's production of crude steel fell 2.3% to 804 million tonnes in 2015, the first time the industry reported negative growth in 34 years.

    China will cut crude steel production capacity by 100 to 150 million tonnes in five years, the State Council said last week.
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    China Jan iron ore imports rise on year ago, steel exports fall

    China's iron ore imports rose 4.6 percent in January from the same time last year to 82.19 million tonnes, as domestic steel mills replenished inventories with cheap overseas supplies, customs data showed on Monday.

    The January figure was still down 14.6 percent on a record 96.27 million tonnes imported the previous month, however, amid a seasonal decline in steel production ahead of the Lunar New Year holiday.

    Demand for restocking held relatively strong in January, but levels were not enough to stimulate iron ore prices, the China Iron and Steel Association (CISA) said in its monthly market report.

    "Low smelter utilisation rates cannot support any increase in iron ore prices, and though factors like the Spring Festival holiday slowed the price decline, the overall downward trend has not been reversed," the association said in the report, published earlier this month.

    Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI fell more than 3 percent in January, after prices tumbled 40 percent in 2015.

    China's giant steel sector, which imported a record 952.72 million tonnes of iron ore last year, is struggling with crippling rates of overcapacity, declining domestic demand and a collapse in prices, and it has relied on overseas sales to keep it afloat.

    Chinese exported 9.74 million tonnes of steel products in January, down 5.3 percent on a year ago and down 8.6 percent from December, in line with recent CISA warnings that sustained increases were unlikely, given a rise in foreign anti-dumping measures against Chinese producers.

    The official customs data also showed that crude oil imports in January fell 4.6 percent on a year earlier to 26.69 million tonnes, while coal imports fell to 15.32 million tonnes, down 9.2 percent from the same time last year.

    The domestic coal sector is suffering a severe capacity glut, cutting prices and eroding the cost advantages usually enjoyed by foreign suppliers. Chinese coal imports plunged 30 percent over the whole of 2015.

    China's copper imports rose 5.3 percent compared with last January, to reach 437,000 tonnes, while soy imports fell 17.7 percent in January to 5.66 million tonnes.
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    EU to investigate alleged Chinese steel dumping

    European Union regulators opened three new anti-dumping investigations into Chinese steel products on Friday, responding to calls from European industry for protection from cheap imports that they blame for thousands of job losses in Europe.

    The EU executive also announced provisional anti-dumping duties on cold-rolled flat steel from China and Russia. The duties range from 13.8 percent to 16 percent for the Chinese companies and from 19.8 percent to 26.2 percent for the Russian ones.

    The new steel investigations concern whether seamless pipes, heavy plates and hot-rolled flat steel are being sold into Europe at unfairly low prices.

    "We cannot allow unfair competition from artificially cheap imports to threaten our industry," EU Trade Commissioner Cecilia Malmstrom said in a statement. "I am determined to use all means possible to ensure that our trading partners play by the rules."

    The EU has the power to impose duties on imported products if it finds they are sold at below fair market prices and damage European producers.

    Seven countries including Britain, France and Germany wrote to the Commission last week urging it to step up action to relieve Europe's ailing steel industry, which is suffering from tumbling prices and cheap imports from China and Russia.

    Europe has lost 85,000 steel jobs since 2008, more than 20 percent of the workforce, according to the industry body Eurofer.

    China's Ministry of Commerce said last week that claims it was dumping steel in Europe should be put to the World Trade Organization.

    China makes nearly half the world's 1.6 billion tonnes of steel, and exported over 100 million tonnes of it last year.

    Britain's largest steelmaker Tata Steel Ltd said last month it would cut 1,050 British jobs, adding to 4,000 job losses in the British steel industry last October.

    As well as targeting steel dumping, the Commission on Friday announced the extension of duties to prevent imports of dumped and subsidised Chinese solar panel components via Taiwan and Malaysia.

    An investigation concluded Chinese-made solar modules and cells were being trans-shipped via Taiwan and Malaysia and to prevent the practice continuing, existing anti-dumping and anti-subsidy duties were being extended to those two countries.

    It said the new duties would not, however, apply to genuine producers in Taiwan and Malaysia.

    Since the investigation began, solar components from Taiwan and Malaysia had to be registered, meaning national customs authorities in the European Union can now retroactively collect the duties for the months since May last year.
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    India prods steelmakers to use local coal to cut $4 bln import bill

    India is asking the country's big steelmakers to consider converting local medium-quality coal into premium coking coal to slash an annual import bill of more than $4 billion for buying that grade from countries such as Australia and South Africa.

    Resurgent local output of power-generating thermal coal has been one of Prime Minister Narendra Modi's successes, and the latest project could help India to partly make up for a shortage of coking reserves that forces companies like JSW Steel and Jindal Steel to import heavily.

    Coal Secretary Anil Swarup - who has held talks with companies including Tata Steel and SAIL - said the government could ask state-run Coal India to sign long-term contracts with steel companies to supply medium-grade coking coal that currently goes into power plants.

    The plan would require investment of a few hundred million dollars for specialised washeries and other equipment to improve the coal quality, but that could lead to savingsof billions of dollars in imports, according to Swarup.

    "We have raised the quantity of coal produced, the aim is now to improve the quality," Swarup told Reuters. "We are trying to formulate a policy."

    This could aid in meeting Modi's goal of making the country self-sufficient in as many raw materials as possible, while at the same time exporting more value-added products like steel to boost local manufacturing and create jobs. (

    India, the world's third-largest steel producer and once an exporter to neighbouring countries, turned a net importer of the alloy in the past two years after China started to aggressively sell its excess steel across the world.

    India is also the world's third-biggest importer of coal, and the surge in local output, mainly of thermal coal, is hurting suppliers of that grade in Indonesia. If India starts to boost coking coal output as well, there could also be a few losers in Australia and South Africa.

    But India will be able to substitute only 5-10 percent of the total coking coal imports to begin with, according to Dipesh Dipu, a natural resources expert at Jenissi Management Consultants that advises companies like Jindal Steel.

    That could mean annual savings of around $500 million based on India's imports of about 44 million tonnes of coking coal last fiscal year. The country's total annual coking coal need is about 90 million tonnes.

    India is in talks with companies in Poland and Australia for technical help in upgrading its coking coal quality.

    It is also trying to douse underground mine fires that have burned for a century in Jharia, in the eastern state of Jharkhand, to better tap the only source of top quality coking coal in the country.

    India's total coal imports have fallen for the last seven months, a big change for a country that has struggled to feed its expanding power plants despite having the world's fifth-biggest reserves of more than 300 billion tonnes of the fuel, almost 90 percent of that in thermal grades.

    Faster environmental clearances and acquisition of land to expand mines have led to the turnaround, although Swarup acknowledged that India will not be able to produce all of its own coking coal.

    "Indian coals can be beneficiated to substitute some amount of imported coals," Tata Steel head spokesman Chanakya Chaudhary said.

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