Mark Latham Commodity Equity Intelligence Service

Wednesday 30th September 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Putin wins parliamentary approval to deploy Russian forces abroad - reports


    Russia's upper house of parliament, the Federation Council, has approved a request by President Vladimir Putin to authorise the the use of military force abroad, according to local reports.

    The Kremlin did not say which country the decision would apply to, but Russia is in the process of building up its military presence in Syria where it supports the government forces of President Bashar al-Assad.

    The use of the military abroad will be related to national interests and will be limited to the use of the country's air force, local agencies reported.

    The last time the Russian parliament granted Putin the right to deploy troops abroad, a technical requirement under Russian law, Moscow seized Crimea from Ukraine last year.

    The Kremlin said the request was for "the deployment of a military contingent of the Russian Federation" outside the country on the basis of the "universally recognised principles and norms of international law."

    http://www.cnbc.com/2015/09/30/putin-wins-parliamentary-approval-to-deploy-russian-forces-abroad--reports.html?utm_source=twitterfeed&utm_medium=twitter
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    China caps overseas withdrawals


    China has capped the amount of money Chinese holders of bank and credit cards can withdraw outside the country, in its latest effort to discourage people from moving badly needed capital offshore.

    China's foreign-exchange regulator put a new annual cap on overseas cash withdrawals using China UnionPay Co. bank cards, a UnionPay official said on Tuesday. Under the new rules, UnionPay cardholders can withdraw up to 50,000 yuan ($US7,860) overseas during the last three months of this year, while that amount will be capped at 100,000 yuan for all of next year, the official said.

    State-run UnionPay has a virtual monopoly on processing card transaction in China, meaning the limits extend to nearly all Chinese bank- and credit-card holders. It wasn't clear when the new cap was issued.

    The new cap is in addition to an existing 10,000 yuan daily withdrawal limit -- part of China's already tough limits on how much money can flow across its borders.

    The move by China's State Administration of Foreign Exchange is the latest by Beijing to scrutinize capital outflows and encourage companies to bring more money into the country. The People's Bank of China, the country's central bank, said earlier this month that its foreign-exchange reserves fell by $US93.9 billion, the biggest monthly drop ever, after it surprised the market on August 11 with its decision to devalue the yuan by around 2 per cent.

    http://www.businessspectator.com.au/news/2015/9/29/china/china-caps-overseas-withdrawals
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    Glencore:


    Mining and trading company Glencore said on Tuesday its business remained "operationally and financially robust" and it was confident in the medium and long-term fundamentals of its commodities.

    Glencore shares fell to a record low on Monday over concerns it was not doing enough to cut its debt to withstand a prolonged fall in global metals prices.

    "We have positive cash flow, good liquidity and absolutely no solvency issues," a company spokesman said in a statement.

    "Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding."

    Chief Executive Ivan Glasenberg had to bow to shareholder pressure this month by agreeing to cut Glencore's $30 billion debt pile and protect its rating after the prices of its main products, copper and coal fell.

    Glencore plans to suspend dividends, sell assets and raise cash, among other measures, to cut its net debt by a third by the end of 2016.

    London-listed Glencore has already raised $2.5 billion through a share placement.

    After Glencore announced its debt-cutting plans, Moody's credit-rating agency affirmed its Baa2 rating on the company but changed the outlook to negative from stable, "to reflect the scope for a prolonged difficult market that may cause a slower recovery in Glencore's financial profile".

    S&P affirmed Glencore's BBB rating and kept a negative outlook, citing worries over economic slowdown in China and copper prices.

    http://www.reuters.com/article/2015/09/29/glencore-credit-idUSL5N11Z2Y020150929

    And: Add another looming problem to the list for Glencore Plc, the commodity group that’s lost almost $45 billion in market value this year.

    A quarter of the beleaguered firm’s bonds and credit lines are due for refinancing by next May, compared with 9 percent for its peers, according to data compiled by Bloomberg. Glencore may have options for delaying the deadline for part of that $13.8 billion in lifeblood financing, but given that some of its debt is already trading like junk as the stock plummets, any bond refinancings will probably be pricey.

    Shares of Glencore dropped 73 percent this year as a rout in commodities fuelled by a slowdown in China’s economic growth threatened to shrink the company’s revenue as it attempts to manage its debt load. The company earlier in September announced a $10 billion debt-reduction program and cut its $30 billion of borrowings to protect its credit rating amid the commodity selloff.

    http://www.mineweb.com/news-fast-news/glencore-faces-yet-another-debt-challenge-with-credit-due-by-may/?utm_content=buffer69d6f&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

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    BHP tests climate-deal scenario


    BHP Billiton Ltd, the world's biggest miner, says a global agreement on climate-change action would slow but not stop demand growth for most of the commodities it produces.

    Revealing projections for the first time as December's Paris Climate Conference nears, BHP Chief Commercial Officer Dean Dalla Valle assured investors in London on Tuesday that the company has "stress-tested" its global resources business, which includes coal mines and oil fields.

    The test: Could it withstand policy shifts that would follow an agreement limiting carbon emissions to cap global average temperatures at no more than 2 degrees Celsius (3.6 degrees Fahrenheit) above preindustrial levels?

    The conclusion, according to the BHP report: "Even in an orderly or rapid shift to a 2-degree world, we forecast growth in long-term demand for most of our commodities, although at a slower pace than in [our] central case." That "central case" assumes an average temperature rise of 3 degrees.

    Mr Dalla Valle added, though, that "the opportunities and risks associated with climate change will not be spread evenly between businesses or sectors." Energy coal, used to generate electricity, would be worst hit, BHP projected, as energy providers switch to natural gas or renewable technology. BHP added, though, that this switch could drive up demand for its own gas and uranium.

    Mr Dalla Valle, who called the report "a major step forward in disclosure," said measures to reduce emissions in steel manufacturing could also increase the price BHP receives for its iron ore, which tends to be higher-quality than some rival miners'.

    Assuming "an orderly transition" between now and 2030 to meet a 2-degree climate target, BHP forecast a doubling in earnings before interest, taxes, depreciation and amortization. That is only marginally below the company's core outlook, based on a 3-degree trajectory.

    "As climate change risk continues to evolve, so too will our approach," said Mr Dalla Valle, referring to BHP's strategy. In recent times the company has shifted its investment focus to copper and oil from coal and iron ore.

    Climate change has been high on US President Barack Obama's agenda as he approaches his final year in office. He has been working to secure support for an international climate-change agreement ahead of the Paris meeting, which will bring world leaders together with the aim of clinching a deal to succeed the Kyoto Protocol.

    United Nations officials concede an accord on a 2-degree cap is unlikely, given that many major carbon emitters haven't submitted emissions targets. Indian Prime Minister Narendra Modi this week expressed "uncompromising commitment on climate change" but stopped short of making new pledges for reducing emissions.

    Mr Dalla Valle separately said BHP remains confident China's economy is on track despite a drop in industrial profits in August that was the biggest in four years, and shook world resources markets. "No doubt there is going to be a lot of volatility, and I think people are reading into that," he told reporters. But "we haven't changed our position."

    In August, BHP forecast China's economy will pick up speed to meet Beijing's growth target for 2015 of about 7 per cent.

    http://www.businessspectator.com.au/news/2015/9/29/resources-and-energy/bhp-tests-climate-deal-scenario
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    Refrigerated vehicles ‘could cost the EU €2bn’


    Refrigerated vehicles could cost the EU almost €2 billion (£1.4bn), a year on health and the environment by 2025.

    That’s according to a new report by cold energy firm, Dearman which stated “if nothing is done” it could cost EU countries €22 billion Euros over the next decade.

    The report also stated one million transport refrigeration units in Europe have the equivalent impact on air pollution as up to 56 million diesel cars.

    The cooling in these vehicles is often powered by an unregulated secondary diesel engine, which is inefficient and disproportionately polluting, it added.

    Dearman claim they can emit up to 13 million tonnes of carbon emissions and 40,000 tonnes of Nitrogen Oxide.

    Toby Peters, Chair in Power and Cold Economy, University of Birmingham and CEO of Dearman said: “Until now, nobody has given transport refrigeration units a thought. We all shop at food stores, eat in restaurants or have chilled and frozen food delivered but the impact of transport refrigeration units has never been investigated, let alone addressed.

    “They are unregulated, use out-dated, fossil fuelled technology and are disproportionately polluting. What’s worse, their pollution is concentrated on city streets where it does the most damage to our health.”

    http://www.energylivenews.com/2015/09/29/refrigerated-vehicles-could-cost-the-eu-e2-5bn/
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    VW Sales forecasts for september

    Meanwhile, based on online shopping data, Edmunds.com predicted VW would be the only major manufacturer to see year-over-year sales losses in September.

    Edmunds.com predicted VW sales would go down about 2 percent in September compared with September 2014. That doesn’t sound like much, but Edmunds.com expects the rest of the market to improve 13.9 percent to about 1.4 million. TrueCar estimated VW Group sales, including Audi, could go down about 5.2 percent in September.

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    Insolvency on Brazil electricity market grows - traders


    Insolvency on the Brazilian electric energy market has spread to critical levels, energy traders said on Tuesday, as hydroelectric generators balk at hefty bills for which the local regulator says they are on the hook.

    After nearly two years of drought and long delays in completion of new generation projects such as large scale dams in the Amazon, Brazil's hydro generators have been unable to produce enough electricity to cover their supply contracts.

    And the energy market regulator Aneel said they must buy energy on the spot market to cover their commitments.

    Conditions on Brazil's energy markets continue to deteriorate due to a growing number of hydroelectric companies that have secured court injunctions exempting them from paying these additional costs for costly spot energy, local energy traders said.

    The CCEE is next due to settle accounts between buyers and sellers of energy again on Oct. 14-15.

    Cristopher Vlavianos, president of energy trader Comerc, said 80 percent to 90 percent of the expected 5 billion reais ($1.2 billion) settlement coming due will not be paid because offinancial distress among such hydropower producers.

    "If you have insolvency of this size, whoever has credit (for supplying energy) will not be paid," said Vlavianos.

    The problem has been growing in recent months. The CCEE was unable to settle payments in June and Aneel thought it had reached an agreement with generators by offering loans to the hydro plant operators to get them to lift their injunctions.

    But now dozens of hydroelectric generators have secured court injunctions suspending their obligations to pay.

    "I'd guess 80 percent of the settlement will not be paid," said Andrew Frank, president of energy trader America Energia.

    Brazil's thermoelectric plants, which run on natural gas, fuel oil and diesel, have been picking up the slack in generation while the hydro plants remain partially off line but could soon run into cash flow problems if they do not receive payments due from the CCEE.

    Brazil's state-run oil company Petroleo Brasileiro SA , is one of the largest operators of thermoelectric plants here, and is already struggling with cash flow problems.

    Petrobras is also the main distributor of fuels for thermoelectric plants in the country.

    The rules of Brazil's energy market say that in case of default by a participant, the group as a whole must cover the shortfall. And this has led to even more court injunctions by members to suspend payments, traders said.

    http://www.reuters.com/article/2015/09/29/brazil-energy-settlement-idUSL1N11Z2OA20150929
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    Oil and Gas

    Petronet LNG breaks Qatar 'oil index' contract to gain from low spot prices


    Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar.

    The company is taking only 70% of the volumes it agreed to in 25-year contracts with the Persian Gulf state, potentially triggering a fine, finance director R.K. Garg said. It’s paying about $8 per million British thermal units of spot LNG, about 36% less than its fixed price with Qatar’s RasGas Co.

    “The major issue has always been price, and since spot prices are down we continue to have the advantage of the spot prices over long-term,” Garg said by phone, declining to say how much Petronet is saving buying more spot cargoes. The company is “trying to see what can be done about the penalty.”

    Petronet, which had agreed to take 7.5 million tonnes of LNG a year from RasGas, is among the first companies in Asia to break a long-term purchase deal as weaker demand, higher supply and oil’s slump push down spot prices. Elsewhere in the region, China is deferring Qatari cargoes, while Japanese and South Korean importers are renegotiating contracts.

    Petronet is running a significant risk. Purchasing less than 90% of contracted volumes from Qatar could result in a penalty of as much as Rs.9,000 crore, according to brokerage KR Choksey Shares and Securities Ltd. That’s equivalent to 10 years’ profit for Petronet.

    The New Delhi-based company is taking its chances as the battle for market share forces sellers to be more flexible. Should a fine be levied at the end of the year, Petronet may pass it on to its customers, potentially including its state-run owners that buy most of the fuel, Garg said.

    http://www.livemint.com/Companies/Lk2NOm5DvuqeqxTCcKD19J/Petronet-LNG-breaks-Qatar-contract-to-gain-from-low-spot-pri.html
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    Iranian condensate exports at 2015 high as China resumes buying -sources


    Iran's condensate exports in September hit the highest monthly total so far this year, after its top client China resumed buying of the ultra-light crude for the first time in six months, two sources familiar with the matter said on Tuesday.

    The sales come as Chinese President Xi Jinping told his Iranian counterpart Hassan Rouhani on the sidelines of the United Nations this week that he wanted to prioritise its energy and financial cooperation with Tehran ahead of a potential lifting of sanctions.

    Iran has had to store tens of millions of barrels of oil, mostly condensate from its South Pars gas fields, onboard ships due to a drop in China's demand over the summer and an outage at a major plant.

    "Unlike crude oil that could be cut back, Iran has had to keep South Pars pumping to supply its local gas market," said one of the sources with direct knowledge of supplies to China.

    The source said that China's Unipec, the trading arm of Asia's largest refiner, Sinopec , imported about one million barrels of Iranian condensate in September, with the same monthly amount due to be shipped through to March.

    A Sinopec spokesman declined to comment, citing business confidentiality.

    Iranian condensate exports in September were around 210,000 barrels per day (bpd), topping 200,000 bpd for the first time this year after China resumed imports, a second source with knowledge of the data said.

    Other buyers included Japan, South Korea, the United Arab Emirates and Poland, said the source.

    Iran has the capacity to export about 500,000 bpd of condensate, but buyers took about 180,000 bpd on average in the first nine months this year, according to the sources.

    Sanctions on Iranian oil exports are expected to ease only next year as Tehran has to first comply with terms set out in a July agreement with world powers on its nuclear program, but the fight for market share in Asia among OPEC producers has already intensified.

    http://www.reuters.com/article/2015/09/29/iran-oil-asia-idUSL3N11Z26J20150929
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    Russia oil output could fall 5-10 pct if prices low for years: Deputy PM


    Russian oil production could fall by up to 10 percent if world prices stay consistently low for a long period, Russian Deputy Prime Minister Arkady Dvorkovich told the Reuters Russian Investment Summit on Tuesday.

    But he said it was unlikely that prices would drop below their current level, of around $48 per barrel, for a sustained period because it was not in the interests of most oil producers to endure low prices for more than two years.

    "We calculate the budget based on a price of $50 a barrel," Dvorkovich said at the summit, held in the Reuters office in Moscow.

    "If prices remain at a low level for a very long time, then a reduction in production of 5-10 percent is entirely possible, that is if the prices stay at a low level for several years," he said.

    He said the government would not take artificial steps to reduce output, but that a reduction would be the natural consequence of low prices for oil companies' investment plans.

    Despite a sharp fall in prices, Russia has refused to cut production. It has instead maintained and even increased crude output, putting up with low prices in the hope it can increase its own share in the world oil market at the expense of others who cut back their output.

    Asked about the prospect of a further fall in oil prices, Dvorkovich said: "Low prices for an extended time are not in the interests of the majority of producing countries, therefore that scenario is unlikely."

    "We understand that some people can wait under low prices - some for one year, others for two, but we don't see countries that want to live with low prices for more than two years."

    He said Saudi Arabia, the world's biggest oil producer, could technically afford to endure low prices for longer, but that even it would have to cut back investment in new production, threatening its position as market leader in the long term.

    Even if Saudi Arabia held out, in the meantime other countries would be forced to cut production, Dvorkovich said, pushing prices back up again before Russia reached the point where it too would have to cut.

    http://www.reuters.com/article/2015/09/29/russia-dvorkovich-oil-idUSL5N11Z1IC20150929
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    Origin Energy to Sell A$2.5 Billion in Shares to Reduce Debt


    Origin Energy Ltd. will sell A$2.5 billion ($1.8 billion) in shares at a 34 percent discount as part of an effort to improve its balance sheet and maintain its investment-grade rating after a plunge in oil prices.

    Origin, preparing to start its A$24.7 billion gas-export project with ConocoPhillips on Australia’s east coast, also plans to sell as much as A$800 million in assets, reduce its dividend and cut spending, the Sydney-based utility said Wednesday. Origin expects the measures to lower net debt to below A$9 billion.

    “It’s important to take action to deal with what is the fundamental issue, which is a high level of debt in Origin that’s unsustainable in the current environment,” Managing Director Grant King told analysts on a conference call. “We must reduce debt now.”

    The debt-reduction plan comes amid a tumble in commodity prices that has punished producers. Oil’s decline of about 50 percent over the past year is cutting revenue for liquefied natural gas projects whose contracts with Asian buyers are linked to the price of crude. Origin said last month that the price slide may significantly reduce the contribution from its LNG project.

    Origin plans to reduce spending by A$1 billion across the financial years ending in June 2016 and June 2017 as part of a A$2.2 billion program to preserve cash, it said.

    Assets potentially for sale include its interests in the Cooper and Perth basins of Australia, investments in wind power and infrastructure such as pipelines, Origin said.

    The company plans to sell the shares to investors on a 4 for 7 basis at A$4 a piece, a 34 percent discount to its closing price of A$6.10 on Tuesday, the company said. The stock has fallen 59 percent in the past 12 months.

    The Australia Pacific LNG project is expected to deliver its first cargo in November, according to the statement. The plant will follow two other export developments on the Queensland coast operated separately by BG Group Plc and Santos Ltd.

    http://www.bloomberg.com/news/articles/2015-09-29/origin-energy-to-sell-a-2-5-billion-in-shares-to-boost-finances
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    Utica shale bulks up: Dividend cuts at majors.


    Call it the Golden Triangle of natural gas. The region where southwestern Pennsylvania, southeastern Ohio and northern West Virginia mash up near the Ohio River is turning out to be the natural gas version of Fort Knox. Monster dry gas wells seem to be fulfilling the promise of geologists who claim Utica Shale production might end up being bigger than its Marcellus cousin.

    That’s saying something, because the Marcellus already produces more than 17 billion cubic feet per day (Bcf/d) and is the largest producing gas field in the world.

    As a result, traditional Appalachian pipeline flows are changing for the first time since the 1940s, with gas and NGLs now set to flow south to the Gulf Coast, east to New Jersey and Maryland LNG export points, and west via the reversed Rockies Express Pipeline to Midwest markets.

    Bernstein Research forecasts that by 2018, the Marcellus and Utica combined will produce 23 Bcf/d or a third of all U.S. gas production. About 3.7 Bcf/d of new and expanded pipeline capacity comes on line this year and another 6 Bcf/d comes on line in 2016.


    All you need to know: http://www.oilandgasinvestor.com/utica-shale-bulks-812591
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    Energy XXI Reports Fiscal Year-End Results


    Energy XXI  today announced fiscal fourth-quarter and full-year financial and operating results for the period ended June 30, 2015, and provided an operations update. Highlights include:

    Production remaining stable into fiscal first quarter at 58,300 BOE/d
    Current liquidity is $679 million

    $124 million available on $500 million revolver

    Proved reserves estimated at 183.5 MMBOE, 75 percent oil
    Non-cash impairment causes ceiling test write-down due to commodity prices
    Acquisitions and divestitures in fiscal fourth-quarter and to-date

    Monetized Grand Isle Gathering System
    Sold East Bay field
    Acquired producing Gulf of Mexico assets from M21K, LLC

    Cost control efforts driving per barrel equivalent costs lower

    LOE down 30 percent from fiscal 4Q2014 to 4Q2015
    G&A down 36 percent from fiscal 4Q2014 to 4Q2015

    Principal and cash interest expense reduction through open market bond purchases

    "As an organization, we responded aggressively to the challenging commodity price environment in fiscal 2015. We focused on our low risk assets, including horizontal drilling and recompletions, which allowed us to maintain production and arrest base declines," Energy XXI Chairman, President and Chief Executive Officer John Schiller said. "Our operations team is doing an excellent job of reducing costs in the field and delivering development opportunities that offer attractive yields in today's commodity price environment and we continue to practice capital discipline across our operations. We are actively managing our balance sheet and our liquidity. We continue to focus on reducing our debt and to date we have retired over $425 million in face value of debt lowering our projected annual interest expense by over $32 million."

    For the 2015 fiscal fourth quarter, adjusted EBITDA was $121.8 million on revenues of $219.5 million, as volumes averaged 59,300 barrels of oil equivalent per day (BOE/d), 71 percent of which was oil. These results compare with 2014 fiscal fourth-quarter adjusted EBITDA of $184.1 million on revenues of $301.3 million and volumes of 46,100 BOE/d, 69 percent oil. Net loss attributable to common shareholders in the 2015 fiscal fourth quarter totaled ($1.7) billion, or ($17.92) per diluted share, compared with fiscal 2014 fourth-quarter net loss attributable to common shareholders of ($18.3) million, or ($0.24) per diluted share.

    For the full fiscal year ended June 30, 2015, adjusted EBITDA was $760.5 million, compared with $729.7 million generated in fiscal 2014. Fiscal 2015 net loss attributable to common shareholders was ($2.4) billion, or ($25.97) per diluted share, on revenues of $1.4 billion and production of 58,900 BOE/d. These results compare with net income available for common shareholders for fiscal 2014 of $6.6 million, or $0.09 per diluted share, on revenues of $1.2 billion and production of 45,000 BOE/d.

    Results for the fiscal fourth-quarter and fiscal year-end 2015 were significantly impacted by non-cash ceiling test write-downs of oil and gas properties, driven by lower commodity prices.

    http://finance.yahoo.com/news/energy-xxi-reports-fiscal-end-213105309.html
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    Chesapeake Energy is aggressively eliminating jobs


    The energy exploration company said on Tuesday that it plans to slash about 15% of its workforce, or 740 employees. Most of the job cuts will take place in Oklahoma City, where Chesapeake (CHK)is based.

    Chesapeake specifically cited current oil and natural gas prices as the reason for the cuts.

    "We must remain focused on building an enduring, resilient and profitable enterprise -- one that can flourish in any commodity price environment," said Doug Lawler, Chesapeake's CEO, in a memo to employees.

    The cost-cutting moves will cause Chesapeake to take a one-time charge of about $55.5 million in the third quarter related to employer payroll taxes.

    While it's been great for most American drivers on the road, the energy industry has been slammed by the crash in oil prices. Crude oil prices have fallen from over $100 a barrel in June 2014 to just $45 today. Chesapeake's shares have plunged 71% over the past year.

    http://money.cnn.com/2015/09/29/investing/chesapeake-job-cuts-oil-prices/
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    Midstream stocks slammed again


    Pipeline companies had a rough Monday on the stock markets, and things got worse on Tuesday.

    The Alerian MLP Index fund, which tracks 50 of the largest midstream master limited partnerships, has lost 11 percent so far this week and now trades at its lowest level since 2010, eliminating nearly a half-decade of gains related to the shale production boom and wiping billions in value from some of nation’s largest energy companies.

    The tax advantaged master limited partnership corporate structure has been popular among midstream companies and their investors, called unit-holders.

    But lower stock prices threaten the future growth potential of energy infrastructure businesses, said Rob Desai, an energy analyst at financial services firm Edward Jones. Many companies sell units to fund new pipelines and processing infrastructure, and cheaper stock means they’ll have to sell more shares and ultimately pay more in dividends later on.

    “It’s drastic,” Desai said. “It lowers return on the projects. The result is the shares are hit again.”

    Midstream companies, which transport and process oil and gas, weren’t hit as hard as other energy sectors when prices first fell, because they operate under long-term contracts that insulate them from swings in commodity prices.

    But traders who once viewed the oil glut that send prices down as a short-term problem now expect it to last years.

    They’re starting to exit pipeline investments on fears that declining production will cut into the need for new pipes and processing plants.

    http://fuelfix.com/blog/2015/09/29/midstream-stocks-slammed-again/
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    Alternative Energy

    China may lift 2020 solar target to 150GW


    Deutsche Bank analysts say local media reports in China suggest that the country’s 2020 solar power target could be lifted to 150GW from the current target of 100GW – meaning more than 20GW of solar would need to be added in each year from 2016 – 2020.

    Climate diplomacy: in a another joint announcement from the US and China, president Xi Jinping committed to an emissions trading scheme in 2017. EPA/Michael Reynolds

    The reports come as China president Xi Jinping pledged during a visit to the US and meetings with President Barack Obama to introduce a nation-wide emissions trading scheme in 2017, and give priority to renewable energy installations.

    As the Rocky Mountain Institute noted on Monday, China has historically had dispatch quotas on fossil generation, often leading to curtailment of renewables and the running of inefficient coal plants. In the first half of 2015 this has led to curtailment of 15 percent of wind and 10 percent of solar generation.

    China now proposes a competitive power dispatch that prioritises the emissions-free, near-zero marginal dispatch cost of renewables. RMI says this should result in an immediate reduction of 200 million metric tons of carbon emissions per year, but more importantly, supports the economic expansion of renewables.

    China is not the only one considering a big boost to its targets for solar and other renewable energy sources. India is reportedly going to announce this week that it will aim for a 40 per cent renewable energy target by 2030, which would require some 250GW of solar and some 100GW of wind energy.

    Brazil earlier this week said it will lift its share of non-hydro renewable energy to 23 per cent by 2030, from 15 per cent now. Total renewables, including hydro, will account for 40 per cent of power production. Even Bangladesh is looking to install 5GW of solar.

    Deuutche Bank says the key to meeting the raised target will be financing and “normalisation” of the subsidy payment that is currently being delayed.

    Deutsche Bank estimates that China will install around 15GW of solar in 2015 and 20GW in 2016.  It noted that China’s National Energy Administration (NEA) announced this week an additional construction quota of 5.3GW for solar power projects in 2015, mainly released to provinces which made good progress in solar farm construction.

    “So far, there have been 24.1GW of new construction quota approved for 2015, including 17.8GW announced in March, 1GW demonstration projects in Shanxi in June, and 5.3GW announced today; while there is no cap on roof-top distribution projects. Not all the 24.1GW can be connected to grid in 2015, though.”

    http://reneweconomy.com.au/2015/china-may-lift-2020-solar-target-to-150gw-59431
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    India backs solar power as Paris climate talks loom


    Image Source: economictimesAFP reported that under a blistering sun, workers install a sea of solar panels in a north Indian desert as part of the government's clean energy push and its trump card at upcoming climate change talks in Paris.

    After years of betting big on highly polluting coal, India is under huge pressure to commit to cutting carbon emissions ahead of the major meet aimed at forging a global climate pact.

    But the world's third largest emitter argues the burden should lie with industrialised countries, which have been accused of hypocrisy in heaping demands on poorer nations.

    Instead, Prime Minister Narendra Modi's government is banking on increasing solar capacity fivefold to help cut crippling blackouts and bring power to 300 million Indians currently living without.

    The government is expected to hike its renewable energy targets again on Thursday night when it becomes the last major economy to release its pledges for the Paris talks.

    A cornerstone of its climate change policy, the solar plans come even as India boosts coal production to meet its growing needs, ignoring calls to slash its dependence on fossil fuels.

    With its year-round sunshine, barren plains and low-cost labour, the northern desert state of Rajasthan lies at the heart of Modi's renewable energy ambitions.

    http://steelguru.com/power/india-backs-solar-power-as-paris-climate-talks-loom/435657#tag
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    Xinjiang renewable energy generation capacity accounts for 21pct


    Northwest China’s Xinjiang Uygur Autonomous Region saw its power generation capacity by renewable energy account for 21% of the total 55 GW capacity, said one senior official with the local government recently.

    Xinjiang added 2.41 GW of power generation capacity in the first half of the year, with combined wind and solar power capacity contributing 33% at 249 MW and 580 MW, respectively, 5 times higher than the same period last year, official data showed.

    Over January-August this year, the region generated 140.9 TWh of electricity, up 17.31% year on year. Of this, hydro, wind and solar power output contributed 8.85%, 7.5% and 2.49% to 12.47 TWh, 10.57 TWh and 3.51 TWh, respectively, up 16.8%, 19.4% and 35.5% on year, separately.

    Xinjiang is one China’s important renewable energy strategy base, with available wind power generation capacity exceeding 80 GW, accounting for 40% of the nation’s total. Vast gobi deserts are suitable for construction of large-scale photovoltaic power stations, analysts said.

    http://en.sxcoal.com/0/132492/DataShow.html
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    SMA Solar hikes sales and profit guidance for second time


    Germany's largest solar company SMA Solar raised its 2015 guidance for a second time this year, citing successful product launches and pushing its shares up more than 10 percent.

    SMA, which is emerging from a painful round of cost cuts, said on Tuesday it expected to swing to an operating profit of up to 10 million euros ($11 million) from a 2014 loss of 165 million.

    It previously expected to post a loss before interest and tax (EBIT) of as much as 25 million euros.

    "Due to the SMA Group's extensive transformation in the current fiscal year, we are emerging stronger from the years of structural change in the solar industry and will generate sales growth again this year for the first time since 2010," SMA Chief Executive Pierre-Pascal Urbon said in a statement.

    The group, which had already increased its guidance in July, now expects sales to come to between 850 and 900 million euros, compared with a previous forecast of 800 to 850 million.

    Shares in SMA Solar were up 10.8 percent at 32.20 euros by 0850 GMT. The stock has more than doubled since the beginning of the year, also supported by strong demand for its inverters in markets outside Europe, most notably North America.

    http://www.reuters.com/article/2015/09/29/sma-solar-outlook-idUSL5N11Z1F820150929
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    ABB energises 1st phase of India’s most advanced UHVDC power link


    Business Line reported that ABB, power and automation technology group, has energised the first pole of the North-East Agra 800 KV ultra-high voltage direct current transmission link, which will supply clean hydropower from northeastern India to a nodal substation in Agra and from there, feed it across north India.

    The project is being executed by ABB together with Bharat Heavy Electricals Limited on a turnkey basis, including design, system engineering, supply, installation and commissioning for Power Grid Corporation of India Ltd, India’s central transmission utility.

    This completes phase one of the project, which enables transfer of up to 1,500MW of electricity along this link, across a distance of 1,728 kilometers. When fully commissioned in 2016, the link will become the world’s first multi-terminal UHVDC connection, capable of transmitting enough electricity to serve around 90 million people, based on average national consumption.

    http://steelguru.com/power/abb-energises-1st-phase-of-india-s-most-advanced-uhvdc-power-link/435650#tag
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    Uranium

    CGN’s nuclear power capacity at 29.37 GW

    CGN’s nuclear power capacity at 29.37 GW

    China General Nuclear Power Group (CGN), a large clean energy enterprise in China, saw its total nuclear power capacity – including capacity in operation and under construction – at 29.37 GW at present, said the group’s spokesman Hu Guangyao on September 29.

    It has 12 nuclear power generating units under construction, with total installed capacity at 14.45 GW. That accounts for 18.6% of the global nuclear installed capacity under construction – the NO.1 in the world, and 52.4% of China’s total volume under construction, said Hu.

    The group has 14 nuclear power units in operation, with combined installed capacity at 14.92 GW, accounting for 60.5% of China’s total nuclear installed capacity in operation.

    In addition, the group’s non-nuclear clean energy installed capacity amounted to 12.49 GW by end-August this year, with wind power at 7.4 GW, solar energy at 0.7 GW, hydropower at 5.26 GW.

    http://en.sxcoal.com/0/132457/DataShow.html
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    Precious Metals

    Platinum extends rout, dips below $900 on Volkswagen scandal


    Platinum fell below $900/oz on Tuesday for the first time since January 2009 on fears that the Volkswagen emissions scandal would reduce demand from the auto sector. Spot platinum slid to $899.80/oz, before paring some losses to trade at $921.83. The metal, which has fallen for seven sessions out of eight, has been hurt by news of Volkswagen AG’s falsification of U.S. vehicle emission tests as investors believe it could affect demand for diesel cars. Platinum is widely used as a component in emissions-cleaning catalytic converters for diesel cars.

    “We tend to think that platinum prices have been oversold in the face of the emissions concerns and worries about diesel vehicle sales going forward,” said HSBC analyst James Steel. “It strikes us that not enough attention is being given to the likelihood that tighter emissions legislation and increased vigilance by the auto makers will increase platinum demand,” he said. Upcoming European legislation on CO2 emissions will make it harder for the authorities to back a war on diesel, analysts have said.

    http://www.miningne.ws/2015/09/29/platinum-extends-rout-falls-below-900-on-volkswagen-scandal/
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    Base Metals

    Deaths in Mining Protest Spur Emergency Declaration in Peru


    Peruvian President Ollanta Humala on Tuesday declared a state of emergency, suspending civil liberties and authorizing military patrols in a highland region where three people died and scores were injured in protests at a Chinese-owned $7.4 billion copper project.

    Humala decreed the emergency for 30 days in the southern Andean regions of Cusco and Apurimac, where the mine, Las Bambas, owned by China's MMG Ltd., is under construction. The state of emergency applies to six provinces.

    Apurimac Governor Wilber Venegas said Tuesday that three people protesting the project had died in clashes with police in the town of Challhuahuacho and scores were wounded.

    Rallies called on MMG to revise its environmental plan so that mineral concentrates would be piped out of town. Protesters also demanded that the company hire more locals as construction work linked to the mine is dropping.

    Some 1,500 police and 150 military officers were sent to the region ahead of protests that started Friday.

    Venegas and other local authorities said police fired live bullets at protesters during rallies that had been largely peaceful. Humala's government said police resorted to lethal weapons to defend themselves from violent protesters who broke into Las Bambas installations.

    Humala has declared several emergencies during his four years in office to calm protests against mining projects, including Newmont Mining Corp.'s suspended $4.8 billion Conga project and Southern Copper Corp.'s recently derailed $1.4 billion Tia Maria mine.

    http://www.voanews.com/content/deaths-mining-protest-emergency-declaration-peru/2984458.html
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    Collahuasi copper mine to cut output amid price rout


    Chile's second-biggest copper mine Collahuasi, owned by Anglo American and Glencore , said on Tuesday it will cut output by 30,000 tonnes, becoming the latest major producer to protect itself against sinking prices in the biggest rout in years.

    "In line with the stabilization of its operations that has been implemented in recent years, and considering the complex market scenario for commodities worldwide, (the mine) is restructuring its operations," said Collahuasi in a statement.

    Reductions would affect the leaching plant and associated activities and take some 30,000 tonnes of refined copper annually out of the market, the company said, without specifying a timetable for the cuts.

    It added that there would also be an unspecified number of job losses.

    The union representing the majority of Collahuasi workers said it was waiting for further information on the cuts to make a decision as to its next move.

    The cut represents 7 percent of the mine's output last year of 470,000 tonnes.

    Still, the measures by a significant player in the world's top producing nation reflect deepening pain as copper's year-long rout hurts producers' margins and the industry faces its biggest test since the 2008 financial crisis.

    Fears over economic growth in key consumer China have led commodities prices to tumble. The copper price has weakened around 20 percent this year, falling below $5,000 a tonne.

    Shares in mining and trading giant Glencore slumped by around a third in a sell-off on Monday, before clawing back some ground on Tuesday.

    The six-year low in the price of copper, used in construction and wiring, has already led Glencore to suspend operations at two mining units in Africa, while in Chile, U.S.-listed Freeport McMoran Inc is slashing output.

    And the world's largest producer, Chile's state-run Codelco, has delayed important expansion projects.

    As well as complicating plans for companies, the potential job cuts and falling income from copper have also created a headache for Chilean President Michelle Bachelet, at a time when she is struggling with sharply declining popularity.

    Copper makes up over half the country's exports, and analysts are expecting an austerity budget from the government this week as it fights to balance the books.

    http://www.reuters.com/article/2015/09/29/anglo-american-collahuasi-idUSL1N11Z1FX20150929
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    Steel, Iron Ore and Coal

    Rio Tinto coal divestment starts with around $600 mln sale


    Global miner Rio Tinto on Wednesday said it had agreed to sell its 40 percent stake in the Bengalla coal mine in Australia to New Hope Corp for $606 million, the latest shuffle of Australian coal assets amid a sector-wide downturn.

    Bengalla is the smallest of three coal mines in the Hunter Valley near Sydney in which Rio Tinto is a stakeholder. It produced 8.6 million tonnes of coal in 2014.

    New Hope, capitalised at A$1.37 billion ($959 million), said last week it was hunting for acquisitions after reporting a 25-percent rise in annual profit to A$51.7 million before one-offs as cost cuts outweighed a drop in sales despite energy coal prices plunging to six-year lows.

    Analysts at Macquarie and Morgan Stanley said Rio had fetched a strong price for the Bengalla stake relative to their valuations of its coal assets.

    Rio has been looking to offload less profitable businesses to ensure it can stick to a promise to raise dividends and focus on iron ore and copper mining amid a broad slump in commodities prices caused by slowing economic growth in China.

    Rio, advised by Deutsche Bank, earlier this year put all its coal stakes in the Australian state of New South Wales up for sale.

    Until recently Glencore Plc was regarded as a front runner for possible purchases as it also mines coal in the same area.

    But those prospects are fading as concerns over its debt mount and some analysts speculate it could begin selling its own mines.

    Glencore has said it will suspend dividends, sell assets and raise cash, among other measures, to cut its $30 billion debt pile and protect its rating after the prices of its main commodities fell.

    As part of the Bengalla sale, Japan's Mitsubishi Corp and Rio have agreed to disband a coal joint venture in the Hunter Valley and will each take direct stakes in mines previously owned via the venture, potentially making it easier for Rio to sell its remaining stakes.

    Rio declined to comment on whether it was still looking to sell any of the stakes in those bigger mines.

    http://www.reuters.com/article/2015/09/30/rio-tinto-divestiture-new-hope-idUSL3N11Z5R620150930
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    Mexico announces import duties on steel products for six months


    Mexico on Tuesday announced new levies for six months to protect its steel industry following a simmering dispute with China over imports from the Asian giant that steelmakers said are hurting local business.

    The duties of around 15 percent would apply to five types of products including cold-rolled steel, hot-rolled steel and wire rod, from countries that do not have free trade agreements with Mexico, the economy ministry said.

    China does not have such an agreement with Mexico.

    Mexico said earlier this month it would conduct an anti-dumping probe into steel wire rod from China following a request from three firms operating in Mexico which complained that cheap, fast-rising imports were hurting the local industry.

    The three companies were ArcelorMittal Las Truchas , Deacero, and Ternium Mexico.

    In recent months, Mexico has taken several steps to protect the industry, including new import duties, anti-dumping quotas, and enhancing customs controls to enforce the quotas.

    http://www.reuters.com/article/2015/09/29/mexico-steel-idUSL1N11Z1E320150929
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