Mark Latham Commodity Equity Intelligence Service

Thursday 24th September 2015
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    Noble Group says chairman Elman steps down from 2 board committees

    Singapore-listed commodity trader Noble Group Ltd said on Wednesday its chairman Richard Elman has stepped down from two board committees.

    Elman has stepped down as a member of the audit committee and the nominating committee, Noble in a statement.

    Two independent directors have been appointed to head two other committees that oversee remuneration and options as well as corporate social responsibility and government relations.
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    New S.Africa mines minister faces platinum baptism of fire

    For South Africa's new mining minister Mosebenzi Zwane, until now a little-known provincial agriculture official, it was not the ideal first day in the office.

    Taking over a sector already bleeding jobs due to the commodity price slump, Zwane was confronted with the price of platinum, one of South Africa's most valuable exports, hitting a 6-1/2 year low due to the Volkswagen emissions tests scandal.

    And the platinum sector is still reeling from a five-month strike, the longest in South African history, last year that has forced shaft closures and mine sales.

    Given that ousted minister Ngoako Ramatlhodi, known for his no-nonsense approach, was credited with helping mediate an end to that strike, analysts and mining executives are questioning President Jacob Zuma's wisdom in pushing him out.

    Zwane's previous jobs, which include stints as provincial minister for agriculture and rural development in the Free State, do little to boost confidence in the future of a sector that accounts for 7 percent of South African GDP.

    Investec Securities described the reshuffle as a "key obstacle" to progress. "Just as the minister gets to grips with all/most of the issues in the sector, we start with a new minister," it said in a note.

    Both labour and management lamented Ramatlhodi's exit.

    The National Union of Mineworkers praised him for forcing Glencore's Optimum Coal mine to close after a supply dispute with state power utility Eskom, and "sending a message" to mining companies that they had to follow the rules.

    The militant Association of Mineworkers and Construction Union (AMCU) also said it would miss his tough approach to compliance in regard to affirmative action regulations and black ownership targets.

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    Oil and Gas

    Saudi Arabia leaves world oil market at risk of price shocks due to low spare capacity at only 1.1 MM bbl/d

    The world's safety cushion to compensate for sudden disruptions of global production is historically low, as Saudi Arabia's spare crude production capacity stands at only 1.1 mm bbl/d, Rystad Energy concluded in its latest oil markets analysis.

    'The oil market is at risk of price spikes despite the focus on oversupply. Current spare capacity is far lower than the 2.1 mm bbl/d of spare capacity the Kingdom held in 2009, when the oil market last demonstrated a significant misbalance in supply and demand', says Nadia Martin, Senior Analyst at Rystad Energy.

    Rystad Energy forecasts that when the oil market rebalances next year, it will be with limited capacity to increase production meaningfully in the event of a sudden disruption, leaving the market vulnerable to price shocks.

    Key findings of the Rystad Energy report conclude:

    Saudi Arabia will again be the world's largest crude oil producer in 2015, tied with Russia, at 9.9 mmbbl/d production. The US will this year be the world's third largest crude oil producer. Saudi Arabia last held the position of world's largest crude producer tied with Russia in 2008, when both countries produced 9.3 mmbbl/d. At that time, Saudi Arabia had implemented a strategy of providing maximum assistance to the market in a year when Brent shot up above 145 USD/bbl. Saudi Arabia's output level dropped by 1 mmbbl/d the year after, down to 8.3 mmbbl/d.

    Saudi Arabia has held the position of holding the largest share of spare capacity in the market. As recently as 2012, Saudi Arabia increased crude exports to ease market tightness as the US embargo against Iran took effect and as EU sanctions were introduced while Libyan exports had collapsed during the Arab Spring. As a result, according to Rystad Energy's calculations, Saudi Arabia's spare capacity had fallen to 0.1 mmbbl/d in 2012. The Kingdom was slow to rebuild spare capacity thereafter, increasing levels to 0.4 mmbbl/d in 2013 and 0.8 mmbbl/d in 2014. For a time when there is a 'historic glut' in the oil market, Saudi Arabia's current spare capacity of 1.1 mmbbl/d is low.

    Besides Saudi Arabia, the US is the remaining producer who can meaningfully increase output in the near-term. Rystad Energy forecasts US crude production of 8.2 mmbbl/d for 2015 and 8.35 mmbbl/d for 2016. In the case of a supply crisis, the US response will occur in three steps: first, within weeks, producers will connect already completed wells to increase output by 100 kbbl/d; second, within a month, producers will complete and connect already drilled wells, so called DUCs, to increase output by 0.5 mmbbl/d; third, with a response time of around a year, producers will increase rig count to increase output by 1 mmbbl/d. While the US supply response to a supply shock could be significant, the resulting oil market volatility could be far greater than expected. The US is a non-crude-exporting nation, and hundreds of companies make individual production decisions.

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    OPEC focuses on rival mega projects, lives with shale swing output

    After almost a year of painfully low oil prices, OPEC members are beginning to believe they are winning against upstart U.S. shale producers in a short-term market share contest.

    Yet insiders and experts say OPEC is looking for a longer-lasting impact on other high-cost production oil field plans, many in deep oceans, with bigger time scales, even if that means a period of cheap oil prices lasting for years.

    Privately, OPEC's core Gulf members say they have resigned themselves to the idea that the U.S. shale industry's high-tech flexibility means it will respond quickly when prices start rising again, making the United States the new swing producer in world oil, the role held for so long by Saudi Arabia.

    "The oil surplus is slowly being drawn from the market. U.S. oil production is expected to fall to less than 9 million barrels per day by the end of this year or early next year," said an OPEC delegate from a Gulf oil producer.

    "But there is one point that no one is looking at which is the delay in the longer-term oil projects, these are 4-5 year projects. The postponement of these projects will impact the overall supply in the market."

    The short investment cycle of U.S. shale, where it takes about few months before returns are seen, make it the most sensitive to oil price fluctuation -- either way.

    Thus the spike in oil prices in June where U.S. crude was trading above $60 a barrel drew out more shale output but the price drop in August will reverse that, OPEC sources say.

    And even if rising prices pushed supplies up again, in the long run, higher production from shale is expected to be offset by lower production from conventional high-cost offshore projects from countries such as Brazil and Mexico, the sources say.

    "Shale will be a new swing producer of sorts," said Yasser Elguindi of economic consultants Medley Global Advisors. "Because of its shorter investment cycle, when prices fall shale producers will be the ones to cut first, but likewise when prices go up, they will also be the first to bring up production.

    "This complicates life for those who are looking at investments that have a 2-5 year investment horizon. But again, the idea is to find the price level that slows down the rate of growth considerably to something more sustainable -- and that takes more than 2 to 3 quarters of lower oil prices."

    The drop in oil prices has forced companies to free up capital to help balance their books at the expense of allocating cash to expensive new projects. In some cases, investment decisions have been delayed to allow more time to reset cost structures on projects.

    Companies such as BP, Total and Norway's Statoil have postponed projects ranging from the Gulf of Mexico to the UK North Sea, Nigeria and Indonesia and dozens of other projects would be also likely delayed, according to Norwegian consultancy Rystad Energy.

    Consultancy Wood Mackenzie estimated around 10.6 billion barrels of oil equivalent potentially retrievable from deep and ultra-deep offshore projects has been deferred, followed by 5.6 billion barrels trapped in oil sands.

    "We've slowed the pace in deep water." Ben Van Buerden, chief executive of Royal Dutch Shell's, said in January.

    Global deepwater production reached 8.8 million barrels per day in 2014, almost 10 percent of global demand.

    Gulf oil sources believe that low oil prices have so far been successful in stimulating demand for crude and will gradually impact the oversupply which will start to be more visible towards 2016 and beyond, a sign that Saudi Arabia's new market share strategy was working.

    "Remember what the Saudi oil minister said last year, even if prices fell to $20, OPEC will not cut," said one Gulf oil source.

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    Beijing Gas Group set for first LNG cargo

    Beijing Gas Group is set to receive the first of two cargoes of liquefied natural gas from Engie as part of a deal signed in July.

    According to sources, the 150,000 cbm cargo that is scheduled for November will be delivered to PetroChina’s receiving terminal at port Caofeidian, near Beijing, Reuters reports.

    The July deal between Beijing Gas’ parent company Beijing Enterprises Holding and Engie, former GDF Suez, stipulates the second cargo to be delivered in January, 2016.

    Sources reveal that the company is looking to become longer-term LNG buyer, and it was reported in July that the cooperation between Beijing Gas and Engie could develop into a 10-year LNG supply deal.

    China is on the path of reforming the LNG trade which would allow private companies to invest in the industry and engage in importing and exporting liquefied natural gas.

    Already in 2015, privately-held companies have imported six cargoes of liquefied natural gas, banking on lower prices caused by the supply increase and oil price drop
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    First gas flows on Curtis Island as Santos starts producing LNG from coal seam gas

    Santos has officially started production of liquefied natural gas (LNG) from its operations at Curtis Island, off the coast of Gladstone, Queensland.

    The company said the first gas flow from the Gladstone LNG (GLNG) project had come online on time and under budget.

    CEO David Knox said it was a significant milestone for the company.

    "We said we'd produce first LNG around the end of the third quarter (of 2015) and that's exactly what we've done," he said.

    "Production from GLNG will be a significant addition to Santos' growing LNG portfolio, which already includes the Darwin LNG and PNG LNG projects."

    The LNG is from coal seam gas (CSG) that is piped from fields in the Surat and Bowen Basins.

    It will be shipped to Asian buyers within weeks, and Santos said when it is fully operational, GLNG will have the capacity to produce 7.8 million tonnes of LNG a year.

    Santos is the operator of the project and joint venture partners are PETRONAS (27.5 per cent), Total (27.5 per cent) and KOGAS (15%).
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    Deal between trio of LNG firms scrapped after negotiations reach stalemate

    A trio of companies have ended their planned merger after the parties failed to agree on terms.

    The deal would have created one of the largest floating LNG infrastructure companies between Flexlife LNG, Geveran and Exmar.

    The companies had agreed on main terms for the transaction in July this year but it was still awaiting due diligence as well as agreement on some finer details.

    However a statement from Flex LNG said the companies have since withdrawn from completing the transaction.

    A spokesman said: “The parties have failed to agree on the definitive transaction documents and the previously announced transaction will not be completed.”

    The construction of two LNG carriers alongside Geveran is set to continue.

    Flex said it would now be considering “strategic alternatives” to add value to the company including considerations of opportunities across the LNG value chain.

    The spokesman added: “The current condition of the LNG market could give interesting consolidation and growth opportunities for the company.”
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    An 'ocean of diesel'

     Add diesel to the commodities flooding global markets from China.

    The nation exported a record volume of the fuel last month after already shipping unprecedented amounts of steel and aluminium overseas. The weakest economic growth since 1990 is sapping domestic demand for commodities, while refineries, mills and smelters grapple with excess capacity after years of

    “A lot of it has to do with slowing demand at a time when companies had plans for much a better demand environment, so capacities had been increased,” said Ivan Szpakowski, a commodities strategist at Citigroup Inc. in Hong Kong. “As demand slows, that’s led to an overcapacity in the domestic market and producers have sought to export the surplus.”

    Exports of Chinese raw materials are exacerbating a global glut that drove prices to the lowest since the 2008 financial crisis and prompted steel and aluminium producers around the world to protest against the deluge. While diesel exports are principally a risk to Asian refiners, the additional shipments threaten to worsen a glut that already extends from Singapore to Europe and the U.S.

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    Total to cut spending; reassures on dividend

    French oil company Total said on Wednesday that it plans to cut its capital and operating spending next year on concerns that the drop in crude oil prices will persist.

    In a presentation to investors and media, Total said it will further reduce investment to $20-21bn in 2016 from $23-24bn this year, before returning to a sustainable level of $17-19bn from 2017 onwards.

    In addition, the group said the start-up of three projects – the Ichthys in Australia, Martin Linge in Norway and Tempa Rossa in Italy — has been postponed to beyond 2017.

    Total also lifted its opex target by 50% to $3bn from $2bn by 2017.

    It said production is planned to grow by 6-7% per year between 2014 and 2017 and by an average of 5% per year between 2014 and 2019. The main drivers for production growth include twenty major start-ups, eight of which are in 2015, and increasing production efficiency, the company said.

    "We lose about 200,000 bpd in comparison to the initial target. About 100,000 bpd come from projects which are facing some delay. An additional 100,000 bpd is due to the lower capex programme," de la Chevardiere told reporters.

    Total also took the opportunity to reassure investors over its dividend. “Capital discipline, further opex reduction and growing production will deliver improving cash flows. The group confirms that organic free cash flow will cover the dividend by 2017 at $60 per barrel.”

    "The break-even price is decreasing sharply. The objective is to by 2017 decrease the break-even price. To cover the existing dividend you need something like a $45/bl assumption by 2019," de la Chevardiere said.

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    Saipem mulls 3 bln euro cash call as state lender eyes stake-sources

    Italian state lender Cassa Depositi e Prestiti (CDP) is in talks to buy a stake in Saipem as part of a restructuring of the troubled oil contractor that could include a capital increase of around 3 billion euros ($3.3 billion), people familiar with the matter said.

    A deal is expected to be announced next month, when Saipem, currently 43 percent owned by oil major Eni, is due to present its turnaround plan, the sources said.

    "The idea is to make a joint announcement on the cap hike and the CDP deal at the end of October," one of the sources said.

    Saipem has seen margins and orders hit by lower oil prices and needs fresh capital to keep afloat. It has issued two profit warnings in just over 30 months and in July announced cost cuts including 8,800 redundancies to bolster its balance sheet.

    Management has ruled out asset sales and the company has said it is studying a possible capital increase.

    "The capital increase will be substantial, around 3 billion euros, that will help get the company back on its feet," a second source said.

    Eni, which funds Saipem debt under the umbrella of its own A- credit rating, wants to sell down its stake in the oil contractor so that it can get Saipem's 5.5 billion euro debt off its books.

    Eni is currently in talks with CDP about a possible stake sale and several options are on the table, a third source said.

    "A solution will be found in the early part of October and an announcement made at the industrial plan on October 27-28," this source said.

    Eni and Saipem declined to comment.

    Saipem shares closed down 3.9 percent, after earlier being halted limit down for excessive losses.

    At least five banks, including Goldman Sachs, have been contacted about the capital increase, a fourth source said.

    "The letter was sent to the banks, two foreign and three domestic, yesterday," the source said.

    One option being considered is for Eni to first cut its stake to around 28 percent and then reduce it further by not taking part in the capital increase, the source said.

    But bankers close to Saipem said they believed Eni would end up participating in the rights issue given the substantial size.

    Sources had previously said foreign investors from China and the Middle East had expressed interest in Saipem, which is a market leader in subsea cable-laying.

    But the government of Prime Minister Matteo Renzi is said to consider the contractor a strategic company and the sources said only CDP was involved in the deal at this stage.

    Eni brought in veteran oilman Stefano Cao in May to turn Saipem round and put it on a firmer footing to secure its own credit rating to refinance debt and fund development.
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    India ready to invest over $15 bln in Iran; seeks cheaper gas

    India is ready to invest more than $15.2 billion to build projects in Iran including taking up full-scale development of Chabahar Port if Tehran offers better terms including cheaper gas, Shipping Minister Nitin Gadkari said on Wednesday.

    India is one of the handful countries that continued trade links with Iran, isolated by Western countries against its disputed nuclear programme. New Delhi is Tehran's second biggest oil client after Beijing.

    "We are ready to make a huge investment in Iran and this is mainly linked to gas pricing offered by Iran ... Gas price is a crucial issue," Gadkari told a news conference.

    Days before the historic nuclear deal between Tehran and the West in July, President Hassan Rouhani offered India a greater role in infrastructure projects including overall development of Chabahar port.

    India hopes to take a decision on Iran's latest offer by early October after obtaining reports from other ministries including petroleum, chemical and fertiliser, and steel by Monday, Shipping Secretary Rajive Kumar said.

    The port of Chabahar in southeast Iran is central to India's efforts to circumvent arch-rival Pakistan and open up a route to landlocked Afghanistan where it has developed close security ties and economic interests.

    The port can also serve as a gateway to the resource-rich countries of Central Asia.

    In May, Gadkari and his Iranian counterpart, Abbas Ahmad Akhoundi, signed an $85 million deal for India to lease two existing berths at the port and use them as multi-purpose cargo terminals.

    With the easing of sanctions New Delhi is hoping for a greater and stronger role in Iran's development by taking up projects including building urea and petrochemical projects using gas produced in the OPEC-member nation.

    India is seeking gas at $1.50 per million British thermal units (mmBtu) compared to $2.95 offered by Iran for building a urea plant there, Gadkari said.

    He said building a plant in Iran and importing urea from there to India will help save a part of the 800 billion rupees ($12.13 billion) in subsidies and halve the prices for farmers.

    "If the gas price is reasonable then all departments in India can together take up projects in the special economic zone there and investment will be more than 1 trillion rupees," he said.
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    Senex Energy strikes Santos GLNG venture gas deals in Queensland

    Image Source: Glent HuntSydney Morning Herald reported that oil and gas junior Senex Energy has struck a significant gas sales deal with Santos's USD 18.5 billion GLNG venture in Queensland that opens the way for development of its Western Surat gas project and provides some handy cash.

    The deal will hand Senex AUD 42 million in cash plus a host of technical data that will speed a final investment decision on the project, in exchange for a gas-rich exploration permit that sits in the middle of the GLNG venture's Roma coal seam gas acreage.

    Senex also agreed to supply 50 terajoules a day of gas to GLNG over 20 years from the Western Surat project, which is expected to cost several hundred millions of dollars to develop and is targeted for a final investment decision in 2017.

    Mr Ian Davies, MD of Senex, has described the deal as ‘transformational’ for the company, whose shares have been hit had by the slump in oil prices over the past year. Senex reported a AUD 81 million loss in 2014-15, dragged down by write-downs driven by the drop in prices.

    Mr Davies said the Australian Financial Review ahead of a teleconference to present the deal to investors that "It provides us with a real, credible and tangible revenue stream in the very near future."

    He said that the Western Surat project was economic even at current low oil prices and could go ahead even in the absence of a price recovery.

    Mr Davies said that the transaction with GLNG would accelerate the development of a major new revenue stream for Senex, allowing it to accelerate commercialization of its gas resources.

    He said in a statement that "This is a transformational deal for Senex and aligns with our strategy to capitalise on the strength of Australia's East Coast gas market whilst maintaining our financial strength."

    For GLNG, which includes Malaysian national oil company Petronas, giant LNG importer Korea Gas Corporation and French oil major Total, the transaction illustrates the venture's continuing quest to source additional gas from third parties to ensure adequate economic supplies for the large LNG export project over the course of its life. GLNG is due to start production within weeks.

    Mr Davies said that the Maisie permit being sold by Senex to GLNG includes 130 petajoules of proven and probable gas reserves, and sits "smack bang in the middle" of GLNG's Roma acreage making it much more efficient to be developed by GLNG than as part of the Western Surat project.

    He said that the gas sales arrangement means all gas from the Western Surat project will be supplied to GLNG on an exclusive basis.

    The transaction also potentially allows Senex use of GLNG's water processing and gas infrastructure in Queensland.
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    Summary of Weekly Petroleum Data for the Week Ending September 18, 2015

    U.S. crude oil refinery inputs averaged 16.2 million barrels per day during the week ending September 18, 2015, 310,000 barrels per day less than the previous week’s average. Refineries operated at 90.9% of their operable capacity last week. Gasoline production increased last week, averaging over 9.5 million barrels per day. Distillate fuel production increased slightly last week, averaging 5.1 million barrels per day.

    U.S. crude oil imports averaged 7.2 million barrels per day last week, down by 13,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.4 million barrels per day, 2.0% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 504,000 barrels per day. Distillate fuel imports averaged 164,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.9 million barrels from the previous week. At 454.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.4 million barrels last week, and are in the upper half of the average range. Finished gasoline inventories stayed same while blending components inventories increased last week. Distillate fuel inventories decreased by 2.1 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories fell 0.6 million barrels last week but are well above the upper limit of the average range.

    Total commercial petroleum inventories decreased by 2.9 million barrels last week. Total products supplied over the last four-week period averaged 19.7 million barrels per day, up by 1.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.2 million barrels per day, up by 3.0% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the last four weeks, up by 1.3% from the same period last year. Jet fuel product supplied is up 5.7% compared to the same four-week period last year.
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    US domestic oil production recovers slightly

                                                  Last Week    Week Before   Year Ago

    Domestic Production.....'000    9,136              9,117            8,867
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    U.S. gasoline sales surge at fastest for over a decade

    Gasoline sales to U.S. motorists rose by more than 5 percent in July compared with the same month a year before, according to the U.S. Energy Information Administration (EIA).

    Gasoline sales are rising at the fastest year-over-year rates for more than 14 years as demand surges.

    Continued economic expansion, rising employment and cheaper fuel are putting a record volume of traffic on U.S. roads as well as encouraging motorists to upgrade to larger and more fuel hungry vehicles.

    Gasoline sales were up 5.1 percent in July 2015 compared with July 2014, according to the EIA's Prime Supplier Report published on Tuesday 

    Sales for the first seven months as a whole were up 4.4 percent compared with 2014.

    The Prime Supplier Report is based on a census of around 200 firms that produce, import or transport across state boundaries selected fuels and sell the products to local distributors, local retailers or end users.

    Fuel consumption is being boosted by more traffic on the roads. Vehicle-miles travelled were up 3 percent in the first half of the year compared with 2014, according to the Federal Highway Administration.

    Motorists are also opting for larger vehicles. Car sales fell almost 3 percent in the first eight months of 2015 but sales of light trucks, which include sport utility vehicles, surged by 10 percent, according to WardsAuto.

    Light trucks typically use nearly 40 percent more fuel for the same journey, according to U.S. government statistics, so the changed sales mix is boosting consumption ("Summary of fuel economy performance" 2014).

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    Sunshine Oilsands announces first steam at West Ells project

    Sunshine Oilsands Ltd. is pleased to announce that it has successfully commenced steam injection into the target formation at the West Ells project located in the Athabasca region of Alberta.

    'First steam injection represents a significant achievement for the West Ells Project as it represents the major milestone before oil production,' said Mr. Sun Kwok Ping, Executive Chairman of Sunshine. 'We are pleased that the West Ells facilities have been successfully commissioned and that first steam was delivered to the well pads and reservoir in accordance with our schedule. We look forward to achieving first production by the fourth quarter of 2015.'

    Sunshine is fully committed to advancing its corporate initiatives to ensure that West Ells achieves a smooth startup of the Phase 1 facilities and achievement of nameplate capacity of 5,000 bbls/day. The Corporation has a 100% working interest in its West Ells asset area with an ultimate development potential of 130,000 bbls/day.
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    Imperial Cuts Spending on Existing Projects as Costs Drop

    Imperial Oil Ltd. has been able to lower the amount of capital reinvestment needed to sustain the business to about C$1.2 billion ($900 million) a year from C$2 billion a year ago, helped by shrinking supplier costs.

    Imperial expects overall annual spending on expansion and maintenance to average about C$2.5 billion in the coming years as it reduces costs and slows expansion, Chief Executive Officer Rich Kruger said Wednesday in a webcast of the company’s annual investor day.

    The company is basing its operations on the current price for oil, which is helping to create a “challenging” environment for Canadian producers, Kruger said. “If prices rise, so be it,” he said, adding that the company is planning for the “long term.”

    Canadian oil-sands producers have cut budgets along with the sinking price for crude this year. Imperial operates bitumen mining at its Kearl site, in addition to its Cold Lake and Nabiye facilities, and owns a stake in Syncrude Canada Ltd.

    In the meantime, the company is considering options for expanding production on oil-sands leases in Alberta using steam-assisted technology, Kruger said. Imperial has already made applications to the provincial government for new projects, including its Aspen site, he said. No decision has been made to proceed with any of the new projects, he added.

    The company is aiming to reduce cash operating costs at Kearl, currently at less than C$30 a barrel, Kruger said.

    “We’re not going to bet the farm on oil price growth,” Kruger said.
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    Total Faces U.S. Probe Over Gas Market Trades

    Some of French oil company Total SA’s market trades in the U.S. are under investigation by the Commodity Futures Trading Commission, and the company is in talks to settle the matter, company officials said Wednesday.

    The existence of the CFTC probe emerged a day after a separate U.S. agency, the Federal Energy Regulatory Commission, released a notice accusing a Total subsidiary of making money-losing gas purchases intended to move prices in a way that helped it make profits on other trading positions on at least 38 occasions in the southwestern U.S.

    Asked about the FERC probe in an interview, Total Chief ExecutivePatrick Pouyanné dismissed the allegations, saying the company was settling similar allegations by the CFTC “for a few million dollars.”

    “There was no wrongdoing,” Mr. Pouyanné said, visiting London for an investor conference.

    The CFTC declined to comment. FERC didn’t respond to messages seeking comment. The CFTC regulates the trading of financial securities tied to commodities while FERC oversees the marketplace of physical gas and power products. They often investigate similar allegations.

    It isn’t clear when the CFTC began its investigation. The trades were made between 2009 and 2012, FERC said.

    The company has been transparent and fully cooperated with both regulators and would be ready to discuss a settlement with FERC too, Mr. Pouyanné said.

    “Either we can settle for the right level of settlement and if not we can go to court,” he said.

    In a written statement after the interview with Mr. Pouyanné, Total said the company “is fully cooperating with the authorities and has provided all documents requested. In light of these documents, Total is convinced that none of the allegations has been committed.”

    Total is among the world’s largest oil producers but also has a sizable trading arm that buys and sells everything from crude to refined products and petrochemicals.

    In the U.S., it has been a player in physical and financial natural-gas markets for 25 years.
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    Credit lines to Oil cut 39%

     Oil producers in the U.S. are about to see their credit lines shrink, just when they need the money most.

    The latest round of twice-yearly reevaluations is under way, and almost 80 percent of oil and natural gas producers will see a reduction in the maximum amount they can borrow, according to a survey by Haynes and Boone LLP, a New York law firm. Companies’ credit lines will be cut by an average of 39 percent, the survey showed.

    "There’s going to be a reduction to the majority of these credit lines," said Neal Dingmann, an analyst at SunTrust Robinson Humphrey Inc. "It’ll make a lot of these companies reduce a bit more on spending."

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    Alternative Energy

    US renewable energy output to drop in 2015 on hydropower

    Despite substantial jumps in solar- and wind-derived power, the U.S. Energy Information Administration (EIA) expects a sharp drop in U.S. hydropower generation will drag down total renewables used in the electric sector this year by 3.5%. The drought in California is the culprit behind the anticipated 10.4% drop in hydropower generation, the EIA says in its September Short Term Energy Outlook (STEO).
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    Just do it! Nike commits to 100% green energy

    Nike, Starbucks and Johnson & Johnson are among 36 companies that have pledged to source 100% of their electricity from renewables.

    They have committed to reducing carbon emissions as part of the ‘RE100’ global campaign led by The Climate Group in partnership with CDP.

    The campaign aims to encourage major businesses towards solely using green energy.

    Other major companies that have made the pledge this week include Goldman Sachs, Procter & Gamble, Walmart and Steelcase.

    The news sends a “timely reminder” ahead of the COP21 climate talks in Paris, stated The Climate Group.

    CEO Mark Kenber added: “Research shows that the most ambitious companies have seen a 27% return on their low carbon investments – no wonder new names keep joining RE100.

    “Lowering risk, protecting against price rises, saving millions and boosting brand is what shaping a low carbon economy is all about. Today these companies are signalling loud and clear to COP21 negotiators that forward-thinking businesses back renewables and want to see a strong climate deal in Paris.”

    Previously M&S, IKEA, H&M and Mars also committed to using 100% of renewable energy.

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    Precious Metals

    Gemfields mine in Zambia richer than initially thought

    Emeralds and rubies miner Gemfields said Wednesday an independent report by consultancy firm SRK shows the Kagem mine in Zambia is set to produce 1.10 billion carats over a 25 year mine life, which is more than initially anticipated.

    The company said the total amount of indicated and inferred mineral resource at the emerald mine, 75% owned by Gemfields, is now estimated at 1.8bn carats worth of the green gemstone and beryl.

    According to SRK, the company needs to spend $84 million over the first four years of the project, and a total of $516million over Kagem mine’s life to create and operation that will initially process around 90,000 tonnes of ore per year. By 2018 output would ramp up to 180,000 tonnes per year, as it will add the Fibolele pit to the project.

    Over its mine life, Kagem is now expected to produce 44.7 million carats per year on average.

    Over its mine life, Kagem is now expected to produce 44.7 million carats per year on average.

    Gemfiels said it would continue exploring the asset "over the next few years" to determine the further resource potential.

    "As I have said on many occasions over the past few years, this operation has a bright future, is still maturing as an established producer, with much more yet to come," said Chief Executive Ian Harebottle.
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    Base Metals

    Freeport McMoRan: Peruvian mine prepares to double production

    The expansion of Freeport-McMoRan's Cerro Verde copper deposit in Peru is nearly finished and should double the mine's copper output after an April or May 2016 start, Reuters reports.

    The expansion will add some 270,000t to annual output from the mine, currently at about 230,000pa and expected to lift to about 500,000tpa, a company spokesman has confirmed.

    Freeport-McMoRan has 53.56% of Cerro Verde, Sumitomo Metal Mining 21% and Buenaventura 19.58%.
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    Steel, Iron Ore and Coal

    China coal miners face harsher times ahead: official

    China's coal miners will continue to feel the pinch from flagging demand, excessive capacity and relatively large coal imports this year, said an senior official on September 22.

    The sector faces starker challenges than a year ago, Peng Jianxun, deputy head of the State Administration of Coal Mine Safety and the China National Coal Association, said at an energy forum.

    With China's economic slowdown and push to save energy and cut emissions, the coal mining sector has been on the decline since the latter half of 2012.

    In the first eight months, China's coal imports dropped 31.3% to 138.6 million tonnes, but that was still a very high level given the weak demand and overcapacity at home, Peng said.

    The sector has been suffering from high inventories and dropping prices since the beginning of this year.

    By end-August, coal stocks at coal enterprises across the country stood at 110 million tonnes, up 11.9% year on year and 27.1% higher than the start of the year.

    The Fenwei CCI 5500 Index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed at 381 yuan/t with VAT on September 22, FOB basis, falling 24.7% from the beginning of the year.

    Peng said the sector had to steer the focus from quantity and growth speed to quality and efficiency and continue to eliminate outdated capacity.

    Coal is the most important energy resource in China. In 2014, however, the share of coal in total primary energy consumption dropped to 64.2% from 66% a year earlier.

    The country is aiming to bring the share of coal in total energy consumption down to below 62% by 2020 and to raise the share of clean non-fossil fuel to reduce emissions and improve air quality.

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    Latin American steel imports represent 35% of regional consumption

    Latin American steel imports represent 35% of regional consumption

    Alacero (Latin American Steel Association) announced that figures corresponding to the first seven months of 2015 show a 3% drop in steel consumption in Latin America. 

    Meanwhile, crude steel production fell 1% while finished steel output decreased 3% versus Jan/Jul 2014. Finished steel imports supplied 35% of the regional consumption and continue to increase their share at the local markets. The trade balance of the region continues to deteriorate during the first seven months of 2015 deficit (in tons) deepened 1% vs same period of 2014.
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    Hebei Steel plans to build plant in South Africa in 2017

    Hebei Steel plans to build plant in South Africa in 2017

    China's Hebei Iron and Steel Group is planning to build a 5-million tonne per year steel plant in South Africa in 2017, an official said on Wednesday.

    "We are now choosing a location," Zhang Hai, vice president at Hebei Iron and Steel, told an industry conference.

    Zhang said the company is also aiming to take over steel mills in eastern Europe, but added that talks are still at an early stage.
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